-----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, Dg66K4hcKOjIx8nYgqdDlbkh7Mx67UA9GWZeqJmQthrUK+a6wbSVBu0Fvhul3eUh e1umWJlpE3nbPeZ3LgJjrQ== 0000950134-98-000966.txt : 19980211 0000950134-98-000966.hdr.sgml : 19980211 ACCESSION NUMBER: 0000950134-98-000966 CONFORMED SUBMISSION TYPE: 8-K/A PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19980210 ITEM INFORMATION: FILED AS OF DATE: 19980210 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: CHANCELLOR MEDIA CORP/ CENTRAL INDEX KEY: 0000894972 STANDARD INDUSTRIAL CLASSIFICATION: RADIO BROADCASTING STATIONS [4832] IRS NUMBER: 752451687 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K/A SEC ACT: SEC FILE NUMBER: 000-21570 FILM NUMBER: 98529653 BUSINESS ADDRESS: STREET 1: 433 EAST LAS COLINAS BLVD STREET 2: STE 1130 CITY: IRVING STATE: TX ZIP: 75039 BUSINESS PHONE: 9728699020 MAIL ADDRESS: STREET 1: 433 E LAS COLINAS STREET 2: STE 1130 CITY: IRVING STATE: TX ZIP: 75039 FORMER COMPANY: FORMER CONFORMED NAME: CHANCELLOR MEDIA CORP DATE OF NAME CHANGE: 19970905 FORMER COMPANY: FORMER CONFORMED NAME: EVERGREEN MEDIA CORP DATE OF NAME CHANGE: 19930326 FILER: COMPANY DATA: COMPANY CONFORMED NAME: CHANCELLOR MEDIA CORP OF LOS ANGELES CENTRAL INDEX KEY: 0001043102 STANDARD INDUSTRIAL CLASSIFICATION: RADIO BROADCASTING STATIONS [4832] IRS NUMBER: 752451687 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K/A SEC ACT: SEC FILE NUMBER: 333-32259 FILM NUMBER: 98529654 BUSINESS ADDRESS: STREET 1: 433 EAST LAS COLINAS BLVD STREET 2: STE 1130 CITY: IRVING STATE: TX ZIP: 75039 BUSINESS PHONE: 9728699020 MAIL ADDRESS: STREET 1: 433 E LAS COLINAS STREET 2: STE 1130 CITY: IRVING STATE: TX ZIP: 75039 FORMER COMPANY: FORMER CONFORMED NAME: EVERGREEN MEDIA CORP OF LOS ANGELES DATE OF NAME CHANGE: 19970728 8-K/A 1 AMENDMENT TO FORM 8-K 1 ================================================================================ SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ------------------------ FORM 8-K/A CURRENT REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Date of report (Date of earliest event reported): February 10, 1998 CHANCELLOR MEDIA CORPORATION CHANCELLOR MEDIA CORPORATION OF LOS ANGELES (Exact Name of Registrant as (Exact Name of Registrant as Specified in Charter) Specified in Charter) 000-21570 333-32259 (Commission File No.) (Commission File No.) 75-2247099 75-2451687 (IRS Employer (IRS Employer Identification No.) Identification No.) DELAWARE DELAWARE (State or Other Jurisdiction (State or Other Jurisdiction of Incorporation) of Incorporation)
433 EAST LAS COLINAS BOULEVARD SUITE 1130 IRVING, TEXAS 75039 (Address of Principal Executive Offices (972) 869-9020 (Registrant's telephone number, including area code) ================================================================================ 2 This Amendment to the Current Report on Form 8-K dated January 13, 1998 and filed on January 13, 1998 by Chancellor Media Corporation and Chancellor Media Corporation of Los Angeles is submitted to provide revised Unaudited Pro Forma Financial Statements, which are filed with this amendment. ITEM 5. OTHER EVENTS The following Unaudited Pro Forma Financial Statements are filed with this report: CHANCELLOR MEDIA CORPORATION AND SUBSIDIARIES: Unaudited Pro Forma Condensed Combined Balance Sheet at September 30, 1997..................................... A-2 Unaudited Pro Forma Condensed Combined Statement of Operations for the year ended December 31, 1996........ A-3 Unaudited Pro Forma Condensed Combined Statement of Operations for the nine months ended September 30, 1997................................................... A-4 Notes to Unaudited Pro Forma Condensed Combined Financial Statements............................................. A-5 CHANCELLOR MEDIA CORPORATION OF LOS ANGELES AND SUBSIDIARIES: Unaudited Pro Forma Condensed Combined Balance Sheet at September 30, 1997..................................... B-2 Unaudited Pro Forma Condensed Combined Statement of Operations for the year ended December 31, 1996........ B-3 Unaudited Pro Forma Condensed Combined Statement of Operations for the nine months ended September 30, 1997................................................... B-4 Notes to Unaudited Pro Forma Condensed Combined Financial Statements............................................. B-5
1 3 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, each of the registrants has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. CHANCELLOR MEDIA CORPORATION CHANCELLOR MEDIA CORPORATION OF LOS ANGELES By: /s/ MATTHEW E. DEVINE By: /s/ MATTHEW E. DEVINE ------------------------------------------------- ------------------------------------------------- Matthew E. Devine Matthew E. Devine Chief Financial Officer Chief Financial Officer
Date: February 10, 1998 2 4 CHANCELLOR MEDIA CORPORATION PRO FORMA FINANCIAL INFORMATION The unaudited pro forma condensed combined financial statements of Chancellor Media Corporation ("Chancellor Media" and, together with its subsidiaries, the "Company") are presented using the purchase method of accounting for all acquisitions and reflect (i) the combination of consolidated historical financial data of the Company, each of the stations acquired by the Company in the transactions completed by the Company and Chancellor Broadcasting Company ("Chancellor") during 1996 and 1997 (the "Completed Transactions") and each of the stations to be acquired by the Company in the transactions of the Company pending as of the date hereof (the "Pending Transactions") and (ii) the elimination of the consolidated historical data of the stations disposed in the Completed Transactions and stations to be disposed in the Pending Transactions. The unaudited pro forma condensed combined balance sheet data at September 30, 1997 presents adjustments for those Completed Transactions consummated since such date, the Pending Transactions and the offering by Chancellor Media Corporation of Los Angeles ("CMCLA"), Chancellor Media's wholly-owned subsidiary, of $500.0 million aggregate principal amount of 8 1/8% Senior Subordinated Notes due 2007, which was completed on December 22, 1997 (the "8 1/8% Notes Offering"), as if each such transaction had occurred at September 30, 1997. The unaudited pro forma condensed combined statements of operations data for the twelve months ended December 31, 1996 and the nine months ended September 30, 1997 present adjustments for the Completed Transactions, the Pending Transactions, financing transactions undertaken by the Company and Chancellor during 1996 and 1997 and the 8 1/8% Notes Offering, as if each such transaction occurred on January 1, 1996. The purchase method of accounting has been used in the preparation of the unaudited pro forma condensed combined financial statements. Under this method of accounting, the aggregate purchase price is allocated to assets acquired and liabilities assumed based on their estimated fair values. For purposes of the unaudited pro forma condensed combined financial statements, the purchase prices of the assets acquired and to be acquired in the Completed Transactions and the Pending Transactions have been allocated based primarily on information furnished by management of the acquired or to be acquired assets. The final allocation of the respective purchase prices of the assets acquired and to be acquired in the Completed Transactions and the Pending Transactions are determined a reasonable time after consummation of such transactions and are based on a complete evaluation of the assets acquired and liabilities assumed. Accordingly, the information presented herein may differ from the final purchase price allocation; however, such allocations are not expected to differ materially from the preliminary amounts. In the opinion of the Company's management, all adjustments have been made that are necessary to present fairly the pro forma data. The unaudited pro forma condensed combined financial statements should be read in conjunction with the respective financial statements and related notes thereto of the Company which have been previously reported. The unaudited pro forma condensed combined financial statements are presented for illustrative purposes only and are not necessarily indicative of the results of operations or financial position that would have been achieved had the transactions reflected therein been consummated as of the dates indicated, or of the results of operations or financial positions for any future periods or dates. A-1 5 CHANCELLOR MEDIA CORPORATION UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET AT SEPTEMBER 30, 1997 (IN THOUSANDS)
COMPANY PRO FORMA PRO FORMA AS ADJUSTED ADJUSTMENTS COMPANY ADJUSTMENTS FOR THE FOR THE HISTORICAL FOR COMPLETED COMPLETED PENDING COMPANY AT 9/30/97(1) TRANSACTIONS TRANSACTIONS TRANSACTIONS PRO FORMA ------------- ------------- ------------ ------------ ---------- ASSETS: Current assets................................ $ 210,544 $ 64,166(2) $ 274,710 $ -- $ 274,710 Property and equipment, net................... 136,405 24,544(2) 160,949 3,730(4) 164,679 Intangible assets, net........................ 3,828,014 713,784(2) 4,541,798 67,270(4) 4,609,068(5) Other assets.................................. 38,413 26,742(2) 70,155 (3,000)(4) 67,155 (10,000)(2) 15,000(3) ---------- -------- ---------- ------- ---------- Total assets................................ $4,213,376 $834,236 $5,047,612 $68,000 $5,115,612 ========== ======== ========== ======= ========== LIABILITIES AND STOCKHOLDERS' EQUITY: Liabilities Current liabilities........................... $ 86,739 $ 45,823(2) $ 132,562 $ -- $ 132,562 Long-term debt................................ 1,857,000 738,601(2) 2,610,601 68,000(4) 2,678,601 500,000(3) (485,000)(3) Deferred tax liabilities (assets)............. 421,408 (14,176)(2) 407,232 -- 407,232 Other liabilities............................. 997 48,988(2) 49,985 -- 49,985 ---------- -------- ---------- ------- ---------- Total liabilities........................... 2,366,144 834,236 3,200,380 68,000 3,268,380 Redeemable preferred stock.................... 338,566 -- 338,566 -- 338,566 STOCKHOLDERS' EQUITY: Preferred stock............................... 410,548 -- 410,548 -- 410,548 Common stock.................................. 596 -- 596 -- 596 Additional paid in capital.................... 1,223,273 -- 1,223,273 -- 1,223,273 Accumulated deficit........................... (125,751) -- (125,751) -- (125,751) ---------- -------- ---------- ------- ---------- Total stockholders' equity.................. 1,508,666 -- 1,508,666 -- 1,508,666 ---------- -------- ---------- ------- ---------- Total liabilities and stockholders' equity.................................... $4,213,376 $834,236 $5,047,612 $68,000 $5,115,612 ========== ======== ========== ======= ==========
See accompanying notes to Unaudited Pro Forma Condensed Combined Financial Statements A-2 6 CHANCELLOR MEDIA CORPORATION UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 1996 (IN THOUSANDS)
PRO FORMA COMPANY ADJUSTMENTS AS ADJUSTED COMPLETED FOR THE FOR THE PENDING COMPANY TRANSACTIONS COMPLETED COMPLETED TRANSACTIONS YEAR ENDED DECEMBER 31, 1996 HISTORICAL HISTORICAL(6) TRANSACTIONS TRANSACTIONS HISTORICAL(15) ---------------------------- ---------- ------------- ------------ ------------ -------------- Gross revenues............................... $337,405 $668,424 $ (15,964)(7) $ 989,865 $24,398 Less: agency commissions..................... (43,555) (65,654) -- (109,209) (4,615) -------- -------- --------- --------- ------- Net revenues................................. 293,850 602,770 (15,964) 880,656 19,783 Station operating expenses excluding depreciation and amortization.............. 174,344 379,749 (15,964)(7) 528,094 9,771 (10,035)(8) Depreciation and amortization................ 93,749 69,333 189,409(9) 352,491 1,341 Corporate general and administrative expenses................................... 7,797 11,440 10,035(8) 22,925 1,024 (6,347)(11) Stock option compensation.................... -- 3,800 -- 3,800 -- -------- -------- --------- --------- ------- Operating income (loss)...................... 17,960 138,448 (183,062) (26,654) 7,647 Interest expense............................. 37,527 110,276 52,876(12) 200,679 (562) Other (income) expense....................... (477) (844) -- (1,321) 1 -------- -------- --------- --------- ------- Income (loss) before income taxes............ (19,090) 29,016 (235,938) (226,012) 8,208 Income tax expense (benefit)................. (2,896) 9,883 (67,685)(13) (60,698) -- Dividends and accretion on preferred stock of subsidiary................................. -- 38,400 -- 38,400 -- -------- -------- --------- --------- ------- Net income (loss)............................ (16,194) (19,267) (168,253) (203,714) 8,208 Preferred stock dividends.................... 3,820 7,700 14,150(14) 25,670 -- -------- -------- --------- --------- ------- Income (loss) attributable to common stockholders............................... $(20,014) $(26,967) $(182,403) $(229,384) $ 8,208 ======== ======== ========= ========= ======= Income (loss) per common share............... $ (0.33) ======== Weighted average common shares outstanding(20)............................ 60,414 58,513 ======== ========= Broadcast cash flow.......................... $119,506 $223,021 $ 10,035 $ 352,562 $10,012 ======== ======== ========= ========= ======= PRO FORMA ADJUSTMENTS FOR THE PENDING COMPANY YEAR ENDED DECEMBER 31, 1996 TRANSACTIONS PRO FORMA ---------------------------- ------------ ---------- Gross revenues............................... $(1,963)(16) $1,012,300 Less: agency commissions..................... -- (113,824) ------- ---------- Net revenues................................. (1,963) 898,476 Station operating expenses excluding depreciation and amortization.............. (4,000)(16) 533,865 Depreciation and amortization................ 2,855(17) 356,687 Corporate general and administrative expenses................................... -- 23,949 Stock option compensation.................... -- 3,800 ------- ---------- Operating income (loss)...................... (818) (19,825) Interest expense............................. 4,760(18) 204,877 Other (income) expense....................... -- (1,320) ------- ---------- Income (loss) before income taxes............ (5,578) (223,382) Income tax expense (benefit)................. 920(19) (59,778) Dividends and accretion on preferred stock of subsidiary................................. -- 38,400 ------- ---------- Net income (loss)............................ (6,498) (202,004) Preferred stock dividends.................... -- 25,670 ------- ---------- Income (loss) attributable to common stockholders............................... $(6,498) $ (227,674) ======= ========== Income (loss) per common share............... $ (1.91) ========== Weighted average common shares outstanding(20)............................ 118,927 ========== Broadcast cash flow.......................... $ 2,037 $ 364,611 ======= ==========
See accompanying notes to Unaudited Pro Forma Condensed Combined Financial Statements A-3 7 CHANCELLOR MEDIA CORPORATION UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1997 (IN THOUSANDS)
PRO FORMA COMPANY ADJUSTMENTS AS ADJUSTED COMPLETED FOR THE FOR THE PENDING COMPANY TRANSACTIONS COMPLETED COMPLETED TRANSACTIONS NINE MONTHS ENDED SEPTEMBER 30, 1997 HISTORICAL HISTORICAL(6) TRANSACTIONS TRANSACTIONS HISTORICAL(15) ------------------------------------ ---------- ------------- ------------ ------------ -------------- Gross revenues............................... $382,994 $450,638 $ (15,119)(7) $ 818,513 $ 976 Less: agency commissions..................... (49,711) (41,764) -- (91,475) (906) -------- -------- --------- --------- ------- Net revenues................................. 333,283 408,874 (15,119) 727,038 70 Station operating expenses excluding depreciation and amortization.............. 184,713 258,690 (15,119)(7) 420,113 3,967 (8,171)(8) Depreciation and amortization................ 104,386 30,068 117,107(9) 251,561 (800) Corporate general and administrative expenses................................... 11,646 8,133 8,171(8) 26,108 -- (1,842)(11) Merger expense............................... -- 6,124 (6,124)(10) -- -- Restructuring charge......................... -- 7,095 -- 7,095 -- Stock option compensation.................... -- 3,083 -- 3,083 -- -------- -------- --------- --------- ------- Operating income (loss)...................... 32,538 95,681 (109,141) 19,078 (3,097) Interest expense............................. 45,036 73,368 31,683(12) 150,087 -- Other (income) expense....................... (18,380) 47 -- (18,333) 13 -------- -------- --------- --------- ------- Income (loss) before income taxes............ 5,882 22,266 (140,824) (112,676) (3,110) Income tax expense (benefit)................. 5,244 7,086 (37,962)(13) (25,632) -- Dividends and accretion on preferred stock of subsidiary................................. 2,779 27,321 -- 30,100 -- -------- -------- --------- --------- ------- Net income (loss)............................ (2,141) (12,141) (102,862) (117,144) (3,110) Preferred stock dividends.................... 5,748 5,281 8,287(14) 19,316 -- -------- -------- --------- --------- ------- Income (loss) attributable to common stockholders............................... $ (7,889) $(17,422) $(111,149) $(136,460) $(3,110) ======== ======== ========= ========= ======= Income (loss) per common share............... $ (0.09) ======== Weighted average common shares outstanding(20)............................ 87,690 31,412 ======== ========= Broadcast cash flow.......................... $148,570 $150,184 $ 8,171 $ 306,925 $(3,897) ======== ======== ========= ========= ======= PRO FORMA ADJUSTMENTS FOR THE PENDING COMPANY NINE MONTHS ENDED SEPTEMBER 30, 1997 TRANSACTIONS PRO FORMA ------------------------------------ ------------ --------- Gross revenues............................... $ (2,711)(16) $ 816,778 Less: agency commissions..................... -- (92,381) -------- --------- Net revenues................................. (2,711) 724,397 Station operating expenses excluding depreciation and amortization.............. (3,201)(16) 420,879 Depreciation and amortization................ 2,364(17) 253,125 Corporate general and administrative expenses................................... -- 26,108 Merger expense............................... -- -- Restructuring charge......................... -- 7,095 Stock option compensation.................... -- 3,083 -------- --------- Operating income (loss)...................... (1,874) 14,107 Interest expense............................. 3,571(18) 153,658 Other (income) expense....................... -- (18,320) -------- --------- Income (loss) before income taxes............ (5,445) (121,231) Income tax expense (benefit)................. (2,994)(19) (28,626) Dividends and accretion on preferred stock of subsidiary................................. -- 30,100 -------- --------- Net income (loss)............................ (2,451) (122,705) Preferred stock dividends.................... -- 19,316 -------- --------- Income (loss) attributable to common stockholders............................... $ (2,451) $(142,021) ======== ========= Income (loss) per common share............... $ (1.19) ========= Weighted average common shares outstanding(20)............................ 119,102 ========= Broadcast cash flow.......................... $ 490 $ 303,518 ======== =========
See accompanying notes to Unaudited Pro Forma Condensed Combined Financial Statements A-4 8 ADJUSTMENTS TO UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET RELATED TO THE COMPLETED TRANSACTIONS COMPLETED AFTER SEPTEMBER 30, 1997 (1) Certain reclassifications have been made to the Company's historical financial statements for the nine months ended September 30, 1997 to conform to the presentation which will be reflected in the Company's audited financial statements for the year ended December 31, 1997. (2) Reflects the Completed Transactions that were completed after September 30, 1997 as follows:
PURCHASE PRICE ALLOCATION ------------------------------------------------------------------------------------------------- PROPERTY AND INTANGIBLE DEFERRED PURCHASE CURRENT EQUIPMENT, ASSETS, OTHER CURRENT TAX OTHER COMPLETED TRANSACTIONS PRICE ASSETS NET(A) NET(A) ASSETS LIABILITIES ASSET LIABILITIES - -------------------------- -------- -------- ------------ ---------- -------- ----------- -------- ----------- Chicago/Dallas Exchange(b)............. $ 3,500 $ -- $ 4,084 $ (584) $ -- $ -- $ -- $ -- Katz Acquisition(c)....... 379,101 64,166 14,770 354,058 26,742 (45,823) 14,176 (48,988) Gannett Acquisition(d).... 340,000 -- 5,244 334,756 -- -- -- -- Denver Acquisition(e)..... 26,000 -- 446 25,554 -- -- -- -- -------- ------- ------- -------- ------- -------- ------- -------- Total............... $748,601 $64,166 $24,544 $713,784 $26,742 $(45,823) $14,176 $(48,988) ======== ======= ======= ======== ======= ======== ======= ======== FINANCING -------------------------- INCREASE DECREASE (DECREASE) IN IN OTHER LONG-TERM COMPLETED TRANSACTIONS ASSETS DEBT - -------------------------- ---------- ------------- Chicago/Dallas Exchange(b)............. $ 8,350 $ (4,850) Katz Acquisition(c)....... -- 379,101 Gannett Acquisition(d).... -- 340,000 Denver Acquisition(e)..... 1,650 24,350 ------- -------- Total............... $10,000 $738,601 ======= ========
- --------------- (a) The Company has assumed that historical balances of net property and equipment acquired approximate fair value for the preliminary allocation of the purchase price. Such amounts are based primarily on information provided by the management of Katz Media Group, Inc. ("KMG") and by the management of the respective stations acquired. The Company, on a preliminary basis, has allocated the $354,058 of intangible assets related to the Katz Acquisition (as defined) to representation contracts and goodwill. This preliminary allocation is based upon information provided by the management of KMG. (b) On October 7, 1997, the Company acquired, in the Bonneville Acquisition, KZPS-FM and KDGE-FM in Dallas for $83,500 in cash. On July 14, 1997, the Company completed the disposition of WLUP-FM in Chicago to Bonneville International Corporation ("Bonneville") and placed $80,000 in a trust pending the completion of the deferred exchange of WLUP-FM in Chicago for KZPS-FM and KDGE-FM in Dallas (the "Chicago/Dallas Exchange"). The Chicago/Dallas Exchange was accounted for as a like-kind exchange and no gain or loss was recognized upon consummation of the exchange. The decrease in long-term debt of $4,850 represents the refund of $8,350 in escrow funds previously paid by the Company on June 29, 1997 and classified as other assets at September 30, 1997 less $3,500 in cash boot paid to Bonneville. (c) On October 28, 1997, the Company acquired KMG, a full service media representation firm, in a tender offer transaction for a total purchase price of approximately $379,101 (the "Katz Acquisition") which included (i) the conversion of each outstanding share of KMG Common Stock into the right to receive $11.00 in cash, resulting in total cash payments of $149,601, (ii) the assumption of long-term debt of KMG and its subsidiaries of $222,000 which includes borrowings outstanding under the senior credit facility of KMG and its subsidiaries of $122,000 and $100,000 of 10 1/2% Senior Subordinated Notes due 2007 of Katz Media Corporation (the "10 1/2% Notes") and (iii) estimated acquisition costs of $7,500. (d) On December 29, 1997, the Company acquired, in the Gannett Acquisition, 5 radio stations in 3 major markets from Pacific & Southern Co. ("P&S"), a subsidiary of Gannett Co., including WGCI-FM/AM in Chicago, KHKS-FM in Dallas, and KKBQ-FM/AM in Houston, for $340,000 in cash. (e) On January 30, 1998, the Company acquired, in the Denver Acquisition, KXPK-FM in Denver from Ever Green Wireless LLC (which is unrelated to the Company) for $26,000 in cash of which $1,650 was previously paid by Chancellor as escrow funds which were classified as other assets at September 30, 1997. (3) Reflects the estimated proceeds of $485,000 received on December 22, 1997 from the issuance of $500,000 of CMCLA's 8 1/8% Senior Subordinated Notes due 2007 (the "8 1/8% Notes"), net of deferred debt issuance costs of $15,000. The net proceeds of the offering were used to reduce bank borrowings under the Senior Credit Facility (as defined). A-5 9 ADJUSTMENTS TO UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET RELATED TO THE PENDING TRANSACTIONS (4) Reflects the Pending Transactions as follows:
PROPERTY AND INCREASE IN PURCHASE EQUIPMENT, INTANGIBLE DECREASE IN LONG-TERM PENDING TRANSACTIONS PRICE NET(A) ASSETS, NET(A) OTHER ASSETS DEBT -------------------- -------- ------------ --------------- ------------ ----------- SFX Exchange(b).............................. $11,000 $1,680 $ 9,320 $ -- $11,000 Bonneville Option(c)......................... 60,000 2,050 57,950 3,000 57,000 ------- ------ ------- ------ ------- Total................................ $71,000 $3,730 $67,270 $3,000 $68,000 ======= ====== ======= ====== =======
