-----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, OiT11mUh+jxKMjANmwa1KWx9T9xnv9JTrJ84Xw+dyZ/S02PKdinWE529bnzJC27b FJfOt4uMC2sdks+VMD2Xjg== 0001047469-98-001584.txt : 19980122 0001047469-98-001584.hdr.sgml : 19980122 ACCESSION NUMBER: 0001047469-98-001584 CONFORMED SUBMISSION TYPE: 8-K/A PUBLIC DOCUMENT COUNT: 5 CONFORMED PERIOD OF REPORT: 19971023 ITEM INFORMATION: ITEM INFORMATION: ITEM INFORMATION: FILED AS OF DATE: 19980121 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: JACOR COMMUNICATIONS INC CENTRAL INDEX KEY: 0000702808 STANDARD INDUSTRIAL CLASSIFICATION: RADIO BROADCASTING STATIONS [4832] IRS NUMBER: 310978313 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K/A SEC ACT: SEC FILE NUMBER: 000-12404 FILM NUMBER: 98509769 BUSINESS ADDRESS: STREET 1: 50 E RIVERCENTER BLVD STREET 2: 12TH FLOOR CITY: COVINGTON STATE: KY ZIP: 41011 BUSINESS PHONE: 6066552267 MAIL ADDRESS: STREET 1: 50 EAST RIVERCENTER BLVD 12TH FLOOR CITY: COVINGTON STATE: KY ZIP: 41011 8-K/A 1 FORM 8-K/A SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 8-K (A) CURRENT REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES AND EXCHANGE ACT OF 1934 Date of Report: October 23, 1997 JACOR COMMUNICATIONS, INC. DELAWARE (State or Other Jurisdiction of Incorporation) 0-12404 31-0978313 (Commission File No.) (IRS Employer Identification No.) 50 East RiverCenter Boulevard 12th Floor Covington, KY 41011 (606) 655-2267 Item 2. ACQUISITION OR DISPOSITION OF ASSETS As previously reported, in October, 1997, Citicasters Co., an indirect wholly-owned subsidiary of Jacor Communications, Inc. (the "Registrant"), signed a letter of intent to acquire the assets of 17 radio stations (the "Stations") from Nationwide Communications Inc. ("NCI") and its affiliated entities. These stations are: KDMX-FM in Dallas, Texas; KEGL-FM in Ft. Worth, Texas; KHMX-FM in Houston, Texas; KTBZ-FM in Lake Jackson, Texas; KMJZ-FM and KSGS-AM in St. Louis Park, Minnesota; KMCG-FM in Carlsbad, California; KGLQ-FM in Phoenix, Arizona; KZZP-FM in Mesa, Arizona; WPOC-FM in Baltimore, Maryland; WGAR-FM, WMJI-FM and WMMS-FM in Cleveland, Ohio; WCOL-FM, WFII-AM and WNCI-FM in Columbus, Ohio; and KXGL-FM in San Diego, California. Also, as previously reported, On December 19, 1997, Citicasters Co. and Jacor Communications Company, a wholly-owned subsidiary of the Registrant ("JCC"), entered into a definitive Agreement of Sale ("Sale Agreement") with NCI and its affiliated entities to acquire the Stations for a purchase price of approximately $620 million in cash, of which $30 million has been placed in escrow pending the closing of the Purchase. For more information, see the initial Form 8-K previously filed by the Registrant relating to this transaction. The historical financial information and unaudited pro forma financial information relating to this transaction is contained in Item 7 hereof. Item 5. OTHER EVENTS On November 26, 1997, the Securities and Exchange Commission declared effective the omnibus shelf registration on Form S-3 (File No. 33-40127) filed by the Registrant, JCC and the Subsidiary Guarantors to register for the offer and sale of up to $500 million of certain types of equity or debt securities and the guarantees of any such debt securities. The form of indenture for any debt securities issued by JCC will require that all present and future subsidiaries of the Registrant become guarantors of any such debt securities. On January 21, 1998, the Registrant filed with the Securities and Exchange Commission, pursuant to Rule 424(b), (i) the definitive prospectus contained in the registration statement, (ii) a preliminary prospectus supplement relating to the offer for sale of approximately 3,800,000 shares of the Registrant's common stock, $.01 par value (including an underwriters' overallotment option to purchase up to an additional 15% of the number of shares offered), (iii) a preliminary prospectus supplement relating to the offer for sale of $100 million in aggregate principal amount of Senior Subordinated Notes due 2010 to be issued by JCC and guaranteed by the Registrant and all of its subsidiaries, and (iv) a prospectus supplement relating to the offer for sale of liquid yield option notes due 2018 with expected gross proceeds of $150 million (together with an over-allotment option to purchase up to an additional 10% of the liquid yield option notes offered). In connection with such Rule 424(b) filing, the Registrant is filing certain exhibits as part of this Form 8-K(A). JCC has previously completed offerings of $100 million of its 10 1/8% Senior Subordinated Notes due 2006, $170 million of its 9 3/4% Senior Subordinated Notes due 2006 and $150 million of its 8 3/4% Series B Senior Subordinated Notes due 2007 (collectively, the "Notes"). The Notes are jointly and severally, fully and unconditionally guaranteed on a senior subordinated basis by the Registrant and all subsidiaries of the Registrant (the "Subsidiary Guarantors"). The Subsidiary Guarantors and JCC are wholly owned direct or indirect subsidiaries of the Registrant. Additionally, there are no current restrictions on the ability of the Subsidiary Guarantors to make distributions to JCC, except to the extent provided by law generally. JCC's credit facility and the terms of the indentures governing the Notes do restrict the ability of JCC and of the Subsidiary Guarantors to make distributions to the Registrant. Separate financial statements of JCC and each of the Subsidiary Guarantors are not presented in the Registrant's periodic securities reports on Form 10-K and Form 10-Q because the Registrant believes that such information would not be material to investors. Provided below is unaudited 2 summarized financial information with respect to the Registrant and the Subsidiary Guarantors on a combined basis for each of the quarterly periods ended March 31, June 30 and September 30, 1997 and 1996, respectively. Summarized unaudited information for JCC is for all periods noted above subsequent to June 6, 1996 (date of inception).
