FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1994
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Commission File No. 0-12404
JACOR COMMUNICATIONS, INC.
An Ohio Corporation Employer
Identification
No. 31-0978313
1300 PNC Center
201 East Fifth Street
Cincinnati, Ohio 45202
Telephone (513) 621-1300
Indicate by check mark whether the Registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding twelve
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 ninety days.
Yes X No
At October 31, 1994, 19,590,293 shares of common stock were
outstanding.
JACOR COMMUNICATIONS, INC.
INDEX
Page
Number
PART I. Financial Information
Item 1. - Financial Statements
Condensed Consolidated Balance Sheets
as of September 30, 1994 and December
31, 1993 3
Condensed Consolidated Statements of
Operations for the three months and
nine months ended September 30, 1994
and 1993 4
Condensed Consolidated Statements of
Shareholders' Equity (Deficit) for the
nine months ended September 30, 1994
and 1993 5
Condensed Consolidated Statements of
Cash Flows for the nine months ended
September 30, 1994 and 1993 6
Notes to Condensed Consolidated Financial
Statements 7
Item 2. - Management's Discussion and Analysis
of Financial Condition and Results of
Operations 19
PART II. Other Information
Item 6. - Exhibits and Reports on Form 8-K 25
Signatures 26
JACOR COMMUNICATIONS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
September 30, December 31,
1994 1993
(UNAUDITED) (AUDITED)
ASSETS
Current assets:
Cash and cash equivalents $ 23,258,885 $ 28,617,599
Accounts receivable, less allowance for
doubtful accounts of $1,385,400 in 1994
and $1,082,000 in 1993 24,857,894 19,449,289
Other current assets 4,640,414 1,997,149
Total current assets 52,757,193 50,064,037
Property and equipment, net 22,876,833 23,072,887
Intangible assets, net 89,130,823 84,991,361
Other assets 5,645,359 1,780,244
Total assets $170,410,208 $159,908,529
LIABILITIES
Current liabilities:
Accounts payable $ 3,040,245 $ 2,011,460
Accrued payroll 2,127,679 3,218,239
Accrued federal, state and
local income tax 3,633,095 2,025,485
Other current liabilities 3,761,935 4,150,097
Total current liabilities 12,562,954 11,405,281
Other liabilities 3,922,960 190,057
Deferred tax liability 8,203,344 7,900,000
Total liabilities 24,689,258 19,495,338
SHAREHOLDERS' EQUITY
Common stock, no par value, $.10 per share
stated value 1,958,981 1,949,982
Additional paid-in capital 137,150,045 136,634,368
Common stock warrants 390,280 390,397
Retained earnings 6,221,644 1,438,444
Total shareholders' equity 145,720,950 140,413,191
Total liabilities and
shareholders' equity $170,410,208 $159,908,529
The accompanying notes are an integral part
of the condensed consolidated financial statements.
JACOR COMMUNICATIONS, INC. AND SUBSIDIARIE
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
For the three months and nine months ended September 30, 1994 and 1993
(UNAUDITED)
Three Months Ended Nine Months Ended
September 30, September 30,
1994 1993 1994 1993
Broadcast revenue $31,912,183 $29,469,525 $ 87,543,871 $74,071,603
Less agency commissions 3,413,707 3,163,042 9,253,147 7,986,021
Net revenue 28,498,476 26,306,483 78,290,724 66,085,582
Broadcast operating expenses 20,496,794 19,399,250 59,919,688 51,947,001
Depreciation and amortization 2,519,255 2,725,513 7,235,023 7,411,941
Corporate general and
administrative expenses 698,212 827,750 2,506,449 2,534,801
Operating income 4,784,215 3,353,970 8,629,564 4,191,839
Interest expense (137,591) (608,203) (428,065) (2,354,263)
Other income, net 286,660 32,751 797,601 124,372
Income before
income taxes 4,933,284 2,778,518 8,999,100 1,961,948
Income tax expense (2,303,900) (1,885,200) (4,215,900) (1,400,000)
Net income $ 2,629,384 $ 893,318 $ 4,783,200 $ 561,948
Income per common share $ 0.12 $ 0.06 $ 0.22 $ 0.04
Number of common shares used
in per share computations 21,413,359 15,237,638 21,454,531 13,278,741
The accompanying notes are an integral
part of the condensed consolidated financial statements.
JACOR COMMUNICATIONS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (DEFICIT)
for the nine months ended September 30, 1994 and 1993
Common Stock Preferred Stock
Shares Stated Value Shares Par Value
- - -----------------------------------------------------------------------------
Balances,
December 31,
1992 428,015 $ 42,802 683,181 $ 68,318
To give effect
to the
Restructuring
and to the
application of
push-down
accounting 8,710,655 871,065 (683,181) (68,318)
- - ------------------------------------------------------------------------------
Balances,
January 1,
1993 9,138,670 913,867 -0- -0-
Issuance of
Common Stock 3,484,321 348,432
Retirement of
Treasury Stock (46,586) (4,659)
Issuance of
Common Stock-
1993 Rights
Offering 345,476 34,548
Issuance of
Common Stock-
Directors
subscription 80,000 8,000
Issuance of
Common Stock-
purchase of
KAZY(FM) 964,006 96,401
Exercise of
Stock Options 52,886 5,289
Other 1,560 156
Net income
- - ------------------------------------------------------------------------------
Balances,
September 30,
1993 14,020,333 $1,402,034 -0- -0-
==============================================================================
Balances,
December 31,
1993 19,499,812 $1,949,982 -0- $ -0-
Exercise of
Stock Options 89,310 8,931
Other 688 68
Net income
- - ------------------------------------------------------------------------------
Balances,
September 30,
1994 19,589,810 $1,958,981 -0- $ -0-
==============================================================================
The accompanying notes are an integral part
of the condensed consolidated financial statements.
