-----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, AHx2IfFmWJrGxwKiZfmpqWlWPmZ4tDpqn1pQBSYDgLSFeYfR23SW49pMRDRuC/pT xfMB3razVraudS8z4CfV1A== 0000950134-99-003514.txt : 19990504 0000950134-99-003514.hdr.sgml : 19990504 ACCESSION NUMBER: 0000950134-99-003514 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19990416 ITEM INFORMATION: ITEM INFORMATION: FILED AS OF DATE: 19990503 FILER: COMPANY DATA: COMPANY CONFORMED NAME: CHANCELLOR MEDIA CORP/ CENTRAL INDEX KEY: 0000894972 STANDARD INDUSTRIAL CLASSIFICATION: RADIO BROADCASTING STATIONS [4832] IRS NUMBER: 752247099 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: SEC FILE NUMBER: 333-72481 FILM NUMBER: 99609315 BUSINESS ADDRESS: STREET 1: 300 CRESCENT COURT STREET 2: STE 600 CITY: DALLAS STATE: TX ZIP: 75201 BUSINESS PHONE: 9728699020 MAIL ADDRESS: STREET 1: 300 CRESCENT COURT STREET 2: STE 600 CITY: DALLAS STATE: TX ZIP: 75201 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 SEC ACT: SEC FILE NUMBER: 333-32259 FILM NUMBER: 99609316 BUSINESS ADDRESS: STREET 1: 300 CRESCENT COURT STREET 2: STE 600 CITY: DALLAS STATE: TX ZIP: 75201 BUSINESS PHONE: 9728699020 MAIL ADDRESS: STREET 1: 300 CRESCENT COURT STREET 2: STE 600 CITY: DALLAS STATE: TX ZIP: 75201 FORMER COMPANY: FORMER CONFORMED NAME: EVERGREEN MEDIA CORP OF LOS ANGELES DATE OF NAME CHANGE: 19970728 8-K 1 FORM 8-K 1 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 ---------- FORM 8-K CURRENT REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 DATE OF REPORT (DATE OF EARLIEST EVENT REPORTED): APRIL 16, 1999 CHANCELLOR MEDIA CORPORATION (Exact name of Registrant as specified in charter) DELAWARE 0-21570 75-2247099 (State or other jurisdiction (Commission file number) (I.R.S. employer of incorporation) identification no.) CHANCELLOR MEDIA CORPORATION OF LOS ANGELES (Exact name of Registrant as specified in charter) DELAWARE 333-32259 75-2451687 (State or other jurisdiction (Commission file number) (I.R.S. employer of incorporation) identification no.) 1845 WOODALL RODGERS FREEWAY, SUITE 1300 DALLAS, TEXAS 75201 (Address of principal executive offices) Registrants' telephone number, including area code: (214) 922-8700 ---------- 2 ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS. On August 14, 1998, Chancellor Media Corporation of Los Angeles ("CMCLA") entered into an agreement to sell WMVP-AM in Chicago, Illinois to ABC, Inc. ("ABC") for approximately $21.0 million in cash. CMCLA also entered into a time brokerage agreement to sell substantially all of the broadcast time of WMVP-AM effective September 10, 1998. The sale of WMVP-AM was completed by the parties on April 16, 1999. The sales price was determined by CMCLA through arms-length negotiations with ABC. ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS. (b) Unaudited Pro Forma Financial Information The unaudited Pro Forma Financial Information of Chancellor Media Corporation and Chancellor Media Corporation of Los Angeles begin on page P-1 following the signature page to this report. (c) Exhibits 2.54 Purchase Agreement between Chancellor Media Corporation of Los Angeles and ABC, Inc.* - ---------- *To be filed by amendment. 2 3 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. CHANCELLOR MEDIA CORPORATION CHANCELLOR MEDIA CORPORATION OF LOS ANGELES Date: May 3, 1999 By: /s/ ANDREA ARCHER HULCY ----------------------------------------- Andrea Archer Hulcy Vice President and Controller 3 4 CHANCELLOR MEDIA CORPORATION PRO FORMA FINANCIAL INFORMATION The unaudited pro forma condensed combined financial statements of Chancellor Media Corporation, (together with its subsidiaries, the "Company") are presented using the purchase method of accounting for all acquisitions and reflect the combination of consolidated historical financial data of the Company and each of the companies acquired in the transactions completed by the Company during 1998 and 1999 and the elimination of the consolidated historical data of the stations disposed in the transactions completed by the Company during 1998 and 1999. The unaudited pro forma condensed combined balance sheet data at December 31, 1998 presents adjustments for the transactions completed in 1999 and the Pending Transactions, as if each such transaction had occurred at December 31, 1998. The unaudited pro forma condensed combined statement of operations data for the twelve months ended December 31, 1998 presents adjustments for the transactions completed by the Company in 1998 and 1999, the 1998 Financing Transactions and the Pending Transactions (excluding the acquisition of Petry Media Corporation), as if each such transaction occurred on January 1, 1998. The acquisition of Petry is excluded from the pro forma information included in this joint proxy statement/prospectus due to uncertainty regarding DOJ approval of the transaction. In the opinion of management of the Company, such information is not material to such pro forma presentations. 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 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 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. P-1 5 CHANCELLOR MEDIA CORPORATION UNAUDITED PRO FORMA BALANCE SHEET AT DECEMBER 31, 1998 (IN THOUSANDS)
CAPSTAR AS ADJUSTED PRO FORMA COMPANY FOR THE PRO FORMA ADJUSTMENTS AS ADJUSTED COMPLETED CAPSTAR ADJUSTMENTS COMPANY FOR THE FOR THE AND PENDING FOR THE HISTORICAL COMPLETED COMPLETED CAPSTAR CAPSTAR AT 12/31/98 TRANSACTIONS(1) TRANSACTIONS TRANSACTIONS(2) MERGER ----------- --------------- ------------ ----------------- ----------- ASSETS: Current assets.......................... $ 424,811 $ 12,564 $ 437,375 $ 160,112 $ -- Property and equipment, net............. 1,388,156 18,168 1,406,324 260,006 -- Intangible assets, net.................. 5,056,047 332,169 5,388,216 4,468,312 1,593,702(3) Other assets............................ 358,893 -- 358,893 51,107 (150,000)(4) ---------- -------- ---------- ---------- ---------- Total assets.................... $7,227,907 $362,901 $7,590,808 $4,939,537 $1,443,702 ========== ======== ========== ========== ========== LIABILITIES AND STOCKHOLDERS' EQUITY: Current liabilities: Current portion of long-term debt....... $ -- $ -- $ -- $ 29,834 $ -- Other current liabilities............... 236,618 2,585 239,203 120,090 -- ---------- -------- ---------- ---------- ---------- Total current liabilities....... 236,618 2,585 239,203 149,924 -- Long-term debt, excluding current portion............................... 4,096,000 307,962 4,403,962 2,019,176 83,487(3) (150,000)(4) Deferred tax liabilities................ 453,134 42,858 495,992 1,198,129 319,069(3) Other liabilities....................... 50,325 250 50,575 178 -- ---------- -------- ---------- ---------- ---------- Total liabilities............... 4,836,077 353,655 5,189,732 3,367,407 252,556 Redeemable preferred stock.............. -- -- -- 262,368 26,894(3) STOCKHOLDERS' EQUITY: Preferred stock......................... 409,500 -- 409,500 -- -- Common stock............................ 1,428 -- 1,428 1,076 (543)(3) Additional paid in capital.............. 2,259,583 -- 2,259,583 1,503,201 972,974(3) Stock subscriptions receivable.......... -- -- -- (2,694) -- Unearned compensation................... -- -- -- (4,893) 4,893(3) Accumulated deficit..................... (278,681) 9,246 (269,435) (186,928) 186,928(3) ---------- -------- ---------- ---------- ---------- Total stockholders' equity...... 2,391,830 9,246 2,401,076 1,309,762 1,164,252 ---------- -------- ---------- ---------- ---------- Total liabilities and stockholders' equity.......... $7,227,907 $362,901 $7,590,808 $4,939,537 $1,443,702 ========== ======== ========== ========== ========== COMPANY AS ADJUSTED FOR THE COMPLETED PRO FORMA TRANSACTIONS ADJUSTMENTS FOR AND THE THE PENDING COMPANY CAPSTAR MERGER TRANSACTION(5) PRO FORMA -------------- --------------- ----------- ASSETS: Current assets.......................... $ 597,487 $ -- $ 597,487 Property and equipment, net............. 1,666,330 1,771 1,668,101 Intangible assets, net.................. 11,450,230 88,229 11,538,459 Other assets............................ 260,000 -- 260,000 ----------- ------- ----------- Total assets.................... $13,974,047 $90,000 $14,064,047 =========== ======= =========== LIABILITIES AND STOCKHOLDERS' EQUITY: Current liabilities: Current portion of long-term debt....... $ 29,834 $ -- $ 29,834 Other current liabilities............... 359,293 -- 359,293 ----------- ------- ----------- Total current liabilities....... 389,127 -- 389,127 Long-term debt, excluding current portion............................... 6,356,625 90,000 6,446,625 Deferred tax liabilities................ 2,013,190 -- 2,013,190 Other liabilities....................... 50,753 -- 50,753 ----------- ------- ----------- Total liabilities............... 8,809,695 90,000 8,899,695 Redeemable preferred stock.............. 289,262 -- 289,262 STOCKHOLDERS' EQUITY: Preferred stock......................... 409,500 -- 409,500 Common stock............................ 1,961 1,961 Additional paid in capital.............. 4,735,758 -- 4,735,758 Stock subscriptions receivable.......... (2,694) -- (2,694) Unearned compensation................... -- -- -- Accumulated deficit..................... (269,435) -- (269,435) ----------- ------- ----------- Total stockholders' equity...... 4,875,090 -- 4,875,090 ----------- ------- ----------- Total liabilities and stockholders' equity.......... $13,974,047 $90,000 $14,064,047 =========== ======= ===========
See accompanying notes to Unaudited Pro Forma Condensed Combined Financial Statements P-2 6 CHANCELLOR MEDIA CORPORATION UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 1998 (IN THOUSANDS)
PRO FORMA ADJUSTMENTS CAPSTAR AS FOR THE COMPANY AS ADJUSTED FOR THE PRO FORMA COMPANY COMPANY ADJUSTED COMPLETED ADJUSTMENTS COMPLETED AND THE FOR THE CAPSTAR AND FOR THE YEAR ENDED COMPANY TRANSACTIONS COMPLETED COMPLETED PENDING CAPSTAR CAPSTAR DECEMBER 31, 1998 HISTORICAL HISTORICAL(6) TRANSACTIONS TRANSACTIONS TRANSACTIONS(14) MERGER - ----------------- ---------- ------------- ------------ ------------ ---------------- ----------- Gross revenues.................... $1,440,357 $261,292 $ -- $1,701,649 $ 728,742 $ (56,261)(15) Less: agency commissions.......... (166,501) (28,372) -- (194,873) (62,670) -- ---------- -------- --------- ---------- --------- --------- Net revenues...................... 1,273,856 232,920 -- 1,506,776 666,072 (56,261) Operating expenses excluding depreciation and amortization.... 682,061 118,666 -- 800,727 385,896 (4,400)(15) Depreciation and amortization..... 446,338 51,201 22,736(7) 578,345 143,979 (49,425)(15) 58,070(8) 281,222(16) Corporate general and administrative................... 36,722 12,775 (570)(9) 48,927 28,963 -- Stock option compensation......... -- -- -- -- 21,401 -- Merger, nonrecurring and systems development expense.............. 63,661 2,164 (2,164)(10) 63,661 57,892 (43,105)(17) ---------- -------- --------- ---------- --------- --------- Operating income (loss)........... 45,074 48,114 (78,072) 15,116 27,941 (240,553) Interest expense.................. 217,136 13,762 131,973(11) 362,871 193,056 (10,600)(15) 1,750(18) Interest income................... (15,650) (643) -- (16,293) (3,870) 10,600(15) Gain on disposition of assets..... (123,845) (3,158) -- (127,003) -- -- Gain on disposition of representation contracts......... (32,198) -- -- (32,198) -- -- Loss on investment in limited liability companies.............. -- -- -- -- 28,565 -- Other (income) expense............ (3,221) (692) -- (3,913) 1,524 -- ---------- -------- --------- ---------- --------- --------- Income (loss) before income taxes............................ 2,852 38,845 (210,045) (168,348) (191,334) (242,303) Income tax expense (benefit)...... 33,751 -- (72,889)(12) (39,138) (58,889) (87,301)(19) Dividends and accretion on preferred stock of subsidiary.... 17,601 -- (17,601)(13) -- 25,586 -- ---------- -------- --------- ---------- --------- --------- Net income (loss)................. (48,500) 38,845 (119,555) (129,210) (158,031) (155,002) Preferred stock dividends......... 25,670 -- -- 25,670 -- -- ---------- -------- --------- ---------- --------- --------- Income (loss) attributable to common stockholders.............. $ (74,170) $ 38,845 $(119,555) $ (154,880) $(158,031) $(155,002) ========== ======== ========= ========== ========= ========= Basic and diluted income (loss) per common share................. $ (0.54) $ (1.12) ========== ========== Weighted average common shares outstanding(21).................. 137,979 137,979 53,319 ========== ========== ========= COMPANY PRO FORMA AS ADJUSTED FOR COMPLETED TRANSACTIONS COMPANY AND THE PRO FORMA YEAR ENDED CAPSTAR PENDING COMPANY DECEMBER 31, 1998 MERGER TRANSACTION(20) PRO FORMA - ----------------- ------------- --------------- ---------- Gross revenues.................... $2,374,130 $12,052 $2,386,182 Less: agency commissions.......... (257,543) (1,329) (258,872) ---------- ------- ---------- Net revenues...................... 2,116,587 10,723 2,127,310 Operating expenses excluding depreciation and amortization.... 1,182,223 6,150 1,188,373 Depreciation and amortization..... 954,121 5,984 960,105 Corporate general and administrative................... 77,890 -- 77,890 Stock option compensation......... 21,401 -- 21,401 Merger, nonrecurring and systems development expense.............. 78,448 -- 78,448 ---------- ------- ---------- Operating income (loss)........... (197,496) (1,411) (198,907) Interest expense.................. 547,077 6,632 553,709 Interest income................... (9,563) -- (9,563) Gain on disposition of assets..... (127,003) -- (127,003) Gain on disposition of representation contracts......... (32,198) -- (32,198) Loss on investment in limited liability companies.............. 28,565 -- 28,565 Other (income) expense............ (2,389) -- (2,389) ---------- ------- ---------- Income (loss) before income taxes............................ (601,985) (8,043) (610,028) Income tax expense (benefit)...... (185,328) (3,378) (188,706) Dividends and accretion on preferred stock of subsidiary.... 25,586 -- 25,586 ---------- ------- ---------- Net income (loss)................. (442,243) (4,665) (446,908) Preferred stock dividends......... 25,670 -- 25,670 ---------- ------- ---------- Income (loss) attributable to common stockholders.............. $ (467,913) $(4,665) $ (472,578) ========== ======= ========== Basic and diluted income (loss) per common share................. $ (2.45) $ (2.47) ========== ========== Weighted average common shares outstanding(21).................. 191,298 191,298 ========== ==========
See accompanying notes to Unaudited Pro Forma Condensed Combined Financial Statements P-3 7 ADJUSTMENTS TO THE UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET RELATED TO THE COMPLETED TRANSACTIONS (1) Reflects the Completed Transactions that were completed after December 31, 1998 as follows:
PURCHASE PRICE ALLOCATION -------------------------------------------------------------------------------------------------------- PROPERTY AND DEFERRED COMPLETED PURCHASE CURRENT EQUIPMENT, INTANGIBLE CURRENT TAX OTHER ACCUMULATED TRANSACTIONS PRICE ASSETS NET ASSETS, NET LIABILITIES LIABILITIES LIABILITIES DEFICIT - ------------ -------- ------- ------------ ----------- ----------- ----------- ----------- ----------- Outdoor Acquisitions(a).... $ 45,204 $ 2,346 $18,335 $ 25,110 $ (337) $ -- $(250) $ -- Cleveland Acquisitions(b).... 283,758 10,218 2,047 309,903 (2,248) (36,162)(c) -- -- Chicago Disposition(d)..... (21,000) -- (2,214) (2,844) -- (6,696) -- (9,246) -------- ------- ------- -------- ------- -------- ----- ------- $307,962 $12,564 $18,168 $332,169 $(2,585) $(42,858) $(250) $(9,246) ======== ======= ======= ======== ======= ======== ===== ======= FINANCING ----------- INCREASE IN COMPLETED LONG-TERM TRANSACTIONS DEBT - ------------ ----------- Outdoor Acquisitions(a).... $ 45,204 Cleveland Acquisitions(b).... 283,758 Chicago Disposition(d)..... (21,000) -------- $307,962 ========
- ------------------------- (a) Subsequent to January 1, 1999, the Company acquired approximately 4,500 outdoor display faces from Triumph Outdoor Holdings and certain affiliated companies ("Triumph") for approximately $37,006 in cash including working capital and acquired approximately 100 additional billboards and outdoor displays in various transactions for approximately $8,198. The outdoor acquisitions aggregate purchase price of $45,204 has been allocated to property and equipment and intangible assets based upon a preliminary appraisal for Triumph and historical information from prior outdoor acquisitions. The amounts allocated to property and equipment consist primarily of advertising structures with an estimated average life of 15 years. The amounts allocated to intangible assets represent goodwill with an estimated average life of 40 years. (b) On January 28, 1999, the Company acquired Wincom Broadcasting Corporation which owns WQAL-FM in Cleveland. The Company had previously been operating WQAL-FM under a time brokerage agreement effective October 1, 1998. On February 2, 1999, the Company acquired five additional radio stations in Cleveland including (i) WDOK-FM and WRMR-AM from Independent Group Limited Partnership, (ii) WZAK-FM from Zapis Communications and (iii) Zebra Broadcasting Corporation which owns WZJM-FM and WJMO-AM. The six Cleveland stations were acquired for an aggregate purchase price of $283,758 in cash including working capital, subject to certain adjustments. The Company has assumed that the historical balances of net property and equipment acquired approximate fair value for the preliminary allocation of the purchase price and are based on information provided by management of the respective companies acquired. The Company, on a preliminary basis, has allocated the intangible assets to broadcast licenses with an estimated average life of 15 years based upon historical information from prior radio acquisitions. (c) Reflects a deferred tax liability related to the difference between the financial statement carrying amount and the tax basis of assets acquired in the stock acquisitions of Wincom Broadcasting Corporation and Zebra Broadcasting Corporation. (d) On April 16, 1999, the Company sold WMVP-AM in Chicago to ABC, Inc. for $21,000 in cash. The Company had previously entered into a time brokerage agreement to sell substantially all of the broadcast time of WMVP-AM effective September 10, 1998. The amounts allocated to accumulated deficit and deferred tax liabilities represent the estimated gain on the disposition of WMVP-AM of $15,942 net of taxes of $6,696. P-4 8 ADJUSTMENTS TO THE UNAUDITED PRO FORMA BALANCE SHEET RELATED TO CAPSTAR AS ADJUSTED FOR THE COMPLETED CAPSTAR AND PENDING CAPSTAR TRANSACTIONS (2) The historical balance sheet of Capstar at December 31, 1998 and the pro forma adjustments related to the Completed Capstar and Pending Capstar Transactions are summarized below:
CAPSTAR AS CAPSTAR PRO FORMA CAPSTAR AS PRO FORMA ADJUSTED FOR THE HISTORICAL ADJUSTMENTS FOR ADJUSTED FOR ADJUSTMENTS FOR COMPLETED AT THE COMPLETED COMPLETED THE PENDING CAPSTAR AND DECEMBER 31, CAPSTAR CAPSTAR CAPSTAR PENDING CAPSTAR 1998 TRANSACTIONS(A) TRANSACTIONS TRANSACTIONS TRANSACTIONS ------------ --------------- ------------ --------------- ---------------- ASSETS: Current assets.................... $ 150,084 $ -- $ 150,084 $ 10,028(b) $ 160,112 Property and equipment, net....... 248,920 (1,758) 247,162 12,844(b) 260,006 Intangible assets, net............ 4,240,378 (3,172) 4,237,206 231,106(b) 4,468,312 Other assets...................... 23,620 19,924 43,544 7,563(b) 51,107 ---------- -------- ---------- -------- ----------- Total assets............. $4,663,002 $ 14,994 $4,677,996 $261,541 $ 4,939,537 ========== ======== ========== ======== =========== LIABILITIES AND STOCKHOLDERS' EQUITY: Current liabilities: Current portion of long-term debt............................ $ 29,834 $ -- $ 29,834 $ -- $ 29,834 Other current liabilities......... 114,127 (616) 113,511 6,579(b) 120,090 ---------- -------- ---------- -------- ----------- Total current liabilities............ 143,961 (616) 143,345 6,579 149,924 Long-term debt, excluding current portion......................... 1,748,755 15,610 1,764,365 219,811(b) 2,019,176 35,000(c) Deferred tax liabilities.......... 1,163,156 -- 1,163,156 34,973(b) 1,198,129 Other liabilities................. -- -- -- 178(b) 178 ---------- -------- ---------- -------- ----------- Total liabilities........ 3,055,872 14,994 3,070,866 296,541 3,367,407 Redeemable preferred stock........ 262,368 -- 262,368 -- 262,368 STOCKHOLDERS' EQUITY: Common stock...................... 1,076 -- 1,076 -- 1,076 Additional paid-in capital........ 1,503,201 -- 1,503,201 -- 1,503,201 Stock subscriptions receivable.... (2,694) -- (2,694) -- (2,694) Unearned compensation............. (4,893) -- (4,893) -- (4,893) Accumulated deficit............... (151,928) -- (151,928) (35,000)(c) (186,928) ---------- -------- ---------- -------- ----------- Total stockholders' equity................. 1,344,762 -- 1,344,762 (35,000) 1,309,762 ---------- -------- ---------- -------- ----------- Total liabilities and stockholders' equity... $4,663,002 $ 14,994 $4,677,996 $261,541 $ 4,939,537 ========== ======== ========== ======== ===========
- ------------------------- (a) Reflects the Completed Capstar Transactions as follows:
PURCHASE PRICE ALLOCATION FINANCING ---------------------------------------------------------- ----------- PROPERTY AND INTANGIBLE INCREASE IN COMPLETED CAPSTAR PURCHASE EQUIPMENT, ASSETS, OTHER CURRENT LONG-TERM TRANSACTIONS PRICE NET NET ASSETS LIABILITIES DEBT - ----------------- -------- ---------- ---------- ------- ----------- ----------- Radio Acquisitions(i)................... $15,610 $ 5,057 $ 10,553 $ -- $ -- $15,610 Muzak Transaction(ii)................... -- (6,815) (13,725) 19,924 616 -- ------- ------- -------- ------- ---- ------- Total.......................... $15,610 $(1,758) $ (3,172) $19,924 $616 $15,610 ======= ======= ======== ======= ==== =======
(i) Subsequent to January 1, 1999, Capstar acquired 14 radio stations (11 FM and 3 AM) in three separate transactions for an aggregate purchase price of $15,610. The purchase price has been P-5 9 allocated to property and equipment and intangible assets based upon preliminary appraisals provided by the management of Capstar. Capstar previously operated all 14 of these stations under either time brokerage agreements or joint sales agreements. (ii) On March 18, 1999, Capstar contributed Muzak affiliate territories in Atlanta, Albany and Macon, Georgia and Ft. Myers, Florida to Muzak Holdings LLC in exchange for a 20.13% voting interest in Muzak Holdings LLC. The investment in Muzak Holdings LLC of $19,924 represents the book value of the net assets contributed, which approximates fair market value. (b) Reflects the Pending Capstar Transactions as follows:
PURCHASE PRICE ALLOCATION ------------------------------------------------------------------- PROPERTY AND INTANGIBLE PURCHASE CURRENT EQUIPMENT, ASSETS, OTHER CURRENT PENDING CAPSTAR TRANSACTIONS PRICE ASSETS NET(I) NET(II) ASSETS LIABILITIES - ---------------------------- -------- ------- ---------- ---------- ------ ----------- Triathlon Acquisition(iii).............. $199,923 $10,231 $16,204 $215,365 $ 36 $(6,609) Other Triathlon Transactions(v)......... (10,000) (203) (4,350) (13,157) 7,527 30 Other Pending Capstar Transactions(vi)....................... 29,888 -- 990 28,898 -- -- -------- ------- ------- -------- ------ ------- Total................................... $219,811 $10,028 $12,844 $231,106 $7,563 $(6,579) ======== ======= ======= ======== ====== ======= PURCHASE PRICE ALLOCATION FINANCING --------------------------- ------------- INCREASE DEFERRED (DECREASE) IN TAX OTHER LONG-TERM PENDING CAPSTAR TRANSACTIONS LIABILITIES LIABILITIES DEBT - ---------------------------- ----------- ----------- ------------- Triathlon Acquisition(iii).............. $(34,973)(iv) $(331) $199,923 Other Triathlon Transactions(v)......... -- 153 (10,000) Other Pending Capstar Transactions(vi)....................... -- -- 29,888 -------- ----- -------- Total................................... $(34,973) $(178) $219,811 ======== ===== ========
- ------------------------- (i) The amounts allocated to net property and equipment are based on preliminary appraisals provided by the management of Capstar. (ii) Capstar, on a preliminary basis, has allocated the intangible assets to broadcast licenses and goodwill resulting from the recognition of deferred tax liabilities in connection with the Triathlon acquisition and are amortized on a straight-line basis over estimated average lives of 40 years. The amounts allocated to net intangible assets are preliminary and are based upon historical information from prior radio acquisitions. (iii)On July 23, 1998, Capstar entered into an agreement to acquire Triathlon Broadcasting Company for an aggregate purchase price of approximately $199,923 which includes (a) the conversion of each outstanding share of each class of Triathlon common stock into the right to receive $13.00 in cash, resulting in cash payments of approximately $63,647; (b) the conversion of each outstanding depositary share of Triathlon, representing one-tenth interest in a share of Triathlon's 9% mandatory convertible preferred stock, into the right to receive $10.83 in cash, resulting in cash payments of approximately $63,182; (c) additional consideration ranging from $0.11 per depositary share to $0.37 per depositary share based upon the average closing price for Triathlon's common stock for the twenty days prior to the closing related to the settlement of a depositary shareholder lawsuit on February 12, 1999, resulting in cash payments of $642 (assuming $0.11 per share); (d) the conversion of each outstanding share of Triathlon's Series B convertible preferred stock into the right to receive $.01 in cash, resulting in cash payments of approximately $6; (e) the assumption of warrants, stock options, and stock appreciation rights with an estimated fair value of $2,712; (f) the assumption of long term debt of $62,496 and (g) estimated acquisition costs of $7,238. If the merger is not completed by April 30, 1999, subject to certain exceptions, the merger consideration to be paid to the Triathlon stockholders will increase by $0.125 per common share and $0.104 per depositary share every two weeks that lapse after April 30, 1999 until the merger is completed. Although there can be no assurances, the Company believes that the merger will be consummated on or before April 30, 1999. Triathlon operates 32 radio stations (22 FM and 10 AM) in six markets: Wichita, Kansas; Colorado Springs, Colorado; Lincoln, Nebraska; Omaha, Nebraska; Spokane, Washington; and Tri-Cities, Washington. Triathlon also owns Pinnacle Sports Productions, L.L.C., a regional sports network that controls the rights to the University of Nebraska football and other sports events. (iv) Reflects a deferred tax liability related to the difference between the financial statement carrying amount and the tax basis of assets acquired in the stock acquisition of Triathlon. (v) In order to consummate the acquisition of Triathlon, Capstar is required to dispose of KSPZ-FM (owned by Triathlon) in the Colorado Spring market; KNSS-AM (owned by Capstar Broadcasting) and KFH-AM, KEYN-FM, KQAM-AM and KWSJ-FM (owned by Triathlon) in the Wichita, P-6 10 Kansas market. Capstar has entered into an exchange agreement and an asset purchase agreement with Citadel Broadcasting Company wherein, upon consummation of the Triathlon acquisition, Capstar will exchange KSPZ-FM for KKLI-FM in Colorado Springs, Colorado and sell stations KTWK-AM and KVOR-AM in Colorado Springs, Colorado and KEYF-FM and KEYF-AM in Spokane, Washington (all of which are owned by Triathlon) for approximately $10,000 in cash. Capstar is actively seeking a purchaser of the Wichita, Kansas stations, but has not yet entered into a contract to sell the Wichita, Kansas stations. Upon consummation of the Triathlon Acquisition, the Wichita, Kansas stations will be placed in a trust pending the sale of the stations. Other assets includes $7,300 for the stations held in trust. Capstar will also contribute the Muzak affiliate territory in Omaha, Nebraska to be acquired as part of the Triathlon Acquisition to Muzak Holdings LLC in exchange for an additional 2.74% voting interest in Muzak Holdings LLC. (vi) Other Pending Capstar Transactions include the acquisition of three FM stations, the disposition of 2 FM stations and the acquisition of LAN International, a software development company. (c) Reflects additional bank borrowings of $35,000 required to finance estimated financial advisory and other fees to be incurred by Capstar in connection with the Merger. ADJUSTMENTS TO UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET RELATED TO THE CAPSTAR MERGER (3) Merger Purchase Price Information. In connection with the Capstar merger, each outstanding share of Capstar common stock will be converted into the right to receive 0.4955 shares of the combined entity. For purposes of the unaudited pro forma condensed combined financial statements, the fair market value of common stock is calculated by using $44.75 per share which is based on the market price of Chancellor Media common stock on the announcement date of the Capstar merger on August 26, 1998. The aggregate purchase price is summarized below: EXCHANGE OF CAPSTAR COMMON STOCK: Shares of Capstar common stock outstanding.................. 107,606,231 Exchange ratio.............................................. 0.4955 ----------- Shares of Chancellor Media common stock issued in connection with the Capstar merger................................... 53,318,887 =========== AGGREGATE PURCHASE PRICE: Estimated fair value of common stock to be issued in connection with the Capstar merger (53,318,887 shares @ $44.75 per share)......................................... $2,386,020 Capstar debt and equity assumed at fair values: Long-term debt outstanding: Capstar Credit Facility................................ 1,179,421 12 3/4% Senior Discount Notes due 2009................. 228,774 9 1/4% Senior Subordinated Notes due 2007.............. 208,000 10 3/4% Senior Subordinated Notes due 2006............. 333,519 11 3/8% Senior Subordinated Notes due 2000............. 566 Note payable to affiliate.............................. 150,000 Capital lease obligation and other notes payable....... 7,217 ----------- Total long-term debt outstanding.......................... 2,107,497 12% senior exchangeable preferred stock................... 136,371 Series E 12 5/8% cumulative preferred stock............... 152,891 Stock options and warrants issued by Capstar.............. 90,688 Financial advisors, legal, accounting and other transaction costs..................................................... 25,000 ---------- Aggregate purchase price.................................... $4,898,467 ==========