(Unaudited) Nine Months Ended September 30 ---------------------------------------------------------------------------------------- Jacor | JCC | Combined subsidiary Guarantors ------------------------- | ------------------------- | ------------------------------ 1997 1996 | 1997 1996 | 1997 1996 | | Net revenue - - | - - | $ 368,941 $ 127,520 Equity in earnings (loss) of subsidiaries $ (5,560) $ 6,958 | $ 1,251 $ 6,169 | - - Operating income (loss) (15,601) 2,837 | 1,251 6,169 | 65,132 25,266 Income (loss) before extraordinary items (5,412) 4,737 | 1,896 9,924 | 1,251 6,169 Net income (loss) (5,412) 4,737 | (5,560) 6,958 | 1,251 6,169 | | Current assets 1,142 756 | 24,529 44,475 | 144,025 91,269 Non-current assets 1,146,382 643,926 | 1,974,907 1,182,358 | 2,262,507 1,579,808 Current liabilities 6,662 4,281 | 23,061 16,481 | 56,781 31,136 Non current liabilities 228,429 158,290 | 1,304,473 1,029,858 | 1,437,318 1,157,830 Shareholders equity 912,433 482,111 | 671,902 180,494 | 912,433 482,111 | | | | | (Unaudited) | | Six Months Ended | | June 30 | ---------------------------|----------------------------|--------------------------------- Jacor | JCC | Combined subsidiary Guarantors -------------------------- | ------------------------- | ------------------------------- 1997 1996 | 1997 1996 | 1997 1996 | | Net revenue - - | - - | $ 224,381 $ 73,194 Equity in earnings (loss) of subsidiaries $ (1,406) $ 6,105 | $ (1,527) $ 4,601 | - - Operating income (loss) (7,795) 3,656 | (1,527) 4,601 | 35,660 14,365 Income (loss) before extraordinary items (3,995) 4,652 | 4,150 7,056 | (1,527) 4,601 Net income (loss) (3,995) 4,652 | (1,406) 6,105 | (1,527) 4,601 | | Current assets 1,122 127 | 36,829 320,162 | 131,525 45,266 Non-current assets 1,120,858 581,514 | 1,869,975 356,217 | 2,158,229 663,013 Current liabilities 8,631 6,868 | 23,948 5,691 | 64,803 9,581 Non current liabilities 221,334 119,013 | 1,204,393 593,572 | 1,332,936 242,938 Shareholders equity 892,015 455,760 | 678,463 77,116 | 892,015 455,760 | | | | | (Unaudited) | | Three Months Ended | | March 31 | ---------------------------|----------------------------|--------------------------------- Jacor | JCC | Combined subsidiary Guarantors -------------------------- | ------------------------- | ------------------------------- 1997 1996 | 1997 | 1997 1996 | | Net revenue - - | - | $ 88,828 $ 30,074 Equity in earnings (loss) of subsidiaries $ (7,072) $ 867 | $ (3,516) | - - Operating income (loss) (9,940) (272) | (3,516) | 8,260 3,585 Income (loss) before extraordinary items (8,140) 1,842 | (1,516) | (3,516) 867 Net income (loss) (8,140) 891 | (7,072) | (3,516) 867 | | Current assets 300 4,967 | 14,438 | 101,087 34,683 Non-current assets 822,913 322,851 | 1,469,112 | 1,791,334 318,565 Current liabilities 4,622 387 | 24,915 | 44,459 14,214 Non current liabilities 222,768 187,056 | 1,076,364 | 1,252,139 268,023 Shareholders equity 595,823 140,375 | 382,271 | 595,823 71,011
Item 7. FINANCIAL STATEMENTS AND EXHIBITS (a) Financial Statements of Businesses Acquired Independent Auditors' Report Financial Statements: Combined Balance Sheets as of December 31, 1996 and September 30, 1997. Combined Statements of Earnings for the years ended December 31, 1995 and 1996 and for the nine month period ended September 30, 1997. Combined Statements of Shareholder's Equity for the years ended December 31, 1995 and 1996 and for the nine month period ended September 30, 1997. Combined Statements of Cash Flows for the years ended December 31, 1995 and 1996 and the nine month period ended September 30, 1997. Notes to Combined Financial Statements. INDEPENDENT AUDITORS' REPORT The Board of Directors Nationwide Mutual Insurance Company: We have audited the accompanying combined balance sheets of Nationwide Communications as of September 30, 1997 and December 31, 1996, and the related combined statements of earnings, shareholder's equity, and cash flows for the nine months ended September 30, 1997 and each of the years in the two year period ended December 31, 1996. These combined financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these combined 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 combined financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the combined financial statements referred to above present fairly, in all material respects, the financial position of Nationwide Communications as of September 30, 1997 and December 31, 1996, and the results of their operations and their cash flows for the nine months ended September 30, 1997 and each of the years in the two year period ended December 31, 1996, in conformity with generally accepted accounting principles. KPMG Peat Marwick LLP Columbus, Ohio January 4, 1998 NATIONWIDE COMMUNICATIONS (Broadcast Operations of Nationwide Mutual Insurance Company) Combined Balance Sheets
September 30, December 31, Assets 1997 1996 ------ ---- ---- Current assets: Cash and cash equivalents $ 7,044,306 $ 47,223,751 Short-term investments, at amortized cost - 74,990,903 Accounts receivable, net of allowance for doubtful accounts of $869,468 at September 30, 1997 and $716,940 at December 31, 1996 21,303,195 17,573,992 Notes receivable, current portion 982,820 931,278 Deferred income taxes 897,000 1,179,967 Assets held for sale 44,667,939 8,868,376 Prepaid expenses 2,057,180 1,471,765 -------------- -------------- Total current assets 76,952,440 152,240,032 Property and equipment, net 17,517,067 8,254,028 Broadcast licenses and other intangibles, net 253,496,524 90,107,979 Notes receivable, excluding current portion 6,119,960 5,765,856 Other assets 2,674,472 3,025,813 -------------- -------------- Total assets $ 356,760,463 $ 259,393,708 -------------- -------------- -------------- -------------- Liabilities and Shareholder's Equity ------------------------------------ Current liabilities: Accounts payable $ 2,256,583 $ 1,166,614 Accrued compensation and benefits 2,190,967 2,506,395 Accrued expenses and other current liabilities 1,389,985 1,403,751 Accrued interest 1,179,516 200,278 Accrued professional fees 932,083 641,882 Accrued property and sales tax 214,776 359,005 Income taxes payable 2,721,629 1,968,891 -------------- -------------- Total current liabilities 10,885,539 8,246,816 -------------- -------------- Long-term debt 92,500,000 40,500,000 Deferred compensation 2,513,139 2,098,705 Accrued retirement benefits 2,909,169 2,892,414 Deferred income taxes 16,283,000 1,172,512 -------------- -------------- Total liabilities 125,090,847 54,910,447 -------------- -------------- Shareholder's equity: 4% noncumulative preferred stock of $50 par value per share; redeemable at par. Authorized, issued, and outstanding 20,000 shares 1,000,000 1,000,000 Common stock, without par value. Authorized 15,000 shares; issued and outstanding 14,750 shares at stated value 14,750 14,750 Additional paid-in capital 11,495,250 11,495,250 Contributed capital for combined radio station 22,500,000 22,500,000 Retained earnings 196,659,616 169,473,261 -------------- -------------- Total shareholder's equity 231,669,616 204,483,261 -------------- -------------- Total liabilities and shareholder's equity $ 356,760,463 $ 259,393,708 -------------- -------------- -------------- --------------
See accompanying notes to combined financial statements. NATIONWIDE COMMUNICATIONS (Broadcast Operations of Nationwide Mutual Insurance Company) Combined Statements of Earnings
Years ended Nine months ended December 31, September 30, ------------------------------ 1997 1996 1995 ---- ---- ---- Broadcast revenues $ 82,015,129 $ 85,276,016 $ 73,217,793 Less agency commissions 10,865,664 11,516,477 10,181,081 --------------- ------------ ------------ Net revenues 71,149,465 73,759,539 63,036,712 Broadcast operating expenses 61,716,538 58,596,364 45,469,057 Depreciation and amortization 6,948,264 7,356,348 5,603,704 Corporate general and administrative expenses 2,657,117 3,282,159 3,461,354 --------------- ------------ ------------ Operating (loss) income (172,454) 4,524,668 8,502,597 --------------- ------------ ------------ Interest income 1,488,447 7,256,973 9,562,334 Interest expense (4,540,479) (2,883,337) (3,134,887) Gain on sale of radio stations and other properties 44,131,624 5,947,951 5,126,403 Other expense, net (55,892) (484,901) (128,874) --------------- ------------ ------------ Nonoperating income, net 41,023,700 9,836,686 11,424,976 --------------- ------------ ------------ Income before taxes 40,851,246 14,361,354 19,927,573 Income tax expense 13,664,891 5,309,885 7,072,231 --------------- ------------ ------------ Net income $ 27,186,355 $ 9,051,469 $ 12,855,342 --------------- ------------ ------------ --------------- ------------ ------------
See accompanying notes to combined financial statements. NATIONWIDE COMMUNICATIONS (Broadcast Operations of Nationwide Mutual Insurance Company) Combined Statements of Shareholder's Equity
