-----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, JtZ8vVo/nb92GBQondT/z6UWMvwdxpMJA7UrfxkKF/migQYrFkPNwQFO04+sc94X iThlsjK2KMT4KklEcFn4HA== 0000912057-96-006400.txt : 19960416 0000912057-96-006400.hdr.sgml : 19960416 ACCESSION NUMBER: 0000912057-96-006400 CONFORMED SUBMISSION TYPE: S-3 PUBLIC DOCUMENT COUNT: 5 FILED AS OF DATE: 19960412 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: JACOR COMMUNICATIONS INC CENTRAL INDEX KEY: 0000702808 STANDARD INDUSTRIAL CLASSIFICATION: RADIO BROADCASTING STATIONS [4832] IRS NUMBER: 310978313 STATE OF INCORPORATION: OH FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-3 SEC ACT: 1933 Act SEC FILE NUMBER: 333-02475 FILM NUMBER: 96546806 BUSINESS ADDRESS: STREET 1: 1300 PNC CENTER STREET 2: 201 E FIFTH ST CITY: CINCINNATI STATE: OH ZIP: 45202 BUSINESS PHONE: 5136211300 S-3 1 S-3 AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON APRIL 12, 1996 REGISTRATION NO. 333- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 --------------------- FORM S-3 REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 ------------------ JACOR COMMUNICATIONS, INC. JCAC, INC. (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER) (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
-------------------------- -------------------------- OHIO 31-0978313 FLORIDA (PENDING) (STATE OR OTHER (I.R.S. (STATE OR OTHER (I.R.S. JURISDICTION OF EMPLOYER JURISDICTION OF EMPLOYER INCORPORATION OR IDENTIFICATION INCORPORATION OR IDENTIFICATION ORGANIZATION) NO.) ORGANIZATION) NO.)
1300 PNC CENTER 201 EAST FIFTH STREET CINCINNATI, OHIO 45202 (513) 621-1300 (ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES) ------------------------------ R. CHRISTOPHER WEBER JACOR COMMUNICATIONS, INC. 1300 PNC CENTER 201 EAST FIFTH STREET CINCINNATI, OHIO 45202 (513) 621-1300 (NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF AGENT FOR SERVICE) ------------------------------ COPIES OF COMMUNICATIONS TO: RICHARD G. SCHMALZL, ESQ. GREGG A. NOEL, GRAYDON, HEAD & RITCHEY ESQ. 1900 FIFTH THIRD CENTER SKADDEN, ARPS, CINCINNATI, OHIO 45202 SLATE, MEAGHER & (513) 621-6464 FLOM 300 SOUTH GRAND AVENUE, SUITE 3400 LOS ANGELES, CALIFORNIA 90071 (213) 687-5000
-------------------------- APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as practicable after this Registration Statement becomes effective. If the only securities being registered on this Form are being offered pursuant to dividend or interest reinvestment plans, please check the following box. / / If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, other than securities offered only in connection with dividend or interest reinvestment plans, check the following box. / / If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. / / If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. / / If delivery of the prospectus is expected to be made pursuant to Rule 434, please check the following box. / / -------------------------- CALCULATION OF REGISTRATION FEE
PROPOSED MAXIMUM PROPOSED MAXIMUM AGGREGATE AMOUNT OF TITLE OF EACH CLASS OF SECURITIES AMOUNT TO BE OFFERING PRICE OFFERING REGISTRATION TO BE REGISTERED REGISTERED PER SECURITY(1) PRICE(1) FEE(1)(2) % Senior Subordinated Notes due 2006... $50,000,000 100.0% $50,000,000 $17,241.37
(1) Estimated solely for purposes of calculating the registration fee. (2) Amount calculated pursuant to Section 6(b) under the Securities Act. -------------------------- THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF THE SECURITIES ACT OF 1933, AS AMENDED, OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A), MAY DETERMINE. - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- JACOR COMMUNICATIONS, INC. CROSS-REFERENCE SHEET PURSUANT TO ITEM 501(B) OF REGULATION S-K
FORM S-3--ITEM NUMBER AND CAPTION CAPTION IN PROSPECTUS Item 1. Forepart of the Registration Statement and Outside Front Cover Page of Prospectus..................... Facing Page of the Registration Statement; Cross-Reference Sheet; Outside Front Cover Page of Prospectus Item 2. Inside Front and Outside Back Cover Pages of Prospectus......................................... Inside Front Cover Page; Incorporation of Certain Documents by Reference; Available Information; Outside Back Cover Page Item 3. Summary Information, Risk Factors, and Ratio of Earnings to Fixed Charges.......................... Prospectus Summary; Risk Factors; Ratio of Earnings to Fixed Charges; Business Item 4. Use of Proceeds.................................... Use of Proceeds Item 5. Determination of Offering Price.................... Not Applicable Item 6. Dilution........................................... Risk Factors Item 7. Selling Security Holders........................... Not Applicable Item 8. Plan of Distribution............................... Outside Front Cover Page; Underwriting Item 9. Description of Securities to be Registered......... Description of Notes Item 10. Interests of Named Experts and Counsel............. Legal Matters; Experts Item 11. Material Changes................................... Prospectus Summary; The Acquisitions Item 12. Incorporation of Certain Information by Reference.......................................... Incorporation of Certain Documents by Reference Item 13. Disclosure of Commission Position on Indemnification for Securities Act Liabilities........................................ Not Applicable
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE. SUBJECT TO COMPLETION, DATED APRIL 12, 1996 PROSPECTUS , 1996 $50,000,000 [LOGO] JACOR COMMUNICATIONS, INC. AND JCAC, INC. % SENIOR SUBORDINATED NOTES DUE 2006 The Senior Subordinated Notes (the "Notes") are being offered (the "Offering") by Jacor Communications, Inc. ("Jacor") and JCAC, Inc., a wholly owned subsidiary of Jacor ("JCAC" and, together with Jacor, the "Obligors"). The Notes are being offered in connection with the acquisitions of Citicasters Inc. and Noble Broadcast Group, Inc. and to repay a portion of the outstanding indebtedness under the Existing Credit Facility (as defined herein). The Notes will mature on , 2006. Interest on the Notes is payable semi-annually on and of each year, commencing , 1996. The Obligors will not be required to make any mandatory redemption or sinking fund payment with respect to the Notes prior to maturity. The Notes will be redeemable at the option of the Obligors, in whole or in part, at any time on or after , 2001 at the redemption prices set forth herein plus accrued and unpaid interest, if any, to the date of redemption. In the event of a Change of Control (as defined herein), the Obligors will be required to make an offer to repurchase the Notes, at a price equal to 101% of the aggregate principal amount thereof, plus accrued and unpaid interest, if any, to the date of repurchase. See "Description of Notes--Certain Covenants-- Repurchase of Notes at the Option of the Holder Upon a Change of Control." The Notes will be general unsecured obligations of the Obligors, subordinated in right of payment to all Senior Debt (as defined herein) of the Obligors, including the LYONs (as defined herein), with respect to Jacor, and the New Credit Facility (as defined herein), with respect to JCAC. On a pro forma basis as of December 31, 1995 after giving effect to the Offering and the application of the net proceeds therefrom, the consummation of the Acquisitions (as defined herein) and the Financing (as defined herein), the aggregate principal amount of Senior Debt (as defined herein) of Jacor would have been approximately $100.0 million, and the aggregate principal amount of Senior Debt of JCAC would have been approximately $620.4 million. The Notes will be fully and unconditionally guaranteed (limited only to the extent necessary to avoid each such guarantee being considered a fraudulent conveyance under applicable law) on a joint and several basis (the "Guarantees") by the Obligors' existing, wholly owned subsidiaries, (the "Initial Guarantors") and the Obligors' future subsidiaries (the "Future Subsidiary Guarantors" and, together with the Initial Guarantors, the "Guarantors"), which Guarantees will be general unsecured obligations of the Guarantors. SEE "RISK FACTORS" BEGINNING ON PAGE 11 FOR A DISCUSSION OF THE RISKS THAT SHOULD BE CONSIDERED BY PROSPECTIVE INVESTORS. THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
- ------------------------------------------------------------------------------------------------- UNDERWRITING PRICE TO THE DISCOUNTS AND PROCEEDS PUBLIC(1) COMMISSIONS(2) TO OBLIGORS(3) - ------------------------------------------------------------------------------------------------- Per Note...................................... $ $ $ Total......................................... $ $ $ - -------------------------------------------------------------------------------------------------
(1) PLUS ACCRUED INTEREST, IF ANY, FROM THE DATE OF ISSUANCE. (2) THE OBLIGORS AND THE INITIAL GUARANTORS HAVE AGREED TO INDEMNIFY THE UNDERWRITER AGAINST, AND TO PROVIDE CONTRIBUTION WITH RESPECT TO, CERTAIN LIABILITIES, INCLUDING LIABILITIES UNDER THE SECURITIES ACT OF 1933, AS AMENDED. SEE "UNDERWRITING." (3) BEFORE DEDUCTING EXPENSES PAYABLE BY THE OBLIGORS ESTIMATED AT $ MILLION. The Notes are offered by the Underwriter when, as and if delivered to and accepted by the Underwriter and subject to various prior conditions. The Underwriter has reserved the right to withdraw, cancel or modify any such offer and to reject orders in whole or in part. It is expected that delivery of the Notes will be made in New York, New York on or about , 1996, against payment therefor in immediately available funds. DONALDSON, LUFKIN & JENRETTE SECURITIES CORPORATION [ARTWORK TO COME] ------------------------ IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE NOTES AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME. 2 PROSPECTUS SUMMARY THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY THE MORE DETAILED INFORMATION AND FINANCIAL STATEMENTS APPEARING ELSEWHERE IN THIS PROSPECTUS. UNLESS OTHERWISE INDICATED, THE INFORMATION IN THIS PROSPECTUS DOES NOT GIVE EFFECT TO THE OVER-ALLOTMENT OPTION DESCRIBED IN "UNDERWRITING." UNLESS THE CONTEXT OTHERWISE REQUIRES, THE TERM (I) "JACOR" REFERS TO JACOR COMMUNICATIONS, INC. AND ITS SUBSIDIARIES, INCLUDING JCAC, AND THEIR COMBINED OPERATIONS ON A HISTORICAL BASIS; (II) "CITICASTERS" REFERS TO CITICASTERS INC. AND ITS SUBSIDIARIES AND THEIR COMBINED OPERATIONS ON A HISTORICAL BASIS; (III) "NOBLE" REFERS TO NOBLE BROADCAST GROUP, INC. AND ITS SUBSIDIARIES AND THEIR COMBINED OPERATIONS ON A HISTORICAL BASIS; AND (IV) "COMPANY" REFERS TO JACOR, CITICASTERS, AND NOBLE ON A COMBINED PRO FORMA BASIS ASSUMING THE ACQUISITIONS ARE CONSUMMATED AS CURRENTLY SET FORTH IN THE RESPECTIVE ACQUISITION AGREEMENTS. THE TERM "ACQUISITIONS" REFERS TO THE PENDING MERGER OF JCAC AND CITICASTERS AND THE PENDING ACQUISITION OF NOBLE BY JACOR. THE ACQUISITIONS WILL NOT BE CONSUMMATED PRIOR TO THE CLOSING OF THE OFFERING. THE COMPANY Jacor, upon consummation of the Acquisitions, will be the second largest radio group in the nation owning and/or operating 50 radio stations and two television stations in 13 markets across the United States. Jacor's strategic objective is to be the leading radio broadcaster in each of its markets. Consistent with this objective, Jacor entered into agreements to acquire 29 radio stations and two television stations for approximately $950.0 million within two weeks of the enactment of the Telecommunications Act of 1996 (the "Telecom Act"). The Company will have multiple radio station platforms in Atlanta, San Diego, St. Louis, Phoenix, Tampa, Denver, Portland, Kansas City, Cincinnati, Sacramento, Columbus, Jacksonville and Toledo. These markets are among the most attractive radio markets in the country, demonstrating, as a group, radio revenue growth in excess of the radio industry average over the last five years. In 1995, the Company would have been the top billing radio group in 9 of its 13 markets and would have had net revenue and broadcast cash flow of $303.5 million and $107.7 million, respectively. The following sets forth certain information regarding the Company and its markets:
COMPANY DATA ---------------------------------------------- MARKET DATA RADIO RADIO ---------------------------------- RADIO REVENUE AUDIENCE 1995 1995 1990-1995 REVENUE MARKET MARKET NO. OF STATIONS METROPOLITAN RADIO REVENUE MARKET SHARE SHARE ---------------- STATISTICAL REVENUE CAGR MARKET RANK % % AM FM TV AREA RANK RANK % - -------------------- ------- ------- ------- ---- ---- ---- ------------ ------- --------- Atlanta............. 1 23.2 15.8 1 3 -- 9 10 9.2 San Diego(1)........ 1 13.9 6.7 1 2 -- 13 13 5.5 Tampa............... 1 24.3 26.4 2 4 1 23 20 6.2 Denver(2)........... 1 45.9 30.6 4 4 -- 26 18 8.6 Portland............ 1 25.3 17.4 1 2 -- 27 26 8.4 Cincinnati(3)....... 1 56.8 38.8 2 4 1 30 23 7.4 Columbus............ 1 37.9 20.9 2 3 -- 38 31 6.7 Jacksonville........ 1 26.2 22.6 2 3 -- 57 50 7.9 Toledo.............. 1 27.9 27.5 1 2 -- 85 77 5.6 Sacramento.......... 2 14.3 7.0 -- 2 -- 34 21 4.6 Kansas City......... 3 15.3 12.9 1 1 -- 29 29 4.3 St. Louis........... 6 8.6 10.0 1 2 -- 16 17 4.5 Phoenix............. 7 6.6 3.8 1 1 -- 17 16 6.1
- ------------------------ (1) Includes XTRA-FM and XTRA-AM, stations Jacor provides programming to and sells air time for under an exclusive sales agency agreement. (2) Excludes one station for which Jacor sells advertising time pursuant to a joint sales agreement. (3) Excludes three stations for which Jacor sells advertising time pursuant to joint sales agreements. 3 BUSINESS STRATEGY Jacor's strategic objective is to be the leading radio broadcaster in each of its markets. Jacor intends to acquire individual radio stations or radio groups that strengthen its market position and that maximize the operating performance of its broadcast properties. Specifically, Jacor's business strategy centers upon: INDIVIDUAL MARKET LEADERSHIP. Jacor strives to maximize the audience ratings in each of its markets in order to capture the largest share of the radio advertising revenue in the market. Jacor focuses on those markets where it believes it has the potential to be the leading radio group in the market. By operating multiple radio stations in its markets, Jacor is able to operate its stations at lower costs, reduce the risk of direct format competition and provide advertisers with the greatest access to targeted demographic groups. For 1995, the Company would have had the number one radio revenue market share in Atlanta (23%), San Diego (14%), Tampa (24%), Denver (46%), Portland (25%), Cincinnati (57%), Columbus (38%), Jacksonville (26%) and Toledo (28%). The Company's aggregate radio revenue market share for 1995 would have been approximately 25%. ACQUISITION AND MARKET DEVELOPMENT. Jacor's acquisition strategy focuses on acquiring both developed, cash flow producing stations and underdeveloped "stick" properties that complement its existing portfolio and strengthen its overall market position. Jacor has been able to improve the ratings of "stick" properties with increased marketing and focused programming that complements its existing radio station formats. Additionally, Jacor utilizes its strong market presence to boost the revenues and cash flow of "stick" properties by encouraging advertisers to buy advertising in a package with its more established stations. The Company may enter new markets through acquisitions of radio groups that have multiple station ownership in such groups' markets. Additionally, the Company will seek to acquire individual stations in new markets that it believes are fragmented and where a market-leading position can be created through additional in-market acquisitions. The Company may exit markets it views as having limited strategic appeal by selling or swapping existing stations for stations in other markets where the Company operates, or for stations in new markets. DIVERSE FORMAT EXPERTISE. Jacor management has developed programming expertise over a broad range of radio formats. This management expertise enables Jacor to specifically tailor the programming of each station in a market in order to maximize Jacor's overall market position. Jacor utilizes sophisticated research techniques to identify opportunities within each market and programs its stations to provide complete coverage of a demographic or format type. This strategy allows Jacor to deliver highly effective access to a target demographic and capture a higher percentage of the radio advertising market. DISTINCT STATION PERSONALITIES. Jacor engages in a number of creative programming and promotional efforts designed to create listener loyalty and station brand awareness. Through these efforts, management seeks to cultivate a distinct personality for each station based upon the unique characteristics of each market. Jacor hires dynamic on-air personalities for key morning and afternoon "drive times" and provides comprehensive news, traffic and weather reports to create active listening by the audience. This commitment to "foreground" or "high impact" programming has successfully generated significant audience share. One of the methods Jacor utilizes to develop the personality of its AM radio stations is by broadcasting professional sporting events and related programming. Currently, Jacor has the broadcast rights for the Cincinnati Reds, Cincinnati Bengals, Colorado Rockies, Denver Broncos, Los Angeles Kings and San Diego Chargers and Citicasters has the broadcast rights for the Portland Trailblazers. In addition, WGST-AM in Atlanta has the broadcast rights to serve as the official information station for the 1996 Olympic Games. Sports broadcasting serves as a key "magnet" for attracting audiences to a station and then introducing them to other programming features, such as local and national news, entertaining talk, and weather and traffic reports. 4 STRONG AM STATIONS. Jacor is an industry leader in successfully operating AM stations. While many radio groups primarily utilize network or simulcast programming on their AM stations, Jacor also develops unique programming for its AM stations to build strong listener loyalty and awareness. Utilizing this operating focus and expertise, Jacor has developed its AM stations in Denver and Cincinnati into the revenue and ratings leaders among both AM and FM stations in their respective markets. Jacor's targeted AM programming adds to Jacor's ability to lead its markets and results in more complete coverage of the listener base. Although the cost structure of a large-scale AM station generally results in lower operating margins than typical music-based FM stations, the majority of Jacor's AM stations generate substantial levels of broadcast cash flow. Historically, Citicasters and Noble have not focused on their AM operations to the same extent as Jacor. Accordingly, most of the AM stations to be acquired meaningfully underperform Jacor's AM stations, and management believes such stations have the potential to generate significant incremental cash flow. POWERFUL BROADCAST SIGNALS. A station's ability to maintain market leadership depends in part upon the strength of its broadcasting delivery system. A powerful broadcast signal enhances delivery range and clarity, thereby influencing listener preference and loyalty. Many of Jacor's stations' broadcasting signals are among the strongest in their respective markets reinforcing its market leadership. Jacor opportunistically upgrades the power and quality of the signals at stations it acquires. Following the consummation of the Acquisitions, Jacor expects that relatively inexpensive technical upgrades in certain markets will provide for significantly greater signal presence. THE ACQUISITIONS In February 1996, Jacor entered into a merger agreement (the "Merger") to acquire Citicasters. Citicasters owns and/or operates 19 radio stations and two television stations. The Citicasters' station portfolio will significantly strengthen Jacor's position in several markets. Citicasters' strong radio stations in Atlanta, Tampa and Cincinnati, as well as network affiliate television stations in Tampa and Cincinnati, complement Jacor's existing radio stations in those markets. In addition, Citicasters has the number one share of the radio advertising revenues in the Portland (25%) and Columbus (38%) markets. Further, Citicasters has attractive radio stations in desirable radio markets, including Phoenix, Kansas City and Sacramento. Also in February 1996, Jacor entered into an agreement to acquire Noble, which owns 10 radio stations. The Noble acquisition significantly strengthens Jacor's existing position in the San Diego and Denver markets. In addition, Noble's number one radio market position in Toledo and Noble's stations in St. Louis provide Jacor with strong platforms and attractive markets to pursue Jacor's market leadership strategy. Both Noble and Citicasters have underdeveloped stations which Jacor believes can benefit from management's proven operating and programming expertise. These underdeveloped stations provide considerable opportunity for both ratings and cash flow improvement. Due to the need to obtain various regulatory approvals, the Acquisitions will not be consummated prior to the closing of the Offering. See "Risk Factors--Pending Acquisitions." The cash to be paid in connection with the Merger, the refinancing of Citicasters' bank debt, a portion of the cash to be paid in connection with the Noble acquisition and the repayment of certain existing indebtedness incurred in connection with such acquisition, together with the fees and expenses incurred in connection therewith, will be financed through (i) the anticipated net proceeds from this Offering; (ii) the anticipated net proceeds of a concurrent offering by Jacor of 13,750,000 shares of Common Stock (the "1996 Stock Offering"); (iii) the anticipated net proceeds of a concurrent offering by Jacor of $202.0 million aggregate principal amount at maturity of its Liquid Yield Option Notes due 2011 (the "LYONs-TM- Offering"); (iv) the anticipated borrowings under a new credit facility with an available principal amount of $600.0 million (the "New Credit Facility") (together the Offering, the LYONs Offering, the 1996 Stock Offering and the New Credit Facility are referred to as the "Financing"); and (v) excess cash. See "Use of Proceeds" and "Description of Indebtedness." 5 THE OFFERING Securities Offered........... $50.0 million in aggregate principal amount of % Senior Subordinated Notes. Maturity Date................ , 2006. Interest Payment Dates....... and , commencing , 1996. Mandatory Redemption......... None. Optional Redemption.......... The Notes will be redeemable, in whole or in part, at the option of the Obligors on or after , 2001, at the redemption prices set forth herein, plus accrued and unpaid interest, if any, to the date of redemption. See "Description of the Notes -- Optional Redemption." Ranking...................... The Notes will be general unsecured obligations of the Obligors and will be subordinated in right of payment to all existing and future Senior Debt of the Guarantors including the LYONs with respect to Jacor, and the New Credit Facility with respect to JCAC. On a pro forma basis as of December 31, 1995, after giving effect to the Acquisitions and the Financing and the application of the net proceeds therefrom, the aggregate principal amount of Senior Debt of Jacor would have been approximately $100.0 million and the aggregate principal amount of Senior Debt of JCAC would have been approximately $620.4 million. See "The Acquisitions," "Description of Other Indebtedness -- The New Credit Facility" and "Description of Notes -- Subordination." Guarantees................... The Notes will be fully and unconditionally guaranteed (the "Guarantee") on a senior subordinated basis by the Initial Guarantors, limited only to the extent necessary for such Guarantee to not constitute a fraudulent conveyance under applicable law. The obligation of the Initial Guarantors with respect to the Guarantee will be subordinated in right of payment, to the same extent the obligations of the Obligors, with respect of the Notes, are subordinated to all existing and future Senior Debt. The Notes also will be fully and unconditionally guaranteed on a joint and several basis by the Future Subsidiary Guarantors, limited only to the extent necessary for each such Guarantee to not constitute a fraudulent conveyance under applicable law. See "Description of Notes -- Guarantees." Change of Control............ If a Change of Control occurs, the Obligors will be required to offer to repurchase all outstanding Notes at a price equal to 101% of their principal amount, plus accrued and unpaid interest, if any, to the date of repurchase. There can be no assurance that the Obligors will have sufficient funds to purchase all of the Notes in the event of a Change of Control or that the Obligors would be able to obtain financing for such purpose on favorable terms, if at all. In addition, it is expected that the New Credit Facility will restrict the Obligors' ability to repurchase the Notes, including pursuant to a Change of Control Offer. Furthermore, a Change of Control under the Indenture will result in a default under the New Credit Facility. The New Credit Facility will also contain certain other provisions relating to a change of control of the Obligors, which provisions are generally broader than the Change of Control provisions of the Indenture. Consequently, certain events that may give rise to change of control under the New Credit Facility may not give rise to a Change of Control under the Indenture. See "Description of the Notes -- Change of Control."
6 Certain Covenants............ The Indenture will impose certain limitations on the ability of the Obligors and its subsidiaries to, among other things (i) incur additional indebtedness; (ii) incur liens; (iii) pay dividends or make certain other restricted payments; (iv) consummate certain asset sales; (v) enter into certain transactions with affiliates; (vi) incur indebtedness that is subordinate in right of payment to any Senior Debt and senior in right of payment to the Notes; (vii) impose restrictions on the ability of a subsidiary to pay dividends or make certain payments to the Obligors; (viii) conduct business other than the ownership and operation of radio and television broadcast stations and related businesses; (ix) merge or consolidate with any other person or (x) sell, assign, transfer, lease, convey or otherwise dispose of all or substantially all of the assets of the Obligors. See "Description of Notes -- Certain Covenants." Use of Proceeds.............. The net proceeds from this Offering will be used as part of the Financing in connection with the Acquisitions; to repay a portion of the outstanding indebtedness under the Existing Credit Facility; and for general corporate purposes. See "Use of Proceeds."
MARKET DATA AND CERTAIN DEFINITIONS All market revenue rankings and rankings of radio stations by revenue or billings that are contained in this Prospectus are based on 1995 information contained in Duncan's Radio Market Guide (1996 ed.), Duncan's Radio Group Directory (1996-1997 ed.) or the Miller, Kaplan, Arase & Co. Market Revenue Report (the "Miller Kaplan Report"). All information concerning ratings and audience listening information is derived from the Fall 1995 Arbitron Metro Area Ratings Survey (the "Fall 1995 Arbitron"). All Designated Market Area ("DMA") information is derived from the Nielsen Station Index, November 1995 ("Nielsen"). The term "LMAS" means local marketing agreements which would be considered time brokerage agreements for Federal Communications Commission (the "FCC") purposes. The term "JSAS" means joint sales agreements pursuant to which a company sells advertising time for stations owned by third parties. 7 SUMMARY PRO FORMA FINANCIAL INFORMATION (DOLLARS IN THOUSANDS) The following sets forth summary unaudited pro forma combined financial information derived from the Unaudited Pro Forma Financial Information included elsewhere in this Prospectus. The unaudited pro forma condensed consolidated statements of operations for the year ended December 31, 1995 give effect to (i) Jacor's 1995 completed radio station acquisitions and the February 1996 radio station dispositions, (ii) Noble's completed 1995 radio station acquisitions and dispositions, (iii) Citicasters' completed 1995 and January 1996 radio station acquisitions, and (iv) the Acquisitions and the Financing. The pro forma condensed consolidated balance sheet as of December 31, 1995 has been prepared as if the Acquisitions and the Financing had occurred on December 31, 1995. The Summary Unaudited Pro Forma Financial Information does not purport to present the actual financial position or results of operations of the Company had the transactions and events assumed therein in fact occurred on the dates specified, nor are they necessarily indicative of the results of operations that may be achieved in the future. The Summary Unaudited Pro Forma Financial Information is based on certain assumptions and adjustments described in the notes to the Unaudited Pro Forma Financial Information and should be read in conjunction therewith. See "Management's Discussion and Analysis of Financial Condition and Results of Operations," and the Consolidated Financial Statements and the Notes thereto for each of Jacor, Citicasters and Noble, included elsewhere in this Prospectus.
YEAR ENDED DECEMBER 31, 1995 ----------- OPERATING STATEMENT DATA: Net revenue......................... $ 303,469 Broadcast operating expenses........ 195,744 Depreciation and amortization....... 46,039 Corporate general and administrative expenses.......................... 6,655 Operating income.................... 55,031 Interest expense.................... 57,445 Loss before extraordinary items..... (2,138) OTHER FINANCIAL DATA: Broadcast cash flow(1).............. $ 107,725 Broadcast cash flow margin(2)....... 35.5% EBITDA(1)........................... $ 101,070 Cash interest expense(3)............ 52,695 Capital Expenditures................ 19,677 Ratio of EBITDA to cash interest expense........................... 1.9x Ratio of EBITDA less capital expenditures to cash interest expense........................... 1.5x AS OF DECEMBER 31, 1995 ----------- BALANCE SHEET DATA: Working capital..................... $ 41,134 Intangible assets................... 1,278,985 Total assets........................ 1,490,658 Long-term debt...................... 620,400 LYONs concurrently being offered.... 100,000 Total shareholders' equity.......... 424,050
8 SUMMARY HISTORICAL FINANCIAL DATA (DOLLARS IN THOUSANDS) The following sets forth summary historical financial data for Jacor, Citicasters and Noble for the three years ended December 31, 1995. The comparability of the historical consolidated financial data reflected in this financial data has been significantly impacted by acquisitions, dispositions and restructurings. The information presented below is qualified in its entirety by, and should be read in conjunction with, "Management's Discussion and Analysis of Financial Condition and Results of Operations," "Selected Historical Financial Data," and the Consolidated Financial Statements and the Notes thereto for each of Jacor, Citicasters and Noble. JACOR
YEAR ENDED DECEMBER 31, ----------------------------------- 1993 1994 1995 ------------- -------- -------- STATEMENT OF OPERATIONS DATA: Net revenue........................... $ 89,932 $107,010 $118,891 Broadcast operating expenses.......... 69,520 80,468 87,290 Depreciation and amortization......... 10,223 9,698 9,483 Corporate general and administrative expenses............................ 3,564 3,361 3,501 Operating income...................... 6,625 13,483 18,617 Net income............................ 1,438 7,852 10,965 OTHER DATA: Broadcast cash flow(1)................ $ 20,412 $26,542 $31,601 Broadcast cash flow margin(2)......... 22.7% 24.8% 26.6% EBITDA(1)............................. $ 16,848 $23,181 $28,100 Capital expenditures.................. 1,495 2,221 4,969
CITICASTERS
PREDECESSOR(3) CITICASTERS ------------- ------------------- YEAR ENDED DECEMBER 31, ----------------------------------- 1993 1994(4) 1995 ------------- -------- -------- STATEMENT OF OPERATIONS DATA: Net revenue........................... $ 205,168 $197,043 $136,414 Broadcast operating expenses.......... 133,070 117,718 80,929 Depreciation and amortization......... 28,119 22,946 14,635 Corporate general and administrative expenses............................ 3,996 4,796 4,303 Operating income...................... 39,983 51,583 36,547 Net income............................ 341,344 63,106 14,317 OTHER DATA: Broadcast cash flow(1)................ $ 72,098 $79,325 $55,485 Broadcast cash flow margin(2)......... 35.1% 40.3% 40.7% EBITDA(1)............................. $ 68,102 $74,529 $51,182 Capital expenditures.................. 5,967 7,569 11,857
NOBLE
YEAR ENDED DECEMBER(5) ----------------------------------- 1993 1994(6) 1995 ------------- -------- -------- STATEMENT OF OPERATIONS DATA:(7) Net revenue........................... $ 47,509 $49,602 $41,902 Broadcast operating expenses.......... 36,944 37,892 31,445 Depreciation and amortization......... 6,916 6,311 4,107 Corporate general and administrative expenses............................ 2,702 2,621 2,285 Operating income (loss)............... 947 (5,026) 4,065 Net income (loss)..................... 13,452 (16,038) 56,853 OTHER DATA:(7) Broadcast cash flow(1)................ $ 10,565 $11,710 $10,457 Broadcast cash flow margin(2)......... 22.2% 23.6% 25.0% EBITDA(1)............................. $ 7,863 $ 9,089 $ 8,172 Capital expenditures.................. 3,009 1,124 2,851
9 - ------------------------ (1) "Broadcast cash flow" means operating income before reduction in carrying value of assets, depreciation and amortization, and corporate general and administrative expenses. "EBITDA" means operating income before reduction in carrying value of assets, depreciation and amortization. Broadcast cash flow and EBITDA should not be considered in isolation from, or as a substitute for, operating income, net income or cash flow and other consolidated income or cash flow statement data computed in accordance with generally accepted accounting principles or as a measure of a company's profitability or liquidity. Although these measures of performance are not calculated in accordance with generally accepted accounting principles, they are widely used in the broadcasting industry as a measure of a company's operating performance because they assist 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. Broadcast cash flow also excludes the effect of corporate general and administrative expenses, which generally do not relate directly to station performance. Pro forma EBITDA includes approximately $5.1 million of annual estimated pretax broadcast operating expense savings and approximately $4.9 million of annual estimated pretax corporate overhead savings resulting from the Acquisitions. (2) Broadcast cash flow margin equals broadcast cash flow as a percentage of net revenue. (3) Cash interest expense is calculated as Generally Accepted Accounting Principles interest expense less interest expense attributable to the LYONs. (4) Prior to its emergence from Chapter 11 bankruptcy in December 1993, Citicasters was known as Great American Communications Company (the "Predecessor"). As a result of the application of "fresh-start reporting," the selected financial data for periods prior to December 31, 1993 are not comparable to periods subsequent to such date. (5) In 1994, the sale of four television stations significantly affects comparison of net revenues, operating expenses and broadcast cash flow for 1994 as compared to 1993 and 1995. (6) Noble's fiscal year ends on the last Sunday of December to coincide with the standard broadcast year. (7) In 1994, Noble reduced intangible assets by $7.8 million to reflect the carrying value of the broadcasting assets at their estimated fair market values. (8) The comparability of the information in the Summary Historical Financial Data is affected by various acquisitions and dispositions of radio stations, as well as the August 1995 restructuring. 10 RISK FACTORS IN ADDITION TO THE OTHER INFORMATION CONTAINED IN THIS PROSPECTUS, PROSPECTIVE INVESTORS SHOULD CONSIDER CAREFULLY THE FOLLOWING FACTORS BEFORE PURCHASING THE NOTES OFFERED HEREBY. PENDING ACQUISITIONS. The consummation of the Acquisitions requires FCC approval with respect to the transfer of the broadcast licenses of Citicasters and Noble to Jacor. Jacor has filed applications seeking FCC approval for the Acquisitions. The FCC has granted its consent to Jacor's acquisition of Noble; such consent remains subject to possible further administrative or judicial review upon the request of third parties until May 1, 1996, or by the FCC's own action until May 13, 1996. In addition, FCC rules generally prohibit the ownership of a television station and of one or more radio stations serving the same market (termed the "one-to-a-market rule"). In connection with its application seeking FCC approval for the Merger, Jacor has requested a waiver of the one-to-a-market rule with respect to the Cincinnati and Tampa markets. The consummation of the Acquisitions also is subject to the expiration or termination of the applicable waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR Act"). Jacor has received a second request for information from the Antitrust Division of the Department of Justice relating to each of the Merger and the Noble acquisition. Accordingly, the applicable waiting period under the HSR Act for each of the Merger and the Noble acquisition is now scheduled to expire 20 days after Jacor responds to the second request relating to such Acquisition unless an extension is requested or an additional request for information is issued. There can be no assurance that (i) the FCC will approve (a) the transfer of the broadcast licenses from Citicasters to Jacor, or (b) the one-to-a-market rule waivers; (ii) the FCC or a court would affirm the FCC consent to the Noble acquisition if such review is undertaken; or (iii) Jacor will be successful in consummating the Acquisitions in a timely manner or on the terms described herein. See "Business--Federal Regulation of Broadcasting." RISKS OF ACQUISITION STRATEGY. Jacor intends to pursue growth through the opportunistic acquisition of broadcasting companies, radio station groups and individual radio stations. In this regard, Jacor routinely reviews such acquisition opportunities. Jacor believes that currently there are available a number of acquisition opportunities that would be complementary to its business. Other than with respect to the Acquisitions and as described in "Business -- Recent Developments," Jacor currently has no binding commitments to acquire any specific business or other material assets. Jacor cannot predict whether it will be successful in pursuing such acquisition opportunities or what the consequences of any such acquisition would be. The Acquisitions will increase Jacor's broadcast station portfolio by 29 radio and two television stations. Jacor's acquisition strategy involves numerous risks, including difficulties in the integration of operations and systems, the diversion of management's attention from other business concerns and the potential loss of key employees of acquired stations. There can be no assurance that Jacor's management will be able to manage effectively the resulting business or that such acquisitions will benefit Jacor. In addition to the expenditure of capital relating to the Acquisitions (see "Uses of Proceeds"), future acquisitions also may involve the expenditure of significant funds. Depending upon the nature, size and timing of future acquisitions, Jacor may be required to raise additional financing. There is no assurance that such additional financing will be available to Jacor on acceptable terms. GOVERNMENTAL REGULATION OF BROADCASTING INDUSTRY. The broadcasting industry is subject to extensive federal regulation which, among other things, requires approval by the FCC for the issuance, renewal, transfer and assignment of broadcasting station operating licenses and limits the number of broadcasting properties Jacor may acquire. Additionally, in certain circumstances, the Communications Act of 1934, as amended (the "Communications Act") and FCC rules will operate to impose limitations on alien ownership and voting of the capital stock of Jacor. The Telecom Act, which became law on February 8, 1996, creates significant new opportunities for broadcasting companies but also creates uncertainties as to how the FCC and the courts will enforce and interpret the Telecom Act. The Company's business will be dependent upon maintaining its broadcasting licenses issued by the FCC, which are issued for a maximum term of eight years. The majority of the Company's radio operating licenses expire at various times in 1996 and 1997. Although it is rare for the FCC to deny a renewal application, there can be no assurance that the future renewal applications will be approved, or that such 11 renewals will not include conditions or qualifications that could adversely affect the Company's operations. Moreover, governmental regulations and policies may change over time and there can be no assurance that such changes would not have a material adverse impact upon the Company's business, financial condition and results of operations. See "Business--Federal Regulation of Broadcasting." COMPETITION; BUSINESS RISKS. Broadcasting is a highly competitive business. Jacor's, Noble's and Citicasters' radio stations and Citicasters' television stations compete for audiences and advertising revenues with other radio and television stations, as well as with other media, such as newspapers, magazines, cable television, outdoor advertising and direct mail, within their respective markets. Audience ratings and market shares are subject to change and any adverse change in a particular market could have a material and adverse effect on the revenue of stations located in that market. Future operations are further subject to many variables which could have an adverse effect upon Jacor's financial performance. These variables include economic conditions, both generally and relative to the broadcasting industry; shifts in population and other demographics; the level of competition for advertising dollars with other radio stations, television stations and other entertainment and communications media; fluctuations in operating costs; technological changes and innovations; changes in labor conditions; and changes in governmental regulations and policies and actions of federal regulatory bodies, including the FCC. Although Jacor believes that each of its stations, and each station operated by Noble and Citicasters, is able to compete effectively in its respective market, there can be no assurance that any such station will be able to maintain or increase its current audience ratings and advertising revenues. SUBSTANTIAL LEVERAGE. The Acquisitions and the Financing will result in a higher level of indebtedness for the Company. At December 31, 1995, on a combined pro forma basis, the Company would have had total indebtedness of approximately $720.4 million representing approximately 63.0% of total capitalization. See "Unaudited Pro Forma Financial Information." The Company's level of indebtedness following the Acquisitions may have the following important consequences: (i) significant interest expense and principal repayment obligations resulting in substantial annual fixed charges; (ii) significant limitations on the Company's ability to obtain additional debt financing; and (iii) increased vulnerability to adverse general economic and industry conditions. In addition, Jacor's existing and anticipated credit facilities have or will have a number of financial covenants, including interest coverage, debt service coverage and a maximum debt to EBITDA ratio. See "Description of Other Indebtedness." SHARE OWNERSHIP BY ZELL/CHILMARK. Upon the consummation of the 1996 Stock Offering, Zell/ Chilmark Fund L.P. ("Zell/Chilmark") will hold approximately 40.9% of the outstanding Common Stock. Share ownership by Zell/Chilmark may have the effect of discouraging certain types of transactions involving an actual or potential change of control of Jacor, including transactions in which the holders of Common Stock might otherwise receive a premium for their shares over then-current market prices. Subject to certain restrictions under the Securities Act of 1933 and under an agreement with the Underwriters for the 1996 Stock Offering restricting the sale of shares of Common Stock by Zell/Chilmark for a period of 180 days after the commencement date of the 1996 Stock Offering, Zell/Chilmark will be free to sell shares of Common Stock after the completion of the 1996 Stock Offering. Zell/Chilmark may thereafter sell shares of Common Stock from time to time for any reason. By virtue of its current control of Jacor, Zell/Chilmark could sell large amounts of Common Stock by causing Jacor to file a registration statement with respect to such stock. In addition, Zell/Chilmark could sell its shares of Common Stock without registration pursuant to Rule 144 under the Securities Act of 1933. Jacor can make no prediction as to the effect, if any, such sales of shares of Common Stock would have on the prevailing market price. Sales of substantial amounts of Common Stock, or the availability of such shares for sale, could adversely affect prevailing market prices. Sales or transfers of Common Stock by Zell/Chilmark could result in another person or entity becoming the controlling shareholder of Jacor. LACK OF DIVIDENDS; RESTRICTIONS ON PAYMENTS OF DIVIDENDS. Jacor has not paid any dividends to its shareholders. Jacor intends to retain all available earnings, if any, generated by its operations for the development and growth of its business and does not anticipate paying any dividends on Common Stock in the foreseeable future. In addition, the payment of dividends on the Common Stock is restricted under its credit facilities. 12 KEY PERSONNEL. Jacor's business is dependent upon the performance of certain key employees, including its President and Co-Chief Operating Officers. Jacor employs several on-air personalities with significant loyal audiences in their respective markets. Jacor generally enters into long-term employment agreements with its key on-air talent to protect its interests in those relationships, but there can be no assurances that all such on-air personalities will remain with Jacor. See "Management." 13 THE ACQUISITIONS THE CITICASTERS MERGER On February 12, 1996, Jacor, JCAC and Citicasters entered into an Agreement and Plan of Merger (the "Merger Agreement"), pursuant to which JCAC will merge with and into Citicasters, with Citicasters as the surviving corporation. As a result of the Merger, Citicasters will become a wholly owned subsidiary of Jacor. The consummation of the Merger is subject to various conditions, including the approval of the FCC, and the expiration or termination of the applicable waiting period under the HSR Act. See "Risk Factors-- Pending Acquisitions." Citicasters owns 19 radio stations serving eight of the nation's top 31 radio revenue markets. Citicasters' radio stations serve Atlanta, Phoenix, Tampa, Portland, Kansas City, Cincinnati, Sacramento and Columbus. Citicasters also owns two television stations, a CBS affiliate in Tampa and an ABC affiliate in Cincinnati, which affiliation will change to CBS in June 1996. At the effective time of the Merger (the "Effective Time"), each share of Class A Common Stock, par value $0.01 per share, of Citicasters (the "Citicasters Common Stock") issued and outstanding immediately prior to the Effective Time (other than Citicasters Common Stock owned by Citicasters, Jacor, Acquisition Corp. or any direct or indirect subsidiary of Citicasters, Jacor or Acquisition Corp., or any Citicasters Common Stock held in the treasury of Citicasters) will, by virtue of the Merger and without any action on the part of holders thereof, be converted into and represent the right to receive: (i) $29.50 in cash, plus, if the closing of the transactions contemplated by the Merger (the "Closing") does not occur prior to October 1, 1996, for each full calendar month ending prior to the Closing, commencing with October 1996, an additional amount of $.22125 in cash (the "Cash Consideration"); plus (ii) a warrant to acquire a fractional share of Common Stock on the terms described in the Citicasters Warrant Agreement to be executed at the Closing (the "Warrant Consideration," and together with the Cash Consideration, the "Merger Consideration"). In accordance with the terms of the Merger Agreement, all necessary corporate actions by Citicasters and the shareholders of Citicasters to approve the Merger Agreement have occurred. Zell/Chilmark has granted Citicasters an irrevocable proxy to vote in favor of the issuance of the warrants necessary to pay the Warrant Consideration (the "Merger Warrants") approximately 69% of the outstanding Common Stock entitled to vote at Jacor's May , 1996 Annual Meeting of Shareholders. Accordingly, Jacor believes the issuance of the Merger Warrants will be approved at the Jacor Annual Meeting and no additional corporate action by either Jacor or the Jacor shareholders will be necessary to effect the Merger. The Merger Agreement may be terminated prior to the consummation of the Merger by either Jacor or Citicasters under various circumstances, including the failure to consummate the Merger on or before May 31, 1997. If the Merger Agreement is terminated upon the occurrence of certain triggering events, including the failure to consummate the Merger by May 31, 1997, Citicasters may draw upon an irrevocable direct pay letter of credit (the "Letter of Credit") in the amount of $75.0 million obtained by Jacor and issued to an escrow agent on behalf of Citicasters. Except in certain circumstances, the right to terminate the Merger Agreement and receive a maximum of $75.0 million pursuant to a draw on the Letter of Credit is Citicasters' exclusive remedy upon the occurrence of a triggering event. Citicasters' outstanding 9 3/4% Senior Subordinated Notes (the "Citicasters Notes") will become obligations of the surviving corporation in the Merger. As a result of a change in control covenant in the Citicasters Notes, the holders of the Citicasters Notes will have the option to cause the Company to purchase the Citicasters Notes at 101% of the principal amount thereof (the "Change of Control Offer"). See "Description of Other Indebtedness." The aggregate value of the Merger, when consummated, is estimated to be approximately $799.4 million. 14 THE NOBLE ACQUISITION On February 21, 1996, Jacor entered into an agreement with the stockholders of Noble to acquire all of the capital stock of Noble for approximately $12.5 million. At the same time, Jacor also purchased a warrant for approximately $52.8 million, entitling Jacor to acquire a 79.1% equity interest in Noble. Upon consummation of the purchase of the outstanding Noble capital stock from the Noble stockholders and the exercise of Jacor's warrant, Jacor will own 100% of the equity interests in Noble. The consummation of Jacor's acquisition of Noble is subject to various conditions including the termination of the applicable waiting period under the HSR Act. See "Risk Factors--Pending Acquisitions." Noble owns 10 radio stations serving Denver, St. Louis and Toledo. Pending the closing of the Noble acquisition, Jacor and Noble have entered into time brokerage agreements with respect to Noble's radio stations in St. Louis and Toledo. On February 21, 1996, Jacor purchased for approximately $47.0 million certain assets relating to Noble's San Diego operations. Noble's San Diego operations assets included an exclusive sales agency agreement under which Noble provided programming to and sold the air time for two radio stations serving San Diego (XTRA-AM and XTRA-FM). These two radio stations are licensed by, and subject to the regulatory control of, the Mexican government. As part of its purchase of Noble's San Diego operations, Jacor was assigned all of Noble's rights under the exclusive sales agency agreement, and Jacor is now providing the programming to and selling air time for such stations. In addition, another wholly owned subsidiary of Jacor provided a credit facility to Noble in the amount of $41.0 million. Noble applied the proceeds of this credit facility to repay in full its outstanding indebtedness as of February 21, 1996. The aggregate value of the Noble acquisition, when fully consummated, is estimated to be approximately $152.0 million, of which approximately $139.5 million has already been paid. In order to fund this acquisition, refinance Jacor's outstanding debt of $45.5 million (as of February 21, 1996), and pay related costs and expenses of approximately $5.0 million, Jacor entered into a $300.0 million credit facility (the "Existing Credit Facility"). 15 USE OF PROCEEDS The net proceeds to Jacor from the sale of the Notes offered hereby are estimated to be $ . Jacor intends to use the net proceeds primarily to repay a portion of the principal amount and accrued interest outstanding under the Existing Credit Facility. The outstanding balance under the Existing Credit Facility currently bears interest at the rate of 7.2% per annum and matures on December 31, 2003, which monies were borrowed to (a) fund a portion of the Noble acquisition, and (b) refinance indebtedness that was initially borrowed to fund a portion of (i) the acquisition of three radio stations in Jacksonville, (ii) the acquisition of two radio stations in Tampa, (iii) the purchase of the licensee of a radio station in San Diego, and (iv) open market repurchases of Common Stock. Jacor intends to use the remaining proceeds in connection with the consummation of the Acquisitions and for general corporate purposes. See "The Acquisitions." Jacor intends to use the net proceeds from the Offering, together with (i) anticipated net proceeds of the concurrent LYONs Offering; (ii) anticipated net proceeds of the concurrent 1996 Stock Offering; (iii) anticipated borrowings under the New Credit Facility; and (iv) excess cash to finance the Merger and the remaining purchase price of the Noble acquisition; to repay all outstanding indebtedness under the Existing Credit Facility ($183.5 million at April 10, 1996) including certain borrowings in connection with the Noble acquisition; and for general corporate purposes. The following sets forth the anticipated sources and uses of funds for the Financing and the Acquisitions on a pro forma basis as if they had occurred on December 31, 1995 (in 000s).
SOURCES OF FUNDS: Gross proceeds from the Offering........................................ $ 50,000 Gross proceeds from the LYONs Offering.................................. 100,000 Gross proceeds from the 1996 Stock Offering............................. 275,000 New Credit Facility..................................................... 445,400 Citicasters Notes....................................................... 125,000 Excess cash............................................................. 7,000 --------- Total sources....................................................... $1,002,400 --------- --------- USES OF FUNDS (1): Repayment of the Existing Credit Facility (2)........................... $ 183,500 Cash consideration for the Merger (3)................................... 624,200 Remainder of purchase price for acquisition of Noble (4)................ 15,700 Refinance existing Citicasters bank debt................................ 26,000 Citicasters Notes....................................................... 125,000 Estimated fees and expenses (5)......................................... 28,000 --------- Total uses.......................................................... $1,002,400 --------- ---------
- ------------------------------ (1) In connection with the 1996 Stock Offering, Jacor has determined that it will convert all of the common stock purchase warrants outstanding on the date hereof (the "1993 Warrants") into the right to receive the Fair Market Value (as defined in the 1993 Warrant). Zell/Chilmark has informed Jacor that it intends to exercise its 1993 Warrants to acquire 629,117 shares of Common Stock in lieu of accepting the Fair Market Value of its 1993 Warrants for proceeds to Jacor totaling approximately $5.2 million. In the event that the holders of the remaining 1,354,583 1993 Warrants elect to receive the Fair Market Value, Jacor will be required to fund approximately $15.8 million assuming that Fair Market Value is $11.70 per 1993 Warrant (based upon the difference between an assumed average market price of $20 per share of Common Stock and the $8.30 exercise price per 1993 Warrant). (2) Includes borrowings of $144.5 million to fund a portion of the Noble acquisition and related fees and expenses. See "The Acquisitions." (3) Pursuant to the Merger Agreement, Jacor delivered a $75.0 million Letter of Credit to an escrow agent pending the Effective Time of the Merger. If the Merger is not consummated by May 31, 1997, or in certain other specified circumstances, the Letter of Credit will be drawn upon by Citicasters. See "The Acquisitions." (4) Purchase price due upon final closing of the Noble acquisition, including fees and expenses. See "The Acquisitions." (5) Estimated fees and expenses include the fees and expenses of Jacor in connection with the Financing and financial advisory fees in connection with the Citicasters acquisition. 16 CAPITALIZATION The following table sets forth the capitalization of Jacor on an actual basis as of December 31, 1995 and pro forma as adjusted to give effect to (i) the Offering, (ii) the 1996 Stock Offering (at an assumed public offering price of $20.00 per share), (iii) the LYONs Offering, (iv) the funding of the New Credit Facility as set forth in "Use of Proceeds", (v) the consummation of the Acquisitions and (vi) certain radio station acquisitions and dispositions as described in the Notes to Unaudited Pro Forma Financial Information.