- --------------- (a) The Company has assumed that historical balances of net property and equipment to be acquired approximate fair value for the preliminary allocation of the purchase price. Such amounts are based primarily on information provided by management of the respective stations to be acquired in the Pending Transactions. The Company, on a preliminary basis, has allocated the $67,270 of intangible assets related to the Pending Transactions to broadcast licenses. This preliminary allocation is based on historical information from prior acquisitions. (b) On July 1, 1996, Chancellor Broadcasting Company ("Chancellor") entered into an agreement (assumed by the Company in the Chancellor Merger) to exchange, in the SFX Exchange, WAPE-FM and WFYV-FM in Jacksonville, Florida (which were acquired as part of the Omni Acquisition (as defined) on February 13, 1997, see 6(k)(v) below), and $11,000 in cash to SFX Broadcasting, Inc. ("SFX") for WBAB-FM, WBLI-FM, WGBB-AM, and WHFM-FM in Long Island. The amounts allocated to net property and equipment and net intangible assets (consisting of broadcast licenses) are based upon preliminary appraisals of the assets to be acquired. On November 6, 1997, the Antitrust Division of the United States Department of Justice (the "DOJ") filed suit against the Company seeking to enjoin under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR Act") the acquisition of the four Long Island properties under the SFX Exchange. If the Company is unable to acquire the four Long Island properties, the SFX Exchange will not be consummated and the Company will retain ownership of the two Jacksonville FM stations. There can be no assurance as to whether or when the SFX Exchange will ultimately be consummated. The Company does not believe that failure to consummate the SFX Exchange would have a material adverse effect on the Company's business, results of operations or financial condition. (c) On August 6, 1997, the Company paid $3,000 to Bonneville for an option to exchange WTOP-AM in Washington, KZLA-FM in Los Angeles and WGMS-FM in Washington plus $57,000 in cash for Bonneville's stations WNSR-FM in New York, KLDE-FM in Houston and KBIG-FM in Los Angeles (the "Bonneville Option"). The Bonneville Option was exercised on October 1, 1997 and definitive exchange documentation is presently being negotiated. ALLOCATION OF COMPANY PRO FORMA COMBINED INTANGIBLE ASSETS (5) The Company Pro Forma Combined intangible assets of $4,609,068 consists of the following at September 30, 1997:
ESTIMATED USEFUL LIFE ----------- Broadcast licenses......................................... 15-40 $3,656,866 Goodwill................................................... 15-40 711,169 Representation contracts................................... 17 105,000 Other intangibles.......................................... 1-40 388,266 ---------- $4,861,301 Less: accumulated amortization............................. (252,233) ---------- Net intangible assets...................................... $4,609,068 ==========
A-6 10 The Company discloses broadcast license value separately from goodwill and amortizes such intangible assets over an estimated average life of 15 years, whereas Chancellor grouped all broadcast license value with goodwill and amortized such intangibles assets over an estimated average life of 40 years. In connection with the application of purchase accounting for the Chancellor Merger (as defined), broadcast license value and goodwill have been separately identified and disclosed and amortized over an estimated average life of 15 years in accordance with the Company's policies and procedures. The intangible assets have been treated in a consistent manner for the Company in the Unaudited Combined Condensed Pro Forma Financial Statements and, upon the consummation of the Chancellor Merger, have been accounted for similarly in the Company's financial statements. The Company amortizes intangible assets using the straight-line method over estimated useful lives ranging from 1 to 40 years. The Company continually evaluates the propriety of the carrying amount of goodwill and other intangible assets as well as the amortization period to determine whether current events or circumstances warrant adjustments to the carrying value and/or revised estimates of useful lives. This evaluation consists of the projection of undiscounted operating income before depreciation, amortization, nonrecurring charges and interest for each of the Company's radio stations over the remaining amortization periods of the related intangible assets. The projections are based on a historical trend line of actual results since the acquisitions of the respective stations adjusted for expected changes in operating results. To the extent such projections indicate that undiscounted operating income is not expected to be adequate to recover the carrying amounts of the related intangible assets, such carrying amounts would be written down by charges to expense. A-7 11 ADJUSTMENTS TO UNAUDITED CONDENSED COMBINED STATEMENTS OF OPERATIONS RELATED TO THE COMPLETED TRANSACTIONS (6) The detail of the historical financial data of the stations to be acquired or disposed of in the Completed Transactions for the year ended December 31, 1996 and the nine months ended September 30, 1997 has been obtained from the historical financial statements of the respective stations and is summarized below:
ACQUISITIONS ----------------------------------------------------------------------------------- WWRC-AM WWWW-FM/ KKSF-FM/ PYRAMID KYLD-FM WGAY-FM WEDR-FM WDFN-AM KDFC-FM/AM HISTORICAL HISTORICAL HISTORICAL HISTORICAL HISTORICAL HISTORICAL 1/1-1/17(A) 1/1-4/30(B) 1/1-6/17(C) 1/1-10/18(D) 1/1-2/14(E) 1/1-10/31(F) ----------- ----------- ----------- ------------ ----------- ------------ YEAR ENDED DECEMBER 31, 1996 Gross revenues..................... $2,144 $ 2,308 $ 3,264 $ 7,933 $ 839 $13,646 Less: agency commissions........... (216) (363) (409) (1,066) (102) (1,746) ------ ------- ------- ------- ----- ------- Net revenues....................... 1,928 1,945 2,855 6,867 737 11,900 Station operating expenses excluding depreciation and amortization..................... 1,489 1,885 3,493 2,933 815 6,358 Depreciation and amortization...... 502 749 314 29 45 2,351 Corporate general and administrative expenses.......... 123 256 477 1,401 -- -- Stock option compensation.......... -- -- -- -- -- -- ------ ------- ------- ------- ----- ------- Operating income (loss)............ (186) (945) (1,429) 2,504 (123) 3,191 Interest expense................... 343 1,094 -- -- -- 429 Other (income) expense............. (5) (97) 5 (15) -- (48) ------ ------- ------- ------- ----- ------- Income (loss) before income taxes............................ (524) (1,942) (1,434) 2,519 (123) 2,810 Income tax expense (benefit)....... -- -- (453) -- -- -- Dividends and accretion on preferred stock of subsidiary.... -- -- -- -- -- -- ------ ------- ------- ------- ----- ------- Net income (loss).................. (524) (1,942) (981) 2,519 (123) 2,810 Preferred stock dividends.......... -- -- -- -- -- -- ------ ------- ------- ------- ----- ------- Income (loss) attributable to common stockholders.............. $ (524) $(1,942) $ (981) $ 2,519 $(123) $ 2,810 ====== ======= ======= ======= ===== ======= Broadcast cash flow................ $ 439 $ 60 $ (638) $ 3,934 $ (78) $ 5,542 ====== ======= ======= ======= ===== ======= ACQUISITIONS --------------------------------------------------------------------------------------- CHANCELLOR AS EVERGREEN ADJUSTED FOR WJLB-FM/ WUSL-FM VIACOM COMPLETED KZPS-FM/ WMXD-FM WDAS-FM/AM WIOQ-FM ACQUISITION CHANCELLOR KDGE-FM HISTORICAL HISTORICAL HISTORICAL HISTORICAL TRANSACTIONS HISTORICAL 1/1-8/31(G) 1/1-12/31(H) 1/1-12/31(I) 1/1-12/31(J) 1/1-12/31(K) 1/1-12/31(L) ----------- ------------ ------------ ------------ ------------- ------------ YEAR ENDED DECEMBER 31, 1996 Gross revenues..................... $15,408 $16,809 $20,152 $ 66,726 $328,522 $12,174 Less: agency commissions........... (1,881) (2,142) (2,369) (10,493) (43,553) (1,758) ------- ------- ------- -------- -------- ------- Net revenues....................... 13,527 14,667 17,783 56,233 284,969 10,416 Station operating expenses excluding depreciation and amortization..................... 5,721 7,759 9,519 26,598 172,729 8,585 Depreciation and amortization...... 2,415 2,763 -- 6,267 46,909 475 Corporate general and administrative expenses.......... 1,005 620 533 1,617 5,657 -- Stock option compensation.......... -- -- -- -- 3,800 -- ------- ------- ------- -------- -------- ------- Operating income (loss)............ 4,386 3,525 7,731 21,751 55,874 1,356 Interest expense................... 1,406 79 3,001 -- 82,655 -- Other (income) expense............. -- (39) 58 (741) (148) 408 ------- ------- ------- -------- -------- ------- Income (loss) before income taxes............................ 2,980 3,485 4,672 22,492 (26,633) 948 Income tax expense (benefit)....... 180 -- -- 10,612 (6,653) -- Dividends and accretion on preferred stock of subsidiary.... -- -- -- -- 38,400 -- ------- ------- ------- -------- -------- ------- Net income (loss).................. 2,800 3,485 4,672 11,880 (58,380) 948 Preferred stock dividends.......... -- -- -- -- 7,700 -- ------- ------- ------- -------- -------- ------- Income (loss) attributable to common stockholders.............. $ 2,800 $ 3,485 $ 4,672 $ 11,880 $(66,080) $ 948 ======= ======= ======= ======== ======== ======= Broadcast cash flow................ $ 7,806 $ 6,908 $ 8,264 $ 29,635 $112,240 $ 1,831 ======= ======= ======= ======== ======== ======= ACQUISITIONS ------------------------------------------ KATZ GANNETT DENVER ACQUISITION ACQUISITION ACQUISITION HISTORICAL HISTORICAL HISTORICAL 1/1-12/31(M) 1/1-12/31(N) 1/1-12/31(O) ------------ ------------ ------------ YEAR ENDED DECEMBER 31, 1996 Gross revenues..................... $183,239 $52,028 $5,624 Less: agency commissions........... -- (6,819) (780) -------- ------- ------ Net revenues....................... 183,239 45,209 4,844 Station operating expenses excluding depreciation and amortization..................... 139,158 25,031 3,947 Depreciation and amortization...... 13,427 1,760 477 Corporate general and administrative expenses.......... -- -- -- Stock option compensation.......... -- -- -- -------- ------- ------ Operating income (loss)............ 30,654 18,418 420 Interest expense................... 21,074 -- 195 Other (income) expense............. (173) -- (49) -------- ------- ------ Income (loss) before income taxes............................ 9,753 18,418 274 Income tax expense (benefit)....... 7,381 -- -- Dividends and accretion on preferred stock of subsidiary.... -- -- -- -------- ------- ------ Net income (loss).................. 2,372 18,418 274 Preferred stock dividends.......... -- -- -- -------- ------- ------ Income (loss) attributable to common stockholders.............. $ 2,372 $18,418 $ 274 ======== ======= ====== Broadcast cash flow................ $ 44,081 $20,178 $ 897 ======== ======= ======
A-8 12
DISPOSITIONS ---------------------------------------------------------------------------------------- WPEG-FM WBAV-FM/AM WRFX-FM SAN FRANCISCO WFNZ-FM WNKS-FM WEJM-FM/AM WJZW-FM FREQUENCY KDFC-FM HISTORICAL HISTORICAL HISTORICAL HISTORICAL HISTORICAL HISTORICAL 1/1-12/31(I) 1/1-12/31(P) 1/1-12/31(Q) 1/1-12/31(R) 1/1-12/31(S) 1/1-12/31(T) ------------ ------------ ------------ ------------ ------------- ------------ YEAR ENDED DECEMBER 31, 1996 Gross revenues..................... $(20,818) $ (3,303) $(2,690) $(8,443) $(2,736) $(5,138) Less: agency commissions........... 2,733 337 293 1,311 358 643 -------- -------- ------- ------- ------- ------- Net revenues....................... (18,085) (2,966) (2,397) (7,132) (2,378) (4,495) Station operating expenses excluding depreciation and amortization..................... (9,509) (2,461) (2,217) (3,998) (3,159) (2,300) Depreciation and amortization...... -- (548) (1,719) (589) (3,826) (853) Corporate general and administrative expenses.......... -- -- -- (206) -- -- Stock option compensation.......... -- -- -- -- -- -- -------- -------- ------- ------- ------- ------- Operating income (loss)............ (8,576) 43 1,539 (2,339) 4,607 (1,342) Interest expense................... -- -- -- -- -- -- Other (income) expense............. -- -- -- -- -- -- -------- -------- ------- ------- ------- ------- Income (loss) before income taxes............................ (8,576) 43 1,539 (2,339) 4,607 (1,342) Income tax expense (benefit)....... -- -- -- (913) -- -- Dividends and accretion on preferred stock of subsidiary.... -- -- -- -- -- -- -------- -------- ------- ------- ------- ------- Net income (loss).................. (8,576) 43 1,539 (1,426) 4,607 (1,342) Preferred stock dividends.......... -- -- -- -- -- -- -------- -------- ------- ------- ------- ------- Income (loss) attributable to common stock..................... $ (8,576) $ 43 $ 1,539 $(1,426) $ 4,607 $(1,342) ======== ======== ======= ======= ======= ======= Broadcast cash flow................ $ (8,576) $ (505) $ (180) $(3,134) $ 781 $(2,195) ======== ======== ======= ======= ======= ======= DISPOSITIONS --------------------------- WBZS-AM WZHF-AM KDFC-AM HISTORICAL WLUP-FM COMPLETED 1/1- HISTORICAL TRANSACTIONS 12/31(U) 1/1-12/31(L) HISTORICAL ------------ ------------ ------------ YEAR ENDED DECEMBER 31, 1996 Gross revenues..................... $(2,240) $(17,024) $668,424 Less: agency commissions........... 36 2,332 (65,654) ------- -------- -------- Net revenues....................... (2,204) (14,692) 602,770 Station operating expenses excluding depreciation and amortization..................... (930) (11,697) 379,749 Depreciation and amortization...... (30) (1,585) 69,333 Corporate general and administrative expenses.......... (43) -- 11,440 Stock option compensation.......... -- -- 3,800 ------- -------- -------- Operating income (loss)............ (1,201) (1,410) 138,448 Interest expense................... -- -- 110,276 Other (income) expense............. -- -- (844) ------- -------- -------- Income (loss) before income taxes............................ (1,201) (1,410) 29,016 Income tax expense (benefit)....... (271) -- 9,883 Dividends and accretion on preferred stock of subsidiary.... -- -- 38,400 ------- -------- -------- Net income (loss).................. (930) (1,410) (19,267) Preferred stock dividends.......... -- -- 7,700 ------- -------- -------- Income (loss) attributable to common stock..................... $ (930) $ (1,410) $(26,967) ======= ======== ======== Broadcast cash flow................ $(1,274) $ (2,995) $223,021 ======= ======== ========
A-9 13
ACQUISITIONS --------------------------------------------------------------------- CHANCELLOR AS EVERGREEN ADJUSTED FOR WUSL-FM VIACOM COMPLETED KZPS-FM/ WDAS-FM/AM WIOQ-FM ACQUISITION CHANCELLOR KDGE-FM NINE MONTHS ENDED HISTORICAL HISTORICAL HISTORICAL TRANSACTIONS HISTORICAL SEPTEMBER 30, 1997 1/1-4/30(H) 1/1-5/15(I) 1/1-7/2(J) 1/1-9/5(K) 1/1-7/31(L) ------------------ ----------- ----------- ----------- ------------- ----------- Gross revenues................ $5,028 $7,088 $38,972 $244,192 $ 7,616 Less: agency commissions.................. (680) (829) (5,470) (30,754) (929) ------ ------ ------- -------- ------- Net revenues.................. 4,348 6,259 33,502 213,438 6,687 Station operating expenses excluding depreciation and amortization................. 2,533 3,649 14,936 122,529 5,293 Depreciation and amortization................. 875 -- 2,279 30,505 280 Corporate general and administrative expenses...... 172 141 682 7,226 -- Merger expense................ -- -- -- 6,124 -- Restructuring charge.......... -- -- -- -- -- Stock option compensation................. -- -- -- 3,083 -- ------ ------ ------- -------- ------- Operating income (loss)....... 768 2,469 15,605 43,971 1,114 Interest expense.............. 19 990 -- 56,382 -- Other (income) expense........ 863 -- -- (584) 12 ------ ------ ------- -------- ------- Income (loss) before income taxes........................ (114) 1,479 15,605 (11,827) 1,102 Income tax expense (benefit).................... -- -- 5,892 (1,731) -- Dividends and accretion on preferred stock of subsidiary................... -- -- -- 27,321 -- ------ ------ ------- -------- ------- Net income (loss)............. (114) 1,479 9,713 (37,417) 1,102 Preferred stock dividends..... -- -- -- 5,281 -- ------ ------ ------- -------- ------- Income (loss) attributable to common stockholders.......... $ (114) $1,479 $ 9,713 $(42,698) $ 1,102 ====== ====== ======= ======== ======= Broadcast cash flow........... $1,815 $2,610 $18,566 $ 90,909 $ 1,394 ====== ====== ======= ======== ======= ACQUISITIONS DISPOSITIONS ----------------------------------------- ------------------------------------------------------ WPEG-FM KATZ WBAV-FM/AM ACQUISITION GANNETT DENVER WRFX-FM WEJM- HISTORICAL ACQUISITION ACQUISITION WFNZ-FM WNKS-FM WPNT-FM FM/AM NINE MONTHS ENDED 1/1- HISTORICAL HISTORICAL HISTORICAL HISTORICAL HISTORICAL HISTORICAL SEPTEMBER 30, 1997 9/30(M) 1/1-9/30(N) 1/1-8/31(O) 1/1-5/15(I) 1/1-5/15(P) 5/30-6/19(V) 1/1-8/26(Q) ------------------ ----------- ----------- ------------- ----------- ----------- ------------ ----------- Gross revenues................ $124,713 $44,339 $3,460 $(7,788) $(1,332) $(567) $(1,279) Less: agency commissions.................. -- (5,772) (458) 1,029 142 93 135 -------- ------- ------ ------- ------- ----- ------- Net revenues.................. 124,713 38,567 3,002 (6,759) (1,190) (474) (1,144) Station operating expenses excluding depreciation and amortization................. 102,991 20,497 2,816 (3,569) (994) (285) (1,276) Depreciation and amortization................. (2,059) 384 198 -- (212) (279) (305) Corporate general and administrative expenses...... -- -- -- -- -- -- -- Merger expense................ -- -- -- -- -- -- -- Restructuring charge.......... 7,095 -- -- -- -- -- -- Stock option compensation................. -- -- -- -- -- -- -- -------- ------- ------ ------- ------- ----- ------- Operating income (loss)....... 16,686 17,686 (12) (3,190) 16 90 437 Interest expense.............. 15,977 -- -- -- -- -- -- Other (income) expense........ (163) -- (81) -- -- -- -- -------- ------- ------ ------- ------- ----- ------- Income (loss) before income taxes........................ 872 17,686 69 (3,190) 16 90 437 Income tax expense (benefit).................... 3,283 -- -- -- -- -- -- Dividends and accretion on preferred stock of subsidiary................... -- -- -- -- -- -- -- -------- ------- ------ ------- ------- ----- ------- Net income (loss)............. (2,411) 17,686 69 (3,190) 16 90 437 Preferred stock dividends..... -- -- -- -- -- -- -- -------- ------- ------ ------- ------- ----- ------- Income (loss) attributable to common stockholders.......... $ (2,411) $17,686 $ 69 $(3,190) $ 16 $ 90 $ 437 ======== ======= ====== ======= ======= ===== ======= Broadcast cash flow........... $ 21,722 $18,070 $ 186 $(3,190) $ (196) $(189) $ 132 ======== ======= ====== ======= ======= ===== ======= DISPOSITIONS ----------------------------------------------------- SAN WBZS-AM FRANCISCO WZHF-AM WJZW-FM FREQUENCY KDFC-FM KDFC-AM WLUP-FM COMPLETED NINE MONTHS ENDED HISTORICAL HISTORICAL HISTORICAL HISTORICAL HISTORICAL TRANSACTIONS SEPTEMBER 30, 1997 1/1-7/2(R) 1/1-7/7(S) 1/1-1/31(T) 1/1-8/13(U) 1/1-7/14(L) HISTORICAL ------------------ ----------- ----------- ----------- ----------- ----------- ------------ Gross revenues................ $(4,137) $(1,370) $(278) $(1,091) $(6,928) $450,638 Less: agency commissions.................. 567 178 26 23 935 (41,764) ------- ------- ----- ------- ------- -------- Net revenues.................. (3,570) (1,192) (252) (1,068) (5,993) 408,874 Station operating expenses excluding depreciation and amortization................. (2,161) (1,738) (224) (665) (5,642) 258,690 Depreciation and amortization................. (315) (84) -- (54) (1,145) 30,068 Corporate general and administrative expenses...... (70) -- -- (18) -- 8,133 Merger expense................ -- -- -- -- -- 6,124 Restructuring charge.......... -- -- -- -- -- 7,095 Stock option compensation................. -- -- -- -- -- 3,083 ------- ------- ----- ------- ------- -------- Operating income (loss)....... (1,024) 630 (28) (331) 794 95,681 Interest expense.............. -- -- -- -- -- 73,368 Other (income) expense........ -- -- -- -- -- 47 ------- ------- ----- ------- ------- -------- Income (loss) before income taxes........................ (1,024) 630 (28) (331) 794 22,266 Income tax expense (benefit).................... (260) -- -- (98) -- 7,086 Dividends and accretion on preferred stock of subsidiary................... -- -- -- -- -- 27,321 ------- ------- ----- ------- ------- -------- Net income (loss)............. (764) 630 (28) (233) 794 (12,141) Preferred stock dividends..... -- -- -- -- -- 5,281 ------- ------- ----- ------- ------- -------- Income (loss) attributable to common stockholders.......... $ (764) $ 630 $ (28) $ (233) $ 794 $(17,422) ======= ======= ===== ======= ======= ======== Broadcast cash flow........... $(1,409) $ 546 $ (28) $ (403) $ (351) $150,184 ======= ======= ===== ======= ======= ========
A-10 14 - --------------- (a) On January 17, 1996, the Company acquired Pyramid Communications, Inc. ("Pyramid"), a radio broadcasting company with 12 radio stations (9 FM and 3 AM) in five markets (Chicago, Philadelphia, Boston, Charlotte, and Buffalo) (the "Pyramid Acquisition"). The total purchase price, including acquisition costs, allocated to net assets acquired was approximately $316,343 of which $315,500 was financed through additional borrowings under the Company's prior senior credit facility. The historical financial data of Pyramid for the period of January 1, 1996 to January 17, 1996 excludes the combined net losses of approximately $60 for WHTT-FM, WHTT-AM and WSJZ-FM in Buffalo (the "Buffalo Transactions") which were sold in 1996 for $32,000 in cash. (b) On August 14, 1996, the Company acquired KYLD-FM in San Francisco for $44,000 in cash. The Company had previously been operating KYLD-FM under a time brokerage agreement since May 1, 1996. (c) On November 26, 1996, the Company exchanged WKLB-FM in Boston (which the Company acquired on May 3, 1996 for $34,000 in cash) for WGAY-FM in Washington, D.C. On April 3, 1997, the Company exchanged, in the Greater Media Exchange, WQRS-FM in Detroit (which the Company acquired on April 3, 1997 for $32,000 in cash) for WWRC-AM in Washington, D.C. and $9,500 in cash. The net purchase price to the Company of WWRC-AM was therefore $22,500. The Company had previously been operating WGAY-FM and WWRC-AM under time brokerage agreements since June 17, 1996. (d) On October 18, 1996, the Company acquired WEDR-FM in Miami for $65,000 in cash. (e) On January 31, 1997, the Company acquired, in the WWWW/WDFN Acquisition, WWWW-FM and WDFN-AM in Detroit from Chancellor for $30,000 in cash (of which $1,500 was paid as escrow funds in January 1996). The Company had previously provided certain sales and promotional functions to WWWW-FM and WDFN-AM under a joint sales agreement since February 14, 1996 and subsequently operated the stations under a time brokerage agreement since April 1, 1996. (f) On January 31, 1997, the Company acquired, in the KKSF/KDFC Acquisition, KKSF-FM and KDFC-FM/AM in San Francisco for $115,000 in cash (of which $10,000 was paid as escrow funds in November 1996). The Company had previously been operating the stations under a time brokerage agreement since November 1, 1996. (g) On April 1, 1997, the Company acquired, in the Secret/Detroit Acquisition, WJLB-FM and WMXD-FM in Detroit for $168,000 in cash. The Company had previously been operating the stations under a time brokerage agreement since September 1, 1996. (h) On May 1, 1997, the Company acquired, in the Beasley Acquisition, WDAS-FM/AM in Philadelphia for $103,000 in cash. (i) On May 15, 1997, the Company exchanged, in the EZ Exchange, 5 of its 6 stations in the Charlotte market (WPEG-FM, WBAV-FM/AM, WRFX-FM and WFNZ-AM) for WUSL-FM and WIOQ-FM in Philadelphia. (j) On July 2, 1997, the Company acquired, in the Evergreen Viacom Acquisition, WLTW-FM and WAXQ-FM in New York and WMZQ-FM, WJZW-FM, WZHF-AM, and WBZS-AM in Washington, D.C. for approximately $612,388 in cash including various other direct acquisition costs. The Evergreen Viacom Acquisition was financed with (i) bank borrowings under the Senior Credit Facility (as defined) of $552,559; (ii) $53,750 in escrow funds paid by the Company on February 19, 1997 and (iii) $6,079 financed through working capital. In June 1997, the Company issued 5,990,000 shares of $3.00 Convertible Exchangeable Preferred Stock (the "$3.00 Convertible Preferred Stock") for net proceeds of approximately $287,800 which were used to repay borrowings under the Senior Credit Facility and subsequently were reborrowed on July 2, 1997 as part of the financing of the Evergreen Viacom Acquisition. On July 7, 1997, the Company sold WJZW-FM in Washington, D.C. to affiliates of Capital Cities/ABC Radio for $68,000 in cash. The assets of WJZW-FM, as well as the assets of WZHF-AM and WBZS-AM, which were also sold on August 13, 1997, were accounted for as assets A-11 15 held for sale in connection with the purchase price allocation of the Evergreen Viacom Acquisition and no gain or loss was recognized by the Company upon consummation of the sales (see 6(r) and 6(u)). The Viacom results of operations for the year ended December 31, 1996 reflect the financial performance of WAXQ-FM for six months of the year that the station was operated by Viacom (July 1, 1996 to December 31, 1996) combined with net income of $851 for the first half of the year when the station was under prior ownership. (k) On September 5, 1997, pursuant to an Amended and Restated Agreement and Plan of Merger, dated as of February 19, 1997 and amended and restated on July 31, 1997 (the "Chancellor Merger Agreement"), among Chancellor, Chancellor Radio Broadcasting Company ("CRBC"), Evergreen Media Corporation ("Evergreen"), Evergreen Mezzanine Holdings Corporation ("EMHC") and Evergreen Media Corporation of Los Angeles ("EMCLA"), (i) Chancellor was merged (the "Parent Merger") with and into EMHC, a direct, wholly-owned subsidiary of Evergreen, with EMHC remaining as the surviving corporation and (ii) CRBC was merged (the "Subsidiary Merger" and, together with the Parent Merger, the "Chancellor Merger") with and into EMCLA, a direct, wholly-owned subsidiary of EMHC, with EMCLA remaining as the surviving corporation. Upon consummation of the Parent Merger, Evergreen was renamed Chancellor Media Corporation and EMHC was renamed Chancellor Mezzanine Holdings Corporation ("CMHC"). Upon consummation of the Subsidiary Merger, EMCLA was renamed Chancellor Media Corporation of Los Angeles ("CMCLA"). Consummation of the Chancellor Merger added 52 radio stations (36 FM and 16 AM) to the Company's portfolio of stations, including 13 stations in markets in which the Company previously operated. The total purchase price allocated to net assets acquired was approximately $1,998,383 which included (i) the conversion of each outstanding share of Chancellor Class A and Class B Common Stock into 0.9091 shares of the Company's Common Stock, resulting in the issuance of 17,308,730 shares of the Company's Common Stock at a fair value of $31.00 per share, (ii) the assumption of Chancellor's and CRBC's long-term debt of $949,000, (iii) the issuance of 2,117,629 shares of CMCLA's 12% Exchangeable Preferred Stock (the "12% Preferred Stock") in exchange for CRBC's substantially identical securities with a fair value of $215,570, (iv) the issuance of 1,000,000 shares of CMCLA's 12 1/4% Series A Senior Cumulative Exchangeable Preferred Stock (the 12 1/4% Preferred Stock") in exchange for CRBC's substantially identical securities with a fair value of $120,217, (v) the issuance of 2,200,000 shares of the Company's 7% Convertible Preferred Stock (the "7% Convertible Preferred Stock") in exchange for Chancellor's substantially identical securities with a fair value of $111,048, (vi) the assumption of stock options issued to Chancellor stock option holders with a fair value of $34,977 and (vii) estimated acquisition costs of $31,000. A-12 16 Chancellor's historical condensed combined statement of operations for the year ended December 31, 1996 and the nine months ended September 30, 1997 and pro forma adjustments related to the transactions completed by Chancellor prior to the Chancellor Merger (the "Completed Chancellor Transactions") is summarized below:
ACQUISITIONS ------------------------------------------------------------------------------------------ KIMN-FM/ SHAMROCK KALC-FM COLFAX KOOL-FM SUNDANCE CHANCELLOR HISTORICAL HISTORICAL HISTORICAL HISTORICAL HISTORICAL YEAR ENDED DECEMBER 31, 1996 HISTORICAL(I) 1/1-2/14(II) 1/1-3/31(III) 1/1-12/31(IV) 1/1-3/31(IV) 1/1-9/12(IV) - ------------------------------ ------------- ------------ ------------- ------------- ------------ ------------ Gross revenues................ $203,188 $ 9,698 $2,010 $51,745 $1,665 $13,844 Less: agency commissions...... (24,787) (1,234) (259) (6,626) (234) (1,740) -------- ------- ------ ------- ------ ------- Net revenues.................. 178,401 8,464 1,751 45,119 1,431 12,104 Station operating expenses excluding depreciation and amortization................. 111,210 7,762 1,523 28,584 852 7,678 Depreciation and amortization................. 20,877 595 511 4,494 229 1,242 Corporate general and administrative expenses...... 4,845 2,215 -- -- -- -- Stock option compensation..... 3,800 -- -- -- -- -- -------- ------- ------ ------- ------ ------- Operating income (loss)....... 37,669 (2,108) (283) 12,041 350 3,184 Interest expense.............. 35,704 1,380 -- 4,369 299 -- Other (income) expense........ 68 49 312 (179) -- 25 -------- ------- ------ ------- ------ ------- Income (loss) before income taxes........................ 1,897 (3,537) (595) 7,851 51 3,159 Income tax expense (benefit).................... 4,612 -- -- -- -- -- Dividends and accretion on preferred stock of subsidiary................... 11,557 -- -- -- -- -- -------- ------- ------ ------- ------ ------- Net income (loss)............. (14,272) (3,537) (595) 7,851 51 3,159 Preferred stock dividends..... -- -- -- -- -- -- -------- ------- ------ ------- ------ ------- Income (loss) attributable to common stockholders.......... $(14,272) $(3,537) $ (595) $ 7,851 $ 51 $ 3,159 ======== ======= ====== ======= ====== ======= Broadcast cash flow........... $ 67,191 $ 702 $ 228 $16,535 $ 579 $ 4,426 ======== ======= ====== ======= ====== ======= ACQUISITIONS -------------------------------------------- CHANCELLOR VIACOM OMNI KSTE-FM ACQUISITION HISTORICAL HISTORICAL HISTORICAL YEAR ENDED DECEMBER 31, 1996 1/1-6/30(V) 1/1-7/31(VI) 1/1-12/31(VII) - ------------------------------ ----------- ------------- -------------- Gross revenues................ $ 8,710 $1,411 $58,806 Less: agency commissions...... (1,211) (149) (9,588) ------- ------ ------- Net revenues.................. 7,499 1,262 49,218 Station operating expenses excluding depreciation and amortization................. 4,985 1,244 25,416 Depreciation and amortization................. 1,458 375 4,640 Corporate general and administrative expenses...... -- -- 1,501 Stock option compensation..... -- -- -- ------- ------ ------- Operating income (loss)....... 1,056 (357) 17,661 Interest expense.............. -- -- 6,374 Other (income) expense........ (404) -- -- ------- ------ ------- Income (loss) before income taxes........................ 1,460 (357) 11,287 Income tax expense (benefit).................... -- -- 4,748 Dividends and accretion on preferred stock of subsidiary................... -- -- -- ------- ------ ------- Net income (loss)............. 1,460 (357) 6,539 Preferred stock dividends..... -- -- -- ------- ------ ------- Income (loss) attributable to common stockholders.......... $ 1,460 $ (357) $ 6,539 ======= ====== ======= Broadcast cash flow........... $ 2,514 $ 18 $23,802 ======= ====== ======= DISPOSITIONS -------------------------------------------------------------- PRO FORMA ADJUSTMENTS WWWW-FM/ WMIL-FM/ FOR THE WDFN-AM KTBZ-FM WOKY-AM WDRQ-FM COMPLETED HISTORICAL HISTORICAL HISTORICAL HISTORICAL CHANCELLOR YEAR ENDED DECEMBER 31, 1996 1/1-2/14(VIII) 1/1-2/14(III) 1/1-12/31(IX) 1/1-12/31(X) TRANSACTIONS - ------------------------------ --------------- ------------- ------------- ------------ ------------------ Gross revenues................ $(839) $(399) $(9,552) $(6,743) $ (5,022)(xi) Less: agency commissions...... 102 48 1,070 1,055 -- ----- ----- ------- ------- ------- Net revenues.................. (737) (351) (8,482) (5,688) (5,022) Station operating expenses excluding depreciation and amortization................. (815) (521) (4,896) (4,530) (5,763)(xi) Depreciation and amortization................. (45) (42) (539) (354) 15,022(xii) (1,554)(xiii) Corporate general and administrative expenses...... -- -- -- (178) (2,726)(xiv) Stock option compensation..... -- -- -- -- -- ----- ----- ------- ------- ------- Operating income (loss)....... 123 212 (3,047) (626) (10,001) Interest expense.............. -- -- -- -- 34,529(xv) Other (income) expense........ -- -- (19) -- -- ----- ----- ------- ------- ------- Income (loss) before income taxes........................ 123 212 (3,028) (626) (44,530) Income tax expense (benefit).................... -- -- -- (326) (15,687)(xvi) Dividends and accretion on preferred stock of subsidiary................... -- -- -- -- 26,843(xvii) ----- ----- ------- ------- ------- Net income (loss)............. 123 212 (3,028) (300) (55,686) Preferred stock dividends..... -- -- -- -- 7,700(xviii) ----- ----- ------- ------- ------- Income (loss) attributable to common stockholders.......... $ 123 $ 212 $(3,028) $ (300) $(63,386) ===== ===== ======= ======= ======= Broadcast cash flow........... $ 78 $ 170 $(3,586) $(1,158) $ 741 ===== ===== ======= ======= ======= CHANCELLOR AS ADJUSTED FOR COMPLETED CHANCELLOR YEAR ENDED DECEMBER 31, 1996 TRANSACTIONS - ------------------------------ ------------- Gross revenues................ $ 328,522 Less: agency commissions...... (43,553) ---------- Net revenues.................. 284,969 Station operating expenses excluding depreciation and amortization................. 172,729 Depreciation and amortization................. 46,909 Corporate general and administrative expenses...... 5,657 Stock option compensation..... 3,800 ---------- Operating income (loss)....... 55,874 Interest expense.............. 82,655 Other (income) expense........ (148) ---------- Income (loss) before income taxes........................ (26,633) Income tax expense (benefit).................... (6,653) Dividends and accretion on preferred stock of subsidiary................... 38,400 ---------- Net income (loss)............. (58,380) Preferred stock dividends..... 7,700 ---------- Income (loss) attributable to common stockholders.......... $ (66,080) ========== Broadcast cash flow........... $ 112,240 ==========
A-13 17
ACQUISITIONS DISPOSITIONS ---------------------------- ------------ PRO FORMA CHANCELLOR ADJUSTMENTS CHANCELLOR AS VIACOM FOR THE ADJUSTED FOR CHANCELLOR COLFAX ACQUISITION WDRQ-FM COMPLETED COMPLETED HISTORICAL HISTORICAL HISTORICAL HISTORICAL CHANCELLOR CHANCELLOR NINE MONTHS ENDED SEPTEMBER 30, 1997 1/1-9/5(I) 1/1-1/23(IV) 1/1-7/2(VII) 1/1-8/11(X) TRANSACTIONS TRANSACTIONS ------------------------------------ ---------- ------------ ------------- ------------ ------------ ------------- Gross revenues........................ $215,018 $3,183 $29,214 $(2,395) $ (828)(xi) $244,192 Less: agency commissions.............. (26,575) (384) (4,046) 251 -- (30,754) -------- ------ ------- ------- -------- -------- Net revenues.......................... 188,443 2,799 25,168 (2,144) (828) 213,438 Station operating expenses excluding depreciation and amortization....... 110,548 1,872 13,326 (1,986) (1,231)(xi) 122,529 Depreciation and amortization......... 23,919 -- 2,370 (186) 4,484(xii) 30,505 (82)(xiii) Corporate general and administrative expenses............................ 7,102 -- 520 (42) (354)(xiv) 7,226 Merger expense........................ 6,124 -- -- -- -- 6,124 Stock option compensation............. 3,083 -- -- -- -- 3,083 -------- ------ ------- ------- -------- -------- Operating income (loss)............... 37,667 927 8,952 70 (3,645) 43,971 Interest expense...................... 39,806 -- 3,178 -- 13,398(xv) 56,382 Other (income) expense................ (584) -- -- -- -- (584) -------- ------ ------- ------- -------- -------- Income (loss) before income taxes..... (1,555) 927 5,774 70 (17,043) (11,827) Income tax expense (benefit).......... 1,378 -- 1,558 18 (4,685)(xvi) (1,731) Dividends and accretion on preferred stock of subsidiary................. 25,817 -- -- -- 1,504(xvii) 27,321 -------- ------ ------- ------- -------- -------- Net income (loss)..................... (28,750) 927 4,216 52 (13,862) (37,417) Preferred stock dividends............. 4,810 -- -- -- 471 (xviii 5,281 -------- ------ ------- ------- -------- -------- Income (loss) attributable to common stockholders........................ $(33,560) $ 927 $ 4,216 $ 52 $(14,333) $(42,698) ======== ====== ======= ======= ======== ======== Broadcast cash flow................... $ 77,895 $ 927 $11,842 $ (158) $ 403 $ 90,909 ======== ====== ======= ======= ======== ========
A-14 18 - --------------- (i) On November 22, 1996, Chancellor acquired WKYN-AM in Cincinnati for $1,400 in cash. Chancellor had been previously operating WKYN-AM under a time brokerage agreement since January 1, 1996. Therefore, Chancellor's historical results of operations for the year ended December 31, 1996 and the nine months ended September 30, 1997 include the results of operations of WKYN-AM. (ii) On February 14, 1996, Chancellor acquired Shamrock Broadcasting, Inc., a radio broadcasting company with 19 radio stations (11 FM and 8 AM) located in 10 markets (Los Angeles, New York, San Francisco, Houston, Atlanta, Detroit, Denver, Minneapolis-St. Paul, Phoenix and Pittsburgh). The total purchase price, including acquisition costs, allocated to net assets acquired was approximately $408,000. (iii) On July 31, 1996, Chancellor exchanged KTBZ-FM in Houston (which was acquired on February 14, 1996 as part of the Shamrock Acquisition) and $5,600 in cash for KIMN-FM and KALC-FM in Denver. Chancellor had previously entered into a time brokerage agreement to sell substantially all of the broadcast time of KTBZ-FM effective February 14, 1996. In addition, Chancellor had been previously operating KIMN-FM and KALC-FM under a time brokerage agreement since April 1, 1996. (iv) On January 23, 1997, Chancellor acquired, in the Colfax Acquisition, Colfax Communications, a radio broadcasting company, with 12 radio stations (8 FM and 4 AM) located in 4 markets (Minneapolis-St. Paul, Phoenix, Washington, D.C. and Milwaukee markets). The total purchase price, including acquisition costs, allocated to net assets acquired was approximately $383,700. The Colfax Acquisition was financed through (i) a private placement by CRBC of $200,000 of 12% Exchangeable Preferred Stock for net proceeds of $191,817; (ii) a private placement by Chancellor of $110,000 of 7% Convertible Preferred Stock for net proceeds of $105,546; (iii) additional bank borrowings under CRBC's previous senior credit agreement of $65,937 and (iv) $20,400 in escrow funds. The historical financial data of Colfax for the year ended December 31, 1996 excludes the combined net income of approximately $224 for KLTB-FM, KARO-FM and KIDO-AM in Boise, Idaho which Chancellor did not acquire as part of the Colfax Acquisition. The Colfax historical condensed statement of operations for the year ended December 31, 1996, does not include the results of operations of the following: (i) KOOL-FM for the period January 1, 1996 to March 31, 1996 and (ii) WMIL-FM and WOKY-AM in Milwaukee and KZON-FM, KISO-AM, KYOT-FM and KOY-AM in Phoenix which were owned and operated by Sundance Broadcasting, Inc. ("Sundance") for the period January 1, 1996 to September 12, 1996. On March 31, 1997, Chancellor sold WMIL-FM and WOKY-AM in Milwaukee for $41,253 in cash. The assets of WMIL-FM and WOKY-AM are classified as assets held for sale in connection with the purchase price allocation of the Colfax Acquisition. Accordingly, WMIL-FM and WOKY-AM net income of approximately $41 for the period January 23, 1997 through March 31, 1997 has been excluded from the Colfax historical condensed statement of operations for the nine months ended September 30, 1997. (v) On February 13, 1997, Chancellor acquired, in the Omni Acquisition, substantially all of the assets and assumed certain liabilities of the OmniAmerica Group including 8 radio stations (7 FM and 1 AM) located in 3 markets (Orlando, West Palm Beach and Jacksonville). The total purchase price, including acquisition costs, allocated to net assets acquired was approximately $181,046. The Omni Acquisition was financed through (i) additional bank borrowings under CRBC's previous senior credit agreement of $166,046 and (ii) the issuance of 555,556 shares of the Chancellor Class A Common Stock valued at $15,000 or $27.00 per share. Prior to the consummation of the Omni Acquisition, Chancellor had entered into an agreement to operate the stations under a time brokerage agreement effective July 1, 1996. Additionally, prior to consummation of the West Palm Beach Exchange (see (vi) below) on March 28, 1997 and the SFX Exchange (see note 15(a)), Chancellor entered into time brokerage agreements to sell substantially all of the broadcast time of WEAT-FM/AM and WOLL-FM in West Palm Beach and WAPE-FM and WFYV-FM in Jacksonville effective July 1, 1996. The historical financial data of Omni for the period January 1, 1996 to June 30, 1996 represents the results of operations for the Orlando stations (WOMX-FM, WXXL-FM and WJHM-FM). The results of operations for WEAT-FM/AM and WOLL-FM in West Palm Beach and WAPE-FM and WFYV-FM A-15 19 in Jacksonville are not included as the acquisition and disposition of these stations is deemed to have occurred on January 1, 1996. (vi) On March 28, 1997, Chancellor exchanged, in the West Palm Beach Exchange, WEAT-FM/AM and WOLL-FM in West Palm Beach, Florida, which were acquired as part of the Omni Acquisition, for KSTE-FM in Sacramento and $33,000 in cash. Chancellor had previously been operating KSTE-FM under a time brokerage agreement since August 1, 1996. (vii) On July 2, 1997, Chancellor acquired, in the Chancellor Viacom Acquisition, KIBB-FM and KYSR-FM in Los Angeles, WLIT-FM in Chicago and WDRQ-FM in Detroit for approximately $500,789 in cash including various other direct acquisition costs. The Chancellor Viacom Acquisition was financed with (i) bank borrowings of $273,159 under CRBC's restated senior credit agreement, dated July 2, 1997 (the "CRBC Restated Credit Agreement"); (ii) borrowings under an interim loan (the "Chancellor Broadcasting /Viacom Interim Financing") of $168,300; (iii) escrow funds of $53,750 paid by Chancellor on February 19, 1997 and (iv) $5,580 financed through working capital. The assets of WDRQ-FM in Detroit are classified as assets held for sale in connection with the purchase price allocation of the Chancellor Viacom Acquisition (see (x) below). (viii)On January 31, 1997, Chancellor sold, in the WWWW/WDFN Disposition, WWWW-FM and WDFN-AM in Detroit, which were acquired on February 14, 1996 as part of the Shamrock Acquisition, to the Company for $30,000 in cash. Prior to the completion of the sale, Chancellor had entered into a joint sales agreement effective February 14, 1996 and a time brokerage agreement effective April 1, 1996 to sell substantially all of the broadcast time of WWWW-FM and WDFN-AM to the Company pending the completion of the sale. (ix) On March 31, 1997, Chancellor sold, in the Milwaukee Disposition, WMIL-FM and WOKY-AM in Milwaukee, which were acquired as part of the Colfax Acquisition on January 23, 1997, for $41,253 in cash. (x) On August 11, 1997, Chancellor sold, in the ABC/Detroit Disposition, WDRQ-FM in Detroit for $37,000 in cash. The assets of WDRQ-FM were classified as assets held for sale in connection with the purchase price allocation of the Chancellor Viacom Acquisition (see 6(k)(vii)). Accordingly, WDRQ-FM net income for the period July 2, 1997 to August 11, 1997 has been excluded from Chancellor's historical condensed statement of operations. (xi) Reflects the elimination of time brokerage agreement fees received and paid by Chancellor as follows:
YEAR ENDED DECEMBER 31, 1996 MARKET PERIOD REVENUE EXPENSE - --------------------------------------------------- --------------- ------------- ------- ------- WWWW-FM/WDFN-AM.................................... Detroit 2/14 -- 12/31 $(2,937) $ (598) KTBZ-FM............................................ Houston 2/14 -- 7/31 (1,113) (265) WOMX-FM, WXXL-FM, WJHM-FM.......................... Orlando 7/1 -- 12/31 -- (3,900) WEAT-FM/AM, WOLL-FM................................ West Palm Beach 7/1 -- 12/31 (972) (1,000) ------- ------- Total adjustment for decrease in gross revenues and expenses $(5,022) $(5,763) ======= =======
NINE MONTHS ENDED SEPTEMBER 30, 1997 MARKET PERIOD REVENUE EXPENSE - --------------------------------------------------- --------------- ------------- ------- ------- WWWW-FM/WDFN-AM.................................... Detroit 1/1 -- 1/31 $ (235) $ (16) WOMX-FM, WXXL-FM, WJHM-FM.......................... Orlando 1/1 -- 2/13 -- (911) WEAT-FM/AM, WOLL-FM................................ West Palm Beach 1/1 -- 3/28 (593) (304) ------- ------- Total adjustment for decrease in gross revenues and expenses $ (828) $(1,231) ======= =======
Gross revenues of the Completed Chancellor Transactions exclude any time brokerage agreement payments received from Chancellor. A-16 20 (xii) Reflects incremental amortization related to the Completed Chancellor Transactions and is based on the following allocation to intangible assets:
INCREMENTAL HISTORICAL ADJUSTMENT COMPLETED CHANCELLOR TRANSACTIONS AMORTIZATION INTANGIBLE AMORTIZATION AMORTIZATION FOR NET YEAR ENDED DECEMBER 31, 1996 PERIOD ASSETS, NET EXPENSE (1) EXPENSE INCREASE --------------------------------- ------------ ----------- ------------ ------------ ---------- Shamrock......................... 1/1 - 2/14 $ 361,425 $ 1,104 $ 393 $ 711 KIMN-FM/KALC-FM.................. 1/1 - 3/31 8,285 52 341 (289) Omni............................. 1/1 - 12/31 171,837 4,296 161 4,135 Colfax........................... 1/1 - 12/31 317,894 7,947 3,861 4,086 KSTE-FM.......................... 1/1 - 12/31 (32,475) (812) -- (812) Chancellor Viacom Acquisition.... 1/1 - 12/31 451,690 11,292 4,101 7,191 ---------- ------- ------ ------- Total.................. $1,278,656 $23,879 $8,857 $15,022 ---------- ------- ------ -------
INCREMENTAL HISTORICAL ADJUSTMENT COMPLETED CHANCELLOR TRANSACTIONS AMORTIZATION INTANGIBLE AMORTIZATION AMORTIZATION FOR NET NINE MONTHS ENDED SEPTEMBER 30, 1997 PERIOD ASSETS, NET EXPENSE (1) EXPENSE INCREASE ------------------------------------ ------------ ----------- ------------ ------------ ---------- Omni................................ 1/1 - 2/13 $ 171,837 $ 525 $ -- $ 525 Colfax.............................. 1/1 - 1/23 317,894 508 -- 508 KSTE-FM............................. 1/1 - 3/28 (32,475) (198) -- (198) Chancellor Viacom Acquisition....... 1/1 - 7/2 451,690 5,709 2,060 3,649 ---------- ------- ------ ------- Total..................... $ 908,946 $ 6,544 $2,060 $ 4,484 ---------- ------- ------ -------
- --------------- (1) Intangible assets were amortized on a straight-line basis over an estimated average 40 year life by Chancellor. In connection with purchase accounting for the Chancellor Merger, intangible assets are amortized over an estimated average life of 15 years in accordance with the Company's accounting policies and procedures. Historical depreciation expense of the Completed Chancellor Transactions is assumed to approximate depreciation expense on a pro forma basis. Actual depreciation and amortization may differ based upon final purchase price allocations. (xiii) Reflects the elimination of disposed stations' historical depreciation and amortization expense of $1,554 for the year ended December 31, 1996 (KTBZ-FM of $642 and WWWW-FM/WDFN-AM of $912 for the period of February 14, 1996 to December 31, 1996) and $82 for the nine months ended September 30, 1997 (WWWW-FM/WDFN-AM for the period of January 1, 1997 to January 31, 1997) recognized by Chancellor during the time brokerage agreement holding period. (xiv) Reflects the elimination of duplicate corporate expenses of $2,726 for the year ended December 31, 1996 and $354 for the nine months ended September 30, 1997 related to the Completed Chancellor Transactions. A-17 21 (xv) Reflects the adjustment to interest expense in connection with the consummation of the Completed Chancellor Transactions, the February 1996 and August 1996 equity offerings of Chancellor (the "Chancellor Offerings"), the issuance by CRBC of its 12 1/4% Series A Senior Cumulative Exchangeable Preferred Stock, the refinancing of CRBC's previous senior credit agreement on January 23, 1997 and the offering on June 24, 1997 by CRBC of $200.0 million aggregate principal amount of its 8 3/4% Senior Subordinated Notes due 2007 (the "8 3/4% Notes"):
NINE MONTHS YEAR ENDED ENDED DECEMBER 31, 1996 SEPTEMBER 30, 1997 ----------------- ------------------ Additional bank borrowings related to: Completed Chancellor Acquisitions.................... $1,162,592 $ 727,192 Completed Chancellor Dispositions.................... (141,253) (141,253) New Loan Fees........................................ 8,573 8,573 ---------- --------- Total additional bank borrowings....................... $1,029,912 $ 594,512 ========== ========= Interest expense on additional bank borrowings at 7.5%................................................. $ 49,626 $ 16,118 Less: historical interest expense of the stations acquired in the Completed Chancellor Transactions.... (12,422) (3,178) ---------- --------- Net increase in interest expense....................... 37,204 12,940 Reduction in interest expense on bank debt related to the application of net proceeds of the following at 7.5%: February 1996 offering proceeds of $155,475 for the period January 1, 1996 to February 14, 1996.......... (1,425) -- August 1996 offering proceeds of $23,050 for the period January 1, 1996 to August 9, 1996.................... (1,052) -- CRBC 12 1/4% Series A Senior Cumulative Exchangeable Preferred Stock proceeds of $96,171 for the period January 1, 1996 to February 14, 1996.............. (902) -- CRBC 8 3/4% Notes proceeds of $194,083 for the year ended December 31, 1996 and for the period January 1, 1997 to June 24, 1997.......................... (14,556) (7,036) Reduction in interest expense resulting from the redemption of CRBC's 12.5% Senior Subordinated Notes of $60,000 on June 5, 1997........................... (7,500) (3,229) Interest expense on $70,133 additional bank borrowings at 7.5% related to the redemption of CRBC's 12.5% Senior Subordinated Notes on June 5, 1997............ 5,260 2,265 Interest expense on $200,000 8 3/4% Notes issued June 24, 1997........................................ 17,500 8,458 ---------- --------- Total adjustment for net increase in interest expense.............................................. $ 34,529 $ 13,398 ========== =========