P-7 11 To record the aggregate purchase price of the Capstar merger and eliminate certain Capstar historical balances as follows:
ELIMINATION OF CAPSTAR HISTORICAL BALANCES AS ADJUSTED FOR THE COMPLETED CAPSTAR AND PURCHASE PENDING CAPSTAR PRICE CAPSTAR MERGER NET ALLOCATION TRANSACTIONS FINANCING ADJUSTMENT ----------- ------------ ----------- ---------- Current assets......................... $ 160,112 $ (160,112) $ -- $ -- Property and equipment, net(a)......... 260,006 (260,006) -- -- Intangible assets(a)................... 6,062,014 (4,468,312) -- 1,593,702 Other assets........................... 51,107 (51,107) -- -- Current liabilities.................... (120,090) 120,090 -- -- Long-term debt(b)...................... -- 2,049,010 (2,132,497) (83,487) Deferred tax liability(c).............. (1,517,198) 1,198,129 -- (319,069) Other liabilities...................... (178) 178 -- -- Redeemable preferred stock(d).......... -- 262,368 (289,262) (26,894) Common stock(e)........................ -- 1,076 (533) 543 Additional paid-in capital(f).......... -- 1,503,201 (2,476,175) (972,974) Stock subscription receivable.......... 2,694 (2,694) -- -- Unearned compensation.................. -- (4,893) -- (4,893) Accumulated deficit.................... -- (186,928) -- (186,928) ----------- ----------- ----------- ---------- Aggregate purchase price............... $ 4,898,467 $ -- $(4,898,467) $ -- =========== =========== =========== ==========
- ------------------------- (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. The Company, on a preliminary basis, has allocated $4,544,816 of intangible assets to broadcast licenses with an estimated average life of 15 years and $1,517,198 to goodwill resulting from the recognition of deferred tax liabilities with an estimated average life of 15 years. This preliminary allocation is based upon historical information from prior radio acquisitions. (b) Reflects the adjustment to record debt assumed or incurred by the Company including (i) the fair value of Capstar's long-term debt of $2,107,497 and (ii) additional bank borrowings of $25,000 required to finance estimated financial advisors, legal, accounting and other transaction costs. (c) Reflects the adjustment to record a $1,517,198 deferred tax liability related to the difference between the financial statement carrying amount and the tax basis of Capstar acquired assets. (d) Reflects the adjustment to record the estimated fair value of redeemable preferred stock to be assumed by the Company including (i) Capstar's 12% senior exchangeable preferred stock of $136,371 and (ii) Capstar's Series E cumulative exchangeable preferred stock of $152,891. (e) Reflects 53,318,887 shares of Chancellor Media common stock at a par value of $0.01 to be issued in connection with the Capstar merger. (f) Reflects additional paid-in capital of $2,385,487 related to 53,318,887 shares of Chancellor Media common stock issued in connection with the Capstar merger and the fair value of stock options and warrants assumed by Chancellor Media of $90,688. The fair value of the Capstar stock options and warrants was estimated using the Black-Scholes option pricing model and the Capstar merger exchange ratio of 0.4955 applied to Capstar's outstanding options and warrants and exercise prices. P-8 12 At December 31, 1998, Capstar had 3,998,144 options outstanding with an exercise prices ranging from $7.10 to $19.00 and 2,696,406 warrants outstanding with exercise prices ranging from $14.00 to $18.10. (4) Reflects the elimination of the $150,000 Capstar loan (as described on page P-11) in connection with the Capstar merger. ADJUSTMENTS TO UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET RELATED TO THE PENDING TRANSACTION (5) Reflects the Pending Transaction as follows:
PURCHASE PRICE ALLOCATION FINANCING ------------------------------------------------------------------ ---------- INCREASE PROPERTY (DECREASE) PURCHASE/ AND INTANGIBLE DEFERRED IN (SALES) EQUIPMENT, ASSETS, TAX ACCUMULATED LONG-TERM PENDING TRANSACTION PRICE NET(A) NET(B) LIABILITIES DEFICIT DEBT ------------------- --------- ---------- ---------- -------------- ----------- ---------- Phoenix Acquisition(c).......................... $90,000 $1,771 $88,229 $ -- $ -- $90,000
- ------------------------- (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 companies to be acquired in the Pending Transaction. (b) The Company, on a preliminary basis, has allocated the intangible assets to broadcast licenses with an estimated average life of 15 years. The amounts allocated to net intangible assets are preliminary and are based upon historical information from prior acquisitions. (c) On September 15, 1998, the Company entered into an agreement to acquire KKFR-FM and KFYI-AM in Phoenix from The Broadcast Group, Inc. for $90,000 in cash plus various other direct acquisition costs. The Company began operating KKFR-FM and KFYI-AM under a time brokerage agreement effective November 5, 1998. P-9 13 ADJUSTMENTS TO UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS RELATED TO THE COMPLETED TRANSACTIONS HISTORICAL (6) The Completed Transactions historical condensed combined statement of operations for the year ended December 31, 1998 are summarized below:
ACQUISITIONS ----------------------------------------------------------------------------------------- MARTIN AS ADJUSTED FOR OTHER CAPSTAR/SFX COMPLETED PRIMEDIA WHITECO OUTDOOR TRANSACTIONS WWDC-FM/AM MARTIN ACQUISITION ACQUISITION ACQUISITIONS YEAR ENDED HISTORICAL HISTORICAL TRANSACTIONS HISTORICAL HISTORICAL HISTORICAL DECEMBER 31, 1998 1/1-12/31 (A) 1/1-6/1 (B) 1/1-7/31 (C) 1/1-10/23 (D) 1/1-12/1 (E) 1/1-12/31 (F) ----------------- ------------- ----------- ------------ ------------- ------------ ------------- Gross revenues........... $34,324 $4,273 $54,472 $12,797 $128,565 $ 7,022 Less: agency commissions............. (4,302) (528) (5,768) (3,358) (8,973) (2,319) ------- ------ ------- ------- -------- ------- Net revenues............. 30,022 3,745 48,704 9,439 119,592 4,703 Operating expenses excluding depreciation and amortization........ 18,464 2,158 23,751 5,363 60,587 3,983 Depreciation and amortization............ 21,435 45 16,068 2,350 10,342 692 Corporate general and administrative.......... -- -- 924 2,794 6,759 1,817 Profit participation fee..................... -- -- -- -- 2,164 -- ------- ------ ------- ------- -------- ------- Operating income (loss).................. (9,877) 1,542 7,961 (1,068) 39,740 (1,789) Interest expense......... -- 62 11,189 1,972 35 197 Interest income.......... -- (18) (381) -- (58) (4) Gain on disposition of assets.................. -- -- -- -- -- (3,158) Other (income) expense... -- (49) (557) 24 (1,082) 105 ------- ------ ------- ------- -------- ------- Income (loss) before income taxes............ (9,877) 1,547 (2,290) (3,064) 40,845 1,071 Income tax expense....... -- -- -- -- -- -- ------- ------ ------- ------- -------- ------- Net income (loss)........ (9,877) 1,547 (2,290) (3,064) 40,845 1,071 Preferred stock dividends............... -- -- -- -- -- -- ------- ------ ------- ------- -------- ------- Income (loss) attributable to common stockholders............ $(9,877) $1,547 $(2,290) $(3,064) $ 40,845 $ 1,071 ======= ====== ======= ======= ======== ======= ACQUISITIONS DISPOSITIONS ------------- ---------------------------- WBAB-FM WBLI-FM CLEVELAND WGBB-AM CHICAGO COMPANY ACQUISITIONS WHFM-FM DISPOSITION COMPLETED YEAR ENDED HISTORICAL HISTORICAL HISTORICAL TRANSACTIONS DECEMBER 31, 1998 1/1-12/31 (G) 1/1-5/29 (H) 1/1-12/31 (I) HISTORICAL ----------------- ------------- ------------ ------------- ------------ Gross revenues........... $36,432 $(5,063) $(11,530) $261,292 Less: agency commissions............. (4,859) 514 1,221 (28,372) ------- ------- -------- -------- Net revenues............. 31,573 (4,549) (10,309) 232,920 Operating expenses excluding depreciation and amortization........ 20,962 (3,331) (13,271) 118,666 Depreciation and amortization............ 861 -- (592) 51,201 Corporate general and administrative.......... 481 -- -- 12,775 Profit participation fee..................... -- -- -- 2,164 ------- ------- -------- -------- Operating income (loss).................. 9,269 (1,218) 3,554 48,114 Interest expense......... 307 -- -- 13,762 Interest income.......... (182) -- -- (643) Gain on disposition of assets.................. -- -- (3,158) Other (income) expense... 867 -- -- (692) ------- ------- -------- -------- Income (loss) before income taxes............ 8,277 (1,218) 3,554 38,845 Income tax expense....... -- -- -- -- ------- ------- -------- -------- Net income (loss)........ 8,277 (1,218) 3,554 38,845 Preferred stock dividends............... -- -- -- -- ------- ------- -------- -------- Income (loss) attributable to common stockholders............ $ 8,277 $(1,218) $ 3,554 $ 38,845 ======= ======= ======== ========
P-10 14 - --------------- (a) On February 20, 1998, the Company entered into an agreement to acquire from Capstar KTXQ-FM and KBFB-FM in Dallas/Ft. Worth, KODA-FM, KKRW-FM and KQUE-AM in Houston, KPLN-FM and KYXY-FM in San Diego and WDRV-FM, WJJJ-FM, WXDX-FM and WDVE-FM in Pittsburgh (collectively, the "Capstar/SFX Stations") for an aggregate purchase price of approximately $637,500 in a series of purchases and exchanges over a period of three years (the "Capstar/ SFX Transaction"). The Company also provided a loan to Capstar in the principal amount of $150,000 as part of the Capstar/SFX Transaction. The Capstar/SFX Stations were acquired by Capstar as part of Capstar's acquisition of SFX on May 29, 1998. This adjustment reflects the following aspects of the Capstar/SFX Transaction: (i) On May 29, 1998, the Company exchanged WAPE-FM and WFYV-FM in Jacksonville (valued at $53,000) for Capstar station KODA-FM in Houston. As part of the KODA-FM transaction, the Company also paid cash of $90,250 to the owners of KVET-AM, KVET-FM and KASE-FM, who simultaneously transferred such stations to Capstar. Thus, this adjustment records the results of operations of KODA-FM for the period January 1, 1998 to May 29, 1998. Chancellor entered into a time brokerage agreement to sell substantially all of the broadcast time of WAPE-FM and WFYV-FM effective July 1, 1996. Therefore, the results of operations of WAPE-FM and WFYV-FM are not included in the Company's historical condensed statement of operations for the year ended December 31, 1998. (ii)The Company began operating the remaining ten Capstar/SFX stations under time brokerage agreements effective May 29, 1998 pending the consummation of the Capstar merger. Thus, this adjustment records the results of operations of the ten Capstar/SFX stations and the related LMA fee payment to Capstar of $20,594 for the period January 1, 1998 to May 29, 1998. (iii) On February 1, 1999, the Company began operating WKNR-FM in Cleveland under a time brokerage agreement with Capstar, pending the consummation of the Capstar merger. WKNR-FM was acquired by Capstar as part of Capstar's acquisition of SFX on May 29, 1998. Therefore, in addition to the above items, this adjustment records the results of operations of WKNR-FM for the year ended December 31, 1998. (b) On June 1, 1998, the Company acquired WWDC-FM/AM in Washington, D.C. from Capitol Broadcasting Company and its affiliates for $74,062 in cash (including $2,062 for the purchase of the stations' accounts receivable) plus various other direct acquisition costs. (c) On July 31, 1998, the Company acquired Martin Media and certain affiliated companies for a total purchase price of $615,117 which consisted of $612,848 in cash including various other direct acquisition costs and the assumption of notes payable of $2,270. Martin is an outdoor advertising company with over 13,700 billboards and outdoor displays in 12 states serving 23 markets. As part of the Martin transaction, the Company acquired an asset purchase agreement with Kunz & Company and paid an additional $6,000 in cash for a purchase option deposit previously paid by Martin. Martin's historical condensed combined statements of operations for the year ended December 31, 1998 and pro forma adjustments related to the significant transactions completed by Martin prior to the acquisition of Martin (the "Completed Martin Transactions") are summarized below. P-11 15
OTHER PRO FORMA MARTIN AS COMPLETED ADJUSTMENTS ADJUSTED MARTIN MARTIN FOR THE FOR ACQUISITION ACQUISITIONS COMPLETED COMPLETED HISTORICAL HISTORICAL MARTIN MARTIN YEAR ENDED DECEMBER 31, 1998 1/1-7/31 1/1-7/31(I) TRANSACTIONS TRANSACTIONS ---------------------------- ----------- ------------ ------------ ------------ Gross revenues.................................. $52,345 $2,127 $ -- $54,472 Less: agency commissions........................ (5,612) (156) -- (5,768) ------- ------ ------ ------- Net revenues.................................... 46,733 1,971 -- 48,704 Operating expenses excluding depreciation and amortization.................................. 22,845 906 -- 23,751 Depreciation and amortization................... 14,694 88 1,286(ii) 16,068 Corporate general and administrative............ 2,919 -- (1,995)(iii) 924 ------- ------ ------ ------- Operating income................................ 6,275 977 709 7,961 Interest expense................................ 10,781 -- 408(iv) 11,189 Interest income................................. (381) -- -- (381) Other (income) expense.......................... (571) 14 -- (557) ------- ------ ------ ------- Net income (loss)............................... $(3,554) $ 963 $ 301 $(2,290) ======= ====== ====== =======
