AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JUNE 6, 1996
REGISTRATION NO. 333-02495
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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AMENDMENT NO. 3
TO
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------
JACOR COMMUNICATIONS, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
------------------------------
OHIO 31-0978313
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
1300 PNC CENTER
201 EAST FIFTH STREET
CINCINNATI, OHIO 45202
(513) 621-1300
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
------------------------------
R. CHRISTOPHER WEBER
JACOR COMMUNICATIONS, INC.
1300 PNC CENTER
201 EAST FIFTH STREET
CINCINNATI, OHIO 45202
(513) 621-1300
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
------------------------------
COPIES OF COMMUNICATIONS TO:
RICHARD G. SCHMALZL, ESQ. GREGG A. NOEL, ESQ.
GRAYDON, HEAD & RITCHEY SKADDEN, ARPS, SLATE, MEAGHER & FLOM
1900 FIFTH THIRD CENTER 300 SOUTH GRAND AVENUE, SUITE 3400
CINCINNATI, OHIO 45202 LOS ANGELES, CALIFORNIA 90071
(513) 621-6464 (213) 687-5000
--------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after this Registration Statement becomes effective.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. / /
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. / /
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. / /
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / /
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. / /
--------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933, AS AMENDED, OR UNTIL THIS REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION,
ACTING PURSUANT TO SAID SECTION 8(A), MAY DETERMINE.
The prospectus contained in this Registration Statement also relates to a
registration statement previously filed with the Commission.
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JACOR COMMUNICATIONS, INC.
CROSS-REFERENCE SHEET
PURSUANT TO ITEM 501(B) OF REGULATION S-K
FORM S-3--ITEM NUMBER AND CAPTION CAPTION IN PROSPECTUS
Item 1. Forepart of the Registration Statement and Outside
Front Cover Page of Prospectus..................... Facing Page of the Registration Statement;
Cross-Reference Sheet; Outside Front Cover Page of
Prospectus
Item 2. Inside Front and Outside Back Cover Pages of
Prospectus......................................... Inside Front Cover Page; Incorporation of Certain
Documents by Reference; Available Information;
Outside Back Cover Page
Item 3. Summary Information, Risk Factors, and Ratio of
Earnings to Fixed Charges.......................... Prospectus Summary; Risk Factors; Selected
Historical Financial Data; Business
Item 4. Use of Proceeds.................................... Use of Proceeds
Item 5. Determination of Offering Price.................... Not Applicable
Item 6. Dilution........................................... Not Applicable
Item 7. Selling Security Holders........................... Not Applicable
Item 8. Plan of Distribution............................... Outside Front Cover Page; Underwriting
Item 9. Description of Securities to be Registered......... Dividend Policy; Description of LYONs
Item 10. Interests of Named Experts and Counsel............. Legal Matters; Experts
Item 11. Material Changes................................... Prospectus Summary; The Acquisitions
Item 12. Incorporation of Certain Information by
Reference.......................................... Incorporation of Certain Documents by Reference
Item 13. Disclosure of Commission Position on
Indemnification for Securities Act
Liabilities........................................ Not Applicable
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
SUBJECT TO COMPLETION
PRELIMINARY PROSPECTUS DATED JUNE 6, 1996
PROSPECTUS
$225,000,000
[LOGO]
[LOGO]
LIQUID YIELD OPTION-TM- NOTES DUE 2011
(ZERO COUPON-SENIOR)
---------------------
The issue price of each Liquid Yield Option-TM- Note ("LYON"-TM-) to be
issued by Jacor Communications, Inc. ("Jacor") will be $ ( % of
principal amount at maturity) (the "Issue Price"), and there will be no periodic
payments of interest. The LYONs will mature on , 2011. The Issue Price
of each LYON represents a yield to maturity of % per annum (computed on a
semi-annual bond equivalent basis) calculated from , 1996. The LYONs
will be senior unsecured general obligations of Jacor, ranking senior to any
future unsecured and unsubordinated indebtedness.
The LYONs are being issued in connection with the acquisitions of
Citicasters Inc. and Noble Broadcast Group, Inc., and to repay a portion of the
outstanding indebtedness under the Existing Credit Facility (as defined herein).
Concurrently with this offering of LYONs (the "Offering"), Jacor is commencing
the "1996 Stock Offering"and the "Notes Offering" and JCAC, Inc. ("JCAC"), a
wholly owned subsidiary of Jacor, is entering into the "New Credit Facility"
(each as defined herein). Consummation of the Offering is subject to
consummation of the 1996 Stock Offering and the Notes Offering, and JCAC
entering into the New Credit Facility. Consummation of the Offering is not
contingent upon consummation of the Acquisitions (defined herein).
As of March 31, 1996, Jacor had $183.5 million of senior secured
indebtedness outstanding which is effectively senior in right of payment to the
LYONs. On a pro forma basis as of March 31, 1996 after giving effect to this
Offering and the application of the net proceeds therefrom, the consummation of
the Acquisitions and the Financings (as defined herein), the aggregate principal
amount of indebtedness of Jacor's subsidiaries would have been approximately
$625.0 million which would have been effectively senior to the LYONs.
Each LYON will be convertible at the option of the Holder at any time on or
prior to maturity, unless previously redeemed or otherwise purchased, into
common stock of Jacor (the "Common Stock") at a conversion rate of
shares per LYON (the "Conversion Rate"). The Conversion Rate will not be
adjusted for accrued Original Issue Discount (as defined herein) but will be
subject to adjustment upon the occurrence of certain events affecting the Common
Stock. Upon conversion, the Holder will not receive any cash payment
representing accrued Original Issue Discount; such accrued Original Issue
Discount will be deemed paid by the Common Stock received on conversion. See
"Description of LYONs-- Conversion Rights." On June 4, 1996, the last reported
sale price of the Common Stock on the Nasdaq Stock Market's National Market (the
"Nasdaq National Market") was $29 1/8 per share.
The LYONs will be purchased by Jacor, at the option of the Holder, on
, 2001 and , 2006 (each, a "Purchase Date") for a Purchase Price per
LYON of $ and $ (Issue Price plus accrued Original Issue Discount to
each such date), respectively. Jacor, at its option, may elect to pay the
Purchase Price on any Purchase Date in cash or shares of Common Stock at the
market value or in any combination thereof. See "Description of LYONs--Purchase
of LYONs at the Option of the Holder." In addition, as of 35 business days after
the occurrence of any Change in Control of Jacor occurring on or prior to
, 2001, LYONs will be purchased for cash by Jacor, at the option of the
Holder, for a Change in Control Purchase Price equal to the Issue Price plus
accrued Original Issue Discount to the date set for such purchase. There can be
no assurance that Jacor would have sufficient funds to pay the Change in Control
Purchase Price. See "Description of LYONs--Change in Control Permits Purchase of
LYONs at the Option of the Holder."
The LYONs are not redeemable by Jacor prior to , 2001. On and after
that date, the LYONs are redeemable for cash at any time at the option of Jacor,
in whole or in part, at a Redemption Price equal to the Issue Price plus accrued
Original Issue Discount to the date of redemption. See "Description of
LYONs--Redemption of LYONs at the Option of Jacor." At final maturity, Jacor is
required to pay cash in satisfaction of the LYONs.
For a discussion of certain United States Federal income tax consequences
for Holders of LYONs, see "Certain United States Federal Income Tax
Considerations."
The LYONs have been approved for listing, subject to official notice of
issuance, on the Nasdaq Stock Market's SmallCap Market under the symbol "JCORL."
The Common Stock is currently quoted on the Nasdaq National Market under the
symbol "JCOR."
SEE "RISK FACTORS" (BEGINNING ON PAGE 14) FOR A DISCUSSION OF CERTAIN
FACTORS THAT SHOULD BE CONSIDERED BY PROSPECTIVE PURCHASERS OF THE LYONS.
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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
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PRINCIPAL
AMOUNT PRICE TO UNDERWRITING PROCEEDS
AT MATURITY PUBLIC DISCOUNT(1) TO JACOR(2)
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Per LYON.......................... 100% % % %
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Total(3).......................... $225,000,000 $ $ $
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(1) Jacor has agreed to indemnify the Underwriter against certain liabilities,
including liabilities under the Securities Act of 1933, as amended. See
"Underwriting."
(2) Before deducting expenses payable by Jacor estimated at $ .
(3) Jacor has granted the Underwriter an option, excercisable within 30 days
after the date of this Prospectus, to purchase up to an additional
$33,750,000 aggregate principal amount at maturity of LYONs on the same
terms as set forth above to cover over-allotments, if any. If the option is
exercised in full, the total Principal Amount at Maturity, Price to Public,
Underwriting Discount and Proceeds to Jacor will be $258,750,000, $ ,
$ and $ , respectively. See "Underwriting."
---------------------
The LYONs are offered by the Underwriter, subject to prior sale, when, as
and if delivered to and accepted by the Underwriter, and subject to certain
other conditions. The Underwriter reserves the right to withdraw, cancel or
modify such offer and to reject orders in whole or in part. It is expected that
delivery of the LYONs will be made in New York, New York on or about ,
1996 to investors in book-entry form through the facilities of the Depositary
Trust Company against payment therefor in immediately available funds.
- -TM-Trademark of Merrill Lynch & Co., Inc.
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MERRILL LYNCH & CO.
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The date of this Prospectus is , 1996
The inside front cover consists of a map of the United States indicating the
cities in which the Company on a pro forma basis after consummation of the
Acquisitions will own and/or operate radio and television stations.
Beneath the map is a listing by city of the call letters and frequencies of
the stations that the Company will own and/or operate in the respective city.
The inside front cover is a gatefold which opens to a multicolor layout
listing each of the Company's markets in a columnar presentation. Under each
market heading are the logos of the Company's stations in that market. The
markets are ranked according to the combined market revenue of all of the
Company's stations in each market. Also included in each market heading is the
percentage of market revenue share obtained by the Company's stations in that
particular market. The extreme lefthand column of the gatefold contains the
following text in bullet point form:
"Jacor's objective is to be the leading radio broadcaster in each of its
markets. Business strategy centers upon:
- Individual market leadership
- Acquisition and market development
- Diverse format expertise
- Distinct radio personalities
- Strong AM stations
- Powerful broadcast signals",
"Upon completion of its acquisitions of Citicasters Inc. and Noble Broadcast
Group, Inc., Jacor will own and/or operate 50 radio stations and two TV stations
in 13 markets across the United States.",
and
"In San Diego, Jacor provides programming to and sells air time for 91X and
690XTRA."
2
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITER MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE LYONS OFFERED
HEREBY OR OF THE COMMON STOCK, OR BOTH, AT LEVELS ABOVE WHICH MIGHT OTHERWISE
PREVAIL IN THE OPEN MARKET. SUCH TRANSACTIONS MAY BE EFFECTED ON THE NASDAQ
STOCK MARKET'S SMALLCAP MARKET, THE NASDAQ NATIONAL MARKET, IN THE
OVER-THE-COUNTER MARKET OR OTHERWISE. SUCH STABILIZING, IF COMMENCED, MAY BE
DISCONTINUED AT ANY TIME.
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITER MAY ENGAGE IN PASSIVE
MARKET MAKING TRANSACTIONS IN THE COMMON STOCK ON THE NASDAQ NATIONAL MARKET, IN
THE OVER-THE-COUNTER MARKET OR OTHERWISE IN ACCORDANCE WITH RULE 10B-6A UNDER
THE SECURITIES EXCHANGE ACT OF 1934. SEE "UNDERWRITING."
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents previously filed by Jacor with the Securities and
Exchange Commission (the "Commission") are incorporated herein by reference and
are made a part hereof:
(a) Annual Report on Form 10-K for the fiscal year ended December 31, 1995,
as amended;
(b) Quarterly Report on Form 10-Q for the quarter ended March 31, 1996;
(c) Current Reports on Form 8-K dated February 14, 1996, February 27, 1996,
March 6, 1996, as amended, and March 27, 1996 as amended; and
(d) Jacor's Form 8-A Registration Statement dated January 12, 1993.
All documents filed by Jacor with the Commission pursuant to Section 13(a),
13(c), 14 or 15(d) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), after the date of this Prospectus and prior to the termination
of the offering of the securities made hereby shall be deemed to be incorporated
by reference into this Prospectus and to be a part hereof from the date of
filing of such documents. Any statement contained in a document incorporated or
deemed to be incorporated by reference herein shall be deemed to be modified or
superseded for purposes of this Prospectus to the extent that a statement
contained herein (or in any other subsequently filed document that is or is
deemed to be incorporated by reference herein) modifies or supersedes such
previous statement. Any statement so modified or superseded shall not be deemed
to constitute a part of this Prospectus except as so modified or superseded.
This Prospectus incorporates by reference certain documents relating to
Jacor which are not delivered herewith. These documents (other than exhibits to
such documents unless such exhibits are specifically incorporated by reference
herein) are available, without charge, upon oral or written request by any
person to whom this Prospectus is delivered. Such requests should be directed to
Jacor Communications, Inc., 1300 PNC Center, 201 East Fifth Street, Cincinnati,
Ohio 45202, Attention: Jon M. Berry, Senior Vice President and Treasurer,
Telephone Number (513) 621-1300.
AVAILABLE INFORMATION
Jacor is subject to the informational requirements of the Exchange Act, and
accordingly files reports, proxy statements and other information with the
Commission. Jacor has filed a Registration Statement on Form S-3 together with
all amendments and exhibits thereto with the Commission under the Securities Act
of 1993 (the "Securities Act") with respect to the Offering. This Prospectus
does not contain all of the information set forth in the Registration Statement,
certain parts of which are omitted in accordance with the rules and regulations
of the Commission. The Registration Statement, including any amendments,
schedules and exhibits thereto, is available for inspection and copying as set
forth above. Statements contained in this Prospectus as to the contents of any
contract or other document referred to herein include all material terms of such
contracts or other documents but are not necessarily complete, and in each
instance reference is made to the copy of such contract or other document filed
as an exhibit to the Registration Statement, each such statement being qualified
in all respects by such reference. Such reports, proxy statements and other
information filed with the Commission are available for inspection and copying
at the public reference facilities maintained by the Commission at Room 1024,
Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549, and at the
Commission's Regional Offices located at Citicorp Center, 500 West Madison
Street, Suite 1400, Chicago, Illinois 60661-2511, and at 7 World Trade Center,
13th Floor, New York, New York 10048. Copies of such documents may also be
obtained from the Public Reference Room of the Commission at Judiciary Plaza,
450 Fifth Street, N.W., Washington, D.C. 20549, at prescribed rates. In
addition, reports and other information concerning Jacor are available for
inspection and copying at the offices of The Nasdaq Stock Market at 1735 K
Street, N.W., Washington, D.C. 20006-1506.
3
PROSPECTUS SUMMARY
THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY THE MORE DETAILED
INFORMATION AND FINANCIAL STATEMENTS AND NOTES APPEARING ELSEWHERE IN THIS
PROSPECTUS. UNLESS OTHERWISE INDICATED, THE INFORMATION IN THIS PROSPECTUS DOES
NOT GIVE EFFECT TO THE OVER-ALLOTMENT OPTION DESCRIBED IN "UNDERWRITING." UNLESS
THE CONTEXT OTHERWISE REQUIRES, THE TERM (I) "JACOR" REFERS TO JACOR
COMMUNICATIONS, INC. AND ITS SUBSIDIARIES AND THEIR COMBINED OPERATIONS ON A
HISTORICAL BASIS; (II) "CITICASTERS" REFERS TO CITICASTERS INC. AND ITS
SUBSIDIARIES AND THEIR COMBINED OPERATIONS ON A HISTORICAL BASIS; (III) "NOBLE"
REFERS TO NOBLE BROADCAST GROUP, INC. AND ITS SUBSIDIARIES AND THEIR COMBINED
OPERATIONS ON A HISTORICAL BASIS; AND (IV) "COMPANY" REFERS TO JACOR,
CITICASTERS, AND NOBLE ON A COMBINED PRO FORMA BASIS ASSUMING THE ACQUISITIONS
ARE CONSUMMATED AS CURRENTLY SET FORTH IN THE RESPECTIVE ACQUISITION AGREEMENTS.
THE TERM "ACQUISITIONS" REFERS TO THE PENDING MERGER OF A JACOR SUBSIDIARY AND
CITICASTERS AND THE PENDING ACQUISITION OF NOBLE BY JACOR. THE ACQUISITIONS WILL
NOT BE CONSUMMATED PRIOR TO THE CLOSING OF THE ISSUANCE AND SALE OF THE LYONS
OFFERED HEREBY.
THE COMPANY
Jacor, upon consummation of the Acquisitions, will be the third largest
radio group in the nation owning and/or operating 50 radio stations and two
television stations in 13 markets across the United States. Jacor's strategic
objective is to be the leading radio broadcaster in each of its markets.
Consistent with this objective, Jacor entered into agreements to acquire 29
radio stations and two television stations for approximately $950.0 million
within two weeks of the enactment of the Telecommunications Act of 1996 (the
"Telecom Act"). The Company will have multiple radio station platforms in
Atlanta, San Diego, St. Louis, Phoenix, Tampa, Denver, Portland, Kansas City,
Cincinnati, Sacramento, Columbus, Jacksonville and Toledo. These markets are
among the most attractive radio markets in the country, demonstrating, as a
group, radio revenue growth in excess of the radio industry average over the
last five years. In 1995, the Company would have been the top billing radio
group in 9 of its 13 markets and would have had net revenue and broadcast cash
flow of $303.5 million and $107.7 million, respectively.
The following sets forth certain information regarding the Company and its
markets:
COMPANY DATA
----------------------------------------------
1995 MARKET DATA
1995 RADIO RADIO ----------------------------------
RADIO REVENUE AUDIENCE 1995 1990-1995
REVENUE MARKET MARKET NO. OF STATIONS 1995 RADIO REVENUE
MARKET SHARE SHARE ---------------- ARBITRON REVENUE CAGR
MARKET RANK % % AM FM TV MARKET RANK RANK %
- -------------------- ------- ------- ------- ---- ---- ---- ------------ ------- ---------
Atlanta............. 1 23.2 15.8 1 3 -- 12 10 9.2
San Diego(1)........ 1 13.9 6.7 1 2 -- 15 16 5.5
Tampa............... 1 24.3 26.4 2 4 1 21 21 6.2
Denver(2)........... 1 45.9 30.6 4 4 -- 23 14 8.6
Portland............ 1 25.3 17.4 1 2 -- 24 23 8.4
Cincinnati(3)....... 1 56.8 38.8 2 4 1 25 20 7.4
Columbus............ 1 37.9 20.9 2 3 -- 32 28 6.7
Jacksonville........ 1 26.2 22.6 2 3 -- 53 46 7.9
Toledo.............. 1 27.9 27.5 1 2 -- 75 74 5.6
Kansas City......... 3 15.3 12.9 1 1 -- 26 32 4.3
Sacramento.......... 3 14.3 7.0 -- 2 -- 29 25 4.6
St. Louis........... 6 8.6 10.0 1 2 -- 17 18 4.5
Phoenix............. 7 6.6 3.8 1 1 -- 20 17 6.1
- ------------------------
(1) Includes XTRA-FM and XTRA-AM, stations Jacor provides programming to and
sells air time for under an exclusive sales agency agreement.
(2) Excludes one station for which Jacor sells advertising time pursuant to a
joint sales agreement.
(3) Excludes three stations for which Jacor sells advertising time pursuant to
joint sales agreements.
4
BUSINESS STRATEGY
Jacor's strategic objective is to be the leading radio broadcaster in each
of its markets. Jacor intends to acquire individual radio stations or radio
groups that strengthen its market position and that maximize the operating
performance of its broadcast properties. Specifically, Jacor's business strategy
centers upon:
INDIVIDUAL MARKET LEADERSHIP. Jacor strives to maximize the audience
ratings in each of its markets in order to capture the largest share of the
radio advertising revenue in the market. Jacor focuses on those markets where it
believes it has the potential to be the leading radio group in the market. By
operating multiple radio stations in its markets, Jacor is able to operate its
stations at lower costs, reduce the risk of direct format competition and
provide advertisers with the greatest access to targeted demographic groups. For
1995, the Company would have had the number one radio revenue market share in
Atlanta (23%), San Diego (14%), Tampa (24%), Denver (46%), Portland (25%),
Cincinnati (57%), Columbus (38%), Jacksonville (26%) and Toledo (28%). The
Company's aggregate radio revenue market share for 1995 would have been
approximately 25%.
ACQUISITION AND MARKET DEVELOPMENT. Jacor's acquisition strategy focuses on
acquiring both developed, cash flow producing stations and underdeveloped
"stick" properties (i.e., stations with insignificant ratings and little or no
positive broadcast cash flow) that complement its existing portfolio and
strengthen its overall market position. Jacor has been able to improve the
ratings of "stick" properties with increased marketing and focused programming
that complements its existing radio station formats. Additionally, Jacor
utilizes its strong market presence to boost the revenues and cash flow of
"stick" properties by encouraging advertisers to buy advertising in a package
with its more established stations. The Company may enter new markets through
acquisitions of radio groups that have multiple station ownership in such
groups' markets. Additionally, the Company will seek to acquire individual
stations in new markets that it believes are fragmented and where a
market-leading position can be created through additional in-market
acquisitions. The Company may exit markets it views as having limited strategic
appeal by selling or swapping existing stations for stations in other markets
where the Company operates, or for stations in new markets.
DIVERSE FORMAT EXPERTISE. Jacor management has developed programming
expertise over a broad range of radio formats. This management expertise enables
Jacor to specifically tailor the programming of each station in a market in
order to maximize Jacor's overall market position. Jacor utilizes sophisticated
research techniques to identify opportunities within each market and programs
its stations to provide complete coverage of a demographic or format type. This
strategy allows Jacor to deliver highly effective access to a target demographic
and capture a higher percentage of the radio advertising market.
DISTINCT STATION PERSONALITIES. Jacor engages in a number of creative
programming and promotional efforts designed to create listener loyalty and
station brand awareness. Through these efforts, management seeks to cultivate a
distinct personality for each station based upon the unique characteristics of
each market. Jacor hires dynamic on-air personalities for key morning and
afternoon "drive times" and provides comprehensive news, traffic and weather
reports to create active listening by the audience. This commitment to
"foreground" or "high impact" programming has successfully generated significant
audience share.
One of the methods Jacor utilizes to develop the personality of its AM radio
stations is by broadcasting professional sporting events and related
programming. Currently, Jacor has the broadcast rights for the Cincinnati Reds,
Cincinnati Bengals, Colorado Rockies, Denver Broncos, Los Angeles Kings and San
Diego Chargers and Citicasters has the broadcast rights for the Portland Trail
Blazers. In addition, WGST-AM in Atlanta has the broadcast rights to serve as
the official information station for the 1996 Olympic Games. Sports broadcasting
serves as a key "magnet" for attracting audiences to a station and then
introducing them to other programming features, such as local and national news,
entertaining talk, and weather and traffic reports.
5
STRONG AM STATIONS. Jacor is an industry leader in successfully operating
AM stations. While many radio groups primarily utilize network or simulcast
programming on their AM stations, Jacor also develops unique programming for its
AM stations to build strong listener loyalty and awareness. Utilizing this
operating focus and expertise, Jacor has developed its AM stations in Denver and
Cincinnati into the revenue and ratings leaders among both AM and FM stations in
their respective markets. Jacor's targeted AM programming adds to Jacor's
ability to lead its markets and results in more complete coverage of the
listener base.
Although the cost structure of a large-scale AM station generally results in
lower operating margins than typical music-based FM stations, the majority of
Jacor's AM stations generate substantial levels of broadcast cash flow.
Historically, Citicasters and Noble have not focused on their AM operations to
the same extent as Jacor. Accordingly, most of the AM stations to be acquired
meaningfully underperform Jacor's AM stations, and management believes such
stations have the potential to generate significant incremental cash flow.
POWERFUL BROADCAST SIGNALS. A station's ability to maintain market
leadership depends in part upon the strength of its broadcasting delivery
system. A powerful broadcast signal enhances delivery range and clarity, thereby
influencing listener preference and loyalty. Many of Jacor's stations'
broadcasting signals are among the strongest in their respective markets
reinforcing its market leadership. Jacor opportunistically upgrades the power
and quality of the signals at stations it acquires. Following the consummation
of the Acquisitions, Jacor expects that relatively inexpensive technical
upgrades in certain markets will provide for significantly greater signal
presence.
6
THE ACQUISITIONS
In February 1996, Jacor entered into a merger agreement (the "Merger") to
acquire Citicasters. Citicasters owns and/or operates 19 radio stations and two
television stations. The Citicasters' station portfolio will significantly
strengthen Jacor's position in several markets. Citicasters' strong radio
stations in Atlanta, Tampa and Cincinnati, as well as network affiliate
television stations in Tampa and Cincinnati, complement Jacor's existing radio
stations in those markets. In addition, Citicasters has the number one share of
the radio advertising revenues in the Portland (25%) and Columbus (38%) markets.
Further, Citicasters has attractive radio stations in desirable radio markets,
including Phoenix, Kansas City and Sacramento.
Also in February 1996, Jacor entered into an agreement to acquire Noble (the
"Noble Acquisition"), which owns 10 radio stations. The Noble Acquisition
significantly strengthens Jacor's existing position in the San Diego and Denver
markets. In addition, Noble's number one radio market position in Toledo and
Noble's stations in St. Louis provide Jacor with strong platforms and attractive
markets to pursue Jacor's market leadership strategy.
Both Noble and Citicasters have underdeveloped stations which Jacor believes
can benefit from management's proven operating and programming expertise. These
underdeveloped stations provide considerable opportunity for both ratings and
cash flow improvement.
Due to the need to obtain various regulatory approvals, the Acquisitions
will not be consummated prior to the closing of the Offering. See "Risk
Factors--Pending Acquisitions."
The cash to be paid in connection with the Merger, the refinancing of
Citicasters' bank debt, a portion of the cash to be paid in connection with the
Noble Acquisition and the repayment of certain existing indebtedness incurred in
connection with such acquisition, together with the fees and expenses incurred
in connection therewith, will be financed through (i) the net proceeds of this
Offering; (ii) the net proceeds of the offering of 11,250,000 shares of Common
Stock (together with up to an additional 1,687,500 shares subject to an
over-allotment option) (the "1996 Stock Offering"); (iii) the net proceeds of an
offering by JCAC of $100.0 million aggregate principal amount of its % Senior
Subordinated Notes due 2006 (the "Notes") (the "Notes Offering"); and (iv)
borrowings by JCAC under a new credit facility with an available principal
amount of $600.0 million (the "New Credit Facility" and, together with the
Offering, the 1996 Stock Offering and the Notes Offering, the "Financing"). The
consummation of each of the Offering, the Notes Offering and the 1996 Stock
Offering is subject to consummation of each of the other Offerings and JCAC
entering into the New Credit Facility. The Acquisitions will not be consummated
prior to the closing of the Offerings. See "Use of Proceeds," "Description of
Capital Stock" and "Description of Indebtedness."
RECENT DEVELOPMENTS
Subsequent to Jacor's entering into the agreements to acquire Citicasters
and Noble, Jacor has also entered into agreements to acquire two radio stations
in Venice, Florida for a purchase price of approximately $4.4 million, two radio
stations in Toledo, Ohio for a purchase price of $13.0 million and three radio
stations in Lexington, Kentucky for a purchase price of approximately $14.0
million. In addition, Jacor has entered into two non-binding letters of intent
pursuant to which Jacor and the prospective sellers have agreed to negotiate
exclusively the terms and conditions of definitive acquisition agreements. If
such negotiations and transactions are successfully completed, Jacor would
acquire an additional ten radio stations for an aggregate purchase price of
approximately $52.5 million. There can be no assurance that Jacor will
successfully complete any such acquisitions or what the consequences thereof
would be. See "Business -- Recent Developments."
7
THE OFFERING
LYONs............................... $225,000,000 aggregate principal amount at maturity
(excluding $33,750,000 aggregate principal amount at
maturity subject to the underwriter's over-allotment
option) of LYONs due , 2011. There will be no
periodic interest payments on the LYONs. Each LYON
will have an Issue Price of $ and a principal
amount due at maturity of $1,000.
Yield to Maturity of LYONs.......... % per annum (computed on a semiannual bond equivalent
basis) calculated from , 1996.
Conversion Rights................... Each LYON will be convertible, at the option of the
Holder, at any time on or prior to maturity, unless
previously redeemed or otherwise purchased by Jacor,
into Common Stock at a Conversion Rate of
shares per LYON. The Conversion Rate will not be
adjusted for accrued Original Issue Discount, but
will be subject to adjustment upon the occurrence of
certain events affecting the Common Stock. Upon
conversion, the Holder will not receive any cash
payment representing accrued Original Issue Discount;
such accrued Original Issue Discount will be deemed
paid by the Common Stock received by the Holder on
conversion. Jacor does not undertake to advise
Holders of the amount of accrued Original Issue
Discount foregone upon conversion. No fractional
interests in shares of Common Stock will be delivered
upon conversion. A Holder otherwise entitled to a
fractional share of Common Stock will receive cash
equal to the then current market value of such
fractional share based on the closing Sale Price (as
defined herein) on the Trading Day (as defined
herein) immediately preceding the Conversion Date.
See "Description of LYONs--Conversion Rights."
Ranking............................. The LYONs will be senior unsecured general
obligations of Jacor ranking senior to any future
unsecured and unsubordinated indebtedness. Because
Jacor is a holding company, the LYONs are effectively
subordinated to any existing and future liabilities,
including trade payables, of Jacor's subsidiaries,
except to the extent Jacor is a creditor of the
subsidiaries recognized as such. As of March 31,
1996, Jacor had $183.5 million of senior secured
indebtedness outstanding which is effectively senior
in right of payment to the LYONs. On a pro forma
basis as of March 31, 1996, after giving effect to
the Acquisitions and the Financing, long-term debt
(excluding intercompany obligations) of Jacor's
subsidiaries, to which the LYONs would have been
effectively subordinated, totaled approximately
$625.0 million, and accounts payable and accrued
liabilities totaled approximately $39.1 million.
Original Issue Discount............. Each LYON is being offered at an Original Issue
Discount for United States Federal income tax
purposes equal to the excess of the principal amount
at maturity of the LYON over the amount of the Issue
Price. Prospective purchasers of LYONs should be
aware that, although there will be no periodic
payments of interest on the LYONs, accrued Original
Issue Discount will be includable periodically in a
Holder's gross income for United States Federal
income tax purposes prior to conversion, redemption,
other disposition or maturity of such Holder's LYONs,
whether or not such LYONs are ultimately converted,
redeemed, sold (to Jacor or otherwise) or paid at
maturity. See "Certain United States Federal Income
Tax Consequences--Original Issue Discount."
8
Sinking Fund........................ None.
Optional Redemption................. The LYONs will not be redeemable by Jacor prior to
, 2001. Thereafter, the LYONs are redeemable
for cash at any time at the option of Jacor, in whole
or in part, at Redemption Prices equal to the Issue
Price plus accrued Original Issue Discount through
the date of redemption. See "Description of
LYONs--Redemption of LYONs at the Option of the
Company."
Purchase at the Option of the Jacor will purchase any LYON, at the option of the
Holder............................ Holder, on , 2001 and , 2006, for a
Purchase Price per LYON of $ and $ (Issue
Price plus accrued Original Issue Discount through
each such Purchase Date), respectively. Jacor, at its
option, may elect to pay the Purchase Price on any
such Purchase Date in cash or Common Stock, or any
combination thereof. Because the Market Price of any
Common Stock to be delivered in payment, in whole or
in part, of a Purchase Price is determined as of the
third business day prior to the applicable Purchase
Date, Holders of LYONs bear the market risk with
respect to the value of the Common Stock to be
received from the date such Market Price is
determined to such Purchase Date. In addition, as of
35 business days after the occurrence of a Change in
Control of Jacor occurring on or prior to ,
2001, Jacor will purchase for cash any LYON, at the
option of the Holder, at a Change in Control Purchase
Price equal to the Issue Price plus accrued Original
Issue Discount through the Change in Control Purchase
Date. The Change in Control purchase feature of the
LYONs may in certain circumstances have an
anti-takeover effect. If a Change in Control were to
occur, there can be no assurance that Jacor would
have sufficient funds to pay the Change in Control
Purchase Price required by Holders seeking to
exercise the purchase right because Jacor might also
be required to prepay certain other indebtedness
including the Notes having financial covenants with
change of control provisions in favor of the holders
thereof. In addition, a Change in Control under the
Indenture will result in a default under the New
Credit Facility and the Existing Credit Facility, and
thereby could cause the acceleration of the maturity
of the indebtedness represented by the Notes and the
Citicaster's Notes. See "Description of Indebtedness"
and "Description of the LYONs--Purchase of LYONs at
the Option of the Holder" and "Change in Control
Permits Purchase of LYONs at the Option of the
Holder" for a summary of these provisions and the
definition of "Change in Control."
Use of Proceeds..................... The net proceeds from the Offering (estimated to be
$97.0 million) will be used as part of the Financing
in connection with the Acquisitions; to repay all
outstanding indebtedness under the Existing Credit
Facility; for general corporate purposes, including
acquisitions of other broadcast properties; and, if
necessary, to redeem the 1993 Warrants (as defined
herein). See "Use of Proceeds."
Listing............................. It is expected that the LYONs will be traded on the
Nasdaq Stock Market's SmallCap Market under the
symbol "JCORL." Jacor's Common Stock is currently
traded on the Nasdaq National Market under the symbol
"JCOR."
Risk Factors........................ Prospective investors should carefully consider the
matters set forth under "Risk Factors."
9
THE 1996 STOCK OFFERING
Concurrently with and as a condition to consummation of this Offering and
the LYONs Offering, Jacor will consummate the 1996 Stock Offering. The Common
Stock will be offered by Jacor exclusively pursuant to a separate Prospectus.
THE NOTES OFFERING
Concurrently with and as a condition to consummation of this Offering and
the 1996 Stock Offering, JCAC will consummate the Notes Offering. The Notes will
be offered by JCAC exclusively pursuant to a separate Prospectus.
MARKET DATA AND CERTAIN DEFINITIONS
All market revenue rankings and rankings of radio stations by revenue or
billings that are contained in this Prospectus are based on 1995 information
contained in Duncan's Radio Market Guide (1996 ed.), Duncan's Radio Group
Directory (1996-1997 ed.), the December 1995 Miller, Kaplan, Arase & Co. Market
Revenue Report (the "Miller Kaplan Report") or the December 1995 Hungerford,
Aldren, Nicholas & Carter Radio Revenue Report. All information concerning
ratings and audience listening information is derived from the Fall 1995
Arbitron Metro Area Ratings Survey (the "Fall 1995 Arbitron"). All Designated
Market Area ("DMA") information is derived from the Nielsen Station Index,
November 1995 ("Nielsen"). The term "LMAS" means local marketing agreements
which would be considered time brokerage agreements for Federal Communications
Commission (the "FCC") purposes. The term "JSAS" means joint sales agreements
pursuant to which a company sells advertising time for stations owned by third
parties. Jacor has agreed to finance the purchase by a Jacor affiliate of a 40%
interest in a limited liability company that has agreed to purchase for $540,000
the assets of Duncan American Radio, Inc. See "Business -- Recent Developments."
10
SUMMARY PRO FORMA FINANCIAL INFORMATION
(DOLLARS IN THOUSANDS)
The following sets forth summary unaudited pro forma combined financial
information derived from the Unaudited Pro Forma Financial Information included
elsewhere in this Prospectus. The unaudited pro forma condensed consolidated
statements of operations for the year ended December 31, 1995 and for the latest
twelve months ended March 31, 1996 give effect to (i) Jacor's 1995 completed
radio station acquisitions and the February 1996 radio station dispositions,
(ii) Noble's completed 1995 radio station acquisitions and dispositions, (iii)
Citicasters' completed 1995 and January 1996 radio station acquisitions, and
(iv) the Acquisitions and the Financing. The pro forma condensed consolidated
balance sheet as of March 31, 1996 has been prepared as if the Acquisitions and
the Financing had occurred on March 31, 1996.
The Summary Unaudited Pro Forma Financial Information does not purport to
present the actual financial position or results of operations of the Company
had the transactions and events assumed therein in fact occurred on the dates
specified, nor are they necessarily indicative of the results of operations that
may be achieved in the future. The Summary Unaudited Pro Forma Financial
Information is based on certain assumptions and adjustments described in the
notes to the Unaudited Pro Forma Financial Information and should be read in
conjunction therewith. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations," and the Consolidated Financial Statements
and the Notes thereto for each of Jacor, Citicasters and Noble, included
elsewhere in this Prospectus.
LATEST
TWELVE
YEAR ENDED MONTHS
DECEMBER ENDED
31, MARCH 31,
1995 1996
----------- -----------
OPERATING STATEMENT DATA:
Net revenue......................... $ 303,469 $ 305,883
Broadcast operating expenses........ 195,744 197,854
Depreciation and amortization....... 46,840 47,118
Corporate general and administrative
expenses.......................... 6,655 6,733
Operating income.................... 54,230 54,178
Interest expense.................... 60,438 60,438
Loss before extraordinary items..... (8,895) (10,116)
OTHER FINANCIAL DATA:
Broadcast cash flow(1).............. $ 107,725 $ 108,029
Broadcast cash flow margin(2)....... 35.5% 35.3%
EBITDA(1)........................... $ 101,070 $ 101,296
Capital expenditures................ 19,677 21,456
AS OF
MARCH 31,
1996
-----------
BALANCE SHEET DATA:
Working capital..................... $ 79,792
Intangible assets................... 1,323,229
Total assets........................ 1,575,556
Long-term debt...................... 625,000
LYONs............................... 100,000
Total shareholders' equity.......... 493,600
11
SUMMARY HISTORICAL FINANCIAL DATA
(DOLLARS IN THOUSANDS)
The following sets forth summary historical financial data for Jacor,
Citicasters and Noble for the three years ended December 1995 and the three
month periods ended March 1995 and 1996. The comparability of the historical
consolidated financial data reflected in this financial data has been
significantly impacted by acquisitions, dispositions and restructurings. The
information presented below is qualified in its entirety by, and should be read
in conjunction with, "Management's Discussion and Analysis of Financial
Condition and Results of Operations," "Selected Historical Financial Data," and
the Consolidated Financial Statements and the Notes thereto for each of Jacor,
Citicasters and Noble.
THREE MONTHS
ENDED
YEAR ENDED DECEMBER 31, MARCH 31,
----------------------------------- -----------------
JACOR 1993 1994 1995 1995 1996(3)
------------- -------- -------- ------- -------
STATEMENT OF OPERATIONS DATA:
Net revenue........................... $ 89,932 $107,010 $118,891 $24,016 $30,074
Broadcast operating expenses.......... 69,520 80,468 87,290 19,960 23,871
Depreciation and amortization......... 10,223 9,698 9,483 2,112 2,619
Corporate general and administrative
expenses............................ 3,564 3,361 3,501 884 1,139
Operating income...................... 6,625 13,483 18,617 1,061 2,445
Net income............................ 1,438 7,852 10,965 751 891
OTHER FINANCIAL DATA:
Broadcast cash flow(1)................ $ 20,412 $26,542 $31,601 $4,057 $6,203
Broadcast cash flow margin(2)......... 22.7% 24.8% 26.6% 16.9% 20.6%
EBITDA(1)............................. $ 16,848 $23,181 $28,100 $3,173 $5,064
Capital expenditures.................. 1,495 2,221 4,969 707 3,437
THREE MONTHS
CITICASTERS PREDECESSOR(4) CITICASTERS ENDED
------------- -------------------
YEAR ENDED DECEMBER 31, MARCH 31,
----------------------------------- -----------------
1993 1994(5) 1995 1995 1996
------------- -------- -------- ------- -------
STATEMENT OF OPERATIONS DATA:
Net revenue........................... $ 205,168 $197,043 $136,414 $29,045 $31,177
Broadcast operating expenses.......... 133,070 117,718 80,929 19,879 21,728
Depreciation and amortization......... 28,119 22,946 14,635 3,319 4,065
Corporate general and administrative
expenses............................ 3,996 4,796 4,303 1,123 1,053
Operating income...................... 39,983 51,583 36,547 4,724 4,331
Net income (loss)..................... 341,344 63,106 14,317 1,278 (570)
OTHER FINANCIAL DATA:
Broadcast cash flow(1)................ $ 72,098 $79,325 $55,485 $9,166 $9,449
Broadcast cash flow margin(2)......... 35.1% 40.3% 40.7% 31.6% 30.3%
EBITDA(1)............................. $ 68,102 $74,529 $51,182 $8,043 $8,396
Capital expenditures.................. 5,967 7,569 11,857 2,591 1,820
THREE MONTHS
ENDED
YEAR ENDED DECEMBER(6) MARCH(6)
----------------------------------- -----------------
NOBLE 1993 1994(7) 1995 1995 1996(1)
------------- -------- -------- ------- -------
STATEMENT OF OPERATIONS DATA:(8)
Net revenue........................... $ 47,509 $49,602 $41,902 $9,006 $6,058
Broadcast operating expenses.......... 36,944 37,892 31,445 7,638 5,626
Depreciation and amortization......... 6,916 6,311 4,107 1,027 1,079
Corporate general and administrative
expenses............................ 2,702 2,621 2,285 602 577
Operating income (loss)............... 947 (5,026) 4,065 (261) (1,224)
Net income (loss)..................... 13,452 (16,038) 56,853 (207) 10,142
OTHER FINANCIAL DATA:(8)
Broadcast cash flow(1)................ $ 10,565 $11,710 $10,457 $1,368 $ 432
Broadcast cash flow margin(2)......... 22.2% 23.6% 25.0% 15.2% 7.1%
EBITDA(1)............................. $ 7,863 $ 9,089 $ 8,172 $ 766 $(145)
Capital expenditures.................. 3,009 1,124 2,851 532 352
12
- ------------------------------
(1) "Broadcast cash flow" means operating income before reduction in carrying
value of assets, depreciation and amortization, and corporate general and
administrative expenses. "EBITDA" means operating income before reduction in
carrying value of assets, depreciation and amortization. Broadcast cash flow
and EBITDA should not be considered in isolation from, or as a substitute
for, operating income, net income or cash flow and other consolidated income
or cash flow statement data computed in accordance with generally accepted
accounting principles or as a measure of a company's profitability or
liquidity. Although these measures of performance are not calculated in
accordance with generally accepted accounting principles, they are widely
used in the broadcasting industry as a measure of a company's operating
performance because they assist in comparing station performance on a
consistent basis across companies without regard to depreciation and
amortization, which can vary significantly depending on accounting methods
(particularly where acquisitions are involved) or non-operating factors such
as historical cost bases. Broadcast cash flow also excludes the effect of
corporate general and administrative expenses, which generally do not relate
directly to station performance. Pro forma EBITDA includes approximately
$5.1 million of annual estimated pretax broadcast operating expense savings
and approximately $4.9 million of annual estimated pretax corporate overhead
savings resulting from the Acquisitions.
(2) Broadcast cash flow margin equals broadcast cash flow as a percentage of net
revenue.
(3) The February 1996 sale of Noble's San Diego operating assets to Jacor
significantly affects comparison of net revenue, operating expenses and
broadcast cash flow for the three months ended March 1996 as compared to the
three months ended March 1995.
(4) Prior to its emergence from Chapter 11 bankruptcy in December 1993,
Citicasters was known as Great American Communications Company (the
"Predecessor"). As a result of the application of "fresh-start reporting,"
the selected financial data for periods prior to December 31, 1993 are not
comparable to periods subsequent to such date.
(5) In 1994, the sale of four television stations significantly affects
comparison of net revenues, operating expenses and broadcast cash flow for
1994 as compared to 1993 and 1995.
(6) Noble's fiscal year ends on the last Sunday of December, and each of Noble's
fiscal quarters ends on the last Sunday of the respective fiscal quarter, to
coincide with the standard broadcast year.
(7) In 1994, Noble reduced intangible assets by $7.8 million to reflect the
carrying value of the broadcasting assets at their estimated fair market
values.
(8) The comparability of the information in the Summary Historical Financial
Data is affected by various acquisitions and dispositions of radio stations,
as well as the August 1995 restructuring.
13
RISK FACTORS
In addition to the other information contained in this Prospectus,
prospective investors should consider carefully the following factors before
purchasing the LYONs offered hereby.
PENDING ACQUISITIONS
The consummation of the Acquisitions requires FCC approval with respect to
the transfer of the broadcast licenses of Citicasters and Noble to Jacor. Jacor
has filed applications seeking FCC approval for the Acquisitions. The FCC has
granted its consent to Jacor's acquisition of Noble, which consent was subject
to reconsideration upon the request of third parties through May 1, 1996. No
party requested reconsideration of this consent prior to May 1, 1996, however
the FCC on its own action may review the consent until May 13, 1996. To date,
the FCC has not acted on the transfer application for the Merger.
In addition, FCC rules generally prohibit the ownership of a television
station and of one or more radio stations serving the same market (termed the
"one-to-a-market rule"). In connection with its application seeking FCC approval
for the Merger, Jacor has requested a waiver of the one-to-a-market rule with
respect to the Cincinnati and Tampa markets. The FCC is currently in the process
of evaluating changes in its one-to-a-market waiver policy, which is anticipated
to be implemented in the fourth quarter of 1996. Jacor believes its waiver
request justifies grant of a permanent waiver under the FCC's current
one-to-a-market waiver policy. In some recent transactions where ownership
policies were under review by the FCC, it has granted temporary waivers to allow
multi-station transactions to be consummated without immediate station
divestitures. Jacor has indicated to the FCC that it would accept initially a
grant of a temporary waiver that would allow the consummation of the Merger,
without the immediate divestiture of any station. In such event, Jacor would
request that the FCC evaluate Jacor's permanent waiver request under the FCC's
new one-to-a-market policy, once adopted. The FCC has tentatively concluded that
the one-to-a-market rule should be modified in one of two ways: (1) elimination
of the one-to-a-market rule altogether, relying instead on compliance with the
separate radio and television local ownership limits; or (2) permit
radio-television combinations when at least 30 independent broadcast voices
remain in the local market, regardless of market ranking. The Merger would meet
either proposed standard. If the FCC does not grant either a permanent or
temporary waiver, but otherwise consents to the Merger, Jacor could consummate
the Merger if it divests the Citicasters television stations or the Citicasters
and Jacor radio stations in the Cincinnati and Tampa markets. If divestitures
are required, there can be no assurance that Jacor would be able to obtain full
value for such stations nor that such sales would not have a material adverse
impact upon the Company's business, financial condition or results of
operations. In such event, however, Jacor's intention would be to seek
reconsideration and/or appellate court review of the FCC's decision.
The consummation of the Acquisitions also is subject to the expiration or
termination of the applicable waiting period under the Hart-Scott-Rodino
Antitrust Improvements Act of 1976, as amended (the "HSR Act"). Jacor has
received second requests for information from the Antitrust Division of the
Department of Justice relating to each of the Merger and the Noble Acquisition
which focus particularly on the Citicasters and Noble radio stations in
Cincinnati and Denver, respectively. The applicable waiting period under the HSR
Act for each of the Merger and the Noble Acquisition will expire 20 days after
both parties in the applicable transaction substantially comply with the second
request relevant to that transaction, unless the parties agree to extend the
waiting period or the Antitrust Division seeks to, and is successful in its
efforts to, enjoin the applicable transaction. Jacor believes that the parties
have substantially complied with the second request relative to the Merger, and
anticipates that the applicable waiting period with respect to the Merger will
expire on June 7, 1996. The parties have not yet completed compliance with the
second request relevant to the Noble Acquisition. The Antitrust Division has
expressed concern regarding the possible effect of the Merger in the Cincinnati
market, and the parties to the Merger are having ongoing discussions with the
Antitrust Division to address those concerns. To date the Antitrust Division has
not expressed a substantive view of the Noble Acquisition.
If the Merger is not consummated prior to January 1, 1997, JCAC will be
required to make an offer to repurchase the Notes and the commitments of the
banks and the financial institutions to fund the New Credit Facility would
terminate. In the event the Merger is not consummated prior to January 1, 1997
and Jacor is required to seek additional sources of financing, there can be no
assurance that Jacor could secure
14
such financing or that such financing, if available, would be on terms
acceptable to Jacor. Accordingly, the failure by Jacor to consummate the Merger
prior to January 1, 1997 could result in Jacor being unable to secure financing
or could delay or prevent any subsequent consummation of the Merger.
There can be no assurance that (i) the FCC will approve (a) the transfer of
the broadcast licenses from Citicasters to Jacor, or (b) the one-to-a-market
rule waivers; (ii) the FCC or a court would affirm the FCC consent to the Noble
Acquisition if such review is undertaken; (iii) the HSR waiting period will
expire without objections being raised by the Antitrust Division that would
require substantial changes to the terms of the Acquisitions, (iv) Jacor will be
successful in consummating the Acquisition in a timely manner or on the terms
described herein or (v) if the Merger is not consummated prior to January 1,
1997, Jacor will be successful in securing additional sources of financing for
the Merger. See "Business--Federal Regulation of Broadcasting."
RISKS OF ACQUISITION STRATEGY
Jacor intends to pursue growth through the opportunistic acquisition of
broadcasting companies, radio station groups and individual radio stations. In
this regard, Jacor routinely reviews such acquisition opportunities. Jacor
believes that currently there are available a number of acquisition
opportunities that would be complementary to its business. Other than with
respect to the Acquisitions and as described in "Business-- Recent
Developments," Jacor currently has no binding commitments to acquire any
specific business or other material assets. Jacor cannot predict whether it will
be successful in pursuing any such acquisition opportunities or what the
consequences of any such acquisition would be.
The Acquisitions will increase Jacor's broadcast station portfolio by 29
radio and two television stations. Jacor's acquisition strategy involves
numerous risks, including difficulties in the integration of operations and
systems, the diversion of management's attention from other business concerns
and the potential loss of key employees of acquired stations. There can be no
assurance that Jacor's management will be able to manage effectively the
resulting business or that such acquisitions will benefit Jacor.
In addition to the expenditure of capital relating to the Acquisitions (see
"Uses of Proceeds"), future acquisitions also may involve the expenditure of
significant funds. Depending upon the nature, size and timing of future
acquisitions, Jacor may be required to raise additional financing. There is no
assurance that such additional financing will be available to Jacor on
acceptable terms.
GOVERNMENTAL REGULATION OF BROADCASTING INDUSTRY
The broadcasting industry is subject to extensive federal regulation which,
among other things, requires approval by the FCC for the issuance, renewal,
transfer and assignment of broadcasting station operating licenses and limits
the number of broadcasting properties Jacor may acquire. Additionally, in
certain circumstances, the Communications Act of 1934, as amended (the
"Communications Act") and FCC rules will operate to impose limitations on alien
ownership and voting of the capital stock of Jacor. The Telecom Act, which
became law on February 8, 1996, creates significant new opportunities for
broadcasting companies but also creates uncertainties as to how the FCC and the
courts will enforce and interpret the Telecom Act.
The Company's business will be dependent upon maintaining its broadcasting
licenses issued by the FCC, which are issued for a maximum term of eight years.
The majority of the Company's radio operating licenses expire at various times
in 1996 and 1997. Although it is rare for the FCC to deny a renewal application,
there can be no assurance that the future renewal applications will be approved,
or that such renewals will not include conditions or qualifications that could
adversely affect the Company's operations. Moreover, governmental regulations
and policies may change over time and there can be no assurance that such
changes would not have a material adverse impact upon the Company's business,
financial condition and results of operations. See "Business--Federal Regulation
of Broadcasting."
COMPETITION; BUSINESS RISKS
Broadcasting is a highly competitive business. Jacor's, Noble's and
Citicasters' radio stations and Citicasters' television stations compete for
audiences and advertising revenues with other radio and television stations, as
well as with other media, such as newspapers, magazines, cable television,
outdoor advertising and direct mail, within their respective markets. Audience
ratings and market shares are subject to change and any adverse change in a
particular market could have a material and adverse effect on the
15
revenue of stations located in that market. Future operations are further
subject to many variables which could have an adverse effect upon Jacor's
financial performance. These variables include economic conditions, both
generally and relative to the broadcasting industry; shifts in population and
other demographics; the level of competition for advertising dollars with other
radio stations, television stations and other entertainment and communications
media; fluctuations in operating costs; technological changes and innovations;
changes in labor conditions; and changes in governmental regulations and
policies and actions of federal regulatory bodies, including the FCC. Although
Jacor believes that each of its stations, and each station operated by Noble and
Citicasters, is able to compete effectively in its respective market, there can
be no assurance that any such station will be able to maintain or increase its
current audience ratings and advertising revenues.
SUBSTANTIAL LEVERAGE
The Acquisitions and the Financing will result in a higher level of
indebtedness for the Company. At March 31, 1996, on a combined pro forma basis,
the Company would have had total indebtedness of $725.0 million representing
approximately 59.5% of total capitalization. See "Unaudited Pro Forma Financial
Information." At December 31, 1995 and March 31, 1996, the Company's earnings on
a combined pro forma basis would have been insufficient to cover its fixed
charges by $5.9 million and $10.9 million, respectively. The Company's level of
indebtedness following the Acquisitions may have the following important
consequences: (i) significant interest expense and principal repayment
obligations resulting in substantial annual fixed charges; (ii) significant
limitations on the Company's ability to obtain additional debt financing; and
(iii) increased vulnerability to adverse general economic and industry
conditions. In addition, under its existing and anticipated credit facilities,
Jacor is required to comply with a number of financial covenants, including
interest coverage, debt service coverage and a maximum debt to EBITDA ratio. See
"Description of Indebtedness."
JACOR STRUCTURE
A significant percentage of the assets and revenues of Jacor are held by or
derived from the operations of Jacor's subsidiaries. As a result, trade
creditors and other creditors of these subsidiaries may have a claim that is
structurally superior to that of the holders of the LYONs whose recourse to the
assets and revenues of these subsidiaries derives solely from the equity
interest therein of Jacor.
The ability of Jacor and its subsidiaries to incur certain obligations is
limited by certain of the restrictive covenants contained in the New Credit
Facility. Additionally, borrowings under the New Credit Facility are secured by
a first priority lien on the capital stock of Jacor's and JCAC's direct
subsidiaries, all intercompany indebtedness owed to Jacor and have priority as
to such collateral over the LYONs. The Indenture will not limit the ability of
subsidiaries of Jacor to incur additional indebtedness.
In addition, Jacor's ability to make required principal and interest
payments with respect to Jacor's indebtedness, including the LYONs, depends on
the earnings of its subsidiaries. Since the LYONs are obligations of Jacor only,
Jacor's subsidiaries are not obligated or required to pay any amounts due
pursuant to the LYONs or to make funds available therefor in the form of
dividends or advances to Jacor. In addition, the payment of dividends and the
making of loans, advances and other payments to Jacor by its subsidiaries may be
subject to statutory restrictions, will be subject to contractual restrictions
in the New Credit Facility, are contingent upon the earnings of those
subsidiaries and are subject to various business and other considerations.
ABSENCE OF COVENANT PROTECTION
The Indenture will not limit the ability of Jacor and its subsidiaries to
incur additional indebtedness, or to grant liens on its assets to secure
indebtedness, to pay dividends or to repurchase shares of its capital stock. The
Indenture does not contain any provisions specifically intended to protect
holders of the LYONs in the event of a future highly leveraged transaction
involving Jacor. Jacor could, in the future, enter into certain transactions,
including certain recapitalizations of Jacor, that would not constitute a Change
in Control with respect to the Change in Control purchase feature of the LYONs,
but that would increase the amount of senior indebtedness outstanding at such
time.
SHARE OWNERSHIP BY ZELL/CHILMARK
Upon the consummation of this Offering and the 1996 Stock Offering,
Zell/Chilmark Fund L.P. ("Zell/ Chilmark") will hold approximately 44.0% of the
outstanding Common Stock. The large share ownership of
16
Zell/Chilmark may have the effect of discouraging certain types of transactions
involving an actual or potential change of control of Jacor, including
transactions in which the holders of Common Stock might otherwise receive a
premium for their shares over then-current market prices.
Subject to certain restrictions under the Securities Act of 1933 and under
an agreement with the underwriters for the 1996 Stock Offering restricting the
sale of shares of Common Stock by Zell/Chilmark for a period of 180 days after
the commencement date of the 1996 Stock Offering, Zell/Chilmark will be free to
sell shares of Common Stock after the completion of the 1996 Stock Offering.
Zell/Chilmark may thereafter sell shares of Common Stock from time to time for
any reason. By virtue of its current control of Jacor, Zell/Chilmark could sell
large amounts of Common Stock by causing Jacor to file a registration statement
with respect to such stock. In addition, Zell/Chilmark could sell its shares of
Common Stock without registration pursuant to Rule 144 under the Securities Act
of 1933. Jacor can make no prediction as to the effect, if any, such sales of
shares of Common Stock would have on the prevailing market price. Sales of
substantial amounts of Common Stock, or the availability of such shares for
sale, could adversely affect prevailing market prices. Sales or transfers of
Common Stock by Zell/Chilmark could result in another person or entity becoming
the controlling shareholder of Jacor.
LACK OF DIVIDENDS; RESTRICTIONS ON PAYMENTS OF DIVIDENDS
Jacor has not paid any dividends to its shareholders. Jacor intends to
retain all available earnings, if any, generated by its operations for the
development and growth of its business and does not anticipate paying any
dividends on Common Stock in the foreseeable future. In addition, the payment of
dividends on the Common Stock is restricted under its credit facilities. See
"Dividend Policy."
KEY PERSONNEL
Jacor's business is dependent upon the performance of certain key employees,
including its President and Co-Chief Operating Officers. Jacor employs several
on-air personalities with significant loyal audiences in their respective
markets. Jacor generally enters into long-term employment agreements with its
key on-air talent to protect its interests in those relationships, but there can
be no assurances that all such on-air personalities will remain with Jacor. See
"Management."
POTENTIAL NEGATIVE IMPACT OF BLANK CHECK PREFERRED STOCK ISSUANCES
Assuming Jacor is successful in reincorporating in Delaware, as is currently
proposed, Jacor has authorized for issuance up to 4,000,000 shares of
undesignated preferred stock. The Board of Directors of Jacor will have the
authority, without further vote or action by Jacor shareholders, to issue the
undesignated shares of Jacor preferred stock in one or more series and to fix
all rights, qualifications, preferences, privileges, limitations and
restrictions of each such series, including dividend rights, voting rights,
terms of redemption, redemption prices, liquidation preferences and the number
of shares constituting any series or the designation of such series. Although it
currently has no plans to do so, the Board of Directors of Jacor, without
shareholder approval, can issue Jacor preferred stock with voting and conversion
rights which would adversely affect the voting power of the holders of Common
Stock. In addition, the issuance of Jacor preferred stock may have the effect of
delaying, deferring or preventing a change in control of Jacor and could
therefore have a negative impact on the trading price of Common Stock. See
"Description of Capital Stock."
FORWARD LOOKING STATEMENTS
This Prospectus contains forward-looking statements within the meaning of
Section 27A of the Securities Act. Discussions containing such forward-looking
statements may be found in the material set forth under "Summary," "Management's
Discussion and Analysis of Financial Condition and Results of
Operations--Liquidity and Capital Resources" and "Business," as well as within
the Prospectus generally. In addition, when used in this Prospectus, the words
"believes," "anticipates," "expects" and similar expressions are intended to
identify forward-looking statements. Such statements are subject to a number of
risks and uncertainties. Actual results in the future could differ materially
from those described in the forward-looking statements as a result of the risk
factors set forth below and the matters set forth in the Prospectus generally.
Jacor undertakes no obligation to publicly release the result of any revisions
to these forward-looking statements that may be made to reflect any future
events or circumstances. Jacor cautions the reader, however, that this list of
risk factors may not be exhaustive.
17
THE ACQUISITIONS
THE CITICASTERS MERGER
On February 12, 1996, Jacor, JCAC and Citicasters entered into an Agreement
and Plan of Merger (the "Merger Agreement"), pursuant to which JCAC will merge
with and into Citicasters, with Citicasters as the surviving corporation. As a
result of the Merger, Citicasters will become a wholly owned subsidiary of
Jacor. The consummation of the Merger is subject to various conditions,
including the approval of the FCC, and the expiration or termination of the
applicable waiting period under the HSR Act. See "Risk Factors-- Pending
Acquisitions."
Citicasters owns 19 radio stations serving eight of the nation's top 32
radio revenue markets. Citicasters' radio stations serve Atlanta, Phoenix,
Tampa, Portland, Kansas City, Cincinnati, Sacramento and Columbus. Citicasters
also owns two television stations, a CBS affiliate in Tampa and an ABC affiliate
in Cincinnati, which affiliation will change to CBS in June 1996.
At the effective time of the Merger (the "Effective Time"), each share of
Class A Common Stock, par value $0.01 per share, of Citicasters (the
"Citicasters Common Stock") issued and outstanding immediately prior to the
Effective Time (other than Citicasters Common Stock owned by Citicasters, Jacor,
JCAC or any direct or indirect subsidiary of Citicasters, Jacor or JCAC, or any
Citicasters Common Stock held in the treasury of Citicasters) will, by virtue of
the Merger and without any action on the part of holders thereof, be converted
into and represent the right to receive: (i) $29.50 in cash, plus, if the
closing of the transactions contemplated by the Merger (the "Closing") does not
occur prior to October 1, 1996, for each full calendar month ending prior to the
Closing, commencing with October 1996, an additional amount of $.22125 in cash
(the "Cash Consideration"); plus (ii) a warrant to acquire a fractional share of
Common Stock on the terms described in the Citicasters Warrant Agreement to be
executed at the Closing (the "Warrant Consideration," and together with the Cash
Consideration, the "Merger Consideration").
In accordance with the terms of the Merger Agreement, all necessary
corporate actions by Citicasters and the shareholders of Citicasters to approve
the Merger Agreement have occurred. Zell/Chilmark has granted Citicasters an
irrevocable proxy to vote in favor of the issuance of the warrants necessary to
pay the Warrant Consideration (the "Merger Warrants") approximately 69% of the
outstanding Common Stock entitled to vote at Jacor's July, 1996 Annual Meeting
of Shareholders. Accordingly, Jacor believes the issuance of the Merger Warrants
will be approved at the Jacor Annual Meeting and no additional corporate action
by either Jacor or the Jacor shareholders will be necessary to effect the
Merger.
The Merger Agreement may be terminated prior to the consummation of the
Merger by either Jacor or Citicasters under various circumstances, including the
failure to consummate the Merger on or before May 31, 1997. If the Merger
Agreement is terminated upon the occurrence of certain triggering events,
including the failure to consummate the Merger by May 31, 1997, Citicasters may
draw upon an irrevocable direct pay letter of credit (the "Letter of Credit") in
the amount of $75.0 million obtained by Jacor and issued to an escrow agent on
behalf of Citicasters. Except in certain circumstances, the right to terminate
the Merger Agreement and receive a maximum of $75.0 million pursuant to a draw
on the Letter of Credit is Citicasters' exclusive remedy upon the occurrence of
a triggering event.
Citicasters' outstanding 9 3/4% Senior Subordinated Notes (the "Citicasters
Notes") will become obligations of the surviving corporation in the Merger. As a
result of a change in control covenant in the Citicasters Notes, the holders of
the Citicasters Notes will have the option to cause the Company to purchase the
Citicasters Notes at 101% of the principal amount thereof (the "Change of
Control Offer"). See "Capitalization" and "Description of Indebtedness."
The aggregate value of the Merger, when consummated, is estimated to be
approximately $829.1 million.