Additional Common
Paid-In Capital Stock
Common Preferred Warrants
- - ------------------------------------------------------------------------------
Balances,
December 31,
1992 $19,497,537 $ 5,263,929 $ 895,800
To give effect
to the
Restructuring
and to the
application of
push-down
accounting 36,994,455 (5,263,929) (492,995)
- - ------------------------------------------------------------------------------
Balances,
January 1,
1993 56,491,992 -0- 402,805
Issuance of
Common Stock 19,651,571
Retirement of
Treasury Stock (6,923,254)
Issuance of
Common Stock-
1993 Rights
Offering 1,703,542
Issuance of
Common Stock-
Directors
subscription 451,200
Issuance of
Common Stock-
purchase of
KAZY(FM) 5,436,993
Exercise of
Stock Options 275,914
Other 12,849 (9,012)
Net income
- - ------------------------------------------------------------------------------
Balances,
September 30,
1993 $77,100,807 $ -0- $ 393,793
==============================================================================
Balances,
December 31,
1993 $136,634,368 $ -0- $ 390,397
Exercise of
Stock Options 503,708
Other 11,969 (117)
Net income
- - ------------------------------------------------------------------------------
Balances,
September 30,
1994 $137,150,045 $ -0- $ 390,280
==============================================================================
Retained
Earnings Treasury Stock
(Deficit) Shares Amount Total
- - ------------------------------------------------------------------------------
Balances,
December 31,
1992 $(69,680,819) 46,586 $(6,927,913) $(50,840,346)
To give effect
to the
Restructuring
and to the
application of
push-down
accounting 69,680,819 101,721,097
- - ------------------------------------------------------------------------------
Balances,
January 1,
1993 -0- 46,586 (6,927,913) 50,880,751
Issuance of
Common Stock 20,000,003
Retirement of
Treasury Stock (46,586) 6,927,913
Issuance of
Common Stock-
1993 Rights
Offering 1,738,090
Issuance of
Common Stock-
Directors
subscription 459,200
Issuance of
Common Stock-
purchase of
KAZY(FM) 5,533,394
Exercise of
Stock Options 281,203
Other 3,993
Net income 561,948 561,948
- - ------------------------------------------------------------------------------
Balances,
September 30,
1993 $ 561,948 -0- $ -0- $ 79,458,582
==============================================================================
Balances,
December 31,
1993 $ 1,438,444 -0- $ -0- $140,413,191
Exercise of
Stock Options 512,639
Other 11,920
Net income 4,783,200 4,783,200
- - ------------------------------------------------------------------------------
Balances,
September 30,
1994 $ 6,221,644 -0- $ -0- $145,720,950
==============================================================================
JACOR COMMUNICATIONS, INC. AN
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
for the nine months ended September 30, 1994 and 1993
(UNAUDITED)
1994 1993
Cash flows from operating activities:
Net income $ 4,783,200 $ 561,948
Adjustments to reconcile net income
to net cash used by operating activities:
Depreciation 1,846,365 1,652,946
Amortization of intangibles 5,388,658 5,660,562
Provision for losses on accounts
and notes receivable 920,192 658,303
Increase (decrease) in deferred tax
liability (561,700) 900,000
Refinancing fees (1,994,801)
Other (597,897) (465,255)
Change in current assets and current
liabilities net of effects of
acquisitions and disposals:
Increase in accounts receivable (5,552,176) (7,553,065)
(Increase) decrease in other
current assets (1,998,272) 529,693
Increase (decrease) in accounts
payable 757,575 (347,864)
Increase (decrease) in accrued
payroll, accrued interest
and other current liabilities 582,050 (252,815)
Net cash provided (used) by operating
activities 5,567,995 (650,348)
Cash flows from investing activities:
Payments received on notes receivable 1,300,000 12,500
Capital expenditures (1,471,367) (1,073,286)
Cash paid for acquisitions (3,233,812) (1,826,419)
Purchase of intangible assets (6,243,109) (2,033,737)
Net proceeds from the sale of assets 1,919,189
Loans originated and other (3,652,440) (43,784)
Net cash used by investing activities (11,381,539) (4,964,726)
Cash flows from financing activities:
Proceeds from issuance of long-term debt 48,000,000
Proceeds from issuance of common stock 524,559 22,483,591
Collection of stock subscriptions receivable 5,740,000
Reduction in long-term debt (74,956,176)
Payment of restructuring expenses (69,729) (4,890,930)
Net cash provided (used) by financing
activities 454,830 (3,623,515)
Net decrease in cash and cash equivalents (5,358,714) (9,238,589)
Cash and cash equivalents at
beginning of period 28,617,599 12,429,574
Cash and cash equivalents at end of period $23,258,885 $ 3,190,985
The accompanying notes are an integral part
of the condensed consolidated financial statements.
JACOR COMMUNICATIONS, INC. AND SUBSIDIARIE
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. FINANCIAL STATEMENTS
The financial statements included herein have been prepared by
the Company, without audit, pursuant to the rules and
regulations of the Securities and Exchange Commission.
Although certain information and footnote disclosures normally
included in financial statements prepared in accordance with
generally accepted accounting principles have been
condensed or omitted pursuant to such rules and regulations,
the Company believes that the disclosures are adequate to make
the information presented not misleading and reflect all
adjustments (consisting only of normal recurring adjustments)
which are necessary for a fair presentation of results of
operations for such periods. Results for interim periods
may not be indicative of results for the full year. It is
suggested that these financial statements be read in
conjunction with the consolidated financial statements for the
year ended December 31, 1993 and the notes thereto.
2. RESTRUCTURING AND CHANGE IN CONTROL
On January 11, 1993, the Company completed a recapitalization
plan that substantially modified its debt and capital
structure (the "Restructuring"). Such Restructuring was
accounted for as if it had been completed January 1, 1993.
The Restructuring consisted of the following five basic parts:
(1) An infusion of equity by Zell/Chilmark Fund L.P.