- ------------------------- (i) Prior to July 31, 1998, Martin acquired approximately 1,636 billboards and outdoor displays in various transactions for approximately $12,246. (ii) Reflects the adjustment to record incremental amortization of $1,286 for the period January 1, 1998 to July 31, 1998 related to the Completed Martin Transactions based upon an estimated average life of 5 years used by Martin for intangible assets. Historical depreciation expense of the Completed Martin Transactions is assumed to approximate depreciation expense on a pro forma basis. Actual depreciation and amortization may differ based upon final purchase price allocations. (iii)On July 31, 1997, Martin paid $6,000 to Kunz for an option to purchase approximately 1,000 display faces from its Kunz Outdoor Advertising division for $33,289 in cash plus various other direct acquisition costs. Martin began operating these 1,000 display faces under a management agreement effective July 31, 1997. Pursuant to the management agreement, Martin paid a management fee of $285 per month to Kunz. Reflects the elimination of management fees paid by Martin to Kunz of $1,995 for the period January 1, 1998 through July 31, 1998. (iv) Reflects the adjustment to increase interest expense by $408 in connection with the consummation of the Completed Martin Transactions based upon additional bank borrowings of $12,246 at 8.5%. (d) On October 23, 1998, the Company acquired Primedia Broadcast Group, Inc. and certain of its affiliates, which own and operate eight FM stations in Puerto Rico, for a purchase price of $75,619 including various other direct acquisition costs. (e) On December 1, 1998, the Company acquired the assets and working capital of the outdoor advertising division of Whiteco Industries, Inc., including approximately 22,500 billboards and outdoor displays in 34 states, for $981,698 in cash including various other direct acquisition costs. (f) Other outdoor acquisitions consist of (i) approximately 670 billboards and outdoor displays acquired in 1998 for approximately $23,582; (ii) approximately 4,500 outdoor display faces acquired from Triumph for approximately $37,006 in cash including working capital in January and February 1999 and (iii) approximately 100 additional billboards and outdoor displays acquired for approximately $8,198 subsequent to January 1, 1999. (g) On January 28, 1999, the Company acquired Wincom Broadcasting Corporation which owns WQAL-FM in Cleveland. The Company had previously been operating WQAL-FM under a time brokerage agreement effective October 1, 1998. On February 2, 1999, the Company acquired five P-12 16 additional radio stations in Cleveland including (i) WDOK-FM and WRMR-AM from Independent Group Limited Partnership, (ii) WZAK-FM from Zapis Communications and (iii) Zebra Broadcasting Corporation which owns WZJM-FM and WJMO-AM. The six Cleveland stations were acquired for an aggregate purchase price of $283,758 in cash including working capital, subject to certain adjustments. (h) Chancellor began programming WBAB-FM, WBLI-FM, WGBB-AM and WHFM-FM in Long Island under a time brokerage agreement effective July 1, 1996. On May 29, 1998, as part of the Capstar/ SFX Transaction, the Company's time brokerage agreements regarding the Long Island properties were terminated. The Company's historical condensed statement of operations for the year ended December 31, 1998 includes the results of operations of WBAB-FM, WBLI-FM, WGBB-AM and WHFM-FM in Long Island for January 1, 1998 through May 29, 1998. (i) On April 16, 1999, the Company sold WMVP-AM in Chicago to ABC, Inc. for $21,000 in cash. The Company entered into a time brokerage agreement to sell substantially all of the broadcast time of WMVP-AM effective September 10, 1998. (7) Reflects incremental amortization related to the Completed Transactions and is based on the following allocation to intangible assets:
ADJUSTMENT INCREMENTAL HISTORICAL FOR NET AMORTIZATION INTANGIBLE AMORTIZATION AMORTIZATION INCREASE YEAR ENDED DECEMBER 31, 1998 PERIOD(A) ASSETS, NET EXPENSE EXPENSE (DECREASE) ---------------------------- ------------ ----------- ------------ ------------ ---------- Denver Acquisition(b)............................ 1/1-1/30 $ 24,589 $ 137 $ -- $ 137 Bonneville Option(b)............................. 1/1-4/3 186,349 3,209 -- 3,209 KODA-FM(b)....................................... 1/1-5/29 93,294 2,574 656 1,918 WWDC-FM/AM(b).................................... 1/1-6/1 64,338 1,799 -- 1,799 Martin Acquisitions(c)........................... 1/1-7/31 264,803 6,618 12,994 (6,376) Other 1998 Outdoor Acquisitions(c)............... 1/1-8/31 8,782 146 -- 146 Primedia Acquisition(b).......................... 1/1-10/23 69,361 3,763 1,765 1,998 Kunz Option(c)................................... 1/1-11/13 13,414 292 -- 292 Whiteco Acquisition(c)........................... 1/1-12/1 212,044 4,874 5,826 (952) Other 1999 Outdoor Acquisitions(c)............... 1/1-12/31 25,110 628 162 466 Cleveland Acquisitions(b)........................ 1/1-12/31 309,903 20,660 561 20,099 ---------- ------- ------- ------- Total.................................... $1,271,987 $44,700 $21,964 $22,736 ========== ======= ======= =======
- ------------------------- (a) The incremental amortization period represents the period of the year that the acquisition was not completed. Actual amortization may differ based upon final purchase price allocations. (b) Intangible assets for the radio acquisitions consist primarily of FCC licenses which are amortized on a straight-line basis over an estimated average life of 15 years. (c) Intangible assets for the outdoor acquisitions consist primarily of goodwill which is amortized on a straight-line basis over an estimated average life of 40 years, except for the acquisition of Martin which includes non-compete agreements of $27,000 which are amortized on a straight-line basis over 5 years. The Martin goodwill of $237,803 includes $98,042 resulting from the recognition of deferred tax liabilities. (8) Historical depreciation expense of the completed radio acquisitions is assumed to approximate depreciation expense on a pro forma basis. Actual depreciation may differ based upon final purchase price allocations. The following adjustments reflect incremental depreciation related to the completed outdoor acquisitions and are based on the following allocation to property and equipment: P-13 17
INCREMENTAL PROPERTY AND HISTORICAL ADJUSTMENT DEPRECIATION EQUIPMENT, DEPRECIATION DEPRECIATION FOR NET YEAR ENDED DECEMBER 31, 1998 PERIOD(A) NET(A) EXPENSE(A) EXPENSE INCREASE ---------------------------- ------------ -------------- ------------ ------------ ---------- Martin Acquisition............................ 1/1-7/31 $ 431,253 $16,771 $3,074 $13,697 Kunz Option................................... 1/1-11/13 26,849 1,556 -- 1,556 Other 1998 Outdoor Acquisitions............... 1/1-11/17 14,815 734 -- 734 Whiteco Acquisition........................... 1/1-12/1 748,940 45,907 4,516 41,391 Other 1999 Outdoor Acquisitions............... 1/1-12/31 18,335 1,222 530 692 ---------- ------- ------ ------- Total................................. $1,240,192 $66,190 $8,120 $58,070 ========== ======= ====== =======
-------------------- (a) Property and equipment consists primarily of advertising structures and is depreciated on a straight-line basis over an estimated average 15 year life. The incremental depreciation period represent the period of the year that the acquisition was not completed. (9) Reflects the elimination of management fees paid by the Company to Kunz of $570 for the period August 1, 1998 through September 30, 1998 in connection with the Kunz Option. (10) Reflects the elimination of the profit participation fee paid by Whiteco to Metro Management Associates of $2,164 for the year ended December 31, 1998. (11) Reflects the adjustment to interest expense in connection with the consummation of the Completed Transactions, the Company's 1998 Equity Offering completed on March 13, 1998, the repurchase of CMCLA's 12% exchange debentures on June 10, 1998, the repurchase of CMCLA's 12 1/4% exchange debentures on August 19, 1998, the offering by CMCLA of the 9% Notes on September 30, 1998 and the offering by CMCLA of the 8% Senior Notes on November 17, 1998:
YEAR ENDED DECEMBER 31, 1998 ------------ Additional bank borrowings related to completed acquisitions.............................................. $2,292,899 ========== Interest expense at 7.0%.................................... $ 123,693 Less: historical interest expense related to completed acquisitions.............................................. (13,762) ---------- Net increase in interest expense............................ 109,931 Reduction in interest expense on bank debt related to the application of net proceeds of the following at 7.0%: Proceeds from the March 13, 1998 equity offering used to reduce bank borrowings by $673,000..................... (9,553) CMCLA 9% Senior Subordinated Notes issuance on September 30, 1998 for net proceeds of $730,000.................. (38,325) CMCLA 8% Senior Notes issuance on November 17, 1998 for net proceeds of $730,000............................... (44,996) Interest expense on borrowings of $262,495 to finance the repurchase of CMCLA's 12% exchange debentures on June 10, 1998...................................................... 8,167 Interest expense on borrowings of $143,836 to finance the repurchase of CMCLA's 12 1/4% exchange debentures on August 19, 1998........................................... 6,405 Interest expense on CMCLA's $750,000 9% Senior Subordinated Notes issued September 30, 1998........................... 50,625 Interest expense on CMCLA's $750,000 8% Senior Notes issued November 17, 1998......................................... 52,833 Elimination of historical interest expense on the CMCLA 12% Subordinated Exchange Debentures from May 13, 1998 through June 10, 1998............................................. (1,976) Elimination of historical interest expense on the CMCLA 12 1/4% Subordinated Exchange Debentures from July 23, 1998 through August 19, 1998.............................. (1,138) ---------- Total adjustment for net increase in interest expense....... $ 131,973 ==========
(12) Reflects the tax effect of the pro forma adjustments. P-14 18 (13) Reflects the elimination of preferred stock dividends on the 12% Preferred Stock and the 12 1/4% Preferred Stock of $17,601 for the year ended December 31, 1998, in connection with the exchange of the 12% Preferred Stock and 12 1/4% Preferred Stock into 12% Debentures and 12 1/4% Debentures, respectively, and the subsequent repurchase of all the 12% Debentures and 12 1/4% Debentures. P-15 19 ADJUSTMENTS TO CAPSTAR'S HISTORICAL CONDENSED STATEMENT OF OPERATIONS RELATED TO THE COMPLETED CAPSTAR TRANSACTIONS (14) Capstar's historical condensed statement of operations for the year ended December 31, 1998 and pro forma adjustments related to the Completed and Pending Capstar Transactions is summarized below:
PRO FORMA CAPSTAR PRO FORMA ADJUSTMENTS AS ADJUSTED ADJUSTMENTS COMPLETED FOR THE FOR THE PENDING FOR THE CAPSTAR COMPLETED COMPLETED CAPSTAR PENDING YEAR ENDED CAPSTAR TRANSACTIONS CAPSTAR CAPSTAR TRANSACTIONS CAPSTAR DECEMBER 31, 1998 HISTORICAL HISTORICAL(A) TRANSACTIONS TRANSACTIONS HISTORICAL(L) TRANSACTIONS - ----------------- ---------- ------------- ------------ ------------ ------------- ------------ Gross revenues........................ $568,050 $ 120,176 $ -- $ 688,226 $ 40,516 $ -- Less: agency commissions.............. (50,583) (8,026) -- (58,609) (4,061) -- -------- --------- -------- --------- -------- -------- Net revenues.......................... 517,467 112,150 -- 629,617 36,455 -- Operating expenses excluding depreciation and amortization....... 304,565 57,874 -- 362,439 23,457 -- Depreciation and amortization......... 96,207 10,953 27,033(B) 134,193 5,307 4,479(M) Corporate general and administrative.. 23,678 3,208 -- 26,886 2,077 -- Stock option compensation............. 21,260 74,199 (74,199)(C) 21,260 141 -- LMA fees.............................. 4,103 697 (4,800)(D) -- -- -- Other nonrecurring costs.............. 12,970 35,318 (11,255)(E) 20,433 2,459 35,000(N) (16,600)(F) -------- --------- -------- --------- -------- -------- Operating income (loss)............... 54,684 (70,099) 79,821 64,406 3,014 (39,479) Interest expense...................... 121,145 31,569 19,957(G) 172,671 6,433 13,952(O) Interest income....................... (3,423) (380) -- (3,803) (67) -- Loss on investments in limited liability companies................. 28,565 -- -- 28,565 -- -- Other (income) expense................ 183 3,311 (3,163)(H) 331 1,193 -- -------- --------- -------- --------- -------- -------- Income (loss) before income taxes..... (91,786) (104,599) 63,027 (133,358) (4,545) (53,431) Income tax expense (benefit).......... (24,317) 210 (14,760)(I) (38,867) -- (20,022)(P) Dividends and accretion on preferred stock of subsidiary................. 17,264(J) 21,987 -- (13,665)(K) 25,586 -- -- -------- --------- -------- --------- -------- -------- Net income (loss)..................... (89,456) (104,809) 74,188 (120,077) (4,545) (33,409) Preferred stock dividends............. -- 17,264 (17,264)(J) -- 5,507 (5,507)(Q) -------- --------- -------- --------- -------- -------- Income (loss) attributable to common stockholders........................ $(89,456) $(122,073) $ 91,452 $(120,077) $(10,052) $(27,902) ======== ========= ======== ========= ======== ======== CAPSTAR AS ADJUSTED FOR THE COMPLETED CAPSTAR AND PENDING YEAR ENDED CAPSTAR DECEMBER 31, 1998 TRANSACTIONS - ----------------- ------------ Gross revenues........................ $ 728,742 Less: agency commissions.............. (62,670) --------- Net revenues.......................... 666,072 Operating expenses excluding depreciation and amortization....... 385,896 Depreciation and amortization......... 143,979 Corporate general and administrative.. 28,963 Stock option compensation............. 21,401 LMA fees.............................. -- Other nonrecurring costs.............. 57,892 --------- Operating income (loss)............... 27,941 Interest expense...................... 193,056 Interest income....................... (3,870) Loss on investments in limited liability companies................. 28,565 Other (income) expense................ 1,524 --------- Income (loss) before income taxes..... (191,334) Income tax expense (benefit).......... (58,889) Dividends and accretion on preferred stock of subsidiary................. 25,586 --------- Net income (loss)..................... (158,031) Preferred stock dividends............. -- --------- Income (loss) attributable to common stockholders........................ $(158,031) =========
P-16 20 (A) The detail of the historical financial data of the stations to be acquired or disposed of in the Completed Transactions by Capstar for the year ended December 31, 1998 has been obtained from the historical financial statements of the respective stations and is summarized below:
OTHER OTHER PATTERSON SFX SFX COMPLETED COMPLETED ACQUISITION ACQUISITION TRANSACTIONS CAPSTAR CAPSTAR YEAR ENDED HISTORICAL HISTORICAL HISTORICAL TRANSACTIONS TRANSACTIONS DECEMBER 31, 1998 1/1-1/29(I) 1/1-5/29(II) 1/1-5/29(III) HISTORICAL(IV) HISTORICAL ----------------- ----------- ------------- ------------- -------------- ------------ Gross revenues................ $ 3,853 $ 141,369 $(24,457) $ (589) $ 120,176 Less: agency commissions...... (350) (16,692) 5,430 3,586 (8,026) ------- --------- -------- ------- --------- Net revenues.................. 3,503 124,677 (19,027) 2,997 112,150 Operating expenses excluding depreciation and amortization................ 2,523 78,235 (26,309) 3,425 57,874 Depreciation and amortization................ 497 17,668 (4,875) (2,337) 10,953 Corporate general and administrative.............. 171 3,069 -- (32) 3,208 Stock option compensation..... -- 74,199 -- -- 74,199 LMA fees...................... -- 697 -- -- 697 Other nonrecurring costs...... -- 35,318 -- -- 35,318 ------- --------- -------- ------- --------- Operating income (loss)....... 312 (84,509) 12,157 1,941 (70,099) Interest expense.............. 645 30,867 (4) 61 31,569 Interest income............... -- (352) -- (28) (380) Other expense................. 3,163 -- 145 3 3,311 ------- --------- -------- ------- --------- Income (loss) before income taxes....................... (3,496) (115,024) 12,016 1,905 (104,599) Income tax expense............ -- 210 -- -- 210 ------- --------- -------- ------- --------- Net income (loss)............. (3,496) (115,234) 12,016 1,905 (104,809) Preferred stock dividends..... -- 17,264 -- -- 17,264 ------- --------- -------- ------- --------- Income (loss) attributable to common stockholders......... $(3,496) $(132,498) $ 12,016 $ 1,905 $(122,073) ======= ========= ======== ======= =========
- --------------- (i) In January 1998, Capstar acquired 39 radio stations (25 FM and 14 AM) from Patterson Broadcasting, Inc. for approximately $227,186 in cash. (ii) On May 29, 1998, Capstar acquired SFX, a radio broadcasting company which owned 81 radio stations (60 FM and 21 AM) and operated two additional radio stations (1 FM and 1 AM) under time brokerage or joint sales agreements (the "SFX Acquisition"). The acquisition was effected through the merger of a wholly owned subsidiary of Capstar with and into SFX, with SFX surviving the merger as a wholly owned subsidiary of Capstar. The total consideration paid for all of the outstanding common equity interest of SFX was approximately $1,279,656, including direct costs of the acquisition. In connection with the SFX Acquisition, Capstar assumed (a) long-term debt with a fair value of $812,436 which included $313,000 of borrowings outstanding under the SFX senior credit facility, $450,000 of 10 3/4% Senior subordinated notes at a fair value of $497,458, $566 of 11 3/8% Senior subordinated notes and other notes payable of $1,412 and (b) 2,392,022 shares of Series E Cumulative Exchangeable Preferred Stock with a fair value of $283,605, including accrued and unpaid interest of $13,754. (iii) Other SFX transactions include the following transactions related to stations acquired by Capstar from SFX on May 29, 1998: (a)In connection with the Capstar/SFX Transaction (as defined at 6(a)), Capstar entered into a time brokerage agreement with the Company to sell substantially all of the broadcasting time of ten of the SFX stations (9 FM and 1 AM) acquired by Capstar effective May 29, 1998 pending consummation of the Capstar Merger. Reflects the adjustment to eliminate the results of operations of the SFX stations operated by the Company under time brokerage agreements and to record the related LMA fee revenue of $20,594 for the period January 1, 1998 to May 29, 1998. (b)In connection with the SFX Merger, Capstar was required to dispose of certain stations acquired from SFX due to governmental restrictions on multiple station ownership. On May 29, 1998, P-17 21 Capstar completed the following disposition and exchange transactions to comply with the multiple ownership rules: -the sale of one FM station in Houston, Texas to HBC Houston, Inc. for approximately $54,000; -the sale of four radio stations (3 FM and 1 AM) in Long Island, New York to Cox Radio, Inc for approximately $46,000; -the sale of four radio stations (3 FM and 1 AM) in Greenville, South Carolina to Clear Channel Radio, Inc. for approximately $35,000; -the sale of one FM station in Daytona Beach, Florida to Clear Channel Metroplex, Inc. for approximately $11,500; -the assignment of four radio stations (2 FM and 2 AM) in Fairfield, Connecticut with an aggregate fair market value of $15,000 to a trust pending the sale to a third party; and -the exchange of KODA-FM in Houston, Texas to the Company for two FM stations in Jacksonville, Florida (valued at $53,000) and $90,250 in cash, which was used by Capstar to acquire three stations (2 FM and 1 AM) in Austin, Texas through a qualified intermediary. Reflects the adjustment to eliminate the results of operations of the SFX stations disposed by Capstar and to record the results of operations for the stations received in the exchange transaction for the period January 1, 1998 to May 29, 1998. (c)On February 1, 1999, Capstar entered into a time brokerage agreement with the Company to sell substantially all of the broadcast time of WKNR-FM in Cleveland, which was acquired by Capstar as part of the SFX Merger on May 29, 1998. Reflects the adjustment to eliminate the results of operations of WKNR-FM for the year ended December 31, 1998. (iv) Reflects the historical results of operations for various other completed Capstar Transactions which include the acquisition of 56 radio stations (39 FM and 17 AM) for approximately $203,470 in cash; the disposition of 15 radio stations (10 FM and 5 AM) for approximately $99,620 in cash; the exchange of 2 radio stations (1 FM and 1 AM) for 2 radio stations (1 FM and 1 AM) and the contribution of Muzak affiliate territories in Atlanta, Albany and Macon, Georgia and Ft. Myers, Florida in exchange for a 20.13% voting interest in Muzak Holdings LLC. (B) Reflects incremental amortization related to the Completed Transactions and is based on the following allocation to intangible assets:
INCREMENTAL HISTORICAL ADJUSTMENT COMPLETED TRANSACTIONS AMORTIZATION INTANGIBLE AMORTIZATION AMORTIZATION FOR NET YEAR ENDED DECEMBER 31, 1998 PERIOD(I) ASSETS, NET EXPENSE EXPENSE INCREASE ---------------------------- ------------ ----------- ------------ ------------ ---------- Patterson Acquisition............ 1/1-1/29 $ 268,219 $ 540 $ 356 $ 184 SFX Acquisition.................. 1/1-5/29 3,194,742 33,057 9,515 23,542 Other Completed Capstar Transactions................... Various 219,936 3,314 7 3,307 ---------- ------- ------- ------- $3,682,897 $36,911 $ 9,878 $27,033 ========== ======= ======= =======
- --------------- (i) The incremental amortization period represents the period of the year that the acquisition was not completed. Intangible assets are amortized on a straight-line basis over estimated average lives of 40 years. Actual amortization may differ based upon final purchase price allocations. (C) Reflects the elimination of non-recurring transaction-related compensation expense of $74,199 attributable to the voluntary settlement of the outstanding options, SARs and unit purchase options by SFX in connection with Capstar's acquisition of SFX. (D) Reflects the elimination of $4,800 of time brokerage (LMA) fees of which $4,103 were paid by Capstar and $697 by SFX related to acquired radio stations that were previously operated under time brokerage agreements. P-18 22 (E) Reflects the elimination of non-recurring transaction-related charges of $11,255 recorded by SFX in connection with Capstar's acquisition of SFX and the spin-off of SFX Entertainment. These charges consist primarily of legal, accounting and regulatory fees. (F) Reflects the elimination of the consent solicitation payments to the holders of the 10 3/4% Senior Subordinated Notes due 2006 and series E cumulative preferred stock of SFX incurred in connection with the spin-off of SFX Entertainment of $16,600. The spin-off of SFX Entertainment was consummated in April 1998. (G) Reflects the adjustment to interest expense in connection with the consummation of the Completed Capstar Transactions:
YEAR ENDED DECEMBER 31, 1998 ----------------- Additional bank borrowings related to completed acquisitions.............................................. $1,721,380 Reduction of bank borrowings related to completed dispositions.............................................. (239,958) ---------- $1,481,422 ========== Interest expense at 8.00%................................... $ 43,293 Less: historical interest expense related to completed transactions.............................................. 31,569 ---------- Net increase in interest expense............................ 11,724 Reduction in interest expense related to the following: Purchase of $76,808 principal amount of 13 1/4% Capstar Radio Notes on March 30, 1998.......................... (2,544) Proceeds from issuance of common stock to affiliates used to reduce bank borrowings by $634,102 at 8.0%.......... (8,473) Proceeds from the May 29, 1998 equity offering used to reduce bank borrowings by $551,308 at 8.0%............. (18,254) Redemption of $154,000 principal amount of 10 3/4% CCI Notes at fair value on July 3, 1998.................... (7,866) Redemption of $1,866 principal amount of 10 3/4% CCI Notes at fair value on July 10, 1998......................... (99) Interest expense on borrowings of $90,200 to finance the repurchase of $76,808 principal amount of 13 1/4% Capstar Radio Notes on March 30, 1998............................. 1,804 Interest expense on borrowings of $313,000 made on May 29, 1998 to finance the payoff of the credit facility assumed as part of the SFX transaction............................ 10,364 Interest expense, including amortization of premiums, on assumption of $450,000 principal amount of 10 3/4% SFX Notes on May 29, 1998..................................... 18,716 Interest expense on assumption of $566 principal amount of 11 3/8% SFX Notes on May 29, 1998......................... 27 Interest expense on $150,000 12% note payable to the Company issued on May 29, 1998.................................... 7,450 Interest expense on borrowings of $172,800 to finance the redemption of $154,000 principal amount of 10 3/4% CCI Notes on July 3, 1998..................................... 7,027 Interest expense on borrowings of $1,915 to finance the redemption of $1,866 principal amount of 10 3/4% CCI Notes on July 10, 1998.......................................... 81 ---------- Total adjustment for net increase in interest expense....... $ 19,957 ==========
(H) Adjustment represents the elimination of $3,163 of transaction expenses recorded by Patterson in connection with Capstar's acquisition of Patterson. (I) Reflects the tax effect of the pro forma adjustments. P-19 23 (J) Reclassification of SFX's historical preferred stock dividends of $17,264 to Capstar's dividends on preferred stock of subsidiaries. (K) Reflects the elimination of a portion of the redeemable preferred stock dividends related to the SFX Merger and the subsequent redemption of $119,600 and $500 liquidation preference on July 3, 1998 and July 10, 1998, respectively, of the series E 12 5/8% cumulative preferred stock of SFX as follows:
YEAR ENDED DECEMBER 31, 1998 ------------ Dividends on Series C 6% redeemable preferred stock redeemed as part of the SFX Merger on May 29, 1998................................................ $ (112) Dividends on Series D 6 1/2% cumulative convertible exchangeable preferred stock redeemed as part of the SFX Merger on May 29, 1998.......................... (5,841) Dividends on Series E 12 5/8% cumulative preferred stock of $119,500 and $500 for the period January 1, 1998 to the redemption dates of July 3, 1998 and July 10, 1998, respectively......................... (7,712) -------- Total adjustment for net decrease in dividends and accretion........................................... $(13,665) ========
ADJUSTMENTS TO CAPSTAR'S HISTORICAL CONDENSED STATEMENT OF OPERATIONS RELATED TO THE PENDING CAPSTAR TRANSACTIONS (L) The detail of the historical financial data of the stations to be acquired or disposed of in the Pending Capstar Transactions for the year ended December 31, 1998 has been obtained from the historical financial statements of the respective stations and is summarized below:
OTHER OTHER PENDING PENDING TRIATHLON TRIATHLON CAPSTAR CAPSTAR HISTORICAL TRANSACTIONS TRANSACTIONS TRANSACTIONS YEAR ENDED DECEMBER 31, 1998 1/1-12/31(A) 1/1-12/31(B) HISTORICAL(C) HISTORICAL - ---------------------------- ------------ ------------ ------------- ------------ Gross revenues............................. $45,025 $(6,098) $ 1,589 $ 40,516 Less: agency commissions................... (4,442) 456 (75) (4,061) ------- ------- ------- -------- Net revenues............................... 40,583 (5,642) 1,514 36,455 Operating expenses excluding depreciation and amortization......................... 26,727 (3,996) 726 23,457 Depreciation and amortization.............. 4,794 -- 513 5,307 Corporate general and administrative....... 2,077 -- -- 2,077 Non-cash compensation...................... 141 -- -- 141 Other nonrecurring costs................... -- -- 2,459 2,459 ------- ------- ------- -------- Operating income (loss).................... 6,844 (1,646) (2,184) 3,014 Interest expense........................... 5,994 -- 439 6,433 Interest income............................ (67) -- -- (67) Other (income) expense..................... 1,193 -- -- 1,193 ------- ------- ------- -------- Net income (loss).......................... (276) (1,646) (2,623) (4,545) Preferred stock dividends.................. 5,507 -- -- 5,507 ------- ------- ------- -------- Income (loss) attributable to common stockholders............................. $(5,783) $(1,646) $(2,623) $(10,052) ======= ======= ======= ========