4% noncumulative Contributed preferred stock Common stock Additional capital for Total ------------------- ----------------- paid in combined Retained shareholder's Shares Amount Shares Amount capital radio station earnings equity ------ ------ ------ ------- ------- ------------- -------- ------ Balances at December 31, 1994 20,000 $ 1,000,000 14,750 $ 14,750 $ 11,495,250 $ - $ 147,646,450 $ 160,156,450 Dividends paid-- preferred stock - - - - - - (40,000) (40,000) Net income - - - - - - 12,855,342 12,855,342 ------ ----------- ------ -------- ------------ ------------- ------------- ------------- Balances at December 31, 1995 20,000 1,000,000 14,750 14,750 11,495,250 - 160,461,792 172,971,792 Dividends paid-- preferred stock - - - - - - (40,000) (40,000) Contributed capital for combined radio station - - - - - 22,500,000 - 22,500,000 Net income - - - - - - 9,051,469 9,051,469 ------ ----------- ------ -------- ------------ ------------- ------------- ------------- Balances at December 31, 1996 20,000 1,000,000 14,750 14,750 11,495,250 22,500,000 169,473,261 204,483,261 Net income - - - - - - 27,186,355 27,186,355 ------ ----------- ------ -------- ------------ ------------- ------------- ------------- Balances at September 30, 1997 20,000 $ 1,000,000 14,750 $ 14,750 $ 11,495,250 $ 22,500,000 $ 196,659,616 $ 231,669,616 ------ ----------- ------ -------- ------------ ------------- ------------- ------------- ------ ----------- ------ -------- ------------ ------------- ------------- -------------
See accompanying notes to combined financial statements. NATIONWIDE COMMUNICATIONS (Broadcast Operations of Nationwide Mutual Insurance Company) Combined Statements of Cash Flows
Years ended Nine months ended December 31, September 30, -------------------------- 1997 1996 1995 ---- ---- ---- Cash flows from operating activities: Net income $ 27,186,355 $ 9,051,469 $ 12,855,342 Adjustments to reconcile net income to net cash provided (used) by operating activities: Depreciation and amortization 6,948,264 7,356,348 5,603,704 Loss on sale of property and equipment 18,724 100,995 28,310 Net gain on sale of radio stations and cable system (44,131,624) (5,947,951) (5,126,403) Provision for doubtful accounts receivable 152,528 273,526 106,579 Deferred income taxes 15,393,455 (1,936,915) (403,088) Changes in assets and liabilities, net of effects of acquisitions and disposals: Accounts receivable (3,881,731) (2,181,725) (2,345,109) Prepaid expenses and other assets (1,232,034) (2,524,774) (1,403,917) Accounts payable (250,031) 383,037 (660,744) Accrued expenses and other liabilities 1,032,472 1,536,048 (316,643) Income taxes payable 752,738 912,525 (44,877,594) ------------- ------------ ------------ Net cash provided (used) by operating activities 1,989,116 7,022,583 (36,539,563) ------------- ------------ ------------ Cash flows from investing activities: Acquisition of radio stations (166,294,524) (23,349,989) - Proceeds from sale of radio stations and cable system 2,600,000 10,558,450 15,500,000 Proceeds from collection of notes receivable - 4,000,000 4,012,942 Additions to property and equipment (5,048,866) (2,965,878) (2,977,258) Proceeds from sale of property and equipment 49,829 177,717 15,363 Proceeds from maturity of investments 75,000,000 5,085,480 19,917,096 ------------- ------------ ------------ Net cash (used) provided by investing activities (93,693,561) (6,494,220) 36,468,143 ------------- ------------ ------------ Cash flows from financing activities: Debt issuance costs paid (475,000) - (281,877) Borrowings under long-term debt 98,000,000 - 1,702,940 Repayments of long-term debt (46,000,000) - - Dividends paid - (40,000) (40,000) ------------- ------------ ------------ Net cash provided (used) by financing activities 51,525,000 (40,000) 1,381,063 ------------- ------------ ------------ Net (decrease) increase in cash and cash equivalents (40,179,445) 488,363 1,309,643 Cash and cash equivalents at beginning of period 47,223,751 46,735,388 45,425,745 ------------- ------------ ------------ Cash and cash equivalents at end of period $ 7,044,306 $ 47,223,751 $ 46,735,388 ------------- ------------ ------------ ------------- ------------ ------------ SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION: Net cash paid (refunds received) for income taxes $ (2,481,301) $ 6,334,674 $ 52,352,913 ------------- ------------ ------------ ------------- ------------ ------------ Cash paid for interest $ 3,309,071 $ 2,831,913 $ 2,727,060 ------------- ------------ ------------ ------------- ------------ ------------ SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING AND FINANCING ACTIVITIES: Fair value of assets exchanged $ 53,000,000 - - ------------- ------------ ------------ ------------- ------------ ------------ Assets acquired from capital contribution from affiliated company - $ 22,500,000 - ------------- ------------ ------------ ------------- ------------ ------------
See accompanying notes to combined financial statements. NATIONWIDE COMMUNICATIONS (Broadcast Operations of Nationwide Mutual Insurance Company) Notes to Combined Financial Statements September 30, 1997 and December 31, 1996 and 1995 (1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (a) DESCRIPTION OF BUSINESS Nationwide Communications (the Company) reflects the broadcast operations of Nationwide Mutual Insurance Company (the Parent). These operations include commercial radio stations in various geographic regions across the United States, primarily in the top twenty-five radio revenue markets. (b) BASIS OF PRESENTATION The combined financial statements include the accounts related to the operation of the Parent's commercial radio stations. The majority of these operations are in Nationwide Communications, Inc. (NCI), a wholly owned subsidiary of the Parent. The Company's financial statements also include the results of operations of KXGL-FM, a station owned by an affiliated company (San Diego Lotus Corporation) controlled by the Parent, as the station is operated and controlled by the Company under a time brokerage agreement. Due to related ownership and control of the station, all significant accounts related to the station have been combined with NCI's financial statements for financial reporting purposes. (c) CASH AND CASH EQUIVALENTS The Company considers all highly liquid debt instruments purchased with an original maturity of three months or less to be cash equivalents. Cash and cash equivalents consist of cash with the Parent, money market funds and cash in banks. Cash with the Parent is invested in various financial instruments and is available upon demand to the Company. (d) REVENUE RECOGNITION Revenue is derived primarily from the sale of commercial announcements to local and national advertisers. Revenue is recognized when the commercial announcements are broadcast. Fees received or paid pursuant to various time brokerage agreements are recognized as revenue or expense, respectively, in accordance with the terms of the agreements. (e) PROPERTY AND EQUIPMENT Property and equipment are stated at cost. Depreciation of equipment is computed using an accelerated method. The Company uses the straight-line method for all buildings and leasehold improvements. The useful lives of property and equipment are as follows: Building and improvements 31.5 years Leasehold improvements 31.5 years Equipment 3 to 20 years (Continued) 2 NATIONWIDE COMMUNICATIONS (Broadcast Operations of Nationwide Mutual Insurance Company) Notes to Combined Financial Statements, Continued September 30, 1997 and December 31, 1996 and 1995 (f) INTANGIBLE ASSETS Intangible assets consist primarily of broadcast licenses. The Company amortizes intangible assets using the straight-line method over the estimated useful lives ranging from 5 to 40 years. The carrying value of intangible assets is reviewed by the Company when events or circumstances suggest that the recoverability of an asset may be impaired. If this review indicates that goodwill and licenses will not be recoverable, as determined based on the undiscounted cash flows of the station over the remaining amortization period, the carrying value of the intangible assets will be reduced accordingly. (g) MARKETABLE SECURITIES All marketable debt securities are classified as held to maturity as the Company has the ability and it is management's intent to hold them until maturity. In accordance with SFAS No. 115, marketable securities held to maturity are stated at amortized cost. All marketable securities matured during 1997. (h) INCOME TAXES The Company files a consolidated federal income tax return with the Parent. The Company calculates income taxes on a separate company basis in accordance with a tax sharing agreement with the Parent. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period the change occurred. (i) PENSION AND OTHER POSTRETIREMENT PLANS The Company participates in a multiemployer defined benefit pension plan and a multiemployer life and health care plan covering substantially all employees achieving certain levels of service. The cost of these programs is being funded currently. The Company also participates in two multiemployer supplemental nonqualified defined benefit plans. The net periodic costs are recognized as employees render the services necessary to earn the retirement benefits. (j) USE OF ESTIMATES Management of the Company has made a number of estimates and assumptions relating to the reporting of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reporting of revenues and expenses during the reporting period to prepare these financial statements in conformity with generally accepted accounting principles. Actual results could differ from those estimates. (Continued) 3 NATIONWIDE COMMUNICATIONS (Broadcast Operations of Nationwide Mutual Insurance Company) Notes to Combined Financial Statements, Continued September 30, 1997 and December 31, 1996 and 1995 (2) ACQUISITIONS AND DISPOSITIONS (a) COMPLETED TRANSACTIONS In January 1995, the Company sold the assets of its cable system in Houston for cash of $15 million and an unsecured note for $6 million due January 2001. This note was discounted to $3,474,341 using an effective interest rate of 8.5%. A pretax gain of $4.9 million was recorded on this sale. In April 1996, the Company entered into an agreement to exchange the assets of WOMX-FM in Orlando and $43.5 million for the assets of WMJI-FM and WMMS-FM in Cleveland. Pending the completion of the exchange, the Company entered into a time brokerage agreement which allowed the Company to operate WMJI-FM and WMMS-FM (and relinquish day to day operations of WOMX-FM) from July 1996 to the February 1997 closing. The assets of WOMX-FM totaling $2,742,696 are classified as "Assets held for sale" on the December 31, 1996 balance sheet. The transaction was completed in February 1997. The Company recorded a pre-tax gain on the exchange of approximately $23 million. In May 1996, the Company acquired the common stock of San Diego Lotus Corporation for $23 million with the purpose of simultaneously transferring the stock to an affiliated company for $23 million. Governmental restrictions delayed the actual transfer of the stock to the affiliated company until September 1996. Simultaneously with the transfer, the Company entered into a time brokerage agreement for $1.125 million per year which allows the Company to operate KFSD-FM. KFSD-FM call letters were changed to KXGL-FM in 1997. All significant accounts related to KXGL-FM have been combined in the accompanying financial statements. In June 1996, the Company purchased the assets of KMJZ-FM and KSGS-AM in Minneapolis for $22 million. In June 1996, the Company entered into an agreement to exchange the assets of KISW-FM in Seattle and $12.5 million for the assets of KTBZ-FM in Houston. Pending the completion of the exchange, the Company entered into a time brokerage agreement which allowed the Company to operate KTBZ-FM (and relinquish day to day operations of KISW-FM) from June 1996 to the May 1997 closing. The assets of KISW-FM totaling $6,125,680 are classified as "Assets held for sale" on the December 31, 1996 balance sheet. The transaction was completed in May 1997. The Company recorded a pre-tax gain on the exchange of approximately $21 million. In July 1996, the Company sold the assets of KLUC-FM and KXNO-AM in Las Vegas for $10.6 million. A pretax gain of approximately $5.9 million was recorded on the sale. (Continued) 4 NATIONWIDE COMMUNICATIONS (Broadcast Operations of Nationwide Mutual Insurance Company) Notes to Combined Financial Statements, Continued September 30, 1997 and December 31, 1996 and 1995 In September 1996, the Company entered into an agreement to purchase the assets of KUPR-FM and KCEO-AM San Diego for $32 million. The transaction was completed in April 1997. Pending the completion of this acquisition, the Company entered into a time brokerage agreement which allowed the Company to operate KUPR-FM and KCEO-AM. The Company sold KCEO-AM in June 1997 for $2.6 million. No gain or loss was realized on the sale. KUPR-FM's call letters were changed to KMCG-FM in 1997. In February 1997, the Company entered into an agreement to purchase the assets of KHTC-FM in Phoenix for $34 million. The transaction was completed in June 1997. Pending the completion of this acquisition, the Company entered into a time brokerage agreement which allowed the Company to operate KHTC-FM from March 1, 1997 through the completion of the transaction. KHTC- FM's call letters were changed in 1997 to KGLQ-FM. The acquisitions completed in 1997 and 1996 have been accounted for by the purchase method of accounting. The purchase price has been allocated to the assets acquired based on their fair values at the date of acquisition. The excess of the purchase price over the estimated fair values of the net tangible assets acquired has been recorded as broadcast licenses. The results of operations of the acquired businesses are included in the Company's financial statements since the respective dates of acquisitions. Assuming each of the above acquisitions and dispositions had taken place at the beginning of 1996 and removing the effects of all gains and losses from these transactions, unaudited pro forma combined results of operations would have been as follows: Pro forma (unaudited) ---------------------------------- Nine months ended Year ended September 30, December 31, 1997 1996 ---- ---- Net revenue $ 71,712,497 86,818,631 Net income (loss) (3,976,192) (2,981,098) (Continued) 5 NATIONWIDE COMMUNICATIONS (Broadcast Operations of Nationwide Mutual Insurance Company) Notes to Combined Financial Statements, Continued September 30, 1997 and December 31, 1996 and 1995 (b) PENDING AS OF SEPTEMBER 30, 1997 In August 1996, the Company entered into an agreement to purchase the assets of KGB-FM and KPOP-AM in San Diego for $44.2 million. The Company then signed agreements to exchange KGB-FM and KPOP-AM in San Diego for KSLX-FM and KSLX-AM in Phoenix and, following that closing, exchange the Phoenix stations for KEGL-FM in Dallas. The acquisition of the San Diego stations was completed in January 1997. The Company operated KGB-FM and KPOP-AM under a time brokerage agreement from August 1996 to the January 1997 closing. In April 1997, the exchange of the San Diego and Phoenix stations was completed. The Phoenix-Dallas exchange is pending FCC approval of the renewal of the KEGL-FM license. In the meantime, the Company has entered into a time brokerage agreement which allows the Company to operate KEGL-FM (and relinquish day to day operations of the Phoenix stations). The assets of the Phoenix stations totaling $44,667,939 are classified as "Assets held for Sale" on the September 30, 1997 balance sheet. The Company does not anticipate recognizing a gain on this transaction. After the completion of these transactions, the Company will own and/or operate the following stations: Station Location ------- -------- KDMX-FM Dallas, Texas KEGL-FM KHMX-FM Houston, Texas KTBZ-FM KMJZ-FM Minneapolis, Minnesota KSGS-AM KXGL-FM San Diego, California KMCG-FM KZZP-FM Phoenix, Arizona KGLQ-FM WPOC-FM Baltimore, Maryland WMJI-FM Cleveland, Ohio WMMS-FM WGAR-FM WNCI-FM Columbus, Ohio WCOL-FM WFII-AM (Continued) 6 NATIONWIDE COMMUNICATIONS (Broadcast Operations of Nationwide Mutual Insurance Company) Notes to Combined Financial Statements, Continued September 30, 1997 and December 31, 1996 and 1995 (c) TIME BROKERAGE AGREEMENT FEES The Company has included $1,731,000 and $634,000 of time brokerage agreement revenue in gross broadcast revenues for the periods ended September 30, 1997 and December 31, 1996, respectively. Broadcast operating expenses include $4,218,000 and $4,942,000 of time brokerage agreement expense for the periods ended September 30, 1997 and December 31, 1996, respectively. There were no time brokerage agreements in 1995. (3) NOTES RECEIVABLE A summary of notes receivable follows: September 30, December 31, 1997 1996 ---- ---- $6 million note receivable net of discounts of $1,679,897 and $1,936,407 at September 30, 1997 and December 31, 1996, respectively; due January 2001 discounted at 8.5% $ 4,320,103 4,063,593 $5 million note receivable net of discounts of $217,323 and $366,459 at September 30, 1997 and December 31, 1996, respectively; $1 million installments due November 1995 to 1999; discounted at 8% 2,782,677 2,633,541 --------- --------- 7,102,780 6,697,134 Less current portion (982,820) (931,278) --------- --------- $ 6,119,960 5,765,856 --------- --------- --------- --------- (4) PROPERTY AND EQUIPMENT A summary of property and equipment follows: September 30, December 31, 1997 1996 ---- ---- Land $ 597,111 471,462 Building and improvements 1,029,072 806,475 Leasehold improvements 1,965,855 1,264,883 Equipment 20,956,133 13,728,965 Construction in process 2,974,208 669,684 ---------- ---------- 27,522,379 16,941,469 Accumulated depreciation (10,005,312) (8,687,441) ---------- ---------- Net property and equipment $ 17,517,067 8,254,028 ---------- ---------- ---------- ---------- Depreciation expense was $1,966,702, $2,184,554, and $1,673,843 for the nine month period ended September 30, 1997 and for the years ended December 31, 1996 and 1995, respectively. (Continued) 7 NATIONWIDE COMMUNICATIONS (Broadcast Operations of Nationwide Mutual Insurance Company) Notes to Combined Financial Statements, Continued September 30, 1997 and December 31, 1996 and 1995 (5) BROADCAST LICENSES AND OTHER INTANGIBLES Intangible assets consist of the following: September 30, December 31, Useful life 1997 1996 ----------- ---- ---- Broadcast licenses 40 Years $ 217,348,705 48,978,599 Broadcast licenses 15-25 Years 56,035,276 56,035,276 Other intangibles 5-20 Years 5,993,898 5,993,898 -------------- ----------- 279,377,879 111,007,773 Accumulated amortization (25,881,355) (20,899,794) -------------- ----------- Net intangible assets $ 253,496,524 90,107,979 -------------- ----------- -------------- ----------- Amortization expense was $4,981,562, $5,171,794, and $3,929,861 for the nine month period ended September 30, 1997 and for the years ended December 31, 1996 and 1995, respectively. (6) LONG-TERM DEBT A summary of long-term debt follows: September 30, December 31, 1997 1996 ---- ---- Notes payable to banks under Credit Agreement (7.813% to 8.125% at September 30, 1997 and 6.625% at December 31, 1996); notes mature March 31, 2004 $92,000,000 40,000,000 Note payable to bank, variable interest rate based on prime (8.5% at September 30, 1997 and December 31, 1996); principal due December 31, 2001 500,000 500,000 ----------- ---------- Total debt $92,500,000 40,500,000 ----------- ---------- ----------- ---------- In April 1997, the Company entered into a new facility (Credit Agreement). The Credit Agreement is with a syndicate of banks and has a capacity of $105 million. Borrowings under the Credit Agreement bear interest at rates that fluctuate with a bank base rate and/or the Eurodollar. The unused portion of the Credit Agreement carries a commitment fee of 0.5%. The Credit Agreement contains various covenants including restrictions on additional indebtedness, liens on property, investments, dividends and mergers or acquisitions. The Credit Agreement also requires that the Company meet certain financial ratios including a leverage ratio, an interest coverage ratio and a free cash flow ratio. The Company was in compliance with all restrictive covenants as of September 30, 1997. The weighted average interest rate of borrowings outstanding at September 30, 1997 is 7.98%. (Continued) 8 NATIONWIDE COMMUNICATIONS (Broadcast Operations of Nationwide Mutual Insurance Company) Notes to Combined Financial Statements, Continued September 30, 1997 and December 31, 1996 and 1995 Aggregate maturities of long-term debt for the next five years and thereafter are as follows: 1998 and 1999 $ - 2000 2,000,000 2001 10,500,000 2002 20,000,000 2003 and thereafter 60,000,000 ---------- $ 92,500,000 ---------- ---------- NCI is required under terms of its Credit Agreement to obtain interest rate protection of 50% of the commitment amount ($52.5 million). During 1997, the Company entered into five-year interest rate swap agreements in order to obtain the required protection. Under the swap agreements, the Company receives a floating rate based on LIBOR, as determined at three month intervals, on a total notional amount of $55,000,000 and pays fixed rates ranging from 5.90% to 5.99%. The swaps effectively change a portion of the Company's interest rate exposure from a variable rate to a fixed rate. Net, off balance- sheet, fair value of the swaps at September 30, 1997 was approximately $271,000 based on the quoted market prices as provided by the financial institutions which are the counterparties to the swap. (7) INCOME TAXES A summary of income tax expense follows: Federal State Total ------- ----- ----- September 30, 1997: Current $ (1,675,000) (53,564) (1,728,564) Deferred 15,544,327 (150,872) 15,393,455 ------------- --------- ---------- $ 13,869,327 (204,436) 13,664,891 ------------- --------- ---------- ------------- --------- ---------- December 31, 1996: Current $ 6,191,800 1,055,000 7,246,800 Deferred (1,623,915) (313,000) (1,936,915) ------------- --------- ---------- $ 4,567,885 742,000 5,309,885 ------------- --------- ---------- ------------- --------- ---------- December 31, 1995: Current 6,900,000 575,319 7,475,319 Deferred (216,788) (186,300) (403,088) ------------- --------- ---------- $ 6,683,212 389,019 7,072,231 ------------- --------- ---------- ------------- --------- ---------- (Continued) 9 NATIONWIDE COMMUNICATIONS (Broadcast Operations of Nationwide Mutual Insurance Company) Notes to Combined Financial Statements, Continued September 30, 1997 and December 31, 1996 and 1995 The actual expense differs from the expected expense as follows:
Years ended Nine months ended December 31, September 30, ------------------------- 1997 1996 1995 ---- ---- ---- Expected tax expense computed at 35% $ 14,297,936 5,026,474 6,974,651 State income tax expense (benefit), net of federal tax benefit (185,689) 482,300 252,863 Amortization of intangibles 48,236 70,741 106,329 Gain on sale of nonamortizable intangibles (901,627) (411,584) (172,581) Other, net 406,035 141,954 (89,031) ------------- --------- --------- $ 13,664,891 5,309,885 7,072,231 ------------- --------- --------- ------------- --------- ---------
The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and deferred tax liabilities are as follows: September 30, December 31, 1997 1996 ---- ---- Deferred tax assets: Accounts receivable $ 304,314 301,115 Accrued expenses 7,000 145,846 Accrued income taxes 698,814 790,117 Deferred compensation 879,599 881,456 Accrued retirement benefits 1,018,209 1,214,814 --------- --------- Total gross deferred tax asset 2,907,936 3,332,688 --------- --------- Deferred tax liabilities: Investments and other assets (181,746) (168,216) Property and equipment (137,447) (382,383) Intangibles (17,861,614) (2,718,183) Prepaid expenses and other assets (113,129) (56,451) ----------- ---------- Total gross deferred tax liabilities (18,293,936) (3,325,233) ----------- ---------- Net deferred tax assets (liabilities) $ (15,386,000) 7,455 ----------- ---------- ----------- ---------- The Company believes the existing deductible temporary differences will reverse during periods in which the Company generates net taxable earnings. The Company has considered the above factors in concluding that it is more likely than not that the Company will realize the benefits of existing deferred tax assets. The IRS has begun an examination of the Parent's consolidated 1993, 1994 and 1995 federal income tax returns. The outcome of this examination is not presently determinable; however, in the opinion of management, the effects, if any, of this examination are not expected to be material to the Company's combined financial statements. (Continued) 10 NATIONWIDE COMMUNICATIONS (Broadcast Operations of Nationwide Mutual Insurance Company) Notes to Combined Financial Statements, Continued September 30, 1997 and December 31, 1996 and 1995 (8) FAIR VALUE OF FINANCIAL INSTRUMENTS The carrying value for cash, short-term investments, accounts receivable, the current portion of notes receivable and current liabilities approximates their respective fair values because of the short maturity of these instruments. The fair value of notes receivable ($6,119,960 at September 30, 1997 excluding the current portion) is calculated by discounting scheduled cash flows through maturity using the current rates. The carrying value for these notes at September 30, 1997 and December 31, 1996 approximated fair value at that date. The carrying value of long-term debt approximates fair value since the interest rate varies periodically with market interest rates. Net, off balance-sheet, fair value of the interest rate swaps at September 30, 1997 was approximately $271,000 based on the quoted market prices as provided by the financial institutions which are the counterparties to the swap. (9) PENSION PLANS The Company is a participant, together with other affiliated companies, in a pension plan covering all employees who have completed at least 1,000 hours of service within a twelve month period and who have met certain age requirements. Benefits are based upon the highest average annual salary of a specified number of consecutive years of the last ten years of service. The Company funds pension costs accrued for all employees as directed by the Parent. Effective January 1, 1995, the plan was amended to provide enhanced benefits for participants who met certain eligibility requirements and elected early retirement no later than March 15, 1995. The entire cost of the enhanced benefit was borne by the Parent and certain of its property and casualty insurance company affiliates. Pension cost (benefits) charged to operations by the Company during the nine months ended September 30, 1997 and during the years ended December 31, 1996 and 1995 were ($359,000), ($519,000), and $151,000, respectively. The Company's net prepaid (accrued) pension expense as of September 30, 1997 and December 31, 1996 was $134,000 and $(213,000), respectively. Accrued pension expense at December 31, 1996 is included in accrued expenses and other current liabilities. The Company also participates, together with certain affiliated companies, in two nonqualified unfunded defined-benefit pension plans covering directors and certain key executives. The Company's pension expense for these plans was $347,000, $413,000 and $542,000 for the nine months ended September 30, 1997 and for the years ended December 31, 1996 and 1995, respectively. Accrued post retirement expense for these plans is $2,909,169 and $2,892,414 at September 30, 1997 and December 31, 1996, respectively. (Continued) 11 NATIONWIDE COMMUNICATIONS (Broadcast Operations of Nationwide Mutual Insurance Company) Notes to Combined Financial