-----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, I/5kwYP137jdynuZAa5fCAYLz8YE6n9wBzuRgmnUgI/P9AAI0xm/7asRqkxSFWH1 ZaguOmBeZp+iJI/pKEvJag== 0000912057-96-017320.txt : 19960814 0000912057-96-017320.hdr.sgml : 19960814 ACCESSION NUMBER: 0000912057-96-017320 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 5 CONFORMED PERIOD OF REPORT: 19960630 FILED AS OF DATE: 19960813 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: CHANCELLOR BROADCASTING CO /DE/ CENTRAL INDEX KEY: 0001002909 STANDARD INDUSTRIAL CLASSIFICATION: RADIO BROADCASTING STATIONS [4832] IRS NUMBER: 752538487 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-27726 FILM NUMBER: 96609483 BUSINESS ADDRESS: STREET 1: 12655 N CENTRAL EXPRESSWAY STREET 2: SUITE 405 CITY: DALLAS STATE: TX ZIP: 75243 BUSINESS PHONE: 2142396220 MAIL ADDRESS: STREET 1: 12655 N CENTRAL EXPRESSWAY STE 405 CITY: DALLAS STATE: TX ZIP: 75243 FORMER COMPANY: FORMER CONFORMED NAME: CHANCELLOR CORP/DE DATE OF NAME CHANGE: 19951031 FILER: COMPANY DATA: COMPANY CONFORMED NAME: CHANCELLOR RADIO BROADCASTING CO CENTRAL INDEX KEY: 0000925744 STANDARD INDUSTRIAL CLASSIFICATION: RADIO BROADCASTING STATIONS [4832] IRS NUMBER: 752544623 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 033-80534 FILM NUMBER: 96609484 BUSINESS ADDRESS: STREET 1: 12655 N CENTRAL EXPRESSWY STREET 2: STE 405 CITY: DALLAS STATE: TX ZIP: 75243 BUSINESS PHONE: 2142396220 MAIL ADDRESS: STREET 2: 12655 N CENTRAL EXPWY SUITE 405 CITY: DALLAS STATE: TX ZIP: 75243 FORMER COMPANY: FORMER CONFORMED NAME: CHANCELLOR BROADCASTING CO DATE OF NAME CHANGE: 19940621 FILER: COMPANY DATA: COMPANY CONFORMED NAME: CHANCELLOR BROADCASTING LICENSEE CO CENTRAL INDEX KEY: 0000925752 STANDARD INDUSTRIAL CLASSIFICATION: RADIO BROADCASTING STATIONS [4832] IRS NUMBER: 752544625 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 033-80534-01 FILM NUMBER: 96609485 BUSINESS ADDRESS: STREET 1: 12655 N CENTRAL EXPWY STREET 2: SUITE 405 CITY: DALLAS STATE: TX ZIP: 75243 BUSINESS PHONE: 2142396220 MAIL ADDRESS: STREET 1: 12655 N CENTRAL EXPRESSWAY STREET 2: SUITE 405 CITY: DALLAS STATE: TX ZIP: 75243 10-Q 1 FORM 10-Q - ----------------------------------------------------------------------------- - ----------------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 ______________________ FORM 10-Q Quarterly Report Pursuant to Section 13 or Section 15(d) of the Securities Exchange Act of 1934 FOR THE FISCAL QUARTER ENDED JUNE 30, 1996 Commission File No. 0-27726 Commission File No. 33-80534 Commission File No. 33-80534 CHANCELLOR BROADCASTING CHANCELLOR RADIO CHANCELLOR BROADCASTING COMPANY BROADCASTING COMPANY LICENSEE COMPANY (Exact Name of Registrant (Exact Name of Registrant (Exact Name of Registrant as Specified in Its Charter) as Specified in Its Charter) as Specified in Its Charter) DELAWARE DELAWARE DELAWARE (State or other jurisdiction of (State or other jurisdiction of (State or other jurisdiction of incorporation or organization) incorporation or organization) incorporation or organization) 75-2538487 75-2544623 75-2544625 (I.R.S. Employer (I.R.S. Employer (I.R.S. Employer Identification Number) Identification Number) Identification Number)
12655 N. CENTRAL EXPRESSWAY, SUITE 405, DALLAS, TEXAS 75243 (Address of Principal Executive Offices, Including Zip Code) AREA CODE (214) 239-6220 (Registrant's Telephone Number, Including Area Code) Indicate by check mark whether Chancellor Broadcasting Company (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes / / No /X/ Indicate by check mark whether Chancellor Radio Broadcasting Company and Chancellor Broadcasting Licensee Company (1) have filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) have been subject to such filing requirements for the past 90 days. Yes /X/ No / / As of August 13, 1996, 8,749,481 shares of the Class A Common Stock, par value $.01 per share, 63,500 shares of the Class B Common Stock, par value $.01 per share, and 8,484,411 shares of the Class C Common Stock, par value $.01 per share, of Chancellor Broadcasting Company were outstanding. As of August 13, 1996, 1,000 shares of common stock, par value $.01 per share, of Chancellor Radio Broadcasting Company and 1,000 shares of common stock, par value $.01 per share, of Chancellor Broadcasting Licensee Company were outstanding. - ----------------------------------------------------------------------------- - ----------------------------------------------------------------------------- TABLE OF CONTENTS
PAGE ---- PART I FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS CHANCELLOR BROADCASTING COMPANY AND SUBSIDIARIES Consolidated Balance Sheets as of December 31, 1995 and June 30, 1996.................................................................... 1 Consolidated Statements of Operations for the three and six months ended June 30, 1995 and 1996........................................................... 2 Consolidated Statements of Changes in Common Stockholders' Equity for the year ended December 31, 1995 and the six months ended June 30, 1996................... 3 Consolidated Statements of Cash Flows for the six months ended June 30, 1995 and 1996..................................................... 4 Notes to Consolidated Financial Statements....................................... 5 CHANCELLOR RADIO BROADCASTING COMPANY AND SUBSIDIARIES Consolidated Balance Sheets as of December 31, 1995 and June 30, 1996.................................................................... 9 Consolidated Statements of Operations for the three and six months ended June 30, 1995 and 1996........................................................... 10 Consolidated Statements of Changes in Common Stockholder's Equity for the year ended December 31, 1995 and the six months ended June 30, 1996...... 11 Consolidated Statements of Cash Flows for the six months ended June 30, 1995 and 1996..................................................... 12 Notes to Consolidated Financial Statements....................................... 13 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS................................................ 17 PART II OTHER INFORMATION ITEM 2. CHANGES IN SECURITIES.............................................................. 20 ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K................................................... 20
PART I FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS CHANCELLOR BROADCASTING COMPANY AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS
DECEMBER 31, JUNE 30, 1995 1996 ------------ ------------ ASSETS Current assets: Cash........................................................................ $ 1,314,214 $ 1,951,241 Accounts receivable, net of allowance for doubtful accounts of $263,528 and $580,076, respectively..................................... 13,243,292 35,707,004 Prepaid expenses and other.................................................. 546,405 2,827,727 ------------ ------------ Total current assets.................................................... 15,103,911 40,485,972 Property and equipment, net................................................. 17,925,845 52,294,924 Intangibles and other, net.................................................. 203,808,395 564,468,503 Deferred financing costs, net............................................... 4,284,413 19,004,762 ------------ ------------ Total assets............................................................ $241,122,564 $676,254,161 ------------ ------------ ------------ ------------ LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable............................................................ $ 1,873,888 $ 2,755,088 Accrued liabilities......................................................... 4,692,948 8,817,451 Accrued interest............................................................ 2,710,891 6,954,218 Current portion of long-term debt........................................... 4,062,500 4,900,000 ------------ ------------ Total current liabilities............................................... 13,340,227 23,426,757 Long-term debt................................................................ 168,107,242 353,123,469 Deferred income taxes......................................................... 4,952,361 18,436,384 Other......................................................................... -- 800,211 ------------ ------------ Total liabilities....................................................... 186,399,830 395,786,821 ------------ ------------ Redeemable Senior Cumulative Exchangeable Preferred Stock of subsidiary, par value $.01 per share; 1,000,000 shares authorized, issued and outstanding; preference in liquidation of $100,000,000, plus accumulated and unpaid dividends and accretion............................... -- 100,563,968 Common stockholders' equity: Class A common stock, par value $.01 per share, 40,000,000 shares authorized, 302,289 and 8,749,481 shares issued and outstanding, respectively............................................................... 3,023 87,495 Class B common stock, par value $.01 per share, 10,000,000 shares authorized, 63,500 shares issued and outstanding........................... 635 635 Class C common stock, par value $.01 per share, 10,000,000 shares authorized, 8,484,411 shares issued and outstanding........................ 84,844 84,844 Additional paid-in capital.................................................. 66,271,498 206,992,087 Accumulated deficit......................................................... (11,637,266) (26,223,555) Treasury stock.............................................................. -- (1,038,134) ------------ ------------ Total common stockholders' equity....................................... 54,722,734 179,903,372 ------------ ------------ Total liabilities and stockholders' equity.............................. $241,122,564 $676,254,161 ------------ ------------ ------------ ------------
