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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 1999
COMMISSION FILE NUMBER 333-32259
CHANCELLOR MEDIA CORPORATION OF LOS ANGELES
(Exact Name of Registrant as Specified in its Charter)
DELAWARE
(State or other jurisdiction of
incorporation or organization)
75-2451687
(I.R.S. Employer Identification Number)
1845 WOODALL RODGERS FREEWAY, SUITE 1300, DALLAS, TEXAS
75201 (Address of principal executive offices, including zip
code)
(214) 922-8700
(Registrant's telephone number, including area code)
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [ ]
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date: As of October 31, 1999, 1,040
shares of Common Stock, par value $.01 per share, of Chancellor Media
Corporation of Los Angeles were outstanding. As of such date, there was no
public market for the Common Stock.
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<TABLE>
<CAPTION>
INDEX
PAGE
NUMBER
------
<S> <C> <C>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements 3
Condensed Consolidated Balance Sheets (unaudited) 3
Condensed Consolidated Statements of Operations
(unaudited) 4
Condensed Consolidated Statement of Stockholder's
Equity
(unaudited) 5
Condensed Consolidated Statements of Cash Flows
(unaudited) 6
Notes to Condensed Consolidated Financial Statements
(unaudited) 7
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 14
Item 3. Quantitative and Qualitative Disclosures About Market
Risk 22
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 23
Item 6. Exhibits and Reports on Form 8-K 23
Signature 25
</TABLE>
<PAGE> 3
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
CHANCELLOR MEDIA CORPORATION OF LOS ANGELES AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS, EXCEPT FOR SHARE DATA)
ASSETS
<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 30,
1998 1999
------------- -------------
(UNAUDITED)
<S> <C> <C>
Current assets:
Cash and cash equivalents ............................................... $ 12,256 $ 24,781
Accounts receivable, less allowance for doubtful accounts
of $15,580 in 1998 and $14,066 in 1999 ............................... 352,646 524,245
Other current assets .................................................... 59,909 85,136
------------- -------------
Total current assets ............................................ 424,811 634,162
------------- -------------
Property and equipment, net ............................................... 1,388,156 196,247
Intangible assets, net .................................................... 5,056,047 4,705,922
Investments in non-consolidated affiliates ................................ -- 1,115,617
Other assets, net ......................................................... 358,893 223,260
------------- -------------
$ 7,227,907 $ 6,875,208
============= =============
LIABILITIES AND STOCKHOLDER'S EQUITY
Current liabilities:
Accounts payable and accrued expenses ................................... $ 236,618 $ 276,786
Long-term debt ............................................................ 4,096,000 3,782,500
Deferred tax liabilities .................................................. 453,134 410,467
Other liabilities ......................................................... 50,325 46,472
------------- -------------
Total liabilities ............................................... 4,836,077 4,516,225
------------- -------------
Commitments and contingencies
Stockholder's equity:
Common stock, $.01 par value. 1,040 shares authorized, issued and
outstanding ............................................................ 1 1
Paid-in capital ......................................................... 2,670,510 2,638,791
Accumulated deficit ..................................................... (278,681) (279,809)
------------- -------------
Total stockholder's equity ...................................... 2,391,830 2,358,983
------------- -------------
$ 7,227,907 $ 6,875,208
============= =============
</TABLE>
See accompanying notes to condensed consolidated financial statements.
3
<PAGE> 4
CHANCELLOR MEDIA CORPORATION OF LOS ANGELES AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
------------------------------ ------------------------------
SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30,
1998 1999 1998 1999
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Gross revenues .............................. $ 389,551 $ 498,233 $ 1,015,562 $ 1,383,076
Less agency commissions ................... 45,722 58,159 116,466 158,591
------------- ------------- ------------- -------------
Net revenues ...................... 343,829 440,074 899,096 1,224,485
------------- ------------- ------------- -------------
Operating expenses:
Operating expenses, excluding
depreciation and amortization .......... 175,062 212,271 491,924 640,039
Depreciation and amortization ............. 120,648 139,612 315,772 432,495
Corporate general and administrative ...... 10,109 10,575 25,188 41,187
Non-cash compensation ..................... -- 3,692 -- 3,692
Merger and non-recurring costs ............ -- 29,581 59,475 45,925
------------- ------------- ------------- -------------
Operating expenses ..................... 305,819 395,731 892,359 1,163,338
------------- ------------- ------------- -------------
Operating income ....................... 38,010 44,343 6,737 61,147
------------- ------------- ------------- -------------
Interest expense, net ..................... 48,624 85,943 135,709 258,054
Gain on disposition of assets ............. -- (208,900) (123,845) (221,306)
Gain on disposition of representation
contracts .............................. (18,497) (9,431) (29,767) (18,284)
Other (income) expense .................... -- -- (3,559) --
------------- ------------- ------------- -------------
Other (income) expense, net ............ 30,127 (132,388) (21,462) 18,464
------------- ------------- ------------- -------------
Income before income taxes ............. 7,883 176,731 28,199 42,683
Income tax expense .......................... 722 53,218 32,507 29,028
------------- ------------- ------------- -------------
Income (loss) before equity in net loss
of affiliates and extraordinary item ... 7,161 123,513 (4,308) 13,655
Equity in net loss of affiliates ............ -- 572 -- 772
------------- ------------- ------------- -------------
Income (loss) before extraordinary item ... 7,161 122,941 (4,308) 12,883
Extraordinary loss, net of income tax
benefit .................................... 15,224 -- 47,089 --
------------- ------------- ------------- -------------
Net income (loss) ................. (8,063) 122,941 (51,397) 12,883
Preferred stock dividends ................... 899 -- 17,601 --
------------- ------------- ------------- -------------
Net income (loss) attributable to
common stock ........................... $ (8,962) $ 122,941 $ (68,998) $ 12,883
============= ============= ============= =============
</TABLE>
See accompanying notes to condensed consolidated financial statements.
4
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CHANCELLOR MEDIA CORPORATION OF LOS ANGELES AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDER'S EQUITY
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1999
(UNAUDITED)
(IN THOUSANDS, EXCEPT FOR SHARE DATA)
<TABLE>
<CAPTION>
COMMON STOCK TOTAL
--------------------------- PAID-IN ACCUMULATED STOCKHOLDER'S
AMOUNT SHARES CAPITAL DEFICIT EQUITY
----------- ----------- ----------- ----------- -------------
<S> <C> <C> <C> <C> <C>
Balances at December 31, 1998 .......... $ 1 1,040 $ 2,670,510 $ (278,681) $ 2,391,830
Non-cash compensation expense ........ -- -- 3,692 -- 3,692
Net capital distributed to parent .... -- -- (35,411) -- (35,411)
Dividend to parent ................... -- -- -- (14,011) (14,011)
Net income ........................... -- -- -- 12,883 12,883
----------- ----------- ----------- ----------- -----------
Balances at September 30, 1999 ......... $ 1 1,040 $ 2,638,791 $ (279,809) $ 2,358,983
=========== =========== =========== =========== ===========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
5
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CHANCELLOR MEDIA CORPORATION OF LOS ANGELES AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
------------------------------------
SEPTEMBER 30, SEPTEMBER 30,
1998 1999
--------------- ---------------
<S> <C> <C>
Net cash provided by operating activities ....................... $ 146,459 $ 161,357
--------------- ---------------
Cash flows from investing activities:
Acquisitions, net of cash acquired ............................ (905,264) (461,247)
Proceeds from sale of assets .................................. -- 743,831
Purchases of property and equipment ........................... (21,684) (47,278)
Payments made on purchases of representation contracts......... (25,724) (27,151)
Payments received on sales of representation contracts......... 20,283 18,193
Issuance of note receivable from affiliate .................... (150,000) --
Payments for equity basis investments ......................... -- (6,500)
Other ......................................................... (39,750) (5,393)
--------------- ---------------
Net cash provided by (used by) investing activities ... (1,122,139) 214,455
--------------- ---------------
Cash flows from financing activities:
Proceeds of long-term debt .................................... 1,973,000 564,500
Payments on long-term debt .................................... (1,528,000) (878,365)
Cash contributed by (distributed to) parent ................... 1,000,645 (35,411)
Repurchase of 12% and 12 1/4% Exchange Debentures ............. (403,213) --
Dividends on preferred stock .................................. (31,183) --
Dividends to parent ........................................... (19,253) (14,011)
Payments for debt issuance costs .............................. (19,837) --
--------------- ---------------
Net cash provided by financing activities ............. 972,159 (363,287)
--------------- ---------------
Increase (decrease) in cash and cash equivalents ................ (3,521) 12,525
Cash and cash equivalents at beginning of period ................ 16,584 12,256
--------------- ---------------
Cash and cash equivalents at end of period ...................... $ 13,063 $ 24,781
=============== ===============
</TABLE>
See accompanying notes to condensed consolidated financial statements.
6
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CHANCELLOR MEDIA CORPORATION OF LOS ANGELES AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(DOLLARS IN THOUSANDS, EXCEPT FOR PER SHARE DATA)
1. BASIS OF PRESENTATION
The accompanying unaudited interim financial statements include the accounts
of Chancellor Media Corporation of Los Angeles and its subsidiaries
(collectively, the "Company" or "CMCLA"). CMCLA is an indirect subsidiary of
AMFM Inc. ("AMFM"). All significant intercompany balances and transactions have
been eliminated in consolidation and in the opinion of management, all
adjustments (consisting of normal recurring accruals) necessary to present
fairly the financial position, results of operations and cash flows have been
recorded. Investments in which the Company owns 20 percent to 50 percent of the
voting common stock or otherwise exercises significant influence over operating
and financial policies of the company are accounted for using the equity method.
