-----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, EmYnM6aRSu8m6/o0zbrdMAzXSrNLdLFr3/BVBBv8EPA/StEtyVSW9pGuh6JwSxLV 4SQuNgkqaHCUJszc7q4W1w== 0000930661-96-001638.txt : 19961118 0000930661-96-001638.hdr.sgml : 19961118 ACCESSION NUMBER: 0000930661-96-001638 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19960930 FILED AS OF DATE: 19961114 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: EVERGREEN MEDIA CORP CENTRAL INDEX KEY: 0000894972 STANDARD INDUSTRIAL CLASSIFICATION: RADIO BROADCASTING STATIONS [4832] IRS NUMBER: 752247099 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-21570 FILM NUMBER: 96666268 BUSINESS ADDRESS: STREET 1: 433 EAST LAS COLINAS BLVD STREET 2: STE 2230 CITY: IRVING STATE: TX ZIP: 75039 BUSINESS PHONE: 2148699020 10-Q 1 FORM 10Q (QE 9-30-96) FORM 10-Q SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended Commission File September 30, 1996 Number 0-215-70 Evergreen Media Corporation --------------------------- (Exact name of registrant as specified in its charter) Delaware 75-2247099 ------------------------------- ------------------- (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 433 East Las Colinas Boulevard, Suite 1130, Irving, Texas 75039 ---------------------------------------------------------------- (Address of principal executive offices) (Zip Code) (972) 869-9020 -------------- (Registrant's telephone number, including area code) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No ----- ----- Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date: 34,028,466 shares of Class A Common Stock and 3,116,066 shares of Class B Common Stock as of October 31, 1996. EVERGREEN MEDIA CORPORATION INDEX Page No. -------- Part I. Financial Information Item 1. Financial Statements Consolidated Balance Sheets (unaudited)................ 2 Consolidated Statements of Operations (unaudited)...... 4 Consolidated Statements of Cash Flows (unaudited)...... 5 Notes to Consolidated Financial Statements (unaudited). 6 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations.................... 13 Part II. Item 1. Legal Proceedings...................................... 18 Item 6. Exhibits and Reports on Form 8-K....................... 19 1 PART I ITEM 1. FINANCIAL STATEMENTS EVERGREEN MEDIA CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (UNAUDITED) (Dollars in thousands)
December 31, September 30, 1995 1996 ------------ ------------- ASSETS Current assets: Cash and cash equivalents 3,430 $ 4,508 Accounts receivable, net 45,413 73,220 Prepaid expenses and other assets 2,146 4,590 -------- -------- Total current assets 50,989 82,318 Property and equipment, net 37,839 48,279 Intangible assets, net 458,787 807,820 Other assets 4,732 40,738 -------- -------- $552,347 $979,155 ======== ========
See accompanying Notes to Consolidated Financial Statements. 2 EVERGREEN MEDIA CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS, CONTINUED (UNAUDITED) (Dollars in thousands)
December 31, September 30, 1995 1996 ------------- -------------- LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable and accrued expenses $ 15,892 $ 23,090 Current portion of long-term debt 4,000 20,875 Other current liabilities 541 436 -------- --------- Total current liabilities 20,433 44,401 -------- --------- Long-term debt, excluding current portion 197,000 562,625 Deferred tax liability 29,233 86,717 Other liabilities 1,104 1,055 -------- --------- Total liabilities 247,770 694,798 -------- --------- Stockholders' equity: Convertible Preferred Stock. Authorized 6,000,000 shares; Issued and outstanding 1,610,000 shares in 1995 and 1,604,500 in 1996. 80,500 80,225 Class A common stock, $.01 par value. Authorized 75,000,000 shares; issued and outstanding 24,929,529 shares in 1995 and 25,028,466 in 1996. 249 250 Class B common stock, $.01 par value. Authorized 4,500,000 shares; issued and outstanding 3,116,066 shares in 1995 and 1996. 31 31 Paid-in capital 317,295 318,256 Accumulated deficit (93,498) (114,405) -------- --------- Total stockholders' equity 304,577 284,357 -------- --------- $552,347 $ 979,155 ======== =========
See accompanying Notes to Consolidated Financial Statements. 3 EVERGREEN MEDIA CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED) (Dollars in thousands, except for per share data)
Three Months Ended Nine Months Ended September 30, September 30, September 30, September 30, 1995 1996 1995 1996 ------------ ------------ ------------ ------------ Gross revenues $ 54,525 90,296 $ 131,863 234,910 Less agency commissions 6,753 11,528 16,686 29,780 ------------ ------------ ------------ ------------ Net revenues 47,772 78,768 115,177 205,130 Station operating expenses excluding depreciation and amortization 28,209 46,131 69,855 126,444 Depreciation and amortization 16,521 21,136 33,053 65,148 Corporate general and administrative expenses 1,230 2,150 2,925 5,348 ------------ ------------ ------------ ------------ Operating expenses 45,960 69,417 105,833 196,940 ------------ ------------ ------------ ------------ Operating income 1,812 9,351 9,344 8,190 ------------ ------------ ------------ ------------ Nonoperating expenses: Interest expense, net 5,084 10,173 14,344 29,212 Other expense, net - - 189 - ------------ ------------ ------------ ------------ Nonoperating expenses, net 5,084 10,173 14,533 29,212 ------------ ------------ ------------ ------------ Loss before income taxes (3,272) (822) (5,189) (21,022) Income tax benefit 921 29 376 3,734 ------------ ------------ ------------ ------------ Net loss (2,351) (793) (4,813) (17,288) Preferred stock dividends (1,208) (1,204) (3,623) (3,619) ------------ ------------ ------------ ------------ Net loss attributable to common stockholders (3,559) $ (1,997) $ (8,436) $(20,907) ============ ============ ============ ============ Loss per common share (0.14) $(0.07) $(0.46) $(0.74) ============ ============ ============ ============ Weighted average common shares outstanding 25,562,000 28,135,000 18,281,000 28,092,000 ============ ============ ============ ============
See accompanying Notes to Consolidated Financial Statements. 4 EVERGREEN MEDIA CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) (Dollars in thousands)
Nine Months Ended September 30, September 30, 1995 1996 ------------- ------------- Cash flows from operating activities: Net loss $( 4,813) $( 17,288) Adjustments to reconcile net loss to net cash provided by operating activities: Depreciation 4,038 4,675 Amortization of goodwill, intangible assets and other assets 29,015 60,473 Provision for doubtful accounts 728 1,395 Deferred income tax benefit (376) ( 3,734) Changes in certain assets and liabilities, net of effects of acquisitions: Accounts receivable (5,078) ( 14,983) Prepaid expenses and other current assets (144) ( 1,637) Accounts payable and accrued expenses 3,352 1,446 Other assets (167) ( 514) Other liabilities 459 ( 339) --------- --------- Net cash provided by operating activities 27,014 29,494 --------- --------- Cash flows from investing activities: Acquisitions, net of cash acquired (188,004) (392,764) Escrow deposits on pending acquisitions - ( 32,500) Proceeds from sale of assets - 32,000 Capital expenditures ( 2,153) ( 4,602) Other ( 921) ( 5,777) --------- --------- Net cash used by investing activities (191,078) (403,643) --------- --------- Cash flows from financing activities: Proceeds from issuance of long-term debt 185,993 398,250 Principal payments on long-term debt (150,182) (15,750) Payments on other liabilities ( 584) (417) Proceeds from issuance of common stock 132,765 687 Dividend payments on preferred stock ( 3,623) ( 3,619) Payments for debt issuance costs ( 114) ( 3,924) --------- --------- Net cash provided by financing activities 164,255 375,227 --------- --------- Increase in cash and cash equivalents 191 1,078 Cash and cash equivalents at beginning of period 1,216 3,430 --------- --------- Cash and cash equivalents at end of period $ 1,407 $ 4,508 ========= =========
See accompanying Notes to Consolidated Financial Statements. 5 EVERGREEN MEDIA CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) 1. Basis of Presentation --------------------- In the opinion of management, the accompanying unaudited interim financial statements contain all adjustments (consisting of normal recurring accruals) necessary to present fairly the financial position, results of operations and cash flows of Evergreen Media Corporation (the "Company") and subsidiaries for the periods presented. Interim periods are not necessarily indicative of results to be expected for the year. It is suggested that these financial statements be read in conjunction with the consolidated financial statements and the notes thereto included in the Company's Annual Report on Form 10-K for the year ended December 31, 1995. The consolidated financial statements include the accounts of the Company and its subsidiaries, all of which are wholly-owned. All significant intercompany balances and transactions have been eliminated in consolidation. On August 8, 1996, the Company declared a three-for-two stock split effected in the form of a stock dividend payable on August 26, 1996 to shareholders of record at the close of business on August 19, 1996. All share and per share data (other than authorized share data) contained in the accompanying financial statements have been retroactively adjusted to give effect to the stock dividend. Loss per common share is based on the weighted average number of common shares outstanding during the periods after giving retroactive effect to the stock split. Stock options and warrants are not included in the calculation as their effect would be antidilutive. The Company adopted the provisions of SFAS 121, "Accounting for the Impairment of Long-Lived Assets and Long-Lived Assets to be Disposed Of" on January 1, 1996. The adoption of this statement did not have a material effect on the Company's financial position or results of operations. 