UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1996
Commission file number 1-9645
CLEAR CHANNEL COMMUNICATIONS, INC.
(Exact name of registrant as specified in its charter)
Texas 74-1787539
(State of Incorporation) (I.R.S. Employer Identification No.)
200 Concord Plaza, Suite 600
San Antonio, Texas 78216
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, Including Area Code:(210) 822-2828
___________________________________________
Securities Registered Pursuant to Section 12(b) of the Act:
Title of each class Name of Exchange on which registered
Common Stock $.10 par value New York Stock Exchange
Securities Registered Pursuant to Section 12(g) of the Act:
None
___________________________________________
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 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 by check mark if disclosure of delinquent filers
pursuant to Item 405 of Regulation S-K (229.405 of this chapter)
is not contained herein, and will not be contained, to the best
of Registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-
K/A or any amendment to this Form 10-K/A. ____
___________________________________
As of March 1, 1997, 77,256,347 shares of Clear Channel
Communications, Inc. Common Stock were outstanding, excluding
26,878 held in treasury, and the aggregate market value (based
upon the last reported sale price of $47.875 on the New York
Stock Exchange on February 28, 1997) of the shares of Common
Stock held by non-affiliates was approximately $2,415,819,000.
(For purposes of calculating the preceding amount only, all
directors and officers of the registrant are assumed to be
affiliates.)
___________________________________________
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the following documents are incorporated by reference
in the Parts of this report indicated below:
Item 1 of Part I, Items 5, 6, 7 and 8 of Part II and Item 14 of
Part IV:
Clear Channel Communications, Inc.'s 1996 Annual Report to
Shareholders ("Annual Report")
Portions of Items 10, 11, 12 and 13 of Part III
Definitive Proxy Statement of Clear Channel Communications, Inc.
relating to its 1997 Annual Meeting of Shareholders to be held on
April 29, 1997.
PART I
Item 1. Business
Clear Channel Communications, Inc. (including its consolidated
subsidiaries, the "Company" or "Registrant") was incorporated
under the laws of the State of Texas in 1974 as the successor to
a radio broadcasting company which began operations in 1972. The
Company is a diversified broadcasting company which at December
31, 1996 owned 86 radio and eleven television stations for which
it is the owner of the Federal Communications Commission (FCC)
license. In addition, the Company has entered into time sales,
time brokerage, or local marketing agreements with fifteen radio
and seven television stations. All of these properties are
located in 32 different markets.
At December 31, 1996 the Company owned the FCC licenses to 30 AM
and 56 FM radio stations located principally in the South,
Southwest, Midwest and Northeast regions of the United States.
These radio stations employ a wide variety of programming
formats, such as News/Talk/Sports, Country, Adult Contemporary,
Urban Contemporary and Album Rock.
The Company's eleven licensed television stations are located in
the South, Southwest, New York, Pennsylvania and Minnesota. Six
of these television stations are affiliated with the FOX
television network; one is affiliated with the ABC television
network; one is affiliated with the NBC television network; two
are affiliated with the CBS television network and one is
affiliated with the UPN television network. Additionally, the
Company operates five radio networks; one of which provides news
coverage in Oklahoma; one of which provides sports coverage in
Oklahoma, Texas and Iowa; one of which provides news, sports and
information to radio stations throughout Kentucky; one of which
provides news, sports and information to radio stations
throughout Virginia and one of which provides news and
agricultural information to radio stations in Texas and New
Mexico. In 1996, the Company derived approximately 62% of its
net broadcasting revenue from radio operations and approximately
38% from television operations.
The Company's strategy is to identify and acquire under-
performing stations on favorable terms and to utilize
management's extensive operating experience to improve the
performance of such stations and its existing stations through
effective programming, reduction of costs and aggressive
promotion, marketing and sales. From 1989 to 1991, growth was
generated primarily from the acquisition of television stations,
as well as operating improvements at existing broadcasting
properties. From 1992 through 1996, growth was generated
primarily from the acquisition of more than sixty radio stations,
television stations WFTC-TV in Minneapolis, Minnesota, WHP-TV in
Harrisburg, Pennsylvania and WPRI-TV in Providence, Rhode Island
and operating improvements at existing broadcasting properties.
The Company continues to seek opportunities for expansion through
the acquisition of attractive broadcasting and other media-
related properties.
The Company believes that one of its most important assets is its
experienced management team. General managers are responsible
for the day-to-day operations of their respective stations. The
Company believes that the autonomy of its station management
enables it to attract top quality managers capable of
implementing the Company's aggressive marketing strategy and
reacting to competition in the local markets. Most general
managers have been granted options to purchase shares of the
Company's Common Stock. As an additional incentive, a portion of
each manager's compensation is based on the performance of the
station or stations for which he or she is responsible.
The major costs associated with radio and television broadcasting
are related to personnel and programming. In an effort to
monitor these costs, corporate management routinely reviews
staffing levels and programming costs. Combined with the
centralized accounting functions, this monitoring enables the
Company to effectively control expenses. Corporate management
also advises local station managers on programming and other
broad policy matters and is responsible for long-range planning,
allocating resources and financial reporting and controls.
The Company made its first international investment in 1995, when
it purchased a 50% equity interest in the Australian Radio
Network Pty Ltd ("ARN"), which owns and operates a radio
representation company and eight radio stations, including
stations in Australia's three largest markets: Sydney, Melbourne
and Brisbane. The Company increased its investment in ARN in
1996 in conjunction with ARN's purchase of four more radio
stations in Australia, two of which were acquired subsequent to
December 31, 1996. The Company also invested in a one-third
interest in the New Zealand Radio Network ("NZRN"). NZRN
acquired more than 50 radio stations formerly owned and operated
by Radio New Zealand Commercial, which was owned by the New
Zealand government. The Company believes that the risks
associated with its foreign currency exposure inherent in its
investments in ARN and NZRN is low due to the relative political
and economic stability in Australia and New Zealand, which
historically have helped these two countries to maintain stable
currencies relative to the U.S. dollar.
RECENT DEVELOPMENTS
Heftel Broadcasting Corporation. On February 14, 1997, the
Company's nonconsolidated affiliate, Heftel Broadcasting
Corporation ("Heftel") then the largest Spanish language radio
broadcasting company, completed a merger with Tichenor Media
System, Inc. ("Tichenor" and the "Tichenor Merger"), then the
third largest Spanish language radio broadcasting company.
Following the Tichenor Merger, Heftel owns or programs 38 radio
stations in 11 markets, including stations in each of the top ten
Hispanic markets. The Company's total ownership interest in
Heftel was reduced to approximately 32.2% of the total
outstanding common stock of Heftel (voting and non-voting)
following the issuance of approximately 4.8 million shares of
voting common stock by Heftel in a public offering for a net
price to the Company of approximately $36.8 per share, the sale
by the Company of 350,000 shares of Heftel's voting common stock
in such public offering and the issuance of approximately 5.6
million shares of Heftel's voting common stock to former Tichenor
shareholders and warrant holders in the Tichenor Merger. In the
Tichenor Merger, all of the voting common stock of Heftel owned
by the Company and shares of Tichenor's common stock owned by the
Company were converted into shares of convertible nonvoting
common stock of Heftel on a one-for-one basis in order to comply
with the cross-interest policy of the Federal Communications
Commission. See-- "Regulation of the Company's Business."
Eller Media Corporation. In February 1997, the Company entered
into a definitive agreement to purchase all of the stock of Eller
Media Corporation ("Eller Media") for a total consideration of
approximately $725 million, consisting of approximately $325
million in cash and approximately $400 million worth of the
Company's Common Stock, subject to certain adjustments, in a
private transaction. In addition, as of December 31, 1996, Eller
Media had approximately $399 million outstanding in long-term
debt. The Company currently intends to retire substantially all
the outstanding debt of Eller Media through borrowings under its
credit facility. Following the closing of this acquisition, the
Company's Board of Directors will appoint Karl Eller, the Chief
Executive Officer of Eller Media, to serve as a director of the
Company. The current management of team of will continue to
manage Eller Media after the acquisition. Upon the Closing of
the Eller Media acquisition, it is contemplated that the former
shareholders of Eller Media will be granted certain demand and
piggyback registration rights. On March 14, 1997, the Company
was granted early termination of the applicable waiting period
under the Hart-Scott-Rodino Antitrust Improvements Act of 1974.
The consummation of the Eller Media Acquisition is subject to
numerous closing conditions, and there can be no assurances that
such acquisition will be timely consummated or on the terms
described herein, if at all. Eller Media is an outdoor
advertising company which has a total advertising display
inventory of approximately 50,000 display faces. It provides
outdoor adverting services in 15 major metropolitan markets
located in six operating regions: Southern California, Texas, the
Midwest, Northern California, the Southeast and the Southwest.
The Company's outdoor advertising strategy is to expand its
market presence in the outdoor advertising business and improve
its operating results by (i) managing the advertising rates and
occupancy levels of its displays to maximize market revenues;
(ii) attracting new categories of advertisers to the outdoor
medium through significant investments in sales and marketing
resources; (iii) constructing new displays and upgrading its
existing displays; (iv) taking advantage of technological
advances which increase both sales force productivity and
production department efficiency; and (v) acquiring additional
displays in its existing markets and expanding into additional
markets. The Company believes this strategy will enhance its
ability to effectively respond to advertisers' needs.
Outdoor advertising displays are subject to governmental
regulation at the federal, state and local levels. These
regulations, in some cases, limit the height, size, location and
operation of billboards and, in limited circumstances, regulate
the content of the advertising copy displayed on the billboards.
Some governmental regulations prohibit the construction of new
billboards or the replacement, relocation, enlargement or
upgrading of existing structures. Some cities have adopted
amortization ordinances under which, after the expiration of a
specified period of time, billboards must be removed at the
owner's expense and without payment of compensation. Ordinances
requiring the removal of billboards without compensation, whether
through amortization or otherwise, are being challenged in
various state and federal courts with conflicting results.
Upon consummation of the Eller Media Acquisition, a significant
portion of the Company's net revenue from outdoor advertising
will be derived from tobacco advertising. In August 1996, the
U.S. Food and Drug Administration issued final regulations
governing certain marketing practices in the tobacco industry,
including a prohibition of tobacco product billboard
advertisements within 1,000 feet of schools and playgrounds and a
requirement that all tobacco product advertisements on billboards
be in black and white and contain only text. These regulations
will become effective in August 1997.
Other Radio Acquisitions. The Company closed the acquisition of
the broadcasting assets, including the FCC licenses, for the
following radio stations on the dates and for the approximate
amounts shown below:
WZZU-FM, Fuquay-Varina (Raleigh), NC
January 31, 1997 $7,500,000
WQMF-FM, Jeffersonville, IN (Louisville, KY)
January 31, 1997 $13,500,000
WVTI-FM, Holland (Grand Rapids), MI
February 28, 1997 $4,100,000
KHOM-FM, Houma (New Orleans), LA
February 5, 1997 $6,500,000
KJOJ-AM, Conroe (Houston), TX
February 5, 1997 $980,000
The Company also entered into definitive agreements to purchase
the broadcasting assets of additional radio stations. Each of
these acquisitions adds to existing radio operations in each of
their respective markets and is expected to close in 1997. The
estimated purchase prices for these station groups are as
follows:
WKII-AM, WFSN-FM and WOLZ-FM in Ft. Myers/Naples, FL
$11,000,000
WDUR-AM, WFXC-FM and WFXK-FM in Raleigh, NC
$20,000,000
WOKY-AM in Milwaukee, WI and WMIL-FM in Waukesha, WI
$41,400,000
In March 1997 the Company's eighty-percent-owned subsidiary,
Radio Enterprises, Inc., closed on the purchase of the
broadcasting assets of radio stations WQBK-FM, WQBJ-FM, WXCR-FM
and WQBK-AM in Albany, New York for an estimated $7,500,000,
using the Company's credit facility as funding for the
acquisition.
EMPLOYEES
At January 1, 1997, the Company had approximately 3,219
employees: 2,377 in radio operations, 805 in television
operations and 37 in corporate activities.
INDUSTRY SEGMENTS
Information relating to the industry segments of the Company's
operations, currently radio broadcasting and television
broadcasting, for 1996, 1995 and 1994 is included in "Note L:
Segment Data" in the Notes to Consolidated Financial Statements
in the Company's Annual Report to Shareholders and hereby is
incorporated by reference as well as the information set forth
under "Radio Broadcasting" and "Television Broadcasting" below.
RADIO BROADCASTING
The following tables set forth certain selected information with
regard to each of the Company's 30 AM and 56 FM radio stations
for which it owned the FCC license at December 31, 1996.
<PAGE>
Number
Market of Stations Population
Market/ Rank/ in Market/ 12+/
Expiration
Date of Date of FCC Power
Station Acquisition Network(1) License Frequency(Kilowatts)
San Antonio, TX 34 30 1,183,200
WOAI-AM Jun. 1975 ABC,CBS,TSN 8/1/97 1200 KHZ 50KW
KAJA-FM Mar. 1972 8/1/97 97.3 MHZ 100KW
KQXT-FM Jan. 1993 8/1/97 101.9 MHZ 100KW
KTKR-AM Jul. 1993ABC,NBC,W1/M 8/1/97 760 KHZ 5KW
Tulsa, OK 60 24 641,600
KAKC-AM Oct.1973 SMN,ONN 6/1/97(3) 1300KHZ 5KW(2)
KMOD-FM Oct. 1973 ONN 6/1/97(3) 97.5 MHZ 100KW
Austin, TX 54 26 821,600
KPEZ-FM Jul. 1982 8/1/97 102.3 MHZ 20KW
KEYI-FM Aug. 1996 8/1/97 103.5 MHZ 100KW
KHFI-FM March 1996 8/1/97 96.7 MHZ 100KW
KFON-AM Aug. 1996 1on1 Sports 8/1/97 1490 KHZ 1KW
Oklahoma City, OK 51 22 836,200
KTOK-AM Oct. 1984 ABC,ONN 6/1/97(3) 1000 KHZ 5KW
KJYO-FM Oct. 1984 ABC 6/1/97(3) 102.7 MHZ 100KW
KNRX-FM Jan. 1994 6/1/97(3) 947 MHZ 100KW
KXXY-FM Aug. 1996 6/1/97(3) 96.1 MHZ 100KW
KEBC-AM Aug. 1996 6/1/97(3) 1340 KHZ 1KW
KTST-FM Aug. 1996 6/1/97(3) 101.9 MHZ 100KW
New Orleans, LA 38 24 1,025,100
WODT-AM Oct. 1984 ABC,SEN 6/1/2004 1280 KHZ 5KW
WQUE-FM Oct. 1984 6/1/2004(3) 93.3 MHZ 100KW
WYLD-AM Jan. 1995 ABC 6/1/2004 940 KHZ 10KW(4)
WYLD-FM Jan. 1995 ABC 6/1/2004 98.5 MHZ 100KW
WNOE-FM Aug. 1996 NBC 6/1/2004 101.1 MHZ 100KW
KKND-FM Aug. 1996 6/1/2004 106.7 MHZ 100KW
New Haven, CT 94 31 389,300
WELI-AM Oct. 1984 ABC 4/1/98 960 KHZ 5KW
WKCI-FM May 1992 4/1/98 101.3 MHZ 50KW
WAVZ-AM Dec. 1992 ABC,USRN 4/1/98 1300 KHZ 1KW
Louisville, KY 49 25 845,900
WHAS-AM Sep. 1986 ABC 8/1/2004 840 KHZ 50KW
WAMZ-FM Sep. 1986 ABC 8/1/2004 97.5 MHZ 100KW
WKJK-AM Oct. 1996 8/1/2004 1080 KHZ 10KW(6)
WWKY-AM Oct. 1996 CBS 8/1/2004 790 KHZ 5KW(1)
WTFX-FM Oct. 1996 8/1/2004 100.5 MHZ 50KW
Richmond, VA 56 22 775,000
WRVA-AM Jul. 1992 CBS 10/1/2003 1140 KHZ 50KW
WRVQ-FM Jul. 1992 10/1/2003 94.5 MHZ 100KW
WRNL-AM Sep. 1993 W1/M 10/1/2003 910 KHZ 5KW
WRXL-FM Sep. 1993 10/1/2003 102.1 MHZ 100KW
WTVR-AM June 1996 10/1/2003 1380 KHZ 5KW
WTVR-FM June 1996 10/1/2003 98.1 MHZ 50KW
Tampa, FL 21 30 1,885,200
WRBQ-AM Jul. 1992 ABC,SMN 2/1/2004 1380 KHZ 5KW
WRBQ-FM Jul. 1992 ABC 2/1/2004 104.7 MHZ 100KW
WMTX-AM Oct. 1994 2/1/2004 1040 KHZ 3KW(5)
WMTX-FM Oct. 1994 2/1/2004 95.7 MHZ 100KW
Miami, FL 11 36 2,936,100
WHYI-FM Oct. 1994 2/1/2004 100.7 MHZ 100KW
WBGG-FM Mar. 1994 2/1/2004 105.9 MHZ 100KW
Houston, TX 9 30 3,348,800
KBXX-FM Aug. 1994 W1/U 8/1/97 97.9 MHZ 100KW
KMJQ-FM Jan. 1995 8/1/97 102.1 MHZ 100KW
KPRC-AM(6) Jan. 1995 CNN, ABC 8/1/97 950 KHZ 5KW
KSEV-AM(6) Jan. 1995 W1/U, ABC 8/1/97 700 KHZ 15KW(7)
Freeport (Houston), TX
KJOJ-FM May 1996 8/1/97 103.3 MHZ 100KW
Cleveland, OH 22 30 1,759,300
WERE-AM Oct. 1994 CNN,W1/M10/01/2004 1300 KHZ 5KW
WNCX-FM Oct. 1994 ABC 10/01/2004 98.5 MHZ 100KW
WENZ-FM May 1996 ABC 10/01/2004 1079 MHZ 16KW
Grand Rapids, MI 66 33 588,600
WOOD-AM Feb. 1996 10/1/2004 1300 KHZ 5KW
WOOD-FM Feb. 1996 10/1/2004 105.7 MHZ 265KW
WBCT-FM Feb. 1996 10/1/2004 93.7 MHZ 320KW
WCUZ-AM Oct. 1996 ABC 10/1/2004 1230 KHZ 1KW
WCUZ-FM Oct. 1996 ABC 10/1/2004 101.3 MHZ 50KW
El Paso, TX 70 31 540,600
KHEY-AM May 1996 ABC 8/1/97 690 KHZ 10KW
KHEY-FM May 1996 ABC 8/1/97 96.3 MHZ 100KW
KPRR-FM May 1996 ABC 8/1/97 102.1 MHZ 100KW
Little Rock, AR 82 25 446,800
KMJX-FM May 1996 ABC-R 6/1/2004 105.1 MHZ 81KW
KDDK-FM May 1996 ABC-F 6/1/2004 100.3 MHZ 44KW
Memphis, TN 43 27 931,800
WHRK-FM May 1996 ABC 8/1/2004 97.1 MHZ 100KW
WDIA-AM May 1996 ABC 8/1/2004 1070 KHZ 50KW
WRXQ-FM Dec. 1996 W1 8/1/2004 95.7 MHZ 6KW
WEGR-FM Dec. 1996 W1 8/1/2004 102.7 MHZ 100KW
WREC-AM Dec. 1996 W1,PFN,TRN 8/1/2004 600 KHZ 5KW
KJMS-FM Dec. 1996 AURN 8/1/2004 101.1 MHZ 100KW
KWAM-AM Dec. 1996 SGN 8/1/2004 990 KHZ 10KW
Milwaukee, WI 28 34 1,339,700
WKKV-FM May 1996 ABC/AURN 8/1/2004 100.7 MHZ 50KW
Norfolk, VA 33 24 1,210,900
WJCD-FM May 1996 ABC 10/1/2003 105.3 MHZ 50KW
WOWI-FM May 1996 10/1/2003 102.9 MHZ 50KW
WSVY-FM May 1996 ABC 10/1/2003 107.7 MHZ 5KW
WMYK-FM May 1996 12/1/2003 92.1 MHZ 15KW
Raleigh, NC 50 29 843,600
WQOK-FM May 1996 12/1/2003 97.5 MHZ 100KW
Reading, PA 129 27 294,600
WRAW-AM May 1996 8/1/2000 1340 KHZ 1KW
WRFY-FM May 1996 8/1/2000 102.5 MHZ 45KW
Columbia, SC 88 18 412,300
WARQ-FM Aug. 1996 12/1/2003 93.5 MHZ 2KW
WWDM-FM Aug. 1996 ABC,W1 12/1/2003 101.3 MHZ 100KW
Ft. Myers, FL 77 23 487,900
WXRM-FM Aug. 1996 ABC 2/1/2004 105.5 MHZ 70KW
WCKT-FM Aug. 1996 2/1/2004 107.1 MHZ 25.5KW
Greensboro, NC 42 31 956,300
WSJS-AM Aug. 1996 ABC 12/1/2003 600 KHZ 5KW
WTQR-FM Aug. 1996 12/1/2003 104.1 MHZ 100KW
WXRA-FM Aug. 1996 12/1/2003 94.5 MHZ 100KW
Springfield, MA 76 28 495,600
WHYN-AM Aug. 1996 ABC 12/1/97 560 KHZ 5KW
WHYN-FM Aug. 1996 12/1/97 93.1 MHZ 9KW
Providence, RI 31 40 263,700
WWRX-FM Dec. 1996 W1 4/1/98 103.7 MHZ 37KW
WWBB-FM Dec. 1996 4/1/98 101.5 MHZ 14KW
(1) TSN-Texas State Network, ONN-Oklahoma News Network, USRN-
U.S. Radio Network, SMN-Satellite Music Network, SBN-Sheridan
Broadcast Network W1/U-Westwood One/Unistar, W1/M-Westwood
One/Mutual, SEN-Sports Entertainment Network.