Statements, Continued September 30, 1997 and December 31, 1996 and 1995 (10) POSTRETIREMENT BENEFITS OTHER THAN PENSIONS In addition to the defined benefit pension plan, the Company, together with other affiliated companies, participates in life and health care defined benefit plans for qualifying retirees. Postretirement life and health care benefits generally available to full time employees who have attained age 55 and have accumulated 15 years of service with the Company after reaching age 40. Postretirement health care benefit contributions are adjusted annually and contain cost-sharing features such as deductibles and coinsurance. In addition, there are caps on the Company's portion of the per-participant cost of the postretirement health care benefits. These caps can increase annually, but not more than three percent. The Company's policy is to fund the cost of health care benefits in amounts determined at the discretion of management. Plan assets are invested primarily in group annuity contracts of Nationwide Life Insurance Company. The Company had prepaid accrued postretirement benefits as of September 30, 1997 and December 31, 1996 of $189,000 and $134,000, respectively. The net periodic postretirement cost (benefit) for the nine months ended September 30, 1997 and for the years ended December 31, 1996 and 1995 was ($55,000), $13,000 and ($128,000), respectively. (11) SAVINGS PLAN The Company is a participant in the Nationwide Insurance Enterprise 401(k) savings plan which covers substantially all employees. Employee contributions to the plan are matched by the Company at the rate of 70% of the first 2% of pay and 40% of the next 4% of pay contributed to the plan. The Company's contribution expense for the plan for the nine months ended September 30, 1997 and for the years ended December 31, 1996 and 1995 were approximately $263,000, $284,000 and $328,000, respectively. (12) COMMITMENTS AND CONTINGENCIES (a) LEASES The Company has operating leases for certain land and facilities used in their operations with initial or remaining lease terms in excess of one year. Future minimum lease payments under these leases as of September 30, 1997 are: Three months ending December 31, 1997 $ 1,027,657 Years ended: 1998 3,367,298 1999 3,207,915 2000 3,139,186 2001 2,739,192 2002 and years ended thereafter 8,614,179 --------- Total minimum lease payments $ 22,095,427 ---------- ---------- (Continued) 12 NATIONWIDE COMMUNICATIONS (Broadcast Operations of Nationwide Mutual Insurance Company) Notes to Combined Financial Statements, Continued September 30, 1997 and December 31, 1996 and 1995 Total rent expense was $2,530,206, $1,769,657 and $1,629,567 for the period ended September 30, 1997 and the years ended December 31, 1996 and 1995, respectively. (b) LEGAL PROCEEDINGS The Company is involved in various claims and legal actions arising in the ordinary course of business. In the opinion of management, the ultimate disposition of these matters will not have a material adverse effect on the Company's financial position, results of operations or liquidity. (13) SUBSEQUENT EVENTS On December 19, 1997, the Company signed an agreement with Citicasters Co., a wholly owned subsidiary of Jacor Communications, Inc., to sell substantially all of the radio station assets (exclusive of cash, cash equivalents, accounts receivable and notes receivable) for $591 million. In the same agreement, Jacor also agreed to purchase the radio station assets of San Diego Lotus Corporation, an affiliate of the Company, for $29 million. These transactions are expected to be finalized in the second quarter of 1998. In December 1997, all employees, assets and liabilities of NCI were transferred to the Parent. As part of the liquidation, the Company paid off its existing long-term debt and canceled its related swap agreements with the proceeds from borrowings from the Parent in December 1997. In connection with the extinguishment, the Company anticipates recognizing an extraordinary loss of approximately $800,000 which includes loss on the extinguishment of debt and early termination fees related to the interest rate swaps. (b) Unaudited Pro Forma Financial Information Unaudited Pro Forma Condensed Consolidated Statements of Operations for the year ended December 31, 1996 and the nine month period ended September 30, 1997. Unaudited Pro Forma Condensed Consolidated Balance Sheet as of September 30, 1997. Notes to Unaudited Pro Forma Financial Information. UNAUDITED PRO FORMA FINANCIAL INFORMATION The following unaudited pro forma financial information is based on the historical financial statements of Jacor and Nationwide 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 nine months ended September 30,1997 and the year ended December 31, 1996 give effect to each of the following transactions as if such transactions had been completed January 1, 1996: (i) the Nationwide Acquisition, and (ii) other 1996 and 1997 Jacor acquisitions previously described in the Company's quarterly reports on Form 10-Q and current reports on Form 8-K. The pro forma condensed consolidated balance sheet as of September 30, 1997 has been prepared as if the Nationwide Acquisition and the other acquisitions pending as of September 30, 1997 and any other transaction consummated after September 30, 1997, had occurred on September 30, 1997. The pending transactions will be accounted for using the purchase method of accounting. The total purchase costs of the pending transactions 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 notes thereto. The Unaudited Pro Forma Financial Information is not necessarily indicative of either future results of operations or the results that might have occurred if the foregoing transactions had been consummated on the indicated dates. The Unaudited Pro Forma Financial Information should be read in conjunction with Jacor's Consolidated Financial Statements and notes thereto contained in Jacor's Form 10-K for the year ended December 31, 1996 and Nationwide's Combined Financial Statements and notes thereto included in this Form 8-K(A). JACOR COMMUNICATIONS, INC. AND SUBSIDIARIES UNAUDITED PROFORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS (IN THOUSANDS, EXCEPT PER SHARE DATA)
LMA Date Year Ended December 31, 1996 Closing Date ------------------------------------------------------------- Other Jacor Acquisition Other Historical Pro Forma Acquisitions Historical Jacor Adjustments Pro Forma Nationwide ----------- ------------ ----------- ----------- Net revenue $223,761 $335,209 (a) $558,970 $73,760 Broadcast operating expenses 151,065 235,630 (a) 386,695 58,596 Depreciation and amortization 23,404 79,870 (a) 103,274 7,356 Corporate general and administrative expenses 7,629 1,479 (a) 9,108 3,282 Special bonuses 2,303 - 2,303 ----------- ------------ ----------- ----------- Operating income 39,360 18,230 57,590 4,526 Interest expense, net (32,244) (51,467)(b) (83,711) 4,373 Gain on sale of radio stations 2,539 - 2,539 5,948 Other income (expense), net 5,716 1,073 (c) 6,769 (485) ----------- ------------ ----------- ----------- Income (loss) before income taxes and extraordinary items 15,371 (32,164) (16,793) 14,362 ----------- ------------ ----------- ----------- Income tax (expense) benefit (7,300) 11,528 (d) 4,228 (5,310) ----------- ------------ ----------- ----------- Income (loss) before extraordinary items $8,071 ($20,636) ($12,565) $9,052 ----------- ------------ ----------- ----------- ----------- ------------ ----------- ----------- Income (loss) per common share $0.30 Number of common shares used in per share computations 26,830 Nationwide Acquisition Total Pro Forma Pro Forma Combined Adjustments Adjustments Pro Forma ----------- ----------- ----------- Net revenue $13,059 (e) (4,014)(h) $641,775 Broadcast operating expenses 8,739 (e) (14,630)(h) 439,400 Depreciation and amortization 4,306 (e) 4,559 (i) 119,495 Corporate general and administrative expenses (3,282)(h) 9,108 Special bonuses 2,303 ----------- ------------ ----------- Operating income 14 9,339 71,469 Interest expense, net (13,401)(e) (15,371)(j) (108,110) Gain on sale of radio stations (6,203)(f) 2,284 Other income (expense), net 6,304 ----------- ------------ ----------- Income (loss) before income taxes and extraordinary items (19,590) (6,032) (28,053) ----------- ------------ ----------- Income tax (expense) benefit 7,559 (g) 2,413 (k) 8,890 ----------- ------------ ----------- Income (loss) before extraordinary items ($12,031) ($3,619) ($19,163) ----------- ------------ ----------- ----------- ------------ ----------- Income (loss) per common share before extraordinary items ($0.39) Number of common shares used in per share computations 49,564(r)
JACOR COMMUNICATIONS, INC. AND SUBSIDIARIES UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS (IN THOUSANDS, EXCEPT PER SHARE DATA)
