-----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, MsrNFSmGhAZ63xkQWv4bw63z3/0cFu9Gnoy+9fOenm1hB7KCjPaCQBinU1f9SS0I 6dN0N/0n0iA54UTNc7zDyA== /in/edgar/work/0000950152-00-007587/0000950152-00-007587.txt : 20001108 0000950152-00-007587.hdr.sgml : 20001108 ACCESSION NUMBER: 0000950152-00-007587 CONFORMED SUBMISSION TYPE: 8-K/A PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 20000824 ITEM INFORMATION: ITEM INFORMATION: FILED AS OF DATE: 20001107 FILER: COMPANY DATA: COMPANY CONFORMED NAME: REGENT COMMUNICATIONS INC CENTRAL INDEX KEY: 0000913015 STANDARD INDUSTRIAL CLASSIFICATION: [4832 ] IRS NUMBER: 311492857 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K/A SEC ACT: SEC FILE NUMBER: 333-46435 FILM NUMBER: 754734 BUSINESS ADDRESS: STREET 1: 50 EAST RIVERCENTER BOULEVARD STREET 2: SUITE 180 CITY: COVINGTON STATE: KY ZIP: 41011 BUSINESS PHONE: 6062920030 MAIL ADDRESS: STREET 1: 50 EAST RIVERCENTER BLVD STREET 2: SUITE 180 CITY: COVINGTON STATE: KY ZIP: 41011 8-K/A 1 l84447ae8-ka.txt REGENT COMMUNICATIONS, INC. FORM 8-K/A 1 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 8-K/A AMENDMENT NO. 1 TO CURRENT REPORT Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 Date of Report (Date of earliest event reported) - August 24, 2000 REGENT COMMUNICATIONS, INC. (Exact name of registrant as specified in charter) DELAWARE 0-15392 31-1492857 (State or other jurisdiction (Commission (IRS Employer of incorporation) File Number) Identification No.) 100 EAST RIVERCENTER BOULEVARD 9TH FLOOR COVINGTON, KENTUCKY 41011 (Address of principal executive offices) (859) 292-0030 (Registrant's telephone number, including area code) 2 This Amendment No. 1 to the Current Report on Form 8-K dated August 24, 2000 and filed on August 29, 2000, is submitted to include the required financial statements of radio stations WGRD-FM, WTRV-FM, WLHT-FM, and WNWZ-AM in Grand Rapids, Michigan, radio stations WQBJ-FM, WQBK-FM and WTMM-AM in Albany, New York and radio stations WGNA-FM, WGNA-AM and WABT-FM in Albany, New York, and the required pro forma financial information which were impracticable to provide at the time the Form 8-K was initially filed. ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS On August 24, 2000, pursuant to the terms of an Asset Exchange Agreement dated as of March 12, 2000, as amended, we acquired from Clear Channel Broadcasting, Inc., Capstar Radio Operating Company and their related entities substantially all of the assets of four FM and two AM radio stations in Albany, New York and three FM and one AM radio stations in Grand Rapids, Michigan in exchange for substantially all of the assets of our five FM and three AM radio stations in the Mansfield, Ohio and Victorville, California markets and the payment by us of $80,465,000 in cash.
Stations Acquired Stations Disposed of ----------------- -------------------- Albany, NY............... WQBJ(FM) Victorville, CA............... KZXY(FM) WQBK(FM) KATJ(FM) WABT(FM) KIXA(FM) WGNA(FM) KIXW(AM) WGNA(AM) KROY(AM) WTMM(AM) Grand Rapids, MI......... WLHT(FM) Mansfield, OH................. WYHT(FM) WGRD(FM) WSWR(FM) WTRV(FM) WMAN(AM) WNWZ(AM)
The sources for the cash portion of the purchase price paid by us were as follows: (a) borrowings in the amount of $44,000,000 under our Credit Agreement with Fleet National Bank, as Administrative Agent and Issuing Lender, GE Capital Commercial Finance, Inc., as Syndication Agent, Dresdner Bank AG, New York and Grand Cayman Branches, as Documentation Agent, and the several lenders party thereto; and (b) $36,465,000 of proceeds from our initial public offering of common stock completed on January 28, 2000 and cash from operations. The terms of this transaction were arrived at and agreed upon through arms' length negotiations between the parties. We intend to continue to use the assets acquired in a manner consistent with their use prior to their acquisition by us. ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS. (a) FINANCIAL STATEMENTS OF BUSINESS ACQUIRED. The following information is included in this report beginning at page F-1: RADIO STATIONS - WQBJ-FM, WQBK-FM and WTMM-AM Report of Independent Accountants Combined Balance Sheets at June 30, 2000 (Unaudited) and December 31, 1999 and 1998 Combined Statements of Operations for the six months ended June 30, 2000 (Unaudited) and 1999 (Unaudited) and for the years ended December 31, 1999 and 1998 Combined Statements of Cash Flows for the six months ended June 30, 2000 (Unaudited) and 1999 (Unaudited) and for the years ended December 31, 1999 and 1998 Combined Statements of Stations' Equity for the years ended December 31, 1999 and 1998 Notes to the Combined Financial Statements RADIO STATIONS - WGNA-FM, WGNA-AM and WABT-FM Report of Independent Accountants Combined Balance Sheets at June 30, 2000 (Unaudited) and December 31, 1999 and 1998 Combined Statements of Operations for the six months ended June 30, 2000 (Unaudited) and 1999 (Unaudited) and for the period from July 13, 1999 to December 31, 1999, the period from January 1, 1999 to July 12, 1999, the period from May 28, 1998 to December 31, 1998 and the period from January 1, 1998 to May 27, 1998 Combined Statements of Cash Flows for the six months ended June 30, 2000 (Unaudited) and 1999 (Unaudited) and for the period from July 13, 1999 to December 31, 1999, the period from January 1, 1999 to July 12, 1999, the period from May 28, 1998 to December 31, 1998 and the period from January 1, 1998 to May 27, 1998 Combined Statements of Stations' Equity for the period from July 13, 1999 to December 31, 1999, the period from January 1, 1999 to July 12, 1999, the period from May 28, 1998 to December 31, 1998 and the period from January 1, 1998 to May 27, 1998. Notes to the Combined Financial Statements RADIO STATIONS - WGRD-FM, WTRV-FM, WLHT-FM and WNWZ-AM Report of Independent Accountants Combined Balance Sheets at June 30, 2000 (Unaudited) and December 31, 1999 and 1998 Combined Statements of Operations for the six months ended June 30, 2000 (Unaudited) and 1999 (Unaudited) and for the period from July 13, 1999 to December 31, 1999, the period from January 1, 1999 to July 12, 1999, and the period from February 1, 1998 to December 31, 1998 Combined Statements of Cash Flows for the six months ended June 30, 2000 (Unaudited) and 1999 (Unaudited) and for the period from July 13, 1999 to December 31, 1999, the period from January 1, 1999 to July 12, 1999, and the period from February 1, 1998 to December 31, 1998 Combined Statements of Stations' Equity for the period from July 13, 1999 to December 31, 1999, the period from January 1, 1999 to July 12, 1999 and the period from February 1, 1998 to December 31, 1998. Notes to the Combined Financial Statements Page 2 3 (b) PRO FORMA FINANCIAL INFORMATION. UNAUDITED PRO FORMA FINANCIAL STATEMENTS The following unaudited pro forma condensed consolidated financial statements contain our results of operations for the year ended December 31, 1999 and the six months ended June 30, 2000 and our balance sheet as of June 30, 2000, after giving effect to the transactions described below. The unaudited pro forma statements of operations give effect to the following transactions as if they had occurred on January 1, 1999, and the unaudited pro forma balance sheet as of June 30, 2000 gives effect to the following transactions as if they had occurred as of June 30, 2000. The unaudited pro forma financial statements give effect to: o all significant radio station acquisitions that we have completed since January 1, 1999, including WJON (AM), WWJO (FM) and KMXK (FM) in St. Cloud, Minnesota; WRIE (AM), WXKC (FM), and WXTA (FM) in Erie, Pennsylvania; KROD (AM), KLAQ (FM), and KSII (FM) in El Paso, Texas; WIBX (AM), WRUN (AM), WFRG (FM), WLZW (FM) and WODZ (FM) in Utica, New York; WTNY (AM), WUZZ (AM), WFRY (FM) and WCIZ (FM) in Watertown, New York; WTMM (AM), WGNA (AM), WGNA (FM), WQBK (FM), WABT (FM) and WQBJ (FM) in Albany, New York; and WNWZ (AM), WLHT (FM), WGRD (FM) and WTRV (FM) in Grand Rapids, Michigan; o all significant radio station dispositions that we have completed since January 1, 1999, including WSSP (FM) in Charleston, South Carolina; KCBQ (AM) in San Diego, California; KFLG (AM), KAAA (AM), KFLG (FM), and KZZZ (FM) in Kingman, Arizona; KOWL (AM) and KRLT (FM) in Lake Tahoe, California; WMAN (AM), WYHT (FM) and WSWR (FM) in Mansfield, Ohio; and KIXW (AM), KROY (AM), KATJ (FM), KZXY (FM) and KIXA (FM) in Victorville, California; o the payment of accumulated, unpaid dividends on all series of preferred stock; o the private placement of our Series K convertible preferred stock; o the redemption of our Series B convertible preferred stock and the conversion of all other series of convertible preferred stock into common stock; o the repayment of all borrowings under our former bank credit facility and payment of new bank credit facility fees; o the repurchase of 275,152 shares of our common stock; and o the public offering of our common stock and use of the net proceeds. The unaudited pro forma financial statements are based on our historical consolidated financial statements and the historical financial statements of those entities acquired in our consummated transactions. They reflect the use of the purchase method of accounting for all acquisitions but do not reflect any estimated cost savings that we believe will be realized. The final allocation of the relative purchase prices of the stations acquired is determined a reasonable time after consummation of such transactions and is based on independent appraisals of the assets acquired and liabilities assumed. Accordingly, the information presented may differ from the final purchase price allocations; however, in our opinion, the final purchase price allocations will not differ significantly from the information presented. In our opinion, all adjustments have been made that are necessary to present fairly the pro forma data. The unaudited pro forma financial statements are presented for illustrative purposes only and are not indicative of the operating results or financial position that would have occurred if the transactions described above had been completed on the dates indicated. Page 3 4 You should read the unaudited pro forma financial statements presented below together with our consolidated financial statements and notes contained in this report starting on page F-1 and those previously filed. See our Form 10-K/A filed April 4, 2000, Form 10-Q filed August 10, 2000 and Form S-1 (Amendment No. 1) filed December 29, 1999. REGENT COMMUNICATIONS, INC. UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 1999