The accompanying notes are an integral part of the financial statements. 1 CHANCELLOR BROADCASTING COMPANY AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS THREE MONTHS ENDED JUNE 30, SIX MONTHS ENDED JUNE 30, --------------------------- -------------------------- 1995 1996 1995 1996 ----------- ----------- ----------- ------------ Gross broadcasting revenues. . . . . . . . $20,219,761 $50,758,926 $35,080,729 $79,848,441 Less agency commissions. . . . . . . . . . 2,490,212 6,333,258 4,269,625 9,780,534 ----------- ----------- ----------- ------------ Net revenues . . . . . . . . . . . . . 17,729,549 44,425,668 30,811,104 70,067,907 ----------- ----------- ----------- ------------ Operating expenses: Programming, technical and news. . . . . 3,054,247 7,865,007 5,816,492 13,009,767 Sales and promotion. . . . . . . . . . . 5,130,916 12,366,880 8,731,157 19,309,958 General and administrative . . . . . . . 2,071,813 6,001,628 4,245,517 10,405,378 Depreciation and amortization. . . . . . 2,109,425 6,040,331 4,468,080 11,067,939 Corporate expenses . . . . . . . . . . . 486,877 831,609 856,444 1,839,206 Stock option compensation. . . . . . . . 4,460,000 950,000 4,460,000 1,900,000 ----------- ----------- ----------- ------------ 17,313,278 34,055,455 28,577,690 57,532,248 ----------- ----------- ----------- ------------ Income from operations . . . . . . . . 416,271 10,370,213 2,233,414 12,535,659 Other expense: Interest expense . . . . . . . . . . . . 4,174,740 8,787,846 8,288,247 15,933,352 Other, net . . . . . . . . . . . . . . . 58,149 92,352 50,216 97,976 ----------- ----------- ----------- ------------ Income (loss) before provision for income taxes, minority interest and extraordinary loss. . . . . . . . (3,816,618) 1,490,015 (6,105,049) (3,495,669) Provision for income taxes . . . . . . . . 889,620 662,000 2,084,558 1,601,361 Dividends and accretion on preferred stock of subsidiary . . . . . . . . . . . -- 3,183,069 -- 4,843,338 ----------- ----------- ----------- ------------ Net loss before extraordinary loss. . . . (4,706,238) (2,355,054) (8,189,607) (9,940,368) Extraordinary loss on early extinguishment of debt. . . . . . . . . . -- -- -- 4,645,921 ----------- ----------- ----------- ------------ Net loss . . . . . . . . . . . . . . . (4,706,238) (2,355,054) (8,189,607) (14,586,289) Loss on repurchase of preferred stock of subsidiary . . . . . . . . . . . . . . -- -- -- 16,570,065 ----------- ----------- ----------- ------------ Net loss attributable to common stock . $(4,706,238) $(2,355,054) $(8,189,607) $(31,156,354) ----------- ----------- ----------- ------------ ----------- ----------- ----------- ------------ Loss applicable to common stock: Loss before extraordinary loss . . . . . $ (0.53) $ (0.14) $ (0.93) $ (1.74) ----------- ----------- ----------- ------------ ----------- ----------- ----------- ------------ Extraordinary loss . . . . . . . . . . . $ -- $ -- $ -- $ (0.31) ----------- ----------- ----------- ------------ ----------- ----------- ----------- ------------ Net loss . . . . . . . . . . . . . . . . $ (0.53) $ (0.14) $ (0.93) $ (2.05) ----------- ----------- ----------- ------------ ----------- ----------- ----------- ------------ Weighted average number of shares outstanding. . . . . . . . . . . 8,850,033 17,241,728 8,850,033 15,216,677 ----------- ----------- ----------- ------------ ----------- ----------- ----------- ------------
The accompanying notes are an integral part of the financial statements. 2 CHANCELLOR BROADCASTING COMPANY AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CHANGES IN COMMON STOCKHOLDERS' EQUITY CLASS A CLASS B CLASS C COMMON STOCK COMMON STOCK COMMON STOCK ------------------- -------------- ------------------- SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT --------- ------- ------ ------ --------- ------- Balance, January 1, 1995. . . . . . . . 302,289 $ 3,023 63,500 $ 635 8,484,244 $84,842 Stock option compensation . . . . . . . -- -- -- -- -- -- Issuance of common stock on June 29, 1995. . . . . . . . . . . . . -- -- -- -- 167 2 Net loss. . . . . . . . . . . . . . . . -- -- -- -- -- -- --------- ------- ------ ---- --------- ------- Balance, December 31, 1995. . . . . . . 302,289 3,023 63,500 635 8,484,411 84,844 Stock option compensation . . . . . . . -- -- -- -- -- -- Issuance of common stock on February 14, 1996. . . . . . . . . . . 8,447,192 84,472 -- -- -- -- Loss on repurchase of preferred stock of subsidiary on February 21, 1996 . . -- -- -- -- -- -- Repurchase of common stock on February 21, 1996. . . . . . . . . . . -- -- -- -- -- -- Net loss. . . . . . . . . . . . . . . . -- -- -- -- -- -- --------- ------- ------ ---- --------- ------- Balance, June 30, 1996 . . . . . . . . . 8,749,481 $87,495 63,500 $635 8,484,411 $84,844 --------- ------- ------ ---- --------- ------- --------- ------- ------ ---- --------- -------
ADDITIONAL PAID-IN ACCUMULATED TREASURY CAPITAL DEFICIT STOCK TOTAL ------------ ------------ ----------- ------------ Balance, January 1, 1995. . . . . . . . $ 59,911,500 $ (105,970) $ -- $ 59,894,030 Stock option compensation . . . . . . . 6,360,000 -- -- 6,360,000 Issuance of common stock on June 29, 1995. . . . . . . . . . . . . (2) -- -- -- Net loss. . . . . . . . . . . . . . . . -- (11,531,296) -- (11,531,296) ------------ ------------ ----------- ------------ Balance, December 31, 1995. . . . . . . 66,271,498 (11,637,266) -- 54,722,734 Stock option compensation . . . . . . . 1,900,000 -- -- 1,900,000 Issuance of common stock on February 14, 1996. . . . . . . . . . . 155,390,654 -- -- 155,475,126 Loss on repurchase of preferred stock of subsidiary on February 21, 1996 . . (16,570,065) -- -- (16,570,065) Repurchase of common stock on February 21, 1996. . . . . . . . . . . -- -- (1,038,134) (1,038,134) Net loss. . . . . . . . . . . . . . . . -- (14,586,289) -- (14,586,289) ------------ ------------ ----------- ------------ Balance, June 30, 1996 . . . . . . . . . $206,992,087 $(26,223,555) $(1,038,134) $179,903,372 ------------ ------------ ----------- ------------ ------------ ------------ ----------- ------------
The accompanying notes are an integral part of the financial statements. 3 CHANCELLOR BROADCASTING COMPANY AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS
SIX MONTHS ENDED JUNE 30, ---------------------------- 1995 1996 ------------ ------------- Cash flows from operating activities: Net loss ....................................................................... $ (8,189,607) $ (14,586,289) Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization................................................. 4,468,080 11,067,939 Provision for doubtful accounts .............................................. 130,159 101,752 Stock option compensation .................................................... 4,460,000 1,900,000 Deferred income taxes ........................................................ 2,084,558 1,539,361 Dividends and accretion on preferred stock of subsidiary ..................... -- 4,843,338 Extraordinary loss ........................................................... -- 4,645,921 Changes in assets and liabilities, net of the effects of acquired businesses: Accounts receivable ........................................................ (3,030,954) (2,733,580) Prepaids and other ......................................................... (247,941) (1,379,953) Accounts payable ........................................................... (805,913) (87,178) Accrued liabilities ........................................................ 1,172,436 (66,139) Accrued interest ........................................................... 286,321 4,243,327 ------------ ------------- Net cash provided by operating activities ................................ 327,139 9,488,499 ------------ ------------- Cash flows from investing activities: Purchases of broadcasting properties ........................................... (169,542) (406,140,430) Purchases of other property and equipment ...................................... (690,906) (1,373,601) ------------ ------------- Net cash used in investing activities .................................... (860,448) (407,514,031) ------------ ------------- Cash flows from financing activities: Proceeds from issuance of long-term debt ....................................... -- 277,627,630 Proceeds from borrowings under revolving debt facility ......................... 9,202,067 46,763,999 Repayments of long-term debt ................................................... -- (90,884,500) Repayments of borrowings under revolving debt facility ......................... (8,779,567) (68,432,127) Issuance of preferred stock of subsidiary ...................................... -- 175,118,543 Repurchase of preferred stock of subsidiary .................................... -- (95,462,423) Issuance of common stock ....................................................... -- 155,475,126 Repurchase of common stock ..................................................... -- (1,038,134) Payment of preferred stock dividends ........................................... -- (505,555) ------------ ------------- Net cash provided by financing activities ................................ 422,500 398,662,559 ------------ ------------- Net increase (decrease) in cash .......................................... (110,809) 637,027 Cash, at beginning of period ..................................................... 1,516,808 1,314,214 ------------ ------------- Cash, at end of period ........................................................... $ 1,405,999 $ 1,951,241 ------------ ------------- ------------ -------------
The accompanying notes are an integral part of the financial statements. 4 CHANCELLOR BROADCASTING COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. BASIS OF PRESENTATION The accompanying unaudited consolidated financial statements of Chancellor Broadcasting Company ("Chancellor") and its subsidiaries (the "Company") have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and notes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the three and six month periods ended June 30, 1996 are not necessarily indicative of the results that may be expected for the year ending December 31, 1996. 2. ACQUISITION On February 14, 1996, the Company acquired all of the outstanding capital stock of Trefoil Communications, Inc. ("Trefoil") for approximately $408.0 million, including acquisition costs. Trefoil is a holding company, the sole asset of which is the capital stock of Shamrock Broadcasting, Inc. ("Shamrock Broadcasting"). The acquisition of Trefoil was financed through the New Credit Agreement, the New Notes, the IPO and the offering of the Acquisition Preferred Stock and Class A Common Stock (all as defined). The acquisition of Trefoil was accounted for as a purchase. Accordingly, the purchase price was allocated to the net assets acquired based upon their estimated fair market values. The excess of the purchase price over the estimated fair value of net assets acquired amounted to approximately $368.0 million, which has been accounted for as goodwill and is being amortized over 40 years using the straight line method. This allocation was based on preliminary estimates. Simultaneously with the acquisition of Trefoil, the Company entered into a joint sales agreement with Evergreen Media Corporation for the outsourcing of certain limited functions of WWWW-FM and WDFN-AM, both Detroit stations, and an option to purchase such stations for $30.0 million of cash. Subsequent to the acquisition of Trefoil, KTBZ-FM, a Houston station acquired from Trefoil, was operated by Secret Communications, L.P. ("Secret") under a Local Marketing Agreement ("LMA")/Exchange Agreement with Chancellor. In March of 1996, the Company entered into an agreement, subject to FCC approval, to exchange KTBZ-FM and approximately $6.0 million of cash to Secret for KALC-FM and KIMN-FM, Denver, Colorado. The Company began managing certain limited functions of these stations, pursuant to an LMA, effective April 1, 1996 and closed on the exchange of the stations effective July 31, 1996. The Company also manages certain limited functions pursuant to an LMA and has entered into an asset purchase agreement to acquire certain assets of WKYN-AM in Florence, Kentucky for approximately $1.0 million of cash. On May 15, 1996, the Company entered into an agreement to acquire substantially all the assets and certain liabilities of OmniAmerica Group ("Omni") for an aggregate price of $178.0 million, including $163.0 million of cash and $15.0 million of Chancellor Broadcasting Company's Class A Common shares. Liabilities assumed will be limited to certain ongoing contractual rights and obligations. On June 24, 1996, the Company entered into an agreement with American Radio Systems Corporation ("American Radio") whereby it will exchange the West Palm Beach, Florida stations being acquired pursuant to the Omni acquisition agreement for American Radio's KSTE-AM and $33.0 million of cash. KSTE-AM is located in Rancho Cordova, California and is part of the Sacramento market. On July 1, 1996, Chancellor entered into an agreement with SFX Broadcasting, Inc. ("SFX") whereby it will exchange the Jacksonville, Florida stations being acquired pursuant to the Omni acquisition agreement and $11.0 million of cash for SFX's WBAB-FM, WBLI-FM, WGBB-AM and WHFM-FM, Nassau-Suffolk, New York. These acquisition and exchange agreements are subject to FCC approval. Pursuant to various agreements, the Company began managing certain limited functions of the remaining Omni stations and the SFX stations beginning July 1, 1996, and station KSTE-AM beginning August 1, 1996. 5 CHANCELLOR BROADCASTING COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) The following summarizes the unaudited consolidated historical and pro forma data for the six months ended June 30, 1995 and 1996, as though the Company's acquisitions of KDWB-FM and Trefoil had occurred as of the beginning of 1995 (in thousands):