AS OF DECEMBER 31, 1995 ------------------------ PRO FORMA AS ACTUAL ADJUSTED ---------- ------------ (DOLLARS IN THOUSANDS) Long-term debt, including current portion:(1) Borrowings under the New Credit Facility............................................ $ 45,500 $ 445,400 Proceeds of the Offering............................................................ -- 50,000 Citicasters Notes................................................................... -- 125,000 Issuance of the LYONs............................................................... -- 100,000 ---------- ------------ Total long-term debt............................................................ 45,500 720,400 ---------- ------------ Shareholders' equity: Common Stock, no par value, $0.10 per share stated value(2)......................... 1,816 3,191 Additional paid-in capital.......................................................... 116,614 379,239 Common stock warrants(3)............................................................ 388 24,588 Retained earnings................................................................... 20,255 17,032 ---------- ------------ Total shareholders' equity...................................................... 139,073 424,050 ---------- ------------ Total capitalization.................................................................... $ 184,573 $ 1,144,450 ---------- ------------ ---------- ------------
- ------------------------------ (1) See Notes 7 and 14 of Notes to Jacor's Consolidated Financial Statements for additional information regarding the components and terms of Jacor's long-term debt. (2) Excludes (i) options outstanding on the date hereof to purchase approximately 1,565,500 shares of Common Stock at a weighted average exercise price of $8.04, which options have been granted to (a) employees under Jacor's 1993 Stock Option Plan and 1995 Employee Stock Purchase Plan, and (b) Jacor's non-employee directors, (ii) the 1993 Warrants and (iii) the Merger Warrants. (3) In connection with the 1996 Stock Offering, Jacor has determined that it will convert each 1993 Warrant into the right to receive the Fair Market Value. Zell/Chilmark has informed Jacor that it intends to exercise its 1993 Warrants to acquire 629,117 shares of Common Stock in lieu of accepting the Fair Market Value of its 1993 Warrants for proceeds to Jacor totaling approximately $5.2 million. In the event that the holders of the remaining 1,354,583 1993 Warrants elect to receive the Fair Market Value, Jacor will be required to fund approximately $15.8 million assuming that Fair Market Value is $11.70 per 1993 Warrant (based upon the difference between an assumed average market price of $20 per share of Common Stock and the $8.30 exercise price per 1993 Warrant). 17 UNAUDITED PRO FORMA FINANCIAL INFORMATION The following unaudited pro forma financial information (the "Pro Forma Financial Information") is based on the historical financial statements of Jacor, Noble and Citicasters and has been prepared to illustrate the effects of the acquisitions described below and the related financing transactions. The unaudited pro forma condensed consolidated statements of operations for the year ended December 31, 1995 give effect to each of the following transactions as if such transactions had been completed as of January 1, 1995: (i) Jacor's 1995 completed radio station acquisitions and the February 1996 radio station dispositions, (ii) Noble's completed 1995 radio station acquisitions and dispositions, (iii) Citicasters' completed 1995 and January 1996 radio station acquisitions, (iv) the Acquisitions, and (v) the related financing transactions. The pro forma condensed consolidated balance sheet as of December 31, 1995 has been prepared as if such acquisitions and the related financing transactions had occurred on that date. The Acquisitions will be accounted for using the purchase method of accounting. The total purchase costs of the Acquisitions will be allocated to the tangible and intangible assets and liabilities acquired based upon their respective fair values. The allocation of the aggregate purchase price reflected in the Unaudited Pro Forma Financial Information is preliminary. The final allocation of the purchase price will be contingent upon the receipt of final appraisals of the acquired assets and liabilities. The Unaudited Pro Forma Financial Information does not purport to present the actual financial position or results of operations of the Company had the transactions and events assumed therein in fact occurred on the dates specified, nor are they necessarily indicative of the results of operations that may be achieved in the future. The Unaudited Pro Forma Financial Information is based on certain assumptions and adjustments described in the notes hereto and should be read in conjunction therewith. See "Management's Discussion and Analysis of Financial Condition and Results of Operations," and the Consolidated Financial Statements and the Notes thereto for each of Jacor, Citicasters and Noble, included elsewhere in this Prospectus. 18 JACOR COMMUNICATIONS, INC. JACOR/NOBLE COMBINED UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS YEAR ENDED DECEMBER 31, 1995 (DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
JACOR NOBLE PRO JACOR/NOBLE HISTORICAL PRO FORMA JACOR PRO HISTORICAL FORMA COMBINED JACOR ADJUSTMENTS FORMA NOBLE ADJUSTMENTS PRO FORMA ---------- ------------- ----------- ----------- ------------- ----------- Net revenue......................... $ 118,891 $ (678)(a) $ 118,213 $ 41,902 $ 87(b) $ 160,202 Broadcast operating expenses........ 87,290 (1,425)(a) 85,865 31,445 (429)(b) 116,881 Depreciation and amortization....... 9,483 400(a) 9,883 4,107 2,360(c) 16,350 Corporate general and administrative expenses.......................... 3,501 3,501 2,285 (1,388)(d) 4,398 ---------- ------ ----------- ----------- ------------- ----------- Operating income................ 18,617 347 18,964 4,065 (456) 22,573 Interest expense.................... (1,444) (1,444) (9,913) (1,621)(e) (12,978) Interest and investment income...... 1,260 (854)(a) 406 406 Other income (expense), net......... (168) 6(a) (162) 2,619 (2,619)(f) (162) ---------- ------ ----------- ----------- ------------- ----------- Income (loss) before income taxes and extraordinary items......................... 18,265 (501) 17,764 (3,229) (4,696) 9,839 Income tax expense.................. (7,300) 200(g) (7,100) (63) 1,360(g) (5,803) ---------- ------ ----------- ----------- ------------- ----------- Income (loss) before extraordinary items........... $ 10,965 $ (301) $ 10,664 $ (3,292) $ (3,336) $ 4,036 ---------- ------ ----------- ----------- ------------- ----------- ---------- ------ ----------- ----------- ------------- ----------- Income per common share......... $ 0.52 $ 0.51 $ 0.19 ---------- ----------- ----------- ---------- ----------- ----------- Number of common shares used in per share computations................ 20,913 20,913 20,913 ---------- ----------- ----------- ---------- ----------- -----------
See Accompanying Notes to Unaudited Pro Forma Financial Information 19 JACOR COMMUNICATIONS, INC. JACOR/NOBLE/CITICASTERS COMBINED UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS YEAR ENDED DECEMBER 31, 1995 (DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
JACOR/NOBLE CITICASTERS COMBINED HISTORICAL PRO FORMA JACOR/NOBLE/CITICASTERS PRO FORMA CITICASTERS ADJUSTMENTS COMBINED PRO FORMA ----------- ---------- -------------- --------------------- Net revenue...................................... $ 160,202 $ 136,414 $ 6,853(h) $ 303,469 Broadcast operating expenses..................... 116,881 80,929 4,366(h) 195,744 (1,322)(i) (5,110)(j) Depreciation and amortization.................... 16,350 14,635 15,054(k) 46,039 Corporate general and administrative expenses.... 4,398 4,303 1,322(i) 6,655 (3,368)(l) ----------- ---------- -------------- -------- Operating income............................. 22,573 36,547 (4,089) 55,031 Interest expense................................. (12,978) (13,854) (30,613)(m) (57,445) Interest and investment income................... 406 1,231 (767)(h) 870 Other income (expense), net...................... (162) (607) 175(h) (594) ----------- ---------- -------------- -------- Income (loss) before income taxes and extraordinary items........................ 9,839 23,317 (35,294) (2,138) Income tax expense............................... (5,803) (9,000) 10,600(n) (4,203) ----------- ---------- -------------- -------- Income (loss) before extraordinary items..... $ 4,036 $ 14,317 $ (24,694) $ (6,341) ----------- ---------- -------------- -------- ----------- ---------- -------------- -------- Income (loss) per common share............... $ 0.19 $ (0.19 ) ----------- -------- ----------- -------- Number of common shares used in per share computations................................... 20,913 32,658 (o) ----------- -------- ----------- --------
See Accompanying Notes to Unaudited Pro Forma Financial Information 20 JACOR COMMUNICATIONS, INC. JACOR/NOBLE COMBINED UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET DECEMBER 31, 1995 (DOLLARS IN THOUSANDS)
JACOR PRO NOBLE PRO JACOR/NOBLE HISTORICAL FORMA JACOR HISTORICAL FORMA COMBINED JACOR ADJUSTMENTS PRO FORMA NOBLE ADJUSTMENTS PRO FORMA ---------- ----------- ----------- ---------- ----------- ----------- Current assets: Cash............................... $ 7,437 $ 7,437 $ 447 $ 7,884 Accounts receivable................ 25,262 25,262 9,094 34,356 Broadcast program rights........... Prepaid expenses and other current assets........................... 3,916 3,916 2,290 6,206 ---------- ----------- ---------- ----------- Total current assets........... 36,615 36,615 11,831 48,446 Property and equipment............. 30,801 $ (1,414)(p) 29,387 9,333 $ 7,667(q) 46,387 Intangible assets.................. 127,158 (2,501)(p) 124,657 50,730 125,480(q) 300,867 Deferred charges and other assets........................... 14,265 (46)(p) 14,219 5,333 (4,267)(q) 15,285 ---------- ----------- ----------- ---------- ----------- ----------- Total assets................... $ 208,839 $ (3,961) $ 204,878 $ 77,227 $ 128,880 $ 410,985 ---------- ----------- ----------- ---------- ----------- ----------- ---------- ----------- ----------- ---------- ----------- ----------- Current liabilities: Accounts payable, accrued liabilities and other current liabilities...................... $ 12,180 $ 862(p) $ 13,042 $ 12,310 $ (3,611)(r) $ 21,741 ---------- ----------- ----------- ---------- ----------- ----------- Total current liabilities...... 12,180 862 13,042 12,310 (3,611) 21,741 Long-term debt, net of current maturities........................... 45,500 (6,500)(p) 39,000 78,000 82,200(r) 199,200 Other liabilities...................... 12,086 12,086 9,208 28,000(s) 49,294 Shareholders' equity: Common stock....................... 1,816 1,816 1,816 Additional paid-in capita1......... 116,614 116,614 44,231 (44,231)(t) 116,614 Common stock warrants.............. 388 388 388 Retained earnings.................. 20,255 1,677(p) 21,932 (66,522) 66,522(t) 21,932 ---------- ----------- ----------- ---------- ----------- ----------- Total shareholders' equity..... 139,073 1,677 140,750 (22,291) 22,291 140,750 ---------- ----------- ----------- ---------- ----------- ----------- Total liabilities and shareholders' equity......... $ 208,839 $ (3,961) $ 204,878 $ 77,227 $ 128,880 $ 410,985 ---------- ----------- ----------- ---------- ----------- ----------- ---------- ----------- ----------- ---------- ----------- -----------
See Accompanying Notes to Unaudited Pro Forma Financial Information 21 JACOR COMMUNICATIONS, INC. JACOR/NOBLE/CITICASTERS COMBINED UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET DECEMBER 31, 1995 (DOLLARS IN THOUSANDS)
JACOR/NOBLE HISTORICAL CITICASTERS PRO JACOR/NOBLE/CITICASTERS COMBINED PRO FORMA CITICASTERS FORMA ADJUSTMENTS COMBINED PRO FORMA -------------------- ---------- ------------------ --------------------- Current Assets: Cash............................. $ 7,884 $ 3,572 $ (500)(u) $ 3,956 (7,000)(v) Accounts receivable.............. 34,356 32,495 66,851 Broadcast program rights......... 5,162 5,162 Prepaid expenses and other current assets................. 6,206 3,059 9,265 -------- ---------- -------- ----------- Total current assets......... 48,446 44,288 (7,500) 85,234 Broadcast program rights, less current portion.................... 3,296 3,296 Property and equipment............... 46,387 33,878 13,000(w) 93,265 Intangible assets.................... 300,867 312,791 670,227(w) 1,278,985 (4,900)(x) Deferred charges and other assets.... 15,285 22,093 (7,500)(y) 29,878 -------- ---------- -------- ----------- Total assets................. $ 410,985 $ 416,346 $ 663,327 $ 1,490,658 -------- ---------- -------- ----------- -------- ---------- -------- ----------- Current liabilities: Accounts payable, accrued liabilities and other current liabilities.................... $ 21,741 $ 17,061 $ 38,802 Broadcast program right fees payable........................ 5,298 5,298 -------- ---------- ----------- Total current liabilities.... 21,741 22,359 44,100 Broadcast program right fees payable, less current portion............... 2,829 2,829 Long-term debt, net of current maturities......................... 199,200 132,481 $ 288,719(v) 620,400 LYONs Subordinated Notes............. 100,000(v) 100,000 Other liabilities.................... 49,294 98,985 151,000(s) 299,279 Shareholders' equity: Common stock..................... 1,816 200 (200)(t) 3,191 1,375(z) Additional paid-in capital....... 116,614 82,736 (82,736)(t) 379,239 262,625(z) Common stock warrants............ 388 24,200 (aa 24,588 Retained earnings................ 21,932 76,756 (76,756)(t) 17,032 (4,900)(x) -------- ---------- -------- ----------- Total shareholders' equity... 140,750 159,692 123,108 424,050 -------- ---------- -------- ----------- Total liabilities and shareholders' equity....... $ 410,985 $ 416,346 $ 663,327 $ 1,490,658 -------- ---------- -------- ----------- -------- ---------- -------- -----------
See Accompanying Notes to Unaudited Pro Forma Financial Information 22 NOTES TO UNAUDITED PRO FORMA FINANCIAL INFORMATION (DOLLARS IN THOUSANDS) (a) These adjustments reflect additional revenues and expenses for Jacor's acquisitions of radio stations WDUV-FM and WBRD-AM in Tampa Bay and WJBT-FM, WSOL-FM, and WZAZ-AM in Jacksonville, which were completed at various dates in 1995, net of the elimination of 1995 revenues and expenses for radio stations WMYU-FM and WWST-FM in Knoxville, which were sold in February 1996. (b) These adjustments reflect additional revenues and expenses for Noble's acquisition of radio stations WRVF-FM (formerly WLQR-FM) and WSPD-AM in Toledo, and the elimination of revenues and expenses for the sale of radio stations KBEQ-FM and KBEQ-AM in Kansas City, and other miscellaneous non-recurring expenses related to dispositions of properties in 1995. The acquisitions were completed in August 1995 and the dispositions were completed in March 1995. (c) The adjustment reflects the additional depreciation and amortization expense resulting from the allocation of Jacor's purchase price to the assets acquired including an increase in property and equipment and identifiable intangible assets, to their estimated fair market values and the recording of goodwill associated with the acquisition of Noble. See Note (q). Goodwill is amortized over 40 years. (d) The adjustment represents $1,513 of corporate overhead savings for the elimination of redundant management costs and other expenses resulting from the combination of the Jacor and Noble entities, net of $125 additional corporate expenses associated with the purchase of the Toledo stations. (e) The adjustment represents additional interest expense associated with Jacor's borrowings under the Existing Credit Facility to finance the Noble acquisition and refinance existing outstanding borrowings. The assumed interest rate is 7.2%, which represents the current rate as of April 1996 on outstanding borrowings. (f) The adjustment reflects the elimination of the gain on the sale of radio stations KBEQ-FM and AM in Kansas City, and WSSH-AM in Boston, which were sold in March 1995 and January 1995, respectively. (g) To provide for the tax effect of pro forma adjustments using an estimated statutory rate of 40%. The Noble pro forma adjustments include non-deductible amortization of goodwill estimated to be approximately $1,300. (h) The adjustments represent additional revenue and expenses associated with Citicasters June 1995 acquisition of KKCW-FM in Portland and the January 1996 acquisition of WHOK-FM, WLLD-FM, and WLOH-AM in Columbus, including adjustments to investment income related to cash expended in the acquisitions and miscellaneous non-recurring costs. (i) Adjustment to reclassify miscellaneous broadcast operating expenses to conform with Jacor's presentation. (j) The adjustment reflects $5,110 of cost savings resulting from the elimination of redundant broadcast operating expenses arising from the operation of multiple stations in certain markets. Such pro forma cost savings are expected to be $2,220 for programming and promotion, $970 for news, $360 for technical and engineering and $1,560 for general and administrative expenses. (k) The adjustment reflects the additional depreciation and amortization expense resulting from the allocation of Jacor's purchase price to the assets acquired including an increase in property and equipment and identifiable intangible assets to their estimated fair market values and the recording of goodwill associated with the acquisition of Citicasters. See Note (w). Goodwill is amortized over 40 years. (l) The adjustment represents $3,368 of corporate overhead savings for the elimination of redundant management costs and other expenses resulting from the combination with Citicasters. 23 NOTES TO UNAUDITED PRO FORMA FINANCIAL INFORMATION (DOLLARS IN THOUSANDS)--(CONTINUED) (m) Represents the adjustment to interest expense associated with the Notes, the Citicasters Notes, the LYONs and borrowings under the New Credit Facility with an assumed blended rate of 7.875%. The adjustment reflects additional interest expense on borrowings necessary to complete the Merger, and refinance outstanding borrowings under the Existing Credit Facility in connection with the Noble acquisition. A change of .125% in interest rates would result in a change in interest expense and income (loss) before extraordinary items of approximately $900 and $540, respectively. See Note (v) for composition of borrowings. (n) To provide for the tax effect of pro forma adjustments using an estimated statutory rate of 40%. The Citicasters pro forma adjustments include non-deductible amortization of goodwill estimated to be approximately $8,800. (o) The pro forma weighted average shares outstanding includes all shares of Common Stock outstanding prior to the 1996 Stock Offering. The weighted average shares of Jacor do not reflect any options and warrants outstanding prior to the 1996 Stock Offering or warrants to be issued to the Citicasters shareholders to consummate the acquisition, as they are antidilutive. The LYONs are not common stock equivalents and are therefore, excluded from the computation. (p) These adjustments reflect the February 1996 sale of radio stations WMYU-FM and WWST-FM in Knoxville and the tax liability related to the gain on the sale. Proceeds from the sale of $6,500 are assumed to reduce outstanding debt. (q) The adjustment represents the allocation of the purchase price of Noble to the estimated fair value of the assets acquired and liabilities assumed, and the recording of goodwill associated with the acquisition.
ESTIMATED FAIR MARKET VALUE -------------- Property and equipment........................................................ $ 17,000 Intangible assets............................................................. 176,210 Cash.......................................................................... 447 Accounts receivable........................................................... 9,094 Prepaid expenses and other current assets..................................... 2,290 Deferred charges and other assets............................................. 1,066 Accounts payable, accrued liabilities and other current liabilities........... (8,699) Other liabilities............................................................. (37,208) -------------- $ 160,200 -------------- --------------
(r) The adjustment assumes that the $3,611 current portion of Noble debt is financed on a long-term basis and net additional borrowings to complete the Noble acquisitions as follows: Historical Jacor debt.......................................... $ 45,500 Historical Noble debt.......................................... 78,000 Proceeds from sale of Knoxville stations....................... (6,500) Pro forma adjustment........................................... 82,200 ----------- Assumed borrowings after acquisitions.......................... $ 199,200 ----------- -----------
(s) The adjustment represents the additional deferred tax liability associated with the difference between the book and tax basis of assets and liabilities, excluding goodwill, after the allocation of the purchase price. (t) The adjustment reflects the elimination of historical stockholders' equity, as the acquisition will be accounted for as a purchase. 24 NOTES TO UNAUDITED PRO FORMA FINANCIAL INFORMATION (DOLLARS IN THOUSANDS)--(CONTINUED) (u) The adjustment reflects $500 cash expended in the acquisition of the Columbus stations in January 1996. (v) The pro forma adjustment represents the net additional borrowings required to complete the Citicasters acquisition (including $16,000 for the acquisition of the Columbus stations in January 1996), assuming the use of $7,000 of excess cash, as follows: Historical Citicasters debt....................................... $ 132,481 Jacor/Noble pro forma debt........................................ 199,200 Pro forma adjustments, including a $2,519 fair market value adjustment for Citicasters debt................................. 388,719 --------- Assumed borrowings after acquisitions............................. $ 720,400 --------- ---------
The assumed borrowings after the acquisitions are as follows: Proceeds of this Offering......................................... $ 50,000 Borrowings under the New Credit Facility.......................... 445,400 Citicasters Notes................................................. 125,000 Issuance of the LYONs............................................. 100,000 --------- $ 720,400 --------- ---------
(w) The adjustments represent the allocation of the purchase price of Citicasters (including the 1996 Columbus acquisitions) to the estimated fair value of the assets acquired and liabilities assumed, and the recording of goodwill associated with the acquisition as follows:
ESTIMATED FAIR MARKET VALUE -------------- Property and equipment........................................................ $ 46,878 Intangible assets............................................................. 983,018 Cash.......................................................................... 3,072 Accounts receivable........................................................... 32,495 Broadcast program rights...................................................... 8,458 Prepaid expenses and other current assets..................................... 3,059 Deferred charges and other assets............................................. 14,593 Accounts payable, accrued liabilities and other current liabilities........... (17,061) Broadcast program rights fees payable......................................... (8,127) Other liabilities............................................................. (249,985) Long-term debt................................................................ (151,000) -------------- $ 665,400 -------------- --------------
The purchase price is summarized as follows: Excess cash.................................................... $ 7,000 Pro forma borrowings: Citicasters.................................................. (16,000) Jacor........................................................ 386,200 Merger Warrants issued......................................... 24,200 Common Stock issued............................................ 264,000 ----------- $ 665,400 ----------- -----------
(x) Adjustment to write off deferred financing costs for the Existing Credit Facility anticipated to be refinanced in connection with the acquisition of Citicasters. 25 NOTES TO UNAUDITED PRO FORMA FINANCIAL INFORMATION (DOLLARS IN THOUSANDS)--(CONTINUED) (y) The adjustment represents a $7,500 cash deposit made in 1995 for the acquisition of the Columbus stations, which was allocated to the fair market value of the assets acquired when the acquisition was completed in January 1996. (z) Adjustment represents assumed proceeds of $264,000 from the 1996 Stock Offering, net of offering costs estimated to be $11,000. (aa) Adjustment represents the value assigned to the Merger Warrants to be issued to Citicasters shareholders in connection with the consummation of the Merger, which Merger Warrants will be exercisable for 4,400,000 shares of Common Stock in the aggregate. The value was determined assuming that the exercise price for each full share of Common Stock issued upon exercise of Merger Warrants is $28 per share. 26 SELECTED HISTORICAL FINANCIAL DATA (DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) JACOR The selected consolidated financial data for Jacor presented below for, and as of the end of each of the years in the five-year period ended December 31, 1995, is derived from Jacor's Consolidated Financial Statements which have been audited by Coopers & Lybrand L.L.P., independent accountants. The consolidated financial statements at December 31, 1994 and 1995 and for each of the three years in the period ended December 31, 1995 and the auditors' report thereon are included elsewhere in this Prospectus. This selected consolidated financial data should be read in conjunction with the "Unaudited Pro Forma Financial Information." Comparability of Jacor's historical consolidated financial data has been significantly impacted by acquisitions, dispositions and the recapitalization and refinancing completed in the first quarter of 1993.
YEAR ENDED DECEMBER 31, ------------------------------------------------------- 1991 1992 1993 1994 1995 ---------- ---------- --------- --------- --------- OPERATING STATEMENT DATA:(1) Net revenue...................................... $ 64,238 $ 70,506 $ 89,932 $ 107,010 $ 118,891 Broadcast operating expenses..................... 48,206 55,782 69,520 80,468 87,290 ---------- ---------- --------- --------- --------- Station operating income excluding depreciation and amortization............................... 16,032 14,724 20,412 26,542 31,601 Depreciation and amortization.................... 7,288 6,399 10,223 9,698 9,483 Reduction in carrying value of assets to net realizable value............................... 8,600 Corporate general and administrative expenses.... 2,682 2,926 3,564 3,361 3,501 ---------- ---------- --------- --------- --------- Operating income (loss).......................... 6,062 (3,201) 6,625 13,483 18,617 Net interest income (expense).................... (16,226) (13,443) (2,476) 684 (184) Gain on sale of radio stations................... 13,014 Other non-operating expenses, net................ (302) (7,057) (11) (2) (168) ---------- ---------- --------- --------- --------- Income (loss) from continuing operations before income tax and extraordinary item.............. $ 2,548 $ (23,701) $ 4,138 $ 14,165 $ 18,265 ---------- ---------- --------- --------- --------- ---------- ---------- --------- --------- --------- Net income (loss)................................ $ (1,468) $ (23,701) $ 1,438 $ 7,852 $ 10,965 ---------- ---------- --------- --------- --------- ---------- ---------- --------- --------- --------- Net income (loss) per common share:(2) primary and fully diluted.................... $ 2.32 $ (61.50) $ 0.10 $ 0.37 $ 0.52 ---------- ---------- --------- --------- --------- ---------- ---------- --------- --------- --------- Weighted average shares outstanding:(2) Primary and fully diluted.................... 406 381 14,505 21,409 20,913 ---------- ---------- --------- --------- --------- ---------- ---------- --------- --------- --------- OTHER FINANCIAL DATA:(1) Broadcast cash flow(3)........................... $ 16,032 $ 14,724 $ 20,412 $ 26,542 $ 31,601 ---------- ---------- --------- --------- --------- ---------- ---------- --------- --------- --------- Broadcast cash flow margin(4).................... 25.0% 20.9% 22.7% 24.8% 26.6% EBITDA(3)........................................ $ 13,350 $ 11,798 $ 16,848 $ 23,181 $ 28,100 Capital expenditures............................. 1,181 915 1,495 2,221 4,969 Ratio of earnings to fixed charges(5)............ 1.1x -- 1.9x 6.0x 5.7x AS OF DECEMBER 31, ------------------------------------------------------- 1991 1992 1993 1994 1995 ---------- ---------- --------- --------- --------- BALANCE SHEET DATA:(1) Working capital (deficit)........................ $ (128,455) $ (140,547 (6) $ 38,659 $ 44,637 $ 24,436 Intangible assets (net of accumulated amortization).................................. 81,738 70,038(6) 84,991 89,543 127,158 Total assets..................................... 125,487 122,000(6) 159,909 173,579 208,839 Total long-term debt (including current portion)....................................... 137,667 140,542(6) 45,500 Common stock purchase warrants................... 1,257 487(6) 390 390 388 Shareholders' equity (deficit)................... (27,383) (50,840 (6) 140,413 149,044 139,073
27 - ------------------------------ (1) The comparability of the information reflected in this selected financial data is affected by Jacor's purchase of radio station KBPI-FM (formerly KAZY-FM), in Denver (July 1993); the purchase and interim operation of radio station WOFX-FM (formerly WPPT-FM) under a local marketing agreement in Cincinnati (April 1994); the purchase of radio stations WJBT-FM, WZAZ- AM, and WSOL-FM (formerly WHJX-FM) in Jacksonville (August 1995); the purchase of radio stations WDUV-FM and WBRD-AM in Tampa (August 1995); the sale of radio stations WMJI-FM, in Cleveland and WYHY(FM), in Nashville (January 1991), the sale of Telesat Cable TV (May 1994), the January 11, 1993 recapitalization plan, that substantially modified Jacor's debt and capital structure (such recapitalization was accounted for as if it had been completed January 1, 1993) and the March 1993 refinancing. For information related to acquisitions in 1993, 1994 and 1995 see Notes 2 and 3 of Notes to Consolidated Financial Statements. For information related to the disposition during 1994, see Note 4 of Notes to Consolidated Financial Statements. (2) Income (loss) per common share for the two years ended December 31, 1992 is based on the weighted average number of shares of Common Stock outstanding and gives consideration to the dividend requirements of the convertible preferred stock and accretion of the change in redemption value of certain common stock warrants. Jacor's stock options and convertible preferred stock were antidilutive and, therefore, were not included in the computations. The redeemable common stock warrants were antidilutive for 1992 and were not included in the computations. Such warrants were dilutive in 1991 using the "equity method" under Emerging Issues Task Force Issue No. 88-9 and, therefore, the common shares issuable upon conversion were included in the 1991 computation. Income per share for the three years ended December 31, 1995 is based on the weighted average number of common shares outstanding and gives effect to both dilutive stock options and dilutive stock purchase warrants during the periods. Income (loss) per common share and weighted average shares outstanding for the two years ended December 31, 1992 are adjusted to reflect the 0.0423618 reverse stock split in Common Stock effected by the January 1993 recapitalization. (3) "Broadcast cash flow" means operating income before reduction in carrying value of assets, depreciation and amortization and corporate general and administrative expenses. "EBITDA" means operating income before reduction in carrying value of assets, depreciation and amortization. Broadcast cash flow and EBITDA should not be considered in isolation from, or as a substitute for, operating income, net income or cash flow and other consolidated income or cash flow statement data computed in accordance with generally accepted accounting principles or as a measure of a company's profitability or liquidity. Although this measure of performance is not calculated in accordance with generally accepted accounting principles, it is widely used in the broadcasting industry as a measure of a company's operating performance because it assists in comparing station performance on a consistent basis across companies without regard to depreciation and amortization, which can vary significantly depending on accounting methods (particularly where acquisitions are involved) or non-operating factors such as historical cost bases. Broadcast cash flow also excludes the effect of corporate general and administrative expenses, which generally do not relate directly to station performance. (4) Broadcast cash flow margin equals broadcast cash flow as a percentage of net revenue. (5) For the purpose of computing the ratio of earnings to fixed charges as prescribed by the rules and regulations of the Securities and Exchange Commission, earnings represent pretax income from continuing operations plus fixed charges, less interest capitalized. Fixed charges represent interest (including amounts capitalized), the portion of rent expenses deemed to be interest and amortization of deferred financing costs. In 1992, fixed charges exceeded earnings by approximately $23.7 million. (6) Pro forma amounts as of December 31, 1992, to give effect to the January 11, 1993 recapitalization plan that substantially modified Jacor's debt and capital structure (in 000s): Working capital............................................................. $15,933 Intangible assets (net of accumulated amortization)......................... 82,857 Total assets................................................................ 142,085 Long-term debt.............................................................. 64,178 Common stock purchase warrants.............................................. 403 Shareholders' equity........................................................ 50,890
28 CITICASTERS The selected consolidated financial data for Citicasters presented below for, and as of the end of each of the years in the five-year period ended December 31, 1995, is derived from Citicasters' Consolidated Financial Statements which have been audited by Ernst & Young LLP, independent accountants. The consolidated financial statements at December 31, 1994 and 1995 and for each of the three years in the period ended December 31, 1995 and the auditors' report thereon are included elsewhere in this Prospectus. This selected consolidated financial data should be read in conjunction with the "Unaudited Pro Forma Financial Information." Comparability of historical consolidated financial data has been significantly impacted by the dispositions of four television stations in 1994, the adoption of "fresh-start reporting" by Citicasters in December 1993, the writedown of intangible assets to estimated fair values in 1992 and the sale of its entertainment business in 1991.
PREDECESSOR(1) CITICASTERS ----------------------------------------- ---------------------- YEAR ENDED DECEMBER 31, ----------------------------------------------------------------- 1991 1992 1993 1994 1995 ---------- -------------- ------------- ---------- ---------- OPERATING STATEMENT DATA:(2) Net revenue.............................. $ 201,556 $ 210,821 $ 205,168 $ 197,043 $ 136,414 Broadcast operating expense.............. 136,629 142,861 133,070 117,718 80,929 ---------- -------------- ------------- ---------- ---------- Station operating income excluding depreciation and amortization.......... 64,927 67,960 72,098 79,325 55,485 Depreciation and amortization............ 48,219 47,617 28,119 22,946 14,635 Reduction in carrying value of assets to net realizable value................... 658,314(3) Corporate general and administrative expenses............................... 4,367 4,091 3,996 4,796 4,303 ---------- -------------- ------------- ---------- ---------- Operating income (loss).................. 12,341 (642,062) 39,983 51,583 36,547 Net interest income (expense)............ (89,845) (69,826) (64,942) (31,979) (13,854) Minority interest........................ (28,822) (30,478) (26,776) Gain on sale of television stations...... 95,339 Investment income........................ 1,296 553 305 1,216 1,231 Miscellaneous income (expense), net...... 33,133 4,036 (494) 447 (607) Reorganization items..................... (14,872) ---------- -------------- ------------- ---------- ---------- Income (loss) from continuing operations before income tax and extraordinary item................................... $ (71,897) $ (737,777) $ (66,796) $ 116,606 $ 23,317 ---------- -------------- ------------- ---------- ---------- ---------- -------------- ------------- ---------- ---------- Net income (loss)........................ $ 84,485 $ (596,864) $ 341,344(4) $ 63,106 $ 14,317 ---------- -------------- ------------- ---------- ---------- ---------- -------------- ------------- ---------- ---------- Net earnings per share(5)................ $ 2.55 $ 0.68 ---------- ---------- ---------- ---------- Average common shares(5)................. 24,777 21,017 ---------- ---------- ---------- ---------- OTHER FINANCIAL DATA:(2) Broadcast cash flow(6)................... $ 64,927 $ 67,960 $ 72,098 $ 79,325 $ 55,485 ---------- -------------- ------------- ---------- ---------- ---------- -------------- ------------- ---------- ---------- Broadcast cash flow margin(7)............ 32.2% 32.2% 35.1% 40.3% 40.7% EBITDA(6)................................ $ 60,560 $ 63,869 $ 68,102 $ 74,529 $ 51,182 Capital expenditures..................... 7,014 6,747 5,967 7,569 11,857 PREDECESSOR CITICASTERS -------------------------- ------------------------------------- DECEMBER 31, ----------------------------------------------------------------- 1991 1992 1993(8) 1994 1995 ---------- -------------- ------------- ---------- ---------- BALANCE SHEET DATA: Working capital (deficit)................. $ (52,520) $ (611,634) $ 1,485 $ 47,518 $ 21,929 Intangible assets (net of accumulated amortization)........................... 1,290,294 539,634 574,878 274,695 312,791 Total assets.............................. 1,475,929 713,830 719,569 403,492 416,346 Long-term debt (including current portion)................................ 692,636 634,777 432,568 122,291 132,481 Shareholders' equity (deficit)............ 257,835 (339,029) 138,588 150,937 159,692
29 - ------------------------------ (1) Prior to its emergence from Chapter 11 bankruptcy in December 1993, Citicasters was known as Great American Communications Company (the "Predecessor"). As a result of the application of "fresh-start reporting," the selected financial data for periods prior to December 31, 1993 are not comparable to periods subsequent to such date. (2) The 1995 acquisition of four FM stations (KKCW, WTBT, WHOK and WLLD) and WLOH-AM increased broadcast cash flow by approximately 2%. The 1994 sale of four television stations (KTSP, KSAZ, WGHP and WDAF) significantly affects comparison of net revenues, operating expenses and broadcast cash flow for 1994 as compared to 1993 and 1995. The purchase and sale of radio stations in 1994 did not effect the comparison of broadcast cash flow, because the cash flow of the stations sold was approximately equal to the cash flow of the stations purchased. (3) The recorded amount of intangible assets as of December 31, 1992 was reduced by $658.3 million to reflect the carrying value of the broadcasting assets at estimated fair market value at that time. (4) Net income for the year ended December 31, 1993 includes, as an extraordinary item, a one-time net gain of $408.0 million relating to debt discharged in the reorganization. Net loss for 1992 includes a $10.7 million gain from discontinued operations and a $5.7 million extraordinary gain from early extinguishment of debt. Net income from 1991 includes $39.9 million from discontinued operations and $77.4 million extraordinary gain from early extinguishment of debt. (5) Per share data are not presented for the Predecessor due to the general lack of comparability as a result of the reorganization. (6) "Broadcast cash flow" means operating income before reduction in carrying value of assets, depreciation and amortization and corporate general and administrative expenses. "EBITDA" means operating income before reduction in carrying value of assets, depreciation and amortization. Broadcast cash flow and EBITDA should not be considered in isolation from, or as a substitute for, operating income, net income or cash flow and other consolidated income or cash flow statement data computed in accordance with generally accepted accounting principles or as a measure of a company's profitability or liquidity. Although this measure of performance is not calculated in accordance with generally accepted accounting principles, it is widely used in the broadcasting industry as a measure of a company's operating performance because it assists in comparing station performance on a consistent basis across companies without regard to depreciation and amortization, which can vary significantly depending on accounting methods (particularly where acquisitions are involved) or non-operating factors such as historical cost bases. Broadcast cash flow also excludes the effect of corporate general and administrative expenses, which generally do not relate directly to station performance. (7) Broadcast cash flow margin equals broadcast cash flow as a percentage of net revenue. (8) Balance sheet data at December 31, 1993 reflects the adoption of "fresh-start reporting" as discussed in more detail in Note B to Citicasters' Consolidated Financial Statements. 30 NOBLE The following data has been derived from Noble's Consolidated Financial Statements audited by Price Waterhouse LLP, independent accountants. Consolidated balance sheets at December 25, 1994 and December 31, 1995 and the related consolidated statements of operations and of cash flows for each of the three years in the period ended December 31, 1995 and notes thereto appear elsewhere in this Prospectus. The report of Price Waterhouse LLP which also appears herein contains an explanatory paragraph describing Jacor's agreement to purchase Noble as described in Note 2 to Noble's Consolidated Financial Statements. The comparability of the consolidated financial data has been significantly impacted by acquisitions, dispositions, Noble's August 1995 restructuring and its December 1991 restructuring.
YEAR ENDED -------------------------------------------------------------------- DECEMBER 28, DECEMBER 27, DECEMBER 26, DECEMBER 25, DECEMBER 31, 1991 1992 1993 1994 1995 ------------ ------------ ------------ ------------ ------------ OPERATING STATEMENT DATA:(1) Net revenue............................. $ 58,283 $ 55,368 $ 47,509 $ 49,602 $ 41,902 Broadcast operating expense............. 44,191 43,565 36,944 37,892 31,445 ------------ ------------ ------------ ------------ ------------ Station operating income excluding depreciation and amortization......... 14,092 11,803 10,565 11,710 10,457 Depreciation and amortization........... 10,005 8,305 6,916 6,311 4,107 Reduction in carrying value of assets to net realizable value.................. 10,367(2) 7,804(2) Corporate general administrative expenses.............................. 3,013 2,483 2,702 2,621 2,285 ------------ ------------ ------------ ------------ ------------ Operating income (loss)................. 1,074 (9,352) 947 (5,026) 4,065 Net interest income (expense)........... (25,063) (10,126) (7,602) (10,976) (9,913) Net gain (loss) on sale of radio stations.............................. (8,403) 7,909 Other income (expense).................. (7,588) (1,905) 2,619 ------------ ------------ ------------ ------------ ------------ Income (loss) before income tax, extraordinary item and cumulative effect of change in accounting principle............................. $ (31,577) $ (29,786) $ 1,254 $ (16,002) $ (3,229) ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ Net income (loss)....................... $ (31,665) $ (5,949)(3) $ 13,452(4) $ (16,038) $ 56,853(5) ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ OTHER FINANCIAL DATA:(1) Broadcast cash flow(6).................. $ 14,092 $ 11,803 $ 10,565 $ 11,710 $ 10,457 ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ Broadcast cash flow margin(7)........... 24.18% 21.32% 22.24% 23.61% 24.96% EBITDA(6)............................... $ 11,079 $ 9,320 $ 7,863 $ 9,089 $ 8,172 Capital expenditures.................... 601 532 3,009 1,124 2,851 AS OF -------------------------------------------------------------------- DECEMBER 28, DECEMBER 27, DECEMBER 26, DECEMBER 25, DECEMBER 31, 1991 1992 1993 1994 1995 ------------ ------------ ------------ ------------ ------------ BALANCE SHEET DATA:(1) Working capital (deficit)............... $ 8,565 $ 2,265 $ 1,002 $ (186,133) $ (479) Intangible assets (net of accumulated amortization)(2)...................... 165,052 125,770 101,555 89,849 50,730 Total assets............................ 207,272 156,740 128,055 116,023 77,227 Long-term debt (including current portion).............................. 272,572 231,980 186,975 186,886 81,611 Stockholders' equity (deficit).......... (114,306) (120,124) (106,672) (122,710) (22,291)
- ------------------------------ (1) The comparability of the information reflected in this selected financial data is affected by Noble's purchase of radio stations WSPD-AM and WRVF-FM in Toledo (August 1995); the sale of radio stations KBEQ-FM/AM in Kansas City (March 1995); the 31 sale of radio stations KMJQ-FM and KYOK-AM in Houston (December 1994); the sale of radio stations WBAB-FM and WGBB-AM in New York (March 1993); the sale of WSSH-FM in Boston (April 1993); the purchase of radio stations KATZ-AM and KNJZ-FM in St. Louis (May 1993); the August 1995 restructuring; and the December 1991 restructuring. (2) The recorded amount of intangible assets was reduced by $10.4 million as of December 27, 1992 and $7.8 million as of December 25, 1994 to reflect the carrying value of the broadcasting assets at their estimated fair market values. (3) Net loss for the year ended December 27, 1992 includes, as an extraordinary item, a gain of $23.9 million relating to debt discharged in the December 1991 restructuring. (4) Net income for the year ended December 26, 1993 includes, as an extraordinary item, a $12.2 million gain on forgiveness of debt, and a $354 thousand cumulative effect of a change in accounting principle. (5) Net income for the year ended December 31, 1995 includes, as an extraordinary item, a $60.1 million gain resulting from the extinguishment of debt in association with the August 1995 restructuring. (6) "Broadcast cash flow" means operating income before reduction in carrying value of assets, depreciation and amortization and corporate general and administrative expenses. "EBITDA" means operating income before reduction in carrying value of assets, depreciation and amortization. Broadcast cash flow and EBITDA should not be considered in isolation from, or as a substitute for, operating income, net income or cash flow and other consolidated income or cash flow statement data computed in accordance with generally accepted accounting principles or as a measure of a company's profitability or liquidity. Although this measure of performance is not calculated in accordance with generally accepted accounting principles, it is widely used in the broadcasting industry as a measure of a company's operating performance because it assists in comparing station performance on a consistent basis across companies without regard to depreciation and amortization, which can vary significantly depending on accounting methods (particularly where acquisitions are involved) or non-operating factors such as historical cost bases. Broadcast cash flow also excludes the effect of corporate general and administrative expenses, which generally do not relate directly to station performance. (7) Broadcast cash flow margin equals broadcast cash flow as a percentage of net revenue. 32 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS GENERAL The performance of a radio station group, such as Jacor, is customarily measured by its ability to generate broadcast cash flow. The primary source of Jacor's revenue is the sale of broadcasting time on its radio stations for advertising. Jacor's significant operating expenses are employee salaries, sports broadcasting rights fees, programming expenses, advertising and promotion expenses, rental of premises for studios and transmitting equipment and music license royalty fees. Jacor works closely with local station management to implement cost control measures. Jacor's revenue is affected primarily by the advertising rates Jacor's radio stations are able to charge. These rates are, in large part, based on a station's ability to attract audiences in the demographic groups targeted by its advertisers, as principally measured by Arbitron Metro Area Ratings Surveys. Most advertising contracts are short-term and run only for a few weeks. Most of Jacor's revenue is generated from local advertising, which is sold by the station's sales staff. In 1995, approximately 85% of Jacor's gross revenue was from local advertising and approximately 15% was from national advertising. A station's local sales staff solicits advertising, either directly from the local advertiser or through an advertising agency for the local advertiser. National advertising sales for most of Jacor's stations are made by Jacor's national sales managers in conjunction with the efforts of an independent advertising representative who specializes in national sales and is compensated on a commission-only basis. Sports broadcasting and full-service programming features play an integral part in Jacor's operating strategy. As a result, because of the rights fees and related costs of broadcasting professional baseball, football and hockey, as well as the costs related to the full-service programming features of its AM radio stations, Jacor's broadcast cash flow margins are typically lower than its competitors'. Jacor's first calendar quarter historically produces the lowest revenue for the year, and the second and third quarters historically produce the highest revenue for the year, due in part to revenue received during the summer months related to the broadcast of Major League Baseball games. During 1995, however, Jacor recorded higher broadcast revenue and broadcast operating expenses during the third and fourth quarters than those recorded during the second quarter due to the Major League Baseball strike. As a result of the strike, second quarter revenue and operating expenses were lower. For the entire twelve months of 1995, the strike did not have a material impact on Jacor's station operating income (broadcast revenue less broadcast operating expenses). Jacor's operating results in any period may be affected by the incurrence of advertising and promotion expenses that do not produce commensurate revenue in the period in which the expenses are incurred. As a result of Arbitron's quarterly reporting of ratings, Jacor's ability to realize revenue as a result of increased advertising and promotional expenses may be delayed for several months. The comparability of financial information for the years ended December 31, 1993, 1994 and 1995 is affected by the July 1993 purchase of radio station KBPI-FM (formerly KAZY-FM) in Denver; the May 1994 sale of Telesat Cable TV; the June 1995 purchase of radio station WOFX-FM (formerly WPPT-FM) in Cincinnati, and interim operation of such station from April 1994 to June 1995 under a LMA; the August 1995 purchases of radio stations WJBT-FM, WZAZ-AM, and WSOL-FM (formerly WHJX-FM), each located in Jacksonville, and WDUV-FM and WBRD-AM, each located in Tampa. With these acquisitions, Jacor expects to realize certain cost savings and increased ratings through format modifications and thereby improve operating results in these markets. The acquisitions discussed above and the Acquisitions will increase Jacor's net revenue, broadcast operating expenses, depreciation and amortization, corporate general and administrative expenses, and interest expense. Accordingly, past financial performance should not be considered a reliable indicator of future performance, and investors should not use historical trends to anticipate results or trends in future periods. 33 General economic conditions have an impact on Jacor's business and financial results. From time to time the markets in which Jacor operates experience weak economic conditions that may negatively affect revenue of Jacor. However, management believes that this impact will be somewhat softened by Jacor's diverse geographical presence. In the following analysis, management discusses the broadcast cash flow of Jacor. "Broadcast cash flow" means operating income before reduction in carrying value of assets, depreciation and amortization and corporate general and administrative expenses. Broadcast cash flow should not be considered in isolation from, or as a substitute for, operating income, net income or cash flow and other consolidated income or cash flow statement data computed in accordance with generally accepted accounting principles or as a measure of a company's profitability or liquidity. Although this measure of performance is not calculated in accordance with generally accepted accounting principles, it is widely used in the broadcasting industry as a measure of a company's operating performance because it assists in comparing station performance on a consistent basis across companies without regard to depreciation and amortization, which can vary significantly depending on accounting methods (particularly where acquisitions are involved) or non-operating factors such as historical cost bases. Broadcast cash flow also excludes the effect of corporate general and administrative expenses, which generally do not relate directly to station performance. THE YEAR ENDED 1995 COMPARED TO THE YEAR ENDED 1994 BROADCAST REVENUE for 1995 was $133.1 million, an increase of $13.5 million or 11.3% from $119.6 million during 1994. This increase resulted from an increase in advertising rates in both local and national advertising and from the revenue generated at those properties owned or operated during 1995 but not during the comparable 1994 period. On a "same station" basis--reflecting results from stations operated for the entire twelve months of both 1995 and 1994--broadcast revenue for 1995 was $125.3 million, an increase of $8.4 million or 7.2% from $116.9 million for 1994. AGENCY COMMISSIONS for 1995 were $14.2 million, an increase of $1.6 million or 12.6% from $12.6 million during 1994 due to the increase in broadcast revenue. Agency commissions increased at a greater rate than broadcast revenue due to a greater proportion of agency sales. BROADCAST OPERATING EXPENSES for 1995 were $87.3 million, an increase of $6.8 million or 8.5% from $80.5 million during 1994. These expenses increased as a result of increased selling and other payroll costs, programming costs and expenses incurred at those properties owned or operated during 1995 but not during the comparable 1994 period. On a "same station" basis, broadcast operating expenses for 1995 were $81.3 million, an increase of $4.2 million or 5.5% from $77.1 million for 1994. DEPRECIATION AND AMORTIZATION for 1995 and 1994 was $9.5 million and $9.7 million, respectively. OPERATING INCOME for 1995 was $18.6 million, an increase of $5.1 million or 38.1% from an operating income of $13.5 million for 1994. INTEREST EXPENSE for 1995 was $1.4 million, an increase of $0.9 million or 170.1% from $0.5 million for 1994. Interest expense increased due to an increase in outstanding debt that was incurred in connection with acquisitions and stock repurchases. NET INCOME for 1995 was $11.0 million, compared to net income of $7.9 million reported by Jacor for 1994. The 1994 period includes income tax expense of $6.3 million, while the 1995 period includes $7.3 million of income tax expense. BROADCAST CASH FLOW for 1995 was $31.6 million, an increase of $5.1 million or 19.2%, from $26.5 million during 1994. On a "same station" basis, broadcast cash flow for 1995 was $30.5 million, an increase of $3.1 million or 11.0%, from $27.4 million for 1994. THE YEAR ENDED 1994 COMPARED TO THE YEAR ENDED 1993 BROADCAST REVENUE for 1994 was $119.6 million, an increase of $18.9 million or 18.8% from $100.7 million during 1993. This increase resulted from an increase in advertising rates in both local and national advertising and from the revenue generated at those properties owned or operated during 1994 but not 34 during the comparable 1993 period. On a "same station" basis--reflecting results from stations operated for the entire twelve months of both 1994 and 1993--broadcast revenue for 1994 was $110.7 million, an increase of $11.6 million or 11.6% from $99.1 million for 1993. AGENCY COMMISSIONS for 1994 were $12.6 million, an increase of $1.8 million or 16.8% from $10.8 million during 1993 due to the increase in broadcast revenue. Agency commissions increased at a lesser rate than broadcast revenue due to a greater proportion of direct sales. BROADCAST OPERATING EXPENSES for 1994 were $80.5 million, an increase of $11.0 million or 15.7% from $69.5 million during 1993. These expenses increased as a result of expenses incurred at those properties owned or operated during 1994 but not during the comparable 1993 period and, to a lesser extent, increased selling and other payroll costs and programming costs. On a "same station" basis, broadcast operating expenses for 1994 were $72.0 million, an increase of $4.1 million or 6.1% from $67.9 million for 1993. DEPRECIATION AND AMORTIZATION for 1994 and 1993 was $9.7 million and $10.2 million, respectively. OPERATING INCOME for 1994 was $13.5 million, an increase of $6.9 million or 103.5% from an operating income of $6.6 million for 1993. INTEREST EXPENSE for 1994 was $0.5 million, a decrease of $2.2 million or 80.5% from $2.7 million for 1993. Interest expense declined due to the reduction in outstanding debt, such debt having been retired from the proceeds of Jacor's November 1993 equity offering. NET INCOME for 1994 was $7.9 million, compared to net income of $1.4 million reported by Jacor for 1993. The 1993 period includes income tax expense of $2.7 million, while the 1994 period includes $6.3 million of income tax expense. BROADCAST CASH FLOW for 1994 was $26.5 million, an increase of $6.1 million or 29.9%, from $20.4 million during 1993. On a "same station" basis, broadcast cash flow for 1994 was $26.4 million, an increase of $6.0 million or 29.0%, from $20.4 million for 1993. LIQUIDITY AND CAPITAL RESOURCES Jacor began 1995 with no outstanding debt and $27.0 million in cash and cash equivalents. During 1995, Jacor used $59.8 million in cash for acquisitions of radio stations and licenses and for loans made in connection with Jacor's JSAs and $21.7 million in cash to purchase shares of its Common Stock. These funds came from cash on hand together with cash provided from operating activities and draws under Jacor's 1993 credit agreement aggregating $45.5 million. During 1995, Jacor made capital expenditures of approximately $5.0 million. Jacor estimates that capital expenditures for 1996 will be approximately $6.0 million which includes approximately $2.5 million to purchase the building currently housing the offices and studios of its Tampa radio stations and to complete the relocation of the offices and studios of its Atlanta radio stations. Jacor estimates that capital expenditures for the properties to be acquired from Citicasters and Noble would be approximately $4.0 million in the 12-month period following the consummation of the Acquisitions. The actual level of spending will depend on a variety of factors, including general economic conditions and the Company's business. In February 1996, Jacor entered into the Existing Credit Facility which provided for a $300.0 million reducing revolving facility that reduces on a quarterly basis commencing March 31, 1997. The credit facility bears interest at floating rates based on a Eurodollar rate or a bank base rate. See "Description of Other Indebtedness." In connection with the Merger, Jacor anticipates entering into the New Credit Facility which would provide for availability of $600.0 million pursuant to a reducing revolving facility that would reduce on a quarterly basis commencing one year from the date of the facility. It is anticipated that the New Credit Facility would bear interest at floating rates based on a Eurodollar rate or a bank base rate. Jacor also anticipates that the New Credit Facility will provide Jacor with additional credit for future acquisitions as well as working capital and other general corporate purposes. In addition, concurrently with this Offering, 35 Jacor anticipates commencing the 1996 Stock Offering and the LYONs Offering which would provide Jacor with gross proceeds of approximately $275.0 million and $100.0 million, respectively. See "Description of Other Indebtedness." Jacor currently expects to fund its acquisition of Noble and expenditures for capital requirements from available cash balances, internally generated funds and the availability of borrowings under its Existing Credit Facility. Jacor currently expects to fund the Merger with a combination of funds provided by this Offering, the 1996 Stock Offering, the LYONs Offering, the New Credit Facility and excess cash on hand. These funds together with cash generated from operations will be sufficient to meet Jacor's liquidity and capital needs for the foreseeable future. As a result of entering into the Existing Credit Facility in the first quarter of 1996, Jacor will write off approximately $1.6 million of unamortized cost associated with its 1993 credit agreement. In connection with entering into the New Credit Facility, Jacor anticipates that it will write off approximately $5.0 million of unamortized cost associated with its Existing Credit Facility. The issuance of additional debt will negatively impact Jacor's debt-to-equity ratio and its results of operations and cash flows due to higher amounts of interest expense, although the issuance of additional equity will soften this impact to some extent. Also, if Jacor were not able to complete the Merger due to certain circumstances, Jacor would incur a one-time charge of $75.0 million relating to the non-refundable deposit. If debt were used to finance such payment, it would negatively impact Jacor's future results of operations and impede Jacor's future growth by limiting the amount available under the Existing Credit Facility. CASH FLOWS Cash flows provided by operating activities, inclusive of working capital, were $20.6 million, $11.3 million and $9.0 million for 1995, 1994 and 1993, respectively. Cash flows provided by operating activities in 1995 resulted primarily from the add-back of $9.5 million of depreciation and amortization expense to net income of $11.0 million for the period. Cash flows provided by operating activities in 1994 resulted primarily from net income of $7.9 million generated during the year. The additional $3.4 million resulted principally from the excess of the sum of the depreciation and amortization add-back of $9.7 million, together with the add-back of $1.4 million for provision for losses on accounts and notes receivable over the net change in working capital of ($7.6) million. Cash flows provided by operating activities in 1993 resulted primarily from the excess of the sum of the depreciation and amortization add-back of $10.1 million, together with the $1.4 million of net income generated during the year over the net change in working capital of ($2.3) million. Cash flows used by investing activities were ($64.3) million, ($13.7) million and ($5.5) million for 1995, 1994 and 1993, respectively. Investing activities include capital expenditures of $5.0 million, $2.2 million and $1.5 million in 1995, 1994 and 1993, respectively. Investing activities in 1995 and 1994 include expenditures of $59.8 million and $14.6 million, respectively, for acquisitions, the purchase of intangible assets and loans made in connection with Jacor's JSAs. In addition, 1994 investing activities were net of $3.2 million of payments received on notes and from the sale of assets. Investing activities in 1993 included expenditures of $3.9 million relating to the purchase of radio station assets. Cash flows provided by financing activities were $24.2 million, $0.7 million and $12.8 million for 1995, 1994 and 1993. Cash flows provided by financing activities in 1995 resulted primarily from the $45.5 million in borrowings under the 1993 credit agreement, together with $0.8 million in proceeds received from the issuance of Common Stock to Jacor's employee stock purchase plan and upon the exercise of outstanding stock options net of the $21.7 million used to repurchase Common Stock. Cash flows from financing activities in 1994 resulted primarily from the proceeds received from the issuance of Common Stock upon the exercise of outstanding stock options. The cash provided by financing activities in 1993 principally was due to the refinancing of Jacor's senior debt in March 1993 plus the issuance of additional Common Stock, and the payment of restructuring expenses in 1993. NEW ACCOUNTING PRONOUNCEMENTS In October 1995, the Financial Accounting Standards Board ("FASB") issued Statement of Financial Accounting Standards ("FAS") No. 123 "Accounting for Stock-Based Compensation." Jacor will continue to 36 apply APB Opinion No. 25 in accounting for its plans as permitted by this statement. This statement, however, requires that a company's financial statements include certain disclosures about stock-based employee compensation arrangements regardless of the method used to account for them. Pro forma disclosures required by a company that elects to continue to measure compensation cost using APB Opinion No. 25 will be made by Jacor for the year ended December 31, 1996. In March 1995, the FASB issued FAS No. 121 "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of." This statement requires Jacor to review for possible impairment of long-lived assets and certain identifiable intangibles when circumstances indicate that the carrying value of these assets may not be recoverable. Jacor will adopt the statement in the first quarter of 1996, the effect of which will be immaterial to Jacor's Consolidated Financial Statements. 37 BUSINESS GENERAL Jacor, upon consummation of the Acquisitions, will be the second largest radio group in the nation owning and/or operating 50 radio stations and two television stations in 13 markets across the United States. Jacor's strategic objective is to be the leading radio broadcaster in each of its markets. Consistent with this objective, Jacor entered into agreements to acquire 29 radio stations and two television stations for approximately $950.0 million within two weeks of the enactment of the Telecom Act. The Company will have multiple station platforms in Atlanta, San Diego, St. Louis, Phoenix, Tampa, Denver, Portland, Kansas City, Cincinnati, Sacramento, Columbus, Jacksonville and Toledo. These markets are among the most attractive radio markets in the country, demonstrating, as a group, radio revenue growth in excess of the radio industry average over the last five years. In 1995, the Company would have been the top billing radio group in 9 of its 13 markets and would have had net revenue and broadcast cash flow of $303.5 million and $107.7 million, respectively. The following table sets forth certain information regarding the Company and its markets:
COMPANY DATA -------------------------------------------------------------------------------------------- NO. OF STATIONS RADIO REVENUE RADIO AUDIENCE ------------- RADIO REVENUE MARKET SHARE MARKET SHARE TV MARKET MARKET RANK % % AM FM -- - -------------------------------- ------------------- --------------- --------------- --- --- Atlanta......................... 1 23.2 15.8 1 3 -- San Diego(1).................... 1 13.9 6.7 1 2 -- Tampa........................... 1 24.3 26.4 2 4 1 Denver(2)....................... 1 45.9 30.6 4 4 -- Portland........................ 1 25.3 17.4 1 2 -- Cincinnati(3)................... 1 56.8 38.8 2 4 1 Columbus........................ 1 37.9 20.9 2 3 -- Jacksonville.................... 1 26.2 22.6 2 3 -- Toledo.......................... 1 27.9 27.5 1 2 -- Sacramento...................... 2 14.3 7.0 -- 2 -- Kansas City..................... 3 15.3 12.9 1 1 -- St. Louis....................... 6 8.6 10.0 1 2 -- Phoenix......................... 7 6.6 3.8 1 1 -- MARKET DATA ----------------------------------------------- 1995 METROPOLITAN 1990-1995 STATISTICAL AREA 1995 RADIO REVENUE CAGR MARKET RANK REVENUE RANK % - -------------------------------- ----------------- ------------- ------------- Atlanta......................... 9 10 9.2 San Diego(1).................... 13 13 5.5 Tampa........................... 23 20 6.2 Denver(2)....................... 26 18 8.6 Portland........................ 27 26 8.4 Cincinnati(3)................... 30 23 7.4 Columbus........................ 38 31 6.7 Jacksonville.................... 57 50 7.9 Toledo.......................... 85 77 5.6 Sacramento...................... 34 21 4.6 Kansas City..................... 29 29 4.3 St. Louis....................... 16 17 4.5 Phoenix......................... 17 16 6.1
- ------------------------------ (1) Includes XTRA-FM and XTRA-AM, stations Jacor provides programming to and sells air time for under an exclusive sales agency agreement. (2) Includes stations for which Jacor sells advertising time pursuant to a joint sales agreement. (3) Excludes three stations for which Jacor sells advertising time pursuant to joint sales agreements. BUSINESS STRATEGY Jacor's strategic objective is to be the leading radio broadcaster in each of its markets. Jacor intends to acquire individual radio stations or radio groups that strengthen its market position and that maximize the operating performance of its broadcast properties. Specifically, Jacor's business strategy centers upon: INDIVIDUAL MARKET LEADERSHIP. Jacor strives to maximize the audience ratings in each of its markets in order to capture the largest share of the radio advertising revenue in the market. Jacor focuses on those markets where it believes it has the potential to be the leading radio group in the market. By operating multiple radio stations in its markets, Jacor is able to operate its stations at lower costs, reduce the risk of direct format competition and provide advertisers with the greatest access to targeted demographic groups. For 1995, the Company would have had the number one radio revenue market share in Atlanta (23%), San Diego (14%), Tampa (24%), Denver (46%), Portland (25%), Cincinnati (57%), Columbus (38%), Jacksonville (26%) and Toledo (28%). The Company's aggregate radio revenue market share for 1995 would have been approximately 25%. 38 ACQUISITION AND MARKET DEVELOPMENT. Jacor's acquisition strategy focuses on acquiring both developed, cash flow producing stations and underdeveloped "stick" properties that complement its existing portfolio and strengthen its overall market position. Jacor has been able to improve the ratings of "stick" properties with increased marketing and focused programming that complements its existing radio station formats. Additionally, Jacor utilizes its strong market presence to boost the revenues and cash flow of "stick" properties by encouraging advertisers to buy advertising in a package with its more established stations. The Company may enter new markets through acquisitions of radio groups that have multiple station ownership in such groups' markets. Additionally, the Company will seek to acquire individual stations in new markets that it believes are fragmented and where a market-leading position can be created through additional in-market acquisitions. The Company may exit markets it views as having limited strategic appeal by selling or swapping existing stations for stations in other markets where the Company operates, or for stations in new markets. DIVERSE FORMAT EXPERTISE. Jacor management has developed programming expertise over a broad range of radio formats. This management expertise enables Jacor to specifically tailor the programming of each station in a market in order to maximize Jacor's overall market position. Jacor utilizes sophisticated research techniques to identify opportunities within each market and programs its stations to provide complete coverage of a demographic or format type. This strategy allows Jacor to deliver highly effective access to a target demographic and capture a higher percentage of the radio advertising market. DISTINCT STATION PERSONALITIES. Jacor engages in a number of creative programming and promotional efforts designed to create listener loyalty and station brand awareness. Through these efforts, management seeks to cultivate a distinct personality for each station based upon the unique characteristics of each market. Jacor hires dynamic on-air personalities for key morning and afternoon "drive times" and provides comprehensive news, traffic and weather reports to create active listening by the audience. This commitment to "foreground" or "high impact" programming has successfully generated significant audience share. One of the methods Jacor utilizes to develop the personality of its AM radio stations is by broadcasting professional sporting events and related programming. Currently, Jacor has the broadcast rights for the Cincinnati Reds, Cincinnati Bengals, Colorado Rockies, Denver Broncos, Los Angeles Kings and San Diego Chargers and Citicasters has the broadcast rights for the Portland Trailblazers. In addition, WGST-AM in Atlanta has the broadcast rights to serve as the official information station for the 1996 Olympic Games. Sports broadcasting serves as a key "magnet" for attracting audiences to a station and then introducing them to other programming features, such as local and national news, entertaining talk, and weather and traffic reports. STRONG AM STATIONS. Jacor is an industry leader in successfully operating AM stations. While many radio groups primarily utilize network or simulcast programming on their AM stations, Jacor also develops unique programming for its AM stations to build strong listener loyalty and awareness. Utilizing this operating focus and expertise, Jacor has developed its AM stations in Denver and Cincinnati into the revenue and ratings leaders among both AM and FM stations in their respective markets. Jacor's targeted AM programming adds to Jacor's ability to lead its markets and results in more complete coverage of the listener base. Although the cost structure of a large-scale AM station generally results in lower operating margins than typical music-based FM stations, the majority of Jacor's AM stations generate substantial levels of broadcast cash flow. Historically, Citicasters and Noble have not focused on their AM operations to the same extent as Jacor. Accordingly, most of the AM stations to be acquired meaningfully underperform Jacor's AM stations, and management believes such stations have the potential to generate significant incremental cash flow. POWERFUL BROADCAST SIGNALS. A station's ability to maintain market leadership depends in part upon the strength of its broadcasting delivery system. A powerful broadcast signal enhances delivery range and clarity, thereby influencing listener preference and loyalty. Many of Jacor's stations' broadcasting signals are among the strongest in their respective markets reinforcing its market leadership. Jacor opportunistically upgrades 39 the power and quality of the signals at stations it acquires. Following the consummation of the Acquisitions, Jacor expects that relatively inexpensive technical upgrades in certain markets will provide for significantly greater signal presence. RADIO STATION OVERVIEW The following sets forth certain information regarding the 50 radio stations that will be owned and/or operated by the Company upon completion of the Acquisitions, and the two San Diego stations for which Jacor provides programming and for which it sells air time.