Interim period results are not necessarily indicative of results to be expected
for the year.
These financial statements should be read in conjunction with the
consolidated financial statements and the notes thereto included in the
Company's Annual Report on Form 10-K for the year ended December 31, 1998. The
year-end consolidated balance sheet data was derived from the audited financial
statements, but does not include all disclosures required by generally accepted
accounting principles.
Certain reclassifications have been made to prior period condensed
consolidated financial statements to conform to the current period presentation.
2. CLEAR CHANNEL MERGER AGREEMENT
On October 2, 1999, AMFM and Clear Channel Communications, Inc. ("Clear
Channel") entered into a definitive merger agreement. Under the terms of the
merger agreement, AMFM stockholders will receive 0.94 shares of Clear Channel
common stock, on a fixed exchange basis, for each share of the AMFM's common
stock held on the record date of the transaction. Pursuant to the
Telecommunications Act of 1996 and other regulatory guidelines, it is expected
that, collectively, Clear Channel and AMFM will need to divest approximately 100
radio stations to obtain antitrust and Federal Communications Commission
approval for the merger, including stations owned by the Company. Consummation
of the merger is also subject to stockholder approval by both companies and
other conditions. Although there can be no assurance, AMFM expects that the
Clear Channel merger will be consummated during the second half of 2000.
3. ACQUISITION OF CAPSTAR BROADCASTING AND CHANGE IN LEGAL STRUCTURE AND
REFINANCING
On July 13, 1999, AMFM acquired Capstar Broadcasting Corporation ("Capstar
Broadcasting"), a Delaware corporation, through the merger (the "Capstar
Merger") of a wholly-owned subsidiary of AMFM into Capstar Broadcasting, with
Capstar Broadcasting surviving as a wholly-owned subsidiary of AMFM. Concurrent
with the Capstar Merger, AMFM (formerly Chancellor Media Corporation) was
renamed AMFM Inc. As a result of the Capstar Merger, all of the then outstanding
shares of Capstar Broadcasting common stock were converted, in a tax-free
exchange, into 0.4955 of a share of AMFM's common stock, or approximately 53.6
million shares of AMFM's common stock in the aggregate. AMFM added 338 radio
stations (239 FM and 99 AM) to its portfolio and also assumed the outstanding
options, warrants and other equity rights in Capstar Broadcasting which
represented up to an additional 3.3 million shares of AMFM's common stock.
Approximately $2,200,000 of Capstar Broadcasting's debt and preferred stock
remained outstanding after the Capstar Merger. Capstar Broadcasting is a direct
subsidiary of AMFM. The financial results of the Company do not include those of
Capstar Broadcasting or its subsidiaries.
Capstar Broadcasting currently conducts its operations through three main
subsidiaries: (i) Capstar Broadcasting Partners, Inc. ("Capstar Partners"), an
indirect subsidiary of Capstar Broadcasting; (ii) Capstar Radio Broadcasting
Partners, Inc. ("Capstar Radio"), a direct wholly-owned subsidiary of Capstar
Partners; and (iii) Capstar Communications, Inc. ("Capstar Communications"), an
indirect subsidiary of Capstar Radio.
7
<PAGE> 8
Through a series of related transactions, including capital contributions of
stock and mergers of subsidiaries, AMFM intends to combine the outstanding
bonds, bank indebtedness and preferred stock of its direct and indirect
subsidiaries into fewer entities (the "Reorganization"). After completion of the
Reorganization, Capstar Communications will assume and/or be liable for all of
its remaining outstanding bonds, as well as the bonds and bank indebtedness of
Capstar Radio and the Company, which will be combined with Capstar
Communications in the fourth quarter of 1999. The Reorganization is expected to
be completed during the fourth quarter of 1999.
Also as part of the Reorganization, AMFM intends to refinance CMCLA's senior
credit facility and the credit facility of Capstar Broadcasting with a new
credit facility. Several banks entered into a commitment letter with CMCLA on
November 3, 1999 and agreed to provide Capstar Communications with a senior
credit facility. AMFM expects that Capstar Communications' new senior credit
facility will be entered into in November 1999. Capstar Communications' senior
credit facility will include commitments for a revolving loan facility of
$600,000 and a term loan facility of $2,600,000. The proceeds of such facilities
may be used to repay the existing credit facilities of CMCLA and Capstar
Broadcasting, to repay, repurchase or redeem other debt and equity securities of
AMFM and its subsidiaries and for other general corporate purposes. Both the
revolving loan facility and the term loan facility of Capstar Communications
will mature two years after the date of Capstar Communications' senior credit
facility. No scheduled amortization of principal will be required prior to
maturity. Both the revolving loan facility and the term loan facility of Capstar
Communications will bear interest at fluctuating rates based upon the prime rate
or the eurodollar rate. The margin above the applicable prime rate or the
eurodollar rate will be determined by reference to Capstar Communications' ratio
of consolidated debt to consolidated earnings before interest, taxes,
depreciation and amortization, provided that such margins will be fixed at .50%
and 1.50%, respectively, until delivery of Capstar Communications' financial
statements for the fiscal quarter ending March 31, 2000, and capped at .50% and
1.50%, respectively, thereafter so long as the Clear Channel merger agreement
has not been terminated. Capstar Communications' senior credit facility will be
guaranteed by most of the direct and indirect subsidiaries, other than Capstar
Communications, of Chancellor Mezzanine Holdings Corporation ("Chancellor
Mezzanine"), a direct subsidiary of AMFM, and will be secured by (a) a
non-recourse pledge of the stock of Chancellor Mezzanine, (b) a recourse pledge
of the stock of Capstar Partners, (c) a recourse pledge of the stock of Capstar
Communications and most of the subsidiaries of Capstar Communications, and (d) a
pledge of the common stock of Lamar Advertising Company ("Lamar") to be held by
Capstar Communications after the Reorganization. Capstar Communications' senior
credit facility will be subject to affirmative and negative covenants, including
(i) limitations on indebtedness, mergers, acquisitions and dispositions of
assets, dividends, stock repurchases, other restricted payments, investments and
liens, and (ii) financial maintenance covenants. The merger of AMFM and Clear
Channel will be an event of default under Capstar Communications' senior credit
facility and will require refinancing at the effective time of the merger.
4. ACQUISITIONS AND DISPOSITIONS
(a) Outdoor Activity and Sale of Outdoor Advertising Business to Lamar
On September 15, 1999, the Company completed the sale to Lamar of all of the
outstanding common stock of Chancellor Media Outdoor Corporation and Chancellor
Media Whiteco Outdoor Corporation, wholly-owned subsidiaries of the Company,
which together held all of the Company's assets used in its outdoor advertising
business. The Company received cash proceeds of $700,000, subject to a net
working capital adjustment, and 26,227,273 shares of class A common stock, par
value $.01 per share, of Lamar ("Lamar Common Stock"). During the three months
ended September 30, 1999, the Company recognized a pre-tax gain of $209,970
related to the sale.
The Company owns approximately 30% of the aggregate number of outstanding
shares and approximately 11% of the voting shares of Lamar, based upon the
number of shares of Lamar common stock outstanding as of September 30, 1999.
Lamar, the Company and the controlling stockholder of Lamar entered into a
stockholders agreement under which (1) the Company designated Thomas O. Hicks
and James E. de Castro as its representatives on the Lamar board of directors,
increasing the size of Lamar's board to ten members, (2) the Company agreed not
to sell any of the Lamar Common Stock for a period of 12 months from the closing
date, which ends on September 15, 2000 and (3) Lamar agreed, subject to certain
exceptions, not to take any action without the prior written consent of the
Company that would result in a change of control of Lamar or the acquisition or
disposition of assets worth in excess of $500,000. Due to the Company's ability
to exercise significant influence over the operating and financial policies of
Lamar, the Company is accounting for its investment in Lamar using the equity
method. Lamar and the Company entered into a registration rights agreement which
gives the Company the right to require Lamar to register the sale of the Lamar
Common Stock under applicable securities laws in some circumstances.
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At September 30, 1999, the market value of the Company's common stock of
Lamar, based on the closing sale price of unrestricted class A common stock of
Lamar as reported by The Nasdaq Stock Market, was $1,298,250, and the investment
was carried at $1,109,671. The excess of the Company's carrying value over the
underlying equity in net assets is being amortized over 15 years. The Company's
share of undistributed losses of Lamar totaled $219 at September 30, 1999.
During 1999, prior to the sale of the Company's outdoor advertising
business, the Company acquired approximately 4,800 billboards and outdoor
displays in various transactions for approximately $51,000 in cash, including
certain working capital and direct acquisition costs. On May 24, 1999, the
Company sold 466 billboards and outdoor displays in various markets to PNE
Media, LLC for approximately $25,600 in cash. These assets were accounted for as
assets held for sale and no gain or loss was recognized by the Company upon
consummation of the sale. The excess of the carrying amount over the proceeds
was accounted for as an adjustment to the original purchase price of the
billboards and outdoor displays.
(b) Other Completed Transactions
On January 15, 1999, the Company acquired the music production library and
related license agreements of Brown Bag Productions for a purchase price of
$8,483 including direct acquisition costs.
On January 28, 1999, the Company acquired Wincom Broadcasting Corporation
which owns WQAL-FM in Cleveland. The Company had previously been operating
WQAL-FM under a time brokerage agreement effective October 1, 1998. On February
2, 1999, the Company acquired five additional radio stations in Cleveland
including (i) WDOK-FM and WRMR-AM from Independent Group Limited Partnership,
(ii) WZAK-FM from Zapis Communications and (iii) Zebra Broadcasting Corporation
which owned WZJM-FM and WJMO-AM. The six Cleveland stations were acquired for an
aggregate purchase price of $283,758 in cash, including working capital and
direct acquisition costs.