SIX MONTHS ENDED SIX MONTHS ENDED JUNE 30, 1995 JUNE 30, 1996 --------------------- ---------------------- HISTORICAL PRO FORMA HISTORICAL PRO FORMA ---------- --------- ---------- --------- Net revenues .......................... $ 30,811 $ 76,213 $ 70,068 $ 77,444 Net loss before extraordinary loss..... (8,190) (18,898) (9,940) (11,127) Net loss .............................. (8,190) (18,898) (14,586) (11,127) Net loss per common share ............. (0.93) (1.10) (2.05) (0.65)
3. LONG-TERM DEBT The Company's $70.0 million term loan facility and $35.0 million revolving loan facility were refinanced on February 14, 1996, in conjunction with the acquisition of Trefoil Communications, Inc. under a new bank credit agreement (the "New Credit Agreement") with Bankers Trust Company, as administrative agent, and other institutions party thereto. In connection with the refinancing of the term loan and revolving loan facility, the Company incurred an extraordinary charge to write-off deferred finance costs of approximately $1.8 million. The New Credit Agreement includes a $60.0 million term loan facility (the "A Term Loan Facility"), a $35.0 million term loan facility (the "B Term Loan Facility" and , together with the A Term Loan Facility, the "Term Loans") and a $40.0 million revolving loan facility (the "Revolving Loan Facility" and, together with the Term Loans, the "New Bank Financing"). The New Bank Financing is collateralized by (i) a first priority perfected pledge of all capital stock and notes owned by Chancellor and its subsidiaries and (ii) a first priority perfected security interest in all other assets (including receivables, contracts, contract rights, securities, patents, trademarks, other intellectual property, inventory, equipment and real estate) owned by Chancellor and its subsidiaries, excluding FCC licenses, leasehold interests in studio or office space and certain leasehold and partnership interests in tower or transmitter sites. The A and B Term Loan Facilities are due in increasing quarterly installments beginning in 1996 and mature in August 2002 and 2003, respectively. All outstanding borrowings under the Revolving Loan Facility mature in August 2002. The facilities bear interest, at the option of the Company, at rates based upon the prime rate of Bankers Trust Company, as announced from time to time, or the London Inter-Bank Offered Rate ("LIBOR") in effect from time to time, plus an applicable margin rate. The Company pays quarterly commitment fees in arrears equal to .5% per annum on the unused portion of the Revolving Loan Facility. As of June 30, 1996, the New Bank Financing facilities accrued interest at prime rate plus 1.50% (9.75%) on $4.1 million of borrowings and LIBOR rate plus 2.75% (8.19%) and 3.00% (8.44%) on $59.0 million and $34.9 million of borrowings, respectively. In connection with the IPO (defined), the Company redeemed 25% of its Existing Notes (defined) for approximately $22.2 million. The redemption was completed in March 1996 and resulted in an extraordinary charge of $2.8 million. The remaining $60 million 12 1/2% Senior Subordinated Notes due 2004 (the "Existing Notes") mature October 1, 2004, and bear interest at 12.5% per annum. On February 14, 1996, in conjunction with the acquisition of Trefoil Communications, Inc., the Company issued $200 million aggregate principal amount of 9 3/8% Senior Subordinated Notes due 2004 (the "New Notes" and, together with the Existing Notes, the "Notes"), which mature on October 1, 2004, and bear interest at 9.375% per annum. Interest on the Notes is paid semi-annually. The Existing and New Notes are redeemable, in whole or in part, at the option of the Company on or after October 1, 1999 and February 1, 2000, respectively. In addition, prior to January 31, 1999, the company may redeem up to 25% of the original aggregate principal amount of the New Notes with the net proceeds of one or more public equity offerings. The Notes are unsecured obligations of the Company, ranking subordinate in right of payment to all senior debt of the Company. The New Notes rank PARI PASSU in right of payment to the Existing Notes. The Notes are guaranteed on a senior subordinated basis by Chancellor Radio Broadcasting Company's subsidiaries. 6 CHANCELLOR BROADCASTING COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED) Both the Bank Financing and Notes indenture contain certain covenants, including, among others, limitations on the incurrence of additional debt, in the case of the Bank Financing; requirements to maintain certain financial ratios; and restrictions on the payment of dividends. 4. CAPITAL STRUCTURE In February 1996, Chancellor sold 7.7 million shares of Class A common stock in an initial public offering (the "IPO"), which generated net proceeds of $142.4 million, and in a private placement, issued $100.0 million of exchangeable redeemable preferred stock (the "Acquisition Preferred Stock") of Chancellor Radio Broadcasting Company and 742,192 shares of Class A common stock of Chancellor to an affiliated entity and other investors. In February 1996, subsequent to the IPO, the Company commenced a private placement of $100.0 million of newly authorized Senior Cumulative Exchangeable Preferred Stock (the "Old Preferred Stock"). Upon completion, the proceeds of the Old Preferred Stock were used to redeem the Acquisition Preferred Stock and 55,664 shares of Class A common stock. The redemption resulted in a charge to net loss applicable to common stock of approximately $16.6 million. In March 1996, the Company commenced an exchange offering to exchange the Old Preferred Stock for 1,000,000 shares of public, 12 1/4% Senior Cumulative Exchangeable Preferred Stock (the "New Preferred Stock"). The terms of the New Preferred Stock are substantially identical to those of the Old Preferred Stock. Dividends on the New Preferred Stock will accrue from its date of issuance and will be payable quarterly commencing May 15, 1996, at a rate per annum of 12 1/4% of the then effective liquidation preference per share. Dividends may be paid, at the Company's option, on any dividend payment date occurring on or prior to February 15, 2001 either in cash or by adding such dividends to the then effective liquidation preference of the New Preferred Stock. The initial liquidation preference of the New Preferred Stock will be $100.00 per share. The New Preferred Stock is redeemable at the Company's option, in whole or in part at any time on or after February 15, 2001, at various redemption prices (as defined), plus, accumulated and unpaid dividends to the date of redemption. In addition, prior to February 15, 1999, the Company may, at its option, redeem the New Preferred Stock with the net cash proceeds from one or more Public Equity Offerings (as defined), at various redemption prices (as defined), plus, accumulated and unpaid dividends to the redemption date; provided, however, that after any such redemption there is outstanding at least 75% of the number of shares of New Preferred Stock originally issued. The Company is required, subject to certain conditions, to redeem all of the New Preferred Stock outstanding on February 15, 2008, at a redemption price equal to 100% of the then effective liquidation preference thereof, plus, accumulated and unpaid dividends to the date of redemption. Upon the occurrence of a change of control (as defined), the Company will offer to purchase all of the then outstanding shares of New Preferred Stock at a price equal to 101% of the then effective liquidation preference thereof, plus, accumulated and unpaid dividends to the date of purchase. Subject to certain conditions, the New Preferred Stock is exchangeable in whole, but not in part, at the option of the Company, on any dividend payment date for the Company's 12 1/4% subordinated exchange debentures due 2008. In addition to the accrued dividends discussed above, the recorded value of the Old Preferred Stock includes an amount for the accretion of the difference between the Old Preferred Stock's fair value at date of issuance and its mandatory redemption amount, calculated using the effective interest method. Immediately prior to the IPO, Chancellor effected a recapitalization of its current capital stock. Pursuant to the recapitalization, each six shares of Chancellor's Nonvoting Stock were reclassified into one share of Class A Common Stock. Each six shares of Chancellor's Voting Stock were reclassified into one share of Class B Common Stock and each six shares of Convertible Nonvoting Stock were reclassified into one share of Class C Common Stock. In connection with the recapitalization, 63,333 shares of Class A Common Stock were exchanged for an equal number of shares of Class B Common Stock, and an additional 8,483,078 shares of Class A Common Stock were exchanged for an equal number of shares of Class C Common Stock. The recapitalization has been given retroactive effect in the financial statements. 7 CHANCELLOR BROADCASTING COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED) In June 1996, the owner's of the Class C Common Stock filed an application with the FCC to convert the stock into Chancellor's Class A Common Stock. This conversion is subject to FCC approval as it results in a change of control. On August 9, 1996, the Company sold 1,185,521 shares of Chancellor's Class A common stock to HM Fund II for cash proceeds of $23.0 million, pursuant to the agreement made at the time of Chancellor's IPO. 5. EMPLOYEE STOCK OPTION PLAN On February 9, 1996, Chancellor's Board of Directors adopted a stock award plan for the Company's management, employees and non-employee directors providing for the grant of options and stock awards for up to 5% of Chancellor's Common Stock (on a fully-diluted basis). During 1996, the Board of Directors has granted options to purchase a total of 537,500 shares of Class A Common Stock with various exercise prices equal to the fair market value of the stock on the respective dates of grant. 6. INCOME TAXES Income tax expense differs from the amount computed by applying the federal statutory income tax rate of 34% to loss before income taxes and dividends and accretion on preferred stock of subsidiary for the following reasons: THREE MONTHS ENDED JUNE 30, SIX MONTHS ENDED JUNE 30, --------------------------- ------------------------- 1995 1996 1995 1996 ----------- -------- ----------- ----------- U.S. federal income tax at statutory rate.... $(1,297,650) $506,605 $(2,075,717) $(1,188,527) State income taxes, net of federal benefit... (228,997) 89,401 (366,303) (209,740) Valuation allowance provided for loss carryforward generated during the current period...................................... 2,376,266 (59,006) 4,446,576 2,749,628 Other........................................ 40,001 125,000 80,002 250,000 ----------- -------- ----------- ----------- $ 889,620 $662,000 $ 2,084,558 $ 1,601,361 ----------- -------- ----------- ----------- ----------- -------- ----------- -----------