JACOR(J) COMBINED RADIO MARKET/ CITICASTERS(C) COMBINED RADIO REVENUE MARKET TARGET STATION NOBLE(N) REVENUE MARKET RANK SHARE % FORMAT DEMOGRAPHIC - -------------------- ------------------- --------------------- ------------------- ------------------------- ------------- ATLANTA 1 23.2 WPCH-FM J Adult Contemporary Women 25-54 WGST-AM/FM(1) J News Talk Men 25-54 WKLS-FM C Album Oriented Rock Men 18-34 SAN DIEGO 1 13.9 KHTS-FM J TBD XTRA-FM(2) N Rock Alternative Men 18-34 XTRA-AM(2) N Sports Men 25-54 DENVER (3) 1 45.9 KOA-AM J News Talk Men 25-54 KRFX-FM J Classic Rock Men 25-54 KBPI-FM J Album Oriented Rock Men 18-34 KTLK-AM J Talk Adults 35-64 KHIH-FM N Jazz Adults 25-54 KHOW-AM N Talk Adults 25-54 KBCO-AM N Talk Adults 25-54 KBCO-FM N Album Oriented Rock Men 18-34 PHOENIX 7 6.6 KSLX-AM/FM C Classic Rock Men 25-54 ST. LOUIS 6 8.6 KMJM-FM N Urban Adult Contemporary Adults 25-54 KATZ-FM N Black Oldies Adults 25-54 KATZ-AM N Urban Talk Adults 35-64 TAMPA 1 24.3 WFLA-AM J News Talk Adults 25-54 WFLZ-FM J Contemporary Hit Radio Adults 18-34 WDUV-FM J Beautiful/EZ Adults 35-64 WBRD-AM(4) J Talk Adults 35-64 WXTB-FM C Album Oriented Rock Men 18-34 WTBT-FM C Classic Rock Men 25-54 CINCINNATI (3) 1 56.8 WLW-AM J News Talk Men 25-54 WEBN-FM J Album Oriented Rock Men 18-34 WOFX-FM J Classic Rock Men 25-54 WCKY-AM J Talk Adults 35-64 WWNK-FM C Adult Contemporary Women 25-54 WKRQ-FM C Contemporary Hit Radio Women 18-34 COLUMBUS 1 37.9 WTVN-AM C Adult Contemporary/Talk Adults 25-54 WLVQ-FM C Album Oriented Rock Men 18-34 WHOK-FM C Country Adults 25-54 WLLD-FM C Country Adults 25-54 WLOH-AM C News Adults 35-64 KANSAS CITY 3 15.3 WDAF-AM C Country Adults 35-64 KYYS-FM C Album Oriented Rock Men 18-34 TARGET DEMOGRAPHIC MARKET/ SHARE STATION %/RANK - -------------------- ------------ ATLANTA WPCH-FM 9.8/2 WGST-AM/FM(1) 5.5/7 WKLS-FM 11.3/3 SAN DIEGO KHTS-FM XTRA-FM(2) 10.5/1 XTRA-AM(2) 4.5/6 DENVER (3) KOA-AM 10.4/1 KRFX-FM 9.6/2 KBPI-FM 10.0/2 KTLK-AM 3.2/10 KHIH-FM 4.9/10 KHOW-AM 1.8/18 KBCO-AM -- KBCO-FM 6.8/4 PHOENIX KSLX-AM/FM 6.9/3 ST. LOUIS KMJM-FM 6.3/6 KATZ-FM 1.2/18 KATZ-AM 1.6/15 TAMPA WFLA-AM 3.7/13 WFLZ-FM 16.1/1 WDUV-FM 4.5/10 WBRD-AM(4) -- WXTB-FM 21.8/1 WTBT-FM 6.0/5 CINCINNATI (3) WLW-AM 16.8/1 WEBN-FM 21.0/1 WOFX-FM 5.9/6 WCKY-AM 5.9/6 WWNK-FM 7.8/4 WKRQ-FM 13.5/2 COLUMBUS WTVN-AM 4.9/7 WLVQ-FM 11.3/2 WHOK-FM 4.0/9 WLLD-FM 3.3/12 WLOH-AM -- KANSAS CITY WDAF-AM 8.3/2 KYYS-FM 11.7/4
40
JACOR(J) COMBINED RADIO MARKET/ CITICASTERS(C) COMBINED RADIO REVENUE MARKET TARGET STATION NOBLE(N) REVENUE MARKET RANK SHARE % FORMAT DEMOGRAPHIC - -------------------- ------------------- --------------------- ------------------- ------------------------- ------------- SACRAMENTO 2 14.3 KRXQ-FM C Album Oriented Rock Men 18-34 KSEG-FM C Classic Rock Men 25-54 PORTLAND 1 25.3 KEX-AM C News Talk Adults 35-64 KKCW-FM C Adult Contemporary Women 25-54 KKRZ-FM C Contemporary Hit Radio Women 18-34 TOLEDO 1 27.9 WSPD-AM N News Talk Adults 35-64 WVKS-FM N Contemporary Hit Radio Adults 18-34 WRVF-FM N Adult Contemporary Women 25-54 JACKSONVILLE 1 26.2 WJBT-FM J Urban Adults 18-34 WQIK-FM J Country Adults 25-54 WSOL-FM J Adult Urban Adults 25-54 WZAZ-AM J Urban Talk Adults 35-64 WJGR-AM J Talk Adults 25-54 TARGET DEMOGRAPHIC MARKET/ SHARE STATION %/RANK - -------------------- ------------ SACRAMENTO KRXQ-FM 8.8/2 KSEG-FM 6.2/4 PORTLAND KEX-AM 7.0/3 KKCW-FM 10.4/1 KKRZ-FM 12.8/1 TOLEDO WSPD-AM 4.7/7 WVKS-FM 19.4/1 WRVF-FM 14.8/2 JACKSONVILLE WJBT-FM 6.7/6 WQIK-FM 9.8/2 WSOL-FM 7.3/5 WZAZ-AM 0.9/17 WJGR-AM 0.8/17
- ------------------------------ (1) Jacor provides programming and sells air time for the FM station pursuant to a LMA. (2) Jacor provides programming and sells air time for these stations under an exclusive sales agency agreement. (3) Excludes stations WAQZ-FM, WAOZ-AM and WSAI-AM in Cincinnati and KTCL-FM in Denver which Jacor sells advertising time for pursuant to JSAs. (4) In March 1996, Jacor entered into a contract for the sale of the assets of WBRD-AM. TELEVISION Upon the acquisition of Citicasters, Jacor will own a television station in each of the Cincinnati and Tampa markets where it currently owns and operates multiple radio stations. Owning and operating television and radio stations in the same market requires an FCC waiver. See "Risk Factors--Pending Acquisitions." By operating television stations in markets where Jacor has a significant radio presence, Jacor expects to realize significant operating advantages, including shared news departments and administrative overhead, as well as cross-selling of advertising time and cross promotions. The following table sets forth certain information regarding these stations and the markets in which they operate:
COMMERCIAL STATIONS IN STATION RANK (1) NATIONAL TV HOUSEHOLDS ------------------------------ MARKET MARKET IN DMA (1) ADULTS AGED ------------- MARKET/STATION RANK (1) (000S) TV HOUSEHOLDS 25-54 VHF UHF - -------------------------- ------------- ------------- ----------------- ----------- ----- ----- TAMPA/WTSP 15 1,395 2 4 2 8 CINCINNATI/WKRC 29 793 3 1T 3 2 CABLE SUBSCRIBER NETWORK MARKET/STATION % AFFILIATION - -------------------------- ----------------- ----------- TAMPA/WTSP 70 CBS CINCINNATI/WKRC 61 ABC(2)
- ------------------------------ (1) Rankings for Designated Market Area ("DMA"), 6:00 a.m. to 2:00 a.m., Sunday-Saturday for "TV Households" and "Adults aged 25-54." "T" designates tied. This market information is from Nielsen. (2) This station is scheduled to switch its network affiliation to CBS in June 1996. RECENT DEVELOPMENTS In February 1996, Jacor entered into an agreement to acquire Citicasters. Citicasters owns and/or operates 19 radio stations, located across the United States in Atlanta, Phoenix, Tampa, Portland, Kansas City, Cincinnati, Sacramento, Columbus and two television stations, one located in Tampa and one in Cincinnati. The Citicasters acquisition enhances Jacor's existing station portfolios in Atlanta, Tampa and Cincinnati and creates new multiple radio station platforms in Phoenix, Portland, Kansas City, Sacramento and Columbus. Also, in February 1996, Jacor entered into an agreement to acquire Noble, which owns ten radio stations serving Denver, St. Louis and Toledo. Pending the closing of this transaction, Jacor and Noble have entered into time brokerage agreements with respect to Noble's radio stations in St. Louis and Toledo. Jacor 41 also acquired from Noble the right to provide programming to and sells the air time for one AM and one FM station serving the San Diego market. The Noble acquisition enhances Jacor's existing portfolio in Denver where it will own eight stations, in addition to creating new multiple station platforms in St. Louis and Toledo, where Jacor will own two of the four Class B FM stations. In February 1996, Jacor sold the business and certain operating assets of radio stations WMYU-FM and WWST-FM in Knoxville. Jacor received approximately $6.5 million in cash for this sale. In March 1996, Jacor entered into an agreement for the sale of the assets of WBRD-AM in Tampa. The sale is pending subject to receipt of the required FCC approvals. In March 1996, Jacor entered into an agreement to acquire the FCC license of WCTQ-FM and WAMR-AM in Venice, Florida. Jacor will also purchase certain real estate and transmission facilities necessary to operate the stations. The purchase price for the assets is approximately $4.4 million. Jacor anticipates that it will consummate this acquisition in the second quarter of 1996. During 1995, Jacor actively pursued the acquisition of selected stations in its existing markets and targeted new markets and acquired six radio stations. In August 1995, Jacor acquired the business and certain operating assets of radio stations WDUV-FM and WBRD-AM in Tampa. In September 1995, Jacor exercised its purchase option to acquire ownership of the licensee of radio station KHTS-FM (formerly KECR) in San Diego. In 1995, Jacor acquired the call letters, programming and certain contracts of radio station WOFX-FM in Cincinnati and then changed the call letters of its FM broadcast station WPPT to WOFX. Jacor also acquired radio stations WSOL-FM (formerly WHJX), WJBT-FM and WZAZ-AM in Jacksonville. The aggregate cash purchase price for these acquisitions was approximately $37.7 million. ADVERTISING Radio stations generate the majority of their revenue from the sale of advertising time to local and national spot advertisers and national network advertisers. Radio serves primarily as a medium for local advertising. The growth in total radio advertising revenue tends to be fairly stable and has generally grown at a rate faster than the Gross National Product ("GNP"). With the exception of 1991, when total radio advertising revenue fell by approximately 3.1% compared to the prior year, advertising revenue has risen in each of the past 15 years more rapidly than either inflation or the GNP. Total advertising revenue in 1994 of $10.2 billion, as reported by RAB, was its highest level in the industry's history. During the year ended December 31, 1995, approximately 82% of the Company's broadcast revenue would have been generated from the sale of local advertising and approximately 18% from the sale of national advertising. Jacor believes that radio is one of the most efficient, cost-effective means for advertisers to reach specific demographic groups. The advertising rates charged by Jacor's radio stations are based primarily on (i) the station's ability to attract an audience in the demographic groups targeted by its advertisers (as measured principally by quarterly Arbitron rating surveys that quantify the number of listeners tuned to the station at various times), (ii) the number of stations in the market that compete for the same demographic group, (iii) the supply of and demand for radio advertising time and (iv) the supply and pricing of alternative advertising media. Jacor emphasizes an aggressive local sales effort because local advertising represents a large majority of Jacor's revenues. Jacor's local advertisers include automotive, retail, financial institutions and services and healthcare. Each station's local sales staff solicits advertising, either directly from the local advertiser or through an advertising agency for the local advertisers. Jacor pays a higher commission rate to the sales staff for generating direct sales because Jacor believes that through a strong relationship directly with the advertiser, it can better understand the advertiser's business needs and more effectively design an advertising campaign to help the advertiser sell its product. Jacor employs personnel in each market to produce commercials for the advertisers. National advertising sales for most of Jacor's stations are made by Jacor's national sales managers in conjunction with the efforts of an independent advertising representative who specializes in national sales and is compensated on a commission-only basis. Jacor believes that sports broadcasting, absent unusual circumstances, is a stable source of advertising revenues. There is less competition for the sports listener, since only one radio station can offer a particular 42 game. In addition, due to the higher degree of audience predictability, sports advertisers tend to sign contracts which are generally longer term and more stable than Jacor's other advertisers. Jacor's sales staffs are particularly skilled in sales of sports advertising. According to the Radio Advertising Bureau Radio Marketing Guide and Fact Book for Advertisers, 1994-1995, each week, radio reaches approximately 76.7% of all Americans over the age of 12. More than one-half of all radio listening is done outside the home, in contrast to other advertising mediums, and three out of four adults are reached by car radio each week. The average listener spends approximately three hours and 20 minutes per day listening to radio. The highest portion of radio listenership occurs during the morning, particularly between the time a listener wakes up and the time the listener reaches work. This "morning drive time" period reaches more than 85% of people over 12 years of age and, as a result, radio advertising sold during this period achieves premium advertising rates. Jacor believes operating multiple stations in a market gives it significant opportunities in competing for advertising dollars. Each multiple station platform better positions Jacor to access a significant share of a given demographic segment making Jacor stations more attractive to advertisers seeking to reach that segment of the population. COMPETITION; CHANGES IN THE BROADCASTING INDUSTRY The radio broadcasting industry is a highly competitive business. The success of each of the Company's stations will depend significantly upon its audience ratings and its share of the overall advertising revenue within its market. The Company's stations will compete for listeners and advertising revenue directly with other radio stations as well as many other advertising media within their respective markets. Radio stations compete for listeners primarily on the basis of program content and by hiring high-profile talent that appeals to a particular demographic group. By building in each of its markets a strong listener base comprised of a specific demographic group, the Company will be able to attract advertisers seeking to reach those listeners. In addition to management experience, factors which are material to competitive position include the station's rank among radio stations in its market, transmitter power, assigned frequency, audience characteristics, local program acceptance and the number and characteristics of other stations in the market area, and other advertising media in that market. Jacor attempts to improve its competitive position with promotional campaigns aimed at the demographic groups targeted by its stations and by sales efforts designed to attract advertisers. Recent changes in the FCC's policies and rules permit increased joint ownership and joint operation of local radio stations. Those stations taking advantage of these joint arrangements may in certain circumstances have lower operational costs and may be able to offer advertisers more attractive rates and services. The Company's audience ratings and competitive position will be subject to change, and any adverse change in a particular market could have a material adverse effect on the revenue of the Company's stations in that market. Although Jacor believes that each of the Company's stations will be able to compete effectively in the market, there can be no assurance that any one of the Company's stations will be able to maintain or increase its current audience ratings and advertising revenue. Although the radio broadcasting industry is highly competitive, some legal restrictions on entry exist. The operation of a radio broadcast station requires a license from the FCC and the number of radio stations that can operate in a given market is limited by the availability of the FM and AM radio frequencies that the FCC will license in that market. Jacor's stations also compete directly for advertising revenues with other media, including broadcast television, cable television, newspapers, magazines, direct mail, coupons and billboard advertising. In addition, the radio broadcasting industry is subject to competition from new media technologies that are being developed or introduced, such as the delivery of audio programming by cable television systems and by digital audio broadcasting. The radio broadcasting industry historically has grown despite the introduction of new technologies for the delivery of entertainment and information, such as television broadcasting, cable television, audio tapes and compact disks. Greater population and greater availability of radios, particularly car and portable radios, have contributed to this growth. There can be no assurance, however, that the 43 development or introduction in the future of any new media technology will not have an adverse effect on the radio broadcasting industry. Jacor also competes with other radio station groups to purchase additional stations. The FCC has allocated spectrum for a new technology, satellite digital audio radio services ("DARS"), to deliver audio programming. The FCC has proposed, but not yet adopted licensing and operating rules for DARS, so that the allocated spectrum is not yet available for service. Jacor cannot predict when and in what form such rules will be adopted. The FCC granted a waiver in September 1995 to permit one potential DARS operator to commence construction of a DARS satellite system, with the express notice that the FCC might not license such operator to provide DARS, nor would such waiver prejudge the ongoing rule making proceeding. DARS may provide a medium for the delivery by satellite or terrestrial means of multiple new audio programming formats to local and/or national audiences. Digital technology also may be used in the future by terrestrial radio broadcast stations either on existing or alternate broadcasting frequencies, and the FCC has stated that it will consider making changes to its rules to permit AM and FM radio stations to offer digital sound following industry analysis of technical standards. In addition, the FCC has authorized an additional 100 kHz of band width for the AM band and will soon allocate frequencies in this new band to certain existing AM station licensees that applied for migration prior to the FCC's cut-off date. At the end of a transition period, those licensees will be required to return to the FCC either the license for their existing AM band station or the license for the expanded AM band station. None of the stations to be affiliated with the Company have sought authorizations for operations on the expanded AM band. Television stations compete for audiences and advertising revenues with radio and other television stations and multichannel video delivery systems in their market areas and with other advertising media such as newspapers, magazines, outdoor advertising and direct mail. Competition for sales of television advertising time is based primarily on the anticipated and actually delivered size and demographic characteristics of audiences as determined by various services, price, the time of day when the advertising is to be broadcast, competition from other television stations, including affiliates of other television broadcast networks, cable television systems and other media and general economic conditions. Competition for audiences is based primarily on the selection of programming, the acceptance of which is dependent on the reaction of the viewing public, which is often difficult to predict. Additional elements that are material to the competitive position of television stations include management experience, authorized power and assigned frequency. The broadcasting industry is continuously faced with technical changes and innovations, the popularity of competing entertainment and communications media, changes in labor conditions, and governmental restrictions or actions of Federal regulatory bodies, including the FCC, any of which could possibly have a material effect on a television station's operations and profits. There are sources of video service other than conventional television stations, the most common being cable television, which can increase competition for a broadcasting television station by bringing into its market distant broadcasting signals not otherwise available to the station's audience, serving as a distribution system for national satellite-delivered programming and other non-broadcast programming originated on a cable system and selling advertising time to local advertisers. Other principal sources of competition include home video exhibition, direct-to-home broadcast satellite television ("DBS") entertainment services and multichannel multipoint distribution services ("MMDS"). Moreover, technology advances and regulatory changes affecting programming delivery through fiber optic telephone lines and video compression could lower entry barriers for new video channels and encourage the development of increasingly specialized "niche" programming. The Telecom Act permits telephone companies to provide video distribution services via radio communication, on a common carrier basis, as "cable systems" or as "open video systems," each pursuant to different regulatory schemes. Jacor is unable to predict the effect that technological and regulatory changes will have on the broadcast television industry and on the future profitability and value of a particular broadcast television station. The FCC authorizes DBS services throughout the United States. Currently, two FCC permittees, DirecTv and United States Satellite Broadcasting, provide subscription DBS services via high power communications satellites and small dish receivers, and other companies provide direct-to-home video service 44 using lower powered satellites and larger receivers. Additional companies are expected to commence direct-to-home operations in the near future. DBS and MMDS, as well as other new technologies, will further increase competition in the delivery of video programming. Jacor cannot predict what other matters might be considered in the future, nor can it judge in advance what impact, if any, the implementation of any of these proposals or changes might have on its business. FEDERAL REGULATION OF BROADCASTING The ownership, operation and sale of stations are subject to the jurisdiction of the FCC, which acts under authority granted by the Communications Act. Among other things, the FCC assigns frequency bands for broadcasting; determines the particular frequencies, locations and power of stations; issues, renews, revokes and modifies station licenses; determines whether to approve changes in ownership or control of station licenses; regulates equipment used by stations; adopts and implements regulations and policies that directly or indirectly affect the ownership, operation and employment practices of stations; and has the power to impose penalties for violations of its rules or the Communications Act. On February 8, 1996, the President signed the Telecom Act. The Telecom Act, among other measures, directs the FCC to (a) eliminate the national radio ownership limits; (b) increase the local radio ownership limits as specified in the Telecom Act; (c) issue broadcast licenses for periods of eight years; and (d) eliminate the opportunity for the filing of competing applications against broadcast renewal applications. Certain of these measures have been adopted by the FCC. Other provisions of the Telecom Act will be acted upon by the FCC through rule-making proceedings, presently scheduled for completion by the end of 1996. Radio stations in the United States operate either by Amplitude Modulation (AM), conducted on 107 different frequencies located between 540 and 1600 kilohertz (kHz) (plus 10 frequencies between 1610-1710 kHz on the newly expanded AM band) in the low frequency band of the electromagnetic spectrum, or by Frequency Modulation (FM), conducted on approximately 100 different frequencies located between 88 and 108 megahertz (MHz) at the very high frequency band of the electromagnetic spectrum. Television stations in the United States operate as either Very High Frequency (VHF) stations (channels 2 through 13) or Ultra High Frequency (UHF) stations (channels 14 through 69). UHF stations in many cases have a weaker signal and therefore do not achieve the same coverage as VHF stations. LICENSE GRANTS AND RENEWALS. The Communications Act provides that a broadcast station license may be granted to an applicant if the grant would serve the public interest, convenience and necessity, subject to certain limitations referred to below. In making licensing determinations, the FCC considers the legal, technical, financial and other qualifications of the applicant, including compliance with the Communications Act's limitations on alien ownership, compliance with various rules limiting common ownership of broadcast, cable and newspaper properties, and the "character" of the licensee and those persons holding "attributable" interests in the licensee. Broadcast station licenses are granted for specific periods of time and, upon application, are renewable for additional terms. The Telecom Act amends the Communications Act to provide that broadcast station licenses be granted, and thereafter renewed, for a term not to exceed eight years, if the FCC finds that the public interest, convenience, and necessity would be served. Generally, the FCC renews licenses without a hearing. The Telecom Act amends the Communications Act to require the FCC to grant an application for renewal of a broadcast station license if: (1) the station has served the public interest, convenience and necessity; (2) there have been no serious violations by the licensee of the Communications Act or the rules and regulations of the FCC; and (3) there have been no other violations by the licensee of the Communications Act or the rules and regulations of the FCC which, taken together, would constitute a pattern of abuse. Pursuant to the Telecom Act, competing applications against broadcast renewal applications will no longer be entertained. The Telecom Act provides that if the FCC, after notice and an opportunity for a hearing, decides that the requirements for renewal have not been met and that no mitigating factors warrant lesser sanctions, it may deny a renewal application. Only thereafter may the FCC accept applications by third parties to operate on the frequency of the former licensee. The Communications Act continues to authorize the filing of petitions to deny against license 45 renewal applications during particular periods of time following the filing of renewal applications. Petitions to deny can be used by interested parties, including members of the public, to raise issues concerning the qualifications of the renewal applicant. Except for the Company's Florida stations and Georgia stations (other than WGST-FM), whose licenses have been renewed for seven years expiring in 2003, the current seven-year terms of the broadcasting licenses of all of the Company's stations expire in 1996, 1997 and 1998. Jacor does not anticipate any material difficulty in obtaining license renewals for full terms in the future. The following sets forth the market, FCC license classification, antenna height above average terrain ("HAAT"), power, frequency and FCC license expiration date for the 50 radio stations that will be owned and/or operated by the Company upon completion of the Acquisitions and the two San Diego stations to which Jacor provides programming and for which it sells air time.