2. Acquisitions, Dispositions, and Financings ------------------------------------------ 1995 Transactions - ----------------- In May 1995, the Company acquired Broadcasting Partners, Inc. ("BPI"), a publicly traded radio broadcasting company with seven FM and four AM radio stations, eight of which are in the nation's ten largest radio markets (the "BPI Acquisition"). The BPI Acquisition was effected through the merger of a wholly- owned subsidiary of the Company with and into BPI, with BPI surviving the merger as a wholly-owned subsidiary of the Company. The BPI Acquisition included the conversion of each outstanding share of BPI common stock into the 6 right to receive $12.00 in cash and .69 shares of the Company's Class A Common Stock, resulting in total cash payments of $94.8 million and the issuance of 5,611,009 shares of the Company's Class A Common Stock valued at $12.50 per share. In addition, the Company retired existing BPI debt of $81.9 million and incurred various other direct acquisition costs. The total purchase price, including closing costs, allocated to net assets acquired was approximately $258.6 million. In July 1995, the Company completed a secondary public offering of 8,287,500 shares of its Class A Common Stock (the "1995 Offering). The Company issued 7,350,000 shares in the offering, while 937,500 shares were issued in connection with the exercise of certain warrants. Furthermore, 1,013,886 shares were issued in the offering in connection with the exercise of the remaining warrants outstanding pursuant to the underwriters' over-allotment option. The net proceeds to the Company in connection with the offering of approximately $132.7 million were used to reduce borrowings under the revolving credit portion of the Senior Credit Facility. 1996 Completed Transactions - ---------------------------- On January 17, 1996, the Company acquired Pyramid Communications, Inc. ("Pyramid"), a radio broadcasting company with nine FM and three AM radio stations in five radio markets (Chicago, Philadelphia, Boston, Charlotte and Buffalo) (the "Pyramid Acquisition"). The Pyramid Acquisition was effected through the merger of a wholly-owned subsidiary of the Company with and into Pyramid with Pyramid surviving the merger as a wholly-owned subsidiary of the Company. The total purchase price, including closing costs, allocated to net assets acquired was approximately $316.3 million. In May 1996, the Company amended its senior credit facility with a group of commercial banks (the "Senior Credit Facility"), which resulted in reducing the margin applied to the participating banks' prime rate or Eurodollar rate on borrowings under the Senior Credit Facility. The Company is actively engaged in negotiations with certain of the lenders party to the Senior Credit Facility regarding the establishment of a new, expanded credit facility (the "Financing Transaction") that would (i) replace the Senior Credit Facility, (ii) provide the Company with additional borrowing capacity and (iii) fund the financing requirements of the Pending Transactions as well as other potential acquisitions. On May 3, 1996, the Company acquired WKLB-FM in Boston from Fairbanks Communications, Inc. for $34 million in cash plus various other direct acquisition costs. The acquisition of WKLB-FM was financed through borrowings of $33 million under the Senior Credit Facility in addition to $1 million in escrow funds paid by the Company in October 1995 and funded from working capital. As discussed below, the Company has agreed with Greater Media Radio, Inc. ("Greater Media") to exchange WKLB-FM (now known as WROR-FM) for WGAY-FM in Washington, D.C. On July 19, 1996, the Company sold WHTT-FM and WHTT-AM in Buffalo to Mercury Radio Communications, L.P. for $19.5 million in cash, and on August 1, 1996 the Company sold WSJZ-FM in Buffalo to American Radio Systems Corporation 7 for $12.5 million in cash. The $19.5 million in proceeds from the sale of WHTT- FM and WHTT-AM were applied toward the purchase price of KYLD-FM in San Francisco (discussed below), while the $12.5 million in proceeds from the sale of WSJZ-FM (held in escrow at September 30, 1996) were applied toward the purchase price of WEDR-FM in Miami (discussed below). The Company also entered into time brokerage agreements (effective April 15, 1996 for WSJZ-FM and April 25, 1996 for WHTT-FM and WHTT-AM) to sell substantially all of the broadcast time of these stations pending the completion of the sales. All of these Buffalo stations had been acquired as part of the Pyramid Acquisition. Accordingly, the assets of these stations were classified as assets held for sale in connection with the purchase price allocation of the Pyramid Acquisition, and no gain or loss was recognized by the Company upon consummation of the sales. WHTT-FM, WHTT-AM and WSJZ-FM combined net losses of approximately $123,000 have been excluded from the consolidated statement of operations for the nine months ended September 30, 1996. Interest costs during the holding period of approximately $1.2 million as of September 30, 1996 have been allocated to the purchase price of the stations. On August 14, 1996, the Company acquired KYLD-FM in San Francisco from Crescent Communications, L.P. for $44.0 million in cash plus various other direct acquisition costs. The Company had previously been operating KYLD-FM under a time brokerage agreement since May 1, 1996. The acquisition of KYLD-FM was financed through the proceeds of $19.5 million from the sale of WHTT-FM and WHTT-AM in Buffalo (discussed above), as well as through borrowings of $24.5 million under the Senior Credit Facility (of which $5 million was borrowed by the Company and paid as escrow funds in April 1996). On October 17, 1996, the Company completed a secondary public offering of 9,000,000 shares of its Class A Common Stock (the "1996 Offering"). The net proceeds of approximately $256.0 million were used to reduce borrowings under the New Revolving Loan portion of the Senior Credit Facility. On October 18, 1996, the Company acquired WEDR-FM in Miami from an affiliate of The Rivers Group for $65 million in cash plus various other direct acquisition costs. The acquisition of WEDR-FM was financed through proceeds of $12.5 million from the sale of WSJZ-FM in Buffalo (discussed above), as well as through borrowings of $52.5 million under the Senior Credit Facility (of which $3 million was borrowed by the Company and paid as escrow funds in June 1996 and is held in escrow at September 30, 1996). Pending Transactions - ------------------------- On June 13, 1996, the Company entered an asset exchange agreement with Greater Media under which the Company will exchange WKLB-FM in Boston for WGAY- FM in Washington, D.C. After also initially agreeing to purchase from Greater Media WWRC-AM in Washington, D.C. for $22.5 million in cash, the Company has subsequently agreed with Greater Media to exchange WQRS-FM in Detroit (which, as discussed below, the Company has agreed to acquire from Secret Communications, L.P. ("Secret") for $32.0 million in cash) for WWRC-AM and $9.5 million in cash. The Company has been operating WGAY-FM and WWRC-AM under time brokerage agreements with Greater Media, and Greater Media has been operating WKLB-FM under a time brokerage agreement with the Company, in 8 each case since June 17, 1996. The acquisition of WWRC-AM, expected to close in the first quarter of 1997, will be financed through borrowings of $22.5 million under the Senior Credit Facility. The Company expects that the exchange of WKLB- FM for WGAY-FM will be completed in the fourth quarter of 1996 and that the exchange of WQRS-FM for WWRC-AM will be completed in the first quarter of 1997. The Company retains the right to acquire WWRC-AM from Greater Media under the original contract irrespective of whether the acquisition of WQRS-FM from Secret is consummated. On July 15, 1996, the Company entered into an agreement with Century Chicago Broadcasting, L.P. to acquire WPNT-FM in Chicago for $73.8 million in cash. Consummation of the acquisition of WPNT-FM would result in the Company's ownership of six FM radio stations in the Chicago market, or one station in excess of the maximum number of FM stations under common ownership in a market of Chicago's size established by the recent passage of the Telecommunications Act of 1996 (the "1996 Act). Accordingly, under the terms of the contract to purchase WPNT-FM, the Company has agreed to dispose of one FM station in Chicago on or prior to March 15, 1997. On September 27, 1996, the Company filed an application with the FCC to transfer one of the Chicago FM stations currently owned by the Company - WEJM-FM - to a trust through which the Company would retain the economic interest in WEJM-FM, but no control, pending the sale of the station by the trust. The Company reserves the right to sell WEJM-FM or any of its other Chicago FM stations to an unrelated third party prior to (and instead of) transferring WEJM-FM to