- --------------- (a) On July 23, 1998, Capstar entered into an agreement to acquire Triathlon Broadcasting Company for an aggregate purchase price of approximately $199,923 which includes (a) the conversion of each outstanding share of each class of Triathlon common stock into the right to receive $13.00 in cash, P-20 24 resulting in cash payments of approximately $63,647; (b) the conversion of each outstanding depositary share of Triathlon, representing one-tenth interest in a share of Triathlon's 9% mandatory convertible preferred stock, into the right to receive $10.83 in cash, resulting in cash payments of approximately $63,182; (c) additional consideration ranging from $0.11 per depositary share to $0.37 per depositary share based upon the average closing price for Triathlon's common stock for the twenty days prior to the closing related to the settlement of a depositary shareholder lawsuit on February 12, 1999, resulting in cash payments of $642 (assuming $0.11 per share); (d) the conversion of each outstanding share of Triathlon's Series B convertible preferred stock into the right to receive $.01 in cash, resulting in cash payments of approximately $6; (e) the assumption of warrants, stock options, and stock appreciation rights with an estimated fair value of $2,712; (f) the assumption of long term debt of $62,496 and (g) estimated acquisition costs of $7,238. If the merger is not completed by April 30, 1999, subject to certain exceptions, the merger consideration to be paid to the Triathlon stockholders will increase by $0.125 per common share and $0.104 per depositary share every two weeks that lapse after April 30, 1999 until the merger is completed. Although there can be no assurances, the Company believes that the merger will be consummated on or before April 30, 1999. Triathlon operates 32 radio stations (22 FM and 10 AM) in six markets: Wichita, Kansas; Colorado Springs, Colorado; Lincoln, Nebraska; Omaha, Nebraska; Spokane, Washington; and Tri-Cities, Washington. Triathlon also owns Pinnacle Sports Productions, L.L.C., a regional sports network that controls the rights to the University of Nebraska football and other sports events. (b) In order to consummate the acquisition of Triathlon, Capstar is required to dispose of KSPZ-FM (owned by Triathlon) in the Colorado Spring market; KNSS-AM (owned by Capstar Broadcasting) and KFH-AM, KEYN-FM, KQAM-AM and KWSJ-FM (owned by Triathlon) in the Wichita, Kansas market. Capstar has entered into an exchange agreement and an asset purchase agreement with Citadel Broadcasting Company wherein, upon consummation of the Triathlon acquisition, Capstar will exchange KSPZ-FM for KKLI-FM in Colorado Springs, Colorado and sell stations KTWK-AM and KVOR-AM in Colorado Springs, Colorado and KEYF-FM and KEYF-AM in Spokane, Washington (all of which are owned by Triathlon) for approximately $10,000 in cash. Capstar is actively seeking a purchaser of the Wichita, Kansas stations, but has not yet entered into a contract to sell the Wichita, Kansas stations. Upon consummation of the Triathlon Acquisition, the Wichita, Kansas stations will be placed in a trust pending the sale of the stations. Other assets includes $7,300 for the stations held in trust. Capstar will also contribute the Muzak affiliate territory in Omaha, Nebraska to be acquired as part of the Triathlon Acquisition to Muzak Holdings LLC in exchange for an additional 2.74% voting interest in Muzak Holdings LLC. (c) Other Pending Capstar Transactions includes the acquisition of three FM stations, the disposition of 2 AM stations and the acquisition of LAN International, a software development company. (M) Reflects incremental amortization related to the Pending Capstar Transactions and is based on the following allocation to intangible assets:
INCREMENTAL HISTORICAL ADJUSTMENT PENDING CAPSTAR TRANSACTIONS AMORTIZATION INTANGIBLE AMORTIZATION AMORTIZATION FOR NET YEAR ENDED DECEMBER 31, 1998 PERIOD(I) ASSETS, NET EXPENSE(I) EXPENSE INCREASE ---------------------------- ------------ ----------- ------------ ------------ ---------- Triathlon Acquisition........ 1/1-12/31 $215,365 $5,384 $3,408 $1,976 Other Triathlon Transactions............... Various (13,157) (329) -- (329) Other Pending Capstar Transactions............... Various 29,352 3,298 466 2,832 -------- ------ ------ ------ $231,560 $8,353 $3,874 $4,479 ======== ====== ====== ======
--------------------- (i) The incremental amortization period represents the period of the year that the acquisition was not completed. Intangible assets of $231,560 consist of broadcast licenses of $196,587 and goodwill of $34,973 resulting from the recognition of deferred tax liabilities in connection with the Triathlon Acquisition and are amortized on a straight-line basis over estimated average lives of 40 years. P-21 25 (N) Reflects the adjustment to record estimated expenses of $35,000 for financial advisory and other fees to be incurred by Capstar in connection with the Merger. (O) Reflects the adjustment to interest expense in connection with the consummation of the Pending Capstar Transactions:
YEAR ENDED DECEMBER 31, 1998 ------------ Interest expense on additional bank borrowings related to pending acquisitions of $219,811 at 8.0%.................. $17,585 Interest expense on additional bank borrowings related to estimated financial advisors, legal, accounting and other professional fees of $35,000 at 8.0%...................... 2,800 Less: historical interest expense of the stations to be acquired in the Pending Capstar Transactions.............. (6,433) ------- Total adjustment for net increase in interest expense....... $13,952 =======
(P) Reflects the tax effect of the pro forma adjustments. (Q) Reflects the elimination of Triathlon's preferred stock dividends of $5,507 for the year ended December 31, 1998. The Triathlon preferred stock will be redeemed in connection with Capstar's acquisition of Triathlon in 1999. ADJUSTMENTS TO UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS RELATED TO THE CAPSTAR MERGER (15) Reflects the elimination of intercompany transactions between the Company and Capstar for the Company's media representation services provided to Capstar, Capstar's participation in the Company's AMFM Radio Networks, fees paid by the Company to Capstar under time brokerage agreements and interest on Capstar's note payable to the Company of $150,000 for the year ended December 31, 1998. (16) Reflects incremental amortization related to the Capstar merger and is based on the allocation of the total consideration as follows:
YEAR ENDED DECEMBER 31, 1998 ----------------- Amortization expense on $6,062,014 additional intangible assets, which includes $4,544,816 of intangible assets and $1,517,198 resulting from the recognition of deferred tax liabilities amortized on a straight-line basis over a period of 15 years........................................ $ 404,134 Less: Historical amortization expense....................... (122,912) --------- Adjustment for net increase in amortization expense......... $ 281,222 =========
Historical depreciation expense of Capstar is assumed to approximate depreciation expense on a pro forma basis. Actual depreciation and amortization may differ based upon final purchase price allocations. (17) Reflects the elimination of $43,105 of financial advisory and other expenses of Capstar in connection with the Merger, including $8,105 recorded by Capstar in 1998 and additional estimated expenses of $35,000 to be incurred by Capstar in 1999. (18) Reflects the adjustment to record interest expense of $1,750 on additional bank borrowings related to estimated financial advisors, legal, accounting and other professional fees of $25,000 at 7.0%. (19) Reflects the tax effect of the pro forma adjustments. P-22 26 ADJUSTMENTS TO UNAUDITED CONDENSED COMBINED STATEMENTS OF OPERATIONS RELATED TO THE PENDING TRANSACTION (20) The detail of the historical financial data of the company to be acquired in the Pending Transaction for the year ended December 31, 1998 has been obtained from the historical financial statements of the respective companies and is summarized below:
PRO FORMA PHOENIX ADJUSTMENTS COMPANY ACQUISITION FOR THE PRO FORMA YEAR ENDED HISTORICAL PENDING PENDING DECEMBER 31, 1998 1/1 - 12/31(A) TRANSACTION TRANSACTION ----------------- -------------- ------------ ------------ Gross revenues.......................................... $12,052 $ -- $12,052 Less: agency commissions................................ (1,329) -- (1,329) ------- -------- ------- Net revenues............................................ 10,723 -- 10,723 Operating expenses excluding depreciation and amortization.......................................... 6,150 -- 6,150 Depreciation and amortization........................... 188 5,796(b) 5,984 Corporate general and administrative.................... -- -- -- ------- -------- ------- Operating income (loss)................................. 4,385 (5,796) (1,411) Interest expense........................................ 332 6,300(c) 6,632 Interest income......................................... -- -- -- Other (income) expense.................................. -- -- -- ------- -------- ------- Income (loss) before income taxes....................... 4,053 (12,096) (8,043) Income tax expense (benefit)............................ -- (3,378)(d) (3,378) ------- -------- ------- Net income (loss)....................................... $ 4,053 $ (8,718) $(4,665) ======= ======== =======
- ------------------------- (a) On September 15, 1998, the Company entered into an agreement to acquire KKFR-FM and KFYI-AM in Phoenix from The Broadcast Group, Inc. for $90,000 in cash. The Company began operating KKFR-FM and KFYI-AM under a time brokerage agreement effective November 5, 1998. (b) Reflects incremental amortization related to the assets acquired in the Pending Transaction and is based on the allocation of the total consideration as follows:
PENDING TRANSACTION INCREMENTAL INTANGIBLE HISTORICAL ADJUSTMENT YEAR ENDED AMORTIZATION ASSETS, AMORTIZATION AMORTIZATION FOR NET DECEMBER 31, 1998 PERIOD(I) NET EXPENSE(I) EXPENSE INCREASE - ------------------- ------------ ---------- ------------ ------------ ---------- Phoenix Acquisition........... 1/1-12/31 $88,229 $5,882 $ 86 $5,796 ------- ------ ---- ------
- ------------------------- (i) Intangible assets are amortized on a straight-line basis over an estimated average 15 year life. The incremental amortization period represents the period of the year that the acquisition was not completed. Historical depreciation expense of the Pending Transaction is assumed to approximate depreciation expense on a pro forma basis. Actual depreciation and amortization may differ based upon final purchase price allocations. P-23 27 (c) Reflects the adjustment to interest expense in connection with the consummation of the Pending Transaction:
YEAR ENDED DECEMBER 31, 1998 ------------ Additional bank borrowings related to: Pending Acquisition....................................... $ 90,000 -------- Interest expense at 7.0%.................................. $ 6,300 ========
(d) Reflects the tax effect of the pro forma adjustments. (21) 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. A summary of shares used in the pro forma combined loss per common share calculation follows:
YEAR ENDED DECEMBER 31, 1998 ----------------- Historical weighted average shares outstanding.............. 137,979 Incremental weighted average shares relating to: 53,318,887 shares of Common Stock to be issued in connection with the Capstar merger..................... 53,319 ------- Shares used in the pro forma combined earnings per share calculation............................................... 191,298 =======
P-24 28 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 the combination of consolidated historical financial data of the Company and each of the companies acquired in the transactions completed by the Company during 1998 and 1999 and the elimination of the consolidated historical data of the stations disposed in the transactions completed by the Company during 1998 and 1999. The unaudited pro forma condensed combined balance sheet data at December 31, 1998 presents adjustments for the transactions completed in 1999 and the Pending Transactions, as if each such transaction had occurred at December 31, 1998. The unaudited pro forma condensed combined statement of operations data for the twelve months ended December 31, 1998 presents adjustments for the transactions completed by the Company in 1998 and 1999, the 1998 Financing Transactions and the Pending Transactions (excluding the acquisition of Petry Media Corporation), as if each such transaction occurred on January 1, 1998. The acquisition of Petry is excluded from the pro forma information included in this prospectus due to uncertainty regarding DOJ approval of the transaction. In the opinion of management of the Company, such information is not material to such pro forma presentations. 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 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 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. P-25 29 CHANCELLOR MEDIA CORPORATION OF LOS ANGELES UNAUDITED PRO FORMA BALANCE SHEET AT DECEMBER 31, 1998 (IN THOUSANDS)
PRO FORMA COMPANY ADJUSTMENTS AS ADJUSTED PRO FORMA COMPANY FOR THE FOR THE ADJUSTMENTS FOR HISTORICAL COMPLETED COMPLETED THE PENDING COMPANY AT 12/31/98 TRANSACTIONS(1) TRANSACTIONS TRANSACTION(2) PRO FORMA ----------- --------------- ------------ --------------- ---------- ASSETS: Current assets........................... $ 424,811 $ 12,564 $ 437,375 $ -- $ 437,375 Property and equipment, net.............. 1,388,156 18,168 1,406,324 1,771 1,408,095 Intangible assets, net................... 5,056,047 332,169 5,388,216 88,229 5,476,445 Other assets............................. 358,893 -- 358,893 -- 358,893 ---------- -------- ---------- ------- ---------- Total assets................... $7,227,907 $362,901 $7,590,808 $90,000 $7,680,808 ========== ======== ========== ======= ========== LIABILITIES AND STOCKHOLDER'S EQUITY: Current liabilities...................... $ 236,618 $ 2,585 $ 239,203 $ -- $ 239,203 Long-term debt, excluding current portion................................ 4,096,000 307,962 4,403,962 90,000 4,493,962 Deferred tax liabilities................. 453,134 42,858 495,992 -- 495,992 Other liabilities........................ 50,325 250 50,575 -- 50,575 ---------- -------- ---------- ------- ---------- Total liabilities.............. 4,836,077 353,655 5,189,732 90,000 5,279,732 STOCKHOLDER'S EQUITY: Common stock............................. 1 -- 1 1 Additional paid in capital............... 2,670,510 -- 2,670,510 -- 2,670,510 Accumulated deficit...................... (278,681) 9,246 (269,435) -- (269,435) ---------- -------- ---------- ------- ---------- Total stockholder's equity..... 2,391,830 9,246 2,401,076 -- 2,401,076 ---------- -------- ---------- ------- ---------- Total liabilities and stockholder's equity......... $7,227,907 $362,901 $7,590,808 $90,000 $7,680,808 ========== ======== ========== ======= ==========
See accompanying notes to Unaudited Pro Forma Condensed Combined Financial Statements P-26 30 CHANCELLOR MEDIA CORPORATION OF LOS ANGELES UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 1998 (IN THOUSANDS)