(hereinafter, "Zell/Chilmark") by way of a merger (the
"Merger") of a corporation wholly owned by Zell/Chilmark
with and into the Company, which resulted in an equity
restructuring of the Company, including:
(i) the conversion of every share of the Company's
common stock outstanding prior to the Merger into
0.0423618 shares of a new class of capital stock,
the Class A Common Stock (the "New Class A Common
Stock"), and warrants ("Warrants") to purchase
0.1611234 additional shares of a new class of non-
voting common stock, the Class B Common Stock (the
"New Class B Common Stock");
(ii) the conversion of every share of the Company's
preferred stock outstanding prior to the Merger,
together with any accumulated and unpaid dividends
thereon, into 0.2026505 shares of New Class B
Common Stock, and Warrants to purchase 0.7707796
shares of New Class B Common Stock;
(iii) the distribution of cash, at the rate of $5.74
per share and $0.20 per Warrant, in lieu of New
Common Stock and Warrants to those shareholders of
record who so elected, and to all holders in lieu
of any fractional shares of New Common Stock or
fractional Warrants; and
(iv) the issuance to Zell/Chilmark of 1,032,060
shares of New Class B Common Stock and 593,255
Warrants to purchase that number of shares of New
Class B Common Stock.
(2) A concurrent issuance of equity securities by the
Company in exchange for the cancellation of
approximately $81,500,000 of debt held by the Company's
senior lenders and various subordinated creditors;
(3) The sale to Zell/Chilmark of most of the equity
securities issued in exchange for such cancellation of
debt and Zell/Chilmark's reoffer of Warrants acquired by
Zell/Chilmark under the Restructuring to those senior
lenders who retained equity securities;
(4) The offering of rights (the "Rights") to (i)
Zell/Chilmark, (ii) the Company's creditors who retained
New Common Stock acquired in the Restructuring and (iii)
other holders of New Common Stock who were also
shareholders on November 27, 1992, to acquire in the
aggregate 1,000,000 shares of New Common Stock at a
price of $5.74 per share; and
(5) An increase in the authorized capital stock to
44,000,000 shares and the reservation of 1,519,218
shares of New Common Stock for issuance after the
Restructuring pursuant to a proposed new management
stock option plan ("Management Options").
As a result of the Company's restructuring and merger, the
Company's Amended and Restated Articles of Incorporation were
amended to (i) increase the authorized capital shares of the
Company to 44,000,000, (ii) authorize two classes of no par
value common stock, designated the "New Class A Common
Stock" and the "New Class B Common Stock", each with
20,000,000 shares authorized for the class, (collectively, the
"New Common Stock"), and (iii) create two classes of no par
value preferred stock, designated the "New Class A Preferred
Stock" and the "New Class B Preferred Stock", each with
2,000,000 shares authorized (collectively, the "New Preferred
Stock"). No New Preferred Stock has been issued.
Upon the grant by the Federal Communications Commission
("FCC") on April 23, 1993 of approval of a transfer of control
of the Company to Zell/Chilmark, the New Class B Common Stock
automatically converted into Class A Common Stock, the Class A
Common Stock was designated "Common Stock" and shares
formerly authorized as Class B Common Stock were added to
increase the authorized shares of such Common Stock to
40,000,000 shares.
The dilution to those who were shareholders prior to the
Restructuring and the resultant impact of the Restructuring on
the Company's common stock ownership are as follows:
Equity Distribution After Restructuring (1)
Common Stock
Received
Common Stock Pursuant to
Common Purchase the 1992
Shares Warrants Rights Percent
Received Received Offering Primary(2) Diluted(3)
Zell/Chilmark 7,288,931 657,668 983,344 91.44% 80.74%
Senior Creditors 402,431 -0- -0- 4.45% 3.64%
Other Creditors 10,000 30,710 -0- 0.11% 0.37%
Preferred Shareholders
prior to the
Restructuring 6,416 38,355 -0- 0.07% 0.40%
Common Shareholders
prior to the
Restructuring 338,505 1,287,501 16,656 3.93% 14.85%
8,046,283 2,014,234 1,000,000 100.00% 100.00%
<FN>
(1) Does not give effect to (a) the 3,484,321 shares of
Common Stock issued to Zell/Chilmark in March 1993 as
part of a refinancing; (b) the 964,006 shares of
Common Stock issued to Zell/Chilmark in July 1993 for
the purchase of radio station KAZY(FM); or (c) the
sale of 5,462,500 shares of Common Stock by the
Company in November 1993 through a public offering.
(2) Before exercise of Warrants and Management Options.
(3) After giving effect to the exercise of Warrants but
not Management Options.
3. BASIS OF PRESENTATION
The Company implemented the Restructuring described in Note
2 using the push-down method of accounting as if the
Restructuring was consummated on January 1, 1993. Push-down
accounting is a procedure whereby subsidiaries use their
parent companies' purchase accounting principles in preparing
their financial statements. In accordance with the push-down
method of accounting, the Company's net assets were restated
generally at current replacement value, the restructured debts
were stated at amounts supported by the underlying documents
and the accumulated deficit was adjusted to a zero balance.
Coincident with the implementation of the aforementioned push-
down accounting, the Company adopted Statement of Financial
Accounting Standards No. 109, "Accounting for Income Taxes".
Such change resulted in the establishment of a deferred income
tax liability of approximately $6,500,000.
A reconciliation of the Company's historical shareholders'
deficit as of December 31, 1992 with shareholders' equity at
January 1, 1993 as reflected in the accompanying Condensed
Consolidated Statement of Shareholders' Equity for the nine
months ended September 30, 1993 is set forth below. Such
reconciliation gives effect to the Restructuring and to the
application of push-down accounting.