The deferred tax valuation allowance has been established due to the uncertainty surrounding the Company's ability to generate taxable income in the immediate future. While the Company currently expects that its long-term profitability should ultimately be sufficient to enable it to realize full benefit of its future tax deductions, considering all factors to be relevant, the Company believes that a portion of the gross deferred tax assets may not currently meet a "more likely than not" realizability test. 7. RELATED PARTY TRANSACTION Effective April 1, 1996, the Company entered into a revised financial monitoring and oversight agreement with Hicks Muse & Co. Partners, L.P. and HM2/Management Partners, L.P., each of which is an affiliate of Hicks, Muse, Tate & Furst Incorporated. The annual fee for financial oversight and monitoring services to the Company has been adjusted to $500,000. The annual fee is adjustable each January 1, to an amount equal to the budgeted consolidated annual net sales of the Company for the then-current fiscal year, multiplied by 0.25%; provided, however, that in no event shall the annual fee be less than $500,000. 8. NEW ACCOUNTING PRONOUNCEMENT Statement of Financial Accounting Standard No. 123, "Accounting for Stock Based Compensation" was issued in October 1995, which establishes financial accounting and reporting standards for stock based employee compensation plans, including stock purchase plans, stock options, restricted stock, and stock appreciation rights. The Company has elected to continue accounting for stock based compensation under Accounting Principles Board Opinion No. 25. The disclosure requirements of SFAS No. 123 will be effective for the Company's financial statements beginning with the annual report for 1996. Management does not believe that the implementation of SFAS 123 will have a material effect on its financial statements. 8 CHANCELLOR RADIO BROADCASTING COMPANY AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS DECEMBER 31, JUNE 30, 1995 1996 ------------ ------------ ASSETS Current assets: Cash........................................... $ 1,314,214 $ 1,951,241 Accounts receivable, net of allowance for doubtful accounts of $263,528 and $580,076, respectively.................................. 13,243,292 35,707,004 Prepaid expenses and other..................... 546,405 2,827,727 ------------ ------------ Total current assets......................... 15,103,911 40,485,972 Property and equipment, net.................... 17,925,845 52,294,924 Intangibles and other, net..................... 203,808,395 564,468,503 Deferred financing costs, net.................. 4,284,413 19,004,762 ------------ ------------ Total assets................................. $241,122,564 $676,254,161 ------------ ------------ ------------ ------------ LIABILITIES AND STOCKHOLDER'S EQUITY Current liabilities: Accounts payable............................... $ 1,873,888 $ 2,755,088 Accrued liabilities............................ 4,692,948 8,817,451 Accrued interest............................... 2,710,891 6,954,218 Current portion of long-term debt.............. 4,062,500 4,900,000 ------------ ------------ Total current liabilities.................... 13,340,227 23,426,757 Long-term debt................................... 168,107,242 353,123,469 Deferred income taxes ........................... 4,952,361 18,436,384 Other ........................................... -- 800,211 ------------ ------------ Total liabilities ........................... 186,399,830 395,786,821 ------------ ------------ Redeemable Senior Cumulative Exchangeable Preferred Stock, par value $.01 per share; 1,000,000 shares authorized, issued and outstanding; preference in liquidation of $100,000,000, plus accumulated and unpaid dividends and accretion......................... -- 100,563,968 Common stockholder's equity: Common stock, par value $.01 per share, 1,000 shares authorized, issued and outstanding..... 10 10 Additional paid-in capital..................... 66,359,990 201,283,579 Accumulated deficit............................ (11,637,266) (21,380,217) ------------ ------------ Total common stockholder's equity............ 54,722,734 179,903,372 ------------ ------------ Total liabilities and stockholder's equity.. $241,122,564 $676,254,161 ------------ ------------ ------------ ------------ The accompanying notes are an integral part of the financial statements. 9 CHANCELLOR RADIO BROADCASTING COMPANY AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS THREE MONTHS ENDED JUNE 30, SIX MONTHS ENDED JUNE 30, --------------------------- -------------------------- 1995 1996 1995 1996 ----------- ----------- ----------- ------------ Gross broadcasting revenues......... $20,219,761 $50,758,926 $35,080,729 $ 79,848,441 Less agency commissions............. 2,490,212 6,333,258 4,269,625 9,780,534 ----------- ----------- ----------- ------------ Net revenues.................... 17,729,549 44,425,668 30,811,104 70,067,907 ----------- ----------- ----------- ------------ Operating expenses: Programming, technical and news... 3,054,247 7,865,007 5,816,492 13,009,767 Sales and promotion............... 5,130,916 12,366,880 8,731,157 19,309,958 General and administrative........ 2,071,813 6,001,628 4,245,517 10,405,378 Depreciation and amortization..... 2,109,425 6,040,331 4,468,080 11,067,939 Corporate expenses................ 486,877 831,609 856,444 1,839,206 Stock option compensation......... 4,460,000 950,000 4,460,000 1,900,000 ----------- ----------- ----------- ------------ 17,313,278 34,055,455 28,577,690 57,532,248 ----------- ----------- ----------- ------------ Income from operations.......... 416,271 10,370,213 2,233,414 12,535,659 Other expense: Interest expense.................. 4,174,740 8,787,846 8,288,247 15,933,352 Other, net........................ 58,149 92,352 50,216 97,976 ----------- ----------- ----------- ------------ Income (loss) before provision for income and extraordinary loss........................... (3,816,618) 1,490,015 (6,105,049) (3,495,669) Provision for income taxes.......... 889,620 662,000 2,084,558 1,601,361 ----------- ----------- ----------- ------------ Net loss before extraordinary loss........................... (4,706,238) 828,015 (8,189,607) (5,097,030) Extraordinary loss on early extinguishment of debt............. -- -- -- 4,645,921 ----------- ----------- ----------- ------------ Net income (loss)............... (4,706,238) 828,015 (8,189,607) (9,742,951) Dividends and accretion on preferred stock................... -- 3,183,069 -- 4,843,338 Loss on repurchase of preferred stock............................. -- -- -- 16,570,065 ----------- ----------- ----------- ------------ Net loss attributable to common stock.................. $(4,706,238) $(2,355,054) $(8,189,607) $(31,156,354) ----------- ----------- ----------- ------------ ----------- ----------- ----------- ------------
The accompanying notes are an integral part of the financial statements. 10 CHANCELLOR RADIO BROADCASTING COMPANY AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CHANGES IN COMMON STOCKHOLDER'S EQUITY COMMON STOCK ADDITIONAL --------------- PAID-IN ACCUMULATED SHARES AMOUNT CAPITAL DEFICIT TOTAL ------ ------ ------------- ------------ ------------ Balance, January 1, 1995..................... 2,000 $ 20 $ 59,999,980 $ (105,970) $ 59,894,030 Capital contributions........................ -- -- 6,360,000 -- 6,360,000 Contribution of stock held by affiliate of Hicks, Muse, Tate & Furst................ (1,000) (10) 10 -- -- Net loss..................................... -- -- -- (11,531,296) (11,531,296) ------ ---- ------------- ------------ ------------ Balance, December 31, 1995................... 1,000 10 66,359,990 (11,637,266) 54,722,734 Loss on repurchase of preferred stock........ -- -- (16,570,065) -- (16,570,065) Dividends and accretion on preferred stock... -- -- (4,843,338) -- (4,843,338) Capital contributions........................ -- -- 156,336,992 -- 156,336,992 Net loss..................................... -- -- -- (9,742,951) (9,742,951) ------ ---- ------------- ------------ ------------ Balance, June 30, 1996....................... 1,000 $ 10 $ 201,283,579 $(21,380,217) $179,903,372 ------ ---- ------------- ------------ ------------ ------ ---- ------------- ------------ ------------
The accompanying notes are an integral part of the financial statements. 11 CHANCELLOR RADIO BROADCASTING COMPANY AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS
SIX MONTHS ENDED JUNE 30, ------------------------------ 1995 1996 ------------ -------------- Cash flows from operating activities: Net loss........................................................................... $(8,189,607) $ (9,742,951) Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization.................................................... 4,468,080 11,067,939 Provision for doubtful accounts.................................................. 130,159 101,752 Stock option compensation........................................................ 4,460,000 1,900,000 Deferred income taxes............................................................ 2,084,558 1,539,361 Extraordinary loss............................................................... -- 4,645,921 Changes in assets and liabilities, net of the effects of acquired businesses: Accounts receivable............................................................ (3,030,954) (2,733,580) Prepaids and other............................................................. (247,941) (1,379,953) Accounts payable............................................................... (805,913) (87,178) Accrued liabilities............................................................ 1,172,436 (66,139) Accrued interest............................................................... 286,321 4,243,327 ----------- ------------ Net cash provided by operating activities.................................... 327,139 9,488,499 ----------- ------------ Cash flows from investing activities: Purchases of broadcasting properties............................................... (169,542) (406,140,430) Purchases of other property and equipment.......................................... (690,906) (1,373,601) ----------- ------------ Net cash used in investing activities........................................ (860,448) (407,514,031) ----------- ------------ Cash flows from financing activities: Proceeds from issuance of long-term debt........................................... -- 277,627,630 Proceeds from borrowings under revolving debt facility............................. 9,202,067 46,763,999 Repayments of long-term debt....................................................... -- (90,884,500) Repayments of borrowings under revolving debt facility............................. (8,779,567) (68,432,127) Issuance of preferred stock........................................................ -- 175,118,543 Repurchase of preferred stock...................................................... -- (95,462,423) Additional capital contributions................................................... -- 155,475,126 Distribution of additional paid in capital......................................... -- (1,038,134) Payment of preferred stock dividends............................................... -- (505,555) ----------- ------------ Net cash provided by financing activities.................................... 422,500 398,662,559 ----------- ------------ Net increase (decrease) in cash.............................................. (110,809) 637,027 Cash, at beginning of period......................................................... 1,516,808 1,314,214 ----------- ------------ Cash, at end of period............................................................... $ 1,405,999 $ 1,951,241 ----------- ------------ ----------- ------------