(2) 5,000 watts during the day and 1,000 watts at night.
(3) The company and its licensee subsidiaries have applications
for renewal
of licenses pending for the following stations:
WQUE-FM, New Orleans, Louisiana (FCC file No. BRH-960201CN)
KNRX-FM, Oklahoma City, Oklahoma (FCC file No. BRH-970203ZL)
KTOK-AM, Oklahoma City, Oklahoma (FCC file No. BRH-970203ZL)
KJYO-FM, Oklahoma City, Oklahoma (FCC file No. BRH-9702023ZJ)
KEBC-AM, Oklahoma City, Oklahoma (FCC file No. BRH-970203ZN)
KXXY-FM, Oklahoma City, Oklahoma (FCC file No. BRH-970203ZM)
KTST-FM, Oklahoma City, Oklahoma (FCC file No. BRH-970203ZO)
KAKC-AM, Tulsa, Oklahoma (FCC file No. BRH-970203ZQ)
KMOD-FM, Tulsa, Oklahoma (FCC file No. BRH-970203ZP)
(4) 10,000 watts during the day and 500 watts at night.
(5) 3,600 watts during the day and 420 watts at night.
(6) The Company acquired an 80% percent interest in this
station.
(7) 15,000 watts during the day and 1,000 watts at night.
<PAGE>
1996 Primary
Station Demographic
Market Rank Audience
and Station Format In Market(1) Range(2)
Louisville, KY
WHAS-AM News, Adult Contemp. 1 25-54
WAMZ-FM Country 2 25-54
WKJK-AM Country NR 25-54
WTFX-FM Modern Rock 5 18-49
WWKY-AM News, Talk, Sports 15 25-54
San Antonio, TX
WOAI-AM News, Talk, Sports 12 25-54
KAJA-FM Country 7 25-54
KQXT-FM Adult Contemporary 5 25-54
KTKR-AM Sports NR 25-54
New Orleans, LA
WODT-AM News, Talk, Sports NR 25-54
WQUE-FM Urban Contemporary 1 18-49
WYLD-AM Gospel 15 25-54
WYLD-FM Urban 4 25-54
WNOE-FM Country 2 25-54
KKND-FM Alternative Rock 13 18-49
Oklahoma City, OK
KTOK-AM News, Talk, Sports 6 35+
KJYO-FM Contemporary Hits 2 18-34
KNRX-FM Alternative Rock 8 18-34
KTST-FM Country 11 18-49
KXXY-FM Country 3 25-54
KEBC-AM Sports, Talk, News,
Spanish NR 25-54
Tulsa, OK
KAKC-AM News, Talk, Sports NR 25-54
KMOD-FM Album Oriented Rock 6 25-54
Houston, TX
KMJQ-FM Urban Contemporary 5 18-49
KBXX-FM Urban Contemporary 2 18-49
KJOJ-FM Rhythmic CHR NR 18-49
KPRC-AM News Talk 15 25-54
KSEV-AM News Talk NR 25-54
Austin, TX
KPEZ-FM Classic Rock 9 18-34
KHFI-FM Contemporary Hits 2 18-49
KEYI-FM Oldies 6 25-54
KFON-AM Sports NR 25-54
New Haven, CT
WELI-AM News, Adult Contemp. 3 35+
WKCI-FM Contemporary Hits 2 18-49
WAVZ-AM News Talk Sports 11 35+
Miami/Ft. Lauderdale, FL
WHYI-FM Contemporary Hits 9 18-34
WBGG-FM Rock Oldies 19 18-49
Cleveland, OH
WNCX-FM Classic Rock 5 25-54
WERE-AM News, Talk NR 25-54
WENZ-FM Alternative Rock 15 18-49
Richmond, VA
WRVA-AM News, Talk, Sports 4 35+
WRNL-AM News, Talk, Sports 15 18-49
WRVQ-FM Contemporary Hits 8 25-54
WRXL-FM Album Oriented Rock 6 18-49
WTVR-AM Nostalgia 3 25-54
WTVR-FM Soft Adult Contemporary 14 25-54
Tampa, FL
WRBQ-AM Country 17 25-54
WRBQ-FM Country 5 18-49
WMTX-AM Adult Contemporary 4 25-54
WMTX-FM Adult Contemporary NR 25-54
El Paso, TX
KPRR-FM Contemporary Hits 2 25-54
KHEY-AM Country NR 25-54
KHEY-FM Country 6 35+
Ft. Myers, FL
WCKT-FM Country 4 25-54
WXRM-FM Soft Adult Contemp. 12 25-54
Norfolk, VA
WOWI-FM Urban Contemporary 1 25-54
WJCD-FM Smooth Jazz 9 25-54
WMYK-FM Rhythmic CHR 18 18-49
WSVY-FM Adult Urban Contemp. 11 25-54
Memphis, TN
WHRK-FM Urban Contemporary 1 25-54
WDIA-AM Urban Contemporary 2 25-54
KJMS-FM Adult Urban Contemp. 5 18-49
KWAM-AM Religious NR 25-54
WEGR-AM Classic Rock 8 18-49
WREC-AM News, Talk 16 25-54
WRXQ-FM Alternative Rock 11 18-49
Raleigh, NC
WQOK-FM Urban Contemporary 2 18-34
Greensboro, NC
WXRA-FM Alternative Rock 5 25-49
WTQR-FM Country 1 25-54
WSJS-FM News, Talk 10 35+
Milwaukee, WI
WKKV-FM Urban Contemporary 3 18-34
Little Rock, AR
KDDK-FM Country 6 35+
KMJX-FM Classic Rock 2 25-54
Reading, PA
WRAW-AM Oldies 5 25-54
WRFY-FM Rock Hits 1 25-54
Grand Rapids, MI
WOOD-AM New Talk Sports 4 35+
WOOD-FM Adult Contemporary 3 25-54
WBCT-FM Country 1 25-54
WCUZ-AM News, Talk, Sports 20 25-54
WCUZ-FM country 8 25-54
Providence, RI
WWBB-FM Oldies 4 25-54
WWRX-FM Classic Rock 11 35+
Springfield, MA
WHYN-AM News, Talk, Sports 4 35+
WHYN-FM Adult Contemporary 5 25-54
Columbia, SC
WWDM-FM Urban Contemporary 1 25-54
WARQ-FM Alternative Rock 8 18-49
(1) Based on 12+ audience shares reported in Duncan's
Winter 1996 American Radio Report for all markets except Reading,
PA (which is based on Duncan's 1996 American Radio Small Market
Report) and New Haven, CT and Ft. Myers/Naples, FL (which are
based on Duncan's Spring 1996 American Radio Report).
(2) Company estimates
NR Not ranked in the market in the 12+ Metro audience
share
At March 25, 1997, the Company had applications
pending before the FCC requesting waivers of the one-to-a-market
rule in order to enable the Company to complete the purchase of
control of:
WLAN-AM, Lancaster, Pennsylvania;
WLAN-FM, Lancaster, Pennsylvania;
KQLL-AM, Tulsa, Oklahoma;
KQLL-FM, Owasso, Oklahoma and
KOAS-FM, Broken Arrow, Oklahoma.
The Company cannot predict whether these waiver
applications will be approved. (See "--Regulation of the
Company's Business" for a discussion of the one-to-a-market
rule.)
At March 25, 1997, the FCC had granted its consent
to the assignments of five radio station licenses to subsidiaries
of the Company. The stations are:
WKII-AM, Port Charlotte, Florida;
WFSN-FM, Port Charlotte, Florida;
WOLZ-FM, Fort Myers, Florida;
WOKY-AM, Milwaukee, Wisconsin and
WMIL-FM, Waukesha, Wisconsin.
Clear Channel Radio, Inc., a subsidiary of the
Company, is an 80% stockholder of Radio Enterprises, Inc. The
FCC has granted its consent to the assignment of four radio
station licenses to Radio Enterprises, Inc. The stations are:
WQBK-AM, Rensselaer, New York;
WQBK-FM, Rensselaer, New York;
WQBJ-FM, Cobbleskill, New York and
WXCR-FM, Ballston Spa, New York.
The Company also has before the FCC applications
seeking authority to construct a new FM radio station at Forest
Acres, South Carolina and a new television station on Channel 24
at Hoisington, Kansas. In addition, at March 1, 1997, the
Company had joint sales or time brokerage agreements with the
licensees to market and sell the advertising time of ten
additional stations.
The Company's radio stations employ various
formats for their programming. A station's format is important
in determining the size and characteristics of its listening
audience. Advertising rates charged by a radio station are based
primarily on the station's ability to attract audiences having
certain demographic characteristics in the market area which
advertisers want to reach, as well as the number of stations
competing in the market. Advertisers often tailor their
advertisements to appeal to selected population or demographic
segments. The Company pays the cost of producing the programming
for each station. Generally, the Company designs formats for its
own stations, but has also used outside consultants and program
syndicators for program material. Most of the Company's radio
revenue is generated from the sale of local advertising.
Additional revenue is generated from the sale of national
advertising, network compensation payments and barter and other
miscellaneous transactions. The Company has focused its sales
effort on selling directly to local advertisers, while seeking to
minimize sales through outside representatives, including
advertising agencies. Direct contact with its customers has
aided the Company's sales personnel in developing long-standing
customer relationships, which the Company believes are a
competitive advantage. The Company's sales personnel are paid on
a commission basis, which emphasizes this direct local focus. The
Company believes that this focus has enabled some of its stations
to achieve market revenue shares exceeding their audience shares
in a given year. Each of the Company's radio stations also
engages independent sales representatives to assist it in
obtaining national advertising. The representatives obtain
advertising through national advertising agencies and receive a
commission from the Company based on the Company's net revenue
from the advertising obtained. In February 1996, the Company
formed an alliance with one of the nation's largest national
advertising representation firms, whereby the firm will dedicate
certain personnel to work exclusively for the Company's radio
stations. The Company believes this arrangement will help its
stations to achieve higher shares of national advertising
revenue.
TELEVISION BROADCASTING
The following table sets forth certain selected
information with regard to each of the Company's eleven
television stations for which it owned the FCC licenses at
December 31, 1996.
Expiration
Date of Date of FCC Power
Market/Station Acquisition Network License Channel(Watts)
Mobile, AL
WPMI-TV Dec. 1988 NBC 4/1/97(2) 15 5,000,000
Tulsa, OK
KOKI-TV Dec. 1989 FOX 6/1/98 23 3,260,000
Jacksonville, FL
WAWS-TV Sep. 1989 FOX 2/1/97(2) 30 2,789,000
Tucson, AZ
KTTU-TV(1) Feb. 1989 UPN 10/1/98 18 2,500,000
Wichita, KS
KSAS-TV Aug. 1990 FOX 6/1/98 24 3,310,000
Memphis, TN
WPTY-TV Apr. 1992 ABC 8/1/97 24 3,003,000
Minneapolis, MN
WFTC-TV Oct. 1993 FOX 4/1/97(2) 29 5,000,000
Little Rock, AR
KLRT-TV Feb. 1994 FOX 6/1/96(2) 16 5,000,000
Albany, NY
WXXA-TV Dec. 1994 FOX 6/1/98 23 3,020,000
Harrisburg, PA
WHP-TV Oct. 1995 CBS 8/1/99 21 1,200,000
Providence, RI
WPRI-TV July 1996 CBS 4/1/99 12 316,000
(1) The Company owns the FCC license for KTTU-TV but
entered into a local marketing agreement, and, therefore, does
not program the station.
(2) The company and its licensee subsidiaries have applications
for renewal of licenses pending for the following stations:
WPMI-TV, Mobile, Alabama (FCC file No. BRCT-961202LN)
KTTU-TV, Tucson, Arizona (FCC file No. BRCT-961202KE)
KLRT-TV, Little Rock, Arkansas (FCC file No. BRCT-970203KR)
In addition, at December 31, 1996, the Company had local
marketing agreements with the licensees of seven additional
television stations in seven markets where the Company also owns
the license of another television station.
The following table shows the number of broadcast television
competitors and the relative market size and population of each
market served by the Company's television stations for which it
owns the FCC license at December 31, 1996:
Television
Market 1996 # of 1996
and Market Stations Households
Station Rank in Market(1) (in thousands)
Tulsa, OK
KOKI-TV 58 6 461
Jacksonville, FL
WAWS-TV 54 5 493
Mobile, AL/Pensacola, FL
WPMI-TV 61 5 449
Memphis, TN
WPTY-TV 42 6 612
Wichita, KS
KSAS-TV 65 4 426
Tucson, AZ
KTTU-TV 78 6 354
Minneapolis, MN
WFTC-TV 14 6 1,428
Little Rock, AR
KLRT-TV 57 5 509
Albany, NY
WXXA-TV 52 5 584
Harrisburg, PA
WHP-TV 45 6 558
Providence, RI
WPRI-TV 47 6 558
Source: 1996 ADI Market Rankings based on A.C. Nielsen estimates
of U.S Television Households.
(1) Company estimate
The Company purchases the broadcast rights for the majority
of its television programming for its FOX and UPN affiliates from
various syndicators. The Company competes with other television
stations within each market for these broadcast rights. These
programming costs have declined in the past five years and are
expected to continue to decline in the foreseeable future due to
the decrease in the number of stations in the Company's markets
competing for the same programming. Moreover, the affiliation
changes to NBC in Mobile, Alabama/Pensacola, Florida and to ABC
in Memphis, Tennessee have reduced the Company's need to obtain
outside programming.
The second source of programming for the Company's FOX
affiliates is the FOX, ABC, NBC and CBS television networks,
which produce and distribute programming in exchange for each
station's commitment to air the programming at specified times
and for commercial announcement time during the programming. For
1996, FOX, ABC and NBC primary programming was intended to appeal
primarily to a target audience of 18 to 49 year old adults, while
the CBS network's primary programming was intended to appeal
primarily to a target audience of 25-54 adults.
Each FOX contract currently runs for a five year term
expiring in 1998 except for the FOX contract for WXXA-TV Albany,
New York, which expires in 1999 and may be renewed by FOX or the
Company. Based on the performance of its FOX-affiliated stations
to date, the Company expects it will continue to be able to renew
its FOX contracts, although no assurances in this regard can be
given. The network affiliation agreements with ABC (for WPTY-TV
in Memphis, Tennessee, effective December 1, 1995), CBS (for WHP-
TV in Harrisburg, Pennsylvania, renewed and effective December
18, 1995 and for WPRI-TV in Providence, RI, effective July 1,
1996), NBC (for WPMI-TV in Mobile, Alabama, effective January 1,
1996) and UPN (for KTTU-TV in Tucson, Arizona, entered into in
1995) run for ten-year terms.
The third source of programming is the production of local
news programming on the FOX, CBS, ABC and NBC affiliate stations
in Jacksonville, Florida, Harrisburg, Pennsylvania, Memphis,
Tennessee and Mobile, Alabama/ Pensacola, Florida, respectively.
Local news programming traditionally has appealed to a target
audience of adults 25 to 54 years of age. Because these viewers
generally have increased buying power relative to viewers in
other demographic groups, they are one of the most sought-after
target audiences for advertisers. With such programming, these
stations are able to attract advertisers to which they otherwise
would not have access.
Revenue is generated primarily from the sale of local and
national advertising, as well as from fees received from the
affiliate television networks. Advertising rates depend primarily
on the quantitative and qualitative characteristics of the
audience the Company can deliver to the advertiser. Local
advertising is sold by the Company's sales personnel, while
national advertising is sold by independent national sales
representatives. The Company's revenue is seasonal, with the
fourth quarter generating the highest level of revenue and the
first quarter generating the lowest. The fourth quarter generally
reflects higher advertising in preparation for the holiday season
and, in the case of radio, the effect of political advertising in
election years.
The Company's broadcasting results are dependent on a number
of factors, including the general strength of the economy,
population growth, ability to provide popular programming,
relative efficiency of radio and television broadcasting compared
to other advertising media, signal strength, technological
capabilities and developments and governmental regulations and
policies.
COMPETITION
The Company's radio and television stations compete for
audience share and advertising revenue directly with other radio
and television stations within their broadcast areas.
Competition among radio and television stations is based
primarily on program content, which is significantly affected by
network affiliation and by local programming activities. Other
factors that affect a station's competitive position include its
authorized power, terrain, assigned frequency, audience
characteristics, local program acceptance and the number and
characteristics of other stations in the market area. The
Company's radio and television stations are located in highly
competitive markets. In the radio broadcasting industry,
moreover, it is not uncommon for radio stations outside of a
market area to broadcast at sufficient strength to gain a share
of the audience in adjacent areas. Many of the stations with
which the Company competes are owned or operated by national or
regional companies with substantially greater financial and other
resources than the Company. Other media, including network
television, cable television, newspapers, magazines, direct mail
coupons, billboard advertising, and direct broadcast satellite,
also compete with the Company for advertising revenue. The
Company believes it competes favorably against other stations
because of its management skill and experience and the ability of
the Company's stations to generate revenue that is at least equal
to their market share in their respective markets.