($000) (UNAUDITED)
Additional
Redeemable Paid-In
Common Convertible Capital, Additional Common
Dividends Stock Preferred Preferred Common Paid-In Stock
Transaction Payable Warrants Stock Stock Stock Capital Warrants
Balances,
December 31,
1992 $ 1,030 $ 487 $ 68 $ 5,264 $ 43 $ 19,497 $ 896
Adjustments:
Exchange of
redeemable
common stock
warrants for New
Common Stock (487) 2 485
Exchange of old
common stock
for New Common (43)
Stock 43
Issuance of New
Common Stock to
Zell/Chilmark 87 4,913
Issuance of New
Common Stock in
Rights Offering 100 5,640
Issuance of New
Common Stock
to creditors 665 37,499
Cancellation of
common stock
warrants 896 (896)
Additional
Redeemable Paid-In
Common Convertible Capital Additional Common
Dividends Stock Preferred Preferred Common Paid-In Stock
Transaction Payable Warrants Stock Stock Stock Capital Warrants
Issuance of New
Common Stock
to preferred
shareholders and
others and
other preferred
stock purchases (1,030) (68) (5,264) 17 6,202
Issuance of New
Common Stock
Warrants (387) 403*
Costs of issuance
of New Common
Stock and
Rights
Offering (1,125)
Forgiveness of
indebtedness
Equity effects of
push-down
accounting:
Adjustment of net
asset carrying
values 10,064
Restructuring
costs
Elimination of
accumulated
deficit (27,193)
Net adjustments (1,030) (487) (68) (5,264) 871 36,994 (493)
Balances,
January 1,
1993 $ 0 $ 0 $ 0 $ 0 $ 914 $ 56,491 $ 403
* Includes 79,275 Warrants at $0.20 each issued in connection with cancellation of
indebtedness.
Accumulated Treasury
Transaction Deficit Stock
Balances,
December 31,
1992 $ (69,681) $(6,928)
Pro Forma Adjustments:
Exchange of
redeemable
common stock
warrants for New
Common Stock
Exchange of current
old common stock
for New Common
Stock
Issuance of New
Common Stock
to Zell/Chilmark
Issuance of New
Common Stock in
Rights Offering
Issuance of New
Common Stock
to creditors
Cancellation of
common stock
warrants
ACCUMULATED TREASURY
TRANSACTION DEFICIT STOCK
Issuance of New
Common Stock
to preferred
shareholders and
others and
other preferred
stock purchases
Issuance of New
Common Stock
Warrants
Costs of issuance
of New Common
Stock and
Rights
Offering
Forgiveness of
indebtedness 47,031
Equity effects of
push-down
accounting:
Adjustment of net
asset carrying
values
Restructuring
costs (4,543)
Elimination of
accumulated
deficit 27,193
Net adjustments 69,681 0
Balances,
January 1,
1993 $ 0 $(6,928)
All common share and per share data included in the financial
statements and footnotes have been restated to reflect the
conversion of every share of the Company's common stock
outstanding prior to the Merger into 0.0423618 shares of new
common stock as discussed above. The conversion was
accounted for as a reverse stock split. The New Common Stock
was recorded at its stated value of $0.10 per share. The
difference between the stated value of common stock and the
New Common Stock was credited to additional paid-in capital,
common.
The basis for the application of push-down accounting is set
forth below. The financial statements only include the
resulting revaluations pursuant to Zell/Chilmark's 91.44%
ownership of the Company. There were no revaluations
recorded for the minority interest ownership of the Company.
The allocation of consideration given for the purchase of
91.44% of the Company by Zell/Chilmark is as follows:
8,272,276 Common Shares at
$5.74 per share $ 47,483,000
629,117 new common stock Warrants
at $0.20 per Warrant 126,000
New debt obligations 62,345,000
Assumption of certain current
liabilities 14,918,000
Assumption of other liabilities 6,130,000
$131,002,000
Current assets $ 33,146,000
Property and equipment 19,845,000
Intangible assets (primarily
FCC licenses) 76,577,000
Notes receivable and other assets 1,434,000
$131,002,000
4. PER SHARE DATA
Income per share for the three months and nine months ended
September 30, 1994 and 1993 is based on the weighted average
number of common shares outstanding and gives effect to both
dilutive stock options and dilutive stock purchase warrants
during the period. Fully diluted earnings per share is not
presented since it approximates primary earnings per share.
5. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
For purposes of the condensed consolidated statements of
cash flows, the Company considers all highly liquid
investments with a maturity of three months or less, when
purchased, to be cash equivalents. Income taxes aggregating
$3,000,000 were paid during the nine months ended September
30, 1994. There were no income taxes paid during the nine
months ended September 30, 1993. Interest paid was $381,393
(attributable to the annual commitment fee payable quarterly
on the credit facility) and $2,649,000 for the nine months
ended September 30, 1994 and 1993, respectively. The effect
of barter transactions has been eliminated.
The condensed consolidated statement of cash flows for the
nine months ended September 30, 1993 reflects the changes in
balance sheet accounts as of January 1, 1993, the date the
restructuring was recorded.
6. ACQUISITIONS
In March 1994, a subsidiary of the Company entered into an
agreement to acquire the assets of radio station WIMJ(FM) in
Cincinnati, Ohio for $9,500,000. The asset purchase is
subject to FCC approval and the satisfaction of certain
other conditions. Pending consummation of the transaction,
the Company's subsidiary has entered into a Local Marketing
Agreement which began April 7, 1994, and will expire on the
earlier of June 30, 1995 or the purchase date.
The acquisition of WIMJ(FM) is not expected to have a
material effect on the Company's operations.
7. DEBT AGREEMENTS
There was no debt outstanding at September 30, 1994 and
December 31, 1993.
Following completion of the Restructuring in January 1993
(see Note 2), the Company refinanced its senior debt in
March 1993 (the "Refinancing") with a new group of lenders
under a new credit facility described below. With the
completion of the Refinancing, the Company's senior debt was
reduced from $69,000,000 to $45,000,000.
As part of this Refinancing, the Company raised $20,000,000
of additional equity from the issuance of 3,484,321 shares
of Common Stock at $5.74 per share through a private
placement to Zell/Chilmark. This $20,000,000, together with
available cash, funded the reduction of the Company's senior
debt.