EXPIRATION HAAT IN POWER IN DATE OF MARKET/STATION FCC CLASS FEET KILOWATTS FREQUENCY FCC LICENSE - --------------------- --------- --------- --------- ---------- ------------ ATLANTA, GA WPCH-FM C 984 100 94.9 MHz 4/1/03 WGST-AM 2 -- 50/1 640 kHz 4/1/03 WGST-FM(1) C2 492 50 105.7 MHz 4/1/96 WKLS-FM C 984 100 96.1 MHz 4/1/03 SAN DIEGO, CA KHTS-FM B 1887 2 93.3 MHz 12/1/97 XTRA-FM(2) C 804 100 91.1 MHz (3) XTRA-AM(2) 1 -- 77/50 690 kHz (3) DENVER, CO(4) KOA-AM 1B 50/50 850 kHz 4/1/97 KRFX-FM C 1045 100 103.5 MHz 4/1/97 KBPI-FM C 988 100 106.7 MHz 4/1/97 KTLK-AM 2 -- 50/1 760 kHz 4/1/97 KHIH-FM C 1608 100 95.7 MHz 4/1/97 KHOW-AM 3 -- 5/5 630 kHz 4/1/97 KBCO-AM 2 -- 5/.1 1190 kHz 4/1/97 KBCO-FM C 1542 100 97.3 MHz 4/1/97 PHOENIX, AZ KSLX-AM 3 -- 5/.5 1440 kHz 10/1/97 KSLX-FM C 1841 100 100.7 MHz 10/1/97 ST. LOUIS, MO KMJM-FM C 1027 100 107.7 MHz 2/1/97 KATZ-FM B 489 50 100.3 MHz 12/1/96 KATZ-AM 3 -- 5/5 1600 kHz 2/1/97 TAMPA, FL WFLA-AM 3 -- 5/5 970 kHz 2/1/03 WFLZ-FM C 1358 100 93.3 MHz 2/1/03 WDUV-FM C 1358 100 103.5 MHz 2/1/03 WBRD-AM 3 -- 2.5/1 1420 kHz 2/1/03 WXTB-FM C 1345 100 97.9 MHz 2/1/03 WTBT-FM A 285 6 105.5 MHz 2/1/03 CINCINNATI, OH(4) WLW-AM 1A -- 50/50 700 kHz 10/1/96 WEBN-FM B 876 16.5 102.7 MHz 10/1/96 WOFX-FM B 909 16 92.5 MHz 10/1/96 WCKY-AM 3 -- 5/1 550 kHz 10/1/96 WWNK-FM B 600 32 94.1 MHz 10/1/96 WKRQ-FM B 876 16 101.9 MHz 10/1/96
46
EXPIRATION HAAT IN POWER IN DATE OF MARKET/STATION FCC CLASS FEET KILOWATTS FREQUENCY FCC LICENSE - --------------------- --------- --------- --------- ---------- ------------ COLUMBUS, OH WTVN-AM 3 5/5 610 kHz 10/1/96 WLVQ-FM B 751 18 96.3 MHz 10/1/96 WHOK-FM B 761 21 95.5 MHz 10/1/96 WLLD-FM A 755 .6 98.9 MHz 10/1/96 WLOH-AM 3 -- 1/0 1320 kHz 10/1/96 KANSAS CITY, MO WDAF-AM 3 -- 5/5 610 kHz 12/1/96 KYYS-FM C 1001 100 102.1 MHz 12/1/96 SACRAMENTO, CA KRXQ-FM B 325 25 93.7 MHz 12/1/97 KSEG-FM B 499 50 96.9 MHz 12/1/97 PORTLAND, OR KEX-AM 1B -- 50/50 1190 kHz 2/1/98 KKCW-FM C 1654 100 103.3 MHz 2/1/98 KKRZ-FM C 1434 100 100.3 MHz 2/1/98 TOLEDO, OH WSPD-AM 3 -- 5/5 1370 kHz 10/1/96 WVKS-FM B 479 50 92.5 MHz 10/1/96 WRVF-FM B 807 19 101.5 MHz 10/1/96 JACKSONVILLE, FL WJBT-FM A 299 6 92.7 MHz 2/1/03 WQIK-FM C 1014 100 99.1 MHz 2/1/03 WSOL-FM C 1463 100 101.5 MHz 4/1/03 WZAZ-AM 4 -- 1/1 1400 kHz 2/1/03 WJGR-AM 3 -- 5/5 1320 kHz 2/1/03
- ------------------------------ (1) Jacor provides programming to and sells air time for this station under an LMA. (2) Jacor provides programming to and sells air time for these stations under an exclusive sales agency agreement. (3) These stations are not licensed by the FCC, but rather are licensed by the Mexican government. (4) Excludes stations WAQZ-FM, WAOZ-AM and WSAI-AM in Cincinnati and KTCL-FM in Denver which Jacor sells advertising time for pursuant to JSAs. LICENSE ASSIGNMENTS AND TRANSFERS OF CONTROL. The Communications Act also prohibits the assignment of a license or the transfer of control of a corporation holding such a license without the prior approval of the FCC. Applications to the FCC for such assignments or transfers are subject to petitions to deny by interested parties and must satisfy requirements similar to those for renewal and new station applicants. OWNERSHIP RULES. Rules of the FCC limit the number and location of broadcast stations in which one licensee (or any party with a control position or attributable ownership interest therein) may have an attributable interest. The "national radio ownership rule" had generally prohibited any one non-minority individual or entity from having a control position or attributable ownership interest in more than 20 AM or more than 20 FM radio stations nationwide. The Telecom Act directs the FCC to modify its rules to eliminate any provisions limiting the number of radio stations which may be owned or controlled by one entity nationally. The FCC adopted this rule change by an order which became effective on March 15, 1996. The "local radio ownership rule" limits the number of stations in a radio market in which any one individual or entity may have a control position or attributable ownership interest. The local radio ownership rule had provided for markets with 15 or more radio stations, a limit of two AMs and two FMs, provided generally that the combined audience shares of the co-owned stations did not exceed 25% of the radio ratings market at the time of acquisition. The Telecom Act directs the FCC to revise its rules to increase the local radio ownership limits as follows: (a) in markets with 45 or more commercial radio stations, a party may own up to eight commercial radio stations, no more than five of which are in the same service (AM or FM); (b) in markets with 30-44 commercial radio stations, the limit is seven commercial radio stations, no more than four of which are in the same service; (c) in markets with 15-29 commercial radio stations, the limit is six commercial radio stations, no more than four of which are in the same service; and (d) in markets with 14 or 47 fewer commercial radio stations, a party may own up to five commercial radio stations, no more than three of which are in the same service, provided that no party may own more than 50% of the commercial stations in the market. The FCC adopted these changes to the local radio ownership rule by an order which became effective March 15, 1996. In addition, the FCC has a "cross interest" policy that may prohibit a party with an attributable interest in one station in a market from also holding either a "meaningful" non-attributable equity interest (e.g., non-voting stock, voting stock, limited partnership interests) or key management position in another station in the same market, or which may prohibit local stations from combining to build or acquire another local station. The FCC is presently evaluating its cross-interest policy as well as policies governing attributable ownership interests. Jacor cannot predict whether the FCC will adopt any changes in these policies or, if so, what the new policies will be. Under the current rules, an individual or other entity owning or having voting control of 5% or more of a corporation's voting stock is considered to have an attributable interest in the corporation and its stations, except that banks holding such stock in their trust accounts, investment companies, and certain other passive interests are not considered to have an attributable interest unless they own or have voting control over 10% or more of such stock. The FCC is currently evaluating whether to raise the foregoing benchmarks to 10% and 20%, respectively. An officer or director of a corporation or any general partner of a partnership also is deemed to hold an attributable interest in the media license. Under the current rules, prior to the Offering Zell/Chilmark is considered a single majority shareholder of Jacor, and minority shareholders are not considered to have attributable interests in Jacor's stations. At present, Zell/Chilmark, the current sole attributable shareholder of Jacor, has no other attributable media interests. The FCC has asked for comments as to whether it should continue the single majority shareholder exemption. Jacor cannot predict whether the FCC will adopt these or any other proposals. Following the Offering, Zell/Chilmark will no longer be the single majority shareholder of Jacor. Consequently, under current rules, shareholders of Jacor with 5% or more of the outstanding votes (except for qualified institutional investors, for which the 10% benchmark is applicable), if any, will be considered to hold attributable interests in Jacor. Such holders of attributable interests must comply with or obtain waivers of the FCC's multiple ownership limits. Zell/Chilmark's change from the single majority shareholder in Jacor to one holding less than 50% requires prior FCC approval. It is Jacor's understanding that such approval is obtained by the filing of a "short-form" transfer of control application with the FCC. Such short-form applications do not require public notice or a waiting period before grant by the FCC. Third parties do not have a right to petition for the denial of such applications. The FCC typically grants uncontested short-form applications within two weeks to one month from filing. The rules also generally prohibit the acquisition of an ownership or control position in a television station and one or more radio stations serving the same market (termed the "one-to-a-market" rule). Current FCC policy looks favorably upon waiver requests relating to television and AM/FM radio combinations in the top 25 television markets where at least 30 separately owned broadcast stations will remain after the combination. One-to-a-market waiver requests in other markets, as well as those in the top 25 television markets that involve the combination of a television station and more than one same service (AM or FM) radio station, presently are evaluated by the FCC pursuant to a fact-based, five-part, case-by-case review. The FCC also has an established policy for granting waivers that involve "failed" stations. The FCC currently is considering changes to its one-to-a-market waiver standards in a pending rule-making proceeding. The Telecom Act instructs the FCC to extend its top 25 market/30 voices waiver policy to the top 50 markets, consistent with the public interest, convenience, and necessity. The Telecom Act conferees stated that they expect the FCC in its future implementation of its current one-to-a-market waiver policy, as well as in any future changes the FCC may adopt in the pending rule-making, to take into account increased competition and the need for diversity in today's radio marketplace. The FCC also plans to review and possibly modify its current prohibitions relating to ownership or control positions in a daily newspaper and a broadcast station in the same market. Holders of non-voting stock generally will not be attributed an interest in the issuing entity, and holders of debt and instruments such as warrants, convertible debentures, options, or other non-voting interests with rights of conversion to voting interests generally will not be attributed such an interest unless and until such conversion is effected. The FCC is currently considering whether it should attribute non-voting stock, or 48 perhaps non-voting stock interests when combined with other rights, such as voting shares or contractual relationships, along with its review of its other attribution policies. Jacor cannot predict whether the FCC will adopt these or other changes in its attribution policies. Under the Communications Act, broadcast licenses may not be granted, transferred or assigned to any corporation of which more than one-fifth of the capital stock is owned of record or voted by non-U.S. citizens or foreign governments or their representatives (collectively, "Aliens"). In addition, the Communications Act provides that no broadcast license may be held by any corporation of which more than one-fourth of the capital stock is owned of record or voted by Aliens, without an FCC public interest finding. The FCC has issued interpretations of existing law under which these restrictions in modified form apply to other forms of business organizations, including general and limited partnerships. The FCC also prohibits a licensee from continuing to control broadcast licenses if the licensee otherwise falls under Alien influence or control in a manner determined by the FCC to be in violation of the Communications Act or contrary to the public interest. No officers, directors or significant shareholders of Jacor are known by Jacor to be Aliens. REGULATION OF BROADCAST OPERATIONS. In order to retain licenses, broadcasters are obligated, under the Communications Act, to serve the "public interest." Since the late 1970s, the FCC gradually has relaxed or eliminated many of the more formalized regulatory procedures and requirements developed to promote the broadcast of certain types of programming responsive to the problems, needs, and interests of a station's community of license. The regulatory changes have provided broadcast stations with increased flexibility to design their program formats and have provided relief from some recordkeeping and FCC filing requirements. However, licensees continue to be required to present programming that is responsive to significant community issues and to maintain certain records demonstrating such responsiveness. Complaints from listeners concerning a station's programming have been considered by the FCC when evaluating licensee renewal applications and at other times. The FCC has proposed implementing the changes in its broadcast renewal procedures required by the Telecom Act by a rule making proceeding scheduled to be completed by the end of 1996. That proceeding may further illuminate the standards for renewal of broadcast licenses under the Telecom Act. Stations still are required to follow various rules promulgated under the Communications Act that regulate political broadcasts, political advertisements, sponsorship identifications, technical operations and other matters. "Equal Opportunity" and affirmative action requirements also exist. Failure to observe these or other rules can result in the imposition of monetary forfeitures or in the grant of a "short" (less than full term) license term or license revocation. The Telecom Act states that the FCC may deny, after a hearing, the renewal of a broadcast license for serious violations of the Communications Act or the FCC's rules or where there have been other violations which together constitute a pattern of abuse. In 1985, the FCC adopted rules regarding human exposure to levels of radio frequency ("RF") radiation. These rules require applicants for new broadcast stations, renewals of broadcast licenses or modification of existing licenses to inform the FCC at the time of filing such applications whether a new or existing broadcast facility would expose people to RF radiation in excess of certain guidelines. In March 1993, the FCC proposed adopting more restrictive radiation limits. Jacor cannot predict whether the FCC will adopt this or any other proposal. AGREEMENTS WITH OTHER BROADCASTERS. Over the past several years a significant number of broadcast licensees, including certain of Jacor's subsidiaries, have entered into cooperative agreements with other stations in their market. These agreements may take varying forms, subject to compliance with the requirements of the FCC's rules and policies and other laws. Typically, separately owned stations may agree to function cooperatively in terms of programming, advertising sales, etc., subject to the licensee of each station maintaining independent control over the programming and station operations of its own station. One typical example is a LMA between two separately owned stations serving a common service area, whereby the licensee of one station programs substantial portions of the broadcast day on the other licensee's station, subject to ultimate editorial and other controls being exercised by the latter licensee, and sells advertising time during such program segments for its own account. Another is a JSA pursuant to which a licensee sells advertising time on both its own station or stations and on another separately owned station. 49 In the past, the FCC has determined that issues of joint advertising sales should be left to antitrust enforcement and has specifically exempted LMAs from its "cross-interest" policy. Furthermore, the FCC has held that LMAs do not per se constitute a transfer of control and are not contrary to the Communications Act provided that the licensee of the station maintains complete responsibility for and control over operations of its broadcast station (including, specifically, control over station finances, personnel and programming) and complies with applicable FCC rules and with antitrust laws. At present, the FCC is considering whether it should treat as attributable multiple business arrangements among local stations, such as joint sales accompanied by debt financing. Jacor cannot predict whether the FCC would require the termination or restructuring of Jacor's JSAs or other arrangements with broadcasters in the Cincinnati and Denver markets in connection with the FCC's pending rule making on attribution or other FCC proceedings. Under certain circumstances, the FCC will consider a radio station brokering time on another radio station serving the same market to have an attributable ownership interest in the brokered station for purposes of the FCC's radio multiple ownership rules. In particular, a radio station is not permitted to enter into a LMA giving it the right to program more than 15% of the broadcast time, on a weekly basis, of another local radio station which it could not own under the FCC's local radio ownership rules. The FCC's rules also prohibit a radio licensee from simulcasting more than 25% of its programming on another radio station in the same broadcast service (i.e., AM-AM or FM-FM) whether it owns both stations or operates both through a LMA where both stations serve substantially the same geographic area. FCC CONSIDERATION OF ACQUISITIONS. On February 8, 1996, Jacor filed an application with the FCC for its consent to the transfer of control of Noble Broadcast Licenses, Inc. ("Noble Licenses"), the licensee of ten full-powered radio stations in the Toledo, St. Louis and Denver markets, from John T. Lynch ET AL., to Jacor (the "Noble Transfer Application"). Jacor presently owns two AM and two FM stations in the Denver market, and Noble presently owns two AM and two FM stations serving the Denver market. The Noble Transfer Application was granted on March 27, 1996 by the Mass Media Bureau of the FCC acting pursuant to delegated authority. No party filed an opposition to the Noble Transfer Application. The FCC issued on April 1, 1996, a public notice of the grant by the Mass Media Bureau. Pursuant to the Communications Act and the FCC's rules, interested third parties may file petitions for reconsideration of the Noble Transfer Application until May 1, 1996. Third parties that did not object to an application prior to its grant must establish good cause for filing a petition for reconsideration. The Mass Media Bureau of the FCC may also reconsider the grant of the Noble Transfer Application on its own motion until May 1, 1996. In addition, the full FCC may on its own motion review the Mass Media Bureau grant until May 13, 1996. If no such actions are taken, the grant of the Noble Transfer Application will become "final," that is, the grant will no longer be subject to further administrative or judicial review. Under FCC rules, in instances such as this, a grant by the Mass Media Bureau is effective immediately. Consequently, under FCC rules, the parties may consummate the transaction prior to the grant having become final, and the agreement between the parties provides that a final grant is not a condition to closing. Pursuant to that agreement, however, Jacor at its option may defer the closing until all Noble station licenses have been renewed and such renewal grants are final. On February 22, 1996, Jacor filed an application with the FCC for its consent to the transfer of control of Citicasters Co., the licensee of 19 full-powered radio stations in the Atlanta, Phoenix, Tampa, Cincinnati, Portland, Sacramento, Columbus and Kansas City markets, and two television stations in the Tampa and Cincinnati markets, from the shareholders of Citicasters to Jacor (the "Citicasters Transfer Application"). The Citicasters Transfer Application has been accepted by the FCC and, pursuant to the Communications Act and the FCC's rules, interested third parties may file petitions to deny the Citicasters Transfer Application until April 4, 1996, and thereafter may file informal objections until the Citicasters Transfer Application is granted. To Jacor's knowledge, no party has filed a timely petition to deny or other objection to the Citicasters Transfer Application. Jacor presently owns and/or has LMAs with one AM and two FM stations in the Atlanta market, two AM and two FM stations in the Tampa market and two AM and two FM stations in the Cincinnati market. The Citicasters Transfer Application provides a technical statement demonstrating that, pursuant to the FCC's methodology for calculating market size, the relevant radio market in each of Atlanta, Tampa and Cincinnati contains more than 45 commercial radio stations, and the Company would own less than eight commercial radio stations, and less than five in the same service in each such radio 50 market. The television stations licensed to Citicasters are in markets in which Jacor and Citicasters own radio stations. Consequently, the Citicasters Transfer Application requests waivers pursuant to a five-part, case-by-case review of the one-to-a-market rule to permit the permanent co-ownership of these television and radio stations. The Citicasters Transfer Application notes that the FCC may choose to grant initially temporary waivers of the one-to-a-market rule in connection with the transfer of Citicasters to Jacor and thereafter rule on the permanent waiver requests. LEGISLATION AND REGULATION OF TELEVISION OPERATIONS. Television stations are regulated by the FCC pursuant to provisions of the Communications Act and the FCC rules that are in many instances the same or similar to those applicable to radio stations. Besides technical differences between television and radio, principal variances in regulation relate to limits on national and local ownership, LMAs and simulcasts, children's programming requirements, advanced television service, signal carriage rights on cable systems, license terms, "V-chip" technology and network/affiliate relations. The current FCC rules prohibit combined local ownership or control of television stations with overlapping "Grade B" service contours (unless established waiver standards are met). The Telecom Act directs the FCC to conduct a rule-making proceeding to determine whether to retain, modify or eliminate these local television ownership rules. This rule making is presently scheduled for completion by the end of 1996. The current FCC rules also prohibit (with certain qualifications) any person or entity from having an attributable interest in more than 12 full-power television stations, subject to a 25% national audience reach limitation. Pursuant to the Telecom Act, the FCC by an order released in March 1996 has modified this national television ownership rule by eliminating the 12-station limit and permitting an entity to have an attributable interest in an unlimited number of U.S. television stations so long as such stations do not reach in the aggregate more than 35% of the national television audience. Additionally, the rules prohibit (with certain qualifications) the holder of an attributable interest in a television station from also having an attributable interest in a radio station, daily newspaper or cable television system serving a community located within the relevant coverage area of that television station. As noted above, the radio/television one-to-a-market rule is under review and the FCC also plans to review and possibly modify its current broadcast/daily newspaper restriction. The Telecom Act mandates the elimination of the restriction of network ownership of cable systems, which the FCC has adopted by an order released in March 1996. The FCC will monitor the response to this change to determine if additional rule changes are necessary to ensure nondiscriminatory carriage and channel positioning of nonaffiliated broadcast stations by network-owned cable systems. Presently, LMAs between television stations are not treated as attributable interests and there is no restriction on same-market television simulcasts. The FCC is considering in a pending rule-making proceeding whether to treat television LMAs similar to radio LMAs for multiple ownership rule purposes. The Citicasters television stations are not participants in LMAs. The FCC is conducting a rule-making proceeding to consider proposals to increase and quantify television stations' programming obligations under the FCC rules implementing the Children's Television Act of 1990, which requires television stations to present programming specifically directed to the "educational and informational" needs of children under the age of 16. The FCC is conducting a rule-making proceeding to devise a table of channel allotments in connection with the introduction of advanced (or "high definition") television service ("ATV"). The FCC has preliminarily decided to allot a second broadcast channel to each full-power commercial television station for ATV operation. According to this preliminary decision, stations would be permitted to phase in their ATV operations over a period of several years following adoption of a final table of allotments, after which they would be required to surrender their non-ATV channel. During the past year, Congress has considered proposals that would require incumbent broadcasters to bid at auctions for the additional spectrum required to effect a transition to ATV, or alternatively, would assign additional ATV spectrum to incumbent broadcasters and require the early surrender of their non-ATV channel for sale by public auction. It is not possible to predict if, or when, any of these proposals will be adopted or the effect, if any, adoption of such proposals would have on the Citicasters television stations. FCC regulations implementing the Cable Television Consumer Protection and Competition Act of 1992 (the "1992 Cable Act") require each television broadcaster to elect, at three-year intervals beginning 51 June 17, 1993, either to (a) require carriage of its signal by cable systems in the station's market ("must-carry") or (b) negotiate the terms on which such broadcast station would permit transmission of its signal by the cable systems within its market ("retransmission consent"). In a 2-1 decision issued on December 13, 1995, a special three-judge panel of the U.S. District Court for the District of Columbia upheld the constitutionality of the must-carry provisions. The District Court's decision has been appealed to the U.S. Supreme Court, which will hear the appeal during its 1996-1997 term, with a decision expected in the second calendar quarter of 1997. In the meantime, the FCC's must-carry regulations implementing the Cable Act remain in effect. Jacor cannot predict the outcome of the Supreme Court review of the case. Until the passage of the Telecom Act, television licenses were granted and renewed for a maximum of five years. The Telecom Act amends the Communications Act to provide that broadcast station licenses be granted, and thereafter renewed, for a term not to exceed eight years, if the FCC finds that the public interest, convenience, and necessity would be served. The Telecom Act also requires the broadcast and cable industries to develop and transmit an encrypted rating that would permit the blocking of violent or indecent video programming and allow telephone companies to operate cable television systems in their own service areas. At present, the Citicasters Cincinnati television station is an ABC-network affiliate (committed to change to a CBS-network affiliate in June 1996) and the Citicasters Tampa television station is a CBS-network affiliate. Both are VHF stations. The FCC currently is reviewing certain of its rules governing the relationship between broadcast television networks and their affiliated stations. The FCC is conducting a rule-making proceeding to examine its rules prohibiting broadcast television networks from representing their affiliated stations for the sale of non-network advertising time and from influencing or controlling the rates set by their affiliates for the sale of such time. Separately, the FCC is conducting a rule-making proceeding to consider the relaxation or elimination of its rules prohibiting broadcast networks from (a) restricting their affiliates' right to reject network programming; (b) reserving an option to use specified amounts of their affiliates' broadcast time; and (c) forbidding their affiliates from broadcasting the programming of another network; and to consider the relaxation of its rule prohibiting network-affiliated stations from preventing other stations from broadcasting the programming of their network. PROPOSED CHANGES. The FCC has not yet implemented formally certain of the changes to its rules necessitated by the Telecom Act. Moreover, the Congress and the FCC have under consideration, and may in the future consider and adopt, new laws, regulations and policies regarding a wide variety of matters that could, directly or indirectly, (i) affect the operation, ownership and profitability of the Company and its broadcast stations, (ii) result in the loss of audience share and advertising revenues of the Company's radio broadcast stations, (iii) affect the ability of the Company to acquire additional broadcast stations or finance such acquisitions, (iv) affect current cooperative agreements and/or financing arrangements with other radio broadcast licensees, or (v) affect the Company's competitive position in relationship to other advertising media in its markets. Such matters include, for example, changes to the license authorization and renewal process; proposals to revise the FCC's equal employment opportunity rules and other matters relating to minority and female involvement in broadcasting; proposals to alter the benchmarks or thresholds for attributing ownership interest in broadcast media; proposals to change rules or policies relating to political broadcasting; changes to technical and frequency allocation matters, including those relative to the implementation of digital audio broadcasting on both a satellite and terrestrial basis; proposals to restrict or prohibit the advertising of beer, wine and other alcoholic beverages on radio; changes in the FCC's cross-interest, multiple ownership, alien ownership and cross-ownership policies; proposals to allow greater telephone company participation in the delivery of audio and video programming; proposals to limit the tax deductibility of advertising expenses by advertisers; potential auctions for ATV or non-ATV television spectrum; the implementation of "V-chip" technology; and changes to children's television programming requirements, signal carriage rights on cable systems and network affiliate relations. Although Jacor believes the foregoing discussion is sufficient to provide the reader with a general understanding of all material aspects of FCC regulations that affect Jacor, it does not purport to be a complete summary of all provisions of the Communications Act or FCC rules and policies. Reference is made to the Communications Act, FCC rules and the public notices and rulings of the FCC for further information. 52 ENERGY AND ENVIRONMENTAL MATTERS Jacor's source of energy used in its broadcasting operations is electricity. No limitations have been placed on the availability of electrical power, and management believes its energy sources are adequate. Management believes that Jacor is currently in material compliance with all statutory and administrative requirements as related to environmental quality and pollution control. EMPLOYEES Jacor has no direct employees. As of March 29, 1996, Jacor's subsidiaries employed approximately 1,170 persons, 836 on a full-time and 334 on a part-time basis. Each Jacor station has its own complement of employees which generally include a general manager, sales manager, operations manager, business manager, advertising sales staff, on-air personalities and clerical personnel. No Jacor employee is represented by a union. PROPERTIES/FACILITIES Jacor owns the office and studio facilities for WQIK(FM) and WJGR(AM) in Jacksonville, Florida (6,875 square feet) and the office and studio facilities for WFLZ(FM), WFLA(AM) and WDUV(FM) in Tampa, Florida (43,000 square feet). Jacor leases space for the office and studio facilities at its other station locations in Jacksonville, Florida (two sites of 4,567 and 5,000 square feet, respectively); Atlanta (19,500 square feet); Denver (25,964 square feet); Cincinnati (27,601 square feet) and Tampa (6,000 square feet). The two leases in Jacksonville expire in 1997 and 1998, respectively. The Denver and Atlanta leases expire in 1999 and 2007, respectively. The Cincinnati lease expires in 1998 and has two five-year renewal options. The small Tampa lease is a month-to-month lease for WBRD-AM. Jacor leases approximately 10,000 square feet for its corporate offices in Cincinnati under a lease expiring in 1996 with a five-year renewal option. The office (500 square feet) for KHTS in San Diego, California is a month-to-month lease. In conjunction with Jacor's acquisition of radio station WOFX(FM) (formerly WPPT) in Cincinnati, Jacor purchased the building from which such station previously operated. Jacor plans to sell this building. Expansion of Jacor's operations generally comes from the acquisition of stations and their facilities and ordinarily does not create a need for additional space at existing locations, although the emergence of LMAs and JSAs with other stations in Jacor's existing markets could create such a need. Any future need for additional office and studio space at existing locations will be satisfied by the construction of additions to the Company-owned facilities and, in the case of leased facilities, the lease of additional space or the relocation of the office and studio. Jacor's office and studio facilities are all located in downtown or suburban office buildings and are capable of being relocated to any suitable office facility in the station market area. Jacor owns the antenna tower and tower site for radio station WJBT(FM) in Jacksonville, Florida. Jacor also owns the towers and tower site locations for its AM stations in Atlanta, Denver, Jacksonville, Tampa and WLW(AM) in Cincinnati. For the tower site at WCKY(AM), Cincinnati, and for all its other FM stations, the Company leases tower space for its FM antennae under leases expiring from 1996 to 2013. Jacor, through a wholly owned subsidiary, owns the real estate on which the tower sites are located for XTRA-AM and XTRA-FM, stations to which Jacor provides programming and for which it sells air time. Jacor owns substantially all of its equipment, consisting principally of transmitting antennae, transmitters, studio equipment and general office equipment. The towers, antennae and other transmission equipment used by Jacor's stations are in generally good condition. In management's opinion, the quality of the signals range from good to excellent, and Jacor is committed to maintaining and updating its equipment and transmission facilities in order to achieve the best possible signal in the market area. Although Jacor believes its properties are generally adequate for its operations, opportunities to upgrade facilities are continuously reviewed. See Notes 7 and 11 of Notes to Consolidated Financial Statements included elsewhere herein for a description of encumbrances against Jacor's properties and Jacor's rental obligations. 53 LITIGATION From time to time, Jacor becomes involved in various claims and lawsuits that are incidental to its business. In the opinion of Jacor's management, there are no material legal proceedings pending against Jacor. MANAGEMENT EXECUTIVE OFFICERS AND DIRECTORS The directors and executive officers of Jacor are as follows:
NAME AGE POSITION - --------------------------------------------- --- ------------------------------------------------------------ Sheli Z. Rosenberg........................... 54 Board Chair and Director Randy Michaels............................... 43 President, Co-Chief Operating Officer and Director Robert L. Lawrence........................... 43 Co-Chief Operating Officer and Director R. Christopher Weber......................... 40 Senior Vice President, Chief Financial Officer and Secretary Jon M. Berry................................. 49 Senior Vice President and Treasurer John W. Alexander............................ 49 Director Rod F. Dammeyer.............................. 55 Director F. Philip Handy.............................. 51 Director Marc Lasry................................... 36 Director
All directors hold office until the annual meeting of shareholders next following their election, or until their successors are elected and qualified. Officers are elected annually by the Board of Directors and serve at the discretion of the Board. The Board of Directors currently has two standing committees, the Compensation Committee and the Audit Committee. The Compensation Committee consists of three directors, Messrs. Dammeyer and Handy and Mrs. Rosenberg. The basic function of the Compensation Committee is to determine stock option grants to executive officers and other key employees, as well as to review salaries, bonuses, and other elements of compensation of executive officers and other key employees and make recommendations on such matters to the full Board of Directors. The Audit Committee consists of three directors, Messrs. Alexander and Dammeyer and Mrs. Rosenberg. The basic function of the Audit Committee is to review the financial statements of the Company, to consult with Jacor's independent auditors and to consider such other matters with respect to the internal and external audit of the financial affairs of Jacor as may be necessary or appropriate in order to facilitate accurate financial reporting. Information with respect to the business experience and affiliations of the directors and executive officers of Jacor is set forth below. Sheli Z. Rosenberg was elected as Jacor's Board Chair in February 1996. She is also the President and a member of the law firm of Rosenberg & Liebentritt, P.C. since 1980. Mrs. Rosenberg is also Chief Executive Officer, President and a director of Equity Financial and Management Company and its parent successor Equity Group Investments, Inc., a privately owned and affiliated investment and management company. Mrs. Rosenberg is also a director of Great American Management and Investment, Inc. ("GAMI"), a diversified manufacturing company, and of Capsure Holdings Corp., an affiliate of GAMI, and a trustee of Equity Residential Properties Trust, a real estate investment trust. Mrs. Rosenberg is also a director of American Classic Voyages Co.; CFI Industries, Inc.; Eagle Industries, Inc.; Anixter International Inc.; Sealy Corporation; and Revco D.S., Inc. Mrs. Rosenberg was a Vice President of Madison Management Group, Inc., which filed a petition under the federal bankruptcy laws on November 8, 1991. Mrs. Rosenberg was also a Vice President of First Capital Benefits Administrators, Inc., a wholly owned indirect subsidiary of GAMI, which filed a federal bankruptcy petition on January 3, 1995. Randy Michaels, whose legal name is Benjamin L. Homel, has served as an officer of Jacor since 1986. From July 1983 until he joined Jacor, Mr. Michaels was executive vice president--programming and 54 operations at Republic Broadcasting Corporation (acquired by the Company in December 1986). Prior to that time, Mr. Michaels served as national program director of Taft Broadcasting Corporation's Radio Group (a predecessor of Citicasters). Robert L. Lawrence has served as an officer of Jacor since 1986. From July 1983 until he joined Jacor, Mr. Lawrence was executive vice president--sales and marketing at Republic Broadcasting Corporation. Prior to that time, Mr. Lawrence was vice president and general manager of WYNF, Tampa, Florida, a station owned by Taft Broadcasting Corporation's Radio Group (a predecessor of Citicasters). R. Christopher Weber has served as an officer of Jacor since 1986. From December 1985 until he joined Jacor, Mr. Weber was chief financial officer of Republic Broadcasting Corporation. Prior to that time, Mr. Weber was employed by the accounting firm of Peat Marwick & Mitchell. Jon M. Berry has served as an officer of Jacor since 1982. From September 1979 until October 1982, Mr. Berry was controller of United Western Corporation, a real estate holding company. John W. Alexander has been a Partner of Meringoff Equities, and a Managing Partner of Mallard Creek Capital Partners, since 1987. Both are private real estate and investment partnerships. Mr. Alexander is also a Trustee of Equity Residential Properties Trust, a real estate investment trust. Rod F. Dammeyer is President and Chief Executive Officer of Anixter International Inc. (formerly known as Itel Corporation), a Chicago-based value-added provider of integrated networking and cabling solutions. Mr. Dammeyer has been President of Anixter International since 1985 and Chief Executive Officer since 1993; and he has been President and Chief Executive Officer since February 1994 and Director since 1992 of Great American Management and Investment, Inc., a diversified manufacturing company. He is a member of the boards of directors of ANTEC Corporation, Capsure Holding Corp. (an affiliate of GAMI); Falcon Building Products, Inc.; IMC Global, Inc., Revco D.S., Inc.; and Sealy Corporation. Mr. Dammeyer is also a trustee of several Van Kampen American Capital, Inc. trusts. F. Philip Handy has been President of Winter Park Capital Company, a private investment firm, since 1980. Mr. Handy is a director of Anixter International, Inc.; GAMI; Q-Tel, S.A. de C.V.; and Banca Quadrum, S.A. (formerly Servicios Financieros Quadrum, S.A.). Marc Lasry has been the Executive Vice President of Amroc Investments, Inc., a private investment firm, since 1990. Mr. Lasry was the Director and Senior Vice President of the corporation reorganization department of Cowen & Co., a privately owned brokerage firm, from 1987 to 1989. From January 1989 to September 1990, he was a portfolio manager for Amroc Investments, L.P., a private investment firm. There are no family relationships among any of the above-named directors nor among any of the directors and any executive officers of Jacor. 55 DESCRIPTION OF NOTES Set forth below is a summary of certain provisions of the Notes. The Notes will be issued pursuant to an indenture (the "Indenture") to be dated as of , 1996, by and among Jacor and JCAC, Inc., a Florida corporation and a wholly owned subsidiary of Jacor ("JCAC" and collectively with Jacor, the "Obligors"), the Guarantors and , as trustee (the "Trustee"). The terms of the Indenture are also governed by certain provisions contained in the Trust Indenture Act of 1939, as amended. The following summaries of certain provisions of the Indenture are summaries only, do not purport to be complete and are qualified in their entirety by reference to all of the provisions of the Indenture. Capitalized terms used herein and not otherwise defined shall have the meanings assigned to them in the Indenture. Wherever particular provisions of the Indenture are referred to in this summary, such provisions are incorporated by reference as a part of the statements made and such statements are qualified in their entirety by such reference. The form of the Indenture has been filed as an exhibit to the Registration Statement of which this Prospectus is a part. A copy of the form of Indenture is available upon request. GENERAL The Notes will be senior subordinated, unsecured, general obligations of the Obligors, limited in aggregate principal amount to $50.0 million. The Notes will be subordinate in right of payment to certain other debt obligations of the Obligors. The Notes will be jointly and severally irrevocably and unconditionally guaranteed on a senior subordinated basis by each of the Obligor's present and future Subsidiaries (the "Guarantors"). The obligations of each Guarantor under its guarantee, however, will be limited in a manner intended to avoid it being deemed a fraudulent conveyance under applicable law. See "Certain Bankruptcy Limitations" below. The Notes will be issued only in fully registered form, without coupons, in denominations of $1,000 and integral multiples thereof. The Notes will mature on , 2006. The Notes will bear interest at the rate per annum stated on the cover page hereof from the date of issuance or from the most recent Interest Payment Date to which interest has been paid or provided for, payable semi-annually on and of each year, commencing , 1996, to the persons in whose names such Notes are registered at the close of business on the or immediately preceding such Interest Payment Date. Interest will be calculated on the basis of a 360-day year consisting of twelve 30-day months. Principal of, premium, if any, and interest on the Notes will be payable, and the Notes may be presented for registration of transfer or exchange, at the office or agency of the Obligors maintained for such purpose, which office or agency shall be maintained in the Borough of Manhattan, The City of New York. At the option of the Obligors, payment of interest may be made by check mailed to the Holders of the Notes at the addresses set forth upon the registry books of the Registrar. No service charge will be made for any registration of transfer or exchange of Notes, but the Obligors may require payment of a sum sufficient to cover any tax or other governmental charge payable in connection therewith. Until otherwise designated by the Obligors, the Obligors' office or agency will be the corporate trust office of the Trustee presently located at the office of the Trustee in the Borough of Manhattan, The City of New York. SUBORDINATION The Notes and the Guarantees will be general, unsecured obligations of the Obligors and the Guarantors, respectively, subordinated in right of payment to all Senior Debt of the Obligors and the Guarantors, as applicable. On a pro forma basis, as of December 31, 1995, after giving effect to the Acquisitions and the Financings and the application of the proceeds from the Financings, the Obligors would have had outstanding an aggregate of approximately $ million of secured Senior Debt, $ million of other Indebtedness that is secured and $ million of Indebtedness subordinate to the Notes in right of payment. The Indenture provides that no payment (by set-off or otherwise) may be made by or on behalf of the Obligors or a Guarantor, as applicable, on account of the principal of, premium, if any, or interest on the Notes (including any repurchases of Notes), or on account of the redemption provisions of the Notes, for cash or property (other than Junior Securities), (i) upon the maturity of any Senior Debt of the Obligors or such Guarantor by lapse of time, acceleration (unless waived) or otherwise, unless and until all principal of, premium, if any, and the interest on such Senior Debt are first paid in full in cash or Cash Equivalents (or 56 such payment is duly provided for) or otherwise to the extent holders accept satisfaction of amounts due by settlement in other than cash or Cash Equivalents, or (ii) in the event of default in the payment of any principal of, premium, if any, or interest on Senior Debt of the Obligors or such Guarantor when it becomes due and payable, whether at maturity or at a date fixed for prepayment or by declaration or otherwise (a "Payment Default"), unless and until such Payment Default has been cured or waived or otherwise has ceased to exist. Upon (i) the happening of an event of default (other than a Payment Default) that permits the holders of Senior Debt to declare such Senior Debt to be due and payable and (ii) written notice of such event of default given to the Obligors and the Trustee by the Representative under the New Credit Facility or the holders of an aggregate of at least $million principal amount outstanding of any other Senior Debt or their representative (a "Payment Notice"), then, unless and until such event of default has been cured or waived or otherwise has ceased to exist, no payment (by set-off or otherwise) may be made by or on behalf of the Obligors or any Guarantor which is an obligor under such Senior Debt on account of the principal of, premium, if any, or interest on the Notes, (including any repurchases of any of the Notes), or on account of the redemption provisions of the Notes, in any such case, other than payments made with Junior Securities. Notwithstanding the foregoing, unless the Senior Debt in respect of which such event of default exists has been declared due and payable in its entirety within 179 days after the Payment Notice is delivered as set forth above (the "Payment Blockage Period") (and such declaration has not been rescinded or waived), at the end of the Payment Blockage Period, the Obligors and the Guarantors shall be required to pay all sums not paid to the Holders of the Notes during the Payment Blockage Period due to the foregoing prohibitions and to resume all other payments as and when due on the Notes. Any number of Payment Notices may be given; PROVIDED, HOWEVER, that (i) not more than one Payment Notice shall be given within a period of any 360 consecutive days, and (ii) no default that existed upon the date of such Payment Notice or the commencement of such Payment Blockage Period (whether or not such event of default is on the same issue of Senior Debt) shall be made the basis for the commencement of any other Payment Blockage Period. Upon any distribution of assets of any Obligor or any Guarantor upon any dissolution, winding up, total or partial liquidation or reorganization of any Obligor or a Guarantor, whether voluntary or involuntary, in bankruptcy, insolvency, receivership or a similar proceeding or upon assignment for the benefit of creditors or any marshalling of assets or liabilities, (i) the holders of all Senior Debt of the Obligors or such Guarantor, as applicable, will first be entitled to receive payment in full in cash or Cash Equivalents (or have such payment duly provided for) or otherwise to the extent holders accept satisfaction of amounts due by settlement in other than cash or Cash Equivalents before the Holders are entitled to receive any payment on account of principal of, premium, if any, and interest on the Notes (other than Junior Securities) and (ii) any payment or distribution of assets of any Obligor or such Guarantor of any kind or character from any source, whether in cash, property or securities (other than Junior Securities) to which the Holders or the Trustee on behalf of the Holders would be entitled (by set-off or otherwise), except for the subordination provisions contained in the Indenture, will be paid by the liquidating trustee or agent or other person making such a payment or distribution directly to the holders of such Senior Debt or their representative to the extent necessary to make payment in full (or have such payment duly provided for) on all such Senior Debt remaining unpaid, after giving effect to any concurrent payment or distribution to the holders of such Senior Debt. In the event that, notwithstanding the foregoing, any payment or distribution of assets of any Obligor or any Guarantor (other than Junior Securities) shall be received by the Trustee or the Holders at a time when such payment or distribution is prohibited by the foregoing provisions, such payment or distribution shall be held in trust for the benefit of the holders of such Senior Debt, and shall be paid or delivered by the Trustee or such Holders, as the case may be, to the holders of such Senior Debt remaining unpaid or unprovided for or to their representative or representatives, or to the trustee or trustees under any indenture pursuant to which any instruments evidencing any of such Senior Debt may have been issued, ratably according to the aggregate principal amounts remaining unpaid on account of such Senior Debt held or represented by each, for application to the payment of all such Senior Debt remaining unpaid, to the extent necessary to pay or to 57 provide for the payment of all such Senior Debt in full in cash or Cash Equivalents or otherwise to the extent holders accept satisfaction of amounts due by settlement in other than cash or Cash Equivalents after giving effect to any concurrent payment or distribution to the holders of such Senior Debt. No provision contained in the Indenture or the Notes will affect the obligation of the Obligors and the Guarantors, which is absolute and unconditional, to pay, when due, principal of, premium, if any, and interest on the Notes. The subordination provisions of the Indenture and the Notes will not prevent the occurrence of any Default or Event of Default under the Indenture or limit the rights of the Trustee or any Holder to pursue any other rights or remedies with respect to the Notes. As a result of these subordination provisions, in the event of the liquidation, bankruptcy, reorganization, insolvency, receivership or similar proceeding or an assignment for the benefit of the creditors of the Obligors or a marshalling of assets or liabilities of the Obligors, holders of the Notes may receive ratably less than other creditors. The Obligors conducts their operations through their Subsidiaries. Accordingly, the Obligors' ability to meet their cash obligations is dependent upon the ability of their subsidiaries to make cash distributions to the Obligors. Furthermore, any right of the Obligors to receive the assets of any such subsidiary upon such subsidiary's liquidation or reorganization effectively will be subordinated by operation of law to the claims of such subsidiary's creditors (including trade creditors) and holders of its preferred stock, except to the extent that the Obligors are themselves recognized as a creditor or preferred stockholder of such subsidiary, in which case the claims of the Obligors would still be subordinate to any indebtedness or preferred stock of such subsidiary senior in right of payment to that held by the Obligors. CERTAIN BANKRUPTCY LIMITATIONS Each of the Obligors is a holding company, conducting all of their business through Subsidiaries, which have guaranteed or will guarantee the Obligors' Obligations with respect to the Notes. See "Risk Factors." Holders of the Notes will be direct creditors of each Guarantor by virtue of its guarantee. Nonetheless, in the event of the bankruptcy or financial difficulty of a Guarantor, such Guarantor's obligations under its guarantee may be subject to review and avoidance under state and federal fraudulent transfer laws. Among other things, such obligations may be avoided if a court concludes that such obligations were incurred for less than reasonably equivalent value or fair consideration at a time when the Guarantor was insolvent, was rendered insolvent, or was left with inadequate capital to conduct its business. A court would likely conclude that a Guarantor did not receive reasonably equivalent value or fair consideration to the extent that the aggregate amount of its liability on its guarantee exceeds the economic benefits it receives in the Offering. The obligations of each Guarantor under its guarantee will be limited in a manner intended to cause it not to be a fraudulent conveyance under applicable law, although no assurance can be given that a court would give the holder the benefit of such provision. If the obligations of a Guarantor under its guarantee were avoided, Holders of Notes would have to look to the assets of any remaining Guarantors for payment. There can be no assurance in that event that such assets would suffice to pay the outstanding principal and interest on the Notes. OPTIONAL REDEMPTION The Obligors will not have the right to redeem any Notes prior to , 2001. The Notes will be redeemable at the option of the Obligors, in whole or in part, at any time on or after , upon not less than 30 days nor more than 60 days notice to each holder of Notes, at the following redemption prices (expressed as percentages of the principal amount) if redeemed during the 12-month period commencing of the years indicated below, in each case (subject to the right of Holders of record on a Record Date to receive interest due on an Interest Payment Date that is on or prior to such Redemption Date) together with accrued and unpaid interest thereon to the Redemption Date:
YEAR PERCENTAGE - ----------------------------------------------------------------------- ----------- 200 ................................................................... % 200 ................................................................... % 200 ................................................................... % 200 and thereafter..................................................... 100.000%
58 In the case of a partial redemption, the Trustee shall select the Notes or portions thereof for redemption on a PRO RATA basis, by lot or in such other manner it deems appropriate and fair. The Notes may be redeemed in part in multiples of $1,000 only. The Notes will not have the benefit of any sinking fund. Notice of any redemption will be sent, by first class mail, at least 30 days and not more than 60 days prior to the date fixed for redemption to the Holder of each Note to be redeemed to such Holder's last address as then shown upon the registry books of the Registrar. Any notice which relates to a Note to be redeemed in part only must state the portion of the principal amount equal to the unredeemed portion thereof and must state that on and after the date of redemption, upon surrender of such Note, a new Note or Notes in a principal amount equal to the unredeemed portion thereof will be issued. On and after the date of redemption, interest will cease to accrue on the Notes or portions thereof called for redemption, unless the Obligors defaults in the payment thereof. CERTAIN COVENANTS REPURCHASE OF NOTES AT THE OPTION OF THE HOLDER UPON A CHANGE OF CONTROL The Indenture will provide that in the event that a Change of Control has occurred, each Holder of Notes will have the right, at such Holder's option, pursuant to an irrevocable and unconditional offer by the Obligors (the "Change of Control Offer"), to require the Obligors to repurchase all or any part of such Holder's Notes (PROVIDED, that the principal amount of such Notes must be $1,000 or an integral multiple thereof) on a date (the "Change of Control Purchase Date") that is no later than 35 Business Days after the occurrence of such Change of Control, at a cash price (the "Change of Control Purchase Price") equal to 101% of the principal amount thereof, together with accrued interest to the Change of Control Purchase Date. The Change of Control Offer shall be made within 10 Business Days following a Change of Control and shall remain open for 20 Business Days following its commencement (the "Change of Control Offer Period"). Upon expiration of the Change of Control Offer Period, the Obligors promptly shall purchase all Notes properly tendered in response to the Change of Control Offer. As used herein, a "Change of Control" means (i) any merger or consolidation of any of the Obligors with or into any person or any sale, transfer or other conveyance, whether direct or indirect, of all or substantially all of any of the assets of the Obligors, on a consolidated basis, in one transaction or a series of related transactions, if, immediately after giving effect to such transaction(s), any "person" or "group" (as such terms are used for purposes of Sections 13(d) and 14(d) of the Exchange Act, whether or not applicable) (other than an Excluded Person) is or becomes the "beneficial owner," directly or indirectly, of more than 50% of the total voting power in the aggregate normally entitled to vote in the election of directors, managers, or trustees, as applicable, of the transferee(s) or surviving entity or entities, (ii) any "person" or "group" (as such terms are used for purposes of Sections 13(d) and 14(d) of the Exchange Act, whether or not applicable) (other than an Excluded Person) is or becomes the "beneficial owner," directly or indirectly, of more than 50% of the total voting power in the aggregate of all classes of Capital Stock of the applicable Obligor then outstanding normally entitled to vote in elections of directors, or (iii) during any period of 12 consecutive months after the Issue Date, individuals who at the beginning of any such 12-month period constituted the Board of Directors of the applicable Obligor (together with any new directors whose election by such Board or whose nomination for election by the shareholders of the applicable Obligor was approved by a vote of a majority of the directors then still in office who were either directors at the beginning of such period or whose election or nomination for election was previously so approved) cease for any reason to constitute a majority of the Board of Directors of the applicable Obligor then in office. On or before the Change of Control Purchase Date, the Obligors will (i) accept for payment Notes or portions thereof properly tendered pursuant to the Change of Control Offer, (ii) deposit with the Paying Agent cash sufficient to pay the Change of Control Purchase Price (together with accrued and unpaid interest) of all Notes so tendered and (iii) deliver to the Trustee Notes so accepted together with an Officers' Certificate listing the Notes or portions thereof being purchased by the Obligors. The Paying Agent promptly will pay the Holders of Notes so accepted an amount equal to the Change of Control Purchase Price (together with accrued and unpaid interest), and the Trustee promptly will authenticate and deliver to 59 such Holders a new Note equal in principal amount to any unpurchased portion of the Note surrendered. Any Notes not so accepted will be delivered promptly by the Obligors to the Holder thereof. The Obligors publicly will announce the results of the Change of Control Offer on or as soon as practicable after the Change of Control Purchase Date. The Change of Control purchase feature of the Notes may make more difficult or discourage a takeover of the Obligors, and, thus, the removal of incumbent management. The phrase "all or substantially all" of the assets of the Obligors will likely be interpreted under applicable state law and will be dependent upon particular facts and circumstances. As a result, there may be a degree of uncertainty in ascertaining whether a sale or transfer of "all or substantially all" of the assets of any of the Obligors has occurred. In addition, no assurances can be given that the Obligors will be able to acquire Notes tendered upon the occurrence of a Change of Control. Any Change of Control Offer will be made in compliance with all applicable laws, rules and regulations, including, if applicable, Regulation 14E under the Exchange Act and the rules thereunder and all other applicable Federal and state securities laws. LIMITATION ON INCURRENCE OF ADDITIONAL INDEBTEDNESS AND DISQUALIFIED CAPITAL STOCK The Indenture will provide that, except as set forth below in this covenant, the Obligors and the Guarantors will not, and will not permit any of their Subsidiaries to, directly or indirectly, issue, assume, guaranty, incur, become directly or indirectly liable with respect to (including as a result of an Acquisition), or otherwise become responsible for, contingently or otherwise (individually and collectively, to "incur" or, as appropriate, an "incurrence"), any Indebtedness or any Disqualified Capital Stock (including Acquired Indebtedness). Notwithstanding the foregoing: (a) if (i) no Default or Event of Default shall have occurred and be continuing at the time of, or would occur after giving effect on a PRO FORMA basis to, such incurrence of Indebtedness or Disqualified Capital Stock and (ii) on the date of such incurrence (the "Incurrence Date"), the Consolidated Coverage Ratio of Jacor for the Reference Period immediately preceding the Incurrence Date, after giving effect on a PRO FORMA basis to such incurrence of such Indebtedness or Disqualified Capital Stock and, to the extent set forth in the definition of Consolidated Coverage Ratio, the use of proceeds thereof, would be at least to 1 (the "Debt Incurrence Ratio"), then the Obligors may incur such Indebtedness or Disqualified Capital Stock; PROVIDED, that except in the case of Acquired Indebtedness, such Indebtedness or Disqualified Capital Stock incurred pursuant to this clause (a) has an Average Life to Stated Maturity that exceeds the remaining Average Life to Stated Maturity of the Notes and has a Stated Maturity for its final scheduled principal or (in the case of Disqualified Capital Stock) redemption payment, as applicable, later than the Stated Maturity for the final scheduled principal payment of the Notes]; (b) the Obligors and the Guarantors may incur Indebtedness evidenced by the Notes and the Guarantees and represented by the Indenture up to the amounts specified therein as of the date thereof; (c) the Obligors and the Guarantors, as applicable, may incur Refinancing Indebtedness with respect to any Indebtedness or Disqualified Capital Stock, as applicable, described in clauses (a) and (b) of this covenant or which is outstanding on the Issue Date so long as, in the case of Indebtedness used to refinance, refund, or replace Indebtedness described in clause (c), such Refinancing Indebtedness is secured only by the assets that secured the Indebtedness so refinanced; (d) the Obligors and the Guarantors may incur Permitted Indebtedness; (e) the Obligors and the Guarantors may incur Indebtedness in an aggregate amount outstanding at any time (including any Indebtedness issued to refinance, replace, or refund such Indebtedness) of up to $ million, minus the amount of any such Indebtedness retired with Net Cash Proceeds from any Asset Sale or assumed by a transferee in an Asset Sale; and 60 (f) Indebtedness incurred pursuant to the New Credit Facility up to an aggregate amount outstanding (including any Indebtedness issued to refinance, refund or replace such Indebtedness) at any time of $ million, plus accrued interest and such additional amounts as may be deemed to be outstanding in the form of Interest Swap and Hedging Obligations with lenders party to the New Credit Facility, minus the amount of any such Indebtedness retired with Net Cash Proceeds from any Asset Sale or assumed by a transferee in an Asset Sale. Indebtedness or Disqualified Capital Stock of any Person which is outstanding at the time such Person becomes a Subsidiary of either of the Obligors (including upon designation of any subsidiary or other Person as a Subsidiary) or is merged with or into or consolidated with either of the Obligors or a Subsidiary of either of the Obligors shall be deemed to have been Incurred at the time such Person becomes such a Subsidiary of either of the Obligors or is merged with or into or consolidated with either of the Obligors or a Subsidiary of either of the Obligors, as applicable. LIMITATION ON RESTRICTED PAYMENTS The Indenture will provide that the Obligors and the Subsidiaries will not, and will not permit any of their Subsidiaries to, directly or indirectly, make any Restricted Payment if, after giving effect to such Restricted Payment on a PRO FORMA basis, (1) a Default or an Event of Default shall have occurred and be continuing, (2) the Obligors are not permitted to incur at least $1.00 of additional Indebtedness pursuant to the Debt Incurrence Ratio in paragraph (a) of the covenant "Limitation on Incurrence of Additional Indebtedness and Disqualified Capital Stock," or (3) the aggregate amount of all Restricted Payments made by the Obligors and its Subsidiaries, including after giving effect to such proposed Restricted Payment, from and after the Issue Date, would exceed the sum of (a) $ million, plus (b) 50% of the aggregate Adjusted Consolidated EBITDA of Jacor and its Consolidated Subsidiaries for the period (taken as one accounting period), commencing on the first day of the first full fiscal quarter commencing after the Issue Date, to and including the last day of the fiscal quarter ended immediately prior to the date of each such calculation (or, in the event Adjusted Consolidated EBITDA for such period is a deficit, then minus 100% of such deficit), plus (c) the aggregate Net Cash Proceeds received by Jacor from the sale of its Qualified Capital Stock (other than (i) to a Subsidiary of Jacor and (ii) to the extent applied in connection with a Qualified Exchange), after the Issue Date. The foregoing clauses (2) and (3) of the immediately preceding paragraph, however, will not prohibit (v) Restricted Investments, PROVIDED,that, after giving PRO FORMA effect to such Investment, the aggregate amount of all such Investments made on or after the Issue Date that are outstanding (after giving effect to any such Investments that are returned to the Obligors or the Subsidiary Guarantor that made such prior Investment, without restriction, in cash on or prior to the date of any such calculation) at any time does not exceed $ million, (w) repurchases of Capital Stock from employees of the Obligors or its Subsidiaries upon the death, disability or termination of employment in an aggregate amount to all employees not to exceed $ per year or $ million in the aggregate on and after the Issue Date, (x) a Qualified Exchange, (y) the payment of any dividend on Qualified Capital Stock within 60 days after the date of its declaration if such dividend could have been made on the date of such declaration in compliance with the foregoing provisions, or (z) the repurchase of the LYONs in accordance with the terms thereof as of the issue date. The full amount of any Restricted Payment made pursuant to the foregoing clauses (v), (w), (y) and (z) (but not pursuant to clause (y)) (but without giving effect to any Restricted Payment made pursuant to such clause (w), so long as the proposed Restricted Payment is a Restricted Investment) of the immediately preceding sentence, however, will be deducted in the calculation of the aggregate amount of Restricted Payments available to be made referred to in clause (3) of the immediately preceding paragraph. LIMITATION ON DIVIDENDS AND OTHER PAYMENT RESTRICTIONS AFFECTING SUBSIDIARIES The Indenture will provide that the Obligors and the Subsidiaries will not, and will not permit any of their Subsidiaries to, directly or indirectly, create, assume or suffer to exist any consensual restriction on the ability of any Subsidiary of the Obligors to pay dividends or make other distributions to or on behalf of, or to pay any obligation to or on behalf of, or otherwise to transfer assets or property to or on behalf of, or make or pay loans or advances to or on behalf of, the Obligors or any Subsidiary of the Obligors, except (a) restrictions imposed by the Notes or the Indenture, (b) restrictions imposed by applicable law, 61 (c) existing restrictions under specified Indebtedness outstanding on the Issue Date, (d) restrictions under any Acquired Indebtedness not incurred in violation of the Indenture or any agreement relating to any property, asset, or business acquired by the Obligors or any of their Subsidiaries, which restrictions in each case existed at the time of acquisition, were not put in place in connection with or in anticipation of such acquisition and are not applicable to any person, other than the person acquired, or to any property, asset or business, other than the property, assets and business so acquired, (e) any such restriction or requirement imposed by Indebtedness incurred under paragraph (e) or (f) of the covenant "Limitation of Incurrence of Additional Indebtedness and Disqualified Capital Stock," provided such restriction or requirement is no more restrictive than that imposed by the New Credit Facility as of the Issue Date, (f) restrictions with respect solely to a Subsidiary of the Obligors imposed pursuant to a binding agreement which has been entered into for the sale or disposition of all or substantially all of the Equity Interests or assets of such Subsidiary, provided such restrictions apply solely to the Equity Interests or assets of such Subsidiary which are being sold, and (g) in connection with and pursuant to permitted Refinancings, replacements of restrictions imposed pursuant to clauses (a), (c) or (d) of this paragraph that are not more restrictive than those being replaced and do not apply to any other person or assets than those that would have been covered by the restrictions in the Indebtedness so refinanced. Notwithstanding the foregoing, neither (a) customary provisions restricting subletting or assignment of any lease entered into in the ordinary course of business, consistent with industry practice, nor (b) Liens permitted under the terms of the Indenture on assets securing Senior Debt incurred in accordance with the covenant "Limitation on Incurrence of Additional Indebtedness and Disqualified Capital Stock" shall in and of themselves be considered a restriction on the ability of the applicable Subsidiary to transfer such agreement or assets, as the case may be. LIMITATIONS ON LAYERING INDEBTEDNESS; LIENS The Indenture will provide that the Obligors and the Subsidiaries will not, and will not permit any of their Subsidiaries to, directly or indirectly, incur, or suffer to exist (a) any Indebtedness that is subordinate in right of payment to any other Indebtedness of the Obligor or a Guarantor unless, by its terms, such Indebtedness (i) has a maturity date subsequent to the Stated Maturity of the Notes and an Average Life longer than that of the Notes and (ii) is subordinate in right of payment to, or ranks PARI PASSU with, the Notes or the Guarantees, as applicable, or (b) other than Permitted Liens, any Lien upon any of its property or assets, whether now owned or hereafter acquired, or upon any income or profits therefrom securing Indebtedness other than Senior Debt or Purchase Money Indebtedness or Capitalized Lease Obligations incurred in accordance with the covenant "Limitation on Incurrence of Additional Indebtedness and Disqualified Capital Stock." LIMITATION ON SALE OF ASSETS AND SUBSIDIARY STOCK The Indenture will provide that the Obligors and the Subsidiaries will not, and will not permit any of their Subsidiaries to, in one or a series of related transactions, convey, sell, transfer, assign or otherwise dispose of, directly or indirectly, any of its property, business or assets, including by merger or consolidation (in the case of a Guarantor or a Subsidiary of any of the Obligors), and including any sale or other transfer or issuance of any Equity Interests of any Subsidiary of the Obligors, whether by the Obligors or a Subsidiary of either or through the issuance, sale or transfer of Equity Interests by a Subsidiary of the Obligors (an "Asset Sale"), unless (l)(a) within days after the date of such Asset Sale, the Net Cash Proceeds therefrom (the "Asset Sale Offer Amount") are applied to the optional redemption of the Notes in accordance with the terms of the Indenture or to the repurchase of the Notes pursuant to an irrevocable, unconditional cash offer (the "Asset Sale Offer") to repurchase Notes at a purchase price (the "Asset Sale Offer Price") of % of principal amount, plus accrued interest to the date of payment, made within days of such Asset Sale or (b) within days following such Asset Sale, the Asset Sale Offer Amount is (i) invested (or committed, pursuant to a binding commitment subject only to reasonable, customary closing conditions, to be invested, and in fact is so invested, within an additional days) in assets and property (other than notes, bonds, obligation and securities) which in the good faith reasonable judgment of the Board will immediately constitute or be a part of a Related Business of the Obligors or such Subsidiary (if it continues to be a Subsidiary) immediately following such transaction or (ii) used to retire specified Indebtedness existing on the Issue Date or Senior Debt to permanently reduce the amount of such Indebtedness outstanding on the Issue Date or permitted pursuant to paragraph (c), (e) or (f) of the covenant "Limitation on Incurrence of 62 Additional Indebtedness and Disqualified Capital Stock" (including that in the case of a revolver or similar arrangement that makes credit available, such commitment is so permanently reduced by such amount), (2) with respect to any Asset Sale or related series of Asset Sales involving securities, property or assets with an aggregate fair market value in excess of $ , at least % of the consideration for such Asset Sale or series of related Asset Sales consists of cash or Cash Equivalents, (3) no Default or Event of Default shall have occurred and be continuing at the time of, or would occur after giving effect, on a PRO FORMA basis, to, such Asset Sale, and (4) the Board of Directors of the applicable Obligor determines in good faith that such Obligor or such Subsidiary, as applicable, receives fair market value for such Asset Sale. The Indenture will provide that an Asset Sale Offer may be deferred until the accumulated Net Cash Proceeds from Asset Sales not applied to the uses set forth in (l)(b) above (the "Excess Proceeds") exceeds $ million and that each Asset Sale Offer shall remain open for 20 Business Days following its commencement and no longer (the "Asset Sale Offer Period"). Upon expiration of the Asset Sale Offer Period, the Obligors shall apply the Asset Sale Offer Amount plus an amount equal to accrued interest to the purchase of all Notes properly tendered (on a PRO RATA basis if the Asset Sale Offer Amount is insufficient to purchase all Notes so tendered) at the Asset Sale Offer Price (together with accrued interest). To the extent that the aggregate amount of Notes tendered pursuant to an Asset Sale Offer is less than the Asset Sale Offer Amount, the Obligors may use any remaining Net Cash Proceeds for general corporate purposes as otherwise permitted by the Indenture and following each Asset Sale Offer the Excess Proceeds amount shall be reset to zero. If required by applicable law, the Asset Sale Offer Period may be extended as so required, however, if so extended it shall nevertheless constitute an Event of Default if within 60 Business Days of its commencement the Asset Sale Offer is not consummated or the properly tendered Notes are not purchased pursuant thereto. For purposes of (2) above, total consideration received means the total consideration received for such Asset Sales minus the amount (a) Senior Debt assumed by a transferee which assumption permanently reduces the amount of Indebtedness outstanding on the Issue Date or permitted pursuant to paragraph (c), (e) or (f) of the covenant "Limitation on Incurrence of Additional Indebtedness and Disqualified Capital Stock" (including that in the case of a revolver or similar arrangement that makes credit available, such commitment is so reduced by such amount) and (b) property that within 30 days of such Asset Sale is converted into cash or Cash Equivalents). Notwithstanding the foregoing provisions of the first paragraph of this covenant: (i) the Obligors and their Subsidiaries may convey, sell, transfer, assign or otherwise dispose of assets pursuant to and in accordance with the limitation on mergers, sales or consolidations provisions in the Indenture; (ii) the Obligors and their Subsidiaries may sell or dispose of damaged, worn out or other obsolete property in the ordinary course of business so long as such property is no longer necessary for the proper conduct of the business of either of the Obligors or such Subsidiary, as applicable; and (iii) the Guarantors may convey, sell, transfer, assign or otherwise dispose of assets to the Obligors or any of their wholly owned Guarantors. All Net Cash Proceeds from an Event of Loss shall be invested, used for prepayment of Senior Debt, or used to repurchase Notes, all within the period and as otherwise provided above in clauses 1(a) or 1(b)(i) of the first paragraph of this covenant. In addition to the foregoing, the Obligors will not, and will not permit any Subsidiary to, directly or indirectly make any Asset Sale of any of the Equity Interests of any Subsidiary except pursuant to an Asset Sale of all the Equity Interests of such Subsidiary. Any Asset Sale Offer shall be made in compliance with all applicable laws, rules, and regulations, including, if applicable, Regulation 14E of the Exchange Act and the rules and regulations thereunder and all other applicable Federal and state securities laws. LIMITATION ON TRANSACTIONS WITH AFFILIATES The Indenture will provide that neither the Obligors nor any of their Subsidiaries will be permitted after the Issue Date to enter into any contract, agreement, arrangement or transaction with any Affiliate (an 63 "Affiliate Transaction"), or any series of related Affiliate Transactions, (other than Exempted Affiliate Transactions) (i) unless it is determined that the terms of such Affiliate Transaction are fair and reasonable to the Obligors, and no less favorable to the Obligors, than could have been obtained in an arm's length transaction with a non-Affiliate and, (ii) if involving consideration to either party in excess of $ , unless such Affiliate Transaction(s) is evidenced by an Officers' Certificate addressed and delivered to the Trustee certifying that such Affiliate Transaction (or Transactions) has been approved by a majority of the members of the Board of Directors that are disinterested in such transaction and (iii) if involving consideration to either party in excess of $ million, unless in addition the Obligors, prior to the consummation thereof, obtains a written favorable opinion as to the fairness of such transaction to the applicable Obligor from a financial point of view from an independent investment banking firm of national reputation. LIMITATION ON MERGER, SALE OR CONSOLIDATION The Indenture will provide that neither of the Obligors will not, directly or indirectly, consolidate with or merge with or into another person or sell, lease, convey or transfer all or substantially all of its assets (computed on a consolidated basis), whether in a single transaction or a series of related transactions, to another Person or group of affiliated Persons or adopt a Plan of Liquidation, unless (i) either (a) the applicable Obligor is the continuing entity or (b) the resulting, surviving or transferee entity or, in the case of a Plan of Liquidation, the entity which receives the greatest value from such Plan of Liquidation is a corporation organized under the laws of the United States, any state thereof or the District of Columbia and expressly assumes by supplemental indenture all of the obligations of the Obligors in connection with the Notes and the Indenture; (ii) no Default or Event of Default shall exist or shall occur immediately after giving effect on a PRO FORMA basis to such transaction; (iii) immediately after giving effect to such transaction on a PRO FORMA basis, the Consolidated Net Worth of the consolidated surviving or transferee entity or, in the case of a Plan of Liquidation, the entity which receives the greatest value from such Plan of Liquidation is at least equal to the Consolidated Net Worth of the Obligors immediately prior to such transaction; and (iv) immediately after giving effect to such transaction on a PRO FORMA basis, the consolidated resulting, surviving or transferee entity or, in the case of a Plan of Liquidation, the entity which receives the greatest value from such Plan of Liquidation would immediately thereafter be permitted to incur at least $1.00 of additional Indebtedness pursuant to the Debt Incurrence Ratio set forth in paragraph (a) of the covenant "Limitation on Incurrence of Additional Indebtedness and Disqualified Capital Stock." Upon any consolidation or merger or any transfer of all or substantially all of the assets of any Obligor or consummation of a Plan of Liquidation in accordance with the foregoing, the successor corporation formed by such consolidation or into which such Obligor is merged or to which such transfer is made or, in the case of a Plan of Liquidation, the entity which receives the greatest value from such Plan of Liquidation shall succeed to, and be substituted for, and may exercise every right and power of, the applicable Obligor under the Indenture with the same effect as if such successor corporation had been named therein as an Obligor, and the applicable Obligor shall be released from the obligations under the Notes and the Indenture except with respect to any obligations that arise from, or are related to, such transaction. For purposes of the foregoing, the transfer (by lease, assignment, sale or otherwise) of all or substantially all of the properties and assets of one or more Subsidiaries, the Obligors' interest in which constitutes all or substantially all of the properties and assets of the Obligors shall be deemed to be the transfer of all or substantially all of the properties and assets of the Obligors. LIMITATION ON LINES OF BUSINESS The Indenture will provide that neither the Obligors nor any of their Subsidiaries shall directly or indirectly engage to any substantial extent in any line or lines of business activity other than that which, in the reasonable good faith judgment of the Board of Directors of the Obligors is a Related Business. 