The accompanying notes are an integral part of the financial statements. 12 CHANCELLOR RADIO BROADCASTING COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. BASIS OF PRESENTATION The accompanying unaudited consolidated financial statements of Chancellor Radio Broadcasting Company ("Chancellor Radio Broadcasting") and its subsidiaries (the "Company") have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and notes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the three and six month periods ended June 30, 1996 are not necessarily indicative of the results that may be expected for the year ending December 31, 1996. Chancellor Radio Broadcasting is a wholly owned subsidiary of Chancellor Broadcasting Company ("Chancellor"). 2. ACQUISITION On February 14, 1996, the Company acquired all of the outstanding capital stock of Trefoil Communications, Inc. ("Trefoil") for approximately $408.0 million, including acquisition costs. Trefoil is a holding company, the sole asset of which is the capital stock of Shamrock Broadcasting, Inc. ("Shamrock Broadcasting"). The acquisition of Trefoil was financed through the New Credit Agreement, the New Notes, the IPO and the offering of the Acquisition Preferred Stock and Class A Common Stock (all as defined). The acquisition of Trefoil was accounted for as a purchase. Accordingly, the purchase price was allocated to the net assets acquired based upon their estimated fair market values. The excess of the purchase price over the estimated fair value of net assets acquired amounted to approximately $368.0 million, which has been accounted for as goodwill and is being amortized over 40 years using the straight line method. This allocation was based on preliminary estimates and may be revised at a later date. Simultaneously with the acquisition of Trefoil, the Company entered into a joint sales agreement with Evergreen Media Corporation for the outsourcing of certain limited functions of WWWW-FM and WDFN-AM, both Detroit stations, and an option to purchase such stations for $30.0 million of cash. Subsequent to the acquisition of Trefoil, KTBZ-FM, a Houston station acquired from Trefoil, was operated by Secret Communications, L.P. ("Secret") under a Local Marketing Agreement ("LMA")/Exchange Agreement with Chancellor. In March of 1996, the Company entered into an agreement, subject to FCC approval, to exchange KTBZ-FM and approximately $6.0 million of cash to Secret for KALC-FM and KIMN-FM, Denver, Colorado. The Company began managing certain limited functions of these stations, pursuant to an LMA, effective April 1, 1996 and intends to close on the exchange of the stations effective July 31, 1996. Additionally, the Company also manages certain limited functions pursuant to an LMA and has entered into an asset purchase agreement to acquire certain assets of WKYN-AM in Florence, Kentucky for approximately $1.0 million of cash. On May 15, 1996, the Company entered into an agreement to acquire substantially all the assets and certain liabilities of OmniAmerica Group ("Omni") for an aggregate price of $178.0 million, including $163.0 million of cash and $15.0 million of Chancellor Broadcasting Company's Class A Common shares. Liabilities assumed will be limited to certain ongoing contractual rights and obligations. On June 24, 1996, the Company entered into an agreement with American Radio Systems Corporation ("American Radio") whereby it will exchange the West Palm Beach, Florida stations being acquired pursuant to the Omni acquisition agreement for American Radio's KSTE-AM and $33.0 million of cash. KSTE-AM is located in Rancho Cordova, California and is part of the Sacramento market. On July 1, 1996, Chancellor entered into an agreement with SFX Broadcasting, Inc. ("SFX") whereby it will exchange the Jacksonville, Florida stations being acquired pursuant to the Omni acquisition agreement and $11.0 million of cash for SFX's WBAB-FM, WBLI-FM, WGBB-AM and WHFM-FM, Nassau-Suffolk, New York. These acquisition and exchange agreements are subject to FCC approval. Pursuant to various agreements, the Company began managing certain limited functions of the remaining Omni stations and the SFX stations beginning July 1, 1996, and station KSTE-AM beginning August 1, 1996. 13 CHANCELLOR RADIO BROADCASTING COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) The following summarizes the unaudited consolidated historical and pro forma data for the six months ended June 30, 1995 and 1996, as though the Company's acquisitions of KDWB-FM and Trefoil had occurred as of the beginning of 1995 (in thousands):
SIX MONTHS ENDED SIX MONTHS ENDED JUNE 30, 1995 JUNE 30, 1996 --------------------- --------------------- HISTORICAL PRO FORMA HISTORICAL PRO FORMA ---------- --------- ---------- --------- Net revenues........................... $30,811 $ 76,213 $70,068 $77,444 Net loss before extraordinary loss..... (8,190) (12,601) (5,097) (4,830) Net loss............................... (8,190) (12,601) (9,743) (4,830)
3. LONG-TERM DEBT The Company's $70.0 million term loan facility and $35.0 million revolving loan facility were refinanced on February 14, 1996, in conjunction with the acquisition of Trefoil Communications, Inc. under a new bank credit agreement (the "New Credit Agreement") with Bankers Trust Company, as administrative agent, and other institutions party thereto. In connection with the refinancing of the term loan and revolving loan facility, the Company incurred an extraordinary charge to write-off deferred finance costs of approximately $1.8 million. The New Credit Agreement includes a $60.0 million term loan facility (the "A Term Loan Facility"), a $35.0 million term loan facility (the "B Term Loan Facility" and, together with the A Term Loan Facility, the "Term Loans") and a $40.0 million revolving loan facility (the "Revolving Loan Facility" and, together with the Term Loans, the "New Bank Financing"). The New Bank Financing is collateralized by (i) a first priority perfected pledge of all capital stock and notes owned by Chancellor and its subsidiaries and (ii) a first priority perfected security interest in all other assets (including receivables, contracts, contract rights, securities, patents, trademarks, other intellectual property, inventory, equipment and real estate) owned by Chancellor and its subsidiaries, excluding FCC licenses, leasehold interests in studio or office space and certain leasehold and partnership interests in tower or transmitter sites. The A and B Term Loan Facilities are due in increasing quarterly installments beginning in 1996 and mature in August 2002 and 2003, respectively. All outstanding borrowings under the Revolving Loan Facility mature in August 2002. The facilities bear interest, at the option of the Company, at rates based upon the prime rate of Bankers Trust Company, as announced from time to time, or the London Inter-Bank Offered Rate ("LIBOR") in effect form time to time, plus an applicable margin rate. The Company pays quarterly commitment fees in arrears equal to 5% per annum on the unused portion of the Revolving Loan Facility. As of June 30, 1996, the New Bank Financing facilities accrued interest at prime rate plus 1.50% (9.75%) on $4.1 million of borrowings and LIBOR rate plus 2.75% (8.19%) and 3.00% (8.44%) on $59.0 million and $34.9 million of borrowings, respectively. In connection with the IPO (defined), the Company redeemed 25% of its Existing Notes (defined) for approximately $22.2 million. The redemption was completed in March 1996 and resulted in an extraordinary charge of $2.8 million. The remaining $60 million 12 1/2% Senior Subordinated Notes due 2004 (the "Existing Notes") mature October 1, 2004, and bear interest at 12.5% per annum. On February 14, 1996, in conjunction with the acquisition of Trefoil Communications, Inc., the Company issued $200 million aggregate principal amount of 9 3/8% Senior Subordinated Notes due 2004 (the "New Notes" and, together with the Existing Notes, the "Notes"), which mature on October 1, 2004, and bear interest at 9.375% per annum. Interest on the Notes is paid semi-annually. The Existing and New Notes are redeemable, in whole or in part, at the option of the Company on or after October 1, 1999 and February 1, 2000, respectively. In addition, prior to January 31, 1999, the company may redeem up to 25% of the original aggregate principal amount of the New Notes with the net proceeds of one or more public equity offerings. The Notes are unsecured obligations of the Company, ranking subordinate in right of payment to all senior debt of the Company. The New Notes rank PARI PASSU in right of payment to the Existing Notes. The Notes are guaranteed on a senior subordinated basis by Chancellor Radio Broadcasting Company's subsidiaries. Both the Bank Financing and Notes indenture contain certain covenants, including, among others, limitations on the incurrence of additional debt, in the case of the Bank Financing; requirements to maintain certain financial ratios; and restrictions on the payment of dividends. 