PRO FORMA HISTORICAL ADJUSTMENTS AS ADJUSTED 1999 FOR 1999 FOR HISTORICAL COMPLETED COMPLETED COMPLETED REGENT TRANSACTIONS(1) TRANSACTIONS TRANSACTIONS ---------- --------------- ------------ ------------ (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) Net broadcast revenues $ 23,854 $ 779 $ 24,633 Station operating expenses 18,325 (207) 18,118 Depreciation and amortization 3,368 424 $ (104)(4) 3,688 Corporate general and administrative expenses 2,774 593 3,367 -------- ----- ------- -------- Operating income (loss) (613) (31) 104 (540) Interest expense (5,248) (420) (638)(5) (6,306) Other income (expense), net (438) 13 (425) -------- ----- ------- -------- Loss from continuing operations, before income taxes (6,299) (438) (534) (7,271) Income tax expense -- -- -- -------- ----- ------- -------- Loss from continuing operations (6,299) (438) (534) (7,271) Preferred stock dividends and accretion (22,427) -- (505)(5) (22,932) -------- ----- ------- -------- Loss from continuing operations attributable to common stockholders $(28,726) $(438) $(1,039) $(30,203) ======== ===== ======= ======== Basic and diluted loss per common share $(119.69) Weighted average common shares used in basic and diluted computations 240
ADJUSTMENTS HISTORICAL ADJUSTMENTS FOR 2000 FOR 2000 FINANCING COMPLETED COMPLETED PRO FORMA TRANSACTIONS(2) TRANSACTIONS(3) TRANSACTIONS AS ADJUSTED --------------- --------------- ------------ ----------- (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) Net broadcast revenues $26,678 $ 51,311 Station operating expenses 16,676 34,794 Depreciation and amortization 7,045 $ 3,549(4) 14,282 Corporate general and administrative expenses 714 4,081 ------- ------- -------- -------- Operating income (loss) 2,243 (3,549) (1,846) Interest expense $ 6,306 (1,665) (4,400)(6) (6,065) Other income (expense), net 76 (349) ------- ------- -------- -------- Income (loss) from continuing operations, before income taxes 6,306 654 (7,949) (8,260) Income tax expense (494) 494 -- ------- ------- -------- -------- Income (loss) from continuing operations 6,306 160 (7,455) (8,260) Preferred stock dividends and accretion 22,932 -- -- ------- ------- -------- -------- Income (loss) from continuing operations attributable to common stockholders $29,238 $ 160 $ (7,455) $ (8,260) ======= ======= ======== ======== Basic and diluted loss per common share $ (.24) Weighted average common shares used in basic and diluted computations 34,516(7)
See accompanying Notes to the Unaudited Pro Forma Condensed Consolidated Statements of Operations. Page 4 5 REGENT COMMUNICATIONS, INC. UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS FOR THE SIX MONTHS ENDED JUNE 30, 2000
ADJUSTMENTS HISTORICAL ADJUSTMENTS FOR 2000 FOR 2000 HISTORICAL FINANCING COMPLETED COMPLETED PRO FORMA REGENT TRANSACTIONS(2) TRANSACTIONS(3) TRANSACTIONS AS ADJUSTED ---------- --------------- --------------- ------------ ----------- (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) Net broadcast revenues $ 18,138 $ 7,425 $25,563 Station operating expenses 12,697 4,309 17,006 Depreciation and amortization 3,269 4,830 $ (792)(4) 7,307 Corporate general and administrative expenses 2,131 232 2,363 -------- ------- ------- ------- ------- Operating income (loss) 41 (1,946) 792 (1,113) Interest expense (2,478) $ 2,478 -- (2,200)(6) (2,200) Other income, net 728 1 729 -------- ------- ------- ------- ------- Income (loss) from continuing operations, before income taxes (1,709) 2,478 (1,945) (1,408) (2,584) Income tax (expense) benefit -- 200 (200) -- -------- ------- ------- ------- ------- Income (loss) from continuing operations (1,709) 2,478 (1,745) (1,608) (2,584) Preferred stock dividends and accretion (27,240) 27,240 -- -- -------- ------- ------- ------- ------- Income (loss) from continuing operations attributable to common stockholders $(28,949) $29,718 $(1,745) $(1,608) $(2,584) ======== ======= ======= ======= ======= Basic and diluted income (loss) per common share $ (.98) $ (.07) Weighted average common shares used in basic and diluted computations 29,365 34,582(7)
See accompanying Notes to the Unaudited Pro Forma Condensed Consolidated Statements of Operations. Page 5 6 REGENT COMMUNICATIONS, INC. NOTES TO THE UNDAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (1) Adjusts for historical revenues and expenses for the year ended December 31, 1999 for stations acquired or disposed of by us during 1999. The adjustment reflects our acquisitions of three radio stations in the St. Cloud, Minnesota market and three radio stations in the Erie, Pennsylvania market and our dispositions of one radio station in Charleston, South Carolina, one radio station in San Diego, California, three radio stations in Kingman, Arizona and two radio stations in Lake Tahoe, California. The following table summarizes the historical revenues and expenses of the stations acquired by us during 1999 for the period from January 1,1999 through the date they were acquired by us and eliminates the historical revenues and expenses of the stations we divested during 1999 for the period from January 1, 1999 through the date we divested the stations: HISTORICAL 1999 COMPLETED TRANSACTIONS FOR THE YEAR ENDED DECEMBER 31, 1999
HISTORICAL 1999 HISTORICAL HISTORICAL HISTORICAL COMPLETED ERIE ST. CLOUD DISPOSITIONS TRANSACTIONS ---------- ---------- ------------ ------------ (DOLLARS IN THOUSANDS) Net broadcast revenues $2,077 $1,007 $(2,305) $ 779 Station operating expenses 1,081 657 (1,945) (207) Depreciation and amortization 609 72 (257) 424 Corporate general and administrative expenses 376 217 -- 593 ------ ------ ------- ------ Operating income (loss) 11 61 (103) (31) Interest expense (380) (39) (1) (420) Other income, net 13 -- -- 13 ------ ------ ------- ------ Income (loss) from continuing operations, before income taxes (356) 22 (104) (438) Income tax expense -- -- -- -- ------ ------ ------- ------ Income (loss) from continuing operations $ (356) $ 22 $ (104) $ (438) ====== ====== ======= ======
Page 6 7 (2) Adjustments for Financing Transactions reflects the decrease in interest expense related to the use of proceeds from the private and public offerings to redeem our Series B convertible preferred stock, to pay all accumulated, unpaid dividends on all series of preferred stock and to repay all of our borrowings under our former bank credit facility, as well as, to eliminate preferred stock dividends and accretion. A non-recurring charge of $1,114,000 to write off deferred financing costs related to our former bank credit facility has not been reflected in the accompanying Unaudited Pro Forma Condensed Consolidated Statements of Operations. (3) Adjusted for historical revenues and expenses of stations acquired or disposed by us in 2000. The adjustment reflects our acquisition of three radio stations in El Paso, Texas, five radio stations in Utica, New York, and four radio stations in Watertown, New York completed January 2000, and six radio stations in Albany, New York and four radio stations in Grand Rapids, Michigan completed August 24, 2000. The adjustment also reflects our disposition of three radio stations in Mansfield, Ohio and five radio stations in Victorville, California completed August 24, 2000. The following table summarizes the historical revenues and expenses for the year ended December 31, 1999 of the stations acquired by us in 2000 and eliminates the historical revenues and expenses for the year ended December 31, 1999 of the stations we divested in 2000. HISTORICAL 2000 COMPLETED TRANSACTIONS For the Year Ended December 31, 1999
HISTORICAL HISTORICAL HISTORICAL HISTORICAL 2000 HISTORICAL HISTORICAL WQBJ,WQBK WGNA-FM,WABT WGRD,WTRV HISTORICAL COMPLETED EL PASO FOREVER WTMM WGNA-AM WLHT,WNNZ DISPOSITIONS TRANSACTIONS ---------- ---------- ---------- ------------ ---------- ------------ ------------ (DOLLARS IN THOUSANDS) Net broadcast revenues $5,288 $8,112 $3,116 $6,534 $9,211 $(5,583) $26,678 Station operating expenses 3,821 4,196 2,691 3,508 6,038 (3,578) 16,676 Depreciation and amortization 620 997 503 3,250 2,867 (1,192) 7,045 Corporate general and administrative expenses 180 -- 81 187 266 -- 714 ------ ------ ------ ------ ------ ------- ------- Operating income (loss) 667 2,919 (159) (411) 40 (813) 2,243 Interest expense (801) (864) -- -- -- -- (1,665) Other income, net -- 44 -- (4) 37 (1) 76 ------ ------ ------ ------ ------ ------- ------- Income (loss) from continuing operations, before income taxes (134) 2,099 (159) (415) 77 (814) 654 Income tax expense -- -- -- (128) (366) -- (494) ------ ------ ------ ------ ------ ------- ------- Income (loss) from continuing operations $ (134) $2,099 $ (159) $ (543) $ (289) $ (814) $ 160 ====== ====== ====== ====== ====== ======= =======
Page 7 8 The following table summarizes the historical revenues and expenses of the stations acquired by us during 2000 for the period January 1, 2000 through the date they were acquired by us and eliminates the historical revenues and expenses of the stations we divested during 2000 for the period January 1, 2000 through the date we divested the stations: HISTORICAL 2000 COMPLETED TRANSACTIONS For the Six Months Ended June 30, 2000
HISTORICAL HISTORICAL HISTORICAL HISTORICAL 2000 HISTORICAL HISTORICAL WQBJ,WQBK WGNA-FM,WABT WGRD,WTRV HISTORICAL COMPLETED EL PASO FOREVER WTMM WGNA-AM WLHT,WNNZ DISPOSITIONS TRANSACTIONS ---------- ---------- ---------- ------------ --------- ------------ ------------ (DOLLARS IN THOUSANDS) Net broadcast revenues $389 $590 $1,271 $3,256 $4,698 $(2,779) $ 7,425 Station operating expenses 332 312 883 1,768 2,910 (1,896) 4,309 Depreciation and amortization 52 83 243 2,576 2,364 (488) 4,830 Corporate general and administrative expenses -- -- 37 76 119 -- 232 ---- ---- ------ ------ ------ ------- ------- Operating income (loss) 5 195 108 (1,164) (695) (395) (1,946) Interest expense -- -- -- -- -- -- -- Other income, net 1 -- -- -- -- -- 1 ---- ---- ------ ------ ------ ------- ------- Income (loss) from continuing operations, before income taxes 6 195 108 (1,164) (695) (395) (1,945) Income tax (expense) benefit -- -- -- 224 (24) -- 200 ---- ---- ------ ------ ------ ------- ------- Income (loss) from continuing operations $ 6 $195 $ 108 $ (940) $ (719) $ (395) $(1,745) ==== ==== ====== ====== ====== ======= =======
Page 8 9 (4) Adjustment gives effect to the depreciation and amortization of assets acquired in our transactions in 1999 and 2000. Assigned lives for the acquired assets are as follows: FCC licenses and goodwill, 20 years; buildings, 40 years; broadcasting equipment, 6 to 13 years; furniture and fixtures, 5 years; and other intangibles, 5 to 15 years. Depreciation expense has been calculated on a straight-line basis. (5) Adjustment to reflect increased interest expense resulting from the debt incurred for the St. Cloud, Minnesota and Erie, Pennsylvania stations acquired in 1999.