64 RESTRICTION ON SALE AND ISSUANCE OF SUBSIDIARY STOCK The Indenture will provide that the Obligors and the Guarantors will not sell, and will not permit any of their Subsidiaries to issue or sell, any Equity Interests of any Subsidiary of the Obligors to any Person other than the Obligors or a wholly owned Subsidiary of the Obligors, except for Equity Interests with no preferences or special rights or privileges and with no redemption or prepayment provisions. FUTURE SUBSIDIARY GUARANTORS The Indenture will provide that all present and future Subsidiaries of the Obligors jointly and severally will guaranty irrevocably and unconditionally all principal, premium, if any, and interest on the Notes on a senior subordinated basis. RELEASE OF GUARANTORS The Indenture will provide that no Guarantor shall consolidate or merge with or into (whether or not such Guarantor is the surviving Person) another Person unless (i) subject to the provisions of the following paragraph and certain other provisions of the Indenture, the Person formed by or surviving any such consolidation or merger (if other than such Guarantor) assumes all the obligations of such Guarantor pursuant to a supplemental indenture in form reasonably satisfactory to the Trustee, pursuant to which such Person shall unconditionally guarantee, on a Senior Subordinated basis, all of such Guarantor's obligations under such Guarantor's guarantee, the Indenture on the terms set forth in the Indenture; (ii) immediately before and immediately after giving effect to such transaction on a PRO FORMA basis, no Default or Event of Default shall have occurred or be continuing; and (iii) immediately after such transaction, the surviving person holds all Permits required for operation of the business of, and such entity is controlled by a person or entity (or has retained a person or entity which is) experienced in, operating broadcast properties otherwise holds all Permits to operate its business. Upon the sale or disposition (whether by merger, stock purchase, asset sale or otherwise) of a Subsidiary Guarantor or all of its assets to an entity which is not a Subsidiary Guarantor, which transaction is otherwise in compliance with the Indenture (including, without limitation, the provisions of the covenant Limitations on Sale of Asset, and Subsidiary Stock), such Subsidiary Guarantor will be deemed released from its obligations under its Guarantee of the Notes; PROVIDED, HOWEVER, that any such termination shall occur only to the extent that all obligations of such Subsidiary Guarantor under all of its guarantees of, and under all of its pledges of assets or other security interests which secure, any Indebtedness of the Obligors or any other Subsidiary shall also terminate upon such release, sale or transfer. LIMITATION ON STATUS AS INVESTMENT COMPANY The Indenture will prohibit the Obligors and their Subsidiaries from being required to register as an "investment company" (as that term is defined in the Investment Company Act of 1940, as amended), or from otherwise becoming subject to regulation under the Investment Company Act. REPORTS The Indenture will provide that whether or not the Obligors are subject to the reporting requirements of Section 13 or 15(d) of the Exchange Act, the Obligors shall deliver to the Trustee and, to each Holder, within 15 days after it is or would have been (if it were subject to such reporting obligations) required to file such with the Commission, annual and quarterly financial statements substantially equivalent to financial statements that would have been included in reports filed with the Commission, if the Obligors were subject to the requirements of Section 13 or 15(d) of the Exchange Act, including, with respect to annual information only, a report thereon by the Obligors' certified independent public accountants as such would be required in such reports to the Commission, and, in each case, together with a management's discussion and analysis of financial condition and results of operations which would be so required and, to the extent permitted by the Exchange Act or the Commission (if it were subject to such reporting obligations), file with the Commission the annual, quarterly and other reports which it is or would have been required to file with the Commission. EVENTS OF DEFAULT AND REMEDIES The Indenture will define an Event of Default as (i) the failure by the Obligors to pay any installment of interest on the Notes as and when the same becomes due and payable and the continuance of any such 65 failure for 30 days, (ii) the failure by the Obligors to pay all or any part of the principal, or premium, if any, on the Notes when and as the same becomes due and payable at maturity, redemption, by acceleration or otherwise, including, without limitation, payment of the Change of Control Purchase Price or the Asset Sale Offer Price, or otherwise, (iii) the failure by the Obligors or any Subsidiary to observe or perform any other covenant or agreement contained in the Notes or the Indenture and, subject to certain exceptions, the continuance of such failure for a period of 30 days after written notice is given to the Obligors by the Trustee or to the Obligors and the Trustee by the Holders of at least 25% in aggregate principal amount of the Notes outstanding, (iv) certain events of bankruptcy, insolvency or reorganization in respect of the Obligors or any of their Significant Subsidiaries, (v) a default in any issue of Indebtedness of the Obligors or any of their Subsidiaries with an aggregate principal amount in excess of $ million (a) resulting from the failure to pay principal at maturity or (b) as a result of which the maturity of such Indebtedness has been accelerated prior to its stated maturity, and (vi) final unsatisfied judgments not covered by insurance aggregating in excess of $ million, at any one time rendered against the Obligors or any of their Subsidiaries and not stayed, bonded or discharged within 60 days. The Indenture provides that if a Default occurs and is continuing, the Trustee must, within 90 days after the occurrence of such Default, give to the Holders notice of such Default. If an Event of Default occurs and is continuing (other than an Event of Default specified in clause (iv), above, relating to the Obligor or any Significant Subsidiary,) then in every such case, unless the principal of all of the Notes shall have already become due and payable, either the Trustee or the Holders of 25% in aggregate principal amount of the Notes at the time outstanding, by notice in writing to the Obligor (and to the Trustee if given by Holders) (an "Acceleration Notice"), may declare all principal, determined as set forth below, and accrued interest thereon to be due and payable immediately; provided, however, that if any Senior Debt is outstanding pursuant to the New Credit Facility upon a declaration of such acceleration, such principal and interest shall be due and payable upon the earlier of (x) the third Business Day after the sending to the Obligors and the Representative of such written notice, unless such Event of Default is cured or waived prior to such date and (y) the date of acceleration of any Senior Debt under the New Credit Facility. In the event a declaration of acceleration resulting from an Event of Default described in clause (v) above has occurred and is continuing, such declaration of acceleration shall be automatically annulled if such default is cured or waived or the holders of the Indebtedness which is the subject of such default have rescinded their declaration of acceleration in respect of such Indebtedness within five days thereof and the Trustee has received written notice or such cure, waiver or rescission and no other Event of Default described in clause (v) above has occurred that has not been cured or waived within five days of the declaration of such acceleration in respect of such Indebtedness. If an Event of Default specified in clause (iv), above, relating to the Obligor or any Significant Subsidiary occurs, all principal and accrued interest thereon will be immediately due and payable on all outstanding Notes without any declaration or other act on the part of Trustee or the Holders. The Holders of a majority in aggregate principal amount of Notes at the time outstanding, generally are authorized to rescind such acceleration if all existing Events of Default, other than the non-payment of the principal of, premium, if any, and interest on the Notes which have become due solely by such acceleration and except on default with respect to any provision requiring a supermajority approval to amend, which default may only be waived by such a supermajority, and have been cured or waived. Prior to the declaration of acceleration of the maturity of the Notes, the Holders of a majority in aggregate principal amount of the Notes at the time outstanding may waive on behalf of all the Holders any default, except on default with respect to any provision requiring a supermajority approved to amend, which default may only be waived by such a supermajority, and except a default in the payment of principal of or interest on any Note not yet cured or a default with respect to any covenant or provision which cannot be modified or amended without the consent of the Holder of each outstanding Note affected. Subject to the provisions of the Indenture relating to the duties of the Trustee, the Trustee will be under no obligation to exercise any of its rights or powers under the Indenture at the request, order or direction of any of the Holders, unless such Holders have offered to the Trustee reasonable security or indemnity. Subject to all provisions of the Indenture and applicable law, the Holders of a majority in aggregate principal amount of the Notes at the time outstanding will have the right to direct the time, method and place of conducting any proceeding for any remedy available to the Trustee, or exercising any trust or power conferred on the Trustee. 66 LEGAL DEFEASANCE AND COVENANT DEFEASANCE The Indenture will provide that the Obligors may, at their option and at any time within one year of the Stated Maturity of the Notes, elect to have their obligations and the obligations of the Guarantors discharged with respect to the outstanding Notes ("Legal Defeasance"). Such Legal Defeasance means that the Obligors shall be deemed to have paid and discharged the entire indebtedness represented, and the Indenture shall cease to be of further effect as to all outstanding Notes and Guarantees, except as to (i) rights of Holders to receive payments in respect of the principal of, premium, if any, and interest on such Notes when such payments are due from the trust funds; (ii) the Obligors' obligations with respect to such Notes concerning issuing temporary Notes, registration of Notes, mutilated, destroyed, lost or stolen Notes, and the maintenance of an office or agency for payment and money for security payments held in trust; (iii) the rights, powers, trust, duties, and immunities of the Trustee, and the Obligors' obligations in connection therewith; and (iv) the Legal Defeasance provisions of the Indenture. In addition, the Obligors may, at their option and at any time, elect to have the obligations of the Obligors and the Guarantors released with respect to certain covenants that are described in the Indenture ("Covenant Defeasance") and thereafter any omission to comply with such obligations shall not constitute a Default or Event of Default with respect to the Notes. In the event Covenant Defeasance occurs, certain events (not including non-payment, bankruptcy, receivership, rehabilitation and insolvency events) described under "Events of Default" will no longer constitute an Event of Default with respect to the Notes. In order to exercise either Legal Defeasance or Covenant Defeasance, (i) the Obligors must irrevocably deposit with the Trustee, in trust, for the benefit of the Holders of the Notes, U.S. legal tender, U.S. Government Obligors or a combination thereof, in such amounts as will be sufficient, in the opinion of a nationally recognized firm of independent public accountants, to pay the principal of, premium, if any, and interest on such Notes on the stated date for payment thereof or on the redemption date of such principal or installment of principal of, premium, if any, or interest on such Notes, and the Holders of Notes must have a valid, perfected, exclusive security interest in such trust; (ii) in the case of the Legal Defeasance, the Obligors shall have delivered to the Trustee an opinion of counsel in the United States reasonably acceptable to Trustee confirming that (A) the Obligors has received from, or there has been published by the Internal Revenue Service, a ruling or (B) since the date of the Indenture, there has been a change in the applicable federal income tax law, in either case to the effect that, and based thereon such opinion of counsel shall confirm that, the Holders of such Notes will not recognize income, gain or loss for federal income tax purposes as a result of such Legal Defeasance and will be subject to federal income tax on the same amounts, in the same manner and at the same times as would have been the case if such Legal Defeasance had not occurred; (iii) in the case of Covenant Defeasance, the Obligors shall have delivered to the Trustee an opinion of counsel in the United States reasonably acceptable to such Trustee confirming that the Holders of such Notes will not recognize income, gain or loss for federal income tax purposes as a result of such Covenant Defeasance and will be subject to federal income tax on the same amounts, in the same manner and at the same times as would have been the case if such Covenant Defeasance had not occurred; (iv) no Default or Event of Default shall have occurred and be continuing on the date of such deposit or insofar as Events of Default from bankruptcy or insolvency events are concerned, at any time in the period ending on the 91st day after the date of deposit; (v) such Legal Defeasance or Covenant Defeasance shall not result in a breach or violation of, or constitute a default under the Indenture or any other material agreement or instrument to which the Obligors or any of their Subsidiaries is a party or by which the Obligors or any of their Subsidiaries is bound; (vi) the Obligors shall have delivered to the Trustee an Officers' Certificate stating that the deposit was not made by the Obligors with the intent of preferring the holders of such Notes over any other creditors of the Obligors or with the intent of defeating, hindering, delaying or defrauding any other creditors of the Obligors or others; and (vii) the Obligors shall have delivered to the Trustee an Officers' Certificate and an opinion of counsel, each stating that the conditions precedent provided for in, in the case of the officers' certificate, (i) through (vi) and, in the case of the opinion of counsel, clauses (i), (with respect to the validity and perfection of the security interest) (ii), (iii) and (v) of this paragraph have been complied with. 67 AMENDMENTS AND SUPPLEMENTS The Indenture will contain provisions permitting the Obligors, the Guarantors and the Trustee to enter into a supplemental indenture for certain limited purposes without the consent of the Holders. With the consent of the Holders of not less than a majority in aggregate principal amount of the Notes at the time outstanding, the Obligors, the Guarantors and the Trustee are permitted to amend or supplement the Indenture or any supplemental indenture or modify the rights of the Holders; provided that no such modification may without the consent of holders of at least 66 2/3% in aggregate principal amount of Notes at the time outstanding, e.g., modify the provisions (including the defined terms used therein) of the covenant "Repurchase of Notes at the Option of the Holder upon a Change of Control" in a manner adverse to the Holders and provided, that no such modification may, without the consent of each Holder affected thereby: (i) change the Stated Maturity on any Note, or reduce the principal amount thereof or the rate (or extend the time for payment) of interest thereon or any premium payable upon the redemption thereof, or change the place of payment where, or the coin or currency in which, any Note or any premium or the interest thereon is payable, or impair the right to institute suit for the enforcement of any such payment on or after the Stated Maturity thereof (or, in the case of redemption, on or after the Redemption Date), or reduce the Change of Control Purchase Price or the Asset Sale Offer Price or alter the provisions (including the defined terms used therein) regarding the right of the Obligors to redeem the Notes or the provisions (including the defined terms used therein) of the "Repurchase of Notes at the Option of the Holder Upon a Change of Control" covenant in a manner adverse to the Holders, or (ii) reduce the percentage in principal amount of the outstanding Notes, the consent of whose Holders is required for any such amendment, supplemental indenture or waiver provided for in the Indenture, or (iii) modify any of the waiver provisions, except to increase any required percentage or to provide that certain other provisions of the Indenture cannot be modified or waived without the consent of the Holder of each outstanding Note affected thereby. NO PERSONAL LIABILITY OF STOCKHOLDERS, OFFICERS, DIRECTORS The Indenture will provide that no direct or indirect stockholder, employee, officer or director, as such, past, present or future of the Obligor, the Guarantors or any successor entity shall have any personal liability in respect of the obligations of the Obligor or the Guarantors under the Indenture or the Notes by reason of his or its status as such stockholder, employee, officer or director, except to the extent such person is an Issuer or Guarantor, except to the extent such is an Obligor or a Guarantor. CERTAIN DEFINITIONS "ACQUIRED INDEBTEDNESS" means Indebtedness or Disqualified Capital Stock of any person existing at the time such person becomes a Subsidiary of the Obligors, including by designation, or is merged or consolidated into or with either of the Obligors or one of their Subsidiaries. "ACQUISITION" means the purchase or other acquisition of any person or substantially all the assets of any person by any other person, whether by purchase, merger, consolidation, or other transfer, and whether or not for consideration. "ADJUSTED CONSOLIDATED EBITDA" means Consolidated EBITDA minus 100% of the amount of any writedowns, writeoffs, or negative extraordinary charges not otherwise reflected in Consolidated EBITDA during such period. "AFFILIATE" means any person directly or indirectly controlling or controlled by or under direct or indirect common control with either of the Obligors. For purposes of this definition, the term "control" means the power to direct the management and policies of a person, directly or through one or more intermediaries, whether through the ownership of voting securities, by contract, or otherwise, PROVIDED, THAT, a Beneficial Owner of 25% or more of the total voting power normally entitled to vote in the election of directors, managers or trustees, as applicable, shall for such purposes be deemed to constitute control. "AVERAGE LIFE" means, as of the date of determination, with respect to any security or instrument, the quotient obtained by dividing (i) the sum of (a) the product of the number of years from the date of determination to the date or dates of each successive scheduled principal (or redemption) payment of such security or instrument and (b) the amount of each such respective principal (or redemption) payment by (ii) the sum of all such principal (or redemption) payments. 68 "BENEFICIAL OWNER" or "BENEFICIAL OWNER" for purposes of the definition of Change of Control has the meaning attributed to it in Rules 13d-3 and 13d-5 under the Exchange Act (as in effect on the Issue Date), whether or not applicable, except that a "person" shall be deemed to have "beneficial ownership" of all shares that any such person has the right to acquire, whether such right is exercisable immediately or only after the passage of time. "BUSINESS DAY" means each Monday, Tuesday, Wednesday, Thursday and Friday which is not a day on which banking institutions in New York, New York are authorized or obligated by law or executive order to close. "CAPITAL STOCK" means, with respect to any corporation, any and all shares, interests, rights to purchase (other than convertible or exchangeable Indebtedness), warrants, options, participations or other equivalents of or interests (however designated) in stock issued by that corporation. "CASH EQUIVALENT" means (i) securities issued or directly and fully guaranteed or insured by the United States of America or any agency or instrumentality thereof (provided that the full faith and credit of the United States of America is pledged in support thereof) or (ii) time deposits and certificates of deposit and commercial paper issued by the parent corporation of any domestic commercial bank of recognized standing having capital and surplus in excess of $500 million and commercial paper issued by others rated at least A-2 or the equivalent thereof by Standard & Poor's Corporation or at least P-2 or the equivalent thereof by Moody's Investors Service, Inc. and in each case maturing within one year after the date of acquisition. "CONSOLIDATED COVERAGE RATIO" of any person on any date of determination (the "Transaction Date") means the ratio, on a PRO FORMA basis, of (a) the aggregate amount of Consolidated EBITDA of such person attributable to continuing operations and businesses (exclusive of amounts attributable to operations and businesses permanently discontinued or disposed of) for the Reference Period to (b) the aggregate Consolidated Fixed Charges of such person (exclusive of amounts attributable to operations and businesses permanently discontinued or disposed of, but only to the extent that the obligations giving rise to such Consolidated Fixed Charges would no longer be obligations contributing to such person's Consolidated Fixed Charges subsequent to the Transaction Date) during the Reference Period; PROVIDED, that for purposes of such calculation, (i) Acquisitions which occurred during the Reference Period or subsequent to the Reference Period and on or prior to the Transaction Date shall be assumed to have occurred on the first day of the Reference Period, (ii) transactions giving rise to the need to calculate the Consolidated Coverage Ratio shall be assumed to have occurred on the first day of the Reference Period, (iii) the incurrence of any Indebtedness or issuance of any Disqualified Capital Stock during the Reference Period or subsequent to the Reference Period and on or prior to the Transaction Date (and the application of the proceeds therefrom to the extent used to refinance or retire other Indebtedness) shall be assumed to have occurred on the first day of such Reference Period, and (iv) the Consolidated Fixed Charges of such person attributable to interest on any Indebtedness or dividends on any Disqualified Capital Stock bearing a floating interest (or dividend) rate shall be computed on a PRO FORMA basis as if the average rate in effect from the beginning of the Reference Period to the Transaction Date had been the applicable rate for the entire period, unless such person or any of its Subsidiaries is a party to an Interest Swap or Hedging Obligation (which shall remain in effect for the 12-month period immediately following the Transaction Date) that has the effect of fixing the interest rate on the date of computation, in which case such rate (whether higher or lower) shall be used. "CONSOLIDATED EBITDA" means, with respect to any person, for any period, the Consolidated Net Income of such person for such period adjusted to add thereto (to the extent deducted from net revenues in determining Consolidated Net Income), without duplication, the sum of (i) Consolidated income tax expense, (ii) Consolidated depreciation and amortization expense, provided that consolidated depreciation and amortization of a Subsidiary that is a less than wholly owned Subsidiary shall only be added to the extent of the equity interest of the Obligors in such Subsidiary, (iii) Consolidated Fixed Charges, and less the amount of all cash payments made by such person or any of its Subsidiaries during such period to the extent such payments relate to non-cash charges that were added back in determining Consolidated EBITDA for such period or any prior period. "CONSOLIDATED FIXED CHARGES" of any person means, for any period, the aggregate amount (without duplication and determined in each case in accordance with GAAP) of (a) interest expensed or capitalized, 69 paid, accrued, or scheduled to be paid or accrued (including, in accordance with the following sentence, interest attributable to Capitalized Lease Obligations) of such person and its Consolidated Subsidiaries during such period, including (i) original issue discount and non-cash interest payments or accruals on any Indebtedness, (ii) the interest portion of all deferred payment obligations, and (iii) all commissions, discounts and other fees and charges owed with respect to bankers' acceptances and letters of credit financings and currency and Interest Swap and Hedging Obligations, in each case to the extent attributable to such period, (b) one-third of Consolidated Rental Expense for such period attributable to operating leases of such person and its Consolidated Subsidiaries, and (c) the amount of dividends accrued or payable (or guaranteed) by such person or any of its Consolidated Subsidiaries in respect of Preferred Stock (other than by Subsidiaries of such person to such person or such person's wholly owned Subsidiaries). For purposes of this definition, (x) interest on a Capitalized Lease Obligation shall be deemed to accrue at an interest rate reasonably determined by the Obligors to be the rate of interest implicit in such Capitalized Lease Obligation in accordance with GAAP and (y) interest expense attributable to any Indebtedness represented by the guaranty by such person or a Subsidiary of such person of an obligation of another person shall be deemed to be the interest expense attributable to the Indebtedness guaranteed. "CONSOLIDATED NET INCOME" means, with respect to any person for any period, the net income (or loss) of such person and its Consolidated Subsidiaries (determined on a consolidated basis in accordance with GAAP) for such period, adjusted to exclude (only to the extent included in computing such net income (or loss) and without duplication): (a) all gains (but not losses) which are either extraordinary (as determined in accordance with GAAP) or are either unusual or nonrecurring (including any gain from the sale or other disposition of assets outside the ordinary course of business or from the issuance or sale of any capital stock), (b) the net income, if positive, of any person, other than a wholly owned Consolidated Subsidiary, in which such person or any of its Consolidated Subsidiaries has an interest, except to the extent of the amount of any dividends or distributions actually paid in cash to such person or a wholly owned Consolidated Subsidiary of such person during such period, but in any case not in excess of such person's PRO RATA share of such person's net income for such period, (c) the net income or loss of any person acquired in a pooling of interests transaction for any period prior to the date of such acquisition, (d) the net income, if positive, of any of such person's Consolidated Subsidiaries to the extent that the declaration or payment of dividends or similar distributions is not at the time permitted by operation of the terms of its charter or bylaws or any other agreement, instrument, judgment, decree, order, statute, rule or governmental regulation applicable to such Consolidated Subsidiary. "CONSOLIDATED NET WORTH" of any person at any date means the aggregate consolidated stockholders' equity of such person (plus amounts of equity attributable to preferred stock) and its Consolidated Subsidiaries, as would be shown on the consolidated balance sheet of such person prepared in accordance with GAAP, adjusted to exclude (to the extent included in calculating such equity), (a) the amount of any such stockholders' equity attributable to Disqualified Capital Stock or treasury stock of such person and its Consolidated Subsidiaries, (b) all upward revaluations and other write-ups in the book value of any asset of such person or a Consolidated Subsidiary of such person subsequent to the Issue Date, and (c) all investments in Subsidiaries that are not Consolidated Subsidiaries and in persons that are not Subsidiaries. "CONSOLIDATED RENTAL EXPENSE" of any person means the aggregate rental obligations of such person and its Consolidated Subsidiaries (not including taxes, insurance, maintenance and similar expenses that the lessee is obligated to pay under the terms of the relevant leases), determined on a Consolidated basis in conformity with GAAP, payable in respect of such period under leases of real or personal property (net of income from subleases thereof, not including taxes, insurance, maintenance and similar expenses that the sublessee is obligated to pay under the terms of such sublease), whether or not such obligations are reflected as liabilities or commitments on a Consolidated balance sheet of such Person and its Subsidiaries or in the notes thereto, excluding, however, in any event, that portion of Consolidated Fixed Charges of such person representing payments by such person or any of its Consolidated Subsidiaries in respect of Capitalized Lease Obligations. "CONSOLIDATED SUBSIDIARY" means, for any person, each Subsidiary of such person (whether now existing or hereafter created or acquired) the financial statements of which are consolidated for financial statement reporting purposes with the financial statements of such person in accordance with GAAP. 70 "DISQUALIFIED CAPITAL STOCK" means (a) except as set forth in (b), with respect to any person, Equity Interests of such person that, by its terms or by the terms of any security into which it is convertible, exercisable or exchangeable, is, or upon the happening of an event or the passage of time would be, required to be redeemed or repurchased (including at the option of the holder thereof) by such person or any of its Subsidiaries, in whole or in part, on or prior to the Stated Maturity of the Notes and (b) with respect to any Subsidiary of such person (including with respect to any Subsidiary of the Obligors), any Equity Interests other than any common equity with no preference, privileges, or redemption or repayment provisions. "EQUITY INTEREST" of any person means any shares, interests, participations or other equivalents (however designated) in such person's equity, and shall in any event include any Capital Stock issued by, or partnership interests in, such person. "EVENT OF LOSS" means, with respect to any property or asset, any (i) loss, destruction or damage of such property or asset or (ii) any condemnation, seizure or taking, by exercise of the power of eminent domain or otherwise, of such property or asset, or confiscation or requisition of the use of such property or asset. "EXCLUDED PERSON" means Zell/Chilmark Fund L.P. and all Related Persons of such person. "EXEMPTED AFFILIATE TRANSACTION" means (a) customary employee compensation arrangements approved by a majority of independent (as to such transactions) members of the Board of Directors of the applicable Obligor, (b) dividends permitted under the terms of the covenant discussed above under "Limitation on Restricted Payments" above and payable, in form and amount, on a pro rata basis to all holders of Common Stock of Jacor, and (c) transactions solely between the Obligors and any of their wholly owned Subsidiaries or solely among wholly owned Subsidiaries of the Obligors. "GAAP" means United States generally accepted accounting principles set forth in the opinions and pronouncements of the Accounting Principles Board of the American Institute of Certified Public Accountants and statements and pronouncements of the Financial Accounting Standards Board or in such other statements by such other entity as approved by a significant segment of the accounting profession as in effect on the Issue Date. "INDEBTEDNESS" of any person means, without duplication, (a) all liabilities and obligations, contingent or otherwise, of such any person, (i) in respect of borrowed money (whether or not the recourse of the lender is to the whole of the assets of such person or only to a portion thereof), (ii) evidenced by bonds, notes, debentures or similar instruments, (iii) representing the balance deferred and unpaid of the purchase price of any property or services, except those incurred in the ordinary course of its business that would constitute ordinarily a trade payable to trade creditors, (iv) evidenced by bankers' acceptances or similar instruments issued or accepted by banks, (v) relating to any Capitalized Lease Obligation, or (vi) evidenced by a letter of credit or a reimbursement obligation of such person with respect to any letter of credit; (b) all net obligations of such person under Interest Swap and Hedging Obligations; (c) all liabilities and obligations of others of the kind described in the preceding clause (a) or (b) that such person has guaranteed or that is otherwise its legal liability or which are secured by any assets or property of such person and all obligations to purchase, redeem or acquire any Equity Interests and (d) any and all deferrals, renewals, extensions, refinancing and refundings (whether direct or indirect) of, or amendments, modifications or supplements to, any liability of the kind described in any of the preceding clauses (a), (b) or (c), or this clause (d), whether or not between or among the same parties, and (i) all Disqualified Capital Stock of such Person (valued at the greater of its voluntary or involuntary maximum fixed repurchase price plus accrued and unpaid dividends). For purposes hereof, the "maximum fixed repurchase price" of any Disqualified Capital Stock which does not have a fixed repurchase price shall be calculated in accordance with the terms of such Disqualified Capital Stock as if such Disqualified Capital Stock were purchased on any date on which Indebtedness shall be required to be determined pursuant to the Indenture, and if such price is based upon, or measured by, the Fair Market Value of such Disqualified Capital Stock, such Fair Market Value to be determined in good faith by the board of directors of the issuer (or managing general partner of the issuer) of such Disqualified Capital Stock. 71 "INTEREST SWAP AND HEDGING OBLIGATION" means any obligation of any person pursuant to any interest rate swap agreement, interest rate cap agreement, interest rate collar agreement, interest rate exchange agreement, currency exchange agreement or any other agreement or arrangement designed to protect against fluctuations in interest rates or currency values, including, without limitation, any arrangement whereby, directly or indirectly, such person is entitled to receive from time to time periodic payments calculated by applying either a fixed or floating rate of interest on a stated notional amount in exchange for periodic payments made by such person calculated by applying a fixed or floating rate of interest on the same notional amount. "INVESTMENT" by any person in any other person means (without duplication) (a) the acquisition (whether by purchase, merger, consolidation or otherwise) by such person (whether for cash, property, services, securities or otherwise) of capital stock, bonds, notes, debentures, partnership or other ownership interests or other securities, including any options or warrants, of such other person or any agreement to make any such acquisition; (b) the making by such person of any deposit with, or advance, loan or other extension of credit to, such other person (including the purchase of property from another person subject to an understanding or agreement, contingent or otherwise, to resell such property to such other person) or any commitment to make any such advance, loan or extension (but excluding accounts receivable or deposits arising in the ordinary course of business); (c) other than guarantees of Indebtedness of either of the Obligors or any Guarantor to the extent permitted by the covenant "Limitation on Incurrence of Additional Indebtedness and Disqualified Capital Stock," the entering into by such person of any guarantee of, or other credit support or contingent obligation with respect to, Indebtedness or other liability of such other person; and (d) the making of any capital contribution by such person to such other person. "ISSUE DATE" means the date of first issuance of the Notes under the Indenture. "LIEN" means any mortgage, charge, pledge, lien (statutory or otherwise), privilege, security interest, hypothecation or other encumbrance upon or with respect to any property of any kind, real or personal, movable or immovable, now owned or hereafter acquired. "JUNIOR SECURITY" means any Qualified Capital Stock and any Indebtedness of either of the Obligors or a Guarantor. as applicable, that is subordinated in right of payment to Senior Debt at least to the same extent as the Notes or the Guarantees, as applicable, and has no scheduled installment of principal due, by redemption, sinking fund payment or otherwise, on or prior to the Stated Maturity of the Notes; PROVIDED, that in the case of subordination in respect of Senior Debt under the New Credit Facility, "Junior Security" shall mean any Qualified Capital Stock and any Indebtedness of the Obligors or the Guarantor, as applicable, that (i) has a final maturity date occurring after the final maturity date of, all Senior Debt outstanding under the New Credit Facility on the date of issuance of such Qualified Capital Stock or Indebtedness, (ii) is unsecured, (iii) has an Average Life longer than the security for which such Qualified Capital Stock or Indebtedness is being exchanged, and (iv) by their terms or by law are subordinated to Senior Debt outstanding under the New Credit Facility on the date of issuance of such Qualified Capital Stock or Indebtedness at least to the same extent as the Notes. "NET CASH PROCEEDS" means the aggregate amount of cash or Cash Equivalents received by the Obligors in the case of a sale of Qualified Capital Stock and by the Obligors and their Subsidiaries in respect of an Asset Sale plus, in the case of an issuance of Qualified Capital Stock upon any exercise, exchange or conversion of securities (including options, warrants, rights and convertible or exchangeable debt) of the applicable Obligor that were issued for cash on or after the Issue Date, the amount of cash originally received by the applicable Obligor upon the issuance of such securities (including options, warrants, rights and convertible or exchangeable debt) less, in each case, the sum of all payments, fees, commissions and (in the case of Asset Sales, reasonable and customary), expenses (including, without limitation, the fees and expenses of legal counsel and investment banking fees and expenses) incurred in connection with such Asset Sale or sale of Qualified Capital Stock, and, in the case of an Asset Sale only, less the amount (estimated reasonably and in good faith by the applicable Obligor) of income, franchise, sales and other applicable taxes required to be paid by the applicable Obligor or any of its respective Subsidiaries in connection with such Asset Sale. 72 "NEW CREDIT FACILITY" means the credit agreement dated by and among the , certain of its subsidiaries, certain financial institutions and , as agent, providing for (A) an aggregate $ million term loan facility, and (B) an aggregate $ million revolving credit facility, including any related notes, guarantees, collateral documents, instruments and agreements executed in connection therewith, as such credit agreement and/or related documents may be amended, restated, supplemented, renewed, replaced or otherwise modified from time to time whether or not with the same agent, trustee, representative lenders or holders, and, subject to the proviso to the next succeeding sentence, irrespective of any changes in the terms and conditions thereof. Without limiting the generality of the foregoing, the term "New Credit Facility" shall include agreements in respect of Interest Swap and Hedging Obligations with lenders party to the New Credit Facility and shall also include any amendment, amendment and restatement, renewal, extension, restructuring, supplement or modification to any New Credit Facility and all refundings, refinancings and replacements of any New Credit Facility, including any agreement (i) extending the maturity of any Indebtedness incurred thereunder or contemplated thereby, (ii) adding or deleting borrowers or guarantors thereunder, so long as borrowers and issuers include one or more of the Obligors and their Subsidiaries and their respective successors and assigns, (iii) increasing the amount of Indebtedness incurred thereunder or available to be borrowed thereunder, PROVIDED that on the date such Indebtedness is incurred it would not be prohibited by clause (g) of the covenant "Limitation on Incurrence of Additional Indebtedness and Disqualified Capital Stock," or (iv) otherwise altering the terms and conditions thereof in a manner not prohibited by the terms hereof. "OBLIGATION" means any principal, premium or interest payment, or monetary penalty, or damages, due by the Obligors or any Guarantor under the terms of the Notes or the Indenture. "PERMITTED INDEBTEDNESS" means any of the following: (a) The Obligors and their Subsidiaries may incur Indebtedness solely in respect of bankers acceptances, letters of credit and performance bonds (to the extent that such incurrence does not result in the incurrence of any obligation to repay any obligation relating to borrowed money of others), all in the ordinary course of business in accordance with customary industry practices, in amounts and for the purposes customary in the Obligors' industry; PROVIDED,that the aggregate principal amount outstanding of such Indebtedness (including any Indebtedness issued to refinance, refund or replace such Indebtedness) shall at no time exceed $ ; and (b) The Obligors may incur Indebtedness to any wholly owned Subsidiary Guarantor, and any wholly owned Subsidiary Guarantor may incur Indebtedness to any other wholly owned Subsidiary Guarantor or to the Obligors; PROVIDED, that, in the case of Indebtedness of the Obligor, such obligations shall be unsecured and subordinated in all respects to the Obligors' obligations pursuant to the Notes and the date of any event that causes such Subsidiary Guarantor to no longer be a wholly owned Subsidiary shall be an Incurrence Date. "PERMITTED INVESTMENT" means (a) Investments in any of the Notes; (b) Cash Equivalents; (c) intercompany notes to the extent permitted under clause (b) of the definition of "Permitted Indebtedness"; and (d) loans, advances or investments in existence on the Issue Date. "PERMITTED LIEN" means (a) Liens existing on the Issue Date; (b) Liens imposed by governmental authorities for taxes, assessments or other charges not yet subject to penalty or which are being contested in good faith and by appropriate proceedings, if adequate reserves with respect thereto are maintained on the books of the Obligors in accordance with GAAP; (c) statutory liens of carriers, warehousemen, mechanics, materialmen, landlords, repairmen or other like Liens arising by operation of law in the ordinary course of business provided that (i) the underlying obligations are not overdue for a period of more than 30 days, or (ii) such Liens are being contested in good faith and by appropriate proceedings and adequate reserves with respect thereto are maintained on the books of the Obligors in accordance with GAAP; (d) Liens securing the performance of bids, trade contracts (other than borrowed money), leases, statutory obligations, surety and appeal bonds, performance bonds and other obligations of a like nature incurred in the ordinary course of business; (e) easements, rights-of-way, zoning, similar restrictions and other similar encumbrances or title defects which, singly or in the aggregate, do not in any case materially detract from the value of the property, subject thereto (as such property is used by the Obligors or any of their Subsidiaries) or interfere with the 73 ordinary conduct of the business of the Obligors or any of their Subsidiaries; (f) Liens arising by operation of law in connection with judgments, only to the extent, for an amount and for a period not resulting in an Event of Default with respect thereto; (g) pledges or deposits made in the ordinary course of business in connection with workers' compensation, unemployment insurance and other types of social security legislation; (h) Liens securing Indebtedness of a Person existing at the time such person becomes a Subsidiary or is merged with or into the Obligors or a Subsidiary or Liens securing Indebtedness incurred in connection with an Acquisition, PROVIDED that such Liens were in existence prior to the date of such acquisition, merger or consolidation, were not incurred in anticipation thereof, and do not extend to any other assets; (i) leases or subleases granted to other persons in the ordinary course of business not materially interfering with the conduct of the business of the Obligors or any of their Subsidiaries or materially detracting from the value of the relative assets of the Obligors or any of their Subsidiaries; (j) Liens arising from precautionary Uniform Commercial Code financing statement filings regarding operating leases entered into by the Obligors or any of their Subsidiaries in the ordinary course of business; and (k) Liens securing Refinancing Indebtedness incurred to refinance any Indebtedness that was previously so secured in a manner no more adverse to the Holders of the Notes than the terms of the Liens securing such refinanced Indebtedness provided that the Indebtedness secured is not increased and the lien is not extended to any additional assets of property. "QUALIFIED CAPITAL STOCK" means any Capital Stock of the Obligors that is not Disqualified Capital Stock. "QUALIFIED EXCHANGE" means any legal defeasance, redemption, retirement, repurchase or other acquisition of Capital Stock or Indebtedness of the Obligors issued on or after the Issue Date with the Net Cash Proceeds received by the Obligors from the substantially concurrent sale of Qualified Capital Stock or any exchange of Qualified Capital Stock for any Capital Stock or Indebtedness issued on or after the Issue Date. "REFERENCE PERIOD" with regard to any person means the four full fiscal quarters (or such lesser period during which such person has been in existence) ended immediately preceding any date upon which any determination is to be made pursuant to the terms of the Notes or the Indenture. "REFINANCING INDEBTEDNESS" means Indebtedness or Disqualified Capital Stock (a) issued in exchange for, or the proceeds from the issuance and sale of which are used substantially concurrently to repay, redeem, defease, refund, refinance, discharge or otherwise retire for value, in whole or in part, or (b) constituting an amendment, modification or supplement to, or a deferral or renewal of ((a) and (b) above are, collectively, a "Refinancing"), any Indebtedness or Disqualified Capital Stock in a principal amount or, in the case of Disqualified Capital Stock, liquidation preference, not to exceed (after deduction of reasonable and customary fees and expenses incurred in connection with the Refinancing) the lesser of (i) the principal amount or, in the case of Disqualified Capital Stock, liquidation preference, of the Indebtedness or Disqualified Capital Stock so Refinanced and (ii) if such Indebtedness being Refinanced was issued with an original issue discount, the accreted value thereof (as determined in accordance with GAAP) at the time of such Refinancing; PROVIDED, that (A) such Refinancing Indebtedness of any Subsidiary of the Obligors shall only be used to Refinance outstanding Indebtedness or Disqualified Capital Stock of such Subsidiary, (B) such Refinancing Indebtedness shall (x) not have an Average Life shorter than the Indebtedness or Disqualified Capital Stock to be so refinanced at the time of such Refinancing and (y) in all respects, be no less subordinated or junior, if applicable, to the rights of Holders of the Notes than was the Indebtedness or Disqualified Capital Stock to be refinanced and (C) such Refinancing Indebtedness shall have no installment of principal (or redemption payment) scheduled to come due earlier than the scheduled maturity of any installment of principal of the Indebtedness or Disqualified Capital Stock to be so refinanced which was scheduled to come due prior to the Stated Maturity. "RELATED BUSINESS" means the business conducted (or proposed to be conducted) by the Obligors and their Subsidiaries as of the Issue Date and any and all businesses that in the good faith judgment of the Board of Directors of the Obligors are materially related businesses. "RELATED PERSON" means any person who controls, is controlled by or is under common control with an Excluded Person; PROVIDED that for purposes of this definition "control" means the beneficial ownership of more than 50% of the total voting power of a person normally entitled to vote in the election of directors, managers or trustees, as applicable of a person. 74 "RESTRICTED INVESTMENT" means, in one or a series of related transactions, any Investment, other than investments in Cash Equivalents and other Permitted Investments; PROVIDED, HOWEVER, that a merger of another person with or into an Obligor or a Subsidiary Guarantor shall not be deemed to be a Restricted Investment so long as the surviving entity is an Obligor or a direct wholly owned Subsidiary Guarantor. "RESTRICTED PAYMENT" means, with respect to any person, (a) the declaration or payment of any dividend or other distribution in respect of Equity Interests of such person or any parent or Subsidiary of such person, (b) any payment on account of the purchase, redemption or other acquisition or retirement for value of Equity Interests of such person or any Subsidiary or parent of such person, (c) other than with the proceeds from the substantially concurrent sale of, or in exchange for, Refinancing Indebtedness any purchase, redemption, or other acquisition or retirement for value of, any payment in respect of any amendment of the terms of or any defeasance of, any Subordinated Indebtedness, directly or indirectly, by such person or a parent or Subsidiary of such person prior to the scheduled maturity, any scheduled repayment of principal, or scheduled sinking fund payment, as the case may be, of such Indebtedness and (d) any Restricted Investment by such person; PROVIDED, HOWEVER, that the term "Restricted Payment" does not include (i) any dividend, distribution or other payment on or with respect to Capital Stock of an issuer to the extent payable solely in shares of Qualified Capital Stock of such issuer; (ii) any dividend, distribution or other payment to an Obligor, or to any of their wholly owned Subsidiary Guarantors, by any of the Subsidiaries of the Obligors; or (iii) loans or advances to any Subsidiary Guarantor the proceeds of which are used by such Subsidiary Guarantor in a Related Business activity of such Subsidiary Guarantor. "SENIOR DEBT" of the Obligor or any Guarantor means Indebtedness (including any monetary obligation in respect of the New Credit Facility, and interest, whether or not allowable, accruing on Indebtedness incurred pursuant to the New Credit Facility after the filing of a petition initiating any proceeding under any bankruptcy, insolvency or similar law) of the Obligors or such Guarantor arising under the New Credit Facility or that, by the terms of the instrument creating or evidencing such Indebtedness, is expressly designated Senior Debt and made senior in right of payment to the Notes or the applicable Guarantee; provided, that in no event shall Senior Debt include (a) Indebtedness to any Subsidiary of the Obligors or any officer, director or employee of the Obligors or any Subsidiary of the Obligors, (b) Indebtedness incurred in violation of the terms of the Indenture, (c) Indebtedness to trade creditors, (d) Disqualified Capital Stock, (e) Capitalized Lease Obligations, and (f) any liability for taxes owed or owing by the Obligors or such Guarantor. "SIGNIFICANT SUBSIDIARY" shall have the meaning provided under Regulation S-X of the Securities Act, as in effect on the Issue Date. "STATED MATURITY," when used with respect to any Note, means , 2006. "SUBORDINATED INDEBTEDNESS" means Indebtedness of the Obligors or a Guarantor that is subordinated in right of payment to the Notes or such Guarantee, as applicable, in any respect or has a stated maturity on or after the Stated Maturity. "SUBSIDIARY," with respect to any person, means (i) a corporation a majority of whose Capital Stock with voting power, under ordinary circumstances, to elect directors is at the time, directly or indirectly, owned by such person, by such person and one or more Subsidiaries of such person or by one or more Subsidiaries of such person, (ii) any other person (other than a corporation) in which such person, one or more Subsidiaries of such person, or such person and one or more Subsidiaries of such person, directly or indirectly, at the date of determination thereof has at least majority ownership interest, or (iii) a partnership in which such person or a Subsidiary of such person is, at the time, a general partner and in which such person, directly or indirectly, at the date of determination thereof has at least a majority ownership interest. "WHOLLY OWNED SUBSIDIARY" means a Subsidiary all the Equity Interests of which are owned by an Obligor or one or more Wholly-owned Subsidiaries of an Obligor. 75 DESCRIPTION OF OTHER INDEBTEDNESS The summaries contained herein of certain of the indebtedness of the Company do not purport to be complete and are qualified in their entirety by reference to the provisions of the various agreements and indentures related thereto, which are filed as exhibits to the Registration Statement of which this Prospectus is a part and to which reference is hereby made. EXISTING CREDIT FACILITY The Existing Credit Facility is provided by a syndicate of banks pursuant to a credit agreement. The Existing Credit Facility provides up to $300.0 million of loans to Jacor in two components: (i) a $190.0 million revolving credit facility with mandatory quarterly commitment reductions beginning on March 31, 1997 and a final maturity date of December 31, 2003; and (ii) a $110.0 million revolving portion with scheduled quarterly reductions beginning on March 31, 1998 and ending on December 31, 2003. Borrowings under the Existing Credit Facility bear interest at rates that fluctuate with the bank base rate and the Eurodollar rate. The loans under the Existing Credit Facility are guaranteed by each of Jacor's direct and indirect subsidiaries other than certain immaterial subsidiaries. Jacor's obligations with respect to the Existing Credit Facility and each guarantor's obligations with respect to the related guaranty are secured by substantially all of their respective assets, including, without limitation, inventory, equipment, accounts receivable, intercompany debt and, in the case of Jacor's subsidiaries, capital stock. The Existing Credit Facility contains covenants and provisions that restrict, among other things, Jacor'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) make capital expenditures; (viii) enter into leases; (ix) engage in certain transactions with affiliates; and (x) make restricted junior payments. The Existing Credit Facility also requires the satisfaction of certain financial performance criteria (including a consolidated interest coverage ratio, a leverage-to-EBITDA ratio and consolidated cash flow available for fixed charges ratio) and the repayment of loans under the Existing Credit Facility with proceeds of certain sales of assets and debt or equity issuances, and with 50% of Jacor's Excess Cash Flow (as defined in the Existing Credit Facility). The Existing Credit Facility provides for certain customary events of default, including a Change of Control (as defined in the Existing Credit Facility). NEW CREDIT FACILITY Jacor is currently negotiating with a syndicate of banks and other financial institutions to secure the New Credit Facility. Jacor anticipates that the New Credit Facility will provide availability of up to $600.0 million of loans to Jacor in three components: (i) a revolving credit facility of up to $200.0 million with mandatory quarterly commitment reductions beginning on September 30, 1998 and a final maturity date of June 30, 2003; (ii) a term loan of up to $300.0 million with scheduled quarterly reductions beginning on September 30, 1997 and a final maturity date of June 30, 2003; and (iii) a tranche B term loan of up to $100.0 million with scheduled quarterly reductions beginning on September 30, 1999 and a final maturity date of September 30, 2003. Jacor may elect to use the New Credit Facility to purchase Notes tendered pursuant to a Change of Control Offer. Jacor anticipates that borrowings under the New Credit Facility will bear interest at rates that fluctuate with a bank base rate and/or the Eurodollar rate. Jacor anticipates that the loans under the New Credit Facility will be guaranteed by each of the Company's direct and indirect subsidiaries other than certain immaterial subsidiaries. It is anticipated that the Company's obligations with respect to the New Credit Facility and each guarantor's obligations with respect to the related guaranty will be secured by substantially all of their respective assets, including, without limitation, inventory, equipment, accounts receivable, intercompany debt and, in the case of the Company's subsidiaries, capital stock. 76 Jacor expects that the New Credit Facility will contain 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) make capital expenditures; (viii) enter into leases; (ix) engage in certain transactions with affiliates; and (x) make restricted junior payments. The New Credit Facility also will require the satisfaction of certain financial performance criteria (including a consolidated interest coverage ratio, a leverage-to-EBITDA ratio and fixed charge coverage ratio) and the repayment of loans under the New Credit Facility with proceeds of certain sales of assets and debt or equity issuances, and with 50% of the Company's Consolidated Excess Cash Flow (as defined in the New Credit Facility). The New Credit Facility will provide for certain customary events of default, including a Change of Control (as defined in the New Credit Facility). THE CITICASTERS NOTES DUE 2004 The Notes due 2004 are general unsecured obligations of Citicasters and are subordinated in rights of payment to all Senior Indebtedness (as defined in the Citicasters Note Indenture). The Citicasters Notes were issued pursuant to an indenture between Citicasters and Shawmut Bank Connecticut, National Association, as Trustee (the "Citicasters Note Indenture"). The current aggregate outstanding principal amount of the Citicasters Notes is $122.4 million and the Citicasters Notes mature on February 15, 2004. Interest on the Citicasters Notes accrues at the rate of 9 3/4% per annum. The Citicasters Notes are not redeemable at Citicasters' option before February 15, 1999 (other than in connection with certain public offerings of common stock by Citicasters, as described below). Thereafter, the Citicasters Notes are subject to redemption at the option of Citicasters, at redemption prices declining from 104.875% of the principal amount for the twelve months commencing February 15, 1999 to 100.00% on and after February 15, 2002, plus, in each case, accrued and unpaid interest thereon to the applicable redemption date. In addition, at any time on or before February 15, 1999, (i) up to 25% of the aggregate principal amount of the Citicasters Notes may be redeemed at a redemption price of 108.75% of the principal amount thereof, plus accrued and unpaid interest, out of the net proceeds of public offerings of primary shares of common stock of Citicasters, and after giving effect to such redemption at least $100.0 million in Citicasters Notes remains outstanding and (ii) upon a Change of Control (as defined in the Citicasters Note Indenture), the Citicasters Notes can be redeemed provided at least $100.0 million of Citicasters Notes remain outstanding and such redemption occurs within 180 days of the date of a Change of Control. In addition, prior to December 31, 1996, Citicasters can redeem the Citicasters Notes from the proceeds of Asset Sales (as defined in the Citicasters Note Indenture) subject to certain restrictions. The Citicasters Note Indenture contains certain covenants which impose certain limitations and restrictions on the ability of Citicasters 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. THE LYONS DUE 2011 Concurrently with this Offering, Jacor is conducting the LYONs Offering whereby Jacor intends to issue and sell LYONs in the aggregate principal amount at maturity of $202.0 million (excluding $ aggregate principal amount at maturity subject to the over-allotment option) of LYONs due April , 2011. Each LYON will have an Issue Price of $ and a principal amount at maturity of $1,000. Each LYON will be convertible, at the option of the Holder, at any time on or prior to maturity, unless previously redeemed or otherwise purchased, into Common Stock at a conversion rate of shares per LYON. The conversion rate will not be adjusted for accrued original issue discount, but will be subject to 77 adjustment upon the occurrence of certain events affecting the Common Stock. Upon conversion, the Holder will not receive any cash payment representing accrued original issue discount; such accrued original issue discount will be deemed paid by the Common Stock received by the Holder on conversion. The LYONs will not be redeemable by Jacor prior to April , 2001. Thereafter, the LYONs are redeemable for cash at any time at the option of Jacor, 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 Jacor, at the option of the Holder, on April , 2001 and April , 2006, for a Purchase Price of $ and $ (representing issue price plus accrued original issue discount to each date), respectively, representing a % yield per annum to the Holder on such date, computed on a semiannual bond equivalent basis. Subject to certain exceptions, Jacor, at its option, may elect to pay the purchase price on any such purchase date in cash or Common Stock, or any combination thereof. In addition, as of 35 business days after the occurrence of a change in control of Jacor occurring on or prior to April , 2001, each LYON will be purchased for cash, by Jacor, at the option of the Holder, for a change in control purchase price equal to the issue price plus accrued original issue discount to the change in control purchase date set for such purchase. The change in control purchase feature of the LYONs may in certain circumstances have an antitakeover effect. 78 UNDERWRITING Subject to certain conditions contained in the Underwriting Agreement, Donaldson, Lufkin & Jenrette Securities Corporation (the "Underwriter"), has agreed to purchase from the Obligors an aggregate of $50.0 million principal amount of Notes. The Underwriting Agreement provides that the obligations of the Underwriter to purchase and accept delivery of the Notes offered hereby are subject to the approval of certain legal matters by counsel and to certain other conditions. The nature of the Underwriter's obligations is such that the Underwriter is committed to purchase all of the Notes if any are purchased by them. The Obligors have agreed to indemnify the Underwriter against certain liabilities, including liabilities under the Securities Act of 1933, or to contribute to payments that the Underwriter may be required to make in respect thereof. The Underwriter proposes to offer the Notes to the public initially at the price to the public set forth on the cover page of this Prospectus and to certain dealers at such price less a concession not to exceed $ per share. The Underwriter may allow, and such dealers may reallow, discounts not in excess of $ per share to the Underwriter and certain other dealers. After the initial public offering of the Notes, the offering price and other selling terms may be changed by the Underwriter. The Underwriter has provided and is currently retained to provide investment banking services to Jacor for which it has received and is entitled to receive usual and customary fees. The Underwriter is also acting as a representative in connection with the 1996 Stock Offering and will receive usual and customary fees for such services. EXPERTS The consolidated balance sheets of Jacor Communications, Inc. and Subsidiaries as of December 31, 1995 and 1994 and the consolidated statements of operations, shareholders' equity and cash flows for each of the three years in the period ended December 31, 1995, included in this registration statement, have been included herein in reliance on the report of Coopers & Lybrand L.L.P., independent accountants, given on the authority of that firm as experts in accounting and auditing. The consolidated balance sheets of Citicasters Inc. as of December 31, 1995 and 1994 and the consolidated statements of operations, changes in shareholders' equity, and cash flows for each of the three years in the period ended December 31, 1995 appearing in this registration statement, have been audited by Ernst & Young LLP, independent auditors, as set forth in their report thereon (which contains an explanatory paragraph with respect to Citicasters Inc.'s emergence from bankruptcy and subsequent adoption of "fresh-start reporting" as of December 31, 1993, as more fully described in Note B to the consolidated financial statements), appearing elsewhere herein, and are included in reliance upon such report given upon the authority of such firm as experts in accounting and auditing. The consolidated financial statements of Noble Broadcast Group, Inc. as of December 31, 1995 and December 25, 1994 and for each of the three years in the period ended December 31, 1995, included in this Prospectus, have been so included in reliance on the report (which includes an explanatory paragraph relating to Jacor's agreement to purchase Noble Broadcast Group, Inc. as described in Note 2 to the consolidated financial statements) of Price Waterhouse LLP, independent accountants, given on the authority of said firm as experts in auditing and accounting. LEGAL MATTERS The authorization and issuance of the Notes offered hereby will be passed upon for Jacor by Graydon, Head & Ritchey, Cincinnati, Ohio. Certain legal matters in connection with this Offering will be passed upon for the Underwriters by Skadden, Arps, Slate, Meagher & Flom, Los Angeles, California. 79 INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE The following documents previously filed by Jacor with the Securities and Exchange Commission (the "Commission") are incorporated herein by reference and are made a part hereof: (a) Annual Report on Form 10-K for the fiscal year ended December 31, 1995; (b) Current Reports on Form 8-K dated February 12, 1996, February 27, 1996, March 6, 1996, as amended, and March 27, 1996 as amended; and (c) Jacor's Form 8-A Registration Statement dated January 12, 1993. All documents filed by Jacor with the Commission pursuant to Section 13(a), 13(c), 14 or 15(d) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), after the date of this Prospectus and prior to the termination of the offering of the securities made hereby shall be deemed to be incorporated by reference into this Prospectus and to be a part hereof from the date of filing of such documents. Any statement contained in a document incorporated or deemed to be incorporated by reference herein shall be deemed to be modified or superseded for purposes of this Prospectus to the extent that a statement contained herein (or in any other subsequently filed document that is or is deemed to be incorporated by reference herein) modifies or supersedes such previous statement. Any statement so modified or superseded shall not be deemed to constitute a part of this Prospectus except as so modified or superseded. This Prospectus incorporates by reference certain documents relating to Jacor which are not delivered herewith. These documents (other than exhibits to such documents unless such exhibits are specifically incorporated by reference herein) are available, without charge, upon oral or written request by any person to whom this Prospectus is delivered. Such requests should be directed to Jacor Communications, Inc., 1300 PNC Center, 201 East Fifth Street, Cincinnati, Ohio 45202, Attention: Jon M. Berry, Senior Vice President and Treasurer, Telephone Number (513) 621-1300. AVAILABLE INFORMATION Jacor is subject to the informational requirements of the Exchange Act, and accordingly files reports, proxy statements and other information with the Commission. Jacor has filed a Registration Statement on Form S-3 together with all amendments and exhibits thereto with the Commission under the Securities Act of 1993 (the "Securities Act") with respect to the Offering. This Prospectus does not contain all of the information set forth in the Registration Statement, certain parts of which are omitted in accordance with the rules and regulations of the Commission. The Registration Statement, including any amendments, schedules and exhibits thereto, is available for inspection and copying as set forth above. Statements contained in this Prospectus as to the contents of any contract or other document referred to herein include all material terms of such contracts or other documents but are not necessarily complete, and in each instance reference is made to the copy of such contract or other document filed as an exhibit to the Registration Statement, each such statement being qualified in all respects by such reference. Such reports, proxy statements and other information filed with the Commission are available for inspection and copying at the public reference facilities maintained by the Commission at Room 1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549, and at the Commission's Regional Offices located at Citicorp Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661-2511, and at 7 World Trade Center, 13th Floor, New York, New York 10048. Copies of such documents may also be obtained from the Public Reference Room of the Commission at Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549, at prescribed rates. In addition, reports and other information concerning Jacor are available for inspection and copying at the offices of The Nasdaq Stock Market at 1735 K Street, N.W., Washington, D.C. 20006-1506. 80 INDEX TO FINANCIAL STATEMENTS Jacor Communications, Inc. and Subsidiaries Report of Independent Accountants................................................ F-2 Consolidated Balance Sheets at December 31, 1994 and 1995........................ F-3 Consolidated Statements of Operations for the years ended December 31, 1993, 1994 and 1995........................................................................ F-4 Consolidated Statements of Shareholders' Equity for the years ended December 31, 1993, 1994 and 1995............................................................. F-5 Consolidated Statements of Cash Flows for the years ended December 31, 1993, 1994 and 1995........................................................................ F-6 Notes to Consolidated Financial Statements....................................... F-7 Citicasters Inc. and Subsidiaries Report of Independent Auditors................................................... F-16 Balance Sheets at December 31, 1994 and 1995..................................... F-17 Statements of Operations for the years ended December 31, 1993, 1994 and 1995.... F-18 Statements of Changes in Shareholders' Equity for the years ended December 31, 1993, 1994 and 1995............................................................. F-19 Statements of Cash Flows for the years ended December 31, 1993, 1994 and 1995.... F-20 Notes to Financial Statements.................................................... F-22 Noble Broadcast Group, Inc. and Subsidiaries Report of Independent Accountants................................................ F-31 Consolidated Balance Sheet at December 25, 1994 and December 31, 1995............ F-32 Consolidated Statement of Operations for the years ended December 26, 1993, December 25, 1994 and December 31, 1995......................................... F-33 Consolidated Statement of Changes in Stockholders' Deficit for the years ended December 26, 1993, December 25, 1994 and December 31, 1995...................... F-34 Consolidated Statement of Cash Flows for the years ended December 26, 1993, December 25, 1994 and December 31, 1995......................................... F-35 Notes to Consolidated Financial Statements....................................... F-36
