Exhibit 99.2
HEFTEL BROADCASTING CORPORATION AND SUBSIDIARIES
UNAUDITED PRO FORMA FINANCIAL INFORMATION
The following unaudited pro forma condensed consolidated financial
information of Heftel Broadcasting Corporation (the "Company") presents the
Company's unaudited pro forma condensed consolidated balance sheet at March
31, 1998 as if at such date, the acquisition of radio station WCAA(FM)
(formerly WNWK(FM)) had been completed. The following unaudited pro forma
condensed consolidated statements of operations present the Company's results
of operations for the year ended December 31, 1997 and the three months ended
March 31, 1998 as if the Tichenor Merger and the acquisitions of KLTO(FM) and
WCAA(FM) (formerly WNWK(FM)) (collectively, the "Acquisitions") had been
completed on January 1, 1997. The pro forma condensed consolidated
statements of operations give effect to the Acquisitions during the periods
presented using the purchase method of accounting and reflect the
consolidated historical financial data of the Company, Tichenor and the
Acquisitions, as more fully described in the notes hereto.
On February 14, 1997, the Company completed its acquisition of Tichenor
Media System, Inc. ("Tichenor"), a national radio broadcasting company
engaged in the business of acquiring, developing and programming Spanish
language radio stations. The acquisition was effected through the merger of
a wholly-owned subsidiary of the Company with and into Tichenor (the
"Tichenor Merger"). Under the terms of the Amended and Restated Agreement
and Plan of Merger by and among Clear Channel Communications, Inc. ("Clear
Channel") and Tichenor dated October 10, 1996 (which agreement was assigned
to the Company by Clear Channel), Tichenor shareholders received (a) 7.8261
shares of Heftel Class A Common Stock, par value $.001 per share ("Heftel
Common Stock"), in exchange for each share of Tichenor Common Stock and (b)
4.3478 shares of Heftel Common Stock in exchange for each share of Tichenor
Junior Preferred Stock. In addition, the holders of Tichenor 14% Senior
Redeemable Cumulative Preferred Stock ("Tichenor Senior Preferred") received
$1,000 per share plus accrued and unpaid dividends through December 31, 1995
for each share of Tichenor Senior Preferred.
The transaction value of the Tichenor Merger was approximately $256.6
million which is the sum of (a) the fair value of the Tichenor Common and
Junior Preferred Stock (the "Tichenor Stock," $181.2 million), (b) the
outstanding Tichenor Senior Preferred ($3.4 million), and (c) Tichenor's
long-term debt ($72.0 million). The fair value of the Tichenor Stock is the
sum of (a) the issuance of 5,689,878 shares (pre-split) of Heftel Common
Stock with an aggregate value of $180.6 million based on a closing price of
$31.75 per share on July 9, 1996 (the day the Tichenor Merger was announced),
and (b) the direct costs related to the Tichenor Merger. The Tichenor Merger
is accounted for using the purchase method of accounting. The purchase price
is allocated primarily to FCC licenses and goodwill and amortized over 40
years. The pro forma condensed consolidated financial information does not
purport to present the actual financial position or results of operations of
the Company had the Transactions actually occurred on the date specified, nor
is it necessarily indicative of the results of operations that may be
achieved in the future.