PRO FORMA ADJUSTMENTS FOR THE COMPANY AS COMPANY COMPANY ADJUSTED COMPANY COMPLETED AND THE FOR THE PRO FORMA YEAR ENDED COMPANY TRANSACTIONS COMPLETED COMPLETED PENDING COMPANY DECEMBER 31, 1998 HISTORICAL HISTORICAL(3) TRANSACTIONS TRANSACTIONS TRANSACTION(11) PRO FORMA - ----------------- ---------- ------------- ------------ ------------ --------------- ---------- Gross revenues....................... $1,440,357 $261,292 $ -- $1,701,649 $12,052 $1,713,701 Less: agency commissions............. (166,501) (28,372) -- (194,873) (1,329) (196,202) ---------- -------- --------- ---------- ------- ---------- Net revenues......................... 1,273,856 232,920 -- 1,506,776 10,723 1,517,499 Operating expenses excluding depreciation and amortization...... 682,061 118,666 -- 800,727 6,150 806,877 Depreciation and amortization........ 446,338 51,201 22,736(4) 578,345 5,984 584,329 58,070(5) Corporate general and administrative..................... 36,722 12,775 (570)(6) 48,927 -- 48,927 Non-cash and non-recurring charges... 63,661 2,164 (2,164)(7) 63,661 -- 63,661 ---------- -------- --------- ---------- ------- ---------- Operating income (loss).............. 45,074 48,114 (78,072) 15,116 (1,411) 13,705 Interest expense..................... 217,136 13,762 131,973(8) 362,871 6,632 369,503 Interest income...................... (15,650) (643) -- (16,293) -- (16,293) Gain on disposition of assets........ (123,845) (3,158) -- (127,003) -- (127,003) Gain on disposition of representation contracts.......................... (32,198) -- -- (32,198) -- (32,198) Other (income) expense............... (3,221) (692) -- (3,913) -- (3,913) ---------- -------- --------- ---------- ------- ---------- Income (loss) before income taxes.... 2,852 38,845 (210,045) (168,348) (8,043) (176,391) Income tax expense (benefit)......... 33,751 -- (79,433)(9) (45,682) (3,378) (49,060) ---------- -------- --------- ---------- ------- ---------- Net income (loss).................... (30,899) 38,845 (130,612) (122,666) (4,665) (127,331) Preferred stock dividends............ 17,601 -- (17,601)(10) -- -- -- ---------- -------- --------- ---------- ------- ---------- Income (loss) attributable to common stock.............................. $ (48,500) $ 38,845 $(113,011) $ (122,666) $(4,665) $ (127,331) ========== ======== ========= ========== ======= ==========
See accompanying notes to Unaudited Pro Forma Condensed Combined Financial Statements P-27 31 ADJUSTMENTS TO THE UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET RELATED TO THE COMPLETED TRANSACTIONS (1) Reflects the Completed Transactions that were completed after December 31, 1998 as follows:
PURCHASE PRICE ALLOCATION -------------------------------------------------------------------------------------------------------- PROPERTY AND DEFERRED COMPLETED PURCHASE CURRENT EQUIPMENT, INTANGIBLE CURRENT TAX OTHER ACCUMULATED TRANSACTIONS PRICE ASSETS NET ASSETS, NET LIABILITIES LIABILITIES LIABILITIES DEFICIT - ------------ -------- ------- ------------ ----------- ----------- ----------- ----------- ----------- Outdoor Acquisitions(a).... $ 45,204 $ 2,346 $18,335 $ 25,110 $ (337) $ -- $(250) $ -- Cleveland Acquisitions(b).... 283,758 10,218 2,047 309,903 (2,248) (36,162)(c) -- -- Chicago Disposition(d)..... (21,000) -- (2,214) (2,844) -- (6,696) -- (9,246) -------- ------- ------- -------- ------- -------- ----- ------- $307,962 $12,564 $18,168 $332,169 $(2,585) $(42,858) $(250) $(9,246) ======== ======= ======= ======== ======= ======== ===== ======= FINANCING ----------- INCREASE IN COMPLETED LONG-TERM TRANSACTIONS DEBT - ------------ ----------- Outdoor Acquisitions(a).... $ 45,204 Cleveland Acquisitions(b).... 283,758 Chicago Disposition(d)..... (21,000) -------- $307,962 ========
- ------------------------- (a) Subsequent to January 1, 1999, the Company acquired approximately 4,500 outdoor display faces from Triumph Outdoor Holdings and certain affiliated companies ("Triumph") for approximately $37,006 in cash including working capital and acquired approximately 100 additional billboards and outdoor displays in various transactions for approximately $8,198. The outdoor acquisitions aggregate purchase price of $45,204 has been allocated to property and equipment and intangible assets based upon a preliminary appraisal for Triumph and historical information from prior outdoor acquisitions. The amounts allocated to property and equipment consist primarily of advertising structures with an estimated average life of 15 years. The amounts allocated to intangible assets represent goodwill with an estimated average life of 40 years. (b) On January 28, 1999, the Company acquired Wincom Broadcasting Corporation which owns WQAL-FM in Cleveland. The Company had previously been operating WQAL-FM under a time brokerage agreement effective October 1, 1998. On February 2, 1999, the Company acquired five additional radio stations in Cleveland including (i) WDOK-FM and WRMR-AM from Independent Group Limited Partnership, (ii) WZAK-FM from Zapis Communications and (iii) Zebra Broadcasting Corporation which owns WZJM-FM and WJMO-AM. The six Cleveland stations were acquired for an aggregate purchase price of $283,758 in cash including working capital, subject to certain adjustments. The Company has assumed that the historical balances of net property and equipment acquired approximate fair value for the preliminary allocation of the purchase price and are based on information provided by management of the respective companies acquired. The Company, on a preliminary basis, has allocated the intangible assets to broadcast licenses with an estimated average life of 15 years based upon historical information from prior radio acquisitions. (c) Reflects a deferred tax liability related to the difference between the financial statement carrying amount and the tax basis of assets acquired in the stock acquisitions of Wincom Broadcasting Corporation and Zebra Broadcasting Corporation. (d) On April 16, 1999, the Company sold WMVP-AM in Chicago to ABC, Inc. for $21,000 in cash. The Company had previously entered into a time brokerage agreement to sell substantially all of the broadcast time of WMVP-AM effective September 10, 1998. The amounts allocated to accumulated deficit and deferred tax liabilities represent the gain on the disposition of WMVP-AM of $15,942 net of taxes of $6,696. P-28 32 ADJUSTMENTS TO UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET RELATED TO THE PENDING TRANSACTION (2) Reflects the Pending Transaction as follows:
PURCHASE PRICE ALLOCATION FINANCING ----------------------------------- --------- PROPERTY INCREASE AND INTANGIBLE IN PURCHASE EQUIPMENT, ASSETS, LONG-TERM PENDING TRANSACTION PRICE NET(A) NET(B) DEBT ------------------- --------- ---------- ---------- --------- Phoenix Acquisition(c)...................................... $90,000 $1,771 $88,229 $90,000
- ------------------------- (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 companies to be acquired in the Pending Transaction. (b) The Company, on a preliminary basis, has allocated the intangible assets to broadcast licenses with an estimated average life of 15 years. The amounts allocated to net intangible assets are preliminary and are based upon historical information from prior acquisitions. (c) On September 15, 1998, the Company entered into an agreement to acquire KKFR-FM and KFYI-AM in Phoenix from The Broadcast Group, Inc. for $90,000 in cash plus various other direct acquisition costs. The Company began operating KKFR-FM and KFYI-AM under a time brokerage agreement effective November 5, 1998. P-29 33 ADJUSTMENTS TO UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS RELATED TO THE COMPLETED TRANSACTIONS HISTORICAL (3) The Completed Transactions historical condensed combined statement of operations for the year ended December 31, 1998 are summarized below:
ACQUISITIONS ----------------------------------------------------------------------------------------- MARTIN AS ADJUSTED FOR OTHER CAPSTAR/SFX COMPLETED PRIMEDIA WHITECO OUTDOOR TRANSACTIONS WWDC-FM/AM MARTIN ACQUISITION ACQUISITION ACQUISITIONS YEAR ENDED HISTORICAL HISTORICAL TRANSACTIONS HISTORICAL HISTORICAL HISTORICAL DECEMBER 31, 1998 1/1-12/31 (a) 1/1-6/1 (b) 1/1-7/31 (c) 1/1-10/23 (d) 1/1-12/1 (e) 1/1-12/31 (f) ----------------- ------------- ----------- ------------ ------------- ------------ ------------- Gross revenues........... $34,324 $4,273 $54,472 $12,797 $128,565 $ 7,022 Less: agency commissions............. (4,302) (528) (5,768) (3,358) (8,973) (2,319) ------- ------ ------- ------- -------- ------- Net revenues............. 30,022 3,745 48,704 9,439 119,592 4,703 Operating expenses excluding depreciation and amortization........ 18,464 2,158 23,751 5,363 60,587 3,983 Depreciation and amortization............ 21,435 45 16,068 2,350 10,342 692 Corporate general and administrative.......... -- -- 924 2,794 6,759 1,817 Profit participation fee..................... -- -- -- -- 2,164 -- ------- ------ ------- ------- -------- ------- Operating income (loss).................. (9,877) 1,542 7,961 (1,068) 39,740 (1,789) Interest expense......... -- 62 11,189 1,972 35 197 Interest income.......... -- (18) (381) -- (58) (4) Gain on disposition of assets.................. -- -- -- -- -- (3,158) Other (income) expense... -- (49) (557) 24 (1,082) 105 ------- ------ ------- ------- -------- ------- Income (loss) before income taxes............ (9,877) 1,547 (2,290) (3,064) 40,845 1,071 Income tax expense....... -- -- -- -- -- -- ------- ------ ------- ------- -------- ------- Net income (loss)........ (9,877) 1,547 (2,290) (3,064) 40,845 1,071 Preferred stock dividends............... -- -- -- -- -- -- ------- ------ ------- ------- -------- ------- Income (loss) attributable to common stock................... $(9,877) $1,547 $(2,290) $(3,064) $ 40,845 $ 1,071 ======= ====== ======= ======= ======== ======= ACQUISITIONS DISPOSITIONS ------------- ---------------------------- WBAB-FM WBLI-FM CLEVELAND WGBB-AM CHICAGO COMPANY ACQUISITIONS WHFM-FM DISPOSITION COMPLETED YEAR ENDED HISTORICAL HISTORICAL HISTORICAL TRANSACTIONS DECEMBER 31, 1998 1/1-12/31 (g) 1/1-5/29 (h) 1/1-12/31 (i) HISTORICAL ----------------- ------------- ------------ ------------- ------------ Gross revenues........... $36,432 $(5,063) $(11,530) $261,292 Less: agency commissions............. (4,859) 514 1,221 (28,372) ------- ------- -------- -------- Net revenues............. 31,573 (4,549) (10,309) 232,920 Operating expenses excluding depreciation and amortization........ 20,962 (3,331) (13,271) 118,666 Depreciation and amortization............ 861 -- (592) 51,201 Corporate general and administrative.......... 481 -- -- 12,775 Profit participation fee..................... -- -- -- 2,164 ------- ------- -------- -------- Operating income (loss).................. 9,269 (1,218) 3,554 48,114 Interest expense......... 307 -- -- 13,762 Interest income.......... (182) -- -- (643) Gain on disposition of assets.................. -- -- (3,158) Other (income) expense... 867 -- -- (692) ------- ------- -------- -------- Income (loss) before income taxes............ 8,277 (1,218) 3,554 38,845 Income tax expense....... -- -- -- -- ------- ------- -------- -------- Net income (loss)........ 8,277 (1,218) 3,554 38,845 Preferred stock dividends............... -- -- -- -- ------- ------- -------- -------- Income (loss) attributable to common stock................... $ 8,277 $(1,218) $ 3,554 $ 38,845 ======= ======= ======== ========
P-30 34 - --------------- (a) On February 20, 1998, the Company entered into an agreement to acquire from Capstar KTXQ-FM and KBFB-FM in Dallas/Ft. Worth, KODA-FM, KKRW-FM and KQUE-AM in Houston, KPLN-FM and KYXY-FM in San Diego and WDRV-FM, WJJJ-FM, WXDX-FM and WDVE-FM in Pittsburgh (collectively, the "Capstar/SFX Stations") for an aggregate purchase price of approximately $637,500 in a series of purchases and exchanges over a period of three years (the "Capstar/ SFX Transaction"). The Company also provided a loan to Capstar in the principal amount of $150,000 as part of the Capstar/SFX Transaction. The Capstar/SFX Stations were acquired by Capstar as part of Capstar's acquisition of SFX on May 29, 1998. This adjustment reflects the following aspects of the Capstar/SFX Transaction: (i) On May 29, 1998, the Company exchanged WAPE-FM and WFYV-FM in Jacksonville (valued at $53,000) for Capstar station KODA-FM in Houston. As part of the KODA-FM transaction, the Company also paid cash of $90,250 to the owners of KVET-AM, KVET-FM and KASE-FM, who simultaneously transferred such stations to Capstar. Thus, this adjustment records the results of operations of KODA-FM for the period January 1, 1998 to May 29, 1998. Chancellor entered into a time brokerage agreement to sell substantially all of the broadcast time of WAPE-FM and WFYV-FM effective July 1, 1996. Therefore, the results of operations of WAPE-FM and WFYV-FM are not included in the Company's historical condensed statement of operations for the year ended December 31, 1998. (ii) The Company began operating the remaining ten Capstar/SFX stations under time brokerage agreements effective May 29, 1998 pending the consummation of the Capstar merger. Thus, this adjustment records the results of operations of the ten Capstar/SFX stations and the related LMA fee payment to Capstar of $20,594 for the period January 1, 1998 to May 29, 1998. (iii) On February 1, 1999, the Company began operating WKNR-FM in Cleveland under a time brokerage agreement with Capstar, pending the consummation of the Capstar merger. WKNR-FM was acquired by Capstar as part of Capstar's acquisition of SFX on May 29, 1998. Therefore, in addition to the above items, this adjustment records the results of operations of WKNR-FM for the year ended December 31, 1998. The Capstar stations currently operated under time brokerage agreements will be acquired by Chancellor Media as part of its pending merger with Capstar. The Company intends to continue operating these stations under time brokerage agreements and paying LMA fees to Capstar subsequent to consummation of Chancellor Media's merger with Capstar. (b) On June 1, 1998, the Company acquired WWDC-FM/AM in Washington, D.C. from Capitol Broadcasting Company and its affiliates for $74,062 in cash (including $2,062 for the purchase of the stations' accounts receivable) plus various other direct acquisition costs. (c) On July 31, 1998, the Company acquired Martin Media and certain affiliated companies for a total purchase price of $615,117 which consisted of $612,848 in cash including various other direct acquisition costs and the assumption of notes payable of $2,270. Martin is an outdoor advertising company with over 13,700 billboards and outdoor displays in 12 states serving 23 markets. As part of the Martin transaction, the Company acquired an asset purchase agreement with Kunz & Company and paid an additional $6,000 in cash for a purchase option deposit previously paid by Martin. Martin's historical condensed combined statements of operations for the year ended December 31, 1998 and pro forma adjustments related to the significant transactions completed by Martin prior to the acquisition of Martin (the "Completed Martin Transactions") are summarized below. P-31 35