On April 16, 1999, the Company sold WMVP-AM in Chicago to ABC, Inc. for
$21,000 in cash and recognized a pre-tax gain of $14,466. The Company had
previously entered into a time brokerage agreement effective September 10, 1998
to sell the broadcast time of WMVP-AM pending completion of the sale.
On July 1, 1999, the Company acquired KKFR-FM and KFYI-AM in Phoenix from
The Broadcast Group, Inc. for $90,000 in cash. The Company began operating
KKFR-FM and KFYI-AM under a time brokerage agreement effective November 5, 1998.
The foregoing acquisitions were accounted for as purchases. Accordingly, the
accompanying consolidated financial statements include the results of operations
of the acquired entities from their respective dates of acquisition.
A summary of the net assets acquired in the nine-month period ended
September 30, 1999 follows:
<TABLE>
<CAPTION>
NINE MONTHS
ENDED
SEPTEMBER 30,
1999
-------------
<S> <C>
Cash and cash equivalents ................... $ 4,360
Accounts receivable, net .................... 6,403
Other current assets ........................ 1,355
Property and equipment ...................... 38,175
Intangible assets ........................... 455,114
Accounts payable and accrued
expenses .................................... (2,663)
Deferred tax liabilities .................... (36,162)
-------------
Total net assets acquired ......... 466,582
Less:
Cash and cash equivalents acquired ........ 4,360
Liabilities assumed ....................... 725
Notes payable ............................. 250
-------------
Cash paid for acquisitions .................. $ 461,247
=============
</TABLE>
The unaudited pro forma condensed consolidated results of operations data
for the nine months ended September 30, 1998 and 1999, as if the acquisitions
and dispositions through September 30, 1999 occurred at January 1, 1998, follow:
9
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<TABLE>
<CAPTION>
NINE MONTHS ENDED
---------------------
SEPTEMBER SEPTEMBER
30, 30,
1998 1999
--------- ----------
<S> <C> <C>
Net revenues........................ $946,588 $1,068,973
Loss before extraordinary item...... (115,226) (7,677)
Net loss............................ (162,315) (7,677)
</TABLE>
The pro forma results are not necessarily indicative of the financial
results which would have occurred if the transactions had been in effect for the
entire periods presented.
(c) Pending Transactions
On February 20, 1998, the Company entered into an agreement to acquire, over
a period of three years, eleven radio stations from Capstar Broadcasting for an
aggregate purchase price of $637,500. Pursuant to this agreement, the
acquisition of KODA-FM was completed on May 29, 1998 for $143,250. On February
1, 1999, the Company began operating WKNR-AM in Cleveland, a station owned by
Capstar Broadcasting, under a time brokerage agreement. The February 20, 1998
purchase agreement and the WKNR-AM time brokerage agreement will be terminated
upon the completion of the Reorganization.
On August 30, 1999, AMFM entered into an agreement with Cox Radio, Inc.
("Cox") to acquire KOST-FM and KFI-AM in Los Angeles plus $3,000 in cash payable
by Cox in exchange for 13 of its radio stations including CMCLA stations WEDR-FM
in Miami and WFOX-FM in Atlanta, and Capstar Broadcasting stations WEFX-FM,
WNLK-AM, WKHL-FM and WSTC-AM in Stamford/Norwalk, WFYV-FM, WAPE-FM, WBWL-AM,
WKQL-FM, WMXQ-FM and WOKV-AM in Jacksonville and WPLR-FM and the local sales
rights of a 14th Capstar Broadcasting station, WYBC-FM in New Haven. The Company
began programming KOST-FM and KFI-AM in Los Angeles and Cox began programming
the 13 AMFM stations under time brokerage agreements effective October 1, 1999.
Although there can be no assurance, AMFM expects that the Cox exchange will be
consummated in the first quarter of 2000.
On September 22, 1999, the Company entered into an agreement to sell the
capital stock of its Puerto Rico subsidiaries to Spanish Broadcasting System of
Puerto Rico, Inc. ("Spanish Broadcasting") for $90,000 payable in cash. The
Company owns and operates eight radio stations in Puerto Rico. Pending
completion of the sale, Spanish Broadcasting will program these eight stations
under a time brokerage agreement. Although there can be no assurance, the
Company expects to complete the sale of these subsidiaries in the fourth quarter
of 1999.
5. MERGER AND NON-RECURRING COSTS
During the first quarter of 1999, the Company recorded a charge of $16,344
for merger and non-recurring costs, of which approximately $1,493 is accrued as
of September 30, 1999, which consisted of the following:
<TABLE>
<S> <C>
Write-off of Petry transaction costs(a)......... $ 4,148
Executive severance costs(b).................... 12,196
--------
Total................................. $ 16,344
========
</TABLE>
- ----------
(a) On April 8, 1998, the Company entered into an agreement to acquire
Petry Media Corporation ("Petry"), a leading independent television
representation firm, for approximately $127,000. The Company
subsequently assigned its contract to acquire Petry to LIN Television
Corporation. The Company recorded a charge of $4,148 to write off
transaction costs incurred in connection with the Petry transaction.
(b) On March 15, 1999, AMFM and CMCLA announced an executive realignment
which included (i) the resignation of Jeffrey A. Marcus as the
Company's President and Chief Executive Officer; (ii) the resignation
of Thomas P. McMillin as the Company's Chief Financial Officer; (iii)
the departure of Richard A. B. Gleiner as the Company's General
Counsel; and (iv) the resignation of Eric C. Neuman as the Company's
Senior Vice President -- Strategic Development, each effective March
15, 1999. In connection with the executive realignment, the Company
recorded a charge of $12,196 for executive severance and other costs.
During the third quarter of 1999, the Company recorded a charge of $29,581
for merger and non-recurring costs which consisted of the following:
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<TABLE>
<S> <C>
Personnel changes, format changes and other
non-recurring costs incurred in connection with
the implementation of the Company's clustering
strategy (a) .................................................. $ 6,027
Personnel changes and contractual obligations in
exiting certain non-core business ventures (b) ................ 23,554
----------
Total ................................................. $ 29,581
==========
</TABLE>
- ----------
(a) The Company has announced its new clustering strategy whereby each
cluster of stations in a market will be managed as a single business
unit. In connection with this strategy, certain personnel have been
terminated and other personnel-related costs have been incurred to
align formats within a market to target certain demographics. Of the
total costs incurred, $5,694 related to personnel costs. At September
30, 1999, $2,269 of those costs were accrued and are expected to be
paid during the fourth quarter of 1999.
(b) Previously, the Company has announced that it would sharpen its focus
on domestic radio and new media operations. As a result, management
decided to discontinue Katz Media's international operations and
streamline its television representation business, sell its outdoor
advertising business, terminate its contracts to acquire Grupo Radio
and assign to LIN Television Corporation its contract to acquire
Petry. Of the $23,554 incurred, $3,814 related to personnel costs and
the remainder related to the termination of contractual obligations,
such as leases, and legal and advisory fees. At September 30, 1999,
$3,312 of the total costs are accrued and are expected to be paid
during the fourth quarter of 1999.
6. CONTINGENCIES
In September 1998, a stockholder class action complaint was filed in the
Delaware Court of Chancery by a stockholder purporting to act individually and
on behalf of all other persons, other than defendants, who own securities of
AMFM and are similarly situated. The defendants named in the case are Chancellor
Media Corporation, Hicks, Muse, Tate & Furst Incorporated Thomas O. Hicks,
Jeffrey A. Marcus, James E. de Castro, Eric C. Neuman, Lawrence D. Stuart, Jr.,
Steven Dinetz, Thomas J. Hodson, Perry Lewis, John H. Massey and Vernon E.
Jordan, Jr. The plaintiff alleges breach of fiduciary duties, gross
mismanagement, gross negligence or recklessness, and other matters relating to
the defendants' actions in connection with the Capstar Merger. The plaintiff
sought to certify the complaint as a class action, enjoin consummation of the
Capstar Merger, order defendants to account to plaintiff and other alleged class
members for damages, and award attorneys' fees and other costs. The Company
believes that the lawsuit is without merit and intends to vigorously defend the
action.
The Company is also involved in various other claims and lawsuits which are
generally incidental to its business. The Company is also vigorously contesting
all of these matters and believes that the ultimate resolution of these matters
and those mentioned above will not have a material adverse effect on its
consolidated financial position or results of operations.
7. SEGMENT DATA
During the nine months ended September 30, 1999, the Company conducted
business in three distinct operating segments consisting of radio broadcasting,
new media and outdoor advertising. Following the sale of the Company's outdoor
advertising business to Lamar on September 15, 1999, the Company operates in
only the radio broadcasting and new media segments. Information about each of
the operating segments follows:
(a) AMFM Radio Group -- radio broadcasting
CMCLA's radio station portfolio consisted of 124 radio stations (91 FM and
33 AM) at September 30, 1999, including two stations operated under time
brokerage or joint sales agreements. The AMFM Radio Group also operates a
national radio network, The AMFM Radio Networks, which broadcasts advertising
and syndicated programming shows to a national audience of approximately 68
million listeners in the United States, and the Chancellor Marketing Group, a
full-service sales promotion firm developing integrated marketing programs for
Fortune 1000 companies.
(b) AMFM New Media Group -- media representation and Internet
The AMFM New Media Group includes Katz Media, a full-service media
representation firm that sells national spot advertising time for its clients in
the radio and television industries primarily throughout the United States and
for AMFM's portfolio of stations. The Company's Internet initiative focuses on
developing the Company's Internet web sites, streaming online broadcasts of the
Company's on-air programming and other media, and promoting emerging Internet
and new media concerns.