With the Refinancing, the Company entered into a new Credit
Agreement (the "New Credit Agreement") in March 1993 with a
group of lenders agented by Banque Paribas, with The First
National Bank of Boston and Continental Bank N.A. acting as
co-agents. In November 1993, the Company entered into the
First Amendment to the New Credit Agreement (the "Amended
Credit Agreement"). The Amended Credit Agreement provides
for a senior secured reducing revolving credit facility with
a commitment of $45,000,000 that expires on December 31,
2000 (the "Revolver") and a senior secured acquisition
facility with a commitment of $55,000,000 that expires on
September 30, 1996 (the "Acquisition Facility"). Both
facilities are available for acquisitions permitted under
conditions set forth in the Amended Credit Agreement. The
indebtedness of the Company under the two facilities is
collateralized by liens on substantially all of the assets
of the Company and its operating subsidiaries and by a
pledge of the operating subsidiaries' stock, and is
guaranteed by those subsidiaries. The Amended Credit
Agreement requires quarterly reductions of the Revolver
commitments under the Amended Credit Agreement, and, under
certain circumstances, requires mandatory prepayments of any
outstanding loans and further commitment reductions under
the Amended Credit Agreement. The Amended Credit Agreement
contains restrictions pertaining to maintenance of financial
ratios, capital expenditures, payment of dividends on
distributions of capital stock and incurrence of additional
indebtedness.
Interest under the Amended Credit Agreement is payable, at
the option of the Company, at alternative rates equal to the
Eurodollar rate plus 1.25% to 2.25% or the base rate
announced by Banque Paribas plus 0.25% to 1.25%. The
spreads over the Eurodollar rate and such base rate vary
from time to time, depending upon the Company's financial
leverage. In November 1994, the Company entered into the
Third Amendment to the New Credit Agreement under which the
Company will pay quarterly commitment fees equal to 1/2%
reducing to 3/8% per annum on the aggregate unused portion
of the aggregate commitment on both facilities, depending
upon the Company's financial leverage. The Company also is
required to pay certain other fees to the agent and the
lenders for the administration of the facilities and the use
of the Acquisition Facility.
In accordance with the terms of the New Credit Agreement,
the Company entered into an interest rate protection
agreement in March 1993 on the notional amount of
$22,500,000 for a three year term. This agreement provides
protection against the rise in the three-month LIBOR
interest rate beyond a level of 7.25%. The current three-
month LIBOR interest rate is 5.69%.
Unaudited pro forma results of operations, assuming the
Refinancing together with the Zell/Chilmark private
placement occurred on the first day of the period shown
below, are as follows (dollars in thousands, except per
share amounts):
For the Nine Months Ended September 30, 1993
Historical Refinancing Total Pro
As Reported Adjustment Forma
Broadcast revenue $ 74,072 $ 74,072
Less agency commissions 7,986 7,986
Net revenue 66,086 66,086
Broadcast operating expenses 51,947 51,947
Depreciation and amortization 7,412 7,412
Corporate general and
administrative expenses 2,535 2,535
Operating income 4,192 4,192
Interest expense (2,354) $ 666 (a) (1,688)
Other income, net 124 124
Income before income tax 1,962 666 2,628
Income tax expense (1,400) (266)(b) (1,666)
Net income $ 562 $ 400 $ 962
Net income per
common share $ 0.04 $ 0.07
Number of common shares used
in per share calculation 13,279 1,323 (c) 14,602
Adjustments to the unaudited pro forma results of operations are
explained as follows:
(a) To reflect the elimination of the interest associated with
the restructuring debt facility and record the interest
associated with the new refinancing debt facility as
follows:
Restructuring debt
interest included
in historical
statements $ (2,354)
Interest on new
refinancing
debt facility
($45,000,000 x 5%) 1,688
Pro forma adjustment $ (666)
(b) To provide for the tax effect of pro forma adjustments using
an estimated statutory rate of 40%.
(c) To provide for the change in the weighted average
outstanding common shares.
8. RELATED PARTY TRANSACTIONS
In 1991, the Company sold the stock of its research
subsidiary, Critical Mass Media, Inc. ("CMM"), to Randy
Michaels, an officer who has since become the current
president of the Company.
Effective January 1, 1994, a subsidiary of the Company and a
corporation wholly owned by Mr. Michaels formed a limited
partnership (the "Partnership") in a transaction whereby the
Partnership now owns all of the CMM stock and Mr. Michaels'
corporation owns a 95% limited partnership interest in the
Partnership. The Company's subsidiary obtained a 5% general
partnership interest in exchange for its contribution of
approximately $126,000 cash to the Partnership and is now
the sole manager of the Partnership's business.
In connection with the formation of the Partnership, the
Company agreed that Mr. Michaels' corporation has the right
between January 1, 1999 and January 1, 2000 to put its
limited partnership interest to the Partnership's general
partner in exchange for 300,000 shares of Common Stock. If
the put is not exercised by January 1, 2000, the general
partner has the right to call the limited partnership
interest prior to 2001 in exchange for 300,000 shares of
Common Stock. In addition, if certain events occur prior to
January 1, 1999 including without limitation, Mr. Michaels'
termination of employment by the Company or a significant
reduction in his responsibilities, a reduction of Mr.
Michaels' annual base salary by more than 10%, or generally
any transaction by which any person or group other than
Zell/Chilmark shall become the owner of more than 30% of the
outstanding voting securities of the Company or
Zell/Chilmark fails to have its designees constitute at
least a majority of the members of the general partner's
Board of Directors, then Mr. Michaels' corporation will have
the right to either (a) purchase the Company's general
partnership interest at a price generally equal to the
balance of the partnership capital account, or (b) sell its
limited partnership interest to the general partner in
exchange for 300,000 shares of Common Stock.
The transaction has been accounted for as a purchase, and
the Partnership has been included in the condensed
consolidated financial statements.
9. INCOME TAXES
Income tax expense for the three months and nine months
ended September 30, 1994 and 1993 is based on the estimated
annual effective tax rate inclusive of federal, state and
local taxes. The effective income tax rate differs from the
expected statutory rate primarily due to the effect of
certain state and local taxes and non-deductible goodwill
amortization.
10. CAPITAL STOCK
Warrants
During the nine months ended September 30, 1994, 583
warrants were exercised.