18
THE NOBLE ACQUISITION
On February 21, 1996, Jacor entered into an agreement with the stockholders
of Noble to acquire all of the outstanding Class B common stock of Noble for
approximately $12.5 million. At the same time, Jacor also purchased a warrant
for approximately $52.8 million, entitling Jacor to acquire the Class A common
stock of Noble comprising a 79.1% equity interest in Noble. Upon consummation of
the purchase of the outstanding Noble capital stock from the Noble stockholders
and the exercise of Jacor's warrant, Jacor will own 100% of the equity interests
in Noble. The consummation of Jacor's acquisition of Noble is subject to various
conditions including the termination of the applicable waiting period under the
HSR Act. See "Risk Factors--Pending Acquisitions."
Noble owns 10 radio stations serving Denver, St. Louis and Toledo. Pending
the closing of the Noble acquisition, Jacor and Noble have entered into time
brokerage agreements with respect to Noble's radio stations in St. Louis and
Toledo.
On February 21, 1996, Jacor purchased from certain Noble subsidiaries for
approximately $47.0 million certain assets relating to Noble's San Diego
operations. Noble's San Diego operations assets included an exclusive sales
agency agreement under which Noble provided programming to and sold the air time
for two radio stations serving San Diego (XTRA-AM and XTRA-FM). These two radio
stations are licensed by, and subject to the regulatory control of, the Mexican
government. As part of its purchase of Noble's San Diego operations, Jacor was
assigned all of Noble's rights under the exclusive sales agency agreement, and
Jacor is now providing the programming to and selling air time for such
stations. In addition, another wholly owned subsidiary of Jacor provided a
credit facility to Noble in the amount of $41.0 million. Noble applied the
proceeds of this credit facility to repay in full its outstanding indebtedness
as of February 21, 1996.
The aggregate value of the Noble Acquisition, when fully consummated, is
estimated to be approximately $152.0 million, of which approximately $139.5
million has already been paid. In order to fund this acquisition, refinance
Jacor's outstanding debt of $45.5 million (as of February 21, 1996), and pay
related costs and expenses of approximately $5.0 million, Jacor entered into a
$300.0 million credit facility (the "Existing Credit Facility").
19
USE OF PROCEEDS
The net proceeds to Jacor from the issuance and sale of the LYONs offered
hereby are estimated to be $97.0 million ($111.6 million if the Underwriter's
over-allotment option is exercised in full). Jacor intends to use the net
proceeds from this Offering, together with (i) the net proceeds of the 1996
Stock Offering; (ii) the net proceeds of the Notes Offering; and (iii)
borrowings under the New Credit Facility: (a) to finance the Merger and the
remaining purchase price of the Noble Acquisition; (b) to repay all outstanding
indebtedness under the Existing Credit Facility ($196.5 million at May 31, 1996)
including certain borrowings incurred in connection with the Noble Acquisition;
(c) to finance the acquisition of three radio stations in Lexington, Kentucky;
(d) to finance the acquisition of two radio stations in Venice, Florida; (e) if
necessary, to redeem the 1993 Warrants; and (f) for general corporate purposes,
including acquisitions of other broadcast properties. Jacor has entered into two
non-binding letters of intent pursuant to which Jacor and the prospective
sellers have agreed to negotiate exclusively the terms and conditions of
definitive acquisition agreements for the acquisition of an additional ten radio
stations for an aggregate purchase price of $52.5 million. There can be no
assurance that Jacor will be successful in consummating either of such
acquisitions on terms acceptable to Jacor.
The outstanding balance under the Existing Credit Facility bears interest at
a floating rate currently of 7.3% per annum and matures on December 31, 2003,
which monies were borrowed to (a) fund a portion of the Noble acquisition, and
(b) refinance indebtedness that was initially borrowed to fund a portion of (i)
the acquisition of three radio stations in Jacksonville, (ii) the acquisition of
two radio stations in Tampa, (iii) the purchase of the licensee of a radio
station in San Diego, (iv) the acquisition of two radio stations in Toledo, Ohio
and (v) open market repurchases of Common Stock.
Consummation of the Offering is subject to consummation of the 1996 Stock
Offering, the Notes Offering and JCAC entering into the New Credit Facility, but
is not subject to consummation of the Acquisitions. The Acquisitions will not be
consummated prior to the closing of the Offerings. In the event that the
Acquisitions are not consummated, Jacor intends to use the proceeds from the
Offering to pursue other strategic acquisitions and for general corporate
purposes. There can be no assurance that Jacor will be successful in
consummating any such acquisitions or the consequences of such acquisitions, if
any, or that any such acquisitions will be available on terms acceptable to
Jacor. See "The Acquisitions."
The following sets forth the anticipated sources and uses of funds for the
Financing and the Acquisitions.
DOLLARS IN
THOUSANDS
----------
SOURCES OF FUNDS:
Gross proceeds from this Offering................................ $100,000
Gross proceeds from the 1996 Stock Offering...................... 315,000
Gross proceeds from the Notes Offering(1)........................ 100,000
New Credit Facility(2)........................................... 414,100
Exercise of 1993 Warrants(3)..................................... 5,200
----------
Total sources................................................ $934,300
----------
----------
USES OF FUNDS:
Repayment of the Existing Credit Facility (4).................... $196,500
Cash consideration for the Merger (5)............................ 624,200
Remainder of purchase price for acquisition of Noble (6)......... 15,100
Refinance existing Citicasters bank debt......................... 26,000
Other acquisitions (7)........................................... 18,400
Redemption of 1993 Warrants (3).................................. 23,200
Estimated fees and expenses (8).................................. 30,900
----------
Total uses................................................... $934,300
----------
----------
20
- ------------------------------
(1) If the Merger is not consummated prior to January 1, 1997, JCAC will be
required to make an offer to repurchase the Notes. Any Notes not
repurchased may be redeemed by JCAC beginning on March 15, 1997. See "Risk
Factors--Pending Acquisitions," and "Description of Indebtedness -- The
% Senior Subordinated Notes Due 2006."
(2) If the Merger is not consummated prior to January 1, 1997, the commitments
of the banks and financial institutions to fund the New Credit Facility
would terminate. Affiliates of certain of the Underwriters will be agents
and lenders under the New Credit Facility and will receive usual and
customary fees. See "Risk Factors--Pending Acquisitions," and "Description
of Indebtedness--New Credit Facility" and "Underwriting."
(3) In connection with the 1996 Stock Offering, Jacor has determined that it
will convert all of the common stock purchase warrants outstanding on the
date hereof (the "1993 Warrants") into the right to receive the Fair Market
Value (as defined in the 1993 Warrant). Zell/Chilmark has informed Jacor
that it intends to exercise its 1993 Warrants to acquire 629,117 shares of
Common Stock in lieu of accepting the Fair Market Value of its 1993
Warrants for proceeds to Jacor totaling approximately $5.2 million. In the
event that the holders of the remaining 1993 Warrants totaling 1,179,492
elect to receive the Fair Market Value, Jacor will be required to fund
approximately $23.2 million assuming that Fair Market Value is $19.70 per
1993 Warrant (based upon the difference between an assumed average market
price of $28.00 per share of Common Stock and the $8.30 exercise price per
1993 Warrant). If necessary, Jacor intends to fund the conversion of 1993
Warrants presented for redemption prior to the consummation of the Merger
with a portion of the proceeds of the Offerings. Jacor further intends to
fund the conversion of 1993 Warrants presented for redemption subsequent to
the consummation of the Merger with any remaining portion of the proceeds
of the Offerings and/or with a portion of the available borrowings under
the New Credit Facility.
(4) Existing Credit Facility amount is at May 31, 1996. Includes borrowings of
$144.5 million to fund a portion of the Noble Acquisition and related fees
and expenses and $13.0 million which has been placed in escrow to fund the
acquisition of two radio stations in Toledo, Ohio. See "The Acquisitions."
(5) Pursuant to the Merger Agreement, Jacor delivered a $75.0 million Letter of
Credit to an escrow agent pending the Effective Time of the Merger. If the
Merger is not consummated by May 31, 1997, or in certain other specified
circumstances, the Letter of Credit will be drawn upon by Citicasters. See
"The Acquisitions" and "Business--Recent Developments."
(6) Purchase price due upon final closing of the Noble Acquisition, including
fees and expenses. See "The Acquisitions."
(7) Other acquisitions include the acquisition of two radio stations in
Lexington, Kentucky and three radio stations in Venice, Florida. See
"Business--Recent Developments."
(8) Estimated fees and expenses include the fees and expenses of Jacor in
connection with the Financing and financial advisory fees in connection
with the Merger. Equity Group Investments, Inc., an affiliate of
Zell/Chilmark, has provided Jacor with certain investment banking,
financial advisory and other similar services in connection with the
Existing Credit Facility, the Financing and the Acquisitions. In
consideration for such services, Jacor will pay Equity Group Investments,
Inc. a fee of approximately $3.4 million upon the consummation of the
Offerings. The services that have been and will continue to be provided by
Equity Group Investments, Inc. could not otherwise be obtained by Jacor
without the engagement of outside professional advisors. Jacor believes
that such fee is less than what it would have had to pay outside
professional advisors for similar services.
21
PRICE RANGE OF COMMON STOCK
The following sets forth, for the calendar quarters indicated, the reported
high and low sales prices of the Common Stock as reported on the Nasdaq National
Market.
COMMON STOCK
--------------
HIGH LOW
------ ------
1994
First Quarter............................................ $17.00 $12.00
Second Quarter........................................... 15.75 11.25
Third Quarter............................................ 15.00 12.25
Fourth Quarter........................................... 14.75 10.50
1995
First Quarter............................................ 14.50 12.00
Second Quarter........................................... 17.00 13.00
Third Quarter............................................ 19.25 15.00
Fourth Quarter........................................... 17.50 15.00
1996
First Quarter............................................ 22.25 16.00
Second Quarter (through May 31, 1996).................... 30.50 19.50
On May 31, 1996, there were approximately 1,500 holders of record of Common
Stock.
DIVIDEND POLICY
Jacor intends to retain future earnings for use in its business and does not
anticipate paying any dividends on shares of its Common Stock in the foreseeable
future. Under the Existing Credit Facility, Jacor is prohibited from paying
dividends on its Common Stock except as provided therein. It is anticipated that
the New Credit Facility will also have restrictions on the payment of dividends.
Jacor has neither declared nor paid any dividends on its Common Stock to date.
Jacor has no current intent to pay dividends on its Common Stock.
22
CAPITALIZATION
The following table sets forth the capitalization of Jacor on an actual
basis as of March 31, 1996 and pro forma as adjusted to give effect to (i) the
issuance and sale of LYONs in this Offering, (ii) the 1996 Stock Offering (at an
assumed public offering price of $28.00 per share), (iii) the Notes Offering,
(iv) the funding of a portion of the New Credit Facility as set forth in "Use of
Proceeds", (v) the consummation of the Acquisitions and (vi) certain radio
station acquisitions and dispositions as described in the Notes to Unaudited Pro
Forma Financial Information.
AS OF MARCH 31, 1996
--------------------
PRO FORMA
AS
ACTUAL ADJUSTED
-------- ----------
(DOLLARS IN
THOUSANDS)
Long-term debt, including current portion:(1)
New Credit Facility(2).................................. $183,500 $ 400,000
% Senior Subordinated Notes, due 2006(3).............. -- 100,000
9 3/4% Citicasters Notes, due 2004(4)................... -- 125,000
LYONs, due 2011......................................... -- 100,000
-------- ----------
Total long-term debt................................ 183,500 725,000
-------- ----------
Shareholders' equity:
Common Stock, no par value, $0.10 per share stated
value(5).............................................. 1,824 2,949
Additional paid-in capital.............................. 117,102 418,602
Common stock warrants(6)................................ 388 54,288
Retained earnings....................................... 21,061 17,761
-------- ----------
Total shareholders' equity.......................... 140,375 493,600
-------- ----------
Total capitalization........................................ $323,874 $1,218,600
-------- ----------
-------- ----------
- ------------------------------
(1) See Notes 7 and 14 of Notes to Jacor's Consolidated Financial Statements
for additional information regarding the components and terms of Jacor's
long-term debt.
(2) If the Merger is not consummated prior to January 1, 1997, the commitments
of the banks and financial institutions to fund the New Credit Facility
would terminate. See "Risk Factors--Pending Acquisitions" and "Description
of Indebtedness--New Credit Facility."
(3) If the Merger is not consummated prior to January 1, 1997, JCAC will be
required to make an offer to repurchase the Notes. Any Notes not
repurchased may be redeemed by JCAC beginning on March 15, 1997. See "Risk
Factors--Pending Acquisitions" and "Description of Indebtedness -- The %
Senior Subordinated Notes Due 2006."
(4) As a result of a change of control covenant in the Citicasters Notes, the
holders thereof will, upon consummation of the Merger, have the option to
require the Company to purchase the Citicasters Notes at 101% of the
principal amount thereof. If necessary, Jacor intends to fund such purchase
with excess cash and a portion of available borrowings under the New Credit
Facility.
(5) Excludes (i) options outstanding on the date hereof to purchase
approximately 1,915,500 shares of Common Stock at a weighted average
exercise price of $10.59, which options have been granted to (a) employees
under Jacor's 1993 Stock Option Plan and 1995 Employee Stock Purchase Plan,
and (b) Jacor's non-employee directors, (ii) the 1993 Warrants and (iii)
the Merger Warrants. See "Description of Capital Stock."
(6) In connection with the Offering, Jacor has determined that it will convert
each 1993 Warrant into the right to receive the Fair Market Value.
Zell/Chilmark has informed Jacor that it intends to exercise its 1993
Warrants to acquire 629,117 shares of Common Stock in lieu of accepting the
Fair Market Value of its 1993 Warrants for proceeds to Jacor totaling
approximately $5.2 million. In the event that the holders of the remaining
1993 Warrants totaling 1,179,492 elect to receive the Fair Market Value,
Jacor will be required to fund approximately $23.2 million assuming that
Fair Market Value is $19.70 per 1993 Warrant (based upon the difference
between an assumed average market price of $28.00 per share of Common Stock
and the $8.30 exercise price per 1993 Warrant). If necessary, Jacor intends
to fund the conversion of 1993 Warrants presented for redemption prior to
the consummation of the Merger with a portion of the proceeds of the
Offerings. Jacor further intends to fund the conversion of 1993 Warrants
presented for redemption subsequent to the consummation of the Merger with
any remaining portion of the proceeds of the Offerings and/or with a
portion of the available borrowings under the New Credit Facility.
23
UNAUDITED PRO FORMA FINANCIAL INFORMATION
The following unaudited pro forma financial information (the "Pro Forma
Financial Information") is based on the historical financial statements of
Jacor, Noble and Citicasters and has been prepared to illustrate the effects of
the acquisitions described below and the related financing transactions.
The unaudited pro forma condensed consolidated statements of operations for
the year ended December 31, 1995 and for the latest twelve months ended March
31, 1996 give effect to each of the following transactions as if such
transactions had been completed as of January 1, 1995: (i) Jacor's 1995
completed radio station acquisitions and the February 1996 radio station
dispositions, (ii) Noble's completed 1995 radio station acquisitions and
dispositions, (iii) Citicasters' completed 1995 and January 1996 radio station
acquisitions, (iv) the Acquisitions, and (v) the related financing transactions.
The unaudited pro forma condensed consolidated statements of operations for the
three months ended March 31, 1996 and for the latest twelve months ended March
31, 1996 give effect to each of the following transactions as if such
transactions had been completed as of January 1, 1996: (i) Jacor's February 1996
radio station dispositions, (ii) the Acquisitions, and (iii) the related
financing transactions. The pro forma condensed consolidated balance sheet as of
March 31, 1996 has been prepared as if such acquisitions and the related
financing transactions had occurred on that date.
The Acquisitions will be accounted for using the purchase method of
accounting. The total purchase costs of the Acquisitions will be allocated to
the tangible and intangible assets and liabilities acquired based upon their
respective fair values. The allocation of the aggregate purchase price reflected
in the Unaudited Pro Forma Financial Information is preliminary. The final
allocation of the purchase price will be contingent upon the receipt of final
appraisals of the acquired assets and liabilities.
The Unaudited Pro Forma Financial Information does not purport to present
the actual financial position or results of operations of the Company had the
transactions and events assumed therein in fact occurred on the dates specified,
nor are they necessarily indicative of the results of operations that may be
achieved in the future. The Unaudited Pro Forma Financial Information is based
on certain assumptions and adjustments described in the notes hereto and should
be read in conjunction therewith. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations," and the Consolidated Financial
Statements and the Notes thereto for each of Jacor, Citicasters and Noble,
included elsewhere in this Prospectus.
24
JACOR COMMUNICATIONS, INC.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
YEAR ENDED DECEMBER 31, 1995
-----------------------------------------------------------------------------
JACOR NOBLE PRO JACOR/NOBLE
HISTORICAL PRO FORMA JACOR PRO HISTORICAL FORMA COMBINED
JACOR ADJUSTMENTS FORMA NOBLE ADJUSTMENTS PRO FORMA
---------- ----------- --------- ---------- ----------- -----------
Net revenue......................................... $ 118,891 $ (678)(a) $118,213 $41,902 $ 87(b) $160,202
Broadcast operating expenses........................ 87,290 (1,425)(a) 85,865 31,445 (429)(b) 116,881
Depreciation and amortization....................... 9,483 400(a) 9,883 4,107 2,710(c) 16,700
Corporate general and administrative expenses....... 3,501 3,501 2,285 (1,388)(d) 4,398
---------- ----------- --------- ---------- ----------- -----------
Operating income................................ 18,617 347 18,964 4,065 (806) 22,223
Interest expense.................................... (1,444) (1,444) (9,913) (3,143)(e) (14,500)
Interest and investment
income............................................ 1,260 (854)(a) 406 406
Other income (expense), net......................... (168) 6(a) (162) 2,619 (2,619)(f) (162)
---------- ----------- --------- ---------- ----------- -----------
Income (loss) before income taxes and
extraordinary items........................... 18,265 (501) 17,764 (3,229) (6,568) 7,967
Income tax expense.................................. (7,300) 200(g) (7,100) (63) 2,100(g) (5,063)
---------- ----------- --------- ---------- ----------- -----------
Income (loss) before extraordinary items........ $ 10,965 $ (301) $ 10,664 $(3,292) $(4,468) $ 2,904
---------- ----------- --------- ---------- ----------- -----------
---------- ----------- --------- ---------- ----------- -----------
Income per common
share......................................... $ 0.52 $ 0.51 $ 0.14
---------- --------- -----------
---------- --------- -----------
Number of common shares used in per share
computations...................................... 20,913 20,913 20,913
---------- --------- -----------
---------- --------- -----------
See Notes to Unaudited Pro Forma Financial Information
25
JACOR COMMUNICATIONS, INC.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
LATEST TWELVE
MONTHS ENDED
YEAR ENDED DECEMBER 31, 1995 MARCH 31, 1996
------------------------------------------------------------ --------------
JACOR/NOBLE/ JACOR/NOBLE/
JACOR/NOBLE CITICASTERS CITICASTERS CITICASTERS
COMBINED HISTORICAL PRO FORMA COMBINED PRO COMBINED PRO
PRO FORMA CITICASTERS ADJUSTMENTS FORMA FORMA
----------- ----------- ------------ ----------------- --------------
Net revenue......................................... $160,202 $ 136,414 $ 6,853(h) $303,469 $305,883
Broadcast operating expenses........................ 116,881 80,929 4,366(h) 195,744 197,854
(1,322)(i)
(5,110)(j)
Depreciation and amortization....................... 16,700 14,635 15,505(k) 46,840 47,118
Corporate general and administrative expenses....... 4,398 4,303 1,322(i) 6,655 6,733
(3,368)(l)
----------- ----------- ------------ -------- --------------
Operating income................................ 22,223 36,547 (4,540) 54,230 54,178
Interest expense.................................... (14,500) (13,854) (32,084)(m) (60,438) (60,438)
Interest and investment income...................... 406 1,231 (767)(h) 870 595
Other income (expense), net......................... (162) (607) 175(h) (594) (896)
----------- ----------- ------------ -------- --------------
Income (loss) before income taxes and
extraordinary items........................... 7,967 23,317 (37,216) (5,932) (6,561)
Income tax expense.................................. (5,063) (9,000) 11,100(n) (2,963) (3,555)
----------- ----------- ------------ -------- --------------
Income (loss) before extraordinary items........ $ 2,904 $ 14,317 $(26,116) $ (8,895) $(10,116)
----------- ----------- ------------ -------- --------------
----------- ----------- ------------ -------- --------------
Income (loss) per common share.................. $ 0.14 $ (0.29) $ (0.34)
----------- -------- --------------
----------- -------- --------------
Number of common shares used in per share
computations...................................... 20,913 30,158(o) 29,433
----------- -------- --------------
----------- -------- --------------
See Notes to Unaudited Pro Forma Financial Information
26
JACOR COMMUNICATIONS, INC.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
THREE MONTHS ENDED MARCH 31, 1996
------------------------------------------------------------------------------
JACOR NOBLE PRO JACOR/NOBLE
HISTORICAL PRO FORMA JACOR PRO HISTORICAL FORMA COMBINED
JACOR ADJUSTMENTS FORMA NOBLE ADJUSTMENTS PRO FORMA
---------- ----------- --------- ---------- ------------ -----------
Net revenue........................................ $ 30,074 $ 1,850(p) $ 31,924 $ 6,058 $ (2,154)(r) $ 35,828
Broadcast operating
expenses......................................... 23,871 1,693(p) 25,564 5,626 (2,075)(r) 29,115
Depreciation and amortization...................... 2,619 30(p) 2,649 1,079 625(c) 4,353
Corporate general and administrative expenses...... 1,139 1,139 577 (378)(s) 1,338
---------- ----------- --------- ---------- ------------ -----------
Operating income............................... 2,445 127 2,572 (1,224) (326) 1,022
Interest expense................................... (2,111) (2,111) (1,875) 361(e) (3,625)
Interest and investment
income...........................................
Other income (expense), net........................ 2,767 (2,539)(q) 228 37,669 (37,669)(r) 228
---------- ----------- --------- ---------- ------------ -----------
Income (loss) before income taxes and
extraordinary items.......................... 3,101 (2,412) 689 34,570 (37,634) (2,375)
Income tax expense................................. (1,259) 965(g) (294) (14,683) 14,925(g) (52)
---------- ----------- --------- ---------- ------------ -----------
Income (loss) before extraordinary items....... $ 1,842 $(1,447) $ 395 $ 19,887 $(22,709) $ (2,427)
---------- ----------- --------- ---------- ------------ -----------
---------- ----------- --------- ---------- ------------ -----------
Income per common
share........................................ $ 0.09 $ 0.02 $ (0.13)
---------- --------- -----------
---------- --------- -----------
Number of common shares used in per share
computations..................................... 20,503 20,503 18,183
---------- --------- -----------
---------- --------- -----------
See Notes to Unaudited Pro Forma Financial Information
27
JACOR COMMUNICATIONS, INC.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
THREE MONTHS
ENDED
THREE MONTHS ENDED MARCH 31, 1996 MARCH 31, 1995
--------------------------------------------------------- --------------
JACOR/NOBLE/ JACOR/NOBLE/
JACOR/NOBLE CITICASTERS CITICASTERS CITICASTERS
COMBINED HISTORICAL PRO FORMA COMBINED PRO COMBINED PRO
PRO FORMA CITICASTERS ADJUSTMENTS FORMA FORMA
----------- ----------- ------------ -------------- --------------
Net revenue............................................ $ 35,828 $ 31,177 $ 67,005 $ 64,591
Broadcast operating expenses........................... 29,115 21,728 $ (330)(i) 49,235 47,125
(1,278)(j)
Depreciation and amortization.......................... 4,353 4,065 3,470(k) 11,888 11,610
Corporate general and administrative expenses.......... 1,338 1,053 330(i) 1,879 1,801
(842)(l)
----------- ----------- ------------ -------------- --------------
Operating income................................... 1,022 4,331 (1,350) 4,003 4,055
Interest expense....................................... (3,625) (3,734) (7,750)(m) (15,109) (15,109)
Interest and investment income......................... 55 55 330
Other income (expense), net............................ 228 (1,522) 1,489(t) 195 497
----------- ----------- ------------ -------------- --------------
Income (loss) before income taxes and extraordinary
items............................................ (2,375) (870) (7,611) (10,856) (10,227)
Income tax expense..................................... (52) 300 2,090(n) 2,338 2,930
----------- ----------- ------------ -------------- --------------
Income (loss) before extraordinary items........... $ (2,427) $ (570) $ (5,521) $ (8,518) $ (7,297)
----------- ----------- ------------ -------------- --------------
----------- ----------- ------------ -------------- --------------
Income (loss) per common share..................... $ (0.13) $ (0.29) $ (0.24)
----------- -------------- --------------
----------- -------------- --------------
Number of common shares used in per share
computations......................................... 18,183 29,433(o) 30,848
----------- -------------- --------------
----------- -------------- --------------
See Notes to Unaudited Pro Forma Financial Information
28
JACOR COMMUNICATIONS, INC.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
(IN THOUSANDS)
AS OF MARCH 31, 1996
------------------------------------------------------------
JACOR/NOBLE
HISTORICAL HISTORICAL NOBLE PRO FORMA COMBINED PRO
JACOR NOBLE ADJUSTMENTS FORMA
---------- ---------- ----------------- --------------
ASSETS
Current assets:
Cash....................................... $ 5,889 $ 592 $ 6,481
Accounts receivable........................ 25,301 3,239 28,540
Broadcast program rights...................
Prepaid expenses and other current
assets................................... 8,460 3,377 11,837
---------- ---------- --------------
Total current assets................... 39,650 7,208 46,858
Property and equipment......................... 39,214 4,670 $ 4,980(u) 48,864
Intangible assets.............................. 165,282 49,965 99,009(u) 314,256
Deferred charges and other assets.............. 109,102 1,289 (54,275)(u) 16,116
(40,000)(v)
---------- ---------- -------- --------------
Total assets........................... $ 353,248 $ 63,132 $ 9,714 $426,094
---------- ---------- -------- --------------
---------- ---------- -------- --------------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable, accrued liabilities and
other current liabilities................ $ 14,601 $ 11,493 $ 26,094
Current portion of Long-term debt.......... 40,000 $(40,000)(v)
---------- ---------- -------- --------------
Total current liabilities.............. 14,601 51,493 (40,000) 26,094
Long-term debt, net of current maturities...... 183,500 15,125(v) 198,625
Other liabilities.............................. 14,772 18,228 28,000 (u)(w 61,000
Shareholders' equity:
Common stock............................... 1,824 1,824
Additional paid-in capital................. 117,102 49,791 (49,791)(x) 117,102
Common stock warrants...................... 388 388
Retained earnings.......................... 21,061 (56,380) 56,380(x) 21,061
---------- ---------- -------- --------------
Total shareholders' equity............. 140,375 (6,589) 6,589 140,375
---------- ---------- -------- --------------
Total liabilities and shareholders'
equity............................... $ 353,248 $ 63,132 $ 9,714 $426,094
---------- ---------- -------- --------------
---------- ---------- -------- --------------
See Notes to Unaudited Pro Forma Financial Information
29
JACOR COMMUNICATIONS, INC.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
(IN THOUSANDS)
AS OF MARCH 31, 1996
------------------------------------------------------------------------------
JACOR/NOBLE HISTORICAL CITICASTERS PRO JACOR/NOBLE/CITICASTERS
COMBINED PRO FORMA CITICASTERS FORMA ADJUSTMENTS COMBINED PRO FORMA
------------------ ----------- ----------------- -----------------------
ASSETS
Current Assets:
Cash................................ $ 6,481 $ 6,238 $ 35,300(z) $ 48,019
Accounts receivable................. 28,540 27,835 56,375
Broadcast program rights............ 4,596 4,596
Prepaid expenses and other current
assets............................ 11,837 2,687 14,524
-------- ----------- -------- -----------
Total current assets............ 46,858 41,356 35,300 123,514
Broadcast program rights, less current
portion............................... 2,406 2,406
Property and equipment.................. 48,864 37,159 9,719(z) 95,742
Intangible assets....................... 314,256 331,258 681,015(z) 1,323,229
(3,300)(aa)
Deferred charges and other assets....... 16,116 14,549 30,665
-------- ----------- -------- -----------
Total assets.................... $426,094 $ 426,728 $722,734 $1,575,556
-------- ----------- -------- -----------
-------- ----------- -------- -----------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable, accrued
liabilities and other current
liabilities....................... $ 26,094 $ 12,983 $ 39,077
Broadcast program right fees
payable........................... 4,645 4,645
-------- ----------- -----------
Total current liabilities....... 26,094 17,628 43,722
Broadcast program right fees payable,
less current portion.................. 2,212 2,212
Long-term debt, net of current
maturities............................ 198,625 148,532 $277,843(y) 625,000
LYONs................................... 100,000(y) 100,000
Other liabilities....................... 61,000 99,022 151,000(z) 311,022
Shareholders' equity:
Common stock........................ 1,824 200 (200)(x) 2,949
1,125(bb)
Additional paid-in capital.......... 117,102 82,948 (82,948)(x) 418,602
301,500(bb)
Common stock warrants............... 388 53,900(cc) 54,288
Retained earnings................... 21,061 76,186 (76,186)(x) 17,761
(3,300)(aa)
-------- ----------- -------- -----------
Total shareholders' equity...... 140,375 159,334 193,891 493,600
-------- ----------- -------- -----------
Total liabilities and
shareholders' equity.......... $426,094 $ 426,728 $722,734 $1,575,556
-------- ----------- -------- -----------
-------- ----------- -------- -----------
See Notes to Unaudited Pro Forma Financial Information
30
NOTES TO UNAUDITED PRO FORMA FINANCIAL INFORMATION
(DOLLARS IN THOUSANDS)
(a) These adjustments reflect additional revenues and expenses for Jacor's
acquisitions of radio stations WDUV-FM and WBRD-AM in Tampa Bay and WJBT-FM,
WSOL-FM, and WZAZ-AM in Jacksonville, which were completed at various dates
in 1995, net of the elimination of 1995 revenues and expenses for radio
stations WMYU-FM and WWST-FM in Knoxville, which were sold in February 1996.
(b) These adjustments reflect additional revenues and expenses for Noble's
acquisition of radio stations WRVF-FM (formerly WLQR-FM) and WSPD-AM in
Toledo, and the elimination of revenues and expenses for the sale of radio
stations KBEQ-FM and KBEQ-AM in Kansas City, and other miscellaneous
non-recurring expenses related to dispositions of properties in 1995. The
acquisitions were completed in August 1995 and the dispositions were
completed in March 1995.
(c) The adjustment reflects the additional depreciation and amortization expense
resulting from the allocation of Jacor's purchase price to the assets
acquired including an increase in property and equipment and identifiable
intangible assets, to their estimated fair market values and the recording
of goodwill associated with the acquisition of Noble. See Note (u). Goodwill
is amortized over 40 years.
(d) The adjustment represents $1,513 of corporate overhead savings for the
elimination of redundant management costs and other expenses resulting from
the combination of the Jacor and Noble entities, net of $125 additional
corporate expenses associated with the purchase of the Toledo stations.
(e) The adjustment represents additional interest expense associated with
Jacor's borrowings under the Existing Credit Facility to finance the Noble
acquisition and refinance existing outstanding borrowings. The assumed
interest rate is 7.3%, which represents the current rate as of May 1996 on
outstanding borrowings.
(f) The adjustment reflects the elimination of the gain on the sale of radio
stations KBEQ-FM and AM in Kansas City, and WSSH-AM in Boston, which were
sold in March 1995 and January 1995, respectively.
(g) To provide for the tax effect of pro forma adjustments using an estimated
statutory rate of 40%. The Noble pro forma adjustments include
non-deductible amortization of goodwill estimated to be approximately $1,300
for the year ended December 31, 1995 and $325 for the three months ended
March 31, 1996.
(h) The adjustments represent additional revenue and expenses associated with
Citicasters June 1995 acquisition of KKCW-FM in Portland and the January
1996 acquisition of WHOK-FM, WLLD-FM, and WLOH-AM in Columbus, including
adjustments to investment income related to cash expended in the
acquisitions and miscellaneous non-recurring costs.
(i) Adjustments to reclassify miscellaneous broadcast operating expenses to
conform with Jacor's presentation.
(j) The adjustments reflect $5,110 and $1,278 of cost savings for the year ended
December 31, 1995 and the three months ended March 31, 1996, respectively,
resulting from the elimination of redundant broadcast operating expenses
arising from the operation of multiple stations in certain markets. Such pro
forma cost savings are expected to be as follows:
THREE MONTHS
YEAR ENDED ENDED
DECEMBER 31, 1995 MARCH 31, 1996
----------------- ---------------
Programming and promotion................................. $ 2,220 $ 555
News...................................................... 970 243
Technical and engineering................................. 360 90
General and administrative................................ 1,560 390
------ ------
$ 5,110 $ 1,278
------ ------
------ ------
31
NOTES TO UNAUDITED PRO FORMA FINANCIAL INFORMATION
(DOLLARS IN THOUSANDS)--(CONTINUED)
(k) The adjustment reflects the additional depreciation and amortization expense
resulting from the allocation of Jacor's purchase price to the assets
acquired including an increase in property and equipment and identifiable
intangible assets to their estimated fair market values and the recording of
goodwill associated with the acquisition of Citicasters. See Note (z).
Goodwill is amortized over 40 years.
(l) The adjustments represent $3,368 and $842 of corporate overhead savings for
the year ended December 31, 1995 and the three months ended March 31, 1996,
respectively, for the elimination of redundant management costs and other
expenses resulting from the combination with Citicasters.
(m) Represents the adjustment to interest expense associated with the Notes, the
Citicasters Notes, the LYONs and borrowings under the New Credit Facility
with an assumed blended rate of 8.336%. The adjustment reflects additional
interest expense on borrowings necessary to complete the Merger, and to
refinance outstanding borrowings under the Existing Credit Facility incurred
in connection with the Noble Acquisition. A change of .125% in interest
rates would result in a change in interest expense and income (loss) before
extraordinary items of approximately $900 and $540, respectively. See Note
(y) for composition of borrowings.
(n) To provide for the tax effect of pro forma adjustments using an estimated
statutory rate of 40%. The Citicasters pro forma adjustments include
non-deductible amortization of goodwill estimated to be approximately $9,540
for the year ended December 31, 1995 and $2,385 for three months ended March
31, 1996.
(o) The pro forma weighted average shares outstanding includes all shares of
Common Stock outstanding prior to the 1996 Stock Offering and shares to be
issued in the 1996 Stock Offering. The pro forma weighted average shares of
Jacor do not reflect any options and warrants outstanding prior to the 1996
Stock Offering or warrants to be issued to the Citicasters shareholders to
consummate the Merger, as they are antidilutive. The LYONs are not common
stock equivalents and are therefore, excluded from the computation.
(p) These adjustments reflect additional revenues and expenses for Jacor's
February 1996 acquisition of Noble's operating assets in San Diego, net of
the elimination of revenues and expenses for radio stations WMYU-FM and
WWST-FM in Knoxville, which were sold in February 1996.
(q) The adjustment reflects the elimination of the gain on the sale of radio
stations WMYU-FM and WWST-FM in Knoxville, which were sold in February 1996
for $6,500.
(r) These adjustments represent the elimination of revenues, operating expenses
and the related gain from the sale of the San Diego operating assets in
February 1996. See note (u).
(s) The adjustment represents corporate overhead savings from the elimination of
redundant management costs and other expenses resulting from the combination
of the Jacor and Noble entities.
(t) The adjustment represents the elimination of non-recurring expenses directly
associated with the sale of Citicasters to Jacor.
32
NOTES TO UNAUDITED PRO FORMA FINANCIAL INFORMATION
(DOLLARS IN THOUSANDS)--(CONTINUED)
(u) The adjustment represents the allocation of the remaining purchase price of
Noble and the portion of the Noble Acquisition already funded, including the
Noble warrant in the amount of $54,275, to the estimated fair value of the
assets acquired and liabilities assumed, and the recording of goodwill
associated with the acquisition. In February 1996, Jacor completed the
acquisition of Noble's operating assets in San Diego and certain assets
related to the Mexican properties for $50,800 and recorded the transaction
as a purchase.
ESTIMATED FAIR
MARKET VALUE
--------------
Property and equipment........................................................ $ 9,650
Intangible assets............................................................. 148,974
Cash.......................................................................... 592
Accounts receivable........................................................... 3,239
Prepaid expenses and other current assets..................................... 3,377
Deferred charges and other assets............................................. 1,289
Accounts payable, accrued liabilities and other current liabilities........... (11,493)
Other liabilities............................................................. (46,228)
--------------
$ 109,400
--------------
--------------
(v) The adjustment represents the net additional borrowings to complete the
Noble Acquisition as follows:
Historical Jacor debt.......................................... $ 183,500
Historical Noble debt.......................................... 40,000
Loan receivable from Noble..................................... (40,000)
Pro forma adjustment........................................... 15,125
-----------
Assumed borrowings after Noble Acquisition..................... $ 198,625
-----------
-----------
(w) The adjustment represents the additional deferred tax liability associated
with the difference between the book and tax basis of assets and
liabilities, excluding goodwill, after the allocation of the purchase price.
(x) The adjustment reflects the elimination of historical stockholders' equity,
as the Noble Acquisition will be accounted for as a purchase.
(y) The pro forma adjustment represents the net additional borrowings required
to complete the Merger as follows:
Historical Citicasters debt....................................... $ 148,532
Jacor/Noble pro forma debt........................................ 198,625
Pro forma adjustments, including a $2,468 fair market value
adjustment for Citicasters debt................................. 377,843
---------
Assumed borrowings after Acquisitions............................. $ 725,000
---------
---------
The assumed borrowings after the Acquisitions are as follows:
Borrowings under the New Credit Facility.......................... $ 400,000
Issuance of the LYONs............................................. 100,000
Issuance of the Notes............................................. 100,000
Citicasters Notes................................................. 125,000
---------
$ 725,000
---------
---------
33
NOTES TO UNAUDITED PRO FORMA FINANCIAL INFORMATION
(DOLLARS IN THOUSANDS)--(CONTINUED)
(z) The adjustments represent the allocation of the purchase price of
Citicasters to the estimated fair value of the assets acquired and
liabilities assumed, and the recording of goodwill associated with the
Merger as follows:
ESTIMATED FAIR
MARKET VALUE
--------------
Property and equipment........................................................ $ 46,878
Intangible assets............................................................. 1,012,273
Cash.......................................................................... 6,238
Accounts receivable........................................................... 27,835
Broadcast program rights...................................................... 7,002
Prepaid expenses and other current assets..................................... 2,687
Deferred charges and other assets............................................. 14,549
Accounts payable, accrued liabilities and other current liabilities........... (12,983)
Broadcast program rights fees payable......................................... (6,857)
Other liabilities............................................................. (250,022)
Long-term debt................................................................ (151,000)
--------------
$ 696,600
--------------
--------------
The purchase price is summarized as follows:
Pro forma borrowings........................................... $ 375,375
Merger Warrants issued......................................... 53,900
Common Stock issued............................................ 302,625
Excess cash.................................................... (35,300)
-----------
$ 696,600
-----------
-----------
(aa) Adjustment to write-off deferred financing costs for the Existing Credit
Facility anticipated to be refinanced in connection with the Merger.
(bb) Adjustment represents assumed proceeds of $315,000 from the 1996 Stock
Offering, net of offering costs estimated to be $12,375.
(cc) Adjustment represents the value assigned to the Merger Warrants to be
issued to Citicasters shareholders in connection with the consummation of
the Merger, which Merger Warrants will be exercisable for 4,400,000 shares
of Common Stock in the aggregate. The value was determined assuming that the
exercise price for each full share of Common Stock issued upon exercise of
Merger Warrants is $28 per share.
34
SELECTED HISTORICAL FINANCIAL DATA
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
JACOR
The selected consolidated financial data for Jacor presented below for, and
as of the end of each of the years in the five-year period ended December 31,
1995, is derived from Jacor's Consolidated Financial Statements which have been
audited by Coopers & Lybrand L.L.P., independent accountants. The consolidated
financial statements at December 31, 1994 and 1995 and for each of the three
years in the period ended December 31, 1995 and the auditors' report thereon are
included elsewhere in this Prospectus. The selected financial data as of March
31, 1996 and for the three months ended March 31, 1995 and 1996 are unaudited.
In opinion of Jacor's management, the unaudited financial statements from which
such data have been derived include all adjustments (consisting of only normal,
recurring adjustments) which are necessary for a fair presentation of results of
operations for such periods. This selected consolidated financial data should be
read in conjunction with the "Unaudited Pro Forma Financial Information."
Comparability of Jacor's historical consolidated financial data has been
significantly impacted by acquisitions, dispositions and the recapitalization
and refinancing completed in the first quarter of 1993.
THREE MONTHS ENDED
YEAR ENDED DECEMBER 31, MARCH 31,
----------------------------------------------------- -----------------------
1991 1992 1993 1994 1995 1995 1996
--------- --------- --------- --------- --------- --------- ------------
OPERATING STATEMENT DATA:(1)
Net revenue........................ $ 64,238 $ 70,506 $ 89,932 $ 107,010 $ 118,891 $ 24,016 $ 30,074
Broadcast operating expenses....... 48,206 55,782 69,520 80,468 87,290 19,960 23,871
--------- --------- --------- --------- --------- --------- ------------
Station operating income excluding
depreciation and amortization.... 16,032 14,724 20,412 26,542 31,601 4,056 6,203
Depreciation and amortization...... 7,288 6,399 10,223 9,698 9,483 2,112 2,619
Reduction in carrying value of
assets to net realizable value... 8,600
Corporate general and
administrative expenses.......... 2,682 2,926 3,564 3,361 3,501 884 1,139
--------- --------- --------- --------- --------- --------- ------------
Operating income (loss)............ 6,062 (3,201) 6,625 13,483 18,617 1,060 2,445
Net interest income (expense)...... (16,226) (13,443) (2,476) 684 (184) 205 (1,884)
Gain on sale of radio stations..... 13,014 2,539
Other non-operating expenses,
net.............................. (302) (7,057) (11) (2) (168)
--------- --------- --------- --------- --------- --------- ------------
Income (loss) from continuing
operations before income tax and
extraordinary item............... $ 2,548 $ (23,701) $ 4,138 $ 14,165 $ 18,265 $ 1,265 $ 3,101
--------- --------- --------- --------- --------- --------- ------------
--------- --------- --------- --------- --------- --------- ------------
Income (loss) from continuing
operations after income taxes but
before extraordinary items and
the cumulative effect of
accounting changes............... $ (364) $ (23,701) $ 1,438 $ 7,852 $ 10,965 $ 751 $ 1,842
--------- --------- --------- --------- --------- --------- ------------
--------- --------- --------- --------- --------- --------- ------------
Net income (loss).................. $ 1,468 $ (23,701) $ 1,438 $ 7,852 $ 10,965 $ 751 $ 891(2)
--------- --------- --------- --------- --------- --------- ------------
--------- --------- --------- --------- --------- --------- ------------
Net income (loss) per common
share:(3)
primary and fully diluted...... $ 2.32 $ (61.50) $ 0.10 $ 0.37 $ 0.52 $ 0.04 $ 0.04
--------- --------- --------- --------- --------- --------- ------------
--------- --------- --------- --------- --------- --------- ------------
Weighted average shares
outstanding:(3)
Primary and fully diluted...... 406 381 14,505 21,409 20,913 21,347 20,503
--------- --------- --------- --------- --------- --------- ------------
--------- --------- --------- --------- --------- --------- ------------
OTHER FINANCIAL DATA:(1)
Broadcast cash flow(4)............. $ 16,032 $ 14,724 $ 20,412 $ 26,542 $ 31,601 $ 4,056 $ 6,203
--------- --------- --------- --------- --------- --------- ------------
--------- --------- --------- --------- --------- --------- ------------
Broadcast cash flow margin(5)...... 25.0% 20.9% 22.7% 24.8% 26.6% 16.9% 20.6%
EBITDA(4).......................... $ 13,350 $ 11,798 $ 16,848 $ 23,181 $ 28,100 $ 3,172 $ 5,064
Capital expenditures............... 1,181 915 1,495 2,221 4,969 707 3,437
Ratio of earnings to fixed
charges(6)....................... 1.1x -- 1.9x 6.0x 5.7x 2.2x
AS OF DECEMBER 31, AS OF
----------------------------------------------------- MARCH 31,
1991 1992(7) 1993 1994 1995 1996
--------- --------- --------- --------- --------- ------------
BALANCE SHEET DATA:(1)
Working capital (deficit).......... $(128,455) $(140,547) $ 38,659 $ 44,637 $ 24,436 $ 25,049
Intangible assets (net of
accumulated amortization)........ 81,738 70,038 84,991 89,543 127,158 165,282
Total assets....................... 125,487 122,000 159,909 173,579 208,839 353,248
Total long-term debt (including
current portion)................. 137,667 140,542 45,500 183,500
Common stock purchase warrants..... 2,342 1,383 390 390 388 388
Shareholders' equity (deficit)..... (27,383) (50,840) 140,413 149,044 139,073 140,374
35
- ------------------------------
(1) The comparability of the information reflected in this selected financial
data is affected by Jacor's purchase of radio station KBPI-FM (formerly
KAZY-FM), in Denver (July 1993); the purchase and interim operation of
radio station WOFX-FM (formerly WPPT-FM) under a local marketing agreement
in Cincinnati (April 1994); the purchase of radio stations WJBT-FM,
WZAZ-AM, and WSOL-FM (formerly WHJX-FM) in Jacksonville (August 1995); the
purchase of radio stations WDUV-FM and WBRD-AM in Tampa (August 1995); the
purchase of Noble's San Diego operating assets (February 1996); the sale of
radio stations WMJI-FM, in Cleveland and WYHY(FM), in Nashville (January
1991), the sale of Telesat Cable TV (May 1994), the January 11, 1993
recapitalization plan, that substantially modified Jacor's debt and capital
structure (such recapitalization was accounted for as if it had been
completed January 1, 1993) and the March 1993 refinancing. For information
related to acquisitions in 1993, 1994 and 1995 see Notes 2 and 3 of Notes
to Consolidated Financial Statements. For information related to the
disposition during 1994, see Note 4 of Notes to Consolidated Financial
Statements.
(2) Net income for the three months ended March 31, 1996 includes, as an
extraordinary item, a loss of approximately $1.0 million for the write-off
of unamortized costs associated with the 1993 credit agreement which was
replaced in February 1996 by the Existing Credit Facility.
(3) Income (loss) per common share for the two years ended December 31, 1992 is
based on the weighted average number of shares of Common Stock outstanding
and gives consideration to the dividend requirements of the convertible
preferred stock and accretion of the change in redemption value of certain
common stock warrants. Jacor's stock options and convertible preferred
stock were antidilutive and, therefore, were not included in the
computations. The redeemable common stock warrants were antidilutive for
1992 and were not included in the computations. Such warrants were dilutive
in 1991 using the "equity method" under Emerging Issues Task Force Issue
No. 88-9 and, therefore, the common shares issuable upon conversion were
included in the 1991 computation. Income per share for the three years
ended December 31, 1995 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 periods. Income (loss) per
common share and weighted average shares outstanding for the two years
ended December 31, 1992 are adjusted to reflect the 0.0423618 reverse stock
split in Common Stock effected by the January 1993 recapitalization.
(4) "Broadcast cash flow" means operating income before reduction in carrying
value of assets, depreciation and amortization and corporate general and
administrative expenses. "EBITDA" means operating income before reduction
in carrying value of assets, depreciation and amortization. Broadcast cash
flow and EBITDA should not be considered in isolation from, or as a
substitute for, operating income, net income or cash flow and other
consolidated income or cash flow statement data computed in accordance with
generally accepted accounting principles or as a measure of a company's
profitability or liquidity. Although this measure of performance is not
calculated in accordance with generally accepted accounting principles, it
is widely used in the broadcasting industry as a measure of a company's
operating performance because it assists in comparing station performance
on a consistent basis across companies without regard to depreciation and
amortization, which can vary significantly depending on accounting methods
(particularly where acquisitions are involved) or non-operating factors
such as historical cost bases. Broadcast cash flow also excludes the effect
of corporate general and administrative expenses, which generally do not
relate directly to station performance.
(5) Broadcast cash flow margin equals broadcast cash flow as a percentage of
net revenue.
(6) For the purpose of computing the ratio of earnings to fixed charges as
prescribed by the rules and regulations of the Securities and Exchange
Commission, earnings represent pretax income from continuing operations
plus fixed charges, less interest capitalized. Fixed charges represent
interest (including amounts capitalized), the portion of rent expense
deemed to be interest and amortization of deferred financing costs. In 1992
fixed charges exceeded earnings (as defined) by approximately $23.7
million. On a pro forma basis for the year ended December 31, 1995 and the
three months ended March 31, 1996, the ratio of earnings to fixed charges
resulted in a coverage deficiency of $5.9 million and $10.5 million,
respectively.
(7) Pro forma amounts as of December 31, 1992, to give effect to the January 11,
1993 recapitalization plan that substantially modified Jacor's debt and
capital structure (in 000s):
Working capital................................................................ $15,933
Intangible assets (net of accumulated amortization)............................ 82,857
Total assets................................................................... 142,085
Long-term debt................................................................. 64,178
Common stock purchase warrants................................................. 403
Shareholders' equity........................................................... 50,890
36
CITICASTERS
The selected consolidated financial data for Citicasters presented below
for, and as of the end of each of the years in the five-year period ended
December 31, 1995, is derived from Citicasters' Consolidated Financial
Statements which have been audited by Ernst & Young LLP, independent
accountants. The consolidated financial statements at December 31, 1994 and 1995
and for each of the three years in the period ended December 31, 1995 and the
auditors' report thereon are included elsewhere in this Prospectus. The selected
financial data as of March 31, 1996 and for the three months ended March 31,
1995 and 1996 are unaudited, but Citicasters believes that all adjustments
(consisting of only normal, recurring adjustments) necessary for a fair
presentation have been made. This selected consolidated financial data should be
read in conjunction with the "Unaudited Pro Forma Financial Information."
Comparability of historical consolidated financial data has been significantly
impacted by the dispositions of four television stations in 1994, the adoption
of "fresh-start reporting" by Citicasters in December 1993, the writedown of
intangible assets to estimated fair values in 1992 and the sale of its
entertainment business in 1991.
PREDECESSOR(1) CITICASTERS
----------------------------------- -------------------- THREE MONTHS
YEAR ENDED DECEMBER 31, ENDED MARCH 31,
--------------------------------------------------------- ----------------------
1991 1992 1993 1994 1995 1995 1996
--------- ----------- ----------- --------- --------- --------- -----------
OPERATING STATEMENT DATA:(2)
Net revenue..................... $ 201,556 $ 210,821 $ 205,168 $ 197,043 $ 136,414 $ 29,045 $ 31,177
Broadcast operating expense..... 136,629 142,861 133,070 117,718 80,929 19,879 21,728
--------- ----------- ----------- --------- --------- --------- -----------
Station operating income
excluding depreciation and
amortization.................. 64,927 67,960 72,098 79,325 55,485 9,166 9,449
Depreciation and amortization... 48,219 47,617 28,119 22,946 14,635 3,319 4,065
Reduction in carrying value of
assets to net realizable
value......................... 658,314(3)
Corporate general and
administrative expenses....... 4,367 4,091 3,996 4,796 4,303 1,123 1,053
--------- ----------- ----------- --------- --------- --------- -----------
Operating income (loss)......... 12,341 (642,062) 39,983 51,583 36,547 4,724 4,331
Net interest income (expense)... (89,845) (69,826) (64,942) (31,979) (13,854) (3,513) (3,734)
Minority interest............... (28,822) (30,478) (26,776)
Gain on sale of television
stations...................... 95,339
Investment income............... 1,296 553 305 1,216 1,231 680 55
Miscellaneous income (expense),
net........................... 33,133 4,036 (494) 447 (607) 187 (1,522)
Reorganization items............ (14,872)
--------- ----------- ----------- --------- --------- --------- -----------
Income (loss) from continuing
operations before income tax
and extraordinary item........ $ (71,897) $(737,777) $ (66,796) $ 116,606 $ 23,317 $ 2,078 $ (870)
--------- ----------- ----------- --------- --------- --------- -----------
--------- ----------- ----------- --------- --------- --------- -----------
Income (loss) from continuing
operations after income taxes
but before extraordinary items
and the cumulative effect of
accounting changes............ $(32,788) $(613,236) $ (66,796) $ 63,106 $ 14,317 $ 1,278 $ (570)
--------- ----------- ----------- --------- --------- --------- -----------
--------- ----------- ----------- --------- --------- --------- -----------
Net income (loss)............... $ 84,485 $(596,864) $ 341,344(4) $ 63,106 $ 14,317 $ 1,278 $ (570)
--------- ----------- ----------- --------- --------- --------- -----------
--------- ----------- ----------- --------- --------- --------- -----------
Net earnings per share(5)....... $ 2.55 $ 0.68 $ 0.06 $ (0.03)
--------- --------- --------- -----------
--------- --------- --------- -----------
Average common shares(5)........ 24,777 21,017 20,819 21,119
--------- --------- --------- -----------
--------- --------- --------- -----------
OTHER FINANCIAL DATA:(2)
Broadcast cash flow(6).......... $ 64,927 $ 67,960 $ 72,098 $ 79,325 $ 55,485 $ 9,166 $ 9,449
--------- ----------- ----------- --------- --------- --------- -----------
--------- ----------- ----------- --------- --------- --------- -----------
Broadcast cash flow margin(7)... 32.2% 32.2% 35.1% 40.3% 40.7% 31.6% 30.3%
EBITDA(6)....................... $ 60,560 $ 63,869 $ 68,102 $ 74,529 $ 51,182 $ 8,043 $ 8,396
Capital expenditures............ 7,014 6,747 5,967 7,569 11,857 2,591 1,820
PREDECESSOR CITICASTERS
---------------------- ---------------------------------
AS OF
AS OF DECEMBER 31,
--------------------------------------------------------- MARCH 31,
1991 1992 1993(8) 1994 1995 1996
--------- ----------- ----------- --------- --------- -----------
BALANCE SHEET DATA:
Working capital (deficit)....... $ (52,520) $(611,634) $ 1,485 $ 47,518 $ 21,929 $ 23,728
Intangible assets (net of
accumulated amortization)..... 1,290,294 539,634 574,878 274,695 312,791 331,258
Total assets.................... 1,475,929 713,830 719,569 403,492 416,346 426,728
Long-term debt (including
current portion).............. 692,636 634,777 432,568 122,291 132,481 148,532
Shareholders' equity
(deficit)..................... 257,835 (339,029) 138,588 150,937 159,692 159,334
37
- ------------------------------
(1) Prior to its emergence from Chapter 11 bankruptcy in December 1993,
Citicasters was known as Great American Communications Company (the
"Predecessor"). As a result of the application of "fresh-start reporting,"
the selected financial data for periods prior to December 31, 1993 are not
comparable to periods subsequent to such date.
(2) The 1995 acquisition of four FM stations (KKCW, WTBT, WHOK and WLLD) and
WLOH-AM increased broadcast cash flow by approximately 2%. The 1994 sale of
four television stations (KTSP, KSAZ, WGHP and WDAF) significantly affects
comparison of net revenues, operating expenses and broadcast cash flow for
1994 as compared to 1993 and 1995. The purchase and sale of radio stations
in 1994 did not effect the comparison of broadcast cash flow, because the
cash flow of the stations sold was approximately equal to the cash flow of
the stations purchased.
(3) The recorded amount of intangible assets as of December 31, 1992 was reduced
by $658.3 million to reflect the carrying value of the broadcasting assets
at estimated fair market value at that time.
(4) Net income for the year ended December 31, 1993 includes, as extraordinary
items, a gain of $414.5 million relating to debt discharged in the
reorganization and a loss of $6.3 million from the retirement of debt prior
to the reorganization. Net loss for 1992 includes a $10.7 million gain from
discontinued operations and a $5.7 million extraordinary gain from early
extinguishment of debt. Net income from 1991 includes $39.9 million from
discontinued operations and $77.4 million extraordinary gain from early
extinguishment of debt.
(5) Per share data are not presented for the Predecessor due to the general lack
of comparability as a result of the reorganization.
(6) "Broadcast cash flow" means operating income before reduction in carrying
value of assets, depreciation and amortization and corporate general and
administrative expenses. "EBITDA" means operating income before reduction in
carrying value of assets, depreciation and amortization. Broadcast cash flow
and EBITDA should not be considered in isolation from, or as a substitute
for, operating income, net income or cash flow and other consolidated income
or cash flow statement data computed in accordance with generally accepted
accounting principles or as a measure of a company's profitability or
liquidity. Although this measure of performance is not calculated in
accordance with generally accepted accounting principles, it is widely used
in the broadcasting industry as a measure of a company's operating
performance because it assists in comparing station performance on a
consistent basis across companies without regard to depreciation and
amortization, which can vary significantly depending on accounting methods
(particularly where acquisitions are involved) or non-operating factors such
as historical cost bases. Broadcast cash flow also excludes the effect of
corporate general and administrative expenses, which generally do not relate
directly to station performance.
(7) Broadcast cash flow margin equals broadcast cash flow as a percentage of net
revenue.
(8) Balance sheet data at December 31, 1993 reflects the adoption of
"fresh-start reporting" as discussed in more detail in Note B to
Citicasters' Consolidated Financial Statements.
38
NOBLE
The following data presented below for, and as of the end of each of the
years in the five-year period ended December 31, 1995 has been derived from
Noble's Consolidated Financial Statements audited by Price Waterhouse LLP,
independent accountants. Consolidated balance sheets at December 25, 1994 and
December 31, 1995 and the related consolidated statements of operations and of
cash flows for each of the three years in the period ended December 31, 1995 and
notes thereto appear elsewhere in this Prospectus. The report of Price
Waterhouse LLP which also appears herein contains an explanatory paragraph
describing Jacor's agreement to purchase Noble as described in Note 2 to Noble's
Consolidated Financial Statements. The following data as of March 31, 1996 and
for the three month periods ended March 26, 1995 and March 31, 1996 are
unaudited. In the opinion of Noble's management, the unaudited statements from
which such data have been derived include all adjustments (consisting only of
normal, recurring adjustments) which are necessary for a fair presentation of
results of operations for such periods. The comparability of the consolidated
financial data has been significantly impacted by acquisitions, dispositions,
Noble's August 1995 restructuring and its December 1991 restructuring.
YEAR ENDED THREE MONTHS ENDED
--------------------------------------------------------------------- MARCH
DECEMBER 28, DECEMBER 27, DECEMBER 26, DECEMBER 25, DECEMBER 31, --------------------------
1991 1992 1993 1994 1995 1995 1996
------------ ------------ ------------ ------------ ------------- ------------- -----------
OPERATING STATEMENT DATA:(1)
Net revenue............... $ 58,283 $ 55,368 $ 47,509 $ 49,602 $ 41,902 $ 9,006 $ 6,058
Broadcast operating
expense................. 44,191 43,565 36,944 37,892 31,445 7,638 5,626
------------ ------------ ------------ ------------ ------------- ------------- -----------
Station operating income
excluding depreciation
and amortization........ 14,092 11,803 10,565 11,710 10,457 1,368 432
Depreciation and
amortization............ 10,005 8,305 6,916 6,311 4,107 1,027 1,079
Reduction in carrying
value of assets to net
realizable value........ 10,367(2) 7,804(2)
Corporate general and
administrative
expenses................ 3,013 2,483 2,702 2,621 2,285 602 577
------------ ------------ ------------ ------------ ------------- ------------- -----------
Operating income (loss)... 1,074 (9,352) 947 (5,026) 4,065 (261) (1,224)
Net interest income
(expense)............... (25,063) (10,126) (7,602) (10,976) (9,913) (2,549) (1,875)
Net gain (loss) on sale of
radio stations.......... (8,403) 7,909 2,619 2,619 37,669
Other income (expense).... (7,588) (1,905)
------------ ------------ ------------ ------------ ------------- ------------- -----------
Income (loss) before
income tax,
extraordinary item and
cumulative effect of
change in accounting
principle............... $ (31,577) $ (29,786) $ 1,254 $ (16,002) $ (3,229) $ (191) $ 34,570
------------ ------------ ------------ ------------ ------------- ------------- -----------
------------ ------------ ------------ ------------ ------------- ------------- -----------
Income (loss) from
continuing operations
after income taxes but
before extraordinary
items and the cumulative
effect of accounting
changes................. $ (31,665) $ (29,874) $ 876 $ (16,038) $ (3,292) $ (207) $ 19,887
------------ ------------ ------------ ------------ ------------- ------------- -----------
------------ ------------ ------------ ------------ ------------- ------------- -----------
Net income (loss)......... $ (31,665) $ (5,949)(3) $ 13,452(4) $ (16,038) $ 56,853(5) $ (207) $ 10,142(8)
------------ ------------ ------------ ------------ ------------- ------------- -----------
------------ ------------ ------------ ------------ ------------- ------------- -----------
OTHER FINANCIAL DATA:(1)
Broadcast cash flow(6).... $ 14,092 $ 11,803 $ 10,565 $ 11,710 $ 10,457 $ 1,368 $ 432
------------ ------------ ------------ ------------ ------------- ------------- -----------
------------ ------------ ------------ ------------ ------------- ------------- -----------
Broadcast cash flow
margin(7)............... 24.18% 21.32% 22.24% 23.61% 24.96% 15.2% 7.1%
EBITDA(6)................. $ 11,079 $ 9,320 $ 7,863 $ 9,089 $ 8,172 $ 766 $ (145 )
Capital expenditures...... 601 532 3,009 1,124 2,851 532 352
AS OF
--------------------------------------------------------------------- AS OF
DECEMBER 28, DECEMBER 27, DECEMBER 26, DECEMBER 25, DECEMBER 31, MARCH 31,
1991 1992 1993 1994 1995 1996
------------ ------------ ------------ ------------ ------------- -----------
BALANCE SHEET DATA:(1)
Working capital
(deficit)............... $ 8,565 $ 2,265 $ 1,002 $ (186,133) $ (479) $ (44,285)
Intangible assets (net of
accumulated
amortization)(2)........ 165,052 125,770 101,555 89,849 50,730 49,965
Total assets.............. 207,272 156,740 128,055 116,023 77,227 63,132
Long-term debt (including
current portion)........ 272,572 231,980 186,975 186,886 81,611 --
Stockholders' equity
(deficit)............... (114,306) (120,124) (106,672) (122,710) (22,291) (6,589)
39
- ------------------------------
(1) The comparability of the information reflected in this selected financial
data is affected by Noble's sale of the operating assets in San Diego
(February 1996); the purchase of radio stations WSPD-AM and WRVF-FM in
Toledo (August 1995); the sale of radio stations KBEQ-FM/AM in Kansas City
(March 1995); the sale of radio stations KMJQ-FM and KYOK-AM in Houston
(December 1994); the sale of radio stations WBAB-FM and WGBB-AM in New York
(March 1993); the sale of WSSH-FM in Boston (April 1993); the purchase of
radio stations KATZ-AM and KNJZ-FM in St. Louis (May 1993); the August 1995
restructuring; and the December 1991 restructuring.
(2) The recorded amount of intangible assets was reduced by $10.4 million as of
December 27, 1992 and $7.8 million as of December 25, 1994 to reflect the
carrying value of the broadcasting assets at their estimated fair market
values.
(3) Net loss for the year ended December 27, 1992 includes, as an extraordinary
item, a gain of $23.9 million relating to debt discharged in the December
1991 restructuring.
(4) Net income for the year ended December 26, 1993 includes, as an
extraordinary item, a $12.2 million gain on forgiveness of debt, and a
$354.0 thousand cumulative effect of a change in accounting principle.
(5) Net income for the year ended December 31, 1995 includes, as an
extraordinary item, a $60.1 million gain resulting from the extinguishment
of debt in association with the August 1995 restructuring.