SIX MONTHS YEAR ENDED ENDED DECEMBER 31, 1999 JUNE 30, 2000 ----------------- ------------- (IN THOUSANDS) Interest on the $14,818,000 indebtedness under our former bank credit facility as if borrowed from January 1, 1999 at 8.50% (variable) $1,260 $ 107 Less: historical interest expense recorded by us in connection with the St. Cloud and Erie stations acquired (622) (107) ------ ----- Net adjustment $ 638 $ -- ====== =====
The variable rate used to calculate pro forma interest expense on our former bank credit facility is 8.50%. The rate is based on the rate in effect at December 31, 1999. In addition an adjustment to reflect additional dividend requirements and accretion related to convertible preferred stock that was issued in conjunction with the acquisition of the St. Cloud, Minnesota and Erie, Pennsylvania stations acquired in 1999. (6) Adjustment to reflect increased interest expense resulting from indebtedness of $44,000,000 under our existing bank credit facility as if borrowed from January 1, 1999 at 10.00%. The variable interest rate used to calculate pro forma interest on our existing bank credit facility is based on the rate in effect on August 24, 2000. A 0.125% change in the interest rate on our existing bank credit facility results in a $61,000 and $46,000 change in the pro forma interest expense for the year ended December 31, 1999 and for the six months ended June 30, 2000, respectively. (7) Historical weighted average common shares have been adjusted to reflect the issuance of 18,400,000 common shares in the January 2000 public offering of common stock (including the underwriters' overallotment of 2,400,000 shares exercised in February 2000), together with the conversion of 15,775,839 shares of convertible preferred stock to the same number of common shares, the redemption of 1,000,000 shares of convertible preferred stock, the repurchase of 275,152 shares of common stock and the issuance of 100,000 shares of common stock in connection with the acquisition of stations in New York, all of which was completed in January 2000. Basic and diluted earnings per share are the same for all periods presented due to the effect of potential common stock being antidilutive on a historical basis and proforma basis. Page 9 10 REGENT COMMUNICATIONS, INC. Unaudited Pro Forma Condensed Consolidated Balance Sheet at June 30, 2000
AUGUST PRO FORMA HISTORICAL 2000 AS REGENT TRANSACTIONS(1) ADJUSTED ---------- --------------- --------- (IN THOUSANDS) ASSETS Current assets: Cash and cash equivalents $ 33,792 $(33,792) $ -- Accounts receivable, net 7,689 -- 7,689 Other current assets 495 -- 495 Assets held for sale 2,000 -- 2,000 -------- -------- -------- Total current assets 43,976 (33,792) 10,184 Property and equipment, net 17,723 3,164 20,887 Intangible assets, net 119,738 102,718 222,456 Other assets, net 7,190 -- 7,190 -------- -------- -------- Total assets $188,627 $ 72,090 $260,717 ======== ======== ======== LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Current portion of long-term debt $ 60 -- $ 60 Other current liabilities 3,434 $ 2,673 6,107 -------- -------- -------- Total current liabilities 3,494 2,673 6,167 Long-term debt, less current portion 540 44,000 44,540 Other long-term liabilities 92 7,607 7,699 -------- -------- -------- Total liabilities 4,126 54,280 58,406 Stockholders' equity (deficit): Preferred stock -- -- -- Common stock 349 -- 349 Treasury stock (1,513) -- (1,513) Additional paid-in capital 256,559 -- 256,559 Retained deficit (70,894) 17,810 (53,084) -------- -------- -------- Total stockholders' equity 184,501 17,810 202,311 -------- -------- -------- Total liabilities and stockholders' equity $188,627 $ 72,090 $260,717 ======== ======== ========
See accompanying Notes to the Unaudited Pro Forma Condensed Consolidated Balance Sheet. Page 10 11 REGENT COMMUNICATIONS, INC. Notes to the Unaudited Pro Forma Condensed Consolidated Balance Sheet (1) Records the purchase of substantially all of the assets, excluding accounts receivable, of four FM and two AM stations in Albany, New York and three FM and one AM stations in Grand Rapids, Michigan in exchange for substantially all the assets of our five FM and three AM stations in the Mansfield, Ohio and Victorville, California markets with a fair value of $34,812,000 and the payment by us of $80,465,000 in cash.
STATIONS ACQUIRED STATIONS DIVESTED ---------------------------------------------- ----------------------- WQBJ,WQBK WGNA-FM,WABT WGRD,WTRV MANSFIELD VICTORVILLE WTMM WGNA-AM WLHT,WNNZ STATIONS STATIONS TOTAL --------- ------------ --------- --------- ----------- ------ (IN THOUSANDS) FCC licenses 11,260 49,873 47,405 (5,562) (8,138) 94,838 Property and equipment, net 1,475 1,509 2,225 (1,081) (964) 3,164 Goodwill 438 6,143 2,556 (352) (905) 7,880 Deferred tax liability -- (5,705) (1,902) -- -- (7,607) ------ ------- ------- ------ ------- ------- 13,173 51,820 50,284 (6,995) (10,007) 98,275 ====== ======= ======= ====== ======= =======
The cash portion of the transaction of $80,465,000 was funded through the use of borrowings in the amount of $44,000,000 under our bank credit facility, from the cash proceeds of the January 2000 public offering and with cash from operations. Page 11 12 (c) EXHIBITS. The Exhibit Index following the signature page hereof constitutes a list of all Exhibits filed with or incorporated by reference in this Form 8-K/A. Page 12 13 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. REGENT COMMUNICATIONS, INC. Date: November 7, 2000 By: /s/ Terry S. Jacobs ------------------------- Terry S. Jacobs, Chairman of the Board and Chief Executive Officer Page 13 14 EXHIBIT INDEX The following exhibits are filed, or incorporated by reference where indicated, as part of this Current Report on Form 8-K/A: EXHIBIT NUMBER EXHIBIT DESCRIPTION - ------ ------------------- 2(a) Asset Exchange Agreement dated as of March 12, 2000 by and among Clear Channel Broadcasting, Inc., Clear Channel Broadcasting Licenses, Inc., Capstar Radio Operating Company, Capstar TX Limited Partnership, Regent Broadcasting of Victorville, Inc., Regent Licensee of Victorville, Inc., Regent Broadcasting of Palmdale, Inc., Regent Licensee of Palmdale, Inc., Regent Broadcasting of Mansfield, Inc. and Regent Licensee of Mansfield, Inc. (previously filed as Exhibit 2(g) to the Registrant's Form 10-K for the year ended December 31, 1999 and incorporated herein by this reference) 2(b) First Amendment to Asset Exchange Agreement made on May 31, 2000 by and among Clear Channel Broadcasting, Inc., Clear Channel Broadcasting Licenses, Inc., Capstar Radio Operating Company, Capstar TX Limited Partnership, Regent Broadcasting of Victorville, Inc., Regent Licensee of Victorville, Inc., Regent Broadcasting of Palmdale, Inc., Regent Licensee of Palmdale, Inc., Regent Broadcasting of Mansfield, Inc. and Regent Licensee of Mansfield, Inc. (previously filed as Exhibit 2(b) to the Registrant's Form 10-Q for the quarter ended June 30, 2000 and incorporated herein by this reference) 2(c) Second Amendment to Asset Exchange Agreement made on June 2, 2000 by and among Clear Channel Broadcasting, Inc., Clear Channel Broadcasting Licenses, Inc., Capstar Radio Operating Company, Capstar TX Limited Partnership, Regent Broadcasting of Victorville, Inc., Regent Licensee of Victorville, Inc., Regent Broadcasting of Mansfield, Inc. and Regent Licensee of Mansfield, Inc. (previously filed as Exhibit 2(c) to the Registrant's Form 10-Q for the quarter ended June 30, 2000 and incorporated herein by this reference) 10(a) Letter agreement dated March 12, 2000 from Clear Channel Communications, Inc. addressed to Regent Broadcasting of Victorville, Inc., Regent Licensee of Victorville, Inc., Regent Broadcasting of Palmdale, Inc., Regent Licensee of Palmdale, Inc., Regent Broadcasting of Mansfield, Inc. and Regent Licensee of Mansfield, Inc. (previously filed as Exhibit 10(b) to the Registrant's Form 10-K for the year ended December 31, 1999 and incorporated herein by this reference) Page 14 15 REPORT OF INDEPENDENT ACCOUNTANTS To the Board of Directors of Regent Communications, Inc. In our opinion, the accompanying combined balance sheets and the related combined statements of operations, cash flows, and stations' equity present fairly, in all material respects, the financial position of Clear Channel Communications, Inc. radio stations WQBJ-FM, WQBK-FM and WTMM-AM (the "Stations") at December 31, 1999 and 1998, and the results of their operations and their cash flows for the years then ended in conformity with accounting principles generally accepted in the United States of America. These financial statements are the responsibility of the Stations' management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these statements in accordance with auditing standards generally accepted in the United States of America, which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for the opinion expressed above. /s/ PricewaterhouseCoopers LLP November 3, 2000 Cincinnati, Ohio F-1 16 RADIO STATIONS WQBJ-FM, WQBK-FM AND WTMM-AM COMBINED BALANCE SHEETS - --------------------------------------------------------------------------------
JUNE 30, DECEMBER 31, 2000 1999 1998 ----------- ---------- ---------- (UNAUDITED) ASSETS Current assets: Cash $ 73,052 $ 3,917 $ 18,544 Accounts receivable, less allowance for doubtful accounts of $35,622, $19,617 and $21,188 in 2000, 1999 and 1998 709,775 615,639 554,728 Barter receivable 130,902 31,350 -- Other current assets 14,497 12,718 19,611 ---------- ---------- ---------- Total current assets 928,226 663,624 592,883 Property and equipment, net 1,001,146 978,890 1,082,208 Intangible assets, net 4,814,196 4,960,148 5,263,974 ---------- ---------- ---------- Total assets 6,743,568 6,602,662 6,939,065 ---------- ---------- ---------- LIABILITIES AND STATIONS' EQUITY Current liabilities: Accounts payable -- 5,000 -- Accrued expenses 26,047 17,573 9,835 Barter payable 60,190 56,800 -- ---------- ---------- ---------- Total current liabilities 86,237 79,373 9,835 Commitments and contingencies -- -- -- Stations' equity 6,657,331 6,523,289 6,929,230 ---------- ---------- ---------- Total stations' equity 6,657,331 6,523,289 6,929,230 ---------- ---------- ---------- Total liabilities and stations' equity $6,743,568 $6,602,662 $6,939,065 ========== ========== ==========
The accompanying notes are an integral part of these financial statements. F-2 17 RADIO STATIONS WQBJ-FM, WQBK-FM AND WTMM-AM COMBINED STATEMENTS OF OPERATIONS - --------------------------------------------------------------------------------
SIX MONTHS ENDED YEAR ENDED JUNE 30, DECEMBER 31, 2000 1999 1999 1998 ----------- ----------- ----------- ----------- (UNAUDITED) Gross broadcast revenues $1,435,024 $1,663,789 $3,440,635 $2,682,619 Less: Agency commissions 164,227 159,590 324,984 286,221 ---------- ---------- ---------- ---------- Net broadcast revenues 1,270,797 1,504,199 3,115,651 2,396,398 Station operating expenses 883,087 1,357,478 2,691,061 2,227,822 Depreciation and amortization 242,926 248,094 503,321 531,336 Allocated corporate general and administrative expenses 36,712 42,242 80,985 66,183 ---------- ---------- ---------- ---------- Operating income (loss) 108,072 (143,615) (159,716) (428,943) Other income (expense), net (311) -- -- -- ---------- ---------- ---------- ---------- Income (loss) before income taxes 107,761 (143,615) (159,716) (428,943) Income tax expense -- -- -- -- ---------- ---------- ---------- ---------- Net income (loss) $ 107,761 $ (143,615) $ (159,716) $ (428,943) ========== ========== ========== ==========