REGULATION OF THE COMPANY'S BUSINESS
Existing Regulation and 1996 Legislation. Television and radio
broadcasting are subject to the jurisdiction of the Federal
Communications Commission ("FCC") under the Communications Act of
1934, as amended (the "Communications Act"). The Communications
Act prohibits the operation of a television or radio broadcasting
station except under a license issued by the FCC and empowers the
FCC, among other things, to issue, renew, revoke and modify
broadcasting licenses; assign frequency bands; determine
stations' frequencies, locations, and power; regulate the
equipment used by stations; adopt other regulations to carry out
the provisions of the Communications Act; impose penalties for
violation of such regulations; and impose fees for processing
applications and other administrative functions. The
Communications Act prohibits the assignment of a license or the
transfer of control of a licensee without prior approval of the
FCC. Under the Communications Act, the FCC also regulates
certain aspects of the operation of cable television systems and
other electronic media that compete with broadcast stations.
The Telecommunications Act of 1996 ("the 1996 Act")
represented the most comprehensive overhaul of the country's
telecommunications laws in more than 60 years. The
Communications Act originated at a time when telephone and
broadcasting technologies were quite distinct and addressed
different consumer needs. As a consequence, both the statute and
its implementing regulatory scheme were designed to
compartmentalize the various sectors of the telecommunications
industry. The 1996 Act removed or relaxed the statutory barriers
to telephone company entry into the video programming delivery
business, to cable company provision of telephone service, and to
common ownership of broadcast television and cable properties.
The 1996 Act also significantly changed both the process for
renewal of broadcast station licenses and the broadcast ownership
rules. First, the 1996 Act established a "two-step" renewal
process that limits the FCC's discretion to consider applications
filed in competition with an incumbent's renewal application.
The 1996 Act also substantially liberalized the national
broadcast ownership rules, eliminating the national radio limits
and easing the national restrictions of TV ownership. The 1996
Act also relaxed local radio ownership restrictions, but left
local TV restrictions in place pending further FCC review. The
FCC has already implemented some of these changes through
Commission Orders.
This new regulatory flexibility has engendered aggressive
local, regional, and/or national acquisition campaigns. Removal
of previous station ownership limitations on leading incumbents
(i.e., existing networks and major station groups) has increased
sharply the competition for and the prices of attractive
stations.
License Grant and Renewal. Prior to the passage of the 1996 Act,
television and radio broadcasting licenses generally were granted
or renewed for a period of five and seven years, respectively,
upon a finding by the FCC that the "public interest, convenience,
and necessity" would be served thereby. At the time an
application is made for renewal of a television or radio license,
parties in interest may file petitions to deny the application,
and such parties, including members of the public, may comment
upon the service the station has provided during the preceding
license term. In addition, prior to passage of the 1996 Act, any
person was permitted to file a competing application for
authority to operate on the station's channel and replace the
incumbent licensee. Renewal applications were granted without a
hearing if there were no competing applications or if issues
raised by petitioners to deny such applications were not serious
enough to cause the FCC to order a hearing. If competing
applications were filed, a full comparative hearing was required.
Under the 1996 Act, the statutory restriction on the length
of broadcast licenses has been amended to allow the FCC to grant
broadcast licenses for terms of up to eight years. The 1996 Act
also requires renewal of a broadcast license if the FCC finds
that (1) the station has served the public interest, convenience,
and necessity; (2) there have been no serious violations of
either the Communications Act or the FCC's rules and regulations
by the licensee; and (3) there have been no other serious
violations which taken together constitute a pattern of abuse.
In making its determination, the FCC may still consider petitions
to deny but cannot consider whether the public interest would be
better served by a person other than the renewal applicant.
Instead, under the 1996 Act, competing applications for the same
frequency may be accepted only after the Commission has denied an
incumbent's application for renewal of license.
Although in the vast majority of cases broadcast licenses
are granted by the FCC even when petitions to deny are filed
against them, there can be no assurance that any of the Company's
stations' licenses will be renewed.
Multiple Ownership Restrictions. The FCC has promulgated
rules that, among other things, limit the ability of individuals
and entities to own or have an official position or ownership
interest above a certain level (an "attributable" interest, as
defined more fully below) in broadcast stations, as well as other
specified mass media entities. Prior to the passage of the
1996 Act, these rules included limits on the number of radio and
television stations that could be owned on both a national and
local basis. On a national basis, the rules generally precluded
any individual or entity from having an attributable interest in
more than 20 AM radio stations, 20 FM radio stations and 12
television stations. Moreover, the aggregate audience reach of
the co-owned television stations could not exceed 25% of all U.S.
television households.
The 1996 Act completely revised the television and radio
ownership rules via changes the FCC implemented in two orders
issued on March 8, 1996. With respect to television, the 1996
Act and the FCC's subsequently issued orders eliminated the 12-
station limit for station ownership and increased the national
audience reach limitation from 25% to 35%. On a local basis,
however, the 1996 Act did not alter current FCC rules limiting an
individual entity to maintaining an attributable interest in only
one television station in a market. The 1996 Act did require the
FCC to conduct a rulemaking proceeding, however, to determine
whether to narrow the geographic scope of the local television
cross-ownership rule (the so-called "TV duopoly rule") to permit
some two-station combinations in certain (large) markets. At the
time of the passage of the 1996 Act, the FCC had already
initiated a rulemaking to consider whether the television duopoly
rule should be retained, modified or eliminated. That proceeding
remains pending.
With respect to radio licensees, the 1996 Act and the FCC's
subsequently issued rule changes eliminated the national
ownership restriction, allowing any one entity to own nationally
any number of AM or FM broadcast stations. The 1996 Act and the
FCC's new rules also greatly eased local radio ownership
restrictions. As with the old rules, the maximum allowable
varies depending on the number of radio stations within a market.
In markets with more than 45 stations, one company may own,
operate, or control eight stations, with no more than five in any
one service (AM or FM). In markets of 30-44 stations, one
company may own seven stations, with no more than four in any one
service; in markets with 15-29 stations, one entity may own six
stations, with no more than four in any one service. In markets
with 14 commercial stations or less, one company may own up to
five stations or 50% of all of the stations, whichever is less,
with no more than three in any one service.
In 1992, the FCC placed limitations on local marketing
agreements ("LMAs") through which the licensee of one radio
station provides the programming for another licensee's station
in the same market. Stations operating in the same service
(e.g., where both stations are AM) and in the same market are
prohibited from simulcasting more than 25% of their programming.
Moreover, in determining the number of stations that a single
entity may control, an entity programming a station pursuant to
an LMA is required, under certain circumstances, to count that
station toward its maximum even though it does not own the
station. In a pending rulemaking, the FCC is seeking comment on
issues of control and attribution with respect to time brokerage
agreements or LMAs entered into by television stations.
A number of cross-ownership rules pertain to licensees of
television and radio stations. FCC rules, the Communications Act
or both generally prohibit an individual or entity from having an
attributable interest in both a television station and a radio
station, daily newspaper or cable television system that is
located in the same local market area served by the television
station. The FCC has employed a liberal waiver policy with
respect to the TV/radio cross-ownership restriction (the so-
called "one-to-a-market" rule), generally permitting common
ownership of one AM, one FM and one TV station in any of the 25
largest markets, provided there are at least 30 separately owned
stations remaining after the proposed sale. The 1996 Act
directed the Commission to extend its one-to-a-market waiver
policy to the top 50 markets, consistent with the public
interest, convenience and necessity. Moreover, in a pending
rulemaking the FCC has proposed eliminating the one-to-a-market
rule entirely.
The 1996 Act eliminated a statutory prohibition against
common ownership of television broadcast stations and cable
systems serving the same area, but left the current FCC rule in
place. The 1996 Act stipulates that the FCC should not consider
the repeal of the statutory ban in any review of its applicable
rules. The legislation also eliminated the FCC's former
network/cable cross-ownership limitations, but allowed the FCC to
adopt regulations if necessary to ensure carriage, appropriate
channel positioning, and nondiscriminatory treatment of non-
affiliated broadcast stations on network-owned cable systems.
The FCC eliminated the restriction and determined that additional
safeguards were not necessary at this time.
The 1996 Act does not alter the FCC's newspaper/broadcast
cross-ownership restrictions. However, the FCC is considering
whether to change the policy pursuant to which it considers
waivers of the radio/newspaper cross-ownership rule. Finally,
the 1996 Act directed the FCC to revise its long-standing "dual
network" rule to permit television broadcast stations to
affiliate with an entity that maintains two or more networks,
unless the combination is composed of (a) two of the four
existing networks (ABC, CBS, NBC or Fox) or (b) any of the four
existing networks and one of the two emerging networks (WBN or
UPN).
Expansion of the Company's broadcast operations in
particular areas and nationwide will continue to be subject to
the FCC's ownership rules and any further changes the FCC or
Congress may adopt. Significantly, the 1996 Act requires the
Commission to review its remaining ownership rules biennially-
as part of its regulatory reform obligations to determine whether
its various rules are still necessary. The Company cannot
predict the impact of the biennial review process or any other
agency or legislative initiatives upon the FCC's broadcast rules.
Further, the 1996 Act's relaxation of the FCC's ownership rules
has increased the level of competition in one or more of the
markets in which the Company's stations are located.
Under the FCC's ownership rules, a direct or indirect
purchaser of certain types of securities of the Company could
violate FCC regulations if that purchaser owned or acquired an
"attributable" or "meaningful" interest in other media properties
in the same areas as stations owned by the Company
or in a manner otherwise prohibited by the FCC. All officers and
directors of a licensee, as well as general partners, limited
partners who are not properly "insulated" from management
activities, and stockholders who own five percent or more of the
outstanding voting stock of a licensee (either directly or
indirectly), generally will be deemed to have an attributable
interest in the license. Certain institutional investors who
exert no control or influence over a licensee may own up to ten
percent of such outstanding voting stock before attribution
occurs. Under current FCC regulations, debt instruments, non-
voting stock, properly insulated limited partnership interests
(as to which the licensee certifies that the limited partners are
not "materially involved" in the management and operation of the
subject media property) and voting stock held by minority
stockholders in cases in which there is a single majority
stockholder generally are not subject to attribution. The FCC's
"cross-interest" policy, which precludes an individual or entity
from having a "meaningful" (even though not attributable)
interest in one media property and an attributable interest in a
broadcast, cable or newspaper property in the same area, may be
invoked in certain circumstances to reach interests not expressly
covered by the multiple ownership rules.
A rulemaking proceeding pending at the FCC is designed to
permit a "thorough review of [its] broadcast media attribution
rules." Among the issues on which comment was sought were (i)
whether to change the voting stock attribution benchmarks from
five percent to ten percent and, for passive investors, from ten
percent to twenty percent; (ii) whether there are any
circumstances in which non-voting stock interests, which are
currently considered non-attributable, should be considered
attributable; (iii) whether the FCC should eliminate its single
majority shareholder exception (pursuant to which voting
interests in excess of five percent are not considered
recognizable if a single shareholder owns more than fifty percent
of the voting power); (iv) whether to relax insulation standards
for business development companies and other widely-held limited
partnerships; (v) how to treat limited liability companies and
other new business forms for attribution purposes; (vi) whether
to eliminate or codify the cross-interest policy; and (vii)
whether to adopt a new policy which would consider whether
multiple cross interests or other significant business
relationships (such as time brokerage agreements, debt
relationships or holdings of nonattributable interests), which
individually do not raise concerns, raise issues with respect to
diversity and competition. The Commission also is to consider
whether to make debt attributable in certain instances as well as
the circumstances, if any, in which television LMAs should be
considered to be an attributable interest. The Company cannot
predict with certainty when this proceeding will be concluded or
whether any of these standards will be changed. Should the
attribution rules be changed, the Company is unable to predict
what effect, if any, such changes would have on the Company or
its activities. To the best of the Company's knowledge at
present, no officer, director or five percent stockholder of the
Company holds an interest in another television station, radio
station, cable television system or daily newspaper that is
inconsistent with the FCC's ownership rules and policies or the
Company's continued ownership of its television stations.
Alien Ownership Restrictions. The Communications Act
restricts the ability of foreign entities or individuals to own
or hold certain interests in broadcast licenses. Foreign
governments, representatives of foreign governments, non-U.S.
citizens, representatives of non-U.S. citizens, and corporations
or partnerships organized under the laws of a foreign nation
are barred from holding broadcast licenses. Non-U.S. citizens,
collectively, may directly or indirectly own or vote up to twenty
percent of the capital stock of a licensee. In addition, a
broadcast license may not be granted to or held by any
corporation that is controlled, directly or indirectly, by any
other corporation more than one-fourth of whose capital
stock is owned or voted by non-U.S. citizens or their
representatives, by foreign governments or their representatives,
or by non-U.S. corporations, if the FCC finds that the public
interest will be served by the refusal or revocation of such
license. The FCC has interpreted this provision of the
Communications Act to require an affirmative public interest
finding before a broadcast license may be granted to or held by
any such corporation, and the FCC has made such an affirmative
finding only in limited circumstances. The Company, which serves
as a holding company for subsidiaries that serve as licensees for
the stations, therefore may be restricted from having more than
one-fourth of its stock owned or voted directly or indirectly by
non-U.S. citizens, foreign governments, representatives of non-
foreign governments, or foreign corporations. The Communications
Act previously also prohibited grant of a broadcast station
license (i) to any corporation with an alien officer or director,
or (ii) to any corporation controlled by another corporation with
any alien officers or more than one-fourth alien directors. The
restrictions on non-U.S. citizens serving as officers or
directors of licensees and their parent corporations were
eliminated, however, by the 1996 Act.
Other Regulations Affecting Broadcast Stations. The FCC has
significantly reduced its past regulation of broadcast stations,
including elimination of formal ascertainment requirements and
guidelines concerning amounts of certain types of programming and
commercial matter that may be broadcast. In 1990, the U.S.
Supreme Court refused to review a lower court decision that
upheld the FCC's 1987 action invalidating most aspects of the
Fairness Doctrine, which had required broadcasters to present
contrasting views on controversial issues of public importance.
The FCC may, however, continue to regulate other aspects of
fairness obligations in connection with certain types of
broadcasts. The United States Court of Appeals for the District
of Columbia Circuit recently ordered the FCC to act on a petition
of the Radio and Television New Directors Association seeking to
repeal the FCC's personal attack and political editorial rules by
August 7, 1997. In addition, there are FCC rules and policies,
and rules and policies of other federal agencies, that regulate
matters such as network-affiliate relations, the ability of
stations to obtain exclusive rights to air syndicated
programming, cable systems' carriage of syndicated and network
programming on distant stations, political advertising practices,
equal employment opportunity, application procedures and other
areas affecting the business or operations of broadcast stations.
The FCC has adopted rules to implement the Children's Television
Act of 1990 ("Children's Television Act"), which, among other
provisions, limits the permissible amount of commercial matter in
children's programs and requires each television station to
present "educational and informational" children's programming.
The FCC also has adopted renewal processing guidelines
effectively requiring television stations to broadcast an average
of three hours per week of children's educational programming
commencing in September 1997.
Recent Developments, Proposed Legislation and Regulation.
In January 1996, the Supreme Court refused to review lower court
decisions that upheld the FCC's restrictions on the broadcast of
indecent material and also upheld the agency's policy of imposing
substantial monetary sanctions on repeat offenders of the
indecency rules. The rules require stations to limit the airing
of indecent programming to a 10 p.m.-6 a.m. "safe harbor" period.
Congress and the FCC currently have under consideration, and
may in the future adopt, new laws, regulations and policies
regarding a wide variety of matters that could affect, directly
or indirectly, the operation and ownership of the Company's
broadcast properties. In addition to the changes and proposed
changes noted above, such matters include, for example, the
license renewal process, spectrum use fees, political advertising
rates, potential restrictions on the advertising of certain
products (beer and wine, for example), the rules and policies to
be applied in enforcing the FCC's equal employment opportunity
regulations, closed captioning requirements, and regulatory
schemes to control the amount of violent television programming
accessible to children (including implementation, as required
under the 1996 Act, of the so-called "V-chip technology," which
would permit parents to program television sets so that certain
programming would be inaccessible to children). If distributors
of video programming fail voluntarily to establish rating rules
to identify programming that contains sexual, violent or other
indecent material, the 1996 Act requires the FCC to formulate, in
conjunction with a non-partisan advisory committee, a system to
identify and rate such programming. Distributors of rated
programs are required to transmit these ratings, thereby
permitting parents to black-out the programs. The FCC has sought
comment on a ratings plan developed by the advisory committee.
Other matters that could affect the Company's broadcast
properties include technological innovations and developments
generally affecting competition in the mass communications
industry, such as the recent initiation of direct broadcast
satellite service, the continued establishment of wireless cable
systems and low power television stations, and the advent of
telephone company participation in the provision of video
programming service.
Distribution of Video Services by Telephone Companies.
Recent actions by Congress, the FCC and the courts all presage
significant future involvement in the provision of video services
by telephone companies. The Company cannot predict either the
timing or the extent of such involvement. These developments all
relate to a former provision of the Communications Act that
prohibited a local telephone company from providing video
programming directly to subscribers within the company's
telephone service areas. As applied by government regulators
historically, the former provision prevented telephone companies
from providing cable service over either the telephone network or
a separate cable system located within the telephone service
area. That provision has now been superseded by the 1996 Act,
which provides for telephone company entry into the distribution
of video services either under the laws and rules applicable to
cable systems as operators of so-called "wireless cable systems",
as common carriers or under new rules devised by the FCC for
"open video systems" subject to certain common carrier
requirements.
The 1996 Act also eliminated the FCC's "video dialtone"
("VDT") rules, which allowed telephone companies to provide a
transport "platform" to multiple video programmers (including,
potentially, competing program packages) on a non-discriminatory,
common carrier basis. (The legislation does not affect any VDT
systems approved prior to enactment of the 1996 Act). Congress
instead has determined that telephone companies may offer video
programming either as a traditional cable operator, as a so-
called "wireless cable" operator, as a common carrier, or through
operation of an "open video system." Although Congress
specifically preempted the FCC's VDT rules, the legislation's
directives for open video systems resemble the rules adopted or
proposed for VDT systems in certain respects. These include the
requirements that (1) the operator of an open video system offer
carriage capacity to various video programming providers under
nondiscriminatory rates, terms, and conditions; and (2) if demand
for carriage exceeds the channel capacity of the open video
system, the operator generally is barred from devoting more than
one-third of the system's capacity to programming provided by
itself or an affiliate.
The 1992 Cable Act. On October 5, 1992, Congress enacted
the Cable Television Consumer Protection and Competition Act of
1992 (the "1992 Cable Act"). The FCC began implementing the
requirements of the 1992 Cable Act in 1993, and final
implementation proceedings remain pending regarding certain
of the rules and regulations previously adopted. Certain
statutory provisions, such as signal carriage, retransmission
consent, and equal employment opportunity requirements, have a
direct effect on television broadcasting. Other provisions are
focused exclusively on the regulation of cable television but can
still be expected to have an indirect effect on the Company
because of the competition between over-the-air television
stations and cable systems.
The signal carriage, or "must carry," provisions of the 1992
Cable Act require cable operators to carry the signals of local
commercial and non-commercial television stations and certain low
power television stations. Systems with 12 or fewer usable
activated channels and more than 300 subscribers must carry the
signals of at least three local commercial television stations.
A cable system with more than 12 usable activated channels,
regardless of the number of subscribers, must carry the signals
of all local commercial television stations, up to one-third of
the aggregate number of usable activated channels of such a
system. The 1992 Cable Act also includes a retransmission
consent provision that prohibits cable operators and other multi-
channel video programming distributors ("MVPDs") from carrying
broadcast signals without obtaining the station's consent in
certain circumstances. The "must carry" and retransmission
consent provisions are related in that a local television
broadcaster, on a cable system-by-cable system basis, must make a
choice once every three years whether to proceed under the "must
carry" rules or to waive the right to mandatory but uncompensated
carriage and negotiate a grant of retransmission consent to
permit the cable system to carry the station's signal, in most
cases in exchange for some form of consideration from the cable
operator. Cable systems and other MVPDs must obtain
retransmission consent to carry all distant commercial stations
other than "super stations" delivered via satellite.