(6) "Broadcast cash flow" means operating income before reduction in carrying
value of assets, depreciation and amortization and corporate general and
administrative expenses. "EBITDA" means operating income before reduction in
carrying value of assets, depreciation and amortization. Broadcast cash flow
and EBITDA should not be considered in isolation from, or as a substitute
for, operating income, net income or cash flow and other consolidated income
or cash flow statement data computed in accordance with generally accepted
accounting principles or as a measure of a company's profitability or
liquidity. Although this measure of performance is not calculated in
accordance with generally accepted accounting principles, it is widely used
in the broadcasting industry as a measure of a company's operating
performance because it assists in comparing station performance on a
consistent basis across companies without regard to depreciation and
amortization, which can vary significantly depending on accounting methods
(particularly where acquisitions are involved) or non-operating factors such
as historical cost bases. Broadcast cash flow also excludes the effect of
corporate general and administrative expenses, which generally do not relate
directly to station performance.
(7) Broadcast cash flow margin equals broadcast cash flow as a percentage of net
revenue.
(8) Net income for the three months ended March 31, 1996 includes, as an
extraordinary item, a $9.7 million loss on the extinguishment of debt in
association with the pending sale of Noble to Jacor and a $37.7 million gain
from the February 1996 sale of Noble's operating assets in San Diego to
Jacor.
40
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
GENERAL
The performance of a radio station group, such as Jacor, is customarily
measured by its ability to generate broadcast cash flow. The primary source of
Jacor's revenue is the sale of broadcasting time on its radio stations for
advertising. Jacor's significant operating expenses are employee salaries,
sports broadcasting rights fees, programming expenses, advertising and promotion
expenses, rental of premises for studios and transmitting equipment and music
license royalty fees. Jacor works closely with local station management to
implement cost control measures.
Jacor's revenue is affected primarily by the advertising rates Jacor's radio
stations are able to charge. These rates are, in large part, based on a
station's ability to attract audiences in the demographic groups targeted by its
advertisers, as principally measured by Arbitron Metro Area Ratings Surveys.
Most advertising contracts are short-term and run only for a few weeks. Most
of Jacor's revenue is generated from local advertising, which is sold by the
station's sales staff. In 1995, approximately 85% of Jacor's gross revenue was
from local advertising and approximately 15% was from national advertising. A
station's local sales staff solicits advertising, either directly from the local
advertiser or through an advertising agency for the local advertiser. National
advertising sales for most of Jacor's stations are made by Jacor's national
sales managers in conjunction with the efforts of an independent advertising
representative who specializes in national sales and is compensated on a
commission-only basis.
Sports broadcasting and full-service programming features play an integral
part in Jacor's operating strategy. As a result, because of the rights fees and
related costs of broadcasting professional baseball, football and hockey, as
well as the costs related to the full-service programming features of its AM
radio stations, Jacor's broadcast cash flow margins are typically lower than its
competitors'.
Jacor's first calendar quarter historically produces the lowest revenue for
the year, and the second and third quarters historically produce the highest
revenue for the year, due in part to revenue received during the summer months
related to the broadcast of Major League Baseball games. During 1995, however,
Jacor recorded higher broadcast revenue and broadcast operating expenses during
the third and fourth quarters than those recorded during the second quarter due
to the Major League Baseball strike. As a result of the strike, second quarter
revenue and operating expenses were lower. For the entire twelve months of 1995,
the strike did not have a material impact on Jacor's station operating income
(broadcast revenue less broadcast operating expenses).
Jacor's operating results in any period may be affected by the incurrence of
advertising and promotion expenses that do not produce commensurate revenue in
the period in which the expenses are incurred. As a result of Arbitron's
quarterly reporting of ratings, Jacor's ability to realize revenue as a result
of increased advertising and promotional expenses may be delayed for several
months.
The comparability of financial information for the years ended December 31,
1993, 1994 and 1995 is affected by the July 1993 purchase of radio station
KBPI-FM (formerly KAZY-FM) in Denver; the May 1994 sale of Telesat Cable TV; the
June 1995 purchase of radio station WOFX-FM (formerly WPPT-FM) in Cincinnati,
and interim operation of such station from April 1994 to June 1995 under a LMA;
the August 1995 purchases of radio stations WJBT-FM, WZAZ-AM, and WSOL-FM
(formerly WHJX-FM), each located in Jacksonville, and WDUV-FM and WBRD-AM, each
located in Tampa. With these acquisitions, Jacor expects to realize certain cost
savings and increased ratings through format modifications and thereby improve
operating results in these markets.
The acquisitions discussed above and the Acquisitions will increase Jacor's
net revenue, broadcast operating expenses, depreciation and amortization,
corporate general and administrative expenses, and
interest expense. Accordingly, past financial performance should not be
considered a reliable indicator of future performance, and investors should not
use historical trends to anticipate results or trends in future periods.
41
General economic conditions have an impact on Jacor's business and financial
results. From time to time the markets in which Jacor operates experience weak
economic conditions that may negatively affect revenue of Jacor. However,
management believes that this impact will be somewhat softened by Jacor's
diverse geographical presence.
In the following analysis, management discusses the broadcast cash flow of
Jacor. "Broadcast cash flow" means operating income before reduction in carrying
value of assets, depreciation and amortization and corporate general and
administrative expenses. Broadcast cash flow should not be considered in
isolation from, or as a substitute for, operating income, net income or cash
flow and other consolidated income or cash flow statement data computed in
accordance with generally accepted accounting principles or as a measure of a
company's profitability or liquidity. Although this measure of performance is
not calculated in accordance with generally accepted accounting principles, it
is widely used in the broadcasting industry as a measure of a company's
operating performance because it assists in comparing station performance on a
consistent basis across companies without regard to depreciation and
amortization, which can vary significantly depending on accounting methods
(particularly where acquisitions are involved) or non-operating factors such as
historical cost bases. Broadcast cash flow also excludes the effect of corporate
general and administrative expenses, which generally do not relate directly to
station performance.
THE THREE MONTHS ENDED MARCH 31, 1996 COMPARED TO THE THREE MONTHS ENDED MARCH
31, 1995
BROADCAST REVENUE for the first quarter of 1996 was $33.6 million, an
increase of $6.8 million or 25.1% from $26.8 million during the first quarter of
1995. This increase resulted from the revenue generated at those properties
owned or operated during the first quarter of 1996 but not during the comparable
1995 period and, to a lesser extent, an increase in advertising rates.
AGENCY COMMISSIONS for the first quarter of 1996 were $3.5 million, an
increase of $0.7 million or 23.9% from $2.8 million during the first quarter of
1995 due primarily to the increase in broadcast revenue.
BROADCAST OPERATING EXPENSES for the first quarter of 1996 were $23.9
million, an increase of $3.9 million or 19.6% from $20.0 million during the
first quarter of 1995. These expenses increased primarily as a result of
expenses incurred at those properties owned or operated during the first quarter
of 1996 but not during the comparable 1995 period and, to a lesser extent,
increased selling and other payroll costs and programming costs.
DEPRECIATION AND AMORTIZATION for the first quarter of 1996 and 1995 was
$2.6 million and $2.1 million, respectively. The increase from
quarter-to-quarter resulted primarily from the acquisitions made by Jacor during
the second half of 1995.
OPERATING INCOME for the first quarter of 1996 was $2.4 million, an increase
of $1.3 million or 130.6% from $1.1 million during the first quarter of 1995.
INTEREST EXPENSE for the first quarter of 1996 was $2.1 million, an increase
of $2.0 million from $0.1 million for the first quarter of 1995. The increase in
interest expense resulted from the increase in Jacor's outstanding long-term
debt which is primarily related to Jacor's acquisition activity.
THE GAIN ON SALE of radio stations in the first quarter of 1996 resulted
from Jacor's February sale of two FM radio stations in Knoxville.
THE EXTRAORDINARY ITEM in the first quarter of 1996 represented the
write-off of unamortized costs associated with Jacor's 1993 credit agreement
which was replaced in February 1996 by Jacor's Existing Credit Facility.
NET INCOME for the first quarter of 1996 and 1995 was $0.9 and $0.8 million,
respectively.
BROADCAST CASH FLOW for the three months ended March 31, 1996 was $6.2
million, an increase of $2.1 million or 52.9% from the $4.1 million for the
three months ended March 31, 1995. On a "same station" basis, broadcast cash
flow for the first quarter of 1996 was $5.8 million, an increase of $1.6 million
or 39.0% from $4.2 million for the same period in 1995.
42
THE YEAR ENDED 1995 COMPARED TO THE YEAR ENDED 1994
BROADCAST REVENUE for 1995 was $133.1 million, an increase of $13.5 million
or 11.3% from $119.6 million during 1994. 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 1995 but not
during the comparable 1994 period. On a "same station" basis--reflecting results
from stations operated for the entire twelve months of both 1995 and
1994--broadcast revenue for 1995 was $125.3 million, an increase of $8.4 million
or 7.2% from $116.9 million for 1994.
AGENCY COMMISSIONS for 1995 were $14.2 million, an increase of $1.6 million
or 12.6% from $12.6 million during 1994 due to the increase in broadcast
revenue. Agency commissions increased at a greater rate than broadcast revenue
due to a greater proportion of agency sales.
BROADCAST OPERATING EXPENSES for 1995 were $87.3 million, an increase of
$6.8 million or 8.5% from $80.5 million during 1994. These expenses increased as
a result of increased selling and other payroll costs, programming costs and
expenses incurred at those properties owned or operated during 1995 but not
during the comparable 1994 period. On a "same station" basis, broadcast
operating expenses for 1995 were $81.3 million, an increase of $4.2 million or
5.5% from $77.1 million for 1994.
DEPRECIATION AND AMORTIZATION for 1995 and 1994 was $9.5 million and $9.7
million, respectively.
OPERATING INCOME for 1995 was $18.6 million, an increase of $5.1 million or
38.1% from an operating income of $13.5 million for 1994.
INTEREST EXPENSE for 1995 was $1.4 million, an increase of $0.9 million or
170.1% from $0.5 million for 1994. Interest expense increased due to an increase
in outstanding debt that was incurred in connection with acquisitions and stock
repurchases.
NET INCOME for 1995 was $11.0 million, compared to net income of $7.9
million reported by Jacor for 1994. The 1994 period includes income tax expense
of $6.3 million, while the 1995 period includes $7.3 million of income tax
expense.
BROADCAST CASH FLOW for 1995 was $31.6 million, an increase of $5.1 million
or 19.2%, from $26.5 million during 1994. On a "same station" basis, broadcast
cash flow for 1995 was $30.5 million, an increase of $3.1 million or 11.0%, from
$27.4 million for 1994.
THE YEAR ENDED 1994 COMPARED TO THE YEAR ENDED 1993
BROADCAST REVENUE for 1994 was $119.6 million, an increase of $18.9 million
or 18.8% from $100.7 million during 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 1994 but not
during the comparable 1993 period. On a "same station" basis--reflecting results
from stations operated for the entire twelve months of both 1994 and
1993--broadcast revenue for 1994 was $110.7 million, an increase of $11.6
million or 11.6% from $99.1 million for 1993.
AGENCY COMMISSIONS for 1994 were $12.6 million, an increase of $1.8 million
or 16.8% from $10.8 million during 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 1994 were $80.5 million, an increase of
$11.0 million or 15.7% from $69.5 million during 1993. These expenses increased
as a result of expenses incurred at those properties owned or operated during
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 1994 were $72.0 million, an
increase of $4.1 million or 6.1% from $67.9 million for 1993.
DEPRECIATION AND AMORTIZATION for 1994 and 1993 was $9.7 million and $10.2
million, respectively.
OPERATING INCOME for 1994 was $13.5 million, an increase of $6.9 million or
103.5% from an operating income of $6.6 million for 1993.
43
INTEREST EXPENSE for 1994 was $0.5 million, a decrease of $2.2 million or
80.5% from $2.7 million for 1993. Interest expense declined due to the reduction
in outstanding debt, such debt having been retired from the proceeds of Jacor's
November 1993 equity offering.
NET INCOME for 1994 was $7.9 million, compared to net income of $1.4 million
reported by Jacor for 1993. The 1993 period includes income tax expense of $2.7
million, while the 1994 period includes $6.3 million of income tax expense.
BROADCAST CASH FLOW for 1994 was $26.5 million, an increase of $6.1 million
or 29.9%, from $20.4 million during 1993. On a "same station" basis, broadcast
cash flow for 1994 was $26.4 million, an increase of $6.0 million or 29.0%, from
$20.4 million for 1993.
LIQUIDITY AND CAPITAL RESOURCES
Jacor began 1995 with no outstanding debt and $27.0 million in cash and cash
equivalents. During 1995, Jacor used $59.8 million in cash for acquisitions of
radio stations and licenses and for loans made in connection with Jacor's JSAs
and $21.7 million in cash to purchase shares of its Common Stock. These funds
came from cash on hand together with cash provided from operating activities and
draws under Jacor's 1993 credit agreement aggregating $45.5 million.
During 1995, Jacor made capital expenditures of approximately $5.0 million.
Jacor estimates that capital expenditures for 1996 will be approximately $6.0
million which includes approximately $2.5 million to purchase the building
currently housing the offices and studios of its Tampa radio stations and to
complete the relocation of the offices and studios of its Atlanta radio
stations. Jacor estimates that capital expenditures for the properties to be
acquired from Citicasters and Noble would be approximately $4.0 million in the
12-month period following the consummation of the Acquisitions. The actual level
of spending will depend
on a variety of factors, including general economic conditions and the Company's
business. In February 1996, Jacor entered into the Existing Credit Facility
which provided for a $300.0 million reducing revolving facility that reduces on
a quarterly basis commencing March 31, 1997. The credit facility bears interest
at floating rates based on a Eurodollar rate or a bank base rate. See
"Description of Indebtedness."
In connection with the Merger, JCAC anticipates entering into the New Credit
Facility which would provide for availability of $600.0 million pursuant to a
reducing revolving facility and two-term facilities that would reduce on a
semi-annual basis commencing two years from the initial funding date. It is
anticipated that the New Credit Facility would bear interest at floating rates
based on a Eurodollar rate or a bank base rate. Jacor also anticipates that the
New Credit Facility will provide JCAC with additional credit for future
acquisitions as well as working capital and other general corporate purposes. In
addition, the 1996 Stock Offering and the Notes Offering will provide Jacor and
JCAC with gross proceeds of approximately $315.0 million and $100.0 million,
respectively. See "Use of Proceeds" and "Description of Indebtedness."
Jacor currently expects to fund its acquisition of Noble and expenditures
for capital requirements from available cash balances, internally generated
funds and the availability of borrowings under its Existing Credit Facility.
Jacor currently expects to fund the Merger with a combination of funds provided
by this Offering, the 1996 Stock Offering, the Notes Offering and the New Credit
Facility. These funds together with cash generated from operations will be
sufficient to meet the Company's liquidity and capital needs for the foreseeable
future.
As a result of entering into the Existing Credit Facility in the first
quarter of 1996, Jacor will write off approximately $1.6 million of unamortized
cost associated with its 1993 credit agreement. In connection with entering into
the New Credit Facility, Jacor anticipates that it will write off approximately
$3.4 million of unamortized cost associated with its Existing Credit Facility.
The issuance of additional debt will negatively impact Jacor's
debt-to-equity ratio and its results of operations and cash flows due to higher
amounts of interest expense, although the issuance of additional equity will
soften this impact to some extent. Also, if Jacor were not able to complete the
Merger due to certain circumstances, Jacor would incur a one-time charge of
$75.0 million relating to the non-refundable
44
deposit. If debt were used to finance such payment, it would negatively impact
Jacor's future results of operations and impede Jacor's future growth by
limiting the amount available under the Existing Credit Facility.
CASH FLOWS
Cash flows provided by operating activities, inclusive of working capital,
were $4.0 million and $6.3 million for the three months ended March 31, 1996 and
1995, respectively. Cash flows provided by operating activities for the first
quarter of 1996 resulted primarily from the add-back of $2.6 million of
depreciation and amortization together with the add-back of $1.0 million for the
extraordinary loss net of ($2.5) million from the gain on sale of radio stations
to net income of $0.9 million for the period. The additional $2.0 million
resulted principally from the net change in working capital of $1.9 million.
Cash flows provided by operating activities for the comparable 1995 period
resulted primarily from the add-back of $2.1 million of depreciation and
amortization together with the net change in working capital of $3.4 million to
net income of $0.8 million for the period.
Cash flows used by investing activities were ($140.3) million and ($0.7)
million for the three months ended March 31, 1996 and 1995, respectively.
Investing activities include capital expenditures of $3.4 million and $0.7
million for the first quarter of 1996 and 1995, respectively. Investing
activities during the first quarter of 1996 include expenditures of $48.1
million, $52.8 million, $41.6 million and $0.8 million, respectively, for
acquisitions, the purchase of the Noble warrant, loans made to Noble and in
connection with Jacor's JSAs and other. Additionally, investing activities for
the 1996 period is net of $6.5 million of proceeds from the sale of radio
stations WMYU-FM and WWST-FM in Knoxville.
Cash flows provided by financing activities were $134.7 million and $0.1
million for the three months ended March 31, 1996 and 1995, respectively. Cash
flows provided by financing activities during the first quarter of 1996 resulted
primarily from the $190.0 million in borrowings under the Existing Credit
Facility, together with $0.5 million in proceeds received from the issuance of
Common Stock upon the exercise of outstanding stock options net of the $52.0
million of reduction in long-term debt and $3.7 million of paid finance costs.
Cash flows from financing activities during the comparable 1995 three-month
period resulted primarily from the proceeds received from the issuance of Common
Stock upon the exercise of outstanding stock options.
Cash flows provided by operating activities, inclusive of working capital,
were $20.6 million, $11.3 million and $9.0 million for 1995, 1994 and 1993,
respectively. Cash flows provided by operating activities in 1995 resulted
primarily from the add-back of $9.5 million of depreciation and amortization
expense to net income of $11.0 million for the period. Cash flows provided by
operating activities in 1994 resulted primarily from net income of $7.9 million
generated during the year. The additional $3.4 million resulted principally from
the excess of the sum of the depreciation and amortization add-back of $9.7
million, together with the add-back of $1.4 million for provision for losses on
accounts and notes receivable over the net change in working capital of ($7.6)
million. Cash flows provided by operating activities in 1993 resulted primarily
from the excess of the sum of the depreciation and amortization add-back of
$10.1 million, together with the $1.4 million of net income generated during the
year over the net change in working capital of ($2.3) million.
Cash flows used by investing activities were ($64.3) million, ($13.7)
million and ($5.5) million for 1995, 1994 and 1993, respectively. Investing
activities include capital expenditures of $5.0 million, $2.2 million and $1.5
million in 1995, 1994 and 1993, respectively. Investing activities in 1995 and
1994 include expenditures of $59.8 million and $14.6 million, respectively, for
acquisitions, the purchase of intangible assets and loans made in connection
with Jacor's JSAs. In addition, 1994 investing activities were net of $3.2
million of payments received on notes and from the sale of assets. Investing
activities in 1993 included expenditures of $3.9 million relating to the
purchase of radio station assets.
Cash flows provided by financing activities were $24.2 million, $0.7 million
and $12.8 million for 1995, 1994 and 1993, respectively. Cash flows provided by
financing activities in 1995 resulted primarily from the $45.5 million in
borrowings under the 1993 credit agreement, together with $0.8 million in
proceeds received from the issuance of Common Stock to Jacor's employee stock
purchase plan and upon the exercise of outstanding stock options net of the
$21.7 million used to repurchase Common Stock. Cash flows from
45
financing activities in 1994 resulted primarily from the proceeds received from
the issuance of Common Stock upon the exercise of outstanding stock options. The
cash provided by financing activities in 1993 principally was due to the
refinancing of Jacor's senior debt in March 1993 plus the issuance of additional
Common Stock, and the payment of restructuring expenses in 1993.
NEW ACCOUNTING PRONOUNCEMENTS
In October 1995, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards ("FAS") No. 123 "Accounting for
Stock-Based Compensation." Jacor will continue to apply APB Opinion No. 25 in
accounting for its plans as permitted by this statement. This statement,
however, requires that a company's financial statements include certain
disclosures about stock-based employee compensation arrangements regardless of
the method used to account for them. Pro forma disclosures required by a company
that elects to continue to measure compensation cost using APB Opinion No. 25
will be made by Jacor for the year ended December 31, 1996.
In March 1995, the FASB issued FAS No. 121 "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to Be Disposed Of." This statement
requires Jacor to review for possible impairment of long-lived assets and
certain identifiable intangibles when circumstances indicate that the carrying
value of these assets may not be recoverable. Jacor will adopt the statement in
the first quarter of 1996, the effect of which will be immaterial to Jacor's
Consolidated Financial Statements.
46
BUSINESS
GENERAL
Jacor, upon consummation of the Acquisitions, will be the third largest
radio group in the nation owning and/or operating 50 radio stations and two
television stations in 13 markets across the United States. Jacor's strategic
objective is to be the leading radio broadcaster in each of its markets.
Consistent with this objective, Jacor entered into agreements to acquire 29
radio stations and two television stations for approximately $950.0 million
within two weeks of the enactment of the Telecom Act. The Company will have
multiple station platforms in Atlanta, San Diego, St. Louis, Phoenix, Tampa,
Denver, Portland, Kansas City, Cincinnati, Sacramento, Columbus, Jacksonville
and Toledo. These markets are among the most attractive radio markets in the
country, demonstrating, as a group, radio revenue growth in excess of the radio
industry average over the last five years. In 1995, the Company would have been
the top billing radio group in 9 of its 13 markets and would have had net
revenue and broadcast cash flow of $303.5 million and $107.7 million,
respectively.
The following table sets forth certain information regarding the Company and
its markets:
COMPANY DATA
--------------------------------------------------------------------------------------------
NO. OF STATIONS
1995
1995 RADIO REVENUE RADIO AUDIENCE -------------
RADIO REVENUE MARKET SHARE MARKET SHARE TV
MARKET MARKET RANK % % AM FM --
- ------------------------------------ ------------------- --------------- --------------- --- ---
Atlanta............................. 1 23.2 15.8 1 3 --
San Diego(1)........................ 1 13.9 6.7 1 2 --
Tampa............................... 1 24.3 26.4 2 4 1
Denver(2)........................... 1 45.9 30.6 4 4 --
Portland............................ 1 25.3 17.4 1 2 --
Cincinnati(3)....................... 1 56.8 38.8 2 4 1
Columbus............................ 1 37.9 20.9 2 3 --
Jacksonville........................ 1 26.2 22.6 2 3 --
Toledo.............................. 1 27.9 27.5 1 2 --
Kansas City......................... 3 15.3 12.9 1 1 --
Sacramento.......................... 3 14.3 7.0 -- 2 --
St. Louis........................... 6 8.6 10.0 1 2 --
Phoenix............................. 7 6.6 3.8 1 1 --
MARKET DATA
-------------------------------------------
1990-1995
1995 ARBITRON 1995 RADIO REVENUE CAGR
MARKET MARKET RANK REVENUE RANK %
- ------------------------------------ ------------- ------------- -------------
Atlanta............................. 12 10 9.2
San Diego(1)........................ 15 16 5.5
Tampa............................... 21 21 6.2
Denver(2)........................... 23 14 8.6
Portland............................ 24 23 8.4
Cincinnati(3)....................... 25 20 7.4
Columbus............................ 32 28 6.7
Jacksonville........................ 53 46 7.9
Toledo.............................. 75 74 5.6
Kansas City......................... 26 32 4.3
Sacramento.......................... 29 25 4.6
St. Louis........................... 17 18 4.5
Phoenix............................. 20 17 6.1
- ------------------------------
(1) Includes XTRA-FM and XTRA-AM, stations Jacor provides programming to and
sells air time for under an exclusive sales agency agreement.
(2) Excludes one station for which Jacor sells advertising time pursuant to a
joint sales agreement.
(3) Excludes three stations for which Jacor sells advertising time pursuant to
joint sales agreements.
BUSINESS STRATEGY
Jacor's strategic objective is to be the leading radio broadcaster in each
of its markets. Jacor intends to acquire individual radio stations or radio
groups that strengthen its market position and that maximize the operating
performance of its broadcast properties. Specifically, Jacor's business strategy
centers upon:
INDIVIDUAL MARKET LEADERSHIP. Jacor strives to maximize the audience
ratings in each of its markets in order to capture the largest share of the
radio advertising revenue in the market. Jacor focuses on those markets where it
believes it has the potential to be the leading radio group in the market. By
operating multiple radio stations in its markets, Jacor is able to operate its
stations at lower costs, reduce the risk of direct format competition and
provide advertisers with the greatest access to targeted demographic groups. For
1995, the Company would have had the number one radio revenue market share in
Atlanta (23%), San Diego (14%), Tampa (24%), Denver (46%), Portland (25%),
Cincinnati (57%), Columbus (38%), Jacksonville (26%) and Toledo (28%). The
Company's aggregate radio revenue market share for 1995 would have been
approximately 25%.
47
ACQUISITION AND MARKET DEVELOPMENT. Jacor's acquisition strategy focuses on
acquiring both developed, cash flow producing stations and underdeveloped
"stick" properties that complement its existing portfolio and strengthen its
overall market position. Jacor has been able to improve the ratings of "stick"
properties with increased marketing and focused programming that complements its
existing radio station formats. Additionally, Jacor utilizes its strong market
presence to boost the revenues and cash flow of "stick" properties by
encouraging advertisers to buy advertising in a package with its more
established stations. The Company may enter new markets through acquisitions of
radio groups that have multiple station ownership in such groups' markets.
Additionally, the Company will seek to acquire individual stations in new
markets that it believes are fragmented and where a market-leading position can
be created through additional in-market acquisitions. The Company may exit
markets it views as having limited strategic appeal by selling or swapping
existing stations for stations in other markets where the Company operates, or
for stations in new markets.
DIVERSE FORMAT EXPERTISE. Jacor management has developed programming
expertise over a broad range of radio formats. This management expertise enables
Jacor to specifically tailor the programming of each station in a market in
order to maximize Jacor's overall market position. Jacor utilizes sophisticated
research techniques to identify opportunities within each market and programs
its stations to provide complete coverage of a demographic or format type. This
strategy allows Jacor to deliver highly effective access to a target demographic
and capture a higher percentage of the radio advertising market.
DISTINCT STATION PERSONALITIES. Jacor engages in a number of creative
programming and promotional efforts designed to create listener loyalty and
station brand awareness. Through these efforts, management seeks to cultivate a
distinct personality for each station based upon the unique characteristics of
each market. Jacor hires dynamic on-air personalities for key morning and
afternoon "drive times" and provides comprehensive news, traffic and weather
reports to create active listening by the audience. This commitment to
"foreground" or "high impact" programming has successfully generated significant
audience share.
One of the methods Jacor utilizes to develop the personality of its AM radio
stations is by broadcasting professional sporting events and related
programming. Currently, Jacor has the broadcast rights for the Cincinnati Reds,
Cincinnati Bengals, Colorado Rockies, Denver Broncos, Los Angeles Kings and San
Diego Chargers and Citicasters has the broadcast rights for the Portland Trail
Blazers. In addition, WGST-AM in Atlanta has the broadcast rights to serve as
the official information station for the 1996 Olympic Games. Sports broadcasting
serves as a key "magnet" for attracting audiences to a station and then
introducing them to other programming features, such as local and national news,
entertaining talk, and weather and traffic reports.
STRONG AM STATIONS. Jacor is an industry leader in successfully operating
AM stations. While many radio groups primarily utilize network or simulcast
programming on their AM stations, Jacor also develops unique programming for its
AM stations to build strong listener loyalty and awareness. Utilizing this
operating focus and expertise, Jacor has developed its AM stations in Denver and
Cincinnati into the revenue and ratings leaders among both AM and FM stations in
their respective markets. Jacor's targeted AM programming adds to Jacor's
ability to lead its markets and results in more complete coverage of the
listener base.
Although the cost structure of a large-scale AM station generally results in
lower operating margins than typical music-based FM stations, the majority of
Jacor's AM stations generate substantial levels of broadcast cash flow.
Historically, Citicasters and Noble have not focused on their AM operations to
the same extent as Jacor. Accordingly, most of the AM stations to be acquired
meaningfully underperform Jacor's AM stations, and management believes such
stations have the potential to generate significant incremental cash flow.
POWERFUL BROADCAST SIGNALS. A station's ability to maintain market
leadership depends in part upon the strength of its broadcasting delivery
system. A powerful broadcast signal enhances delivery range and clarity, thereby
influencing listener preference and loyalty. Many of Jacor's stations'
broadcasting signals are among the strongest in their respective markets
reinforcing its market leadership. Jacor opportunistically upgrades the power
and quality of the signals at stations it acquires. Following the consummation
of the Acquisitions, Jacor expects that relatively inexpensive technical
upgrades in certain markets will provide for significantly greater signal
presence.
48
RADIO STATION OVERVIEW
The following sets forth certain information regarding the 50 radio stations
that will be owned and/or operated by the Company upon completion of the
Acquisitions, and the two San Diego stations for which Jacor provides
programming and for which it sells air time.
1995
JACOR(J) 1995 COMBINED RADIO
MARKET/ CITICASTERS(C) COMBINED RADIO REVENUE MARKET TARGET
STATION NOBLE(N) REVENUE MARKET RANK SHARE % FORMAT DEMOGRAPHIC
- -------------------- ------------------- --------------------- ------------------- ------------------------- -------------
ATLANTA 1 23.2
WPCH-FM J Adult Contemporary Women 25-54
WGST-AM/FM(1) J News Talk Men 25-54
WKLS-FM C Album Oriented Rock Men 18-34
SAN DIEGO 1 13.9
KHTS-FM J TBD
XTRA-FM(2) N Rock Alternative Men 18-34
XTRA-AM(2) N Sports Men 25-54
DENVER (3) 1 45.9
KOA-AM J News Talk Men 25-54
KRFX-FM J Classic Rock Men 25-54
KBPI-FM J Rock Alternative Men 18-34
KTLK-AM J Talk Adults 35-64
KHIH-FM N Jazz Adults 25-54
KHOW-AM N Talk Adults 25-54
KBCO-AM N Talk Adults 25-54
KBCO-FM N Album Oriented Rock Adults 25-49
PHOENIX 7 6.6
KSLX-AM/FM C Classic Rock Men 25-54
ST. LOUIS 6 8.6
KMJM-FM N Urban Adult Contemporary Adults 25-54
KATZ-FM N Black Oldies Adults 25-54
KATZ-AM N Urban Talk Adults 35-64
TAMPA 1 24.3
WFLA-AM J News Talk Adults 25-54
WFLZ-FM J Contemporary Hit Radio Adults 18-34
WDUV-FM J Beautiful/EZ Adults 35-64
WBRD-AM(4) J Talk Adults 35-64
WXTB-FM C Album Oriented Rock Men 18-34
WTBT-FM C Classic Rock Men 25-54
CINCINNATI (3) 1 56.8
WLW-AM J News Talk Men 25-54
WEBN-FM J Album Oriented Rock Men 18-34
WOFX-FM J Classic Rock Men 25-54
WCKY-AM J Talk Adults 35-64
WWNK-FM C Adult Contemporary Women 25-54
WKRQ-FM C Contemporary Hit Radio Women 18-34
COLUMBUS 1 37.9
WTVN-AM C Adult Contemporary/Talk Adults 25-54
WLVQ-FM C Album Oriented Rock Men 18-34
WHOK-FM C Country Adults 25-54
WLLD-FM C Country Adults 25-54
WLOH-AM C News Adults 35-64
KANSAS CITY 3 15.3
WDAF-AM C Country Adults 35-64
KYYS-FM C Album Oriented Rock Men 18-34
SACRAMENTO 3 14.3
KRXQ-FM C Album Oriented Rock Men 18-34
KSEG-FM C Classic Rock Men 25-54
TARGET
DEMOGRAPHIC
MARKET/ SHARE
STATION %/RANK
- -------------------- ------------
ATLANTA
WPCH-FM 9.8/2
WGST-AM/FM(1) 5.5/7
WKLS-FM 11.3/3
SAN DIEGO
KHTS-FM
XTRA-FM(2) 10.5/1
XTRA-AM(2) 4.5/6
DENVER (3)
KOA-AM 10.4/1
KRFX-FM 9.6/2
KBPI-FM 10.0/2
KTLK-AM 3.2/10
KHIH-FM 4.9/10
KHOW-AM 1.8/18
KBCO-AM --
KBCO-FM 6.3/5
PHOENIX
KSLX-AM/FM 6.9/3
ST. LOUIS
KMJM-FM 6.3/6
KATZ-FM 1.2/18
KATZ-AM 1.6/15
TAMPA
WFLA-AM 3.7/13
WFLZ-FM 16.1/1
WDUV-FM 4.5/10
WBRD-AM(4) --
WXTB-FM 21.8/1
WTBT-FM 6.0/5
CINCINNATI (3)
WLW-AM 16.8/1
WEBN-FM 21.0/1
WOFX-FM 5.9/6
WCKY-AM 5.9/6
WWNK-FM 7.8/4
WKRQ-FM 13.5/2
COLUMBUS
WTVN-AM 4.9/7
WLVQ-FM 11.3/2
WHOK-FM 4.0/9
WLLD-FM 3.3/12
WLOH-AM --
KANSAS CITY
WDAF-AM 8.3/2
KYYS-FM 11.7/4
SACRAMENTO
KRXQ-FM 8.8/2
KSEG-FM 6.2/4
49
1995
JACOR(J) 1995 COMBINED RADIO
MARKET/ CITICASTERS(C) COMBINED RADIO REVENUE MARKET TARGET
STATION NOBLE(N) REVENUE MARKET RANK SHARE % FORMAT DEMOGRAPHIC
- -------------------- ------------------- --------------------- ------------------- ------------------------- -------------
PORTLAND 1 25.3
KEX-AM C News Talk Adults 35-64
KKCW-FM C AdultContemporary Women 25-54
KKRZ-FM C Contemporary Hit Radio Women 18-34
TOLEDO 1 27.9
WSPD-AM N News Talk Adults 35-64
WVKS-FM N Contemporary Hit Radio Adults 18-34
WRVF-FM N Adult Contemporary Women 25-54
JACKSONVILLE 1 26.2
WJBT-FM J Urban Adults 18-34
WQIK-FM J Country Adults 25-54
WSOL-FM J Adult Urban Adults 25-54
WZAZ-AM J Urban Talk Adults 35-64
WJGR-AM J Talk Adults 25-54
TARGET
DEMOGRAPHIC
MARKET/ SHARE
STATION %/RANK
- -------------------- ------------
PORTLAND
KEX-AM 7.0/3
KKCW-FM 10.4/1
KKRZ-FM 12.8/1
TOLEDO
WSPD-AM 4.7/7
WVKS-FM 19.4/1
WRVF-FM 14.8/2
JACKSONVILLE
WJBT-FM 6.7/6
WQIK-FM 9.8/2
WSOL-FM 7.3/5
WZAZ-AM 0.9/17
WJGR-AM 0.8/17
- ------------------------------
(1) Jacor provides programming and sells air time for the FM station pursuant
to a LMA.
(2) Jacor provides programming and sells air time for these stations under an
exclusive sales agency agreement.
(3) Excludes stations WAQZ-FM, WAOZ-AM and WSAI-AM in Cincinnati and KTCL-FM in
Denver which Jacor sells advertising time for pursuant to JSAs.
(4) In March 1996, Jacor entered into a contract for the sale of the assets of
WBRD-AM.
TELEVISION
Upon the acquisition of Citicasters, Jacor will own a television station in
each of the Cincinnati and Tampa markets where it currently owns and operates
multiple radio stations. Owning and operating television and radio stations in
the same market requires an FCC waiver. See "Risk Factors--Pending
Acquisitions." By operating television stations in markets where Jacor has a
significant radio presence, Jacor expects to realize significant operating
advantages, including shared news departments and administrative overhead, as
well as cross-selling of advertising time and cross promotions.
The following table sets forth certain information regarding these stations
and the markets in which they operate:
COMMERCIAL STATIONS IN
STATION RANK (1)
NATIONAL TV HOUSEHOLDS ------------------------------ MARKET
MARKET IN DMA (1) ADULTS AGED ------------------------ CABLE SUBSCRIBER
MARKET/STATION RANK (1) (000S) TV HOUSEHOLDS 25-54 VHF UHF %
- -------------------- ------------- ------------- ----------------- ----------- ----- ----- -----------------
TAMPA/WTSP 15 1,395 2 4 2 8 70
CINCINNATI/WKRC 29 793 3 1T 3 2 61
NETWORK
MARKET/STATION AFFILIATION
- -------------------- -----------
TAMPA/WTSP CBS
CINCINNATI/WKRC CBS
- ------------------------------
(1) Rankings for Designated Market Area ("DMA"), 6:00 a.m. to 2:00 a.m.,
Sunday-Saturday for "TV Households" and "Adults aged 25-54." "T" designates
tied. This market information is from Nielsen.
RECENT DEVELOPMENTS
In February 1996, Jacor entered into an agreement to acquire Citicasters.
Citicasters owns and/or operates 19 radio stations, located across the United
States in Atlanta, Phoenix, Tampa, Portland, Kansas City, Cincinnati,
Sacramento, Columbus and two television stations, one located in Tampa and one
in Cincinnati. The Citicasters acquisition enhances Jacor's existing station
portfolios in Atlanta, Tampa and Cincinnati and creates new multiple radio
station platforms in Phoenix, Portland, Kansas City, Sacramento and Columbus.
Also, in February 1996, Jacor entered into an agreement to acquire Noble,
which owns ten radio stations serving Denver, St. Louis and Toledo. Pending the
closing of this transaction, Jacor and Noble have entered into time brokerage
agreements with respect to Noble's radio stations in St. Louis and Toledo. Jacor
also acquired from Noble the right to provide programming to and sells the air
time for one AM and one FM
50
station serving the San Diego market. The Noble Acquisition enhances Jacor's
existing portfolio in Denver where it will own eight stations, in addition to
creating new multiple station platforms in St. Louis and Toledo, where Jacor
will own two of the four Class B FM stations.
In February 1996, Jacor sold the business and certain operating assets of
radio stations WMYU-FM and WWST-FM in Knoxville. Jacor received approximately
$6.5 million in cash for this sale, representing an approximately $2.5 million
gain. In March 1996, Jacor entered into an agreement for the sale of the assets
of WBRD-AM in Tampa. Such sale is pending subject to receipt of the required FCC
approvals.
In March 1996, Jacor entered into an agreement to acquire the FCC licenses
of WCTQ-FM and WAMR-AM in Venice, Florida. Jacor will also purchase certain real
estate and transmission facilities necessary to operate the stations. The
purchase price for the assets is approximately $4.4 million. Jacor anticipates
that it will consummate this acquisition upon receipt of the required FCC
approvals using a portion of the proceeds from the Offerings, or with funds
obtained from available borrowings under the Existing Credit Facility or the New
Credit Facility, whichever is then in effect.
Jacor has agreed to finance the purchase by Critical Mass Media, Inc.
("CMM") of a 40% interest in a newly formed limited liability company that has
agreed to purchase for $540,000 the assets of Duncan American Radio, Inc. CMM is
a marketing research and radio consulting business which is owned by a limited
partnership of which Jacor is the 5% general partner and a corporation wholly
owned by Randy Michaels, the president of Jacor, is the 95% limited partner.
Jacor anticipates that it will finance such purchase using cash on hand.
In May 1996, Jacor entered into an agreement to acquire the FCC licenses of
WIOT-FM and WCWA-AM in Toledo, Ohio. Jacor will also purchase real estate and
transmission facilities necessary to operate the stations. The purchase price
for the assets is $13.0 million. Jacor anticipates that it will consummate this
acquisition upon receipt of the required fee approvals using borrowings under
the Existing Credit Facility which have been placed in escrow pending closing of
the transaction. Subject to certain conditions, pending the closing of this
transaction, Jacor has entered into a time brokerage agreement with respect to
these stations.
Jacor has agreed to acquire the FCC licenses of WLAP-AM, WMXL-FM and WWYC-FM
in Lexington, Kentucky. Jacor will also purchase real estate and transmission
facilities necessary to operate the stations. The purchase price for the assets
is $14.0 million. Jacor anticipates that it will consummate this acquisition
upon receipt of the required FCC approvals using a portion of the proceeds from
the Offerings, or with funds obtained from available borrowings under the
Existing Credit Facility or the New Credit Facility, whichever is then in
effect.
Consistent with Jacor's objectives described under "-- Business Strategy,"
Jacor is currently negotiating acquisitions for additional radio stations in its
existing markets and in new markets. Jacor has entered into two non-binding
letters of intent pursuant to which Jacor and the prospective sellers have
agreed to exclusively negotiate the terms and conditions of a definitive
acquisition agreement. If such negotiations are successfully completed, Jacor
would acquire an additional ten radio stations for an aggregate purchase price
of approximately $52.5 million. Jacor is also engaged in active negotiations to
acquire two radio stations in one of its existing markets for an acquisition
price of approximately $37.0 million. Finally, Jacor is also currently engaged
in preliminary discussions with owners of other radio stations, which may or may
not result in negotiations for additional acquisitions, including acquisitions
in which Common Stock may be exchanged in consideration for the acquired
stations. There can be no assurance that Jacor will successfully complete any
such acquisitions or what the consequences thereof would be.
During 1995, Jacor actively pursued the acquisition of selected stations in
its existing markets and targeted new markets and acquired six radio stations.
In August 1995, Jacor acquired the business and certain operating assets of
radio stations WDUV-FM and WBRD-AM in Tampa. In September 1995, Jacor exercised
its purchase option to acquire ownership of the licensee of radio station
KHTS-FM (formerly KECR) in San Diego. In 1995, Jacor acquired the call letters,
programming and certain contracts of radio
51
station WOFX-FM in Cincinnati and then changed the call letters of its FM
broadcast station WPPT to WOFX. Jacor also acquired radio stations WSOL-FM
(formerly WHJX), WJBT-FM and WZAZ-AM in Jacksonville. The aggregate cash
purchase price for these acquisitions was approximately $37.7 million.
ADVERTISING
Radio stations generate the majority of their revenue from the sale of
advertising time to local and national spot advertisers and national network
advertisers. Radio serves primarily as a medium for local advertising. The
growth in total radio advertising revenue tends to be fairly stable and has
generally grown at a rate faster than the Gross National Product ("GNP").
Advertising revenue has risen more rapidly during the past 10 years than either
inflation or the GNP. Total advertising revenue in 1994 of $10.6 billion, as
reported by RAB, was its highest level in the industry's history.
During the year ended December 31, 1995, approximately 82% of the Company's
broadcast revenue would have been generated from the sale of local advertising
and approximately 18% from the sale of national advertising. Jacor believes that
radio is one of the most efficient, cost-effective means for advertisers to
reach specific demographic groups. The advertising rates charged by Jacor's
radio stations are based primarily on (i) the station's ability to attract an
audience in the demographic groups targeted by its advertisers (as measured
principally by quarterly Arbitron rating surveys that quantify the number of
listeners tuned to the station at various times), (ii) the number of stations in
the market that compete for the same demographic group, (iii) the supply of and
demand for radio advertising time and (iv) the supply and pricing of alternative
advertising media.
Jacor emphasizes an aggressive local sales effort because local advertising
represents a large majority of Jacor's revenues. Jacor's local advertisers
include automotive, retail, financial institutions and services and healthcare.
Each station's local sales staff solicits advertising, either directly from the
local advertiser or through an advertising agency for the local advertisers.
Jacor pays a higher commission rate to the sales staff for generating direct
sales because Jacor believes that through a strong relationship directly with
the advertiser, it can better understand the advertiser's business needs and
more effectively design an advertising campaign to help the advertiser sell its
product. Jacor employs personnel in each market to produce commercials for the
advertisers. National advertising sales for most of Jacor's stations are made by
Jacor's national sales managers in conjunction with the efforts of an
independent advertising representative who specializes in national sales and is
compensated on a commission-only basis.
Jacor believes that sports broadcasting, absent unusual circumstances, is a
stable source of advertising revenues. There is less competition for the sports
listener, since only one radio station can offer a particular game. In addition,
due to the higher degree of audience predictability, sports advertisers tend to
sign contracts which are generally longer term and more stable than Jacor's
other advertisers. Jacor's sales staffs are particularly skilled in sales of
sports advertising.
According to the Radio Advertising Bureau Radio Marketing Guide and Fact
Book for Advertisers, 1994-1995, each week, radio reaches approximately 76.7% of
all Americans over the age of 12. More than one-half of all radio listening is
done outside the home, in contrast to other advertising mediums, and three out
of four adults are reached by car radio each week. The average listener spends
approximately three hours and 20 minutes per day listening to radio. The highest
portion of radio listenership occurs during the morning, particularly between
the time a listener wakes up and the time the listener reaches work. This
"morning drive time" period reaches more than 85% of people over 12 years of age
and, as a result, radio advertising sold during this period achieves premium
advertising rates.
Jacor believes operating multiple stations in a market gives it significant
opportunities in competing for advertising dollars. Each multiple station
platform better positions Jacor to access a significant share of a given
demographic segment making Jacor stations more attractive to advertisers seeking
to reach that segment of the population.
COMPETITION; CHANGES IN THE BROADCASTING INDUSTRY
The radio broadcasting industry is a highly competitive business. The
success of each of the Company's stations will depend significantly upon its
audience ratings and its share of the overall advertising revenue within its
market. The Company's stations will compete for listeners and advertising
revenue directly with
52
other radio stations as well as many other advertising media within their
respective markets. Radio stations compete for listeners primarily on the basis
of program content and by hiring high-profile talent that appeals to a
particular demographic group. By building in each of its markets a strong
listener base comprised of a specific demographic group, the Company will be
able to attract advertisers seeking to reach those listeners.
In addition to management experience, factors which are material to
competitive position include the station's rank among radio stations in its
market, transmitter power, assigned frequency, audience characteristics, local
program acceptance and the number and characteristics of other stations in the
market area, and other advertising media in that market. Jacor attempts to
improve its competitive position with promotional campaigns aimed at the
demographic groups targeted by its stations and by sales efforts designed to
attract advertisers. Recent changes in the FCC's policies and rules permit
increased joint ownership and joint operation of local radio stations. Those
stations taking advantage of these joint arrangements may in certain
circumstances have lower operational costs and may be able to offer advertisers
more attractive rates and services.
The Company's audience ratings and competitive position will be subject to
change, and any adverse change in a particular market could have a material
adverse effect on the revenue of the Company's stations in that market. Although
Jacor believes that each of the Company's stations will be able to compete
effectively in the market, there can be no assurance that any one of the
Company's stations will be able to maintain or increase its current audience
ratings and advertising revenue.
Although the radio broadcasting industry is highly competitive, some legal
restrictions on entry exist. The operation of a radio broadcast station requires
a license from the FCC and the number of radio stations that can operate in a
given market is limited by the availability of the FM and AM radio frequencies
that the FCC will license in that market.
Jacor's stations also compete directly for advertising revenues with other
media, including broadcast television, cable television, newspapers, magazines,
direct mail, coupons and billboard advertising. In addition, the radio
broadcasting industry is subject to competition from new media technologies that
are being developed or introduced, such as the delivery of audio programming by
cable television systems and by digital audio broadcasting. The radio
broadcasting industry historically has grown despite the introduction of new
technologies for the delivery of entertainment and information, such as
television broadcasting, cable television, audio tapes and compact disks.
Greater population and greater availability of radios, particularly car and
portable radios, have contributed to this growth. There can be no assurance,
however, that the development or introduction in the future of any new media
technology will not have an adverse effect on the radio broadcasting industry.
Jacor also competes with other radio station groups to purchase additional
stations.
The FCC has allocated spectrum for a new technology, satellite digital audio
radio services ("DARS"), to deliver audio programming. The FCC has proposed, but
not yet adopted licensing and operating rules for DARS, so that the allocated
spectrum is not yet available for service. Jacor cannot predict when and in what
form such rules will be adopted. The FCC granted a waiver in September 1995 to
permit one potential DARS operator to commence construction of a DARS satellite
system, with the express notice that the FCC might not license such operator to
provide DARS, nor would such waiver prejudge the ongoing rule making proceeding.
DARS may provide a medium for the delivery by satellite or terrestrial means of
multiple new audio programming formats to local and/or national audiences.
Digital technology also may be used in the future by terrestrial radio broadcast
stations either on existing or alternate broadcasting frequencies, and the FCC
has stated that it will consider making changes to its rules to permit AM and FM
radio stations to offer digital sound following industry analysis of technical
standards. In addition, the FCC has authorized an additional 100 kHz of band
width for the AM band and will soon allocate frequencies in this new band to
certain existing AM station licensees that applied for migration prior to the
FCC's cut-off date. At the end of a transition period, those licensees will be
required to return to the FCC either the license for their existing AM band
station or the license for the expanded AM band station. None of the stations to
be affiliated with the Company have sought authorizations for operations on the
expanded AM band because such signals operate at a lower power and have less
coverage and thereby are not consistent with Jacor's strategic objectives.
Television stations compete for audiences and advertising revenues with
radio and other television stations and multichannel video delivery systems in
their market areas and with other advertising media such as newspapers,
magazines, outdoor advertising and direct mail. Competition for sales of
television advertising
53
time is based primarily on the anticipated and actually delivered size and
demographic characteristics of audiences as determined by various services,
price, the time of day when the advertising is to be broadcast, competition from
other television stations, including affiliates of other television broadcast
networks, cable television systems and other media and general economic
conditions. Competition for audiences is based primarily on the selection of
programming, the acceptance of which is dependent on the reaction of the viewing
public, which is often difficult to predict. Additional elements that are
material to the competitive position of television stations include management
experience, authorized power and assigned frequency. The broadcasting industry
is continuously faced with technical changes and innovations, the popularity of
competing entertainment and communications media, changes in labor conditions,
and governmental restrictions or actions of Federal regulatory bodies, including
the FCC, any of which could possibly have a material effect on a television
station's operations and profits. There are sources of video service other than
conventional television stations, the most common being cable television, which
can increase competition for a broadcasting television station by bringing into
its market distant broadcasting signals not otherwise available to the station's
audience, serving as a distribution system for national satellite-delivered
programming and other non-broadcast programming originated on a cable system and
selling advertising time to local advertisers. Other principal sources of
competition include home video exhibition, direct-to-home broadcast satellite
television ("DBS") entertainment services and multichannel multipoint
distribution services ("MMDS"). Moreover, technology advances and regulatory
changes affecting programming delivery through fiber optic telephone lines and
video compression could lower entry barriers for new video channels and
encourage the development of increasingly specialized "niche" programming. The
Telecom Act permits telephone companies to provide video distribution services
via radio communication, on a common carrier basis, as "cable systems" or as
"open video systems," each pursuant to different regulatory schemes. Jacor is
unable to predict the effect that technological and regulatory changes will have
on the broadcast television industry and on the future profitability and value
of a particular broadcast television station.
The FCC authorizes DBS services throughout the United States. Currently, two
FCC permittees, DirecTv and United States Satellite Broadcasting, provide
subscription DBS services via high power communications satellites and small
dish receivers, and other companies provide direct-to-home video service using
lower powered satellites and larger receivers. Additional companies are expected
to commence direct-to-home operations in the near future. DBS and MMDS, as well
as other new technologies, will further increase competition in the delivery of
video programming.
Jacor cannot predict what other matters might be considered in the future,
nor can it judge in advance what impact, if any, the implementation of any of
these proposals or changes might have on its business.
FEDERAL REGULATION OF BROADCASTING
The ownership, operation and sale of stations are subject to the
jurisdiction of the FCC, which acts under authority granted by the
Communications Act. Among other things, the FCC assigns frequency bands for
broadcasting; determines the particular frequencies, locations and power of
stations; issues, renews, revokes and modifies station licenses; determines
whether to approve changes in ownership or control of station licenses;
regulates equipment used by stations; adopts and implements regulations and
policies that directly or indirectly affect the ownership, operation and
employment practices of stations; and has the power to impose penalties for
violations of its rules or the Communications Act. On February 8, 1996, the
President signed the Telecom Act. The Telecom Act, among other measures, directs
the FCC to (a) eliminate the national radio ownership limits; (b) increase the
local radio ownership limits as specified in the Telecom Act; (c) issue
broadcast licenses for periods of eight years; and (d) eliminate the opportunity
for the filing of competing applications against broadcast renewal applications.
Certain of these measures have been adopted by the FCC. Other provisions of the
Telecom Act will be acted upon by the FCC through rule-making proceedings,
presently scheduled for completion by the end of 1996.
Radio stations in the United States operate either by Amplitude Modulation
(AM), conducted on 107 different frequencies located between 540 and 1600
kilohertz (kHz) (plus 10 frequencies between 1610-1710 kHz on the newly expanded
AM band) in the low frequency band of the electromagnetic spectrum, or by
Frequency Modulation (FM), conducted on approximately 100 different frequencies
located between 88 and 108 megahertz (MHz) at the very high frequency band of
the electromagnetic spectrum.
54
Television stations in the United States operate as either Very High
Frequency (VHF) stations (channels 2 through 13) or Ultra High Frequency (UHF)
stations (channels 14 through 69). UHF stations in many cases have a weaker
signal and therefore do not achieve the same coverage as VHF stations.
LICENSE GRANTS AND RENEWALS. The Communications Act provides that a
broadcast station license may be granted to an applicant if the grant would
serve the public interest, convenience and necessity, subject to certain
limitations referred to below. In making licensing determinations, the FCC
considers the legal, technical, financial and other qualifications of the
applicant, including compliance with the Communications Act's limitations on
alien ownership, compliance with various rules limiting common ownership of
broadcast, cable and newspaper properties, and the "character" of the licensee
and those persons holding "attributable" interests in the licensee. Broadcast
station licenses are granted for specific periods of time and, upon application,
are renewable for additional terms. The Telecom Act amends the Communications
Act to provide that broadcast station licenses be granted, and thereafter
renewed, for a term not to exceed eight years, if the FCC finds that the public
interest, convenience, and necessity would be served.
Generally, the FCC renews licenses without a hearing. The Telecom Act amends
the Communications Act to require the FCC to grant an application for renewal of
a broadcast station license if: (1) the station has served the public interest,
convenience and necessity; (2) there have been no serious violations by the
licensee of the Communications Act or the rules and regulations of the FCC; and
(3) there have been no other violations by the licensee of the Communications
Act or the rules and regulations of the FCC which, taken together, would
constitute a pattern of abuse. Pursuant to the Telecom Act, competing
applications against broadcast renewal applications will no longer be
entertained. The Telecom Act provides that if the FCC, after notice and an
opportunity for a hearing, decides that the requirements for renewal have not
been met and that no mitigating factors warrant lesser sanctions, it may deny a
renewal application. Only thereafter may the FCC accept applications by third
parties to operate on the frequency of the former licensee. The Communications
Act continues to authorize the filing of petitions to deny against license
renewal applications during particular periods of time following the filing of
renewal applications. Petitions to deny can be used by interested parties,
including members of the public, to raise issues concerning the qualifications
of the renewal applicant.
Except for the Company's Florida stations and Georgia stations (other than
WGST-FM), whose licenses have been renewed for seven years expiring in 2003, the
current seven-year terms of the broadcasting licenses of all of the Company's
stations expire in 1996, 1997 and 1998. Applications for regular renewals of the
licenses of Jacor's four Ohio radio stations and of Citicasters' seven Ohio
radio stations were filed with the FCC in May 1996. In the normal course, such
applications would be granted by the end of September 1996. Similar renewal
applications will be due to be filed by October 1, 1996 for Citicasters' Kansas
City radio stations and its Florida television station. Such applications would
normally be granted by the end of January 1997. The licenses of Citicasters'
stations in Phoenix, Sacramento and Portland will not come due for renewal prior
to May 31, 1997. Jacor does not anticipate any material difficulty in obtaining
license renewals for full terms in the future.
When the FCC considers a proposed transfer of control of an FCC licensee
that holds multiple FCC licenses, some of which licenses are subject to pending
renewal applications, the FCC's past policy has been either to defer action on
the transfer application until the pending renewals have been granted or to
grant the transfer application conditioned on the transfer not being consummated
until the renewals have been granted. The FCC has recently modified that policy
to provide that so long as there are no unresolved issues pertaining to the
qualifications of the transferor or the transferee and so long as the transferee
is willing to substitute itself as the renewal applicant, the FCC will grant a
transfer application for a licensee holding multiple licenses and permit
consummation of the transfer notwithstanding the pendency of renewal
applications for one or several of the licensee's stations. This new policy
should permit the parties to consummate the Merger (assuming satisfaction or
waiver of all other conditions and the FCC's grant of the Citicasters Transfer
Application) during those periods when renewal applications are pending for one
or more Citicasters' stations. It is anticipated that Citicasters will have
renewal applications pending from June 1996 through January 1997 and from June
1997 through January 1998, although these periods could be extended in the event
that the FCC does not grant the subject renewal applications promptly. However,
because the policy is so new, there can be no assurance that further
clarifications of the policy will not make it impossible or inadvisable to
consummate the Merger during such periods. In such event, if the consummation of
the Merger does not occur prior to October 1, 1996, the Cash Consideration to be
paid by Jacor will be increased each month by $.22125 for each
55
issued and outstanding share of Citicasters Common Stock and the exercise price
of the Merger Warrants will be reduced from $28.00 to $26.00 per full share of
Jacor Common Stock. In the event that the Merger is not consummated on or before
May 31, 1997, Citicasters may terminate the Merger Agreement and draw upon an
irrevocable, direct pay letter of credit obtained by Jacor in the amount of
$75.0 million.
The following sets forth the market, FCC license classification, antenna
height above average terrain ("HAAT"), power, frequency and FCC license
expiration date for the 50 radio stations that will be owned and/ or operated by
the Company upon completion of the Acquisitions and the two San Diego stations
to which Jacor provides programming and for which it sells air time.
EXPIRATION
HAAT IN POWER IN DATE OF
MARKET/STATION FCC CLASS FEET KILOWATTS FREQUENCY FCC LICENSE
- --------------------- --------- --------- --------- ---------- -----------
ATLANTA, GA
WPCH-FM C 984 100 94.9 MHz 4/1/03
WGST-AM 2 -- 50/1 640 kHz 4/1/03
WGST-FM(1) C2 492 50 105.7 MHz 4/1/96
WKLS-FM C 984 100 96.1 MHz 4/1/03
SAN DIEGO, CA
KHTS-FM B 1887 2 93.3 MHz 12/1/97
XTRA-FM(2) C 804 100 91.1 MHz (3)
XTRA-AM(2) 1 -- 77/50 690 kHz (3)
DENVER, CO(4)
KOA-AM 1B 50/50 850 kHz 4/1/97
KRFX-FM C 1045 100 103.5 MHz 4/1/97
KBPI-FM C 988 100 106.7 MHz 4/1/97
KTLK-AM 2 -- 50/1 760 kHz 4/1/97
KHIH-FM C 1608 100 95.7 MHz 4/1/97
KHOW-AM 3 -- 5/5 630 kHz 4/1/97
KBCO-AM 2 -- 5/.1 1190 kHz 4/1/97
KBCO-FM C 1539 100 97.3 MHz 4/1/97
PHOENIX, AZ
KSLX-AM 3 -- 5/.05 1440 kHz 10/1/97
KSLX-FM C 1840 100 100.7 MHz 10/1/97
ST. LOUIS, MO
KMJM-FM C 485 100 107.7 MHz 2/1/97
KATZ-FM B 490 50 100.3 MHz 12/1/96
KATZ-AM 3 -- 5/5 1600 kHz 2/1/97
TAMPA, FL
WFLA-AM 3 -- 5/5 970 kHz 2/1/03
WFLZ-FM C 1358 100 93.3 MHz 2/1/03
WDUV-FM C 1358 100 103.5 MHz 2/1/03
WBRD-AM 3 -- 2.5/1 1420 kHz 2/1/03
WXTB-FM C 1345 100 97.9 MHz 2/1/03
WTBT-FM A 285 6 105.5 MHz 2/1/03
CINCINNATI, OH(4)
WLW-AM 1A -- 50/50 700 kHz 10/1/96
WEBN-FM B 876 16.5 102.7 MHz 10/1/96
WOFX-FM B 910 16 92.5 MHz 10/1/96
WCKY-AM 3 -- 5/1 550 kHz 10/1/96
WWNK-FM B 600 32 94.1 MHz 10/1/96
WKRQ-FM B 876 16 101.9 MHz 10/1/96
COLUMBUS, OH
WTVN-AM 3 5/5 610 kHz 10/1/96
WLVQ-FM B 750 18 96.3 MHz 10/1/96
WHOK-FM B 761 21 95.5 MHz 10/1/96
WLLD-FM A 755 .6 98.9 MHz 10/1/96
WLOH-AM 3 -- 1/.02 1320 kHz 10/1/96
KANSAS CITY, MO
WDAF-AM 3 -- 5/5 610 kHz 2/1/97
KYYS-FM C 213 52 102.1 MHz 2/1/97
56
EXPIRATION
HAAT IN POWER IN DATE OF
MARKET/STATION FCC CLASS FEET KILOWATTS FREQUENCY FCC LICENSE
- --------------------- --------- --------- --------- ---------- -----------
SACRAMENTO, CA
KRXQ-FM B 397 25 93.7 MHz 12/1/97
KSEG-FM B 500 50 96.9 MHz 12/1/97
PORTLAND, OR
KEX-AM 1B -- 50/50 1190 kHz 2/1/98
KKCW-FM C 1654 100 103.3 MHz 2/1/98
KKRZ-FM C 1434 100 100.3 MHz 2/1/98
TOLEDO, OH
WSPD-AM 3 -- 5/5 1370 kHz 10/1/96
WVKS-FM B 479 50 92.5 MHz 10/1/96
WRVF-FM B 807 19 101.5 MHz 10/1/96
JACKSONVILLE, FL
WJBT-FM A 299 6 92.7 MHz 2/1/03
WQIK-FM C 1014 100 99.1 MHz 2/1/03
WSOL-FM C 1463 100 101.5 MHz 4/1/03
WZAZ-AM 4 -- 1/1 1400 kHz 2/1/03
WJGR-AM 3 -- 5/5 1320 kHz 2/1/03
- ------------------------------
(1) Jacor provides programming to and sells air time for this station under an
LMA.
(2) Jacor provides programming to and sells air time for these stations under an
exclusive sales agency agreement.
(3) These stations are not licensed by the FCC, but rather are licensed by the
Mexican government.
(4) Excludes stations WAQZ-FM, WAOZ-AM and WSAI-AM in Cincinnati and KTCL-FM in
Denver which Jacor sells advertising time for pursuant to JSAs.
LICENSE ASSIGNMENTS AND TRANSFERS OF CONTROL. The Communications Act also
prohibits the assignment of a license or the transfer of control of a
corporation holding such a license without the prior approval of the FCC.
Applications to the FCC for such assignments or transfers are subject to
petitions to deny by interested parties and must satisfy requirements similar to
those for renewal and new station applicants.
OWNERSHIP RULES. Rules of the FCC limit the number and location of
broadcast stations in which one licensee (or any party with a control position
or attributable ownership interest therein) may have an attributable interest.
The "national radio ownership rule" had generally prohibited any one
non-minority individual or entity from having a control position or attributable
ownership interest in more than 20 AM or more than 20 FM radio stations
nationwide. The Telecom Act directs the FCC to modify its rules to eliminate any
provisions limiting the number of radio stations which may be owned or
controlled by one entity nationally. The FCC adopted this rule change by an
order which became effective on March 15, 1996. Consequently, there is no limit
imposed by the FCC for the number of radio stations one party may own
nationally.