The accompanying notes are an integral part of these financial statements. F-3 18 RADIO STATIONS WQBJ-FM, WQBK-FM AND WTMM-AM COMBINED STATEMENTS OF CASH FLOWS - --------------------------------------------------------------------------------
SIX MONTHS ENDED YEAR ENDED JUNE 30, DECEMBER 31, 2000 1999 1999 1998 --------- --------- --------- --------- (UNAUDITED) (UNAUDITED) Cash flows from operating activities: Net income (loss) $ 107,761 $(143,615) $(159,716) $(428,943) Adjustments to reconcile net loss to cash flows from operating activities: Depreciation and amortization 242,926 248,094 503,321 531,336 Allocation of corporate expenses 36,712 42,242 80,985 66,189 Changes in operating assets and liabilities: Accounts receivable (193,688) 68,778 (92,261) (167,626) Other current assets (1,777) 10,550 6,893 (34) Accounts payable (1,614) -- 61,800 (55,777) Accrued expenses 8,474 5,630 7,738 (5,691) --------- --------- --------- --------- Net cash flows provided/(used) by operating activities 198,794 231,679 408,760 (60,546) --------- --------- --------- --------- Cash flows used in investing activities: Purchase of property and equipment (113,268) (87,055) (96,177) (38,817) --------- --------- --------- --------- Net cash flows used in investing activities (113,268) (87,055) (96,177) (38,817) --------- --------- --------- --------- Cash flows from financing activities: Net transfers (to)/from Parent Company (16,391) (149,781) (327,210) 114,193 --------- --------- --------- --------- Net cash flows (used)/provided in financing activities (16,391) (149,781) (327,210) 114,193 --------- --------- --------- --------- Net (decrease) increase in cash 69,135 (5,157) (14,627) 14,830 Cash at the beginning of the period 3,917 18,544 18,544 3,714 --------- --------- --------- --------- Cash at the end of the period $ 73,052 $ 13,387 $ 3,917 $ 18,544 ========= ========= ========= =========
The accompanying notes are an integral part of these financial statements. F-4 19 RADIO STATIONS WQBJ-FM, WQBK-FM AND WTMM-AM COMBINED STATEMENTS OF STATIONS' EQUITY - -------------------------------------------------------------------------------- Balance at December 31, 1997 $7,177,791 Net transfers to/from parent company 114,193 Corporate expense allocation 66,189 Net loss (428,943) ---------- Balance at December 31, 1998 6,929,230 Net transfers to/from parent company (327,210) Corporate expense allocation 80,985 Net loss (159,716) ---------- Balance at December 31, 1999 $6,523,289 ========== The accompanying notes are an integral part of these financial statements. F-5 20 RADIO STATIONS WQBJ-FM, WQBK-FM AND WTMM-AM NOTES TO COMBINED FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- 1. BASIS OF PRESENTATION: These financial statements of WQBJ-FM, WQBK-FM and WTMM-AM (collectively referred to as the "Stations"), located in Albany, NY owned by Clear Channel Communications, Inc. ("Clear Channel" or the "Parent Company"), have been prepared in conjunction with the sale of the Stations to Regent Communications Inc. (see Note 7). These combined financial statements present the operations of the Stations on a "carved-out" basis. The combined financial statements have been prepared as if the Stations had operated as a stand-alone entity for all periods presented and include only those assets, liabilities, revenues and expenses directly attributable to the Stations' operations. The Stations are allocated certain corporate expenses for services provided by the Parent Company based upon the percentage of revenue generated by each station to total revenue of all stations operated by the Parent Company. Though management is of the opinion that all allocations used are reasonable and appropriate, other allocations might be used that could produce results substantially different from those reflected herein, and these cost allocations might not be indicative of amounts which might be paid to unrelated parties for similar services or if the Stations had been operated on a stand-alone basis. The Parent Company's corporate departmental expenses of $80,985 and $66,189 have been allocated to the Stations during 1999 and 1998, respectively, for management salaries and benefits, legal services, corporate office and other miscellaneous expenses. The financial information included herein does not necessarily reflect the financial position and results of operations that the Stations would have experienced had they operated as a stand-alone entity during the periods covered and may not be indicative of future operations or financial position. The Stations were acquired by Clear Channel on March 15, 1997 for $7,500,000 in cash and was accounted for as a purchase transaction. The financial statements for the six months ended June 30, 2000 and 1999 are unaudited, but, in the opinion of management, such financial statements have been presented on the same basis as the audited financial statements for the year ended December 31, 1999 and include all adjustments, consisting only of normal recurring adjustments necessary for a fair presentation of the financial position and results of operations and cash flows for these periods. During the periods presented, the Stations did not maintain a significant cash balance, but were funded as needed by the Parent Company. In turn, if the Stations generated positive cash flow, the amounts were transferred back to the Parent Company. The net of these activities for each period has been presented in Stations' Equity as net transfers to and from the Parent Company. 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: The significant accounting principles followed by the Stations and the methods of applying those principles that materially affect the determination of financial position, results of operation, and cash flow are summarized below. a. CONCENTRATIONS OF CREDIT RISK: Financial instruments which potentially subject the Stations to concentrations of credit risk consist principally of accounts receivable. The credit risk is limited due to the large number of customers comprising the Stations' customer base. F-6 21 RADIO STATIONS WQBJ-FM, WQBK-FM AND WTMM-AM NOTES TO COMBINED FINANCIAL STATEMENTS (continued) - -------------------------------------------------------------------------------- b. FAIR VALUE OF FINANCIAL INSTRUMENTS: Financial instruments as of December 31, 1999 and 1998 consist of cash, accounts receivable and accounts payable, all of which approximate fair value. c. PROPERTY AND EQUIPMENT: Purchases of property and equipment, including additions and improvements and expenditures for repairs and maintenance that significantly add to productivity or extend the economic lives of the assets, are capitalized at cost and depreciated on a straight-line basis over their estimated useful lives, as follows: Buildings and improvements 20 - 30 years Broadcasting towers and equipment 7 - 10 years Computers 3 - 5 years Furniture and fixtures 7 - 10 years d. INTANGIBLE ASSETS: Intangible assets are comprised of FCC licenses, goodwill and five-year non-compete agreements. FCC licenses are stated at cost and are being amortized using the straight-line method over 25 years. Goodwill is stated at cost and is being amortized over 25 years. The five-year non-compete agreements were obtained by the Parent Company in connection with the initial purchase of the Stations. The five-year non-compete agreements are being amortized over the period of the agreement and expire March 2002. The carrying value of intangible assets is reviewed by the Stations when events or circumstances suggest that their recoverability may be impaired. If this review indicates that the intangibles will not be recoverable, as determined based on the undiscounted cash flows of the entity over the remaining amortization period, the carrying value of the intangibles will be reduced to their respective fair values. e. BUSINESS SEGMENT AND REVENUE RECOGNITION: The Stations operate in one business segment, and revenue is derived primarily from the sale of commercial airtime to local and national advertisers in the Albany, New York market area. Revenue is recognized as commercials are broadcast. The stations also derive revenues from promotional events which resulted in revenues of approximately $338,000 and $23,000 for the years ended December 31, 1999 and 1998. f. BARTER AGREEMENTS: The Stations enter into trade agreements which give rise to sales of advertising air time in exchange for products and services. Revenues from trade agreements are recognized at the fair market value of the products or services received as advertising airtime is broadcast. Products and services received are expensed when used in the broadcast operations. The revenues from trade agreements were $120,843, $122,301, $234,567 and $158,952 for the six months ended June 30, 2000 and 1999 and the years ended December 31, 1999 and 1998, respectively. The products and services expensed were $22,793, $114,946, $260,017 and $126,257 for the six months ended June 30, 2000 and 1999 and the years ended December 31, 1999 and 1998, respectively. g. INCOME TAXES: The Stations were part of the combined return of the Parent Company. For purposes of separate financial statement presentation, the Stations' current and deferred income taxes have been determined as if the Stations' were a separate taxpayer. Deferred tax assets and liabilities have not been allocated to the Stations. F-7 22 RADIO STATIONS WQBJ-FM, WQBK-FM AND WTMM-AM NOTES TO COMBINED FINANCIAL STATEMENTS (continued) - -------------------------------------------------------------------------------- h. USE OF ESTIMATES: The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. 3. PROPERTY AND EQUIPMENT: Property and equipment at December 31, 1999 and 1998 consisted of the following:
DECEMBER 31, 1999 1998 ---------- ---------- Land $ 143,700 $ 143,700 Building and improvements 10,000 10,000 Broadcasting towers and equipment 1,344,170 1,189,366 Furniture and fixtures 50,669 91,103 Construction in progress 5,223 23,416 ---------- ---------- Total property and equipment 1,553,762 1,457,585 Less: accumulated depreciation 574,872 375,377 ---------- ---------- Property and equipment, net $ 978,890 $1,082,208 ========== ==========
Depreciation expense for the years ended December 31, 1999 and 1998 was $199,495 and $227,510, respectively. 4. INTANGIBLE ASSETS: Intangible assets at December 31, 1999 and 1998 consisted of the following:
DECEMBER 31, 1999 1998 ------------ ---------- Goodwill $2,672,835 $2,672,835 FCC licenses 2,672,835 2,672,835 Five year non-compete agreements 450,000 450,000 ---------- ---------- Total intangibles 5,795,670 5,795,670 Less: accumulated amortization 835,522 531,696 ---------- ---------- Intangible assets, net $4,960,148 $5,263,974 ========== ==========