the trust. The acquisition of WPNT-FM, expected to close in the first quarter of 1997, will be financed through borrowings of $73.3 million under the Senior Credit Facility (of which $5.0 million was borrowed by the Company and is held in escrow at September 30, 1996) and $500,000 funded from working capital and held in escrow at September 30, 1996. On August 12, 1996, the Company entered into an agreement with Secret to acquire WMXD-FM and WJLB-FM in Detroit for $168.0 million in cash and WFLN-FM in Philadelphia for $37.8 million. The Company also entered into an agreement to operate WMXD-FM and WJLB-FM under time brokerage agreements effective September 1, 1996. The Company entered into a separate agreement with Chancellor Broadcasting Company ("Chancellor") on August 12, 1996 to acquire WWWW-FM and WDFN-AM in Detroit for $30.0 million in cash. Prior to entering into this agreement, the Company had provided certain sales and promotional functions to WWWW-FM and WDFN-AM under a joint sales agreement since February 14, 1996 and, has subsequently operated the stations under a time brokerage agreement since April 1, 1996. The purchase agreement replaced a put and call arrangement regarding the stations that had been in place between the Company and Chancellor since January 9, 1996. The Company also entered into a separate agreement with Secret on August 12, 1996 to acquire WQRS-FM in Detroit for $32 million in cash. As discussed above, the Company will swap WQRS-FM at closing to Greater Media for WWRC-AM in Washington and $9.5 million in cash. In connection with its review under the HSR Act, on October 30, 1996, the Department of Justice ("DOJ") requested additional information concerning the Secret and Chancellor Transactions. The Company is in the process of providing that information at this time. The Company believes that the Secret and Chancellor Transactions do not violate applicable antitrust laws. The Company anticipates closing both transactions during the first quarter of 1997, although there can be no assurance that this will be the case. These transactions will be financed through borrowings of $234.3 million under the Senior Credit Facility and $1.5 million funded from working capital and held in escrow at September 30, 1996. 9 On September 4, 1996, the Company entered into a binding letter of intent with EZ Communications, Inc. ("EZ") to swap five of the Company's six stations in the Charlotte market (WPEG-FM, WBAV-AM, WBAV-FM, WRFX-FM and WFNZ-AM), which were acquired as part of the Pyramid Acquisition and the BPI Acquisition, for WIOQ-FM and WUSL-FM in Philadelphia. As part of this transaction, the Company has also agreed to sell to EZ its sixth radio station in Charlotte, WNKS-FM, for $10.0 million in cash (the exchange and the sale being referred to herein as the "Philadelphia/Charlotte Transaction"). The consummation of the sale of WNKS-FM is contingent on consummation of the exchange of the Company's five other Charlotte stations for EZ's two Philadelphia stations, but consummation of the exchange is not contingent on consummation of the sale. The consummation of the Philadelphia/Charlotte Transaction would result in EZ's ownership of stations in excess of the maximum number of stations under common ownership in a market of Charlotte's size established by the 1996 Act. Accordingly, EZ has agreed with a third party to dispose of certain of its Charlotte FM stations in order to consummate the exchange with the Company. The Philadelphia/Charlotte Transaction is expected to be completed in the first quarter of 1997. On September 19, 1996, the Company entered into an agreement with The Brown Organization to acquire KKSF-FM, KDFC-FM and KDFC-AM in San Francisco for $115.0 million in cash (the "San Francisco Transaction"). The Company also entered into an agreement on September 19, 1996 to operate the stations under a time brokerage agreement effective November 1, 1996. KDFC-AM is currently operated by a third party under a time brokerage agreement, and the Company expects this arrangement to continue after consummation of the San Francisco Transaction. The San Francisco Transaction, expected to be completed in the first quarter of 1997, will be financed through borrowings of $115.0 million under the Senior Credit Facility (of which $10.0 million was borrowed by the Company and is held in escrow at September 30, 1996). On September 19, 1996, the Company entered into an agreement with Beasley FM Acquisition Corp. and certain of its affiliates to acquire WDAS-FM and WDAS- AM in Philadelphia for $103.0 million in cash (the "WDAS-FM/AM Transaction"). In connection with the WDAS-FM/AM Transaction, the Company issued a $5.0 million letter of credit for the benefit of the seller. Consummation of the WDAS-FM/AM Transaction, the Philadelphia/Charlotte Transaction and the acquisition of WFLN- FM from Secret would result in the Company's ownership of six FM radio stations in the Philadelphia market, or one station in excess of the maximum number of FM stations under common ownership in a market of Philadelphia's size established by the 1996 Act. Accordingly, in order to comply with the FCC's multiple ownership rules, the Company filed on October 10, 1996 an application with the FCC to transfer one of the Philadelphia FM stations to be acquired (WFLN-FM) to a trust through which the Company would retain the economic interest in the station, but no control, pending sale of the station by the trust. The Company reserves the right to sell WFLN-FM or any of its other Philadelphia FM stations to an unrelated third party prior to (and instead of) transferring WFLN-FM to the trust. The contract relating to the WDAS-FM/AM Transaction requires that the disposition or transfer of one of the Company's Philadelphia FM stations occur by May 1, 1997. The WDAS-FM/AM Transaction, expected to be completed in the first quarter of 1997, will be financed through borrowings of $103.0 million under the Senior Credit Facility. 10 Consummation of each Pending Transaction is subject to various conditions, including approval from the FCC and review under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR Act"). The Company believes that FCC approval of the 1996 Pending Transactions will be forthcoming in the ordinary course, but there can be no assurance that this will be the case. Escrow funds of $32.5 million paid by the Company in connection with the Pending Transactions have been classified as other assets in the accompanying balance sheet. Summary of Net Assets Acquired - ------------------------------ The BPI Acquisition, the Pyramid Acquisition and the acquisitions of WKLB- FM in Boston and KYLD-FM in San Francisco discussed above were accounted for as purchases. Accordingly, the accompanying consolidated financial statements include the results of operations of the acquired entities from the dates of acquisition. A summary of the net assets acquired follows:
Year Ended Nine Months Ended December 31, September 30, 1995 1996 ------------- ------------------ Working capital, including cash of $492 in 1995 and $1,011 in 1996 $ 12,012 $ 11,218 Assets held for sale - 32,000 Property and equipment 11,684 10,513 Intangible assets 264,650 401,830 Deferred tax liability (29,712) ( 61,218) -------- --------- $258,634 $ 394,343 ======== =========
The consolidated condensed results of operations data for the nine months ended September 30, 1995 and 1996, as if the BPI Acquisition, the 1995 Offering, the Pyramid Acquisition and the KYLD-FM Acquisition, had occurred at January 1, 1995, follows:
Nine Months Ended September 30, September 30, 1995 1996 ------------- ------------- Net revenues $ 181,046 $ 199,555 Operating income (loss) ( 3,571) 6,504 Net loss ( 14,223) ( 4,895) Net loss per common share $( 0.64) $( 0.30)
11 The above pro forma results of operations are presented pursuant to applicable accounting rules relating to business acquisitions and are not necessarily indicative of the actual results that would have been achieved had these transactions occurred at the beginning of 1995, nor are they indicative of future results of operations. 3. Contingencies ------------- The Company is involved in several lawsuits that are incidental to its business. A discussion of certain of these lawsuits is contained in Part II, Item 1, "Legal Proceedings", of this Form 10-Q. The Company believes that the ultimate resolution of the lawsuits will not have a material effect on its financial position or results of operations. 