57
The "local radio ownership rule" limits the number of stations in a radio
market in which any one individual or entity may have a control position or
attributable ownership interest. The local radio ownership rule had provided for
markets with 15 or more radio stations, a limit of two AMs and two FMs, provided
generally that the combined audience shares of the co-owned stations did not
exceed 25% of the radio ratings market at the time of acquisition. The Telecom
Act directs the FCC to revise its rules to increase the local radio ownership
limits as follows: (a) in markets with 45 or more commercial radio stations, a
party may own up to eight commercial radio stations, no more than five of which
are in the same service (AM or FM); (b) in markets with 30-44 commercial radio
stations, the limit is seven commercial radio stations, no more than four of
which are in the same service; (c) in markets with 15-29 commercial radio
stations, the limit is six commercial radio stations, no more than four of which
are in the same service; and (d) in markets with 14 or fewer commercial radio
stations, a party may own up to five commercial radio stations, no more than
three of which are in the same service, provided that no party may own more than
50% of the commercial stations in the market. The FCC adopted these changes to
the local radio ownership rule by an order which became effective March 15,
1996. In addition, the FCC has a "cross interest" policy that may prohibit a
party with an attributable interest in one station in a market from also holding
either a "meaningful" non-attributable equity interest (e.g., non-voting stock,
voting stock, limited partnership interests) or key management position in
another station in the same market, or which may prohibit local stations from
combining to build or acquire another local station. The FCC is presently
evaluating its cross-interest policy as well as policies governing attributable
ownership interests. Jacor cannot predict whether the FCC will adopt any changes
in these policies or, if so, what the new policies will be.
Under the current rules, an individual or other entity owning or having
voting control of 5% or more of a corporation's voting stock is considered to
have an attributable interest in the corporation and its stations, except that
banks holding such stock in their trust accounts, investment companies, and
certain other passive interests are not considered to have an attributable
interest unless they own or have voting control over 10% or more of such stock.
The FCC is currently evaluating whether to raise the foregoing benchmarks to 10%
and 20%, respectively. An officer or director of a corporation or any general
partner of a partnership also is deemed to hold an attributable interest in the
media license. Under the current rules, prior to the Offering Zell/Chilmark is
considered a single majority shareholder of Jacor, and minority shareholders are
not considered to have attributable interests in Jacor's stations. At present,
Zell/Chilmark, the current sole attributable shareholder of Jacor, has no other
attributable media interests. The FCC has asked for comments as to whether it
should continue the single majority shareholder exemption. Jacor cannot predict
whether the FCC will adopt these or any other proposals.
Following the Offering, Zell/Chilmark will no longer be the single majority
shareholder of Jacor. Consequently, under current rules, shareholders of Jacor
with 5% or more of the outstanding votes (except for qualified institutional
investors, for which the 10% benchmark is applicable), if any, will be
considered to hold attributable interests in Jacor. Such holders of attributable
interests must comply with or obtain waivers of the FCC's multiple ownership
limits. Zell/Chilmark's change from the single majority shareholder in Jacor to
one holding less than 50% requires prior FCC approval. Such approval is obtained
by the filing of "short-form" transfer of control applications with the FCC.
Such short-form applications do not require public notice or a waiting period
before grant by the FCC. Third parties do not have a right to petition for the
denial of such applications. The FCC staff has granted the short-form
applications relating to Jacor's broadcast and earth station licenses (such
grants are not yet final); the application relating to Jacor's business radio
license is still pending. Jacor expects that such application will be granted
shortly.
The rules also generally prohibit the acquisition of an ownership or control
position in a television station and one or more radio stations serving the same
market (termed the "one-to-a-market" rule). Current FCC policy looks favorably
upon waiver requests relating to television and AM/FM radio combinations in the
top 25 television markets where at least 30 separately owned broadcast stations
will remain after the combination. One-to-a-market waiver requests in other
markets, as well as those in the top 25 television markets that involve the
combination of a television station and more than one same service (AM or FM)
radio station, presently are evaluated by the FCC pursuant to a fact-based
five-part, case-by-case review. The FCC also has an established policy for
granting waivers that involve "failed" stations. The FCC currently is
considering changes to its one-to-a-market waiver standards in a pending
rule-making proceeding. The
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Telecom Act instructs the FCC to extend its top 25 market/30 voices waiver
policy to the top 50 markets, consistent with the public interest, convenience,
and necessity. The Telecom Act conferees stated that they expect the FCC in its
future implementation of its current one-to-a-market waiver policy, as well as
in any future changes the FCC may adopt in the pending rule-making, to take into
account increased competition and the need for diversity in today's radio
marketplace. The FCC also plans to review and possibly modify its current
prohibitions relating to ownership or control positions in a daily newspaper and
a broadcast station in the same market.
Holders of non-voting stock generally will not be attributed an interest in
the issuing entity, and holders of debt and instruments such as warrants,
convertible debentures, options, or other non-voting interests with rights of
conversion to voting interests generally will not be attributed such an interest
unless and until such conversion is effected. The FCC is currently considering
whether it should attribute non-voting stock, or perhaps non-voting stock
interests when combined with other rights, such as voting shares or contractual
relationships, along with its review of its other attribution policies. Jacor
cannot predict whether the FCC will adopt these or other changes in its
attribution policies.
Under the Communications Act, broadcast licenses may not be granted,
transferred or assigned to any corporation of which more than one-fifth of the
capital stock is owned of record or voted by non-U.S. citizens or foreign
governments or their representatives (collectively, "Aliens"). In addition, the
Communications Act provides that no broadcast license may be held by any
corporation of which more than one-fourth of the capital stock is owned of
record or voted by Aliens, without an FCC public interest finding. The FCC has
issued interpretations of existing law under which these restrictions in
modified form apply to other forms of business organizations, including general
and limited partnerships. The FCC also prohibits a licensee from continuing to
control broadcast licenses if the licensee otherwise falls under Alien influence
or control in a manner determined by the FCC to be in violation of the
Communications Act or contrary to the public interest. No officers, directors or
significant shareholders of Jacor are known by Jacor to be Aliens.
REGULATION OF BROADCAST OPERATIONS. In order to retain licenses,
broadcasters are obligated, under the Communications Act, to serve the "public
interest." Since the late 1970s, the FCC gradually has relaxed or eliminated
many of the more formalized regulatory procedures and requirements developed to
promote the broadcast of certain types of programming responsive to the
problems, needs, and interests of a station's community of license.
The regulatory changes have provided broadcast stations with increased
flexibility to design their program formats and have provided relief from some
recordkeeping and FCC filing requirements. However, licensees continue to be
required to present programming that is responsive to significant community
issues and to maintain certain records demonstrating such responsiveness.
Complaints from listeners concerning a station's programming have been
considered by the FCC when evaluating licensee renewal applications and at other
times. The FCC has proposed implementing the changes in its broadcast renewal
procedures required by the Telecom Act by a rule making proceeding scheduled to
be completed by the end of 1996. That proceeding may further illuminate the
standards for renewal of broadcast licenses under the Telecom Act.
Stations still are required to follow various rules promulgated under the
Communications Act that regulate political broadcasts, political advertisements,
sponsorship identifications, technical operations and other matters. "Equal
Opportunity" and affirmative action requirements also exist. Failure to observe
these or other rules can result in the imposition of monetary forfeitures or in
the grant of a "short" (less than full term) license term or license revocation.
The Telecom Act states that the FCC may deny, after a hearing, the renewal of a
broadcast license for serious violations of the Communications Act or the FCC's
rules or where there have been other violations which together constitute a
pattern of abuse.
In 1985, the FCC adopted rules regarding human exposure to levels of radio
frequency ("RF") radiation. These rules require applicants for new broadcast
stations, renewals of broadcast licenses or modification of existing licenses to
inform the FCC at the time of filing such applications whether a new or existing
broadcast facility would expose people to RF radiation in excess of certain
guidelines. In March 1993, the FCC proposed adopting more restrictive radiation
limits. Jacor cannot predict whether the FCC will adopt this or any other
proposal.
59
AGREEMENTS WITH OTHER BROADCASTERS. Over the past several years a
significant number of broadcast licensees, including certain of Jacor's
subsidiaries, have entered into cooperative agreements with other stations in
their market. These agreements may take varying forms, subject to compliance
with the requirements of the FCC's rules and policies and other laws. Typically,
separately owned stations may agree to function cooperatively in terms of
programming, advertising sales, etc., subject to the licensee of each station
maintaining independent control over the programming and station operations of
its own station. One typical example is a LMA between two separately owned
stations serving a common service area, whereby the licensee of one station
programs substantial portions of the broadcast day on the other licensee's
station, subject to ultimate editorial and other controls being exercised by the
latter licensee, and sells advertising time during such program segments for its
own account. Another is a JSA pursuant to which a licensee sells advertising
time on both its own station or stations and on another separately owned
station.
In the past, the FCC has determined that issues of joint advertising sales
should be left to antitrust enforcement and has specifically exempted LMAs from
its "cross-interest" policy. Furthermore, the FCC has held that LMAs do not per
se constitute a transfer of control and are not contrary to the Communications
Act provided that the licensee of the station maintains complete responsibility
for and control over operations of its broadcast station (including,
specifically, control over station finances, personnel and programming) and
complies with applicable FCC rules and with antitrust laws. At present, the FCC
is considering whether it should treat as attributable multiple business
arrangements among local stations, such as joint sales accompanied by debt
financing. Jacor cannot predict whether the FCC would require the termination or
restructuring of Jacor's JSAs or other arrangements with broadcasters in the
Cincinnati and Denver markets in connection with the FCC's pending rule making
on attribution or other FCC proceedings.
Under certain circumstances, the FCC will consider a radio station brokering
time on another radio station serving the same market to have an attributable
ownership interest in the brokered station for purposes of the FCC's radio
multiple ownership rules. In particular, a radio station is not permitted to
enter into a LMA giving it the right to program more than 15% of the broadcast
time, on a weekly basis, of another local radio station which it could not own
under the FCC's local radio ownership rules.
The FCC's rules also prohibit a radio licensee from simulcasting more than
25% of its programming on another radio station in the same broadcast service
(i.e., AM-AM or FM-FM) whether it owns both stations or operates both through a
LMA where both stations serve substantially the same geographic area.
FCC CONSIDERATION OF ACQUISITIONS. On February 8, 1996, Jacor filed an
application with the FCC for its consent to the transfer of control of Noble
Broadcast Licenses, Inc. ("Noble Licenses"), the licensee of ten full-powered
radio stations in the Toledo, St. Louis and Denver markets, from John T. Lynch
ET AL., to Jacor (the "Noble Transfer Application"). Jacor presently owns two AM
and two FM stations in the Denver market, and Noble presently owns two AM and
two FM stations serving the Denver market. The Noble Transfer Application was
granted on March 27, 1996 by the Mass Media Bureau of the FCC acting pursuant to
delegated authority. No party filed an opposition to the Noble Transfer
Application. The FCC issued on April 1, 1996, a public notice of the grant by
the Mass Media Bureau. Pursuant to the Communications Act and the FCC's rules,
interested third parties could have filed petitions for reconsideration of the
Noble Transfer Application until May 1, 1996. Third parties that did not object
to an application prior to its grant must establish good cause for filing a
petition for reconsideration. The Mass Media Bureau of the FCC may also
reconsider the grant of the Noble Transfer Application on its own motion until
May 1, 1996. No petitions for reconsideration were filed, nor did the Mass Media
Bureau reconsider the grant, on or before May 1, 1996. In addition, the full FCC
could have on its own motion reviewed the Mass Media Bureau grant until May 13,
1996. No such action was taken, so that the grant of the Noble Transfer
Application became "final," that is, the grant no longer is subject to further
administrative or judicial review. Pursuant to the Noble agreement, Jacor at its
option may defer the closing until all Noble station licenses have been renewed
and such renewal grants are final. Noble currently has applications pending for
the renewal of its Ohio radio station licenses.
On February 22, 1996, Jacor filed an application with the FCC for its
consent to the transfer of control of Citicasters Co., the licensee of 19
full-powered radio stations in the Atlanta, Phoenix, Tampa, Cincinnati,
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Portland, Sacramento, Columbus and Kansas City markets, and two television
stations in the Tampa and Cincinnati markets, from the shareholders of
Citicasters to Jacor (the "Citicasters Transfer Application"). Jacor presently
owns and/or has LMAs with one AM and two FM stations in the Atlanta market, two
AM and two FM stations in the Tampa market and two AM and two FM stations in the
Cincinnati market. The Citicasters Transfer Application provides a technical
statement demonstrating that, pursuant to the FCC's methodology for calculating
market size, the relevant radio market in each of Atlanta, Tampa and Cincinnati
contains more than 45 commercial radio stations, and the Company would own less
than eight commercial radio stations, and less than five in the same service in
each such radio market. The television stations licensed to Citicasters are in
markets in which Jacor and Citicasters own radio stations. Consequently, the
Citicasters Transfer Application requests waivers pursuant to a five-part,
case-by-case review of the one-to-a-market rule to permit the permanent
co-ownership of these television and radio stations. The Citicasters Transfer
Application notes that the FCC may choose to grant initially temporary waivers
of the one-to-a-market rule in connection with the transfer of Citicasters to
Jacor and thereafter rule on the permanent waiver requests. If the FCC does not
grant either a permanent or temporary one-to-a-market waiver, but otherwise
consents to the Merger, Jacor could not consummate the Merger unless the
Citicasters television stations or the Citicasters and Jacor radio stations in
the Cincinnati and Tampa markets were assigned to third parties. If divestitures
are required, there can be no assurance that Jacor would be able to obtain full
value for such stations nor that such sales would not have a material adverse
impact upon Jacor's business, financial condition and results of operations. In
such event, Jacor's intention would be to seek reconsideration and/or appellate
court review of the FCC's decision.
The Citicasters Transfer Application has been accepted by the FCC and,
pursuant to the Communications Act and the FCC's rules, interested third parties
could have filed petitions to deny the Citicasters Transfer Application until
April 4, 1996, and thereafter may file informal objections until the Citicasters
Transfer Application is granted. No party has filed a timely petition to deny
or, to Jacor's knowledge, other objection to the Citicasters Transfer
Application. To date, the FCC has not acted on the Citicasters Transfer
Application.
In the event that an opposition against the Citicasters Transfer Application
is filed that raises substantial issues, the FCC would determine on the basis of
the opposition, responses to the opposition that may be filed by Jacor and/or
Citicasters, and such other facts as it may officially notice, whether there
were substantial and material issues of fact that would require an evidentiary
hearing to resolve. In the absence of issues requiring an evidentiary hearing,
and upon a finding that a grant of the Citicasters Transfer Application (and the
associated waivers noted above) would serve the public interest, convenience and
necessity, the FCC, or the FCC's staff acting by delegated authority, will grant
the Citicasters Transfer Application. In the unlikely event that there are any
issues of fact which cannot be resolved without an evidentiary hearing, the FCC
could designate the Citicasters Transfer Application for such a hearing, and the
consummation of the Merger could be jeopardized due to the length of time
ordinarily required to complete such proceedings.
Within thirty days following FCC public notice of such a grant, parties in
interest may file a petition for reconsideration requesting that the FCC (or the
FCC's staff in the case of a staff grant), reconsider its action. Alternatively
in the case of a staff grant, parties in interest may within the same thirty-day
period file an "Application for Review" requesting that the FCC review and set
aside the staff grant. In the event of a staff grant, a party in interest could
take both actions, by first filing a petition for reconsideration with the staff
and later, within thirty days following public notice of the denial of that
petition, filing an Application for Review. In the case of a staff grant, the
FCC may also review the staff action on its own motion within forty days
following public notice of the staff's action. The FCC may review any of its own
actions on its own motion within thirty days following public notice of the
action.
Within thirty days of public notice of an action by the FCC (i) granting the
Citicasters Transfer Application, (ii) denying a petition for reconsideration of
such a grant or (iii) denying an Application for Review of a staff grant,
parties in interest may appeal the FCC's action to the U.S. Court of Appeals for
the District of Columbia Circuit.
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In the event that the Citicasters Transfer Application should be denied or
the requested waivers not granted by the FCC or its staff, Jacor and Citicasters
would have the same rights to seek reconsideration or review and to appeal as
set forth above with respect to adverse parties.
If the FCC does not, on its own motion, or upon a request by an interested
party for reconsideration or review, review a staff grant or its own action
within the time periods set forth above, an action by the FCC or its staff
granting the Citicasters Transfer Application would become final. The Merger
Agreement provides that if all other conditions to the Merger are satisfied or
waived, the parties are obligated to consummate the Merger upon the issuance of
an FCC grant of the Citicasters Transfer Application, even if such grant has not
become final.
LEGISLATION AND REGULATION OF TELEVISION OPERATIONS. Television stations
are regulated by the FCC pursuant to provisions of the Communications Act and
the FCC rules that are in many instances the same or similar to those applicable
to radio stations. Besides technical differences between television and radio,
principal variances in regulation relate to limits on national and local
ownership, LMAs and simulcasts, children's programming requirements, advanced
television service, signal carriage rights on cable systems, license terms,
"V-chip" technology and network/affiliate relations.
The current FCC rules prohibit combined local ownership or control of
television stations with overlapping "Grade B" service contours (unless
established waiver standards are met). The Telecom Act directs the FCC to
conduct a rule-making proceeding to determine whether to retain, modify or
eliminate these local television ownership rules. This rule making is presently
scheduled for completion by the end of 1996. The current FCC rules also prohibit
(with certain qualifications) any person or entity from having an attributable
interest in more than 12 full-power television stations, subject to a 25%
national audience reach limitation. Pursuant to the Telecom Act, the FCC by an
order released in March 1996 has modified this national television ownership
rule by eliminating the 12-station limit and permitting an entity to have an
attributable interest in an unlimited number of U.S. television stations so long
as such stations do not reach in the aggregate more than 35% of the national
television audience. Additionally, the rules prohibit (with certain
qualifications) the holder of an attributable interest in a television station
from also having an attributable interest in a radio station, daily newspaper or
cable television system serving a community located within the relevant coverage
area of that television station. As noted above, the radio/television
one-to-a-market rule is under review and the FCC also plans to review and
possibly modify its current broadcast/daily newspaper restriction. The Telecom
Act mandates the elimination of the restriction of network ownership of cable
systems which the FCC has adopted by an order released in March 1996. The FCC
will monitor the response to this change to determine if additional rule changes
are necessary to ensure nondiscriminatory carriage and channel positioning of
nonaffiliated broadcast stations by network-owned cable systems.
Presently, LMAs between television stations are not treated as attributable
interests and there is no restriction on same-market television simulcasts. The
FCC is considering in a pending rule-making proceeding whether to treat
television LMAs similar to radio LMAs for multiple ownership rule purposes. The
Citicasters television stations are not participants in LMAs.
The FCC is conducting a rule-making proceeding to consider proposals to
increase and quantify television stations' programming obligations under the FCC
rules implementing the Children's Television Act of 1990, which requires
television stations to present programming specifically directed to the
"educational and informational" needs of children under the age of 16.
The FCC is conducting a rule-making proceeding to devise a table of channel
allotments in connection with the introduction of advanced (or "high
definition") television service ("ATV"). The FCC has preliminarily decided to
allot a second broadcast channel to each full-power commercial television
station for ATV operation. According to this preliminary decision, stations
would be permitted to phase in their ATV operations over a period of several
years following adoption of a final table of allotments, after which they would
be required to surrender their non-ATV channel. During the past year, Congress
has considered proposals that would require incumbent broadcasters to bid at
auctions for the additional spectrum required
62
to effect a transition to ATV, or alternatively, would assign additional ATV
spectrum to incumbent broadcasters and require the early surrender of their
non-ATV channel for sale by public auction. It is not possible to predict if, or
when, any of these proposals will be adopted or the effect, if any, adoption of
such proposals would have on the Citicasters television stations.
FCC regulations implementing the Cable Television Consumer Protection and
Competition Act of 1992 (the "1992 Cable Act") require each television
broadcaster to elect, at three-year intervals beginning June 17, 1993, either to
(a) require carriage of its signal by cable systems in the station's market
("must-carry") or (b) negotiate the terms on which such broadcast station would
permit transmission of its signal by the cable systems within its market
("retransmission consent"). In a 2-1 decision issued on December 13, 1995, a
special three-judge panel of the U.S. District Court for the District of
Columbia upheld the constitutionality of the must-carry provisions. The District
Court's decision has been appealed to the U.S. Supreme Court, which will hear
the appeal during its 1996-1997 term, with a decision expected in the second
calendar quarter of 1997. In the meantime, the FCC's must-carry regulations
implementing the Cable Act remain in effect. Jacor cannot predict the outcome of
the Supreme Court review of the case.
Until the passage of the Telecom Act, television licenses were granted and
renewed for a maximum of five years. The Telecom Act amends the Communications
Act to provide that broadcast station licenses be granted, and thereafter
renewed, for a term not to exceed eight years, if the FCC finds that the public
interest, convenience, and necessity would be served. The Telecom Act also
requires the broadcast and cable industries to develop and transmit an encrypted
rating that would permit the blocking of violent or indecent video programming
and allow telephone companies to operate cable television systems in their own
service areas.
The Citicasters Cincinnati and Tampa television stations are both
CBS-network affiliates. Both are VHF stations. The FCC currently is reviewing
certain of its rules governing the relationship between broadcast television
networks and their affiliated stations. The FCC is conducting a rule-making
proceeding to examine its rules prohibiting broadcast television networks from
representing their affiliated stations for the sale of non-network advertising
time and from influencing or controlling the rates set by their affiliates for
the sale of such time. Separately, the FCC is conducting a rule-making
proceeding to consider the relaxation or elimination of its rules prohibiting
broadcast networks from (a) restricting their affiliates' right to reject
network programming; (b) reserving an option to use specified amounts of their
affiliates' broadcast time; and (c) forbidding their affiliates from
broadcasting the programming of another network; and to consider the relaxation
of its rule prohibiting network-affiliated stations from preventing other
stations from broadcasting the programming of their network.
PROPOSED CHANGES. The FCC has not yet implemented formally certain of the
changes to its rules necessitated by the Telecom Act. Moreover, the Congress and
the FCC have under consideration, and may in the future consider and adopt, new
laws, regulations and policies regarding a wide variety of matters that could,
directly or indirectly, (i) affect the operation, ownership and profitability of
the Company and its broadcast stations, (ii) result in the loss of audience
share and advertising revenues of the Company's radio broadcast stations, (iii)
affect the ability of the Company to acquire additional broadcast stations or
finance such acquisitions, (iv) affect current cooperative agreements and/or
financing arrangements with other radio broadcast licensees, or (v) affect the
Company's competitive position in relationship to other advertising media in its
markets. Such matters include, for example, changes to the license authorization
and renewal process; proposals to revise the FCC's equal employment opportunity
rules and other matters relating to minority and female involvement in
broadcasting; proposals to alter the benchmarks or thresholds for attributing
ownership interest in broadcast media; proposals to change rules or policies
relating to political broadcasting; changes to technical and frequency
allocation matters, including those relative to the implementation of digital
audio broadcasting on both a satellite and terrestrial basis; proposals to
restrict or prohibit the advertising of beer, wine and other alcoholic beverages
on radio; changes in the FCC's cross-interest, multiple ownership, alien
ownership and cross-ownership policies; proposals to allow greater telephone
company participation in the delivery of audio and video programming; proposals
to limit the tax deductibility of advertising expenses by advertisers; potential
auctions for ATV or non-ATV television spectrum; the implementation of "V-chip"
technology; and changes to children's television programming requirements,
signal carriage rights on cable systems and network affiliate relations.
63
Although Jacor believes the foregoing discussion is sufficient to provide
the reader with a general understanding of all material aspects of FCC
regulations that affect Jacor, it does not purport to be a complete summary of
all provisions of the Communications Act or FCC rules and policies. Reference is
made to the Communications Act, FCC rules and the public notices and rulings of
the FCC for further information.
ANTITRUST. Certain acquisitions by Jacor of broadcasting companies, radio
station groups or individual radio stations will be subject to review by the
Antitrust Division and the Federal Trade Commission pursuant to the provisions
of the HSR Act. Generally, acquisitions involving assets valued at $15.0 million
or more, and certain acquisitions of voting securities, come within the purview
of the HSR Act. Although it is likely that many proposed acquisitions will not
require the parties to the transactions to comply with the HSR Act, or if such
compliance is required, will result in rapid clearance by the antitrust
agencies, in certain instances, such as is the case with the Acquisitions, the
antitrust agencies may choose to investigate the proposed acquisition,
particularly if it appears that such acquisition will result in substantial
concentration within a specific market. Any decision by an antitrust agency to
challenge a proposed acquisition could affect the ability of Jacor to consummate
the proposed acquisition, or to consummate the acquisition on the proposed
terms.
Under the HSR Act and the rules promulgated thereunder, the Merger may not
be consummated until notifications have been given and certain information has
been furnished to the Antitrust Division and the FTC and specified waiting
period requirements have been satisfied. Jacor and Citicasters each filed with
the Antitrust Division and the FTC a Notification and Report Form (the
"Notification and Report Form") with
respect to the Merger on February 16, 1996.
The Antitrust Division and the FTC determine between themselves which agency
is to take a closer look at a proposed transaction. The Antitrust Division or
the FTC, as the case may be, may then issue a formal request for additional
information ("the Second Request"). Under the HSR Act, if a Second Request is
issued, the waiting period then would be extended and would expire at 11:59
p.m., on the twentieth calendar day after the date of substantial compliance by
both parties with such Second Request. Only one extension of the waiting period
pursuant to a request for additional information is authorized by the HSR Act.
Thereafter, such waiting period may be extended only by court order or with the
consent of the parties. In practice, complying with a request for additional
information or material can take a significant amount of time. In addition, if
the Antitrust Division or the FTC raises substantive issues in connection with a
proposed transaction, the parties frequently engage in negotiations with the
relevant governmental agency concerning possible means of addressing those
issues and may agree to delay consummation of the transaction while such
negotiations continue.
Jacor has received Second Requests for information from the Antitrust
Division of the Department of Justice relating to each of the Merger and the
Noble Acquisition which focus particularly on the Citicasters and Noble radio
stations in Cincinnati and Denver, respectively. The applicable waiting period
under the HSR Act for each of the Merger and the Noble Acquisition will expire
20 days after both parties in the applicable transaction substantially comply
with the Second Request relevant to that transaction, unless the parties agree
to extend the waiting period or the Antitrust Division seeks to, and is
successful in its efforts to, enjoin the applicable transaction. Jacor believes
that the parties have substantially complied with the Second Request relative to
the Merger, and anticipates that the applicable waiting period with respect to
the Merger will expire on June 7, 1996. The parties have not yet completed
compliance with the Second Request relevant to the Noble Acquisition. The
Antitrust Division has expressed concern regarding the possible effect of the
Merger in the Cincinnati market, and the parties to the Merger are having
ongoing discussions with the Antitrust Division to address those concerns. To
date the Antitrust Division has not expressed a substantive view of the Noble
Acquisition.
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CORPORATE HISTORY
Jacor, an Ohio corporation, began operations in January 1981 with the
acquisition of three small religious-format radio stations. Through 1986, Jacor
expanded its operations into progressively larger and more competitive markets
purchasing twelve stations in seven markets for an aggregate purchase price in
excess of $94.0 million. These acquisitions were financed primarily through
borrowings.
In January 1993, Jacor completed the restructuring of approximately $140.0
million of indebtedness. The restructuring principally consisted of (i) an
initial equity infusion of approximately $6.0 million by Zell/ Chilmark, (ii) a
conversion of approximately $81.5 million of debt into equity, (iii) a
conversion of every share of Jacor's common stock outstanding prior to the
restructuring into a fewer number of shares and warrants, (iv) a conversion of
every share of Jacor's preferred stock outstanding prior to the restructuring
into a fewer number of shares and warrants and (v) an increase in the authorized
capital stock to 44,000,000 shares.
In July 1993, Jacor completed the acquisition of radio station KAZY(FM) in
Denver, Colorado. Effective January 1, 1994, Jacor acquired an interest in
Critical Mass Media, Inc. ("CMM") from Jacor's President. In March 1994, Jacor
entered into an agreement to acquire the assets of radio station WPPT(FM)
(formerly WIMJ) in Cincinnati, Ohio. In May 1994, Jacor completed the sale of
the business and substantially all the assets of its wholly owned subsidiary,
Telesat Cable TV, Inc. In 1994, Jacor acquired the call letters, programming and
certain contracts of radio station KBPI(FM) in Denver, Colorado, the call
letters, programming and certain contracts of radio stations WCKY(AM) in
Cincinnati, Ohio, radio station KTLK(AM) in Denver, Colorado and radio station
WWST(FM) in Knoxville, Tennessee. In August 1995, Jacor acquired certain
operating assets of radio stations WDUV(FM) and WBRD(AM) in Tampa, Florida. In
1995, Jacor acquired the call letters, programming and certain contracts of
radio station WOFX(FM) in Cincinnati, Ohio, and acquired radio stations
WSOL(FM), WJBT(FM) and WZAZ(AM) in Jacksonville, Florida. See Notes 3 and 4 of
the Notes to Jacor's Consolidated Financial Statements.
ENERGY AND ENVIRONMENTAL MATTERS
Jacor's source of energy used in its broadcasting operations is electricity.
No limitations have been placed on the availability of electrical power, and
management believes its energy sources are adequate. Management believes that
Jacor is currently in material compliance with all statutory and administrative
requirements as related to environmental quality and pollution control.
EMPLOYEES
As of March 29, 1996, Jacor employed approximately 1,170 persons, 836 on a
full-time and 334 on a part-time basis. Each Jacor station has its own
complement of employees which generally include a general manager, sales
manager, operations manager, business manager, advertising sales staff, on-air
personalities and clerical personnel. No Jacor employee is represented by a
union.
PROPERTIES/FACILITIES
Jacor owns the office and studio facilities for WQIK(FM) and WJGR(AM) in
Jacksonville, Florida (6,875 square feet) and the office and studio facilities
for WFLZ(FM), WFLA(AM) and WDUV(FM) in Tampa, Florida (43,000 square feet).
Jacor leases space for the office and studio facilities at its other station
locations in Jacksonville, Florida (two sites of 4,567 and 5,000 square feet,
respectively); Atlanta (19,500 square feet); Denver (25,964 square feet);
Cincinnati (27,601 square feet) and Tampa (6,000 square feet). The two leases in
Jacksonville expire in 1997 and 1998, respectively. The Denver and Atlanta
leases expire in 1999 and 2007, respectively. The Cincinnati lease expires in
1998 and has two five-year renewal options. The small Tampa lease is a
month-to-month lease for WBRD-AM. Jacor leases approximately 10,000 square feet
for its corporate offices in Cincinnati under a lease expiring in 1996 with a
five-year renewal option. The office (500 square feet) for KHTS in San Diego,
California is a month-to-month lease. In conjunction with Jacor's acquisition of
radio station WOFX(FM) (formerly WPPT) in Cincinnati, Jacor purchased the
building from which such station previously operated. Jacor plans to sell this
building.
Expansion of Jacor's operations generally comes from the acquisition of
stations and their facilities and ordinarily does not create a need for
additional space at existing locations, although the emergence of LMAs
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and JSAs with other stations in Jacor's existing markets could create such a
need. Any future need for additional office and studio space at existing
locations will be satisfied by the construction of additions to the
Company-owned facilities and, in the case of leased facilities, the lease of
additional space or the relocation of the office and studio. Jacor's office and
studio facilities are all located in downtown or suburban office buildings and
are capable of being relocated to any suitable office facility in the station
market area.
Jacor owns the antenna tower and tower site for radio station WJBT(FM) in
Jacksonville, Florida. Jacor also owns the towers and tower site locations for
its AM stations in Atlanta, Denver, Jacksonville, Tampa and WLW(AM) in
Cincinnati. For the tower site at WCKY(AM), Cincinnati, and for all its other FM
stations, the Company leases tower space for its FM antennae under leases
expiring from 1996 to 2013. Jacor owns the real estate on which the tower sites
are located for XTRA-AM and XTRA-FM, stations to which Jacor provides
programming and for which it sells air time.
Jacor owns substantially all of its equipment, consisting principally of
transmitting antennae, transmitters, studio equipment and general office
equipment. The towers, antennae and other transmission equipment used by Jacor's
stations are in generally good condition. In management's opinion, the quality
of the signals range from good to excellent, and Jacor is committed to
maintaining and updating its equipment and transmission facilities in order to
achieve the best possible signal in the market area.
Although Jacor believes its properties are generally adequate for its
operations, opportunities to upgrade facilities are continuously reviewed.
See Notes 7 and 11 of Jacor's Notes to Consolidated Financial Statements
included elsewhere herein for a description of encumbrances against Jacor's
properties and Jacor's rental obligations.
LITIGATION
From time to time, Jacor becomes involved in various claims and lawsuits
that are incidental to its business. In the opinion of Jacor's management, there
are no material legal proceedings pending against Jacor.
66
MANAGEMENT
EXECUTIVE OFFICERS AND DIRECTORS
The directors and executive officers of Jacor are as follows:
NAME AGE POSITION
- --------------------------------------------- --- ------------------------------------------------------------
Sheli Z. Rosenberg........................... 54 Board Chair and Director
Randy Michaels............................... 44 President, Co-Chief Operating Officer and Director
Robert L. Lawrence........................... 43 Co-Chief Operating Officer and Director
R. Christopher Weber......................... 40 Senior Vice President, Chief Financial Officer and Secretary
Jon M. Berry................................. 49 Senior Vice President and Treasurer
John W. Alexander............................ 49 Director
Rod F. Dammeyer.............................. 55 Director
F. Philip Handy.............................. 51 Director
Marc Lasry................................... 36 Director
All directors hold office until the annual meeting of shareholders next
following their election, or until their successors are elected and qualified.
Officers are elected annually by the Board of Directors and serve at the
discretion of the Board.
The Board of Directors currently has two standing committees, the
Compensation Committee and the Audit Committee. The Compensation Committee
consists of three directors, Messrs. Dammeyer and Handy and Mrs. Rosenberg. The
basic function of the Compensation Committee is to determine stock option grants
to executive officers and other key employees, as well as to review salaries,
bonuses, and other elements of compensation of executive officers and other key
employees and make recommendations on such matters to the full Board of
Directors. The Audit Committee consists of three directors, Messrs. Alexander
and Dammeyer and Mrs. Rosenberg. The basic function of the Audit Committee is to
review the financial statements of the Company, to consult with Jacor's
independent auditors and to consider such other matters with respect to the
internal and external audit of the financial affairs of Jacor as may be
necessary or appropriate in order to facilitate accurate financial reporting.
Information with respect to the business experience and affiliations of the
directors and executive officers of Jacor is set forth below.
Sheli Z. Rosenberg was elected as Jacor's Board Chair in February 1996. She
is also the Chairman and a member of the law firm of Rosenberg & Liebentritt,
P.C. since 1980. Mrs. Rosenberg is also Chief Executive Officer, President and a
director of Equity Financial and Management Company and its parent successor
Equity Group Investments, Inc., a privately owned and affiliated investment and
management company. Mrs. Rosenberg is also a director of Great American
Management and Investment, Inc. ("GAMI"), a diversified manufacturing company,
and of Capsure Holdings Corp., and a trustee of Equity Residential Properties
Trust, a real estate investment trust. Mrs. Rosenberg is also a director of
Falcon Building Products, Inc.; American Classic Voyages Co.; CFI Industries,
Inc.; Eagle Industries, Inc.; Anixter International Inc.; Sealy Corporation; and
Revco D.S., Inc. Mrs. Rosenberg was a Vice President of Madison Management
Group, Inc., which filed a petition under the federal bankruptcy laws on
November 8, 1991. Mrs. Rosenberg was also a Vice President of First Capital
Benefits Administrators, Inc., a wholly owned indirect subsidiary of GAMI, which
filed a federal bankruptcy petition on January 3, 1995.
Randy Michaels, whose legal name is Benjamin L. Homel, has served as an
officer of Jacor since 1986. From July 1983 until he joined Jacor, Mr. Michaels
was executive vice president--programming and operations at Republic
Broadcasting Corporation (acquired by the Company in December 1986). Prior to
that time, Mr. Michaels served as national program director of Taft Broadcasting
Corporation's Radio Group (a predecessor of Citicasters).
Robert L. Lawrence has served as an officer of Jacor since 1986. From July
1983 until he joined Jacor, Mr. Lawrence was executive vice president--sales and
marketing at Republic Broadcasting Corporation. Prior to that time, Mr. Lawrence
was vice president and general manager of WYNF, Tampa, Florida, a station owned
by Taft Broadcasting Corporation's Radio Group (a predecessor of Citicasters).
67
R. Christopher Weber has served as an officer of Jacor since 1986. From
December 1985 until he joined Jacor, Mr. Weber was chief financial officer of
Republic Broadcasting Corporation. Prior to that time, Mr. Weber was employed by
the accounting firm of Peat Marwick & Mitchell.
Jon M. Berry has served as an officer of Jacor since 1982. From September
1979 until October 1982, Mr. Berry was controller of United Western Corporation,
a real estate holding company.
John W. Alexander has been president of Mallard Creek Capital Partners,
Inc., primarily an investment company with interests in real estate and
development entities, since February 1994. Mr. Alexander is a partner of
Meringoff Equities, a real estate investment and development company. Mr.
Alexander has also served as a Trustee of Equity Residential Properties Trust, a
real estate investment trust, since May 1993.
Rod F. Dammeyer is President and Chief Executive Officer of Anixter
International Inc. (formerly known as Itel Corporation), a Chicago-based
value-added provider of integrated networking and cabling solutions. Mr.
Dammeyer has been President and a director of Anixter International since 1985,
and Chief Executive Officer since 1993; and he has been President and Chief
Executive Officer since February 1994 and Director since 1992 of Great American
Management and Investment, Inc., a diversified manufacturing company. He is a
member of the boards of directors of ANTEC Corporation, Capsure Holdings Corp.;
Falcon Building Products, Inc.; IMC Global, Inc.; Lukens, Inc.; Revco D.S.,
Inc.; and Sealy Corporation. Mr. Dammeyer is also a trustee of several Van
Kampen American Capital, Inc. trusts.
F. Philip Handy has been President of Winter Park Capital Company, a private
investment firm, since 1980. Mr. Handy is a director of Anixter International,
Inc.; GAMI; Q-Tel, S.A. de C.V.; and Banca Quadrum, S.A. (formerly Servicios
Financieros Quadrum, S.A.).
Marc Lasry has been the Executive Vice President of Amroc Investments, Inc.,
a private investment firm, since 1990. Mr. Lasry was the Director and Senior
Vice President of the corporation reorganization department of Cowen & Co., a
privately owned brokerage firm, from 1987 to 1989. From January 1989 to
September 1990, he was a portfolio manager for Amroc Investments, L.P., a
private investment firm.
There are no family relationships among any of the above-named directors nor
among any of the directors and any executive officers of Jacor.
68
PRINCIPAL SHAREHOLDERS
The following table sets forth, as of May 31, 1996, as adjusted to give
effect to the issuance of Common Stock in the 1996 Stock Offering, the number of
shares and percentage of Common Stock beneficially owned by each person who is
known to Jacor to be the beneficial owner of more than 5% of Jacor Common Stock,
by each of Jacor's directors and nominees for election as directors, by Jacor's
executive officers and by all of Jacor's executive officers and directors as a
group.
BENEFICIAL OWNERS AND MANAGEMENT
AMOUNT AND
NATURE OF PERCENT
BENEFICIAL OF
NAME OF BENEFICIAL OWNER OWNERSHIP(1) CLASS(2)
- -------------------------------------------------- -------------- --------
5% OR MORE BENEFICIAL OWNERS
Zell/Chilmark Fund L.P. .......................... 13,349,720(3) 44.0%
David M. Schulte.................................. 13,349,720(4) 44.0%
Samuel Zell....................................... 13,349,720(4) 44.0%
MANAGEMENT
John W. Alexander................................. 33,000(5) *
Rod F. Dammeyer................................... 13,362,720(4)(6) 44.1%
F. Philip Handy................................... 56,000(7) *
Marc Lasry........................................ 23,000(5) *
Robert L. Lawrence................................ 498,093(8) 1.7%
Randy Michaels.................................... 673,805(9)(10) 2.2%
Sheli Z. Rosenberg................................ 13,352,720(4)(11) 44.0%
R. Christopher Weber.............................. 466,954(10)(12) 1.6%
Jon M. Berry...................................... 250,095(10)(13) *
All executive officers and directors as a group (9
persons)......................................... 14,900,707(14) 47.1%
- ------------------------------
*Less than 1%
(1) The Commission has defined beneficial ownership to include sole or shared
voting or investment power with respect to a security or the right to
acquire beneficial ownership of a security within 60 days. The number of
shares indicated is owned with sole voting and investment power unless
otherwise noted and includes certain shares held in the name of family
members, trusts and affiliated companies as to which beneficial ownership
may be disclaimed. The number of shares indicated includes shares of Jacor
Common Stock issuable pursuant to options granted under Jacor's 1993 Stock
Option Plan and which have vested.
(2) Under rules promulgated by the Commission, any securities not outstanding
that are subject to options or warrants exercisable within 60 days are
deemed to be outstanding for the purpose of computing the percentage of the
class owned by such person but are not deemed to be outstanding for the
purpose of computing the percentage of the class owned by any other person.
(3) The address of Zell/Chilmark is Two North Riverside Plaza, Suite 600,
Chicago, Illinois 60606. Zell/Chilmark is a Delaware limited partnership
controlled by Samuel Zell and David M. Schulte, former directors of the
Company, as follows: the sole general partner of Zell/Chilmark is ZC Limited
Partnership ("ZC Limited"); the sole general partner of ZC Limited is ZC
Partnership; the sole general partners of ZC Partnership are ZC, Inc. and
CZ, Inc.; Mr. Zell is the sole shareholder of ZC, Inc.; and Mr. Schulte is
the sole shareholder of CZ, Inc. Of the shares beneficially owned by
Zell/Chilmark, 629,117 are shares issuable pursuant to warrants owned by
Zell/Chilmark.
(4) All shares beneficially owned by Zell/Chilmark (see Note (3) above) are
included in the shares beneficially owned by Messrs. Zell, Schulte and
Dammeyer and Mrs. Rosenberg, who constitute all of the members of the
management committee of Z/C Limited. The address of Mr. Schulte is Two North
Riverside Plaza, Suite 1500, Chicago, Illinois 60606. The address of Mr.
Zell is Two North Riverside Plaza, Suite 600, Chicago, Illinois 60606. Mr.
Schulte indirectly shares beneficial ownership of a 20% limited partnership
interest in ZC Limited, and Mr. Zell indirectly shares beneficial ownership
of an 80% limited partnership interest in ZC Limited.
(5) Includes vested options to purchase 13,000 shares.
69
(6) Includes vested options to purchase 13,000 shares. Mr. Dammeyer indirectly
shares beneficial ownership of an 80% limited partnership interest in ZC
Limited. See Note (3) above.
(7) Includes vested options to purchase 13,000 shares. Mr. Handy indirectly
shares beneficial ownership of an 80% limited partnership interest in ZC
Limited. See Note (3) above. Also includes 13,000 shares held by H.H.
Associates Trust of which Mr. Handy is co-trustee.
(8) Includes vested options to purchase 491,060 shares and 3,556 shares
issuable pursuant to warrants. Of the shares indicated, 637 shares
(including 481 shares issuable pursuant to warrants) are owned by members of
Mr. Lawrence's family.
(9) Includes 118,997 shares issuable pursuant to warrants and vested options to
purchase 431,000 shares. The number of shares indicated includes shares and
warrant shares held as co-trustee under the Jacor Communications, Inc.
Retirement Plan (the "Retirement Plan"). See Note (10) below. Also includes
15 shares and 58 warrants owned by Mr. Michaels' wife, as to which Mr.
Michaels disclaims beneficial ownership. Does not include 300,000 shares
subject to a contingent right of acquisition held by a corporation owned by
Mr. Michaels.
(10) Includes 233,024 shares (including 112,820 shares issuable pursuant to
warrants) held under the Retirement Plan with respect to which Messrs.
Michaels, Weber and Berry, as co-trustees, share voting and investment
power. Of these 233,005 shares, 9,093 shares (including 5,033 shares
issuable pursuant to warrants) are beneficially owned by the named
executives.
(11) Includes vested options to purchase 3,000 shares.
(12) Includes 112,801 shares issuable pursuant to warrants and vested options to
purchase 232,250 shares. The number of shares indicated includes shares and
warrant shares held as co-trustee under the Retirement Plan. See Note (10)
above.
(13) Includes 112,801 shares issuable pursuant to warrants and vested options to
purchase 16,835 shares. The number of shares indicated includes shares and
warrant shares held as co-trustee under the Retirement Plan. See Note (10)
above.
(14) Includes 639,136 shares issuable pursuant to warrants, vested options to
purchase 1,226,145 shares and 233,005 shares (including 112,801 shares
issuable pursuant to warrants not included in the 639,136 above) held under
the Retirement Plan.
No agreements, formal or informal, exist among the various officers and
directors to vote their shares collectively.
70
DESCRIPTION OF LYONS
The LYONs are to be issued under an indenture to be dated as of June ,
1996 (the "Indenture"), between Jacor and The Bank of New York, as trustee (the
"Trustee"), a copy of which is filed as an exhibit to the Registration Statement
of which this Prospectus is a part. The terms of the Indenture are also governed
by certain provisions contained in the Trust Indenture Act of 1939, as amended
(the "Trust Indenture Act"). The following summaries of certain provisions of
the LYONs and the Indenture do not purport to be complete and are subject to,
and are qualified in their entirety by reference to, all of the provisions of
the LYONs and the Indenture, including the definitions therein of certain terms
which are not otherwise defined in this Prospectus and those terms made a part
of the Indenture by reference to the Trust Indenture Act as in effect on the
date of the Indenture. Wherever particular provisions or defined terms of the
Indenture (or of the Form of LYON which is a part thereof) are referred to, such
provisions or defined terms are incorporated herein by reference. References
herein are to sections in the Indenture and paragraphs in the Form of LYON.
GENERAL
The LYONs will be senior unsecured general obligations of Jacor limited to
$225,000,000 aggregate principal amount at maturity ($258,750,000 aggregate
principal amount at maturity if the Underwriter's over-allotment option is
exercised in full) and will mature on , 2011. The principal amount at
maturity of each LYON is $1,000 and will be payable at the office of the Paying
Agent, initially the Trustee, or an office or agency maintained by Jacor for
such purpose in the Borough of Manhattan, The City of New York. (Sections 2.03,
2.04 and 4.05 and Form of LYON, paragraph 3.)
The LYONs are being offered at a substantial discount from their principal
amount at maturity. See "Certain United States Federal Income Tax
Considerations--Original Issue Discount." There will be no periodic payments of
interest. The calculation of the accrual of Original Issue Discount (the
difference between the Issue Price and the principal amount at maturity of a
LYON) in the period during which a LYON remains outstanding will be on a
semiannual bond equivalent basis using a 360-day year composed of twelve 30-day
months; such accrual will commence on the issue date of the LYONs. (Form of
LYON, paragraph 1.) In the event of the maturity, conversion, purchase by the
Company at the option of a Holder, or redemption of a LYON, Original Issue
Discount and interest, if any, will cease to accrue on such LYON, under the
terms and subject to the conditions (summaries of which are set forth below) of
the Indenture. (Section 3.08.) Jacor may not reissue a LYON that has matured or
been converted, purchased by Jacor at the option of a Holder, redeemed or
otherwise cancelled (except for registration of transfer, exchange or
replacement thereof). (Section 2.10.)
To the extent that the operations of Jacor are conducted through, and the
assets of Jacor are owned by, wholly owned subsidiaries, Jacor's cash flow and
consequent ability to meet its debt obligations are dependent in part upon the
earnings of its subsidiaries and on dividends and other payments therefrom.
Since the LYONs are solely an obligation of Jacor, Jacor's subsidiaries are not
obligated or required to pay any amounts due pursuant to the LYONs or to make
funds available therefor in the form of dividends or advances to Jacor.
The LYONs will be issued only in fully registered form, without coupons, in
denominations of $1,000 of principal amount at maturity or an integral multiple
thereof. (Form of LYON, paragraph 10.) Jacor will maintain in the Borough of
Manhattan, The City of New York, an office or agency of the Trustee, Registrar,
Paying Agent and Conversion Agent where LYONs may be presented or surrendered
for payment, where LYONs may be surrendered for registration of transfer,
exchange, purchase, redemption or conversion and where notices and demands to or
upon Jacor in respect of the LYONs and the Indenture may be served, which shall
initially be the corporate trust office of the Trustee in such Borough. (Section
4.05.) Jacor will not charge a service charge for any registration of transfer
or exchange of LYONs; however, Jacor may require payment by a Holder of a sum
sufficient to cover any tax, assessment or other governmental charge payable in
connection therewith. (Section 2.06.)
71
RANKING OF LYONS; EFFECT OF CORPORATE STRUCTURE
The LYONs will be senior unsecured general obligations of Jacor, ranking
equally with other senior unsecured obligations of Jacor. The Indenture does not
contain any provisions that limit the ability of Jacor or any of its
subsidiaries to incur indebtedness or to grant security interests or liens in
respect of their assets or that afford Holders protection in the event of a
highly leveraged or similar transaction involving Jacor.
Jacor is a holding company. Accordingly, the LYONs will be effectively
subordinated to all existing and future liabilities, including trade payables,
of Jacor's subsidiaries, except to the extent Jacor is a creditor of the
subsidiaries recognized as such. Any right of Jacor as an equity holder to
participate in any distribution of the assets of any of Jacor's subsidiaries
upon the liquidation, reorganization or insolvency of such subsidiaries (and the
consequent right of Holders to participate in such distribution) will be subject
to the claims of the creditors (including trade creditors) and any preferred
shareholders of such subsidiary. As of March 31, 1996, Jacor had $183.5 million
of senior secured indebtedness outstanding which is effectively senior in right
of payment to the LYONs. On a pro forma basis as of March 31, 1996, after giving
effect to the Acquisitions and the Financing, long-term debt (excluding
intercompany obligations) of Jacor's subsidiaries, to which the LYONs would have
been effectively subordinated, totaled approximately $625.0 million, and
accounts payable and accrued liabilities totaled approximately $39.1 million.
Jacor and its subsidiaries expect to incur additional indebtedness from time to
time.
The LYONs are obligations exclusively of Jacor. Substantially all of Jacor's
business activities and assets are operated or held by its subsidiaries. As a
holding company, Jacor's ability to meet its financial obligations, including
its obligations under the LYONs, is dependent primarily upon the receipt of
interest and principal payments on intercompany advances, management fees, cash
dividends and other payments from its subsidiaries. The subsidiaries are
distinct legal entities and have no obligation, contingent or otherwise, to pay
any amounts due pursuant to the LYONs or to make any funds available therefor,
whether by dividends, interest, loans, advances or other payments. In addition,
the payment of dividends and the making of loans, advances and other payments to
Jacor by its subsidiaries may be subject to statutory or contractual
restrictions, are contingent upon the earnings of those subsidiaries and are
subject to various business and other considerations.
CONVERSION RIGHTS
A Holder of a LYON may convert it into Common Stock at any time before the
close of business on , 2011, provided, however, that if a LYON is
called for redemption, the Holder may convert it at any time before the close of
business on the Redemption Date. A LYON in respect of which a Holder has
delivered a written purchase notice (a "Purchase Notice") or a Change in Control
Purchase Notice exercising the option of such Holder to require Jacor to
purchase such LYON may be converted only if such notice is withdrawn in
accordance with the terms of the Indenture. (Sections 3.08, 3.09 and 3.10 and
Form of LYON, paragraph 8.)
The initial Conversion Rate for the LYONs is shares of Common Stock per
LYON, subject to adjustment upon the occurrence of certain events described
below. (Form of LYON, paragraph 8.) See "Price Range of Common Stock." A Holder
otherwise entitled to a fractional share of Common Stock will receive cash equal
to the then current market value of such fractional share based on the closing
Sale Price on the Trading Day immediately preceding the Conversion Date.
(Section 10.03 and Form of LYON, paragraph 8.) A Holder may convert a portion of
such Holder's LYONs so long as such portion is $1,000 principal amount at
maturity or an integral multiple thereof. (Section 10.01 and Form of LYON,
paragraph 8.)
To convert a LYON into Common Stock, a Holder must (i) complete and manually
sign the conversion notice on the back of the LYON (or complete and manually
sign a facsimile thereof) and deliver such notice to the Conversion Agent
(initially the Trustee) at the office maintained by the Conversion Agent for
such purpose, (ii) surrender the LYON to the Conversion Agent, (iii) if
required, furnish appropriate endorsements and transfer documents, and (iv) if
required, pay all transfer or similar taxes. Pursuant to the Indenture, the date
on which all of the foregoing requirements have been satisfied is the Conversion
Date. (Sections 10.02 and 10.04 and Form of LYON, paragraph 8.)
72
Upon conversion of a LYON, a Holder will not receive any cash payment
representing accrued Original Issue Discount. Jacor's delivery to the Holder of
the fixed number of shares of Common Stock into which the LYON is convertible
(together with the cash payment, if any, in lieu of a fractional share of Common
Stock) will be deemed to satisfy Jacor's obligation to pay the principal amount
of the LYON, including the accrued Original Issue Discount attributable to the
period from the Issue Date through the Conversion Date. Thus, the accrued
Original Issue Discount will be deemed to be paid in full rather than cancelled,
extinguished or forfeited. The Conversion Rate will not be adjusted at any time
during the term of the LYONs for such accrued Original Issue Discount. Jacor
does not undertake to advise Holders of the amount of accrued Original Issue
Discount foregone upon conversion. A certificate for the number of full shares
of Common Stock into which any LYON is converted (and for cash in lieu of a
fractional share of Common Stock) will be delivered through the Conversion Agent
as soon as practicable following the Conversion Date. (Sections 2.08 and 10.02.)
For a discussion of the tax treatment of a Holder receiving Common Stock upon
conversion, see "Certain United States Federal Income Tax
Consequences--Disposition or Conversion."
The Conversion Rate will be adjusted for dividends or distributions on
Common Stock payable in Common Stock or other capital stock of Jacor;
subdivisions, combinations or certain reclassifications of Common Stock;
distributions to all holders of Common Stock of certain rights, warrants or
options to purchase Common Stock or securities convertible into Common Stock for
a period expiring within 60 days after the record date for such distribution at
a price per share less than the Sale Price at the time of determination; and
distributions to all holders of Common Stock of assets or debt securities of
Jacor or rights, warrants or options to purchase securities of Jacor (excluding
cash dividends or other cash distributions from consolidated current net income
or retained earnings other than any Extraordinary Cash Dividend). However, no
adjustment need be made (i) if Holders may participate in the transactions on a
basis and with notice that the Board of Directors of Jacor determines to be fair
and appropriate, (ii) for rights to purchase Common Stock pursuant to a Jacor
dividend or interest reinvestment plan, (iii) for changes in the par value of
the Common Stock or (iv) unless such adjustment, together with any other
adjustments similarly deferred, equals at least 1% of the then current
Conversion Rate. In cases where the fair market value of the portion of assets,
debt securities or rights, warrants or options to purchase securities of Jacor
applicable to one share of Common Stock distributed to stockholders exceeds the
Average Sale Price per share of Common Stock, or such Average Sale Price exceeds
such fair market value of such portion of assets, debt securities or rights,
warrants or options so distributed by less than $1.00, rather than being
entitled to an adjustment in the Conversion Rate, the Holder of a LYON upon
conversion thereof will be entitled to receive, in addition to the shares of
Common Stock into which such LYON is convertible, the kind and amounts of
assets, debt securities or rights, options or warrants comprising the
distribution that such Holder would have received if such Holder had converted
such LYON immediately prior to the record date for determining the shareholders
entitled to receive the distribution. The Indenture permits Jacor to increase
the Conversion Rate from time to time at its discretion. (Sections 10.06, 10.07,
10.08, 10.10, 10.12 and 10.14 and Form of LYON, paragraph 8.)
"AVERAGE SALE PRICE" means the average of the Sale Prices of the Common
Stock for the shorter of (i) 30 consecutive Trading Days ending on the last full
Trading Day prior to the Time of Determination with respect to the rights,
options, warrants or distribution in respect of which the Average Sale price is
being calculated, or (ii) the period (x) commencing on the date next succeeding
the first public announcement of (a) the issuance of rights, options or warrants
or (b) the distribution, in each case, in respect of which the Average Sale
Price is being calculated and (y) proceeding through the last full trading day
prior to the Time of Determination with respect to the rights, warrants or
distribution in respect of which the Average Sale Price is being calculated, or
(iii) the period,if any, (x) commencing on the date next succeeding the Ex-
Dividend Time with respect to the next preceding (a) issuance of rights,
warrants, or options or (b) distribution, in each case, for which an adjustment
is required by the Indenture and (y) proceeding through the last full Trading
Day prior to the Time of Determination with respect to the rights, warrants, or
options or distribution in respect to which the Average Sale Price is being
calculated.
If the Ex-Dividend Time (or in the case of a subdivision, combination or
reclassification, the effective date with respect thereto) with respect to a
dividend, subdivision, combination or reclassification to which certain sections
of the Indenture apply occurs during the period applicable for calculating
"Average Sale
73
Price" pursuant to the definition in the preceding sentence, "Average Sale
Price" shall be calculated for such period in a manner determined by the Board
of Directors to reflect the impact of such dividend, subdivision, combination or
reclassification on the Sale Price of the Common Stock during such period.
"TIME OF DETERMINATION" means the time and date of the earlier of (i) the
determination of stockholders entitled to receive rights, warrants, or options
or a distribution, in each case, to which certain sections of the Indenture
apply and (ii) the time "EX-DIVIDEND" trading for such rights, options, warrants
or distribution on the Nasdaq National Market or such other national or regional
exchange or market on which the Common Stock is then listed or quoted.
If Jacor is party to a consolidation, merger or binding share exchange or a
transfer of all or substantially all of its assets which is otherwise permitted
under the terms of the Indenture, the right to convert a LYON into Common Stock
may be changed into a right to convert it into the kind and amount of
securities, cash or other assets of Jacor which the Holder would have received
if the Holder had converted such Holder's LYONs immediately prior to the
transaction. (Section 10.14.)
In the event of a taxable distribution to holders of Common Stock which
results in an adjustment of the Conversion Rate (or in which Holders otherwise
participate) or in the event the Conversion Rate is increased at the discretion
of Jacor, the Holders of the LYONs may, in certain circumstances, be deemed to
have received a distribution subject to United States Federal income tax as a
dividend. See "Certain United States Federal Income Tax
Consequences--Constructive Dividend."
REDEMPTION OF LYONS AT THE OPTION OF JACOR
No sinking fund is provided for the LYONs. Prior to , 2001, the
LYONs will not be redeemable at the option of Jacor. Thereafter, Jacor may
redeem the LYONs for cash as a whole at any time, or from time to time in part,
upon not less than 30 days' nor more than 60 days' notice of redemption given by
mail to Holders of LYONs. Any such redemption must be in multiples of $1,000
principal amount at maturity. (Sections 3.01, 3.02 and 3.03 and Form of LYON,
paragraphs 5 and 7.)
The table below shows Redemption Prices of a LYON per $1,000 principal
amount at maturity on , 2001, at each thereafter prior to
maturity, and at maturity on , 2011, which prices reflect the accrued
Original Issue Discount calculated through each such date. The Redemption Price
of a LYON redeemed between such dates would include an additional amount
reflecting the additional Original Issue Discount accrued from the next
preceding date in the table through the actual Redemption Date. (Form of LYON,
paragraph 5.)
(2)
(1) ACCRUED ORIGINAL (3)
LYON ISSUE DISCOUNT REDEMPTION PRICE
REDEMPTION DATE ISSUE PRICE AT % (1) + (2)
- ------------------------------------------------------- ----------- ---------------- ----------------
, 2001...................................... $ $ $
, 2002......................................
, 2003......................................
, 2004......................................
, 2005......................................
, 2006......................................
, 2007......................................
, 2008......................................
, 2009......................................
, 2010......................................
At maturity............................................
If fewer than all of the LYONs are to be redeemed, the Trustee shall select
the LYONs to be redeemed in principal amounts at maturity of $1,000 or integral
multiples thereof by lot, pro rata or by another method the Trustee considers
fair and appropriate. If a portion of a Holder's LYONs is selected for partial
redemption and such Holder converts a portion of such LYONs prior to such
redemption, such converted portion shall be deemed to be of the portion selected
for redemption. (Section 3.02.)
74
In connection with any redemption of the LYONs, Jacor may arrange, in lieu
of redemption, for the purchase and conversion of any LYONs called for
redemption by an agreement with one or more investment bankers or other
purchasers to purchase all or a portion of such LYONs by paying to the Trustee
in trust for the Holders whose LYONs are to be so purchased, on or before the
close of business on the Redemption Date, an amount that, together with any
amounts deposited with the Trustee by Jacor for redemption of such LYONs, is not
less than the Redemption Price, together with interest, if any, accrued to the
Redemption Date, of such LYONs.
PURCHASE OF LYONS AT THE OPTION OF THE HOLDER
On , 2001 and , 2006 (each, a "Purchase Date"), Jacor will
become obligated to purchase, at the option of the Holder thereof, any
outstanding LYON for which a written Purchase Notice has been delivered by the
Holder to the Paying Agent or an office or agency maintained by Jacor for such
purpose in the Borough of Manhattan, The City of New York, at any time from the
opening of business on the date that is 20 business days preceding such Purchase
Date until the close of business on such Purchase Date and for which such
Purchase Notice has not been withdrawn, subject to certain additional conditions
set forth in part in the following paragraphs. (Section 3.08 and Form of LYON,
paragraph 6.)
The table below shows the Purchase Prices of a LYON as of the specified
Purchase Dates:
PURCHASE DATE PURCHASE PRICE
- -------------------------------------------------------------------- --------------
, 2001.................................................. $
, 2006.................................................. $
The Purchase Price payable in respect of a LYON will be equal to the Issue
Price plus accrued Original Issue Discount through the Purchase Date, with
respect to each Purchase Date. Jacor, at its option, may elect to pay such
Purchase Price in cash or Common Stock, or any combination thereof. (Section
3.08 and Form of LYON, paragraph 6.) For a discussion of the tax treatment of
such a transaction, see "Certain United States Federal Income Tax
Consequences--Disposition or Conversion."
Jacor will be required to give notice (the "Jacor Notice") not less than 20
business days prior to each Purchase Date (the "Jacor Notice Date") to all
Holders at their addresses shown in the register of the Registrar (and to
beneficial owners as required by applicable law) stating, among other things
(specifying the percentages of each), (i) whether Jacor will pay the Purchase
Price of the LYONs in cash or Common Stock, or any combination thereof, (ii) if
Jacor elects to pay in Common Stock, in whole or in part, the method of
calculating the market price of the Common Stock, and (iii) the procedures that
Holders must follow to require Jacor to purchase LYONs from such Holders.
(Section 3.08.)
The Purchase Notice given by any Holder requiring Jacor to purchase LYONs
shall state (i) the certificate numbers of the LYONs to be delivered by such
Holder for purchase by Jacor; (ii) the portion of the principal amount at
maturity of LYONs to be purchased, which portion must be $1,000 or an integral
multiple thereof; (iii) that such LYONs are to be purchased by Jacor pursuant to
the applicable provisions of the LYONs; and (iv) if Jacor elects, pursuant to
the Jacor Notice, to pay a specified percentage of the Purchase Price in Common
Stock but such specified percentage is ultimately to be paid in cash because any
of the conditions to payment of such specified percentage of the Purchase Price
in Common Stock contained in the Indenture is not satisfied prior to the close
of business on the Purchase Date, as described below, that such Holder elects
(a) to withdraw such Purchase Notice as to some or all of the LYONs to which it
relates (stating the principal amount at maturity and certificate numbers of the
LYONs as to which such withdrawal shall relate) or (b) to receive cash in
respect of the Purchase Price of all LYONs subject to such Purchase Notice. If
the Holder fails to indicate such Holder's choice with respect to the election
described in clause (iv) above in the Purchase Notice, such Holder shall be
deemed to have elected to receive cash for the specified percentage that was to
have been payable in Common Stock. (Section 3.08.) See "Certain United States
Federal Income Tax Consequences--Disposition or Conversion."