F-8 23 RADIO STATIONS WQBJ-FM, WQBK-FM AND WTMM-AM NOTES TO COMBINED FINANCIAL STATEMENTS (continued) - -------------------------------------------------------------------------------- Amortization expense for the years ended December 31, 1999 and 1998 was $303,826 and $303,826, respectively. 5. COMMITMENTS AND CONTINGENCIES: The Stations lease office equipment, studio facilities and tower space under certain non-cancelable operating leases. Future minimum lease payments are as follows: 2000 $ 73,223 2001 57,178 2002 56,400 2003 54,000 2004 27,000 Thereafter -- -------- $267,801 -------- Rent expense for the years ended December 31, 1999 and 1998 was $104,231 and $113,200, respectively. F-9 24 RADIO STATIONS WQBJ-FM, WQBK-FM AND WTMM-AM NOTES TO COMBINED FINANCIAL STATEMENTS (continued) - -------------------------------------------------------------------------------- 6. RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS: In December 1999, Securities Exchange Commission (SEC) staff issued SAB 101 "Revenue Recognition in Financial Statement," which was effective for fiscal years beginning after December 15, 1999, but was delayed until no later than the fourth fiscal quarter of fiscal years beginning after December 15, 1999 by the issuance of SAB 101B. SAB 101 provides guidance on applying generally accepted accounting principles for recognizing revenue. The Stations believe that applying the provisions of SAB 101 will not significantly affect the Stations. 7. SUBSEQUENT EVENT: On August 24, 2000, pursuant to the terms of an Asset Exchange Agreement dated as of March 12, 2000, as amended, Regent Communications, Inc. ("Regent") acquired from Clear Channel Broadcasting, Inc., Capstar Radio Operating Company and their related entities substantially all of the assets of four FM and two AM radio stations in Albany, New York and three FM and one AM radio stations in Grand Rapids, Michigan in exchange for substantially all of the assets of Regent's five FM and three AM radio stations in the Mansfield, Ohio and Victorville, California markets and the payment by Regent of $80,465,000 in cash. F-10 25 REPORT OF INDEPENDENT ACCOUNTANTS To the Board of Directors of Regent Communications, Inc. In our opinion, the accompanying combined balance sheets and the related combined statements of operations, cash flows, and stations' equity present fairly, in all material respects, the financial position of AMFM Inc.'s radio stations WGNA-FM, WGNA-AM and WABT-FM (the "Stations"), at December 31, 1999 and 1998, and the results of their operations and their cash flows for the period from July 13, 1999 to December 31, 1999, the period from January 1, 1999 to July 12, 1999, the period from May 28, 1998 to December 31, 1998 and the period from January 1, 1998 to May 27, 1998, in conformity with accounting principles generally accepted in the United States of America. These financial statements are the responsibility of the Stations' management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these statements in accordance with auditing standards generally accepted in the United States of America, which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for the opinion expressed above. /s/ PricewaterhouseCoopers LLP November 3, 2000 Cincinnati, Ohio F-11 26 RADIO STATIONS WGNA-FM, WGNA-AM AND WABT-FM COMBINED BALANCE SHEETS - --------------------------------------------------------------------------------
AMFM CAPSTAR --------------------------- ----------- JUNE 30, DECEMBER 31, 2000 1999 1998 ----------- ----------- ----------- ASSETS (unaudited) Current assets Cash $ 131,065 $ 29,505 | $ 262,206 Accounts receivable, less allowance for doubtful | accounts of $40,109, $85,726 and $69,952, respectively | in 2000, 1999 and 1998 1,587,279 1,479,605 | 1,397,893 Barter receivable 136,272 62,346 | 18,438 Other current assets 27,168 13,669 | 5,265 ----------- ----------- | ----------- | Total current assets 1,881,785 1,585,125 | 1,683,802 | Property and equipment, net 1,530,980 1,610,711 | 1,642,159 Intangible assets, net 69,920,496 72,410,246 | 58,729,718 ----------- ----------- | ----------- | Total assets 73,333,260 75,606,082 | 62,055,679 ----------- ----------- | ----------- | LIABILITIES AND STATIONS' EQUITY | Current liabilities | Accounts payable 35,211 67,757 | 136,833 Barter payable 215,546 107,463 | 81,657 Accrued bonus 46,219 17,401 | 2,500 Accrued commissions 74,906 56,677 | 61,949 Other accrued expenses 4,900 18,826 | 4,120 ----------- ----------- | ----------- | Total current liabilities 376,782 268,124 | 287,059 ----------- ----------- | ----------- | Commitments and contingencies -- -- | -- Stations' equity 72,956,478 75,337,958 | 61,768,620 ----------- ----------- | ----------- | Total stations' equity 72,956,478 75,337,958 | 61,768,620 ----------- ----------- | ----------- | Total liabilities and stations' equity $73,333,260 $75,606,082 | $62,055,679 =========== =========== | ===========
The accompanying notes are an integral part of these financial statements. F-12 27 RADIO STATIONS WGNA-FM, WGNA-AM AND WABT-FM COMBINED STATEMENTS OF OPERATIONS - --------------------------------------------------------------------------------
AMFM CAPSTAR AMFM CAPSTAR SFX ---------- | ---------- ------------ | ----------------------------- | ------------- SIX MONTHS | SIX MONTHS PERIOD FROM | PERIOD FROM PERIOD FROM | PERIOD FROM ENDED | ENDED JULY 13 TO | JANUARY 1 TO MAY 28 TO | JANUARY 1 TO JUNE 30, | JUNE 30, DECEMBER 31, | JULY 12, DECEMBER 31, | MAY 27 2000 | 1999 1999 | 1999 1998 | 1998 ---------- | ---------- ------------ | ------------ ------------ | ------------- (unaudited) | (unaudited) | | | | | Gross broadcast revenues $3,676,669 | $3,487,168 $3,618,358 | $3,721,722 $4,468,316 | $2,316,300 Less: Agency commissions 420,727 | 373,598 396,599 | 409,682 530,573 | 266,719 ---------- | ---------- ---------- | ---------- ---------- | ---------- | | | Net broadcast revenues 3,255,942 | 3,113,570 3,221,759 | 3,312,040 3,937,743 | 2,049,581 | | | Station operating expenses 1,767,684 | 1,753,971 1,637,562 | 1,870,204 1,617,819 | 998,860 Depreciation and amortization 2,575,718 | 821,626 2,360,144 | 889,728 924,278 | 709,555 Allocated corporate general and administrative expenses 76,367 | 80,550 99,870 | 87,168 97,618 | 50,542 ---------- | ---------- ---------- | ---------- ---------- | ---------- | | | Operating income (loss) (1,163,827) | 457,423 (875,817) | 464,940 1,298,028 | 290,624 | | | Other income (expense), net -- | -- (22,679) | 18,347 47,154 | (27,048) ---------- | ---------- ---------- | ---------- ---------- | ---------- | | | Income (loss) before income taxes (1,163,287) | 457,423 (898,496) | 483,287 1,345,182 | 263,576 | | | Income tax expense (benefit) (223,591) | 250,121 (137,621) | 266,062 616,416 | 144,763 ---------- | ---------- ---------- | ---------- ---------- | ---------- | | | Net income (loss) $ (940,236) | $ 207,302 $ (760,875) | $ 217,225 $ 728,766 | $ 118,813 ========== | ========== ========== | ========== ========== | ==========
The accompanying notes are an integral part of these financial statements. F-13 28 RADIO STATIONS WGNA-FM, WGNA-AM AND WABT-FM COMBINED STATEMENTS OF CASH FLOWS - --------------------------------------------------------------------------------
AMFM CAPSTAR AMFM CAPSTAR SFX ---------- --------- ------------ -------------------------- ------------ SIX |SIX MONTHS PERIOD FROM |PERIOD FROM PERIOD FROM | PERIOD FROM MONTHS ENDED| ENDED JULY 13 TO |JANUARY 1 TO MAY 29 TO | JANUARY 1 TO JUNE 30, | JUNE 30 DECEMBER 31,| JULY 12, DECEMBER 31,| MAY 28, 2000 | 1999 1999 | 1999 1998 | 1998 ---------- | --------- ------------|------------ ------------| ------------ (unaudited)|(unaudited) | | | | | Cash flows from operating activities: | | | Net income (loss) $ (940,236)| $ 207,302 $ (760,875)|$ 217,225 $ 728,766 | $ 118,813 Adjustments to reconcile net income (loss) | | | to cash flows from operating activities: | | | Depreciation and amortization 2,575,718 | 821,626 2,360,144 | 889,728 924,278 | 709,555 Corporate allocated expenses 76,367 | 80,550 99,870 | 87,168 97,618 | 50,542 Changes in operating assets | | | and liabilities: | | | Accounts receivable (181,599)| (118,638) (3,937)| (121,681) (239,607)| 107,651 Other current assets (19,737)| (6,611) (1,793)| (5,924) (5,264)| -- Accounts payable 75,538 | 35,680 (63,396)| 20,125 40,485 | 55,354 Accrued expenses 33,121 | 64,543 (40,208)| 64,543 15,356 | (11,739) ---------- | --------- ---------- |----------- ----------- | ----------- | | | Net cash flows provided by operating activities 1,619,172 | 1,084,452 1,589,805 | 1,151,184 1,561,632 | 1,030,176 ---------- | --------- ---------- |----------- ----------- | ----------- | | | Cash flows from investing activities: | | | Purchase of property and equipment -- | (90,852) (25,356)| (90,852) (105,882)| -- ---------- | --------- ---------- |----------- ----------- | ----------- | | | Net cash flows used in investing activities -- | (90,852) (25,356)| (90,852) (105,882)| -- ---------- | --------- ---------- |----------- ----------- | ----------- | | | Cash flows from financing activities: | | | Owner distributions (1,517,612)|(1,017,051) (1,830,646)| (1,026,836) (1,337,585) | (949,468) ---------- | --------- ---------- |----------- ----------- | ----------- | | | Net cash flows used in financing activities (1,517,612)|(1,017,051) (1,830,646)| (1,026,836) (1,337,585) | (949,468) ---------- | --------- ---------- |----------- ----------- | ----------- | | | Net increase (decrease) in cash 101,560 | (23,451) (266,197)| 33,496 118,165 | 80,708 | | | Cash at the beginning of the period 29,505 | 262,206 295,702 | 262,206 144,041 | 63,333 ---------- | --------- ---------- |----------- ----------- | ----------- | | | Cash at the end of the period $ 131,065 | $ 238,755 $ 29,505 |$ 295,702 $ 262,206 | $ 144,041 ========== | ========= ========== |=========== =========== | ===========
The accompanying notes are an integral part of these financial statements. F-14 29 RADIO STATIONS WGNA-FM, WGNA-AM AND WABT-FM COMBINED STATEMENTS OF STATIONS' EQUITY - -------------------------------------------------------------------------------- Balance at December 31, 1997 (SFX) $46,073,899 Corporate allocated expenses 50,542 Net transfers to/from parent (949,468) Net income 118,813 ----------- Balance at May 27, 1998 (SFX) $45,293,786 ================================================================================ Balance at May 28, 1998 (Capstar) $59,525,577 Corporate allocated expenses 97,618 Net transfers to/from parent (1,337,585) Purchase of WABT assets 2,754,244 Net income 728,766 ----------- Balance at December 31, 1998 (Capstar) $61,768,620 Corporate allocated expenses 87,168 Net transfers to/from parent (1,026,836) Net income 217,225 ----------- Balance at July 12, 1999 (Capstar) $61,046,177 ================================================================================ Balance at July 13, 1999 (AMFM) $77,829,609 Corporate allocated expenses 99,870 Net transfers to/from parent (1,830,646) Net loss (760,875) Balance at December 31, 1999 (AMFM) $75,337,958 -----------