14 CHANCELLOR BROADCASTING COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED) 4. CAPITAL STRUCTURE In February 1996, Chancellor sold 7.7 million shares of Class A common stock in an initial public offering (the "IPO"), which generated net proceeds of $142.4 million, and in a private placement, issued $100.0 million of exchangeable redeemable preferred stock (the "Acquisition Preferred Stock") of Chancellor Radio Broadcasting and 742,192 shares of Class A common stock of Chancellor to an affiliated entity and other investors. In February 1996, subsequent to the IPO, the Company commenced a private placement of $100.0 million of newly authorized Senior Cumulative Exchangeable Preferred Stock (the "Old Preferred Stock"). Upon completion, the proceeds of the Old Preferred Stock were used to redeem the Acquisition Preferred Stock and 55,664 shares of Class A common stock. The redemption resulted in a charge to net loss applicable to common stock of approximately $16.6 million and an additional reduction of paid-in capital of approximately $1.0 million In March 1996, the Company commenced an exchange offering to exchange the Old Preferred Stock for 1,000,000 shares of public, 12 1/4% Senior Cumulative Exchangeable Preferred Stock (the "New Preferred Stock"). The terms of the New Preferred Stock are substantially identical to those of the Old Preferred Stock. Dividends on the New Preferred Stock will accrue from its date of issuance and will be payable quarterly commencing May 15, 1996, at a rate per annum of 12 1/4% of the then effective liquidation preference per share. Dividends may be paid, at the Company's option, on any dividend payment date occurring on or prior to February 15, 2001 either in cash or by adding such dividends to the then effective liquidation preference of the New Preferred Stock. The initial liquidation preference of the New Preferred Stock will be $100.00 per share. The New Preferred Stock is redeemable at the Company's option, in whole or in part at any time on or after February 15, 2001, at various redemption prices (as defined), plus, accumulated and unpaid dividends to the date of redemption. In addition, prior to February 15, 1999, the Company may, at its option, redeem the Senior exchangeable Preferred Stock with the net cash proceeds from one or more Public Equity Offerings (as defined), at various redemption prices (as defined), plus, accumulated and unpaid dividends to the redemption date; provided, however, that after any such redemption there is outstanding at least 75% of the number of shares of New Preferred Stock originally issued. The Company is required, subject to certain conditions, to redeem all of the New Preferred Stock outstanding on February 15, 2008, at a redemption price equal to 100% of the then effective liquidation preference thereof, plus, accumulated and unpaid dividends to the date of redemption. Upon the occurrence of a change of control (as defined), the Company will offer to purchase all of the then outstanding shares of New Preferred Stock at a price equal to 101% of the then effective liquidation preference thereof, plus, accumulated and unpaid dividends to the date of purchase. Subject to certain conditions, the New Preferred Stock is exchangeable in whole, but not in part, at the option of the Company, on any dividend payment date for the Company's 12 1/4% subordinated exchange debentures due 2008. In addition to the accrued dividends discussed above, the recorded value of the Old Preferred Stock includes an amount for the accretion of the difference between the Old Preferred Stock's fair value at date of issuance and its mandatory redemption amount, calculated using the effective interest method. In June 1996, the owner's of Chancellor's Class C Common Stock filed an application with the FCC to convert the stock into Chancellor's Class A Common Stock. This conversion is subject to FCC approval as it results in a change of control. 5. EMPLOYEE STOCK OPTION PLAN On February 9, 1996, Chancellor's Board of Directors adopted a stock award plan for the Company's management, employees and non-employee directors providing for the grant of options and stock awards for up to 5% of Chancellor's Common Stock (on a fully-diluted basis). During 1996, the Board of Directors has granted options to purchase a total of 537,500 shares of Class A Common Stock with various exercise prices equal to the fair market value of the stock on the respective dates of grant. 15 CHANCELLOR BROADCASTING COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED) 6. INCOME TAXES Income tax expense differs from the amount computed by applying the federal statutory income tax rate of 34% to loss before income taxes for the following reasons:
THREE MONTHS ENDED JUNE 30, SIX MONTHS ENDED JUNE 30, --------------------------- ---------------------------- 1995 1996 1995 1996 ------------ -------- ------------ ------------ U.S. federal income tax at statutory rate.............. $(1,297,650) $506,605 $(2,075,717) $(1,188,527) State income taxes, net of federal benefit............. (228,997) 89,401 (366,303) (209,740) Valuation allowance provided for loss carryforward generated during the current period.................................... 2,376,266 (59,006) 4,446,576 2,749,628 Other.................................................. 40,001 125,000 80,002 250,000 ----------- -------- ----------- ----------- $ 889,620 $662,000 $ 2,084,558 $ 1,601,361 ----------- -------- ----------- ----------- ----------- -------- ----------- -----------
The deferred tax valuation allowance has been established due to the uncertainty surrounding the Company's ability to generate taxable income in the immediate future. While the Company currently expects that its long-term profitability should ultimately be sufficient to enable it to realize full benefit of its future tax deductions, considering all factors to be relevant, the Company believes that a portion of the gross deferred tax assets may not currently meet a "more likely than not" realizability test. 7. RELATED PARTY TRANSACTION Effective April 1, 1996, Chancellor and the Company entered into a revised financial monitoring and oversight agreement with Hicks Muse & Co. Partners, L.P. and HM2/Management Partners, L.P., each of which is an affiliate of Hicks, Muse, Tate & Furst Incorporated. The annual fee for financial oversight and monitoring services to Chancellor and the Company has been adjusted to $500,000. The annual fee is adjustable each January 1, to an amount equal to the budgeted consolidated annual net sales of the Company for the then-current fiscal year, multiplied by 0.25%; provided, however, that in no event shall the annual fee be less than $500,000. 8. NEW ACCOUNTING PRONOUNCEMENT Statement of Financial Accounting Standard No. 123, "Accounting for Stock Based Compensation" was issued in October 1995, which establishes financial accounting and reporting standards for stock based employee compensation plans, including stock purchase plans, stock options, restricted stock, and stock appreciation rights. The Company has elected to continue accounting for stock based compensation under Accounting Principles Board Opinion No. 25. The disclosure requirements of SFAS No. 123 will be effective for the Company's financial statements beginning with the annual report for 1996. Management does not believe that the implementation of SFAS 123 will have a material effect on its financial statements. 16 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS GENERAL The following discussion and analysis of results of operations and financial condition of the Company should be read in conjunction with the consolidated financial statements and related notes thereto of the Company included elsewhere in this document. Periodically, the Company makes forward looking statements that are not historical facts. Actual results may differ materially from those projected in the forward looking statements. These forward looking statements involve risks and uncertainties, including but not limited to, the following: business conditions and growth in the radio broadcasting industry and general economy; competitive factors; that interest rates may increase rather than remain stable or decrease; that one or more of the Company's broadcasting licenses may not be renewed; and the risk factors listed from time to time in documents filed by the Company with the Securities and Exchange Commission. Chancellor Broadcasting Company and its subsidiaries (the "Company") have grown largely through acquisitions, as well as through internally generated growth. Upon completion of its pending acquisition, exchange and sales agreements, the Company will own and operate 41 radio stations serving the following top 40 markets: New York, New York; Los Angeles, California; San Francisco, California; Atlanta, Georgia; Riverside-San Bernardino, California; Minneapolis-St. Paul, Minnesota; Nassau-Suffolk (Long Island), New York; Phoenix, Arizona; Pittsburgh, Pennsylvania; Denver, Colorado; Cincinnati, Ohio; Sacramento, California; and Orlando, Florida. See the "Acquisition" note to the financial statements for a more detailed description of the pending agreements. In the following analysis, management discusses the "broadcast cash flow" of the combined station group. Broadcast cash flow consists of operating income before depreciation and amortization, corporate expenses and non-cash stock option compensation expense. Although broadcast cash flow is not a measure of performance calculated in accordance with generally accepted accounting principles ("GAAP"), management believes that it is useful to an investor in evaluating the Company because it is a measure widely used in the broadcast industry to evaluate a radio company's operating performance. However, broadcast cash flow should not be considered in isolation or as a substitute for net income, cash flows from operating activities and other income or cash flow statement data prepared in accordance with GAAP or as a measure of liquidity or profitability. The discussion of broadcast cash flow appears as the last paragraph in the discussion of the results of operations. For ease of comprehension, the following table and analysis presents and discusses the combined historical net revenues, operating expenses and broadcast cash flow of the Company, Midcontinent Radio of Minnesota Inc. related to radio station KDWB-FM (where not already included in the Company's results of operations per the terms of the LMA), Shamrock Broadcasting and Secret related to radio stations KIMN-FM and KALC-FM (where not already included in the Company's results of operations per the terms of the LMA) for the three and six months ended June 30, 1995 and 1996. Results related to the Company's Detroit and Houston stations are limited to those revenues and expenses attributable to the Company per the terms of the LMA agreements in 1996. No data for these stations prior to the LMA agreements in February 1996 or for 1995 have been included. This combined "same station basis" information is presented in a manner similar to a "pooling of interests"; however, it is not in accordance with GAAP which does not allow for the aggregation of financial data for entities which are not under common management and control. Nevertheless, management believes the financial information shown below is helpful in understanding past and current operations of the Company's stations. In the following information, the KDWB-FM LMA fee of $180,000, paid by the Company to Midcontinent Radio of Minnesota Inc. in 1995, for the three and six months ended June 30, 1995, has been eliminated from net revenues and operating expenses:
THREE MONTHS ENDED JUNE 30, SIX MONTHS ENDED JUNE 30, --------------------------- -------------------------- 1995 1996 1995 1996 ----------- ----------- ----------- ----------- Net revenues............... $41,564,363 $44,425,668 $74,180,591 $79,239,431 Operating expenses......... 29,483,264 26,233,515 53,888,784 50,701,496 ----------- ----------- ----------- ----------- Broadcast cash flow...... $12,081,099 $18,192,153 $20,291,807 $28,537,935 ----------- ----------- ----------- ----------- ----------- ----------- ----------- -----------