Any Purchase Notice may be withdrawn by the Holder by a written notice of
withdrawal delivered to the Paying Agent prior to the close of business on the
Purchase Date. The notice of withdrawal shall state the principal amount at
maturity and the certificate numbers of the LYONs as to which the withdrawal
notice relates and the principal amount at maturity, if any, which remains
subject to the Purchase Notice. (Section 3.10)
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If Jacor elects to pay the Purchase Price, in whole or in part, in shares of
Common Stock, the number of shares of Common Stock to be delivered in respect of
the specified percentage of the Purchase Price to be paid in Common Stock shall
be equal to the dollar amount of such specified percentage of the Purchase Price
divided by the Market Price (as defined below) of a share of Common Stock. No
fractional interests in shares of Common Stock will be delivered upon any
purchase by Jacor of LYONs in payment, in whole or in part, of the Purchase
Price. Instead, Jacor will pay cash based on the Market Price for all fractional
shares of Common Stock. (Section 3.08.) Each Holder whose LYONs are purchased at
the option of such Holder as of the Purchase Date shall receive the same
percentage of cash or Common Stock in payment of the Purchase Price for such
LYONs, except as described above with regard to the payment of cash in lieu of
fractional shares of Common Stock. See "Certain United States Federal Income Tax
Considerations--Disposition or Conversion."
The "Market Price" means the average of the Sale Price of the Common Stock
for the five Trading Day (as defined below) period ending on the third Trading
Day prior to the applicable Purchase Date, appropriately adjusted to take into
account the occurrence, during the seven Trading Days preceding such Purchase
Date, of certain events described under "--Conversion Rights" that would result
in an adjustment of the Conversion Rate with respect to the Common Stock.
(Section 3.08.) The "Sale Price" of the Common Stock on any Trading Day means
the closing per share sale price for the Common Stock (or, if no closing sale
price is reported, the average of the bid and ask prices or, if more than one in
either case the average of the average bid and average ask prices) on such
Trading Day as reported in composite transactions for the principal United
States securities exchange on which the Common Stock is traded or, if the Common
Stock is not listed on a United States national or regional securities exchange,
as reported by the National Association of Securities Dealers Automated
Quotation System. A "Trading Day" means each day on which the securities
exchange or quotation system which is used to determine the Sale Price is open
for trading or quotation. (Section 1.01.) Because the Market Price of the Common
Stock is determined prior to a Purchase Date, Holders of LYONs bear the market
risk with respect to the value of the Common Stock to be received from the date
such Market Price is determined to the Purchase Date. Jacor may pay the Purchase
Price, in whole or in part, in Common Stock only if the information necessary to
calculate the Market Price is reported in a daily newspaper of national
circulation. (Section 3.08.)
Upon determination of the actual number of shares of Common Stock issuable
in accordance with the foregoing provisions, Jacor will publish such
determination in a daily newspaper of national circulation. (Section 3.08.)
Jacor's right to purchase LYONs, in whole or in part, with Common Stock is
subject to the satisfaction by Jacor of various conditions, including: (i) the
registration of the Common Stock under the Securities Act and the Exchange Act,
if required; and (ii) any necessary qualification or registration under
applicable state securities law or the availability of an exemption from such
qualification and registration. If such conditions are not satisfied with
respect to a Holder or Holders prior to the close of business on the Purchase
Date, Jacor will pay, without further notice, the Purchase Price of the LYONs of
such Holder or Holders entirely in cash. (Section 3.08.) See "Certain United
States Federal Income Tax Consequences--Disposition or Conversion". Jacor may
not change the form of consideration (or components or percentages of components
thereof) to be paid once Jacor has given its Jacor Notice to Holders of LYONs
except as described in the second sentence of this paragraph. (Section 3.08.)
Jacor will comply with the provisions of Rule 13e-4, Rule 14e-1, and any
other tender offer rules under the Exchange Act which may then be applicable and
will file Schedule 13E-4 or any other schedule required thereunder in connection
with any offer by Jacor to purchase LYONs at the option of Holders. (Section
3.13.)
Payment of the Purchase Price for a LYON for which a Purchase Notice has
been delivered and not validly withdrawn is conditioned upon delivery of such
LYON (together with necessary endorsements) to the Paying Agent or an office or
agency maintained by Jacor for such purpose in the Borough of Manhattan, The
City of New York, at any time (whether prior to, on or after the Purchase Date)
after delivery of such Purchase Notice. (Section 3.08.) Payment of the Purchase
Price for such LYON will be made promptly following the later of the business
day following the Purchase Date and the time of delivery of such LYON. (Section
3.10.) If the Paying Agent holds, in accordance with the terms of the Indenture,
money or securities
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sufficient to pay the Purchase Price of such LYON on the business day following
the Purchase Date, then, on and after the Purchase Date, such LYON will cease to
be outstanding and Original Issue Discount on such LYON will cease to accrue and
will be deemed paid, whether or not such LYON is delivered to the Paying Agent,
and all other rights of the Holder shall terminate (other than the right to
receive the Purchase Price upon delivery of such LYON). (Section 2.08.)
Jacor's ability to purchase LYONs with cash may be limited by the terms of
its then-existing borrowing agreements. No LYONs may be purchased at the option
of Holders for cash if there has occurred and is continuing an Event of Default
described under "Events of Default; Notice and Waiver" below (other than a
default in the payment of the Purchase Price with respect to such LYONs).
(Section 3.10.)
CHANGE IN CONTROL PERMITS PURCHASE OF LYONS AT THE OPTION OF THE HOLDER
In the event of any Change in Control (as defined below) of Jacor occurring
on or prior to , 2001, each Holder of LYONs will have the right, at the
Holder's option, subject to the terms and conditions of the Indenture which will
be contained in the notice described in the following paragraph, to require
Jacor to purchase all or any part (provided that the principal amount at
maturity must be $1,000 or an integral multiple thereof) of the Holder's LYONs
on the date that is 35 business days after the occurrence of such Change in
Control (the "Change in Control Purchase Date") at a cash price equal to the
Issue Price plus accrued Original Issue Discount through the Change in Control
Purchase Date (the "Change in Control Purchase Price"). (Section 3.09 and Form
of LYON, paragraph 6.) Holders will not have any right to require Jacor to
purchase LYONs in the event of any Change in Control of Jacor occurring after
, 2001.
Within 15 business days after the Change in Control, Jacor shall mail to the
Trustee and to each Holder (and to beneficial owners as required by applicable
law) a notice regarding the Change in Control, which notice shall state, among
other things: (i) the date of such Change in Control and, briefly, the events
causing such Change in Control, (ii) the date by which the Change in Control
Purchase Notice (as defined below) must be given, (iii) the Change in Control
Purchase Date, (iv) the Change in Control Purchase Price, (v) the name and
address of the Paying Agent and the Conversion Agent, (vi) the Conversion Rate
and any adjustments thereto, (vii) that LYONs with respect to which a Change in
Control Purchase Notice is given by the Holder may be converted into shares of
Common Stock only if the Change in Control Purchase Notice has been withdrawn by
the Holder in accordance with the procedures stated in the notice, (viii) the
procedures that Holders must follow to exercise these rights, (ix) the
procedures for withdrawing a Change in Control Purchase Notice, (x) that Holders
who want to convert LYONs must satisfy the requirements set forth in paragraph 9
of the LYONs and (xi) briefly, the conversion rights of Holders of LYONs. Jacor
will cause a copy of such notice to be published in a daily newspaper of
national circulation. (Section 3.09.)
To exercise the purchase right, the Holder must deliver written notice of
the exercise of such right (a "Change in Control Purchase Notice") to the Paying
Agent or an office or agency maintained by Jacor for such purpose in the Borough
of Manhattan, The City of New York, prior to the close of business on the Change
in Control Purchase Date. The Change in Control Purchase Notice shall state (i)
the certificate numbers of the LYONs to be delivered by the Holder thereof for
purchase by Jacor; (ii) the portion of the principal amount at maturity of LYONs
to be purchased, which portion must be $1,000 or an integral multiple thereof;
and (iii) that such LYONs are to be purchased by Jacor pursuant to the
applicable provisions of the LYONs. (Section 3.09.)
Any Change in Control Purchase Notice may be withdrawn by the Holder by a
written notice of withdrawal delivered to the Paying Agent prior to the close of
business on the Change in Control Purchase Date. The notice of withdrawal shall
state the principal amount at maturity and the certificate numbers of the LYONs
as to which the withdrawal notice relates and the principal amount at maturity,
if any, which remains subject to a Change in Control Purchase Notice. (Section
3.10.)
Payment of the Change in Control Purchase Price for a LYON for which a
Change in Control Purchase Notice has been delivered and not withdrawn is
conditioned upon delivery of such LYON (together with necessary endorsements) to
the Paying Agent or an office or agency maintained by Jacor for such purpose in
the Borough of Manhattan, The City of New York, at any time (whether prior to,
on or after the Change in Control Purchase Date) after the delivery of such
Change in Control Purchase Notice. (Section 3.09.)
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Payment of the Change in Control Purchase Price for such LYON will be made
promptly following the later of the business day following the Change in Control
Purchase Date and the time of delivery of such LYON. (Section 3.10.) If the
Paying Agent holds, in accordance with the terms of the Indenture, money
sufficient to pay the Change in Control Purchase Price of such LYON on the
business day following the Change in Control Purchase Date, then, on and after
the Change in Control Purchase Date, such LYON will cease to be outstanding and
Original Issue Discount on such LYON will cease to accrue and will be deemed
paid, whether or not such LYON is delivered to the Paying Agent, and all other
rights of the Holder shall terminate (other than the right to receive the Change
in Control Purchase Price upon delivery of such LYON). (Section 2.08 and Form of
LYON, paragraph 6.)
Under the Indenture, a "Change in Control" of Jacor is deemed to have
occurred at such time as (i) any person (as the term "person" is used in Section
13(d)(3) or Section 14(d)(2) of the Exchange Act) other than Zell/Chilmark,
Jacor, any subsidiary of Jacor, or any employee benefit plan of either Jacor or
any Subsidiary of Jacor, files a Schedule 13D or 14D-1 under the Exchange Act
(or any successor schedule, form or report) disclosing that such person has
become the beneficial owner of 50% or more of the Common Stock or other capital
stock of Jacor into which such Common Stock is reclassified or changed, with
certain exceptions, or (ii) there shall be consummated any consolidation or
merger of Jacor (a) in which Jacor is not the continuing or surviving
corporation or (b) pursuant to which the Common Stock would be converted into
cash, securities or other property, in each case, other than a consolidation or
merger of Jacor in which the holders of Common Stock immediately prior to the
consolidation or merger own, directly or indirectly, at least a majority of
Common Stock of the continuing or surviving corporation immediately after the
consolidation or merger. The Indenture does not permit the Board of Directors to
waive Jacor's obligation to purchase LYONs at the option of a Holder in the
event of a Change in Control of Jacor. (Section 3.09.) A Change of Control under
the LYONs indenture is expected to constitute an event of default under the New
Credit Facility. See"--New Credit Facility."
It is expected that a change of control under the indenture which governs
each of the Notes, the Citicasters Notes and the LYONs will result in a default
under the Existing Credit Agreement and the New Credit Facility, as applicable.
Additionally, unless JCAC is successful in seeking consents from its lenders
under the Existing Credit Agreement and the New Credit Facility, as applicable
to consummate change of control repurchase offers for each of the Notes, the
Citicasters Notes or the LYONs or JCAC is successful in refinancing such
borrowings such event of default under the New Credit Facility would constitute
an event of default under each of the Notes, the Citicasters Notes and the
LYONs. Such events of default could result in the immediate acceleration of all
then outstanding indebtedness under each of the Notes, Citicasters Notes and
LYONs. As a result, differences in the definitions of change of control under
the indenture for the Notes and the Citicasters Notes and the LYONs will not
result in a difference in the effect on JCAC or the respective holders other
than where the lenders under the New Credit Facility have waived such event of
default. In the event of such waiver there could be a change of control under
the Notes and the Citicasters Notes which would not result in a change of
control under the LYONs or VICE VERSA. See "Description of Other Indebtedness."
Jacor will comply with the provisions of Rule 13e-4, Rule 14e-1 and any
other tender offer rules under the Exchange Act which may then be applicable,
and will file Schedule 13E-4 or any other schedule required thereunder in
connection with any offer by Jacor to purchase LYONs at the option of the
Holders thereof upon a Change in Control. (Section 3.13.) The Change in Control
purchase feature of the LYONs may in certain circumstances make more difficult
or discourage a takeover of Jacor and, thus, the removal of incumbent
management. The Change in Control purchase feature, however, is not the result
of management's knowledge of any specific effort to accumulate shares of Common
Stock or to obtain control of Jacor by means of a merger, tender offer,
solicitation or otherwise, or part of a plan by management to adopt a series of
anti-takeover provisions. Instead, the Change in Control purchase feature is a
standard term contained in other LYONs offerings that have been marketed by the
Underwriter, and the terms of such feature result from negotiations between
Jacor and the Underwriter.
Jacor could, in the future, enter into certain transactions, including
certain recapitalizations of Jacor, that would not consititute a Change in
Control with respect to the Change in Control purchase feature of the LYONs, but
that would increase the amount of indebtedness outstanding at such time. If a
Change in
78
Control were to occur, there can be no assurance that Jacor would have funds
sufficient to pay the Change in Control Purchase Price for all of the LYONs that
might be delivered by Holders seeking to exercise the purchase right since Jacor
might also be required to prepay certain other indebtedness having financial
covenants with change of control provisions in favor of the holders thereof. In
addition, a Change in Control under the Indenture will result in a default under
the New Credit Facility and the Existing Credit Facility, and thereby could
cause the acceleration of the maturity of the indebtedness represented by the
Notes and the Citicasters Notes. In addition, Jacor's ability to purchase LYONs
with cash may be limited by the terms of its then-existing borrowing agreements.
No LYONs may be purchased pursuant to the provisions described above if there
has occurred and is continuing an Event of Default described under "Events of
Default; Notice and Waiver" below (other than a default in the payment of the
Change in Control Purchase Price with respect to such LYONs). (Section 3.10.)
MERGERS AND SALES OF ASSETS BY JACOR
Jacor may consolidate with or merge into, or transfer or lease its assets
substantially as an entirety to any corporation organized under the laws of any
domestic jurisdiction, provided that (i) the successor corporation assumes
Jacor's obligations on the LYONs and under the Indenture and (ii) after giving
effect to the transaction no Event of Default, and no event which, after notice
or lapse of time would become an Event of Default, shall have occurred and be
continuing. (Section 5.01.) Certain of the foregoing transactions, if they occur
on or prior to , 2001, could constitute a Change in Control of Jacor
permitting each Holder to require Jacor to purchase the LYONs of such Holder as
described above. (Section 3.09.)
EVENTS OF DEFAULT; NOTICE AND WAIVER
The Indenture provides that, if an Event of Default specified therein shall
have happened and be continuing, either the Trustee or the Holders of not less
than 25% in aggregate principal amount at maturity of the LYONs then outstanding
may declare the Issue Price of the LYONs plus Original Issue Discount on the
LYONs accrued through the date of default (in the case of an Event of Default
specified in (i) or (ii) of the following paragraph) or to the date of such
declaration (in the case of an Event of Default specified in (iii) or (iv) of
the following paragraph) on all the LYONs to be immediately due and payable. In
the case of certain events of bankruptcy or insolvency, the Issue Price of the
LYONs plus the Original Issue Discount accrued thereon to the occurrence of such
event shall automatically become and be immediately due and payable. Under
certain circumstances, the Holders of a majority in aggregate principal amount
at maturity of the outstanding LYONs may rescind any such acceleration with
respect to the LYONs and its consequences. (Sections 6.02 and 6.04.) Interest
shall, to the extent permitted by law, accrue and be payable on demand upon a
default in the payment of principal amount at maturity, Issue Price, accrued
Original Issue Discount, Redemption Price, Purchase Price, Change in Control
Purchase Price with respect to any LYON and such interest shall be compounded
semi-annually. (Section 6.01.) The accrual of such interest on overdue amounts
shall be in lieu of, and not in addition to, the continued accrual of Original
Issue Discount. (Form of LYON, paragraph 1.)
Under the Indenture, Events of Default include: (i) default in payment of
the principal amount at maturity, Issue Price, accrued Original Issue Discount,
Redemption Price, Purchase Price or Change in Control Purchase Price with
respect to any LYON, when the same becomes due and payable (whether or not such
payment is prohibited by the provisions of the Indenture); (ii) failure by Jacor
to deliver shares of Common Stock (or cash in lieu of a fractional share of
Common Stock) when such Common Stock (or cash in lieu of a fractional share of
Common Stock) is required to be delivered following conversion of a LYON and
continuance of such default for 10 days; (iii) failure by Jacor to comply with
any of its other agreements in the LYONs or the Indenture upon the receipt by
Jacor of notice of such default from the Trustee or from Holders of not less
than 25% in aggregate principal amount at maturity of the LYONs then outstanding
and Jacor's failure to cure such default within 60 days after receipt by Jacor
of such notice; and (iv) default (A) in the payment of any principal on any debt
for borrowed money of Jacor or any subsidiary of Jacor (excluding any
non-recourse debt), in an aggregate principal amount in excess of $10.0 million,
that results in such debt becoming or being declared due and payable prior to
the date on which it would otherwise become due and payable, unless (x) such
acceleration or action to enforce payment, as the case may be, has been
rescinded or annulled, (y) such debt has been discharged or (z) a sum sufficient
to discharge in full such debt has been deposited in trust by or on behalf of
Jacor, in each case, within a period of 10 days after there has been given,
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by registered or certified mail, to Jacor by the Trustee or to Jacor and the
Trustee by the Holders of at least 25% in aggregate principal amount at maturity
of the LYONs, a written notice specifying such default or defaults and stating
that such notice is a "Notice of Default" or (v) certain events of bankruptcy or
insolvency. (Section 6.01.)
The Trustee shall, within 90 days after the occurrence of any default, mail
to all Holders of the LYONs notice of all defaults of which the Trustee shall be
aware, unless such defaults shall have been cured or waived before the giving of
such notice; provided, that the Trustee may withhold such notice as to any
default other than a payment default, if it determines in good faith that
withholding the notice is in the interests of the Holders. (Section 6.12.)
The Holders of a majority in aggregate principal amount at maturity of the
outstanding LYONs may direct the time, method and place of conducting any
proceeding for any remedy available to the Trustee or exercising any trust or
power conferred on the Trustee, provided that such direction shall not be in
conflict with any law or the Indenture and subject to certain other limitations.
(Section 6.05.) The Trustee may refuse to perform any duty or exercise any right
or power or extend or risk its own funds or otherwise incur any financial
liability unless it receives indemnity satisfactory to it against any loss,
liability or expense. (Section 7.01.) No Holder of any LYON will have any right
to pursue any remedy with respect to the Indenture or the LYONs, unless (i) such
Holder shall have previously given the Trustee written notice of a continuing
Event of Default; (ii) the Holders of at least 25% in aggregate principal amount
at maturity of the outstanding LYONs shall have made a written request to the
Trustee to pursue such remedy; (iii) such Holder or Holders shall have offered
to the Trustee reasonable security or indemnity against any loss, liability or
expense satisfactory to it; (iv) the Trustee shall have failed to comply with
the request within 60 days after receipt of such notice, request and offer of
security or indemnity; and (v) the Holders of a majority in aggregate principal
amount at maturity of the outstanding LYONs shall not have given the Trustee a
direction inconsistent with such request within 60 days after receipt of such
request. (Section 6.06.)
The right of any Holder: (a) to receive payment of the principal amount at
maturity, Issue Price, accrued Original Issue Discount, Redemption Price,
Purchase Price, Change in Control Purchase Price or interest, if any, in respect
of the LYONs held by such Holder on or after the respective due dates expressed
in the LYONs or as of any Redemption Date, (b) to convert such LYONs or (c) to
bring suit for the enforcement of any such payment on or after such respective
dates or the right to convert, shall not be impaired or adversely affected
without such Holder's consent. (Section 6.07.)
The Holders of a majority in aggregate principal amount at maturity of LYONs
at the time outstanding may waive any existing default and its consequences
except (i) any default in any payment on the LYONs, (ii) any default with
respect to the conversion rights of the LYONs, or (iii) any default in respect
of certain covenants or provisions in the Indenture which may not be modified
without the consent of the Holder of each LYON as described in "Modification"
below. When a default is waived, it is deemed cured and shall cease to exist,
but no such waiver shall extend to any subsequent or other default or impair any
consequent right. (Section 6.04.)
Jacor will be required to furnish to the Trustee annually a statement as to
any default by Jacor in the performance and observance of its obligations under
the Indenture. In addition, Jacor shall file with the Trustee written notice of
the occurrence or any default or Event of Default within five business days of
its becoming aware of such default or Event of Default. (Section 4.03.)
MODIFICATION
Modification and amendment of the Indenture or the LYONs may be effected by
Jacor and the Trustee with the consent of the Holders of not less than a
majority in aggregate principal amount at maturity of the LYONs then
outstanding. However, without the consent of each Holder affected thereby, no
amendment may, among other things, (i) reduce the principal amount at maturity,
Issue Price, Purchase Price, Change in Control Purchase Price or Redemption
Price with respect to any LYON, or extend the stated maturity of any LYON or
alter the manner or rate of accrual of Original Issue Discount or interest, or
make any LYON payable in money or securities other than that stated in the LYON;
(ii) make any reduction in the principal amount at maturity of LYONs whose
Holders must consent to an amendment or any waiver under the
80
Indenture or modify the Indenture provisions relating to such amendments or
waivers; (iii) make any change that adversely affects the right to convert any
LYON or the right to require Jacor to purchase a LYON; or (iv) impair the right
to institute suit for the enforcement of any payment with respect to, or
conversion of, the LYONs. (Section 9.02.)
Without the consent of any Holder of LYONs, Jacor and the Trustee may amend
the Indenture to (i) cure any ambiguity, defect or inconsistency, provided,
however, that such amendment does not materially adversely affect the rights of
any Holder, (ii) provide for the assumption by a successor to the Company of the
obligations of Jacor under the Indenture, (iii) provide for uncertificated LYONs
in addition to certificated LYONs, as long as such uncertificated LYONs are in
registered form for United States federal income tax purposes, (iv) make any
change that does not adversely affect the rights of any Holder of LYONs, or (v)
add to the covenants or obligations of Jacor under the Indenture or surrender
any right, power or option conferred by the Indenture on Jacor. (Section 9.01.)
DISCHARGE OF THE INDENTURE
Jacor may satisfy and discharge its obligations under the Indenture by
delivering to the Trustee for cancellation all outstanding LYONs or by
depositing with the Trustee, the Paying Agent or the Conversion Agent, if
applicable, after the LYONs have become due and payable, whether at stated
maturity, or any Redemption Date, or any Purchase Date, a Change of Control
Purchase Date, or upon conversion or otherwise, cash or Common Stock (as
applicable under the terms of the Indenture) sufficient to pay all of the
outstanding LYONs and paying all other sums payable under the Indenture by
Jacor. (Article 8.)
NO RECOURSE AGAINST OTHERS
The Indenture provides that a director, officer, employee or stockholder, as
such, of Jacor shall not have any liability for any obligations of Jacor under
the LYONs or the Indenture or for any claim based on, in respect of or by reason
of such obligations or their creation.
LIMITATIONS OF CLAIMS IN BANKRUPTCY
If a bankruptcy proceeding is commenced in respect of Jacor, under Title 11
of the United States Code, the claim of the Holder of a LYON may be limited to
the Issue Price of the LYON plus that portion of the Original Issue Discount
that is deemed to have accrued from the date of issue to the commencement of the
proceeding. In addition, the Holders of the LYONs will be effectively
subordinated to all indebtedness and other obligations of Jacor's subsidiaries.
TAXATION OF LYONS
See "Certain United States Federal Income Tax Considerations" for a
discussion of certain United States Federal income tax aspects which will apply
to Holders of LYONs.
INFORMATION CONCERNING THE TRUSTEE
The Bank of New York is the Trustee, Registrar, Paying Agent and Conversion
Agent under the Indenture.
BOOK-ENTRY, DELIVERY AND FORM
Except as set forth below, the LYONs will initially be issued in the form of
one or more registered LYONs in global form (the "Global LYONs"). Each Global
LYON will be deposited on the date of the closing of the sale of the LYONs (the
"Closing Date") with, or on behalf of, The Depository Trust Company (the
"Depositary") and registered in the name of Cede & Co., as nominee of the
Depositary.
DTC is a limited-purpose trust company organized under the New York Banking
Law, a "banking organization" within the meaning of the New York Banking Law, a
member of the Federal Reserve System, a "clearing corporation" within the
meaning of the New York Uniform Commercial Code, and a "clearing agency"
registered pursuant to the provisions of Section 17A of the Exchange Act. DTC
holds securities that its participants ("Participants") deposit with DTC. DTC
also facilitates the settlement among Participants of securities transactions,
such as transfers and pledges, in deposited securities through electronic
computerized book-entry changes in Participants' accounts, thereby eliminating
the need for physical movement of securities certificates. Direct Participants
include securities brokers and dealers, banks, trust companies, clearing
corporations, and certain other organizations ("Direct Participants"). DTC is
owned by a number of
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its Direct Participants and by the NYSE, the American Stock Exchange, Inc. and
the National Association of Securities Dealers, Inc. Access to the DTC system is
also available to others such as securities brokers and dealers, banks and trust
companies that clear through or maintain a custodial relationship with a Direct
Participant, either directly or indirectly ("Indirect Participants"). The rules
applicable to DTC and its Participants are on file with the SEC.
Jacor expects that pursuant to procedures established by the Depositary (i)
upon deposit of the Global LYONs, the Depositary will credit the accounts of
Participants designated by the Underwriters with an interest in the Global LYON
and (ii) ownership of the LYONs evidenced by the Global LYON will be shown on,
and the transfer of ownership thereof will be effected only through, records
maintained by the Depositary (with respect to the interests of Participants),
the Participants and the Indirect Participants. The laws of some states require
that certain persons take physical delivery in definitive form of securities
that they own and that security interests in negotiable instruments can only be
perfected by delivery of certificates representing the instruments.
Consequently, the ability to transfer LYONs evidenced by the Global LYON will be
limited to such extent.
So long as the Depositary or its nominee is the registered owner of a LYON,
the Depositary or such nominee, as the case may be, will be considered the sole
owner or holder of the LYONs represented by the Global LYON for all purposes
under the Indenture. Except as provided below, owners of beneficial interests in
a Global LYON will not be entitled to have LYONs represented by such Global LYON
registered in their names, will not receive or be entitled to receive physical
delivery of Certificated LYONs, and will not be considered the owners or holders
thereof under the Indenture for any purpose, including with respect to the
giving of any directions, instructions or approvals to the Trustee thereunder.
As a result, the ability of a person having a beneficial interest in LYONs
represented by a Global LYON to pledge such interest to persons or entities that
do not participate in the Depositary's system, or to otherwise take actions with
respect to such interest, may be affected by the lack of a physical certificate
evidencing such interest.
Neither the Company nor the Trustee will have any responsibility or
liability for any aspect of the records relating to or payments made on account
of LYONs by the Depositary, or for maintaining, supervising or reviewing any
records of the Depositary relating to such LYONs.
Payments with respect to the principal of, premium, if any, interest on, any
LYON represented by a Global LYON registered in the name of the Depositary or
its nominee on the applicable record date will be payable by the Trustee to or
at the direction of the Depositary or its nominee in its capacity as the
registered Holder of the Global LYON representing such LYONs under the
Indenture. Under the terms of the Indenture, Jacor and the Trustee may treat the
persons in whose names the LYONs, including the Global LYONs, are registered as
the owners thereof for the purpose of receiving such payments and for any and
all other purposes whatsoever. Consequently, neither Jacor nor the Trustee has
or will have any responsibility or liability for the payment of such amounts to
beneficial owners of LYONs (including principal, premium, if any or interest),
or to immediately credit the accounts of the relevant Participants with such
payment, in amounts proportionate to their respective holdings in principal
amount of beneficial interests in the Global LYON as shown on the records of the
Depositary. Payments by the Participants and the Indirect Participants to the
beneficial owners of LYONs will be governed by standing instructions and
customary practice and will be the responsibility of the Participants or the
Indirect Participants.
CERTIFICATED NOTES
If (i) Jacor notifies the Trustee in writing that the Depositary is no
longer willing or able to act as a depositary and Jacor is unable to locate a
qualified successor within 90 days or (ii) Jacor, at its option, notifies the
Trustee in writing that it elects to cause the issuance of LYONs in definitive
form under the Indenture, then, upon surrender by the Depositary of the Global
LYONs, Certificated LYONs will be issued to each person that the Depositary
identifies as the beneficial owner of the LYONs represented by Global LYONs. In
addition, subject to certain conditions, any person having a beneficial interest
in a Global LYON may, upon request to the Trustee, exchange such beneficial
interest for LYONs in the form of Certificated LYONs. Upon any such issuance,
the Trustee is required to register such Certificated LYONs in the name of such
person or persons (or the nominee of any thereof), and cause the same to be
delivered thereto.
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Neither Jacor nor the Trustee shall be liable for any delay by the
Depositary or any Participant or Indirect Participant in identifying the
beneficial owners of the LYONs, and Jacor and the Trustee may conclusively rely
on, and shall be protected in relying on, instructions from the Depositary for
all purposes (including with respect to the registration and delivery, and the
respective principal amounts, of the LYONs to be issued).
The information in this section concerning the Depositary and the
Depositary's book-entry system has been obtained from sources that Jacor
believes to be reliable. Jacor will have no responsibility for the performance
by the Depositary or its Participants of their respective obligations as
described hereunder or under the rules and procedures governing their respective
operations.
SAME-DAY FUNDS SETTLEMENT AND PAYMENT
The Indenture will require that payments in respect of the LYONs represented
by the Global LYONs (including principal, premium, if any, and interest) be made
by wire transfer of immediately available funds to the accounts specified by the
Depositary. With respect to LYONs represented by Certificated LYONs, Jacor will
make all payments of principal, premium, if any, and interest, by mailing a
check to each such Holder's registered address. The LYONs will trade in the
Depositary's Same-Day Funds Settlement System until maturity, or until the LYONs
are issued in certificated form, and secondary market trading activity in the
LYONs will therefore be required by the Depositary to settle in immediately
available funds. No assurance can be given as to the effect, if any, of
settlement in immediately available funds on trading activity in the LYONs.
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DESCRIPTION OF CAPITAL STOCK
Jacor's existing Amended and Restated Articles of Incorporation authorizes
44,000,000 shares of capital stock, of which 40,000,000 are no par value common
stock and 4,000,000 are divided into two classes of no par value preferred
stock, designated the Class A Preferred Stock and the Class B Preferred Stock,
each with 2,000,000 shares authorized. At the 1994 Jacor annual meeting of
shareholders, the Jacor shareholders approved an increase in the number of
authorized shares of Jacor Common Stock to 100,000,000 shares. Following that
annual meeting, Jacor's management elected to not immediately file such
amendment to the Jacor Amended and Restated Articles of Incorporation until such
time as Jacor identified a specific purpose for those additional shares.
At the 1996 Annual Meeting of Jacor shareholders scheduled for July, 1996,
the Jacor shareholders will vote upon a proposal to reincorporate Jacor under
the laws of the State of Delaware (the "Reincorporation"). The Reincorporation
would be accomplished by way of a statutory merger under the laws of Delaware
and Ohio. Zell/Chilmark has informed Jacor that it will vote in favor of the
Reincorporation, and such votes would be sufficient to approve the
Reincorporation. The Reincorporation of Jacor is also conditional upon the
receipt of prior FCC approval. Jacor anticipates that the Reincorporation will
occur as proposed by the Jacor Board.
Following the consummation of the Reincorporation, Jacor's new Certificate
of Incorporation will authorize 104,000,000 shares of capital stock, of which
100,000,000 shares will be common stock, $.01 par value, 2,000,000 shares will
be Class A Preferred Stock, $.01 par value and 2,000,000 shares will be Class B
Preferred Stock, $.01 par value. Upon the consummation of the Reincorporation,
each outstanding share of Common Stock then outstanding will automatically be
converted into a share of the resulting Delaware corporation's common stock. As
of May 31, 1996, 18,439,694 shares of Jacor Common Stock were issued and
outstanding.
COMMON STOCK
Under Jacor's existing Amended and Restated Articles of Incorporation and
Ohio law, the holders of Common Stock have no preemptive rights, and the Common
Stock has no redemption, sinking fund, or conversion privileges. The holders of
Common Stock are entitled to one vote for each share held on any matter
submitted to the shareholders and, upon timely written request, may cumulate
their votes in the election of directors. Under cumulative voting, each
shareholder is entitled to give one candidate as many votes as the number of
directors to be elected multiplied by the number of such holder's shares, or the
shareholder may distribute votes on the same principle, as such shareholder sees
fit. All corporate action requiring shareholder approval, unless otherwise
required by law, Jacor's Amended and Restated Articles of Incorporation or its
Amended and Restated Code of Regulations, must be authorized by a majority of
the votes cast. Under Ohio law, approval by a two-thirds vote of the outstanding
voting shares is required to effect (i) an amendment to Jacor's Amended and
Restated Articles of Incorporation or its Amended and Restated Code of
Regulations, (ii) a merger or consolidation, and (iii) a disposition of all or
substantially all of Jacor's assets.
In the event of liquidation, each share of Common Stock is entitled to share
ratably in the distribution of remaining assets after payment of all debts,
subject to the prior rights in liquidation of any share of preferred stock
issued. Holders of shares of Common Stock are entitled to share ratably in such
dividends as the Board of Directors, in its discretion, may validly declare from
funds legally available therefor, subject to the prior rights of holders of
shares of Jacor's preferred stock as may be outstanding from time to time.
Certain restrictions on the payment of dividends are imposed under the Existing
Credit Facility and will be imposed under the New Credit Facility. See "Risk
Factors -- Lack of Dividends; Restriction on Payment of Dividends."
Upon the consummation of the Reincorporation, under Jacor's new Certificate
of Incorporation and Delaware law, the holders of Common Stock will continue to
have the various rights, and the Common Stock will continue to have the various
features, set forth above, except (i) the holders of shares of Common Stock will
not have the right to cumulate their votes in the election of directors
(accordingly, the holders of a
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majority of the voting power of Jacor will be able to elect all of the directors
of Jacor after the Reincorporation), (ii) approval of only a majority of the
outstanding voting shares will be required to effect (a) an amendment to Jacor's
Certificate of Incorporation, (b) a merger or consolidation, and (c) a
disposition of all or substantially all of Jacor's assets, and (iii) a majority
of the directors on the Jacor Board, as well as a majority of the outstanding
voting shares, will have the ability to amend the Jacor Bylaws.
CLASS A AND CLASS B PREFERRED STOCK
No shares of Jacor's Class A Preferred Stock or Class B Preferred Stock
(together with the Class A Preferred Stock, the "Preferred Stock") have been
issued. The Class A Preferred Stock has full voting rights. The Class B
Preferred Stock has no voting rights except as otherwise provided by law or as
lawfully fixed by the Board of Directors with respect to a particular series.
Under Ohio law, the Jacor Board may provide the Class B Preferred Stock with
only limited or no voting rights.
Jacor's Amended and Restated Articles of Incorporation authorize the Jacor
Board to provide from time to time for the issuance of the shares or Preferred
Stock in series by adopting an amendment to the Amended and Restated Articles of
Incorporation and to establish the terms of each such series, including (i) the
number of shares of the series and the designation thereof, (ii) the rights in
respect of dividends on the shares, (iii) liquidation rights, (iv) redemption
rights, (v) the terms of any purchase, retirement or sinking fund to be provided
for the shares of the series, (vi) terms of conversion, if any, (vii)
restrictions, limitations and conditions, if any, on issuance of indebtedness of
Jacor, and (viii) any other preferences and other rights and limitations not
inconsistent with law, the Amended and Restated Articles of Incorporation, or
any resolution of the Jacor Board.
Upon the consummation of the Reincorporation, under Jacor's new Certificate
of Incorporation and Delaware law, the holders of Preferred Stock will continue
to have the various rights, and the Preferred Stock will continue to have the
various features, set forth above with the exception of the manner in which the
directors may fix the terms of a series of the Preferred Stock and the terms
which may be so fixed. Under Delaware law, the Jacor Board will be able to fix
the terms of a series of Preferred Stock by resolution, as opposed to an actual
amendment to the Certificate of Incorporation, as under Ohio law. In addition,
under Delaware law, the Jacor Board will have the authority to provide for
different voting rights between series of Preferred Stock whereas, under Ohio
law the Jacor Board does not have this right.
The issuance of Preferred Stock, while providing flexibility in connection
with the possible acquisitions and other corporate purposes, could among other
things adversely affect the rights of holders of Common Stock, and, under
certain circumstances, make it more difficult for a third party to gain control
of Jacor. In the event that shares of Preferred Stock are issued as convertible
into shares of Common Stock, the holders of Common Stock may experience
dilution.
STATE ANTITAKEOVER STATUTES
CHAPTER 1704 OF THE OHIO REVISED CODE. Jacor is subject to Chapter 1704 of
the Ohio Revised code. In general, such statute prohibits an "Issuing Public
Corporation" from engaging in a "Chapter 1704 Transaction" with an "Interested
Shareholder" for a period of three years following the date on which the person
became an Interested Shareholder unless, prior to such date, the directors of
the Issuing Public Corporation approve either the Chapter 1704 Transaction or
the acquisition of shares pursuant to which such person become an Interested
Shareholder. Jacor is an Issuing Public Corporation for purposed of the statute.
An Interested Shareholder is any person who is the beneficial owner of a
sufficient number of shares to allow such person, directly or indirectly, alone
or with others, including affiliates and associates, to exercise or direct the
exercise of 10% of the voting power of the Issuing Public Corporation in the
election of directors.
A Chapter 1704 Transaction includes any merger, consolidation, combination,
or majority share acquisition between or involving an Issuing Public Corporation
and an Interested Shareholder or an affiliate or associate of an Interested
Shareholder. A Chapter 1704 Transaction also includes certain transfers of
property, dividends and issuance or transfers of shares, from or by an Issuing
Public Corporation or a subsidiary of an Issuing Public Corporation to, with or
for the benefit of an Interested Shareholder of an affiliate or associate of an
Interested Shareholder unless such transaction is in the ordinary course of
business of the Issuing Public Corporation on terms no more favorable to the
Interested Shareholder than
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those acceptable to third parties as demonstrated by contemporaneous
transactions. Finally, Chapter 1704 Transactions include certain transactions
which (i) increase the proportionate share ownership of an Interested
Shareholder, (ii) result in the adoption of a plan or proposal for the
dissolution, winding up of the affairs or liquidation of the Issuing Public
Corporation if such plan is proposed by or on behalf of the Interested
Shareholder, or (iii) pledge or extend the credit or financial resources of the
Issuing Public Corporation to or for the benefit of the Interested Shareholder.
After the initial three-year moratorium has expired, an Issuing Public
Corporation may engage in a Chapter 1704 Transaction if (i) the acquisition of
shares pursuant to which the person became an Interested Shareholder received
the prior approval of the board of directors of the Issuing Public Corporation,
(ii) the Chapter 1704 Transaction is approved by the affirmative vote of the
holders of shares representing at least two-thirds of the voting power of the
Issuing Public Corporation and by the holders of shares representing at least a
majority of voting shares which are not beneficially owned by an Interested
Shareholder or an affiliate or associate of an Interested Shareholder, or (iii)
the Chapter 1704 Transaction meets certain statutory tests designed to ensure
that it be economically fair to all shareholders. This statute could prohibit or
delay mergers or other takeover or change in control attempts with respect to
Jacor and, accordingly, may discourage attempts to acquire Jacor.
SECTION 203 OF DELAWARE CORPORATION LAW. Upon consummation of the
Reincorporation, Jacor will be subject to the "business combination" statute of
the Delaware General Corporation Law (Section 203). In general, such statute
prohibits a publicly held Delaware corporation from engaging in various
"business combination" transaction with any "interested stockholder" for a
period of three years after the date of the transaction in which the person
became an "interested stockholder," unless (i) such transaction is approved by
the Board of Directors prior to the date the interested stockholder obtains such
status, (ii) upon consummation of the transaction the interested stockholder
beneficially owned at least 85% of the voting stock of the corporation
outstanding at the time the transaction commenced, excluding for purposes of
determining the number of shares outstanding those shares owned by (a) persons
who are directors and also officers and (b) employee stock plans in which
employee participants do not have the right to determine confidentially whether
shares held subject to the plan will be tendered in a tender or exchange offer,
or (iii) the "business combination" is approved by the Board of Directors and
authorized at an annual or special meeting of stockholders by the affirmative
vote of at least 66 2/3% of the outstanding voting stock which is not owned by
the "interested stockholder." A "business combination" includes mergers, asset
sales and other transactions resulting in a financial benefit to an "interested
stockholder." An "interested stockholder" is a person who, together with
affiliates and associates, owns (or within three years, did own) 15% or more of
the corporation's voting stock. The statute could prohibit or delay mergers or
other takeover or change in control attempts with respect to Jacor and,
accordingly, may discourage attempts to acquire Jacor.
CERTAIN EFFECTS OF AUTHORIZED BUT UNISSUED STOCK
Upon the sale of Common Stock offered hereby there will be shares of Common
Stock authorized but unissued (assuming no exercise of options) and 4,000,000
shares of Preferred Stock authorized but unissued for future issuance without
additional stockholder approval. These additional shares may be utilized for a
variety of corporate purposes, including future offerings to raise additional
capital or to facilitate corporate acquisitions.
One of the effects of the existence of unissued and unreserved Common Stock
or Preferred Stock may be to enable the Board to issue shares to persons
friendly to current management which could render more difficult or discourage
an attempt to obtain control of Jacor by means of a merger, tender offer, proxy
contest or otherwise, and thereby protect the continuity of management. Such
additional shares also could be used to dilute the stock ownership of persons
seeking to obtain control of Jacor.
The issuance of Preferred Stock could have the effect of delaying or
preventing a change in control of Jacor. The issuance of Preferred Stock could
decrease the amount of earnings and assets available for distribution to the
holders of Common Stock or could adversely effect the right and powers,
including voting rights of the holders of the Common Stock. In certain
circumstances, such issuance could have the effect of decreasing the market
price of the Common Stock. Jacor does not currently have any plans to issue
additional shares of Common Stock or Preferred Stock other than shares of Common
Stock which may be
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issued upon the exercise of options which have been granted or which may be
granted in the future to directors, officers, and employees of Jacor or shares
of Common Stock issuable upon conversion of the LYONs, the 1993 Warrants and the
Merger Warrants.
INDEMNIFICATION
Jacor's charter documents contain provisions that limit the liability of
Jacor's directors for monetary damages for breach of fiduciary duty as a
director to the fullest extent permitted by applicable law. Such limitation does
not, however, affect the liability of a director unless such director acted in
good faith and in a manner he reasonably believed to be in or not opposed to the
best interests of Jacor, and, with respect to any criminal action or proceeding,
had no reasonable cause to believe his conduct was unlawful. The effect of this
provision is to eliminate the rights of Jacor and its stockholders (through
stockholders, derivative suits on behalf of Jacor) to recover monetary damages
against a director for breach of the fiduciary duty of care as a director
(including breaches resulting from negligent or grossly negligent behavior)
except in certain situations. This provision does not limit or eliminate the
rights of Jacor or any stockholder to seek non-monetary relief such as an
injunction or rescission in the event of a breach of a directors duty of care.
In addition, the directors and officers of Jacor have indemnification and
directors and officers liability protection.
REGISTRAR AND TRANSFER AGENT
The registrar and transfer agent for the Common Stock is KeyCorp Shareholder
Services, Inc.
1993 WARRANTS
Warrants to purchase 2,014,233 shares of Jacor Common Stock were issued by
Jacor in 1993 (the "1993 Warrants"). Through May 31, 1996, 205,624 1993 Warrants
were exercised.
The 1993 Warrants are registered warrants issued under a warrant agreement.
Each 1993 Warrant entitles the holder to purchase one share of Common Stock at
the price of $8.30 per share. Except as provided below, the 1993 Warrants may be
exercised, in whole or in part (but only for whole shares of Common Stock), at
any time prior to January 14, 2000, at which time the 1993 Warrants expire. The
1993 Warrants do not confer upon the holder any voting or preemptive rights, or
any other rights of a shareholder of Jacor.
The 1993 Warrant exercise price and the number of shares of Common Stock
issuable upon exercise are subject to adjustment in the event of a dividend or
other distribution of Common Stock or securities convertible into or
exchangeable for Jacor Common Stock (which shall not include options, warrants
or other rights to purchase securities) on, or a subdivision or combination of,
the Jacor Common Stock.
Generally, in case of any reclassification, capital reorganization or other
similar change of outstanding shares of Common Stock or substitution or other
securities of Jacor for Common Stock or in case of any consolidation or merger
of Jacor with or into another corporation, Jacor shall cause effective provision
to be made so that a holder of 1993 Warrants shall have the right thereafter, by
exercising the 1993 Warrants, to purchase the kind and amount of shares of stock
and other securities and property which are receivable upon such
reclassification, capital reorganization or other change, consolidation or
merger by a holder of the number of shares of Jacor Common Stock purchasable
upon exercise of the 1993 Warrants. Any such provision shall include provision
for adjustments which shall be as nearly equivalent as may be practicable to the
adjustments provided for in the 1993 Warrants.
Notwithstanding the foregoing, upon the happening of any Sale Event (as
defined below), the 1993 Warrants may, in the sole discretion of Jacor,
automatically be converted into the right to receive the Fair Market Value (as
defined in the 1993 Warrant) of the 1993 Warrants, whereupon the 1993 Warrants
will cease to be exercisable for shares of Common Stock. "Sale Event" is defined
generally to mean any of the following: (a) a sale or other disposition of all
or a substantial portion of the assets of Jacor; (b) a share exchange; (c) a
sale or other disposition of securities of Jacor constituting more than 30% of
the voting power of Jacor's voting stock to one or more entities or persons not
controlled by Samuel Zell or David Schulte; and (d) certain business
combinations resulting in the shares of Jacor's voting stock outstanding
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immediately prior to the Sale Event constituting 70% or less of Jacor's combined
voting power immediately after such Sale Event. The 1996 Stock Offering
constitutes a Sale Event and Jacor has determined that it will convert the 1993
Warrants into the right to receive the Fair Market Value. Zell/Chilmark has
informed Jacor that it intends to exercise its 1993 Warrants to acquire 629,117
shares of Common Stock in lieu of accepting the Fair Market Value of the 1993
Warrants it holds.
MERGER WARRANTS
Pursuant to the Merger Agreement, Jacor is obligated to issue one warrant to
acquire a fractional share of Common Stock (the "Merger Warrants") for each
outstanding share of Citicasters common stock. If all of the Merger Warrants are
exercised, 4,400,000 shares of Common Stock would be issued. Each Merger Warrant
initially will entitle the holder thereof to purchase a fractional share of
Common Stock (which fraction is currently anticipated to be .2035247) at a price
of $28.00 per full share of Common Stock, such exercise price to be reduced to
$26.00 if the Merger is not consummated prior to October 1, 1996 (the "Warrant
Price"). The Warrant Price and the number of shares of Common Stock issuable
upon the exercise of each Merger Warrant will be subject to adjustment in
certain events described below. Each Merger Warrant may be exercised on or after
the issuance thereof and until 5:00 p.m., Eastern Time, on the fifth anniversary
of the date of the Effective Time (the "Expiration Date") in accordance with the
terms of the Merger Warrants and the Warrant Agreement. To the extent that any
Merger Warrant remains outstanding after such time, such unexercised Merger
Warrant will automatically terminate.
Merger Warrants may be exercised by surrendering to the Warrant Agent a
signed Merger Warrant certificate together with the form of election to purchase
on the reverse thereof indicating the warrantholder's election to exercise all
or a portion of the Merger Warrants evidenced by such certificate. Surrendered
certificates must be accompanied by payment of the aggregate Warrant Price in
respect of the Merger Warrants to be exercised, which payment may be made in
cash or by certified or bank cashier's check drawn on a banking institution
chartered by the government of the United States or any state thereof payable to
the order of Jacor. No adjustments as to cash dividends with respect to the
Common Stock will be made upon any exercise of Merger Warrants.
If fewer than all the Merger Warrants evidenced by any certificate are
exercised, the Warrant Agent will deliver to the exercising warrantholder a new
Merger Warrant certificate representing the unexercised Merger Warrants. Jacor
will not be required to issue fractional shares of Common Stock upon exercise of
any Merger Warrant and in lieu thereof will pay in cash an amount equal to the
same fraction of the closing price per share of Common Stock, determined as
provided in the Warrant Agreement. Jacor has reserved for issuance a number of
shares of Common Stock sufficient to provide for the exercise of the rights of
purchase represented by the Merger Warrants.
A Merger Warrant may not be exercised in whole or in part if in the
reasonable opinion of counsel to Jacor the issuance of Common Stock upon such
exercise would cause Jacor to be in violation of the Communications Act or the
rules and regulations in effect thereunder.
The number of shares of Common Stock purchasable upon the exercise of each
Merger Warrant and the Warrant Price are subject to the adjustment in connection
with (i) the issuance of a stock dividend to holders of Common Stock, a
combination or subdivision or issuance by reclassification of Common Stock; (ii)
the issuance of rights, options or warrants to all holders of Common Stock
without charge to such holders to subscribe for or purchase shares of Common
Stock at a price per share which is lower than the current market price; and
(iii) certain distributions by Jacor to the holders of Common Stock of evidences
of indebtedness or of its assets (excluding cash dividends or distributions out
of earnings or out of surplus legally available for dividends) or of convertible
securities, all as set forth in the Warrant Agreement. Notwithstanding the
foregoing, no adjustment in the number of Warrant Shares will be required until
such adjustment would require an increase or decrease of at least one percent
(1%) in the number of Warrant Shares purchasable upon the exercise of each
Merger Warrant. In addition, Jacor may at its option reduce the Warrant Price.
In case of any consolidation or merger of Jacor with or into another
corporation, or any sale, transfer or lease to another corporation of all or
substantially all the property of Jacor, the Warrant Agreement will
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require that effective provisions will be made so that each holder of an
outstanding Merger Warrant will have the right thereafter to exercise the Merger
Warrant for the kind and amount of securities and property receivable in
connection with such consolidation, merger, sale, transfer or lease by a holder
of the number of shares of Common Stock for which such Merger Warrant were
exercisable immediately prior thereto. In addition, if Jacor takes any action
prior to the issuance of the Merger Warrants that would have required an
adjustment in the exercise price of the Merger Warrants or in the number of
shares purchasable upon exercise of the Merger Warrants, then the exercise price
of the Merger Warrants or such number of shares will be adjusted upon issuance
of the Merger Warrants to give effect to the adjustment which would have been
required as a result of such action.
The Warrant Agreement may be amended or supplemented without the consent of
the holders of Merger Warrants to cure any ambiguity or to correct or supplement
any defective or inconsistent provision contained therein, or to make such other
necessary or desirable changes which shall not adversely affect the interests of
the warrantholders. Any other amendment to the Warrant Agreement shall require
the consent of warrantholders representing not less than 50% of the Merger
Warrants then outstanding provided that no change in the number or nature of the
securities purchasable upon the exercise of any Merger Warrant, or the Warrant
Price therefor, or the acceleration of the Expiration Date, and no change in the
antidilution provisions which would adversely affect the interests of the
holders of Merger Warrants, shall be made without the consent of the holder of
such Merger Warrant, other than such changes as are specifically prescribed by
the Warrant Agreement or are made in compliance with applicable law.
No holder of Merger Warrants shall be entitled to vote or receive dividends
or be deemed for any purpose the holder of Common Stock until the Merger
Warrants are properly exercised as provided in the Warrant Agreement.
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DESCRIPTION OF INDEBTEDNESS
The summaries contained herein of certain of the indebtedness of the Company
do not purport to be complete and are qualified in their entirety by reference
to the provisions of the various agreements and indentures related thereto,
which are filed as exhibits to the Registration Statement of which this
Prospectus is a part and to which reference is hereby made.
EXISTING CREDIT FACILITY
The Existing Credit Facility is provided by a syndicate of banks pursuant to
a credit agreement. The Existing Credit Facility provides up to $300.0 million
of loans to Jacor in two components: (i) a $190.0 million revolving credit
facility with mandatory quarterly commitment reductions beginning on March 31,
1997 and a final maturity date of December 31, 2003; and (ii) a $110.0 million
revolving portion with scheduled quarterly reductions beginning on March 31,
1998 and ending on December 31, 2003.
Borrowings under the Existing Credit Facility bear interest at rates that
fluctuate with the bank base rate and the Eurodollar rate.
The loans under the Existing Credit Facility are guaranteed by each of
Jacor's direct and indirect subsidiaries other than certain immaterial
subsidiaries. Jacor's obligations with respect to the Existing Credit Facility
and each guarantor's obligations with respect to the related guaranty are
secured by substantially all of their respective assets, including, without
limitation, inventory, equipment, accounts receivable, intercompany debt and, in
the case of Jacor's subsidiaries, capital stock.
The Existing Credit Facility contains covenants and provisions that
restrict, among other things, Jacor's ability to: (i) incur additional
indebtedness; (ii) incur liens on its property; (iii) make investments and
advances; (iv) enter into guarantees and other contingent obligations; (v) merge
or consolidate with or acquire another person or engage in other fundamental
changes; (vi) engage in certain sales of assets; (vii) make capital
expenditures; (viii) enter into leases; (ix) engage in certain transactions with
affiliates; and (x) make restricted junior payments. The Existing Credit
Facility also requires the satisfaction of certain financial performance
criteria (including a consolidated interest coverage ratio, a
leverage-to-operating cash flow ratio and a consolidated operating cash flow
available for fixed charges ratio) and the repayment of loans under the Existing
Credit Facility with proceeds of certain sales of assets and debt or equity
issuances, and with 50% of Jacor's Excess Cash Flow (as defined in the Existing
Credit Facility).
The Existing Credit Facility provides for certain customary events of
default, including a Change of Control (as defined in the Existing Credit
Facility).
NEW CREDIT FACILITY
Jacor has received commitment letters from certain banks and other financial
institutions which banks and financial institutions will constitute the
syndicate from which JCAC will secure the New Credit Facility. Such commitments
will expire in the event the Merger is not consummated prior to January 1, 1997.
Jacor anticipates that the New Credit Facility will provide availability of up
to $600.0 million of loans to JCAC in three components: (i) a revolving credit
facility of up to $200.0 million with mandatory semi-annual commitment
reductions beginning six months prior to the third anniversary of the closing of
the New Credit Facility and a final maturity date of seven years after initial
funding; (ii) a term loan of up to $300.0 million with scheduled semi-annual
reductions beginning six months prior to the second anniversary of the closing
of the New Credit Facility and a final maturity date of seven years after
initial funding; and (iii) a tranche B term loan of up to $100.0 million with
scheduled semi-annual reductions beginning six months prior to the third
anniversary of the closing of the New Credit Facility and a final maturity date
of eight years after initial funding. JCAC may elect to use the New Credit
Facility to purchase Citicasters Notes tendered pursuant to a Change of Control
Offer (as defined in the Citicasters Note Indenture).
Jacor anticipates that borrowings under the New Credit Facility will bear
interest at rates that fluctuate with a bank base rate and/or the Eurodollar
rate.
Jacor anticipates that the loans under the New Credit Facility will be
guaranteed by each of the Company's direct and indirect subsidiaries other than
certain immaterial subsidiaries. It is anticipated that the Company's
obligations with respect to the New Credit Facility and each guarantor's
obligations with
90
respect to the related guaranty will be secured by substantially all of their
respective assets, including, without limitation, inventory, equipment, accounts
receivable, intercompany debt and, in the case of the Company's subsidiaries,
capital stock. JCAC's obligations under the New Credit Facility will be secured
by a first priority lien on the capital stock of the Company's subsidiaries and
by the guarantee of JCAC's parent, Jacor.
Jacor expects that the New Credit Facility will contain covenants and
provisions that restrict, among other things, the Company's ability to: (i)
incur additional indebtedness; (ii) incur liens on its property; (iii) make
investments and advances; (iv) enter into guarantees and other contingent
obligations; (v) merge or consolidate with or acquire another person or engage
in other fundamental changes; (vi) engage in certain sales of assets; (vii) make
capital expenditures; (viii) enter into leases; (ix) engage in certain
transactions with affiliates; and (x) make restricted junior payments. The New
Credit Facility also will require the satisfaction of certain financial
performance criteria (including a consolidated interest coverage ratio, a
leverage-to-operating cash flow ratio and a consolidated operating cash flow
available for fixed charges coverage) and the repayment of loans under the New
Credit Facility with proceeds of certain sales of assets and debt issuances, and
with 50% of the Company's Consolidated Excess Cash Flow (as defined in the New
Credit Facility).
It is anticipated that events of default under the New Credit Facility will
include various events of default customary for such type of agreement, such as
failure to pay scheduled payments when due, cross defaults on other
indebtedness, change of control events under other indebtedness (including the
LYONs, the Notes and the Citicasters Notes) and certain events of bankruptcy,
insolvency and reorganization. In addition, it is anticipated that the New
Credit Facility will include events of default for JCAC and the cessation of any
lien on any of the collateral under the New Credit Facility as a perfected first
priority lien and the failure of Zell/Chilmark appointees to represent at least
30% of the Jacor Board of Directors.
For purposes of the New Credit Facility, a change of control is anticipated
to include the occurrence of any event that triggers a change of control under
the LYONs, the Notes or the Citicasters Notes. Such change of control under the
New Credit Facility would constitute an event of default which would give the
syndicate the right to accelerate the unpaid principal amounts due under the New
Credit Facility. Upon such acceleration, there is no assurance that JCAC will
have funds available to fund such repayment or that such funds will be available
or terms acceptable to JCAC.
THE CITICASTERS NOTES DUE 2004
The Citicasters Notes are general unsecured obligations of Citicasters and
are subordinated in rights of payment to all Senior Indebtedness (as defined in
the Citicasters Note Indenture). The Citicasters Notes were issued pursuant to
an indenture between Citicasters and Shawmut Bank Connecticut, National
Association, as Trustee (the "Citicasters Note Indenture").
The December 31, 1995 aggregate outstanding principal amount of the
Citicasters Notes is $122.5 million and the Citicasters Notes mature on February
15, 2004. Interest on the Citicasters Notes accrues at the rate of 9 3/4% per
annum.
The Citicasters Notes are not redeemable at Citicasters' option before
February 15, 1999 (other than in connection with certain public offerings of
common stock by Citicasters, as described below). Thereafter, the Citicasters
Notes are subject to redemption at the option of Citicasters, at redemption
prices declining from 104.875% of the principal amount for the twelve months
commencing February 15, 1999 to 100.00% on and after February 15, 2002, plus, in
each case, accrued and unpaid interest thereon to the applicable redemption
date.
In addition, at any time on or before February 15, 1999, (i) up to 25% of
the aggregate principal amount of the Citicasters Notes may be redeemed at a
redemption price of 108.75% of the principal amount thereof, plus accrued and
unpaid interest, out of the net proceeds of public offerings of primary shares
of common stock of Citicasters, and after giving effect to such redemption at
least $100.0 million in Citicasters Notes remains outstanding and (ii) upon a
Change of Control (as defined in the Citicasters Note Indenture), the
Citicasters Notes can be redeemed provided at least $100.0 million of
Citicasters Notes remain outstanding
91
and such redemption occurs within 180 days of the date of a Change of Control.
In addition, prior to December 31, 1996, Citicasters can redeem the Citicasters
Notes from the proceeds of Asset Sales (as defined in the Citicasters Note
Indenture) subject to certain restrictions.
Within 60 days after any Change of Control, Citicasters or its successor
must make an offer to purchase the Citicasters Notes at a purchase price equal
to 101% of the aggregate principal amount thereof, plus accrued and unpaid
interest to the date of purchase. The Merger will constitute a Change of
Control. Any Citicasters Notes which are not acquired in connection with such
Change of Control offer, subject to the successor's right to redeem the
Citicasters Notes as described, will remain outstanding. Subsequent to the
consummation of the Merger, the definition of Change of Control under the
indenture governing the Citicasters Notes will be substantially similar to the
definition of Change of Control in the Indenture governing the Notes. Jacor will
comply with the requirements of Rule 14e-1 in connection with the repurchase of
the Citicasters Notes, as such rule might apply to any such repurchase at the
time thereof.
The Citicasters Note Indenture contains certain covenants which impose
certain limitations and restrictions on the ability of Citicasters to incur
additional indebtedness, pay dividends or make other distributions, make certain
loans and investments, apply the proceeds of Asset Sales (and use the proceeds
thereof), create liens, enter into certain transactions with affiliates, merge,
consolidate or transfer substantially all its assets and make investments in
unrestricted subsidiaries.
The Indenture for the Citicasters Notes includes various events of default
customary for such type of agreements, such as failure to pay principal and
interest when due on the Citicasters Notes, cross defaults on other indebtedness
and certain events of bankruptcy, insolvency and reorganization.
THE % SENIOR SUBORDINATED NOTES DUE 2006
Concurrently with this Offering, JCAC is conducting the Notes Offering and
intends to lend the net proceeds to Jacor. Jacor and JCAC plan to consummate the
Notes Offering in connection with the financing for the Acquisitions.
Consummation of this Offering and the 1996 Stock Offering is a condition to
closing the LYONs Offering.
The interest rate, interest payment dates, date of maturity, redemption
premiums and yield to maturity of the Senior Subordinated Notes will be
determined at the time of pricing based on market conditions and negotiations
between Jacor and the Underwriter. It is expected that the trustee under the
Senior Subordinated Note Indenture will authenticate and deliver the Senior
Subordinated Notes for original issue in an aggregate principal amount of $100.0
million.
It is expected that the Senior Subordinated Note Indenture will contain
certain covenants which impose certain limitations and restrictions on the
ability of Jacor to incur additional indebtedness, pay dividends or make other
distributions, make certain loans and investments, apply the proceeds of asset
sales (and use the proceeds thereof), create liens, enter into certain
transactions with affiliates, merge, consolidate or transfer substantially all
its assets and make investments in unrestricted subsidiaries.
If a change of control occurs, JCAC will be required to offer to repurchase
all outstanding Notes at a price equal to 101% of their principal amount, plus
accrued and unpaid interest, if any, to the date of repurchase. There can be no
assurance that JCAC will have sufficient funds to purchase all of the Notes in
the event of a change of control offer or that JCAC would be able to obtain
financing for such purpose on favorable terms, if at all. In addition, it is
expected that the New Credit Facility will restrict JCAC's ability to repurchase
the Notes, including pursuant to a change of control offer. Furthermore, a
change of control under the Senior Subordinated Note Indenture will result in a
default under the New Credit Facility.