The accompanying notes are an integral part of these financial statements. F-15 30 RADIO STATIONS WGNA-FM, WGNA-AM AND WABT-FM NOTES TO COMBINED FINANCIAL STATEMENTS - ------------------------------------------------------------------------------- 1. BASIS OF PRESENTATION: These financial statements of WGNA-FM, WGNA-AM and WABT-FM, (collectively referred to as the "Stations") located in Albany, New York owned by AMFM Inc. ("AMFM") from July 13, 1999 through August 24, 2000 have been prepared in conjunction with the sale of the Stations to Regent Communications, Inc. (see Note 9). The period presented from January 1, 1998 to May 27, 1998 includes the results of operations of WGNA-FM and WGNA-AM. WGNA-FM/AM were owned by SFX Communications, Inc. ("SFX") prior to the acquisition of the stations by Capstar Communications, Inc. ("Capstar") on May 28, 1998. The period from May 28, 1998 through December 31, 1998 includes the results of operations of WGNA-FM and WGNA-AM from May 28 to December 31, 1998 and the results of operations of WABT-FM from October 5, 1998 to December 31, 1998. Capstar acquired WABT-FM on October 5, 1998 from Foley Broadcasting Inc. The period from January 1, 1999 to July 12, 1999 includes the results of operations of all three of the Stations while owned and operated by Capstar. On July 13, 1999 Chancellor Media Corporation acquired the stock of Capstar Communications and changed the mane of the combined entity to AMFM Inc. The period presented as AMFM contains the results of operations from July 13, 1999 forward for the period that the Stations were owned by AMFM. These combined financial statements present the operations of the Stations on a "carved-out" basis. The combined financial statements have been prepared as if the Stations had operated as a stand-alone entity for all periods presented, as described above, and include only those assets, liabilities, revenues and expenses directly attributable to the Stations' operations. The Stations are allocated certain corporate expenses for services provided by AMFM, Capstar and SFX during their respective periods of ownership of the stations, based upon the percentage of revenue of each station to total revenue of all stations operated by AMFM, Capstar and SFX. Though management is of the opinion that all allocations used are reasonable and appropriate, other allocations might be used that could produce results substantially different from those reflected herein and these cost allocations might not be indicative of amounts which might be paid to unrelated parties for similar services or if the Stations had been operated on a stand-alone basis. Corporate departmental expenses of $99,870, $87,168, $97,618, and $50,542 have been allocated to the Stations for the period from July 13 to December 31, 1999, January 1, to July 12, 1999, May 28 to December 31, 1998 and January 1 to May 27, 1998, respectively, for management salaries and benefits, legal services, corporate office expenses, and other miscellaneous expenses. The financial information included herein does not necessarily reflect the financial position and results of operations that the Stations would have experienced had they been operated as a stand-alone entity during the periods covered and may not be indicative of future operations or financial position. The financial statements for the six months ended June 30, 2000 and 1999 are unaudited, but, in the opinion of management, such financial statements have been presented on the same basis as the audited financial statements for the period from July 13 to December 31, 1999 and the period from January 1 to July 12, 1999, respectively, and include all adjustments, consisting only of normal recurring adjustments necessary for a fair presentation of the financial position and results of operations and cash flows for these periods. F-16 31 RADIO STATIONS WGNA-FM, WGNA-AM AND WABT-FM NOTES TO COMBINED FINANCIAL STATEMENTS (continued) - -------------------------------------------------------------------------------- The Stations did not maintain a significant cash balance, but were funded as needed by their parent companies. In turn, if the Stations generated positive cash flow, the amounts were transferred back to the parent company. The net of these activities for each period has been presented in Stations' Equity as net transfers to/from parent. 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: The significant accounting principles followed by the Stations and the methods of applying those principles that materially affect the determination of financial position, results of operation, and cash flows are summarized below. a. CONCENTRATIONS OF CREDIT RISK: Financial instruments which potentially subject the Stations to concentrations of credit risk consist principally of accounts receivable. The credit risk is limited due to the large number of customers comprising the Stations' customer base. b. FAIR VALUE OF FINANCIAL INSTRUMENTS: Financial instruments as of December 31, 1999 and 1998 consist of cash, accounts receivable, and accounts payable, all of which approximate fair value. c. PROPERTY AND EQUIPMENT: Purchases of property and equipment, including additions and improvements and expenditures for repairs and maintenance that significantly add to productivity or extend the economic lives of the assets, are capitalized at cost and depreciated on a straight-line basis over their estimated useful lives, as follows: Buildings and improvements 20 years Broadcasting towers and equipment 10 - 20 years Computers 3 years Furniture and fixtures 5 years d. INTANGIBLE ASSETS: Intangible assets are comprised of FCC licenses and goodwill. FCC licenses and goodwill are stated at cost and were amortized using the straight-line method over 15 years during the period from July 13, 1999 to June 30, 2000 and 40 years for all other periods presented. The carrying value of intangible assets is reviewed by the Stations when events or circumstances suggest that their recoverability may be impaired. If this review indicates that the intangibles will not be recoverable, as determined based on the undiscounted cash flows of the entity over the remaining amortization period, the carrying value of the intangibles will be reduced to their respective fair values. e. REVENUE RECOGNITION: Revenue is derived primarily from the sale of commercial airtime to local and national advertisers in the Albany, New York market area. Revenue is recognized as commercials are broadcast. F-17 32 RADIO STATIONS WGNA-FM, WGNA-AM AND WABT-FM NOTES TO COMBINED FINANCIAL STATEMENTS (continued) - -------------------------------------------------------------------------------- f. BARTER AGREEMENTS: The Stations enter into trade agreements which give rise to sales of advertising air time in exchange for products and services. Revenues from trade agreements are recognized at the fair market value of products or services received as advertising airtime is broadcast. Products and services received are expensed when used in the broadcast operations. Revenues from trade agreements were $180,219, $275,445, $207,533, $304,757, $239,678, and $159,671 for the six months ended June 30, 2000 and 1999 and the period from July 13, 1999 to December 31, 1999, period from January 1, 1999 to July 12, 1999, period from May 28, 1998 to December 31, 1999 and period from January 1, 1998 to May 27, 1998, respectively. Products and services expensed for the same periods were $180,219, $310,445, $242,535, $339,757, $239,678 and $159,670, respectively. g. INCOME TAXES: The Stations were part of the combined return of their parent companies. For the purposes of separate financial statement presentation, the Station's current and deferred income taxes have been determined as if the Station's were a separate taxpayer. Deferred tax assets and liabilities have not been allocated to the Stations. h. USE OF ESTIMATES: The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. 3. ACQUISITION AMFM Inc.- On July 13, 1999, Chancellor Media Corporation acquired the stock of Capstar Communications and changed the name of the combined entity to AMFM Inc. Under the terms of the merger, Capstar stockholders received AMFM Inc. shares for their Capstar shares. This merger was accounted for as a purchase transaction. The results of the allocation of the purchase price of the merger to the Stations are as follows: Accounts receivable $ 1,573,012 Broadcasting equipment and furniture and equipment 1,656,196 FCC license 56,547,065 Goodwill 18,145,453 Other net liabilities (92,117) ------------ $ 77,829,609 Capstar Communications, Inc.- On May 29, 1998 Capstar Communications acquired SFX Broadcasting, Inc. This acquisition was accounted for as a purchase transaction. The results of the allocation of the purchase price to the Stations are as follows: Accounts receivable $ 1,176,724 Broadcasting equipment and furniture and equipment 1,374,580 FCC license 43,631,137 Goodwill 13,430,311 Other net liabilities (87,175) ------------ $ 59,525,577 4. PROPERTY AND EQUIPMENT: Property and equipment at December 31, 1999 and 1998 consisted of the following:
AMFM CAPSTAR ---------- ---------- 1999 1998 ---------- ---------- Land $ 147,022 $ 147,022 Building and improvements 226,718 240,762 Broadcasting towers and equipment 1,132,240 1,107,649 Computers 25,276 24,480 Furniture and fixtures 150,295 172,653 Construction in progress -- 26,343 ---------- ---------- Total property and equipment 1,681,551 1,718,909 Less: accumulated depreciation 70,840 76,750 ---------- ---------- Property and equipment, net $1,610,711 $1,642,159 ---------- ----------
Depreciation expense for the periods from July 13, 1999 to December 31, 1999, January 1, 1999 to July 12, 1999, May 28, 1998 to December 31, 1998 and January 1, 1998 to May 27, 1998 was $77,872, $83,694, $76,750 and $270,780, respectively. F-18 33 RADIO STATIONS WGNA-FM, WGNA-AM AND WABT-FM NOTES TO COMBINED FINANCIAL STATEMENTS (continued) - -------------------------------------------------------------------------------- 5. INTANGIBLE ASSETS: Intangible assets at December 31, 1999 and 1998 consisted of the following:
AMFM CAPSTAR ---------- ----------- 1999 1998 ---------- ----------- Goodwill $18,145,453 $13,430,311 FCC licenses 56,547,065 46,146,935 ----------- ----------- Total intangibles 74,692,518 59,577,246 Less: accumulated amortization 2,282,272 847,528 ----------- ----------- Intangible assets, net $72,410,246 $58,729,718 ----------- -----------
Amortization expense for the periods from July 13, 1999 to December 31, 1999, January 1, 1999 to July 12, 1999, May 28, 1998 to December 31, 1998 and January 1, 1998 to May 29, 1998 was $2,282,272, $806,034, $847,528 and $438,775, respectively. 6. INCOME TAXES: The components of the provisions for income taxes are as follows:
AMFM CAPSTAR SFX -------------- ------------------------------- --------------- Period from Period from Period from Period from July 13 to January 1 to May 28 to January 1 to December 31, July 12, December 31, May 27, 1999 1999 1998 1998 -------------- --------------- -------------- --------------- Current: Federal $ 284,395 $215,865 $547,586 $170,759 State 50,187 38,094 96,633 30,134 Deferred: Federal (401,373) 10,288 (23,633) (47,710) State (70,830) 1,815 (4,170) (8,420) -------------- --------------- -------------- --------------- $(137,621) $266,062 $616,416 $144,763 -------------- --------------- -------------- ---------------
The following is a reconciliation of the statutory Federal income tax rate with the effective tax rate for each year:
AMFM CAPSTAR SFX ----------------- ------------------------------------- --------------- Period from Period from Period from Period from July 13 to January 1 to May 28 to January 1 to December 31, 1999 July 12, 1999 December 31, 1998 May 27, 1998 ----------------- ------------- ----------------- ------------ U.S. Federal Statutory rate 34.0% 34.0% 34.0% 34.0% State and local income taxes, net of federal benefit 2.3% 8.2% 6.8% 8.3% Amortization of non-deductible intangible assets (21.0)% 12.8% 5.0% 12.6% ----- ---- ---- ---- Effective rate 15.3% 55.0% 45.8% 54.9%