11
<PAGE> 12
(c) Chancellor Outdoor Group -- outdoor advertising
The Company's outdoor advertising business was formed on July 31, 1998 with
the acquisition of Martin Media and Martin & MacFarlane, Inc., and also included
the assets of the outdoor advertising division of Whiteco Industries, Inc.,
acquired on December 1, 1998. On September 15, 1999, the Company completed the
sale of its outdoor advertising business to Lamar, as discussed in Note 4(a).
The Chancellor Outdoor Group segment data includes the results of operations of
the outdoor advertising business through September 15, 1999.
Separate financial data for each of the Company's operating segments is
provided below.
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
-------------------------------- --------------------------------
SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30,
1998 1999 1998 1999
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
AMFM Radio Group -- radio broadcasting:
Net revenues .............................. $ 287,704 $ 368,123 $ 778,901 $ 967,771
Operating expenses, excluding
depreciation and amortization ............ 140,682 164,967 420,745 485,386
Depreciation and amortization ............. 98,476 89,982 271,265 296,084
Operating income .......................... 46,799 105,386 81,651 171,140
Capital expenditures ...................... NA NA 10,754 13,950
AMFM New Media Group -- media
representation and Internet:
Net revenues .............................. 46,764 48,745 122,127 137,281
Operating expenses, excluding
depreciation and amortization ............ 32,994 33,384 81,086 96,635
Depreciation and amortization ............. 7,155 15,441 22,727 30,909
Operating income (loss) ................... 5,076 (4,488) 13,427 2,303
Capital expenditures ...................... NA NA 8,616 4,484
Chancellor Outdoor Group -- outdoor
advertising:
Net revenues .............................. 15,086 45,737 15,086 156,627
Operating expenses, excluding
depreciation and amortization ............ 7,111 25,822 7,111 84,583
Depreciation and amortization ............. 11,022 30,536 11,022 94,062
Operating loss ............................ (3,504) (13,731) (3,504) (31,007)
Capital expenditures ...................... NA NA -- 22,716
</TABLE>
The segment financial data includes intersegment revenues and expenses which
must be excluded to reconcile to the Company's consolidated financial
statements. In addition, certain depreciation and amortization expenses,
corporate general and administrative expenses, non-cash compensation, merger and
non-recurring costs, and corporate capital expenditures were not allocated to
operating segments and must be included to reconcile to the Company's
consolidated financial statements. Reconciling financial data is provided below:
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
------------------------------- -------------------------------
SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30,
1998 1999 1998 1999
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Intersegment net revenues ........................ $ 5,725 $ 22,531 $ 17,018 $ 37,194
Intersegment operating expenses,
excluding depreciation and amortization ....... 5,725 11,902 17,018 26,565
Unallocated depreciation and amortization ........ 3,995 3,653 10,758 11,440
Unallocated corporate general and
administrative expenses ........................ 6,366 4,673 14,604 19,007
Unallocated non-cash compensation ................ -- 3,692 -- 3,692
Unallocated merger and non-recurring costs ....... -- 20,177 59,475 36,521
Unallocated corporate capital expenditures ....... NA NA 2,314 6,128
</TABLE>
8. RECENTLY ISSUED ACCOUNTING PRONOUNCEMENT
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133, Accounting for Derivative Instruments
and Hedging Activities. This statement establishes accounting and reporting
standards for derivative instruments and hedging activities. SFAS No. 133, as
amended by SFAS No. 137, is effective for all fiscal quarters of all fiscal
years beginning after June 15, 2000. Management does not anticipate that this
statement will have a material impact on the Company's consolidated financial
statements.
9. SUMMARIZED FINANCIAL INFORMATION OF SUBSIDIARY GUARANTORS
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<PAGE> 13
The 9 3/8% Senior Subordinated Notes due 2004, the 8 3/4% Senior
Subordinated Notes due 2007, the 10 1/2% Senior Subordinated Notes due 2007, the
8 1/8% Senior Subordinated Notes due 2007, the 9% Senior Subordinated Notes due
2008 and the 8% Senior Notes due 2008 are fully and unconditionally guaranteed,
on a joint and several basis, by all of CMCLA's direct and indirect subsidiaries
other than certain inconsequential subsidiaries (the "Subsidiary Guarantors").
The Subsidiary Guarantors are wholly-owned subsidiaries of CMCLA. Summarized
financial information of the Subsidiary Guarantors as of December 31, 1998 and
September 30, 1999 and for the nine months ended September 30, 1999 is presented
below. Separate financial statements and other disclosures concerning the
Subsidiary Guarantors are not presented because management has determined that
they are not material to investors. There are no significant restrictions on
distributions from each of the Subsidiary Guarantors to CMCLA.
<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 30,
1998 1999
------------- -------------
<S> <C> <C>
Current assets ............... $ 376,217 $ 547,959
Noncurrent assets ............ 5,530,190 4,023,261
Current liabilities .......... 133,872 89,261
Noncurrent liabilities ....... 5,744,413 4,494,062
</TABLE>
<TABLE>
<CAPTION>
NINE MONTHS
ENDED
SEPTEMBER 30,
1999
-------------
<S> <C>
Net revenues .................................... $ 1,105,579
Operating income ................................ 84,034
Net loss ........................................ (110,187)
</TABLE>
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<PAGE> 14
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
GENERAL
Chancellor Media Corporation of Los Angeles together with its subsidiaries
("CMCLA" or the "Company") is an indirect, wholly-owned subsidiary of AMFM Inc.
(together with its subsidiaries, "AMFM"), a large national pure-play radio
broadcasting and related media company with operations in radio broadcasting and
media representation and growing Internet operations, which focus on developing
AMFM's Internet web sites, streaming online broadcasts of AMFM's on-air
programming and other media, and promoting emerging Internet and new media
concerns. In addition, CMCLA owns an approximate 30% equity interest in Lamar
Advertising Company ("Lamar"), one of the largest owners and operators of
outdoor advertising structures in the United States. As of November 1, 1999,
CMCLA owned and operated, programmed or sold air time for 124 radio stations (91
FM and 33 AM) in 23 markets in the continental United States and in Puerto Rico,
including two radio stations programmed under time brokerage ("LMA") or joint
sales agreements. The AMFM Radio Group also includes a national radio network,
The AMFM Radio Networks, which broadcasts advertising and syndicated programming
shows to a national audience of approximately 68 million listeners in the United
States (including approximately 59 million listeners from AMFM's portfolio of
stations) and the Chancellor Marketing Group, a full-service sales promotion
firm developing integrated marketing programs for Fortune 1000 companies. The
media representation business consists of Katz Media Group, Inc. ("Katz"), a
full-service media representation firm that sells national spot advertising time
for its clients in the radio and television industries primarily throughout the
United States and for AMFM's portfolio of stations.
See Note 7 to the Condensed Consolidated Financial Statements included
elsewhere in this Form 10-Q for additional information on CMCLA's operating
segments as of September 30, 1999.
CMCLA's results of operations for the three months and nine months ended
September 30, 1999 are not comparable to the results of operations for the three
months and nine months ended September 30, 1998 due to the impact of CMCLA's
various acquisitions and dispositions. CMCLA completed the following
transactions from October 1, 1998 through September 30, 1999:
o the net acquisition of approximately 28,000 outdoor advertising
billboards and display faces for approximately $1.1 billion in cash and
the subsequent sale of CMCLA's entire outdoor advertising business to
Lamar on September 15, 1999;
o the acquisition of 16 radio stations (13 FM and three AM) for
approximately $449.4 million in cash;
o the disposition of one AM radio station for approximately $21.0 million
in cash; and
o the acquisition of music production libraries for approximately $8.5
million in cash.
Seasonal revenue fluctuations are common in the radio broadcasting and
outdoor advertising industries and are due primarily to fluctuations in
advertising expenditures by local and national advertisers. Advertising
expenditures are typically lower in the first and third calendar quarters and
higher in the second and fourth calendar quarters of each year. CMCLA's
operating results in any period may be affected by the occurrence of advertising
and promotion expenses that do not produce commensurate revenues in the period
in which the expenditures are made.
RECENT EVENTS
On October 2, 1999, AMFM and Clear Channel Communications, Inc. ("Clear
Channel") entered into a definitive merger agreement. Under the terms of the
merger agreement, AMFM stockholders will receive 0.94 shares of Clear Channel
common stock, on a fixed exchange basis, for each share of AMFM common stock
held on the record date of the transaction. Pursuant to the Telecommunications
Act of 1996 and other regulatory guidelines, it is expected that, collectively,
Clear Channel and AMFM will need to divest approximately 100 radio stations to
obtain antitrust and Federal Communications Commission approval for the merger,
including stations owned by CMCLA. Consummation of the merger is also subject to
stockholder approval by both companies and other conditions. Although there can
be no assurance, AMFM expects that the Clear Channel merger will be consummated
during the second half of 2000.
14
<PAGE> 15
On September 15, 1999, CMCLA completed the sale to Lamar of all of the
outstanding common stock of Chancellor Media Outdoor Corporation and Chancellor
Media Whiteco Outdoor Corporation, wholly-owned subsidiaries of CMCLA, which
together held all of CMCLA's assets used in its outdoor advertising business.
CMCLA received cash proceeds of $700.0 million, subject to a net working capital
adjustment, and 26,227,273 shares of class A common stock, par value $.01 per
share, of Lamar. CMCLA recognized a pre-tax gain of approximately $210.0 million
related to the sale. CMCLA owns approximately 30% of the aggregate number of
outstanding shares and approximately 11% of the voting shares of Lamar, based
upon the number of shares of Lamar common stock outstanding as of September 30,
1999.