Upon consummation of the Merger, a Change of Control under the indenture
governing the Senior Subordinated Notes means any transaction or series of
transactions in which any of the following occurs: (i) any person or group
(within the meaning of Rule 13d-3 under the Exchange Act and Sections 13(d) and
14(d) of the Exchange Act), other than Zell/Chilmark or any of its Affiliates,
becomes the direct or indirect beneficial owner (as defined in Rule 13d-3 under
the Exchange Act) of (A) greater than 50% of the total voting power (on a fully
diluted basis as if all convertible securities had been converted) entitled to
vote in the election of directors of JCAC or Citicasters, or the surviving
person (if other than the Company), or (B) greater than 20% of the total voting
power (on a fully diluted basis as if all convertible securities had been
converted) entitled to vote in the election of directors of JCAC or Citicasters,
or the surviving person (if other the JCAC), and such person or group has the
ability to elect, directly or indirectly, a majority of the members of the Board
of Directors of JCAC; or (ii) JCAC or Citicasters consolidates with or merges
into
92
another person, another person consolidates with or merges into JCAC or
Citicasters, JCAC or Citicasters issues shares of its Capital Stock or all or
substantially all of the assets of JCAC or CC are sold, assigned, conveyed,
transferred, leased or otherwise disposed of to any person as an entirety or
substantially as an entirety in one transaction or a series of related
transactions and the effect of such consolidation, merger, issuance or sale is
as described in clause (i) above.
Additionally, in the event the Merger has not become effective prior to
January 1, 1997, JCAC will be required to make an offer to repurchase the Notes
at a price equal to 101% of the aggregate principal amount thereof, plus accrued
and unpaid interest, if any, to the date of repurchase (the "Citicasters
Offer"). There can be no assurance that JCAC will have sufficient funds to
purchase all of the Notes in the event of a Citicasters Offer or that JCAC would
be able to obtain financing for such purpose on favorable terms, if at all. JCAC
currently has no material assets or operations. Upon consummation of the Merger,
however, Jacor will, directly or indirectly, contribute, convey, or transfer all
of the equity interests of its wholly owned subsidiaries to JCAC.
It is anticipated that events of default under the Senior Subordinated Note
Indenture will include various events of default customary for such type of
agreement, including the failure to pay principal and interest when due on the
Notes, cross defaults on other indebtedness for borrowed monies in excess of
$5.0 million (which indebtedness would therefor include the Existing Credit
Facility, the New Credit Facility the LYONs and the Citicasters Notes) and
certain events of bankruptcy, insolvency and reorganization.
93
CERTAIN UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS
The following summary of United States Federal income tax considerations is
based on current law, regulations and judicial and administrative
interpretations thereof, all of which are subject to change. The tax treatment
of a Holder of a LYON may vary depending upon his particular situation. Certain
Holders (including insurance companies, tax-exempt organizations, individual
retirement and other tax-deferred accounts, financial institutions,
broker-dealers, foreign corporations and individuals who are not citizens or
residents of the United States) may be subject to special rules not discussed
below. This summary does not discuss the tax considerations of subsequent
purchasers of LYONs and is limited to investors who hold LYONs as capital
assets. Each purchaser of LYONs should consult his tax advisor as to the
particular tax consequences to him of acquiring, holding, converting or
otherwise disposing of the LYONs, including the applicability and the effect of
any state, local or foreign tax laws and recent changes in applicable tax laws.
Jacor has been advised by its counsel, Graydon, Head & Ritchey, that in
counsel's opinion, based on current laws, regulations and administrative and
judicial standards, all of which are subject to change, the LYONs will be
treated as indebtedness for United States Federal income tax purposes. Counsel
has further advised Jacor that it is counsel's opinion that, while the following
does not purport to discuss all tax matters relating to the LYONs, based upon
the LYONs being treated as indebtedness, the following are the material federal
income tax consequences of the LYONs, subject to the qualifications set forth
above.
ORIGINAL ISSUE DISCOUNT
The LYONs are being issued at a substantial discount from their principal
amount at maturity. For United States Federal income tax purposes, the
difference between the issue price (the initial price at which the LYONs are
sold) and the stated principal amount at maturity of each LYON constitutes
original issue discount ("Original Issue Discount"). Holders of the LYONs will
be required to include Original Issue Discount in income periodically over the
term of the LYONs before receipt of the cash or other payment attributable to
such income.
For United States Federal income tax purposes, each Holder of a LYON (other
than Holders described in the third and fourth sentences in the first paragraph
under this heading) must include in gross income a portion of the Original Issue
Discount in each taxable year during which the LYON is held in an amount equal
to the Original Issue Discount that accrues on the LYON during such period,
determined by using a constant yield to maturity method. The Original Issue
Discount included in income for each year will be calculated under a compounding
formula that will result in the allocation of less Original Issue Discount to
the earlier years of the term of the LYON and more Original Issue Discount to
later years. For the approximate cumulative total amount of the Original Issue
Discount accrued annually, see the chart under "Description of LYONs--Redemption
of LYONs at the Option of Jacor." Any amount included in income as Original
Issue Discount will increase a Holder's tax basis in the LYON.
CONVERSION
A Holder's conversion of a LYON into Common Stock is not a taxable event
(except with respect to cash received in lieu of a fractional share of Common
Stock). The Holder's tax basis in the Common Stock received on conversion of a
LYON will be the same as the Holder's adjusted tax basis in the LYON at the time
of conversion (exclusive of any basis allocable to a fractional share of Common
Stock), and the holding period of the Common Stock received on conversion will
include the holding period of the LYON converted, except that it is possible
that the Internal Revenue Service may argue that the holding period of the
Common Stock allocable to accrued Original Issue Discount will commence on the
date of the conversion and the Holder would be required to hold such Common
Stock for more than twelve months before long term capital gain treatment could
be obtained upon a sale of such Common Stock.
OTHER DISPOSITION
If a Holder elects to exercise his option to tender a LYON to Jacor on a
Purchase Date and Jacor issues Common Stock in satisfaction of the Purchase
Price, such exchange will be treated the same as a conversion. If a Holder
elects to exercise his option to tender a LYON to Jacor on a Purchase Date and
Jacor delivers a combination of cash and Common Stock in satisfaction of the
Purchase Price, such Holder will have gain or loss to the extent that the cash
and the value of the Common Stock received is more or less than the Holder's
94
tax basis in the LYON. A Holder's basis in the Common Stock received would be
the same as the Holder's basis in the LYON put to Jacor by the Holder (exclusive
of any basis allocable to a fractional share), decreased by the amount of cash
(other than cash received in lieu of a fractional share), if any, received and
increased by the amount of gain, if any, recognized by the Holder (other than
gain with respect to a fractional share).
If a Holder elects to exercise his option to tender a LYON to Jacor on a
Purchase Date or a Change in Control Purchase Date and the holder receives cash,
such a tender will be a taxable sale. The Holder will recognize gain or loss
upon the sale, measured by the difference between the amount of cash transferred
by Jacor to the Holder in satisfaction of the Purchase Price or the Change in
Control Purchase Price and the Holder's basis in the tendered LYON. Gain or loss
recognized by the Holder would be capital gain or loss.
If a Holder sells a LYON in the market, it will be a taxable sale with the
same results as a tender to Jacor with a payment in cash.
CONSTRUCTIVE DIVIDEND
If at any time Jacor makes a distribution of property to its shareholders
that would be taxable to such shareholders as a dividend for United States
Federal income tax purposes and, in accordance with the anti-dilution provisions
of the LYONs, the Conversion Rate of the LYONs is increased, such increase may
be deemed to be the payment of a taxable dividend to Holders of the LYONs. For
example, an increase in the Conversion Rate in the event of distributions of
evidences of indebtedness or assets of Jacor or an increase in the event of an
Extraordinary Cash Dividend will generally result in deemed dividend treatment
to Holders of the LYONs, but generally an increase in the event of stock
dividends or the distribution of rights to subscribe for Common Stock will not.
See "Description of LYONs--Conversion Rights."
PROPOSED TAX LAW CHANGES
The Clinton Administration has proposed legislation (the "Clinton Proposal")
that would deny the deduction of interest (including original issue discount) on
certain debt instruments, such as the LYONs, until such interest (including
original issue discount) is paid in cash. The proposed legislation, if enacted
in its current proposed form, would apply to debt instruments issued on or after
December 7, 1995. The Chairman of the Senate Finance Committee as well as the
Chairman of the House Ways and Means Committee and the ranking minority member
of such committee have announced, however, that if the Clinton Proposal were to
be enacted, the effective date of such legislation would be no earlier than the
date of appropriate Congressional action. Accordingly, Jacor does not believe
that the Clinton Proposal, if enacted, would apply to the LYONs. Nevertheless,
no assurances can be given that such Proposal, if enacted into law, would not
apply to the LYONs.
95
UNDERWRITING
Merrill Lynch, Pierce, Fenner & Smith Incorporated (the "Underwriter") has
agreed, subject to the terms and conditions of the Purchase Agreement, to
purchase $225,000,000 aggregate principal amount at maturity of the LYONs from
Jacor. The Underwriter has advised Jacor that it proposes to offer the LYONs
directly to the public at the offering price set forth on the cover page of this
Prospectus. After the initial public offering, the offering price may be
changed. The LYONs are offered subject to receipt and acceptance by the
Underwriter and to certain other conditions, including the right to reject
orders in whole or in part.
Jacor has granted the Underwriter an option to purchase up to an additional
$33,750,000 aggregate principal amount at maturity of the LYONs, at the initial
public offering price less the underwriting discount solely to cover
over-allotments, if any. Such option may be exercised at any time until 30 days
after the date of this Prospectus.
Jacor has agreed to indemnify the Underwriter against certain liabilities,
including liabilities under the Securities Act of 1933, or to contribute to
payments the Underwriter may be required to make in respect thereof.
Jacor, its directors and officers and Zell/Chilmark each have agreed,
subject to certain exceptions, not to sell or otherwise dispose of shares of
Common Stock, sell or grant rights, options or warrants with respect to Common
Stock or securities convertible into Common Stock prior to the expiration of 180
days from the date of this Prospectus, without the prior written consent of the
Underwriter.
Merrill Lynch, Pierce, Fenner & Smith Incorporated has previously marketed
(and anticipates continuing to market) securities of issuers under the trademark
"LYONs." The LYONs offered by Jacor hereby contain terms and provisions which
are different from such other previously marketed LYONs, the terms and
provisions of which also vary. See "Description of LYONs."
Merrill Lynch, Pierce, Fenner & Smith Incorporated is also acting as a
representative of the underwriters in connection with the 1996 Stock Offering
and the Notes Offering and will receive usual and customary fees for such
services.
Concurrently with this offering of LYONs, Jacor is conducting the 1996 Stock
and JCAC is conducting the Notes Offering. Consummation of the Offering is
subject to consummation of the 1996 Stock Offering and the Notes Offering.
EXPERTS
The consolidated balance sheets of Jacor Communications, Inc. and
Subsidiaries as of December 31, 1995 and 1994 and the consolidated statements of
operations, shareholders' equity and cash flows for each of the three years in
the period ended December 31, 1995, included in this registration statement,
have been included herein in reliance on the report of Coopers & Lybrand L.L.P.,
independent accountants, given on the authority of that firm as experts in
accounting and auditing.
The consolidated balance sheets of Citicasters Inc. as of December 31, 1995
and 1994 and the consolidated statements of operations, changes in shareholders'
equity, and cash flows for each of the three years in the period ended December
31, 1995 appearing in this registration statement, have been audited by Ernst &
Young LLP, independent auditors, as set forth in their report thereon (which
contains an explanatory paragraph with respect to Citicasters Inc.'s emergence
from bankruptcy and subsequent adoption of "fresh-start reporting" as of
December 31, 1993, as more fully described in Note B to the consolidated
financial statements), appearing elsewhere herein, and are included in reliance
upon such report given upon the authority of such firm as experts in accounting
and auditing.
The consolidated financial statements of Noble Broadcast Group, Inc. as of
December 31, 1995 and December 25, 1994 and for each of the three years in the
period ended December 31, 1995, included in this Prospectus, have been so
included in reliance on the report (which includes an explanatory paragraph
relating to Jacor's agreement to purchase Noble Broadcast Group, Inc. as
described in Note 2 to the consolidated financial statements) of Price
Waterhouse LLP, independent accountants, given on the authority of said firm as
experts in auditing and accounting.
96
LEGAL MATTERS
The authorization and issuance of the LYONs offered hereby will be passed
upon for Jacor by Graydon, Head & Ritchey, Cincinnati, Ohio. Certain legal
matters in connection with this Offering will be passed upon for the Underwriter
by Skadden, Arps, Slate, Meagher & Flom, Los Angeles, California.
97
INDEX TO FINANCIAL STATEMENTS
PAGE
---------
JACOR COMMUNICATIONS, INC. AND SUBSIDIARIES
AUDITED--
Report of Independent Accountants........................................................................ F-2
Consolidated Balance Sheets at December 31, 1994 and 1995................................................ F-3
Consolidated Statements of Operations for the years ended December 31, 1993, 1994 and 1995............... F-4
Consolidated Statements of Shareholders' Equity for the years ended December 31, 1993, 1994 and 1995..... F-5
Consolidated Statements of Cash Flows for the years ended December 31, 1993, 1994 and 1995............... F-6
Notes to Consolidated Financial Statements............................................................... F-7
UNAUDITED--
Condensed Consolidated Balance Sheets at December 31, 1995 and March 31, 1996............................ F-16
Condensed Consolidated Statements of Operations for the three months ended March 31, 1995 and 1996....... F-17
Condensed Consolidated Statements of Cash Flows for the three months ended March 31, 1995 and 1996....... F-18
Notes to Condensed Consolidated Financial Statements..................................................... F-19
CITICASTERS INC. AND SUBSIDIARIES
AUDITED--
Report of Independent Auditors........................................................................... F-22
Balance Sheets at December 31, 1994 and 1995............................................................. F-23
Statements of Operations for the years ended December 31, 1993, 1994 and 1995............................ F-24
Statements of Changes in Shareholders' Equity for the years ended December 31, 1993, 1994 and 1995....... F-25
Statements of Cash Flows for the years ended December 31, 1993, 1994 and 1995............................ F-26
Notes to Financial Statements............................................................................ F-28
UNAUDITED--
Condensed Balance Sheets at December 31, 1995 and March 31, 1996......................................... F-37
Condensed Statements of Operations for the three months ended March 31, 1995 and 1996.................... F-38
Condensed Statements of Changes in Shareholders' Equity for the three months ended March 31, 1995 and
1996................................................................................................... F-39
Condensed Statements of Cash Flows for the three months ended March 31, 1995 and 1996.................... F-40
Notes to Condensed Financial Statements.................................................................. F-41
NOBLE BROADCAST GROUP, INC. AND SUBSIDIARIES
AUDITED--
Report of Independent Accountants........................................................................ F-44
Consolidated Balance Sheet at December 25, 1994 and December 31, 1995.................................... F-45
Consolidated Statement of Operations for the years ended December 26, 1993, December 25, 1994 and
December 31, 1995...................................................................................... F-46
Consolidated Statement of Changes in Stockholders' Deficit for the years ended December 26, 1993,
December 25, 1994 and December 31, 1995................................................................ F-47
Consolidated Statement of Cash Flows for the years ended December 26, 1993, December 25, 1994 and
December 31, 1995...................................................................................... F-48
Notes to Consolidated Financial Statements............................................................... F-49
UNAUDITED--
Condensed Consolidated Balance Sheet at December 31, 1995 and March 31, 1996............................. F-61
Condensed Consolidated Statement of Operations for the three months ended March 26, 1995 and March 31,
1996................................................................................................... F-62
Condensed Consolidated Statement of Cash Flows for the three months ended March 26, 1995 and March 31,
1996................................................................................................... F-63
Notes to Condensed Consolidated Financial Statements..................................................... F-64
F-1
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholders and
Board of Directors of
Jacor Communications, Inc.
We have audited the accompanying consolidated balance sheets of Jacor
Communications, Inc. and Subsidiaries as of December 31, 1994 and 1995, and the
related consolidated statements of operations, shareholders' equity, and cash
flows for each of the three years in the period ended December 31, 1995. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of Jacor
Communications, Inc. and Subsidiaries as of December 31, 1994 and 1995, and the
consolidated results of their operations and their cash flows for each of the
three years in the period ended December 31, 1995, in conformity with generally
accepted accounting principles.
COOPERS & LYBRAND L.L.P.
Cincinnati, Ohio
February 12, 1996 except for Note 14,
as to which the date
is March 13, 1996
F-2
JACOR COMMUNICATIONS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1994 AND 1995
ASSETS 1994 1995
Current assets:
Cash and cash equivalents.................................................... $ 26,974,838 $ 7,436,779
Accounts receivable, less allowance for doubtful accounts of $1,348,000 in
1994 and $1,606,000 in 1995................................................ 24,500,652 25,262,410
Prepaid expenses............................................................. 3,419,719 2,491,140
Other current assets......................................................... 1,230,582 1,425,000
-------------- --------------
Total current assets..................................................... 56,125,791 36,615,329
Property and equipment....................................................... 22,628,841 30,801,225
Intangible assets............................................................ 89,543,301 127,157,762
Other assets................................................................. 5,281,422 14,264,775
-------------- --------------
Total assets............................................................. $ 173,579,355 $ 208,839,091
-------------- --------------
-------------- --------------
LIABILITIES
Current liabilities:
Accounts payable............................................................. $ 2,723,717 $ 2,312,691
Accrued payroll.............................................................. 3,274,902 3,177,945
Accrued federal, state and local income tax.................................. 2,092,616 3,225,585
Other current liabilities.................................................... 3,397,117 3,463,344
-------------- --------------
Total current liabilities................................................ 11,488,352 12,179,565
Long-term debt................................................................... -- 45,500,000
Other liabilities................................................................ 3,869,567 3,468,995
Deferred tax liability........................................................... 9,177,456 8,617,456
-------------- --------------
Total liabilities........................................................ 24,535,375 69,766,016
-------------- --------------
Commitments and contingencies....................................................
SHAREHOLDERS' EQUITY
Preferred stock, authorized and unissued 4,000,000 shares........................ -- --
Common stock, no par value, $0.10 per share stated value; authorized 100,000,000
shares, issued and outstanding shares: 19,590,373 in 1994 and 18,157,209 in
1995............................................................................ 1,959,038 1,815,721
Additional paid-in capital....................................................... 137,404,815 116,614,230
Common stock warrants............................................................ 390,167 388,055
Retained earnings................................................................ 9,289,960 20,255,069
-------------- --------------
Total shareholders' equity............................................... 149,043,980 139,073,075
-------------- --------------
Total liabilities and shareholders' equity............................... $ 173,579,355 $ 208,839,091
-------------- --------------
-------------- --------------
The accompanying notes are an integral part of the consolidated financial
statements.
F-3
JACOR COMMUNICATIONS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1993, 1994 AND 1995
1993 1994 1995
Broadcast revenue............................................... $ 100,745,089 $ 119,635,308 $ 133,103,137
Less agency commissions..................................... 10,812,889 12,624,860 14,212,306
-------------- -------------- --------------
Net revenue............................................... 89,932,200 107,010,448 118,890,831
Broadcast operating expenses.................................... 69,520,397 80,468,077 87,290,409
Depreciation and amortization................................... 10,222,844 9,698,030 9,482,883
Corporate general and administrative expenses................... 3,563,800 3,361,263 3,500,518
-------------- -------------- --------------
Operating income.......................................... 6,625,159 13,483,078 18,617,021
Interest expense................................................ (2,734,677) (533,862) (1,443,836)
Interest income................................................. 258,857 1,218,179 1,259,696
Other expense, net.............................................. (10,895) (2,079) (167,772)
-------------- -------------- --------------
Income before income taxes................................ 4,138,444 14,165,316 18,265,109
Income tax expense.............................................. (2,700,000) (6,313,800) (7,300,000)
-------------- -------------- --------------
Net income................................................ $ 1,438,444 $ 7,851,516 $ 10,965,109
-------------- -------------- --------------
-------------- -------------- --------------
Net income per common share............................... $ 0.10 $ 0.37 $ 0.52
-------------- -------------- --------------
-------------- -------------- --------------
Number of common shares used in per share calculation........... 14,504,527 21,409,177 20,912,705
-------------- -------------- --------------
-------------- -------------- --------------
The accompanying notes are an integral part of the consolidated financial
statements.
F-4
JACOR COMMUNICATIONS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1993, 1994 AND 1995
COMMON STOCK
-------------------- ADDITIONAL COMMON
STATED PAID-IN STOCK RETAINED
SHARES VALUE CAPITAL WARRANTS EARNINGS TOTAL
Balances, January 1, 1993............. 9,092,084 $ 909,208 $49,568,738 $ 402,805 $ 0 $50,880,751
Issuance of common stock:
Public offering................. 5,462,500 546,250 59,390,937 59,937,187
Sale to Majority Shareholder.... 3,484,321 348,432 19,651,571 20,000,003
1993 rights offering............ 345,476 34,548 1,703,287 1,737,835
Directors' subscription......... 80,000 8,000 451,200 459,200
Purchase of KAZY(FM)............ 964,006 96,401 5,436,993 5,533,394
Exercise of stock options....... 52,886 5,289 275,914 281,203
Other........................... 18,539 1,854 155,728 (12,408) 145,174
Net income............................ 1,438,444 1,438,444
--------- --------- ----------- ----------- ---------- -----------
Balances, December 31, 1993........... 19,499,812 1,949,982 136,634,368 390,397 1,438,444 140,413,191
Exercise of stock options............. 89,310 8,931 760,215 769,146
Other................................. 1,251 125 10,232 (230) 10,127
Net income............................ 7,851,516 7,851,516
--------- --------- ----------- ----------- ---------- -----------
Balances, December 31, 1994........... 19,590,373 1,959,038 137,404,815 390,167 9,289,960 149,043,980
Purchase and retirement of stock...... (1,515,300) (151,530) (21,542,302) (21,693,832)
Purchase of stock by employee stock
purchase plan....................... 43,785 4,378 470,251 474,629
Exercise of stock options............. 27,790 2,779 192,754 195,533
Other................................. 10,561 1,056 88,712 (2,112) 87,656
Net income............................ 10,965,109 10,965,109
--------- --------- ----------- ----------- ---------- -----------
Balances, December 31, 1995........... 18,157,209 $1,815,721 $116,614,230 $ 388,055 $20,255,069 $139,073,075
--------- --------- ----------- ----------- ---------- -----------
--------- --------- ----------- ----------- ---------- -----------
The accompanying notes are an integral part of the consolidated financial
statements.
F-5
JACOR COMMUNICATIONS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1993, 1994 AND 1995
1993 1994 1995
Cash flows from operating activities:
Net income.................................................. $ 1,438,444 $ 7,851,516 $ 10,965,109
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation............................................ 2,258,818 2,506,661 3,251,360
Amortization of intangible assets....................... 7,840,064 7,191,369 6,231,523
Provision for losses on accounts and notes receivable... 957,749 1,441,925 1,136,887
Refinancing fees........................................ (2,455,770)
Deferred income tax provision (benefit)................. 1,400,000 (355,000) (560,000)
Other................................................... (138,920) (477,825) 237,418
Changes in operating assets and liabilities, net of
effects of acquisitions and disposals:
Accounts receivable................................. (5,677,825) (5,765,899) (2,343,943)
Other current assets................................ 1,487,404 (2,008,159) 1,029,161
Accounts payable.................................... (268,903) 371,913 (424,306)
Accrued payroll and other current liabilities....... 2,119,153 591,389 1,102,239
--------------- -------------- --------------
Net cash provided by operating activities....................... 8,960,214 11,347,890 20,625,448
--------------- -------------- --------------
Cash flows from investing activities:
Payment received on notes receivable........................ 1,300,000 392,500
Capital expenditures........................................ (1,495,317) (2,221,140) (4,969,027)
Cash paid for acquisitions.................................. (3,871,910) (4,904,345) (34,007,857)
Purchase of intangible assets............................... (6,261,520) (15,535,809)
Proceeds from sale of assets................................ 1,919,189
Loans originated and other.................................. (160,158) (3,482,379) (10,220,300)
--------------- -------------- --------------
Net cash used by investing activities........................... (5,527,385) (13,650,195) (64,340,493)
--------------- -------------- --------------
Cash flows from financing activities:
Proceeds from issuance of long-term debt.................... 48,000,000 45,500,000
Purchase of common stock.................................... (21,693,832)
Proceeds from issuance of common stock...................... 88,301,704 779,273 757,818
Reduction in long-term debt................................. (118,484,583)
Payment of restructuring expenses........................... (5,061,925) (119,729) (387,000)
--------------- -------------- --------------
Net cash provided by financing activities....................... 12,755,196 659,544 24,176,986
--------------- -------------- --------------
Net increase (decrease) in cash and cash equivalents............ 16,188,025 (1,642,761) (19,538,059)
Cash and cash equivalents at beginning of year.................. 12,429,574 28,617,599 26,974,838
--------------- -------------- --------------
Cash and cash equivalents at end of year........................ $ 28,617,599 $ 26,974,838 $ 7,436,779
--------------- -------------- --------------
--------------- -------------- --------------
The accompanying notes are an integral part of the consolidated financial
statements.
F-6
JACOR COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. ACCOUNTING POLICIES AND DESCRIPTION OF BUSINESS
DESCRIPTION OF BUSINESS
The Company owns and operates 23 radio stations in seven metropolitan
markets throughout the United States. On January 11, 1993, the Company completed
a recapitalization plan that substantially modified its debt and capital
structure. Such recapitalization was accounted for as if it had been completed
January 1, 1993.
PRINCIPLES OF CONSOLIDATION
The accompanying consolidated financial statements include the accounts of
Jacor Communications, Inc. and its subsidiaries. All significant intercompany
accounts and transactions have been eliminated.
REVENUES
Revenues for commercial broadcasting advertisements are recognized when the
commercial is broadcast.
BARTER TRANSACTIONS
Revenue from barter transactions (advertising provided in exchange for goods
and services) is recognized as income when advertisements are broadcast, and
merchandise or services received are charged to expense when received or used.
If merchandise or services are received prior to the broadcast of the
advertising, a liability (deferred barter revenue) is recorded. If the
advertising is broadcast before the receipt of the goods or services, a
receivable is recorded.
CONSOLIDATED STATEMENTS OF CASH FLOWS
For purposes of the 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 $100,000,
$5,545,000, and $6,662,000 were paid during 1993, 1994 and 1995, respectively.
Interest paid was $3,107,000, $381,000, and $1,378,000 during 1993, 1994, and
1995, respectively. The effect of barter transactions has been eliminated (see
Note 12).
CONCENTRATIONS OF CREDIT RISK
Financial instruments which potentially subject the Company to
concentrations of credit risk consist principally of temporary cash investments
and accounts receivable. Concentrations of credit risk with respect to accounts
receivable are limited due to the large number of customers comprising the
Company's customer base and their dispersion across many different geographic
areas of the country.
PROPERTY AND EQUIPMENT
Property and equipment are stated at cost less accumulated depreciation;
depreciation is provided on the straight-line basis over the estimated useful
lives of the assets as follows:
Land improvements..................................... 20 Years
Buildings............................................. 25 Years
3 to 20
Equipment............................................. Years
5 to 12
Furniture and fixtures................................ Years
Life of
Leasehold improvements................................ lease
F-7
JACOR COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
INTANGIBLE ASSETS
Intangible assets are stated at cost less accumulated amortization;
amortization is provided principally on the straight-line basis over the
following lives:
Goodwill.............................................. 40 Years
5 to 25
Other intangibles..................................... Years
Other intangible assets consist primarily of various contracts and purchased
intellectual property.
The carrying value of intangible assets is reviewed by the Company when
events or circumstances suggest that the recoverability of an asset may be
impaired. If this review indicates that goodwill and licenses will not be
recoverable, as determined based on the undiscounted cash flows of the entity
over the remaining amortization period, the carrying value of the goodwill and
licenses will be reduced accordingly.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities, and
disclosure of contingent assets and liabilities, at the dates of the financial
statements and the reported amounts of revenues and expenses during the
reporting periods. Actual results could differ from those estimates.
PER SHARE DATA
Income per share for the three years ended December 31, 1995 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 year.
Fully diluted income per share is not presented since it approximates income per
share.
2. ACQUISITION OF LICENSES
In June 1993, the Company acquired the FCC license and certain contracts of
radio station WLWA(AM) (formerly WKRC) in Cincinnati, Ohio for $1,600,000 in
cash.
In September 1995, the Company exercised its purchase option to acquire
ownership of the FCC license of radio station KHTS-FM (formerly KECR-FM) in San
Diego, California for approximately $13,875,000 in cash.
3. ACQUISITIONS
In July 1993, the Company completed the acquisition of radio station
KAZY(FM) in Denver, Colorado from its majority shareholder. The majority
shareholder had purchased that station for $5,500,000 and then sold the station
to the Company in consideration of the issuance of shares of the Company's
common stock having a value, at $5.74 per share, equal to the majority
shareholder's cost for the station plus related acquisition costs. In connection
with the acquisition, 964,006 shares of the Company's common stock were issued
to the majority shareholder.
Effective January 1, 1994, the Company acquired an interest in Critical Mass
Media, Inc. ("CMM") from the Company's President. In connection with the
transaction, the President has the right to put the remaining interest to the
Company between January 1, 1999 and January 1, 2000 for 300,000 shares of the
Company's common stock. If the put is not exercised by January 1, 2000, the
Company has the right to acquire the remaining interest prior to 2001 in
exchange for 300,000 shares of the Company's common stock. In connection with
the acquisition, the Company recorded $3,017,000 in goodwill and a $2,400,000
obligation included in other liabilities.
F-8
JACOR COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
In March 1994, the Company entered into an agreement to acquire the assets
of radio station WPPT(FM) (formerly WIMJ) in Cincinnati, Ohio for $9,500,000 in
cash. Pending consummation of the transaction (which occurred in June 1995), the
Company operated the station under a Local Marketing Agreement which commenced
April 7, 1994, and expired upon completion of the purchase.
In 1994, the Company acquired the call letters, programming and certain
contracts of radio station KBPI(FM) in Denver, Colorado and then changed the
call letters of its FM broadcast station KAZY to KBPI; the Company acquired the
call letters, programming and certain contracts of radio station WCKY(AM) in
Cincinnati, Ohio and then changed the call letters of its AM broadcast station
WLWA to WCKY; the Company acquired radio station KTLK(AM) (formerly KRZN) in
Denver, Colorado; and the Company acquired radio station WWST(FM) (formerly
WWZZ) in Knoxville, Tennessee. The aggregate cash purchase price for these
acquisitions was approximately $9.5 million.
In August 1995, the Company acquired certain operating assets of radio
stations WDUV(FM) and WBRD(AM) in Tampa, Florida for approximately $14,000,000
in cash.
In 1995, the Company acquired the call letters, programming and certain
contracts of radio station WOFX(FM) in Cincinnati, Ohio and then changed the
call letters of its FM broadcast station WPPT to WOFX. The Company also acquired
radio stations WSOL(FM) (formerly WHJX), WJBT(FM) and WZAZ(AM) in Jacksonville,
Florida. The aggregate cash purchase price for these acquisitions was
approximately $9,750,000.
All of the above acquisitions have been accounted for as purchases. The
excess cost over the fair value of net assets acquired is being amortized over
40 years. The results of operations of the acquired businesses are included in
the Company's financial statements since the respective dates of acquisition.
Assuming each of the 1994 and 1995 acquisitions had taken place at the beginning
of 1994, unaudited pro forma consolidated results of operations would have been
as follows:
PRO FORMA (UNAUDITED)
YEAR ENDED DECEMBER 31,
------------------------------
1994 1995
Net broadcasting revenue..................................... $ 111,232,000 $ 121,214,000
Net income................................................... 7,115,000 10,423,000
Net income per share......................................... 0.33 0.50
4. DISPOSITION
In May 1994, the Company completed the sale of the business and
substantially all the assets of its wholly owned subsidiary, Telesat Cable TV,
Inc., under a contract dated December 1993. The Company received approximately
$2,000,000 in cash for this sale.
5. PROPERTY AND EQUIPMENT
Property and equipment at December 31, 1994 and 1995 consist of the
following:
1994 1995
Land and land improvements..................................... $ 1,999,002 $ 2,575,224
Buildings...................................................... 1,912,432 2,584,556
Equipment...................................................... 18,725,970 26,673,912
Furniture and fixtures......................................... 2,346,041 3,505,363
Leasehold improvements......................................... 2,116,548 3,184,683
------------- -------------
27,099,993 38,523,738
Less accumulated depreciation.................................. (4,471,152) (7,722,513)
------------- -------------
$ 22,628,841 $ 30,801,225
------------- -------------
------------- -------------
F-9
JACOR COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
6. INTANGIBLE ASSETS
Intangible assets at December 31, 1994 and 1995 consist of the following:
1994 1995
Goodwill..................................................... $ 78,621,918 $ 120,947,774
Other........................................................ 25,952,816 27,488,624
-------------- --------------
104,574,734 148,436,398
Less accumulated amortization................................ (15,031,433) (21,278,636)
-------------- --------------
$ 89,543,301 $ 127,157,762
-------------- --------------
-------------- --------------
7. DEBT AGREEMENT
The Company's debt obligations at December 31, 1995 consist of the
following:
Indebtedness under the Bank Credit Agreement (described
below)--
Senior reducing revolving facility......................... $38,500,000
Senior acquisition facility................................ 7,000,000
----------
$45,500,000
----------
----------
The Company has an agreement with a group of lenders, as amended (the "1993
Credit Agreement"), which provides for a senior reducing revolving credit
facility with a commitment of $39,550,000 at December 31, 1995 that expires on
December 31, 2000 (the "Revolver") and a senior 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 1993 Credit Agreement.
The 1993 Credit Agreement requires that the commitment under the Revolver be
reduced by $900,000 quarterly during 1996 and by increasing quarterly amounts
thereafter, and, under certain circumstances, requires mandatory prepayments of
any outstanding loans and further commitment reductions under the 1993 Credit
Agreement. Amounts outstanding under the Acquisition Facility at September 30,
1996 are payable in 17 equal quarterly installments.
The indebtedness of the Company under the 1993 Credit Agreement 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 1993 Credit Agreement contains
restrictions pertaining to maintenance of financial ratios, capital
expenditures, payment of dividends or distributions of capital stock and
incurrence of additional indebtedness.
Interest under the 1993 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. The Company will pay quarterly commitment
fees equal to 3/8% per annum on the aggregate unused portion of the aggregate
commitment on both facilities. 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 1993 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 5.3125%.
F-10
JACOR COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
8. CAPITAL STOCK
During 1995, the Company purchased and retired 1,515,300 shares of its own
common stock at a cost of $21,693,832. The Company's Board of Directors has
authorized the Company to purchase up to an additional 1,000,000 shares of its
own common stock from time to time in open-market or negotiated transactions.
The Company issued 2,014,233 warrants on January 1, 1993 to purchase
2,014,233 shares of common stock at $8.30 which were recorded at their estimated
fair value of $0.20 per warrant. The warrants may be exercised at any time prior
to January 14, 2000, at which time the warrants expire. During the year ended
December 31, 1995, 10,561 warrants were exercised.
9. INCOME TAXES
Income tax expense for the years ended December 31, 1993, 1994 and 1995 is
summarized as follows:
FEDERAL STATE TOTAL
1993:
Current............................................................. $ 900,000 $ 400,000 $ 1,300,000
Deferred............................................................ 1,300,000 100,000 1,400,000
------------ ------------ ------------
$ 2,200,000 $ 500,000 $ 2,700,000
------------ ------------ ------------
------------ ------------ ------------
1994:
Current............................................................. $ 5,593,800 $ 1,075,000 $ 6,668,800
Deferred............................................................ (300,000) (55,000) (355,000)
------------ ------------ ------------
$ 5,293,800 $ 1,020,000 $ 6,313,800
------------ ------------ ------------
------------ ------------ ------------
1995:
Current............................................................. $ 6,600,000 $ 1,260,000 $ 7,860,000
Deferred............................................................ (500,000) (60,000) (560,000)
------------ ------------ ------------
$ 6,100,000 $ 1,200,000 $ 7,300,000
------------ ------------ ------------
------------ ------------ ------------
The provisions for income tax differ from the amount computed by applying
the statutory federal income tax rate due to the following:
1993 1994 1995
Federal income taxes at the statutory rate.............................. $ 1,407,071 $ 4,957,861 $ 6,392,788
Amortization not deductible............................................. 404,660 606,137 606,137
State income taxes, net of any current federal income tax benefit....... 330,000 663,000 780,000
Other................................................................... 558,269 86,802 (478,925)
------------ ------------ ------------
$ 2,700,000 $ 6,313,800 $ 7,300,000
------------ ------------ ------------
------------ ------------ ------------
The tax effects of the significant temporary differences which comprise the
deferred tax liability at December 31, 1993, 1994 and 1995 are as follows:
1993 1994 1995
Property and equipment.............................................. $ 11,172,498 $ 11,062,121 $ 12,208,187
Intangibles......................................................... (1,445,854) (860,566) (1,456,567)
Accrued expenses.................................................... (740,790) (2,183,592) (1,992,093)
Reserve for pending sale of assets.................................. (1,458,396)
Other............................................................... 372,542 1,159,493 (142,071)
------------- ------------- -------------
Net liability................................................. $ 7,900,000 $ 9,177,456 $ 8,617,456
------------- ------------- -------------
------------- ------------- -------------
F-11
JACOR COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
10. STOCK-BASED COMPENSATION PLANS
In October 1995, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 123 "Accounting for Stock-Based
Compensation". The Company will continue to apply APB Opinion No. 25 in
accounting for its plans as permitted by this statement. This statement however,
requires that a company's financial statements include certain disclosures about
stock-based employee compensation arrangements regardless of the method used to
account for them. Pro forma disclosures required by a company that elects to
continue to measure compensation cost using Opinion No. 25 will be made by the
Company for the year ended December 31, 1996.
At December 31, 1995, the Company has three stock-based compensation plans,
which are described below. The Company applies APB Opinion 25 in accounting for
its plans. Accordingly, no compensation cost has been recognized for its fixed
stock option plans and its stock purchase plan.
1993 STOCK OPTION PLAN
Under the Company's 1993 stock option plan, options to acquire up to
2,769,218 shares of common stock can be granted to officers and key employees at
no less than the fair market value of the underlying stock on the date of grant.
The plan permits the granting of non-qualified stock options as well as
incentive stock options. The options vest 30% upon grant, 30% upon the first
anniversary of the grant date and 20% per year for each of the next two years
thereafter and expire 10 years after grant. The plan will terminate no later
than February 7, 2003. Information pertaining to the plan for the years ended
December 31, 1993, 1994 and 1995 is as follows:
NUMBER OF OPTION PRICE
SHARES PER SHARE
1993:
Outstanding at beginning of year.................................... 0
Granted............................................................. 1,535,910 $ 5.74-$ 6.46
Exercised........................................................... (55,980) $5.74
Surrendered......................................................... (114,310) $ 5.97-$ 6.46
Outstanding at end of year.......................................... 1,365,620 $ 5.74-$ 6.46
Exercisable at end of year.......................................... 370,500 $5.74
Available for grant at end of year.................................. 97,618
1994:
Outstanding at beginning of year.................................... 1,365,620 $ 5.74-$ 6.46
Granted............................................................. 10,000 $13.50-$15.18
Exercised........................................................... (89,310) $ 5.74-$ 5.97
Outstanding at end of year.......................................... 1,286,310 $ 5.74-$15.18
Exercisable at end of year.......................................... 734,670 $ 5.74-$13.50
Available for grant at end of year.................................. 87,618
1995:
Outstanding at beginning of year.................................... 1,286,310 $ 5.74-$15.18
Granted............................................................. 245,000 $13.88-$15.60
Exercised........................................................... (27,790) $ 5.74-$ 6.46
Outstanding at end of year.......................................... 1,503,520 $ 5.74-$15.60
Exercisable at end of year.......................................... 1,046,340 $ 5.74-$14.04
Available for grant at end of year.................................. 1,092,618
F-12
JACOR COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DIRECTORS' STOCK OPTIONS
The Company has granted nonqualified stock options to purchase up to 65,000
shares of the Company's common stock to certain members of the Company's Board
of Directors. These options vest 30% upon grant, 30% upon the first anniversary
of the grant date and 20% per year for each of the next two years thereafter.
Options to purchase up to 40,000 shares must be exercised in full prior to May
28, 1998 while the remaining options must be exercised in full prior to December
15, 2004. The exercise price of these options ranges from $5.74 per share to
$14.34 per share.
EMPLOYEE STOCK PURCHASE PLAN
Under the 1995 Employee Stock Purchase Plan, the Company is authorized to
issue up to 200,000 shares of common stock to its full-time and part-time
employees, all of whom are eligible to participate. Under the terms of the Plan,
employees can choose each year to have up to 10 percent of their annual base
earnings withheld to purchase the Company's common stock. The purchase price of
the stock is 85 percent of the lower of its beginning-of-year or end-of-year
market price. Under the Plan, the Company sold 43,785 shares to employees in
1995 at a purchase price of $10.84 per share.
11. COMMITMENTS AND CONTINGENCIES
LEASE OBLIGATIONS
The Company and its subsidiaries lease certain land and facilities used in
their operations, including local marketing agreements for certain radio
stations. Future minimum rental payments under all noncancellable operating
leases as of December 31, 1995 are payable as follows:
1996................................... $2,958,000
1997................................... 2,681,000
1998................................... 2,340,000
1999................................... 1,208,000
2000................................... 1,106,000
Thereafter............................. 4,273,000
----------
$14,566,000
----------
----------
Rental expense was approximately $2,991,000, $3,336,000, and $3,471,000 for
the years ended December 31, 1993, 1994 and 1995, respectively.
The Company has a real estate lease for office space for its Atlanta
operations with an affiliate of its majority shareholder. The annual rental rate
is approximately $330,000.
LEGAL PROCEEDINGS
The Company is a party to various legal proceedings. In the opinion of
management, all such matters are adequately covered by insurance, or if not so
covered, are without merit or are of such kind, or involve such amounts, as
would not have a significant effect on the financial position or results of
operations of the Company.
12. BARTER TRANSACTIONS
Barter revenue was approximately $5,061,000, $4,647,000, and $4,976,000 in
1993, 1994 and 1995, respectively. Barter expense was approximately $4,941,000,
$4,164,000, and $5,166,000 in 1993, 1994 and 1995, respectively.
F-13
JACOR COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Included in accounts receivable and accounts payable in the accompanying
consolidated balance sheets for 1994 and 1995 are barter accounts receivable
(merchandise or services due the Company) of approximately $1,372,000 and
$927,000, respectively, and barter accounts payable (air time due supplier of
merchandise or service) of approximately $1,000,000 and $1,012,000,
respectively.
13. RETIREMENT PLAN
The Company maintains a defined contribution retirement plan covering
substantially all employees who have met eligibility requirements. The Company
matches 50% of participating employee contributions, subject to a maximum
contribution by the Company of 1 1/2% of such employee's annual compensation up
to $150,000 of such compensation. Total expense related to this plan was
$237,875, $289,487, and $334,253 in 1993, 1994 and 1995, respectively.
14. SUBSEQUENT EVENTS
ACQUISITIONS
In February 1996, the Company entered into an agreement to acquire Noble
Broadcast Group, Inc. ("Noble"), for $152,000,000 in cash. Noble owns 10 radio
stations, 4 of which serve Denver, Colorado, with 3 each serving St. Louis,
Missouri and Toledo, Ohio; and provides programming to and sells air time for
two stations serving the San Diego market. The broadcast signals for the
stations serving the San Diego market originate from Mexico. The agreement is
subject to the approval of the Federal Communications Commission and the
satisfaction of certain other conditions. Pending consummation of the
transaction, the Company entered into Time Brokerage Agreements for the stations
in St. Louis and Toledo which began February 21, 1996, and will expire on the
purchase date. The Company will finance this acquisition from the proceeds of a
new credit facility discussed below.
In February 1996, the Company signed an agreement and plan of merger to
acquire Citicasters Inc. ("Citicasters"), owner of 19 radio stations in eight
U.S. markets as well as two network-affiliated television stations. Citicasters'
radio stations serve Atlanta, Georgia; Cincinnati and Columbus, Ohio; Kansas
City, Kansas and Missouri; Phoenix, Arizona; Portland, Oregon; Sacramento,
California; and Tampa, Florida. The television stations serve Cincinnati, Ohio
and Tampa, Florida. The agreement is subject to the approval of the Federal
Communications Commission and the satisfaction of certain other conditions. In
conjunction with this agreement, the Company has delivered to the seller a
$75,000,000 nonrefundable deposit in the form of a letter of credit. The letter
of credit requires annual fees of 1.25% and can be drawn upon by Citicasters if
the merger agreement is terminated.
Jacor will pay $29.50 in cash, plus, in the event that the closing does not
occur prior to October 1, 1996, for each full calendar month ending prior to the
merger commencing with October 1996, an additional amount of $.22125 in cash. In
addition, for each share of Citicasters common stock held, Citicasters
shareholders will receive one Jacor warrant to purchase a fractional share of
Jacor common stock (which fraction is anticipated to be .2035247) at a price of
$28.00 per full share of Jacor common stock. If the merger is not consummated by
October 1, 1996, the exercise price for the warrants to purchase 4,400,000
shares of Jacor stock will be reduced to $26.00 per share. The cash purchase
price, which is approximately $630,000,000, will increase by approximately
$5,000,000 for each full month subsequent to October 1996 but prior to the
merger.
NEW CREDIT AGREEMENT
On February 20, 1996 the Company entered into a new credit facility. The
Company's new senior debt consists of two facilities (the "Facilities") provided
under an agreement (the "Existing Credit Facility") with ten banks: a
$190,000,000 reducing revolving credit facility ("Revolving A Loans") and a
$110,000,000 reducing revolving credit facility ("Revolving B Loans"). Both
Facilities mature on December 31, 2003. The
F-14
JACOR COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
indebtedness of the Company under the 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 Revolving A Loans will be used primarily to refinance existing debt and
to complete the Noble acquisition. The Revolving B Loans will be used to finance
acquisitions, stock repurchases and for working capital and other general
corporate purposes.
The commitment under the Revolving A Loans will be reduced by $2,500,000
each quarter commencing January 1, 1997 and by increasing quarterly amounts in
each succeeding year. The commitment under the Revolving B Loans will be reduced
by $5,000,000 for each quarter commencing January 1, 1998.
The Company is required to make mandatory prepayments of the Facilities
equal to (i) net proceeds from any debt offerings, (ii) 50% of net proceeds from
any equity offerings to bring the Company's leverage ratio down to 5 to 1, (iii)
50% of excess cash flow, as defined, beginning in 1997, and (iv) net after tax
proceeds received from asset sales or other dispositions.
Interest under the Facilities is payable, at the option of the Company, at
alternative rates equal to the Eurodollar rate plus 1% to 2 3/4% or the base
rate announced by Banque Paribas plus up to 1 1/2%. The spreads over the
Eurodollar rate and such base rate vary from time to time, depending upon the
Company's financial leverage. The Company will pay quarterly commitment fees of
3/8% to 1/2% per annum on the unused portion of the commitment on both
Facilities depending on 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.
The Existing Credit Facility contains a number of covenants which, among
other things, require the Company to maintain specified financial ratios and
impose certain limitations on the Company with respect to (i) the incurrence of
additional indebtedness; (ii) investments and acquisitions, except under
specified conditions; (iii) the incurrence of additional liens; (iv) the
disposition of assets; (v) the payment of cash dividends; (vi) capital
expenditures; and (vii) mergers, changes in business, and transactions with
affiliates.
SUPPLEMENTARY DATA
Quarterly Financial Data for the years ended December 31, 1994 and 1995
(Unaudited)
FIRST SECOND FOURTH
QUARTER QUARTER THIRD QUARTER QUARTER
------------- ------------- ------------- -------------
1994
Net revenue....................................... $ 19,782,029 $ 30,010,219 $ 28,498,476 $ 28,719,724
Operating income (loss)........................... (519,163) 4,364,512 4,784,215 4,853,514
Net income (loss)................................. (220,443) 2,374,259 2,629,384 3,068,316
Net income (loss) per common share(1)............. (0.01) 0.11 0.12 0.14
1995
Net revenue....................................... $ 24,016,183 $ 30,866,300 $ 32,293,562 $ 31,714,786
Operating income.................................. 1,060,526 5,628,006 5,899,472 6,029,017
Net income........................................ 751,314 3,528,561 3,488,305 3,196,929
Net income per common share(1).................... 0.04 0.17 0.17 0.16
- ------------------------------
(1) The sum of the quarterly net income (loss) per share amounts does not equal
the annual amount reported as per share amounts are computed independently
for each quarter.
F-15
JACOR COMMUNICATIONS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
DECEMBER 31,
1995 MARCH 31, 1996
-------------- --------------
ASSETS
Current assets:
Cash and cash equivalents.................................................... $ 7,436,779 $ 5,889,086
Accounts receivable, less allowance for doubtful accounts of $1,606,000 in
1995 and $1,792,000 in 1996................................................ 25,262,410 25,301,411
Other current assets......................................................... 3,916,140 8,459,513
-------------- --------------
Total current assets..................................................... 36,615,329 39,650,010
Property and equipment, net...................................................... 30,801,225 39,214,100
Intangible assets, net........................................................... 127,157,762 165,282,175
Other assets..................................................................... 14,264,775 109,101,988
-------------- --------------
Total assets............................................................. $ 208,839,091 $ 353,248,273
-------------- --------------
-------------- --------------
LIABILITIES
Current liabilities:
Accounts payable............................................. $ 2,312,691 $ 2,670,017
Accrued payroll.............................................. 3,177,945 1,623,631
Accrued federal, state and local income tax.................. 3,225,585 3,756,596
Other current liabilities.................................... 3,463,344 6,550,488
----------- -----------
Total current liabilities................................ 12,179,565 14,600,732
Long-term debt................................................... 45,500,000 183,500,000
Other liabilities................................................ 3,468,995 6,115,602
Deferred tax liability........................................... 8,617,456 8,657,456
----------- -----------
Total liabilities........................................ 69,766,016 212,873,790
----------- -----------
SHAREHOLDERS' EQUITY
Common stock, no par value, $.10 per share stated value.......... 1,815,721 1,823,723
Additional paid-in capital....................................... 116,614,230 117,101,914
Common stock warrants............................................ 388,055 387,998
Retained earnings................................................ 20,255,069 21,060,848
----------- -----------
Total shareholders' equity............................... 139,073,075 140,374,483
----------- -----------
Total liabilities and shareholders' equity............... $208,839,091 $353,248,273
----------- -----------
----------- -----------
The accompanying notes are an integral part of the condensed consolidated
financial statements.
F-16
JACOR COMMUNICATIONS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 1995 AND 1996
(UNAUDITED)
1995 1996
------------- -------------
Broadcast revenue.................................................................. $ 26,840,493 $ 33,572,314
Less agency commissions........................................................ 2,824,310 3,498,278
------------- -------------
Net revenue.................................................................. 24,016,183 30,074,036
Broadcast operating expenses....................................................... 19,959,660 23,870,578
Depreciation and amortization...................................................... 2,111,971 2,619,466
Corporate general and administrative expenses...................................... 884,026 1,138,560
------------- -------------
Operating income............................................................. 1,060,526 2,445,432
Interest expense................................................................... (104,822) (2,111,496)
Gain on sale of radio stations..................................................... 2,539,407
Other income, net.................................................................. 309,610 227,212
------------- -------------
Income before income taxes and extraordinary loss............................ 1,265,314 3,100,555
Income tax expense................................................................. (514,000) (1,259,000)
------------- -------------
Income before extraordinary loss............................................. 751,314 1,841,555
Extraordinary loss, net of income tax credit....................................... (950,775)
------------- -------------
Net income................................................................... $ 751,314 $ 890,780
------------- -------------
------------- -------------
Net income per common share:
Before extraordinary loss...................................................... $ 0.04 $ 0.09
Extraordinary loss............................................................. (0.05)
------------- -------------
Net income per common share.................................................. $ 0.04 $ 0.04
------------- -------------
------------- -------------
Number of common shares used in per share computations............................. 21,347,440 20,502,752
------------- -------------
------------- -------------
The accompanying notes are an integral part of the condensed consolidated
financial statements.
F-17
JACOR COMMUNICATIONS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 1995 AND 1996
(UNAUDITED)
1995 1996
------------- ---------------
Cash flows from operating activities:
Net income................................................................... $ 751,314 $ 890,780
Adjustments to reconcile net income to net cash provided by operating
activities:
Depreciation............................................................... 686,522 1,010,964
Amortization of intangibles................................................ 1,425,449 1,608,502
Extraordinary loss......................................................... 950,775
Provision for losses on accounts and notes receivable...................... 277,892 354,583
Deferred income tax provision (benefit).................................... (50,000) 40,000
Gain on sale of radio stations............................................. (2,539,407)
Other...................................................................... (198,570) (179,971)
Change in current assets and current liabilities net of effects of
acquisitions:
Accounts receivable...................................................... 4,844,835 2,778,311
Other current assets..................................................... (767,393) (3,852,999)
Accounts payable......................................................... (273,728) 336,645
Accrued payroll, accrued interest and other current liabilities.......... (371,551) 2,629,075
------------- ---------------
Net cash provided by operating activities........................................ 6,324,770 4,027,258
------------- ---------------
Cash flows from investing activities:
Capital expenditures......................................................... (707,183) (3,436,834)
Cash paid for acquisitions................................................... (48,100,000)
Proceeds from sale of radio stations......................................... 6,453,626
Purchase of Noble warrant.................................................... (52,775,170)
Loans made in conjunction with acquisitions.................................. (41,625,000)
Other........................................................................ (33,029) (840,544)
------------- ---------------
Net cash used by investing activities........................................ (740,212) (140,323,922)
------------- ---------------
Cash flows from financing activities:
Proceeds from issuance of long-term debt..................................... 190,000,000
Proceeds from issuance of common stock....................................... 155,515 495,629
Reduction in long-term debt.................................................. (52,000,000)
Payment of finance cost...................................................... (3,696,658)
Payment of restructuring expenses............................................ (50,000) (50,000)
------------- ---------------
Net cash provided by financing activities.................................... 105,515 134,748,971
------------- ---------------
Net increase (decrease) in cash and cash equivalents............................. 5,690,073 (1,547,693)
Cash and cash equivalents at beginning of period................................. 26,974,838 7,436,779
------------- ---------------
Cash and cash equivalents at end of period....................................... $ 32,664,911 $ 5,889,086
------------- ---------------
------------- ---------------
The accompanying notes are an integral part of the condensed consolidated
financial statements.
F-18
JACOR COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. FINANCIAL STATEMENTS
The December 31, 1995 consolidated balance sheet data was derived from
audited financial statements, but does not include all disclosures required by
Generally Accepted Accounting Principles. 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, 1995 and the notes thereto.
2. ACQUISITIONS
NOBLE BROADCAST GROUP, INC.
In February 1996, the Company agreed to acquire Noble Broadcast Group, Inc.
("Noble"), for approximately $152,000,000 in cash plus related costs and
expenses. The Company entered into an agreement with the stockholders of Noble
to acquire all of the outstanding capital stock of Noble for approximately
$12,500,000. At the same time, the Company also purchased a warrant for
$52,775,170 entitling the Company to acquire a 79.1% equity interest in Noble
(the "Noble Warrant"). Upon consummation of the purchase of the outstanding
Noble capital stock from the Noble stockholders and the exercise of the Noble
Warrant, the Company will own 100% of the equity interests in Noble. The
completion of the Company's acquisition of Noble is subject to various
conditions including the receipt of consents from regulatory authorities. The
Company will finance this acquisition from the proceeds of a new credit facility
(see Note 4).
Noble owns ten radio stations. Noble's radio stations serve Denver (two AM
and two FM), St. Louis (one AM, two FM) and Toledo (one AM, two FM). Pending the
closing of the Company's acquisition of Noble, the Company and Noble have
entered into local marketing agreements with respect to Noble's radio stations
in St. Louis and Toledo.
Also, in February 1996, a wholly owned subsidiary of the Company purchased
for approximately $47,000,000 certain assets from Noble relating to Noble's San
Diego operations. As part of Noble's San Diego operations, Noble provided
programming to and sold the air time for two radio stations serving San Diego
(one AM, one FM), which programming and air time is now provided and sold by the
Company. In addition, another wholly owned subsidiary of the Company provided a
credit facility to Noble in the amount of $41,000,000.
CITICASTERS INC.
In February 1996, the Company signed an agreement and plan of merger to
acquire Citicasters Inc. ("Citicasters") owner of 19 radio stations in eight
U.S. markets as well as two network affiliated television stations. Citicasters'
radio stations serve Atlanta, Cincinnati, Columbus, Kansas City, Phoenix,
Portland, Sacramento, and Tampa. The television stations serve Cincinnati and
Tampa. The agreement is subject to various conditions including the receipt of
consents from regulatory authorities. In conjunction with this agreement, the
Company has delivered to the seller a $75,000,000 non-refundable deposit in the
form of a letter of credit. The letter of credit requires annual fees of 1.25%
and can be drawn upon by Citicasters if the merger agreement is terminated.
The Company will pay $29.50 in cash per share, plus, in the event that the
closing does not occur prior to October 1, 1996, for each full calendar month
ending prior to the merger commencing with October 1996, an additional amount of
$.22125 per share in cash. In addition, for each share of Citicasters common
stock held, Citicasters shareholders will receive one Jacor warrant to purchase
a fractional share of Jacor common stock
F-19
JACOR COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
2. ACQUISITIONS (CONTINUED)
(which fraction is anticipated to be .2035247) at a price of $28.00 per full
share of Jacor common stock. If the merger is not consummated by October 1,
1996, the exercise price for the warrants to purchase 4,400,000 shares of Jacor
stock will be reduced to $26.00 per share. The cash purchase price, which is
approximately $630,000,000, will increase by approximately $5,000,000 for each
full month subsequent to October, 1996 but prior to the merger.
The above acquisitions will be accounted for as purchases. The excess cost
over the fair value of identifiable net assets acquired will be amortized over
40 years. Assuming each of these acquisitions had taken place at the beginning
of 1995 and 1996, respectively, unaudited pro forma consolidated results of
operations would have been as follows:
THREE MONTHS ENDED
MARCH 31,
--------------------
1995 1996
--------- ---------
Net revenue....................................................................... $ 64,591 $ 67,005
Loss before extraordinary items................................................... (6,860) (8,086)
Net loss per share................................................................ (0.21) (0.25)
3. OTHER ASSETS
The Company's other assets at December 31, 1995 and March 31, 1996 consist
of the following:
DECEMBER 31,
1995 MARCH 31, 1996
------------- --------------
Noble Warrant..................................................................... $ 52,775,170
Loan to Noble..................................................................... 40,000,000
Other............................................................................. $ 14,264,775 16,326,818
------------- --------------
$ 14,264,775 $ 109,101,988
------------- --------------
------------- --------------
4. DEBT AGREEMENT
The Company's debt obligations at December 31, 1995 and March 31, 1996
consist of the following:
DECEMBER 31,
1995 MARCH 31, 1996
------------- --------------
Indebtedness under the 1993 Credit Agreement...................................... $ 45,500,000
Indebtedness under the Existing Credit Facility (described below)................. $ 183,500,000
------------- --------------
$ 45,500,000 $ 183,500,000
------------- --------------
------------- --------------
On February 20, 1996 the Company entered into a new credit facility. The
Company's new senior debt consists of two facilities (the "Facilities") provided
under an agreement (the "Existing Credit Facility") with ten banks: a
$190,000,000 reducing revolving credit facility ("Revolving A Loans") and a
$110,000,000 reducing revolving credit facility ("Revolving B Loans"). Both
facilities mature on December 31, 2003. The indebtedness of the Company under
the 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 Revolving A Loans will be used primarily to refinance existing debt and
to complete the Noble acquisition. The Revolving B Loans will be used to finance
acquisitions, stock repurchases and for working capital and other general
corporate purposes.
The commitment under the Revolving A Loans will be reduced by $2,500,000
each quarter commencing January 1, 1997 and by increasing quarterly amounts in
each succeeding year. The commitment under the Revolving B Loans will be reduced
by $5,000,000 for each quarter commencing January 1, 1998.
F-20
JACOR COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
4. DEBT AGREEMENT (CONTINUED)
The Company is required to make mandatory prepayments of the Facilities
equal to (i) net proceeds from any debt offerings, (ii) 50% of net proceeds from
any equity offerings to bring the Company's leverage ratio down to 5 to 1, (iii)
50% of excess cash flow, as defined, beginning in 1997, and (iv) net after tax
proceeds received from asset sales or other dispositions.
Interest under the Facilities is payable, at the option of the Company, at
alternative rates equal to the Eurodollar rate plus 1% to 2 3/4% or the base
rate announced by Banque Paribas plus up to 1 1/2%. The spreads over the
Eurodollar rate and such base rate vary from time to time, depending upon the
Company's financial leverage. The Company will pay quarterly commitment fees of
3/8% to 1/2% per annum on the unused portion of the commitment on both
Facilities depending on 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.
The Existing Credit Facility contains a number of covenants which, among
other things, require the Company to maintain specified financial ratios and
impose certain limitations on the Company with respect to (i) the incurrence of
additional indebtedness; (ii) investments and acquisitions, except under
specified conditions; (iii) the incurrence of additional liens; (iv) the
disposition of assets; (v) the payment of cash dividends; (vi) capital
expenditures; and (vii) mergers, changes in business, and transactions with
affiliates.
F-21
REPORT OF INDEPENDENT AUDITORS
Board of Directors
Citicasters Inc.
We have audited the accompanying balance sheets of Citicasters Inc. and
subsidiaries (formerly Great American Communications Company) as of December 31,
1994 and 1995, and the related statements of operations, shareholders' equity
and cash flows for each of the three years in the period ended December 31,
1995. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
As more fully described in Note B to the financial statements, effective
December 28, 1993, the Company emerged from bankruptcy pursuant to a plan of
reorganization confirmed by the Bankruptcy Court on December 7, 1993. In
accordance with an American Institute of Certified Public Accountants Statement
of Position, the Company has adopted "fresh-start reporting" whereby its assets,
liabilities, and new capital structure have been adjusted to reflect estimated
fair values as of December 31, 1993. As a result, the statements of operations,
shareholders' equity and cash flows for the years ended December 31, 1994 and
December 31, 1995 reflect the Company's new basis of accounting and,
accordingly, are not comparable to the Company's pre-reorganization statements
of operations, shareholders' equity and cash flows for the year ended December
31, 1993.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Citicasters Inc. and
subsidiaries at December 31, 1994 and 1995, and the results of their operations
and their cash flows for each of the three years in the period ended December
31, 1995, in conformity with generally accepted accounting principles.
ERNST & YOUNG LLP
Cincinnati, Ohio
February 23, 1996
F-22
CITICASTERS INC. AND SUBSIDIARIES
BALANCE SHEETS
(DOLLARS IN THOUSANDS)
DECEMBER 31,
----------------------
1994 1995
ASSETS
Current assets:
Cash and short-term investments......................................................... $ 46,258 $ 3,572
Trade receivables, less allowance for doubtful accounts of $1,244 and $1,643............ 31,851 32,495
Broadcast program rights................................................................ 5,488 5,162
Prepaid and other current assets........................................................ 2,635 3,059
---------- ----------
Total current assets.................................................................. 86,232 44,288
Broadcast program rights, less current portion.......................................... 4,466 3,296
Property and equipment, net............................................................. 25,083 33,878
Contracts, broadcasting licenses and other intangibles, net............................. 274,695 312,791
Deferred charges and other assets....................................................... 13,016 22,093
---------- ----------
$ 403,492 $ 416,346
---------- ----------
---------- ----------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable, accrued expenses and other current liabilities........................ $ 33,673 $ 17,061
Broadcast program rights fees payable................................................... 5,041 5,298
---------- ----------
Total current liabilities............................................................. 38,714 22,359
Broadcast program rights fees payable, less current portion............................... 3,666 2,829
Long-term debt............................................................................ 122,291 132,481
Deferred income taxes..................................................................... 44,486 44,822
Other liabilities......................................................................... 43,398 54,163
---------- ----------
Total liabilities..................................................................... 252,555 256,654
Shareholders' equity:
Class A Common Stock, $.01 par value, including additional paid-in capital, 500,000,000
shares authorized; 20,203,247 and 19,976,927 shares outstanding....................... 87,831 82,936
Retained earnings from January 1, 1994.................................................. 63,106 76,756
---------- ----------
Total shareholders' equity............................................................ 150,937 159,692
---------- ----------
$ 403,492 $ 416,346
---------- ----------
---------- ----------
See notes to financial statements.