12 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS ------------------------------------------------- GENERAL - -------- The performance of a radio station group is customarily measured by its ability to generate broadcast cash flow. The two components of broadcast cash flow are gross revenues (net of agency commissions) and operating expenses (excluding depreciation and amortization and corporate general and administrative expense). The primary source of revenues is the sale of broadcasting time for advertising. The Company's most significant operating expenses for purposes of the computation of broadcast cash flow are employee salaries and commissions, programming expenses, and advertising and promotion expenses. The Company strives to control these expenses by working closely with local station management. The Company's revenues vary throughout the year. As is typical in the radio broadcasting industry, the Company's first calendar quarter generally produces the lowest revenues, and the fourth quarter generally produces the highest revenues. Data on broadcast cash flow, although not calculated in accordance with generally accepted accounting principles, is widely used in the broadcast industry as a measure of a company's operating performance. Nevertheless, this measure should not be considered in isolation or as a substitute for operating income, cash flows from operating activities or any other measure for determining the Company's operating performance or liquidity that is calculated in accordance with generally accepted accounting principles. Broadcast cash flow does not take into account the Company's debt service requirements and other commitments and, accordingly, broadcast cash flow is not necessarily indicative of amounts that may be available for dividends, reinvestment in the Company's business or other discretionary uses. COMPARISON OF THREE AND NINE MONTHS ENDED SEPTEMBER 30, 1996, TO THREE AND NINE MONTHS ENDED SEPTEMBER 30, 1995 Results of operations for the three and nine months ended September 30, 1996 are not comparable to results of operations for the same periods in 1995 due to the impact of the various station acquisitions and dispositions, time brokerage agreements and financings discussed in Note 2 of the unaudited condensed financial statements included elsewhere in this Form 10-Q. Furthermore, the results of operations for the remainder of 1996 will be affected by the aforementioned transactions. Net revenues for the nine months ended September 30, 1996 increased 78.1% to $205.1 million compared to $115.2 million for the nine months ended September 1995. Net revenues for the three months ended September 30, 1996 increased 64.9% to $78.8 million compared to $47.8 million for the third quarter of 1995. 13 Station operating expenses excluding depreciation and amortization for the nine months ended September 30, 1996 increased 81.0% to $126.4 million compared to $69.9 million for the nine months ended September 30, 1995. Station operating expenses excluding depreciation and amortization for the three months ended September 30, 1996 increased 63.5% to $46.1 million compared to $28.2 million for the third quarter of 1995. Station operating income excluding depreciation and amortization and corporate, general and administrative expense (broadcast cash flow) for the nine months ended September 30, 1996 increased 73.6% to $78.7 million compared to $45.3 million for the nine months ended September 30, 1995. Broadcast cash flow for the three months ended September 30, 1996 increased 66.8% to $32.6 million compared to $19.6 million for the third quarter of 1995. The increase in net revenues, station operating expenses, and broadcast cash flow for the three and nine months ended September 30, 1996 was primarily attributable to the impact of the various station acquisitions, dispositions and time brokerage agreements discussed above, in addition to the overall net operational improvements realized by the Company's radio stations. Depreciation and amortization for the nine months ended September 30, 1996 increased 97.1% to $65.1 million compared to $33.1 million for the same period in 1995. Depreciation and amortization for the three months ended September 30, 1996 increased 27.9% to $21.1 million compared to $16.5 million for the third quarter of 1995. The increase represents additional depreciation and amortization expenses due to the impact of recent acquisitions, offset by decreases due to certain intangibles which became fully amortized in 1995 and 1996. Corporate general and administrative expenses for the nine months ended September 30, 1996 increased 82.8% to $5.3 million compared to $2.9 million for the same period in 1995. Corporate general and administrative expenses for the three months ended September 30, 1996 increased 74.8% to $2.2 million compared to $1.2 million for the third quarter of 1995. The increase is due to the growth of the Company primarily related to recent acquisitions. As a result of the above factors, the Company realized $8.2 million of operating income for the nine months ended September 30, 1996 compared to $9.3 million for the third quarter of 1995. The Company realized $9.4 million of operating income for the three months ended September 30, 1996 compared to $1.8 million for the third quarter of 1995. Interest expense for the nine months ended September 30, 1996 increased 103.6% to $29.2 million compared to $14.3 million for the same period in 1995. Interest expense for the three months ended September 30, 1995 increased 100.2% to $10.2 million compared to $5.1 million for the third quarter of 1995. The net increase in interest expense was primarily due to additional bank borrowings required to finance the acquisitions of BPI, Pyramid, WKLB-FM and KYLD-FM offset by repayment of borrowings from the net proceed of the 1995 Offering and an overall decrease in the Company's borrowing rates. The income tax benefit for the nine and three months ended September 30, 1996 is comprised of current federal and state tax expense and a deferred federal income tax benefit. 14 The net loss attributable to common stockholders for the nine months ended September 30, 1996 was $20.9 million compared to a $8.4 million net loss for the same period in 1995. The increase in net loss attributable to common stockholders for the nine months ended September 30, 1996 was primarily due to the increase in depreciation and amortization expense and interest expense related to recent acquisitions. The net loss attributable to common stockholders for the three months ended September 30, 1996 was $2.0 million compared to a $3.6 million net loss for the third quarter of 1995. The loss per common share for the nine months ended September 30, 1996 was $(0.74) compared to a $(0.46) loss per common share for the same period in 1995. The loss per common share for the three months ended September 30, 1996 was $(0.07) compared to a $(0.14) loss per common share for the third quarter of 1995. The increase in the net loss per common share for the nine months ended September 30, 1996 is a result of the above mentioned factors. LIQUIDITY AND CAPITAL RESOURCES - ------------------------------- Overview -------- The Company historically has generated sufficient cash flow from operations to finance its existing operational requirements, debt service requirements and preferred stock dividends, and the Company anticipates that this will continue to be the case. On October 17, 1996, the Company completed a secondary public offering of 9,000,000 shares of its Class A Common Stock ("1996 Offering") at a public offering price of $30.625 per share. The net proceeds of approximately $256.0 million were used to reduce borrowings under the New Revolving Loan portion of the Senior Credit Facility. The total cash financing required to consummate the Pending Transactions (as discussed in Note 2 to the unaudited condensed financial statements included in this Form 10-Q) is expected to be $550.0 million. Of this amount, approximately $17.0 million has already been advanced by the Company to various sellers in the form of escrow deposits or other upfront payments. In addition, the Company expects to receive $10.0 million in cash from the sale of WNKS-FM to EZ. Accordingly, the Company will require $523.0 million in additional financing to consummate the 1996 Pending Transactions, of which at October 31, 1996 approximately $267.0 million would have been available to the Company under the Company's $625.0 million Senior Credit Facility, after giving effect to the application of the net proceeds of the 1996 Offering on October 17, 1996 to repay borrowings thereunder and the reduction of available borrowings resulting from the issuance of a $5.0 million letter of credit in connection with the WDAS-FM/AM Transaction. The Company is actively engaged in negotiations with certain of the lenders party to the Senior Credit Facility regarding the establishment of a new, expanded credit facility (the "Financing Transaction") that would (i) 15 replace the Senior Credit Facility, (ii) provide the Company with additional borrowing capacity and (iii) fund the financing requirements of the Pending Transactions as well as other potential acquisitions. In the event that the Financing Transaction is not consummated, the Company will need to consider sales of assets or pursue other sources of debt or equity capital in order to consummate the Pending Transactions, and the Company may pursue these possible sources in any event. There can be no assurance that the Company will be successful in establishing an expanded credit facility, or that alternative sources of funding will be available on acceptable terms. The Senior Credit Facility -------------------------- In connection with the Pyramid Acquisition, the Company amended and restated the Senior Credit Facility. Under the amended agreement, dated January 17, 1996, the $150.0 million Term Loan and the $ 200.0 million Revolving Loan remained in place, and the Company also established an additional revolving facility of up to $275.0 million (the "New Revolving Loan"). At September 30, 1996, the Company had drawn $150.0 million of the Term Loan, $199.0 million of the Revolving Loan, and $223.5 million of the New Revolving Loan. The Company's ability to make additional borrowings under the New Revolving Loan is subject to compliance with certain financial ratios and other conditions set forth