On July 13, 1999, AMFM acquired Capstar Broadcasting Corporation ("Capstar
Broadcasting") through the merger (the "Capstar Merger") of a wholly-owned
subsidiary of AMFM into Capstar Broadcasting, with Capstar Broadcasting
surviving as a wholly-owned subsidiary of AMFM. As a result of the Capstar
Merger, all of the then outstanding shares of Capstar Broadcasting common stock
were converted, in a tax-free exchange, into 0.4955 of a share of AMFM's common
stock, or approximately 53.6 million shares of AMFM's common stock in the
aggregate. AMFM added 338 radio stations (239 FM and 99 AM) to its portfolio and
also assumed the outstanding options, warrants and other equity rights in
Capstar Broadcasting which represented up to an additional 3.3 million shares of
AMFM's common stock. Approximately $2.2 billion of Capstar Broadcasting's debt
and preferred stock remained outstanding after the Capstar Merger. Capstar
Broadcasting is a direct subsidiary of AMFM. The financial results of the
Company do not include those of Capstar Broadcasting or its subsidiaries.
Capstar Broadcasting currently conducts its operations through three main
subsidiaries: (i) Capstar Broadcasting Partners, Inc. ("Capstar Partners"), an
indirect subsidiary of Capstar Broadcasting; (ii) Capstar Radio Broadcasting
Partners, Inc. ("Capstar Radio"), a direct wholly-owned subsidiary of Capstar
Partners; and (iii) Capstar Communications, Inc. ("Capstar Communications"), an
indirect subsidiary of Capstar Radio.
RESULTS OF OPERATIONS
Three Months Ended September 30, 1999 Compared To Three Months Ended September
30, 1998
Net revenues for the three months ended September 30, 1999 increased 28.0%
to $440.1 million compared to $343.8 million for the third quarter of 1998.
Operating expenses excluding depreciation and amortization for the three months
ended September 30, 1999 increased 21.3% to $212.3 million compared to $175.1
million for the three months ended September 30, 1998. The increase in net
revenues and operating expenses was primarily attributable to the net impact of
the various acquisitions and dispositions discussed elsewhere in this Form 10-Q
and overall net operational improvements, as evidenced by the increase in
CMCLA's direct operating margin from 49.1% for the three months ended September
30, 1998 to 51.8% for the three months ended September 30, 1999.
Depreciation and amortization for the three months ended September 30, 1999
increased 15.7% to $139.6 million compared to $120.6 million for the third
quarter of 1998. The increase is due to the impact of the acquisitions completed
during 1998 and through September 30, 1999.
Corporate general and administrative expenses for the three months ended
September 30, 1999 increased 4.6% to $10.6 million compared to $10.1 million for
the third quarter of 1998. The increase is due to the growth of CMCLA, and the
related increase in properties and staff, primarily due to recent acquisitions.
The non-cash compensation expense of $3.7 million for the three months ended
September 30, 1999 related to AMFM stock options granted to employees of CMCLA.
The merger and non-recurring costs of $29.6 million for the third quarter of
1999 consist of (i) the costs to terminate employees and close certain
facilities in connection with the Capstar Merger and the implementation of
CMCLA's clustering strategy and (ii) the costs associated with CMCLA's decision
to focus primarily on domestic radio and new media operations including: costs
to discontinue Katz's international division and integrate its Seltel TV
Division into its operations, personnel costs related to the sale of CMCLA's
outdoor advertising business, and legal and advisory fees associated with the
termination of contracts and exit of certain non-core business ventures. The
majority of these costs have been paid as of September 30, 1999. Remaining
amounts will be paid in the fourth quarter of 1999 and early in 2000.
15
<PAGE> 16
As a result of the above factors, CMCLA realized operating income of $44.3
million for the three months ended September 30, 1999 compared to operating
income of $38.0 million for the third quarter of 1998.
Net interest expense for the three months ended September 30, 1999 increased
76.8% to $85.9 million compared to $48.6 million for the same period in 1998.
The net increase in interest expense was primarily due to (i) additional bank
borrowings under the senior credit facility of CMCLA required to finance the
various acquisitions discussed elsewhere in this Form 10-Q; (ii) the issuance of
the 9% Senior Subordinated Notes due 2008 by CMCLA on September 30, 1998; and
(iii) the issuance of the 8% Senior Notes due 2008 by CMCLA on November 17,
1998.
The gain on disposition of assets of $208.9 million for the three months
ended September 30, 1999 related primarily to the gain of $210.0 million
recognized upon the sale of CMCLA's outdoor advertising business to Lamar on
September 15, 1999.
CMCLA recorded a gain on disposition of representation contracts of $9.4
million for the three months ended September 30, 1999 and $18.5 million for the
third quarter of 1998 related to its media representation operations. The gain
represents the sales proceeds received from successor representation firms for
the buyout of existing media representation contracts, net of any remaining
deferred costs associated with obtaining the original representation contract.
While the consolidation of the radio broadcasting industry has resulted in an
increase in buyout activity, the impact on future periods cannot be predicted.
Income tax expense for the three months ended September 30, 1999 increased
to $53.2 million compared with $0.7 million for the three months ended September
30, 1998. The increase was primarily due to higher pretax income for the three
months ended September 30, 1999.
During the third quarter of 1999, CMCLA recorded equity in net loss of
affiliates of $0.6 million, which related to CMCLA's investments accounted for
using the equity method.
During the third quarter of 1998, CMCLA recorded an extraordinary charge of
$15.2 million, net of a tax benefit of $8.2 million, consisting of the premiums,
estimated transaction costs and the write-off of the unamortized balance of
deferred debt issuance costs in connection with the tender offer for CMCLA's
12 1/4% Subordinated Exchange Debentures due 2008.
Dividends on preferred stock of $0.9 million for the three months ended
September 30, 1998 related to preferred stock of CMCLA, which was exchanged for
CMCLA's 12 1/4% Subordinated Exchange Debentures due 2008 in July 1998.
As a result of the above factors, CMCLA recorded net income attributable to
common stock of $122.9 million for the three months ended September 30, 1999
compared to a $9.0 million net loss attributable to common stock for the third
quarter of 1998.
Nine Months Ended September 30, 1999 Compared To Nine Months Ended September 30,
1998
Net revenues for the nine months ended September 30, 1999 increased 36.2% to
$1.2 billion compared to $899.1 million for the nine months ended September 30,
1998. Operating expenses excluding depreciation and amortization for the nine
months ended September 30, 1999 increased 30.1% to $640.0 million compared to
$491.9 million for the nine months ended September 30, 1998. The increase in net
revenues and operating expenses was primarily attributable to the net impact of
the various acquisitions and dispositions discussed elsewhere in this Form 10-Q
and overall net operational improvements, as evidenced by the increase in
CMCLA's direct operating margin from 45.3% for the nine months ended September
30, 1998 to 47.7% for the nine months ended September 30, 1999.
Depreciation and amortization for the nine months ended September 30, 1999
increased 37.0% to $432.5 million compared to $315.8 million for the nine months
ended September 30, 1998. The increase is due to the impact of the acquisitions
completed during 1998 and through September 30, 1999.
Corporate general and administrative expenses for the nine months ended
September 30, 1999 increased 63.5% to $41.2 million compared to $25.2 million
for the nine months ended September 30, 1998. The increase is due to the growth
of CMCLA, and the related increase in properties and staff, primarily due to
recent acquisitions.
16
<PAGE> 17
The non-cash compensation expense of $3.7 million for the nine months ended
September 30, 1999 related to AMFM stock options granted to employees of CMCLA.
In the first quarter of 1999, CMCLA recorded merger and non-recurring costs
of $16.3 million related to the write-off of Petry Media Corporation transaction
costs and executive severance and other costs related to the executive
management realignment. Additional merger and non-recurring costs of $29.6
million were recorded in the third quarter of 1999 which consist of (i) the
costs to terminate employees and close certain facilities in connection with the
Capstar Merger and the implementation of CMCLA's clustering strategy and (ii)
the costs associated with CMCLA's decision to focus primarily on domestic radio
and new media operations including: costs to discontinue Katz's international
division and integrate its Seltel TV Division into its operations, personnel
costs related to the sale of CMCLA's outdoor advertising business, and legal and
advisory fees associated with the termination of contracts and exit of certain
non-core business ventures. The majority of the costs incurred through September
30, 1999 have been paid. Remaining amounts will be paid in the fourth quarter of
1999 and early in 2000. The merger and non-recurring costs of $59.5 million for
the nine months ended September 30, 1998 represent a one-time charge incurred in
connection with the resignation of Scott K. Ginsburg as President and Chief
Executive Officer in April 1998.
As a result of the above factors, CMCLA realized operating income of $61.1
million for the nine months ended September 30, 1999 compared to operating
income of $6.7 million for the nine months ended September 30, 1998.
Net interest expense for the nine months ended September 30, 1999 increased
90.2% to $258.1 million compared to $135.7 million for the same period in 1998.
The net increase in interest expense was primarily due to (i) additional bank
borrowings under CMCLA's senior credit facility required to finance the various
acquisitions discussed elsewhere in this Form 10-Q; (ii) the issuance of the 9%
Senior Subordinated Notes due 2008 by CMCLA on September 30, 1998; and (iii) the
issuance of the 8% Senior Notes due 2008 by CMCLA on November 17, 1998.