On April 8, 1993, a special three-judge panel of the U.S.
District Court for the District of Columbia upheld the
constitutionality of the must carry provisions of the 1992 Cable
Act. Cable interests appealed that ruling directly to the
Supreme Court. On June 27, 1994, in a 5-4 decision,
the justices determined that must carry "in the abstract" did not
constitute a clear violation of the First Amendment.
Nevertheless, the Court remanded the case to the District Court
and ordered it to determine the factual validity of Congress'
premise for enacting the law-that "the economic health of local
broadcasting" would be "in genuine jeopardy" without cable
carriage. On remand, the District Court panel held, by a vote of
2-1, that Congress had sufficient evidence about the state of
broadcasting and cable competition to determine that mandatory
carriage laws were necessary. The Supreme Court has heard
arguments in the case and a decision is expected in the first
half of 1997. The Company cannot predict the ultimate outcome of
this appeal. In the meantime, the must carry regulations
implemented by the FCC pursuant to the 1992 Cable Act remain in
effect.
The 1992 Cable Act also codified the FCC's basic equal
employment opportunity ("EEO") rules and the use of certain EEO
reporting forms currently filed by radio and television broadcast
stations. In addition, pursuant to the 1992 Cable Act's
requirements, the FCC has adopted new rules providing for a
review of the EEO performance of each broadcast station at the
mid-point of its license term (in addition to renewal time).
Such a review will give the FCC an opportunity to evaluate
whether the licensee is in compliance with the FCC's processing
criteria and notify the licensee of any deficiency in its
employment profile. Among the other rulemaking proceedings
conducted by the FCC to implement provisions of the 1992 Cable
Act have been those concerning cable rate regulation, cable
technical standards, cable multiple ownership limits and
competitive access to programming.
The 1992 Cable Act was amended in several important respects
by the 1996 Act. Most notably, as discussed above, the 1996 Act
repealed the cross-ownership ban between cable and telephone
entities and the FCC's current video dialtone rules. These
provisions, among others, foreshadow significant future
involvement in the provision of video services by telephone
companies. The Company cannot predict the impact that telephone
company entry into video programming will have upon the
broadcasting industry.
The 1996 Act also repealed or curtailed several cable-
related ownership and cross-ownership restrictions. For example,
as noted above, the 1996 Act eliminated the broadcast
network/cable cross-ownership limitations and the statutory
prohibition on TV/cable cross-ownership.
Advanced Television Service. The FCC has proposed the
adoption of rules for implementing advanced television ("ATV")
service in the United States. Implementation of digital ATV will
improve the technical quality of television signals receivable by
viewers and will provide broadcasters the flexibility to offer
new services, including high-definition television ("HDTV"),
simultaneous multiple programs of standard definition television
("SDTV"), and data broadcasting. The FCC is expected to release
a final plan during the first half of 1997.
As currently proposed, the FCC generally will assign all
existing television licensees and permitees a second channel on
which to provide ATV simultaneously with their current analog
service. After a period of years (the 1992 proposal was for 15
years, although that period of time is under review in the
pending FCC proceeding) broadcasters would be required to cease
analog operations and broadcast only with the newer digital ATV
technology. It is also possible that the analog channel, once
returned to the FCC, will be auctioned for other use. Under
certain circumstances, conversion to ATV operations could reduce
a station's geographical coverage area; it is anticipated,
however, that the majority of stations will obtain service areas
that match or exceed the limits of existing operations. Over the
course of the ATV debate, several members of Congress stated that
they favor authorizing the FCC to auction the second channels as
opposed to assigning them directly to existing broadcasters. Such
authority could be contained in budget legislation or a stand-
alone spectrum law.
Due to additional equipment costs, implementation of ATV
will impose near-term financial burdens on television stations
providing the service. If ATV stations are licensed by auction,
this additional expense will apply to broadcasters who choose to
implement ATV. At the same time, there is a potential for
increased revenues to be derived from ATV. Although the
Company believes the FCC will authorize ATV in the United States,
the Company cannot predict precisely when or under what
conditions such authorization might be given, when analog
operations will be required to cease, or the overall effect the
transition to ATV might have on the Company's business.
Digital Audio Radio Service. The FCC is also considering
alternative systems for the delivery of digital audio radio
service ("DARS"). DARS systems could permit delivery of audio
signals with fidelity comparable to compact discs. The FCC has
allocated spectrum for satellite DARS use and is considering
several applications for satellite DARS licenses. On March 3,
1997, the FCC announced a plan to license two providers of
satellite DARS. The Commission will conduct a closed auction
among four pending applicants to select the two licensees. The
auction is scheduled to be held on April 1, 1997. The FCC has
also undertaken an inquiry into the terrestrial broadcast of DARS
signals which addresses, among other things, the need for
spectrum outside the existing FM band. The Company cannot
predict the outcome of these proceedings or the impact thereof
upon its business.
Direct Broadcast Satellite Systems. The FCC has authorized
DBS, a service which provides video programming via satellite
directly to home subscribers. Local broadcast stations are not
carried on DBS systems. Currently, several entities including
DIRECT TV, Inc. ("DIRECT TV"), an affiliate of the General Motors
Company, United States Satellite Broadcasting Company ("USSB")
and Echostar Satellite Corporation ("Echostar") provide DBS
service. DBS service is also provided by Primestar Partners, an
entity owned by a number of large cable interests, using a
medium-powered satellite in the fixed satellite service.
In 1996, MCI Telecommunications Corporation ("MCI") acquired
at auction for $682.5 million the right to operate a 28
transponder DBS system capable of providing service to the entire
continental United States. Thereafter, MCI entered into a joint
venture, called ASkyB, with News Corporation Ltd. (an entity
controlled by Rupert Murdoch) to provide DBS service from MCI's
satellite. In early 1997, ASkyB and EchoStar announced that they
would merge their DBS operations in order to provide a service
capable of delivering 500 channels of programming to subscribers.
They also announced a plan to provide local broadcast signals to
certain markets. In March, 1997, TEMPO Satellite, Inc. launched
a new satellite from which it will provide DBS service. Other
parties hold authorizations to provide DBS service, but have not
launched their proposed satellites. It is uncertain if or when
additional service by these or other parties may commence.
As part of the 1996 Act, Congress required the FCC to
promulgate regulations to prohibit restrictions that impair a
viewer's ability to receive video programming services through
over-the-air reception devices, multipoint distribution service,
or direct broadcast satellite services. The legislation also
awarded the FCC exclusive jurisdiction to regulate the provision
of direct-to-home satellite services, and limited the authority
of local jurisdictions to tax direct-to-home satellite service
providers.
The foregoing does not purport to be a complete summary of
all the provisions of the Communications Act, the 1996 Act, or
the 1992 Cable Act, nor of the regulations and policies of the
FCC thereunder. Proposals for additional or revised regulations
and requirements are pending before and are being considered by
Congress and federal regulatory agencies from time to time.
Also, various of the foregoing matters are now, or may become,
the subject of court litigation, and the Company cannot predict
the outcome of any such litigation or the impact on its broadcast
business.
Antitrust Matters. An important element of the Company's
growth strategy involves the acquisition of additional radio and
television stations and outdoor advertising display faces, many
of which are likely to require preacquisition antitrust review by
the Federal Trade Commission (the "FTC") and the Antitrust
Division of the United States Department of Justice (the
"Antitrust Division"). Following passage of the 1996 Act, the
Antitrust Division has become more aggressive in reviewing
proposed acquisitions of radio stations and radio station
networks, particularly in instances where the proposed acquiror
already owns one or more radio stations in a particular market
and the acquisition involves another radio station in the same
market. Recently, the Antitrust Division has obtained consent
decrees requiring an acquiror to dispose of at least one radio
station in a particular market where the acquisition otherwise
would have resulted in a concentration of market share by the
acquiror. There can be no assurance that the Antitrust Division
or the FTC will not seek to bar the Company from acquiring
additional radio stations or outdoor advertising display faces in
a market where the Company's existing stations or display faces
already have a significant market share.
Environmental Matters. As the owner, lessee or operator of
various real properties and facilities, the Company is subject to
various federal, state and local environmental laws and
regulations. Historically, compliance with such laws and
regulations has not had a material adverse effect on the
Company's business. There can be no assurance, however, that
compliance with existing or new environmental laws and
regulations will not require the Company to make significant
expenditures in the future.
2. Properties
The Company's corporate headquarters is in San Antonio,
Texas. The lease agreement for the approximately 7,500 square
feet of office space in San Antonio expires on February 28, 2001.
The types of properties required to support each of the
Company's radio and television stations listed in Item 1 above
include offices, studios, transmitter sites and antenna sites. A
radio or television station's studios are generally housed with
its offices in downtown or business districts. A radio or
television station's transmitter sites and antenna sites
generally are located in a manner that provides maximum market
coverage.
The studios and offices of the Company's radio and
television stations are located in leased or owned facilities.
These leases generally have expiration dates that range from one
to twenty years. The Company either owns or leases its
transmitter and antenna sites. These leases generally have
expiration dates that range from five to fifteen years. The
Company does not anticipate any difficulties in renewing those
leases that expire within the next several years or in leasing
other space, if required.
As noted in Item 1 above, as of December 31, 1996, the
Company owned 86 radio stations and 11 television stations in
various markets throughout the United States. See "Business --
Radio Broadcasting" and "-- Television Broadcasting." Therefore,
no one property is material to the Company's overall operations.
The Company believes that its properties are in good condition
and suitable for its operations. The Company owns substantially
all of the equipment used in its radio and television
broadcasting business.
ITEM 3. Legal Proceedings
The Company from time to time becomes involved in various
claims and lawsuits incidental to its business, including
defamation actions. The Company believes that any ultimate
liability arising out of currently pending claims and lawsuits
will not have a material effect on the financial condition or
operations of the Company.
ITEM 4. Submission of Matters to a Vote of Security Holders.
There were no matters submitted to a vote of security
holders in the fourth quarter of fiscal year 1996.
PART II
ITEM 5. Market for Registrant's Common Equity and Related
Stockholder Matters
The information required by Item 5 is included in "Note M:
Quarterly Results of Operations" to the Company's Consolidated
Financial Statements in the Company's Annual Report to
Shareholders and is incorporated herein by reference. There were
approximately 6,400 shareholders of record as of March 1, 1997.
Presently, the Company expects to retain its earnings for
the development and expansion of its business and does not
anticipate paying any dividends in 1997. However, any future
decision by the Board of Directors to pay cash dividends will
depend, among other factors, the Company's earnings, financial
position, capital requirements and loan covenant restrictions.
The Company's current bank credit agreement allows for the
payment of dividends subject to certain loan covenant
restrictions. There are no restrictions on dividends payable
wholly in capital stock of the Company. At March 11, 1997 the
market price of the Company's Common Stock was $48.75 per share.
ITEM 6. Selected Financial Data
The information required by Item 6 is incorporated by
reference to the information set forth under the caption
"Selected Financial Data" in the Company's Annual Report to
Shareholders.
ITEM 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations.
The information required by Item 7 is included in the
information set forth under the caption "Management's Discussion
and Analysis of Financial Condition and Results of Operations" in
the Company's Annual Report to Shareholders and is incorporated
herein by reference.
ITEM 8. Financial Statements and Supplementary Data
The information required by Item 8 and the Report of
Independent Auditors is included in the "1996 Financial Report"
in the Company's Annual Report to Shareholders and is
incorporated herein by reference.
ITEM 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure
Not Applicable
PART III
ITEM 10. Directors and Executive Officers of the Registrant
The information required by Item 10 with respect to the
directors and nominees for election to the Board of Directors of
the Company is incorporated by reference to the information set
forth under the caption "Election of Directors" and "Compliance
With Section 16(A) of the Exchange Act," in the Company's
Definitive Schedule 14A Proxy Statement dated March 26, 1997.
The following information is submitted with respect to the
executive officers of the Company as of December 31, 1996.
Age on
December 31, Officer
Name 1996 Position Since
L. Lowry Mays 61 Chairman/
Chief Executive Officer 1972
Mark P. Mays 33 President 1989
Randall T. Mays 31 Executive Vice President/
Chief Financial Officer 1993
Herbert W. Hill, Jr. 37 Senior Vice President/
Chief Accounting Officer 1989
Kenneth E. Wyker 35 Senior Vice President/
Legal Affairs 1993
Jacob T. Gray 29 Vice President/Controller 1996
J. Stanley Webb 53 Senior Vice President/
Radio Operations 1984
George Sosson 46 Senior Vice President/
Radio Operations 1996
James D. Smith 48 Senior Vice President/
Capital Asset Management 1984
Dave Ross 46 Vice President/
GM WHYI-FM, WBGG-FM 1994
William R. Riordan 39 Exec. Vice President/
COO Clear Channel Television 1990
The officers named above serve until the next Board of Directors
meeting immediately following the Annual Meeting of Shareholders.
Mr. L. Mays is the founder of the Company and was the President
and Chief Executive Officer of the Company and its predecessor
since 1972. He has been a director of the Company since its
inception.
Mr. M. Mays was Senior Vice President of Operations from 1993
until his appointment as President in February 1997. Prior
thereto, he was Vice President and Treasurer of the Company for
the remainder of the relevant five year period.
Mr. R. Mays was appointed Executive Vice President/Chief
Financial Officer in February 1997. Prior thereto, he was Vice
President/Treasurer since he joined the Company in 1993. Prior
thereto, he was an associate for Goldman Sachs & Co. Prior
thereto he was a graduate student at Harvard University for the
remainder of the relevant five year period.
Mr. H. Hill was appointed Senior Vice President/Chief Accounting
Officer in February 1997. Prior thereto, he was the Vice
President/Controller of the Company since January, 1989 and
Principal Financial Officer since June 1991
Mr. K. Wyker was appointed Senior Vice President for Legal
Affairs in February 1997. Prior thereto he was Vice
President/General Counsel since he joined the Company in 1993.
Prior thereto, he was Corporate Counsel at Greater Media for the
remainder of the relevant five year period.
Mr. J. Gray was appointed Vice President/Controller in May 1996.
He was named Assistant Controller when he joined the Company in
1995. Prior thereto, he was a Manager with Price Waterhouse LLP
and an Audit Senior with Ernst & Young LLP for the remainder of
the relevant five year period.
Mr. J. Stanley Webb was appointed Senior Vice President/Radio
Operations in May, 1996. Prior thereto, he was Vice
President/General Manager of the Company's radio stations in
Austin, Texas for the remainder of the relevant five year period.
Mr. George Sosson was appointed Senior Vice President/Radio
Operations in August 1996. He was an equity investor and
managing General Partner of Radio Equity Partners, LP from 1993
to the time he joined the Company. Prior thereto, he was Vice
President responsible for the operations of all of the FM radio
stations owned by CBS for the remainder of the relevant five year
period.
Mr. J. Smith was appointed Senior Vice President/Capital
Management in January 1997. Prior thereto, he was Vice
President/General Manager of the Company's radio stations in
Tulsa, Oklahoma for the remainder of the relevant five year
period.
Mr. D. Ross, prior to his election as an officer of the Company
in 1994, was Executive Vice President and General Manager of
WHYI-FM with Metroplex Communications, Inc. for the remainder of
the relevant five year period.
Mr. W. Riordan has been an officer of the Company for the
relevant five-year period. Mr. Riordan served as General Manager
of KSAS-TV from 1990 to 1993, as General Manager of WFTC-TV from
1993 to 1995, and is currently Executive Vice President and Chief
Operating Officer of Clear Channel Television, Inc.
There is no family relationship between any of the executive
officers of the Company except that Mark P. Mays, President/COO
and Randall T. Mays, Executive Vice President/CFO, are the sons
of the Chairman/CEO, L. Lowry Mays.
ITEM 11. Executive Compensation
The information required by Item 11 is incorporated by
reference to the information set forth under the caption
"Executive Compensation" in the Company's Definitive Schedule 14A
Proxy Statement dated March 26, 1997. Cash Compensation excludes
personal benefits and other forms of non-cash compensation, the
aggregate value of which did not exceed the lesser of $25,000 or
10% of the cash compensation shown for each officer. Directors
who are not also officers of the Company receive $5,000 for each
meeting of the Board of Directors they attend and are reimbursed
for travel expenses. Those Board members on the Compensation
Committee receive $500 for each meeting they attend.
ITEM 12. Security Ownership of Certain Beneficial Owners and
Management
The information required by Item 12 is incorporated by
reference to the Company's Definitive Schedule 14A Proxy
Statement dated March 26, 1997 under the headings "Security
Ownership" and "Election Of Directors And Director Compensation".
Except as described therein, no other individual or group owns 5%
or more of the Company's outstanding Common Stock.
ITEM 13. Certain Relationships and Related Transactions
The information required by Item 13 is incorporated by
reference to the Company's Definitive Schedule 14A Proxy
Statement dated March 26, 1997 under the heading "Certain
Transactions."
PART IV
ITEM 14. Exhibits, Financial Statement Schedules and Reports on
Form 8-K
(a)1. Financial Statements.
The following consolidated financial statements included in
the Company's Annual Report to Shareholders are incorporated by
reference in Item 8.
Consolidated Balance Sheets as of December 31, 1996 and 1995
Consolidated Statements of Earnings for the Years Ended December
31, 1996, 1995 and 1994. Consolidated Statements of Changes in
Shareholders' Equity for the Years Ended December 31, 1996, 1995
and 1994. Consolidated Statements of Cash Flows for the Years
Ended December 31, 1996, 1995 and 1994.
Notes to Consolidated Financial Statements
(a)2. Financial Statement Schedules.
The following financial statement schedules of the Company
for the years ended December 31, 1996, 1995 and 1994 and related
report of independent auditors are filed as part of this report
and should be read in conjunction with the financial statements.
<PAGE>
SCHEDULE II
VALUATION AND QUALIFYING ACCOUNTS
Allowance for doubtful accounts
Charges
Balance at to Costs, Write-off Balance
Beginning Expenses of Accounts at end
of
Description of period and other Receivable Period
- ----------- ---------- --------- --------- --------
- --
[S] [C] [C] [C] [C]
$442,490(1)
1,394,535
Year ended
December 31,
1994 $3,026,785 $1,837,025 $1,746,314
$3,117,496
========== ========== ========= =======
$1,003,995(1)
2,352,300
Year ended
December 31,
1995 $3,117,496 $3,356,295 $2,664,262
$3,809,529
========== ========== ======== =======
$2,880,634(1)
2,375,665
Year ended
December 31,
1996 $3,809,529 $5,255,999 $2,998,734
$6,066,794
======== ========= ========= =======
(1) Allowance for accounts receivable acquired in acquisitions
net
of deletions related to dispositions.
SCHEDULE II
VALUATION AND QUALIFYING ACCOUNTS
Accumulated Amortization of Intangibles
Charges
Balance at to Costs, Balance
Beginning Expenses at end
of
Description of period and other Deletions (1) Period
- ---------- ---------- --------- ------------- --------
- --
[S] [C] [C] [C] [C]
Year ended
December 31,
1994 $24,028,299 $12,029,436 $2,195,935
$33,861,800
========== ========= ========= =======
Year ended
December 31,
1995 $33,861,800 $18,389,056 $ 58,529
$52,192,327
========== ========== ========= =======
Year ended
December 31,
1996 $52,192,327 $26,453,381
$78,645,708
========== ========== ======== =======
(1) Related to disposition of stations and fully amortized
intangible assets. All other schedules for which provision is
made in the applicable accounting regulation of the Securities
and Exchange Commission are not required under the related
instructions or are inapplicable, and therefore have been
omitted.