F-1 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, 1994 and 1995, and the related consolidated statements of operations, shareholders' equity, and cash flows for each of the three years in the period ended December 31, 1995. 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, 1994 and 1995, and the consolidated results of their operations and their cash flows for each of the three years in the period ended December 31, 1995, in conformity with generally accepted accounting principles. COOPERS & LYBRAND L.L.P. Cincinnati, Ohio February 12, 1996 except for Note 14, as to which the date is March 13, 1996 F-2 JACOR COMMUNICATIONS, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS DECEMBER 31, 1994 AND 1995
ASSETS 1994 1995 Current assets: Cash and cash equivalents.................................................... $ 26,974,838 $ 7,436,779 Accounts receivable, less allowance for doubtful accounts of $1,348,000 in 1994 and $1,606,000 in 1995................................................ 24,500,652 25,262,410 Prepaid expenses............................................................. 3,419,719 2,491,140 Other current assets......................................................... 1,230,582 1,425,000 -------------- -------------- Total current assets..................................................... 56,125,791 36,615,329 Property and equipment....................................................... 22,628,841 30,801,225 Intangible assets............................................................ 89,543,301 127,157,762 Other assets................................................................. 5,281,422 14,264,775 -------------- -------------- Total assets............................................................. $ 173,579,355 $ 208,839,091 -------------- -------------- -------------- -------------- LIABILITIES Current liabilities: Accounts payable............................................................. $ 2,723,717 $ 2,312,691 Accrued payroll.............................................................. 3,274,902 3,177,945 Accrued federal, state and local income tax.................................. 2,092,616 3,225,585 Other current liabilities.................................................... 3,397,117 3,463,344 -------------- -------------- Total current liabilities................................................ 11,488,352 12,179,565 Long-term debt................................................................... -- 45,500,000 Other liabilities................................................................ 3,869,567 3,468,995 Deferred tax liability........................................................... 9,177,456 8,617,456 -------------- -------------- Total liabilities........................................................ 24,535,375 69,766,016 -------------- -------------- Commitments and contingencies.................................................... SHAREHOLDERS' EQUITY Preferred stock, authorized and unissued 4,000,000 shares........................ -- -- Common stock, no par value, $0.10 per share stated value; authorized 100,000,000 shares, issued and outstanding shares: 19,590,373 in 1994 and 18,157,209 in 1995............................................................................ 1,959,038 1,815,721 Additional paid-in capital....................................................... 137,404,815 116,614,230 Common stock warrants............................................................ 390,167 388,055 Retained earnings................................................................ 9,289,960 20,255,069 -------------- -------------- Total shareholders' equity............................................... 149,043,980 139,073,075 -------------- -------------- Total liabilities and shareholders' equity............................... $ 173,579,355 $ 208,839,091 -------------- -------------- -------------- --------------
The accompanying notes are an integral part of the consolidated financial statements. F-3 JACOR COMMUNICATIONS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE YEARS ENDED DECEMBER 31, 1993, 1994 AND 1995
1993 1994 1995 Broadcast revenue............................................... $ 100,745,089 $ 119,635,308 $ 133,103,137 Less agency commissions..................................... 10,812,889 12,624,860 14,212,306 -------------- -------------- -------------- Net revenue............................................... 89,932,200 107,010,448 118,890,831 Broadcast operating expenses.................................... 69,520,397 80,468,077 87,290,409 Depreciation and amortization................................... 10,222,844 9,698,030 9,482,883 Corporate general and administrative expenses................... 3,563,800 3,361,263 3,500,518 -------------- -------------- -------------- Operating income.......................................... 6,625,159 13,483,078 18,617,021 Interest expense................................................ (2,734,677) (533,862) (1,443,836) Interest income................................................. 258,857 1,218,179 1,259,696 Other expense, net.............................................. (10,895) (2,079) (167,772) -------------- -------------- -------------- Income before income taxes................................ 4,138,444 14,165,316 18,265,109 Income tax expense.............................................. (2,700,000) (6,313,800) (7,300,000) -------------- -------------- -------------- Net income................................................ $ 1,438,444 $ 7,851,516 $ 10,965,109 -------------- -------------- -------------- -------------- -------------- -------------- Net income per common share............................... $ 0.10 $ 0.37 $ 0.52 -------------- -------------- -------------- -------------- -------------- -------------- Number of common shares used in per share calculation........... 14,504,527 21,409,177 20,912,705 -------------- -------------- -------------- -------------- -------------- --------------
The accompanying notes are an integral part of the consolidated financial statements. F-4 JACOR COMMUNICATIONS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY FOR THE YEARS ENDED DECEMBER 31, 1993, 1994 AND 1995
COMMON STOCK -------------------- ADDITIONAL COMMON STATED PAID-IN STOCK RETAINED SHARES VALUE CAPITAL WARRANTS EARNINGS TOTAL Balances, January 1, 1993............. 9,092,084 $ 909,208 $49,568,738 $ 402,805 $ 0 $50,880,751 Issuance of common stock: Public offering................. 5,462,500 546,250 59,390,937 59,937,187 Sale to Majority Shareholder.... 3,484,321 348,432 19,651,571 20,000,003 1993 rights offering............ 345,476 34,548 1,703,287 1,737,835 Directors' subscription......... 80,000 8,000 451,200 459,200 Purchase of KAZY(FM)............ 964,006 96,401 5,436,993 5,533,394 Exercise of stock options....... 52,886 5,289 275,914 281,203 Other........................... 18,539 1,854 155,728 (12,408) 145,174 Net income............................ 1,438,444 1,438,444 --------- --------- ----------- ----------- ---------- ----------- Balances, December 31, 1993........... 19,499,812 1,949,982 136,634,368 390,397 1,438,444 140,413,191 Exercise of stock options............. 89,310 8,931 760,215 769,146 Other................................. 1,251 125 10,232 (230) 10,127 Net income............................ 7,851,516 7,851,516 --------- --------- ----------- ----------- ---------- ----------- Balances, December 31, 1994........... 19,590,373 1,959,038 137,404,815 390,167 9,289,960 149,043,980 Purchase and retirement of stock...... (1,515,300) (151,530) (21,542,302) (21,693,832) Purchase of stock by employee stock purchase plan....................... 43,785 4,378 470,251 474,629 Exercise of stock options............. 27,790 2,779 192,754 195,533 Other................................. 10,561 1,056 88,712 (2,112) 87,656 Net income............................ 10,965,109 10,965,109 --------- --------- ----------- ----------- ---------- ----------- Balances, December 31, 1995........... 18,157,209 $1,815,721 $116,614,230 $ 388,055 $20,255,069 $139,073,075 --------- --------- ----------- ----------- ---------- ----------- --------- --------- ----------- ----------- ---------- -----------
The accompanying notes are an integral part of the consolidated financial statements. F-5 JACOR COMMUNICATIONS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 1993, 1994 AND 1995
1993 1994 1995 Cash flows from operating activities: Net income.................................................. $ 1,438,444 $ 7,851,516 $ 10,965,109 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation............................................ 2,258,818 2,506,661 3,251,360 Amortization of intangible assets....................... 7,840,064 7,191,369 6,231,523 Provision for losses on accounts and notes receivable... 957,749 1,441,925 1,136,887 Refinancing fees........................................ (2,455,770) Deferred income tax provision (benefit)................. 1,400,000 (355,000) (560,000) Other................................................... (138,920) (477,825) 237,418 Changes in operating assets and liabilities, net of effects of acquisitions and disposals: Accounts receivable................................. (5,677,825) (5,765,899) (2,343,943) Other current assets................................ 1,487,404 (2,008,159) 1,029,161 Accounts payable.................................... (268,903) 371,913 (424,306) Accrued payroll and other current liabilities....... 2,119,153 591,389 1,102,239 --------------- -------------- -------------- Net cash provided by operating activities....................... 8,960,214 11,347,890 20,625,448 --------------- -------------- -------------- Cash flows from investing activities: Payment received on notes receivable........................ 1,300,000 392,500 Capital expenditures........................................ (1,495,317) (2,221,140) (4,969,027) Cash paid for acquisitions.................................. (3,871,910) (4,904,345) (34,007,857) Purchase of intangible assets............................... (6,261,520) (15,535,809) Proceeds from sale of assets................................ 1,919,189 Loans originated and other.................................. (160,158) (3,482,379) (10,220,300) --------------- -------------- -------------- Net cash used by investing activities........................... (5,527,385) (13,650,195) (64,340,493) --------------- -------------- -------------- Cash flows from financing activities: Proceeds from issuance of long-term debt.................... 48,000,000 45,500,000 Purchase of common stock.................................... (21,693,832) Proceeds from issuance of common stock...................... 88,301,704 779,273 757,818 Reduction in long-term debt................................. (118,484,583) Payment of restructuring expenses........................... (5,061,925) (119,729) (387,000) --------------- -------------- -------------- Net cash provided by financing activities....................... 12,755,196 659,544 24,176,986 --------------- -------------- -------------- Net increase (decrease) in cash and cash equivalents............ 16,188,025 (1,642,761) (19,538,059) Cash and cash equivalents at beginning of year.................. 12,429,574 28,617,599 26,974,838 --------------- -------------- -------------- Cash and cash equivalents at end of year........................ $ 28,617,599 $ 26,974,838 $ 7,436,779 --------------- -------------- -------------- --------------- -------------- --------------
The accompanying notes are an integral part of the consolidated financial statements. F-6 JACOR COMMUNICATIONS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. ACCOUNTING POLICIES AND DESCRIPTION OF BUSINESS DESCRIPTION OF BUSINESS The Company owns and operates 23 radio stations in seven metropolitan markets throughout the United States. On January 11, 1993, the Company completed a recapitalization plan that substantially modified its debt and capital structure. Such recapitalization was accounted for as if it had been completed January 1, 1993. 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. BARTER TRANSACTIONS 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 a maturity of three months or less, when purchased, to be cash equivalents. Income taxes aggregating $100,000, $5,545,000, and $6,662,000 were paid during 1993, 1994 and 1995, respectively. Interest paid was $3,107,000, $381,000, and $1,378,000 during 1993, 1994, and 1995, respectively. The effect of barter transactions has been eliminated (see Note 12). 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. 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 3 to 20 Equipment............................................. Years 5 to 12 Furniture and fixtures................................ Years Life of Leasehold improvements................................ lease
F-7 JACOR COMMUNICATIONS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) INTANGIBLE ASSETS Intangible assets are stated at cost less accumulated amortization; amortization is provided principally on the straight-line basis over the following lives: Goodwill.............................................. 40 Years 5 to 25 Other intangibles..................................... Years
Other intangible assets consist primarily of various contracts and purchased intellectual property. 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. PER SHARE DATA Income per share for the three years ended December 31, 1995 is based on the weighted average number of common shares outstanding and gives effect to both dilutive stock options and dilutive stock purchase warrants during the year. Fully diluted income per share is not presented since it approximates income per share. 2. ACQUISITION OF LICENSES In June 1993, the Company acquired the FCC license and certain contracts of radio station WLWA(AM) (formerly WKRC) in Cincinnati, Ohio for $1,600,000 in cash. In September 1995, the Company exercised its purchase option to acquire ownership of the FCC license of radio station KHTS-FM (formerly KECR-FM) in San Diego, California for approximately $13,875,000 in cash. 3. ACQUISITIONS In July 1993, the Company completed the acquisition of radio station KAZY(FM) in Denver, Colorado from its majority shareholder. The majority shareholder had purchased that station for $5,500,000 and then sold the station to the Company in consideration of the issuance of shares of the Company's common stock having a value, at $5.74 per share, equal to the majority shareholder's cost for the station plus related acquisition costs. In connection with the acquisition, 964,006 shares of the Company's common stock were issued to the majority shareholder. Effective January 1, 1994, the Company acquired an interest in Critical Mass Media, Inc. ("CMM") from the Company's President. In connection with the transaction, the President has the right to put the remaining interest to the Company between January 1, 1999 and January 1, 2000 for 300,000 shares of the Company's common stock. If the put is not exercised by January 1, 2000, the Company has the right to acquire the remaining interest prior to 2001 in exchange for 300,000 shares of the Company's common stock. In connection with the acquisition, the Company recorded $3,017,000 in goodwill and a $2,400,000 obligation included in other liabilities. F-8 JACOR COMMUNICATIONS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) In March 1994, the Company entered into an agreement to acquire the assets of radio station WPPT(FM) (formerly WIMJ) in Cincinnati, Ohio for $9,500,000 in cash. Pending consummation of the transaction (which occurred in June 1995), the Company operated the station under a Local Marketing Agreement which commenced April 7, 1994, and expired upon completion of the purchase. In 1994, the Company acquired the call letters, programming and certain contracts of radio station KBPI(FM) in Denver, Colorado and then changed the call letters of its FM broadcast station KAZY to KBPI; the Company acquired the call letters, programming and certain contracts of radio station WCKY(AM) in Cincinnati, Ohio and then changed the call letters of its AM broadcast station WLWA to WCKY; the Company acquired radio station KTLK(AM) (formerly KRZN) in Denver, Colorado; and the Company acquired radio station WWST(FM) (formerly WWZZ) in Knoxville, Tennessee. The aggregate cash purchase price for these acquisitions was approximately $9.5 million. In August 1995, the Company acquired certain operating assets of radio stations WDUV(FM) and WBRD(AM) in Tampa, Florida for approximately $14,000,000 in cash. In 1995, the Company acquired the call letters, programming and certain contracts of radio station WOFX(FM) in Cincinnati, Ohio and then changed the call letters of its FM broadcast station WPPT to WOFX. The Company also acquired radio stations WSOL(FM) (formerly WHJX), WJBT(FM) and WZAZ(AM) in Jacksonville, Florida. The aggregate cash purchase price for these acquisitions was approximately $9,750,000. 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 1994 and 1995 acquisitions had taken place at the beginning of 1994, unaudited pro forma consolidated results of operations would have been as follows:
PRO FORMA (UNAUDITED) YEAR ENDED DECEMBER 31, ------------------------------ 1994 1995 Net broadcasting revenue..................................... $ 111,232,000 $ 121,214,000 Net income................................................... 7,115,000 10,423,000 Net income per share......................................... 0.33 0.50
4. DISPOSITION In May 1994, the Company completed the sale of the business and substantially all the assets of its wholly owned subsidiary, Telesat Cable TV, Inc., under a contract dated December 1993. The Company received approximately $2,000,000 in cash for this sale. 5. PROPERTY AND EQUIPMENT Property and equipment at December 31, 1994 and 1995 consist of the following:
1994 1995 Land and land improvements..................................... $ 1,999,002 $ 2,575,224 Buildings...................................................... 1,912,432 2,584,556 Equipment...................................................... 18,725,970 26,673,912 Furniture and fixtures......................................... 2,346,041 3,505,363 Leasehold improvements......................................... 2,116,548 3,184,683 ------------- ------------- 27,099,993 38,523,738 Less accumulated depreciation.................................. (4,471,152) (7,722,513) ------------- ------------- $ 22,628,841 $ 30,801,225 ------------- ------------- ------------- -------------
F-9 JACOR COMMUNICATIONS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) 6. INTANGIBLE ASSETS Intangible assets at December 31, 1994 and 1995 consist of the following:
1994 1995 Goodwill..................................................... $ 78,621,918 $ 120,947,774 Other........................................................ 25,952,816 27,488,624 -------------- -------------- 104,574,734 148,436,398 Less accumulated amortization................................ (15,031,433) (21,278,636) -------------- -------------- $ 89,543,301 $ 127,157,762 -------------- -------------- -------------- --------------
7. DEBT AGREEMENT The Company's debt obligations at December 31, 1995 consist of the following:
Indebtedness under the Bank Credit Agreement (described below)-- Senior reducing revolving facility......................... $38,500,000 Senior acquisition facility................................ 7,000,000 ---------- $45,500,000 ---------- ----------
The Company has an agreement with a group of lenders, as amended (the "1993 Credit Agreement"), which provides for a senior reducing revolving credit facility with a commitment of $39,550,000 at December 31, 1995 that expires on December 31, 2000 (the "Revolver") and a senior acquisition facility with a commitment of $55,000,000 that expires on September 30, 1996 (the "Acquisition Facility"). Both facilities are available for acquisitions permitted under conditions set forth in the 1993 Credit Agreement. The 1993 Credit Agreement requires that the commitment under the Revolver be reduced by $900,000 quarterly during 1996 and by increasing quarterly amounts thereafter, and, under certain circumstances, requires mandatory prepayments of any outstanding loans and further commitment reductions under the 1993 Credit Agreement. Amounts outstanding under the Acquisition Facility at September 30, 1996 are payable in 17 equal quarterly installments. The indebtedness of the Company under the 1993 Credit Agreement is collateralized by liens on substantially all of the assets of the Company and its operating subsidiaries and by a pledge of the operating subsidiaries' stock, and is guaranteed by those subsidiaries. The 1993 Credit Agreement contains restrictions pertaining to maintenance of financial ratios, capital expenditures, payment of dividends or distributions of capital stock and incurrence of additional indebtedness. Interest under the 1993 Credit Agreement is payable, at the option of the Company, at alternative rates equal to the Eurodollar rate plus 1.25% to 2.25% or the base rate announced by Banque Paribas plus 0.25% to 1.25%. The spreads over the Eurodollar rate and such base rate vary from time to time, depending upon the Company's financial leverage. The Company will pay quarterly commitment fees equal to 3/8% per annum on the aggregate unused portion of the aggregate commitment on both facilities. The Company also is required to pay certain other fees to the agent and the lenders for the administration of the facilities and the use of the Acquisition Facility. In accordance with the terms of the 1993 Credit Agreement, the Company entered into an interest rate protection agreement in March 1993 on the notional amount of $22,500,000 for a three-year term. This agreement provides protection against the rise in the three-month LIBOR interest rate beyond a level of 7.25%. The current three-month LIBOR interest rate is 5.3125%. F-10 JACOR COMMUNICATIONS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) 8. CAPITAL STOCK During 1995, the Company purchased and retired 1,515,300 shares of its own common stock at a cost of $21,693,832. The Company's Board of Directors has authorized the Company to purchase up to an additional 1,000,000 shares of its own common stock from time to time in open-market or negotiated transactions. The Company issued 2,014,233 warrants on January 1, 1993 to purchase 2,014,233 shares of common stock at $8.30 which were recorded at their estimated fair value of $0.20 per warrant. The warrants may be exercised at any time prior to January 14, 2000, at which time the warrants expire. During the year ended December 31, 1995, 10,561 warrants were exercised. 9. INCOME TAXES Income tax expense for the years ended December 31, 1993, 1994 and 1995 is summarized as follows:
FEDERAL STATE TOTAL 1993: Current............................................................. $ 900,000 $ 400,000 $ 1,300,000 Deferred............................................................ 1,300,000 100,000 1,400,000 ------------ ------------ ------------ $ 2,200,000 $ 500,000 $ 2,700,000 ------------ ------------ ------------ ------------ ------------ ------------ 1994: Current............................................................. $ 5,593,800 $ 1,075,000 $ 6,668,800 Deferred............................................................ (300,000) (55,000) (355,000) ------------ ------------ ------------ $ 5,293,800 $ 1,020,000 $ 6,313,800 ------------ ------------ ------------ ------------ ------------ ------------ 1995: Current............................................................. $ 6,600,000 $ 1,260,000 $ 7,860,000 Deferred............................................................ (500,000) (60,000) (560,000) ------------ ------------ ------------ $ 6,100,000 $ 1,200,000 $ 7,300,000 ------------ ------------ ------------ ------------ ------------ ------------
The provisions for income tax differ from the amount computed by applying the statutory federal income tax rate due to the following:
1993 1994 1995 Federal income taxes at the statutory rate.............................. $ 1,407,071 $ 4,957,861 $ 6,392,788 Amortization not deductible............................................. 404,660 606,137 606,137 State income taxes, net of any current federal income tax benefit....... 330,000 663,000 780,000 Other................................................................... 558,269 86,802 (478,925) ------------ ------------ ------------ $ 2,700,000 $ 6,313,800 $ 7,300,000 ------------ ------------ ------------ ------------ ------------ ------------
The tax effects of the significant temporary differences which comprise the deferred tax liability at December 31, 1993, 1994 and 1995 are as follows:
1993 1994 1995 Property and equipment.............................................. $ 11,172,498 $ 11,062,121 $ 12,208,187 Intangibles......................................................... (1,445,854) (860,566) (1,456,567) Accrued expenses.................................................... (740,790) (2,183,592) (1,992,093) Reserve for pending sale of assets.................................. (1,458,396) Other............................................................... 372,542 1,159,493 (142,071) ------------- ------------- ------------- Net liability................................................. $ 7,900,000 $ 9,177,456 $ 8,617,456 ------------- ------------- ------------- ------------- ------------- -------------
F-11 JACOR COMMUNICATIONS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) 10. STOCK-BASED COMPENSATION PLANS In October 1995, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 123 "Accounting for Stock-Based Compensation". The Company will continue to apply APB Opinion No. 25 in accounting for its plans as permitted by this statement. This statement however, requires that a company's financial statements include certain disclosures about stock-based employee compensation arrangements regardless of the method used to account for them. Pro forma disclosures required by a company that elects to continue to measure compensation cost using Opinion No. 25 will be made by the Company for the year ended December 31, 1996. At December 31, 1995, the Company has three stock-based compensation plans, which are described below. The Company applies APB Opinion 25 in accounting for its plans. Accordingly, no compensation cost has been recognized for its fixed stock option plans and its stock purchase plan. 1993 STOCK OPTION PLAN Under the Company's 1993 stock option plan, options to acquire up to 2,769,218 shares of common stock can be granted to officers and key employees at no less than the fair market value of the underlying stock on the date of grant. The plan permits the granting of non-qualified stock options as well as incentive stock options. The options vest 30% upon grant, 30% upon the first anniversary of the grant date and 20% per year for each of the next two years thereafter and expire 10 years after grant. The plan will terminate no later than February 7, 2003. Information pertaining to the plan for the years ended December 31, 1993, 1994 and 1995 is as follows:
NUMBER OF OPTION PRICE SHARES PER SHARE 1993: Outstanding at beginning of year.................................... 0 Granted............................................................. 1,535,910 $ 5.74-$ 6.46 Exercised........................................................... (55,980) $5.74 Surrendered......................................................... (114,310) $ 5.97-$ 6.46 Outstanding at end of year.......................................... 1,365,620 $ 5.74-$ 6.46 Exercisable at end of year.......................................... 370,500 $5.74 Available for grant at end of year.................................. 97,618 1994: Outstanding at beginning of year.................................... 1,365,620 $ 5.74-$ 6.46 Granted............................................................. 10,000 $13.50-$15.18 Exercised........................................................... (89,310) $ 5.74-$ 5.97 Outstanding at end of year.......................................... 1,286,310 $ 5.74-$15.18 Exercisable at end of year.......................................... 734,670 $ 5.74-$13.50 Available for grant at end of year.................................. 87,618 1995: Outstanding at beginning of year.................................... 1,286,310 $ 5.74-$15.18 Granted............................................................. 245,000 $13.88-$15.60 Exercised........................................................... (27,790) $ 5.74-$ 6.46 Outstanding at end of year.......................................... 1,503,520 $ 5.74-$15.60 Exercisable at end of year.......................................... 1,046,340 $ 5.74-$14.04 Available for grant at end of year.................................. 1,092,618
F-12 JACOR COMMUNICATIONS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) DIRECTORS' STOCK OPTIONS The Company has granted nonqualified stock options to purchase up to 65,000 shares of the Company's common stock to certain members of the Company's Board of Directors. These options vest 30% upon grant, 30% upon the first anniversary of the grant date and 20% per year for each of the next two years thereafter. Options to purchase up to 40,000 shares must be exercised in full prior to May 28, 1998 while the remaining options must be exercised in full prior to December 15, 2004. The exercise price of these options ranges from $5.74 per share to $14.34 per share. EMPLOYEE STOCK PURCHASE PLAN Under the 1995 Employee Stock Purchase Plan, the Company is authorized to issue up to 200,000 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 percent of the lower of its beginning-of-year or end-of-year market price. Under the Plan, the Company sold 43,785 shares to employees in 1995 at a purchase price of $10.84 per share. 11. COMMITMENTS AND CONTINGENCIES LEASE OBLIGATIONS The Company and its subsidiaries lease certain land and facilities used in their operations, including local marketing agreements for certain radio stations. Future minimum rental payments under all noncancellable operating leases as of December 31, 1995 are payable as follows: 1996................................... $2,958,000 1997................................... 2,681,000 1998................................... 2,340,000 1999................................... 1,208,000 2000................................... 1,106,000 Thereafter............................. 4,273,000 ---------- $14,566,000 ---------- ----------
Rental expense was approximately $2,991,000, $3,336,000, and $3,471,000 for the years ended December 31, 1993, 1994 and 1995, respectively. The Company has a real estate lease for office space for its Atlanta operations with an affiliate of its majority shareholder. The annual rental rate is approximately $330,000. LEGAL PROCEEDINGS The Company is a party to various legal proceedings. In the opinion of management, all such matters are adequately covered by insurance, or if not so covered, are without merit or are of such kind, or involve such amounts, as would not have a significant effect on the financial position or results of operations of the Company. 12. BARTER TRANSACTIONS Barter revenue was approximately $5,061,000, $4,647,000, and $4,976,000 in 1993, 1994 and 1995, respectively. Barter expense was approximately $4,941,000, $4,164,000, and $5,166,000 in 1993, 1994 and 1995, respectively. F-13 JACOR COMMUNICATIONS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) Included in accounts receivable and accounts payable in the accompanying consolidated balance sheets for 1994 and 1995 are barter accounts receivable (merchandise or services due the Company) of approximately $1,372,000 and $927,000, respectively, and barter accounts payable (air time due supplier of merchandise or service) of approximately $1,000,000 and $1,012,000, respectively. 13. RETIREMENT PLAN The Company maintains a defined contribution retirement plan covering substantially all employees who have met eligibility requirements. The Company matches 50% of participating employee contributions, subject to a maximum contribution by the Company of 1 1/2% of such employee's annual compensation up to $150,000 of such compensation. Total expense related to this plan was $237,875, $289,487, and $334,253 in 1993, 1994 and 1995, respectively. 14. SUBSEQUENT EVENTS ACQUISITIONS In February 1996, the Company entered into an agreement to acquire Noble Broadcast Group, Inc. ("Noble"), for $152,000,000 in cash. Noble owns 10 radio stations, 4 of which serve Denver, Colorado, with 3 each serving St. Louis, Missouri and Toledo, Ohio; and provides programming to and sells air time for two stations serving the San Diego market. The broadcast signals for the stations serving the San Diego market originate from Mexico. The agreement is subject to the approval of the Federal Communications Commission and the satisfaction of certain other conditions. Pending consummation of the transaction, the Company entered into Time Brokerage Agreements for the stations in St. Louis and Toledo which began February 21, 1996, and will expire on the purchase date. The Company will finance this acquisition from the proceeds of a new credit facility discussed below. In February 1996, the Company signed an agreement and plan of merger to acquire Citicasters Inc. ("Citicasters"), owner of 19 radio stations in eight U.S. markets as well as two network-affiliated television stations. Citicasters' radio stations serve Atlanta, Georgia; Cincinnati and Columbus, Ohio; Kansas City, Kansas and Missouri; Phoenix, Arizona; Portland, Oregon; Sacramento, California; and Tampa, Florida. The television stations serve Cincinnati, Ohio and Tampa, Florida. The agreement is subject to the approval of the Federal Communications Commission and the satisfaction of certain other conditions. In conjunction with this agreement, the Company has delivered to the seller a $75,000,000 nonrefundable deposit in the form of a letter of credit. The letter of credit requires annual fees of 1.25% and can be drawn upon by Citicasters if the merger agreement is terminated. Jacor will pay $29.50 in cash, plus, in the event that the closing does not occur prior to October 1, 1996, for each full calendar month ending prior to the merger commencing with October 1996, an additional amount of $.22125 in cash. In addition, for each share of Citicasters common stock held, Citicasters shareholders will receive one Jacor warrant to purchase a fractional share of Jacor common stock (which fraction is anticipated to be .2035247) at a price of $28.00 per full share of Jacor common stock. If the merger is not consummated by October 1, 1996, the exercise price for the warrants to purchase 4,400,000 shares of Jacor stock will be reduced to $26.00 per share. The cash purchase price, which is approximately $630,000,000, will increase by approximately $5,000,000 for each full month subsequent to October 1996 but prior to the merger. NEW CREDIT AGREEMENT On February 20, 1996 the Company entered into a new credit facility. The Company's new senior debt consists of two facilities (the "Facilities") provided under an agreement (the "Existing Credit Facility") with ten banks: a $190,000,000 reducing revolving credit facility ("Revolving A Loans") and a $110,000,000 reducing revolving credit facility ("Revolving B Loans"). Both Facilities mature on December 31, 2003. The F-14 JACOR COMMUNICATIONS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) indebtedness of the Company under the Facilities is collateralized by liens on substantially all of the assets of the Company and its operating subsidiaries and by a pledge of the operating subsidiaries' stock, and is guaranteed by those subsidiaries. The Revolving A Loans will be used primarily to refinance existing debt and to complete the Noble acquisition. The Revolving B Loans will be used to finance acquisitions, stock repurchases and for working capital and other general corporate purposes. The commitment under the Revolving A Loans will be reduced by $2,500,000 each quarter commencing January 1, 1997 and by increasing quarterly amounts in each succeeding year. The commitment under the Revolving B Loans will be reduced by $5,000,000 for each quarter commencing January 1, 1998. The Company is required to make mandatory prepayments of the Facilities equal to (i) net proceeds from any debt offerings, (ii) 50% of net proceeds from any equity offerings to bring the Company's leverage ratio down to 5 to 1, (iii) 50% of excess cash flow, as defined, beginning in 1997, and (iv) net after tax proceeds received from asset sales or other dispositions. Interest under the Facilities is payable, at the option of the Company, at alternative rates equal to the Eurodollar rate plus 1% to 2 3/4% or the base rate announced by Banque Paribas plus up to 1 1/2%. The spreads over the Eurodollar rate and such base rate vary from time to time, depending upon the Company's financial leverage. The Company will pay quarterly commitment fees of 3/8% to 1/2% per annum on the unused portion of the commitment on both Facilities depending on the Company's financial leverage. The Company also is required to pay certain other fees to the agent and the lenders for the administration of the Facilities. The Existing Credit Facility contains a number of covenants which, among other things, require the Company to maintain specified financial ratios and impose certain limitations on the Company with respect to (i) the incurrence of additional indebtedness; (ii) investments and acquisitions, except under specified conditions; (iii) the incurrence of additional liens; (iv) the disposition of assets; (v) the payment of cash dividends; (vi) capital expenditures; and (vii) mergers, changes in business, and transactions with affiliates. SUPPLEMENTARY DATA Quarterly Financial Data for the years ended December 31, 1994 and 1995 (Unaudited)
FIRST SECOND FOURTH QUARTER QUARTER THIRD QUARTER QUARTER ------------- ------------- ------------- ------------- 1994 Net revenue....................................... $ 19,782,029 $ 30,010,219 $ 28,498,476 $ 28,719,724 Operating income (loss)........................... (519,163) 4,364,512 4,784,215 4,853,514 Net income (loss)................................. (220,443) 2,374,259 2,629,384 3,068,316 Net income (loss) per common share(1)............. (0.01) 0.11 0.12 0.14 1995 Net revenue....................................... $ 24,016,183 $ 30,866,300 $ 32,293,562 $ 31,714,786 Operating income.................................. 1,060,526 5,628,006 5,899,472 6,029,017 Net income........................................ 751,314 3,528,561 3,488,305 3,196,929 Net income per common share(1).................... 0.04 0.17 0.17 0.16
- ------------------------------ (1) 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. F-15 REPORT OF INDEPENDENT AUDITORS Board of Directors Citicasters Inc. We have audited the accompanying balance sheets of Citicasters Inc. and subsidiaries (formerly Great American Communications Company) as of December 31, 1994 and 1995, and the related statements of operations, shareholders' equity and cash flows for each of the three years in the period ended December 31, 1995. 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. As more fully described in Note B to the financial statements, effective December 28, 1993, the Company emerged from bankruptcy pursuant to a plan of reorganization confirmed by the Bankruptcy Court on December 7, 1993. In accordance with an American Institute of Certified Public Accountants Statement of Position, the Company has adopted "fresh-start reporting" whereby its assets, liabilities, and new capital structure have been adjusted to reflect estimated fair values as of December 31, 1993. As a result, the statements of operations, shareholders' equity and cash flows for the years ended December 31, 1994 and December 31, 1995 reflect the Company's new basis of accounting and, accordingly, are not comparable to the Company's pre-reorganization statements of operations, shareholders' equity and cash flows for the year ended December 31, 1993. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Citicasters Inc. and subsidiaries at December 31, 1994 and 1995, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 1995, in conformity with generally accepted accounting principles. ERNST & YOUNG LLP Cincinnati, Ohio February 23, 1996 F-16 CITICASTERS INC. AND SUBSIDIARIES BALANCE SHEETS (DOLLARS IN THOUSANDS)
DECEMBER 31, ---------------------- 1994 1995 ASSETS Current assets: Cash and short-term investments......................................................... $ 46,258 $ 3,572 Trade receivables, less allowance for doubtful accounts of $1,244 and $1,643............ 31,851 32,495 Broadcast program rights................................................................ 5,488 5,162 Prepaid and other current assets........................................................ 2,635 3,059 ---------- ---------- Total current assets.................................................................. 86,232 44,288 Broadcast program rights, less current portion.......................................... 4,466 3,296 Property and equipment, net............................................................. 25,083 33,878 Contracts, broadcasting licenses and other intangibles, net............................. 274,695 312,791 Deferred charges and other assets....................................................... 13,016 22,093 ---------- ---------- $ 403,492 $ 416,346 ---------- ---------- ---------- ---------- LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Accounts payable, accrued expenses and other current liabilities........................ $ 33,673 $ 17,061 Broadcast program rights fees payable................................................... 5,041 5,298 ---------- ---------- Total current liabilities............................................................. 38,714 22,359 Broadcast program rights fees payable, less current portion............................... 3,666 2,829 Long-term debt............................................................................ 122,291 132,481 Deferred income taxes..................................................................... 44,486 44,822 Other liabilities......................................................................... 43,398 54,163 ---------- ---------- Total liabilities..................................................................... 252,555 256,654 Shareholders' equity: Common Stock, $.01 par value, including additional paid-in capital, 500,000,000 shares authorized; 20,203,247 and 19,976,927 shares outstanding.............................. 87,831 82,936 Retained earnings from January 1, 1994.................................................. 63,106 76,756 ---------- ---------- Total shareholders' equity............................................................ 150,937 159,692 ---------- ---------- $ 403,492 $ 416,346 ---------- ---------- ---------- ----------
See notes to financial statements. F-17 CITICASTERS INC. AND SUBSIDIARIES STATEMENTS OF OPERATIONS (IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
YEAR ENDED DECEMBER 31, ----------------------------------- PREDECESSOR 1993 1994 1995 Net revenues: Television broadcasting................................................... $ 139,576 $ 130,418 $ 61,592 Radio broadcasting........................................................ 65,592 66,625 74,822 ----------- ---------- ---------- 205,168 197,043 136,414 ----------- ---------- ---------- Costs and expenses: Operating expenses........................................................ 71,730 60,682 37,416 Selling, general and administrative....................................... 61,340 57,036 43,513 Corporate, general and administrative expenses............................ 3,996 4,796 4,303 Depreciation and amortization............................................. 28,119 22,946 14,635 ----------- ---------- ---------- 165,185 145,460 99,867 ----------- ---------- ---------- Operating income............................................................ 39,983 51,583 36,547 Other income (expense): Interest expense, (contractual interest for 1993 was $69,806)............. (64,942) (31,979) (13,854) Minority interest......................................................... (26,776) -- -- Investment income......................................................... 305 1,216 1,231 Gain on sale of television stations....................................... -- 95,339 -- Miscellaneous, net........................................................ (494) 447 (607) ----------- ---------- ---------- (91,907) 65,023 (13,230) ----------- ---------- ---------- Earnings (loss) before reorganization items and income taxes................ (51,924) 116,606 23,317 Reorganization items........................................................ (14,872) -- -- ----------- ---------- ---------- Earnings (loss) before income taxes and extraordinary items................. (66,796) 116,606 23,317 Income taxes................................................................ -- 53,500 9,000 ----------- ---------- ---------- Earnings (loss) before extraordinary items.................................. (66,796) 63,106 14,317 Extraordinary items, net of tax............................................. 408,140 -- -- ----------- ---------- ---------- Net earnings................................................................ $ 341,344 $ 63,106 $ 14,317 ----------- ---------- ---------- ----------- ---------- ---------- Share data: Primary and Fully Diluted: Net earnings............................................................ * $ 2.55 $ .68 Average common shares................................................... * 24,777 21,017
- ------------------------ *Share amounts are not relevant due to the effects of the reorganization. See notes to financial statements. F-18 CITICASTERS INC. AND SUBSIDIARIES STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY (IN THOUSANDS)
YEAR ENDED DECEMBER 31, ----------------------------------- PREDECESSOR 1993 1994 1995 Common stock, including additional paid-in capital: Beginning balance......................................................... $ 270,891 $ 138,588 $ 87,831 Common stock issued: Exercise of stock options............................................... -- -- 273 Stock bonus awarded..................................................... 350 297 -- Common stock repurchased and retired...................................... -- (51,054) (5,168) Effect of restructuring................................................... (132,653) -- -- ----------- ---------- ---------- Balance at end of period $ 138,588 $ 87,831 $ 82,936 ----------- ---------- ---------- ----------- ---------- ---------- Retained earnings: Beginning balance......................................................... $(609,920) $ -- $ 63,106 Net earnings.............................................................. 341,344 63,106 14,317 Application of fresh-start accounting..................................... 268,576 -- -- Cash dividends............................................................ -- -- (667) ----------- ---------- ---------- Balance at end of period.................................................. $ -- $ 63,106 $ 76,756 ----------- ---------- ---------- ----------- ---------- ---------- Total Shareholders' Equity.................................................. $ 138,588 $ 150,937 $ 159,692 ----------- ---------- ---------- ----------- ---------- ----------
See notes to financial statements. F-19 CITICASTERS INC. AND SUBSIDIARIES STATEMENTS OF CASH FLOWS (IN THOUSANDS)
YEAR ENDED DECEMBER 31, --------------------------------- PREDECESSOR 1993 1994 1995 Operating Activities: Net earnings................................................................ $ 341,344 $ 63,106 $ 14,317 Adjustments: Depreciation and amortization............................................. 28,119 22,946 14,635 Non-cash interest expense................................................. 8,780 198 190 Other non-cash adjustments (primarily non-cash dividends on the preferred stock of a former subsidiary)........................................... 26,941 -- -- Reorganization items...................................................... 14,872 -- -- Realized gains on sales of assets......................................... (1,871) (51,218) -- Extraordinary gains on retirements and refinancing of long-term debt...... (408,140) -- -- Decrease (increase) in trade receivables.................................. (1,635) 16,443 (644) Decrease (increase) in broadcast program rights, net of fees payable...... 201 (146) 916 Increase (decrease) in accounts payable, accrued expenses and other liabilities............................................................. 9,514 (2,891) (5,885) Increase (decrease) in deferred taxes..................................... -- (6,559) 336 Other..................................................................... 306 (4,389) (634) ----------- --------- --------- 18,431 37,490 23,231 ----------- --------- --------- Investing Activities: Deposits on broadcast stations to be acquired............................... -- -- (7,500) Purchases of: Broadcast stations........................................................ -- (16,000) (50,598) Real estate, property and equipment....................................... (5,967) (7,569) (11,857) Sales of: Broadcast stations........................................................ 1,600 381,547 -- Entertainment businesses: Cash proceeds received.................................................. -- 5,000 -- Cash expenses related to sale........................................... (6,021) (813) (22) Investments and other subsidiaries........................................ -- 2,841 -- Other....................................................................... (1,131) 204 (378) ----------- --------- --------- (11,519) 365,210 (70,355) ----------- --------- --------- Financing Activities: Retirements and refinancing of long-term debt............................... (370,150) (505,824) (3,500) Additional long-term borrowings............................................. 355,339 195,350 13,500 Financing costs............................................................. (13,549) -- -- Common shares repurchased................................................... -- (51,054) (5,168) Cash dividends paid on common stock......................................... -- -- (667) Proceeds from the sale of common stock...................................... 1,161 -- -- Other....................................................................... -- 297 273 ----------- --------- --------- (27,199) (361,231) 4,438 ----------- --------- --------- Net Increase (Decrease) in Cash and Short-Term Investments.................... (20,287) 41,469 (42,686) Cash and short-term investments at beginning of period........................ 25,076 4,789 46,258 ----------- --------- --------- Cash and short-term investments at end of period.............................. $ 4,789 $ 46,258 $ 3,572 ----------- --------- --------- ----------- --------- ---------
See notes to financial statements. F-20 CITICASTERS INC. AND SUBSIDIARIES SUPPLEMENTARY SCHEDULE TO THE STATEMENT OF CASH FLOWS--REORGANIZATION ITEMS (IN THOUSANDS)
YEAR ENDED DECEMBER 31, 1993 PREDECESSOR Effects of Reorganization Activities: Cash Items: Operating activities: Professional fees and other expenses related to bankruptcy proceedings and consummation of the reorganization............................................................................... $ (10,633) ----------- ----------- Financing activities: Long-term debt issued for cash................................................................. $ 6,339 Common stock issued for cash................................................................... 1,161 ----------- $ 7,500 ----------- ----------- Non Cash Items: Increase in long-term debt (primarily reduction in original issue discount)...................... $ 25,967 Net adjustment of accounts to fair value......................................................... (15,961) Decrease in liabilities subject to exchange...................................................... (40,423) Increase in accrued liabilities (professional fees and other expenses related to consummation of the reorganization)............................................................................ 1,438 Decrease in long-term debt through the issuance of common stock.................................. (221,541) Elimination of minority interest (preferred stock of subsidiary) through the issuance of common stock.......................................................................................... (274,932) Common stock issued in reorganization............................................................ 134,762 ----------- $(390,690) ----------- -----------
See notes to financial statements. F-21 CITICASTERS INC. AND SUBSIDIARIES NOTES TO FINANCIAL STATEMENTS A. ACCOUNTING POLICIES ORGANIZATION. Citicasters is engaged in the ownership and operation of radio and television stations and derives substantially all of its revenue from the sale of advertising time. The amount of broadcast advertising time available for sale by Citicasters' stations is relatively fixed, and by its nature cannot be stockpiled for later sale. Therefore, the primary variables affecting revenue levels are the demand for advertising time, the viewing or listening audience of the station and the entry of new stations in the marketplace. The major variable costs of operation are programming (news, sports and entertainment), sales costs related to revenues and promotional costs. The success of the programming determines the audience levels and therefore affects revenue. BASIS OF PRESENTATION. The accompanying financial statements include the accounts of Citicasters Inc. and its subsidiaries. For purposes of the financial statements and notes hereto the term "Predecessor" refers to Great American Communications Company and its subsidiaries prior to emergence from chapter 11 bankruptcy. Significant intercompany balances and transactions have been eliminated. On December 28, 1993, the Predecessor completed its comprehensive financial restructuring through a prepackaged plan of reorganization under chapter 11 of the Bankruptcy Code (see Note B for a description of the reorganization). Pursuant to the reporting principles of AICPA Statement of Position No. 90-7 entitled "Financial Reporting by Entities in Reorganization under the Bankruptcy Code" ("SOP 90-7"), Predecessor adjusted its assets and liabilities to their estimated fair values upon consummation of the reorganization. The adjustments to reflect the consummation of the reorganization as of December 31, 1993, including, among other things, the gain on debt discharge and the adjustment to record assets and liabilities at their fair values, have been reflected in the accompanying financial statements. The Statements of Operations, Changes in Shareholders' Equity and Cash Flows for the year ended December 31, 1993 are presented on a historical cost basis without giving effect to the reorganization. Therefore, the Statements of Operations, Changes in Shareholders' Equity and Cash Flows for periods after December 31, 1993 are generally not comparable to prior periods and are separated by a line (see Note B). All acquisitions have been treated as purchases. The accounts and results of operations of companies since their formation or acquisition are included in the consolidated financial statements. American Financial Group, Inc. and its Subsidiaries ("American Financial") owned 7,566,889 shares (37.8%) of Citicasters' outstanding Common Stock at March 1, 1996. At that date, American Financial's Chairman, Carl H. Lindner, owned an additional 3,428,166 shares (17.1%) of Citicasters' outstanding Common Stock. USE OF ESTIMATES. The preparation of the financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Changes in circumstances could cause actual results to differ materially from those estimates. BROADCAST PROGRAM RIGHTS. The rights to broadcast non-network programs on Citicasters' television stations are stated at cost, less accumulated amortization. These costs are charged to operations on a straight-line basis over the contract period or on a per-showing basis, whichever results in the greater aggregate amortization. PROPERTY AND EQUIPMENT. Property and equipment are based on cost and depreciation is calculated primarily using the straight-line method. Depreciable lives are: land improvements, 8-20 years; buildings and improvements, 8-40 years; operating and other equipment, 3-20 years; and leasehold improvements, over the life of the lease. F-22 CITICASTERS INC. AND SUBSIDIARIES NOTES TO FINANCIAL STATEMENTS--(CONTINUED) CONTRACTS, BROADCASTING LICENSES AND OTHER INTANGIBLES. Contracts, broadcasting licenses and other intangibles represent the excess of the value of the broadcast station over the values of their net tangible assets, and is attributable to FCC licenses, network affiliation agreements and other contractual or market related factors. Reorganization value in excess of amounts allocable to identifiable assets represents the excess of the estimated fair value of Citicasters at the time of the reorganization over the estimated fair value allocated to its net identifiable assets. Intangible assets are being amortized on a straight-line basis over an average of 34 years. On an ongoing basis, Citicasters reviews the carrying value of its intangible assets. If this review indicates that intangible assets will not be recoverable, as determined based on undiscounted cash flows of broadcast stations over the remaining amortization period, Citicasters' carrying value of intangible assets are reduced by the amount of the estimated shortfall of cash flows. INCOME TAXES. Citicasters files a consolidated Federal income tax return which includes all 80% or more owned subsidiaries. Deferred income tax assets and liabilities are determined based on differences between financial reporting and tax bases and are measured using enacted tax rates. Deferred tax assets are recognized if it is more likely than not that a benefit will be realized. EARNINGS PER SHARE. Primary and fully diluted earnings per share in 1994 and 1995 are based upon the weighted average number of common shares and gives effect to common equivalent shares (dilutive options) outstanding during the respective periods. As a result of the effects of the reorganization, per share data for the year ended December 31, 1993 has been rendered meaningless and, therefore, per share information for this period has been omitted from the accompanying financial statements. STOCK BASED COMPENSATION. The Company grants stock options for a fixed number of shares to employees with an exercise price equal to the fair value of the shares at the date of grant. The Company accounts for stock option grants in accordance with APB Opinion No. 25, Accounting for Stock Issued to Employees, and, accordingly, recognizes no compensation expense for the stock option grants. STATEMENT OF CASH FLOWS. For cash flow purposes, "investing activities" are defined as making and collecting loans and acquiring and disposing of debt or equity instruments and property and equipment. "Financing activities" include obtaining resources from owners and providing them with a return on their investments, borrowing money and repaying amounts borrowed. All other activities are considered "operating." Short-term investments for purposes of the financial statements are those which had a maturity of three months or less when acquired. B. REORGANIZATION On December 28, 1993, Citicasters completed its comprehensive financial restructuring that was designed to enhance its long-term viability by adjusting its capitalization to reflect current and projected operating performance levels. The Predecessor accomplished the reorganization of its debt and preferred stock obligations through "prepackaged" bankruptcy filings made under chapter 11 of the Bankruptcy Code by the Predecessor and two of its former non-operating subsidiaries. The Predecessor's primary operating subsidiary, Great American Television and Radio Company, Inc., was not a party to any such filings under the Bankruptcy Code. Acceptances for a prepackaged plan of reorganization were solicited in October and early November 1993. The plan of reorganization described below was overwhelmingly approved by the creditors and shareholders. The Predecessor filed its bankruptcy petition with the Bankruptcy Court on November 5, 1993. The plan was confirmed on December 7, 1993 and became effective on December 28, 1993. Under the terms of the plan the following occurred: - Predecessor effected a reverse stock split; issuing 2.25 shares of a new class of common stock for each 300 shares of common stock outstanding prior to the reorganization. F-23 CITICASTERS INC. AND SUBSIDIARIES NOTES TO FINANCIAL STATEMENTS--(CONTINUED) - Debt with a carrying value of $634.8 million was exchanged for 23,256,913 shares of common stock and $426.6 million in debt. - Preferred stock of a subsidiary was exchanged for 1,515,499 shares of common stock. - American Financial fulfilled a commitment to contribute $7.5 million in cash for which it received approximately $6.3 million principal amount of 14% Notes and 213,383 shares of common stock. - The net expense incurred as a result of the chapter 11 filings and subsequent reorganization has been segregated from ordinary operations in the Statement of Operations. Reorganization items for 1993 include the following (in thousands): Financing costs............................................................ $ 25,967 Adjustments to fair value.................................................. (15,961) Professional fees and other expenses related to bankruptcy................. 4,914 Interest income............................................................ (48) --------- $ 14,872 --------- ---------
Financing costs consist of the unamortized portion of original issue discount and deferred financing costs relating to debt subject to exchange as of the date the petition for bankruptcy was filed (November 5, 1993). Adjustments to fair value reflect the net change to state assets and liabilities at estimated fair value as of December 31, 1993. Interest income is attributable to the accumulation of cash and short-term investments after commencement of the chapter 11 cases. Pursuant to the fresh-start reporting provisions of SOP 90-7, the Predecessor's assets and liabilities were revalued and a new reporting entity was created with no retained earnings or accumulated deficit as of the effective date. The period from the effective date to December 31, 1993 was considered immaterial thus, December 31, 1993 was used as the effective date for recording the fresh-start adjustments. Predecessor's results of operations for the period from the effective date of the restructuring to December 31, 1993 have been reflected in the Statement of Operations for the year ended December 31, 1993. The reorganization values of the assets and liabilities were determined based upon several factors including: prices and multiples of broadcast cash flow (operating income before depreciation and amortization) paid in purchase and business combination transactions, projected operating results of the broadcast stations, market values of publicly traded broadcast companies, economic and industry information and the reorganized capital structure. The foregoing factors resulted in a range of reorganization values between $75 and $200 million. Based upon an analysis of all of this data, management determined that the reorganization value of the company would be $138.6 million. The gain on debt discharge is summarized as follows (in thousands): Carrying value of debt securities subject to exchange, including accrued interest................................................................ $ 318,447 Carrying value of preferred stock of subsidiary, including accrued dividends............................................................... 309,608 Aggregate principal amount of 14% Senior Extendable Notes issued in exchanges, including accrued interest since June 30, 1993............... (71,236) Aggregate value of common stock issued in exchanges....................... (134,762) Expenses attributable to consummation of the reorganization............... (7,573) --------- Total gain on debt discharge (See Note J)................................. $ 414,484 --------- ---------
F-24 CITICASTERS INC. AND SUBSIDIARIES NOTES TO FINANCIAL STATEMENTS--(CONTINUED) C. ACQUISITIONS AND DISPOSITIONS During June 1995, Citicasters acquired its second FM station in Portland (KKCW) for $30 million. During August 1995, Citicasters acquired a second FM radio station in Tampa (WTBT) for $5.5 million. The purchase price for WTBT-FM could increase to $8 million depending on the satisfaction of certain conditions. Citicasters began operating WTBT-FM during March 1995. In December 1995, the Company began operating WHOK-FM, WLLD-FM and WLOH-AM in Columbus under a local marketing agreement and acquired the stations in January 1996 for $24 million. During 1994, Citicasters sold one AM and three FM radio stations and acquired or commenced the operation of two FM radio stations. The following table sets forth certain information regarding these radio station transactions:
ACQUISITION DATE OPERATIONS DATE OF PRICE/ SALES COMMENCED/CEASED CLOSING PRICE Acquisitions: Sacramento (KRXQ-FM).................. January 1, 1994 May 27, 1994 $ 16 million Cincinnati (WWNK-FM).................. April 25, 1994 April 21, 1995 $ 15 million Dispositions: Detroit (WRIF-FM)..................... January 23, 1994 September 23, 1994 $ 11.5 million Milwaukee (WLZR-FM&AM)................ April 14, 1994 April 14, 1994 $ 7 million Denver (KBPI-FM)...................... April 19, 1994 August 5, 1994 $ 8 million
In the aggregate, the purchases and sales of radio stations completed in 1994 and 1995 did not have a material effect on Citicasters' results. No gain or loss was recognized on the radio stations sold during 1994, because those stations were valued at their respective sales price under the fresh-start reporting provision of SOP 90-7. During September and October 1994, Citicasters sold four of its network affiliated television stations to entities affiliated with New World Communications Group Incorporated ("New World"). The stations sold included KSAZ in Phoenix, WDAF in Kansas City, WBRC in Birmingham and WGHP in Greensboro/ Highpoint. Citicasters received $355.5 million in cash and a warrant to purchase, for five years, 5,000,000 shares of New World Common Stock at $15 per share. The warrant was valued at $10 million and is included in the balance sheet caption "Deferred charges and other assets." Citicasters recorded a pretax gain of $95.3 million ($50.1 million after tax) on these sales. Proceeds from the sales were used to retire long-term debt and to repurchase shares of the Company's Common Stock. During 1995, the terms of the warrant were amended to modify the registration rights relating to the underlying shares. In consideration for such modification, the exercise price was increased from $15 to $16 per share. The following unaudited proforma financial information is based on the historical financial statements of Citicasters, adjusted to reflect the television station sales, retirement of long-term debt, the effects of the December 1993 reorganization and the February 1994 refinancing of subordinated debt (in thousands except per share data).