The gain on disposition of assets of $221.3 million for the nine months
ended September 30, 1999 related primarily to a gain of $210.0 million
recognized upon the sale of CMCLA's outdoor advertising business to Lamar on
September 15, 1999 and a gain of $14.5 million upon the sale of WMVP-AM in
Chicago to ABC, Inc. on April 16, 1999. CMCLA recorded a gain on disposition of
assets of $123.8 million for the nine months ended September 30, 1998 related to
the exchange of WTOP-AM and WGMS-FM in Washington, D.C. and KZLA-FM in Los
Angeles plus $63.0 million in cash for WTJM-FM in New York, KLDE-FM in Houston
and KBIG-FM in Los Angeles.
CMCLA recorded a gain on disposition of representation contracts of $18.3
million for the nine months ended September 30, 1999 and $29.8 million for the
nine months ended September 30, 1998 related to its media representation
operations. The gain represents the sales proceeds received from successor
representation firms for the buyout of existing media representation contracts,
net of any remaining deferred costs associated with obtaining the original
representation contract. While the consolidation of the radio broadcasting
industry has resulted in an increase in buyout activity, the impact on future
periods cannot be predicted.
Income tax expense for the nine months ended September 30, 1999 decreased to
$29.0 million compared with $32.5 million for the nine months ended September
30, 1998. The decreased expense for the current period was due to relatively
higher non-deductible permanent items in the prior year, which increased taxable
income.
During the nine months ended September 30, 1999, CMCLA recorded equity in
net loss of affiliates of $0.8 million, which related to CMCLA's investments
accounted for using the equity method.
During the nine months ended September 30, 1998, CMCLA recorded an
extraordinary charge of $47.1 million, net of a tax benefit of $25.4 million,
consisting of the premiums, estimated transaction costs and the write-off of the
unamortized balance of deferred debt issuance costs in connection with the
tender offers for CMCLA's 12% Subordinated Exchange Debentures due 2009 and
12 1/4% Subordinated Exchange Debentures due 2008.
Dividends on preferred stock of $17.6 million for the nine months ended
September 30, 1998 related to preferred stock of CMCLA, which was exchanged for
CMCLA's 12% Subordinated Exchange Debentures due 2009 and CMCLA's 12 1/4%
Subordinated Exchange Debentures due 2008 in May and July 1998.
17
<PAGE> 18
As a result of the above factors, CMCLA recorded net income attributable to
common stock of $12.9 million for the nine months ended September 30, 1999
compared to a net loss attributable to common stockholders of $69.0 million for
the nine months ended September 30, 1998.
LIQUIDITY AND CAPITAL RESOURCES
Overview
CMCLA historically has generated sufficient cash flow from operations to
finance its existing operational requirements and debt service requirements, and
CMCLA anticipates that this will continue to be the case. Operating activities
provided net cash of $146.5 million and $161.4 million for the nine months ended
September 30, 1998 and 1999, respectively. CMCLA has used the proceeds of bank
debt and private and public debt and equity offerings, supplemented by cash flow
from operations not required to fund operational requirements and debt service,
to fund implementation of CMCLA's acquisition strategy.
AMFM is a holding company with no significant assets other than the capital
stock of its direct and indirect subsidiaries. For the nine months ended
September 30, 1998 and 1999, CMCLA recorded dividends and distributions to AMFM
of approximately $19.3 million and $49.4 million to allow AMFM to meet its
obligations.
CMCLA's primary source of cash from which to service indebtedness is through
dividends distributed or other payments made to it by its operating
subsidiaries. The instruments governing CMCLA's indebtedness contain certain
covenants that restrict or, in some cases, prohibit the ability of subsidiaries
to pay dividends and make other distributions. These restrictions are not
anticipated to have an impact on CMCLA's ability to meet its cash obligations.
Outstanding Debt
CMCLA's Senior Credit Facility. CMCLA's senior credit facility provides for
aggregate commitments under a revolving loan facility and a term loan facility
of $1.6 billion and $900.0 million, respectively. The term loan facility is
payable in quarterly installments commencing on September 30, 2000 and ending
June 30, 2005. The revolving loan facility requires scheduled annual reductions
of the commitment amount, payable in quarterly installments commencing on
September 30, 2000 and ending on June 30, 2005. As of October 31, 1999, CMCLA
had drawn approximately $402.5 million of the revolving loan facility and $900.0
million of the term loan facility.
8% CMCLA Senior Notes. The 8% CMCLA Senior Notes due 2008 are senior
unsecured obligations of CMCLA and rank equal in right of payment to the
obligations of CMCLA under CMCLA's senior credit facility and existing and all
other indebtedness of CMCLA not expressly subordinated to the 8% CMCLA Senior
Notes due 2008. However, because the 8% CMCLA Senior Notes due 2008 are
unsecured, the 8% CMCLA Senior Notes due 2008 are effectively subordinated in
right of payment to CMCLA's secured debt, including CMCLA's senior credit
facility. The 8% CMCLA Senior Notes due 2008 are fully and unconditionally
guaranteed, on a joint and several basis, by all of CMCLA's direct and indirect
wholly owned subsidiaries other than certain inconsequential subsidiaries (the
"Subsidiary Guarantors"). As of October 31, 1999, the outstanding principal
balance was $750.0 million. Interest payment requirements on the 8% CMCLA Senior
Notes due 2008 are approximately $60.0 million per year.
CMCLA Senior Subordinated Notes. The 9 3/8% CMCLA Senior Subordinated Notes
due 2004, the 8 3/4% CMCLA Senior Subordinated Notes due 2007, the 10 1/2% CMCLA
Senior Subordinated Notes due 2007, the 8 1/8% CMCLA Senior Subordinated Notes
due 2007 and the 9% CMCLA Senior Subordinated Notes due 2008 (collectively, the
"Subordinated Notes") are unsecured obligations of CMCLA. The Subordinated Notes
are subordinated in right of payment to all existing and any future senior
indebtedness of CMCLA. The Subordinated Notes are fully and unconditionally
guaranteed, on a joint and several basis, by the Subsidiary Guarantors. As of
October 31, 1999, the total outstanding principal balance on the Subordinated
Notes was approximately $1.8 billion. Interest payment requirements on the
Subordinated Notes are approximately $154.9 million per year.
CMCLA's senior credit facility and the indentures governing the 8% CMCLA
Senior Notes due 2008 and the Subordinated Notes contain customary restrictive
covenants, which, among other things and with certain exceptions, limit the
ability of CMCLA and its subsidiaries to incur additional indebtedness and liens
in connection therewith, enter into certain transactions with affiliates, pay
dividends, consolidate, merge or effect certain asset sales, issue additional
stock,
18
<PAGE> 19
effect an asset swap and make acquisitions. CMCLA is required under its senior
credit facility to maintain specified financial ratios, including leverage, cash
flow and debt service coverage ratios. As of October 31, 1999, CMCLA remains in
compliance with these covenants.
Change in Legal Structure and Refinancing
Through a series of related transactions, including capital contributions of
stock and mergers of subsidiaries, AMFM intends to combine the outstanding
bonds, bank indebtedness and preferred stock of its direct and indirect
subsidiaries into fewer entities (the "Reorganization"). After completion of the
Reorganization, Capstar Communications will assume and/or be liable for all of
its remaining outstanding bonds, as well as the bonds and bank indebtedness of
Capstar Radio and CMCLA, which will be combined with Capstar Communications in
the fourth quarter of 1999. The Reorganization also includes the tender offer
for the 10 3/4% Capstar Communications Senior Subordinated Notes due 2006 and
the possible exchange of the 12 5/8% Capstar Communications Series E Cumulative
Exchangeable Preferred Stock for 12 5/8% Capstar Communications Senior
Subordinated Debentures due 2006 described above. The Reorganization is expected
to be completed during the fourth quarter of 1999.
Also as part of the Reorganization, AMFM intends to refinance CMCLA's senior
credit facility and Capstar Broadcasting's credit facility with a new credit
facility. Several banks entered into a commitment letter with CMCLA on November
3, 1999 and agreed to provide Capstar Communications with a senior credit
facility. AMFM expects that Capstar Communications' new senior credit facility
will be entered into in November 1999. Capstar Communications' senior credit
facility will include commitments for a revolving loan facility of $600.0
million and a term loan facility of $2.6 billion. The proceeds of such
facilities may be used to repay the existing credit facilities of CMCLA and
Capstar Broadcasting, to repay, repurchase or redeem other debt and equity
securities of AMFM and its subsidiaries and for other general corporate
purposes. Both the revolving loan facility and the term loan facility of Capstar
Communications will mature two years after the date of Capstar Communications'
senior credit facility. No scheduled amortization of principal will be required
prior to maturity. Both the revolving loan facility and the term loan facility
of Capstar Communications will bear interest at fluctuating rates based upon the
prime rate and the eurodollar rate. The margin above the applicable prime rate
or the eurodollar rate will be determined by reference to Capstar
Communications' ratio of consolidated debt to consolidated earnings before
interest, taxes, depreciation and amortization, provided that such margins will
be fixed at .50% and 1.50%, respectively, until delivery of Capstar
Communications' financial statements for the fiscal quarter ending March 31,
2000, and capped at .50% and 1.50%, respectively, thereafter so long as the
Clear Channel merger agreement has not been terminated. Capstar Communications'
senior credit facility will be guaranteed by most of the direct and indirect
subsidiaries, other than Capstar Communications, of Chancellor Mezzanine
Holdings Corporation ("Chancellor Mezzanine"), a direct subsidiary of AMFM, and
will be secured by (a) a non-recourse pledge of the stock of Chancellor
Mezzanine, (b) a recourse pledge of the stock of Capstar Partners (c) a recourse
pledge of the stock of Capstar Communications and most of the subsidiaries of
Capstar Communications, and (d) a pledge of the common stock of Lamar to be held
by Capstar Communications after the Reorganization. Capstar Communications'
senior credit facility will be subject to affirmative and negative covenants,
including (i) limitations on indebtedness, mergers, acquisitions and
dispositions of assets, dividends, stock repurchases, other restricted payments,
investments and liens, and (ii) financial maintenance covenants. The merger of
AMFM and Clear Channel will be an event of default under Capstar Communications'
senior credit facility and will require refinancing at the effective time of the
merger.