<PAGE>
(a)3. Exhibits. Refer to (c) below.
(b) Reports on Form 8-K. No reports on Form 8-K were filed
during the last quarter of the year ended December 31, 1996.
(c) Exhibits
Index to Exhibits
(a) 3.1 -- Articles of Incorporation, as amended, of
Registrant
(h) 3.1.1-- Articles of Amendment to the Articles of
Incorporation of Clear Channel Communications,
Inc.
(a) 3.2 -- Amended and Restated Bylaws of Registrant
(a) 4 -- Buy-Sell Agreement among Clear Channel
Communications, Inc., L. Lowry Mays, B. J.
McCombs, John M. Schaefer and John W. Barger dated
May 31, 1977.
(a)10.1 -- Incentive Stock Option Plan of Clear Channel
Communications, Inc. as of January 1, 1984.
(b)10.2 -- Radio Asset Merger Agreement dated March 22, 1994,
by and between Metroplex Communications, Inc. and
Clear Channel Radio, Inc.
(c)10.3 -- Radio Partnership Interest Purchase Agreement
dated April 5, 1994, by and between Cook Inlet
Communications, Inc. and WCC Associates and Clear
Channel Radio, Inc.
(d)10.4 -- Television Asset Purchase Agreement September
12,1994, by and between Heritage Broadcasting
Company of New York, Inc. and Clear Channel
Television, Inc. and Clear Channel Television
Licenses, Inc.
(e)10.5 -- Radio Asset Purchase Agreement dated November
17,1994, by and between Noble Broadcast of
Houston, Inc. and Clear Channel Radio, Inc.
(f)10.6 -- Australian Radio Network Shareholders Agreement
dated February, 1995, by and between APN
Broadcasting Investments Pty Ltd, Australian
Provincial Newspapers Holdings Limited, APN
Broadcasting Pty Ltd and Clear Channel Radio, Inc.
and Clear Channel Communications, Inc.
(g)10.7 -- $600,000,000 Amended and Restated Credit Agreement
Among Clear Channel Communications, Inc., Certain
Lenders, and NationsBank of Texas, N.A., as
Administrative Lender, dated October 19, 1995.
(h)10.8 -- Clear Channel Communications, Inc. 1994 Incentive
Stock Option Plan.
(h)10.9 -- Clear Channel Communications, Inc. 1994
Nonqualified Stock Option Plan.
(h)10.10 -- Clear Channel Communications, Inc. Directors'
Nonqualified Stock Option Plan.
(h)10.11 -- Option Agreement for Officer
10.12 -- Employment Agreement between Clear Channel
Communications, Inc. and L. Lowry Mays dated
February 10, 1997.
(i)10.13 -- Stock Purchase Agreement dated as of March 4, 1996
by and among US Radio Stations, L.P., Blackstone
USR Capital Partners L.P., Blackstone USR Offshore
Capital Partners L.P., Blackstone Family
Investment Partnership II L.P., BCP Radio L.P.,
BCP Offshore Radio L.P., US Radio Inc., Clear
Channel Communications of Memphis, Inc. and Clear
Channel Communications, Inc.
(j)10.14 -- Asset Purchase Agreement, dated as of May 9, 1996,
by and among REP New England G.P., REP Southeast
G.P., REP Ft. Myers G.P., REP Rhode Island G.P.,
REP Florida G.P., REP WHYN G.P., REP WWBB G.P.,
S.E. Licensee G.P., REP WCKT G.P. and RI Licensee
G.P., Radio Station Management, Inc., Clear
Channel Radio, Inc., and Clear Channel Radio
Licenses, Inc.
(k)10.15 -- Tender Offer Agreement Between Clear Channel
Radio, Inc. and Heftel Broadcasting Corporation
dated June 1, 1996
(k)10.16 -- Stock Purchase Agreement between Clear Channel
Radio, Inc. and Certain Shareholders of Heftel
Broadcasting Corporation dated June 1, 1996.
(l)10.17 -- Amended and Restated Agreement and Plan of Merger
Between Clear Channel Communications, Inc. and
Tichenor Media System, Inc. October 10, 1996.
(m)10.18 -- Second Amended and Restated Credit Agreement among
Clear Channel Communications, Inc., certain
Lenders and NationsBank, N.A., as Administrative
Lender dated August 1, 1996.
10.19 -- Stock Purchase Agreement By and Among Clear
Channel Communications, Inc., Eller Media
Corporation and the Stockholders of Eller Media
Corporation Dated February 25, 1997.
13.1 -- Annual Report to Shareholders
(n) 13.2 -- Definitive Schedule 14A Proxy Statement (Notice of
Annual Meeting of Shareholders to be Held April
29, 1997) dated March 26, 1997.
21. -- Subsidiaries of Registrant.
23.1 -- Consent of Independent Auditors - Ernst & Young
LLP.
23.2 -- Consent of Independent Auditors - KPMG.
27.1 -- Financial Data Schedule
99.1 -- Report of Independent Auditors on Financial
Statement Schedules -- Ernst & Young LLP.
99.2 -- Report of Independent Auditors - KPMG.
(a) -- Incorporated by reference to the exhibits of the
Company's Registration Statement on Form S-1(Reg.
No. 289161) dated April 19, 1984.
(b) -- Incorporated by reference to the Registrant's Form
8-K dated October 26, 1994.
(c) -- Incorporated by reference to the Registrant's Form
10-Q dated November 14 1994.
(d) -- Incorporated by reference to the Registrant's Form
8-K dated December 14, 1994.
(e) -- Incorporated by reference to the Registrant's Form
8-K dated January 13, 1995.
(f) -- Incorporated by reference to the Registrant's Form
8-K dated May 26, 1995.
(g) -- Incorporated by reference to the Registrant's Form
10-Q dated November 14, 1995.
(h) -- Incorporated by reference to the Registrant's Form
S-8 dated November 20, 1995.
(i) -- Incorporated by reference to the Registrant's Form
8-K dated May 24, 1996.
(j) -- Incorporated by reference to the Registrant's Form
8-K dated June 5, 1996.
(k) -- Incorporated by reference to the Registrant's
(Reg. No. 333-04581) Form S-3 dated June 14, 1996.
(l) -- Incorporated by reference to Heftel Broadcasting
Corporation's Registration Statement on Form S-4
(Reg. No. 333-1973)dated January 15, 1997
(m) -- Incorporated by reference to Heftel Broadcasting
Corporation's Amendment 4 to Form SC 14D1/A dated
August 5, 1996.
(n) -- Incorporated by reference to the Registrant's
Definitive Schedule 14A Proxy Statement dated
March 26, 1997.
EXHIBIT 10.12 - EMPLOYMENT AGREEMENT BETWEEN CLEAR CHANNEL
COMMUNICATIONS, INC. AND L. LOWRY MAYS DATED FEBRUARY 10, 1997.
AMENDED AND RESTATED EMPLOYMENT AGREEMENT
THIS AMENDED AND RESTATED EMPLOYMENT AGREEMENT (the "Agreement")
is made and entered into as of the 10th day of February, 1997 by
and between Clear Channel Communications, Inc., a Texas
corporation (together with its successors and assigns permitted
thereunder, the "Company"), and L. Lowry Mays (the "Executive").
WHEREAS, the Compensation Committee (as defined herein) of the
Board of Directors of the Company and the Board of Directors of
the Company (the "Board") has determined that it is in the best
interests of the Company and its stockholders to employ the
Executive on the terms and conditions set forth herein and to
amend and restate the Executive's current employment agreement.
NOW, THEREFORE, IT IS HEREBY AGREED AS FOLLOWS:
1. Employment Period. Subject to Section 3, the Company
hereby agrees to employ the Executive, and the Executive hereby
agrees to be employed by the Company, in accordance with the
terms and provisions of this Agreement, for the period commencing
on the date hereof (the "Effective Date") and ending on the fifth
anniversary of such date. On each anniversary date of this
agreement, the term of employment shall be automatically renewed
and extended for a successive one (1) year period unless the
Executive shall give the other party written notice of non-
renewal thirty (30) days prior to such anniversary date. As used
herein, "Employment Period" shall include the initial term and
any applicable renewal periods.
2. Terms of Employment.
(a) Position and Duties.
(i) During the term of the Executive's employment, the Executive
shall serve as Chairman and Chief Executive Officer of the
Company and, in so doing, shall report to the Board. The
Executive shall have supervision and control over, and
responsibility for, such management and operational functions of
the Company currently assigned to such position, and shall have
such other powers and duties (including holding officer positions
with one or more subsidiaries of the Company) as may from time to
time be prescribed by the Board, so long as such powers and
duties are reasonable and customary for the Chairman and Chief
Executive Officer of an enterprise comparable to the Company.
(ii) During the term of the Executive's employment, and excluding
any periods of vacation and sick leave to which the Executive is
entitled, the Executive agrees to devote a substantial portion
of his business time to the business and affairs of the Company.
During the term of Executive's employment it shall not be a
violation of this Agreement for the Executive to (A) serve on
corporate, civic or charitable boards or committees, (B) deliver
lectures or fulfill speaking engagements and c manage personal
investments, so long as such activities do not significantly
interfere with the performance of the Executive's
responsibilities as an employee of the Company in accordance with
this Agreement.
(b) Compensation.
(i) Base Salary. During the term of the Executive's employment,
the Executive shall receive an annual base salary ("Annual Base
Salary"), which shall be paid in accordance with the customary
payroll practices of the Company, at least equal to $750,000.
During the term of the Executive's employment, the Annual Base
Salary shall be reviewed annually by the Compensation Committee
of the Board or other appropriate committee of the Board of
Directors (the "Compensation Committee") and shall be increased
at any time and from time to time as the Compensation Committee
shall consider appropriate in accordance with the compensation
practices and guidelines of the Company. Any increase in Annual
Base Salary shall not serve to limit or reduce any other
obligation to the Executive under this Agreement. The term
Annual Base Salary as utilized in this Agreement shall refer to
Annual Base Salary as so increased.
(ii) Bonus. In addition to Annual Base Salary, the Executive
shall be awarded during the term of the Executive's employment
such bonuses (each a "Bonus"), if any, as shall be determined by
the Compensation Committee.
(iii) Incentive, Savings and Retirement Plans. During
the term of the Executive's employment, the Executive shall be
entitled to participate in all incentive, savings and retirement
plans, practices, policies and programs applicable generally to
other executives of the Company ("Investment Plans").
(iv) Welfare Benefit Plans. During the term of the Executive's
employment, the Executive and/or the Executive's family, as the
case may be, shall be eligible for participation in and shall
receive all benefits under welfare benefit plans, practices,
policies and programs ("Welfare Plans") provided by the Company
(including, without limitation, medical, prescription, dental
disability, salary continuance, employee life, group life,
accidental death and travel accident insurance plans and
programs) to the extent applicable generally to other executives
of the Company.
(v) Other Benefits. During the term of the Executive's
employment, the Executive shall be entitled to, at the expense of
the Company, the use of an automobile appropriate to his
position and shall be entitled to an annual vacation in
accordance with the Company's policies.
(vi) Expenses. During the term of the Executive's employment,
the Executive shall be entitled to receive prompt reimbursement
for all reasonable employment expenses incurred by the Executive
in accordance with the policies, practices and procedures of the
Company.
3. Termination of Employment.
(a) Death or Disability. The Executive's employment shall
terminate automatically upon the Executive's death during the
Employment Period. If the Disability of the Executive has
occurred during the Employment Period (pursuant to the definition
of Disability set forth below), the Company may give to the
Executive written notice in accordance with Section 10(b) of its
intention to terminate the Executive's employment. In such
event, the Executive's employment with the Company shall
terminate effective on the 30th day after receipt of such notice
by the Executive (the "Disability Effective Date"), provided
that, within the 30 days after such receipt, the Executive shall
not have returned to full-time performance of the Executive's
duties. For purposes of this Agreement "Disability" shall mean
the Executive's incapacity due to mental or physical illness for
a period in excess of ninety (90) days as determined by the Board
of the Company.
(b) Cause. The Company may terminate the Executive's employment
during the Employment Period for Cause or without Cause. For
purposes of this Agreement, "Cause" shall mean (i) a material
breach by the Executive of the Executive's obligations under
Section 2(a) (other than as a result of incapacity due to
physical or mental illness) which constitutes a continued
material nonperformance by the Executive of his obligations and
duties thereunder, as determined by the Board, and which is not
remedied within 30 days after receipt of written notice from the
Company specifying such breach, (ii) commission by the Executive
of an act of fraud upon the Company, as determined by a final,
non-appealable judgment by a court of proper jurisdiction, or
(iii) the conviction of the Executive of any felony involving
moral turpitude.
(c) Good Reason. The Executive's employment may be terminated
during the Employment Period by the Executive for Good Reason or
without Good Reason; provided, however, that the Executive agrees
not to terminate his employment for Good Reason unless (i) the
Executive has given the Company at least 30 days' prior written
notice of his intent to terminate his employment for Good Reason,
which notice shall specify the facts and circumstances
constituting Good Reason, and (ii) the Company has not remedied
such facts and circumstances constituting Good Reason within such
30 day period. For purposes of this Agreement, "Good Reason"
shall mean:
(i) The assignment to the Executive of any duties inconsistent
in any respect with the Executive's position (including status,
offices, titles and reporting requirements), authority, duties or
responsibilities as contemplated by Section 2(a) or any other
action by the Company which results in a material diminution in
such position, authority, duties or responsibilities, excluding
for this purpose an isolated insubstantial and inadvertent action
not taken in bad faith and which is remedied by the Company
promptly after receipt of notice thereof given by the Executive
(without limiting the foregoing, the Company and the Executive
agree that the Executive's failure to serve as the sole chief
executive officer of the Company or the delegation of the
authority, duties or responsibilities of the chief executive
officer to another person or persons, including any committee,
shall be deemed to be an action by the Company which results in a
material diminution in the Executive's position, authority,
duties, or responsibilities as contemplated by Section 2(a));
(ii) any termination or material reduction of a material benefit
under any
Investment Plan or Welfare Plan in which the Executive
participates unless (A) there is substituted a comparable benefit
that is economically substantially equivalent to the terminated
or reduced benefit prior to such termination or reduction or (B)
benefits under such Investment Plan or Welfare Plan are
terminated or reduced with respect to all employees previously
granted benefits thereunder;
(iii) any failure by the Company to comply with any of
the provisions of Section 2(b), other than an isolated,
insubstantial and inadvertent failure not occurring in bad faith
and which is remedied by the Company promptly after receipt of
notice thereof given by the Executive;
(iv) any failure by the Company to comply with and satisfy
Section 8c, provided that such successor has received at least
ten days prior written notice from the Company or the Executive
of the requirements of Section 8c;
(v) prior to the termination of the Executive for Cause, the
Executive's ceasing to be a director of the Company for any
reason other than his death, Disability (as hereinafter defined)
or voluntary resignation;
(vi) the relocation or transfer of the senior management's
executive offices to a location more than 15 miles from the
Executive's current principal residence as of the date of this
Agreement; or
(vii) without limiting the generality of the foregoing,
any material breach by the Company or any of its subsidiaries or
other affiliates (as defined below) of (A) this Agreement or (B)
any other agreement between the Executive and the Company or any
such subsidiary or other affiliate.
As used in this Agreement, "affiliate" means, with respect to a
person, any other person controlling, controlled by or under,
common control with the first person; the term "control," and
correlative terms, means the power, whether by contract, equity
ownership or otherwise, to direct the policies or management of a
person; and "person" means an individual, partnership,
corporation, limited liability company, trust or unincorporated
organization, or a government or agency or political subdivision
thereof.
(d) Notice of Termination. Any termination by the Company for
Cause or without Cause, or by the Executive for Good Reason or
without Good Reason, shall be communicated by Notice of
Termination to the other party hereto given in accordance with
Section 10(b). For purposes of this Agreement "Notice of
Termination" means a written notice which (i) indicates the
specific termination provision in this Agreement relied upon,
(ii) to the extent applicable, sets forth in reasonable detail
the facts and circumstances claimed to provide a basis for
termination of the Executive's employment under the provision so
indicated and (iii) if the Date of Termination (as defined below)
is other than the date of receipt of such notice, specifies the
termination date (which date shall not be more than 15 days after
the giving of such notice). The failure by the Executive or the
Company to set forth in the Notice of Termination any fact or
circumstance which contributes to a showing of Good Reason or
Cause shall not waive any right of the Executive or the Company
thereunder or preclude the Executive or the Company from
asserting such fact or circumstances in enforcing the Executive's
or the Company's rights thereunder.
(e) Date of Termination. "Date of Termination" means (i) if the
Executive's employment is terminated by the Company for Cause, or
by the Executive for Good Reason or without Good Reason, the date
of receipt of the Notice of Termination or any later date
specified therein, as the case may be, (ii) if the Executive's
employment is terminated by the Company other than for Cause, the
date on which the Company notifies the Executive of such
termination and (iii) if the Executive's employment is terminated
by reason of death or Disability, the date of death of the
Executive or the Disability Effective Date, as the case may be.
4. Obligations of the Company upon Termination.
(a) Good Reason; Other Than for Cause, Death or Disability. If,
during the Employment Period, the Company shall terminate the
Executive's employment other than for either Cause or Disability
or the Executive shall terminate his employment for Good Reason,
and the termination of the Executive's employment in any case is
not due to his death:
(i) The Company shall pay to the Executive in a lump sum in cash
within ten days after the Date of Termination the aggregate of
the following amounts: (A) the sum of the Executive's Annual Base
Salary through the Date of Termination to the extent not
therefore paid and any compensation previously deferred by the
Executive (together with any accrued interest or earnings
thereon) and any accrued vacation pay (Accrued Obligations"); (B)
an amount equal to the product of (x) the Executive's Annual Base
Salary multiplied by (y) a fraction, the numerator of which is
the number of full or partial months in the period from the Date
of Termination to the end of the Employment Period and the
denominator of which is 12; and c any amount arising from
Executive's participation in, or benefits under, any investment
Plans ("Accrued Investments"), which amounts shall be payable in
accordance with the terms and conditions of such Investment
Plans;
(ii) For the remainder of the Employment Period, or such longer
period as any plan, program, practice or policy may provide, the
Company shall continue benefits provided under Welfare Plans to
the Executive and/or the Executive's family at least equal to
those which would have been provided to them if the Executive's
employment had not been terminated or pay the Executive monthly
an amount of cash equal to the value of benefits under Welfare
Plans; provided, however, that if the Executive becomes employed
with another employer and is eligible to receive similar benefits
under another employer provided plan, such benefits or cash
described herein shall be secondary to and not duplicate those
provided under such other plan during such applicable Period of
eligibility (such continuation of such benefits or cash for the
applicable period hereinabove set forth in this clause (ii) shall
be hereinafter referred to as "Welfare Benefit Continuation").