NINE MONTHS ENDED SEPTEMBER 30, 1997 --------------------------------------------------------------------- OTHER JACOR ACQUISITIONS OTHER NATIONWIDE HISTORICAL PRO FORMA ACQUISITIONS HISTORICAL PRO FORMA JACOR ADJUSTMENTS PRO FORMA NATIONWIDE ADJUSTMENTS ----------- -------------- ------------ ----------- ------------ Net revenue............................................. $ 368,941 $ 70,972 (a) $ 439,913 $ 71,149 $ 565 (e) Broadcast operating expenses............................ 251,513 47,524 (a) 299,037 61,717 (1,699)(e) Depreciation and amortization........................... 53,097 23,363 (a) 76,460 6,948 1,812 (e) Corporate general and administrative expenses........... 9,240 9,240 2,657 ----------- ------- ------------ ----------- ---------- Operating income (loss)............................. 55,091 85 55,176 (173) 452 Interest expense........................................ (57,348) (7,677)(b) (65,025) (3,052) (3,197)(e) Gain on sale of radio stations and other assets......... 10,801 10,801 44,132 (44,132)(f) Other income (expense), net............................. 298 (c) 298 (56) ----------- ------- ------------ ----------- ---------- Income (loss) before income taxes and extraordinary items............................................. 8,544 (7,294) 1,250 40,851 (46,877) ----------- ------- ------------ ----------- ---------- Income tax (expense) benefit............................ (6,500) 3,825 (d) (2,675) (13,665) 15,714 (g) ----------- ------- ------------ ----------- ---------- Income (loss) before extraordinary items............ $ 2,044 $ (3,469) $ (1,425) $ 27,186 $ (31,163) ----------- ------- ------------ ----------- ---------- ----------- ------- ------------ ----------- ---------- Income (loss) per common share before extraordinary items .............................. $ 0.05 ----------- ----------- Number of common shares used in per share computations.. 41,647 ----------- ----------- ACQUISITION TOTAL PRO FORMA COMBINED ADJUSTMENTS PRO FORMA ------------- ------------- Net revenue............................................. $ (2,176)(h) $ 509,451 Broadcast operating expenses............................ (15,946)(h) 343,109 Depreciation and amortization........................... 3,406 (i) 88,625 Corporate general and administrative expenses........... (2,657)(h) 9,240 ------------ ------------ Operating income (loss)............................. 13,021 68,476 Interest expense........................................ (12,051)(j) (83,325) Gain on sale of radio stations and other assets......... 10,801 Other income (expense), net............................. 242 ------------ ------------ Income (loss) before income taxes and extraordinary items............................................. 970 (3,806) ------------ ------------ Income tax (expense) benefit............................ (388)(k) (1,014) ------------ ------------ Income (loss) before extraordinary items............ $ 582 $ (4,820) ------------ ------------ ------------ ------------ Income (loss) per common share...................... $ (0.10) ------------ ------------ Number of common shares used in per share computations.. 49,564 (r) ------------ ------------
See accompanying notes to unaudited pro forma condensed consolidated financial statements. JACOR COMMUNICATIONS, INC. AND SUBSIDIARIES UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET (IN THOUSANDS)
AS OF SEPTEMBER 30, 1997 --------------------------------------------------------------------------------- OTHER JACOR NATIONWIDE ACQUISITION OTHER ACQUISITION TOTAL HISTORICAL PRO FORMA ACQUISITIONS AND RELATED SAN DIEGO COMBINED JACOR ADJUSTMENTS PRO FORMA FINANCING DISPOSITION PRO FORMA ---------- ------------- ------------ ------------ ------------- ----------- Current Assets Cash and cash equivalents.................... $ 18,779 $ 18,779 $ 18,779 Accounts receivable.......................... 118,500 118,500 118,500 Prepaid expenses and other current assets.... 32,417 32,417 32,417 ---------- ------------- ------------ ------------ ------------- ----------- Total current assets..................... 169,696 169,696 Property and equipment......................... 175,567 $ 20,050 (l) 195,617 $ 28,000(o)$ (2,000)(q) 221,617 Intangible assets.............................. 2,003,526 183,925 (l) 2,185,551 604,000(o) (63,000)(q) 2,728,451 Other assets................................... 57,743 (26,225)(m) 31,518 31,518 ---------- ------------- ------------ ------------ ------------- ----------- Total assets............................. $2,406,532 $ 177,750 $ 2,584,282 $ 632,000 $ (65,000) $3,151,282 ---------- ------------- ------------ ------------ ------------- ----------- ---------- ------------- ------------ ------------ ------------- ----------- Current liabilities: Accounts payable, accrued expenses and other current liabilities........................ $ 86,504 $ 86,504 $ 86,504 Long-term debt, current portion.............. -- ---------- ------------- ------------ ------------ ------------- ----------- Total current liabilities................ 86,504 86,504 86,504 Long-term debt................................. 834,500 $ 174,000(n) 1,008,500 $ 290,000(p) $ (65,000)(p) 1,233,500 Liquid Yield Option Notes...................... 123,619 123,619 150,000(p) 273,619 Other liabilities.............................. 114,927 3,750(l) 118,677 118,677 Deferred tax liability......................... 334,549 334,549 334,549 Shareholders' equity: Common stock................................. 455 455 40(p) 495 Additional paid-in capital................... 860,530 860,530 191,960(p) 1,052,490 Common stock warrants........................ 31,500 31,500 31,500 Retained earnings............................ 19,948 19,948 19,948 ---------- ------------- ------------ ------------ ------------- ----------- Total shareholders' equity............... 912,433 912,433 192,000 1,104,433 ---------- ------------- ------------ ------------ ------------- ----------- Total liabilities and shareholders' equity.................................. $2,406,532 $ 177,750 $ 2,584,282 $ 632,000 $ (65,000) $3,151,282 ---------- ------------- ------------ ------------ ------------- ----------- ---------- ------------- ------------ ------------ ------------- -----------
See accompanying notes to unaudited pro forma condensed consolidated financial statements. Jacor Communications, Inc. and Subsidiaries Notes to Unaudited Pro Forma Condensed Consolidated Financial Statements (in thousands) (a) These adjustments reflect additional revenues and expenses related to the following acquisitions for periods prior to the dates of acquisition, and other individually immaterial acquisitions completed during 1996 and 1997 and pending as of September 30, 1997:
Nine Months Ended September 30, 1997 ------------------------------------ Broadcast Net Operating Depreciation and Revenue Expenses Amortization ------- -------- ------------ Regent (February 1997) $ 233 $ 1,061 Premiere (June 1997) $14,130 9,276 4,347 Radio Active Media (April 1997) 11,191 7,484 3,834 Multiverse (October 1997) 11,445 4,179 6,589 Other (various) 34,206 26,352 7,532 ------- ------- ------- Total $70,972 $47,524 $23,363 ------- ------- ------- ------- ------- -------
Year Ended December 31, 1996 ---------------------------- Broadcast General Net Operating Depreciation and and Revenue Expenses Amortization Administrative ------- -------- ------------ -------------- Noble (February and July 1996) $ 10,721 $ 8,872 $ 2,665 Citicasters (September 1996) 101,806 58,543 21,913 $ 1,479 Gannett (December 1996) 2,503 6,828 -- Regent (February 1997) 33,797 26,447 6,369 Premiere (June 1997) 31,678 22,465 9,486 Radio Active Media (April 1997) 47,357 32,144 15,336 Multiverse (October 1997) 7,444 2,832 8,786 Other (various) 99,903 77,499 15,315 -------- -------- ------- ------ Total $335,209 $235,630 $79,870 $1,479 -------- -------- ------- ------ -------- -------- ------- ------
(b) The adjustment represents additional interest expense associated with Jacor's borrowings under the Credit Facility and the issuance of various debt securities in 1996 and 1997 to finance in part the acquisitions. The weighted average interest rate of 7.3% is based on the proforma capitalization of Jacor as of September 30, 1997, prior to the acquisition of Nationwide and the related financings. The assumed interest rate on the Credit Facility borrowings is 6.5% (c) Adjustments represent miscellaneous income generated primarily by Premiere for periods prior to acquisition. (d) To provide for the tax effect of pro forma adjustments. The acquisition adjustments described in Note (a) include non-deductible goodwill amortization estimated to be approximately $1,350 for the nine months ended September 30, 1997 and $7,600 for the year ended December 31, 1996. (e) The adjustments for the year ended December 31, 1996 represent additional revenues and expenses related to Nationwide's acquisitions of radio stations in the Dallas, Houston, Phoenix, San Diego, Minneapolis and Cleveland markets. These adjustment amounts are net of stations divested in the Las Vegas, Orlando and Seattle markets. The adjustments for the nine months ended September 30, 1997 represent additional revenues and expenses related primarily to Nationwide's acquisitions of radio stations in the Dallas, Phoenix and San Diego markets. Nationwide has operated a majority of the stations acquired in 1997 under local marketing agreements since January 1, therefore a significant amount of the revenues and operating expenses related to these stations are included in Nationwide's historical financial statements for