(xvi) Reflects the income tax benefit related to pro forma adjustments. The adjustment to income taxes reflects the application of the estimated effective tax rate on a pro forma basis to income (loss) before income taxes for historical and pro forma adjustment amounts. (xvii) Reflects incremental dividends and accretion on preferred stock of subsidiaries as follows:
NINE MONTHS DATE OF YEAR ENDED ENDED ISSUANCE DECEMBER 31, 1996 SEPTEMBER 30, 1997 ----------------- ----------------- ------------------ 12 1/4% Series A Senior Cumulative Exchangeable Preferred Stock........ February 26, 1996 $ 1,441 $ -- 12% Exchangeable Preferred Stock...... January 23, 1997 25,402 1,504 ------- ------- Total dividends and accretion......... $26,843 $1,504 ======= =======
A-18 22 (xviii) Reflects incremental dividends on Chancellor's 7% Convertible Preferred Stock (issued on January 23, 1997) of $7,700 for the year ended December 31, 1996 and $471 for the nine months ended September 30, 1997. (l) On October 7, 1997, the Company acquired, in the Bonneville Acquisition, KZPS-FM and KDGE-FM in Dallas for $83,500 in cash. On July 14, 1997, the Company completed the disposition of WLUP-FM in Chicago to Bonneville and placed $80,000 in a trust pending the completion of the Chicago/Dallas Exchange. The Chicago/Dallas Exchange was accounted for as a like-kind exchange and no gain or loss was recognized upon consummation of the exchange. The Company began operating KZPS-FM and KDGE-FM under a time brokerage agreement on August 1, 1997. (m) On October 28, 1997, the Company acquired Katz Media Group, Inc. ("KMG"), a full-service media representation firm, in a tender offer transaction for a total purchase price of approximately $379,101 (the "Katz Acquisition") which included (i) the conversion of each outstanding share of KMG Common Stock into the right to receive $11.00 in cash, resulting in total cash payments of $149,601, (ii) the assumption of long-term debt of KMG and its subsidiaries of $222,000 which includes borrowings outstanding under the senior credit facility of KMG and its subsidiaries of $122,000 and $100,000 of the 10 1/2% Notes and (iii) estimated acquisition costs of $7,500. (n) On December 29, 1997, the Company acquired, in the Gannett Acquisition, 5 radio stations in 3 major markets from P&S including WGCI-FM/AM in Chicago, KHKS FM in Dallas, and KKBQ-FM/AM in Houston for $340,000 in cash. (o) On January 30, 1998, the Company acquired, in the Denver Acquisition, KXPK-FM in Denver from Ever Green Wireless LLC (which is unrelated to the Company) for $26,000 in cash (including $1,650 paid by Chancellor in escrow). Chancellor had previously been operating KXPK-FM under a time brokerage agreement since September 1, 1997. (p) On May 15, 1997, the Company sold, in the EZ Sale, WNKS-FM in Charlotte for $10,000 in cash. (q) On June 3, 1997, the Company sold, in the Crawford Disposition, WEJM-FM in Chicago for $14,750 in cash. On August 26, 1997, the Company sold, in the Douglas Chicago Disposition, WEJM-AM in Chicago for $7,500 in cash. (r) On July 7, 1997, the Company sold, in the ABC/Washington Disposition, WJZW-FM in Washington for $68,000 in cash. The assets of WJZW-FM were classified as assets held for sale in connection with the purchase price allocation of the Evergreen Viacom Acquisition (see 6(j)). Accordingly, WJZW-FM net income for the period July 2, 1997 to July 7, 1997 has been excluded from the Company's historical condensed statement of operations. (s) On July 7, 1997, the Company sold, in the San Francisco Frequency Disposition, the San Francisco 107.7 MHz FM dial position and transmission facility and the call letters from Chancellor's KSAN-FM in San Francisco for $44,000 in cash. (t) On January 31, 1997, the Company acquired, in the KKSF/KDFC Acquisition, KKSF-FM and KDFC-FM/AM in San Francisco for $115,000 in cash. The Company had previously been operating KKSF-FM and KDFC-FM/AM under a time brokerage agreement since November 1, 1996. On July 21, 1997, the Company sold, in the Bonneville/KDFC Disposition, KDFC-FM in San Francisco for $50,000 in cash. The assets of KDFC-FM are classified as assets held for sale in connection with the purchase price allocation of the acquisition of KKSF-FM/KDFC-FM/AM. Accordingly, KDFC-FM net income of approximately $791 for the period February 1, 1997 through September 30, 1997 has been excluded from the Company's historical condensed statement of operations. Therefore, the KDFC-FM condensed statement of operations includes the results of operations for January 1, 1997 through January 31, 1997 (the time brokerage agreement holding period in 1997) for the nine months ended September 30, 1997. (u) On August 13, 1997, the Company sold, in the Douglas AM Dispositions, WBZS-AM and WZHF-AM in Washington (acquired as part of the Evergreen Viacom Acquisition -- see 6(j)) and KDFC-AM in A-19 23 San Francisco for $5,500, $7,500 and $5,000, respectively, payable in the form of a promissory note. The assets of WBZS-AM and WZHF-AM were classified as assets held for sale in connection with the purchase price allocation of the Evergreen Viacom Acquisition (see 6(j)). Accordingly, WBZS-AM and WZHF-AM net income for the period July 2, 1997 to August 13, 1997 has been excluded from the Company's historical condensed statement of operations. (v) On May 30, 1997, the Company acquired, in the Century Acquisition, WPNT-FM in Chicago for $75,750 in cash (including $2,000 for the purchase of the station's accounts receivable) of which $5,500 was paid as escrow funds in July 1996. On June 19, 1997, the Company sold, in the Bonneville/WPNT Disposition, WPNT-FM in Chicago for $75,000 in cash and recognized a gain of $500. (7) Reflects the elimination of intercompany Katz revenue and Company expense related to national representation commissions of $15,964 for the year ended December 31, 1996 and $15,119 for the nine months ended September 30, 1997 paid to Katz by the Company. (8) Reflects the reclassification of Katz corporate general and administrative expenses of $10,035 for the year ended December 31, 1996 and $8,171 for the nine months ended September 30, 1997 to conform with Company classification. (9) Reflects incremental amortization related to the Completed Transactions and is based on the following allocation to intangible assets:
INCREMENTAL INTANGIBLE HISTORICAL ADJUSTMENT COMPLETED TRANSACTIONS AMORTIZATION ASSETS, AMORTIZATION AMORTIZATION FOR NET YEAR ENDED DECEMBER 31, 1996 PERIOD(I) NET EXPENSE(I) EXPENSE INCREASE ---------------------------- ------------ ---------- ------------ ------------ ---------- Pyramid Acquisition (ii)........ 1/1-1/17 $ 325,871 $ 1,026 $ 409 $ 617 KYLD-FM......................... 1/1-8/14 43,659 1,811 640 1,171 WEDR-FM......................... 1/1-10/18 63,757 3,400 -- 3,400 WGAY-FM......................... 1/1-11/26 32,538 1,964 -- 1,964 WWWW-FM/WDFN-AM................. 1/1-12/31 26,590 1,773 7 1,766 KKSF-FM (iii)................... 1/1-12/31 58,698 3,913 868 3,045 WJLB-FM/WMXD-FM................. 1/1-12/31 165,559 11,037 2,145 8,892 WWRC-AM......................... 1/1-12/31 16,808 1,121 -- 1,121 WDAS-FM/AM...................... 1/1-12/31 98,185 6,546 2,470 4,076 Evergreen Viacom Acquisition (iv).......................... 1/1-12/31 515,654 34,377 5,606 28,771 Chancellor Merger (v)........... 1/1-12/31 2,178,137 145,209 37,834 107,375 Chicago/Dallas Exchange......... 1/1-12/31 (584) (39) -- (39) Katz Acquisition (vi)........... 1/1-12/31 354,058 12,402 7,616 4,786 Gannett Acquisition............. 1/1-12/31 334,756 22,317 1,229 21,088 Denver Acquisition.............. 1/1-12/31 25,554 1,704 328 1,376 ---------- -------- ------- -------- Total........................... $4,239,240 $248,561 $59,152 $189,409 ========== ======== ======= ========
INCREMENTAL INTANGIBLE HISTORICAL ADJUSTMENT COMPLETED TRANSACTIONS AMORTIZATION ASSETS, AMORTIZATION AMORTIZATION FOR NET NINE MONTHS ENDED SEPTEMBER 30, 1997 PERIOD(I) NET EXPENSE(I) EXPENSE INCREASE ------------------------------------ ------------ ---------- ------------ ------------ ---------- WWWW-FM/WDFN-AM..................... 1/1-1/31 $ 26,590 $ 148 $ -- $ 148 KKSF-FM (iii)....................... 1/1-1/31 58,698 326 -- 326 WJLB-FM/WMXD-FM..................... 1/1-3/31 165,559 2,759 -- 2,759 WWRC-AM............................. 1/1-4/2 16,808 286 -- 286 WDAS-FM/AM.......................... 1/1-4/30 98,185 2,182 820 1,362 Evergreen Viacom Acquisition(iv).... 1/1-7/2 515,654 17,379 793 16,586 Chancellor Merger(v)................ 1/1-9/5 2,178,137 98,823 23,638 75,185 Chicago/Dallas Exchange............. 1/1-9/30 (584) (29) -- (29) Katz Acquisition(vi)................ 1/1-9/30 354,058 9,302 5,712 3,590 Gannett Acquisition................. 1/1-9/30 334,756 16,738 921 15,817 Denver Acquisition.................. 1/1-9/30 25,554 1,278 201 1,077 ---------- -------- ------- -------- Total............................... $3,773,415 $149,192 $32,085 $117,107 ========== ======== ======= ========
A-20 24 - --------------- (i) Intangible assets are amortized on a straight-line basis over an estimated average 15 year life (except for the Katz Acquisition -- see (vi) below). The incremental amortization period represents the period of the year that the station was not owned by the Company. (ii) Intangible assets for the Pyramid Acquisition of $325,871 includes $61,218 resulting from the recognition of deferred tax liabilities and excludes approximately $29,915 of the purchase price allocated to the Buffalo Stations which were sold during the year ended December 31, 1996. (iii) Intangible assets for KKSF-FM excludes (1) $50,000 of the purchase price allocated to KDFC-FM which has been classified as assets held for sale, (2) $1,500 to be reimbursed by the buyers of KDFC-FM for costs incurred in connection with relocating KKSF and (3) $4,802 of the purchase price allocated to KDFC-AM which was sold, in the Douglas AM Dispositions, on August 13, 1997. (iv) Intangible assets for the Evergreen Viacom Acquisition of $515,654 excludes (1) $67,231 of the purchase price allocated to WJZW-FM which was sold in the ABC/Washington Disposition on July 7, 1997 and (2) $12,148 of the purchase price allocated to WZHF-AM and WBZS-AM which were sold in the Douglas AM Dispositions on August 13, 1997. (v) Intangible assets for the Chancellor Merger of $2,178,137 includes $293,548 resulting from the recognition of deferred tax liabilities. (vi) Intangible assets for the Katz Acquisition of $354,058 consist of goodwill of $249,058 and representation contract value of $105,000 with estimated average lives of 40 years and 17 years, respectively. Historical depreciation expense of the Completed Transactions is assumed to approximate depreciation expense on a pro forma basis. Actual depreciation and amortization may differ based upon final purchase price allocations. (10) Reflects the elimination of merger expenses of $6,124 for the nine months ended September 30, 1997 incurred by Chancellor in connection with the Chancellor Merger. (11) Reflects the elimination of duplicate corporate expenses of $6,347 for the year ended December 31, 1996 and $1,842 for the nine months ended September 30, 1997 related to the Completed Transactions. (12) Reflects the adjustment to interest expense in connection with the consummation of the Completed Transactions, the sale in October 1996 by the Company of 9,000,000 shares of its common stock for aggregate net proceeds of $264,236 (the "1996 Evergreen Offering"), the amendment and restatement of the Company's senior credit agreement on April 25, 1997 (the "Senior Credit Facility") and the offering by CMCLA of the 8 1/8% Notes: A-21 25
NINE MONTHS YEAR ENDED ENDED DECEMBER 31, 1996 SEPTEMBER 30, 1997 ----------------- ------------------ Additional bank borrowings related to: Completed Station Acquisitions.................... $2,025,409 $1,551,409 Chancellor Merger (a)............................. 31,000 31,000 Katz Acquisition (b).............................. 157,101 157,101 Completed Station Dispositions.................... (381,250) (349,250) New Loan Fees..................................... 10,473 10,473 ---------- ---------- Total additional bank borrowings.................... $1,842,733 $1,400,733 ========== ========== Interest expense at 7.0%............................ $ 106,013 $ 49,237 Less: historical interest expense related to completed station acquisitions and dispositions... (6,547) (1,009) ---------- ---------- Net increase in interest expense.................... 99,466 48,228 Reduction in interest expense on bank debt related to the application of net proceeds of the following at 7.0%: 1996 Evergreen Offering proceeds of $264,236 for the period January 1, 1996 to October 22, 1996........................................... (15,003) -- $3.00 Convertible Preferred Stock Offering proceeds of $287,808 for the year ended December 31, 1996 and for the period January 1, 1997 to June 16, 1997.......................... (20,147) (9,290) CMCLA 8 1/8% Notes proceeds of $485,000 for the year ended December 31, 1996 and for the nine months ended September 30, 1997................ (33,950) (25,463) Interest expense on CMCLA's $500,000 8 1/8% Notes issued December 22, 1997.......................... 40,625 30,469 Reduction in interest expense related to the application of the 7.0% interest rate to the Company's bank debt prior to the refinancing of the Senior Credit Facility, to CRBC's bank debt prior to consummation of the Chancellor Merger and to KMG's bank debt prior to consummation of the Katz Acquisition.................................. (18,115) (12,261) ---------- ---------- Total adjustment for net increase in interest expense........................................... $ 52,876 $ 31,683 ========== ==========
(a) The Company incurred additional bank borrowings of $31,000 to finance estimated acquisition costs related to the Chancellor Merger. (b) The Company incurred additional bank borrowings of $149,601 to finance the payment of $11.00 in cash for each outstanding share of KMG Common Stock and $7,500 to finance estimated acquisition costs related to the Katz Acquisition. (13) Reflects the income tax benefit related to pro forma adjustments. The adjustment to income taxes reflects the application of the estimated effective tax rate on a pro forma basis to income (loss) before income taxes for historical and pro forma adjustment amounts. (14) Reflects the (i) elimination of historical preferred stock dividends of $3,820 for the year ended December 31, 1996, assuming the conversion of 1,608,297 shares of the Company's formerly outstanding convertible exchangeable preferred stock into 5,025,916 shares of Class A Common Stock (the "1996 Preferred Stock Conversion") and the redemption of the remaining 1,703 shares of formerly outstanding convertible exchangeable preferred stock occurred on January 1, 1996 and (ii) incremental dividends on the $3.00 Convertible Preferred Stock (issued on June 16, 1997) of $17,970 for the year ended December 31, 1996 and $8,287 for the nine months ended September 30, 1997. A-22 26 ADJUSTMENTS TO UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENTS OF OPERATIONS RELATED TO THE PENDING TRANSACTIONS (15) The detail of the historical financial data of the stations to be acquired or disposed of in the Pending Transactions for the year ended December 31, 1996 and the nine months ended September 30, 1997 has been obtained from the historical financial statements of the respective stations and is summarized below:
ACQUISITIONS DISPOSITIONS ---------------------------- --------------------------- SFX BONNEVILLE BONNEVILLE EXCHANGE OPTION WFLN-FM OPTION PENDING HISTORICAL HISTORICAL HISTORICAL HISTORICAL TRANSACTIONS YEAR ENDED DECEMBER 31, 1996 1/1-6/30(A) 1/1-12/31(B) 9/1-12/31(C) 1/1-12/31(B) HISTORICAL - ------------------------------------------------------ ------------- ------------ ------------ ------------ ------------ Gross revenues........................................ $ 5,726 $55,482 $(1,455) $(35,355) $24,398 Less: agency commissions.............................. (619) (8,683) 159 4,528 (4,615) ------- ------- ------- -------- ------- Net revenues.......................................... 5,107 46,799 (1,296) (30,827) 19,783 Station operating expenses excluding depreciation and amortization......................................... 3,676 25,678 (725) (18,858) 9,771 Depreciation and amortization......................... 2,141 -- (800) -- 1,341 Corporate general and administrative.................. 1,024 -- -- -- 1,024 ------- ------- ------- -------- ------- Operating income (loss)............................... (1,734) 21,121 229 (11,969) 7,647 Interest expense...................................... -- -- -- (562) (562) Other (income) expense................................ -- (8) -- 9 1 ------- ------- ------- -------- ------- Net income (loss)..................................... $(1,734) $21,129 $ 229 $(11,416) $ 8,208 ======= ======= ======= ======== ======= Broadcast cash flow................................... $ 1,431 $21,121 $ (571) $(11,969) $10,012 ======= ======= ======= ======== =======
ACQUISITIONS DISPOSITIONS ------------ ------------------------- BONNEVILLE BONNEVILLE OPTION WFLN-FM OPTION PENDING HISTORICAL HISTORICAL HISTORICAL TRANSACTIONS NINE MONTHS ENDED SEPTEMBER 30, 1997 1/1-9/30(B) 1/1-4/30(C) 1/1-9/30(B) HISTORICAL - ------------------------------------------------------------ ------------ ----------- ----------- ------------ Gross revenues.............................................. $32,912 $(1,298) $(30,638) $ 976 Less: agency commissions.................................... (4,992) 134 3,952 (906) ------- ------- -------- ------- Net revenues................................................ 27,920 (1,164) (26,686) 70 Station operating expenses excluding depreciation and amortization............................................... 18,901 (728) (14,206) 3,967 Depreciation and amortization............................... -- (800) -- (800) Corporate general and administrative........................ -- -- -- -- ------- ------- -------- ------- Operating income (loss)..................................... 9,019 364 (12,480) (3,097) Interest expense............................................ -- -- -- -- Other (income) expense...................................... 4 -- 9 13 ------- ------- -------- ------- Net income (loss)........................................... $ 9,015 $ 364 $(12,489) $(3,110) ======= ======= ======== ======= Broadcast cash flow......................................... $ 9,019 $ (436) $(12,480) $(3,897) ======= ======= ======== =======
(a) On July 1, 1996, Chancellor entered into an agreement to exchange, in the SFX Exchange, WAPE-FM and WFYV-FM in Jacksonville, Florida (which were acquired as part of the Omni Acquisition) (see 6(k)(v)), and $11,000 in cash to SFX for WBAB-FM, WBLI-FM, WGBB-AM, and WHFM-FM in Long Island. Chancellor entered into time brokerage agreements to operate WBAB-FM, WBLI-FM, WGBB-AM, and WHFM-FM effective July 1, 1996 and entered into time brokerage agreements to sell substantially all of the broadcast time of WAPE-FM and WFYV-FM effective July 1, 1996. On November 6, 1997, the DOJ filed suit against the Company seeking to enjoin under the HSR Act the acquisition of the four Long Island Properties under the SFX Exchange. If the Company is unable to acquire the four Long Island properties, the SFX Exchange will not be consummated and the Company will retain ownership of the two Jacksonville FM stations. There can be no assurance as to whether or when the SFX Exchange will ultimately be consummated. The Company does not believe that failure to consummate the SFX Exchange would have a material adverse effect on the Company's business, results of operations or financial condition. A-23 27 (b) On August 6, 1997, the Company paid $3,000 to Bonneville for an option to exchange WTOP-AM in Washington, KZLA-FM in Los Angeles and WGMS-FM in Washington plus $57,000 in cash for Bonneville's stations WNSR-FM in New York, KLDE-FM in Houston and KBIG-FM in Los Angeles (the "Bonneville Option"). The Bonneville Option was exercised on October 1, 1997, and definitive exchange documentation is presently being negotiated. The Company has entered into time brokerage agreements to operate KLDE-FM and KBIG-FM effective October 1, 1997 and WNSR-FM effective October 10, 1997 and has entered into time brokerage agreements to sell substantially all of the broadcast time of WTOP-AM, KZLA-FM and WGMS-FM effective October 1, 1997. (c) On August 12, 1996, the Company entered into an agreement to acquire WFLN-FM in Philadelphia from Secret for $37,750 in cash. The Company also entered into an agreement to operate WFLN-FM under a time brokerage agreement effective September 1, 1996. The Company subsequently entered into an agreement to sell WFLN-FM to Greater Media for $41,800 in cash. On May 1, 1997, the Company assigned its time brokerage agreement to operate WFLN-FM to Greater Media. On July 16, 1997, Secret purported to terminate the sale of WFLN-FM to the Company. The Company subsequently brought suit against Secret to enforce its right to acquire WFLN-FM. In August 1997, pursuant to a court settlement, the Company, Secret and Greater Media agreed that (i) Secret would sell WFLN-FM directly to Greater Media for $37,750, (ii) Greater Media would deposit $4,050 (the difference between the Company's proposed acquisition price for WFLN-FM from Secret and the Company's proposed sale price for WFLN-FM to Greater Media) with the court and (iii) the Company and Secret would litigate each party's entitlement to the amount deposited with the court. As of the date hereof, no further resolution to this dispute has occurred. (16) Reflects the elimination of time brokerage agreement fees received and paid by Chancellor as follows:
YEAR ENDED DECEMBER 31, 1996 MARKET PERIOD REVENUE EXPENSE ---------------------------- ----------- --------- ------- ------- WAPE-FM, WFYV-FM................................ Jacksonville 7/1-12/31 $(1,963) $(2,000) WBAB-FM, WBLI-FM, WGBB-AM, WHFM-FM.............. Long Island 7/1-12/31 -- (2,000) ------- ------- Total adjustment for decrease in gross revenues and expenses............ $(1,963) $(4,000) ======= =======
NINE MONTHS ENDED SEPTEMBER 30, 1997 MARKET PERIOD REVENUE EXPENSE ------------------------------------ ----------- --------- ------- ------- WAPE-FM, WFYV-FM................................ Jacksonville 1/1-9/5 $(2,711) $ (490) WBAB-FM, WBLI-FM, WGBB-AM, WHFM-FM.............. Long Island 1/1-9/5 -- (2,711) ------- ------- Total adjustment for decrease in gross revenues and expenses............ $(2,711) $(3,201) ======= =======
(17) Reflects incremental amortization related to the Pending Transactions and is based on the allocation of the total consideration as follows:
YEAR ENDED NINE MONTHS ENDED DECEMBER 31, 1996 SEPTEMBER 30, 1997 ----------------- ------------------ Amortization expense on $67,270 additional intangible assets amortized on a straight-line basis over a 15 year period......................................... $ 4,484 $ 3,363 Less: historical amortization expense................. (1,629) (999) ------- ------- Adjustment for net increase in amortization expense... $ 2,855 $ 2,364 ======= =======
Historical depreciation expense of the Pending Transactions is assumed to approximate depreciation expense on a pro forma basis. Actual depreciation and amortization may differ based upon final purchase price allocations. A-24 28 (18) Reflects the adjustment to interest expense in connection with the consummation of the Pending Transactions:
NINE MONTHS YEAR ENDED ENDED DECEMBER 31, SEPTEMBER 30, 1996 1997 ------------ ------------- Additional bank borrowings related to: Pending Acquisitions...................................... $68,000 $68,000 ======= ======= Interest expense on additional bank borrowings at 7.0%...... $ 4,760 $ 3,571 ======= =======
(19) Reflects the income tax benefit related to pro forma adjustments. The adjustment to income taxes reflects the application of the estimated effective tax rate on a pro forma basis to income (loss) before income taxes for historical and pro forma adjustment amounts. (20) The pro forma combined loss per common share data is computed by dividing pro forma loss attributable to common stockholders by the weighted average common shares assumed to be outstanding. On December 18, 1997, the Company declared a 2-for-1 split of its Common Stock effected as a stock dividend (the "Stock Split"). The stock dividend was paid on January 12, 1998, to stockholders of record on December 29, 1997. Stockholders received one additional share of Common Stock for each share held on the record date. The following summary of shares used in the pro forma combined loss per common share calculation gives effect to the Stock Split.