For purposes of determining eligibility of the Executive for
retiree benefits pursuant to such Plans, practices, programs and
policies, the Executive shall be considered to have remained
employed until the end of the Employment Period and to have
retired on the last day of such period;
(iii) For the remainder of the Employment Period, to the
extent not therefore paid or provided, the Company shall timely
pay or provide to the Executive and/or the Executive's family any
other amounts or benefits required to be paid or provided or
which the Executive and/or the Executive's family is eligible to
receive pursuant to this Agreement and under
any plan, program, policy or practice or contract or agreement of
the Company ("Other Benefits"); and
(iv) Notwithstanding the terms or conditions of any stock option,
stock appreciation right or similar agreements between the
Company and the Executive, the Executive shall vest, as of the
Date of Termination, in all rights under such agreements (i.e.,
stock options that would otherwise vest after the Date of
Termination) and thereafter shall be permitted to exercise any
and all such rights until the first anniversary of the Date of
Termination.
(b) Death. If the Executive's employment is terminated
by reason of the Executive's death during the Employment
Period, the Company shall promptly pay to his legal
representatives: (i) the Accrued Obligations; (ii) the Accrued
Investments and (iii) $3,750,000 as a death benefit. The Company
may provide for the payment of such amounts through insurance.
The Company shall have no further payment obligations to the
Executive or his legal representatives under this Agreement other
than for payment of Other Benefits and the timely provision of
the Welfare Benefit Continuation to the Executive's family.
(c) Disability. If the Executive's employment is terminated by
reason of the Executive's Disability during the Employment
Period, the Company shall have no further payment obligations to
the Executive or his legal representatives under this Agreement,
other than for (i) payment of Accrued Obligations, Accrued
Investments and Other Benefits and (ii) the payment to the
Executive of his Annual Base Salary in effect at the date of such
termination (in accordance with the customary payroll practices
of the Company) for the remainder of the Employment Period.
(d) Cause; Other than for Good Reason. If the Executive's
employment shall be terminated by the Company for Cause or by
the Executive without Good Reason during the Employment Period,
the Company shall have no further payment obligations to the
Executive other than for payment of Accrued Obligations, Accrued
Investments and Other Benefits to the Date of Termination.
5. Full Settlement. The Company's obligation to make the
payments provided for in this Agreement and otherwise to perform
its obligations thereunder shall not be affected by any setoff,
counterclaim, recoupment, defense or other claim, right or action
which the Company may have against the Executive or others;
provided, however, that in no event shall the Executive be
obligated to seek other employment or take any other action by
way of mitigation of the amounts payable to the Executive under
any of the provisions of this Agreement and, except as provided
in Section 4(a)(ii), such amounts shall not be reduced whether or
not the Executive obtains other employment. Neither the
Executive nor the Company shall be liable to the other party for
any damages in addition to the amounts payable under Section 4
hereof arising out of the termination of the Executive's
employment prior to the end of the Employment Period; provided,
however, that the Company shall be entitled to seek damages for
any breach of Section 6 or criminal misconduct.
6. Confidential Information.
(a) The Executive acknowledges that the Company and its
affiliates have trade, business and financial secrets and other
confidential and proprietary information (collectively, the
"Confidential Information"). As defined herein, Confidential
Information shall not include (i) information that is generally
known to other persons or entities who can obtain economic value
from its disclosure or use and (ii) information required to be
disclosed by the Executive pursuant to a subpoena or court order,
or pursuant to a requirement of a governmental agency or law of
the United States of America or a state thereof or any
governmental or political subdivision thereof; provided, however,
that the Executive shall take all reasonable steps to prohibit
disclosure pursuant to subsection (ii) above.
(b) The Executive agrees (i) to hold such Confidential
Information in confidence and (ii) not to release such
information to any person (other than Company employees and other
persons to whom the Company has authorized the Executive to
disclose such information and then only to the extent that such
Company employees and other persons authorized by the Company
have a need for such knowledge).
(c) The Executive further agrees not to use any Confidential
Information for the benefit of any person or entity other than
the Company.
(d) The Executive's obligations under this Section 6 shall
terminate on the first anniversary of the Date of Termination,
provided that such obligations shall terminate on the Date of
Termination if the Company fails to make the payments or perform
its obligations required thereunder.
7. Surrender of Materials Upon Termination. Upon any
termination of the Executive's employment, the Executive shall,
upon the request of the Company, immediately return to the
Company all copies, in whatever form, of any and all Confidential
Information and other properties of the Company and its
affiliates which are in the Executive's possession, custody or
control.
8. Successors.
(a) This Agreement is personal to the Executive and without the
prior written consent of the Company shall not be assignable by
the Executive otherwise than by will or the laws of descent and
distribution or by the Company except as set forth in c below.
This Agreement shall inure to the benefit of an be enforceable by
the Executive's legal representatives.
(b) This Agreement shall inure to the benefit of and be binding
upon the Company and its successors and assigns.
(c) The Company will require any successor (whether direct or
indirect, by purchase, merger, consolidation or otherwise) to all
or substantially all of the business and/or assets of the Company
to assume expressly and agree to perform this Agreement in the
same manner and to the same extent that the Company would be
required to perform it if no such succession had taken place. As
used in this Agreement, "Company" shall mean the Company as
hereinbefore defined and any successor to its business and/or
assets as aforesaid which assumes and agrees to perform this
Agreement by operation of law, or otherwise.
9. Effect of Agreement on Other Benefits. The existence of
this Agreement shall not prohibit or restrict the Executive's
entitlement to full participation in the executive compensation,
employee benefit and other plans or programs in which executives
of the Company are eligible to participate.
10. Miscellaneous.
(a) This Agreement shall be governed by and construed in
accordance with the laws of the State of Texas, without reference
to principles of conflict of laws. The captions of this
Agreement are not part of the provisions hereof and shall have no
force or effect. This Agreement may not be amended or modified
otherwise than by a written agreement executed by the parties
hereto or their respective successors and legal representatives.
(b) All notices and other communications thereunder shall be in
writing and shall be given by hand delivery to the other party or
by registered or certified mail, return receipt requested,
postage prepaid, addressed as follows:
If to the Executive: L. Lowry Mays
200 Concord Plaza, Suite 600
San Antonio, Texas 78216
If to the Company: Clear Channel Communications, Inc.
200 Concord Plaza, Suite 600
San Antonio, Texas 78216
Attention: President
or to such other address as either party shall have furnished to
the other in writing in accordance herewith. Notice and
communications shall be effective when actually received by the
addressee.
(c) If any provision of this Agreement is held to be illegal,
invalid or unenforceable under present or future laws effective
during the term of this Agreement, such provision shall be fully
severable; this Agreement shall be construed and enforced as if
such illegal, invalid or unenforceable provision had never
comprised a portion of this Agreement; and the remaining
provisions of this Agreement shall remain in full force and
effect and shall not be affected by the illegal, invalid or
unenforceable provision or by its severance from this Agreement.
Furthermore, in lieu of such illegal, invalid or unenforceable
provision there shall be added automatically as part of this
Agreement a provision as similar in terms to such illegal,
invalid or unenforceable provision as may be possible and be
legal, valid and enforceable.
(d) The Company agrees to attempt to obtain and maintain a
director's and officer's liability insurance policy during the
term of the Executive's employment covering the Executive on
commercially reasonable terms, and the amount of coverage shall
be reasonable in relation to the Executive's position and
responsibilities thereunder; provided, however, that such
coverage may be reduced or eliminated to the extent that the
Company reduces or eliminates coverage for its directors and
executives generally.
(e) The Company may withhold from any amounts payable under this
Agreement such Federal, state or local taxes as shall be required
to be withheld pursuant to any applicable law or regulation.
(f) The Executive's or the Company's failure to insist upon
strict compliance with any provision of this Agreement or the
failure to assert any right the Executive or the Company may have
thereunder, including, without limitation, the right of the
Executive to terminate employment for Good Reason, shall not be
deemed to be a waiver of such provision or right or any other
provision or right of this Agreement.
(g) The Executive acknowledges that money damages would be both
incalculable and an insufficient remedy for a breach of Section 6
by the Executive and that any such breach would cause the Company
irreparable harm. Accordingly the Company, in addition to any
other remedies at law or in equity it may have, shall be
entitled, without the requirement of posting of bond or other
security, to equitable relief, including injunctive relief and
specific performance, in connection with a breach of Section 6 by
the Executive.
(h) The provisions of this Agreement constitute the complete
understanding and agreement between the parties with respect to
the subject matter hereof.
(i) This Agreement may be executed in two or more counterparts.
IN WITNESS WHEREOF, the Executive has hereunto set the
Executive's hand and, pursuant to the authorization from the
Compensation Committee and the Board, the Company has caused this
Agreement to be executed in its name on its behalf, all as of the
day and year first above written.
EXECUTIVE
/s/ L. Lowry Mays
L. Lowry Mays
CLEAR CHANNEL COMMUNICATIONS, INC.
By: /s/ Randall Mays
Name: Randall Mays
Title: Vice President
EXHIBIT 10.19 -- STOCK PURCHASE AGREEMENT BY AND AMONG CLEAR
CHANNEL COMMUNICATIONS, INC., ELLER MEDIA CORPORATION AND THE
STOCKHOLDERS OF ELLER MEDIA CORPORATION DATED FEBRUARY 25, 1997
STOCK PURCHASE AGREEMENT
BY AND AMONG
CLEAR CHANNEL COMMUNICATIONS, INC.
ELLER MEDIA CORPORATION
AND
THE STOCKHOLDERS OF
ELLER MEDIA CORPORATION
DATED FEBRUARY 25, 1997
STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT (this "Agreement"), dated as of
February 25, 1997, is by and among Clear Channel Communications,
Inc., a Texas corporation ("Purchaser"), Eller Media Corporation,
a Delaware corporation (the "Company"), and those persons listed
on Exhibit A hereto (individually, including both option holders
and stockholders as identified on such exhibit, each a
"Stockholder" and collectively, the "Stockholders"), being the
beneficial owners of all shares, and all options to acquire
shares, of capital stock of the Company issued and outstanding on
the date hereof.
RECITALS
WHEREAS, the Stockholders as a group own all of the shares of
Common Stock, par value $.01 per share, of the Company, issued
and outstanding or issuable pursuant to options outstanding on
the date hereof, with each Stockholder owning or having the right
to acquire the number of shares set forth opposite such
Stockholder's name on Exhibit A;
WHEREAS, the Company, through its subsidiaries, is in the
business of (a) owning, leasing, constructing, posting, painting
and maintaining outdoor advertising displays and (b) renting and
selling space on such outdoor and other out-of-home advertising
displays, consisting principally of painted bulletins and poster
panels of various sizes to the general public for outdoor and
other out-of-home advertising purposes; and
WHEREAS, the Stockholders desire to sell to Purchaser, and
Purchaser desires to purchase from the Stockholders, the Shares
(as defined herein), in exchange for the Purchase Price (as
defined herein), as allocated in the manner set forth on Exhibit
B hereto, upon the terms and subject to the conditions
hereinafter set forth.
AGREEMENT
NOW, THEREFORE, in consideration of the premises and mutual
covenants hereinafter contained, the parties hereto agree as
follows:
1. Definitions. As used in this Agreement, the following terms
shall have the indicated meanings, which meanings shall be
applicable, except to the extent otherwise indicated in a
definition of a particular term, both to the singular and plural
forms of such terms. Any agreement referred to below shall mean
such agreement as amended, supplemented and modified from time to
time to the extent permitted by the applicable provisions thereof
and by this Agreement.
"ADCO Note" shall mean that certain 6.25% Convertible
Secured Note Due 2002, dated January 3, 1997, in favor of Richard
Traverso d/b/a ADCO Outdoor Advertising, in the principal amount
of $9.5 million.
"Affiliate" shall have the meaning specified in Rule 12b-2
of the regulations promulgated under the Exchange Act.
"Aggregate Consideration" shall mean the sum of the Cash
Consideration plus the Stock Consideration, as adjusted pursuant
to Section 2 of this Agreement.
"Agreement" has the meaning specified in the first paragraph
of this Agreement.
"Average Share Price" shall mean the average closing price
of Purchaser Common Stock on the NYSE during the 10 trading days
beginning 13 trading days prior to the Closing Date; provided,
however, that, if Purchaser exercises its option pursuant to
Section 9(a) of this Agreement to extend the Closing Date beyond
April 10, 1997, the Stockholders may, at their option, elect to
use April 10, 1997 or the Closing Date as so extended as the
Closing Date for the purposes of this definition.
"Balance Sheet" shall mean, as of the date hereof, the
unaudited Consolidated Balance Sheet of the Company and its
Subsidiaries at December 31, 1996, and at and after the date of
delivery to Purchaser of such Balance Sheet accompanied by the
unqualified report of Arthur Andersen LLP, such audited Balance
Sheet.
"Balance Sheet Date" shall mean December 31, 1996.
"Bankruptcy and Equity Exceptions" has the meaning set forth
in Section 3(d) of this Agreement.
"Best Efforts" shall mean reasonable good faith efforts but
shall in no event require the commencement of litigation against
any third party or the payment of any fees to any third party.
"Business Day" shall mean any weekday on which commercial
banks in New York City are open. Any action, notice or right
which is to be exercised or lapses on or by a given date which is
not a Business Day may be taken, given or exercised, and shall
not lapse, until the end of the next Business Day.
"Cash Consideration" has the meaning specified in
Section 2(b) of this Agreement.
"Chase Credit Agreement" shall mean that certain Amended and
Restated Credit Agreement, dated as of November 19, 1996, between
Eller Media Company, as Borrower, the Company, as Parent
Guarantor, the Subsidiary Guarantors named therein, each of the
lenders that is a signatory thereto, and The Chase Manhattan
Bank, as Administrative Agent.
"Claim" has the meaning specified in Section 12(d) of this
Agreement.
"Claim Notice" has the meaning specified in Section 12(d) of
this Agreement.
"Closing" has the meaning specified in Section 9(a) of this
Agreement.
"Closing Date" has the meaning specified in Section 9(a) of
this Agreement.
"Code" shall mean the Internal Revenue Code of 1986, as
amended.
"Commission" shall mean the Securities and Exchange
Commission.
"Company" has the meaning specified in the first paragraph
of this Agreement.
"Company Common Stock" shall mean the Common Stock, par
value $.01 per share, of the Company.
"Company Employee Benefit Plans" shall mean Employee Benefit
Plans and any other material employee benefit arrangements or
payroll practices, including, without limitation, employment
agreements, severance agreements, executive compensation
arrangements, incentive programs or arrangements, sick leave,
vacation pay, severance pay policies, plant closing benefits,
salary continuation for disability, consulting or other
compensation arrangements, workers' compensation, retirement,
deferred compensation, bonus, stock purchase, hospitalization,
medical insurance, life insurance, tuition reimbursement or
scholarship programs, any plans providing benefits or payments in
the event of a change of control, change in ownership, or sale of
a substantial portion (including all or substantially all) of the
assets of the Company, maintained by the Company, a Subsidiary or
an ERISA Affiliate or to which the Company, a Subsidiary or an
ERISA Affiliate has contributed or is or was obligated to make
payments, excluding any Multiemployer Plan, in each case with
respect to any employees or former employees of the Company, a
Subsidiary or an ERISA Affiliate.
"Company Employee Pension Plans" shall mean Company Employee
Benefit Plans which constitute "employee pension benefit plans"
as defined in Section 3(2) of ERISA.
"Company Stock Option Agreements" shall mean the Company
stock option agreements listed on Schedule 3(b) of this
Agreement.
"Company Stock Options" shall mean the stock options of the
Company pursuant to the Company Stock Option Agreements.
"Company Welfare Plans" shall mean Company Benefit Employee
Plans which constitute "employee welfare benefit plans" within
the meaning of Section 3(1) of ERISA.
"Damages" has the meaning specified in Section 12(a) of this
Agreement.
"Disclosure Letter" shall mean the schedules prepared and
delivered by the Company and the Stockholders to Purchaser in a
letter dated as of the date hereof (and as updated pursuant to
Section 15 hereof) which set forth the exceptions to the
representations and warranties contained in Section 3 hereof and
certain other information called for by this Agreement. Unless
otherwise specified, each reference in this Agreement to any
numbered schedule is a reference to that numbered schedule which
is included in the Disclosure Letter.
"Employee Benefit Plan" shall have the meaning ascribed to
such term by Section 3(3) of ERISA.
"Encumbrances" shall mean any lien, security interest,
mortgage, pledge, hypothecation, easement or conditional sale or
other title retention agreement; provided, however, that
Encumbrances shall not include any Permitted Encumbrance.
"Environmental Laws" shall mean any federal, state, or local
law, ordinance, regulation, order or permit pertaining to the
environment, natural resources or public health or safety as
presently in effect.
"ERISA" shall mean the Employee Retirement Income Security
Act of 1974, as amended.
"ERISA Affiliate" shall refer to any trade or business,
whether or not incorporated, under common control of the Company
within the meaning of Section 414(b) or (c) of the Code and,
solely for the purposes of potential liability under
Section 302(c)(11) of ERISA and Section 412(c)(11) of the Code
and the lien created under Section 302(f) of ERISA and
Section 412(n) of the Code, within the meaning of Section 414(m)
or (o) of the Code.
"Escrow Agent" shall mean the entity designated by Purchaser
and the Stockholders to act as escrow agent under the Escrow
Agreement.
"Escrow Agreement" shall mean that certain Escrow Agreement,
dated as of the Closing Date, by and among Purchaser, the
Stockholder Representative and the Escrow Agent, substantially in
the form of Exhibit C attached hereto.
"Escrowed Shares" shall mean a number of shares of Purchaser
Common Stock equal to $35 million divided by the Average Share
Price (which, to the extent provided on Exhibit B hereto, may
include Option Shares).
"Exchange Act" shall mean the Securities Exchange Act of
1934, as amended, and the rules and regulations promulgated
thereunder.
"Exchange Rate" has the meaning specified in Section 2(b) of
this Agreement.
"Financial Statements" shall mean (1) the audited
Consolidated Balance Sheet of the Company and its Subsidiaries at
December 31, 1995 and the related audited Consolidated Statements
of Earnings and Cash Flows of the Company and its Subsidiaries
for the year then ended, certified by Arthur Andersen LLP, and
(ii) as of the date hereof the unaudited Consolidated Balance
Sheet of the Company and its Subsidiaries at December 31, 1996
and the related unaudited Consolidated Statements of Earnings and
Cash Flows of the Company and its Subsidiaries for the year then
ended, and at and after the date of delivery to Purchaser of such
Financial Statements accompanied by the unqualified report of
Arthur Andersen LLP, such audited Financial Statements.
"Hart-Scott-Rodino Act" shall mean the Hart-Scott-Rodino
Antitrust Improvements Act of 1976, as amended.
"Hazardous Materials" shall mean hazardous wastes as
presently defined by the Resource Conservation and Recovery Act
of 1976, 42 U.S.C. Section 6901 et. seq., as amended, and
regulations promulgated thereunder and hazardous substances as
presently defined by the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, 42 U.S.C. Section 9601 et
seq., as amended ("CERCLA" or "Superfund") and regulations
promulgated thereunder, and shall also mean every "hazardous
material," "hazardous substance," "hazardous waste," "toxic
substance," or petroleum or petroleum product, as defined or
described in every state, local or other federal Environmental
Law which is or was applicable to the operations of the Company
and its Subsidiaries.
"H&F Funds" shall mean Hellman & Friedman Capital Partners
III, L.P., H&F Orchard Partners III, L.P. and H&F International
Partners III, L.P., and their Permitted Assignees (as defined in
the Registration Rights Agreement) and Permitted Transferees (as
defined in the Registration Rights Agreement).
"HFCP III" has the meaning specified in Section 6(f)(ii) of
this Agreement.
"Indebtedness" shall mean all obligations which arise from
borrowed money or the deferred purchase price of property or
services, including capitalized leases under generally accepted
accounting principles (other than accounts payable arising in the
ordinary course of business).