F-19 34 RADIO STATIONS WGNA-FM, WGNA-AM AND WABT-FM NOTES TO COMBINED FINANCIAL STATEMENTS (continued) - -------------------------------------------------------------------------------- 7. COMMITMENTS AND CONTINGENCIES: The Stations lease office equipment, studio facilities and tower space under certain non-cancelable operating leases. Future minimum lease payments are as follows: 2000 $157,824 2001 157,824 2002 153,204 2003 88,094 2004 16,344 Thereafter 130,752 -------- $704,042 -------- Rent expense was $72,336, $85,488, $92,064, and $65,760 for the period from July 13 to December 31, 1999, January 1 to July 12, 1999, May 28 to December 31, 1998, and January 1 to May 27, 1998, respectively. 8. RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS: In December 1999, Securities Exchange Commission (SEC) staff issued SAB 101 "Revenue Recognition in Financial Statement", which was effective for fiscal years beginning after December 15, 1999, but was delayed until no later than the fourth fiscal quarter of fiscal years beginning after December 15, 1999 by the issuance of SAB 101B. SAB 101 provides guidance on applying generally accepted accounting principles for recognizing revenue. The Stations believe that applying the provisions of SAB 101 will not significantly affect the Stations. F-20 35 RADIO STATIONS WGNA-FM, WGNA-AM AND WABT-FM NOTES TO COMBINED FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- 9. SUBSEQUENT EVENT: On August 24, 2000, pursuant to the terms of an Asset Exchange Agreement dated as of March 12, 2000, as amended, Regent Communications, Inc. ("Regent"), acquired from Clear Channel Broadcasting, Inc., Capstar Radio Operating Company and their related entities substantially all of the assets of four FM and two AM radio stations in Albany, New York and three FM and one AM radio stations in Grand Rapids, Michigan in exchange for substantially all of the assets of Regent's five FM and three AM radio stations in the Mansfield, Ohio and Victorville, California markets and the payment by Regent of $80,465,000 in cash. F-21 36 REPORT OF INDEPENDENT ACCOUNTANTS To the Board of Directors of Regent Communications, Inc. In our opinion, the accompanying combined balance sheets and the related combined statements of operations, cash flows, and stations' equity present fairly, in all material respects, the financial position of radio stations WGRD-FM, WTRV-FM, WLHT-FM and WNWZ-AM (the "Stations"), owned by AMFM Inc. at December 31, 1999 and by Capstar Communications, Inc. at December 31, 1998, and the results of their operations and their cash flows for the period from July 13, 1999 to December 31, 1999, the period from January 1, 1999 to July 12, 1999, and the period from February 1, 1998 to December 31, 1998, in conformity with accounting principles generally accepted in the United States of America. These financial statements are the responsibility of the Stations' management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these statements in accordance with auditing standards generally accepted in the United States of America, which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for the opinion expressed above. /s/ PricewaterhouseCoopers LLP November 3, 2000 Cincinnati, Ohio F-22 37 RADIO STATIONS WGRD-FM, WTRV-FM, WHLT-FM AND WNWZ-AM COMBINED BALANCE SHEETS - --------------------------------------------------------------------------------
CAPSTAR AMFM INC. COMMUNICATIONS, INC. ------------------------------ -------------------- JUNE 30, DECEMBER 31, DECEMBER 31, 2000 1999 1998 ----------- ------------ ------------ | Assets (unaudited) | Current assets | Cash $ 1,449,333 $ 308,672 | $ 152,635 Accounts receivable, less allowance for doubtful | accounts of $46,084, $70,303 and $64,116 in 2000, | 1999 and 1998, respectively 1,921,499 1,670,178 | 1,561,892 Barter receivable 183,580 46,586 | 47,892 Other current assets 95,007 68,422 | 60,340 ----------- ----------- | ----------- | Total current assets 3,649,419 2,093,858 | 1,822,759 | Property and equipment, net 1,530,590 1,593,032 | 1,667,185 Intangible assets, net 63,658,074 65,919,653 | 49,517,370 Other non-current assets 1,300 1,800 | 1,950 ----------- ----------- | ----------- | Total assets $68,839,383 $69,608,343 | $53,009,264 =========== =========== | =========== | LIABILITIES AND STATIONS' EQUITY Current liabilities | Accounts payable $ 26,412 $ 31,258 | $ 19,477 Barter payable 137,527 46,587 | 43,013 Accrued bonus 38,050 41,515 | 35,000 Accrued commissions 108,965 111,138 | 122,231 Other current liabilities 26,349 43,093 | 43,205 ----------- ----------- | ----------- | Total current liabilities 337,303 273,591 | 262,926 | Commitments and contingencies -- -- | -- ----------- ----------- | ----------- Stations' equity 68,502,080 69,334,752 | 52,746,338 ----------- ----------- | ----------- | Total stations' equity 68,502,080 69,334,752 | 52,746,338 ----------- ----------- | ----------- | Total liabilities and stations' equity $68,839,383 $69,608,343 | $53,009,264 =========== =========== | ===========
The accompanying notes are an integral part of these financial statements. F-23 38 RADIO STATIONS WGRD-FM, WTRV-FM, WLHT-FM AND WNWZ-AM COMBINED STATEMENTS OF OPERATIONS - --------------------------------------------------------------------------------
AMFM INC. CAPSTAR AMFM INC. CAPSTAR ----------- | -------------- ------------- | ----------------------------- SIX MONTHS | SIX MONTHS PERIOD FROM | PERIOD FROM PERIOD FROM ENDED | ENDED JULY 13, 1999 | JAN. 1, 1999 FEBRUARY 1 TO JUNE 30, | JUNE 30, THROUGH | THROUGH DECEMBER 31, 2000 | 1999 DEC. 31, 1999 | JULY 12, 1999 1998 ----------- | ----------- ------------- | ------------- ------------- (unaudited) | (unaudited) | | | Gross broadcast revenues $ 5,257,571 | $4,970,643 $ 4,979,372 | $5,357,281 $9,480,420 Less: Agency commissions 559,312 | 531,747 551,661 | 573,737 1,015,843 ----------- | ---------- ----------- | ---------- ---------- | | Net broadcast revenues 4,698,259 | 4,438,896 4,427,711 | 4,783,544 8,464,577 | | Station operating expenses 2,910,060 | 2,968,165 2,816,123 | 3,221,980 5,515,528 Depreciation and amortization 2,364,472 | 745,513 2,067,408 | 799,509 1,332,602 Allocated corporate general and administrative expenses 118,804 | 177,829 88,517 | 177,829 386,700 ----------- | ---------- ----------- | ---------- ---------- | | Operating income (loss) (695,077) | 547,389 (544,337) | 584,226 1,229,747 | | Other income (expense), net -- | 18,759 8,048 | 29,375 91,012 ----------- | ---------- ----------- | ---------- ---------- | | Income (loss) before income taxes (695,077) | 566,148 (536,289) | 613,601 1,320,759 | | Income tax expense 24,215 | 287,489 55,297 | 310,617 627,151 ----------- | ---------- ----------- | ---------- ---------- | | Net income (loss) $ (719,292) | $ 278,659 $ (591,586) | $ 302,984 $ 693,608 =========== | ========== =========== | ========== ==========
The accompanying notes are an integral part of these financial statements. F-24 39 RADIO STATIONS WGRD-FM, WTRV-FM. WLHT-FM AND WNWZ-AM COMBINED STATEMENTS OF CASH FLOWS - --------------------------------------------------------------------------------
AMFM INC. | CAPSTAR AMFM INC. | CAPSTAR COMMUNICATIONS, INC. ------------- | ------------- ------------- | -------------------------------- SIX MONTHS | SIX MONTHS PERIOD FROM | PERIOD FROM PERIOD FROM ENDED | ENDED JULY 13 TO | JANUARY 1 TO FEBRUARY 1, 1998 JUNE 30, | JUNE 30, DECEMBER 31, | JULY 12, TO DECEMBER 31, 2000 | 1999 1999 | 1999 1998 ------------- | ------------- ------------- | ------------- ------------------ (unaudited) | (unaudited) | | | Cash flows from operating activities: | | Net income (loss) $ (719,292) | $ 278,659 $ (591,586) | $ 302,984 $ 693,608 Adjustments to reconcile net income to | | cash flows from operating activities: | | Depreciation and amortization 2,364,472 | 745,513 2,067,408 | 799,509 1,332,602 Allocation of corporate expenses 118,805 | 177,829 88,517 | 177,829 386,700 Changes in operating | | assets and liabilities: | | Accounts receivable (388,315) | (247,820) 185,392 | (292,372) (234,830) Other current assets (26,085) | (9,369) | (14,684) Accounts payable 86,094 | 136,059 (115,010) | 136,059 (47,752) Accrued expenses (22,382) | 14,454 (24,689) | 14,454 71,654 Other -- | (37,267) | -- -- ---------- | ---------- ----------- | ----------- ----------- | | Net cash flows provided by operating | | activities 1,413,297 | 1,095,325 1,572,765 | 1,123,779 2,201,982 ---------- | ---------- ----------- | ----------- ----------- | | Cash flows from investing activities: | | Purchase of property and equipment (40,451) | (75,152) (144,154) | (71,552) (345,600) ---------- | ---------- ----------- | ----------- ----------- | | Net cash flows used in | | investing activities (40,451) | (75,152) (144,154) | (71,552) (345,600) ---------- | ---------- ----------- | ----------- ----------- | | Cash flows from financing activities: | | Net transfers (to) from parent company (232,185) | (935,174) (1,238,191) | (1,086,610) (1,817,371) ---------- | ---------- ----------- | ----------- ----------- | | Net transfers (to) from parent company (232,185) | (935,174) (1,238,191) | (1,086,610) (1,817,371) ---------- | ---------- ----------- | ----------- ----------- | | Net increase (decrease) in cash 1,140,661 | 84,999 190,420 | (34,383) 39,011 | | Cash at the beginning of the period 308,672 | 152,635 118,252 | 152,635 113,624 ---------- | ---------- ----------- | ----------- ----------- | | Cash at the end of the period $1,449,333 | $ 237,634 $ 308,672 | $ 118,252 $ 152,635 ========== | ========== =========== | =========== ===========
The accompanying notes are an integral part of these financial statements. F-25 40 RADIO STATIONS WGRD-FM, WTRV-FM, WLHT-FM AND WNWZ-AM COMBINED STATEMENTS OF STATIONS' EQUITY - -------------------------------------------------------------------------------- Balance at February 1, 1998 (Capstar Communications, Inc.) $53,483,401 Net income 693,608 Corporate expense allocation 386,700 Net transfer to/from parent, Capstar Communications, Inc. (1,817,371) ----------- Balance at December 31, 1998 (Capstar Communications, Inc.) 52,746,338 Net income 302,984 Corporate expense allocation 177,829 Net transfer to/from parent, Capstar Communications, Inc. (1,086,610) ----------- Balance At July 12, 1999 (Capstar Communications, Inc.) 52,140,541 - ------------------------------------------------------------------------------ Balance at July 13, 1999 (AMFM Inc.) 71,076,012 Net income (loss) (591,586) Corporate expense allocation 88,517 Net transfer, to/from parent, AMFM Inc. (1,238,191) ----------- Balance at December 31, 1999 (AMFM Inc.) $69,334,752 ----------- The accompanying notes are an integral part of these financial statements. F-26 41 RADIO STATIONS WGRD-FM, WTRV-FM, WLHT-FM AND WNWZ-AM NOTES TO COMBINED FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- 1. BASIS OF PRESENTATION: These financial statements of WGRD-FM, WTRV-FM, WLHT-FM and WNWZ-AM, located in Grand Rapids, Michigan owned by AMFM Inc. (collectively referred to as the "Stations") from July 13, 1999 through August 24, 2000 have been prepared in conjunction with the sale of the Stations to Regent Communications Inc. (see Note 9). AMFM Inc. ("AMFM") owned and operated radio stations WGRD-FM, WTRV-FM, WLHT-FM and WNWZ-AM from July 13, 1999 through December 31, 1999. At the close of business on July 13, 1999, AMFM purchased the stock of Capstar Communications, Inc. (Capstar). Capstar owned and operated the Stations from February 1, 1998 through July 12, 1999. Capstar purchased the stations from Patterson Broadcasting on February 1, 1998 and as a result the results of operations and cash flows reflect only the eleven month's ended December 31, 1998. As a result of the changes in ownership the financial position, results of operations and cash flows of the stations subsequent to the date of the AMFM acquisition are labeled AMFM in the accompanying combined financial statements, and results of operations and cash flows of the Stations for the period prior to the AMFM acquisition are labeled Capstar. These combined financial statements present the operations of the Stations on a "carved-out" basis. The combined financial statements have been prepared as if the Stations had operated as a stand-alone entity for all periods presented, and include only those assets, liabilities, revenues and expenses directly attributable to the Stations' operations. The Stations are allocated certain corporate expenses for services provided by AMFM and Capstar based upon the percentage of revenue of each station to total revenue of all stations operated by AMFM and Capstar. Though management is of the opinion that all allocations used are reasonable and appropriate, other allocations might be used that could produce results substantially different from those reflected herein and these