OTHER PRO FORMA MARTIN AS COMPLETED ADJUSTMENTS ADJUSTED MARTIN MARTIN FOR THE FOR ACQUISITION ACQUISITIONS COMPLETED COMPLETED HISTORICAL HISTORICAL MARTIN MARTIN YEAR ENDED DECEMBER 31, 1998 1/1-7/31 1/1-7/31(i) TRANSACTIONS TRANSACTIONS ---------------------------- ----------- ------------ ------------ ------------ Gross revenues.................................. $52,345 $2,127 $ -- $54,472 Less: agency commissions........................ (5,612) (156) -- (5,768) ------- ------ ------ ------- Net revenues.................................... 46,733 1,971 -- 48,704 Operating expenses excluding depreciation and amortization.................................. 22,845 906 -- 23,751 Depreciation and amortization................... 14,694 88 1,286(ii) 16,068 Corporate general and administrative............ 2,919 -- (1,995)(iii) 924 ------- ------ ------ ------- Operating income................................ 6,275 977 709 7,961 Interest expense................................ 10,781 -- 408(iv) 11,189 Interest income................................. (381) -- -- (381) Other (income) expense.......................... (571) 14 -- (557) ------- ------ ------ ------- Net income (loss)............................... $(3,554) $ 963 $ 301 $(2,290) ======= ====== ====== =======
- ------------------------- (i) Prior to July 31, 1998, Martin acquired approximately 1,636 billboards and outdoor displays in various transactions for approximately $12,246. (ii) Reflects the adjustment to record incremental amortization of $1,286 for the period January 1, 1998 to July 31, 1998 related to the Completed Martin Transactions based upon an estimated average life of 5 years used by Martin for intangible assets. Historical depreciation expense of the Completed Martin Transactions is assumed to approximate depreciation expense on a pro forma basis. Actual depreciation and amortization may differ based upon final purchase price allocations. (iii)On July 31, 1997, Martin paid $6,000 to Kunz for an option to purchase approximately 1,000 display faces from its Kunz Outdoor Advertising division for $33,289 in cash plus various other direct acquisition costs. Martin began operating these 1,000 display faces under a management agreement effective July 31, 1997. Pursuant to the management agreement, Martin paid a management fee of $285 per month to Kunz. Reflects the elimination of management fees paid by Martin to Kunz of $1,995 for the period January 1, 1998 through July 31, 1998. (iv) Reflects the adjustment to increase interest expense by $408 in connection with the consummation of the Completed Martin Transactions based upon additional bank borrowings of $12,246 at 8.5%. (d) On October 23, 1998, the Company acquired Primedia Broadcast Group, Inc. and certain of its affiliates, which own and operate eight FM stations in Puerto Rico, for a purchase price of $75,619 including various other direct acquisition costs. (e) On December 1, 1998, the Company acquired the assets and working capital of the outdoor advertising division of Whiteco Industries, Inc., including approximately 22,500 billboards and outdoor displays in 34 states, for $981,698 in cash including various other direct acquisition costs. (f) Other outdoor acquisitions consist of (i) approximately 670 billboards and outdoor displays acquired in 1998 for approximately $23,582; (ii) approximately 4,500 outdoor display faces acquired from Triumph for approximately $37,006 in cash including working capital in January and February 1999 and (iii) approximately 100 additional billboards and outdoor displays acquired for approximately $8,198 subsequent to January 1, 1999. (g) On January 28, 1999, the Company acquired Wincom Broadcasting Corporation which owns WQAL-FM in Cleveland. The Company had previously been operating WQAL-FM under a time brokerage agreement effective October 1, 1998. On February 2, 1999, the Company acquired five P-32 36 additional radio stations in Cleveland including (i) WDOK-FM and WRMR-AM from Independent Group Limited Partnership, (ii) WZAK-FM from Zapis Communications and (iii) Zebra Broadcasting Corporation which owns WZJM-FM and WJMO-AM. The six Cleveland stations were acquired for an aggregate purchase price of $283,758 in cash including working capital, subject to certain adjustments. (h) Chancellor began programming WBAB-FM, WBLI-FM, WGBB-AM and WHFM-FM in Long Island under a time brokerage agreement effective July 1, 1996. On May 29, 1998, as part of the Capstar/ SFX Transaction, the Company's time brokerage agreements regarding the Long Island properties were terminated. The Company's historical condensed statement of operations for the year ended December 31, 1998 includes the results of operations of WBAB-FM, WBLI-FM, WGBB-AM and WHFM-FM in Long Island for January 1, 1998 through May 29, 1998. (i) On April 16, 1999, the Company sold WMVP-AM in Chicago to ABC, Inc. for $21,000 in cash. The Company entered into a time brokerage agreement to sell substantially all of the broadcast time of WMVP-AM effective September 10, 1998. (4) Reflects incremental amortization related to the Completed Transactions and is based on the following allocation to intangible assets:
ADJUSTMENT INCREMENTAL HISTORICAL FOR NET AMORTIZATION INTANGIBLE AMORTIZATION AMORTIZATION INCREASE YEAR ENDED DECEMBER 31, 1998 PERIOD(A) ASSETS, NET EXPENSE EXPENSE (DECREASE) ---------------------------- ------------ ----------- ------------ ------------ ---------- Denver Acquisition(b)............................ 1/1-1/30 $ 24,589 $ 137 $ -- $ 137 Bonneville Option(b)............................. 1/1-4/3 186,349 3,209 -- 3,209 KODA-FM(b)....................................... 1/1-5/29 93,294 2,574 656 1,918 WWDC-FM/AM(b).................................... 1/1-6/1 64,338 1,799 -- 1,799 Martin Acquisitions(c)........................... 1/1-7/31 264,803 6,618 12,994 (6,376) Other 1998 Outdoor Acquisitions(c)............... 1/1-8/31 8,782 146 -- 146 Primedia Acquisition(b).......................... 1/1-10/23 69,361 3,763 1,765 1,998 Kunz Option(c)................................... 1/1-11/13 13,414 292 -- 292 Whiteco Acquisition(c)........................... 1/1-12/1 212,044 4,874 5,826 (952) Other 1999 Outdoor Acquisitions(c)............... 1/1-12/31 25,110 628 162 466 Cleveland Acquisitions(b)........................ 1/1-12/31 309,903 20,660 561 20,099 ---------- ------- ------- ------- Total.................................... $1,271,987 $44,700 $21,964 $22,736 ========== ======= ======= =======
- ------------------------- (a) The incremental amortization period represents the period of the year that the acquisition was not completed. Actual amortization may differ based upon final purchase price allocations. (b) Intangible assets for the radio acquisitions consist primarily of FCC licenses which are amortized on a straight-line basis over an estimated average life of 15 years. (c) Intangible assets for the outdoor acquisitions consist primarily of goodwill which is amortized on a straight-line basis over an estimated average life of 40 years, except for the acquisition of Martin which includes non-compete agreements of $27,000 which are amortized on a straight-line basis over 5 years. The Martin goodwill of $237,803 includes $98,042 resulting from the recognition of deferred tax liabilities. (5) Historical depreciation expense of the completed radio acquisitions is assumed to approximate depreciation expense on a pro forma basis. Actual depreciation may differ based upon final purchase price allocations. The following adjustments reflect incremental depreciation related to the completed outdoor acquisitions and are based on the following allocation to property and equipment: P-33 37
INCREMENTAL PROPERTY AND HISTORICAL ADJUSTMENT DEPRECIATION EQUIPMENT, DEPRECIATION DEPRECIATION FOR NET YEAR ENDED DECEMBER 31, 1998 PERIOD(A) NET(A) EXPENSE(A) EXPENSE INCREASE ---------------------------- ------------ -------------- ------------ ------------ ---------- Martin Acquisition............................ 1/1-7/31 $ 431,253 $16,771 $3,074 $13,697 Kunz Option................................... 1/1-11/13 26,849 1,556 -- 1,556 Other 1998 Outdoor Acquisitions............... 1/1-11/17 14,815 734 -- 734 Whiteco Acquisition........................... 1/1-12/1 748,940 45,907 4,516 41,391 Other 1999 Outdoor Acquisitions............... 1/1-12/31 18,335 1,222 530 692 ---------- ------- ------ ------- Total................................. $1,240,192 $66,190 $8,120 $58,070 ========== ======= ====== =======
-------------------- (a) Property and equipment consists primarily of advertising structures and is depreciated on a straight-line basis over an estimated average 15 year life. The incremental depreciation period represents the period of the year that the acquisition was not completed. (6) Reflects the elimination of management fees paid by the Company to Kunz of $570 for the period August 1, 1998 through September 30, 1998 in connection with the Kunz Option. (7) Reflects the elimination of the profit participation fee paid by Whiteco to Metro Management Associates of $2,164 for the year ended December 31, 1998. (8) Reflects the adjustment to interest expense in connection with the consummation of the Completed Transactions, the Company's 1998 Equity Offering completed on March 13, 1998, the repurchase of CMCLA's 12% exchange debentures on June 10, 1998, the repurchase of CMCLA's 12 1/4% exchange debentures on August 19, 1998, the offering by CMCLA of the 9% Notes on September 30, 1998 and the offering by CMCLA of the 8% Senior Notes on November 17, 1998:
YEAR ENDED DECEMBER 31, 1998 ------------ Additional bank borrowings related to completed acquisitions.............................................. $2,292,899 ========== Interest expense at 7.0%.................................... $ 123,693 Less: historical interest expense related to completed acquisitions.............................................. (13,762) ---------- Net increase in interest expense............................ 109,931 Reduction in interest expense on bank debt related to the application of net proceeds of the following at 7.0%: Proceeds from the March 13, 1998 equity offering used to reduce bank borrowings by $673,000..................... (9,553) CMCLA 9% Senior Subordinated Notes issuance on September 30, 1998 for net proceeds of $730,000.................. (38,325) CMCLA 8% Senior Notes issuance on November 17, 1998 for net proceeds of $730,000............................... (44,996) Interest expense on borrowings of $262,495 to finance the repurchase of CMCLA's 12% exchange debentures on June 10, 1998...................................................... 8,167 Interest expense on borrowings of $143,836 to finance the repurchase of CMCLA's 12 1/4% exchange debentures on August 19, 1998........................................... 6,405 Interest expense on CMCLA's $750,000 9% Senior Subordinated Notes issued September 30, 1998........................... 50,625 Interest expense on CMCLA's $750,000 8% Senior Notes issued November 17, 1998......................................... 52,833 Elimination of historical interest expense on the CMCLA 12% Subordinated Exchange Debentures from May 13, 1998 through June 10, 1998............................................. (1,976) Elimination of historical interest expense on the CMCLA 12 1/4% Subordinated Exchange Debentures from July 23, 1998 through August 19, 1998.............................. (1,138) ---------- Total adjustment for net increase in interest expense....... $ 131,973 ==========
(9) Reflects the tax effect of the pro forma adjustments. P-34 38 (10) Reflects the elimination of preferred stock dividends on the 12% Preferred Stock and the 12 1/4% Preferred Stock of $17,601 for the year ended December 31, 1998, in connection with the exchange of the 12% Preferred Stock and 12 1/4% Preferred Stock into 12% Debentures and 12 1/4% Debentures, respectively, and the subsequent repurchase of all the 12% Debentures and 12 1/4% Debentures. ADJUSTMENTS TO UNAUDITED CONDENSED COMBINED STATEMENTS OF OPERATIONS RELATED TO THE PENDING TRANSACTION (11) The detail of the historical financial data of the company to be acquired in the Pending Transaction for the year ended December 31, 1998 has been obtained from the historical financial statements of the respective companies and is summarized below:
PRO FORMA PHOENIX ADJUSTMENTS COMPANY ACQUISITION FOR THE PRO FORMA YEAR ENDED HISTORICAL PENDING PENDING DECEMBER 31, 1998 1/1 - 12/31(a) TRANSACTION TRANSACTION ----------------- -------------- ------------ ------------ Gross revenues.......................................... $12,052 $ -- $12,052 Less: agency commissions................................ (1,329) -- (1,329) ------- -------- ------- Net revenues............................................ 10,723 -- 10,723 Operating expenses excluding depreciation and amortization.......................................... 6,150 -- 6,150 Depreciation and amortization........................... 188 5,796(b) 5,984 ------- -------- ------- Operating income (loss)................................. 4,385 (5,796) (1,411) Interest expense........................................ 332 6,300(c) 6,632 ------- -------- ------- Income (loss) before income taxes....................... 4,053 (12,096) (8,043) Income tax expense (benefit)............................ -- (3,378)(d) (3,378) ------- -------- ------- Net income (loss)....................................... $ 4,053 $ (8,718) $(4,665) ======= ======== =======
- ------------------------- (a) On September 15, 1998, the Company entered into an agreement to acquire KKFR-FM and KFYI-AM in Phoenix from The Broadcast Group, Inc. for $90,000 in cash. The Company began operating KKFR-FM and KFYI-AM under a time brokerage agreement effective November 5, 1998. (b) Reflects incremental amortization related to the assets acquired in the Pending Transaction and is based on the allocation of the total consideration as follows:
PENDING TRANSACTION INCREMENTAL INTANGIBLE HISTORICAL ADJUSTMENT YEAR ENDED AMORTIZATION ASSETS, AMORTIZATION AMORTIZATION FOR NET DECEMBER 31, 1998 PERIOD(I) NET EXPENSE(I) EXPENSE INCREASE - ------------------- ------------ ---------- ------------ ------------ ---------- Phoenix Acquisition........... 1/1-12/31 $88,229 $5,882 $ 86 $5,796 ------- ------ ---- ------
- ------------------------- (i) Intangible assets are amortized on a straight-line basis over an estimated average 15 year life. The incremental amortization period represents the period of the year that the acquisition was not completed. P-35 39 Historical depreciation expense of the Pending Transaction is assumed to approximate depreciation expense on a pro forma basis. Actual depreciation and amortization may differ based upon final purchase price allocations. (c) Reflects the adjustment to interest expense in connection with the consummation of the Pending Transaction:
YEAR ENDED DECEMBER 31, 1998 ------------ Additional bank borrowings related to: Pending Acquisition....................................... $ 90,000 -------- Interest expense at 7.0%.................................. $ 6,300 ========
(d) Reflects the tax effect of the pro forma adjustments. P-36 -----END PRIVACY-ENHANCED MESSAGE-----