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HEFTEL BROADCASTING CORPORATION AND SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1997(1)
Company
pro forma
Company Tichenor Pro forma condensed
as reported(2) as reported(4) Acquisition(5) adjustments consolidated
-------------- -------------- -------------- ----------- -------------
Net revenues $136,583,855 $ 4,711,877 $4,836,144 $ - $ 146,131,876
-------------- -------------- -------------- ----------- -------------
Operating expenses:
Operating expenses 82,064,446 3,850,923 3,304,922 (93,750)(6) 89,126,541
Corporate expenses 4,579,270 741,335 - - 5,320,605
Depreciation and amortization 14,928,326 622,117 381,694 3,664,633 (7) 19,596,770
-------------- -------------- -------------- ----------- -------------
Total operating expenses 101,572,042 5,214,375 3,686,616 3,570,883 114,043,916
-------------- -------------- -------------- ----------- -------------
Operating income (loss) 35,011,813 (502,498) 1,149,528 (3,570,883) 32,087,960
-------------- -------------- -------------- ----------- -------------
Other expense (income):
Interest expense, net 3,540,851 822,019 578,530 6,518,323 (8) 11,459,723
Other expense (income), net 81,973 2,310,640 (11,085) (1,100,000)(9) 1,281,528
-------------- -------------- -------------- ----------- -------------
Total other expense 3,622,824 3,132,659 567,445 5,418,323 12,741,251
-------------- -------------- -------------- ----------- -------------
Income (loss) before income tax 31,388,989 (3,635,157) 582,083 (8,989,206) 19,346,709
Income tax (benefit) 12,616,833 (946,495) 91,333 (2,745,933)(10) 8,924,405
-------------- -------------- -------------- ----------- -------------
Income (loss) from continuing operations $ 18,772,156 $(2,688,662) $ 490,750 $(6,243,273) $ 10,422,304
-------------- -------------- -------------- ----------- -------------
-------------- -------------- -------------- ----------- -------------
Income (loss) from continuing operations
per common share - basic and diluted $ 0.45 $ 0.24
-------------- -------------
-------------- -------------
Weighted average common shares outstanding:
Basic 41,671,026 43,061,885
Diluted 41,792,191 43,063,219
Other operating data:
Broadcast cash flow $ 54,519,409 $ 57,005,335
-------------- -------------
-------------- -------------
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HEFTEL BROADCASTING CORPORATION AND SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 1998
Company
pro forma
Company Pro forma condensed
as reported(3) Acquisition(5) adjustments consolidated
-------------- -------------- ------------- ------------
Net revenues $31,347,088 $1,036,184 $ - $32,383,272
-------------- -------------- ------------- ------------
Operating expenses:
Operating expenses 20,136,524 617,768 - 20,754,292
Corporate expenses 1,186,734 - - 1,186,734
Depreciation and amortization 4,338,556 100,042 861,684 (7) 5,300,282
-------------- -------------- ------------- ------------
Total operating expenses 25,661,814 717,810 861,684 27,241,308
-------------- -------------- ------------- ------------
Operating income (loss) 5,685,274 318,374 (861,684) 5,141,964
-------------- -------------- ------------- ------------
Other expense (income):
Interest expense (income), net (1,678,162) 122,834 1,759,331 (8) 204,003
Other income, net - (2,220) - (2,220)
-------------- -------------- ------------- ------------
Total other expense (income) (1,678,162) 120,614 1,759,331 201,783
-------------- -------------- ------------- ------------
Income (loss) before income tax 7,363,436 197,760 (2,621,015) 4,940,181
Income tax (benefit) 3,019,018 31,000 (856,779)(10) 2,193,239
-------------- -------------- ------------- ------------
Income (loss) from continuing operations $4,344,418 $166,760 $(1,764,236) $2,746,942
-------------- -------------- ------------- ------------
-------------- -------------- ------------- ------------
Income (loss) from continuing operations
per common share - basic and diluted $ 0.09 $ 0.06
-------------- ------------
-------------- ------------
Weighted average common shares outstanding:
Basic 48,109,168 48,109,168
Diluted 48,462,844 48,462,844
Other operating data:
Broadcast cash flow $11,210,564 $11,628,980
-------------- ------------
-------------- ------------
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HEFTEL BROADCASTING CORPORATION AND SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
MARCH 31, 1998
Company
pro forma
Company Pro forma condensed
as reported adjustments consolidated
------------- -------------- -------------
Assets:
Cash and cash equivalents $ 211,476,121 $(117,206,011)(11) $ 94,270,110
Accounts receivable, net 24,939,199 - 24,939,199
Other current assets 1,392,952 - 1,392,952
------------- -------------- -------------
Total current assets 237,808,272 (117,206,011) 120,602,261
Property and equipment, net 32,601,864 (4,179,712)(11) 28,422,152
Intangible assets, net 420,456,190 121,385,723 (11) 541,841,913
Other assets 19,528,039 - 19,528,039
------------- -------------- -------------
Total assets $ 710,394,365 $ - $ 710,394,365
------------- -------------- -------------
------------- -------------- -------------
Liabilities and Stockholders' Equity:
Current liabilities $ 25,593,046 $ 25,593,046
Long-term obligations, less current portion 2,051,490 2,051,490
Deferred income taxes 82,941,601 82,941,601
------------- -------------
Total liabilities 110,586,137 110,586,137
------------- -------------
Class A common stock 35,160 35,160
Class B common stock 14,156 14,156
Additional paid-in capital 656,066,331 665,066,331
Accumulated deficit (65,307,419) (65,307,419)
------------- -------------
Total stockholders' equity 599,808,228 599,808,228
------------- -------------
Total liabilities and stockholders' equity $ 710,394,365 $ 710,394,365
------------- -------------
------------- -------------
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HEFTEL BROADCASTING CORPORATION AND SUBSIDIARIES
NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED
FINANCIAL INFORMATION
(1) The Company is the acquiring entity for accounting purposes in the
Tichenor Merger because of: (i) Clear Channel's relationship with the Company
and Tichenor both before and after the consummation of the Tichenor Merger,
(ii) Clear Channel's ability in the future to convert its Class B Nonvoting
Common Stock into Class A Common Stock and comply with the FCC's
cross-interest policy without substantial economic hardship, and (iii) the
Company's relative size as compared to Tichenor.