"Material Lease" or "Material Leases" has the meaning
specified in Section 3(j) of this Agreement.
"Multiemployer Plan" shall mean any Employee Benefit Plan to
which the Company, any Subsidiary or any ERISA Affiliate has or
has had after September 25, 1980 an obligation to contribute that
constitutes a multiple employer plan described in Section 3(37)
of ERISA.
"Multiple Employer Plan" shall mean any Employee Benefit
Plan to which the Company, any Subsidiary or any ERISA Affiliate
has or has had after September 25, 1980 an obligation to
contribute that constitutes a multiple employer plan which is
subject to Section 413(c) of the Code and which is not a
Multiemployer Plan.
"New Disclosure Matters" has the meaning specified in
Section 15(b) of this Agreement.
"NYSE" shall mean the New York Stock Exchange.
"1997 Budget" has the meaning specified in Section 6(d) of
this Agreement.
"Option Assumption Agreement" shall mean that certain form
of Option Assumption Agreement, dated as of the Closing Date, to
be entered into between Purchaser and each employee of the
Company who holds Company Stock Options which remain unexercised
on the Closing Date, substantially in the form of Exhibit D
attached hereto.
"Option Shares" shall mean shares of Company Common Stock
issuable pursuant to Company Stock Options.
"Optionees" shall mean the holders of Company Stock Options
outstanding on the date hereof.
"Permitted Encumbrance" shall mean, (a) Encumbrances imposed
by any governmental authority for Taxes, assessments or charges
not yet due and payable or which are being contested in good
faith and by appropriate proceedings if adequate reserves with
respect thereto are maintained on the books of the Company or its
Subsidiaries in accordance with generally accepted accounting
principles; (b) carriers', warehousemen's, mechanics',
materialmen's, repairmen's or other like Encumbrances arising in
the ordinary course of business which are not overdue for a
period of more than 30 days or which are being contested in good
faith and by appropriate proceedings, if adequate reserves with
respect thereto are maintained on the books of the Company and
its Subsidiaries in accordance with generally accepted accounting
principles; (c) pledges or deposits in connection with worker's
compensation, unemployment insurance and other social security
legislation; (d) deposits to secure the performance of any or all
of the following: bids, trade contracts (other than for borrowed
money), leases, statutory obligations, surety and appeal bonds,
performance bonds and other obligations of a like nature incurred
in the ordinary course of business; (e) easements, rights-of-way,
restrictions and other similar encumbrances on real property
incurred in the ordinary course of business and encroachments
(whether or not in the ordinary course of business) which, in the
aggregate, are not substantial in amount, and which do not in any
case materially detract from the value of the property subject
thereto or interfere with the ordinary conduct of the business
thereon; and (f) all the exceptions to title reflected in
Schedule 3(n).
"Phantom Stock Grantees" shall mean the holders of Phantom
Stock Units outstanding on the date hereof.
"Phantom Stock Units" shall mean the aggregate number of
units of phantom stock issuable pursuant to the terms of the
Company phantom stock agreements listed on Schedule 3(b) of this
Agreement.
"Post-Agreement Date Disclosure Matters" has the meaning
specified in Section 15(b) of this Agreement.
"Pre-Agreement Date Disclosure Matters" has the meaning
specified in Section 15(b) of this Agreement.
"Pre-Closing Tax Period" has the meaning specified in
Section 3(h) of this Agreement.
"Preferred Stock" has the meaning specified in Section 3(b)
of this Agreement.
"Purchase Price" has the meaning specified in Section 2(b)
of this Agreement.
"Purchaser" has the meaning specified in the first
paragraph of this Agreement.
"Purchaser Common Stock" shall mean the Common Stock, par
value $.10 per share, of Purchaser.
"Purchaser Financial Statements" has the meaning specified
in Section 5(f) of this Agreement.
"Purchaser SEC Documents" has the meaning specified in
Section 5(f) of this Agreement.
"Registration Rights Agreement" shall mean that certain
Registration Rights Agreement, dated the Closing Date,
substantially in the form of Exhibit E attached hereto.
"Representative" shall mean any officer, director,
principal, attorney, employee, consultant or other
representative.
"Restated Option" has the meaning specified in Section 2(c)
of this Agreement.
"Restated Option Agreement" has the meaning specified in
Section 2(c) of this Agreement.
"Securities Act" shall mean the Securities Act of 1933, as
amended, and the rules and regulations promulgated thereunder.
"Share" or "Shares" has the meaning specified in
Section 2(a) of this Agreement.
"Stockholder" or "Stockholders" has the meaning specified in
the first paragraph of this Agreement.
"Stock Consideration" has the meaning specified in
Section 2(b) of this Agreement.
"Stockholder Representative" has the meaning specified in
Section 13(a) of this Agreement.
"Stockholders Agreement" shall mean that certain
Stockholders Agreement, dated August 18, 1995, by and among
(i) Eller Media Company; (ii) Hellman & Friedman Capital Partners
III, L.P.; (iii) H&F Orchard Partners III, L.P.; (iv) H&F
International Partners III, L.P.; (v) EM Holdings LLC; (vi) Karl
Eller; and (vii) Irving Grousbeck, American Media Management,
Inc., Richard Reiss, Jr., Glenn Krevlin (as trustee fbo Nina
Krevlin, Glenn Krevlin, Michael Krevlin and Jill Krevlin), K.
Tucker Anderson, and Bruce Halle.
"Straddle Period" has the meaning specified in Section 3(h)
of this Agreement.
"Subsidiary" shall mean each corporation, partnership or
other entity, fifty percent (50%) or more of the outstanding
voting shares of which or other voting interests or equity
interests in the case of a partnership are owned or controlled
directly or indirectly by the Company.
"Tax" or "Taxes" means all taxes, charges, fees, imposts,
levies or other assessments, including, without limitation, all
net income, franchise, profits, gross receipts, capital, sales,
use, ad valorem, value added, transfer, transfer gains,
inventory, capital stock, license, withholding, payroll,
employment, social security, unemployment, excise, severance,
stamp, occupation, real or personal property, and estimated
taxes, water, rent and sewer service charges, customs duties,
fees, assessments and charges of any kind whatsoever, together
with any interest and any penalties, fines, additions to tax or
additional amounts thereon, imposed by any taxing authority
(federal, state, local or foreign) and shall include any
transferee liability in respect of Taxes.
"Tax Return" means all returns, declarations, reports,
estimates, information returns and statements required to be
filed in respect of any Taxes.
"VEBA" has the meaning specified in Section 3(s) of this
Agreement.
"WARN" shall mean the Workers Adjustment and Retraining
Notification Act of 1988 and any similar state or local plant
closing law.
Sale of Shares; Purchase Price.
Sale of Shares. On the terms and subject to the conditions set
forth in this Agreement and, subject to the immediately following
sentence hereof, each Stockholder hereby severally agrees to
sell, assign and transfer to Purchaser, and Purchaser hereby
agrees to purchase from such Stockholder, on the Closing Date,
the number of shares of Company Common Stock owned by such
Stockholder on the date hereof as set forth opposite such
Stockholder's name on Exhibit B hereto, plus such number of
additional shares of Company Common Stock as will hereafter be
acquired by such Stockholder prior to the Closing Date upon the
exercise of Company Stock Options held by such Stockholder as set
forth on Exhibit B, for the aggregate consideration set forth on
Exhibit B opposite such Stockholder's name, subject to the Escrow
Agreement provided for in Section 2(d). In the event any
Optionee who on the date hereof is an employee of the Company
does not fully exercise Company Stock Options as listed opposite
such Optionee's name on Exhibit B under the column "Value of
Stock Consideration" on or prior to the Closing Date, Purchaser
hereby agrees to assume such options pursuant to Section 2(c)
hereof and no shares of Purchaser Common Stock will be issuable
at Closing in respect of the unexercised portion of such Company
Stock Options. As used herein, "Shares" shall mean the aggregate
number of shares of Company Common Stock to be sold by the
Stockholders and purchased by the Purchaser pursuant to this
Section 2.
Purchase Price.
In consideration of the transactions contemplated by
this Agreement, Purchaser shall pay to the Stockholders, the
Optionees and the Phantom Stock Grantees an aggregate purchase
price (the "Purchase Price") equal to (A) $325,329,131 (the "Cash
Consideration") in cash (without interest), payable in
immediately available funds, plus (B) a number of shares of
Purchaser Common Stock (the "Stock Consideration") determined as
set forth in subsection (ii) of this Section 2(b), subject to the
Escrow Agreement described in Section 2(d) hereof. The Purchase
Price shall be allocated among the Stockholders, the Optionees
and the Phantom Stock Grantees in the manner set forth on
Exhibit B hereto.
The Stock Consideration shall equal the number of
shares of Purchaser Common Stock obtained as a result of dividing
$400,000,000 by the Average Share Price. Notwithstanding the
foregoing, if the Average Share Price exceeds $45.94, the Stock
Consideration shall be 8,707,009 shares of Purchaser Common
Stock; and if the Average Share Price is less than $41.56, the
Stock Consideration shall be 9,624,639 shares of Purchaser Common
Stock. Should the Average Share Price be greater than $45.94 or
less than $41.56, the Stockholders shall adjust the proportions
of Cash Consideration and Stock Consideration on Exhibit B hereto
in a manner that insures that each Stockholder will receive the
Aggregate Consideration in proportion to the value of such
Stockholder's respective ownership in the Company as reflected by
such Stockholder's share of the Aggregate Consideration as shown
on Exhibit B as of the date hereof.
Notwithstanding subsection (i) of this Section 2(b),
each Stockholder may elect to receive the Purchase Price in
different proportions of Cash Consideration and Stock
Consideration than provided on Exhibit B hereto, but only to the
extent that other Stockholders make the opposite complementary
elections, to the end that the aggregate amount of cash and
number of shares of Purchaser Common Stock included in the
Purchase Price shall not (other than as a result of rounding) be
different as a result of all such elections. To the extent the
Stockholders make such an election, the Stockholder
Representative will deliver a revised Exhibit B reflecting such
an election(s) to Purchaser no later than ten (10) days prior to
the Closing Date.
If, between the date of this Agreement and the Closing
Date, the outstanding shares of Purchaser Common Stock shall have
been changed into a different number of shares or a different
class by reason of any reclassification, recapitalization, split-
up, stock dividend, stock combination, exchange of shares or
readjustment, the Stock Consideration shall be proportionately
adjusted (rounded to the nearest six decimal places).
No fractional shares of Purchaser Common Stock shall be
issued, but in lieu thereof each holder of Shares who would
otherwise be entitled to receive a fraction of a share of
Purchaser Common Stock shall receive from Purchaser an amount of
cash equal to the product of (i) the fraction of a share of
Purchaser Common Stock to which such holder would otherwise be
entitled multiplied by (ii) the Average Share Price.
Company Stock Options. On the Closing Date, all then
outstanding Company Stock Options will be fully vested and
immediately exercisable. Purchaser shall enter into an Option
Assumption Agreement with each employee of the Company who holds
Company Stock Options which have not been exercised on or prior
to the Closing Date such that, immediately after the Closing, all
such unexercised Company Stock Options shall be fully vested and
immediately exercisable for shares of Purchaser Common Stock
(each a "Restated Option"). Each Restated Option shall be
identical to such Company Stock Option, except that the Restated
Option shall (i) be exercisable for a number of shares of
Purchaser Common Stock determined by dividing the sum of the
value of the Stock Consideration set forth on Exhibit B hereto
plus the aggregate amount of the exercise price pursuant to such
Restated Option by the Average Share Price, and (ii) have an
exercise price per share of Purchaser Common Stock equal to the
aggregate exercise price of the unexercised portion of the
Company Stock Option immediately prior to the Closing Date,
divided by the number of shares of Purchaser Common Stock
determined pursuant to clause (i), and rounded to the nearest
whole cent. Notwithstanding the foregoing, for purposes of
calculating the number of shares of Purchase Common Stock
pursuant to clause (i), the Average Share Price shall not be
greater than $45.94 nor less than $41.56. A sample calculation
pursuant to this Section 2(c) is set forth on Exhibit G hereto.
Purchaser shall reserve a sufficient number of shares of
Purchaser Common Stock for issuance upon exercise of such
Restated Options, shall cause the shares so issuable to be
included in Purchaser's registration statement on Form S-8, and
shall cause such registration statement to remain effective until
the Restated Options are exercised, expire or lapse. On the
Closing Date, and upon surrender of any outstanding Company Stock
Option Agreement, Purchaser and the holder of such outstanding
Company Stock Option shall enter into a restated option agreement
(a "Restated Option Agreement") evidencing the Restated Option to
which such Company Stock Option relates. In the event any holder
of a Company Stock Option Agreement exercises all or a portion of
his or its Company Stock Options pursuant to the terms of such
Company Stock Option Agreement on or prior to the Closing Date,
such holder shall enter an agreement with Purchaser to sell such
shares of Company Common Stock issued upon the exercise of such
Company Stock Options upon the terms and subject to the
conditions of this Agreement.
Escrow Agreement. In order to establish a procedure
for the satisfaction of any claims by Purchaser for
indemnification pursuant to Section 12 hereof, the Stockholder
Representative shall enter into the Escrow Agreement with
Purchaser pursuant to which, among other things, (i) Purchaser
shall deposit with the Escrow Agent a number of shares of
Purchaser Common Stock to be received by the Stockholders
pursuant to Section 2(b) equal to $35 million divided by the
Average Share Price multiplied by the percentages with respect to
the Stockholders (excluding Optionees with respect to Company
Stock Options which are not exercised at or prior to Closing) as
set forth on Exhibit F hereto and (ii) rights with respect to a
number of shares of Purchaser Common Stock issuable upon the
exercise of Restated Options equal to $35 million divided by the
Average Share Price multiplied by the percentages with respect to
the Optionees (excluding Optionees with respect to Company Stock
Options which are exercised at or prior to Closing) as set forth
on Exhibit F hereto shall be made subject to an escrow fund
pursuant to the Option Assumption Agreements. The Escrowed
Shares shall be available to secure, in accordance with the
Escrow Agreement, and shall be the sole source of payment of, the
Stockholders' indemnity obligations under Section 12 hereof. All
costs of the escrow shall be paid one-half by the Purchaser, on
the one hand, and one-half by the Stockholders collectively, on
the other, all as further provided in the Escrow Agreement.
Representations and Warranties as to the Company. Each
of the Company and the Stockholders hereby severally represents
and warrants to Purchaser that, except as otherwise set forth in
the Disclosure Letter (which Disclosure Letter sets forth the
schedules referred to in this Section 3 and Section 4), the
following representations and warranties are, as of the date
hereof, and will be, as of the Closing Date, true and correct (it
being understood that the inclusion of any item on a schedule
hereto shall not be deemed an acknowledgement that such item is
material, and any disclosure set forth on any schedule is deemed
to be set forth on all other schedules, to the extent
applicable):
Organization and Good Standing. The Company is a
corporation duly organized, validly existing and in good standing
under the laws of the State of Delaware, and has full corporate
power and authority to own its properties and carry on its
business as presently conducted. The Company is duly qualified
to do business as a foreign corporation and is in good standing
in each jurisdiction where the character of its properties owned
or leased or the nature of its activities makes such
qualification necessary, except where the failure to be so
qualified or in good standing would not be material to the
Company and its Subsidiaries, taken as a whole. The copies of
the Company's Certificate of Incorporation and By-Laws (together
with all amendments thereto) which have been previously delivered
or made available to Purchaser are correct and complete as of the
date hereof.
Capitalization. The authorized capital stock of the
Company consists of (i) 10,000 shares of Company Common Stock, of
which 1,917 shares are outstanding as of the date hereof, and
(ii) 2,000 shares of Preferred Stock, par value $.01 per share
("Preferred Stock"), of which no shares are outstanding as of the
date hereof. All of the outstanding Shares of the Company have
been validly issued and are fully paid and non-assessable. No
shares of Company Common Stock or Preferred Stock are held by the
Company as treasury stock. Except as set forth on Schedule 3(b),
there is no existing option, warrant, call, commitment or other
security or agreement of any kind to which the Company is a party
requiring, and there are no convertible securities of the Company
outstanding which upon conversion would require, the issuance of
any additional shares of capital stock of the Company or other
securities convertible into shares of capital stock or any debt
or equity security of the Company of any kind.
Subsidiaries. The Company has no Subsidiaries, except
as listed on Schedule 3(c) hereto. The authorized and
outstanding capital stock or equity interests of each Subsidiary
is as set forth on Schedule 3(c) hereto. All of such outstanding
shares or equity interests have been validly issued and are fully
paid, non-assessable and, except as set forth on Schedule 3(c),
owned by the Company or a Subsidiary as indicated thereon, free
and clear of any and all Encumbrances. No shares of capital stock
are held by any Subsidiary as treasury stock. There is no
existing option, warrant, call, commitment or other security or
agreement of any kind to which any Subsidiary is a party
requiring, and there are no convertible securities of any
Subsidiary outstanding which upon conversion would require, the
issuance of any additional shares of capital stock or equity
interests of any Subsidiary or other securities convertible into
shares of capital stock or any other debt or equity security of
any kind of any Subsidiary. Each Subsidiary is duly incorporated
or organized and validly existing in good standing under the laws
of its respective state of incorporation or organization. Each
Subsidiary has all requisite corporate or partnership power and
authority to own its properties and carry on its business as
presently conducted. Each Subsidiary is duly qualified to do
business as a foreign corporation or partnership and is in good
standing in each jurisdiction where the character of its
properties owned or leased or the nature of its activities makes
such qualification necessary, except where the failure to be so
qualified or in good standing would not be material to the
Company and its Subsidiaries, taken as a whole. There have been
delivered or made available to Purchaser complete and correct
copies as of the date hereof of the Certificate of Incorporation
and By-Laws (together with all amendments and proposed amendments
thereto) or other organizational documents of non-corporate
Subsidiaries of each Subsidiary.
Execution and Effect of Agreement. The Company has the
corporate power and authority to execute and deliver this
Agreement and to perform its obligations hereunder, and to
consummate the transactions contemplated hereby. The execution
and delivery of this Agreement by the Company and the
consummation by the Company of the transactions contemplated
hereby have been duly authorized by the Board of Directors of the
Company and no other corporate proceeding on the part of the
Company is necessary to authorize the execution, delivery and
performance of this Agreement and the transactions contemplated
hereby. This Agreement has been duly executed and delivered by
the Company and constitutes the legal, valid and binding
obligation of the Company, enforceable against the Company in
accordance with its terms, subject to applicable bankruptcy,
insolvency, fraudulent conveyance, reorganization, moratorium and
similar laws affecting creditors' rights and remedies generally,
and subject as to enforceability, to general principles of
equity, including principles of commercial reasonableness, good
faith and fair dealing (regardless of whether enforcement is
sought in a proceeding at law or in equity), and except as
limited by the unenforceability under certain circumstances under
law or court decisions of provisions providing for the
indemnification of or contribution to a party with respect to a
liability where such indemnification or contribution is contrary
to public policy (the "Bankruptcy and Equity Exceptions").
Financial Statements. The Company has delivered to Purchaser
copies of the Financial Statements. Each of the Financial
Statements (including the footnotes thereto) is complete and
correct, is in accordance with the books and records of the
Company and has been prepared in accordance with generally
accepted accounting principles applied on a consistent basis
throughout the periods covered thereby, and, with respect to the
unaudited financial statements, subject to normal year-end audit
adjustments, and presents fairly in all material respects the
financial position, results of operations and cash flows of the
Company and its Subsidiaries at the dates and for the periods
indicated.