Stock Options
During the nine months ended September 30, 1994, 89,310
options were exercised. In addition, options to purchase
10,000 shares were granted during this same period. The
options vest 30% per year for the first two years after
issuance and 20% per year for each of the next two years
thereafter. The exercise price of the options that vested
upon grant is $13.50 per share, and the options that
subsequently vest on each anniversary of the grant date have
an exercise price 4% greater than the options that vested in
the previous year. Once an option vests, the exercise price
for that option is fixed for the remaining term of the
option.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
LIQUIDITY AND CAPITAL RESOURCES
The Company began 1994 with no outstanding debt and $28.6 million
in cash and cash equivalents. The Company used the net proceeds
(approximately $60 million) from the public offering during the
fourth quarter of 1993 to repay all of its indebtedness and the
remaining net proceeds (in the form of cash and cash equivalents)
are available to finance acquisitions of radio groups and/or
radio stations and for general corporate purposes. In
conjunction with the public offering, the Company also entered
into the First Amendment to the Credit Agreement (the "Amended
Credit Agreement").
The Amended Credit Agreement provides for a senior secured
reducing revolving credit facility with a commitment of $45
million ($43.3 million at September 30, 1994 - see following
paragraph) that expires on December 31, 2000 (the "Revolver") and
a senior secured acquisition facility with a commitment of $55
million (the "Acquisition Facility") that expires on September
30, 1996. The Amended Credit Agreement contains restrictive
covenants, and the indebtedness thereunder is collateralized by
liens on substantially all of the assets of the Company and its
operating subsidiaries and by a pledge of the operating
subsidiaries' stock. The indebtedness under the Amended Credit
Agreement is guaranteed by those subsidiaries. Both facilities
may be used for acquisitions permitted under conditions set forth
in the Amended Credit Agreement. Interest under the Amended
Credit Agreement is payable, at the option of the Company, at
alternative rates equal to the Eurodollar rate plus 1.25% to
2.25% or the base rate announced by Banque Paribas plus 0.25% to
1.25%.
The Amended Credit Agreement requires that the commitment under
the Revolver be reduced in the quarter commencing January 1, 1994
(reduced by $1.7 million as of September 30, 1994), and
continuing quarterly thereafter. After the Acquisition Facility
commitment terminates on September 30, 1996, the Amended Credit
Agreement requires 17 equal quarterly amortization payments. The
Amended Credit Agreement further requires that, with certain
exceptions, the Company prepay the loans and reduce the
commitments under the Amended Credit Agreement with excess cash
flow and the net proceeds from certain sales of assets and
capital stock.
The Company entered into an interest rate protection agreement in
March 1993 on a notional amount of $22.5 million for a three-year
term for a cost of $0.1 million. This agreement provided
protection against the rise in the three-month LIBOR interest
rate beyond a level of 7.25%. The current three-month LIBOR
interest rate is 5.69%.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS, Continued
LIQUIDITY AND CAPITAL RESOURCES, Continued
During the nine months ended September 30, 1994, the Company,
through its subsidiaries, made acquisitions, loans and capital
expenditures of approximately $14.6 million. The Company expects
to make further acquisitions, loans and capital expenditures in
the range of $17.0 million to $21.0 million over the balance of
1994 and into early 1995.
The Company has been authorized by its Board of Directors to
purchase up to one million shares of its common stock from time-
to-time in open-market or negotiated transactions. As of
September 30, 1994 the Company had not acquired any shares under
this authorization.
Management believes that its existing cash balances, cash
generated from operations and the availability of borrowings
under the Amended Credit Agreement will be sufficient to meet its
liquidity and capital needs for the foreseeable future, under
existing market conditions.
CASH FLOW
Cash flows provided by operating activities, inclusive of working
capital were $5.7 million and $0.7 million for the first nine
months of 1994 and 1993, respectively, resulting primarily from
the net income of $4.8 million and $0.7 million generated during
the respective nine-month period. The additional $1.0 million of
net cash provided for the 1994 nine-month period results from the
excess of the depreciation and amortization add-back over the net
change in working capital. Cash flows used by investing
activities were ($11.5) million and ($5.0) million for the first
nine months of 1994 and 1993, respectively, as a result of
payments made for acquisitions, loans and capital expenditures.
The 1994 amount is net of $3.2 million of payments received on
notes and from the sale of assets. Cash flows used by financing
activities were ($3.6) million during the first nine months of
1993 principally due to the refinancing of the Company's senior
debt net of the issuance of additional common stock and the
payment of restructuring expenses.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS, Continued
RESULTS OF OPERATIONS
THE NINE MONTHS ENDED SEPTEMBER 30, 1994 COMPARED TO THE NINE
MONTHS ENDED SEPTEMBER 30, 1993
Broadcast revenue for the first nine months of 1994 was $87.5
million, an increase of $13.4 million or 18.2% from $74.1 million
during the first nine months of 1993. This increase resulted
from an increase in advertising rates in both local and national
advertising and from the revenue generated at those properties
owned or operated during the first nine months of 1994 but not
during the comparable 1993 period. On a "same station" basis -
reflecting results from stations operated in the first nine
months of both 1994 and 1993 - broadcast revenue for the 1994
period was $81.6 million, an increase of $8.7 million or 11.8%
from $72.9 million for the 1993 period.
Agency commissions for the first nine months of 1994 were $9.3
million, an increase of $1.3 million or 15.9% from $8.0 million
during the first nine months of 1993 due to the increase in
broadcast revenue. Agency commissions increased at a lesser rate
than broadcast revenue due to a greater proportion of direct
sales.
Broadcast operating expenses for the first nine months of 1994
were $59.9 million, an increase of $8.0 million or 15.3% from
$51.9 million during the first nine months of 1993. These
expenses increased as a result of expenses incurred at those
properties owned or operated during the first nine months of 1994
but not during the comparable 1993 period and, to a lesser
extent, increased selling and other payroll costs and programming
costs. On a "same station" basis, broadcast operating expenses
for the 1994 period were $54.2 million, an increase of $3.2
million or 6.1% from $51.0 million for the 1993 period.