NINE MONTHS YEAR ENDED ENDED DECEMBER 31, SEPTEMBER 30, 1996 1997 ------------ ------------- Historical weighted average shares outstanding.............. 60,414 87,690 Incremental weighted average shares relating to: Issuance of 18,000,000 shares of Common Stock on October 17, 1996................................................ 14,650 -- Conversion of 1,608,297 shares of preferred stock in 1996.................................................... 9,246 -- Issuance of 34,617,460 shares of Common Stock in connection with the Chancellor Merger................... 34,617 31,412 -------- ------- Total incremental weighted average shares.......... 58,513 31,412 ======== ======= Shares used in the pro forma combined earnings per share calculation............................................... 118,927 119,102 ======== =======
A-25 29 CHANCELLOR MEDIA CORPORATION OF LOS ANGELES PRO FORMA FINANCIAL INFORMATION The unaudited pro forma condensed combined financial statements of Chancellor Media Corporation of Los Angeles ("CMCLA" and, together with its subsidiaries, the "Company") are presented using the purchase method of accounting for all acquisitions and reflect (i) the combination of consolidated historical financial data of the Company, each of the stations acquired in the transactions completed by the Company and Chancellor Radio Broadcasting Company ("CRBC") during 1996 and 1997 (the "Completed Transactions") and each of the stations to be acquired in the transactions of the Company pending as of the date hereof (the "Pending Transactions") and (ii) the elimination of the consolidated historical data of the stations disposed in the Completed Transactions and stations to be disposed in the Pending Transactions. The unaudited pro forma condensed combined balance sheet data at September 30, 1997 presents adjustments for those Completed Transactions consummated since such date, the Pending Transactions and the offering by CMCLA of $500.0 million aggregate principal amount of 8 1/8% Senior Subordinated Notes due 2007, which was completed on December 22, 1997 (the "8 1/8% Notes Offering") as if each such transaction had occurred at September 30, 1997. The unaudited pro forma condensed combined statements of operations data for the twelve months ended December 31, 1996 and the nine months ended September 30, 1997 present adjustments for the Completed Transactions, the Pending Transactions, financing transactions undertaken by the Company and CRBC during 1996 and 1997 and the 8 1/8% Notes Offering, as if each such transaction occurred on January 1, 1996. The purchase method of accounting has been used in the preparation of the unaudited pro forma condensed combined financial statements. Under this method of accounting, the aggregate purchase price is allocated to assets acquired and liabilities assumed based on their estimated fair values. For purposes of the unaudited pro forma condensed combined financial statements, the purchase prices of the assets acquired and to be acquired in the Completed Transactions and the Pending Transactions have been allocated based primarily on information furnished by management of the acquired or to be acquired assets. The final allocation of the respective purchase prices of the assets acquired and to be acquired in the Completed Transactions and the Pending Transactions are determined a reasonable time after consummation of such transactions and are based on a complete evaluation of the assets acquired and liabilities assumed. Accordingly, the information presented herein may differ from the final purchase price allocation; however, such allocations are not expected to differ materially from the preliminary amounts. In the opinion of the Company's management, all adjustments have been made that are necessary to present fairly the pro forma data. The unaudited pro forma condensed combined financial statements should be read in conjunction with the respective financial statements and related notes thereto of the Company which have previously been reported. The unaudited pro forma condensed combined financial statements are presented for illustrative purposes only and are not necessarily indicative of the results of operations or financial position that would have been achieved had the transactions reflected therein been consummated as of the dates indicated, or of the results of operations or financial positions for any future periods or dates. B-1 30 CHANCELLOR MEDIA CORPORATION OF LOS ANGELES UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET AT SEPTEMBER 30, 1997 (IN THOUSANDS)
PRO FORMA COMPANY PRO FORMA ADJUSTMENTS AS ADJUSTED ADJUSTMENTS COMPANY FOR THE FOR THE FOR THE HISTORICAL COMPLETED COMPLETED PENDING COMPANY AT 9/30/97 TRANSACTIONS TRANSACTIONS TRANSACTIONS PRO FORMA ---------- ------------ ------------ ------------ ---------- ASSETS: Current assets.................................... $ 210,544 $ 64,166(1) $ 274,710 $ -- $ 274,710 Property and equipment, net....................... 136,405 24,544(1) 160,949 3,730(3) 164,679 Intangible assets, net............................ 3,828,014 713,784(1) 4,541,798 67,270(3) 4,609,068(4) Other assets...................................... 38,413 26,742(1) 70,155 (3,000)(3) 67,155 (10,000)(1) 15,000(2) ---------- --------- ---------- -------- ---------- Total assets.................................... $4,213,376 $ 834,236 $5,047,612 $ 68,000 $5,115,612 ========== ========= ========== ======== ========== LIABILITIES AND STOCKHOLDER'S EQUITY: Liabilities Current liabilities............................... $ 86,739 $ 45,823(1) $ 132,562 $ -- $ 132,562 Long-term debt.................................... 1,857,000 738,601(1) 2,610,601 68,000(3) 2,678,601 500,000(2) (485,000)(2) Deferred tax liabilities (assets)................. 421,408 (14,176)(1) 407,232 -- 407,232 Other liabilities................................. 997 48,988(1) 49,985 -- 49,985 ---------- --------- ---------- -------- ---------- Total liabilities............................... 2,366,144 834,236 3,200,380 68,000 3,268,380 Redeemable preferred stock........................ 338,566 -- 338,566 -- 338,566 STOCKHOLDER'S EQUITY: Common stock...................................... 1 -- 1 -- 1 Additional paid in capital........................ 1,628,668 -- 1,628,668 -- 1,628,668 Accumulated deficit............................... (120,003) -- (120,003) -- (120,003) ---------- --------- ---------- -------- ---------- Total stockholder's equity...................... 1,508,666 -- 1,508,666 -- 1,508,666 ---------- --------- ---------- -------- ---------- Total liabilities and stockholder's equity...... $4,213,376 $ 834,236 $5,047,612 $ 68,000 $5,115,612 ========== ========= ========== ======== ==========
See accompanying notes to Unaudited Pro Forma Condensed Combined Financial Statements B-2 31 CHANCELLOR MEDIA CORPORATION OF LOS ANGELES UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 1996 (IN THOUSANDS)
PRO FORMA COMPANY PRO FORMA ADJUSTMENTS AS ADJUSTED ADJUSTMENTS COMPLETED FOR THE FOR THE PENDING FOR THE COMPANY TRANSACTIONS COMPLETED COMPLETED TRANSACTIONS PENDING YEAR ENDED DECEMBER 31, 1996 HISTORICAL HISTORICAL(5) TRANSACTIONS TRANSACTIONS HISTORICAL(13) TRANSACTIONS ---------------------------- ---------- ------------- ------------ ------------ -------------- ------------ Gross revenues..................... $337,405 $668,424 $ (15,964)(6) $ 989,865 $ 24,398 $ (1,963)(14) Less: agency commissions........... (43,555) (65,654) -- (109,209) (4,615) -- -------- -------- --------- --------- -------- -------- Net revenues....................... 293,850 602,770 (15,964) 880,656 19,783 (1,963) Station operating expenses excluding depreciation and amortization..................... 174,344 379,749 (15,964)(6) 528,094 9,771 (4,000)(14) (10,035)(7) Depreciation and amortization...... 93,749 69,333 189,409(8) 352,491 1,341 2,855(15) Corporate general and administrative expenses.......... 7,797 11,440 10,035(7) 22,925 1,024 -- (6,347)(10) Stock option compensation.......... -- 3,800 -- 3,800 -- -- -------- -------- --------- --------- -------- -------- Operating income (loss)............ 17,960 138,448 (183,062) (26,654) 7,647 (818) Interest expense................... 37,527 100,301 62,851(11) 200,679 (562) 4,760(16) Other (income) expense............. (477) (844) -- (1,321) 1 -- -------- -------- --------- --------- -------- -------- Income (loss) before income taxes............................ (19,090) 38,991 (245,913) (226,012) 8,208 (5,578) Income tax expense (benefit)....... (2,896) 13,873 (68,474)(12) (57,497) -- 920(17) -------- -------- --------- --------- -------- -------- Net income (loss).................. (16,194) 25,118 (177,439) (168,515) 8,208 (6,498) Preferred stock dividends.......... -- 38,400 -- 38,400 -- -- -------- -------- --------- --------- -------- -------- Income (loss) attributable to common stock..................... $(16,194) $(13,282) $(177,439) $(206,915) $ 8,208 $ (6,498) ======== ======== ========= ========= ======== ======== Broadcast cash flow................ $119,506 $223,021 $ 10,035 $ 352,562 $ 10,012 $ 2,037 ======== ======== ========= ========= ======== ======== COMPANY YEAR ENDED DECEMBER 31, 1996 PRO FORMA ---------------------------- ---------- Gross revenues..................... $1,012,300 Less: agency commissions........... (113,824) ---------- Net revenues....................... 898,476 Station operating expenses excluding depreciation and amortization..................... 533,865 Depreciation and amortization...... 356,687 Corporate general and administrative expenses.......... 23,949 Stock option compensation.......... 3,800 ---------- Operating income (loss)............ (19,825) Interest expense................... 204,877 Other (income) expense............. (1,320) ---------- Income (loss) before income taxes............................ (223,382) Income tax expense (benefit)....... (56,577) ---------- Net income (loss).................. (166,805) Preferred stock dividends.......... 38,400 ---------- Income (loss) attributable to common stock..................... $ (205,205) ========== Broadcast cash flow................ $ 364,611 ==========
See accompanying notes to Unaudited Pro Forma Condensed Combined Financial Statements B-3 32 CHANCELLOR MEDIA CORPORATION OF LOS ANGELES UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1997 (IN THOUSANDS)
PRO FORMA COMPANY PRO FORMA ADJUSTMENTS AS ADJUSTED ADJUSTMENTS COMPLETED FOR THE FOR THE PENDING FOR THE COMPANY TRANSACTIONS COMPLETED COMPLETED TRANSACTIONS PENDING NINE MONTHS ENDED SEPTEMBER 30, 1997 HISTORICAL HISTORICAL(5) TRANSACTIONS TRANSACTIONS HISTORICAL(13) TRANSACTIONS ------------------------------------ ---------- ------------- ------------ ------------ -------------- ------------ Gross revenues........................ $382,994 $450,638 $ (15,119)(6) $ 818,513 $ 976 $ (2,711)(14) Less: agency commissions.............. (49,711) (41,764) -- (91,475) (906) -- -------- -------- --------- --------- ------- -------- Net revenues.......................... 333,283 408,874 (15,119) 727,038 70 (2,711) Station operating expenses excluding depreciation and amortization....... 184,713 258,690 (15,119)(6) 420,113 3,967 (3,201)(14) (8,171)(7) Depreciation and amortization......... 104,386 30,068 117,107(8) 251,561 (800) 2,364(15) Corporate general and administrative expenses............................ 11,646 8,133 8,171(7) 26,108 -- -- (1,842)(10) Merger expense........................ -- 6,124 (6,124)(9) -- -- -- Restructuring charge.................. -- 7,095 -- 7,095 -- -- Stock option compensation............. -- 3,083 -- 3,083 -- -- -------- -------- --------- --------- ------- -------- Operating income (loss)............... 32,538 95,681 (109,141) 19,078 (3,097) (1,874) Interest expense...................... 45,036 66,580 38,471(11) 150,087 -- 3,571(16) Other (income) expense................ (18,380) 47 -- (18,333) 13 -- -------- -------- --------- --------- ------- -------- Income (loss) before income taxes..... 5,882 29,054 (147,612) (112,676) (3,110) (5,445) Income tax expense (benefit).......... 5,244 9,801 (38,276)(12) (23,231) -- (2,995)(17) -------- -------- --------- --------- ------- -------- Net income (loss)..................... 638 19,253 (109,336) (89,445) (3,110) (2,450) Preferred stock dividends............. 2,779 27,321 -- 30,100 -- -- -------- -------- --------- --------- ------- -------- Income (loss) attributable to common stock............................... $ (2,141) $ (8,068) $(109,336) $(119,545) $(3,110) $ (2,450) ======== ======== ========= ========= ======= ======== Broadcast cash flow................... $148,570 $150,184 $ 8,171 $ 306,925 $(3,897) $ 490 ======== ======== ========= ========= ======= ======== COMPANY NINE MONTHS ENDED SEPTEMBER 30, 1997 PRO FORMA ------------------------------------ --------- Gross revenues........................ $ 816,778 Less: agency commissions.............. (92,381) --------- Net revenues.......................... 724,397 Station operating expenses excluding depreciation and amortization....... 420,879 Depreciation and amortization......... 253,125 Corporate general and administrative expenses............................ 26,108 Merger expense........................ -- Restructuring charge.................. 7,095 Stock option compensation............. 3,083 --------- Operating income (loss)............... 14,107 Interest expense...................... 153,658 Other (income) expense................ (18,320) --------- Income (loss) before income taxes..... (121,231) Income tax expense (benefit).......... (26,226) --------- Net income (loss)..................... (95,005) Preferred stock dividends............. 30,100 --------- Income (loss) attributable to common stock............................... $(125,105) ========= Broadcast cash flow................... $ 303,518 =========
See accompanying notes to Unaudited Pro Forma Condensed Combined Financial Statements B-4 33 ADJUSTMENTS TO UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET RELATED TO THE COMPLETED TRANSACTIONS COMPLETED AFTER SEPTEMBER 30, 1997 (1) Reflects the Completed Transactions that were completed after September 30, 1997 as follows:
PURCHASE PRICE ALLOCATION ---------------------------------------------------------------------------------------------------- PROPERTY AND INTANGIBLE DEFERRED PURCHASE CURRENT EQUIPMENT, ASSETS, OTHER CURRENT TAX OTHER COMPLETED TRANSACTIONS PRICE ASSETS NET(A) NET(A) ASSETS LIABILITIES ASSET LIABILITIES - ------------------------ ------------ ------- ------------ ---------- -------- ----------- -------- ----------- Chicago/Dallas Exchange(b)........... $ 3,500 $ -- $ 4,084 $ (584) $ -- $ -- $ -- $ -- Katz Acquisition(c)..... 379,101 64,166 14,770 354,058 26,742 (45,823) 14,176 (48,988) Gannett Acquisition(d)........ 340,000 -- 5,244 334,756 -- -- -- -- Denver Acquisition(e)... 26,000 -- 446 25,554 -- -- -- -- -------- ------- ------- -------- ------- -------- ------- -------- Total............. $748,601 $64,166 $24,544 $713,784 $26,742 $(45,823) $14,176 $(48,988) ======== ======= ======= ======== ======= ======== ======= ======== FINANCING -------------------------- INCREASE DECREASE (DECREASE) IN IN OTHER LONG-TERM COMPLETED TRANSACTIONS ASSETS DEBT - ------------------------ ---------- ------------- Chicago/Dallas Exchange(b)........... $ 8,350 $ (4,850) Katz Acquisition(c)..... -- 379,101 Gannett Acquisition(d)........ -- 340,000 Denver Acquisition(e)... 1,650 24,350 ------- -------- Total............. $10,000 $738,601 ======= ========
- --------------- (a) The Company has assumed that historical balances of net property and equipment acquired approximate fair value for the preliminary allocation of the purchase price. Such amounts are based primarily on information provided by the management of Katz Media Group, Inc. ("KMG") and by the management of the respective stations acquired. The Company, on a preliminary basis, has allocated the $354,058 of intangible assets related to the Katz Acquisition (as defined) to representation contracts and goodwill. This preliminary allocation is based upon information provided by the management of KMG. (b) On October 7, 1997, the Company acquired, in the Bonneville Acquisition, KZPS-FM and KDGE-FM in Dallas for $83,500 in cash. On July 14, 1997, the Company completed the disposition of WLUP-FM in Chicago to Bonneville International Corporation ("Bonneville") and placed $80,000 in a trust pending the completion of the deferred exchange of WLUP-FM in Chicago for KZPS-FM and KDGE-FM in Dallas (the "Chicago/Dallas Exchange"). The Chicago/Dallas Exchange was accounted for as a like-kind exchange and no gain or loss was recognized upon consummation of the exchange. The decrease in long-term debt of $4,850 represents the refund of $8,350 in escrow funds previously paid by the Company on June 29, 1997 and classified as other assets at September 30, 1997 less $3,500 in cash boot paid to Bonneville. (c) On October 28, 1997, Chancellor Media Corporation ("Chancellor Media") and the Company acquired KMG, a full service media representation firm, in a tender offer transaction for a total purchase price of approximately $379,101 (the "Katz Acquisition") which included (i) the conversion of each outstanding share of KMG Common Stock into the right to receive $11.00 in cash, resulting in total cash payments of $149,601, (ii) the assumption of long-term debt of KMG and its subsidiaries of $222,000 which includes borrowings outstanding under the senior credit facility of KMG and its subsidiaries of $122,000 and $100,000 of 10 1/2% Senior Subordinated Notes due 2007 of Katz Media Corporation (the "10 1/2% Notes") and (iii) estimated acquisition costs of $7,500. (d) On December 29, 1997, the Company acquired, in the Gannett Acquisition, 5 radio stations in 3 major markets from Pacific & Southern Co. ("P&S"), a subsidiary of Gannett Co., including WGCI-FM/AM in Chicago, KHKS-FM in Dallas, and KKBQ-FM/AM in Houston, for $340,000 in cash. (e) On January 30, 1998, the Company acquired, in the Denver Acquisition, KXPK-FM in Denver from Ever Green Wireless LLC (which is unrelated to the Company) for $26,000 in cash of which $1,650 was previously paid by CRBC as escrow funds which were classified as other assets at September 30, 1997. (2) Reflects the estimated proceeds of $485,000 received on December 22, 1997 from the issuance of $500,000 of CMCLA's 8 1/8% Senior Subordinated Notes due 2007 (the "8 1/8% Notes"), net of deferred debt issuance costs of $15,000. The net proceeds of the offering were used to reduce bank borrowings under the Senior Credit Facility (as defined). B-5 34 ADJUSTMENTS TO UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET RELATED TO THE PENDING TRANSACTIONS (3) Reflects the Pending Transactions as follows:
PROPERTY AND INCREASE IN PURCHASE EQUIPMENT, INTANGIBLE DECREASE IN LONG-TERM PENDING TRANSACTIONS PRICE NET(A) ASSETS, NET(A) OTHER ASSETS DEBT -------------------- -------- ------------ --------------- ------------ ----------- SFX Exchange(b).......................................... $11,000 $1,680 $ 9,320 $ -- $11,000 Bonneville Option(c)..................................... 60,000 2,050 57,950 3,000 57,000 ------- ------ ------- ------ ------- Total............................................ $71,000 $3,730 $67,270 $3,000 $68,000 ======= ====== ======= ====== =======
- --------------- (a) The Company has assumed that historical balances of net property and equipment to be acquired approximate fair value for the preliminary allocation of the purchase price. Such amounts are based primarily on information provided by management of the respective stations to be acquired in the Pending Transactions. The Company, on a preliminary basis, has allocated the $67,270 of intangible assets related to the Pending Transactions to broadcast licenses. This preliminary allocation is based on historical information from prior acquisitions. (b) On July 1, 1996, Chancellor Radio Broadcasting Company ("CRBC") entered into an agreement (assumed by the Company in the Chancellor Merger) to exchange, in the SFX Exchange, WAPE-FM and WFYV-FM in Jacksonville, Florida (which were acquired as part of the Omni Acquisition (as defined) on February 13, 1997, see 5(k)(v) below), and $11,000 in cash to SFX Broadcasting, Inc. ("SFX") for WBAB-FM, WBLI-FM, WGBB-AM, and WHFM-FM in Long Island. The amounts allocated to net property and equipment and net intangible assets (consisting of broadcast licenses) are based upon preliminary appraisals of the assets to be acquired. On November 6, 1997, the Antitrust Division of the United States Department of Justice (the "DOJ") filed suit against the Company seeking to enjoin under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR Act") the acquisition of the four Long Island properties under the SFX Exchange. If the Company is unable to acquire the four Long Island properties, the SFX Exchange will not be consummated and the Company will retain ownership of the two Jacksonville FM stations. There can be no assurance as to whether or when the SFX Exchange will ultimately be consummated. The Company does not believe that failure to consummate the SFX Exchange would have a material adverse effect on the Company's business, results of operations or financial condition. (c) On August 6, 1997, the Company paid $3,000 to Bonneville for an option to exchange WTOP-AM in Washington, KZLA-FM in Los Angeles and WGMS-FM in Washington plus $57,000 in cash for Bonneville's stations WNSR-FM in New York, KLDE-FM in Houston and KBIG-FM in Los Angeles (the "Bonneville Option"). The Bonneville Option was exercised on October 1, 1997 and definitive exchange documentation is presently being negotiated. ALLOCATION OF COMPANY PRO FORMA COMBINED INTANGIBLE ASSETS (4) The Company Pro Forma Combined intangible assets of $4,609,068 consists of the following at September 30, 1997:
ESTIMATED USEFUL LIFE ----------- Broadcast licenses......................................... 15-40 $3,656,866 Goodwill................................................... 15-40 711,169 Representation contracts................................... 17 105,000 Other intangibles.......................................... 1-40 388,266 ---------- $4,861,301 Less: accumulated amortization............................. (252,233) ---------- Net intangible assets...................................... $4,609,068 ==========