17 Because the Company incurred substantial indebtedness for its acquisitions for which it has significant debt service requirements, and because the Company has significant non-cash charges for stock option compensation and depreciation and amortization expense related to the fixed assets and intangibles acquired in the acquisitions, the Company expects that it will report net losses for the foreseeable future, which losses may be greater than those historically experienced by the Company. RESULTS OF OPERATIONS THREE MONTHS ENDED JUNE 30, 1996 COMPARED TO THREE MONTHS ENDED JUNE 30, 1995 Net revenues increased 150.6% to $44.4 million for the three months ended June 30, 1996 from $17.7 million for the same period in 1995. The majority of this increase was due to the acquisition of Shamrock Broadcasting. On a same station basis, net revenues increased 6.9% to $44.4 million for the second quarter of 1996 from $41.6 million for the second quarter of 1995. Station operating expenses increased 155.8% to $26.2 million for the quarter ended June 30, 1996 from $10.3 million for the quarter ended June 30, 1995. The majority of this increase was due to the acquisition of Shamrock Broadcasting. On a same station basis, station operating expenses decreased 11.0% to $26.2 million for the three months ended June 30, 1996 from $29.5 million over the same period of 1995. Depreciation and amortization increased 186.3% to $6.0 million for the second quarter of 1996 from $2.1 million for the same period in the prior year. Corporate expenses increased 70.8% to $832,000 for the second quarter of 1996 from approximately $294,000 for the same period in 1995, as a result of additional personnel and overhead costs associated with the acquisition of Shamrock Broadcasting. Interest expense increased 110.5% to $8.8 million from $4.2 million for the same period. These increases were primarily attributable to the acquisition of Shamrock Broadcasting and the resulting change in capital structure from its financing. See the discussion of "Liquidity and Capital Resources" below. During the second quarter of 1995, the Company developed an estimate of the fair value of its outstanding stock options in the amount of $19.0 million. Based upon this estimate and the applicable vesting periods, the Company recognized $4.5 million of non-cash stock option compensation expense, with the remaining amount to be amortized over an approximate four year period. During the second quarter of 1996, the Company recognized non-cash stock option compensation expense of $950,000 and non-cash charges for dividends and accretion on the preferred stock of its subsidiary of $3.2 million. As a result of the foregoing, income from operations for the second quarter of 1996 was $10.4 million compared to $416,000 for the same period in 1995. Chancellor Broadcasting Company had a net loss of $2.4 million compared with a net loss of approximately $4.7 million for the second quarter of the prior year. On a same station basis, broadcast cash flow increased 50.6% to $18.2 million for the three months ended June 30, 1996, from $12.1 million over the comparable 1995 period. Same station broadcast cash flow as a percentage of net revenues increased to 40.9% for 1996 from 29.1% for 1995. SIX MONTHS ENDED JUNE 30, 1996 COMPARED TO SIX MONTHS ENDED JUNE 30, 1995 Net revenues increased 127.4% to $70.1 million for the six months ended June 30, 1996 from $30.8 million over the same period in 1995. The majority of this increase was due to the acquisition of Shamrock Broadcasting. On a same station basis, net revenues increased 6.8% to $79.2 million for the first half of 1996 from $74.2 million over the first half of 1995. Station operating expenses increased 127.3% to $42.7 million for the six months ended June 30, 1996 from $18.8 million for the same period in 1995. The majority of this increase was due to the acquisition of Shamrock Broadcasting. On a same station basis, station operating expenses decreased 5.9% to $50.7 million for the six months ended June 30, 1996 from $53.9 million for the same period in 1995. Depreciation and amortization increased 147.7% to $11.1 million for the first half of 1996 from $4.5 million over the same period in the prior year. Corporate expenses increased 114.7% to $1.8 million for the first six months of 1996 from approximately $856,000 over the same period in 1995, as a result of additional personnel and overhead costs associated with the acquisition of Shamrock Broadcasting. Interest expense increased 92.2% to $15.9 million from $8.3 million for the same period. These increases, and the extraordinary loss on early extinguishment of debt of $4.6 million, were primarily attributable to the acquisition of Shamrock Broadcasting and 18 the resulting change in capital structure from its financing. See the discussion of "Liquidity and Capital Resources" below. During the second quarter of 1995, the Company developed an estimate of the fair value of its outstanding stock options in the amount of $19.0 million. Based upon this estimate and the applicable vesting periods, the Company recognized $4.5 million of non-cash stock option compensation expense during the first half of 1995, with the remaining amount to be amortized over an approximate four year period. During the first half of 1996, the Company recognized non-cash stock option compensation expense of $1.9 million, a one-time loss of $16.6 million on the repurchase of preferred stock of its subsidiary and incurred non-cash charges for dividends and accretion on the repurchased and newly issued preferred stock of its subsidiary of $4.8 million. As a result of the foregoing, income from operations for the first half of 1996 was $12.5 million compared to $2.2 million for the same period in 1995. Chancellor Broadcasting Company had a net loss of $14.6 million compared with a net loss of $8.2 million for the first half of the prior year. On a same station basis, broadcast cash flow increased 40.6% to $28.5 million for the six months ended June 30, 1996, from $20.3 million over the comparable 1995 period. Same station broadcast cash flow as a percentage of net revenues increased to 36.0% for 1996 from 27.4% for 1995. LIQUIDITY AND CAPITAL RESOURCES The Company's liquidity and capital resources have been significantly impacted by the acquisition, and the financing thereof, of Shamrock Broadcasting, on February 14, 1996. The acquisition of Shamrock Broadcasting was financed through the New Credit Agreement, the New Notes, the IPO and the offering of the Acquisition Preferred Stock and Class A Common Stock (all as defined and described in the notes to the financial statements included herewith). In connection with this financing, the Company refinanced its existing bank financing and redeemed 25% of its Existing Notes (as defined), resulting in a combined extraordinary charge of $4.6 million. HM Fund II had advised Chancellor and Chancellor Broadcasting that on or before September 30, 1996, it would sell all of its capital stock in its affiliate, HMW, or would cause HMW to sell all or substantially all of its assets (which consist primarily of eight radio broadcast stations), and that it or HMW would invest the net proceeds of such sale in Class A Common Stock of Chancellor. On August 9, 1996, the Company sold 1,185,521 shares of Chancellor's Class A common stock to HM Fund II for cash proceeds of $23.0 millon, pursuant to this agreement made at the time of Chancellor's IPO. Management believes that these proceeds, cash from operating activities and available revolving credit borrowings under its bank credit agreement should be sufficient to permit the Company to meet its financial obligations and fund its operations. The Company anticipates that it will consummate all of its pending acquisition, exchange and disposition agreements by January 1997. However, the closing of each of the transactions is subject to FCC approval and certain closing conditions, certain of which are beyond the Company's control, and there can be no assurance as to when such transactions will be completed or that they will be completed on the terms described herein, or at all. The Company intends to fund the cash portion of its pending acquisitions with the HM Fund II investment proceeds, the proceeds from the sale of the Detroit stations, cash flow from operations, financing under its current credit agreement and new bank financing. There can be no assurance regarding the availability of cash flow from operations or that financing will be available to the Company on commercially acceptable terms, if at all. 19 PART II OTHER INFORMATION ITEM 2. CHANGES IN SECURITIES On February 14, 1996, Chancellor Broadcasting Company ("Chancellor") consummated an initial public offering (the "IPO") of its Class A Common Stock, par value $.01 per share. In connection with such offering, Chancellor reclassified its previously outstanding capital stock immediately prior to the IPO. Pursuant to such reclassification, Chancellor's Non-Voting Stock, Voting Stock and Convertible Non-Voting Stock were reclassified into its Class A Common Stock, Class B Common Stock, and Class C Common Stock, respectively, on a six-for-one basis. The holders of the Class A Common Stock are entitled to one vote per share on all matters submitted to the stock holders of Chancellor and, except as otherwise specified in the Second Restated Certificate of Incorporation of Chancellor, to elect, voting as a class, two members of the Board of Directors of Chancellor. ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) EXHIBITS EXHIBIT NO. DESCRIPTION OF DOCUMENT ------- ----------------------- 2.1 Asset Purchase Agreement dated as of April 19, 1994, between American Media, Inc. and Chancellor Holdings Corp. (formerly, MBD Broadcasting, Inc.) (1) 2.2 Asset Purchase Agreement dated as of April 19, 1994, among SanRiver Radio, Inc., Mid-Florida Radio, Inc. and Chancellor Holdings Corp. (formally MBD Broadcasting, Inc.) (1) 2.3 Asset Purchase Agreement dated as of April 19, 1994, between National Radio Partners, L.P. and Chancellor Holdings Corp. (formerly, MBD Broadcasting, Inc.) (1) 2.4 Asset Purchase Agreement dated as of April 19, 1994, between National Radio Partners, L.P. and Chancellor Communications Corporation (1) 2.5 Local Programming and Marketing Agreement dated February 1, 1995, between Midcontinent Radio of Minnesota, Inc., as Licensee, Radio Station, KDWB-FM, and Chancellor Broadcasting Company(2) 2.6 Asset Purchase Agreement dated February 1, 1995, between Midcontinent Radio of Minnesota, Inc., Chancellor Broadcasting Company and Chancellor Broadcasting Licensee Company (2) 2.7 Escrow Agreement dated February 7, 1995, between Midcontinent Radio of Minnesota, Inc., Chancellor Broadcasting Company and NationsBank of Texas, N.A. (2) 2.8 Stock Purchase Agreement dated as of August 3, 1995, among Chancellor Broadcasting Company, Trefoil Communications, Inc., and the Selling Securityholders named therein (3) 2.9 Option Agreement dated January 9, 1996 by and between Chancellor Broadcasting Company and Evergreen Media Corporation (3) 2.10 Option Agreement dated January 9, 1996 by and between Chancellor Broadcasting Company and Secret Communications (3) 2.11 Asset Purchase Agreement, dated as of May 14, 1996, among OmniAmerica Group, WAPE-FM License Partnership, WFYV-FM License Partnership, WEAT-FM License Partnership, WEAT-AM License Partnership, WXXL License Partnership, WOLL License Partnership, WJHM-FM License Partnership, Chancellor Broadcasting Company and Chancellor Radio Broadcasting Company (7) 2.12 Local Marketing Agreement, dated as of June 28, 1996, among OmniAmerica Group, Chancellor Broadcasting Company