F-23
CITICASTERS INC. AND SUBSIDIARIES
STATEMENTS OF OPERATIONS
(IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
YEAR ENDED DECEMBER 31,
-----------------------------------
PREDECESSOR
1993 1994 1995
Net revenues:
Television broadcasting................................................... $ 139,576 $ 130,418 $ 61,592
Radio broadcasting........................................................ 65,592 66,625 74,822
----------- ---------- ----------
205,168 197,043 136,414
----------- ---------- ----------
Costs and expenses:
Operating expenses........................................................ 71,730 60,682 37,416
Selling, general and administrative....................................... 61,340 57,036 43,513
Corporate, general and administrative expenses............................ 3,996 4,796 4,303
Depreciation and amortization............................................. 28,119 22,946 14,635
----------- ---------- ----------
165,185 145,460 99,867
----------- ---------- ----------
Operating income............................................................ 39,983 51,583 36,547
Other income (expense):
Interest expense, (contractual interest for 1993 was $69,806)............. (64,942) (31,979) (13,854)
Minority interest......................................................... (26,776) -- --
Investment income......................................................... 305 1,216 1,231
Gain on sale of television stations....................................... -- 95,339 --
Miscellaneous, net........................................................ (494) 447 (607)
----------- ---------- ----------
(91,907) 65,023 (13,230)
----------- ---------- ----------
Earnings (loss) before reorganization items and income taxes................ (51,924) 116,606 23,317
Reorganization items........................................................ (14,872) -- --
----------- ---------- ----------
Earnings (loss) before income taxes and extraordinary items................. (66,796) 116,606 23,317
Income taxes................................................................ -- 53,500 9,000
----------- ---------- ----------
Earnings (loss) before extraordinary items.................................. (66,796) 63,106 14,317
Extraordinary items, net of tax............................................. 408,140 -- --
----------- ---------- ----------
Net earnings................................................................ $ 341,344 $ 63,106 $ 14,317
----------- ---------- ----------
----------- ---------- ----------
Share data:
Primary and Fully Diluted:
Net earnings............................................................ * $ 2.55 $ .68
Average common shares................................................... * 24,777 21,017
- ------------------------
*Share amounts are not relevant due to the effects of the reorganization.
See notes to financial statements.
F-24
CITICASTERS INC. AND SUBSIDIARIES
STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
(IN THOUSANDS)
YEAR ENDED DECEMBER 31,
-----------------------------------
PREDECESSOR
1993 1994 1995
Common stock, including additional paid-in capital:
Beginning balance......................................................... $ 270,891 $ 138,588 $ 87,831
Common stock issued:
Exercise of stock options............................................... -- -- 273
Stock bonus awarded..................................................... 350 297 --
Common stock repurchased and retired...................................... -- (51,054) (5,168)
Effect of restructuring................................................... (132,653) -- --
----------- ---------- ----------
Balance at end of period $ 138,588 $ 87,831 $ 82,936
----------- ---------- ----------
----------- ---------- ----------
Retained earnings:
Beginning balance......................................................... $(609,920) $ -- $ 63,106
Net earnings.............................................................. 341,344 63,106 14,317
Application of fresh-start accounting..................................... 268,576 -- --
Cash dividends............................................................ -- -- (667)
----------- ---------- ----------
Balance at end of period.................................................. $ -- $ 63,106 $ 76,756
----------- ---------- ----------
----------- ---------- ----------
Total Shareholders' Equity.................................................. $ 138,588 $ 150,937 $ 159,692
----------- ---------- ----------
----------- ---------- ----------
See notes to financial statements.
F-25
CITICASTERS INC. AND SUBSIDIARIES
STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
YEAR ENDED DECEMBER 31,
---------------------------------
PREDECESSOR
1993 1994 1995
Operating Activities:
Net earnings................................................................ $ 341,344 $ 63,106 $ 14,317
Adjustments:
Depreciation and amortization............................................. 28,119 22,946 14,635
Non-cash interest expense................................................. 8,780 198 190
Other non-cash adjustments (primarily non-cash dividends on the preferred
stock of a former subsidiary)........................................... 26,941 -- --
Reorganization items...................................................... 14,872 -- --
Realized gains on sales of assets......................................... (1,871) (51,218) --
Extraordinary gains on retirements and refinancing of long-term debt...... (408,140) -- --
Decrease (increase) in trade receivables.................................. (1,635) 16,443 (644)
Decrease (increase) in broadcast program rights, net of fees payable...... 201 (146) 916
Increase (decrease) in accounts payable, accrued expenses and other
liabilities............................................................. 9,514 (2,891) (5,885)
Increase (decrease) in deferred taxes..................................... -- (6,559) 336
Other..................................................................... 306 (4,389) (634)
----------- --------- ---------
18,431 37,490 23,231
----------- --------- ---------
Investing Activities:
Deposits on broadcast stations to be acquired............................... -- -- (7,500)
Purchases of:
Broadcast stations........................................................ -- (16,000) (50,598)
Real estate, property and equipment....................................... (5,967) (7,569) (11,857)
Sales of:
Broadcast stations........................................................ 1,600 381,547 --
Entertainment businesses:
Cash proceeds received.................................................. -- 5,000 --
Cash expenses related to sale........................................... (6,021) (813) (22)
Investments and other subsidiaries........................................ -- 2,841 --
Other....................................................................... (1,131) 204 (378)
----------- --------- ---------
(11,519) 365,210 (70,355)
----------- --------- ---------
Financing Activities:
Retirements and refinancing of long-term debt............................... (370,150) (505,824) (3,500)
Additional long-term borrowings............................................. 355,339 195,350 13,500
Financing costs............................................................. (13,549) -- --
Common shares repurchased................................................... -- (51,054) (5,168)
Cash dividends paid on common stock......................................... -- -- (667)
Proceeds from the sale of common stock...................................... 1,161 -- --
Other....................................................................... -- 297 273
----------- --------- ---------
(27,199) (361,231) 4,438
----------- --------- ---------
Net Increase (Decrease) in Cash and Short-Term Investments.................... (20,287) 41,469 (42,686)
Cash and short-term investments at beginning of period........................ 25,076 4,789 46,258
----------- --------- ---------
Cash and short-term investments at end of period.............................. $ 4,789 $ 46,258 $ 3,572
----------- --------- ---------
----------- --------- ---------
See notes to financial statements.
F-26
CITICASTERS INC. AND SUBSIDIARIES
SUPPLEMENTARY SCHEDULE TO THE STATEMENT OF CASH FLOWS--REORGANIZATION ITEMS
(IN THOUSANDS)
YEAR ENDED
DECEMBER
31, 1993
PREDECESSOR
Effects of Reorganization Activities:
Cash Items:
Operating activities:
Professional fees and other expenses related to bankruptcy proceedings and consummation of the
reorganization............................................................................... $ (10,633)
-----------
-----------
Financing activities:
Long-term debt issued for cash................................................................. $ 6,339
Common stock issued for cash................................................................... 1,161
-----------
$ 7,500
-----------
-----------
Non Cash Items:
Increase in long-term debt (primarily reduction in original issue discount)...................... $ 25,967
Net adjustment of accounts to fair value......................................................... (15,961)
Decrease in liabilities subject to exchange...................................................... (40,423)
Increase in accrued liabilities (professional fees and other expenses related to consummation of
the reorganization)............................................................................ 1,438
Decrease in long-term debt through the issuance of common stock.................................. (221,541)
Elimination of minority interest (preferred stock of subsidiary) through the issuance of common
stock.......................................................................................... (274,932)
Common stock issued in reorganization............................................................ 134,762
-----------
$(390,690)
-----------
-----------
See notes to financial statements.
F-27
CITICASTERS INC. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
A. ACCOUNTING POLICIES
ORGANIZATION. Citicasters is engaged in the ownership and operation of
radio and television stations and derives substantially all of its revenue from
the sale of advertising time. The amount of broadcast advertising time available
for sale by Citicasters' stations is relatively fixed, and by its nature cannot
be stockpiled for later sale. Therefore, the primary variables affecting revenue
levels are the demand for advertising time, the viewing or listening audience of
the station and the entry of new stations in the marketplace. The major variable
costs of operation are programming (news, sports and entertainment), sales costs
related to revenues and promotional costs. The success of the programming
determines the audience levels and therefore affects revenue.
BASIS OF PRESENTATION. The accompanying financial statements include the
accounts of Citicasters Inc. and its subsidiaries. For purposes of the financial
statements and notes hereto the term "Predecessor" refers to Great American
Communications Company and its subsidiaries prior to emergence from chapter 11
bankruptcy. Significant intercompany balances and transactions have been
eliminated.
On December 28, 1993, the Predecessor completed its comprehensive financial
restructuring through a prepackaged plan of reorganization under chapter 11 of
the Bankruptcy Code (see Note B for a description of the reorganization).
Pursuant to the reporting principles of AICPA Statement of Position No. 90-7
entitled "Financial Reporting by Entities in Reorganization under the Bankruptcy
Code" ("SOP 90-7"), Predecessor adjusted its assets and liabilities to their
estimated fair values upon consummation of the reorganization. The adjustments
to reflect the consummation of the reorganization as of December 31, 1993,
including, among other things, the gain on debt discharge and the adjustment to
record assets and liabilities at their fair values, have been reflected in the
accompanying financial statements. The Statements of Operations, Changes in
Shareholders' Equity and Cash Flows for the year ended December 31, 1993 are
presented on a historical cost basis without giving effect to the
reorganization. Therefore, the Statements of Operations, Changes in
Shareholders' Equity and Cash Flows for periods after December 31, 1993 are
generally not comparable to prior periods and are separated by a line (see Note
B).
All acquisitions have been treated as purchases. The accounts and results of
operations of companies since their formation or acquisition are included in the
consolidated financial statements.
American Financial Group, Inc. and its Subsidiaries ("American Financial")
owned 7,566,889 shares (37.8%) of Citicasters' outstanding Common Stock at March
1, 1996. At that date, American Financial's Chairman, Carl H. Lindner, owned an
additional 3,428,166 shares (17.1%) of Citicasters' outstanding Common Stock.
USE OF ESTIMATES. The preparation of the financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the amounts reported in the financial
statements and accompanying notes. Changes in circumstances could cause actual
results to differ materially from those estimates.
BROADCAST PROGRAM RIGHTS. The rights to broadcast non-network programs on
Citicasters' television stations are stated at cost, less accumulated
amortization. These costs are charged to operations on a straight-line basis
over the contract period or on a per-showing basis, whichever results in the
greater aggregate amortization.
PROPERTY AND EQUIPMENT. Property and equipment are based on cost and
depreciation is calculated primarily using the straight-line method. Depreciable
lives are: land improvements, 8-20 years; buildings and improvements, 8-40
years; operating and other equipment, 3-20 years; and leasehold improvements,
over the life of the lease.
F-28
CITICASTERS INC. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
CONTRACTS, BROADCASTING LICENSES AND OTHER INTANGIBLES. Contracts,
broadcasting licenses and other intangibles represent the excess of the value of
the broadcast station over the values of their net tangible assets, and is
attributable to FCC licenses, network affiliation agreements and other
contractual or market related factors. Reorganization value in excess of amounts
allocable to identifiable assets represents the excess of the estimated fair
value of Citicasters at the time of the reorganization over the estimated fair
value allocated to its net identifiable assets. Intangible assets are being
amortized on a straight-line basis over an average of 34 years. On an ongoing
basis, Citicasters reviews the carrying value of its intangible assets. If this
review indicates that intangible assets will not be recoverable, as determined
based on undiscounted cash flows of broadcast stations over the remaining
amortization period, Citicasters' carrying value of intangible assets are
reduced by the amount of the estimated shortfall of cash flows.
INCOME TAXES. Citicasters files a consolidated Federal income tax return
which includes all 80% or more owned subsidiaries. Deferred income tax assets
and liabilities are determined based on differences between financial reporting
and tax bases and are measured using enacted tax rates. Deferred tax assets are
recognized if it is more likely than not that a benefit will be realized.
EARNINGS PER SHARE. Primary and fully diluted earnings per share in 1994
and 1995 are based upon the weighted average number of common shares and gives
effect to common equivalent shares (dilutive options) outstanding during the
respective periods. As a result of the effects of the reorganization, per share
data for the year ended December 31, 1993 has been rendered meaningless and,
therefore, per share information for this period has been omitted from the
accompanying financial statements.
STOCK BASED COMPENSATION. The Company grants stock options for a fixed
number of shares to employees with an exercise price equal to the fair value of
the shares at the date of grant. The Company accounts for stock option grants in
accordance with APB Opinion No. 25, Accounting for Stock Issued to Employees,
and, accordingly, recognizes no compensation expense for the stock option
grants.
STATEMENT OF CASH FLOWS. For cash flow purposes, "investing activities" are
defined as making and collecting loans and acquiring and disposing of debt or
equity instruments and property and equipment. "Financing activities" include
obtaining resources from owners and providing them with a return on their
investments, borrowing money and repaying amounts borrowed. All other activities
are considered "operating." Short-term investments for purposes of the financial
statements are those which had a maturity of three months or less when acquired.
B. REORGANIZATION
On December 28, 1993, Citicasters completed its comprehensive financial
restructuring that was designed to enhance its long-term viability by adjusting
its capitalization to reflect current and projected operating performance
levels. The Predecessor accomplished the reorganization of its debt and
preferred stock obligations through "prepackaged" bankruptcy filings made under
chapter 11 of the Bankruptcy Code by the Predecessor and two of its former
non-operating subsidiaries. The Predecessor's primary operating subsidiary,
Great American Television and Radio Company, Inc., was not a party to any such
filings under the Bankruptcy Code.
Acceptances for a prepackaged plan of reorganization were solicited in
October and early November 1993. The plan of reorganization described below was
overwhelmingly approved by the creditors and shareholders. The Predecessor filed
its bankruptcy petition with the Bankruptcy Court on November 5, 1993. The plan
was confirmed on December 7, 1993 and became effective on December 28, 1993.
Under the terms of the plan the following occurred:
- Predecessor effected a reverse stock split; issuing 2.25 shares of a new
class of common stock for each 300 shares of common stock outstanding
prior to the reorganization.
F-29
CITICASTERS INC. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
- Debt with a carrying value of $634.8 million was exchanged for 23,256,913
shares of common stock and $426.6 million in debt.
- Preferred stock of a subsidiary was exchanged for 1,515,499 shares of
common stock.
- American Financial fulfilled a commitment to contribute $7.5 million in
cash for which it received approximately $6.3 million principal amount of
14% Notes and 213,383 shares of common stock.
- The net expense incurred as a result of the chapter 11 filings and
subsequent reorganization has been segregated from ordinary operations in
the Statement of Operations. Reorganization items for 1993 include the
following (in thousands):
Financing costs............................................................ $ 25,967
Adjustments to fair value.................................................. (15,961)
Professional fees and other expenses related to bankruptcy................. 4,914
Interest income............................................................ (48)
---------
$ 14,872
---------
---------
Financing costs consist of the unamortized portion of original issue
discount and deferred financing costs relating to debt subject to exchange as of
the date the petition for bankruptcy was filed (November 5, 1993). Adjustments
to fair value reflect the net change to state assets and liabilities at
estimated fair value as of December 31, 1993. Interest income is attributable to
the accumulation of cash and short-term investments after commencement of the
chapter 11 cases.
Pursuant to the fresh-start reporting provisions of SOP 90-7, the
Predecessor's assets and liabilities were revalued and a new reporting entity
was created with no retained earnings or accumulated deficit as of the effective
date. The period from the effective date to December 31, 1993 was considered
immaterial thus, December 31, 1993 was used as the effective date for recording
the fresh-start adjustments. Predecessor's results of operations for the period
from the effective date of the restructuring to December 31, 1993 have been
reflected in the Statement of Operations for the year ended December 31, 1993.
The reorganization values of the assets and liabilities were determined
based upon several factors including: prices and multiples of broadcast cash
flow (operating income before depreciation and amortization) paid in purchase
and business combination transactions, projected operating results of the
broadcast stations, market values of publicly traded broadcast companies,
economic and industry information and the reorganized capital structure. The
foregoing factors resulted in a range of reorganization values between $75 and
$200 million. Based upon an analysis of all of this data, management determined
that the reorganization value of the company would be $138.6 million.
The gain on debt discharge is summarized as follows (in thousands):
Carrying value of debt securities subject to exchange, including accrued
interest................................................................ $ 318,447
Carrying value of preferred stock of subsidiary, including accrued
dividends............................................................... 309,608
Aggregate principal amount of 14% Senior Extendable Notes issued in
exchanges, including accrued interest since June 30, 1993............... (71,236)
Aggregate value of common stock issued in exchanges....................... (134,762)
Expenses attributable to consummation of the reorganization............... (7,573)
---------
Total gain on debt discharge (See Note J)................................. $ 414,484
---------
---------
F-30
CITICASTERS INC. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
C. ACQUISITIONS AND DISPOSITIONS
During June 1995, Citicasters acquired its second FM station in Portland
(KKCW) for $30 million. During August 1995, Citicasters acquired a second FM
radio station in Tampa (WTBT) for $5.5 million. The purchase price for WTBT-FM
could increase to $8 million depending on the satisfaction of certain
conditions. Citicasters began operating WTBT-FM during March 1995. In December
1995, the Company began operating WHOK-FM, WLLD-FM and WLOH-AM in Columbus under
a local marketing agreement and acquired the stations in January 1996 for $24
million.
During 1994, Citicasters sold one AM and three FM radio stations and
acquired or commenced the operation of two FM radio stations. The following
table sets forth certain information regarding these radio station transactions:
ACQUISITION
DATE OPERATIONS DATE OF PRICE/ SALES
COMMENCED/CEASED CLOSING PRICE
Acquisitions:
Sacramento (KRXQ-FM).................. January 1, 1994 May 27, 1994 $ 16 million
Cincinnati (WWNK-FM).................. April 25, 1994 April 21, 1995 $ 15 million
Dispositions:
Detroit (WRIF-FM)..................... January 23, 1994 September 23, 1994 $ 11.5 million
Milwaukee (WLZR-FM&AM)................ April 14, 1994 April 14, 1994 $ 7 million
Denver (KBPI-FM)...................... April 19, 1994 August 5, 1994 $ 8 million
In the aggregate, the purchases and sales of radio stations completed in
1994 and 1995 did not have a material effect on Citicasters' results. No gain or
loss was recognized on the radio stations sold during 1994, because those
stations were valued at their respective sales price under the fresh-start
reporting provision of SOP 90-7.
During September and October 1994, Citicasters sold four of its network
affiliated television stations to entities affiliated with New World
Communications Group Incorporated ("New World"). The stations sold included KSAZ
in Phoenix, WDAF in Kansas City, WBRC in Birmingham and WGHP in Greensboro/
Highpoint. Citicasters received $355.5 million in cash and a warrant to
purchase, for five years, 5,000,000 shares of New World Common Stock at $15 per
share. The warrant was valued at $10 million and is included in the balance
sheet caption "Deferred charges and other assets." Citicasters recorded a pretax
gain of $95.3 million ($50.1 million after tax) on these sales. Proceeds from
the sales were used to retire long-term debt and to repurchase shares of the
Company's Common Stock. During 1995, the terms of the warrant were amended to
modify the registration rights relating to the underlying shares. In
consideration for such modification, the exercise price was increased from $15
to $16 per share.
The following unaudited proforma financial information is based on the
historical financial statements of Citicasters, adjusted to reflect the
television station sales, retirement of long-term debt, the effects of the
December 1993 reorganization and the February 1994 refinancing of subordinated
debt (in thousands except per share data).
YEAR ENDED DECEMBER
1993 31, 1994
Net revenues.................................................................... $ 119,597 $ 128,375
---------- ----------
---------- ----------
Operating income................................................................ $ 20,142 $ 30,624
---------- ----------
---------- ----------
Net earnings.................................................................... $ 4,244 $ 11,582
---------- ----------
---------- ----------
Net earnings per share.......................................................... $ .16 $ .47
---------- ----------
---------- ----------
F-31
CITICASTERS INC. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
D. PROPERTY AND EQUIPMENT
Property and equipment at December 31, consisted of the following (in
thousands):
1994 1995
Land and land improvements....................................................... $ 5,305 $ 5,883
Buildings and improvements....................................................... 10,710 15,458
Operating and other equipment.................................................... 13,873 22,771
---------- ---------
29,888 44,112
Accumulated depreciation......................................................... (4,805) (10,234)
---------- ---------
$ 25,083 $ 33,878
---------- ---------
---------- ---------
Pursuant to the fresh-start reporting principles of SOP 90-7, the carrying
value of property and equipment was adjusted to estimated fair value as of the
effective date of the reorganization, which included the restarting of
accumulated depreciation. Depreciation expense relating to property and
equipment was $11.6 million in 1993; $8.7 million in 1994; and $5.4 million in
1995.
E. CONTRACTS, BROADCASTING LICENSES AND OTHER INTANGIBLES
Contracts, broadcasting licenses and other intangibles at December 31,
consisted of the following (in thousands):
1994 1995
Licenses, network affiliation agreements and other market related intangibles... $ 275,629 $ 322,749
Reorganization value in excess of amounts allocable to identifiable assets...... 7,998 7,998
---------- ----------
283,627 330,747
Accumulated amortization........................................................ (8,932) (17,956)
---------- ----------
$ 274,695 $ 312,791
---------- ----------
---------- ----------
Citicasters' carrying value of its broadcasting assets was adjusted to
estimated fair value as of the effective date of the reorganization pursuant to
the reporting principles of SOP 90-7. This adjustment included, among other
things, the restarting of accumulated amortization related to intangibles.
Amortization expense relating to contracts, broadcasting licenses and other
intangibles was $16.5 million in 1993; $14.2 million in 1994; and $9.3 million
in 1995.
F. LONG-TERM DEBT
Long-term debt at December 31, consisted of the following (in thousands):
1994 1995
Citicasters:
9 3/4% Senior Subordinated Notes due February 2004, less unamortized discount
of $2,709 and $2,519 (imputed interest rate 10.13%)......................... $ 122,291 $ 122,481
Subsidiaries:
Bank credit facility.......................................................... -- 10,000
---------- ----------
Total long-term debt........................................................ $ 122,291 $ 132,481
---------- ----------
---------- ----------
F-32
CITICASTERS INC. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
At December 31, 1995, the only sinking fund or other scheduled principal
payments due during the next five years is $10 million, due in 1998.
Cash interest payments were $45.1 million in 1993; $27.1 million in 1994;
and $12.9 million in 1995.
In February 1994, Citicasters refinanced its 14% Notes and the 13% Senior
Subordinated Notes due 2001 through the issuance of $200 million principal
amount of 9 3/4% Senior Subordinated Notes due 2004 ("9 3/4% Notes"). The 9 3/4%
Notes were issued at a discount; the net proceeds were $195.4 million. No gain
or loss was recognized on these transactions. A portion of the proceeds from the
sale of the four television stations ($305 million) was used to retire long-term
debt including $75 million principal amount of the 9 3/4% Notes.
In October 1994, Citicasters entered into a bank credit agreement with a
group of banks providing two revolving credit facilities: a $125 million
facility to fund future acquisitions and a $25 million working capital facility.
The acquisition facility is available through December 31, 2001. The maximum
amount available under this facility will be reduced by $7.5 million per quarter
beginning in the first quarter of 1998. The working capital facility is
available through December 31, 1997. Citicasters is required to use excess cash
flow to reduce amounts outstanding under the facilities if leverage ratios
exceed certain levels.
The interest rate under the facilities varies depending on Citicasters'
leverage ratio. In the case of the base rate option, the rate ranges from the
base rate to the base rate plus .75%. In the case of the eurodollar rate option,
the rate ranges from 1% to 2% over the eurodollar rate. The weighted average
interest rate on Citicasters outstanding bank debt as of December 31, 1995 was
6.84%. The bank credit facilities are secured by substantially all the assets of
Citicasters. As of March 1, 1996, Citicasters had $26 million outstanding under
the acquisition facility.
Citicasters' 9 3/4% Notes require a prepayment of the 9 3/4% Notes in the
event of certain changes in the control of Citicasters and further require the
proceeds from certain asset sales to be used to partially redeem 9 3/4% Notes.
At December 31, 1995 the market of the 9 3/4% Notes exceeded carrying value
by approximately $1.5 million.
G. SHAREHOLDERS' EQUITY
Citicasters is authorized to issue 500 million shares of Class A Common
Stock, $.01 par value, 125 million shares of Class B Common Stock, $.01 par
value and 9.5 million shares of Serial Preferred Stock, $.01 par value. The
preferred stock may have such preferences and other rights and limitations as
the Board of Directors may designate with respect to each series.
During 1994 and 1995, Citicasters acquired 2,354,475 and 254,760 shares of
its common stock from several unaffiliated institutions for $51.1 million and
$5.2 million, respectively. Under the most restrictive provision of Citicasters'
debt covenants, Citicasters may acquire an additional $8.7 million of its common
stock.
During 1995, Citicasters' Board of Directors twice declared three-for-two
stock splits of its outstanding common stock. All share and per share data have
been restated to reflect both stock splits.
The Company's debt instruments contain certain covenants which limit the
amount of dividends which Citicasters is able to pay on its common stock. Under
the most restrictive provision of Citicasters' debt covenants, dividends are
limited to a maximum of $2.5 million annually. Citicasters paid a dividend of
$.03 per common share in 1995. Under the merger agreement with Jacor (see Note
M), Citicasters will not be permitted to pay dividends without the prior consent
of Jacor.
F-33
CITICASTERS INC. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
Changes in the number of shares of common stock are shown in the following
table:
Predecessor:
Outstanding at January 1, 1993........................................ 56,729,434
Effect of reverse stock split in restructuring........................ (56,303,963)
Issued in restructuring for exchanges of securities................... 24,772,412
Issued for cash....................................................... 213,383
Citicasters:
Stock bonuses awarded to employees.................................... 52,425
----------
Outstanding at December 31, 1993...................................... 25,463,691
Stock bonuses awarded to employees.................................... 37,125
Stock repurchased and retired......................................... (5,297,569)
----------
Outstanding at December 31, 1994...................................... 20,203,247
Exercise of stock option.............................................. 29,812
Stock repurchased and retired......................................... (256,132)
----------
Outstanding at December 31, 1995...................................... 19,976,927
----------
----------
Following the consummation of the reorganization, the Board of Directors
established the 1993 Stock Option Plan. The Plan provides for granting both
non-qualified and incentive stock options to key employees. There are 1,800,000
common shares reserved for issuance under the 1993 Plan. During 1994, the Board
of Directors established the 1994 Directors Stock Option Plan. The Plan provides
for the granting of options to non-employee directors of Citicasters. There are
450,000 common shares reserved for issuance under the 1994 Plan. Options under
both plans become exercisable at the rate of 20% per year commencing one year
after grant and expire at the earlier of 10 years from the date of grant, three
months after termination of employment or retirement as a director, or one year
after the death or disability of the holder.
Stock option data for Citicasters' stock option plans are as follows:
1994 1995
-------------------------- ---------------------------
OPTION PRICE OPTION PRICE
SHARES PER SHARE SHARES PER SHARE
Outstanding, beginning of period............. 1,307,250 $ 6.67 1,614,375 $ 6.67-$10.33
Granted...................................... 498,375 $ 9.77-$10.33 57,500 $ 18.00-$25.50
Exercised.................................... -- -- (29,812) $ 6.67
Terminated................................... (191,250) $ 6.67 -- --
---------- -------------- ---------- ---------------
Outstanding, December 31..................... 1,614,375 $ 6.67-$10.33 1,642,063 $ 6.67-$25.50
---------- -------------- ---------- ---------------
---------- -------------- ---------- ---------------
Exercisable, December 31..................... 223,200 $ 6.67 516,263 $ 6.67-$10.33
---------- -------------- ---------- ---------------
---------- -------------- ---------- ---------------
Available for grant December 31.............. 635,625 607,937
---------- ----------
---------- ----------
F-34
CITICASTERS INC. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
H. INCOME TAXES
Deferred income taxes reflect the impact of temporary differences between
the carrying amounts of assets and liabilities recognized for financial
reporting purposes and the amounts recognized for income tax purposes.
Significant components of Citicasters' deferred tax assets and liability as of
December 31, are as follows (in thousands):
1994 1995
Deferred tax assets:
Accrued expenses and other...................................................... $ 8,190 $ 8,409
Deferred tax liability:
Book over tax basis of depreciable assets......................................... 52,676 53,231
--------- ---------
Net deferred tax liability........................................................ $ 44,486 $ 44,822
--------- ---------
--------- ---------
The following is a reconciliation of Federal income taxes at the "statutory"
rate of 35% in 1993, 1994, and 1995 and as shown in the Statement of Operations
(in thousands):
PREDECESSOR
1993 1994 1995
Earnings (loss) from continuing operations before income taxes.... $ (66,796) $ 116,606 $ 23,317
Extraordinary items............................................... 408,140 -- --
----------- ---------- ----------
Adjusted earnings before income taxes............................. $ 341,344 $ 116,606 $ 23,317
----------- ---------- ----------
----------- ---------- ----------
Income taxes at the statutory rate................................ $ 119,470 $ 40,812 $ 8,161
Effect of:
Book basis over tax basis of stations sold...................... -- 8,472 --
Goodwill........................................................ (630) 599 74
Minority interest............................................... 9,372 -- --
Certain reorganization items.................................... (127,606) -- --
State taxes net of Federal income tax benefit................... -- 3,575 650
Other........................................................... (606) 42 115
----------- ---------- ----------
Income taxes as shown in the Statement of Operations............ $ -- $ 53,500 $ 9,000
----------- ---------- ----------
----------- ---------- ----------
Income tax provision as applied to continuing operations consists of (in
thousands):
PREDECESSOR
1993 1994 1995
Current taxes..................................... $ -- $ 42,800 $ 7,300
Deferred taxes.................................... -- 5,200 700
State taxes....................................... -- 5,500 1,000
----- --------- ---------
$ -- $ 53,500 $ 9,000
----- --------- ---------
----- --------- ---------
Federal income taxes of $7 million and $8.4 million were paid in cash during
1994 and 1995, respectively.
I. DISCONTINUED OPERATIONS
During 1994, Citicasters received an additional $5 million related to the
1991 sale of its entertainment businesses. The after-tax proceeds were credited
to reorganization intangibles. A final distribution is scheduled to occur in
December 1996. It is not possible to quantify the amount of the distribution
Citicasters will receive at that time.
J. EXTRAORDINARY ITEMS
Predecessor's extraordinary items in 1993 consisted of a loss of $6.3
million from the retirement of debt prior to the reorganization and a gain of
$414.5 million on debt discharge in the reorganization.
F-35
CITICASTERS INC. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
K. PENDING LEGAL PROCEEDINGS
Management, after review and consultation with counsel, considers that any
liability from litigation pending against Citicasters and any of its
subsidiaries would not materially affect the consolidated financial position or
results of operations of Citicasters and its subsidiaries.
L. ADDITIONAL INFORMATION
Quarterly Operating Results (Unaudited)--The following are quarterly results
of consolidated operations for 1994 and 1995 (in thousands except per share
data).
1ST 2ND 3RD 4TH
QUARTER QUARTER QUARTER QUARTER TOTA1
1994
Net revenues.................................. $ 48,449 $ 60,423 $ 50,908 $ 37,263 $ 197,043
Operating income.............................. 7,193 18,321 13,386 12,683 51,583
Net earnings (loss)........................... (1,752) 5,161 44,851 14,846 63,106
Net earnings (loss) per share................. $ (.07) $ .20 $ 1.75 $ .67 $ 2.55
1995
Net revenues.................................. $ 29,045 $ 36,886 $ 34,126 $ 36,357 $ 136,414
Operating income.............................. 4,724 11,588 8,910 11,325 36,547
Net earnings.................................. 1,278 5,242 3,282 4,515 14,317
*Net earnings per share........................ $ .06 $ .25 $ .15 $ .21 $ .68
- ------------------------
* The sum of the quarterly earnings per share does not equal the earnings per
share computed on a year-to-date basis due to rounding.
Citicasters' financial results are seasonal. Revenues are higher in the
second and fourth quarter and lower in the first and third quarter; the first
quarter is the lowest of the year.
During the third and fourth quarters of 1994, Citicasters recorded net
earnings of $41.7 million and $8.4 million, respectively, attributable to the
sale of the four television stations.
Included in selling, general and administrative expenses in 1993, 1994 and
1995 are charges of $6.6 million, $7.2 million and $5.8 million, respectively,
for advertising and charges of $2.4 million, $2.2 million and $1.3 million,
respectively, for repairs and maintenance.
M. SUBSEQUENT EVENT
On February 12, 1996, Citicasters and Jacor Communications, Inc. entered
into a merger agreement by which Jacor will acquire Citicasters. Under the
agreement, for each share of Citicasters' stock, Jacor will pay cash of $29.50
plus a five-year warrant to purchase approximately .2 shares of Jacor common
stock at $28 per share. If the closing occurs after September 1996 the exercise
price of the warrant would be reduced to $26 per share and the per share cash
price would increase at the rate of $.2215 per month. American Financial and
certain of its affiliates have agreed to execute irrevocable consents in favor
of the Jacor transaction on March 13, 1996. The closing of the transaction is
conditioned on, among other things, receipt of FCC and other regulatory
approvals. Upon consummation of the merger, holders of the 9 3/4% Notes have the
right to put their notes to the Company at 101% of principal.
F-36
CITICASTERS INC. AND SUBSIDIARIES
CONDENSED BALANCE SHEET -- UNAUDITED
(DOLLARS IN THOUSANDS)
ASSETS
DECEMBER 31, MARCH 31,
1995 1996
------------ ----------
Current assets:
Cash and short-term investments.................................................... $ 3,572 $ 6,238
Trade receivables, less allowance for doubtful accounts of $1,643 and $1,603....... 32,495 27,835
Broadcast program rights........................................................... 5,162 4,596
Prepaid and other current assets................................................... 3,059 2,687
------------ ----------
Total current assets........................................................... 44,288 41,356
Broadcast program rights, less current portion..................................... 3,296 2,406
Property and equipment, net........................................................ 33,878 37,159
Contracts, broadcasting licenses and other intangibles, less accumulated
amortization of $17,956 and $20,489.............................................. 312,791 331,258
Deferred charges and other assets.................................................. 22,093 14,549
------------ ----------
$ 416,346 $ 426,728
------------ ----------
------------ ----------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable accrued expenses and other current liabilities... $ 17,061 $ 12,983
Broadcast program rights fees payable............................. 5,298 4,645
----------- ---------
Total current liabilities..................................... 22,359 17,628
Broadcast program rights fees payable, less current portion....... 2,829 2,212
Long-term debt.................................................... 132,481 148,532
Deferred income taxes............................................. 44,822 44,822
Other liabilities................................................. 54,163 54,200
----------- ---------
Total liabilities............................................. 256,654 267,394
Shareholders' equity:
Common Stock, $.01 par value, including additional paid-in
capital; 500,000,000 shares authorized; 19,976,927 and
20,007,552 shares outstanding................................... 82,936 83,148
Retained earnings from January 1, 1994............................ 76,756 76,186
----------- ---------
Total shareholders' equity.................................... 159,692 159,334
----------- ---------
$ 416,346 $ 426,728
----------- ---------
----------- ---------
See notes to financial statements.
F-37
CITICASTERS INC. AND SUBSIDIARIES
CONDENSED STATEMENT OF OPERATIONS -- UNAUDITED
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
THREE MONTHS ENDED
MARCH 31,
--------------------
1995 1996
--------- ---------
Net Revenues:
Television broadcasting................................................................. $ 14,086 $ 13,677
Radio broadcasting...................................................................... 14,959 17,500
--------- ---------
29,045 31,177
--------- ---------
Costs and expenses:
Operating expenses...................................................................... 9,144 10,034
Selling, general and administrative..................................................... 10,735 11,694
Corporate general and administrative.................................................... 1,123 1,053
Depreciation and amortization........................................................... 3,319 4,065
--------- ---------
24,321 26,846
--------- ---------
Operating income............................................................................ 4,724 4,331
Other income (expense):
Interest expense........................................................................ (3,513) (3,734)
Investment income....................................................................... 680 55
Miscellaneous, net...................................................................... 187 (1,522)
--------- ---------
(2,646) (5,201)
--------- ---------
Earnings (loss) before income taxes......................................................... 2,078 (870)
Income tax (benefit)........................................................................ 800 (300)
--------- ---------
NET EARNINGS (LOSS)......................................................................... $ 1,278 $ (570)
--------- ---------
--------- ---------
SHARE DATA:
Primary and Fully Diluted:
Net earnings (loss)................................................................... $ .06 $ (.03)
Average common shares................................................................... 20,819 21,119
See notes to financial statements.
F-38
CITICASTERS INC. AND SUBSIDIARIES
CONDENSED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY -- UNAUDITED
(IN THOUSANDS)
THREE MONTHS ENDED
MARCH 31,
----------------------
1995 1996
---------- ----------
Common Stock, including additional paid-in capital:
Beginning balance..................................................................... $ 87,831 $ 82,936
Common Stock issued:
Exercise of stock options............................................................. 162 212
Common Stock repurchased and retired...................................................... (329) --
---------- ----------
Balance at end of period.................................................................. $ 87,664 $ 83,148
---------- ----------
---------- ----------
Retained earnings:
Beginning balance..................................................................... 63,106 76,756
Net earnings (loss)................................................................... 1,278 (570)
---------- ----------
$ 64,384 $ 76,186
---------- ----------
---------- ----------
TOTAL SHAREHOLDERS' EQUITY................................................................ $ 152,048 $ 159,334
---------- ----------
---------- ----------
See notes to financial statements.
F-39
CITICASTERS INC. AND SUBSIDIARIES
CONDENSED STATEMENT OF CASH FLOWS -- UNAUDITED
(IN THOUSANDS)
THREE MONTHS ENDED
MARCH 31,
---------------------
1995 1996
--------- ----------
OPERATING ACTIVITIES:
Net earnings (loss).................................................................... $ 1,278 $ (570)
Adjustments:
Depreciation and amortization........................................................ 3,319 4,065
Non-cash interest expense............................................................ 46 51
Decrease in trade receivables........................................................ 6,308 4,660
Decrease (increase) in broadcast program rights, net of fees payable................. (7) 186
Decrease in accounts payable, accrued expenses and other liabilities................. (9,459) (4,000)
Other................................................................................ 487 150
--------- ----------
1,972 4,542
--------- ----------
INVESTING ACTIVITIES:
Deposits on broadcast stations to be acquired.......................................... (4,900) --
Purchases of:
Broadcast stations................................................................... -- (16,500)
Real estate, property and equipment.................................................. (2,591) (1,820)
Other.................................................................................. 60 232
--------- ----------
(7,431) (18,088)
--------- ----------
FINANCING ACTIVITIES:
Additional long-term borrowings........................................................ -- 16,000
Common shares repurchased.............................................................. (328) --
Other.................................................................................. 161 212
--------- ----------
(167) 16,212
--------- ----------
NET INCREASE (DECREASE) IN CASH AND SHORT-TERM INVESTMENTS................................. (5,626) 2,666
Cash and short-term investments at beginning of period..................................... 46,258 3,572
--------- ----------
Cash and short-term investments at end of period........................................... $ 40,632 $ 6,238
--------- ----------
--------- ----------
See notes to financial statements.
F-40
CITICASTERS INC. AND SUBSIDIARIES
NOTES TO CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
A. ACCOUNTING POLICIES
ORGANIZATION Citicasters is engaged in the ownership and operation of radio
and television stations and derives substantially all of its revenue from the
sale of advertising time. The amount of broadcast advertising time available for
sale by Citicasters' stations is relatively fixed, and by its nature cannot be
stockpiled for later sale. Therefore, the primary variables affecting revenue
levels are the demand for advertising time, the viewing or listening audience of
the station and the entry of new stations in the marketplace. The major variable
costs of operation are programming (news, sports and entertainment), sales costs
related to revenues and promotional costs. The success of the programming
determines the audience levels and therefore affects revenue.
BASIS OF PRESENTATION The accompanying financial statements for Citicasters
Inc. are unaudited, but Citicasters believes that all adjustments (consisting
only of normal recurring accruals, unless otherwise disclosed herein) necessary
for fair presentation have been made. The results of operations for interim
periods are not necessarily indicative of results to be expected for the year.
The financial statements have been prepared in accordance with the instructions
to Form 10-Q and therefore do not include all information and footnotes
necessary to be in conformity with generally accepted accounting principles.
Significant intercompany balances and transactions have been eliminated. Certain
reclassifications have been made to conform to the current year's presentation.
All acquisitions have been treated as purchases. The accounts and results of
operations of companies since their formation or acquisition are included in the
consolidated financial statements.
American Financial Group, Inc. and its Subsidiaries ("American Financial")
owned 7,566,889 shares or 37.8% of Citicasters' outstanding Common Stock at
April 15, 1996. At that date, American Financial's Chairman, Carl H. Lindner,
owned an additional 3,341,936 shares or 16.7% of Citicasters' outstanding Common
Stock.
USE OF ESTIMATES The preparation of the financial statements requires
management to make estimates and assumptions that affect the amounts reported in
the financial statements and accompanying notes. Changes in circumstances could
cause actual results to differ materially from those estimates.
BROADCAST PROGRAM RIGHTS The rights to broadcast non-network programs on
Citicasters' television stations are stated at cost, less accumulated
amortization. These costs are charged to operations on a straight-line basis
over the contract period or on a per showing basis, whichever results in the
greater aggregate amortization.
PROPERTY AND EQUIPMENT Property and equipment are based on cost and
depreciation is calculated primarily using the straight-line method. Depreciable
lives are: land improvements, 8-20 years; buildings and improvements, 8-20
years; operating and other equipment, 3-20 years; and leasehold improvements,
over the life of the lease.
CONTRACTS, BROADCASTING LICENSES AND OTHER INTANGIBLES Contracts,
broadcasting licenses and other intangibles represent the excess of the value of
the broadcast stations over the values of their net tangible assets, and is
attributable to FCC licenses, network affiliation agreements and other
contractual or market related factors. Reorganization value in excess of amounts
allocable to identifiable assets represents the excess of the estimated fair
value of the Company at the time of the reorganization over the estimated fair
value allocated to its net identifiable assets. Intangible assets are being
amortized on a straight-line basis over an average of 35 years. On an ongoing
basis, Citicasters reviews the carrying value of its intangible assets. If this
review indicates that intangible assets will not be recoverable, as determined
based on undiscounted cash flows of the Company's broadcast stations over the
remaining amortization period, Citicasters' carrying values of intangible assets
are reduced by the amount of the estimated shortfall of cash flows.
F-41
CITICASTERS INC. AND SUBSIDIARIES
NOTES TO CONDENSED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
A. ACCOUNTING POLICIES (CONTINUED)
DEBT DISCOUNT Debt discount is being amortized over the life of the related
debt obligations by the interest method.
INCOME TAXES Citicasters files a consolidated Federal income tax return
which includes all 80% or more owned subsidiaries. Deferred income tax assets
and liabilities are determined based on differences between financial reporting
and tax bases and are measured using enacted tax rates. Deferred tax assets are
recognized if it is more likely than not that a benefit will be realized
EARNINGS PER SHARE Primary and fully diluted earnings per share are based
upon the weighted average number of common shares and gives effect to common
equivalent shares (dilutive options) outstanding during the respective periods.
The effect of the options was to increase average shares outstanding by
1,116,000 shares for the three months ended March 31, 1996.
STOCK BASED COMPENSATION The Company grants stock options for a fixed
number of shares to employees with an exercise price equal to the fair value of
the shares at the date of grant. The Company accounts for stock option grants in
accordance with APB Opinion No. 25, ACCOUNTING FOR STOCK ISSUED TO EMPLOYEES,
and, accordingly, recognizes no compensation expense for the stock option
grants.
STATEMENT OF CASH FLOWS For cash flow purposes, "investing activities" are
defined as making and collecting loans and acquiring and disposing of debt or
equity instruments and property and equipment. "Financing activities" include
obtaining resources from owners and providing them with a return on their
investments, borrowing money and repaying amounts borrowed. All other activities
are considered "operating." Short-term investments for purposes of the Financial
Statements are those which had a maturity of three months or less when acquired.
B. ACQUISITIONS AND DISPOSITIONS
On February 12, 1996, Citicasters and Jacor Communications, Inc. entered
into a merger agreement, by which Jacor will acquire Citicasters. Under the
agreement, for each share of Citicasters' stock Jacor will pay cash of $29.50
plus a five-year warrant to purchase approximately .2 shares of Jacor common
stock at $28 per full share. If the closing occurs after September 1996, the
exercise price of the warrant would be reduced to $26 per share and the per
share cash price would increase at the rate of $.2215 per month. American
Financial and certain of its affiliates executed irrevocable consents in favor
of the Jacor transaction on March 13, 1996. The closing of the transaction is
conditioned on, among other things, receipt of FCC and other regulatory
approvals. Upon consummation of the merger, holders of the 9 3/4% Notes have the
right to put their notes to the Company at 101% of principal.
During January 1996, Citicasters acquired two additional FM radio stations
(WHOK and WLLD) and an additional AM radio station (WLOH) in Columbus for $24
million. Citicasters borrowed from its acquisition facility to fund the
purchases. In the aggregate, the purchases of radio stations completed during
1995 and 1996 did not have a material effect on the Company's results.
During June 1995, Citicasters acquired its second FM station in Portland
(KKCW) for $30 million. During August 1995, Citicasters acquired a second FM
radio station in Tampa (WTBT) for $5.5 million. The purchase price for WTBT-FM
could increase to $8 million depending on the satisfaction of certain
conditions. Citicasters began operating WTBT-FM during March 1995.
F-42
CITICASTERS INC. AND SUBSIDIARIES
NOTES TO CONDENSED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
C. LONG-TERM DEBT
Long-term debt consisted of the following (in thousands):
DECEMBER 31, MARCH 31,
1995 1996
------------ ----------
Citicasters:
9 3/4% Senior Subordinated Notes due February 2004, less unamortized
discount of $2,519 and $2,468 (imputed interest rate 10.13%)........... $ 122,481 $ 122,532
Subsidiaries:
Bank credit facility..................................................... 10,000 26,000
------------ ----------
$ 132,481 $ 148,532
------------ ----------
------------ ----------
As of March 31, 1996, Citicasters had $99 million of bank credit available
under a $125 million acquisition facility and all $25 million of bank credit
available under a working capital facility.
D. SHAREHOLDERS' EQUITY
Citicasters is authorized to issue 500 million shares of Class A Common
Stock, $.01 par value, 125 million shares of Class B Common Stock, $.01 par
value and 9.5 million shares of Serial Preferred Stock, $.01 par value. The
preferred stock may have such preferences and other rights and limitations as
the Board of Directors may designate with respect to each series.
F-43
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Stockholders of
Noble Broadcast Group, Inc.
In our opinion, the accompanying consolidated balance sheet and the related
consolidated statements of operations, of changes in stockholders' deficit and
of cash flows present fairly, in all material respects, the financial position
of Noble Broadcast Group, Inc. and its subsidiaries at December 25, 1994 and
December 31, 1995, and the results of their operations and their cash flows for
each of the three years in the period ended December 31, 1995, in conformity
with generally accepted accounting principles. These financial statements are
the responsibility of the Company's management; our responsibility is to express
an opinion on these financial statements based on our audits. We conducted our
audits of these statements in accordance with generally accepted auditing
standards which require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for the opinion expressed above.
As discussed in Note 2 to the consolidated financial statements, in February
1996 the Company entered into an agreement to be purchased by Jacor
Communications, Inc.
PRICE WATERHOUSE LLP
San Diego, California
March 21, 1996
F-44
NOBLE BROADCAST GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
DECEMBER DECEMBER
25, 31,
ASSETS 1994 1995
Current assets:
Cash and cash equivalents..................................................... $ 2,134,000 $ 447,000
Accounts receivable, less allowance for doubtful accounts of $515,000 and
$455,000.................................................................... 12,401,000 9,094,000
Prepaid expenses and other.................................................... 2,084,000 2,290,000
-------------- -------------
Total current assets...................................................... 16,619,000 11,831,000
Property, plant and equipment, net................................................ 7,623,000 9,333,000
Intangible assets, less accumulated amortization of $33,718,000 and $25,734,000... 89,849,000 50,730,000
Other assets...................................................................... 1,932,000 5,333,000
-------------- -------------
$ 116,023,000 $ 77,227,000
-------------- -------------
-------------- -------------
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities:
Accounts payable.............................................................. $ 3,537,000 $ 2,867,000
Accrued interest.............................................................. 6,477,000 1,674,000
Accrued payroll and related expenses.......................................... 1,720,000 1,077,000
Other accrued liabilities..................................................... 4,364,000 3,081,000
Current portion of long-term debt............................................. 167,209,000 3,611,000
Unamortized carrying value of subordinated debt............................... 19,445,000
-------------- -------------
Total current liabilities................................................. 202,752,000 12,310,000
Long-term debt, less current portion.............................................. 232,000 78,000,000
Deferred income taxes............................................................. 8,568,000
Other long-term liabilities....................................................... 683,000 640,000
-------------- -------------
Total liabilities................................................................. 203,667,000 99,518,000
-------------- -------------
Mandatorily redeemable Class A-1 common stock, $.01 par value; 1,580,285 shares
authorized; 249,931 shares issued and outstanding in 1994........................ 35,066,000
-------------- -------------
Stockholders' deficit:
Class A common stock, $.000001 par value; 1,569,514 shares authorized, 49,904
shares issued and outstanding in 1995....................................... -- --
Class B common stock, $.01 par value and $.000001 par value in 1994 and 1995,
respectively; 2,293,235 and 254,018 shares authorized in 1994 and 1995,
respectively; 254,018 shares issued and outstanding......................... 3,000 --
Paid-in capital............................................................... 662,000 44,231,000
Accumulated deficit........................................................... (123,375,000) (66,522,000)
-------------- -------------
Total stockholders' deficit............................................... (122,710,000) (22,291,000)
Commitments (Note 11)
-------------- -------------
$ 116,023,000 $ 77,227,000
-------------- -------------
-------------- -------------
The accompanying notes are an integral part of the consolidated financial
statements.
F-45
NOBLE BROADCAST GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEARS ENDED
-------------------------------------------------------
DECEMBER 26, DECEMBER 25, DECEMBER 31,
1993 1994 1995
Broadcast revenue............................................ $ 53,860,000 $ 56,154,000 $ 47,061,000
Less agency commissions...................................... (6,351,000) (6,552,000) (5,159,000)
----------------- ----------------- -----------------
Net revenue.............................................. 47,509,000 49,602,000 41,902,000
----------------- ----------------- -----------------
Expenses:
Broadcast operating expenses............................. 36,944,000 37,892,000 31,445,000
Corporate general and administrative..................... 2,702,000 2,621,000 2,285,000
Depreciation and amortization............................ 6,916,000 6,311,000 4,107,000
Write-down of intangibles and other assets............... 7,804,000
----------------- ----------------- -----------------
46,562,000 54,628,000 37,837,000
----------------- ----------------- -----------------
Income (loss) from operations................................ 947,000 (5,026,000) 4,065,000
Interest expense............................................. (7,602,000) (10,976,000) (9,913,000)
Net gain on sale of radio stations........................... 7,909,000 2,619,000
----------------- ----------------- -----------------
Income (loss) before provision for income taxes,
extraordinary gain and cumulative effect of change in
accounting principle....................................... 1,254,000 (16,002,000) (3,229,000)
Provision for income taxes................................... (378,000) (36,000) (63,000)
----------------- ----------------- -----------------
Income (loss) before extraordinary gain and cumulative effect
of change in accounting principle.......................... 876,000 (16,038,000) (3,292,000)
Extraordinary gain on forgiveness of debt, net of income
taxes...................................................... 12,222,000 60,145,000
----------------- ----------------- -----------------
Income (loss) before cumulative effect of change in
accounting principle....................................... 13,098,000 (16,038,000) 56,853,000
Cumulative effect of change in accounting principle.......... 354,000
----------------- ----------------- -----------------
Net income (loss)............................................ $ 13,452,000 $ (16,038,000) $ 56,853,000
----------------- ----------------- -----------------
----------------- ----------------- -----------------
Primary earnings (loss) per share:
Before extraordinary item and cumulative effect of change
in accounting principle................................ $ 1.96 $ (31.82 ) $ (1.80 )
Extraordinary item....................................... 9.35 47.23
Cumulative effect of change in accounting principle...... .27
----------------- ----------------- -----------------
Total................................................ $ 11.58 $ (31.82 ) $ 45.43
----------------- ----------------- -----------------
----------------- ----------------- -----------------
Fully diluted earnings (loss) per share:
Before extraordinary item and cumulative effect of change
in accounting principle................................ $ 1.96 $ (31.82 ) $ (1.83 )
Extraordinary item....................................... 9.35 47.23
Cumulative effect of change in accounting principle...... .27
----------------- ----------------- -----------------
Total................................................ $ 11.58 $ (31.82 ) $ 45.40
----------------- ----------------- -----------------
----------------- ----------------- -----------------
Common equivalent shares:
Primary.................................................. 1,307,541 503,949 1,273,569
Fully diluted............................................ 1,307,541 503,949 1,273,569
The accompanying notes are an integral part of the consolidated financial
statements.
F-46
NOBLE BROADCAST GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' DEFICIT
CLASS A CLASS B
COMMON STOCK COMMON STOCK
------------------------ ---------------------- PAID-IN ACCUMULATED
SHARES AMOUNT SHARES AMOUNT CAPITAL DEFICIT TOTAL
Balance at December 27, 1992...... 254,018 $ 3,000 $ 662,000 $(120,789,000) $(120,124,000)
Net income.................... 13,452,000 13,452,000
----------- ----- --------- ----------- ---------- ------------ ------------
Balance at December 26, 1993...... 254,018 3,000 662,000 (107,337,000) (106,672,000)
Net loss...................... (16,038,000) (16,038,000)
----------- ----- --------- ----------- ---------- ------------ ------------
Balance at December 25, 1994...... 254,018 3,000 662,000 (123,375,000) (122,710,000)
Cancellation of Class A-1
Mandatorily Redeemable
Common Stock................ 26,562,000 26,562,000
Exchange of Class A-1
Mandatorily Redeemable
Common Stock................ 49,904 -- 8,504,000 8,504,000
Change in par value of Class B
Common Stock from $.01 per
share to $.000001 per
share....................... (3,000) 3,000
Issuance of warrant to
purchase common stock....... 8,500,000 8,500,000
Net income.................... 56,853,000 56,853,000
----------- ----- --------- ----------- ---------- ------------ ------------
Balance at December 31, 1995...... 49,904 $ -- 254,018 $ -- $44,231,000 $(66,522,000) $(22,291,000)
----------- ----- --------- ----------- ---------- ------------ ------------
----------- ----- --------- ----------- ---------- ------------ ------------
The accompanying notes are an integral part of the consolidated financial
statements.
F-47
NOBLE BROADCAST GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE YEARS ENDED
-----------------------------------------------
DECEMBER 26, DECEMBER 25, DECEMBER 31,
1993 1994 1995
Cash flows from operating activities:
Net income (loss)........................................... $ 13,452,000 $ (16,038,000) $ 56,853,000
Adjustments to reconcile net income to net cash provided by
(used in) operating activities:
Cumulative effect of change in accounting principle..... (354,000)
Interest expense added to long-term debt................ 2,309,000 2,465,000 3,631,000
Depreciation and amortization........................... 6,916,000 6,311,000 4,107,000
Amortization of debt issuance costs and unamortized
carrying value of subordinated debt................... (1,002,000) (1,312,000) 392,000
Net (revenue) expense on barter transactions............ 81,000 (288,000) (210,000)
(Gain) loss on disposition of assets.................... (7,930,000) 138,000 (2,287,000)
Extraordinary gain on forgiveness of debt............... (12,222,000) (60,145,000)
Write-down of intangibles and other assets.............. 9,297,000
Changes in assets and liabilities, net of effects of
acquisitions:
Accounts receivable................................. (1,318,000) (2,367,000) 3,698,000
Prepaid expenses and other.......................... 233,000 (14,000) 4,000
Other assets........................................ (610,000) 732,000 (224,000)
Accounts payable.................................... 679,000 1,360,000 (670,000)
Accrued interest.................................... (223,000) 2,070,000 (1,674,000)
Other accrued liabilities........................... (888,000) 924,000 (1,926,000)
Other long-term liabilities......................... 2,577,000 (107,000) (43,000)
-------------- -------------- ---------------
Net cash provided by (used in) operating
activities........................................ 1,700,000 3,171,000 1,506,000
-------------- -------------- ---------------
Cash flows from investing activities:
Proceeds from disposition of assets......................... 35,002,000 6,000 47,650,000
Acquisition of property, plant and equipment................ (3,009,000) (1,124,000) (2,851,000)
Acquisition of radio stations............................... (6,834,000)
-------------- -------------- ---------------
Net cash flows provided by (used in) investing
activities........................................ 31,993,000 (1,118,000) 37,965,000
-------------- -------------- ---------------
Cash flows from financing activities:
Payments on long-term debt.................................. (34,036,000) (2,534,000) (126,450,000)
Borrowings.................................................. 90,500,000
Payments related to financing costs......................... (5,208,000)
-------------- -------------- ---------------
Net cash used in financing activities............... (34,036,000) (2,534,000) (41,158,000)
-------------- -------------- ---------------
Net decrease in cash and cash equivalents....................... (343,000) (481,000) (1,687,000)
Cash and cash equivalents at beginning of period................ 2,958,000 2,615,000 2,134,000
-------------- -------------- ---------------
Cash and cash equivalents at end of period...................... $ 2,615,000 $ 2,134,000 $ 447,000
-------------- -------------- ---------------
-------------- -------------- ---------------
The accompanying notes are an integral part of the consolidated financial
statements.
F-48
NOBLE BROADCAST GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1--THE COMPANY
Noble Broadcast Group, Inc. (the Company), a privately held Delaware
corporation, owned and operated the following radio stations during 1995:
WSSH-AM serving Boston, Massachusetts; KBEQ-FM and AM, serving Kansas City,
Missouri; KMJQ-FM and KYOK-AM serving Houston, Texas; KBCO-FM and AM and KHIH-FM
and KHOW-AM, serving Denver, Colorado; KMJM-FM, KNJZ-FM and KATZ-AM, serving St.
Louis, Missouri; WVKS-FM, WRVF-FM and WSPD-AM, serving Toledo, Ohio. Four of
these stations were sold and two stations were purchased during 1995 (Note 8).
In addition, the Company also provided programming for and had exclusive rights
to sell advertising time on two radio stations located in Baja California,
Mexico, XETRA-FM and XETRA-AM, which primarily serve the metropolitan San Diego
area broadcasting as XTRA-FM and AM.
NOTE 2--SUBSEQUENT EVENT-SALE OF THE COMPANY
In February 1996, the Company entered into a Stock Purchase and Stock and
Warrant Redemption Agreement (the Agreement) whereby Jacor Communications, Inc.
(Jacor) agreed to purchase both the Company's outstanding Class B common stock
and a newly-issued warrant allowing Jacor to purchase the Company's Class A
common stock. This transaction is subject to Federal Communications Commission
approval and certain other conditions. Simultaneously, the Company entered into
an Asset Purchase Agreement and sold the assets of certain subsidiaries of the
Company to a wholly-owned subsidiary of Jacor and assigned to this subsidiary
its rights and obligations under certain contracts including the Exclusive Sales
Agency Agreement (Note 10). The aggregate value of the above transactions, when
fully consummated, is $152,000,000 plus certain closing costs. At that time,
Jacor will own 100% of the equity interests in the Company. The Company also
entered into time brokerage agreements with Jacor for the stations in St. Louis
and Toledo. The Company received approximately $99,000,000 in February 1996 in
conjunction with the transactions.
In connection with this transaction, the Company entered into a Credit
Agreement with another wholly-owned subsidiary of Jacor providing for a
$40,000,000 Term Loan Facility, which was borrowed in full in February 1996, and
a $1,000,000 Revolving Loan Facility. The loans bear interest at the Prime rate,
payable quarterly. Both facilities are to be repaid on February 1, 2002 or upon
occurrence of certain ownership changes, whichever occurs earlier.
The Company used the total proceeds received in February 1996 to repay the
outstanding indebtedness under the Senior Secured Term Loan, the Senior
Revolving Credit Facility and the Subordinated Notes, to redeem and retire the
warrant held by the subordinated debtholder, and to redeem and retire all of the
Company's Class A shares outstanding (Notes 5 and 6). In the event that the
transaction cannot be consummated, none of the proceeds previously paid to the
Class A stockholders or the warrant holders shall be returned. If the
transaction is terminated by the buyer, the Class B stockholders shall be
entitled to the balance of the amounts due under the Agreement; if terminated by
the Company, the buyer shall be entitled only to the amounts previously paid to
the Class B stockholders as well as certain other amounts.
NOTE 3--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of the Company
and its wholly-owned subsidiaries. Significant intercompany balances and
transactions have been eliminated.
FINANCIAL STATEMENT PREPARATION
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenue and expenses during the reporting
period. Actual results could differ from those estimates.
F-49
NOBLE BROADCAST GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
FISCAL YEAR
The Company's fiscal year ends on the last Sunday of December to coincide
with the standard broadcast year.
REVENUES
Revenues for commercial broadcasting advertisements are recognized when the
commercial is broadcast.
CASH AND CASH EQUIVALENTS
Cash equivalents are highly liquid investments (money market funds) with
original maturities of three months or less. Included in cash and cash
equivalents at December 25, 1994 is $1,600,000 of restricted cash. Restricted
cash of $1,500,000 was released to the Company on December 31, 1994 in
conjunction with its sale of KMJQ-FM and KYOK-AM (Note 8). The remaining
$100,000 of restricted cash was released to the Company in January 1995 in
conjunction with the sale of WSSH-AM (Note 8).
BARTER TRANSACTIONS
Revenue from barter transactions (advertising provided in exchange for goods
and services) is recognized as income when advertisements are broadcast, and
merchandise or services received are charged to expense when received or used.
If merchandise or services are received prior to the broadcast of the
advertising, a liability (deferred barter revenue) is recorded. If the
advertising is broadcast before the receipt of the goods or services, a
receivable is recorded.
CONCENTRATIONS OF CREDIT RISK
Financial instruments which potentially subject the Company to
concentrations of credit risk consist principally of cash investments and
accounts receivable. The Company places its cash and temporary cash investments
in money market funds with high quality institutions. Concentrations of credit
risk with respect to accounts receivable are limited due to the large number of
customers comprising the Company's customer base and their dispersion across
many different geographic areas of the United States.
EARNINGS (LOSS) PER COMMON SHARE
Primary earnings (loss) per common share are calculated on the basis of the
weighted average number of common shares outstanding plus (in periods in which
they have a dilutive effect) the effect of common equivalent shares arising from
Senior Subordinated Convertible Notes, using the if-converted method, and the
effect of warrants to purchase common stock using the treasury stock method. The
calculation of fully diluted earnings per common share also includes the effect
of the assumed conversion of Senior Subordinated Convertible Notes and exercise
of warrants to purchase common stock in periods in which such conversion would
cause dilution.