in the Senior Credit Facility. Substantially all of the assets of the Company and its subsidiaries are pledged to secure performance of the Company's obligations under the Senior Credit Facility. Borrowings under the Senior Credit Facility bear interest at a rate based, at the option of the Company, on the participating banks' prime rate or Eurodollar rate, plus an incremental rate. Without giving effect to the interest rate swap and cap agreements described in the following paragraph, the interest rate on the $150.0 million outstanding under the Term Loan at September 30, 1996 was 7.25% on a blended basis, based on Eurodollar rates, and the interest rates on $185.0 million and $14.0 million of advances outstanding under the Revolving Loan were 7.26% and 8.875% at September 30, 1996, based on the Eurodollar and prime rates, respectively. The interest rate on the $223.5 million outstanding under the New Revolving Loan at September 30, 1996 was 7.23% on a blended basis, based on Eurodollar rates. As required by the terms of the Senior Credit Facility, the Company has entered into interest rate swap agreements with certain of the participating banks under the Senior Credit Facility. These swap agreements have the effect of reducing the impact of changes in interest rates on the Company's floating rate debt under the Senior Credit Facility. At September 30, 1996, interest rate swap agreements covering a notional balance of $325.0 million were outstanding. These outstanding swap agreements mature during 1996 and 1997 and require the Company to pay a fixed rate of 4.96% - 6.38% while the counterparty pays a floating rate based on the six-month London Interbank Borrowing Offered Rate ("LIBOR") plus an incremental rate. In addition to these swap agreements, and in connection with the BPI Acquisition, the Company assumed interest rate cap agreements covering a notional balance of $35.0 million. These outstanding interest rate cap agreements provide fixed rates ranging from 6.0% to 8.0% and mature during 1996 and 1997. During the nine months ended September 30, 1995 and 1996, the Company recognized charges 16 (income) under its interest rate swap and cap agreements of ($272,000) and $21,461, respectively. Because the interest rate swap and cap agreements are with banks that are lenders under the Senior Credit Facility, the Company is not exposed to credit loss. The Term Loan is payable in quarterly installments beginning March 31, 1997 and ending June 30, 2002, while availability under the Revolving Loan reduces quarterly commencing March 31, 1997 and ending June 30, 2002. Availability under the New Revolving Loan reduces quarterly beginning March 31, 1998 and ending December 31, 2002. In May 1996, the Company amended the Senior Credit Facility which resulted in reducing the margin applied to the participating banks' prime rate or Eurodollar rate on borrowings under the Senior Credit Facility. Senior Notes ------------ The Company's Senior Notes due 1999 (the "Senior Notes") were originally issued by the Company in 1989. The Senior Notes bear interest at a fixed rate of 11.6% per annum. Amortization of the Senior Notes began August 1, 1994 and is payable in equal quarterly installments of $1.0 million through May 1, 1999. The Senior Notes are equally and ratably secured by the same collateral package securing the Senior Credit Facility, and the Senior Notes and the Senior Credit Facility rank equal in right of payment with each other. At September 30, 1996, $11.0 million in principal amount of the Senior Notes was outstanding. Forward Looking Statements -------------------------- When used in the preceding and following discussion, the words "expects," "anticipates" and similar expressions are intended to identify forward looking statements. Such statements are subject to certain risks and uncertainties that could cause actual results to differ materially from those expressed in any of the forward looking statements. Such risks and uncertainties include, but are not limited to, industrywide market factors and regulatory developments affecting the Company's operations and the acquisitions and dispositions of broadcast properties described elsewhere herein. 17 PART II ITEM 1. - LEGAL PROCEEDINGS - ------- ----------------- In August 1993, the Company terminated an agreement with Sagittarius Broadcasting Company (an affiliate of Infinity Broadcasting Corporation) and One Twelve, Inc. (collectively, the "Claimants" or the "Plaintiffs") pursuant to which programming featuring radio personality Howard Stern was broadcast on radio station WLUP-AM (now WMVP-AM) in Chicago. The Claimants allege that termination of the agreement was wrongful and have sued the Company in the Supreme Court of the State of New York, County of New York. The agreement required payments to the Claimants in the amount of $2.6 million, plus five percent of advertising revenues generated by the programming over the three year term of the agreement. A total of approximately $680,000 was paid to the Claimants pursuant to the agreement prior to termination. Claimants' original complaint alleged claims for breach of contract, indemnification, breach of fiduciary duty and fraud. Plaintiffs' aggregate prayer for relief in the original complaint totaled $45 million. On July 12, 1994, the Court granted the Company's motion to dismiss Plaintiffs' claims for fraud and breach of fiduciary duty. On June 6, 1995, the Court denied the Plaintiffs' motion for summary judgment on their contract and indemnification claims and this order has been affirmed on appeal. On May 17, 1996, after the close of discovery, the Company filed a motion for summary judgment seeking the dismissal of the remaining claims in the original complaint. Plaintiffs have opposed the Company's summary judgment motion. On July 1, 1996, Plaintiffs moved for leave to amend their complaint in order to add claims for breach of the covenant of good faith and fair dealing, tortious interference with business advantage and prima facia tort. In the proposed amended complaint, Plaintiffs seek compensatory and punitive damages in excess of $25 million. The Company has opposed Plaintiffs' motion for leave to amend. The Court has not yet ruled on the Company's motion for summary judgment or decided whether to permit Plaintiffs to so amend their complaint. The Company believes that it acted within its rights in terminating the agreement. The Company is also involved in various other claims and lawsuits which are generally incidental to its business. The Company is vigorously contesting all such matters and believes that their ultimate resolution, as well as the matter discussed in the preceding paragraph, will not have a material adverse effect on its consolidated financial position or results of operations. 18 ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits. Exhibit No. Description of Exhibit - ------- ---------------------- (a) 2.1 Purchase Agreement, dated as of February 3, 1993, among The Rusk Corporation, 511 Lovett Venture and Evergreen Media Corporation of Houston (see table of contents for list of omitted exhibits). (a) 2.2 Purchase Agreement by and between Metroplex Communications, Inc. and Evergreen Media Corporation of Jacksonville (see table of contents for list of omitted exhibits). (a) 2.2A Second Amendment to Purchase Agreement, dated April 29, 1993, by and between Metroplex Communications, Inc. and Evergreen Media Corporation of North Florida. (a) 2.3 Purchase Agreement, dated as of October 16, 1992, by and between Evergreen Media Corporation of Washington, D.C. and WPNT, Inc. (see table of contents for list of omitted exhibits). (a) 2.3A Amendment to Purchase Agreement, dated April 29, 1993, by and between Evergreen Media Corporation of Washington, D.C. and WPNT, Inc. (b) 2.4 Asset Purchase Agreement by and between Major Broadcasting of Chicago, Inc. and Evergreen Media Corporation of Illinois dated as of June 30, 1993 (see table of contents for list of omitted exhibits and schedules). (b) 2.5 Purchase Agreement by and among Evergreen Media Corporation of Dallas, the Company and Armadillo Broadcasting, L.P. dated as of June 18, 1993 (see table of contents for list of omitted schedules). (c) 2.6 Purchase Agreement by and among Evergreen Media Corporation of Washington, D.C., KASP License Corp., WKBQ License Corp. and Zimco, Inc. (see table of contents for list of omitted exhibits and schedules). (d) 2.7 Asset Purchase Agreement, dated November 19, 1993, by and among Hirsch Holdings of Cleveland, Inc. Evergreen Media Corporation of North Florida and Evergreen Media Corporation of Jacksonville (see table of contents for list of omitted exhibits and schedules). (e) 2.8 Asset Purchase Agreement, dated as of December 10, 1993, by and between Bay Broadcasting Corporation and Evergreen Media Corporation of Jacksonville (see table of contents for list of omitted exhibits and schedules). (f) 2.9 Plan of Reorganization and Merger by and between Evergreen Media Corporation and Broadcasting Partners, Inc., dated as of January 31, 1995, as amended, including the Form of Registration Rights Agreement 19 among MLGA Fund I, L.P., MLGA Fund II, L.P., MLGA/BPI Partners I, L.P., MLGAL Partners, Limited Partnership and Evergreen Media Corporation (see table of contents for a list of omitted schedules). (g) 2.9A Agreement dated as of January 31, 1995 among Evergreen Media Corporation, Broadcasting Partners, Inc., the holders of the shares of capital