(2) Represents the historical operating results of the Company for the
year ended December 31, 1997. The operating results of the Company include
the operating results of Tichenor from the merger date of February 14, 1997.
(3) Represents the historical operating results of the Company for the
three months ended March 31, 1998.
(4) Represents the historical operating results of Tichenor for the
period January 1 to February 13, 1997.
(5) Represents the historical operating results of WCAA(FM) for the
year ended December 31, 1997 and for the three months ended March 31, 1998.
The historical operating results of KLTO(FM) are not included because the
station operated under a time brokerage agreement in 1997 prior to the
acquisition date.
(6) Represents the reversal of KLTO (FM) time brokerage agreement fees
which were recognized from the beginning of the accounting period through the
date the assets were acquired.
(7) Represents incremental depreciation and amortization expense
resulting from the Acquisitions from the beginning of the accounting period
through the respective dates of purchase as follows:
FOR THE YEAR ENDED DECEMBER 31, 1997:
TICHENOR KLTO(FM) WCAA(FM) TOTAL
-------- ------- ---------- ----------
Depreciation $ - $15,726 $ 39,452 $ 55,178
Amortization 528,983 54,880 3,407,286 3,991,149
Less historical - - (381,694) (381,694)
-------- ------- ---------- ----------
Total $528,983 $70,606 $3,065,044 $3,664,633
-------- ------- ---------- ----------
-------- ------- ---------- ----------
FOR THE THREE MONTHS ENDED MARCH 31, 1998:
WCAA(FM)
--------
Depreciation $ 9,863
Amortization 851,822
Less historical -
--------
Total $861,684
--------
--------
The estimated weighted average useful lives of property and
equipment, FCC licenses, and going concern value is assumed to be five, forty
and fifteen years, respectively.
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HEFTEL BROADCASTING CORPORATION AND SUBSIDIARIES
NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED
FINANCIAL INFORMATION
(8) Represents the assumed reduction in interest income for the year
ended December 31, 1997 and the three months ended March 31, 1998 associated
with the Acquisitions as if the radio stations were acquired on January 1,
1997. The purchase of KLTO(FM) was funded with cash from operations. The
purchase of WNWK(FM) was funded from proceeds obtained from the secondary
public offering that occurred on January 22, 1998. The assumed reduction in
interest income associated with the acquisition of KLTO(FM) and WCAA(FM) is
computed using a weighted average interest rate of 6%. This rate is based on
historical yields of short-term investments.
FOR THE YEAR ENDED DECEMBER 31, 1997:
LESS
KLTO(FM) WCAA(FM) HISTORICAL TOTAL
-------- ---------- ---------- ----------
Interest expense, net $139,610 $7,037,322 $(658,610) $6,518,323
-------- ---------- ---------- ----------
-------- ---------- ---------- ----------
FOR THE THREE MONTHS ENDED MARCH 31, 1998:
WCAA(FM)
----------
Interest expense, net $1,759,331
----------
----------
(9) Reflects the elimination of a media broker commission of $1,100,000
paid by Tichenor related to the Tichenor Merger.
(10) Reflects the income tax benefit related to the pro forma
adjustments. The adjustment to income taxes reflects the application of the
estimated effective tax rate to income before income tax for historical and
pro forma adjustment amounts.
(11) The Company exchanged the assets of WPAT(AM) and $115.5 million in
cash for the assets of WCAA(FM). The following is a summary of purchase price
and the adjustments to allocate the purchase price:
COMPUTATION OF PURCHASE PRICE AND AMOUNT TO BE ALLOCATED:
Net book value of WPAT(AM) at May 22, 1998 $ 18,761,069
Cash paid and direct costs of acquisition 117,288,708
------------
Total purchase price of WCAA(FM) 136,049,777
Net book value of WPAT(AM) at March 31, 1998 18,843,766
------------
Purchase price to be allocated $117,206,011
------------
------------
ADJUSTMENTS TO ALLOCATE PURCHASE PRICE:
Property and equipment $(4,179,712)
Intangible assets 121,385,723
------------
$117,206,011
------------
------------
The historical cost of property and equipment decreased because the
assets of WPAT(AM) included land and a building and such property was not
received with the assets of WCAA(FM).
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