Station operating income excluding depreciation and amortization
for the nine months ended September 30, 1994 was $18.4 million,
an increase of $4.3 million or 29.9% from $14.1 million for the
nine months ended September 30, 1993. On a "same station" basis,
station operating income excluding depreciation and amortization
for the 1994 period was $18.4 million, an increase of $4.5
million or 32.1% from $13.9 million for the 1993 period.
Depreciation and amortization for the first nine months of 1994
and 1993 was $7.2 million and $7.4 million, respectively.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS, Continued
RESULTS OF OPERATIONS
THE NINE MONTHS ENDED SEPTEMBER 30, 1994 COMPARED TO THE NINE
MONTHS ENDED SEPTEMBER 30, 1993, Continued
Operating income for the first nine months of 1994 was $8.6
million, an increase of $4.4 million or 105.9% from an operating
income of $4.2 million during the first nine months of 1993.
Interest expense for the first nine months of 1994 was $0.4
million, a decrease of $2.0 million or 81.8% from $2.4 million
during the first nine months of 1993. Interest expense declined
due to the reduction in outstanding debt.
Net income for the first nine months of 1994 was $4.8 million,
compared to net income of $0.6 million reported by the Company
for the first nine months of 1993. The 1993 period includes
income tax expense of $1.4 million while the 1994 period includes
$4.2 million of income tax expense. The income tax expense for
each period is based on the estimated annual effective tax rate.
THE THREE MONTHS ENDED SEPTEMBER 30, 1994 COMPARED TO THE THREE
MONTHS ENDED SEPTEMBER 30, 1993
Broadcast revenue for the third quarter of 1994 was $31.9
million, an increase of $2.4 million or 8.3% from $29.5 million
during the third quarter of 1993. This increase resulted from an
increase in advertising rates in both local and national
advertising and from the revenue generated at those properties
owned or operated during the 1994 third quarter but not during
the comparable 1993 period. On a "same station" basis -
reflecting results from stations operated in the third quarter of
both 1994 and 1993 - broadcast revenue for the 1994 period was
$29.6 million, an increase of $0.5 million or 1.7% from $29.1
million for the 1993 period. The 1994 third quarter "same
station" revenue was depressed due to the professional baseball
strike beginning in August 1994, resulting in a loss of revenue
at three of the Company's stations which broadcast professional
baseball.
Agency commissions for the third quarter of 1994 were $3.4
million, an increase of $0.2 million or 7.9% from $3.2 million
during the third quarter of 1993 due to the increase in broadcast
revenue. Agency commissions increased at a lesser rate than
broadcast revenue due to a greater proportion of direct sales.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS, Continued
RESULTS OF OPERATIONS
THE THREE MONTHS ENDED SEPTEMBER 30, 1994 COMPARED TO THE THREE
MONTHS ENDED SEPTEMBER 30, 1993, Continued
Broadcast operating expenses for the third quarter of 1994 were
$20.5 million, an increase of $1.1 million or 5.7% from $19.4
million during the third quarter of 1993. These expenses
increased as a result of expenses incurred at those properties
owned or operated during the 1994 third quarter but not during
the comparable 1993 period and, to a lesser extent, increased
selling and other payroll costs and programming costs.
On a "same station" basis, broadcast operating expenses for the
1994 period were $18.4 million, a decrease of $0.7 million or
3.5% from $19.1 million for the 1993 period. The 1994 third
quarter decline in "same station" broadcast operating expenses
resulted from a reduction in broadcast rights' fees for
professional baseball due to the baseball strike beginning in
August 1994.
Station operating income excluding depreciation and amortization
for the three months ended September 30, 1994 was $8.0 million,
an increase of $1.1 million or 15.8% from the $6.9 million for
the three months ended September 30, 1993. On a "same station"
basis, station operating income excluding depreciation and
amortization for the 1994 period was $7.9 million, an increase of
$1.1 million or 15.3% from $6.8 million for the 1993 period.
Depreciation and amortization for the third quarter of 1994 and
1993 was $2.5 million and $2.7 million, respectively.
Operating income for the third quarter of 1994 was $4.8 million,
an increase of $1.4 million or 42.6% from operating income of
$3.4 million during the third quarter of 1993.
Interest expense for the third quarter of 1994 was $0.1 million,
a decrease of $0.5 million or 77.4% from $0.6 million during the
third quarter of 1993. Interest expense declined due to the
reduction in outstanding debt.
Net income for the third quarter of 1994 was $2.6 million,
compared to net income of $0.9 million reported by the Company
for the third quarter of 1993. The 1993 period includes income
tax expense of $1.9 million while the 1994 period includes $2.3
million of income tax expense. The income tax expense for each
period is based on the estimated annual effective tax rate.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS, Continued
RESULTS OF OPERATIONS
OTHER
Although the Company has significant net operating loss
carryforwards for federal and other tax purposes, the Company's
ability to use such losses to reduce its taxable income is
severely limited because of the Restructuring. Further, as a
result of the Restructuring, the net operating loss carryforwards
and other tax attributes (including the tax basis in assets) will
be reduced or eliminated, except to the extent the Company is
permitted to apply the stock for debt exception provided under
section 108 of the Internal Revenue Code (the "Code"). As a
result of changes to the Code in 1993, the Company will be able
to amortize certain of its costs in the purchase of broadcasting
assets, particularly goodwill, on a more favorable basis than was
previously the case.
JACOR COMMUNICATIONS, INC. AND SUBSIDIARIES
PART II - OTHER INFORMATION, Continued
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits.
Number Description Page
11 Statement re computation of consolidated
income per common share 27
27 Financial Data Schedule 28
99 Press Release dated November 3, 1994 29
(b) Reports on Form 8-K
None
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, Registrant has duly caused this Report to be signed on its
behalf by the undersigned, thereunto duly authorized.
JACOR COMMUNICATIONS, INC.