the nine months ended September 30, 1997. (f) The adjustments represent elimination of Nationwide's gain on the sale and exchange of certain radio stations in 1996 and 1997. (g) To provide for the tax effect of Nationwide's pro forma adjustments relating to their acquisitions and divestitures at statutory rates. (h) The adjustments represent revenue and expense elimination from the planned divestitures of Nationwide's San Diego stations and projected expense savings of $13,707 and $10,476 for the year ended December 31, 1996 and the nine months ended September 30, 1997, respectively. Expense savings will result from the elimination of redundant broadcast operating expenses arising from the operation of multiple stations in certain markets, changes in compensation and benefit plan structures to conform with Jacor's and the elimination of Nationwide's corporate office function. Estimated savings are as follows: 1996 1997 ---- ---- Corporate general and administrative $ 3,282 $ 2,657 Benefit plan expenses 2,850 2,138 Commissions 675 506 Promotion and programming 2,500 1,875 Personnel reductions 3,200 2,400 Other 1,200 900 ------- ------- Total $13,707 $10,476 ------- ------- ------- ------- (i) 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. (j) The adjustment reflects additional interest expense related to additional borrowings under the credit facility and the 1998 debt offerings to finance, in part, the Acquisition of Nationwide's radio stations. See Note (p) for description of related financings. (k) To provide for the tax effect of pro forma adjustments. (l) The adjustment represents the allocation of Jacor's purchase price, for other individually immaterial acquisitions pending as of September 30, 1997, to the estimated fair value of the assets acquired and certain liabilities assumed. (m) The adjustment represents the application of previously funded escrow deposits to the purchase price of the other acquisitions described in note l. (n) The adjustment represents incremental credit facility borrowings required to finance Jacor's other acquisitions. (o) The adjustment represents the allocation of Jacor's purchase price of Nationwide to the estimated fair value of the assets acquired and the recording of goodwill associated with the acquisition. (p) The adjustment represents the assumed net proceeds from the common stock offering, the liquid yield option notes (LYON's) offering, the subordinated notes offering and incremental credit facility borrowings to finance the acquisition of Nationwide's radio stations. Common stock proceeds $192,000 Notes offering 100,000 LYONs 150,000 Net credit facility borrowings 125,000 -------- Total $567,000 -------- -------- The net credit facility borrowings assumes Jacor divests the San Diego stations for cash proceeds of $65 million. (q) Upon completion of the Nationwide acquisition, Jacor's radio station ownership in the San Diego market would exceed the Federal Communications Commission ownership limitation in that market. Jacor plans to divest the Nationwide radio stations currently operating in the market. The sale price is management's estimate based on current available information. (r) The pro forma weighted average shares outstanding includes all shares outstanding as of September 30, 1997 and the shares to be issued in the 1998 common stock offering. The pro forma weighted average shares of Jacor do not reflect any outstanding options and warrants as they are antidilutive. The LYON's are not common stock equivalents and are therefore, excluded from the computations. (c) Exhibits 2.1 Agreement of Sale dated December 19, 1997 by and between Nationwide Mutual Insurance Company, Employers Insurance of Wausau, Nationwide Communications Inc., San Diego Lotus Corp., The Beak and Wire Corporation, Citicasters Co. and Jacor Communications Company (omitting schedules and exhibits not deemed material).* 23.1 Consent of Coopers & Lybrand L.L.P. 23.2 Consent of Ernst & Young LLP 23.3 Consent of William T. Ogden, Inc. 23.4 Consent of KPMG Peat Marwick LLP 3 99.1 Press Release dated October 13, 1997 * 99.2 Press Release dated October 23, 1997* 99.3 Press Release dated October 27, 1997* * Previously filed. Signatures Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. JACOR COMMUNICATIONS, INC. January 20, 1998 By: /s/ Jon M. Berry --------------------------------------------- Jon M. Berry, Senior Vice President and Treasurer 4 EX-23.1 2 CONSENT OF COOPERS & LYBRAND Exhibit 23.1 CONSENT OF INDEPENDENT ACCOUNTANTS We consent to the incorporation by reference in the Prospectus Supplements to the Registration Statement of Jacor Communications, Inc., Jacor Communications Company and Subsidiary Guarantors on Form S-3 (File No. 333-40127) of our report dated February 27, 1997 on our audits of the consolidated financial statements of Jacor Communications, Inc. as of December 31, 1996 and 1995 and for each of the three years in the period ended December 31, 1996, which report is included in Jacor Communications, Inc.'s Annual Report on Form 10-K; of our report dated February 28, 1997, on our audits of the combined financial statements of EFM Media Management, Inc., EFM Publishing, Inc., and PAM Media, Inc. as of December 31, 1995 and 1996 and for each of the three years in the period ended December 31, 1996, which report is included in Jacor Communications, Inc.'s Current Report on Form 8-K dated March 21, 1997, as amended on March 26, 1997; of our report dated November 7, 1997 on our audits of the financial statements of Archon Communications, Inc. as of December 31, 1996 and March 31, 1997 and for the period July 6, 1995 (Date of Inception) to December 31, 1995, the year ended December 31, 1996 and the three months ended March 31, 1997, which report is included in Jacor Communications, Inc.'s Current Report on form 8-K dated November 21, 1997; and of our report dated November 14, 1997 on our audits of the combined balance sheet of Synergy Broadcast Investment Enterprises, L.L.C., Worldstar, Inc. and MultiVerse Networks, L.L.C. as of September 28, 1997 and the combined balance sheets of Shanahan Broadcasting, Inc., Worldstar, Inc. and MultiVerse Networks, L.L.C. as of December 29, 1996 and December 31, 1995, and the related combined statements of income, shareholders' equity and cash flows for the nine month period ended September 28, 1997, the year ended December 29, 1996 and the ten months ended December 31, 1995, which report is included in Jacor Communications, Inc.'s Current Report on Form 8-K dated November 21, 1997. We also consent to the reference to our firm under the caption "Experts." COOPERS & LYBRAND L.L.P. Cincinnati, Ohio January 20, 1998 EX-23.2 3 CONSENT OF ERNST & YOUNG LLP Exhibit 23.2 CONSENT OF INDEPENDENT AUDITORS We consent to the reference to our firm under the caption "Experts" in the Preliminary Prospectus Supplements dated January 21, 1998 to the Prospectus contained in the Registration Statement (Form S-3 No. 333-40127) of Jacor Communications, Inc., Jacor Communications Company and the Subsidiary Guarantors and to the incorporation by reference therein of our report dated February 21, 1997, with respect to the consolidated financial statements of Premiere Radio Networks, Inc. included in Jacor Communications, Inc.'s Current Report on Form 8-K(A) dated April 7, 1997. ERNST & YOUNG LLP Los Angeles, California January 19, 1998 EX-23.3 4 CONSENT OF WILLIAM T. OGDEN, INC. Exhibit 23.3 CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS We consent to the reference to our firm under the caption "Experts" and to the use of our report dated September 18, 1997, with respect to the financial statements of Jacor Broadcasting of Youngstown, Inc. (formerly WN Broadcasting Corp.) incorporated by reference in the Preliminary Prospectus Supplements to the Registration Statement on Form S-3 (File No. 333-40127) and related Prospectus of Jacor Communications Company, Jacor Communications, Inc. and Subsidiary Guarantors. WILLIAM T. OGDEN, INC. Youngstown, Ohio January 19, 1998 EX-23.4 5 CONSENT OF KPMG PEAT MARWICK LLP Exhibit 23.4 CONSENT OF INDEPENDENT AUDITORS We consent to the incorporation by reference in the Preliminary Prospectus Supplements to the Prospectus contained in the registration statement (No. 333-40127) on Form S-3 of Jacor Communications, Inc., Jacor Communications Company and the Subsidiary Guarantors of our report dated January 4, 1998, with respect to the combined balance sheets of Nationwide Communications as of September 30, 1997 and December 31, 1996, and the related combined statements of earnings, shareholder's equity, and cash flows for the nine month period ended September 30, 1997 and each of the years in the two year period ended December 31, 1996, which report appears in the Form 8-K of Jacor Communications, Inc. dated January 5, 1998, as amended. In addition, we consent to the reference to our firm under the heading "Experts" in the Preliminary Prospectus Supplements to the Prospectus contained in the registration statement (No. 333-40127) on Form S-3 of Jacor Communications, Inc., Jacor Communications Company and the Subsidiary Guarantors. KPMG Peat Marwick LLP Columbus, Ohio January 20, 1998 -----END PRIVACY-ENHANCED MESSAGE-----