stock of Broadcasting Partners, Inc. and Scott K. Ginsburg, holder of shares of capital stock of Evergreen Media Corporation. (f) 2.10 Plan and Agreement of Merger among Evergreen Media Partners Corporation, Evergreen Media Corporation and Broadcasting Partners, Inc., dated as of April 12, 1995. (h) 2.11 Agreement and Plan of Merger by and among Pyramid Communications, Inc., Evergreen Media Corporation and Evergreen Media/Pyramid Corporation dated as of July 14, 1995 (see table of contents for list of omitted exhibits and schedules). (i) 2.11A Amendment to Plan and Agreement of Merger by and among Pyramid Communications, Inc., Evergreen Media Corporation and Evergreen Media/Pyramid Corporation dated September 7, 1995. (i) 2.11B Amendment to Plan and Agreement of Merger by and among Pyramid Communications, Inc., Evergreen Media Corporation and Evergreen Media/Pyramid Corporation dated January 11, 1996. (j) 2.12 Purchase Agreement between Fairbanks Communications, Inc. and Evergreen Media Corporation dated October 12, 1995 (see table of contents for list of omitted exhibits and schedules). (n) 2.13 Option Agreement dated as of January 9, 1996 between Chancellor Broadcasting Company and Evergreen Media Corporation (including Form of Advertising Brokerage Agreement and Form of Asset Purchase Agreement). (o) 2.14 Asset Purchase Agreement dated April 4, 1996 between American Radio Systems Corporation and Evergreen Media Corporation of Buffalo (see table of contents for list of omitted exhibits and schedules). (o) 2.15 Asset Purchase Agreement dated April 11, 1996 between Mercury Radio Communications, L.P. and Evergreen Media Corporation of Los Angeles, Evergreen Media/Pyramid Holdings Corporation, WHTT (AM) License Corp. and WHTT (FM) License Corp (see table of contents for list of omitted exhibits and schedules). (o) 2.16 Asset Purchase Agreement dated April 19, 1996 between Crescent Communications L.P. and Evergreen Media Corporation of Los Angeles (see table of contents for list of omitted exhibits and schedules). (p) 2.17 Asset Purchase Agreement dated June 13, 1996 between Evergreen Media Corporation of Los Angeles and Greater Washington Radio, Inc. (see table of contents for list of omitted exhibits and schedules). 20 (p) 2.18 Asset Exchange Agreement dated June 13, 1996 among Evergreen Media Corporation of Los Angeles, Evergreen Media Corporation of the Bay State, WKLB License Corp., Greater Media Radio, Inc. and Greater Washington Radio, Inc. (see table of contents for list of omitted exhibits and schedules). (p) 2.19 Purchase Agreement dated June 27, 1996 between WEDR, Inc., Seller and Evergreen Media Corporation of Los Angeles, Buyer. (See table of contents for list of omitted schedules) (p) 2.20 Time Brokerage Agreement dated July 10, 1996 by and between Evergreen Media Corporation of Detroit, as Licensee, and Kidstar Interactive Media Incorporated, as Time Broker. (p) 2.21 Asset Purchase Agreement dated July 15, 1996 by and among Century Chicago Broadcasting L.P., an Illinois limited partnership, ("Seller"), Century Broadcasting Corporation, a Delaware Corporation ("Century"), Evergreen Media Corporation of Los Angeles, a Delaware Corporation ("Parent"), and Evergreen Media Corporation of Chicago, a Delaware Corporation ("Buyer"). (p) 2.22 Asset Purchase Agreement dated August 12, 1996 by and among Chancellor Broadcasting Company, Shamrock Broadcasting, Inc. and Evergreen Media Corporation of the Great Lakes. (p) 2.23 Asset Purchase Agreement dated as of August 12, 1996 between Secret Communications Limited Partnership and Evergreen Media Corporation of Los Angeles (WQRS-FM). (See table of contents for list of omitted exhibits and schedules) (p) 2.24 Asset Purchase Agreement dated as of August 12, 1996 between Secret Communications Limited Partnership and Evergreen Media Corporation of Los Angeles. (See table of contents for list of omitted schedules) (q) 2.25 Letter of intent dated August 27, 1996 between EZ Communications, Inc. and Evergreen Media Corporation. (q) 2.26 Asset Purchase Agreement dated September 19, 1996 between Beasley-FM Acquisition Corp., WDAS License Limited Partnership and Evergreen Media Corporation of Los Angeles. (q) 2.27 Asset Purchase Agreement dated September 19, 1996 between The Brown Organization and Evergreen Media Corporation of Los Angeles. (a) 3.1A Restated Certificate of Incorporation of Evergreen Media Corporation, dated November 6, 1992. (k) 3.1B Certificate of Amendment of Restated Certificate of Incorporation of Evergreen Media Corporation. (a) 3.2 Restated Bylaws of Evergreen Media Corporation. 21 (a) 3.3 Certificate of Designation, Preferences, and Relative Rights Qualifications, Limitations and Restrictions of the Series A Preferred Stock of Evergreen Media Corporation. (a) 3.4 Certificate of Designation relating to the Company's Series 1 13 3/4% Junior Exchangeable Preferred Stock. (a) 3.5 Certificate of Designation relating to the Company's Series 2 13 3/4% Junior Exchangeable Preferred Stock. (k) 3.6 Certificate of Designation relating to the Company's Convertible Exchangeable Preferred Stock. (a) 4.1 Specimen Class A Common Stock certificate. (k) 4.1A Specimen Convertible Preferred Stock certificate. (k) 4.1B Form of Indenture between the Company and the Bank of New York,as Trustee, relating to the Company's Exchange Debentures that may be issued in exchange for shares of the Convertible Preferred Stock. (a) 4.2 Senior Secured Credit Facilities for Evergreen Media Corporation of Los Angeles (the "Borrower") from Various Lending Institutions (the "Banks"), Some of Which are also Acting as Co-Agents (the "Co-Agents") with Toronto Dominion (Texas), Inc. (the "Agent"), as Agent for the Co-Agents and the Banks, dated as of November 6,1992, together with the form of Assignment of Partnership Interests attached thereto as Exhibit A, the form of Assignment of Rights by General Partner attached thereto as Exhibit B, the form of Borrowers Pledge Agreement attached thereto as Exhibit C, and the forms of other collateral documents attached thereto as Exhibits D through U. (a) 4.2A Waiver and Consent, dated March 31, 1993, between Evergreen Media Corporation of Los Angeles and the Toronto-Dominion Bank, the Bank of New York, Bank of Montreal, The First National Bank of Boston, Nations Bank of Texas, N.A., Fleet Bank of Massachusetts, N.A., ABN AMRO Bank N.V., Society National Bank, Banque Paribas, and Toronto Dominion (Texas), Inc. (d) 4.2B First Amendment to Loan Agreement, dated June 25, 1993, between the Company, the Banks, the Co-Agents and the Agent. (d) 4.2C Second Amendment to Loan Agreement and other Loan Agreements, dated October 27, 1993, between the Company, the Banks, the Co-Agents and the Agent. (a) 4.3 Amended and Restated Note Purchase Agreement, dated November 1992, between Evergreen Media Corporation of Los Angeles and Teachers Insurance and Annuity Association of America. (a) 4.3A Waiver and Consent, dated April 15, 1993, between Evergreen Media Corporation of Los Angeles and Teachers Insurance and Annuity Association of America. 22 (d) 4.3B Amendment, Waiver and Consent, dated October 27, 1993, between Evergreen Media Corporation of Los Angeles and Teachers Insurance and Annuity Association of America. (l) 4.3C Amended and Restated Note Purchase Agreement, dated as of November 28, 1994, between Evergreen Media Corporation of Los Angeles and Teachers Insurance and Annuity Association of America. (m) 4.3D First Amendment to Amended and Restated Note Purchase Agreement, dated as of April 12, 1995, between Evergreen Media Corporation of Los Angeles and Teachers Insurance and Annuity Association of America. (b) 4.6 Letter Agreement, dated May 7, 1993, by and among Evergreen Media Corporation, DLJ Merchant Banking Partners, L.P., DLJ International Partners, C.V., DLJ Merchant Banking Funding, Inc., DLJ Offshore Partners, C.V., Lehman Brothers Merchant Banking Portfolio Partnership L.P., Lehman Brothers Offshore Investment Partnership Japan L.P., Lehman Brothers Offshore Investment Partnership L.P. and Shearson Lehman Brothers Capital Partners II L.P. (l) 4.7 Loan Agreement dated November 28, 1994 Among Evergreen Media Corporation of Los Angeles, Various Financial Institutions (the "Lenders"); the Bank of New York and NationsBank of Texas, N.A., as Agents and Toronto Dominion (Texas), Inc., as Administrative Agent for the Lenders together with certain collateral documents attached thereto as exhibits, including Assignment of Partnership Interests, Borrowers Pledge Agreement, Parent Company Guaranty, Security Agreement, Stock Pledge Agreement, Subsidiary Guaranty, Subsidiary Pledge Agreement and Subsidiary Security Agreement. (m) 4.7A First Amendment to Loan Agreement, dated April 12, 1995, among Evergreen Media Corporation of Los Angeles, Various Financial Institutions (the "Lenders"); the Bank of New York and NationsBank of Texas, N.A., as Agents and Toronto Dominion (Texas), Inc., as Administrative Agent for the Lenders. (i) 4.8 Amended and Restated Loan Agreement dated as of January 17, 1996 among Evergreen Media Corporation of Los Angeles, the financial institutions whose names appear as Lenders on the signature pages thereof (the "Lenders"), The Toronto Dominion Bank, The Bank of New York and NationsBank of Texas, N.A., as Arranging Agents, The Bank of New York, as Syndication Agent, NationsBank of Texas, N.A., as Documentation Agent, and Toronto Dominion (Texas), Inc. as Administrative Agent for the Lenders together with certain collateral documents attached thereto as exhibits, including Assignment of Partnership Interests, Borrower's Pledge Agreement, Parent Company Guarantee, Security Agreement, Stock Pledge Agreement, Subsidiary Guarantee, Subsidiary Pledge Agreement and Subsidiary Security Agreement. (o) 4.8A First Amendment to Loan Agreement, dated May 8, 1996, between the Company, the Banks, the Co-Agents and the Agent. 