The Company discloses broadcast license value separately from goodwill and amortizes such intangible assets over an estimated average life of 15 years, whereas CRBC grouped all broadcast license value with B-6 35 goodwill and amortized such intangibles assets over an estimated average life of 40 years. In connection with the application of purchase accounting for the Chancellor Merger (as defined), broadcast license value and goodwill have been separately identified and disclosed and amortized over an estimated average life of 15 years in accordance with the Company's policies and procedures. The intangible assets have been treated in a consistent manner for the Company in the Unaudited Combined Condensed Pro Forma Financial Statements and, upon the consummation of the Chancellor Merger, have been accounted for similarly in the Company's financial statements. The Company amortizes intangible assets using the straight-line method over estimated useful lives ranging from 1 to 40 years. The Company continually evaluates the propriety of the carrying amount of goodwill and other intangible assets as well as the amortization period to determine whether current events or circumstances warrant adjustments to the carrying value and/or revised estimates of useful lives. This evaluation consists of the projection of undiscounted operating income before depreciation, amortization, nonrecurring charges and interest for each of the Company's radio stations over the remaining amortization periods of the related intangible assets. The projections are based on a historical trend line of actual results since the acquisitions of the respective stations adjusted for expected changes in operating results. To the extent such projections indicate that undiscounted operating income is not expected to be adequate to recover the carrying amounts of the related intangible assets, such carrying amounts would be written down by charges to expense. B-7 36 ADJUSTMENTS TO UNAUDITED CONDENSED COMBINED STATEMENTS OF OPERATIONS RELATED TO THE COMPLETED TRANSACTIONS (5) The detail of the historical financial data of the stations to be acquired or disposed of in the Completed Transactions for the year ended December 31, 1996 and the nine months ended September 30, 1997 has been obtained from the historical financial statements of the respective stations and is summarized below:
ACQUISITIONS ----------------------------------------------------------------------------------- WWRC-AM WWWW-FM/ KKSF-FM/ PYRAMID KYLD-FM WGAY-FM WEDR-FM WDFN-AM KDFC-FM/AM HISTORICAL HISTORICAL HISTORICAL HISTORICAL HISTORICAL HISTORICAL YEAR ENDED DECEMBER 31, 1996 1/1-1/17(A) 1/1-4/30(B) 1/1-6/17(C) 1/1-10/18(D) 1/1-2/14(E) 1/1-10/31(F) - ---------------------------- ----------- ----------- ----------- ------------ ----------- ------------ Gross revenues..................... $2,144 $ 2,308 $ 3,264 $ 7,933 $ 839 $13,646 Less: agency commissions........... (216) (363) (409) (1,066) (102) (1,746) ------ ------- ------- ------- ----- ------- Net revenues....................... 1,928 1,945 2,855 6,867 737 11,900 Station operating expenses excluding depreciation and amortization...................... 1,489 1,885 3,493 2,933 815 6,358 Depreciation and amortization...... 502 749 314 29 45 2,351 Corporate general and administrative expenses........... 123 256 477 1,401 -- -- Stock option compensation.......... -- -- -- -- -- -- ------ ------- ------- ------- ----- ------- Operating income (loss)............ (186) (945) (1,429) 2,504 (123) 3,191 Interest expense................... 343 1,094 -- -- -- 429 Other (income) expense............. (5) (97) 5 (15) -- (48) ------ ------- ------- ------- ----- ------- Income (loss) before income taxes............................. (524) (1,942) (1,434) 2,519 (123) 2,810 Income tax expense (benefit)....... -- -- (453) -- -- -- ------ ------- ------- ------- ----- ------- Net income (loss).................. (524) (1,942) (981) 2,519 (123) 2,810 Preferred stock dividends.......... -- -- -- -- -- -- ------ ------- ------- ------- ----- ------- Income (loss) attributable to common stock...................... $ (524) $(1,942) $ (981) $ 2,519 $(123) $ 2,810 ====== ======= ======= ======= ===== ======= Broadcast cash flow................ $ 439 $ 60 $ (638) $ 3,934 $ (78) $ 5,542 ====== ======= ======= ======= ===== ======= ACQUISITIONS -------------------------------------------------------------------------------------- CRBC AS EVERGREEN ADJUSTED FOR WJLB-FM/ WUSL-FM VIACOM COMPLETED KZPS-FM/ WMXD-FM WDAS-FM/AM WIOQ-FM ACQUISITION CHANCELLOR KDGE-FM HISTORICAL HISTORICAL HISTORICAL HISTORICAL TRANSACTIONS HISTORICAL YEAR ENDED DECEMBER 31, 1996 1/1-8/31(G) 1/1-12/31(H) 1/1-12/31(I) 1/1-12/31(J) 1/1-12/31(K) 1/1-12/31(L) - ---------------------------- ----------- ------------ ------------ ------------ ------------ ------------ Gross revenues..................... $15,408 $16,809 $20,152 $ 66,726 $328,522 $12,174 Less: agency commissions........... (1,881) (2,142) (2,369) (10,493) (43,553) (1,758) ------- ------- ------- -------- -------- ------- Net revenues....................... 13,527 14,667 17,783 56,233 284,969 10,416 Station operating expenses excluding depreciation and amortization...................... 5,721 7,759 9,519 26,598 172,729 8,585 Depreciation and amortization...... 2,415 2,763 -- 6,267 46,909 475 Corporate general and administrative expenses........... 1,005 620 533 1,617 5,657 -- Stock option compensation.......... -- -- -- -- 3,800 -- ------- ------- ------- -------- -------- ------- Operating income (loss)............ 4,386 3,525 7,731 21,751 55,874 1,356 Interest expense................... 1,406 79 3,001 -- 72,680 -- Other (income) expense............. -- (39) 58 (741) (148) 408 ------- ------- ------- -------- -------- ------- Income (loss) before income taxes............................. 2,980 3,485 4,672 22,492 (16,658) 948 Income tax expense (benefit)....... 180 -- -- 10,612 (2,663) -- ------- ------- ------- -------- -------- ------- Net income (loss).................. 2,800 3,485 4,672 11,880 (13,995) 948 Preferred stock dividends.......... -- -- -- -- 38,400 -- ------- ------- ------- -------- -------- ------- Income (loss) attributable to common stock...................... $2,800 $ 3,485 $ 4,672 $ 11,880 $(52,395) $ 948 ======= ======= ======= ======== ======== ======= Broadcast cash flow................ $7,806 $ 6,908 $ 8,264 $ 29,635 $112,240 $ 1,831 ======= ======= ======= ======== ======== ======= ACQUISITIONS ------------------------------------------ KATZ GANNETT DENVER ACQUISITION ACQUISITION ACQUISITION HISTORICAL HISTORICAL HISTORICAL YEAR ENDED DECEMBER 31, 1996 1/1-12/31(M) 1/1-12/31(N) 1/1-12/31(O) - ---------------------------- ------------ ------------ ------------ Gross revenues..................... $183,239 $52,028 $5,624 Less: agency commissions........... -- (6,819) (780) -------- ------- ------ Net revenues....................... 183,239 45,209 4,844 Station operating expenses excluding depreciation and amortization...................... 139,158 25,031 3,947 Depreciation and amortization...... 13,427 1,760 477 Corporate general and administrative expenses........... -- -- -- Stock option compensation.......... -- -- -- -------- ------- ------ Operating income (loss)............ 30,654 18,418 420 Interest expense................... 21,074 -- 195 Other (income) expense............. (173) -- (49) -------- ------- ------ Income (loss) before income taxes............................. 9,753 18,418 274 Income tax expense (benefit)....... 7,381 -- -- -------- ------- ------ Net income (loss).................. 2,372 18,418 274 Preferred stock dividends.......... -- -- -- -------- ------- ------ Income (loss) attributable to common stock...................... $ 2,372 $18,418 $ 274 ======== ======= ====== Broadcast cash flow................ $ 44,081 $20,178 $ 897 ======== ======= ======
B-8 37
DISPOSITIONS ---------------------------------------------------------------------------------------- WPEG-FM WBAV-FM/AM WRFX-FM SAN FRANCISCO WFNZ-FM WNKS-FM WEJM-FM/AM WJZW-FM FREQUENCY KDFC-FM HISTORICAL HISTORICAL HISTORICAL HISTORICAL HISTORICAL HISTORICAL YEAR ENDED DECEMBER 31, 1996 1/1-12/31(I) 1/1-12/31(P) 1/1-12/31(Q) 1/1-12/31(R) 1/1-12/31(S) 1/1-12/31(T) - ---------------------------- ------------ ------------ ------------ ------------ ------------- ------------ Gross revenues..................... $(20,818) $ (3,303) $(2,690) $(8,443) $(2,736) $(5,138) Less: agency commissions........... 2,733 337 293 1,311 358 643 -------- -------- ------- ------- ------- ------- Net revenues....................... (18,085) (2,966) (2,397) (7,132) (2,378) (4,495) Station operating expenses excluding depreciation and amortization..................... (9,509) (2,461) (2,217) (3,998) (3,159) (2,300) Depreciation and amortization...... -- (548) (1,719) (589) (3,826) (853) Corporate general and administrative expenses.......... -- -- -- (206) -- -- Stock option compensation.......... -- -- -- -- -- -- -------- -------- ------- ------- ------- ------- Operating income (loss)............ (8,576) 43 1,539 (2,339) 4,607 (1,342) Interest expense................... -- -- -- -- -- -- Other (income) expense............. -- -- -- -- -- -- -------- -------- ------- ------- ------- ------- Income (loss) before income taxes............................ (8,576) 43 1,539 (2,339) 4,607 (1,342) Income tax expense (benefit)....... -- -- -- (913) -- -- -------- -------- ------- ------- ------- ------- Net income (loss).................. (8,576) 43 1,539 (1,426) 4,607 (1,342) Preferred stock dividends.......... -- -- -- -- -- -- -------- -------- ------- ------- ------- ------- Income (loss) attributable to common stock..................... $ (8,576) $ 43 $ 1,539 $(1,426) $ 4,607 $(1,342) ======== ======== ======= ======= ======= ======= Broadcast cash flow................ $ (8,576) $ (505) $ (180) $(3,134) $ 781 $(2,195) ======== ======== ======= ======= ======= ======= DISPOSITIONS --------------------------- WBZS-AM WZHF-AM KDFC-AM HISTORICAL WLUP-FM COMPLETED 1/1- HISTORICAL TRANSACTIONS YEAR ENDED DECEMBER 31, 1996 12/31(U) 1/1-12/31(L) HISTORICAL - ---------------------------- ------------ ------------ ------------ Gross revenues..................... $(2,240) $(17,024) 668,424 Less: agency commissions........... 36 2,332 (65,654) ------- -------- -------- Net revenues....................... (2,204) (14,692) 602,770 Station operating expenses excluding depreciation and amortization..................... (930) (11,697) 379,749 Depreciation and amortization...... (30) (1,585) 69,333 Corporate general and administrative expenses.......... (43) -- 11,440 Stock option compensation.......... -- -- 3,800 ------- -------- -------- Operating income (loss)............ (1,201) (1,410) 138,448 Interest expense................... -- -- 100,301 Other (income) expense............. -- -- (844) ------- -------- -------- Income (loss) before income taxes............................ (1,201) (1,410) 38,991 Income tax expense (benefit)....... (271) -- 13,873 ------- -------- -------- Net income (loss).................. (930) (1,410) 25,118 Preferred stock dividends.......... -- -- 38,400 ------- -------- -------- Income (loss) attributable to common stock..................... $ (930) $ (1,410) $(13,282) ======= ======== ======== Broadcast cash flow................ $(1,274) $ (2,995) $223,021 ======= ======== ========
B-9 38
ACQUISITIONS -------------------------------------------------------------------- CRBC AS EVERGREEN ADJUSTED FOR KZPS- WUSL-FM VIACOM COMPLETED FM/ WDAS-FM/AM WIOQ-FM ACQUISITION CHANCELLOR KDGE-FM NINE MONTHS ENDED HISTORICAL HISTORICAL HISTORICAL TRANSACTIONS HISTORICAL SEPTEMBER 30, 1997 1/1-4/30(H) 1/1-5/15(I) 1/1-7/2(J) 1/1-9/5(K) 1/1-7/31(L) ------------------ ----------- ----------- ----------- ------------ ----------- Gross revenues................ $5,028 $7,088 $38,972 $244,192 $ 7,616 Less: agency commissions...... (680) (829) (5,470) (30,754) (929) ------ ------ ------- -------- ------- Net revenues.................. 4,348 6,259 33,502 213,438 6,687 Station operating expenses excluding depreciation and amortization................. 2,533 3,649 14,936 122,529 5,293 Depreciation andamortization.............. 875 -- 2,279 30,505 280 Corporate general and administrative expenses...... 172 141 682 7,226 -- Merger expense................ -- -- -- 6,124 -- Restructuring charge.......... -- -- -- -- -- Stock option compensation..... -- -- -- 3,083 -- ------ ------ ------- -------- ------- Operating income (loss)....... 768 2,469 15,605 43,971 1,114 Interest expense.............. 19 990 -- 49,594 -- Other (income) expense........ 863 -- -- (584) 12 ------ ------ ------- -------- ------- Income (loss) before income taxes........................ (114) 1,479 15,605 (5,039) 1,102 Income tax expense (benefit).................... -- -- 5,892 984 -- ------ ------ ------- -------- ------- Net income (loss)............. (114) 1,479 9,713 (6,023) 1,102 Preferred stock dividends..... -- -- -- 27,321 -- ------ ------ ------- -------- ------- Income (loss) attributable to common stock................. $ (114) $1,479 $ 9,713 $(33,344) $ 1,102 ====== ====== ======= ======== ======= Broadcast cash flow........... $1,815 $2,610 $18,566 $ 90,909 $ 1,394 ====== ====== ======= ======== ======= ACQUISITIONS DISPOSITIONS --------------------------------------- ------------------------------------------------------ WPEG-FM KATZ WBAV-FM/AM ACQUISITION GANNETT DENVER WRFX-FM WPNT-FM WEJM- HISTORICAL ACQUISITION ACQUISITION WFNZ-FM WNKS-FM HISTORICAL FM/AM NINE MONTHS ENDED 1/1- HISTORICAL HISTORICAL HISTORICAL HISTORICAL 5/30- HISTORICAL SEPTEMBER 30, 1997 9/30(M) 1/1-9/30(N) 1/1-8/31(O) 1/1-5/15(I) 1/1-5/15(P) 6/19(V) 1/1-8/26(Q) ------------------ ----------- ----------- ----------- ----------- ----------- ------------ ----------- Gross revenues................ $124,713 $44,339 $3,460 $(7,788) $(1,332) $(567) $(1,279) Less: agency commissions...... -- (5,772) (458) 1,029 142 93 135 -------- ------- ------ ------- ------- ----- ------- Net revenues.................. 124,713 38,567 3,002 (6,759) (1,190) (474) (1,144) Station operating expenses excluding depreciation and amortization................. 102,991 20,497 2,816 (3,569) (994) (285) (1,276) Depreciation andamortization.............. (2,059) 384 198 -- (212) (279) (305) Corporate general and administrative expenses...... -- -- -- -- -- -- -- Merger expense................ -- -- -- -- -- -- -- Restructuring charge.......... 7,095 -- -- -- -- -- -- Stock option compensation..... -- -- -- -- -- -- -- -------- ------- ------ ------- ------- ----- ------- Operating income (loss)....... 16,686 17,686 (12) (3,190) 16 90 437 Interest expense.............. 15,977 -- -- -- -- -- -- Other (income) expense........ (163) -- (81) -- -- -- -- -------- ------- ------ ------- ------- ----- ------- Income (loss) before income taxes........................ 872 17,686 69 (3,190) 16 90 437 Income tax expense (benefit).................... 3,283 -- -- -- -- -- -- -------- ------- ------ ------- ------- ----- ------- Net income (loss)............. (2,411) 17,686 69 (3,190) 16 90 437 Preferred stock dividends..... -- -- -- -- -- -- -- -------- ------- ------ ------- ------- ----- ------- Income (loss) attributable to common stock................. $ (2,411) $17,686 $ 69 $(3,190) $ 16 $ 90 $ 437 ======== ======= ====== ======= ======= ===== ======= Broadcast cash flow........... $ 21,722 $18,070 $ 186 $(3,190) $ (196) $(189) $ 132 ======== ======= ====== ======= ======= ===== ======= DISPOSITIONS ----------------------------------------------------------------- SAN WBZS-AM FRANCISCO WZHF-AM WJZW-FM FREQUENCY KDFC-FM KDFC-AM WLUP-FM COMPLETED NINE MONTHS ENDED HISTORICAL HISTORICAL HISTORICAL HISTORICAL HISTORICAL TRANSACTIONS SEPTEMBER 30, 1997 1/1-7/2(R) 1/1-7/7(S) 1/1-1/31(T) 1/1-8/13(U) 1/1-7/14(L) HISTORICAL ------------------ ---------- ---------- ----------- ----------- ----------- ------------ Gross revenues................ $(4,137) $(1,370) $(278) $(1,091) $(6,928) $450,638 Less: agency commissions...... 567 178 26 23 935 (41,764) ------- ------- ----- ------- ------- -------- Net revenues.................. (3,570) (1,192) (252) (1,068) (5,993) 408,874 Station operating expenses excluding depreciation and amortization................. (2,161) (1,738) (224) (665) (5,642) 258,690 Depreciation andamortization.............. (315) (84) -- (54) (1,145) 30,068 Corporate general and administrative expenses...... (70) -- -- (18) -- 8,133 Merger expense................ -- -- -- -- -- 6,124 Restructuring charge.......... -- -- -- -- -- 7,095 Stock option compensation..... -- -- -- -- -- 3,083 ------- ------- ----- ------- ------- -------- Operating income (loss)....... (1,024) 630 (28) (331) 794 95,681 Interest expense.............. -- -- -- -- -- 66,580 Other (income) expense........ -- -- -- -- -- 47 ------- ------- ----- ------- ------- -------- Income (loss) before income taxes........................ (1,024) 630 (28) (331) 794 29,054 Income tax expense (benefit).................... (260) -- -- (98) -- 9,801 ------- ------- ----- ------- ------- -------- Net income (loss)............. (764) 630 (28) (233) 794 19,253 Preferred stock dividends..... -- -- -- -- -- 27,321 ------- ------- ----- ------- ------- -------- Income (loss) attributable to common stock................. $ (764) $ 630 $ (28) $ (233) $ 794 $ (8,068) ======= ======= ===== ======= ======= ======== Broadcast cash flow........... $(1,409) $ 546 $ (28) $ (403) $ (351) $150,184 ======= ======= ===== ======= ======= ========
B-10 39 - --------------- (a) On January 17, 1996, the Company acquired Pyramid Communications, Inc. ("Pyramid"), a radio broadcasting company with 12 radio stations (9 FM and 3 AM) in five markets (Chicago, Philadelphia, Boston, Charlotte, and Buffalo) (the "Pyramid Acquisition"). The total purchase price, including acquisition costs, allocated to net assets acquired was approximately $316,343 of which $315,500 was financed through additional borrowings under the Company's prior senior credit facility. The historical financial data of Pyramid for the period of January 1, 1996 to January 17, 1996 excludes the combined net losses of approximately $60 for WHTT-FM, WHTT-AM and WSJZ-FM in Buffalo (the "Buffalo Transactions") which were sold in 1996 for $32,000 in cash. (b) On August 14, 1996, the Company acquired KYLD-FM in San Francisco for $44,000 in cash. The Company had previously been operating KYLD-FM under a time brokerage agreement since May 1, 1996. (c) On November 26, 1996, the Company exchanged WKLB-FM in Boston (which the Company acquired on May 3, 1996 for $34,000 in cash) for WGAY-FM in Washington, D.C. On April 3, 1997, the Company exchanged, in the Greater Media Exchange, WQRS-FM in Detroit (which the Company acquired on April 3, 1997 for $32,000 in cash) for WWRC-AM in Washington, D.C. and $9,500 in cash. The net purchase price to the Company of WWRC-AM was therefore $22,500. The Company had previously been operating WGAY-FM and WWRC-AM under time brokerage agreements since June 17, 1996. (d) On October 18, 1996, the Company acquired WEDR-FM in Miami for $65,000 in cash. (e) On January 31, 1997, the Company acquired, in the WWWW/WDFN Acquisition, WWWW-FM and WDFN-AM in Detroit from CRBC for $30,000 in cash (of which $1,500 was paid as escrow funds in January 1996). The Company had previously provided certain sales and promotional functions to WWWW-FM and WDFN-AM under a joint sales agreement since February 14, 1996 and subsequently operated the stations under a time brokerage agreement since April 1, 1996. (f) On January 31, 1997, the Company acquired, in the KKSF/KDFC Acquisition, KKSF-FM and KDFC-FM/AM in San Francisco for $115,000 in cash (of which $10,000 was paid as escrow funds in November 1996). The Company had previously been operating the stations under a time brokerage agreement since November 1, 1996. (g) On April 1, 1997, the Company acquired, in the Secret/Detroit Acquisition, WJLB-FM and WMXD-FM in Detroit for $168,000 in cash. The Company had previously been operating the stations under a time brokerage agreement since September 1, 1996. (h) On May 1, 1997, the Company acquired, in the Beasley Acquisition, WDAS-FM/AM in Philadelphia for $103,000 in cash. (i) On May 15, 1997, the Company exchanged, in the EZ Exchange, 5 of its 6 stations in the Charlotte market (WPEG-FM, WBAV-FM/AM, WRFX-FM and WFNZ-AM) for WUSL-FM and WIOQ-FM in Philadelphia. (j) On July 2, 1997, the Company acquired, in the Evergreen Viacom Acquisition, WLTW-FM and WAXQ-FM in New York and WMZQ-FM, WJZW-FM, WZHF-AM, and WBZS-AM in Washington, D.C. for approximately $612,388 in cash including various other direct acquisition costs. The Evergreen Viacom Acquisition was financed with (i) bank borrowings under the Senior Credit Facility (as defined) of $552,559; (ii) $53,750 in escrow funds paid by the Company on February 19, 1997 and (iii) $6,079 financed through working capital. In June 1997, Chancellor Media issued 5,990,000 shares of $3.00 Convertible Exchangeable Preferred Stock (the "$3.00 Convertible Preferred Stock") for net proceeds of approximately $287,800 which were contributed to the Company by Evergreen and used to repay borrowings under the Senior Credit Facility and subsequently were reborrowed on July 2, 1997 as part of the financing of the Evergreen Viacom Acquisition. On July 7, 1997, the Company sold WJZW-FM in Washington, D.C. to affiliates of Capital Cities/ABC Radio for $68,000 in cash. The assets of WJZW-FM, as well as the assets of WZHF-AM and WBZS-AM, which were also sold on August 13, B-11 40 1997, were accounted for as assets held for sale in connection with the purchase price allocation of the Viacom Acquisition and no gain or loss was recognized by the Company upon consummation of the sales (see 5(r) and 5(u)). The Viacom results of operations for the year ended December 31, 1996 reflect the financial performance of WAXQ-FM for six months of the year that the station was operated by Viacom (July 1, 1996 to December 31, 1996) combined with net income of $851 for the first half of the year when the station was under prior ownership. (k) On September 5, 1997, pursuant to an Amended and Restated Agreement and Plan of Merger, dated as of February 19, 1997 and amended and restated on July 31, 1997 (the "Chancellor Merger Agreement"), among Chancellor Broadcasting Company ("Chancellor"), CRBC, Evergreen Media Corporation ("Evergreen"), Evergreen Mezzanine Holdings Corporation ("EMHC") and Evergreen Media Corporation of Los Angeles ("EMCLA"), (i) Chancellor was merged (the "Parent Merger") with and into EMHC, a direct, wholly-owned subsidiary of Evergreen, with EMHC remaining as the surviving corporation and (ii) CRBC was merged (the "Subsidiary Merger" and, together with the Parent Merger, the "Chancellor Merger") with and into EMCLA, a direct, wholly-owned subsidiary of EMHC, with EMCLA remaining as the surviving corporation. Upon consummation of the Parent Merger, Evergreen was renamed Chancellor Media Corporation and EMHC was renamed Chancellor Mezzanine Holdings Corporation ("CMHC"). Upon consummation of the Subsidiary Merger, EMCLA was renamed Chancellor Media Corporation of Los Angeles ("CMCLA"). Consummation of the Chancellor Merger added 52 radio stations (36 FM and 16 AM) to the Company's portfolio of stations, including 13 stations in markets in which the Company previously operated. The total purchase price allocated to net assets acquired was approximately $1,998,383 which included (i) the conversion of each outstanding share of Chancellor Class A and Class B Common Stock into 0.9091 shares of Chancellor Media Common Stock, resulting in the issuance of 17,308,730 shares of Chancellor Media Common Stock at a fair value of $31.00 per share, (ii) the assumption of Chancellor's and CRBC's long-term debt of $949,000, (iii) the issuance of 2,117,629 shares of CMCLA's 12% Exchangeable Preferred Stock (the "12% Preferred Stock") in exchange for CRBC's substantially identical securities with a fair value of $215,570, (iv) the issuance of 1,000,000 shares of CMCLA's 12 1/4% Series A Senior Cumulative Exchangeable Preferred Stock (the "12 1/4% Preferred Stock") in exchange for CRBC's substantially identical securities with a fair value of $120,217, (v) the issuance of 2,200,000 shares of Chancellor Media's 7% Convertible Preferred Stock (the "7% Convertible Preferred Stock") in exchange for Chancellor's substantially identical securities with a fair value of $111,048, (vi) the assumption of stock options issued to Chancellor stock option holders with a fair value of $34,977 and (vii) estimated acquisition costs of $31,000. B-12 41 CRBC's historical condensed combined statement of operations for the year ended December 31, 1996 and the nine months ended September 30, 1997 and pro forma adjustments related to the transactions completed by CRBC prior to the Chancellor Merger (the "Completed Chancellor Transactions") is summarized below:
ACQUISITIONS ------------------------------------------------------------------------------------------ KIMN-FM/ SHAMROCK KALC-FM COLFAX KOOL-FM SUNDANCE CRBC HISTORICAL HISTORICAL HISTORICAL HISTORICAL HISTORICAL YEAR ENDED DECEMBER 31, 1996 HISTORICAL(I) 1/1-2/14(II) 1/1-3/31(III) 1/1-12/31(IV) 1/1-3/31(IV) 1/1-9/12(IV) - ------------------------------- ------------- ------------ ------------- ------------- ------------ ------------ Gross revenues................. $203,188 $ 9,698 $2,010 $51,745 $1,665 $13,844 Less: agency commissions....... (24,787) (1,234) (259) (6,626) (234) (1,740) -------- ------- ------ ------- ------ ------- Net revenues................... 178,401 8,464 1,751 45,119 1,431 12,104 Station operating expenses excluding depreciation and amortization.................. 111,210 7,762 1,523 28,584 852 7,678 Depreciation and amortization.................. 20,877 595 511 4,494 229 1,242 Corporate general and administrative expenses....... 4,845 2,215 -- -- -- -- Stock option compensation...... 3,800 -- -- -- -- -- -------- ------- ------ ------- ------ ------- Operating income (loss)........ 37,669 (2,108) (283) 12,041 350 3,184 Interest expense............... 35,704 1,380 -- 4,369 299 -- Other (income) expense......... 68 49 312 (179) -- 25 -------- ------- ------ ------- ------ ------- Income (loss) before income taxes......................... 1,897 (3,537) (595) 7,851 51 3,159 Income tax expense (benefit)... 4,612 -- -- -- -- -- -------- ------- ------ ------- ------ ------- Net income (loss).............. (2,715) (3,537) (595) 7,851 51 3,159 Preferred stock dividends...... 11,557 -- -- -- -- -- -------- ------- ------ ------- ------ ------- Income (loss) attributable to common stock.................. $(14,272) $(3,537) $ (595) $ 7,851 $ 51 $ 3,159 ======== ======= ====== ======= ====== ======= Broadcast cash flow............ $ 67,191 $ 702 $ 228 $16,535 $ 579 $ 4,426 ======== ======= ====== ======= ====== ======= ACQUISITIONS -------------------------------------------- CHANCELLOR VIACOM OMNI KSTE-FM ACQUISITION HISTORICAL HISTORICAL HISTORICAL YEAR ENDED DECEMBER 31, 1996 1/1-6/30(V) 1/1-7/31(VI) 1/1-12/31(VII) - ------------------------------- ----------- ------------- -------------- Gross revenues................. $ 8,710 $1,411 $58,806 Less: agency commissions....... (1,211) (149) (9,588) ------- ------ ------- Net revenues................... 7,499 1,262 49,218 Station operating expenses excluding depreciation and amortization.................. 4,985 1,244 25,416 Depreciation and amortization.................. 1,458 375 4,640 Corporate general and administrative expenses....... -- -- 1,501 Stock option compensation...... -- -- -- ------- ------ ------- Operating income (loss)........ 1,056 (357) 17,661 Interest expense............... -- -- 6,374 Other (income) expense......... (404) -- -- ------- ------ ------- Income (loss) before income taxes......................... 1,460 (357) 11,287 Income tax expense (benefit)... -- -- 4,748 ------- ------ ------- Net income (loss).............. 1,460 (357) 6,539 Preferred stock dividends...... -- -- -- ------- ------ ------- Income (loss) attributable to common stock.................. $ 1,460 $ (357) $ 6,539 ======= ====== ======= Broadcast cash flow............ $ 2,514 $ 18 $23,802 ======= ====== ======= DISPOSITIONS -------------------------------------------------------------- PRO FORMA ADJUSTMENTS WWWW-FM/ WMIL-FM/ FOR THE WDFN-AM KTBZ-FM WOKY-AM WDRQ-FM COMPLETED HISTORICAL HISTORICAL HISTORICAL HISTORICAL CHANCELLOR YEAR ENDED DECEMBER 31, 1996 1/1-2/14(VIII) 1/1-2/14(III) 1/1-12/31(IX) 1/1-12/31(X) TRANSACTIONS - ------------------------------- --------------- ------------- ------------- ------------ ----------------- Gross revenues................. $(839) $(399) $(9,552) $(6,743) $ (5,022)(xi) Less: agency commissions....... 102 48 1,070 1,055 -- ----- ----- ------- ------- ------- Net revenues................... (737) (351) (8,482) (5,688) (5,022) Station operating expenses excluding depreciation and amortization.................. (815) (521) (4,896) (4,530) (5,763)(xi) Depreciation and amortization.................. (45) (42) (539) (354) 15,022(xii) (1,554)(xiii) Corporate general and administrative expenses....... -- -- -- (178) (2,726)(xiv) Stock option compensation...... -- -- -- -- -- ----- ----- ------- ------- ------- Operating income (loss)........ 123 212 (3,047) (626) (10,001) Interest expense............... -- -- -- -- 24,554(xv) Other (income) expense......... -- -- (19) -- -- ----- ----- ------- ------- ------- Income (loss) before income taxes......................... 123 212 (3,028) (626) (34,555) Income tax expense (benefit)... -- -- -- (326) (11,697)(xvi) ----- ----- ------- ------- ------- Net income (loss).............. 123 212 (3,028) (300) (22,858) Preferred stock dividends...... -- -- -- -- 26,843(xvii) ----- ----- ------- ------- ------- Income (loss) attributable to common stock.................. $ 123 $ 212 $(3,028) $ (300) $(49,701) ===== ===== ======= ======= ======= Broadcast cash flow............ $ 78 $ 170 $(3,586) $(1,158) $ 741 ===== ===== ======= ======= ======= CRBC AS ADJUSTED FOR COMPLETED CHANCELLOR YEAR ENDED DECEMBER 31, 1996 TRANSACTIONS - ------------------------------- ------------ Gross revenues................. $328,522 Less: agency commissions....... (43,553) -------- Net revenues................... 284,969 Station operating expenses excluding depreciation and amortization.................. 172,729 Depreciation and amortization.................. 46,909 Corporate general and administrative expenses....... 5,657 Stock option compensation...... 3,800 -------- Operating income (loss)........ 55,874 Interest expense............... 72,680 Other (income) expense......... (148) -------- Income (loss) before income taxes......................... (16,658) Income tax expense (benefit)... (2,663) -------- Net income (loss).............. (13,995) Preferred stock dividends...... 38,400 -------- Income (loss) attributable to common stock.................. $(52,395) ======== Broadcast cash flow............ $112,240 ========
B-13 42
ACQUISITIONS DISPOSITIONS ---------------------------- ------------ PRO FORMA CHANCELLOR ADJUSTMENTS CRBC AS VIACOM FOR THE ADJUSTED FOR CRBC COLFAX ACQUISITION WDRQ-FM COMPLETED COMPLETED HISTORICAL HISTORICAL HISTORICAL HISTORICAL CHANCELLOR CHANCELLOR NINE MONTHS ENDED SEPTEMBER 30, 1997 1/1-9/5(I) 1/1-1/23(IV) 1/1-7/2(VII) 1/1-8/11(X) TRANSACTIONS TRANSACTIONS ------------------------------------ ---------- ------------ ------------- ------------ ------------ ------------- Gross revenues......................... $215,018 $3,183 $29,214 $(2,395) $ (828)(xi) $244,192 Less: agency commissions............... (26,575) (384) (4,046) 251 -- (30,754) -------- ------ ------- ------- -------- -------- Net revenues........................... 188,443 2,799 25,168 (2,144) (828) 213,438 Station operating expenses excluding depreciation and amortization........ 110,548 1,872 13,326 (1,986) (1,231)(xi) 122,529 Depreciation and amortization.......... 23,919 -- 2,370 (186) 4,484(xii) 30,505 (82)(xiii) Corporate general and administrative expenses............................. 7,102 -- 520 (42) (354)(xiv) 7,226 Merger expense......................... 6,124 -- -- -- -- 6,124 Stock option compensation.............. 3,083 -- -- -- -- 3,083 -------- ------ ------- ------- -------- -------- Operating income (loss)................ 37,667 927 8,952 70 (3,645) 43,971 Interest expense....................... 37,760 -- 3,178 -- 8,656(xv) 49,594 Other (income) expense................. (584) -- -- -- -- (584) -------- ------ ------- ------- -------- -------- Income (loss) before income taxes...... 491 927 5,774 70 (12,301) (5,039) Income tax expense (benefit)........... 2,196 -- 1,558 18 (2,788)(xvi) 984 -------- ------ ------- ------- -------- -------- Net income (loss)...................... (1,705) 927 4,216 52 (9,513) (6,023) Preferred stock dividends.............. 25,817 -- -- -- 1,504 (xvii 27,321 -------- ------ ------- ------- -------- -------- Income (loss) attributable to common stock................................ $(27,522) $ 927 $ 4,216 $ 52 $(11,017) $(33,344) ======== ====== ======= ======= ======== ======== Broadcast cash flow.................... $ 77,895 $ 927 $11,842 $ (158) $ 403 $ 90,909 ======== ====== ======= ======= ======== ========
B-14 43 - --------------- (i) On November 22, 1996, CRBC acquired WKYN-AM in Cincinnati for $1,400 in cash. CRBC had been previously operating WKYN-AM under a time brokerage agreement since January 1, 1996. Therefore, CRBC's historical results of operations for the year ended December 31, 1996 and the nine months ended September 30, 1997 include the results of operations of WKYN-AM. (ii) On February 14, 1996, CRBC acquired Shamrock Broadcasting, Inc., a radio broadcasting company with 19 radio stations (11 FM and 8 AM) located in 10 markets (Los Angeles, New York, San Francisco, Houston, Atlanta, Detroit, Denver, Minneapolis-St. Paul, Phoenix and Pittsburgh). The total purchase price, including acquisition costs, allocated to net assets acquired was approximately $408,000. (iii) On July 31, 1996, CRBC exchanged KTBZ-FM in Houston (which was acquired on February 14, 1996 as part of the Shamrock Acquisition) and $5,600 in cash for KIMN-FM and KALC-FM in Denver. CRBC had previously entered into a time brokerage agreement to sell substantially all of the broadcast time of KTBZ-FM effective February 14, 1996. In addition, CRBC had been previously operating KIMN-FM and KALC-FM under a time brokerage agreement since April 1, 1996. (iv) On January 23, 1997, CRBC acquired, in the Colfax Acquisition, Colfax Communications, a radio broadcasting company, with 12 radio stations (8 FM and 4 AM) located in 4 markets (Minneapolis-St. Paul, Phoenix, Washington, D.C. and Milwaukee markets). The total purchase price, including acquisition costs, allocated to net assets acquired was approximately $383,700. The Colfax Acquisition was financed through (i) a private placement by CRBC of $200,000 of 12% Exchangeable Preferred Stock for net proceeds of $191,817; (ii) a private placement by Chancellor of $110,000 of 7% Convertible Preferred Stock for net proceeds of $105,546; (iii) additional bank borrowings under CRBC's previous senior credit agreement of $65,937 and (iv) $20,400 in escrow funds. The historical financial data of Colfax for the year ended December 31, 1996 excludes the combined net income of approximately $224 for KLTB-FM, KARO-FM and KIDO-AM in Boise, Idaho which CRBC did not acquire as part of the Colfax Acquisition. The Colfax historical condensed statement of operations for the year ended December 31, 1996, does not include the results of operations of the following: (i) KOOL-FM for the period January 1, 1996 to March 31, 1996 and (ii) WMIL-FM and WOKY-AM in Milwaukee and KZON-FM, KISO-AM, KYOT-FM and KOY-AM in Phoenix which were owned and operated by Sundance Broadcasting, Inc. ("Sundance") for the period January 1, 1996 to September 12, 1996. On March 31, 1997, CRBC sold WMIL-FM and WOKY-AM in Milwaukee for $41,253 in cash. The assets of WMIL-FM and WOKY-AM are classified as assets held for sale in connection with the purchase price allocation of the Colfax Acquisition. Accordingly, WMIL-FM and WOKY-AM net income of approximately $41 for the period January 23, 1997 through March 31, 1997 has been excluded from the Colfax historical condensed statement of operations for the nine months ended September 30, 1997. (v) On February 13, 1997, CRBC acquired, in the Omni Acquisition, substantially all of the assets and assumed certain liabilities of the OmniAmerica Group including 8 radio stations (7 FM and 1 AM) located in 3 markets (Orlando, West Palm Beach and Jacksonville). The total purchase price, including acquisition costs, allocated to net assets acquired was approximately $181,046. The Omni Acquisition was financed through (i) additional bank borrowings under CRBC's previous senior credit agreement of $166,046 and (ii) the issuance of 555,556 shares of the Chancellor Class A Common Stock valued at $15,000 or $27.00 per share which was contributed by CRBC by Chancellor. Prior to the consummation of the Omni Acquisition, CRBC had entered into an agreement to operate the stations under a time brokerage agreement effective July 1, 1996. Additionally, prior to consummation of the West Palm Beach Exchange (see (vi) below) on March 28, 1997 and the SFX Exchange (see note 13(a)), CRBC entered into time brokerage agreements to sell substantially all of the broadcast time of WEAT-FM/AM and WOLL-FM in West Palm Beach and WAPE-FM and WFYV-FM in Jacksonville effective July 1, 1996. The historical financial data of Omni for the period January 1, 1996 to June 30, 1996 represents the results of operations for the Orlando stations (WOMX-FM, WXXL-FM and WJHM-FM). The results of operations for WEAT-FM/AM and WOLL-FM in West Palm Beach B-15 44 and WAPE-FM and WFYV-FM in Jacksonville are not included as the acquisition and disposition of these stations is deemed to have occurred on January 1, 1996. (vi) On March 28, 1997, CRBC exchanged, in the West Palm Beach Exchange, WEAT-FM/AM and WOLL-FM in West Palm Beach, Florida, which were acquired as part of the Omni Acquisition, for KSTE-FM in Sacramento and $33,000 in cash. CRBC had previously been operating KSTE-FM under a time brokerage agreement since August 1, 1996. (vii) On July 2, 1997, CRBC acquired, in the Chancellor Viacom Acquisition, KIBB-FM and KYSR-FM in Los Angeles, WLIT-FM in Chicago and WDRQ-FM in Detroit for approximately $500,789 in cash including various other direct acquisition costs. The Chancellor Viacom Acquisition was financed with (i) bank borrowings of $273,159 under CRBC's restated senior credit agreement, dated July 2, 1997 (the "CRBC Restated Credit Agreement"); (ii) borrowings under an interim loan of Chancellor (the "Chancellor Broadcasting/Viacom Interim Financing") of $168,300 which were contributed to CRBC by Chancellor; (iii) escrow funds of $53,750 paid by CRBC on February 19, 1997 and (iv) $5,580 financed through working capital. The assets of WDRQ-FM in Detroit are classified as assets held for sale in connection with the purchase price allocation of the Chancellor Viacom Acquisition (see (x) below). (viii)On January 31, 1997, CRBC sold, in the WWWW/WDFN Disposition, WWWW-FM and WDFN-AM in Detroit, which were acquired on February 14, 1996 as part of the Shamrock Acquisition, to the Company for $30,000 in cash. Prior to the completion of the sale, CRBC had entered into a joint sales agreement effective February 14, 1996 and a time brokerage agreement effective April 1, 1996 to sell substantially all of the broadcast time of WWWW-FM and WDFN-AM to the Company pending the completion of the sale. (ix) On March 31, 1997, CRBC sold, in the Milwaukee Disposition, WMIL-FM and WOKY-AM in Milwaukee, which were acquired as part of the Colfax Acquisition on January 23, 1997, for $41,253 in cash. (x) On August 11, 1997, CRBC sold, in the ABC/Detroit Disposition, WDRQ-FM in Detroit for $37,000 in cash. The assets of WDRQ-FM were classified as assets held for sale in connection with the purchase price allocation of the Chancellor Viacom Acquisition (see 5(k)(vii)). Accordingly, WDRQ-FM net income for the period July 2, 1997 to August 11, 1997 has been excluded from CRBC's historical condensed statement of operations. (xi) Reflects the elimination of time brokerage agreement fees received and paid by CRBC as follows:
YEAR ENDED DECEMBER 31, 1996 MARKET PERIOD REVENUE EXPENSE - --------------------------------------------------- --------------- ------------ ------- ------- WWWW-FM/WDFN-AM.................................... Detroit 2/14 -- 12/31 $(2,937) $ (598) KTBZ-FM............................................ Houston 2/14 -- 7/31 (1,113) (265) WOMX-FM, WXXL-FM, WJHM-FM.......................... Orlando 7/1 -- 12/31 -- (3,900) WEAT-FM/AM, WOLL-FM................................ West Palm Beach 7/1 -- 12/31 (972) (1,000) ------- ------- Total adjustment for decrease in gross revenues and expenses $(5,022) $(5,763) ======= =======
NINE MONTHS ENDED SEPTEMBER 30, 1997 MARKET PERIOD REVENUE EXPENSE - --------------------------------------------------- --------------- ------------ ------- ------- WWWW-FM/WDFN-AM.................................... Detroit 1/1 -- 1/31 $ (235) $ (16) WOMX-FM, WXXL-FM, WJHM-FM.......................... Orlando 1/1 -- 2/13 -- (911) WEAT-FM/AM, WOLL-FM................................ West Palm Beach 1/1 -- 3/28 (593) (304) ------- ------- Total adjustment for decrease in gross revenues and expenses $ (828) $(1,231) ======= =======
Gross revenues of the Completed Chancellor Transactions exclude any time brokerage agreement payments received from CRBC. B-16 45 (xii) Reflects incremental amortization related to the Completed Chancellor Transactions and is based on the following allocation to intangible assets:
INCREMENTAL HISTORICAL ADJUSTMENT COMPLETED CHANCELLOR TRANSACTIONS AMORTIZATION INTANGIBLE AMORTIZATION AMORTIZATION FOR NET YEAR ENDED DECEMBER 31, 1996 PERIOD ASSETS, NET EXPENSE (1) EXPENSE INCREASE --------------------------------- ------------ ----------- ------------ ------------ ---------- Shamrock......................... 1/1 - 2/14 $ 361,425 $ 1,104 $ 393 $ 711 KIMN-FM/KALC-FM.................. 1/1 - 3/31 8,285 52 341 (289) Omni............................. 1/1 - 12/31 171,837 4,296 161 4,135 Colfax........................... 1/1 - 12/31 317,894 7,947 3,861 4,086 KSTE-FM.......................... 1/1 - 12/31 (32,475) (812) -- (812) Chancellor Viacom Acquisition.... 1/1 - 12/31 451,690 11,292 4,101 7,191 ---------- ------- ------ ------- Total.................. $1,278,656 $23,879 $8,857 $15,022 ---------- ------- ------ -------
INCREMENTAL HISTORICAL ADJUSTMENT COMPLETED CHANCELLOR TRANSACTIONS AMORTIZATION INTANGIBLE AMORTIZATION AMORTIZATION FOR NET NINE MONTHS ENDED SEPTEMBER 30, 1997 PERIOD ASSETS, NET EXPENSE (1) EXPENSE INCREASE ------------------------------------ ------------ ----------- ------------ ------------ ---------- Omni................................ 1/1 - 2/13 $ 171,837 $ 525 $ -- $ 525 Colfax.............................. 1/1 - 1/23 317,894 508 -- 508 KSTE-FM............................. 1/1 - 3/28 (32,475) (198) -- (198) Chancellor Viacom Acquisition....... 1/1 - 7/2 451,690 5,709 2,060 3,649 ---------- ------- ------ ------- Total..................... $ 908,946 $ 6,544 $2,060 $ 4,484 ---------- ------- ------ -------
- --------------- (1) Intangible assets were amortized on a straight-line basis over an estimated average 40 year life by CRBC. In connection with purchase accounting for the Chancellor Merger, intangible assets are amortized over an estimated average life of 15 years in accordance with the Company's accounting policies and procedures. Historical depreciation expense of the Completed Chancellor Transactions is assumed to approximate depreciation expense on a pro forma basis. Actual depreciation and amortization may differ based upon final purchase price allocations. (xiii)Reflects the elimination of disposed stations' historical depreciation and amortization expense of $1,554 for the year ended December 31, 1996 (KTBZ-FM of $642 and WWWW-FM/WDFN-AM of $912 for the period of February 14, 1996 to December 31, 1996) and $82 for the nine months ended September 30, 1997 (WWWW-FM/WDFN-AM for the period of January 1, 1997 to January 31, 1997) recognized by CRBC during the time brokerage agreement holding period. (xiv) Reflects the elimination of duplicate corporate expenses of $2,726 for the year ended December 31, 1996 and $354 for the nine months ended September 30, 1997 related to the Completed Chancellor Transactions. B-17 46 (xv) Reflects the adjustment to interest expense in connection with the consummation of the Completed Chancellor Transactions, the February 1996 and August 1996 equity offerings of Chancellor (the "Chancellor Offerings"), the issuance by CRBC of its 12 1/4% Series A Senior Cumulative Exchangeable Preferred Stock, the refinancing of CRBC's previous senior credit agreement on January 23, 1997 and the offering on June 24, 1997 by CRBC of $200.0 million aggregate principal amount of its 8 3/4% Senior Subordinated Notes due 2007 (the "8 3/4% Notes"):
NINE MONTHS YEAR ENDED ENDED DECEMBER 31, 1996 SEPTEMBER 30, 1997 ----------------- ------------------ Additional bank borrowings related to: Completed Chancellor Acquisitions.................... $ 994,292 $ 558,892 Completed Chancellor Dispositions.................... (104,253) (104,253) New Loan Fees........................................ 6,873 6,873 --------- --------- Total additional bank borrowings....................... $ 896,912 $ 461,512 ========= ========= Interest expense on additional bank borrowings at 7.5%................................................. $ 39,651 $ 11,376 Less: historical interest expense of the stations acquired in the Completed Chancellor Transactions.... (12,422) (3,178) --------- --------- Net increase in interest expense....................... 27,229 8,198 Reduction in interest expense on bank debt related to the application of net proceeds of the following at 7.5%: February 1996 offering proceeds contributed to CRBC by Chancellor of $155,475 for the period January 1, 1996 to February 14, 1996................................. (1,425) -- August 1996 offering proceeds contributed to CRBC by Chancellor of $23,050 for the period January 1, 1996 to August 9, 1996.................................... (1,052) -- CRBC 12 1/4% Series A Senior Cumulative Exchangeable Preferred Stock proceeds of $96,171 for the period January 1, 1996 to February 14, 1996.............. (902) -- CRBC 8 3/4% Notes proceeds of $194,083 for the year ended December 31, 1996 and for the period January 1, 1997 to June 24, 1997.......................... (14,556) (7,036) Reduction in interest expense resulting from the redemption of CRBC's 12.5% Senior Subordinated Notes of $60,000 on June 5, 1997........................... (7,500) (3,229) Interest expense on $70,133 additional bank borrowings at 7.5% related to the redemption of CRBC's 12.5% Senior Subordinated Notes on June 5, 1997............ 5,260 2,265 Interest expense on $200,000 8 3/4% Notes issued June 24, 1997........................................ 17,500 8,458 --------- --------- Total adjustment for net increase in interest expense.............................................. $ 24,554 $ 8,656 ========= =========
(xvi) Reflects the income tax benefit related to pro forma adjustments. The adjustment to income taxes reflects the application of the estimated effective tax rate on a pro forma basis to income (loss) before income taxes for historical and pro forma adjustment amounts. (xvii) Reflects incremental dividends and accretion on preferred stock as follows:
NINE MONTHS DATE OF YEAR ENDED ENDED ISSUANCE DECEMBER 31, 1996 SEPTEMBER 30, 1997 ----------------- ----------------- ------------------ 12 1/4% Series A Senior Cumulative Exchangeable Preferred Stock........ February 26, 1996 $ 1,441 $ -- 12% Exchangeable Preferred Stock...... January 23, 1997 25,402 1,504 ------- ------- Total dividends and accretion......... $26,843 $1,504 ======= =======
B-18 47 (l) On October 7, 1997, the Company acquired, in the Bonneville Acquisition, KZPS-FM and KDGE-FM in Dallas for $83,500 in cash. On July 14, 1997, the Company completed the disposition of WLUP-FM in Chicago to Bonneville and placed $80,000 in a trust pending the completion of the Chicago/Dallas Exchange. The Chicago/Dallas Exchange was accounted for as a like-kind exchange and no gain or loss was recognized upon consummation of the exchange. The Company began operating KZPS-FM and KDGE-FM under a time brokerage agreement on August 1, 1997. (m) On October 28, 1997, Chancellor Media and the Company acquired Katz Media Group, Inc. ("KMG"), a full-service media representation firm, in a tender offer transaction for a total purchase price of approximately $379,101 (the "Katz Acquisition") which included (i) the conversion of each outstanding share of KMG Common Stock into the right to receive $11.00 in cash, resulting in total cash payments of $149,601, (ii) the assumption of long-term debt of KMG and its subsidiaries of $222,000 which includes borrowings outstanding under the senior credit facility of KMG and its subsidiaries of $122,000 and $100,000 of the 10 1/2% Notes and (iii) estimated acquisition costs of $7,500. (n) On December 29, 1997, the Company acquired, in the Gannett Acquisition, 5 radio stations in 3 major markets from P&S, including WGCI-FM/AM in Chicago, KHKS-FM in Dallas, and KKBQ-FM/AM in Houston for $340,000 in cash. (o) On January 30, 1998, the Company acquired, in the Denver Acquisition, KXPK-FM in Denver from Ever Green Wireless LLC (which is unrelated to the Company) for $26,000 in cash (including $1,650 paid by Chancellor in escrow). Chancellor had previously been operating KXPK-FM under a time brokerage agreement since September 1, 1997. (p) On May 15, 1997, the Company sold, in the EZ Sale, WNKS-FM in Charlotte for $10,000 in cash. (q) On June 3, 1997, the Company sold, in the Crawford Disposition, WEJM-FM in Chicago for $14,750 in cash. On August 26, 1997, the Company sold, in the Douglas Chicago Disposition, WEJM-AM in Chicago for $7,500 in cash. (r) On July 7, 1997, the Company sold, in the ABC/Washington Disposition, WJZW-FM in Washington for $68,000 in cash. The assets of WJZW-FM were classified as assets held for sale in connection with the purchase price allocation of the Evergreen Viacom Acquisition (see 5(j)). Accordingly, WJZW-FM net income for the period July 2, 1997 to July 7, 1997 has been excluded from the Company's historical condensed statement of operations. (s) On July 7, 1997, the Company sold, in the San Francisco Frequency Disposition, the San Francisco 107.7 MHz FM dial position and transmission facility and the call letters from CRBC's KSAN-FM in San Francisco for $44,000 in cash. (t) On January 31, 1997, the Company acquired, in the KKSF/KDFC Acquisition, KKSF-FM and KDFC-FM/AM in San Francisco for $115,000 in cash. The Company had previously been operating KKSF-FM and KDFC-FM/AM under a time brokerage agreement since November 1, 1996. On July 21, 1997, the Company sold, in the Bonneville/KDFC Disposition, KDFC-FM in San Francisco for $50,000 in cash. The assets of KDFC-FM are classified as assets held for sale in connection with the purchase price allocation of the acquisition of KKSF-FM/KDFC-FM/AM. Accordingly, KDFC-FM net income of approximately $791 for the period February 1, 1997 through September 30, 1997 has been excluded from the Company's historical condensed statement of operations. Therefore, the KDFC-FM condensed statement of operations includes the results of operations for January 1, 1997 through January 31, 1997 (the time brokerage agreement holding period in 1997) for the nine months ended September 30, 1997. (u) On August 13, 1997, the Company sold, in the Douglas AM Dispositions, WBZS-AM and WZHF-AM in Washington (acquired as part of the Evergreen Viacom Acquisition -- see 5(j)) and KDFC-AM in San Francisco for $5,500, $7,500 and $5,000, respectively, payable in the form of a promissory note. The assets of WBZS-AM and WZHF-AM were classified as assets held for sale in connection with the purchase price allocation of the Evergreen Viacom Acquisition (see 5(j)). Accordingly, WBZS-AM and B-19 48 WZHF-AM net income for the period July 2, 1997 to August 13, 1997 has been excluded from the Company's historical condensed statement of operations. (v) On May 30, 1997, the Company acquired, in the Century Acquisition, WPNT-FM in Chicago for $75,750 in cash (including $2,000 for the purchase of the station's accounts receivable) of which $5,500 was paid as escrow funds in July 1996. On June 19, 1997, the Company sold, in the Bonneville/WPNT Disposition, WPNT-FM in Chicago for $75,000 in cash and recognized a gain of $500. (6) Reflects the elimination of intercompany Katz revenue and Company expense related to national representation commissions of $15,964 for the year ended December 31, 1996 and $15,119 for the nine months ended September 30, 1997 paid to Katz by the Company. (7) Reflects the reclassification of Katz corporate general and administrative expenses of $10,035 for the year ended December 31, 1996 and $8,171 for the nine months ended September 30, 1997 to conform with Company classification. (8) Reflects incremental amortization related to the Completed Transactions and is based on the following allocation to intangible assets:
INCREMENTAL INTANGIBLE HISTORICAL ADJUSTMENT COMPLETED TRANSACTIONS AMORTIZATION ASSETS, AMORTIZATION AMORTIZATION FOR NET YEAR ENDED DECEMBER 31, 1996 PERIOD(I) NET EXPENSE(I) EXPENSE INCREASE ---------------------------- ------------ ---------- ------------ ------------ ---------- Pyramid Acquisition (ii)........ 1/1-1/17 $ 325,871 $ 1,026 $ 409 $ 617 KYLD-FM......................... 1/1-8/14 43,659 1,811 640 1,171 WEDR-FM......................... 1/1-10/18 63,757 3,400 -- 3,400 WGAY-FM......................... 1/1-11/26 32,538 1,964 -- 1,964 WWWW-FM/WDFN-AM................. 1/1-12/31 26,590 1,773 7 1,766 KKSF-FM (iii)................... 1/1-12/31 58,698 3,913 868 3,045 WJLB-FM/WMXD-FM................. 1/1-12/31 165,559 11,037 2,145 8,892 WWRC-AM......................... 1/1-12/31 16,808 1,121 -- 1,121 WDAS-FM/AM...................... 1/1-12/31 98,185 6,546 2,470 4,076 Evergreen Viacom Acquisition (iv).......................... 1/1-12/31 515,654 34,377 5,606 28,771 Chancellor Merger (v)........... 1/1-12/31 2,178,137 145,209 37,834 107,375 Chicago/Dallas Exchange......... 1/1-12/31 (584) (39) -- (39) Katz Acquisition (vi)........... 1/1-12/31 354,058 12,402 7,616 4,786 Gannett Acquisition............. 1/1-12/31 334,756 22,317 1,229 21,088 Denver Acquisition.............. 1/1-12/31 25,554 1,704 328 1,376 ---------- -------- ------- -------- Total........................... $4,239,240 $248,561 $59,152 $189,409 ========== ======== ======= ========
INCREMENTAL INTANGIBLE HISTORICAL ADJUSTMENT COMPLETED TRANSACTIONS AMORTIZATION ASSETS, AMORTIZATION AMORTIZATION FOR NET NINE MONTHS ENDED SEPTEMBER 30, 1997 PERIOD(I) NET EXPENSE(I) EXPENSE INCREASE ------------------------------------ ------------ ---------- ------------ ------------ ---------- WWWW-FM/WDFN-AM..................... 1/1-1/31 $ 26,590 $ 148 $ -- $ 148 KKSF-FM (iii)....................... 1/1-1/31 58,698 326 -- 326 WJLB-FM/WMXD-FM..................... 1/1-3/31 165,559 2,759 -- 2,759 WWRC-AM............................. 1/1-4/2 16,808 286 -- 286 WDAS-FM/AM.......................... 1/1-4/30 98,185 2,182 820 1,362 Evergreen Viacom Acquisition(iv).... 1/1-7/2 515,654 17,379 793 16,586 Chancellor Merger(v)................ 1/1-9/5 2,178,137 98,823 23,638 75,185 Chicago/Dallas Exchange............. 1/1-9/30 (584) (29) -- (29) Katz Acquisition(vi)................ 1/1-9/30 354,058 9,302 5,712 3,590 Gannett Acquisition................. 1/1-9/30 334,756 16,738 921 15,817 Denver Acquisition.................. 1/1-9/30 25,554 1,278 201 1,077 ---------- -------- ------- -------- Total............................... $3,773,415 $149,192 $32,085 $117,107 ========== ======== ======= ========
- --------------- (i) Intangible assets are amortized on a straight-line basis over an estimated average 15 year life (except for the Katz Acquisition -- see (vi) below). The incremental amortization period represents the period of the year that the station was not owned by the Company. B-20 49 (ii) Intangible assets for the Pyramid Acquisition of $325,871 includes $61,218 resulting from the recognition of deferred tax liabilities and excludes approximately $29,915 of the purchase price allocated to the Buffalo Stations which were sold during the year ended December 31, 1996. (iii) Intangible assets for KKSF-FM excludes (1) $50,000 of the purchase price allocated to KDFC-FM which has been classified as assets held for sale, (2) $1,500 to be reimbursed by the buyers of KDFC-FM for costs incurred in connection with relocating KKSF and (3) $4,802 of the purchase price allocated to KDFC-AM which was sold, in the Douglas AM Dispositions, on August 13, 1997. (iv) Intangible assets for the Evergreen Viacom Acquisition of $515,654 excludes (1) $67,231 of the purchase price allocated to WJZW-FM which was sold in the ABC/Washington Disposition on July 7, 1997 and (2) $12,148 of the purchase price allocated to WZHF-AM and WBZS-AM which were sold in the Douglas AM Dispositions on August 13, 1997. (v) Intangible assets for the Chancellor Merger of $2,178,137 includes $293,548 resulting from the recognition of deferred tax liabilities. (vi) Intangible assets for the Katz Acquisition of $354,058 consist of goodwill of $249,058 and representation contract value of $105,000 with estimated average lives of 40 years and 17 years, respectively. Historical depreciation expense of the Completed Transactions is assumed to approximate depreciation expense on a pro forma basis. Actual depreciation and amortization may differ based upon final purchase price allocations. (9) Reflects the elimination of merger expenses of $6,124 for the nine months ended September 30, 1997 incurred by CRBC in connection with the Chancellor Merger. (10) Reflects the elimination of duplicate corporate expenses of $6,347 for the year ended December 31, 1996 and $1,842 for the nine months ended September 30, 1997 related to the Completed Transactions. B-21 50 (11) Reflects the adjustment to interest expense in connection with the consummation of the Completed Transactions, the sale in October 1996 by Chancellor Media of 9,000,000 shares of its common stock for aggregate net proceeds of $264,236, which were contributed to the Company (the "1996 Evergreen Offering") and the amendment and restatement of the Company's senior credit agreement on April 25, 1997 (the "Senior Credit Facility") and the offering by the Company of the 8 1/8% Notes:
NINE MONTHS YEAR ENDED ENDED DECEMBER 31, 1996 SEPTEMBER 30, 1997 ----------------- ------------------ Additional bank borrowings related to: Completed Station Acquisitions.................... $2,025,409 $1,551,409 Chancellor Merger(a).............................. 164,000 164,000 Katz Acquisition(b)............................... 157,101 157,101 Completed Station Dispositions.................... (381,250) (349,250) New Loan Fees..................................... 10,473 10,473 ---------- ---------- Total additional bank borrowings.................... $1,975,733 $1,533,733 ========== ========== Interest expense at 7.0%............................ $ 115,323 $ 55,573 Less: historical interest expense related to completed station acquisitions and dispositions... (6,547) (1,009) ---------- ---------- Net increase in interest expense.................... 108,776 54,564 Reduction in interest expense on bank debt related to the application of net proceeds of the following at 7.0%: 1996 Evergreen Offering proceeds contributed to the Company of $264,236 for the period January 1, 1996 to October 22, 1996.................... (15,003) -- $3.00 Convertible Preferred Stock Offering proceeds contributed to the Company of $287,808 for the year ended December 31, 1996 and for the period January 1, 1997 to June 16, 1997.... (20,147) (9,290) 8 1/8% Notes proceeds of $485,000 for the year ended December 31, 1996 and for the nine months ended September 30, 1997....................... (33,950) (25,463) Interest expense on the Company's $500,000 8 1/8% Notes issued December 22, 1997.................... 40,625 30,469 Reduction in interest expense related to the application of the 7.0% interest rate to the Company's bank debt prior to the refinancing of the Senior Credit Facility, to CRBC's bank debt prior to consummation of the Chancellor Merger and to KMG's bank debt prior to consummation of the Katz Acquisition.................................. (17,450) (11,809) ---------- ---------- Total adjustment for net increase in interest expense........................................... $ 62,851 $ 38,471 ========== ==========
(a) The Company incurred additional bank borrowings of $133,000 to distribute to CMHC to retire outstanding borrowings under the Chancellor Broadcasting/Viacom Interim Financing and $31,000 to finance estimated acquisition costs related to the Chancellor Merger. (b) The Company incurred additional bank borrowings of $149,601 to finance the payment of $11.00 in cash for each outstanding share of KMG Common Stock and $7,500 to finance estimated acquisition costs related to the Katz Acquisition. (12) Reflects the income tax benefit related to pro forma adjustments. The adjustment to income taxes reflects the application of the estimated effective tax rate on a pro forma basis to income (loss) before income taxes for historical and pro forma adjustment amounts. B-22 51 ADJUSTMENTS TO UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENTS OF OPERATIONS RELATED TO THE PENDING TRANSACTIONS (13) The detail of the historical financial data of the stations to be acquired or disposed of in the Pending Transactions for the year ended December 31, 1996 and the nine months ended September 30, 1997 has been obtained from the historical financial statements of the respective stations and is summarized below:
ACQUISITIONS DISPOSITIONS --------------------------- --------------------------- SFX BONNEVILLE BONNEVILLE EXCHANGE OPTION WFLN-FM OPTION PENDING HISTORICAL HISTORICAL HISTORICAL HISTORICAL TRANSACTIONS YEAR ENDED DECEMBER 31, 1996 1/1-6/30(A) 1/1-12/31(B) 9/1-12/31(C) 1/1-12/31(B) HISTORICAL - ------------------------------------------------------- ------------ ------------ ------------ ------------ ------------ Gross revenues......................................... $ 5,726 $55,482 $(1,455) $(35,355) $24,398 Less: agency commissions............................... (619) (8,683) 159 4,528 (4,615) ------- ------- ------- -------- ------- Net revenues........................................... 5,107 46,799 (1,296) (30,827) 19,783 Station operating expenses excluding depreciation and amortization.......................................... 3,676 25,678 (725) (18,858) 9,771 Depreciation and amortization.......................... 2,141 -- (800) -- 1,341 Corporate general and administrative................... 1,024 -- -- -- 1,024 ------- ------- ------- -------- ------- Operating income (loss)................................ (1,734) 21,121 229 (11,969) 7,647 Interest expense....................................... -- -- -- (562) (562) Other (income) expense................................. -- (8) -- 9 1 ------- ------- ------- -------- ------- Net income (loss)...................................... $(1,734) $21,129 $ 229 $(11,416) $ 8,208 ======= ======= ======= ======== ======= Broadcast cash flow.................................... $ 1,431 $21,121 $ (571) $(11,969) $10,012 ======= ======= ======= ======== =======
ACQUISITIONS DISPOSITIONS ------------ ------------------------- BONNEVILLE BONNEVILLE OPTION WFLN-FM OPTION PENDING HISTORICAL HISTORICAL HISTORICAL TRANSACTIONS NINE MONTHS ENDED SEPTEMBER 30, 1997 1/1-9/30(B) 1/1-4/30(C) 1/1-9/30(B) HISTORICAL - ------------------------------------------------------------ ------------ ----------- ----------- ------------ Gross revenues.............................................. $32,912 $(1,298) $(30,638) $ 976 Less: agency commissions.................................... (4,992) 134 3,952 (906) ------- ------- -------- ------- Net revenues................................................ 27,920 (1,164) (26,686) 70 Station operating expenses excluding depreciation and amortization............................................... 18,901 (728) (14,206) 3,967 Depreciation and amortization............................... -- (800) -- (800) Corporate general and administrative........................ -- -- -- -- ------- ------- -------- ------- Operating income (loss)..................................... 9,019 364 (12,480) (3,097) Interest expense............................................ -- -- -- -- Other (income) expense...................................... 4 -- 9 13 ------- ------- -------- ------- Net income (loss)........................................... $ 9,015 $ 364 $(12,489) $(3,110) ======= ======= ======== ======= Broadcast cash flow......................................... $ 9,019 $ (436) $(12,480) $(3,897) ======= ======= ======== =======
(a) On July 1, 1996, CRBC entered into an agreement to exchange, in the SFX Exchange, WAPE-FM and WFYV-FM in Jacksonville, Florida (which were acquired as part of the Omni Acquisition) (see 5(k)(v)), and $11,000 in cash to SFX for WBAB-FM, WBLI-FM, WGBB-AM, and WHFM-FM in Long Island. CRBC entered into time brokerage agreements to operate WBAB-FM, WBLI-FM, WGBB-AM, and WHFM-FM effective July 1, 1996 and entered into time brokerage agreements to sell substantially all of the broadcast time of WAPE-FM and WFYV-FM effective July 1, 1996. On November 6, 1997, the DOJ filed suit against the Company seeking to enjoin under the HSR Act the acquisition of the four Long Island properties under the SFX Exchange. If the Company is unable to acquire the four Long Island properties, the SFX Exchange will not be consummated and the Company will retain ownership of the two Jacksonville FM stations. There can be no assurance as to whether or when the SFX Exchange will ultimately be consummated. The Company does not believe that failure to consummate the SFX Exchange would have a material adverse effect on the Company's business, results of operations or financial condition. B-23 52 (b) On August 6, 1997, the Company paid $3,000 to Bonneville for an option to exchange WTOP-AM in Washington, KZLA-FM in Los Angeles and WGMS-FM in Washington plus $57,000 in cash for Bonneville's stations WNSR-FM in New York, KLDE-FM in Houston and KBIG-FM in Los Angeles (the "Bonneville Option"). The Bonneville Option was exercised on October 1, 1997, and definitive exchange documentation is presently being negotiated. The Company has entered into time brokerage agreements to operate KLDE-FM and KBIG-FM effective October 1, 1997 and WNSR-FM effective October 10, 1997 and has entered into time brokerage agreements to sell substantially all of the broadcast time of WTOP-AM, KZLA-FM and WGMS-FM effective October 1, 1997. (c) On August 12, 1996, the Company entered into an agreement to acquire WFLN-FM in Philadelphia from Secret for $37,750 in cash. The Company also entered into an agreement to operate WFLN-FM under a time brokerage agreement effective September 1, 1996. The Company subsequently entered into an agreement to sell WFLN-FM to Greater Media for $41,800 in cash. On May 1, 1997, the Company assigned its time brokerage agreement to operate WFLN-FM to Greater Media. On July 16, 1997, Secret purported to terminate the sale of WFLN-FM to the Company. The Company subsequently brought suit against Secret to enforce its right to acquire WFLN-FM. In August 1997, pursuant to a court settlement, the Company, Secret and Greater Media agreed that (i) Secret would sell WFLN-FM directly to Greater Media for $37,750, (ii) Greater Media would deposit $4,050 (the difference between the Company's proposed acquisition price for WFLN-FM from Secret and the Company's proposed sale price for WFLN-FM to Greater Media) with the court and (iii) the Company and Secret would litigate each party's entitlement to the amount deposited with the court. As of the date hereof, no further resolution to this dispute has occurred. (14) Reflects the elimination of time brokerage agreement fees received and paid by CRBC as follows:
YEAR ENDED DECEMBER 31, 1996 MARKET PERIOD REVENUE EXPENSE ---------------------------- ----------- --------- ------- ------- WAPE-FM, WFYV-FM................................ Jacksonville 7/1-12/31 $(1,963) $(2,000) WBAB-FM, WBLI-FM, WGBB-AM, WHFM-FM.............. Long Island 7/1-12/31 -- (2,000) ------- ------- Total adjustment for decrease in gross revenues and expenses............ $(1,963) $(4,000) ======= =======
NINE MONTHS ENDED SEPTEMBER 30, 1997 MARKET PERIOD REVENUE EXPENSE ------------------------------------ ----------- --------- ------- ------- WAPE-FM, WFYV-FM................................ Jacksonville 1/1-9/5 $(2,711) $ (490) WBAB-FM, WBLI-FM, WGBB-AM, WHFM-FM.............. Long Island 1/1-9/5 -- (2,711) ------- ------- Total adjustment for decrease in gross revenues and expenses............ $(2,711) $(3,201) ======= =======
(15) Reflects incremental amortization related to the Pending Transactions and is based on the allocation of the total consideration as follows:
YEAR ENDED NINE MONTHS ENDED DECEMBER 31, 1996 SEPTEMBER 30, 1997 ----------------- ------------------ Amortization expense on $67,270 additional intangible assets amortized on a straight-line basis over a 15 year period......................................... $ 4,484 $ 3,363 Less: historical amortization expense................. (1,629) (999) ------- ------- Adjustment for net increase in amortization expense... $ 2,855 $ 2,364 ======= =======
Historical depreciation expense of the Pending Transactions is assumed to approximate depreciation expense on a pro forma basis. Actual depreciation and amortization may differ based upon final purchase price allocations. B-24 53 (16) Reflects the adjustment to interest expense in connection with the consummation of the Pending Transactions:
NINE MONTHS YEAR ENDED ENDED DECEMBER 31, SEPTEMBER 30, 1996 1997 ------------ ------------- Additional bank borrowings related to: Pending Acquisitions...................................... $68,000 $68,000 ======= ======= Interest expense on additional bank borrowings at 7.0%...... $ 4,760 $ 3,571 ======= =======
(17) Reflects the income tax benefit related to pro forma adjustments. The adjustment to income taxes reflects the application of the estimated effective tax rate on a pro forma basis to income (loss) before income taxes for historical and pro forma adjustment amounts. B-25 -----END PRIVACY-ENHANCED MESSAGE-----