YEAR ENDED DECEMBER 31, 1993 1994 Net revenues.................................................................... $ 119,597 $ 128,375 ---------- ---------- ---------- ---------- Operating income................................................................ $ 20,142 $ 30,624 ---------- ---------- ---------- ---------- Net earnings.................................................................... $ 4,244 $ 11,582 ---------- ---------- ---------- ---------- Net earnings per share.......................................................... $ .16 $ .47 ---------- ---------- ---------- ----------
F-25 CITICASTERS INC. AND SUBSIDIARIES NOTES TO FINANCIAL STATEMENTS--(CONTINUED) D. PROPERTY AND EQUIPMENT Property and equipment at December 31, consisted of the following (in thousands):
1994 1995 Land and land improvements....................................................... $ 5,305 $ 5,883 Buildings and improvements....................................................... 10,710 15,458 Operating and other equipment.................................................... 13,873 22,771 ---------- --------- 29,888 44,112 Accumulated depreciation......................................................... (4,805) (10,234) ---------- --------- $ 25,083 $ 33,878 ---------- --------- ---------- ---------
Pursuant to the fresh-start reporting principles of SOP 90-7, the carrying value of property and equipment was adjusted to estimated fair value as of the effective date of the reorganization, which included the restarting of accumulated depreciation. Depreciation expense relating to property and equipment was $11.6 million in 1993; $8.7 million in 1994; and $5.4 million in 1995. E. CONTRACTS, BROADCASTING LICENSES AND OTHER INTANGIBLES Contracts, broadcasting licenses and other intangibles at December 31, consisted of the following (in thousands):
1994 1995 Licenses, network affiliation agreements and other market related intangibles... $ 275,629 $ 322,749 Reorganization value in excess of amounts allocable to identifiable assets...... 7,998 7,998 ---------- ---------- 283,627 330,747 Accumulated amortization........................................................ (8,932) (17,956) ---------- ---------- $ 274,695 $ 312,791 ---------- ---------- ---------- ----------
Citicasters' carrying value of its broadcasting assets was adjusted to estimated fair value as of the effective date of the reorganization pursuant to the reporting principles of SOP 90-7. This adjustment included, among other things, the restarting of accumulated amortization related to intangibles. Amortization expense relating to contracts, broadcasting licenses and other intangibles was $16.5 million in 1993; $14.2 million in 1994; and $9.3 million in 1995. F. LONG-TERM DEBT Long-term debt at December 31, consisted of the following (in thousands):
1994 1995 Citicasters: 9 3/4% Senior Subordinated Notes due February 2004, less unamortized discount of $2,709 and $2,519 (imputed interest rate 10.13%)......................... $ 122,291 $ 122,481 Subsidiaries: Bank credit facility.......................................................... -- 10,000 ---------- ---------- Total long-term debt........................................................ $ 122,291 $ 132,481 ---------- ---------- ---------- ----------
F-26 CITICASTERS INC. AND SUBSIDIARIES NOTES TO FINANCIAL STATEMENTS--(CONTINUED) At December 31, 1995, the only sinking fund or other scheduled principal payments due during the next five years is $10 million, due in 1998. Cash interest payments were $45.1 million in 1993; $27.1 million in 1994; and $12.9 million in 1995. In February 1994, Citicasters refinanced its 14% Notes and the 13% Senior Subordinated Notes due 2001 through the issuance of $200 million principal amount of 9 3/4% Senior Subordinated Notes due 2004 ("9 3/4% Notes"). The 9 3/4% Notes were issued at a discount; the net proceeds were $195.4 million. No gain or loss was recognized on these transactions. A portion of the proceeds from the sale of the four television stations ($305 million) was used to retire long-term debt including $75 million principal amount of the 9 3/4% Notes. In October 1994, Citicasters entered into a bank credit agreement with a group of banks providing two revolving credit facilities: a $125 million facility to fund future acquisitions and a $25 million working capital facility. The acquisition facility is available through December 31, 2001. The maximum amount available under this facility will be reduced by $7.5 million per quarter beginning in the first quarter of 1998. The working capital facility is available through December 31, 1997. Citicasters is required to use excess cash flow to reduce amounts outstanding under the facilities if leverage ratios exceed certain levels. The interest rate under the facilities varies depending on Citicasters' leverage ratio. In the case of the base rate option, the rate ranges from the base rate to the base rate plus .75%. In the case of the eurodollar rate option, the rate ranges from 1% to 2% over the eurodollar rate. The bank credit facilities are secured by substantially all the assets of Citicasters. As of March 1, 1996, Citicasters had $26 million outstanding under the acquisition facility. Citicasters' 9 3/4% Notes require a prepayment of the 9 3/4% Notes in the event of certain changes in the control of Citicasters and further require the proceeds from certain asset sales to be used to partially redeem 9 3/4% Notes. At December 31, 1995 the market of the 9 3/4% Notes exceeded carrying value by approximately $1.5 million. G. SHAREHOLDERS' EQUITY Citicasters is authorized to issue 500 million shares of Class A Common Stock, $.01 par value, 125 million shares of Class B Common Stock, $.01 par value and 9.5 million shares of Serial Preferred Stock, $.01 par value. The preferred stock may have such preferences and other rights and limitations as the Board of Directors may designate with respect to each series. During 1994 and 1995, Citicasters acquired 2,354,475 and 254,760 shares of its common stock from several unaffiliated institutions for $51.1 million and $5.2 million, respectively. Under the most restrictive provision of Citicasters' debt covenants, Citicasters may acquire an additional $8.7 million of its common stock. During 1995, Citicasters' Board of Directors twice declared three-for-two stock splits of its outstanding common stock. All share and per share data have been restated to reflect both stock splits. The Company's debt instruments contain certain covenants which limit the amount of dividends which Citicasters is able to pay on its common stock. Under the most restrictive provision of Citicasters' debt covenants, dividends are limited to a maximum of $2.5 million annually. Citicasters paid a dividend of $.03 per common share in 1995. Under the merger agreement with Jacor (see Note M), Citicasters will not be permitted to pay dividends without the prior consent of Jacor. F-27 CITICASTERS INC. AND SUBSIDIARIES NOTES TO FINANCIAL STATEMENTS--(CONTINUED) Changes in the number of shares of common stock are shown in the following table: Predecessor: Outstanding at January 1, 1993........................................ 56,729,434 Effect of reverse stock split in restructuring........................ (56,303,963) Issued in restructuring for exchanges of securities................... 24,772,412 Issued for cash....................................................... 213,383 Citicasters: Stock bonuses awarded to employees.................................... 52,425 ---------- Outstanding at December 31, 1993...................................... 25,463,691 Stock bonuses awarded to employees.................................... 37,125 Stock repurchased and retired......................................... (5,297,569) ---------- Outstanding at December 31, 1994...................................... 20,203,247 Exercise of stock option.............................................. 29,812 Stock repurchased and retired......................................... (256,132) ---------- Outstanding at December 31, 1995...................................... 19,976,927 ---------- ----------
Following the consummation of the reorganization, the Board of Directors established the 1993 Stock Option Plan. The Plan provides for granting both non-qualified and incentive stock options to key employees. There are 1,800,000 common shares reserved for issuance under the 1993 Plan. During 1994, the Board of Directors established the 1994 Directors Stock Option Plan. The Plan provides for the granting of options to non-employee directors of Citicasters. There are 450,000 common shares reserved for issuance under the 1994 Plan. Options under both plans become exercisable at the rate of 20% per year commencing one year after grant and expire at the earlier of 10 years from the date of grant, three months after termination of employment or retirement as a director, or one year after the death or disability of the holder. Stock option data for Citicasters' stock option plans are as follows:
1994 1995 -------------------------- --------------------------- OPTION PRICE OPTION PRICE SHARES PER SHARE SHARES PER SHARE Outstanding, beginning of period............. 1,307,250 $ 6.67 1,614,375 $ 6.67-$10.33 Granted...................................... 498,375 $ 9.77-$10.33 57,500 $ 18.00-$25.50 Exercised.................................... -- -- (29,812) $ 6.67 Terminated................................... (191,250) $ 6.67 -- -- ---------- -------------- ---------- --------------- Outstanding, December 31..................... 1,614,375 $ 6.67-$10.33 1,642,063 $ 6.67-$25.50 ---------- -------------- ---------- --------------- ---------- -------------- ---------- --------------- Exercisable, December 31..................... 223,200 $ 6.67 516,263 $ 6.67-$10.33 ---------- -------------- ---------- --------------- ---------- -------------- ---------- --------------- Available for grant December 31.............. 635,625 607,937 ---------- ---------- ---------- ----------
F-28 CITICASTERS INC. AND SUBSIDIARIES NOTES TO FINANCIAL STATEMENTS--(CONTINUED) H. INCOME TAXES Deferred income taxes reflect the impact of temporary differences between the carrying amounts of assets and liabilities recognized for financial reporting purposes and the amounts recognized for income tax purposes. Significant components of Citicasters' deferred tax assets and liability as of December 31 are as follows (in thousands):
1994 1995 Deferred tax assets: Accrued expenses and other...................................................... $ 8,190 $ 8,409 Deferred tax liability: Book over tax basis of depreciable assets......................................... 52,676 53,231 --------- --------- Net deferred tax liability........................................................ $ 44,486 $ 44,822 --------- --------- --------- ---------
The following is a reconciliation of Federal income taxes at the "statutory" rate of 35% in 1993, 1994 and 1995 and as shown in the Statement of Operations (in thousands):
PREDECESSOR 1993 1994 1995 Earnings (loss) from continuing operations before income taxes.... $ (66,796) $ 116,606 $ 23,317 Extraordinary items............................................... 408,140 -- -- ----------- ---------- ---------- Adjusted earnings before income taxes............................. $ 341,344 $ 116,606 $ 23,317 ----------- ---------- ---------- ----------- ---------- ---------- Income taxes at the statutory rate................................ $ 119,470 $ 40,812 $ 8,161 Effect of: Book basis over tax basis of stations sold...................... -- 8,472 -- Goodwill........................................................ (630) 599 74 Minority interest............................................... 9,372 -- -- Certain reorganization items.................................... (127,606) -- -- State taxes net of Federal income tax benefit................... -- 3,575 650 Other........................................................... (606) 42 115 ----------- ---------- ---------- Income taxes as shown in the Statement of Operations............ $ -- $ 53,500 $ 9,000 ----------- ---------- ---------- ----------- ---------- ----------
Income tax provision as applied to continuing operations consists of (in thousands):
PREDECESSOR 1993 1994 1995 Current taxes..................................... $ -- $ 42,800 $ 7,300 Deferred taxes.................................... -- 5,200 700 State taxes....................................... -- 5,500 1,000 ----- --------- --------- $ -- $ 53,500 $ 9,000 ----- --------- --------- ----- --------- ---------
Federal income taxes of $7 million and $8.4 million were paid in cash during 1994 and 1995, respectively. I. DISCONTINUED OPERATIONS During 1994, Citicasters received an additional $5 million related to the 1991 sale of its entertainment businesses. The after-tax proceeds were credited to reorganization intangibles. A final distribution is scheduled to occur in December 1996. It is not possible to quantify the amount of the distribution Citicasters will receive at that time. J. EXTRAORDINARY ITEMS Predecessor's extraordinary items in 1993 consisted of a loss of $6.3 million from the retirement of debt prior to the reorganization and a gain of $414.5 million on debt discharge in the reorganization. F-29 CITICASTERS INC. AND SUBSIDIARIES NOTES TO FINANCIAL STATEMENTS--(CONTINUED) K. PENDING LEGAL PROCEEDINGS Management, after review and consultation with counsel, considers that any liability from litigation pending against Citicasters and any of its subsidiaries would not materially affect the consolidated financial position or results of operations of Citicasters and its subsidiaries. L. ADDITIONAL INFORMATION Quarterly Operating Results (Unaudited)--The following are quarterly results of consolidated operations for 1994 and 1995 (in thousands except per share data).
1ST 2ND 3RD 4TH QUARTER QUARTER QUARTER QUARTER TOTA1 1994 Net revenues.................................. $ 48,449 $ 60,423 $ 50,908 $ 37,263 $ 197,043 Operating income.............................. 7,193 18,321 13,386 12,683 51,583 Net earnings (loss)........................... (1,752) 5,161 44,851 14,846 63,106 Net earnings (loss) per share................. $ (.07) $ .20 $ 1.75 $ .67 $ 2.55 1995 Net revenues.................................. $ 29,045 $ 36,886 $ 34,126 $ 36,357 $ 136,414 Operating income.............................. 4,724 11,588 8,910 11,325 36,547 Net earnings.................................. 1,278 5,242 3,282 4,515 14,317 *Net earnings per share........................ $ .06 $ .25 $ .15 $ .21 $ .68
- ------------------------ * The sum of the quarterly earnings per share does not equal the earnings per share computed on a year-to-date basis due to rounding. Citicasters' financial results are seasonal. Revenues are higher in the second and fourth quarter and lower in the first and third quarter; the first quarter is the lowest of the year. During the third and fourth quarters of 1994, Citicasters recorded net earnings of $41.7 million and $8.4 million, respectively, attributable to the sale of the four television stations. Included in selling, general and administrative expenses in 1993, 1994 and 1995 are charges of $6.6 million, $7.2 million and $5.8 million, respectively, for advertising and charges of $2.4 million, $2.2 million and $1.3 million, respectively, for repairs and maintenance. M. SUBSEQUENT EVENT On February 12, 1996, Citicasters and Jacor Communications, Inc. entered into a merger agreement by which Jacor will acquire Citicasters. Under the agreement, for each share of Citicasters' stock, Jacor will pay cash of $29.50 plus a five-year warrant to purchase approximately .2 shares of Jacor common stock at $28 per share. If the closing occurs after September 1996 the exercise price of the warrant would be reduced to $26 per share and the per share cash price would increase at the rate of $.2215 per month. American Financial and certain of its affiliates have agreed to execute irrevocable consents in favor of the Jacor transaction on March 13, 1996. The closing of the transaction is conditioned on, among other things, receipt of FCC and other regulatory approvals. Upon consummation of the merger, holders of the 9 3/4% Notes have the right to put their notes to the Company at 101% of principal. F-30 REPORT OF INDEPENDENT ACCOUNTANTS To the Board of Directors and Stockholders of Noble Broadcast Group, Inc. In our opinion, the accompanying consolidated balance sheet and the related consolidated statements of operations, of changes in stockholders' deficit and of cash flows present fairly, in all material respects, the financial position of Noble Broadcast Group, Inc. and its subsidiaries at December 25, 1994 and December 31, 1995, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 1995, in conformity with generally accepted accounting principles. 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 of these statements in accordance with generally accepted auditing standards which 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, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for the opinion expressed above. As discussed in Note 2 to the consolidated financial statements, in February 1996 the Company entered into an agreement to be purchased by Jacor Communications, Inc. PRICE WATERHOUSE LLP San Diego, California March 21, 1996 F-31 NOBLE BROADCAST GROUP, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEET
DECEMBER DECEMBER 25, 31, ASSETS 1994 1995 Current assets: Cash and cash equivalents..................................................... $ 2,134,000 $ 447,000 Accounts receivable, less allowance for doubtful accounts of $515,000 and $455,000.................................................................... 12,401,000 9,094,000 Prepaid expenses and other.................................................... 2,084,000 2,290,000 -------------- ------------- Total current assets...................................................... 16,619,000 11,831,000 Property, plant and equipment, net................................................ 7,623,000 9,333,000 Intangible assets, less accumulated amortization of $33,718,000 and $25,734,000... 89,849,000 50,730,000 Other assets...................................................................... 1,932,000 5,333,000 -------------- ------------- $ 116,023,000 $ 77,227,000 -------------- ------------- -------------- ------------- LIABILITIES AND STOCKHOLDERS' DEFICIT Current liabilities: Accounts payable.............................................................. $ 3,537,000 $ 2,867,000 Accrued interest.............................................................. 6,477,000 1,674,000 Accrued payroll and related expenses.......................................... 1,720,000 1,077,000 Other accrued liabilities..................................................... 4,364,000 3,081,000 Current portion of long-term debt............................................. 167,209,000 3,611,000 Unamortized carrying value of subordinated debt............................... 19,445,000 -------------- ------------- Total current liabilities................................................. 202,752,000 12,310,000 Long-term debt, less current portion.............................................. 232,000 78,000,000 Deferred income taxes............................................................. 8,568,000 Other long-term liabilities....................................................... 683,000 640,000 -------------- ------------- Total liabilities................................................................. 203,667,000 99,518,000 -------------- ------------- Mandatorily redeemable Class A-1 common stock, $.01 par value; 1,580,285 shares authorized; 249,931 shares issued and outstanding in 1994........................ 35,066,000 -------------- ------------- Stockholders' deficit: Class A common stock, $.000001 par value; 1,569,514 shares authorized, 49,904 shares issued and outstanding in 1995....................................... -- -- Class B common stock, $.01 par value and $.000001 par value in 1994 and 1995, respectively; 2,293,235 and 254,018 shares authorized in 1994 and 1995, respectively; 254,018 shares issued and outstanding......................... 3,000 -- Paid-in capital............................................................... 662,000 44,231,000 Accumulated deficit........................................................... (123,375,000) (66,522,000) -------------- ------------- Total stockholders' deficit............................................... (122,710,000) (22,291,000) Commitments (Note 11) -------------- ------------- $ 116,023,000 $ 77,227,000 -------------- ------------- -------------- -------------
The accompanying notes are an integral part of the consolidated financial statements. F-32 NOBLE BROADCAST GROUP, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEARS ENDED ------------------------------------------------------- DECEMBER 26, DECEMBER 25, DECEMBER 31, 1993 1994 1995 Broadcast revenue............................................ $ 53,860,000 $ 56,154,000 $ 47,061,000 Less agency commissions...................................... (6,351,000) (6,552,000) (5,159,000) ----------------- ----------------- ----------------- Net revenue.............................................. 47,509,000 49,602,000 41,902,000 ----------------- ----------------- ----------------- Expenses: Broadcast operating expenses............................. 36,944,000 37,892,000 31,445,000 Corporate general and administrative..................... 2,702,000 2,621,000 2,285,000 Depreciation and amortization............................ 6,916,000 6,311,000 4,107,000 Write-down of intangibles and other assets............... 7,804,000 ----------------- ----------------- ----------------- 46,562,000 54,628,000 37,837,000 ----------------- ----------------- ----------------- Income (loss) from operations................................ 947,000 (5,026,000) 4,065,000 Interest expense............................................. (7,602,000) (10,976,000) (9,913,000) Net gain on sale of radio stations........................... 7,909,000 2,619,000 ----------------- ----------------- ----------------- Income (loss) before provision for income taxes, extraordinary gain and cumulative effect of change in accounting principle....................................... 1,254,000 (16,002,000) (3,229,000) Provision for income taxes................................... (378,000) (36,000) (63,000) ----------------- ----------------- ----------------- Income (loss) before extraordinary gain and cumulative effect of change in accounting principle.......................... 876,000 (16,038,000) (3,292,000) Extraordinary gain on forgiveness of debt, net of income taxes...................................................... 12,222,000 60,145,000 ----------------- ----------------- ----------------- Income (loss) before cumulative effect of change in accounting principle....................................... 13,098,000 (16,038,000) 56,853,000 Cumulative effect of change in accounting principle.......... 354,000 ----------------- ----------------- ----------------- Net income (loss)............................................ $ 13,452,000 $ (16,038,000) $ 56,853,000 ----------------- ----------------- ----------------- ----------------- ----------------- ----------------- Primary earnings (loss) per share: Before extraordinary item and cumulative effect of change in accounting principle................................ $ 2.21 $ (31.82 ) $ (1.59 ) Extraordinary item....................................... 9.35 48.66 Cumulative effect of change in accounting principle...... .27 ----------------- ----------------- ----------------- Total................................................ $ 11.83 $ (31.82 ) $ 47.07 ----------------- ----------------- ----------------- ----------------- ----------------- ----------------- Fully diluted earnings (loss) per share: Before extraordinary item and cumulative effect of change in accounting principle................................ $ 2.21 $ (31.82 ) $ (1.61 ) Extraordinary item....................................... 9.35 48.66 Cumulative effect of change in accounting principle...... .27 ----------------- ----------------- ----------------- Total................................................ $ 11.83 $ (31.82 ) $ 47.05 ----------------- ----------------- ----------------- ----------------- ----------------- ----------------- Common equivalent shares: Primary.................................................. 1,307,541 503,949 1,236,098 Fully diluted............................................ 1,307,541 503,949 1,236,098
The accompanying notes are an integral part of the consolidated financial statements. F-33 NOBLE BROADCAST GROUP, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' DEFICIT
CLASS A CLASS B COMMON STOCK COMMON STOCK ------------------------ ---------------------- PAID-IN ACCUMULATED SHARES AMOUNT SHARES AMOUNT CAPITAL DEFICIT TOTAL Balance at December 27, 1992...... 254,018 $ 3,000 $ 662,000 $(120,789,000) $(120,124,000) Net income.................... 13,452,000 13,452,000 ----------- ----- --------- ----------- ---------- ------------ ------------ Balance at December 26, 1993...... 254,018 3,000 662,000 (107,337,000) (106,672,000) Net loss...................... (16,038,000) (16,038,000) ----------- ----- --------- ----------- ---------- ------------ ------------ Balance at December 25, 1994...... 254,018 3,000 662,000 (123,375,000) (122,710,000) Cancellation of Class A-1 Mandatorily Redeemable Common Stock................ 26,562,000 26,562,000 Exchange of Class A-1 Mandatorily Redeemable Common Stock................ 49,904 -- 8,504,000 8,504,000 Change in par value of Class B Common Stock from $.01 per share to $.000001 per share....................... (3,000) 3,000 Issuance of warrant to purchase common stock....... 8,500,000 8,500,000 Net income.................... 56,853,000 56,853,000 ----------- ----- --------- ----------- ---------- ------------ ------------ Balance at December 31, 1995...... 49,904 $ -- 254,018 $ -- $44,231,000 $(66,522,000) $(22,291,000) ----------- ----- --------- ----------- ---------- ------------ ------------ ----------- ----- --------- ----------- ---------- ------------ ------------
The accompanying notes are an integral part of the consolidated financial statements. F-34 NOBLE BROADCAST GROUP, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE YEARS ENDED ----------------------------------------------- DECEMBER 26, DECEMBER 25, DECEMBER 31, 1993 1994 1995 Cash flows from operating activities: Net income (loss)........................................... $ 13,452,000 $ (16,038,000) $ 56,853,000 Adjustments to reconcile net income to net cash provided by (used in) operating activities: Cumulative effect of change in accounting principle..... (354,000) Interest expense added to long-term debt................ 2,309,000 2,465,000 3,631,000 Depreciation and amortization........................... 5,848,000 4,999,000 4,499,000 Net (revenue) expense on barter transactions............ 81,000 (288,000) (210,000) (Gain) loss on disposition of assets.................... (7,930,000) 138,000 (2,287,000) Extraordinary gain on forgiveness of debt............... (12,222,000) (60,145,000) Write-down of intangibles and other assets.............. 9,297,000 Changes in assets and liabilities, net of effects of acquisitions: Accounts receivable................................. (1,318,000) (2,367,000) 3,698,000 Prepaid expenses and other.......................... 233,000 (14,000) 4,000 Other assets........................................ (610,000) 732,000 (224,000) Accounts payable.................................... 679,000 1,360,000 (670,000) Accrued interest.................................... (223,000) 2,070,000 (1,674,000) Other accrued liabilities........................... (888,000) 924,000 (1,926,000) Other long-term liabilities......................... 2,643,000 (107,000) (43,000) -------------- -------------- --------------- Net cash provided by (used in) operating activities........................................ 1,700,000 3,171,000 1,506,000 -------------- -------------- --------------- Cash flows from investing activities: Proceeds from disposition of assets......................... 35,002,000 6,000 47,650,000 Acquisition of property, plant and equipment................ (3,009,000) (1,124,000) (2,851,000) Acquisition of radio stations............................... (6,834,000) -------------- -------------- --------------- Net cash flows provided by (used in) investing activities........................................ 31,993,000 (1,118,000) 37,965,000 -------------- -------------- --------------- Cash flows from financing activities: Payments on long-term debt.................................. (34,036,000) (2,534,000) (126,450,000) Borrowings.................................................. 90,500,000 Payments related to financing costs......................... (5,208,000) -------------- -------------- --------------- Net cash used in financing activities............... (34,036,000) (2,534,000) (41,158,000) -------------- -------------- --------------- Net decrease in cash and cash equivalents....................... (343,000) (481,000) (1,687,000) Cash and cash equivalents at beginning of period................ 2,958,000 2,615,000 2,134,000 -------------- -------------- --------------- Cash and cash equivalents at end of period...................... $ 2,615,000 $ 2,134,000 $ 447,000 -------------- -------------- --------------- -------------- -------------- ---------------
The accompanying notes are an integral part of the consolidated financial statements. F-35 NOBLE BROADCAST GROUP, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 1--THE COMPANY Noble Broadcast Group, Inc. (the Company), a privately held Delaware corporation, owned and operated the following radio stations during 1995: WSSH-AM serving Boston, Massachusetts; KBEQ-FM and AM, serving Kansas City, Missouri; KMJQ-FM and KYOK-AM serving Houston, Texas; KBCO-FM and AM and KHIH-FM and KHOW-AM, serving Denver, Colorado; KMJM-FM, KNJZ-FM and KATZ-AM, serving St. Louis, Missouri; WVKS-FM, WRVF-FM and WSPD-AM, serving Toledo, Ohio. Four of these stations were sold and two stations were purchased during 1995 (Note 8). In addition, the Company also provided programming for and had exclusive rights to sell advertising time on two radio stations located in Baja California, Mexico, XETRA-FM and XETRA-AM, which primarily serve the metropolitan San Diego area broadcasting as XTRA-FM and AM. NOTE 2--SUBSEQUENT EVENT-SALE OF THE COMPANY In February 1996, the Company entered into a Stock Purchase and Stock and Warrant Redemption Agreement (the Agreement) whereby Jacor Communications, Inc. (Jacor) agreed to purchase both the Company's outstanding Class B common stock and a newly-issued warrant allowing Jacor to purchase the Company's Class A common stock. This transaction is subject to Federal Communications Commission approval and certain other conditions. Simultaneously, the Company entered into an Asset Purchase Agreement and sold the assets of certain subsidiaries of the Company to a wholly-owned subsidiary of Jacor and assigned to this subsidiary its rights and obligations under certain contracts including the Exclusive Sales Agency Agreement (Note 10). The aggregate value of the above transactions, when fully consummated, is $152,000,000 plus certain closing costs. At that time, Jacor will own 100% of the equity interests in the Company. The Company also entered into time brokerage agreements with Jacor for the stations in St. Louis and Toledo. The Company received approximately $99,000,000 in February 1996 in conjunction with the transactions. In connection with this transaction, the Company entered into a Credit Agreement with another wholly-owned subsidiary of Jacor providing for a $40,000,000 Term Loan Facility, which was borrowed in full in February 1996, and a $1,000,000 Revolving Loan Facility. The loans bear interest at the Prime rate, payable quarterly. Both facilities are to be repaid on February 1, 2002 or upon occurrence of certain ownership changes, whichever occurs earlier. The Company used the total proceeds received in February 1996 to repay the outstanding indebtedness under the Senior Secured Term Loan, the Senior Revolving Credit Facility and the Subordinated Notes, to redeem and retire the warrant held by the subordinated debtholder, and to redeem and retire all of the Company's Class A shares outstanding (Notes 5 and 6). In the event that the transaction cannot be consummated, none of the proceeds previously paid to the Class A stockholders or the warrant holders shall be returned. If the transaction is terminated by the buyer, the Class B stockholders shall be entitled to the balance of the amounts due under the Agreement; if terminated by the Company, the buyer shall be entitled only to the amounts previously paid to the Class B stockholders as well as certain other amounts. NOTE 3--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES PRINCIPLES OF CONSOLIDATION The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. Significant intercompany balances and transactions have been eliminated. FINANCIAL STATEMENT PREPARATION 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 date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates. F-36 NOBLE BROADCAST GROUP, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) FISCAL YEAR The Company's fiscal year ends on the last Sunday of December to coincide with the standard broadcast year. REVENUES Revenues for commercial broadcasting advertisements are recognized when the commercial is broadcast. CASH AND CASH EQUIVALENTS Cash equivalents are highly liquid investments (money market funds) with original maturities of three months or less. Included in cash and cash equivalents at December 25, 1994 is $1,600,000 of restricted cash. Restricted cash of $1,500,000 was released to the Company on December 31, 1994 in conjunction with its sale of KMJQ-FM and KYOK-AM (Note 8). The remaining $100,000 of restricted cash was released to the Company in January 1995 in conjunction with the sale of WSSH-AM (Note 8). BARTER TRANSACTIONS 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. CONCENTRATIONS OF CREDIT RISK Financial instruments which potentially subject the Company to concentrations of credit risk consist principally of cash investments and accounts receivable. The Company places its cash and temporary cash investments in money market funds with high quality institutions. 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 United States. EARNINGS (LOSS) PER COMMON SHARE Primary earnings (loss) per common share are calculated on the basis of the weighted average number of common shares outstanding plus (in periods in which they have a dilutive effect) the effect of common equivalent shares arising from Senior Subordinated Convertible Notes, using the if-converted method, and the effect of warrants to purchase common stock using the treasury stock method. The calculation of fully diluted earnings per common share also includes the effect of the assumed conversion of Senior Subordinated Convertible Notes and exercise of warrants to purchase common stock in periods in which such conversion would cause dilution. PROPERTY, PLANT AND EQUIPMENT Purchases of property, plant and equipment, including additions and improvements and expenditures for repairs and maintenance that significantly add to productivity or extend the economic lives of the assets, are capitalized at cost and depreciated on the straight-line basis over their estimated useful lives as follows: Technical and office equipment.................................. 5-8 years 10-30 Buildings and building improvements............................. years Furniture and fixtures.......................................... 10 years Leasehold improvements.......................................... 10 years Land improvements............................................... 8 years Automobiles..................................................... 3 years
F-37 NOBLE BROADCAST GROUP, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) Maintenance and repairs are expensed as incurred. INTANGIBLE ASSETS Intangible assets represents the aggregate excess purchase cost over the fair market value of radio station net assets acquired. Intangible assets are stated at the lower of cost or net realizable value and are being amortized using the straight-line method over periods not exceeding 40 years. The Company evaluates the realizability of intangible assets by comparing the asset carrying amount to future anticipated undiscounted cash flows. In 1994, the Company determined that intangibles related to its Houston stations were impaired and, accordingly, it recorded a $7,450,000 loss (Note 8). Additionally, in 1994, the Company determined that $354,000 in other assets would not be realized, and recorded a loss. DEBT ISSUANCE COSTS Debt issuance costs incurred in connection with executing long-term debt agreements are amortized over the term of associated debt to interest expense. FINANCIAL INSTRUMENTS Interest rate swaps are entered into as a hedge against interest exposure of variable rate debt. The differences to be paid or received on the swaps are included in interest expense. Gains and losses are recognized when the swaps are settled. The interest rate swaps are subject to market risk as interest rates fluctuate. FAIR VALUE OF FINANCIAL INSTRUMENTS Financial Accounting Standards Board Statement No. 107, "Disclosures about Fair Value of Financial Instruments," (FAS 107) requires disclosure of fair value information about financial instruments, whether or not recognized in the balance sheet, for which it is practicable to estimate that value. Fair values are based on estimates using present value or other valuation techniques. Those techniques are significantly affected by the assumptions used. The carrying amount of all financial instruments on the consolidated balance sheet are considered reasonable estimates of fair value, with the exception of long-term debt as of December 25, 1994, of which $50,301,000 was forgiven in August 1995 (Note 5) and the interest rate swap agreement (Note 5). NOTE 4--COMPOSITION OF CERTAIN FINANCIAL STATEMENT CAPTIONS
DECEMBER 25, DECEMBER 31, 1994 1995 Property, plant and equipment Technical and office equipment................................................. $ 12,295,000 $ 10,196,000 Land and land improvements..................................................... 978,000 1,067,000 Buildings and building improvements............................................ 2,880,000 2,517,000 Furniture and fixtures......................................................... 1,531,000 1,244,000 Leasehold improvements......................................................... 1,640,000 1,057,000 Automobiles.................................................................... 327,000 314,000 ------------- -------------- 19,651,000 16,395,000 Less accumulated depreciation and amortization................................. (12,028,000) (7,062,000) ------------- -------------- $ 7,623,000 $ 9,333,000 ------------- -------------- ------------- -------------- Other non-current assets Debt issuance costs............................................................ $ 646,000 $ 4,267,000 Other.......................................................................... 1,286,000 1,066,000 ------------- -------------- $ 1,932,000 $ 5,333,000 ------------- -------------- ------------- --------------
F-38 NOBLE BROADCAST GROUP, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) Statement of Cash Flows Information Schedule of certain non-cash financing activities:
FOR THE YEARS ENDED ---------------------------------------------- DECEMBER 26, DECEMBER 25, DECEMBER 31, 1993 1994 1995 ------------ --------------- --------------- Acquisition of assets in exchange for debt.................... $ 463,000 $ -- $ -- ------------ ----- ----- ------------ ----- -----
NOTE 5--LONG-TERM DEBT Long-term debt is comprised of:
DECEMBER 25, DECEMBER 31, 1994 1995 Senior Secured Term Loan..................................... $ 45,000,000 Senior Revolving Credit Facility............................. 7,050,000 Subordinated Notes........................................... 29,325,000 Tranche A Notes.............................................. $ 87,364,000 Tranche B Notes.............................................. 11,587,000 Series A Senior Subordinated Notes........................... 29,617,000 Series B Senior Subordinated Convertible Notes............... 37,000,000 Other........................................................ 1,873,000 236,000 --------------- ------------- 167,441,000 81,611,000 Less current portion......................................... (167,209,000) (3,611,000) --------------- ------------- $ 232,000 $ 78,000,000 --------------- ------------- --------------- -------------
Interest paid during 1993, 1994 and 1995 aggregated $4,354,000, $6,152,000 and $3,673,000, respectively. TRANCHE A NOTES AND TRANCHE B NOTES--The Tranche A and Tranche B Notes, which were outstanding as of December 25, 1994, were extinguished in conjunction with the Company's August 1995 debt restructuring (see Debt Restructuring below). The Tranche A Notes bore interest at the 30-day LIBOR rate plus an applicable margin. The Tranche B Notes bore interest at 4 percent. The senior debt agreement provided for principal prepayments at the option of the Company and called for mandatory principal prepayments from the net proceeds of sales of certain radio station properties or from 50 percent of the net proceeds of sales by the Company of any stock or warrants issued by the Company or from the exercise of any such warrants or from excess operating cash, as defined. During 1993, the Company sold certain radio station properties and other assets (Note 8) and utilized resultant net proceeds of $32,960,000 to repay Tranche A Notes of $18,498,000 and Tranche B Notes of $14,462,000. Pursuant to agreements with the senior debtholders, $12,222,000 of the Tranche A Notes was forgiven, resulting in an extraordinary gain during the year ended December 26, 1993. The Company's agreement with the Senior debtholders contained, among other things, certain covenants as to the maintenance of certain financial ratios and cash flows, as well as restrictions on additional indebtedness, property sales and liens, mergers and acquisitions, contingent liabilities, certain lease transactions, investments, transactions with affiliates, corporate overhead, capital expenditures, prepaid expenditures, and employment and certain other contracts. Based on agreements between the Company and the holders of the Tranche A Notes and Tranche B Notes, the outstanding debt was to be repaid as of August 18, 1995 and the Company classified the debt as current as of December 25, 1994. F-39 NOBLE BROADCAST GROUP, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) SENIOR SUBORDINATED NOTES AND SENIOR SUBORDINATED CONVERTIBLE NOTES--The Series A Senior Subordinated Notes (Subordinated Notes) and Series B Senior Subordinated Convertible Notes (Convertible Notes), which were outstanding as of December 25, 1994, were extinguished in conjunction with the Company's 1995 debt restructuring (see Debt Restructuring below). In fiscal year 1991 the Company restructured its debt with the subordinated debtholders by modifying certain terms. The $24,423,000 excess of the carrying amount of the old subordinated debt instruments over the principal amount of the Subordinated and Convertible Notes was recorded as unamortized carrying value of subordinated debt in 1991 and was being amortized against future interest expense over the term of the restructured Subordinated and Convertible Notes. The Subordinated Notes bore interest at an annual rate of 9%; interest was added to principal semiannually. During 1993, 1994 and 1995, approximately $2,309,000, $2,465,000 and $3,631,000 of interest was added to the principal, respectively. The Convertible Notes bore interest at the non-compounding annual rate of 5 percent and such interest was due and payable at such time as the principal became payable. The Convertible Notes were convertible as to both principal and accrued interest into 803,592 shares of Mandatorily Redeemable Class A-1 common stock at the option of the holders after April 30, 1994. The Subordinated Notes and Convertible Notes were subordinated to the Tranche A and B Notes and contained, among other things, covenants as to the maintenance of certain financial ratios and cash flows, and certain restrictions as to additional indebtedness, amounts and types of payments and investments, dividends, liens and encumbrances, sale and leaseback transactions, equity interests of subsidiaries, sales of assets, mergers, corporate overhead, capital expenditures, prepayment of expenses, and employment contracts. Based on agreements between the Company and the holders of Subordinated Notes and Convertible Notes, the outstanding debt was to be repaid as of August 18, 1995 and the Company classified the debt and associated unamortized carrying value of subordinated debt as current as of December 25, 1994. DEBT RESTRUCTURING--In August 1995, the Company completed a restructuring of its debt, resulting in the extinguishment of $175,301,000 of Tranche A Notes, Tranche B Notes, Subordinated Notes and Convertible Notes plus accrued interest for an aggregate amount of $125,000,000 in cash. Additionally, the Company repurchased or exchanged the shares of Class A-1 common stock held by the holders of these debt instruments. The Company sold its Houston, Boston and Kansas City stations in 1995 and utilized the resultant net proceeds of $47,650,000, along with $1,500,000 restricted cash released to the Company (Note 3), to repay outstanding debt prior to the completion of the restructuring (Note 8), entered into a new senior $60,000,000 Credit Agreement and obtained new subordinated debt for $37,000,000. The former debtholders forgave $50,301,000 of principal and accrued interest which has been recognized as an extraordinary gain in 1995. Also included in the extraordinary gain for 1995 is $18,412,000, representing the remaining unamortized carrying value of subordinated debt as of the date of the related debt extinguishment. SENIOR SECURED TERM LOAN AND SENIOR REVOLVING CREDIT FACILITY--In August 1995, the Company and its wholly-owned subsidiaries entered into a $60,000,000 Credit Agreement with a consortium of banks, consisting of a $45,000,000 Senior Secured Term Loan (the Term Loan) and a $15,000,000 Senior Revolving Credit Facility (the Revolver). The Company borrowed all of the $45,000,000 Term Loan and $7,500,000 of the Revolver and paid transaction costs of approximately $4,700,000. Under the Term Loan and the Revolver, principal payments were due in varying amounts through 2001. As discussed in Note 2, the outstanding debt under the Credit Agreement was paid in full and cancelled in February 1996. F-40 NOBLE BROADCAST GROUP, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) Borrowings under the Credit Agreement bore interest, at the option of the Company, at either the London Interbank Offered Rate (LIBOR) plus an applicable margin of up to 2.625%, or at a base rate (defined as the higher of the Federal Funds Rate plus .5% or the bank's Prime rate) plus an applicable margin of up to 1.375% per annum. The Term Loan and the Revolver were secured by substantially all of the Company's assets, including the common stock and tangible and intangible assets and major lease rights of the Company's operating subsidiaries. In conjunction with entering into the Credit Agreement, the Company issued a warrant to purchase 10% of the common stock of the Company's primary operating subsidiary, exercisable only in the event of certain specified occurrences through June 30, 1996, for an exercise price of $1.00. The Company determined that the value of the warrant was de minimus because of the nature of the specified events required for warrant exercise. As discussed in Note 2, the warrant was cancelled in February 1996. INTEREST RATE SWAP AGREEMENT--In accordance with the terms of the Credit Agreement, the Company entered into a three year interest rate swap agreement in September 1995 on a notional principal amount of $30,000,000. Under the interest rate swap agreement, on a quarterly basis the Company pays the counterparty interest at a fixed rate of 5.87%, and the counterparty pays the Company interest at a variable rate based on the LIBOR. As of December 31, 1995, the interest rate swap agreement had a nominal carrying value and a ($425,000) fair value. The fair value was estimated by obtaining a quotation from the counterparty. In February 1996, the Company terminated the interest rate swap agreement in conjunction with its debt extinguishment, and realized a loss of $686,000 upon termination. SUBORDINATED NOTES--In August 1995, the Company entered into an Investment Agreement with a new subordinated debtholder, consisting of $37,000,000 in subordinated notes. The subordinated notes bore interest at a rate of 8.108% per annum compounded quarterly, of which 50% was to be paid annually with the remainder being added to principal. The notes were due in August 2002. As discussed in Note 2, the debt was paid in full and cancelled in February 1996. Under the Investment Agreement, the Company issued a warrant for 75% of the Company's Class A common stock, exercisable through August 2005, with an exercise price of $1.00. Management has determined that the fair value of the warrant on the date of issuance was approximately $8,500,000, which has been recorded as a discount on the related debt and was being amortized to interest expense over the term of the debt. As discussed in Note 2, the Company repurchased the warrant in February 1996. COVENANTS--The Credit Agreement and the Investment Agreement required the Company to comply with certain financial and operating covenants, including, among others, limitations on: capital expenditures, acquisitions and additional indebtedness, engaging in a business other than radio broadcasting, paying cash dividends, corporate overhead levels, the use of borrowings, and requirements to maintain certain financial ratios. NOTE 6--COMMON STOCK In conjunction with the August 1995 refinancing, the Company entered into an agreement with its former debtholders providing for the repurchase or exchange of all of their Class A-1 shares of common stock. Under the agreement, 189,321 Class A-1 shares were repurchased by the Company for a de minimus amount and the remaining 60,610 shares were exchanged for 49,904 shares of Class A common stock. There were 249,931 shares of Mandatorily Redeemable Class A-1 common stock outstanding in 1993 and 1994. The Company's authorized capital stock subsequent to the August 1995 restructuring consists of 1,569,514 shares of Class A common stock, $.000001 par value, of which 49,904 shares are issued and outstanding, and F-41 NOBLE BROADCAST GROUP, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) 254,018 shares of Class B voting common stock, $.000001 par value, all of which are issued and outstanding. Prior to August 1995, the Class B common stock had a par value of $.01. Class B common stock is voting common stock, while Class A common stock has no right to vote with respect to the election of directors, or other corporate actions other than certain major events set forth in the Company's Restated Certificate of Incorporation. The holders of Class B common stock, voting as a class, are entitled to elect six members of the Board of Directors. Class B common stock may convert their shares into stock that is registered pursuant to certain firm commitment underwritten public offerings, as defined. Shares of Class A common stock are convertible into an equal number of shares of Class B common stock subsequent to a public offering, as described in the Restated Certificate of Incorporation, upon certain events as defined in the Company's agreements with the subordinated debtholders, or as of August 18, 2000. In addition, holders of both Class A and Class B common stock may convert their shares into stock that is registered pursuant to a public offering. Holders of Class A common stock are entitled to participate on a pro rata basis with the holders of Class B common stock with respect to dividends, when and as declared by the Board of Directors, provided there are funds legally available for such purpose, and with respect to any redemption or repurchase by the Company of any Class B common stock. The Mandatorily Redeemable Class A-1 common stock contained a liquidation preference over Class B common stock in an amount equal to a prescribed formula value solely in the event of a liquidation resulting from bankruptcy, insolvency or other similar proceeding. Such liquidation preference was zero at December 25, 1994. The Mandatorily Redeemable Class A-1 common stock was not entitled to vote except for the right, voting as a separate class, to elect one member of the Company's Board of Directors and except that certain transactions specified in the Company's Restated Certificate of Incorporation required the consent of the majority of the then-outstanding shares of Mandatorily Redeemable Class A-1 common stock. Holders of Mandatorily Redeemable Class A-1 common stock were entitled to participate on a pro rata basis with the holders of Class B common stock upon any redemption or repurchase by the Company of any Class B common stock or other equity securities of the Company. Shares of Class A-1 common stock were convertible into an equal number of shares of Class B common stock subsequent to a public offering, or under certain specified circumstances. In addition, holders of Class A-1 common stock were entitled to convert their shares into stock registered pursuant to certain firm commitment underwritten public offerings, as defined. Prior to an initial public offering (IPO), holders of Class A-1 common stock were entitled to, in the event of a defined change of voting control of the Company, require the Company to repurchase their shares of Class A-1 common stock in accordance with specified formula prices. In addition, if the Company had not effected an IPO by December 2002, then holders of a majority of the then-outstanding Class A-1 common stock, on or after December 31, 2003, could require the Company to repurchase the Class A-1 common stock owned by them at a specified formula repurchase price. The Mandatorily Redeemable Class A-1 common stock was recorded at an "issue price" equivalent to the carrying value of the equity instruments exchanged therefor. No subsequent adjustment to the valuation of the Mandatorily Redeemable Class A-1 common stock was required prior to its repurchase and exchange in August 1995. NOTE 7--STOCK OPTIONS The Company had two stock option plans, the Executive Stock Option Plan (Executive Plan) and the 1991 Stock Option Plan (1991 Plan). No options were granted under the Executive Plan or the 1991 Plan. In conjunction with the August 1995 debt restructuring, the Company cancelled the 1991 Plan and the Executive Plan. F-42 NOBLE BROADCAST GROUP, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) NOTE 8--STATION TRANSACTIONS In August 1995, concurrent with the debt restructuring, the Company purchased substantially all of the assets and certain liabilities of WSPD-AM and WRVF-FM, Toledo, Ohio, for $6,660,000 using cash proceeds obtained through the August 1995 debt restructuring. The acquisition has been accounted for using the purchase method. The assets acquired were comprised of accounts receivable of $391,000 and property, plant and equipment of $1,525,000. The excess of the purchase price over the fair value of the assets and liabilities acquired was $4,744,000, which is attributable to intangible assets and is being amortized over 40 years using the straight-line method. The results of operations are included in the results of operations of the Company since their acquisition. The following unaudited pro forma summary information presents the results of operations of the Company as if the acquisition of WSPD-AM and WRVF-FM had occurred on December 27, 1993, after giving effect to certain adjustments, principally intangible amortization and interest. These pro forma results have been prepared for comparative purposes only and do not purport to be indicative of what would have occurred had the acquisition been effected as of December 27, 1993 or of the results which may occur in the future.