Pending Transactions
On February 20, 1998, CMCLA entered into an agreement to acquire, over a
period of three years, eleven radio stations from Capstar Broadcasting for an
aggregate purchase price of $637.5 million. Pursuant to this agreement, the
acquisition of KODA-FM was completed on May 29, 1998 for $143.3 million. On
February 1, 1999, CMCLA began operating WKNR-AM in Cleveland, a station owned by
Capstar Broadcasting, under a time brokerage agreement. The February 20, 1998
purchase agreement and the WKNR-AM time brokerage agreement will be terminated
upon the completion of the Reorganization.
On August 30, 1999, AMFM entered into an agreement with Cox Radio, Inc. to
acquire KOST-FM and KFI-AM in Los Angeles plus $3.0 million in cash payable by
Cox Radio, Inc. in exchange for 13 of its radio stations including CMCLA
stations WEDR-FM in Miami and WFOX-FM in Atlanta, and Capstar Broadcasting
stations WEFX-FM, WNLK-AM, WKHL-FM and WSTC-AM in Stamford/Norwalk, WFYV-FM,
WAPE-FM, WBWL-AM, WKQL-FM, WMXQ-FM and WOKV-AM in Jacksonville and WPLR-FM and
the local sales rights of a 14th Capstar Broadcasting station, WYBC-FM in
19
<PAGE> 20
New Haven. AMFM began programming KOST-FM and KFI-AM in Los Angeles and Cox
Radio, Inc. began programming the 13 AMFM stations under time brokerage
agreements effective October 1, 1999. Although there can be no assurance, AMFM
expects that the exchange will be consummated in the first quarter of 2000.
On September 22, 1999, CMCLA entered into an agreement to sell the capital
stock of its Puerto Rico subsidiaries to Spanish Broadcasting System of Puerto
Rico, Inc. for $90.0 million payable in cash. CMCLA owns and operates eight
radio stations in Puerto Rico. Pending completion of the sale, Spanish
Broadcasting will program these eight stations under a time brokerage agreement.
Although there can be no assurance, CMCLA expects to complete the sale of these
subsidiaries in the fourth quarter of 1999.
Consummation of each of the transactions discussed above is subject to
various conditions, including approval from the Federal Communications
Commission, in the case of radio broadcast station transactions, and the
expiration or early termination of any waiting period required under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976. AMFM and CMCLA believe
that such conditions will be satisfied in the ordinary course, but there can be
no assurance that this will be the case.
The principal liquidity requirements of CMCLA and its subsidiaries (in
addition to debt service and tax liabilities) will be for working capital,
general corporate purposes, capital expenditures and pending acquisitions, and
as opportunities arise, to acquire additional radio stations or complementary
broadcast-related businesses. CMCLA believes that disposition of certain assets
and cash from operating activities, together with available revolving credit
borrowings under its credit facilities, should be sufficient to permit CMCLA to
meet its obligations. As of October 31, 1999, CMCLA had available borrowings of
$1.2 billion under its credit facility, subject to financial covenants contained
in its credit facility and the indentures that govern the indebtedness of its
subsidiaries.
In the future, CMCLA may require additional financing, either in the form of
additional debt or equity securities. CMCLA evaluates potential acquisition
opportunities on an ongoing basis and has had, and continues to have,
preliminary discussions concerning the purchase of additional stations and other
assets. CMCLA expects that in connection with the financing of future
acquisitions, it may consider disposing of stations in its current markets.
FORWARD-LOOKING STATEMENTS
Certain statements used in the preceding and following discussion and
elsewhere in this Quarterly Report on Form 10-Q are forward-looking statements
within the meaning of Section 27A of the Securities Act of 1933, as amended, and
Section 21E of the Securities Exchange Act of 1934, as amended. These
forward-looking statements about the financial condition, prospects, operations
and business of CMCLA are generally accompanied by words such as "believes,"
"expects," "plans," "anticipates," "intends," "likely," "estimates," or similar
expressions. These forward-looking statements are subject to risks,
uncertainties and other factors, some of which are beyond the control of CMCLA,
that could cause actual results to differ materially from those forecast or
anticipated in such forward-looking statements.
These risks, uncertainties and other factors include, but are not limited
to: the potential negative consequences of the substantial indebtedness of
CMCLA; the restrictions imposed on CMCLA and its subsidiaries by the agreements
governing its debt instruments; the competitive nature of the radio broadcasting
and new media businesses; the potential adverse effects on licenses and
ownership of regulation of the radio broadcasting industry; the difficulty of
integrating substantial acquisitions and entering new lines of business;
potential adverse effects of the Year 2000 issue; and the control of CMCLA by
affiliates of Hicks, Muse, Tate & Furst Incorporated and potential conflicts of
interest relating thereto.
Because such forward-looking statements are subject to risks and
uncertainties, readers are cautioned not to place undue reliance on these
forward-looking statements, which reflect management's view only as of the date
of this Quarterly Report on Form 10-Q. CMCLA undertakes no obligation to update
such statements or publicly release the result of any revisions to these
forward-looking statements which it may make to reflect events or circumstances
after the date of this report or to reflect the occurrence of unanticipated or
unforeseen events.
RECENTLY ISSUED ACCOUNTING PRONOUNCEMENT
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133, Accounting for Derivative Instruments
and Hedging Activities. This statement establishes accounting and reporting
20
<PAGE> 21
standards for derivative instruments and hedging activities. SFAS No. 133, as
amended by SFAS No. 137, is effective for all fiscal quarters of all fiscal
years beginning after June 15, 2000. Management does not anticipate that this
statement will have a material impact on CMCLA's consolidated financial
statements.
YEAR 2000 ISSUE
Background. The Year 2000 issue is whether the Company's computer systems
will properly recognize date sensitive information when the year changes to
2000, or "00." Systems that do not properly recognize such information could
generate erroneous data or cause a system to fail.
State of Readiness. The Company has substantially completed an inventory and
assessment of its systems and operations to identify any software or hardware
systems, equipment with embedded chips or processors, and non-information
technology systems, such as telephone, voicemail and HVAC systems, which do not
properly recognize dates after December 31, 1999. Concurrent with its
company-wide assessment, the Company has developed and is in the process of
implementing its Year 2000 compliance program. The Company is utilizing both
internal and external resources to identify its mission critical systems and,
upon identification, to remediate or replace and test systems for Year 2000
compliance.
The Company has identified its corporate financial reporting, radio
broadcasting operations (including advertising scheduling and billing systems)
and media representation systems as its mission critical systems to evaluate for
Year 2000 compliance. The Company has received Year 2000 compliance certificates
from these application vendors indicating that they are Year 2000 compliant. The
Company is in the process of testing these systems to ensure their Year 2000
compliance. In addition, prior to the Capstar Merger, Capstar Broadcasting had
identified StarSystem(TM), its digital automation systems, as one of its
critical systems. The management of Capstar Broadcasting had determined that the
software underlying StarSystem(TM) is Year 2000 compliant, but is dependent on
the systems of the its telecommunications service providers, over which it has
no control. The Company has been assured by its vendors that its other digital
automation systems are Year 2000 compliant. The Company has tested substantially
all of these systems to ensure their Year 2000 compliance.
The list of the Company's mission critical systems may be expanded upon
completion of the Company's inventory and assessment. As part of its acquisition
and consolidation strategy, the Company also assesses and, as necessary,
remediates or replaces the systems of acquired companies and stations with Year
2000 compliant systems.
Third Party Relationships. In addition to identifying, assessing and
remediating or replacing its mission critical systems, the Company continues to
assess its exposure from external sources to Year 2000. The Company relies on
third party providers for key services such as telecommunications and utilities.
Interruption of these services could, in management's view, have a material
adverse impact on the operations of the Company. The ability of third parties
with which the Company does business to adequately address their Year 2000
issues is outside of the Company's control. Therefore, there can be no assurance
that the failure of such third parties to adequately address their Year 2000
issues will not have a material adverse effect on the Company's business,
financial condition, cash flows and results of operations. The Company has sent
questionnaires to many of its third party providers, and continues to do so,
asking them to update the Company on the status of their Year 2000 compliance.
Until all questionnaires are returned and reviewed, the Company will be unable
to fully assess the potential for disruption in its programming and operations
arising from this third party risk. If the Company does not receive reasonable
assurance regarding Year 2000 compliance from any provider of these services,
the Company will then develop contingency plans, to the extent possible, to
address its exposure.
Costs. Costs specifically associated with the Company's Year 2000 efforts
are currently expected to be approximately $3.0 million, of which approximately
$1.9 million has been incurred to date. Additionally, through September 15,
1999, the Company incurred costs of $0.6 million related to its outdoor
advertising business, which was sold on September 15, 1999. These cost estimates
are subject to change once the Company has fully assessed its systems, including
those acquired in the Capstar Merger, and as responses are obtained from third
party vendors and service providers. Any change in cost may be material. Funding
of these costs is anticipated to come from cash flows generated by business
operations and/or borrowings under the Company's credit facilities.
Risks. The Company is in the process of identifying the most reasonably
likely worst case scenarios that may affect its operations due to Year 2000
noncompliance of the Company's systems or the systems of third parties.