23 (i) 4.9 Amended and Restated Note Purchase Agreement dated as of January 17, 1996 among Evergreen Media Corporation of Los Angeles and Teachers Insurance and Annuity Association of America. (a) 10.1 Securities Purchase Agreement, dated November 6, 1992, among DLJ Merchant Banking Partners, L.P., DLJ International Partners, C.V., DLJ Merchant Banking Funding, Inc., DLJ Offshore Partners, C.V., Evergreen Media Corporation, and Evergreen Media Corporation of Los Angeles. (a) 10.2 Stockholders Agreement, dated November 6, 1992, among Merchant Banking Partners, L.P., DLJ International Partners, C.V., DLJ Merchant Banking Funding, Inc., DLJ Offshore Partners C.V., Evergreen Media Corporation, and Evergreen Media Corporation. (b) 10.2A Amendment No. 1 to DLJ Stockholders Agreement dated as of May 10, 1993 among the Company, DLJ Merchant Banking Partners, L.P., DLJ International Partners, C.V., DLJ Merchant Banking Funding, Inc., DLJ Offshore Partners, C.V. and Scott K. Ginsburg. (a) 10.3 Registration Rights Agreement, dated as of November 6, 1992 among DLJ Merchant Banking Partners, L.P., DLJ International Partners, C.V., DLJ Merchant Banking Funding, Inc., DLJ Offshore Partners, C.V., and Evergreen Media Corporation. (a) 10.4 Warrant Certificate, dated November 6, 1992, certifying that DLJ Merchant Banking Partners, L.P., or its assigns is entitled to purchase shares of Class A Common Stock, par value $0.01 per share, of the Company. (a) 10.5 Partnership Interest Purchase Agreement, dated November 6, 1992, between The Sheet Metal Workers' National Pension Fund and Evergreen Media Corporation. (a) 10.6 Warrant Agreement, dated November 6, 1992, between The Sheet Metal Workers' National Pension Fund and Evergreen Media Corporation. (a) 10.7 Stock Purchase Agreement, dated May 15, 1989, entered into by and among Evergreen Media Corporation, Shearson Lehman Hutton Merchant Banking Portfolio Partnership L.P., Shearson Lehman Hutton Offshore Investment Partnership L.P., Shearson Lehman Hutton Offshore Investment Partnership Japan L.P., Shearson Lehman Hutton Capital Partners II L.P., and Mid-America Capital Resources, Inc. (b) 10.7A Master Agreement, dated as of May 10, 1993, made and entered into among Scott K. Ginsburg, Lehman Brothers Merchant Banking Portfolio Partnership, L.P., Lehman Brothers Offshore Investment Partnership, L.P., Lehman Brothers Offshore Investment Partnership Japan L.P. and Shearson Lehman Capital Partners II L.P., Mid-America Capital Resources, Inc., DLJ Merchant Banking Partners, L.P., DLJ International Partners, C.V., DLJ Merchant Banking Funding, Inc. DLJ Offshore Partners, C.V., with Exhibits thereto. (b) 10.7C Amendment No. 1 to 1989 Stock Purchase Agreement dated as of May 17, 1993 by and among the Company, Lehman Brothers Merchant Banking 24 Portfolio Partnership, L.P., Lehman Brothers Offshore Investment Partnership, L.P., Lehman Brothers Offshore Investment Partnership Japan, L.P., Shearson Lehman Brothers Capital Partners, II, L.P., Mid America Capital Resources, Inc., and Scott K. Ginsburg. (a) 10.8 Time Brokerage Agreement, dated October 16, 1992, between Evergreen Media Corporation of Washington, D.C. and WPNT, Inc. (a) 10.9 Time Brokerage Agreement, dated May 30, 1992, between Evergreen Media Corporation of Jacksonville and Metroplex Communications, Inc. (a) 10.10 Time Brokerage Agreement, dated October 9, 1992, between Evergreen Media Corporation of Dallas and Armadillo Broadcasting,L.P. +(a) 10.11 1992 Key Employee Stock Option Plan, dated August 5, 1992. +(a) 10.12 1993 Key Employee Stock Option Plan, dated March 15, 1993. +(a) 10.13 Employment Agreement, dated May 1, 1989, by and between Evergreen Media Corporation and Scott K. Ginsburg, as amended. +(a) 10.14 Employment Agreement, dated March 1, 1993, by and between Evergreen Media Corporation of Los Angeles and James de Castro. +(a) 10.15 Option Agreement, dated March 1, 1993, by and between Evergreen Media Corporation and James de Castro. +(a) 10.16 Employment Agreement, dated March 23, 1993, by and between Evergreen Media Corporation of Los Angeles and Matthew E. Devine. +(a) 10.17 Option Agreement, dated March 1, 1993, between Evergreen Media Corporation and Matthew E. Devine. (a) 10.18 Equipment Lease, dated July 1, 1986, between Statewide Broadcasting of Dallas, Inc. and Midway Equipment Leasing, Inc. (a) 10.19 Equipment Lease, dated July 1, 1986, between Statewide Broadcasting of Duval County, Inc. and Midway Equipment Leasing, Inc. (b) 10.20 Local Programming and Marketing Agreement by and between Major Broadcasting of Chicago, Inc. and Evergreen Media Corporation of Illinois dated as of June 30, 1993 (see table of contents for list of omitted exhibits and schedules). (k) 10.21 Letter Agreement, dated October 19, 1993, between the Company and the Sheet Metal Workers' Union National Pension Fund. (c) 10.22 Non-Competition Agreement between Evergreen Media Corporation Illinois, Major Broadcasting of Chicago, Inc., and the other Covenantors named therein. (f) 10.23 Evergreen Media Corporation Stock Option Plan for Non-employee Directors (included as Annex E to the Joint Proxy Statement/Prospectus) 25 +(n) 10.24 Employment Agreement dated November 28, 1995 by and between Evergreen Media Corporation and Matthew E. Devine. +(n) 10.25 Employment Agreement dated November 28, 1995 by and between Evergreen Media Corporation and James de Castro. +(n) 10.26 Employment Agreement dated February 9, 1996 by and between Evergreen Media Corporation and Kenneth J. O'Keefe. +(o) 10.27 Employment Agreement, dated April 15, 1996 by and between Evergreen Media Corporation and Scott K. Ginsburg, as amended. +(o) 10.28 1995 Stock Option Plan for executive officers and key employees of Evergreen Media Corporation. *27 Financial Data Schedule - --------------------- *Filed herewith. +Management contract or compensatory arrangement. (a) Incorporated by reference to the identically numbered exhibit to the Company's Registration Statement on Form S-1, as amended (Reg. No. 33- 60036). (b) Incorporated by reference to the identically numbered exhibit to the Company's Report on Form 10-Q for the quarterly period ended June 30, 1993 (c) Incorporated by reference to the identically numbered exhibit to the Company's Report on Form 8-K dated December 27, 1993. (d) Incorporated by reference to the identically numbered exhibit to the Company's Annual Report on Form 10-K for the fiscal year ended December 1993 (File No. 0-215-70). (e) Incorporated by reference to the identically numbered exhibit to the Company's Report on Form 8-K dated April 25, 1994. (f) Incorporated by reference to the identically numbered exhibit to the Company's Registration Statement on Form S-4, as amended (Reg. No. 33- 89838). (g) Incorporated by reference to Exhibit No. 4.8 to the Company's Registration Statement on Form S-4, as amended (Reg. No. 33-89838). (h) Incorporated by reference to the identically numbered exhibit to the Company's Report on Form 8-K dated July 14, 1995. (i) Incorporated by reference to the identically numbered exhibit to the Company's Report on Form 8-K dated January 17, 1996. (j) Incorporated by reference to the identically numbered exhibit to the Company's Report on Form 10-Q for the quarterly period ending September 26 30,1995. (k) Incorporated by reference to the identically numbered exhibit to the Company's Registration Statement on Form S-1, as amended (Reg. No. 33- 69752). (l) Incorporated by reference to the identically numbered exhibit to the Company's Registration Statement on Form S-3, as amended (Reg. No. 33- 85506). (m) Incorporated by reference to the identically numbered exhibit to the Company's Report on Form 10-Q for the quarterly period ended March 31,1995. (n) Incorporated by reference to the identically numbered exhibit to the Company's Report on Form 10-K for the fiscal year ended December 31, 1995. (o) Incorporated by reference to the identically numbered exhibit to the Company's report on Form 10-Q for the quarterly period ending March 31,1996. (p) Incorporated by reference to the identically numbered exhibit to the Company's report on Form 10-Q for the quarterly period ended June 30, 1996. (q) Incorporated by reference to the identically numbered exhibit to the Company's Registration Statement on Form S-3, as amended (Reg. No. 333- 12453). (b) Reports on Form 8-K A report on Form 8-K dated August 23, 1996, was filed by the Company with the Securities and Exchange Commission on August 23, 1996. It reported under Item 5 that on June 27, 1996, the Company entered into an agreement to purchase from WEDR, Inc. the assets used in the operation of WEDR-FM, 99.1 MHz, Miami, Florida, for a purchase price of $65 million. The Report on Form 8-K also included (i) Independent Auditors' Report, (ii) Balance Sheet of WEDR, Inc. at December 31, 1995 and at June 30, 1996 (unaudited), (iii) Statements of Earnings and Retained Earnings of WEDR, Inc. for the year ended December 31, 1995 and the six months ended June 30, 1995 and 1996, (iv) Statements