cost allocations might not be indicative of amounts which might be paid to unrelated parties for similar services or if the Stations had been operated on a stand-alone basis. Corporate departmental expenses of $88,517, $177,829 and $386,700 have been allocated to the Stations during July 13 to December 31, 1999, January 1 to July 12, 1999 and the eleven months ended December 31, 1998, respectively, for management salaries and benefits, legal services, corporate office expenses, and other miscellaneous expenses. The financial information included herein does not necessarily reflect the financial position and results of operations of what the Stations would have experienced had they been operated as a stand-alone entity during the periods covered, and may not be indicative of future operations or financial position. The financial statements for the six months ended June 30, 2000 and 1999 are unaudited, but, in the opinion of management, such financial statements have been presented on the same basis as the audited financial statements for the year ended December 31, 1999, and include all adjustments, consisting only of normal recurring adjustments necessary for a fair presentation of the financial position and results of operations and cash flows for these periods. The Stations did not maintain a significant cash balance, but were funded as needed by their parent company. In turn, if the Stations generated positive cash flow, the amounts were transferred back to the Parent Company. The net of these activities for each period has been presented in Stations' Equity as net transfers to and from the parent company. F-27 42 RADIO STATIONS WGRD-FM, WTRV-FM, WLHT-FM AND WNWZ-AM NOTES TO COMBINED FINANCIAL STATEMENTS (continued) - -------------------------------------------------------------------------------- 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: The significant accounting principles followed by the Stations and the methods of applying those principles that materially affect the determination of financial position, results of operation, and cash flows are summarized below. a. CONCENTRATIONS OF CREDIT RISK: Financial instruments which potentially subject the Stations to concentrations of credit risk consist principally of accounts receivable. The credit risk is limited due to the large number of customers comprising the Stations' customer base. b. FAIR VALUE OF FINANCIAL INSTRUMENTS: Financial instruments as of December 31, 1999 and 1998 consist of cash, accounts receivable, and accounts payable, all of which approximate fair value. c. PROPERTY AND EQUIPMENT: Purchases of property and equipment, including additions and improvements and expenditures for repairs and maintenance that significantly add to productivity or extend the economic lives of the assets, are capitalized at cost and depreciated on a straight-line basis over their estimated useful lives, as follows: Buildings and improvements 20 years Broadcasting towers, antennas and equipment 10 - 20 years Computers 3 years Furniture and fixtures, office equipment and autos 5 years d. INTANGIBLE ASSETS: Intangible assets are comprised of FCC licenses and goodwill. FCC licenses and goodwill are stated at cost and are being amortized using the straight-line method over 15 years during the period from July 13, 1999 to June 30, 2000 and 40 years for all other periods presented. Goodwill was stated at cost and was amortized over 40 years in 1998. The carrying value of intangible assets is reviewed by the Stations when events or circumstances suggest that their recoverability may be impaired. If this review indicates that the intangibles will not be recoverable, as determined based on the undiscounted cash flows of the entity over the remaining amortization period, the carrying value of the intangibles will be reduced to their respective fair values. e. REVENUE RECOGNITION: Revenue is derived primarily from the sale of commercial airtime to local and national advertisers in the Grand Rapids, Michigan market area. Revenue is recognized as commercials are broadcast. F-28 43 RADIO STATIONS WGRD-FM, WTRV-FM, WLHT-FM AND WNWZ-AM NOTES TO COMBINED FINANCIAL STATEMENTS (continued) - -------------------------------------------------------------------------------- f. BARTER AGREEMENTS: The Stations enter into trade agreements which give rise to sales of advertising air time in exchange for products and services. Revenues from trade agreements are recognized at the fair market value of products or services received as advertising airtime is broadcast. Products and services received are expensed when used in the broadcast operations. Revenues from trade agreements were $121,319, $111,440, $94,750, $122,560 and $157,500 for the six months ended June 30, 2000 and 1999 and the period from July 13, 1999 to December 31, 1999, from January 1, 1999 to July 12, 1999 and the eleven months ended December 31, 1998, respectively. Products and services expensed for the same periods were $121,319, $111,440, $88,780, $128,530 and $166,670, respectively. g. INCOME TAXES: The Stations were part of the combined return of their parent company. For purposes of separate financial statement presentation, the Stations' current and deferred-income taxes have been determined as if the Stations' were a separate taxpayer. Deferred tax assets and liabilities have not been allocated to the Stations. h. USE OF ESTIMATES: The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. 3. ACQUISITION AMFM Inc.- On July 13, 1999, Chancellor Media Corporation acquired the stock of Capstar Communications and changed the name of the combined entity to AMFM Inc. Under the terms of the merger, Capstar stockholders received AMFM Inc. shares for their Capstar shares. This merger was accounted for as a purchase transaction. The results of the allocation of the purchase price to the Stations are as follows: Accounts receivable $ 1,902,166 Broadcasting equipment and furniture and equipment 1,544,696 FCC license 52,344,933 Goodwill 15,502,431 Other net liabilities (218,214) ------------ $ 71,076,012 Capstar Communications, Inc.- On January 29, 1998 Capstar Communications Inc. acquired all of the outstanding preferred stock, common stock and common stock equivalents of Patterson Broadcasting, Inc. This acquisition was accounted for as a purchase transaction. The results of the allocation of the purchase price to the Stations are as follows: Accounts receivable $ 1,355,824 Broadcasting equipment and furniture and equipment 1,529,662 FCC license 40,016,862 Goodwill 10,662,689 Other net liabilities (81,636) ------------ $ 53,483,401 4. PROPERTY AND EQUIPMENT: Property and equipment at December 31, 1999 and 1998 consisted of the following:
AMFM CAPSTAR ------------ ---------- DECEMBER 31, 1999 1998 ------------ ---------- Land $ 142,695 $ 142,695 Building and improvements 46,233 52,301 Broadcasting towers, antennas and equipment 1,161,532 1,260,966 Computers 171,582 225,507 Furniture and fixtures, office equipment and autos 166,808 156,138 ---------- ---------- Total property and equipment 1,688,850 1,837,607 Less: accumulated depreciation 95,818 170,422 ---------- ---------- Property and equipment, net $1,593,032 $1,667,185 ========== ==========
Depreciation expense for the periods from July 13, 1999 to December 31, 1999, January 1, 1999 to July 12, 1999 and the eleven months ended December 31, 1998 was $95,818, $120,056 and $170,422 respectively. F-29 44 RADIO STATIONS WGRD-FM, WTRV-FM, WLHT-FM AND WNWZ-AM NOTES TO COMBINED FINANCIAL STATEMENTS (continued) - -------------------------------------------------------------------------------- 5. INTANGIBLE ASSETS: Intangible assets at December 31, 1999 and 1998 consisted of the following:
AMFM CAPSTAR ----------- ----------- DECEMBER 31, 1999 1998 ----------- ----------- Goodwill $15,502,431 $10,662,688 FCC licenses 52,388,812 40,016,862 ----------- ----------- Total intangibles 67,891,243 50,679,550 Less: accumulated amortization 1,971,590 1,162,180 ----------- ----------- Intangible assets, net $65,919,653 $49,517,370 =========== ===========
Amortization expense for the period from July 13, 1999 to December 31, 1999, from January 1, 1999 to July 12, 1999 and the eleven months ended December 31, 1998 were $1,971,590, $679,453 and $1,162,180, respectively. 6. INCOME TAXES: The components of the provisions for income taxes are as follows:
AMFM CAPSTAR --------------- ------------------------------------ PERIOD FROM PERIOD FROM PERIOD FROM JULY 13, 1999 JANUARY 1, 1999 FEBRUARY 1, 1998 TO DECEMBER 31, TO JULY 12, TO DECEMBER 31, 1999 1999 1998 --------------- ---------------- ---------------- Current: Federal $ 335,017 $ 261,154 531,014 State 52,077 51,354 92,301 Deferred: Federal (356,302) (3,806) 500 State 24,505 1,915 3,336 ----------- ----------- ---------- $ 55,297 $ 310,617 $ 627,151 =========== =========== ==========
The following is a reconciliation of the Statutory Federal income tax rate with the effective tax rate for each year:
AMFM CAPSTAR ----------------- ------------------------------------------ Period from Period from Period from July 13, 1997 to January 1, 1999 February 1, 1998 December 31, 1999 to July 12, 1999 to December 31, 1998 ----------------- ---------------- -------------------- U.S. Federal Statutory rate 34.0% 34.0% 34.0% State and local income taxes, net of federal benefit (14.3%) 8.7% 7.3% Amortization of non-deductible intangible assets (30.0%) 7.9% 6.2% ----- ---- ---- Effective rate (10.3%) 50.6% 47.5%
F-30 45 RADIO STATIONS WGRD-FM, WTRV-FM, WLHT-FM AND WNWZ-AM NOTES TO COMBINED FINANCIAL STATEMENTS (continued) - -------------------------------------------------------------------------------- 7. COMMITMENTS AND CONTINGENCIES: The Stations lease office equipment, studio facilities and tower space under certain non-cancelable operating leases. In addition, the station's carry various non-cancelable employment agreements. Future minimum payments are as follows: 2000 $169,614 2001 11,088 2002 11,088 2003 10,164 2004 -- Thereafter -- -------- $201,954 ======== Rent expense was $76,204, $90,060 and $160,239 for the period from July 13 to December 31, 1999, January 1 to July 12, 1999 and February 1 to December 31, 1998, respectively. 8. RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS: In December 1999, Securities Exchange Commission (SEC) staff issued SAB 101 "Revenue Recognition in Financial Statement", which was effective for fiscal years beginning after December 15, 1999, but was delayed until no later than the fourth fiscal quarter of fiscal years beginning after December 15, 1999, by the issuance of SAB 101B. SAB 101 provides guidance on applying generally accepted accounting principles for recognizing revenue. The Stations believe that applying the provisions of SAB 101 will not significantly affect the Stations. F-31 46 RADIO STATIONS WGRD-FM, WTRV-FM, WLHT-FM AND WNWZ-AM NOTES TO COMBINED FINANCIAL STATEMENTS (continued) - -------------------------------------------------------------------------------- 9. SUBSEQUENT EVENT: On August 24, 2000, pursuant to the terms of an Asset Exchange Agreement dated as of March 12, 2000, as amended, Regent Communications Inc. ("Regent") acquired from Clear Channel Broadcasting, Inc., Capstar Radio Operating Company and their related entities substantially all of the assets of four FM and two AM radio stations in Albany, New York and three FM and one AM radio stations in Grand Rapids, Michigan in exchange for substantially all of the assets of Regent's five FM and three AM radio stations in the Mansfield, Ohio and Victorville, California markets and the payment by Regent of $80,465,000 in cash. F-32 -----END PRIVACY-ENHANCED MESSAGE-----