(UNAUDITED) YEAR ENDED ----------------------------- DECEMBER 25, DECEMBER 31, 1994 1995 Net revenue.................................................... $ 59,455,000 $ 47,945,000 Loss before extraordinary item................................. $ (16,230,000) $ (4,015,000) Net income (loss).............................................. $ (16,230,000) $ 57,576,000 Earnings (loss) per share before extraordinary item............ $ (32.21) $ (3.25) Earnings (loss) per share...................................... $ (32.21) $ 46.58
In March 1995, the Company sold substantially all of the assets (excluding cash and accounts receivable) and certain liabilities of Noble Broadcast of Kansas City, Inc. (KBEQ-FM and KBEQ-AM) for $7,650,000. The sale of these assets resulted in a gain of approximately $1,982,000 and has been reflected in the Company's 1995 results of operations. In January 1995, the Company sold substantially all of the assets (excluding cash and accounts receivable) and certain liabilities of Noble Broadcast of Ballybunion, Inc. (WSSH-AM) for $1,500,000. The sale of these assets resulted in a gain of approximately $637,000 and has been reflected in the Company's 1995 results of operations. On December 31, 1994, the Company sold substantially all of the non-cash assets and certain liabilities of Noble Broadcast of Houston, Inc. (KMJQ-FM and KYOK-AM) for $38,500,000 and released restricted cash of $1,500,000 (Note 3). The sale of these assets resulted in a loss on the sale of $7,450,000. This loss was considered to result from permanent impairment of intangible assets as of December 25, 1994 and has been reflected in the Company's results of operations in 1994. In March 1993, the Company sold substantially all of the assets of Noble Broadcast of New York, Inc. (WBAB-FM and WGBB-AM) for $16,000,000. Net proceeds from this sale of $15,000,000 were used to reduce the Tranche A and Tranche B Notes (Note 5) resulting in the forgiveness of $5,562,000 of Tranche A Notes. The sale of these assets resulted in a gain on the sale of $6,555,000. In April 1993, the Company sold substantially all of the assets of WSSH-FM Boston, Massachusetts, for $18,500,000. Net proceeds from this sale of $15,250,000 were used to reduce the Tranche A and Tranche B Notes (Note 5) resulting in the forgiveness of $5,655,000 of the Notes. The sale of these assets resulted in a gain of $1,354,000. F-43 NOBLE BROADCAST GROUP, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) In May 1993, the Company purchased substantially all of the assets of KATZ-AM and KNJZ-FM in St. Louis for $2,750,000. The Company paid $2,250,000 in cash and issued a non-interest bearing promissory note for $500,000. The note is payable in equal installments of $250,000 in May 1994 and May 1996. The acquisition has been accounted for using the purchase method. The assets and liabilities acquired were comprised entirely of intangible assets which are being amortized over 40 years using the straight-line method. The results of operations are included in the results of operations of the Company since their acquisition. NOTE 9--INCOME TAXES The Company adopted Statement of Financial Accounting Standards ("SFAS") No. 109 on a prospective basis, effective January 1, 1993. SFAS 109 requires recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements or tax returns. Under the SFAS 109 asset and liability method, deferred tax assets and liabilities are determined based upon the difference between the financial statement and tax bases of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse. Upon implementation of SFAS 109, the Company recorded a cumulative effect (benefit) of a change in accounting principle of $354,000, which represented the future tax benefits expected to be realized upon utilization of the Company's state tax loss carryforwards. The benefit of these loss carryforwards was realized during 1993. The following is a summary of the provision for income taxes, for the years ended December 26, 1993, December 25, 1994 and December 31, 1995:
1993 1994 1995 Current: Federal................................................. $ -- $ -- $ -- State................................................... 24,000 36,000 63,000 Deferred: Federal................................................. -- -- State................................................... 354,000 -- -- ---------- --------- --------- Provision................................................... $ 378,000 $ 36,000 $ 63,000 ---------- --------- --------- ---------- --------- ---------
A reconciliation of the provision for income taxes to the amount computed by applying the statutory Federal income tax rate to income before income taxes follows:
FOR THE YEARS ENDED ------------------------------------------ DECEMBER 26, DECEMBER 25, DECEMBER 31, 1993 1994 1995 Federal statutory rate......................................... $ 439,000 $ (5,601,000) $ (1,176,000) State income taxes, net of federal benefit..................... 57,000 (728,000) (153,000) Amortization and write down of intangibles..................... (496,000) 3,348,000 1,329,000 Losses for which no current benefit is available............... -- 2,847,000 -- State net operating loss utilization........................... 354,000 -- -- Other.......................................................... 24,000 170,000 63,000 ------------ ------------- ------------- $ 378,000 $ 36,000 $ 63,000 ------------ ------------- ------------- ------------ ------------- -------------
F-44 NOBLE BROADCAST GROUP, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) The components of deferred income taxes at December 25, 1994 and December 31, 1995 are as follows:
1994 1995 Deferred tax assets: Available net operating loss carryforwards for financial reporting purposes........................................................... $ 30,060,000 $ -- Charitable contribution carryovers................................... 250,000 250,000 Book and tax amortization differences................................ 12,530,000 -- Accrued liabilities and reserves..................................... 200,000 180,000 -------------- ------------- 43,040,000 430,000 Deferred tax liabilities: Book and tax basis differences....................................... (14,272,000) (7,256,000) Book and tax depreciation and amortization differences............... (4,458,000) (1,312,000) -------------- ------------- Net deferred tax assets (liabilities)................................ 24,310,000 (8,138,000) Valuation allowance.................................................. (24,310,000) (430,000) -------------- ------------- $ -- $ (8,568,000) -------------- ------------- -------------- -------------
The Company recorded a provision for income taxes in 1993, 1994 and 1995 due to taxable income for state tax reporting purposes related to entities in the consolidated group which were subject to state income tax. The Company recorded a valuation allowance for those deferred tax assets for which the Company's management determined that the realization of such future tax benefits is not more likely than not. Taxes paid during 1993, 1994 and 1995 aggregated $24,000, $36,000 and $63,000, respectively. At December 31, 1995, the Company had available Federal net operating losses of approximately $46,000,000 for tax reporting purposes. Additionally, the Company had available net operating losses of approximately $41,000,000 for state income tax purposes. The net operating losses for tax purposes expire between 2001 and 2009. In certain circumstances, as specified in the Internal Revenue Code, a 50 percent or more ownership change by certain combinations of the Company's stockholders during any three year period would result in limitations on the Company's ability to utilize its net operating loss carryforwards. The value of the Company's stock at the time of the ownership change is the primary factor in determining the limit on the Company's ability to utilize its net operating loss carryforwards. As a result of the August 1995 debt and equity restructuring, an ownership change occurred, and consequently the Company's net operating loss carryforwards generated prior to the ownership change are limited. The purchase of the Company by Jacor (Note 2) will also result in an ownership change as specified in the Internal Revenue Code. As a result of the August 1995 debt and equity restructuring, certain deferred tax assets were reduced for financial reporting purposes. The increase in deferred tax liabilities of $8,568,000 that occurred in conjunction with the August 1995 debt and equity restructuring was recorded as a component of the extraordinary gain resulting from the August 1995 restructuring. NOTE 10--BROADCAST LICENSE AGREEMENT The Company's consolidated net sales for 1993, 1994 and 1995, include XTRA-FM and XTRA-AM sales of approximately $13,346,000, $14,087,000 and $15,613,000, respectively, pursuant to an Exclusive Sales Agency Agreement (the Agreement) with the broadcast licensee expiring in 2015. Under the Agreement, the Company acts as the agent for the sale of advertising time on XTRA-FM and XTRA-AM for all areas outside Mexico. The Company operated a broadcasting tower under a month-to-month lease until February 1996 when it moved to a new location in Mexico owned by the Company. The broadcast licenses for these stations from the Ministry of Communications of the Republic of Mexico are scheduled to expire on July 3, 2004. F-45 NOBLE BROADCAST GROUP, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) The Company is not aware of any information which would lead it to believe that any specific risks exist which threaten the continuance of the Company's relationship with the broadcast licensee. Pursuant to the terms of the Agreement, as amended, the Company provides programming for and purchases advertising time directly from the broadcast licensee and resells such time to United States advertisers and agencies. The Company incurred $555,000, $584,000 and $415,000 in expenses under the Agreement during 1993, 1994 and 1995. NOTE 11--BARTER TRANSACTIONS Barter revenue was approximately $2,956,000, $2,551,000 and $2,461,000, in 1993, 1994 and 1995, respectively. Barter expense was approximately $3,037,000, $2,263,000 and $2,251,000, in 1993, 1994 and 1995, respectively. Included in prepaid expenses and other current assets and accrued liabilities in the accompanying consolidated balance sheets for 1995 and 1994 are barter receivables (merchandise or services due to the Company) of approximately $1,640,000 and $1,540,000, respectively and barter accounts payable (air time due to suppliers of merchandise or services) of approximately $1,384,000 and $1,385,000, respectively. NOTE 12--COMMITMENTS BROADCAST COMMITMENTS The Company has agreements to broadcast a series of professional sports games and related events through 1998. The Company incurred total expenses of $2,142,000, $2,744,000 and $3,757,000 during 1993, 1994 and 1995, respectively, in accordance with the agreements. Future minimum annual payments under the agreements become due and payable as follows: 1996............................................ $2,765,000 1997............................................ 1,172,000 1998............................................ 385,000 --------- $4,322,000 --------- ---------
LEASE COMMITMENTS The Company incurred total rental expenses of $1,389,000, $1,378,000 and $538,000 in 1993, 1994 and 1995, respectively, under operating leases for facilities and equipment. Future annual rental commitments expected under such leases at December 31, 1995 are as follows: 1996............................................ $ 489,000 1997............................................ 406,000 1998............................................ 415,000 1999............................................ 404,000 2000............................................ 368,000 Thereafter...................................... 1,038,000 --------- $3,120,000 --------- ---------
TIME BROKERAGE AGREEMENTS The Company, through various subsidiaries, previously provided programming through time brokerage agreements. These agreements, which were terminated in August 1995, allowed the Company to purchase a F-46 NOBLE BROADCAST GROUP, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) specified amount of broadcast time per week in exchange for the rights to all advertising revenues. The Company incurred related total expenses of $1,294,000, $1,517,000 and $479,000 during 1993, 1994 and 1995, respectively. NOTE 13--LITIGATION The Company is involved in litigation on certain matters arising in the ordinary course of business. Management has consulted with legal counsel and does not believe that the resolution of such matters will have a material adverse effect on the Company's financial position, results of operations, or cash flows. F-47 - ---------------------------------------------- ---------------------------------------------- - ---------------------------------------------- ---------------------------------------------- NO DEALER, SALES REPRESENTATIVE OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATIONS IN CONNECTION WITH THIS OFFERING OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS, AND IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY OR ANY UNDERWRITER. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY OF THE SECURITIES OFFERED HEREBY BY ANYONE IN ANY JURISDICTION IN WHICH SUCH OFFER OR SOLICITATION IS NOT AUTHORIZED OR IN WHICH THE PERSON MAKING SUCH OFFER OR SOLICITATION IS NOT QUALIFIED TO DO SO OR TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF OR THAT THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE HEREOF. ------------------- TABLE OF CONTENTS
PAGE ----- Prospectus Summary.................................. 3 Risk Factors........................................ 11 The Acquisitions.................................... 14 Use of Proceeds..................................... 16 Capitalization...................................... 17 Unaudited Pro Forma Financial Information........... 18 Selected Historical Financial Data.................. 27 Management's Discussion and Analysis of Financial Condition and Results of Operations................ 33 Business............................................ 38 Management.......................................... 54 Description of Notes................................ 56 Description of Other Indebtedness................... 76 Underwriting........................................ 79 Experts............................................. 79 Legal Matters....................................... 79 Incorporation of Certain Documents by Reference..... 80 Available Information............................... 80 Index to Financial Statements....................... F-1
$50,000,000 JACOR COMMUNICATIONS, INC. AND JCAC, INC. % SENIOR SUBORDINATED NOTES DUE 2006 ----------------- PROSPECTUS ----------------- DONALDSON, LUFKIN & JENRETTE SECURITIES CORPORATION , 1996 - ---------------------------------------------- ---------------------------------------------- - ---------------------------------------------- ---------------------------------------------- PART II INFORMATION NOT REQUIRED IN THE PROSPECTUS ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION. The following is an itemized statement of the fees and expenses (all but the SEC and NASD fees are estimates) in connection with the issuance and distribution of the Notes being registered hereunder. All such fees and expenses shall be borne by the Company. SEC Registration fees............................................. $ 17,242 NASD fee.......................................................... 5,500 Blue Sky fees and expenses........................................ 25,000 Printing and engraving expenses................................... 150,000 Transfer agent and registrar fee and expenses..................... 12,000 Attorneys' fees and expenses...................................... 200,000 Accounting fees and expenses...................................... 125,000 Miscellaneous..................................................... 65,258 --------- Total..................................................... $ 600,000 --------- ---------
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS. Section 1 of Article VI of the Registrant's Amended and Restated Code of Regulations (the "Code of Regulations") generally provides that each of the Registrant's directors, officers and employees is entitled to be indemnified from personal liability to the fullest extent permitted by Ohio law. Section 1701.13 of the Ohio Revised Code permits a corporation to indemnify its officers, directors and employees (other than in certain cases involving bad faith, negligence or misconduct) from and against any and all claims and liabilities to which he or she may become subject by reason of his or her position, or acts or commissions in such position, including reasonable costs of defense and settlements (except in connection with shareholder derivative suits, where indemnification is limited to the costs of defense). Ohio law also permits corporations to provide broader indemnification than that provided by statute. Pursuant to authority contained in its Code of Regulations, the Registrant maintains in force a standard directors' and officers' liability insurance policy providing coverage of $10,000,000 against liability incurred by any director or officer in his or her capacity as such. ITEM 16. EXHIBITS. See Index to Exhibits. ITEM 17. UNDERTAKINGS. Insofar as indemnification for liabilities arising under the Act may be permitted to directors, officers and controlling persons of the Registrant pursuant to the foregoing provisions described under Item 15 above, or otherwise, the Registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the Registrant of expenses incurred or paid by a director, officer or controlling person of the Registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the Registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Act and will be governed by the final adjudication of such issue. II-1 The undersigned registrant hereby undertakes: (1) That, for purposes of determining any liability under the Act, the information omitted from the form of Prospectus filed as part of this Registration Statement in reliance upon Rule 430A and contained in a form of Prospectus filed by the Registrant pursuant to Rule 424(b)(1) or (4) or 497(h) under the Act shall be deemed to be part of this Registration Statement as of the time it was declared effective; (2) That, for the purpose of determining any liability under the Act, each post-effective amendment that contains a form of prospectus shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof; and (3) That, for the purpose of determining the eligibility of the trustee under the Indenture for the Notes, to file an application under subsection (a) of section 310 of the Trust Indenture Act ("Act") in accordance with the rules and regulations prescribed by the Commission under section 305(b)(2) of the Act. II-2 SIGNATURES PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), THE REGISTRANT CERTIFIES THAT IT HAS REASONABLE GROUNDS TO BELIEVE THAT IT MEETS ALL OF THE REQUIREMENTS FOR FILING ON FORM S-3 AND HAS DULY CAUSED THIS REGISTRATION STATEMENT TO BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED IN THE CITY OF CINCINNATI, STATE OF OHIO ON THIS 12TH DAY OF APRIL 1996. JACOR COMMUNICATIONS, INC. BY: /S/ R. CHRISTOPHER WEBER ----------------------------------- R. Christopher Weber SENIOR VICE PRESIDENT, CHIEF FINANCIAL OFFICER AND SECRETARY POWER OF ATTORNEY KNOW ALL PERSONS BY THESE PRESENTS, THAT EACH PERSON WHOSE SIGNATURE APPEARS BELOW HEREBY CONSTITUTES AND APPOINTS R. CHRISTOPHER WEBER AND JON M. BERRY, OR EITHER OF THEM, AS SUCH SIGNATORY'S TRUE AND LAWFUL ATTORNEYS-IN-FACT AND AGENTS, WITH FULL POWER OF SUBSTITUTION AND RESUBSTITUTION, FOR SUCH SIGNATORY AND IN SUCH SIGNATORY'S NAME, PLACE AND STEAD, IN ANY AND ALL CAPACITIES, TO SIGN ANY OR ALL AMENDMENTS (INCLUDING POST-EFFECTIVE AMENDMENTS) TO THIS REGISTRATION STATEMENT (AND TO ANY REGISTRATION STATEMENT FILED PURSUANT TO RULE 462 UNDER THE SECURITIES ACT), AND TO FILE THE SAME, WITH ALL EXHIBITS THERETO, AND ALL DOCUMENTS IN CONNECTION THEREWITH, WITH THE SECURITIES AND EXCHANGE COMMISSION, GRANTING UNTO SAID ATTORNEYS-IN-FACT AND AGENTS, FULL POWER AND AUTHORITY TO DO AND PERFORM EACH AND EVERY ACT AND THING REQUISITE AND NECESSARY TO BE DONE IN AND ABOUT THE FOREGOING, AS FULLY AS TO ALL INTENTS AND PURPOSES AS SUCH SIGNATORY MIGHT OR COULD DO IN PERSON, HEREBY RATIFYING AND CONFIRMING ALL THAT SAID ATTORNEYS-IN-FACT AND AGENTS, OR ANY OF THEM, OR THEIR OR HIS SUBSTITUTE OR SUBSTITUTES, MAY LAWFULLY DO OR CAUSE TO BE DONE BY VIRTUE HEREOF. PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED, THIS REGISTRATION STATEMENT HAS BEEN SIGNED ON APRIL 12, 1996 BY THE FOLLOWING PERSONS IN THE CAPACITIES INDICATED. Principal Executive Officer: Principal Financial and Accounting Officer: /s/ RANDY MICHAELS /s/ R. CHRISTOPHER WEBER - ----------------------------------- ----------------------------------- Randy Michaels R. Christopher Weber PRESIDENT, CO-CHIEF OPERATING SENIOR VICE PRESIDENT, CHIEF OFFICER AND DIRECTOR FINANCIAL OFFICER AND SECRETARY /S/ ROBERT L. LAWRENCE /s/ ROD F. DAMMEYER - ----------------------------------- ----------------------------------- Robert L. Lawrence Rod F. Dammeyer CO-CHIEF OPERATING OFFICER AND DIRECTOR DIRECTOR /s/ SHELI Z. ROSENBERG /s/ F. PHILIP HANDY - ----------------------------------- ----------------------------------- Sheli Z. Rosenberg F. Philip Handy BOARD CHAIR AND DIRECTOR DIRECTOR /s/ JOHN W. ALEXANDER /s/ MARC LASRY - ----------------------------------- ----------------------------------- John W. Alexander Marc Lasry DIRECTOR DIRECTOR II-3 INDEX TO EXHIBITS
SEQUENTIALLY EXHIBIT NUMBERED NUMBER DESCRIPTION OF EXHIBIT PAGE - ---------- --------------------------------------------------------------------------- --------- 1.1 Form of Underwriting Agreement (to be filed by amendment). ** 2.1 Agreement and Plan of Merger dated February 12, 1996 (the "Merger * Agreement") among Citicasters Inc., the Registrant and JCAC, Inc. Incorporated by reference to Exhibit 2.1 to the Registrant's Current Report on Form 8-K dated February 27, 1991. 2.2 Stockholders Agreement dated February 12, 1996 among the Registrant, JCAC, * Inc., Great American Insurance Company, American Financial Corporation, American Financial Enterprises, Inc., Carl H. Lindner, The Carl H. Lindner Foundation and S. Craig Lindner. Incorporated by reference to Exhibit 2.2 to the Registrant's Current Report on Form 8-K dated February 27, 1996. 2.3 Jacor Shareholders Agreement dated February 12, 1996 among Citicasters Inc. * and Zell/ Chilmark Fund L.P. Incorporated by reference to Exhibit 2.3 to the Registrant's Current Report on Form 8-K dated February 27, 1996. 2.4 Escrow Agreement among the Registrant, Citicasters Inc. and PNC Bank dated ** March 13, 1996. 2.5 Irrevocable Letter of Credit, Banque Paribas, Chicago Branch dated March ** 13, 1996. 2.6 Letter of Credit and Reimbursement Agreement by and between the Registrant ** and Banque Paribas dated March 13, 1996. 2.7 Form of Employment Continuation Agreement (executive officer form) between * Citicasters Inc. and [executive officer] (referred to as exhibit 6.6(c)(i) in Merger Agreement). Incorporated by reference to Exhibit 2.5 to the Registrant's Current Report on Form 8-K dated February 27, 1996. 2.8 Form of Employment Continuation Agreement (management form) between * Citicasters Inc. and [manager] (referred to as exhibit 6.6(c)(ii) in Merger Agreement). Incorporated by reference to Exhibit 2.6 to the Registrant's Current Report on Form 8-K dated February 27, 1996. 2.9 Form of Warrant Agreement between the Registrant, and KeyCorp Shareholder * Services, Inc., as warrant agent (referred to as exhibit 3.1 in Merger Agreement). Incorporated by reference to Exhibit 2.7 to the Registrant's Current Report on Form 8-K dated February 27, 1996. 2.10 Stock Purchase and Stock Warrant Redemption Agreement dated as of February * 20, 1996 among the Registrant, Prudential Venture Partners II, L.P., Northeast Ventures, II, John T. Lynch, Frank A. DeFrancesco, Thomas R. Jiminez, William R. Arbenz, CIHC, Incorporated, Bankers Life Holding Corporation and Noble Broadcast Group, Inc. ("Noble") (omitting exhibits not deemed material or filed separately in executed form). [Prudential and Northeast are sometimes referred to hereafter as the "Class A Shareholders"; Lynch, DeFrancesco, Jiminez and Arbenz as the "Class B Shareholders"; and CIHC and Bankers Life as the Warrant Sellers.] Incorporated by reference to Exhibit 2.1 to the Registrant's Current Report on Form 8-K dated March 6, 1996. 2.11 Investment Agreement dated as of February 20, 1996 among the Registrant, * Noble and the Class B Shareholders (omitting exhibits not deemed material). Incorporated by reference to Exhibit 2.2 to the Registrant's Current Report on Form 8-K dated March 6, 1996. 2.12 Warrant to Purchase Class A Common Stock of Noble issued to the Registrant. * Incorporated by reference to Exhibit 2.3 to the Registrant's Current Report on Form 8-K dated March 6, 1996.
SEQUENTIALLY EXHIBIT NUMBERED NUMBER DESCRIPTION OF EXHIBIT PAGE - ---------- --------------------------------------------------------------------------- --------- 2.13 Indemnification and Escrow Agreement dated as of February 20, 1996 among * the Registrant, Noble, the Class A Shareholders, the Class B Shareholders, the Warrant Sellers, The Fifth Third Bank and Conseco, Inc. Incorporated by reference to Exhibit 2.4 to the Registrant's Current Report on Form 8-K dated March 6, 1996. 2.14 Stock Escrow and Security Agreement dated as of February 20, 1996 among the * Registrant, Noble, the Class B Shareholders, Philip H. Banks, as trustee, and The Fifth Third Bank, as escrow agent (omitting exhibits not deemed material or filed separately in executed form). Incorporated by reference to Exhibit 2.5 to the Registrant's Current Report on Form 8-K dated March 6, 1996. 2.15 Trust Agreement dated as of February 20, 1996 among the Class B * Shareholders and their spouses, and Philip H. Banks, as trustee. Incorporated by reference to Exhibit 2.6 to the Registrant's Current Report on Form 8-K dated March 6, 1996. 2.16 Registration Rights Agreement dated as of February 20, 1996 between the * Registrant and Noble. Incorporated by reference to Exhibit 2.7 to the Registrant's Current Report on Form 8-K dated March 6, 1996. 2.17 Asset Purchase Agreement dated as of February 20, 1996 among Chesapeake * Securities, Inc. (a Registrant subsidiary), Noble Broadcast of San Diego, Inc., Sports Radio, Inc. and Noble Broadcast Center, Inc. Incorporated by reference to Exhibit 2.7 to the Registrant's Current Report on Form 8-K dated March 6, 1996. 2.18 Jacor--CMM Limited Partnership Agreement of Limited Partnership dated * January 1, 1994, by and between Jacor Cable, Inc., Up Your Ratings, Inc. and the Registrant. Incorporated by reference to Exhibit 2.2 of the Registrant's Annual Report on Form 10-K dated March 30, 1995. 2.19 Amendment No. 1 to Jacor--CMM Limited Partnership Agreement of Limited * Partnership dated July 22, 1994, by and between Jacor Cable, Inc., Up Your Ratings, Inc. and the Registrant to amend the Jacor--CMM Limited Partnership Agreement of Limited Partnership dated January 1, 1994. Incorporated by reference to Exhibit 2.3 of the Registrant's Annual Report on Form 10-K dated March 30, 1995. 2.20 Amendment No. 2 to Jacor--CMM Limited Partnership Agreement of Limited * Partnership with an effective date as of January 1, 1994, by and between Jacor Cable, Inc., Up Your Ratings, Inc. and the Registrant to amend the Jacor--CMM Limited Partnership Agreement of Limited Partnership dated January 1, 1994. Incorporated by reference to Exhibit 2.4 of the Registrant's Annual Report on Form 10-K dated March 30, 1995. 4.1 Specimen Common Stock Certificate. Incorporated by reference to Exhibit 2.1 * to the Registrant's Form 8-A, dated January 12, 1993. 4.2 Credit Agreement dated as of February 20, 1996, among the Registrant, the * Banks named therein, Banque Paribas, as Agent, and The First National Bank of Boston and Bank of America Illinois, as Co-Agents (omitting exhibits not deemed material or filed separately in executed form). Incorporated by reference to Exhibit 4.1 to the Registrant's Current Report on Form 8-K dated March 6, 1996. 4.3 Revolving A Note in favor of Banque Paribas by the Registrant dated as of * February 20, 1996. (1) Incorporated by reference to Exhibit 4.2 to the Registrant's Current Report on Form 8-K dated March 6, 1996. 4.4 Revolving B Note in favor of Banque Paribas by the Registrant dated as of * February 20, 1996. (1) Incorporated by reference to Exhibit 4.3 to the Registrant's Current Report on Form 8-K dated March 6, 1996.
SEQUENTIALLY EXHIBIT NUMBERED NUMBER DESCRIPTION OF EXHIBIT PAGE - ---------- --------------------------------------------------------------------------- --------- 4.5 Security Agreement dated as of February 20, 1996 among the Registrant, * Banque Paribas, as Agent, for itself, the Co-Agents and the Banks. Incorporated by reference to Exhibit 4.4 to the Registrant's Current Report on Form 8-K dated March 6, 1996. 4.6 Pledge Agreement dated as of February 20, 1996 among the Registrant, Banque * Paribas, as Agent, for itself, the Co-Agents and the Banks. Incorporated by reference to Exhibit 4.5 to the Registrant's Current Report on Form 8-K dated March 6, 1996. 4.7 Trademark Security Agreement dated as of February 20, 1996 among the * Registrant, Banque Paribas, as Agent, for itself, the Co-Agents and the Banks. Incorporated by reference to Exhibit 4.6 to the Registrant's Current Report on Form 8-K dated March 6, 1996. 4.8 Subsidiary Guaranty dated as of February 20, 1996, by various subsidiaries * of the Registrant in favor of Banque Paribas, as Agent, for itself, the Co-Agents and the Banks. (2) Incorporated by reference to Exhibit 4.7 to the Registrant's Current Report on Form 8-K dated March 6, 1996. 4.9 Subsidiary Security Agreement dated as of February 20, 1996, by various * Company subsidiaries in favor of Banque Paribas, as Agent, for itself, the Co-Agents and the Banks (omitting exhibits not deemed material). (2) Incorporated by reference to Exhibit 4.8 to the Registrant's Current Report on Form 8-K dated March 6, 1996. 4.10 Primary Pledge Agreement dated as of February 20, 1996 among Chesapeake * Securities, Inc. (a subsidiary of the Registrant), Banque Paribas as Agent, for itself, the Co-Agents and the Banks. (3) Incorporated by reference to Exhibit 4.9 to the Registrant's Current Report on Form 8-K dated March 6, 1996. 4.11 Secondary Pledge Agreement dated as of February 20, 1996 between the * Registrant and Chesapeake Securities, Inc. (a subsidiary of the Registrant). (4) Incorporated by reference to Exhibit 4.10 to the Registrant's Current Report on Form 8-K dated March 6, 1996. 4.12 Subsidiary Trademark Agreement dated as of February 20, 1996 among Jacor * Broadcasting of Tampa Bay, Inc., Jacor Broadcasting of Atlanta, Inc., Jacor Broadcasting Corporation and Jacor Broadcasting of Florida, Inc. in favor of Banque Paribas as Agent, for itself, the Co-Agents and the Banks. Incorporated by reference to Exhibit 4.11 to the Registrant's Current Report on Form 8-K dated March 6, 1996. 4.13 Deed to Secure Debt and Security Agreement, dated as of February 20, 1996, * by and between Jacor Broadcasting of Atlanta, Inc. and Banque Paribas, as Agent. Incorporated by reference to Exhibit 4.12 to the Registrant's Current Report on Form 8-K dated March 6, 1996. 4.14 Deed of Trust and Security Agreement, dated as of February 20, 1996, * between Jacor Broadcasting of Colorado, Inc. and the Public Trustee in the County of Weld and the State of Colorado. (6) Incorporated by reference to Exhibit 4.13 to the Registrant's Current Report on Form 8-K dated March 6, 1996. 4.15 Open-End Mortgage, Assignment of Rents and Leases and Security Agreement, * dated February 20, 1996, by and between Jacor Broadcasting Corporation and Banque Paribas, as Agent. (7) Incorporated by reference to Exhibit 4.14 to the Registrant's Current Report on Form 8-K dated March 6, 1996. 4.16 Open-End Mortgage, Assignment of Rents and Leases and Security Agreement * dated as of February 20, 1996, by Jacor Broadcasting of Tampa Bay, Inc. in favor of Banque Paribas, as Agent. (8) Incorporated by reference to Exhibit 4.15 to the Registrant's Current Report on Form 8-K dated March 6, 1996.
SEQUENTIALLY EXHIBIT NUMBERED NUMBER DESCRIPTION OF EXHIBIT PAGE - ---------- --------------------------------------------------------------------------- --------- 4.17 Deed of Trust and Security Agreement, Assignment of Leases, Rents and * Profits, Financing Statement and Fixture Filing made by Chesapeake Securities, Inc. for the Benefit of Banque Paribas as Agent dated as of February 20, 1996. Incorporated by reference to Exhibit 4.16 to the Registrant's Current Report on Form 8-K dated March 6, 1996. 4.18 Second Consolidated Amended and Restated Intercompany Demand Note issued to * the Company by various subsidiaries of the Registrant dated as of February 20, 1996. (5) Incorporated by reference to Exhibit 4.17 to the Registrant's Current Report on Form 8-K dated March 6, 1996. 4.19 Second Amended and Restated Intercompany Security Agreement and Financing * Statement dated as of February 20, 1996 by various subsidiaries of the Registrant in favor of the Company (omitting exhibits not deemed material). (2) Incorporated by reference to Exhibit 4.18 to the Registrant's Current Report on Form 8-K dated March 6, 1996. 4.20(+) Restricted Stock Agreement dated as of June 23, 1993 by and between the * Registrant and Rod F. Dammeyer. (9) Incorporated by reference to Exhibit 4.2 to the Registrant's Quarterly Report on Form 10-Q dated August 13, 1993. 4.21(+) Stock Option Agreement dated as of June 23, 1993 between the Registrant and * Rod F. Dammeyer covering 10,000 shares of the Registrant's common stock. (10) Incorporated by reference to Exhibit 4.3 to the Registrant's Quarterly Report on Form 10-Q dated August 13, 1993. 4.22(+) Stock Option Agreement dated as of December 15, 1994 between the Registrant * and Rod F. Dammeyer covering 5,000 shares of the Registrant's common stock. (11) Incorporated by reference to Exhibit 4.23 to the Registrant's Quarterly Report on Form 10-Q dated August 13, 1993. 4.23 Form of Indenture for Notes (to be filed by amendment) ** 5.1 Form of Opinion of Graydon, Head & Ritchey (to be filed by amendment). ** 10.1 Credit Agreement dated as of February 20, 1996 among Broadcast Finance, Inc. (a Regis-trant subsidiary), Noble Broadcast Group, Inc. and Noble Broadcast Holdings, Inc. (omitting exhibits not deemed material or filed separately in executed form). Incorporated by reference to Exhibit 10.1 to the Registrant's Current Report on Form 8-K dated March 6, 1996. 10.2 Subsidiary Guaranty dated as of February 20, 1996 in favor of Broadcast * Finance, Inc. by Noble Broadcast Center, Inc., Noble Broadcast of Colorado, Inc., Noble Broadcast of St. Louis, Inc., Noble Broadcast of Toledo, Inc., Nova Marketing Group, Inc., Noble Broadcast Licenses, Inc., Noble Broadcast of San Diego, Inc., Sports Radio, Inc. and Sports Radio Broadcasting, Inc. Incorporated by reference to Exhibit 10.2 to the Registrant's Current Report on Form 8-K dated March 6, 1996. 10.3 Term Note in the amount of $40,000,000 by Noble Broadcast Holdings, Inc. in * favor of Broadcast Finance, Inc. dated as of February 20, 1996. Incorporated by reference to Exhibit 10.3 to the Registrant's Current Report on Form 8-K dated March 6, 1996. 10.4 Revolving Note in the amount of $1,000,000 by Noble Broadcast Holdings, * Inc. in favor of Broadcast Finance, Inc. dated as of February 20, 1996. Incorporated by reference to Exhibit 10.4 to the Registrant's Current Report on Form 8-K dated March 6, 1996. 10.5(+) Jacor Communications, Inc. 1993 Stock Option Plan. Incorporated by * reference to Exhibit 99 to the Quarterly Report on Form 10-Q dated August 13, 1993.
SEQUENTIALLY EXHIBIT NUMBERED NUMBER DESCRIPTION OF EXHIBIT PAGE - ---------- --------------------------------------------------------------------------- --------- 10.6(+) Jacor Communications, Inc. 1995 Employee Stock Purchase Plan. Incorporated * by reference to Exhibit 4.01 to the Registration Statement on Form S-8, filed on November 9, 1994. (12) Computation of Ratios of Earnings to Fixed Charges 23.1 Consent of Coopers & Lybrand L.L.P. 23.2 Consent of Ernst & Young LLP. 23.3 Consent of Price Waterhouse LLP. 23.4 Consent of Graydon, Head & Ritchey (included in opinion of counsel filed as Exhibit 5.1). 24 Powers of Attorney of directors and officers signing this Registration Statement. 27.1 Financial Data Schedule of the Registrant. Incorporated by reference to the * Registrants Annual Report on Form 10-K for the year ended December 31, 1995.
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(*) Incorporated by reference. (**) To be filed by Amendment. (+) Management Contracts and Compensatory Arrangements. (1) Identical Notes were issued by the Company in favor of the following Banks: The First National Bank of Boston Bank of America Illinois Bank of Montreal The Bank of New York The Bank of Nova Scotia CIBC, Inc. First Bank Society National Bank Union Bank The aggregate principal amount of Revolving A Notes is $190 million. The aggregate principal amount of the Revolving B Notes is $110 million. (2) Executed by the following subsidiaries of the Registrant: Jacor Broadcasting of Florida, Inc. Jacor Broadcasting of Atlanta, Inc. Jacor Broadcasting of Knoxville, Inc. Jacor Broadcasting of Colorado, Inc. Jacor Broadcasting of Tampa Bay, Inc. Jacor Broadcasting of St. Louis, Inc. Jacor Cable, Inc. Georgia Network Equipment, Inc. Jacor Broadcasting Corporation Broadcast Finance, Inc. Chesapeake Securities, Inc. OIA Broadcasting L.L.C. (3) An identical Primary Pledge Agreement was executed by Jacor Broadcasting of Atlanta, Inc. (4) An identical Secondary Pledge Agreement was executed by Jacor Broadcasting of Atlanta, Inc. (5) Such notes were issued by the subsidiaries of the Registrant identified in (2) above. (6) A substantially similar document was entered into by Jacor Broadcasting of Colorado, Inc. relating to real property located in Douglas County, Colorado.
(7) A substantially similar document was entered into by Jacor Broadcasting Corporation relating to real property located in Hamilton County, Ohio. (8) Substantially similar documents were entered into by Jacor of Tampa Bay, Inc. relating to real property located in Manatee County, Florida and by Jacor Broadcasting of Florida relating to real property located in Duval County, Florida and St. Johns County, Florida. (9) Substantially identical documents were entered into with John W. Alexander, F. Philip Handy and Marc Lasry covering 20,000, 30,000 and 10,000 shares of common stock, respectively. (10) Identical documents were entered into with John W. Alexander, F. Philip Handy and Marc Lasry. (11) Identical documents were entered into with John W. Alexander, F. Philip Handy, Marc Lasry and Sheli Z. Rosenberg.
EX-12 2 EX-12 EXHIBIT 12 COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES FOR THE YEARS ENDED DECEMBER 31, (DOLLARS IN THOUSANDS)
1991 1992 1993 1994 1995 EARNINGS: Income (loss) before income taxes........................ $ 2,548 $ (23,701) $ 4,138 $ 14,165 $ 18,265 Fixed charges............................................ 18,830 15,578 4,768 2,860 3,853 --------- ---------- --------- --------- --------- Total.............................................. $ 21,378 $ (8,123) $ 8,906 $ 17,025 $ 22,118 --------- ---------- --------- --------- --------- --------- ---------- --------- --------- --------- FIXED CHARGES: Interest expense......................................... $ 16,775 $ 13,701 $ 2,735 $ 534 $ 1,444 Amortization of debt expense............................. 718 449 238 324 326 Portion of rent expense deemed to be interest............ 1,337 1,428 1,795 2,002 2,083 --------- ---------- --------- --------- --------- Total.............................................. $ 18,830 $ 15,578 $ 4,768 $ 2,860 $ 3,853 --------- ---------- --------- --------- --------- --------- ---------- --------- --------- --------- Ratio of earnings to fixed charges......................... 1.1 N/A 1.9 6.0 5.7 --------- ---------- --------- --------- --------- --------- ---------- --------- --------- --------- Coverage deficiency........................................ N/A $ 23,701 N/A N/A N/A --------- ---------- --------- --------- --------- --------- ---------- --------- --------- ---------
EX-23.1 3 EX-23.1 EXHIBIT 23.1 CONSENT OF INDEPENDENT ACCOUNTANTS We consent to the inclusion and incorporation by reference in this registration statement of Jacor Communications, Inc. on Form S-3 of our report dated February 12, 1996, except for Note 14, as to which the date is March 13, 1996, on our audits of the consolidated financial statements of Jacor Communications, Inc. as of December 31, 1995 and 1994 and for each of the three years in the period ended December 31, 1995. We also consent to the reference to our firm under the captions "Selected Historical Financial Data" and "Experts." COOPERS & LYBRAND L.L.P. Cincinnati, Ohio April 11, 1996 EX-23.2 4 EX-23.2 EXHIBIT 23.2 CONSENT OF INDEPENDENT AUDITORS We consent to the reference to our firm under the caption "Experts" and to the use of our report dated February 23, 1996 with respect to the financial statements of Citicasters Inc. included in the Registration Statement (Form S-3) and related Prospectus of Jacor Communications, Inc. for the registration of an aggregate principal amount of $50,000,000 of senior subordinated notes due 2006. ERNST & YOUNG LLP Cincinnati, Ohio April 11, 1996 EX-23.3 5 EX-23.3 EXHIBIT 23.3 CONSENT OF INDEPENDENT ACCOUNTANTS We hereby consent to the use in the Prospectus constituting part of this Registration Statement on Form S-3 of Jacor Communications, Inc. of our report dated March 21, 1996 relating to the consolidated financial statements of Noble Broadcast Group, Inc. (which report includes an explanatory paragraph regarding Jacor Communications, Inc.'s agreement to purchase Noble Broadcast Group, Inc.), which appears in such Prospectus. We also consent to the references to us under the headings "Experts" and "Selected Historical Financial Data" in such Prospectus. However, it should be noted that Price Waterhouse LLP has not prepared or certified such "Selected Historical Financial Data." PRICE WATERHOUSE LLP San Diego, California April 12, 1996 -----END PRIVACY-ENHANCED MESSAGE-----