of Cash Flows for the year ended December 31, 1995 and the six months ended June 30, 1995 and 1996, and (v) Notes to Financial Statements. A report on Form 8-K dated September 3, 1996, was filed by the Company with the Securities and Exchange Commission on September 3, 1996 and was amended on Form 8-K/A dated September 3, 1996 and filed with the Securities and Exchange Commission on September 20, 1996. The report, as amended, reported the following under Item 5: (i) on August 8, 1996 the Company declared a three-for-two split effected in the form of a stock dividend payable on August 26, 1996 to shareholders of record at the close of business on August 19, 1996 and (ii) on May 15, 1996, the shareholders of the Company amended its Certificate of Incorporation to increase the authorized shares of the Company from 31,000,000 to 75,000,000. The Report on Form 8-K also provided the following information: (i) the Company's Consolidated Financial Statements as of 27 December 31, 1995 and (ii) the Company's Consolidated Financial Statements as of March 31, 1996 and for the three month period ended March 31, 1995 and 1996. A report on Form 8-K dated September 20, 1996 was filed with the Securities and Exchange Commission on September 20, 1996. It reported the following under Item 5: (i) On July 15, 1996, the Company entered into an agreement to purchase from Century Chicago Broadcasting L.P. the assets used in the operation of WPNT-FM, 100.3 MHz, Chicago, Illinois, for a purchase price of $73.75 million. The Company also provided financial information in regard to Century Chicago Broadcasting, L.P. including (a) Report of Independent Accountants; (b) Balance Sheets at December 31, 1995 and June 30, 1996 (unaudited); (C) Statements of Operations and Partners' Deficit for the year ended December 31, 1995 and for the six months ended June 30, 1995 and 1996 (unaudited); (d) Statements of Cash Flows for the year ended December 31, 1995 and for the six months ended June 30, 1995 and 1996 (unaudited) and (e) Notes to Financial Statements. (ii) On August 12, 1996, the Company entered into an agreement to purchase from Secret Communications L.P. the assets used in the operation of WJLB-FM, 97.9 MHz and WMXD-FM, 92.3 MHz, Detroit, Michigan, for a purchase price of $168.0 million. The Company also provided financial information in regard to WJLB/WMXD, Detroit including (a) Independent Auditors' Report; (b) Combined Balance Sheets at June 30, 1995 and at June 30, 1996; (c) Combined Statements of Operations for the year ended June 30, 1996 and the eleven months ended June 30, 1995; (d) Combined Statements of Cash Flows for the year ended June 30, 1996 and the eleven months ended June 30, 1995 and (e) Notes to Financial Statements. (iii) On August 14, 1996, the Company acquired the assets used in the operation of KYLD-FM, 107.7 MHz, San Francisco, California, from Crescent Communications, L.P. for a purchase price of $44 million. The Company also provided financial information in regard to KYLD-FM (A Division of Crescent Communications, L.P.) (a) Independent Auditors' Report; (b) Balance Sheet at December 31, 1995 and at June 30, 1996 (unaudited); (c) Statements of Operations and Partners' Deficiency for the year ended December 31, 1995 and the six months ended June 30, 1995 and 1996 (unaudited); (d) Statements of Cash Flows for the year ended December 31, 1995 and the six months ended June 30, 1995 and 1996 (unaudited). (iv) On June 13, 1996, the Company entered an asset exchange agreement with Greater Media under which the Company will exchange WKLB-FM for WGAY-FM. After also initially agreeing to purchase from Greater Media WWRC-AM in Washington, D.C. for $22.5 million in cash, the Company has subsequently agreed with Greater Media to exchange WQRS-FM in Detroit (which, as discussed below, the Company has agreed to acquire from Secret Communications, L.P. for $32.0 million in cash) for WWRC-AM and $9.5 million in cash. (v) On June 27, 1996, the Company entered into an agreement with an affiliate of The Rivers Group to acquire WEDR-FM in Miami for $65.0 million in cash (including $3.0 million paid by the Company in escrow). (vi) On July 15, 1996, the Company entered into an agreement with Century Chicago Broadcasting, L.P. to acquire WPNT-FM in Chicago for $73.8 million in cash (including $5.0 million already paid by the Company for an option to purchase the station and $0.5 28 million paid by the Company in escrow). (vii) On August 12, 1996, the Company entered into an agreement with Secret Communications, L.P. ("Secret") to acquire WMXD-FM and WJLB-FM in Detroit for $168.0 million in cash and WFLN-FM in Philadelphia for $37.8 million in cash. (viii) On August 12, 1996, the Company entered into an agreement with Chancellor Broadcasting Company ("Chancellor") to acquire WWWW-FM and WDFN-AM in Detroit for $30.0 million in cash (including $1.5 million paid in escrow by the Company). (ix) On September 4, 1996, the Company entered into a binding letter of intent with EZ Communications, Inc. ("EZ") to swap five of the Company's six stations in the Charlotte market (WPEG-FM, WBAV-AM, WBAV-FM, WRFX-FM and WFNZ-AM), which were acquired as part of the Pyramid Acquisition and the BPI Acquisition, for WIOQ-FM and WUSL-FM in Philadelphia. As part of this transaction, the Company has also agreed to sell to EZ its sixth radio station in Charlotte, WNKS-FM, for $10.0 million in cash (the exchange and the sale being referred to herein as the "Philadelphia/Charlotte Transaction"). (x) On September 19, 1996, the Company entered into an agreement with The Brown Organization to acquire KKSF-FM, KDFC-FM and KDFC-AM in San Francisco for $115.0 million in cash (including $10.0 million paid by the Company in escrow) (the "San Francisco Transaction"). (xi) On September 19, 1996, the Company entered into an agreement with Beasley FM Acquisition Corp. and certain of its affiliates to acquire WDAS-FM and WDAS-AM in Philadelphia for $103.0 million in cash (the "WDAS-AM/FM Transaction"). (xii) The Company provided the following pro forma financial information, not otherwise called for by this form but of importance to securityholders, in regard to (a) the acquisition (the "BPI Acquisition") of Broadcasting Partners, Inc. ("BPI") on May 12, 1995, (b) the acquisition (the "Pyramid Aquisition") of Pyramid Communications, Inc. ("Pyramid") on January 17, 1996, (c) the acquisition of KYLD-FM and the dispositions of WHTT-FM/AM and WSJZ-FM in Buffalo ("the Buffalo Dispositions") (the transactions described in clause (c) are referred to collectively as the "Other Completed Transactions") and (d) the pending acquisitions of WWWW-FM/WDFN-AM in Detroit, WWRC-AM in Washington, D.C., WEDR-FM in Miami, WPNT-FM in Chicago, WJLB-FM/WMXD-FM in Detroit, WFLN-FM in Philadelphia, WUSL-FM/WIOQ-FM in Philadelphia, WDAS-FM/AM in Philadelphia and KKSF-FM and KDFC-FM/AM in San Francisco and the pending dispositions of WPEG-FM, WBAV-FM/AM, WRFX-FM/AM and WNKS-FM in Charlotte (the transactions described in clause (d) are collectively referred to as the "Pending Transactions") and reflect the combination of consolidated historical financial data of the Company, BPI, Pyramid, KYLD-FM and the stations to be acquired in the Pending Transactions and elimination of the consolidated historical data of the stations sold in the Buffalo Dispositions and of the Charlotte stations being swapped or sold to EZ Communications, Inc. ("EZ") in the Philadelphia/Charlotte Transaction. A report on Form 8-K dated September 30, 1996, was filed by the Company with the Securities and Exchange Commission on September 30, 1996. It reported the following under Item 5: (i) the Company entered into an agreement to purchase from Beasley-FM Acquisition Corp. the assets used in the operation of WDAS-AM/FM (station owned and operated by Beasley FM Acquisition Corp.), 1480 KHz and 105.3 MHz, Philadelphia, Pennsylvania, for a purchase price of $103 million and (ii) the Company entered into an agreement to purchase from the Brown Organization the assets used in the operation of KKSF-FM, 103.7 MHz and KDFC AM/FM, 1220 KHz and 102.1 MHz, San Francisco, California, for a purchase price of $115 million. The Report on Form 8-K also provided the following information in regard to WDAS AM/FM, KKSF-FM and KDFC AM/FM: (a) Independent Auditor's Report, (b) Balance Sheets at December 31, 1995 and June 30, 1996 (unaudited), (c) Statements of Earnings and Station Equity for the year ended December 31, 1995 and the six months ended June 30, 1995 and 1996 (unaudited), (d) Statements of Cash Flows for the year ended December 31, 1995 and the six months ended June 30, 1995 and 1996 (unaudited) and (e) Notes to Financial Statements. 29 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 thereunto duly authorized. EVERGREEN MEDIA CORPORATION --------------------------- (Registrant) /s/ Matthew E. Devine --------------------------- Matthew E. Devine Senior Vice President/ Chief Financial Officer Dated: November 13, 1996 30 EX-27 2 ARTICLE 5 - FDS
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM 9/30/96 CONSOLIDATED FINANCIAL STATEMENTS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 9-MOS DEC-31-1995 JAN-01-1996 SEP-30-1996 4,508 0 74,761 1,541 0 82,318 72,808 24,529 979,155 44,401 562,625 80,225 0 281 203,851 979,155 205,130 205,130 29,780 196,940 0 0 29,212 (21,022) (3,734) (17,288) 0 0 0 (20,907) (0.74) (0.74)
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