PROPERTY, PLANT AND EQUIPMENT
Purchases of property, plant and equipment, including additions and
improvements and expenditures for repairs and maintenance that significantly add
to productivity or extend the economic lives of the assets, are capitalized at
cost and depreciated on the straight-line basis over their estimated useful
lives as follows:
Technical and office equipment.................................. 5-8 years
10-30
Buildings and building improvements............................. years
Furniture and fixtures.......................................... 10 years
Leasehold improvements.......................................... 10 years
Land improvements............................................... 8 years
Automobiles..................................................... 3 years
F-50
NOBLE BROADCAST GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Maintenance and repairs are expensed as incurred.
INTANGIBLE ASSETS
Intangible assets represents the aggregate excess purchase cost over the
fair market value of radio station net assets acquired. Intangible assets are
stated at the lower of cost or net realizable value and are being amortized
using the straight-line method over periods not exceeding 40 years. The Company
evaluates the realizability of intangible assets by comparing the asset carrying
amount to future anticipated undiscounted cash flows.
In 1994, the Company determined that intangibles related to its Houston
stations were impaired and, accordingly, it recorded a $7,450,000 loss (Note 8).
Additionally, in 1994, the Company determined that $354,000 in other assets
would not be realized, and recorded a loss.
DEBT ISSUANCE COSTS
Debt issuance costs incurred in connection with executing long-term debt
agreements are amortized over the term of associated debt to interest expense.
FINANCIAL INSTRUMENTS
Interest rate swaps are entered into as a hedge against interest exposure of
variable rate debt. The differences to be paid or received on the swaps are
included in interest expense. Gains and losses are recognized when the swaps are
settled. The interest rate swaps are subject to market risk as interest rates
fluctuate.
FAIR VALUE OF FINANCIAL INSTRUMENTS
Financial Accounting Standards Board Statement No. 107, "Disclosures about
Fair Value of Financial Instruments," (FAS 107) requires disclosure of fair
value information about financial instruments, whether or not recognized in the
balance sheet, for which it is practicable to estimate that value. Fair values
are based on estimates using present value or other valuation techniques. Those
techniques are significantly affected by the assumptions used. The carrying
amount of all financial instruments on the consolidated balance sheet are
considered reasonable estimates of fair value, with the exception of long-term
debt as of December 25, 1994, of which $50,301,000 was forgiven in August 1995
(Note 5) and the interest rate swap agreement (Note 5).
NOTE 4--COMPOSITION OF CERTAIN FINANCIAL STATEMENT CAPTIONS
DECEMBER 25, DECEMBER 31,
1994 1995
Property, plant and equipment
Technical and office equipment................................................. $ 12,295,000 $ 10,196,000
Land and land improvements..................................................... 978,000 1,067,000
Buildings and building improvements............................................ 2,880,000 2,517,000
Furniture and fixtures......................................................... 1,531,000 1,244,000
Leasehold improvements......................................................... 1,640,000 1,057,000
Automobiles.................................................................... 327,000 314,000
------------- --------------
19,651,000 16,395,000
Less accumulated depreciation and amortization................................. (12,028,000) (7,062,000)
------------- --------------
$ 7,623,000 $ 9,333,000
------------- --------------
------------- --------------
Other non-current assets
Debt issuance costs............................................................ $ 646,000 $ 4,267,000
Other.......................................................................... 1,286,000 1,066,000
------------- --------------
$ 1,932,000 $ 5,333,000
------------- --------------
------------- --------------
F-51
NOBLE BROADCAST GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Statement of Cash Flows Information
Schedule of certain non-cash financing activities:
FOR THE YEARS ENDED
----------------------------------------------
DECEMBER 26, DECEMBER 25, DECEMBER 31,
1993 1994 1995
------------ --------------- ---------------
Acquisition of assets in exchange for debt.................... $ 463,000 $ -- $ --
------------ ----- -----
------------ ----- -----
NOTE 5--LONG-TERM DEBT
Long-term debt is comprised of:
DECEMBER 25, DECEMBER 31,
1994 1995
Senior Secured Term Loan..................................... $ 45,000,000
Senior Revolving Credit Facility............................. 7,050,000
Subordinated Notes........................................... 29,325,000
Tranche A Notes.............................................. $ 87,364,000
Tranche B Notes.............................................. 11,587,000
Series A Senior Subordinated Notes........................... 29,617,000
Series B Senior Subordinated Convertible Notes............... 37,000,000
Other........................................................ 1,873,000 236,000
--------------- -------------
167,441,000 81,611,000
Less current portion......................................... (167,209,000) (3,611,000)
--------------- -------------
$ 232,000 $ 78,000,000
--------------- -------------
--------------- -------------
Interest paid during 1993, 1994 and 1995 aggregated $4,354,000, $6,152,000
and $3,673,000, respectively.
TRANCHE A NOTES AND TRANCHE B NOTES--The Tranche A and Tranche B Notes,
which were outstanding as of December 25, 1994, were extinguished in conjunction
with the Company's August 1995 debt restructuring (see Debt Restructuring
below). The Tranche A Notes bore interest at the 30-day LIBOR rate plus an
applicable margin. The Tranche B Notes bore interest at 4 percent. The senior
debt agreement provided for principal prepayments at the option of the Company
and called for mandatory principal prepayments from the net proceeds of sales of
certain radio station properties or from 50 percent of the net proceeds of sales
by the Company of any stock or warrants issued by the Company or from the
exercise of any such warrants or from excess operating cash, as defined.
During 1993, the Company sold certain radio station properties and other
assets (Note 8) and utilized resultant net proceeds of $32,960,000 to repay
Tranche A Notes of $18,498,000 and Tranche B Notes of $14,462,000. Pursuant to
agreements with the senior debtholders, $12,222,000 of the Tranche A Notes was
forgiven, resulting in an extraordinary gain during the year ended December 26,
1993.
The Company's agreement with the Senior debtholders contained, among other
things, certain covenants as to the maintenance of certain financial ratios and
cash flows, as well as restrictions on additional indebtedness, property sales
and liens, mergers and acquisitions, contingent liabilities, certain lease
transactions, investments, transactions with affiliates, corporate overhead,
capital expenditures, prepaid expenditures, and employment and certain other
contracts.
Based on agreements between the Company and the holders of the Tranche A
Notes and Tranche B Notes, the outstanding debt was to be repaid as of August
18, 1995 and the Company classified the debt as current as of December 25, 1994.
F-52
NOBLE BROADCAST GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
SENIOR SUBORDINATED NOTES AND SENIOR SUBORDINATED CONVERTIBLE NOTES--The
Series A Senior Subordinated Notes (Subordinated Notes) and Series B Senior
Subordinated Convertible Notes (Convertible Notes), which were outstanding as of
December 25, 1994, were extinguished in conjunction with the Company's 1995 debt
restructuring (see Debt Restructuring below).
In fiscal year 1991 the Company restructured its debt with the subordinated
debtholders by modifying certain terms. The $24,423,000 excess of the carrying
amount of the old subordinated debt instruments over the principal amount of the
Subordinated and Convertible Notes was recorded as unamortized carrying value of
subordinated debt in 1991 and was being amortized against future interest
expense over the term of the restructured Subordinated and Convertible Notes.
The Subordinated Notes bore interest at an annual rate of 9%; interest was added
to principal semiannually. During 1993, 1994 and 1995, approximately $2,309,000,
$2,465,000 and $3,631,000 of interest was added to the principal, respectively.
The Convertible Notes bore interest at the non-compounding annual rate of 5
percent and such interest was due and payable at such time as the principal
became payable. The Convertible Notes were convertible as to both principal and
accrued interest into 803,592 shares of Mandatorily Redeemable Class A-1 common
stock at the option of the holders after April 30, 1994.
The Subordinated Notes and Convertible Notes were subordinated to the
Tranche A and B Notes and contained, among other things, covenants as to the
maintenance of certain financial ratios and cash flows, and certain restrictions
as to additional indebtedness, amounts and types of payments and investments,
dividends, liens and encumbrances, sale and leaseback transactions, equity
interests of subsidiaries, sales of assets, mergers, corporate overhead, capital
expenditures, prepayment of expenses, and employment contracts.
Based on agreements between the Company and the holders of Subordinated
Notes and Convertible Notes, the outstanding debt was to be repaid as of August
18, 1995 and the Company classified the debt and associated unamortized carrying
value of subordinated debt as current as of December 25, 1994.
DEBT RESTRUCTURING--In August 1995, the Company completed a restructuring of
its debt, resulting in the extinguishment of $175,301,000 of Tranche A Notes,
Tranche B Notes, Subordinated Notes and Convertible Notes plus accrued interest
for an aggregate amount of $125,000,000 in cash. Additionally, the Company
repurchased or exchanged the shares of Class A-1 common stock held by the
holders of these debt instruments. The Company sold its Houston, Boston and
Kansas City stations in 1995 and utilized the resultant net proceeds of
$47,650,000, along with $1,500,000 restricted cash released to the Company (Note
3), to repay outstanding debt prior to the completion of the restructuring (Note
8), entered into a new senior $60,000,000 Credit Agreement and obtained new
subordinated debt for $37,000,000. The former debtholders forgave $50,301,000 of
principal and accrued interest which has been recognized as an extraordinary
gain in 1995. Also included in the extraordinary gain for 1995 is $18,412,000,
representing the remaining unamortized carrying value of subordinated debt as of
the date of the related debt extinguishment.
SENIOR SECURED TERM LOAN AND SENIOR REVOLVING CREDIT FACILITY--In August
1995, the Company and its wholly-owned subsidiaries entered into a $60,000,000
Credit Agreement with a consortium of banks, consisting of a $45,000,000 Senior
Secured Term Loan (the Term Loan) and a $15,000,000 Senior Revolving Credit
Facility (the Revolver). The Company borrowed all of the $45,000,000 Term Loan
and $7,500,000 of the Revolver and paid transaction costs of approximately
$4,700,000. Under the Term Loan and the Revolver, principal payments were due in
varying amounts through 2001. As discussed in Note 2, the outstanding debt under
the Credit Agreement was paid in full and cancelled in February 1996.
F-53
NOBLE BROADCAST GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Borrowings under the Credit Agreement bore interest, at the option of the
Company, at either the London Interbank Offered Rate (LIBOR) plus an applicable
margin of up to 2.625%, or at a base rate (defined as the higher of the Federal
Funds Rate plus .5% or the bank's Prime rate) plus an applicable margin of up to
1.375% per annum. The Term Loan and the Revolver were secured by substantially
all of the Company's assets, including the common stock and tangible and
intangible assets and major lease rights of the Company's operating
subsidiaries.
In conjunction with entering into the Credit Agreement, the Company issued a
warrant to purchase 10% of the common stock of the Company's primary operating
subsidiary, exercisable only in the event of certain specified occurrences
through June 30, 1996, for an exercise price of $1.00. The Company determined
that the value of the warrant was de minimus because of the nature of the
specified events required for warrant exercise. As discussed in Note 2, the
warrant was cancelled in February 1996.
INTEREST RATE SWAP AGREEMENT--In accordance with the terms of the Credit
Agreement, the Company entered into a three year interest rate swap agreement in
September 1995 on a notional principal amount of $30,000,000. Under the interest
rate swap agreement, on a quarterly basis the Company pays the counterparty
interest at a fixed rate of 5.87%, and the counterparty pays the Company
interest at a variable rate based on the LIBOR.
As of December 31, 1995, the interest rate swap agreement had a nominal
carrying value and a ($425,000) fair value. The fair value was estimated by
obtaining a quotation from the counterparty. In February 1996, the Company
terminated the interest rate swap agreement in conjunction with its debt
extinguishment, and realized a loss of $686,000 upon termination.
SUBORDINATED NOTES--In August 1995, the Company entered into an Investment
Agreement with a new subordinated debtholder, consisting of $37,000,000 in
subordinated notes. The subordinated notes bore interest at a rate of 8.108% per
annum compounded quarterly, of which 50% was to be paid annually with the
remainder being added to principal. The notes were due in August 2002. As
discussed in Note 2, the debt was paid in full and cancelled in February 1996.
Under the Investment Agreement, the Company issued a warrant for 75% of the
Company's Class A common stock, exercisable through August 2005, with an
exercise price of $1.00. Management has determined that the fair value of the
warrant on the date of issuance was approximately $8,500,000, which has been
recorded as a discount on the related debt and was being amortized to interest
expense over the term of the debt. As discussed in Note 2, the Company
repurchased the warrant in February 1996.
COVENANTS--The Credit Agreement and the Investment Agreement required the
Company to comply with certain financial and operating covenants, including,
among others, limitations on: capital expenditures, acquisitions and additional
indebtedness, engaging in a business other than radio broadcasting, paying cash
dividends, corporate overhead levels, the use of borrowings, and requirements to
maintain certain financial ratios.
NOTE 6--COMMON STOCK
In conjunction with the August 1995 refinancing, the Company entered into an
agreement with its former debtholders providing for the repurchase or exchange
of all of their Class A-1 shares of common stock. Under the agreement, 189,321
Class A-1 shares were repurchased by the Company for a de minimus amount and the
remaining 60,610 shares were exchanged for 49,904 shares of Class A common
stock. There were 249,931 shares of Mandatorily Redeemable Class A-1 common
stock outstanding in 1993 and 1994.
The Company's authorized capital stock subsequent to the August 1995
restructuring consists of 1,569,514 shares of Class A common stock, $.000001 par
value, of which 49,904 shares are issued and outstanding, and
F-54
NOBLE BROADCAST GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
254,018 shares of Class B voting common stock, $.000001 par value, all of which
are issued and outstanding. Prior to August 1995, the Class B common stock had a
par value of $.01. Class B common stock is voting common stock, while Class A
common stock has no right to vote with respect to the election of directors, or
other corporate actions other than certain major events set forth in the
Company's Restated Certificate of Incorporation. The holders of Class B common
stock, voting as a class, are entitled to elect six members of the Board of
Directors. Class B common stock may convert their shares into stock that is
registered pursuant to certain firm commitment underwritten public offerings, as
defined.
Shares of Class A common stock are convertible into an equal number of
shares of Class B common stock subsequent to a public offering, as described in
the Restated Certificate of Incorporation, upon certain events as defined in the
Company's agreements with the subordinated debtholders, or as of August 18,
2000. In addition, holders of both Class A and Class B common stock may convert
their shares into stock that is registered pursuant to a public offering.
Holders of Class A common stock are entitled to participate on a pro rata basis
with the holders of Class B common stock with respect to dividends, when and as
declared by the Board of Directors, provided there are funds legally available
for such purpose, and with respect to any redemption or repurchase by the
Company of any Class B common stock.
The Mandatorily Redeemable Class A-1 common stock contained a liquidation
preference over Class B common stock in an amount equal to a prescribed formula
value solely in the event of a liquidation resulting from bankruptcy, insolvency
or other similar proceeding. Such liquidation preference was zero at December
25, 1994. The Mandatorily Redeemable Class A-1 common stock was not entitled to
vote except for the right, voting as a separate class, to elect one member of
the Company's Board of Directors and except that certain transactions specified
in the Company's Restated Certificate of Incorporation required the consent of
the majority of the then-outstanding shares of Mandatorily Redeemable Class A-1
common stock. Holders of Mandatorily Redeemable Class A-1 common stock were
entitled to participate on a pro rata basis with the holders of Class B common
stock upon any redemption or repurchase by the Company of any Class B common
stock or other equity securities of the Company.
Shares of Class A-1 common stock were convertible into an equal number of
shares of Class B common stock subsequent to a public offering, or under certain
specified circumstances. In addition, holders of Class A-1 common stock were
entitled to convert their shares into stock registered pursuant to certain firm
commitment underwritten public offerings, as defined. Prior to an initial public
offering (IPO), holders of Class A-1 common stock were entitled to, in the event
of a defined change of voting control of the Company, require the Company to
repurchase their shares of Class A-1 common stock in accordance with specified
formula prices. In addition, if the Company had not effected an IPO by December
2002, then holders of a majority of the then-outstanding Class A-1 common stock,
on or after December 31, 2003, could require the Company to repurchase the Class
A-1 common stock owned by them at a specified formula repurchase price.
The Mandatorily Redeemable Class A-1 common stock was recorded at an "issue
price" equivalent to the carrying value of the equity instruments exchanged
therefor. No subsequent adjustment to the valuation of the Mandatorily
Redeemable Class A-1 common stock was required prior to its repurchase and
exchange in August 1995.
NOTE 7--STOCK OPTIONS
The Company had two stock option plans, the Executive Stock Option Plan
(Executive Plan) and the 1991 Stock Option Plan (1991 Plan). No options were
granted under the Executive Plan or the 1991 Plan. In conjunction with the
August 1995 debt restructuring, the Company cancelled the 1991 Plan and the
Executive Plan.
F-55
NOBLE BROADCAST GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
NOTE 8--STATION TRANSACTIONS
In August 1995, concurrent with the debt restructuring, the Company
purchased substantially all of the assets and certain liabilities of WSPD-AM and
WRVF-FM, Toledo, Ohio, for $6,660,000 using cash proceeds obtained through the
August 1995 debt restructuring. The acquisition has been accounted for using the
purchase method. The assets acquired were comprised of accounts receivable of
$391,000 and property, plant and equipment of $1,525,000. The excess of the
purchase price over the fair value of the assets and liabilities acquired was
$4,744,000, which is attributable to intangible assets and is being amortized
over 40 years using the straight-line method. The results of operations are
included in the results of operations of the Company since their acquisition.
The following unaudited pro forma summary information presents the results
of operations of the Company as if the acquisition of WSPD-AM and WRVF-FM had
occurred on December 27, 1993, after giving effect to certain adjustments,
principally intangible amortization and interest. These pro forma results have
been prepared for comparative purposes only and do not purport to be indicative
of what would have occurred had the acquisition been effected as of December 27,
1993 or of the results which may occur in the future.
(UNAUDITED)
YEAR ENDED
-----------------------------
DECEMBER 25, DECEMBER 31,
1994 1995
Net revenue.................................................... $ 59,455,000 $ 47,945,000
Loss before extraordinary item................................. $ (16,230,000) $ (4,015,000)
Net income (loss).............................................. $ (16,230,000) $ 57,576,000
Earnings (loss) per share before extraordinary item............ $ (32.21) $ (3.15)
Earnings (loss) per share...................................... $ (32.21) $ 45.21
In March 1995, the Company sold substantially all of the assets (excluding
cash and accounts receivable) and certain liabilities of Noble Broadcast of
Kansas City, Inc. (KBEQ-FM and KBEQ-AM) for $7,650,000. The sale of these assets
resulted in a gain of approximately $1,982,000 and has been reflected in the
Company's 1995 results of operations.
In January 1995, the Company sold substantially all of the assets (excluding
cash and accounts receivable) and certain liabilities of Noble Broadcast of
Ballybunion, Inc. (WSSH-AM) for $1,500,000. The sale of these assets resulted in
a gain of approximately $637,000 and has been reflected in the Company's 1995
results of operations.
On December 31, 1994, the Company sold substantially all of the non-cash
assets and certain liabilities of Noble Broadcast of Houston, Inc. (KMJQ-FM and
KYOK-AM) for $38,500,000 and released restricted cash of $1,500,000 (Note 3).
The sale of these assets resulted in a loss on the sale of $7,450,000. This loss
was considered to result from permanent impairment of intangible assets as of
December 25, 1994 and has been reflected in the Company's results of operations
in 1994.
In March 1993, the Company sold substantially all of the assets of Noble
Broadcast of New York, Inc. (WBAB-FM and WGBB-AM) for $16,000,000. Net proceeds
from this sale of $15,000,000 were used to reduce the Tranche A and Tranche B
Notes (Note 5) resulting in the forgiveness of $5,562,000 of Tranche A Notes.
The sale of these assets resulted in a gain on the sale of $6,555,000.
In April 1993, the Company sold substantially all of the assets of WSSH-FM
Boston, Massachusetts, for $18,500,000. Net proceeds from this sale of
$15,250,000 were used to reduce the Tranche A and Tranche B Notes (Note 5)
resulting in the forgiveness of $5,655,000 of the Notes. The sale of these
assets resulted in a gain of $1,354,000.
F-56
NOBLE BROADCAST GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
In May 1993, the Company purchased substantially all of the assets of
KATZ-AM and KNJZ-FM in St. Louis for $2,750,000. The Company paid $2,250,000 in
cash and issued a non-interest bearing promissory note for $500,000. The note is
payable in equal installments of $250,000 in May 1994 and May 1996. The
acquisition has been accounted for using the purchase method. The assets and
liabilities acquired were comprised entirely of intangible assets which are
being amortized over 40 years using the straight-line method. The results of
operations are included in the results of operations of the Company since their
acquisition.
NOTE 9--INCOME TAXES
The Company adopted Statement of Financial Accounting Standards ("SFAS") No.
109 on a prospective basis, effective January 1, 1993. SFAS 109 requires
recognition of deferred tax assets and liabilities for the expected future tax
consequences of events that have been included in the financial statements or
tax returns. Under the SFAS 109 asset and liability method, deferred tax assets
and liabilities are determined based upon the difference between the financial
statement and tax bases of assets and liabilities using enacted tax rates in
effect for the year in which the differences are expected to reverse. Upon
implementation of SFAS 109, the Company recorded a cumulative effect (benefit)
of a change in accounting principle of $354,000, which represented the future
tax benefits expected to be realized upon utilization of the Company's state tax
loss carryforwards. The benefit of these loss carryforwards was realized during
1993.
The following is a summary of the provision for income taxes, for the years
ended December 26, 1993, December 25, 1994 and December 31, 1995:
1993 1994 1995
Current:
Federal................................................. $ -- $ -- $ --
State................................................... 24,000 36,000 63,000
Deferred:
Federal................................................. -- --
State................................................... 354,000 -- --
---------- --------- ---------
Provision................................................... $ 378,000 $ 36,000 $ 63,000
---------- --------- ---------
---------- --------- ---------
A reconciliation of the provision for income taxes to the amount computed by
applying the statutory Federal income tax rate to income before income taxes
follows:
FOR THE YEARS ENDED
------------------------------------------
DECEMBER 26, DECEMBER 25, DECEMBER 31,
1993 1994 1995
Federal statutory rate......................................... $ 439,000 $ (5,601,000) $ (1,176,000)
State income taxes, net of federal benefit..................... 57,000 (728,000) (153,000)
Amortization and write down of intangibles..................... (496,000) 3,348,000 1,329,000
Losses for which no current benefit is available............... -- 2,847,000 --
State net operating loss utilization........................... 354,000 -- --
Other.......................................................... 24,000 170,000 63,000
------------ ------------- -------------
$ 378,000 $ 36,000 $ 63,000
------------ ------------- -------------
------------ ------------- -------------
F-57
NOBLE BROADCAST GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
The components of deferred income taxes at December 25, 1994 and December
31, 1995 are as follows:
1994 1995
Deferred tax assets:
Available net operating loss carryforwards for financial reporting
purposes........................................................... $ 30,060,000 $ --
Charitable contribution carryovers................................... 250,000 250,000
Book and tax amortization differences................................ 12,530,000 --
Accrued liabilities and reserves..................................... 200,000 180,000
-------------- -------------
43,040,000 430,000
Deferred tax liabilities:
Book and tax basis differences....................................... (14,272,000) (7,256,000)
Book and tax depreciation and amortization differences............... (4,458,000) (1,312,000)
-------------- -------------
Net deferred tax assets (liabilities)................................ 24,310,000 (8,138,000)
Valuation allowance.................................................. (24,310,000) (430,000)
-------------- -------------
$ -- $ (8,568,000)
-------------- -------------
-------------- -------------
The Company recorded a provision for income taxes in 1993, 1994 and 1995 due
to taxable income for state tax reporting purposes related to entities in the
consolidated group which were subject to state income tax. The Company recorded
a valuation allowance for those deferred tax assets for which the Company's
management determined that the realization of such future tax benefits is not
more likely than not. Taxes paid during 1993, 1994 and 1995 aggregated $24,000,
$36,000 and $63,000, respectively.
At December 31, 1995, the Company had available Federal net operating losses
of approximately $46,000,000 for tax reporting purposes. Additionally, the
Company had available net operating losses of approximately $41,000,000 for
state income tax purposes. The net operating losses for tax purposes expire
between 2001 and 2009. In certain circumstances, as specified in the Internal
Revenue Code, a 50 percent or more ownership change by certain combinations of
the Company's stockholders during any three year period would result in
limitations on the Company's ability to utilize its net operating loss
carryforwards. The value of the Company's stock at the time of the ownership
change is the primary factor in determining the limit on the Company's ability
to utilize its net operating loss carryforwards. As a result of the August 1995
debt and equity restructuring, an ownership change occurred, and consequently
the Company's net operating loss carryforwards generated prior to the ownership
change are limited. The purchase of the Company by Jacor (Note 2) will also
result in an ownership change as specified in the Internal Revenue Code. As a
result of the August 1995 debt and equity restructuring, certain deferred tax
assets were reduced for financial reporting purposes. The increase in deferred
tax liabilities of $8,568,000 that occurred in conjunction with the August 1995
debt and equity restructuring was recorded as a component of the extraordinary
gain resulting from the August 1995 restructuring.
NOTE 10--BROADCAST LICENSE AGREEMENT
The Company's consolidated net sales for 1993, 1994 and 1995, include
XTRA-FM and XTRA-AM sales of approximately $13,346,000, $14,087,000 and
$15,613,000, respectively, pursuant to an Exclusive Sales Agency Agreement (the
Agreement) with the broadcast licensee expiring in 2015. Under the Agreement,
the Company acts as the agent for the sale of advertising time on XTRA-FM and
XTRA-AM for all areas outside Mexico. The Company operated a broadcasting tower
under a month-to-month lease until February 1996 when it moved to a new location
in Mexico owned by the Company. The broadcast licenses for these stations from
the Ministry of Communications of the Republic of Mexico are scheduled to expire
on July 3, 2004.
F-58
NOBLE BROADCAST GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
The Company is not aware of any information which would lead it to believe that
any specific risks exist which threaten the continuance of the Company's
relationship with the broadcast licensee.
Pursuant to the terms of the Agreement, as amended, the Company provides
programming for and purchases advertising time directly from the broadcast
licensee and resells such time to United States advertisers and agencies. The
Company incurred $555,000, $584,000 and $415,000 in expenses under the Agreement
during 1993, 1994 and 1995.
NOTE 11--BARTER TRANSACTIONS
Barter revenue was approximately $2,956,000, $2,551,000 and $2,461,000, in
1993, 1994 and 1995, respectively. Barter expense was approximately $3,037,000,
$2,263,000 and $2,251,000, in 1993, 1994 and 1995, respectively.
Included in prepaid expenses and other current assets and accrued
liabilities in the accompanying consolidated balance sheets for 1995 and 1994
are barter receivables (merchandise or services due to the Company) of
approximately $1,640,000 and $1,540,000, respectively and barter accounts
payable (air time due to suppliers of merchandise or services) of approximately
$1,384,000 and $1,385,000, respectively.
NOTE 12--COMMITMENTS
BROADCAST COMMITMENTS
The Company has agreements to broadcast a series of professional sports
games and related events through 1998. The Company incurred total expenses of
$2,142,000, $2,744,000 and $3,757,000 during 1993, 1994 and 1995, respectively,
in accordance with the agreements. Future minimum annual payments under the
agreements become due and payable as follows:
1996............................................ $2,765,000
1997............................................ 1,172,000
1998............................................ 385,000
---------
$4,322,000
---------
---------
LEASE COMMITMENTS
The Company incurred total rental expenses of $1,389,000, $1,378,000 and
$538,000 in 1993, 1994 and 1995, respectively, under operating leases for
facilities and equipment. Future annual rental commitments expected under such
leases at December 31, 1995 are as follows:
1996............................................ $ 489,000
1997............................................ 406,000
1998............................................ 415,000
1999............................................ 404,000
2000............................................ 368,000
Thereafter...................................... 1,038,000
---------
$3,120,000
---------
---------
TIME BROKERAGE AGREEMENTS
The Company, through various subsidiaries, previously provided programming
through time brokerage agreements. These agreements, which were terminated in
August 1995, allowed the Company to purchase a
F-59
NOBLE BROADCAST GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
specified amount of broadcast time per week in exchange for the rights to all
advertising revenues. The Company incurred related total expenses of $1,294,000,
$1,517,000 and $479,000 during 1993, 1994 and 1995, respectively.
NOTE 13--LITIGATION
The Company is involved in litigation on certain matters arising in the
ordinary course of business. Management has consulted with legal counsel and
does not believe that the resolution of such matters will have a material
adverse effect on the Company's financial position, results of operations, or
cash flows.
F-60
NOBLE BROADCAST GROUP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEET
ASSETS
(UNAUDITED)
--------------
DECEMBER 31, MARCH 31,
1995 1996
-------------- --------------
Current assets:
Cash and cash equivalents..................................................... $ 447,000 $ 592,000
Restricted cash............................................................... 1,978,000
Accounts receivable, less allowance for doubtful accounts of $455,000 and
$466,000.................................................................... 9,094,000 3,239,000
Prepaid expenses and other ................................................... 2,290,000 1,399,000
-------------- --------------
Total current assets...................................................... 11,831,000 7,208,000
Property, plant and equipment, net............................................ 9,333,000 4,670,000
Intangible assets, less accumulated amortization of $25,734,000 and
$23,968,000................................................................. 50,730,000 49,965,000
Other assets.................................................................. 5,333,000 1,289,000
-------------- --------------
$ 77,227,000 $ 63,132,000
-------------- --------------
-------------- --------------
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities:
Accounts payable.............................................................. $ 2,867,000 $ 1,395,000
Accrued interest.............................................................. 1,674,000 320,000
Accrued payroll and related expenses.......................................... 1,077,000 739,000
Other accrued liabilities..................................................... 3,081,000 9,039,000
Current portion of long-term debt............................................. 3,611,000 40,000,000
Unamortized carrying value of subordinated debt...............................
-------------- --------------
Total current liabilities................................................. 12,310,000 51,493,000
Long-term debt, less current portion.............................................. 78,000,000
Deferred income taxes and other long-term liabilities............................. 9,208,000 18,228,000
-------------- --------------
Total liabilities......................................................... 99,518,000 69,721,000
-------------- --------------
Stockholders' deficit:
Class A common stock $.000001 par value; 1,569,514 shares authorized, 49,904
shares issued and outstanding............................................... -- --
Class B common stock $.000001 par value; 254,018 shares issued and
outstanding................................................................. -- --
Paid-in capital............................................................... 44,231,000 49,791,000
Accumulated deficit........................................................... (66,522,000) (56,380,000)
-------------- --------------
Total stockholders' deficit............................................... (22,291,000) (6,589,000)
Commitments...............................................................
-------------- --------------
$ 77,227,000 $ 63,132,000
-------------- --------------
-------------- --------------
The accompanying notes are an integral part of the condensed consolidated
financial statements.
F-61
NOBLE BROADCAST GROUP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(UNAUDITED)
THREE MONTHS ENDED
----------------------------
MARCH 26, MARCH 31,
1995 1996
------------- -------------
Broadcast revenue.................................................................. $ 10,054,000 $ 6,717,000
Less agency commissions........................................................ (1,048,000) (659,000)
------------- -------------
Net revenue.................................................................. 9,006,000 6,058,000
Expenses:
Broadcast operating expenses................................................... 7,638,000 5,626,000
Corporate general and administrative........................................... 602,000 577,000
Depreciation and amortization.................................................. 1,027,000 1,079,000
------------- -------------
9,267,000 7,282,000
------------- -------------
Income (loss) from operations...................................................... (261,000) (1,224,000)
Interest expense................................................................... (2,549,000) (1,875,000)
Net gain on sale of radio stations................................................. 2,619,000 37,669,000
------------- -------------
Income (loss) before provision for income taxes and extraordinary loss............. (191,000) 34,570,000
Provision for income taxes......................................................... (16,000) (14,683,000)
------------- -------------
Income (loss) before extraordinary loss............................................ (207,000) 19,887,000
Extraordinary loss on extinguishment of debt, net of tax effect.................... (9,745,000)
------------- -------------
Net income (loss).................................................................. $ (207,000) $ 10,142,000
------------- -------------
------------- -------------
Primary earnings (loss) per share:
Before extraordinary item...................................................... $ (.41) $ 16.36
Extraordinary item............................................................. (8.02)
------------- -------------
Total...................................................................... $ (.41) $ 8.34
------------- -------------
------------- -------------
Fully diluted earnings (loss) per share:
Before extraordinary item...................................................... $ (.41) $ 13.69
Extraordinary item............................................................. (8.02)
------------- -------------
Total...................................................................... $ (.41) $ 5.67
------------- -------------
------------- -------------
Common equivalent shares:
Primary........................................................................ 503,949 1,215,688
Fully diluted.................................................................. 503,949 1,215,688
The accompanying notes are an integral part of the condensed consolidated
financial statements.
F-62
NOBLE BROADCAST GROUP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(UNAUDITED)
MARCH 26, MARCH 31,
1995 1996
-------------- --------------
Cash flows from operating activities:
Net income (loss)............................................................. $ (207,000) $ 10,142,000
Adjustments to reconcile net income (loss) to net cash used in operating
activities:
Interest expense added to long-term debt.................................... 667,000
Depreciation and amortization............................................... 1,027,000 1,079,000
Amortization of debt issuance costs and unamortized carrying value of
subordinated debt......................................................... (339,000) 116,000
Revenue on Barter transactions.............................................. (57,000) 77,000
Gain on disposition of assets............................................... (2,619,000) (32,676,000)
Extraordinary loss on extinguishment of debt................................ 7,675,000
Write-down of intangibles and other assets.................................. 519,000
Changes in assets and liabilities, net of effects of acquisition:
Restricted cash........................................................... (1,978,000)
Accounts receivable....................................................... 2,474,000 1,619,000
Prepaid expenses and other................................................ (423,000) 644,000
Other assets.............................................................. (890,000)
Accounts payable.......................................................... (323,000) (1,472,000)
Accued interest........................................................... 268,000 (1,354,000)
Other accrued liabilities................................................. (1,574,000) 3,565,000
Deferred income taxes and other long-term liabilities..................... (113,000) 9,660,000
-------------- --------------
Net cash used in operating activities............................................. (1,590,000) (2,903,000)
-------------- --------------
Cash flows from investing activities:
Proceeds from disposition of assets........................................... 47,650,000 46,753,000
Acquisition of fixed assets................................................... (532,000) (352,000)
-------------- --------------
Net cash flows provided by investing activities............................... 47,118,000 46,401,000
-------------- --------------
Cash flows from financing activities:
Payments on long-term debt.................................................... (47,662,000) (89,924,000)
Borrowings.................................................................... 40,000,000
Payments of deferred financing costs.......................................... (966,000)
Redemption of Class A common stock............................................ (2,347,000)
Proceeds from issuance of stock purchase Warrant.............................. 52,775,000
Redemption of stock purchase Warrant.......................................... (42,891,000)
-------------- --------------
Net cash used in financing activities......................................... (47,662,000) (43,353,000)
-------------- --------------
Net decrease in cash and cash equivalents......................................... (2,134,000) 145,000
Cash and cash equivalents at beginning of period.................................. 2,134,000 447,000
-------------- --------------
Cash and cash equivalents at end of period........................................ $ -- $ 592,000
-------------- --------------
-------------- --------------
The accompanying notes are an integral part of the condensed consolidated
financial statements.
F-63
NOBLE BROADCAST GROUP, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. FINANCIAL STATEMENTS
The December 31, 1995 condensed consolidated balance sheet data was derived
from audited financial statements, but does not include all disclosures required
by generally accepted accounting principles. 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, 1995 and the notes thereto.
2. SALE OF THE COMPANY
In February 1996, the Company entered into a Stock Purchase and a Stock and
Warrant Purchase Redemption Agreement (the Agreement) whereby Jacor
Communications, Inc. (Jacor) agreed to purchase both the Company's outstanding
Class B common stock and a newly-issued warrant allowing Jacor to purchase the
Company's Class A common stock. This transaction is subject to Federal
Communications Commission approval, which has been obtained; a Department of
Justice review, which is ongoing and certain other conditions. Simultaneously,
the Company entered into an Asset Purchase Agreement and sold the assets of
certain subsidiaries of the Company to a wholly-owned subsidiary of Jacor and
assigned to this subsidiary its rights and obligations under certain contracts.
The aggregate value of the above transactions, when fully consummated, is
$152,000,000 plus certain closing costs. At that time, Jacor will own 100% of
the equity interests in the Company. The Company also entered into time
brokerage agreements with Jacor for the stations in St. Louis and Toledo. The
Company received approximately $99,000,000 in February 1996 in conjunction with
the transactions.
In connection with the transaction, the Company entered into a Credit
Agreement with another wholly-owned subsidiary of Jacor providing for a
$40,000,000 Term Loan Facility, which was borrowed in full in February 1996, and
a $1,000,000 Revolving Loan Facility. The loans bear interest at the Prime rate,
payable quarterly. Both facilities are to be repaid February 1, 2002 or upon
occurrence of certain ownership changes, whichever occurs earlier.
The Company used the total proceeds received in February 1996 to repay the
outstanding indebtedness under the Senior Secured Term Loan, the Senior
Revolving Credit Facility and the Subordinated Notes, to redeem and retire the
warrant held by the subordinated debtholder, and to redeem and retire all of the
Company's Class A shares outstanding. In the event that the transaction cannot
be consummated, none of the proceeds previously paid to the Class A stockholders
or the warrant holders shall be returned. If the transaction is terminated by
the buyer, the Class B stockholders shall be entitled to the balance of the
amounts due under the Agreement; if terminated by the Company, the buyer shall
be entitled only to the amounts previously paid to the Class B stockholders as
well as certain other amounts.
F-64
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NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS IN
CONNECTION WITH THE OFFERING COVERED BY THIS PROSPECTUS. IF GIVEN OR MADE, SUCH
INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED
BY THE COMPANY OR THE UNDERWRITER. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER
TO SELL, OR A SOLICITATION OF AN OFFER TO BUY, THE LYONS IN ANY JURISDICTION
WHERE, OR TO ANY PERSON TO WHOM, IT IS UNLAWFUL TO MAKE SUCH OFFER OR
SOLICITATION. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE
HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS
NOT BEEN ANY CHANGE IN THE FACTS SET FORTH IN THIS PROSPECTUS OR THE AFFAIRS OF
THE COMPANY SINCE THE DATE HEREOF.
-------------------
TABLE OF CONTENTS
PAGE
-----
Incorporation of Certain Documents by Reference..... 3
Available Information............................... 3
Prospectus Summary.................................. 4
Risk Factors........................................ 13
The Acquisitions.................................... 17
Use of Proceeds..................................... 19
Price Range of Common Stock......................... 21
Dividend Policy..................................... 21
Capitalization...................................... 22
Unaudited Pro Forma Financial Information........... 23
Selected Historical Financial Data.................. 34
Management's Discussion and Analysis of Financial
Condition and Results of Operations................ 40
Business............................................ 46
Management.......................................... 64
Principal Shareholders.............................. 66
Description of LYONs................................ 68
Description of Capital Stock........................ 81
Description of Indebtedness......................... 87
Certain United States Federal Income Tax
Considerations..................................... 90
Underwriting........................................ 92
Experts............................................. 92
Legal Matters....................................... 93
Index to Financial Statements....................... F-1
$225,000,000
[LOGO]
[LOGO]
LIQUID YIELD OPTION-TM- NOTES
DUE 2011
(ZERO COUPON-SENIOR)
-----------------
PROSPECTUS
-----------------
MERRILL LYNCH & CO.
, 1996
-TM-TRADEMARK OF MERRILL LYNCH & CO., INC.
- ----------------------------------------------
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- ----------------------------------------------
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PART II
INFORMATION NOT REQUIRED IN THE PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following is an itemized statement of the fees and expenses (all but the
SEC and NASD fees are estimates) in connection with the issuance and
distribution of the LYONs being registered hereunder. All such fees and expenses
shall be borne by the Company.
SEC Registration fees............................................. $ 39,539
NASD fee.......................................................... $ 11,988
Blue Sky fees and expenses........................................ $ 25,000
Printing and engraving expenses................................... $ 200,000
Transfer agent and registrar fee and expenses..................... $ 12,000
Attorneys' fees and expenses...................................... $ 250,000
Accounting fees and expenses...................................... $ 125,000
Miscellaneous..................................................... $ 11,473
---------
Total..................................................... $ 675,000
---------
---------
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Section 1 of Article VI of the Registrant's Amended and Restated Code of
Regulations (the "Code of Regulations") generally provides that each of the
Registrant's directors, officers and employees is entitled to be indemnified
from personal liability to the fullest extent permitted by Ohio law. Section
1701.13 of the Ohio Revised Code permits a corporation to indemnify its
officers, directors and employees (other than in certain cases involving bad
faith, negligence or misconduct) from and against any and all claims and
liabilities to which he or she may become subject by reason of his or her
position, or acts or commissions in such position, including reasonable costs of
defense and settlements (except in connection with shareholder derivative suits,
where indemnification is limited to the costs of defense). Ohio law also permits
corporations to provide broader indemnification than that provided by statute.
Pursuant to authority contained in its Code of Regulations, the Registrant
maintains in force a standard directors' and officers' liability insurance
policy providing coverage of $10,000,000 against liability incurred by any
director or officer in his or her capacity as such.
ITEM 16. EXHIBITS.
See Index to Exhibits.
ITEM 17. UNDERTAKINGS.
Insofar as indemnification for liabilities arising under the Act may be
permitted to directors, officers and controlling persons of the Registrant
pursuant to the foregoing provisions described under Item 15 above, or
otherwise, the Registrant has been advised that in the opinion of the Securities
and Exchange Commission such indemnification is against public policy as
expressed in the Act and is, therefore, unenforceable. In the event that a claim
for indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a director, officer or controlling
person of the Registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the Registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Act and will
be governed by the final adjudication of such issue.
II-1
The undersigned registrant hereby undertakes:
(1) That, for purposes of determining any liability under the Act, the
information omitted from the form of Prospectus filed as part of this
Registration Statement in reliance upon Rule 430A and contained in a form of
Prospectus filed by the Registrant pursuant to Rule 424(b)(1) or (4) or 497(h)
under the Act shall be deemed to be part of this Registration Statement as of
the time it was declared effective; and
(2) That, for the purpose of determining any liability under the Act, each
post-effective amendment that contains a form of prospectus shall be deemed to
be a new registration statement relating to the securities offered therein, and
the offering of such securities at that time shall be deemed to be the initial
bona fide offering thereof.
II-2
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED, THE
REGISTRANT CERTIFIES THAT IT HAS REASONABLE GROUNDS TO BELIEVE THAT IT MEETS ALL
OF THE REQUIREMENTS FOR FILING ON FORM S-3 AND HAS DULY CAUSED THIS AMENDMENT
NO. 3 TO REGISTRATION STATEMENT NO. 333-02495 TO BE SIGNED ON ITS BEHALF BY THE
UNDERSIGNED, THEREUNTO DULY AUTHORIZED IN THE CITY OF CINCINNATI, STATE OF OHIO
ON THIS 6TH DAY OF JUNE 1996.
JACOR COMMUNICATIONS, INC.
BY: /s/ JON M. BERRY
-----------------------------------
Jon M. Berry
SENIOR VICE PRESIDENT AND
TREASURER
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED, THIS
AMENDMENT NO. 3 TO REGISTRATION STATEMENT NO. 333-02495 HAS BEEN SIGNED ON JUNE
6, 1996 BY THE FOLLOWING PERSONS IN THE CAPACITIES INDICATED.
Principal Executive Officer: Principal Financial and Accounting
Officer:
/s/ RANDY /s/ R. CHRISTOPHER WEBER*
MICHAELS*
- ----------------------------------- -----------------------------------
Randy Michaels R. Christopher Weber
PRESIDENT, CO-CHIEF OPERATING SENIOR VICE PRESIDENT, CHIEF
OFFICER AND DIRECTOR FINANCIAL OFFICER AND SECRETARY
/s/ ROBERT L. /s/ ROD F. DAMMEYER*
LAWRENCE*
- ----------------------------------- -----------------------------------
Robert L. Lawrence Rod F. Dammeyer
CO-CHIEF OPERATING OFFICER AND DIRECTOR
DIRECTOR
/s/ SHELI Z. /s/ F. PHILIP HANDY*
ROSENBERG*
- ----------------------------------- -----------------------------------
Sheli Z. Rosenberg F. Philip Handy
BOARD CHAIR AND DIRECTOR DIRECTOR
/s/ JOHN W. /s/ MARC LASRY*
ALEXANDER*
- ----------------------------------- -----------------------------------
John W. Alexander Marc Lasry
DIRECTOR DIRECTOR
*By: Jon M. Berry as attorney-in-fact,
pursuant to a power of attorney
previously filed.
II-3
INDEX TO EXHIBITS
SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER DESCRIPTION OF EXHIBIT PAGE
- ---------- --------------------------------------------------------------------------- ---------
1.1 Form of Purchase Agreement. ***
2.1 Agreement and Plan of Merger dated February 12, 1996 (the "Merger *
Agreement") among Citicasters Inc., the Registrant and JCAC, Inc.
Incorporated by reference to Exhibit 2.1 to the Registrant's Current
Report on Form 8-K dated February 27, 1996.
2.2 Stockholders Agreement dated February 12, 1996 among the Registrant, JCAC, *
Inc., Great American Insurance Company, American Financial Corporation,
American Financial Enterprises, Inc., Carl H. Lindner, The Carl H.
Lindner Foundation and S. Craig Lindner. Incorporated by reference to
Exhibit 2.2 to the Registrant's Current Report on Form 8-K dated February
27, 1996.
2.3 Jacor Shareholders Agreement dated February 12, 1996 among Citicasters Inc. *
and Zell/ Chilmark Fund L.P. Incorporated by reference to Exhibit 2.3 to
the Registrant's Current Report on Form 8-K dated February 27, 1996.
2.4 Escrow Agreement among the Registrant, Citicasters Inc. and PNC Bank dated *
March 13, 1996. Incorporated by reference to Exhibit 2.4 to the
Registrant's Registration Statement on Form S-3 (File No. 333-01917).
2.5 Irrevocable Letter of Credit, Banque Paribas, Chicago Branch dated March *
13, 1996. Incorporated by reference to Exhibit 2.4 to the Registrant's
Registration Statement on Form S-3 (File No. 333-01917).
2.6 Letter of Credit and Reimbursement Agreement by and between the Registrant *
and Banque Paribas dated March 13, 1996. Incorporated by reference to
Exhibit 2.4 to the Registrant's Registration Statement on Form S-3 (File
No. 333-01917).
2.7 Form of Employment Continuation Agreement (executive officer form) between *
Citicasters Inc. and [executive officer] (referred to as exhibit
6.6(c)(i) in Merger Agreement). Incorporated by reference to Exhibit 2.5
to the Registrant's Current Report on Form 8-K dated February 27, 1996.
2.8 Form of Employment Continuation Agreement (management form) between *
Citicasters Inc. and [manager] (referred to as exhibit 6.6(c)(ii) in
Merger Agreement). Incorporated by reference to Exhibit 2.6 to the
Registrant's Current Report on Form 8-K dated February 27, 1996.
2.9 Form of Warrant Agreement between the Registrant, and KeyCorp Shareholder *
Services, Inc., as warrant agent (referred to as exhibit 3.1 in Merger
Agreement). Incorporated by reference to Exhibit 2.7 to the Registrant's
Current Report on Form 8-K dated February 27, 1996.
2.10 Stock Purchase and Stock Warrant Redemption Agreement dated as of February *
20, 1996 among the Registrant, Prudential Venture Partners II, L.P.,
Northeast Ventures, II, John T. Lynch, Frank A. DeFrancesco, Thomas R.
Jiminez, William R. Arbenz, CIHC, Incorporated, Bankers Life Holding
Corporation and Noble Broadcast Group, Inc. ("Noble") (omitting exhibits
not deemed material or filed separately in executed form). [Prudential
and Northeast are sometimes referred to hereafter as the "Class A
Shareholders"; Lynch, DeFrancesco, Jiminez and Arbenz as the "Class B
Shareholders"; and CIHC and Bankers Life as the Warrant Sellers.]
Incorporated by reference to Exhibit 2.1 to the Registrant's Current
Report on Form 8-K dated March 6, 1996, as amended.
2.11 Investment Agreement dated as of February 20, 1996 among the Registrant, *
Noble and the Class B Shareholders (omitting exhibits not deemed
material). Incorporated by reference to Exhibit 2.2 to the Registrant's
Current Report on Form 8-K dated March 6, 1996, as amended.
SEQUENTIALLY
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2.12 Warrant to Purchase Class A Common Stock of Noble issued to the Registrant. *
Incorporated by reference to Exhibit 2.3 to the Registrant's Current
Report on Form 8-K dated March 6, 1996, as amended.
2.13 Indemnification and Escrow Agreement dated as of February 20, 1996 among *
the Registrant, Noble, the Class A Shareholders, the Class B
Shareholders, the Warrant Sellers, The Fifth Third Bank and Conseco, Inc.
Incorporated by reference to Exhibit 2.4 to the Registrant's Current
Report on Form 8-K dated March 6, 1996, as amended.
2.14 Stock Escrow and Security Agreement dated as of February 20, 1996 among the *
Registrant, Noble, the Class B Shareholders, Philip H. Banks, as trustee,
and The Fifth Third Bank, as escrow agent (omitting exhibits not deemed
material or filed separately in executed form). Incorporated by reference
to Exhibit 2.5 to the Registrant's Current Report on Form 8-K dated March
6, 1996, as amended.
2.15 Trust Agreement dated as of February 20, 1996 among the Class B *
Shareholders and their spouses, and Philip H. Banks, as trustee.
Incorporated by reference to Exhibit 2.6 to the Registrant's Current
Report on Form 8-K dated March 6, 1996, as amended.
2.16 Registration Rights Agreement dated as of February 20, 1996 between the *
Registrant and Noble. Incorporated by reference to Exhibit 2.7 to the
Registrant's Current Report on Form 8-K dated March 6, 1996, as amended.
2.17 Asset Purchase Agreement dated as of February 20, 1996 among Chesapeake *
Securities, Inc. (a Registrant subsidiary), Noble Broadcast of San Diego,
Inc., Sports Radio, Inc. and Noble Broadcast Center, Inc. Incorporated by
reference to Exhibit 2.7 to the Registrant's Current Report on Form 8-K
dated March 6, 1996, as amended.
2.18 Jacor--CMM Limited Partnership Agreement of Limited Partnership dated *
January 1, 1994, by and between Jacor Cable, Inc., Up Your Ratings, Inc.
and the Registrant. Incorporated by reference to Exhibit 2.2 of the
Registrant's Annual Report on Form 10-K dated March 30, 1995.
2.19 Amendment No. 1 to Jacor--CMM Limited Partnership Agreement of Limited *
Partnership dated July 22, 1994, by and between Jacor Cable, Inc., Up
Your Ratings, Inc. and the Registrant to amend the Jacor-CMM Limited
Partnership Agreement of Limited Partnership dated January 1, 1994.
Incorporated by reference to Exhibit 2.3 of the Registrant's Annual
Report on Form 10-K dated March 30, 1995.
2.20 Amendment No. 2 to Jacor--CMM Limited Partnership Agreement of Limited *
Partnership with an effective date as of January 1, 1994, by and between
Jacor Cable, Inc., Up Your Ratings, Inc. and the Registrant to amend the
Jacor--CMM Limited Partnership Agreement of Limited Partnership dated
January 1, 1994. Incorporated by reference to Exhibit 2.4 of the
Registrant's Annual Report on Form 10-K dated March 30, 1995.
4.1 Specimen Common Stock Certificate. Incorporated by reference to Exhibit 2.1 *
to the Registrant's Form 8-A, dated January 12, 1993.
4.2 Credit Agreement dated as of February 20, 1996, among the Registrant, the *
Banks named therein, Banque Paribas, as Agent, and The First National
Bank of Boston and Bank of America Illinois, as Co-Agents (omitting
exhibits not deemed material or filed separately in executed form).
Incorporated by reference to Exhibit 4.1 to the Registrant's Current
Report on Form 8-K dated March 6, 1996, as amended.
4.3 Revolving A Note in favor of Banque Paribas by the Registrant dated as of *
February 20, 1996. (1) Incorporated by reference to Exhibit 4.2 to the
Registrant's Current Report on Form 8-K dated March 6, 1996, as amended.
SEQUENTIALLY
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4.4 Revolving B Note in favor of Banque Paribas by the Registrant dated as of *
February 20, 1996. (1) Incorporated by reference to Exhibit 4.3 to the
Registrant's Current Report on Form 8-K dated March 6, 1996, as amended.
4.5 Security Agreement dated as of February 20, 1996 among the Registrant, *
Banque Paribas, as Agent, for itself, the Co-Agents and the Banks.
Incorporated by reference to Exhibit 4.4 to the Registrant's Current
Report on Form 8-K dated March 6, 1996, as amended.
4.6 Pledge Agreement dated as of February 20, 1996 among the Registrant, Banque *
Paribas, as Agent, for itself, the Co-Agents and the Banks. Incorporated
by reference to Exhibit 4.5 to the Registrant's Current Report on Form
8-K dated March 6, 1996, as amended.
4.7 Trademark Security Agreement dated as of February 20, 1996 among the *
Registrant, Banque Paribas, as Agent, for itself, the Co-Agents and the
Banks. Incorporated by reference to Exhibit 4.6 to the Registrant's
Current Report on Form 8-K dated March 6, 1996, as amended.
4.8 Subsidiary Guaranty dated as of February 20, 1996, by various subsidiaries *
of the Registrant in favor of Banque Paribas, as Agent, for itself, the
Co-Agents and the Banks. (2) Incorporated by reference to Exhibit 4.7 to
the Registrant's Current Report on Form 8-K dated March 6, 1996, as
amended.
4.9 Subsidiary Security Agreement dated as of February 20, 1996, by various *
Company subsidiaries in favor of Banque Paribas, as Agent, for itself,
the Co-Agents and the Banks (omitting exhibits not deemed material). (2)
Incorporated by reference to Exhibit 4.8 to the Registrant's Current
Report on Form 8-K dated March 6, 1996, as amended.
4.10 Primary Pledge Agreement dated as of February 20, 1996 among Chesapeake *
Securities, Inc. (a subsidiary of the Registrant), Banque Paribas as
Agent, for itself, the Co-Agents and the Banks. (3) Incorporated by
reference to Exhibit 4.9 to the Registrant's Current Report on Form 8-K
dated March 6, 1996, as amended.
4.11 Secondary Pledge Agreement dated as of February 20, 1996 between the *
Registrant and Chesapeake Securities, Inc. (a subsidiary of the
Registrant). (4) Incorporated by reference to Exhibit 4.10 to the
Registrant's Current Report on Form 8-K dated March 6, 1996, as amended.
4.12 Subsidiary Trademark Agreement dated as of February 20, 1996 among Jacor *
Broadcasting of Tampa Bay, Inc., Jacor Broadcasting of Atlanta, Inc.,
Jacor Broadcasting Corporation and Jacor Broadcasting of Florida, Inc. in
favor of Banque Paribas as Agent, for itself, the Co-Agents and the
Banks. Incorporated by reference to Exhibit 4.11 to the Registrant's
Current Report on Form 8-K dated March 6, 1996, as amended.
4.13 Deed to Secure Debt and Security Agreement, dated as of February 20, 1996, *
by and between Jacor Broadcasting of Atlanta, Inc. and Banque Paribas, as
Agent. Incorporated by reference to Exhibit 4.12 to the Registrant's
Current Report on Form 8-K dated March 6, 1996, as amended.
4.14 Deed of Trust and Security Agreement, dated as of February 20, 1996, *
between Jacor Broadcasting of Colorado, Inc. and the Public Trustee in
the County of Weld and the State of Colorado. (6) Incorporated by
reference to Exhibit 4.13 to the Registrant's Current Report on Form 8-K
dated March 6, 1996, as amended.
4.15 Open-End Mortgage, Assignment of Rents and Leases and Security Agreement, *
dated February 20, 1996, by and between Jacor Broadcasting Corporation
and Banque Paribas, as Agent. (7) Incorporated by reference to Exhibit
4.14 to the Registrant's Current Report on Form 8-K dated March 6, 1996,
as amended.
SEQUENTIALLY
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4.16 Open-End Mortgage, Assignment of Rents and Leases and Security Agreement *
dated as of February 20, 1996, by Jacor Broadcasting of Tampa Bay, Inc.
in favor of Banque Paribas, as Agent. (8) Incorporated by reference to
Exhibit 4.15 to the Registrant's Current Report on Form 8-K dated March
6, 1996, as amended.
4.17 Deed of Trust and Security Agreement, Assignment of Leases, Rents and *
Profits, Financing Statement and Fixture Filing made by Chesapeake
Securities, Inc. for the Benefit of Banque Paribas as Agent dated as of
February 20, 1996. Incorporated by reference to Exhibit 4.16 to the
Registrant's Current Report on Form 8-K dated March 6, 1996, as amended.
4.18 Second Consolidated Amended and Restated Intercompany Demand Note issued to *
the Company by various subsidiaries of the Registrant dated as of
February 20, 1996. (5) Incorporated by reference to Exhibit 4.17 to the
Registrant's Current Report on Form 8-K dated March 6, 1996, as amended.
4.19 Second Amended and Restated Intercompany Security Agreement and Financing *
Statement dated as of February 20, 1996 by various subsidiaries of the
Registrant in favor of the Company (omitting exhibits not deemed
material). (2) Incorporated by reference to Exhibit 4.18 to the
Registrant's Current Report on Form 8-K dated March 6, 1996, as amended.
4.20(+) Restricted Stock Agreement dated as of June 23, 1993 by and between the *
Registrant and Rod F. Dammeyer. (9) Incorporated by reference to Exhibit
4.2 to the Registrant's Quarterly Report on Form 10-Q dated August 13,
1993.
4.21(+) Stock Option Agreement dated as of June 23, 1993 between the Registrant and *
Rod F. Dammeyer covering 10,000 shares of the Registrant's common stock.
(10) Incorporated by reference to Exhibit 4.3 to the Registrant's
Quarterly Report on Form 10-Q dated August 13, 1993.
4.22(+) Stock Option Agreement dated as of December 15, 1994 between the Registrant *
and Rod F. Dammeyer covering 5,000 shares of the Registrant's common
stock. (11) Incorporated by reference to Exhibit 4.23 to the Registrant's
Quarterly Report on Form 10-Q dated August 13, 1993.
4.23 Form of Indenture for the LYONs. ***
4.24 First Amendment and Limited Waiver to Credit Agreement dated as of June 3, *
1996 by and among the Registrant, Banque Paribas as Agent, the Co-Agents
named herein, and the Banks named therein. Incorporated by referencee to
Exhibit 4.23 to the Registrant's Form S-3 Registration Statement, File
No. 333-1917, as amended.
5.1 Opinion of Graydon, Head & Ritchey.
8.1 Tax Opinion of Graydon, Head & Ritchey.
10.1 Credit Agreement dated as of February 20, 1996 among Broadcast Finance,
Inc. (a Regis-trant subsidiary), Noble Broadcast Group, Inc. and Noble
Broadcast Holdings, Inc. (omitting exhibits not deemed material or filed
separately in executed form). Incorporated by reference to Exhibit 10.1
to the Registrant's Current Report on Form 8-K dated March 6, 1996, as
amended.
10.2 Subsidiary Guaranty dated as of February 20, 1996 in favor of Broadcast *
Finance, Inc. by Noble Broadcast Center, Inc., Noble Broadcast of
Colorado, Inc., Noble Broadcast of St. Louis, Inc., Noble Broadcast of
Toledo, Inc., Nova Marketing Group, Inc., Noble Broadcast Licenses, Inc.,
Noble Broadcast of San Diego, Inc., Sports Radio, Inc. and Sports Radio
Broadcasting, Inc. Incorporated by reference to Exhibit 10.2 to the
Registrant's Current Report on Form 8-K dated March 6, 1996, as amended.
SEQUENTIALLY
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10.3 Term Note in the amount of $40,000,000 by Noble Broadcast Holdings, Inc. in *
favor of Broadcast Finance, Inc. dated as of February 20, 1996.
Incorporated by reference to Exhibit 10.3 to the Registrant's Current
Report on Form 8-K dated March 6, 1996, as amended.
10.4 Revolving Note in the amount of $1,000,000 by Noble Broadcast Holdings, *
Inc. in favor of Broadcast Finance, Inc. dated as of February 20, 1996.
Incorporated by reference to Exhibit 10.4 to the Registrant's Current
Report on Form 8-K dated March 6, 1996, as amended.
10.5(+) Jacor Communications, Inc. 1993 Stock Option Plan. Incorporated by *
reference to Exhibit 99 to the Quarterly Report on Form 10-Q dated August
13, 1993.
10.6(+) Jacor Communications, Inc. 1995 Employee Stock Purchase Plan. Incorporated *
by reference to Exhibit 4.01 to the Registration Statement on Form S-8,
filed on November 9, 1994.
12 Computation of Ratio of Earnings to Fixed Charges.
23.1 Consent of Coopers & Lybrand L.L.P.
23.2 Consent of Ernst & Young LLP.
23.3 Consent of Price Waterhouse LLP. ***
23.4 Consent of Graydon, Head & Ritchey (included in opinion of counsel filed as
Exhibit 5.1).
24 Powers of Attorney. ***
25 Statement of Eligibility of The Bank of New York as Trustee. ***
27.1 Financial Data Schedule of the Registrant. Incorporated by reference to the *
Registrant's Annual Report on Form 10-K for the year ended December 31,
1995, as amended.
- ------------------------
(*) Incorporated by reference.
(**) To be filed by Amendment.
(***) Previously filed.
(+) Management Contracts and Compensatory Arrangements.
(1) Identical Notes were issued by the Company in favor of the following Banks:
The First National Bank of Boston
Bank of America Illinois
Bank of Montreal
The Bank of New York
The Bank of Nova Scotia
CIBC, Inc.
First Bank
Society National Bank
Union Bank
The aggregate principal amount of Revolving A Notes is $190 million. The aggregate
principal amount of the Revolving B Notes is $110 million.
(2) Executed by the following subsidiaries of the Registrant:
Jacor Broadcasting of Florida, Inc.
Jacor Broadcasting of Atlanta, Inc.
Jacor Broadcasting of Knoxville, Inc.
Jacor Broadcasting of Colorado, Inc.
Jacor Broadcasting of Tampa Bay, Inc.
Jacor Broadcasting of St. Louis, Inc.
Jacor Cable, Inc.
Georgia Network Equipment, Inc.
Jacor Broadcasting Corporation
Broadcast Finance, Inc.
Chesapeake Securities, Inc.
OIA Broadcasting L.L.C.
(3) An identical Primary Pledge Agreement was executed by Jacor Broadcasting of Atlanta,
Inc.
(4) An identical Secondary Pledge Agreement was executed by Jacor Broadcasting of Atlanta,
Inc.
(5) Such notes were issued by the subsidiaries of the Registrant identified in (2) above.
(6) A substantially similar document was entered into by Jacor Broadcasting of Colorado,
Inc. relating to real property located in Douglas County, Colorado.
(7) A substantially similar document was entered into by Jacor Broadcasting Corporation
relating to real property located in Hamilton County, Ohio.
(8) Substantially similar documents were entered into by Jacor of Tampa Bay, Inc. relating
to real property located in Manatee County, Florida and by Jacor Broadcasting of
Florida relating to real property located in Duval County, Florida and St. Johns
County, Florida.
(9) Substantially identical documents were entered into with John W. Alexander, F. Philip
Handy and Marc Lasry covering 20,000, 30,000 and 10,000 shares of common stock,
respectively.
(10) Identical documents were entered into with John W. Alexander, F. Philip Handy and Marc
Lasry.
(11) Identical documents were entered into with John W. Alexander, F. Philip Handy, Marc
Lasry and Sheli Z. Rosenberg.