and Chancellor Radio Broadcasting Company (7) 2.13 Exchange Agreement, dated as of July 1, 1996, among WBLI-FM, Inc., WHFM, Inc., WBAB, Inc., WGBB, Inc., SFX Broadcasting, Inc. and Chancellor Radio Broadcasting Company (7) 2.14 Local Marketing Agreement, dated as of July 1, 1996, among WBLI, Inc., WBLI-FM, Inc., WHFM, Inc., WBAB, Inc., WGBB, Inc. and Chancellor Radio Broadcasting Company (7) 20 EXHIBIT NO. DESCRIPTION OF DOCUMENT - ------- ----------------------- 3.1 Certificate of Incorporation of Chancellor Broadcasting Company, as amended and restated (1)(4) 3.2 Certificate of Incorporation of Chancellor Radio Broadcasting Company, as amended (1)(4) 3.3 Certificate of Incorporation of Chancellor Broadcasting Licensee Company (1) 3.4 Bylaws of Chancellor Broadcasting Company, as amended and restated (1)(4) 3.5 Bylaws of Chancellor Radio Broadcasting Company, as amended (1)(4) 3.6 Bylaws of Chancellor Broadcasting Licensee Company (1) 3.7 Certificate of Designations for the 14% Redeemable Exchangeable Preferred Stock (5) 3.8 Certificate of Amendment to Certificate of Designations for the 14% Redeemable Exchangeable Preferred Stock (4) 3.9 Certificate of Designation for the Old Preferred Stock (4) 3.10 Form of Certificate of Designations for the New Preferred Stock (7) 4.1 Indenture, dated October 1, 1994, governing the outstanding 12-1/2% Senior Subordinated Notes due 2004 (1) 4.2 First Supplemental Indenture, dated as of February 14, 1996, to the Indenture dated October 1, 1994, governing the 12-1/2% Senior Subordinated Notes due 2004 (4) 4.3 Second Supplemental Indenture, dated as of February 14, 1996, to the Indenture dated October 1, 1994, governing the 12-1/2% Senior Subordinated Notes due 2004 (4) 4.4 Indenture, dated as of February 26, 1996, governing the outstanding 9-3/8% Senior Subordinated Notes due 2004 (5) 4.5 First Supplemental Indenture, dated as of February 14, 1996, to the Indenture dated February 14, 1996, governing the 9-3/8% Senior Subordinated Notes due 2004 (4) 4.6 Indenture, dated as of February 26, 1996, governing the Exchange Debentures (4) 10.1 Credit Agreement, including certain ancillary documents thereto, dated October 12, 1994 among Chancellor Holdings Corp., Chancellor Broadcasting Company and Bankers Trust Company, as agent, and the lenders party thereto (2) 10.2 Lease Agreement dated as of May 22, 1989, between Kruse Microwave and SanRiver Radio, Inc., as amended (1) 10.3 License Agreement dated as of March 1, 1974, between City of New Hope, Minnesota and National Radio Partners, L.P., as assignee of American Media, Inc. (1) 10.4 Tower Lease Agreement dated as of November 23, 1988, between United Television and Shoreview FM Group, a Minnesota general partnership (1) 10.5 Partnership Agreement dated as of November 23, 1988, of Shoreview FM Group, a Minnesota general partnership (1) 10.6 Employment Agreement between Chancellor Holdings Corp., Chancellor Broadcasting Company and Seven Dinetz (2) 10.7 Employment Agreement between Chancellor Broadcasting Company and George C. Toulas (2) 10.8 Employment Agreement date as of january 10, 1994 between Chancellor Communications Corporation and Rick Eytcheson, as amended (1) 21 EXHIBIT NO. DESCRIPTION OF DOCUMENT - ------- ----------------------- 10.9 Financial Monitoring and Oversight Agreement among Chancellor Holdings Corp., Chancellor Broadcasting Company and Hicks, Muse & Co. Partners, L.P. (2) 10.10 Tax Sharing Agreement between Chancellor Holdings Corp. and Chancellor Broadcasting Company(2) 10.11 Financial Advisory Agreement among Chancellor Broadcasting Company, Chancellor Radio Broadcasting Company and HM2/Management Partners, L.P. (4) 10.12 Credit Agreement dated as February 14, 1996, among Chancellor Broadcasting Company, Chancellor Radio Broadcasting Company, various banks and Bankers Trust Company, as agent (5) 10.13 Amended and Restated Monitoring and Oversight Agreement between Chancellor Broadcasting Company, Chancellor Radio Broadcasting Company and HM2/Management Partners, L.P. (4) 10.14 Amended and Restated Stockholders Agreement dated February 14, 1996 among Chancellor Broadcasting Company and certain Holders named therein (4) 10.15 Stockholders Agreement dated as of October 12, 1994 between Chancellor Broadcasting Company and the Holders named therein (6) 10.16 Registration Rights Agreement dated October 12, 1994 between Chancellor Broadcasting Company and the Holders named therein (6) 10.17 Letter Agreement dated February 9, 1996 regarding Hicks Muse Equity Investment among Chancellor Broadcasting Company and HM Fund II (4) 10.18 Sales Agreement, dated as of July 1, 1996, among OmniAmerica Group, Chancellor Broadcasting Company and Chancellor Radio Broadcasting Company (7) 10.19 Program Consulting Agreement, dated as of June 28, 1996, among OmniAmerica Group, Chancellor Broadcasting Company and Chancellor Radio Broadcasting Company (7) 10.20 Consulting Agreement, dated as of May 14, 1996, among Chancellor Broadcasting Company, Chancellor Radio Broadcasting Company and Anthony S. Ocepek (7) 10.21 Consulting Agreement, dated as of May 14, 1996, among Chancellor Broadcasting Company, Chancellor Radio Broadcasting Company and Carl E. Hirsch (7) 10.22 Consulting Agreement, dated as of May 14, 1996, among Chancellor Broadcasting Company, Chancellor Radio Broadcasting Company and H. Dean Thacker (7) 10.23 Non-Competition Agreement, dated as of May 14, 1996, among Chancellor Broadcasting Company, Chancellor Radio Broadcasting Company and Carl E. Hirsch (7) 10.24 First Consent and Amendment, dated as of May 13, 1996, among Chancellor Radio Broadcasting Company, the Banks party thereto and Bankers Trust Company, as managing agent (7) 10.25 Employment Agreement, dated as of February 1, 1996, between Chancellor Radio Broadcasting Company and Samuel Weller (7) 11.1 Statement RE Computation of Per Share Earnings of Chancellor Broadcasting Company* 21.1 Subsidiary of Chancellor Broadcasting Company (4) 27.1 Financial Data Schedule for Chancellor Broadcasting Company* 27.2 Financial Data Schedule for Chancellor Radio Broadcasting Company* 27.3 Financial Data Schedule for Chancellor Broadcasting Licensee Company* 22 - ---------------- * Filed herewith. (1) Incorporated by reference to Amendment No. 3 to the Registration Statement on Form S-1 (File No. 33-98334) of Chancellor Broadcasting as filed with the Securities and Exchange Commission. (2) Incorporated by reference to the Registration Statement on Form S-1 (File No. 33-80534) of Chancellor Broadcasting as filed with the Securities and Exchange Commission. (3) Incorporated by reference to the Annual Report on Form 10-K of Chancellor, Chancellor Broadcasting and Broadcasting Licensee for the fiscal year 1995. (4) Incorporated by reference from the Form 8-K of Chancellor (File No. 33-98336) and Chancellor Broadcasting (File No. 33-98334) as filed with the Securities and Exchange Commission on February 29, 1996. (b) REPORTS ON FORM 8-K. A Current Report on Form 8-K dated February 14, 1996 was filed with the Securities and Exchange Commission on February 29, 1996 on behalf of Chancellor and Chancellor Broadcasting relating to the acquisition by Chancellor Broadcasting of Trefoil Communications, Inc. and its subsidiaries. The audited financial statements of Trefoil Communications, Inc. and Subsidiaries as of December 31, 1994 and 1995, and for each of the three years ended December 31, 1995 and Malrite Communications Group, Inc. Radio Operation as of July 30, 1993 and the seven-month period then ended were filed with such report. In addition, an unaudited pro forma condensed statement of operations for the year ended December 31, 1995 and an unaudited pro forma balance sheet dated December 31, 1995 for Holdings and Trefoil Communications, Inc. combined were filed with such report. 23 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant and each co-registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. CHANCELLOR BROADCASTING COMPANY AND EACH CO-REGISTRANT Date: August 13, 1996 By /s/ Jacques D. Kerrest -------------------------------------------------- Jacques D. Kerrest Senior Vice President and Chief Financial Officer (Duly Authorized Officer and Principal Financial and Accounting Officer of Registrant and each co-registrant) 24 EX-11.1 2 EXHIBIT 11.1 EXHIBIT 11.1 CHANCELLOR BROADCASTING COMPANY AND SUBSIDIARIES STATEMENT RE COMPUTATION OF PER SHARE EARNINGS
THREE MONTHS ENDED JUNE 30, SIX MONTHS ENDED JUNE 30, ---------------------------- ----------------------------- 1995 1996 1995 1996 ------------ ------------ ------------ ------------ Computation for statements of operations: Net loss before extraordinary loss ............ $ (4,706,238) $ (2,354,054) $ (8,189,607) $ (9,940,368) Loss on repurchase of preferred stock of subsidiary ......................... -- -- -- (16,570,065) ------------ ------------ ------------ ------------ Loss before extraordinary loss applicable to common stock ............... (4,706,238) (2,354,054) (8,189,607) (26,510,433) Extraordinary loss............................. -- -- -- (4,645,921) ------------ ------------ ------------ ------------ Net loss applicable to common stock ....... $ (4,706,238) $ (2,354,054) $ (8,189,607) $(31,156,354) ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ Computation for weighted average common shares outstanding: Weighted average common shares outstanding ................................. 8,850,033 17,241,728 8,850,033 15,216,677 Incremental common shares applicable to common stock options based on the estimated fair value of the stock ....... 16,557 1,060,357 354,299 944,121 Common stock options excluded based on anti-dilutive effect .................... (16,557) (1,060,357) (354,299) (944,121) ------------ ------------ ------------ ------------ Weighted average common shares ................ 8,850,033 17,241,728 8,850,033 15,216,677 ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ Loss per common share: Primary and fully diluted Loss before extraordinary loss $ (0.53) $ (0.14) $ (0.93) $ (1.74) Extraordinary loss -- -- -- (0.31) ------------ ------------ ------------ ------------ Net loss $ (0.53) $ (0.14) $ (0.93) $ (2.05) ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------
EX-27.1 3 FDS
5 0001002909 CHANCELLOR BROADCASTING CO. 6-MOS DEC-31-1996 JAN-01-1996 JUN-30-1996 1,951,241 0 36,287,080 580,076 0 40,485,972 58,939,158 6,644,234 676,254,161 23,426,757 260,000,000 100,563,968 0 172,974 179,730,398 676,254,161 0 70,067,907 0 57,532,248 97,976 313,949 15,933,352 (3,495,669) 1,601,361 (9,940,368) 0 4,645,921 0 (14,586,289) (2.05) (2.05)
EX-27.2 4 FDS
5 0000925744 CHANCELLOR RADIO BROADCASTING COMPANY 6-MOS DEC-31-1996 JAN-01-1996 JUN-30-1996 1,951,241 0 36,287,080 580,076 0 40,485,972 58,939,158 6,644,234 676,254,161 23,426,757 260,000,000 100,563,968 0 10 179,903,362 676,254,161 0 70,067,907 0 57,532,248 97,976 313,949 15,933,352 (3,495,669) 1,601,361 (9,940,368) 0 4,645,921 0 (9,742,951) (0.00) (0.00)
EX-27.3 5 FDS
5 0000925752 CHANCELLOR BROADCASTING LICENSEE COMPANY 6-MOS DEC-31-1996 JAN-01-1996 JUN-30-1996 1,951,241 0 36,287,080 580,076 0 40,485,972 58,939,158 6,644,234 679,254,161 23,426,757 260,000,000 100,563,968 0 10 179,903,362 676,254,161 0 70,067,907 0 57,532,248 97,976 313,949 15,933,352 (3,495,669) 1,601,361 (9,940,368) 0 4,645,921 0 (9,742,951) (0.00) (0.00)
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