(Registrant)
DATED: November 4, 1994 BY /s/ R. Christopher Weber
R. Christopher Weber,
Senior Vice President and
Chief Financial Officer
JACOR COMMUNICATIONS, INC. AND SUBSIDIARIES
EXHIBIT 11
Computation of Consolidated Income Per Common Share
for the three months and nine months ended September 30, 1994 and 1993
Three Months Ended Nine Months Ended
September 30 September 30
1994 1993 1994 1993
Income for primary and
fully diluted computation:
Income $2,629,384 $ 893,318 $4,783,200 $ 561,948
Primary (1):
Weighted average common shares
and all other dilutive
securities:
Common stock 19,589,120 13,799,539 19,566,685 12,111,621
Stock purchase warrants 779,639 676,258 822,893 494,020
Stock options 744,600 761,841 764,953 673,100
Contingently issuable
common shares 300,000 300,000
21,413,359 15,237,638 21,454,531 13,278,741
Primary income (loss)
per common share $ .12 $ .06 $ .22 $ .04
<FN>
NOTES:
1. Fully diluted earnings per share is not presented since it approximates
primary income per share.
JACOR COMMUNICATIONS, INC. AND SUBSIDIARIES
EXHIBIT 27
Financial Data Schedule
for the nine months ended September 30, 1994
Fiscal-Year-End December 31, 1994
Period-End September 30, 1994
Item Description Amount (1)
Cash and cash items 23,259
Marketable securities 0
Notes and accounts receivable-trade 26,243
Allowances for doubtful accounts 1,385
Inventory 0
Total current assets 52,757
Property, plant and equipment 26,676
Accumulated depreciation 3,799
Total assets 170,410
Total current liabilities 12,563
Bonds, mortgages and similar debt 0
Preferred stock-mandatory redemption 0
Preferred stock-no mandatory redemption 0
Common stock 1,959
Other stockholders' equity 143,762
Total liabilities and stockholders' equity 170,410
Net sales of tangible products 0
Total revenues 87,544
Cost of tangible goods sold 0
Total costs and expenses applicable to
sale and revenues 69,173
Other costs and expenses 9,741
Provision for doubtful accounts and notes 920
Interest and amortization of debt discount 0
Income before taxes and other items 8,999
Income tax expense 4,216
Income/loss continuing operations 0
Discontinued operations 0
Extraordinary items 0
Cumulative effect - changes in accounting
principles 0
Net income 4,783
Earnings per share - primary .22
Earnings per share - fully diluted .22
[FN]
(1) Dollars in thousands except per share amounts.
EXHIBIT 99
JACOR REPORTS CONTINUED IMPROVEMENTS IN
BROADCAST CASH FLOW
CINCINNATI, NOVEMBER 3 - Jacor Communications,Inc. (NASDAQ-JCOR), owner and
operator of radio stations in six U.S. markets, today reported a 30-percent
increase in broadcast cash flow during the nine months ended September 30,
1994, and a 16-percent increase in broadcast cash flow for the third quarter of
1994.
Jacor's broadcast cash flow for the 1994 nine-month period rose 30 percent to
$18.4 million from $14.1 million in the same nine-month period of 1993. Third
quarter broadcast cash flow rose 16 percent to $8.0 million in 1994 from $6.9
million in the same quarter of 1993. Net revenues for the nine-month period
rose 18 percent to $78.3 million from $66.1 million in the 1993 period. Third
quarter 1994 net revenues rose 8 percent to $28.5 million from $26.3 million in
the 1993 period.
On a "same station" basis - reflecting results from stations operated in the
first nine months of both 1994 and 1993 - Jacor's broadcast cash flow rose 32
percent to $18.4 million for the first nine months of 1994 from $13.9 million
in the same period last year. Broadcast cash flow on the "same station" basis
for the third quarter of 1994 rose 15 percent to $7.9 million from $6.8 million
for the third quarter of 1993.
The company reported net income of $4.8 million or 22 cents per share, during
the first nine months of 1994. Results for the same period last year reflected
net income of $0.6 million, or 4 cents per share. Net income for the third
quarter of 1994 was $2.6 million or 12 cents per share, an increase of 194
percent from the net income of $0.9 million or 6 cents per share reported by
the Company for the third quarter of 1993.
Jacor Communications, Inc., headquartered in Cincinnati, is the nation's ninth
largest radio group. The Company plans to pursue growth through continued
acquisitions of complementary stations in its existing markets, and radio
groups or individual stations with significant presence in the top 25 markets.
CONTACT: Chris Weber
513/621-1300
or
Kirk Brewer
312/466-4042
JACOR COMMUNICATIONS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
For the three months and nine months ended September 30, 1994 and 1993
(UNAUDITED)
Three Months Ended Nine Months Ended
September 30, September 30,
1994 1993 1994 1993
Broadcast revenue $31,912,183 $29,469,525 $ 87,543,871 $74,071,603 Less agency
commissions 3,413,707 3,163,042 9,253,147 7,986,021
Net revenue 28,498,476 26,306,483 78,290,724 66,085,582
Broadcast operating expenses 20,496,794 19,399,250 59,919,688 51,947,001
Broadcast cash flow (1) 8,001,682 6,907,233 18,371,036 14,138,581
Depreciation and amortization 2,519,255 2,725,513 7,235,023 7,411,941
Corporate general and
administrative expenses 698,212 827,750 2,506,449 2,534,801
Operating income 4,784,215 3,353,970 8,629,564 4,191,839
Interest expense (137,591) (608,203) (428,065) (2,354,263)
Other income, net 286,660 32,751 797,601 124,372
Income before
income taxes 4,933,284 2,778,518 8,999,100 1,961,948
Income tax expense (2,303,900) (1,885,200) (4,215,900) (1,400,000)
Net income $ 2,629,384 $ 893,318 $ 4,783,200 $ 561,948
Income per common share $ 0.12 $ 0.06 $ 0.22 $ 0.04
Number of common shares used
in per share computations 21,413,359 15,237,638 21,454,531 13,278,741
<FN>
(1) Operating income before depreciation and amortization and corporate
general and administrative expenses.