Initially, the Company believes that the failure of its radio broadcast systems
and the temporary loss of power at some of its stations due
21
<PAGE> 22
to Year 2000 noncompliance are the most reasonably likely worst case scenarios.
Most of the Company's stations and transmitter sites currently have on-site
generators in the event of power outages. As part of the Company's capital
improvement program, management has begun installation of generators at many of
its remaining stations and transmitter sites. The Company believes that the
upgrade of the hardware on its existing radio broadcast systems and the
installation of generators at most of its stations will resolve possible
material disruptions in the business operations of the Company that would result
from such risks. The Company may identify additional worst case scenarios once
it has fully assessed its mission critical systems and obtained responses from
the remaining third party vendors and service providers.
Based on the nature of the Company's business and dispersed geographical
locations, the Company believes that it may experience some disruption in its
business due to the impact of the Year 2000 issue. Management presently
believes, however, that the Company is taking appropriate steps to assess and
control its Year 2000 issues. The Company cannot guarantee that there will be no
Year 2000 issues in spite of these efforts. If the Company does not complete all
phases of its Year 2000 compliance program and remediations or replacements are
not made, are not completed on time, or are insufficient to prevent systems
failures or other disruptions, the Year 2000 issue could have a material adverse
impact on the Company's results of operations and financial condition.
Contingency Plans. The Company has developed contingency plans to mitigate
the possible disruption in business operations that may result from the
Company's systems or the systems of third parties that are not Year 2000
compliant. The Company is continually assessing the status of completion of its
Year 2000 compliance program and, as necessary, will update the level of
contingency plans necessary.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Management monitors and evaluates changes in market conditions on a regular
basis. Based upon the most recent review, management has determined that there
have been no material changes in market risks since year end. For further
information regarding market risk as of year end, refer to CMCLA's Annual Report
on Form 10-K for the year ended December 31, 1998.
22
<PAGE> 23
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
In September 1998, a stockholder class action complaint was filed in the
Delaware Court of Chancery by a stockholder purporting to act individually and
on behalf of all other persons, other than defendants, who own securities of
AMFM and are similarly situated. The defendants named in the case are AMFM,
Hicks, Muse, Tate & Furst Incorporated, Thomas O. Hicks, Jeffrey A. Marcus,
James E. de Castro, Eric C. Neuman, Lawrence D. Stuart, Jr., Steven Dinetz,
Thomas J. Hodson, Perry Lewis, John H. Massey and Vernon E. Jordan, Jr. The
plaintiff alleges breach of fiduciary duties, gross mismanagement, gross
negligence or recklessness, and other matters relating to the defendants'
actions in connection with the Capstar Merger. The plaintiff sought to certify
the complaint as a class action, enjoin consummation of the Capstar Merger,
order defendants to account to plaintiff and other alleged class members for
damages, and award attorneys' fees and other costs. AMFM believes that the
lawsuit is without merit and intends to vigorously defend the action.
CMCLA is also involved in various other claims and lawsuits which are
generally incidental to its business. CMCLA is vigorously contesting all of
these matters and believes that the ultimate resolution of these matters and
those mentioned above will not have a material adverse effect on its
consolidated financial position or results of operation.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
EXHIBIT
NO. DESCRIPTION OF EXHIBIT
------- ----------------------
2.61(a) -- Second Amended and Restated Stock Purchase Agreement
dated as of August 11, 1999 by and among Lamar
Advertising Company, Lamar Media Corp., Chancellor
Mezzanine Holdings Corporation and Chancellor Media
Corporation of Los Angeles.
2.62(a) -- Registration Rights Agreement dated as of August 11,
1999 among Lamar Advertising Company, Chancellor Media
Corporation of Los Angeles and Chancellor Mezzanine
Holdings Corporation.
2.63(a) -- Stockholders Agreement dated as of August 11, 1999
among Lamar Advertising Company and certain of its
stockholders.
2.64(a) -- Second Amended and Restated Voting Agreement, dated
as of August 11, 1999, among Lamar Advertising Company,
Chancellor Media Corporation of Los Angeles, Chancellor
Mezzanine Holdings Corporation and Reilly Family Limited
Partnership.
2.65(b) -- Agreement and Plan of Merger, dated October 2, 1999,
by and between Clear Channel Communications, Inc., CCU
Merger Sub, Inc. and AMFM Inc.
3.1(a) -- Amended and Restated Certificate of Incorporation of
AMFM Inc. (formerly known as Chancellor Media
Corporation)
3.2(a) -- Certificate of Correction of Amended and Restated
Certificate of Incorporation of AMFM Inc. 10.73(a) --
Termination and Release Agreement, dated July 13, 1999,
by and among Capstar Broadcasting, Capstar Partners,
Hicks, Muse & Co. Partners, L.P. and Chancellor Media
Corporation.
27.1* -- Financial Data Schedule of Chancellor Media
Corporation of Los Angeles
- ----------
* Filed herewith.
(a) Incorporated by reference to the identically numbered exhibit to the
Quarterly Report on Form 10-Q of AMFM Inc. for the quarterly period
ending June 30, 1999, File No. 001-15145.
(b) Incorporated by reference to Exhibit 2.1 to the Current Report on
Form 8-K of AMFM Inc., dated October 2, 1999 and filed on October 5,
1999, File No. 001-15145.
23
<PAGE> 24
(b) Reports on Form 8-K
1. Current Report on Form 8-K (Items 2, 5 and 7), dated July 1, 1999
and filed July 15, 1999 announcing (i) stockholder approval of the merger
between Chancellor Media Corporation (now AMFM Inc.) and Capstar Broadcasting
Corporation, (ii) the acquisition of KKFR-FM and KFYI-AM in Phoenix from The
Broadcast Group, Inc. and (iii) the appointment of R. Gerald Turner to AMFM's
Board of Directors.
2. Current Report on Form 8-K (Items 2 and 7), dated September 15, 1999
and filed September 29, 1999, to announce the consummation of the sale of
CMCLA's outdoor advertising business to Lamar Advertising Company.
24
<PAGE> 25
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
Chancellor Media Corporation of Los Angeles has duly caused this report to be
signed on its behalf by the undersigned hereunto duly authorized.
CHANCELLOR MEDIA CORPORATION
OF LOS ANGELES
By: /s/ W. SCHUYLER HANSEN
--------------------------
W. Schuyler Hansen
Senior Vice President and
Chief Accounting Officer
Date: November 12, 1999
25
<PAGE> 26
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION OF EXHIBIT
------- ----------------------
<S> <C>
2.61(a) -- Second Amended and Restated Stock Purchase Agreement
dated as of August 11, 1999 by and among Lamar
Advertising Company, Lamar Media Corp., Chancellor
Mezzanine Holdings Corporation and Chancellor Media
Corporation of Los Angeles.
2.62(a) -- Registration Rights Agreement dated as of August 11,
1999 among Lamar Advertising Company, Chancellor Media
Corporation of Los Angeles and Chancellor Mezzanine
Holdings Corporation.
2.63(a) -- Stockholders Agreement dated as of August 11, 1999
among Lamar Advertising Company and certain of its
stockholders.
2.64(a) -- Second Amended and Restated Voting Agreement, dated
as of August 11, 1999, among Lamar Advertising Company,
Chancellor Media Corporation of Los Angeles, Chancellor
Mezzanine Holdings Corporation and Reilly Family Limited
Partnership.
2.65(b) -- Agreement and Plan of Merger, dated October 2, 1999,
by and between Clear Channel Communications, Inc., CCU
Merger Sub, Inc. and AMFM Inc.
3.1(a) -- Amended and Restated Certificate of Incorporation of
AMFM Inc. (formerly known as Chancellor Media
Corporation)
3.2(a) -- Certificate of Correction of Amended and Restated
Certificate of Incorporation of AMFM Inc. 10.73(a) --
Termination and Release Agreement, dated July 13, 1999,
by and among Capstar Broadcasting, Capstar Partners,
Hicks, Muse & Co. Partners, L.P. and Chancellor Media
Corporation.
27.1* -- Financial Data Schedule of Chancellor Media
Corporation of Los Angeles
</TABLE>
- ----------
* Filed herewith.
(a) Incorporated by reference to the identically numbered exhibit to the
Quarterly Report on Form 10-Q of AMFM Inc. for the quarterly period
ending June 30, 1999, File No. 001-15145.
(b) Incorporated by reference to Exhibit 2.1 to the Current Report on
Form 8-K of AMFM Inc., dated October 2, 1999 and filed on October 5,
1999, File No. 001-15145.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONATINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM 9/30/99
CONSOLIDATED FINANCIAL STATEMENTS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE
TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> SEP-30-1999
<CASH> 24,781
<SECURITIES> 0
<RECEIVABLES> 538,311
<ALLOWANCES> 14,066
<INVENTORY> 0
<CURRENT-ASSETS> 634,162
<PP&E> 264,892
<DEPRECIATION> 68,645
<TOTAL-ASSETS> 6,875,208
<CURRENT-LIABILITIES> 276,786
<BONDS> 3,782,500
0
0
<COMMON> 1
<OTHER-SE> 2,358,982
<TOTAL-LIABILITY-AND-EQUITY> 6,875,208
<SALES> 1,224,485
<TOTAL-REVENUES> 1,224,485
<CGS> 0
<TOTAL-COSTS> 640,039
<OTHER-EXPENSES> 523,299
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 258,054
<INCOME-PRETAX> 42,683
<INCOME-TAX> 29,028
<INCOME-CONTINUING> 12,883
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 12,883
<EPS-BASIC> 0
<EPS-DILUTED> 0
</TABLE>