No Undisclosed Liabilities. As at the Balance Sheet
Date, neither the Company nor any Subsidiary had any Indebtedness
or liabilities (whether accrued, absolute, contingent or
otherwise, and whether due or to become due) which would normally
be disclosed on a balance sheet (including its footnotes)
prepared in accordance with generally accepted accounting
principles if such Indebtedness or liabilities had been known at
the time of the balance sheet's preparation, which is not shown
on the Balance Sheet or disclosed in the Financial Statements
(including the footnotes thereto). Except as set forth in the
Balance Sheet, neither the Company nor any Subsidiary has
outstanding any Indebtedness or liability which would normally be
disclosed on a balance sheet (including its footnotes) prepared
in accordance with generally accepted accounting principles if
such Indebtedness or liabilities had been known at the time of
the balance sheet's preparation, other than those incurred since
the Balance Sheet Date in the ordinary course of business or
disclosed herein or in a schedule hereto or in any document
referred to in a schedule or in the Financial Statements
(including the footnotes thereto).
No Material Adverse Change; No Dividends. Since the
Balance Sheet Date, there has been no material adverse change in
the business (as presently conducted or presently expected to be
conducted), financial condition or results of operations of the
Company and its Subsidiaries, taken as a whole. Since the
Balance Sheet Date (i) no dividends or distributions have been
declared or paid on or made with respect to the shares of capital
stock or other equity interests of the Company or the
Subsidiaries nor have any such shares been repurchased or
redeemed, other than dividends or distributions paid to the
Company or a Subsidiary and (ii) except as set forth in the
Disclosure Letter, neither the Company nor any Subsidiary has
taken any action which would have violated Section 6(d) if this
Agreement had been dated December 31, 1996 and such covenants had
been binding and applicable from and after such date.
Taxes.
Except as set forth in Schedule 3(h) hereto, neither
the Company nor any of its Subsidiaries has any material
liability for any Taxes imposed by law in respect of any taxable
period ending on or before the Closing Date, or any Taxes imposed
by law in respect of the portion of any Straddle Period (as
defined below) which ends on the Closing Date (a "Pre-Closing Tax
Period"), other than amounts properly reserved or reflected in
the Financial Statements or arising in the ordinary course of
business since the date thereof. As used in this Agreement, the
term "Straddle Period" means any taxable period beginning before
and ending after the Closing Date.
The Company and each of its Subsidiaries has filed or
will timely file all material Tax Returns required to have been
filed prior to the Closing Date (subject to any timely extensions
permitted by law) by it with the appropriate taxing authority
with respect to Taxes for any period ending on or before the
Closing Date, and all Taxes shown to be payable on such Tax
Returns have been paid or will be paid prior to the Closing Date.
Except as set forth in Schedule 3(h) hereto, (A) to the
knowledge of the Company, no deficiency for any amount of Tax has
been asserted or assessed by a taxing authority against the
Company or any of its Subsidiaries, which is still pending, and
(B) neither the Company nor any of its Subsidiaries has filed any
waiver of the statute of limitations applicable to the assessment
or collection of any Tax imposed in respect of a Pre-Closing Tax
Period which is still open.
All material Taxes that the Company or any of its
Subsidiaries are required by law to withhold or collect have been
duly withheld or collected, and have been timely paid over to the
appropriate tax authorities.
No consent under Section 341(f) of the Code has been
filed with respect to the Company or any of its Subsidiaries.
Neither the Company nor any of its Subsidiaries has any
liability for the Taxes of any person other than the Company and
its Subsidiaries under Sections 1.1502-6 or 1.1502-78 of Title 26
of the Code of Federal Regulations (or any similar provisions of
state, local or foreign income tax law).
Except as set forth in Schedule 3(h) hereto, neither
the Company nor any of its Subsidiaries is a party to any tax
indemnity agreement, tax sharing agreement or other agreement
under which the Company or a Subsidiary could become liable to
another person as a result of the imposition upon of a Tax upon
such person, or the assessment or collection of such a Tax.
Except as set forth in Schedule 3(h) hereto, neither
the Company nor any of its Subsidiaries has agreed to make, or is
required to make, any adjustment under Section 481 of the Code
(or any similar provision of state, local or foreign income tax
law) by reason of a change in accounting methods or otherwise.
Patents, Trademarks and Copyrights. Schedule 3(i)
hereto contains a complete and correct list of each material
patent, trademark, trade name, service mark and copyright owned
or used by the Company or a Subsidiary and pending applications
therefor, and each license or other agreement relating thereto.
Except as set forth on Schedule 3(i) hereto, each of the
foregoing is owned by the party shown on such Schedule as owning
the same, free and clear of all Encumbrances. To the Company's
knowledge, there have been no material claims asserted in
writing, which are still pending, that any of the foregoing is
invalid or conflicts with the asserted rights of others. The
Company and each Subsidiary possess all patents, patent licenses,
trade names, trademarks, service marks, brand marks, brand names,
copyrights, know-how, formulas and other proprietary and trade
rights material to the conduct of its respective business as now
conducted.
Real Property; Leases of Real Property. Except as set
forth on Schedule 3(j) hereto, neither the Company nor any of its
Subsidiaries owns any real property. Schedule 3(j) hereto
contains a complete and correct list in all material respects of
all leases, subleases, license agreements or other rights of
possession or occupancy of real property to which the Company or
any Subsidiary is a party (as tenant, occupier or possessor)
pursuant to which the current net annual rent payable by the
Company or any Subsidiary currently exceeds $50,000 (each such
lease or agreement, a "Material Lease" and collectively the
"Material Leases"). Except as set forth on Schedule 3(j), all of
the Material Leases are in full force and effect. Complete and
correct copies of each Material Lease have been furnished or made
available to Purchaser. Except as disclosed on Schedule 3(j)
hereto, no consent is required of any landlord or other third
party to any Material Lease to consummate the transactions
contemplated hereby, and upon consummation of the transactions
contemplated hereby, each Material Lease will continue to entitle
the Company or its Subsidiaries, as the case may be, to the use
and possession of the real property specified in such Material
Leases and for the purposes for which such real property is now
being used by the Company or its Subsidiaries, respectively.
Except as set forth in such Schedule, neither the Company nor any
of its Subsidiaries is in default in any material respect beyond
any applicable notice or grace period or has received written
notice of any such default still outstanding on the date hereof
under any such Material Lease, and to the Company's knowledge, on
the date hereof, there exists no uncured material default
thereunder by any third party. All Material Leases are in full
force and effect and are enforceable against the parties thereto
in accordance with their terms except as limited by the
Bankruptcy and Equity Exceptions.
Permits; Compliance with Laws.
The Company and its Subsidiaries have all permits,
licenses and governmental authorizations material to ownership or
occupancy of their respective properties and assets and the
carrying on of their respective business.
The Company, its Subsidiaries and their respective
billboards are in compliance in all material respects with all
applicable federal, state and local laws and regulations relating
to zoning, land use, and billboard operations and content.
Except as set forth on Schedule 3(p) hereto, the
Company and its Subsidiaries are in compliance in all material
respects with all applicable federal, state and local laws and
regulations relating to employee or occupational safety,
discrimination in hiring, promotion or pay of employees, employee
hours and wages or employee benefits.
Insurance. Schedule 3(1) hereto contains a complete
and correct list in all material respects of all policies of
insurance of any kind or nature covering the Company or its
Subsidiaries, including, without limitation, policies of life,
fire, theft, employee fidelity and other casualty and liability
insurance, and such policies are in full force and effect.
Complete and correct copies of each such policy have been
furnished or made available to Purchaser.
Material Contracts. Except as listed in Schedule 3(m) hereto or
any other schedule hereto, neither the Company nor any Subsidiary
is a party to any (i) material contract not made in the ordinary
course of business; (ii) contract for the employment of any
officer or employee; (iii) advertising agreement with a remaining
term in excess of one year and a payment obligation in excess of
$50,000; (iv) franchise, distributorship or sales agency
agreement; (v) contract for the future purchase of materials,
supplies, services, merchandise or equipment not capable of being
fully performed or not terminable within a period of one year
from the date hereof or in excess of normal operating
requirements; (vi) agreement for the sale or lease of any of its
assets other than in the ordinary course of business;
(vii) contract or commitment for capital expenditures in excess
of $100,000; (viii) mortgage, pledge, conditional sales contract,
security agreement, factoring agreement, or other similar
agreement with respect to any of its real or personal property;
(ix) lease of machinery or equipment involving annual payments in
excess of $100,000; (x) agreement with a labor union or labor
association; (xi) loan agreement, promissory note issued by it,
guarantee, subordination or similar type of agreement;
(xii) stock option, retirement, severance, pension, bonus, profit
sharing, group insurance, medical or other fringe benefit plan or
program providing employee benefits; (xiii) consulting agreement
involving annual payments in excess of $50,000; or
(xiv) municipal or other governmental franchise agreements.
Complete and correct copies of each such agreement have been
furnished or made available to Purchaser. Except as set forth in
Schedule 3(m) hereto, the Company and its Subsidiaries have
performed in all material respects all of the obligations
required to be performed by them to date and are not in default
in any material respect under any of the agreements, leases,
contracts or other documents to which they are a party listed on
Schedule 3(m). Except as set forth in Schedule 3(m) hereto, to
the Company's knowledge, no party with whom the Company or its
Subsidiaries has such a scheduled agreement is in material
default thereunder. All such scheduled agreements are in full
force and effect and are enforceable against the parties thereto
in accordance with their terms subject to the Bankruptcy and
Equity Exceptions. Except as disclosed herein or in Schedule
3(m) hereto, neither the Company nor any of its Subsidiaries is a
party to any non-compete or similar agreement which restricts in
any material way the current operation of their businesses taken
as a whole.
Title to Properties; Absence of Encumbrances. The
Company and its Subsidiaries own or have good and marketable
title to all of their respective properties and assets shown as
owned on the Balance Sheet or acquired thereafter (except for
assets disposed of in the ordinary course of business since the
Balance Sheet Date or as set forth in Schedule 3(n) hereto), free
and clear of any and all Encumbrances, except as set forth in
Schedule 3(n) hereto or except for Permitted Encumbrances.
Restrictions. Except as set forth in Schedules 3(j) or
3(o) hereto, except for leases which do not constitute Material
Leases and other than the required consent under the Chase Credit
Agreement, neither the execution or delivery of this Agreement by
the Company nor the consummation by the Company of the
transactions contemplated hereby, will violate in any material
respect any statute, regulation, rule, injunction, judgment,
order, decree, ruling, charge or restriction of any government,
governmental agency, or court to which the Company or any of its
Subsidiaries is a party or to which any of them is bound or
subject, conflict in any material respect with or result in a
material breach of, or give rise to a right of termination of, or
accelerate the performance required by, any terms of any material
agreement to which the Company or its Subsidiaries is a party, or
constitute a default in any material respect thereunder, or
result in the creation of any Encumbrance upon any of their
respective assets (except Encumbrances that individually and in
the aggregate are not material), nor will it violate in any
material respect any of the provisions of their respective
Certificates of Incorporation or By-Laws or, as to non-corporate
Subsidiaries, organizational documents, or violate in any
material respect any judgment or decree by which any of them is
bound.
Litigation; Consents. There is no action, suit, proceeding or
formal governmental inquiry or investigation pending against the
Company or its Subsidiaries which seeks to restrain or prohibit
or otherwise challenges the consummation, legality or validity of
the transactions contemplated hereby. Except as disclosed in
Schedule 3(p) hereto, there is no action, suit, proceeding,
formal governmental inquiry or investigation pending against the
Company or the Subsidiaries involving a potential future payment
by the Company or its Subsidiaries of $50,000 or more or
otherwise material to the Company and its Subsidiaries. Other
than in connection with or in compliance with the provisions of
the Hart-Scott-Rodino Act and except as set forth on Schedule
3(p) hereto, no consent, approval or authorization of any
governmental authority on the part of the Company or the
Subsidiaries is required in connection with the execution and
delivery of this Agreement or the consummation of any of the
transactions contemplated hereby, except where the failure to
obtain any consent, approval or authorization would not be
material.
Environmental Matters. Except as disclosed in Schedule
3(q) hereto, (i) the operations of the Company and its
Subsidiaries are now and have been in compliance in all material
respects with applicable Environmental Laws, (ii) neither the
Company nor any of its Subsidiaries is subject to any pending or,
to the Company's knowledge, material threatened judicial or
administrative proceeding alleging the violation of any
Environmental Law, (iii) neither the Company nor any of its
Subsidiaries has received any written notice that it is a
potentially responsible party at any Superfund site or state-
equivalent site; (iv) neither the Company nor any of its
Subsidiaries has disposed of or released Hazardous Materials (at
a concentration or level which requires remedial action under any
applicable Environmental Law) nor are underground storage tanks
present on, in, at or under any real property currently owned or
leased by the Company or its Subsidiaries; (v) the Company and
its Subsidiaries have not disposed of or released any Hazardous
Materials in or at any other real property at a concentration or
level which requires remedial action under any applicable
Environmental Law; (vi) the Company and its Subsidiaries have all
material permits and approvals required by Environmental Laws to
conduct their existing business operations; (vii) neither the
Company nor its Subsidiaries have agreed to indemnify any
predecessor or other party, including a buyer, seller, landlord
or tenant, with respect to any environmental liability, other
than customary indemnity arrangements contained in leases where
the Company or any of its Subsidiaries is a landlord or tenant;
(viii) the contemplated stock purchase that is the subject of
this Agreement is not subject to any state environmental transfer
laws; (ix) to the Company's knowledge, no other party has
released Hazardous Materials at a concentration or level which
requires remedial action under any applicable Environmental Law
at any property now or formerly owned or operated by the Company
or its Subsidiaries or in a location that would threaten or
contaminate such properties in any material respect; and (x) the
Company and its Subsidiaries have delivered copies to Purchaser
of all material environmental reports, permits, suits,
information requests, orders, notices of violation, closure
letters, site status letters and similar documentation that are
in their possession; provided, however, that, except with respect
to clause (ii) above, the representations and warranties set
forth above are made to the Company's knowledge as to matters or
events occurring prior to August 18, 1995.
Collective Bargaining Agreements and Labor.
Except as set forth in Schedule 3(r) hereto, neither the Company
nor any of its Subsidiaries is a party to any labor or collective
bargaining agreement and there are no labor or collective
bargaining agreements which pertain to employees of the Company
or the Subsidiaries.
Except as set forth in Schedule 3(r) hereto, there are
no pending strikes, work stoppages, slowdowns, lockouts, or
material arbitrations or other labor disputes pending against the
Company or the Subsidiaries.
Except as set forth in Schedule 3(r) hereto, there are
no material pending complaints, charges or claims against the
Company or the Subsidiaries filed with any public or governmental
authority, arbitrator or court based upon the employment or
termination of employment by the Company or the Subsidiaries of
any individual.
Except as set forth in Schedule 3(r) hereto, the
Company and the Subsidiaries are in compliance in all material
respects with all laws, regulations and orders relating to the
employment of labor, including all such laws, regulations and
orders relating to wages, hours, WARN, collective bargaining,
discrimination, civil rights, safety and health, workers'
compensation and the collection and payment of withholding and/or
social security taxes and any similar tax.
Employee Benefit Plans; ERISA.
Schedule 3(s)(i) contains a complete and correct list
of the Company Employee Benefit Plans and Multiemployer Plans.
Schedule 3(s)(i) clearly identifies all Company Employee Benefit
Plans and Multiemployer Plans which are (i) Company Employee
Pension Plans, (ii) Multiemployer Plans, (iii) Multiple Employer
Plans, (iv) plans other than Multiemployer Plans and Multiple
Employer Plans that are subject to Section 412 of the Code or
Section 302 of ERISA, (v) plans intended to qualify under Section
401 of the Code, and (vi) Company Welfare Plans which provide for
continuing benefits or coverage for any participant or any
beneficiary of a participant after such participant's termination
of employment except coverage or benefits required by Part 6 of
Title I of ERISA or Section 4980B of the Code if paid 100% by the
participant or beneficiary.
Except as set forth on Schedule 3(s)(ii):
true, correct and complete copies of the following
documents, with respect to each of the Company Employee Benefit
Plans, have been made available or delivered to Purchaser;
(I) all plan documents, including trust agreements, insurance
policies and service agreements and amendments thereto, (II) the
most recent Forms 5500 and any financial statements attached
thereto and those for the prior three years, (III) the last
Internal Revenue Service determination letter, (IV) summary plan
descriptions, (V) the most recent actuarial report and those for
the prior three years, and (VI) written descriptions of all non-
written agreements relating to any such plan;
all amendments and actions required to bring the
Company Employee Benefit Plans into conformity in all material
respect with all of the applicable provisions of ERISA, the Code
and any other applicable laws (including the rules and
regulations thereunder) have been made or taken except to the
extent that such amendments or actions are not required by law to
be made or taken until a date after the Closing Date;
the Company Employee Pension Plans which are intended
to qualify under Section 401 of the Code are so qualified in form
and the trusts maintained pursuant thereto are exempt from
federal income taxation under Section 501 of the Code, and, to
the knowledge of the Company, its Subsidiaries and any ERISA
Affiliates, nothing has occurred with respect to the operation of
such plans which could cause the loss of such qualification or
exemption or the imposition of any lien, penalty, or tax under
ERISA or the Code, and the Company, its Subsidiaries and ERISA
Affiliates have not received any material adverse notice
concerning a Company Employee Benefit Plan from the Internal
Revenue Service, the Department of Labor or the Pension Benefit
Guaranty Corporation within the four years preceding the date of
this Agreement;
no Company Employee Pension Plans have been amended in
any manner which would require the posting of any security under
Section 401(a)(29) of the Code or Section 307 of ERISA;
the Company, Subsidiaries and any ERISA Affiliates have
met the minimum funding standards and have made all contributions
required under Section 302 of ERISA and Section 412 of the Code;
no accumulated funding deficiency, whether or not waived, exists
with respect to any Company Employee Pension Plan, and no event
has occurred or circumstances exists that may result in an
accumulated funding deficiency as of the last day of the current
plan year for any such plan;
the Company, its Subsidiaries and any ERISA Affiliates
have paid all amounts due to the PBGC pursuant to Section 4007 of
ERISA;
the actuarial report for each Company Employee Pension
Plan fairly presents the financial condition and the results of
operations of each such plan in accordance with generally
accepted accounting principles;
the benefit liabilities (as defined in Section
4001(a)(16) of ERISA) of each Company Employee Pension Plan which
is a defined benefit plan calculated using the actuarial
assumptions that would be used by the PBGC in the event of the
termination of such plan do not exceed the fair market value of
the assets of such plan;
there are no material pending claims or lawsuits which
have been asserted or instituted by or against the Company
Employee Benefit Plans, against the assets of any of the trusts
under such plans or by or against the plan sponsor, plan
administrator, or any fiduciary of the Company Employee Benefit
Plans (other than routine benefit claims) and none of the Company
nor any Subsidiary or ERISA Affiliate have knowledge of facts
which could form the basis for any such claim or lawsuit;
the Company Employee Benefit Plans have been maintained
in accordance with their plan documents and with all provisions
of the Code and ERISA (including rules and regulations
thereunder) and other applicable law, in all material respects,
and none of the Company nor, to the knowledge of the Company, its
Subsidiaries and any ERISA Affiliates, any other "party in
interest" or "disqualified person" with respect to the Company
Employee Benefit Plans has engaged in a "prohibited transaction"
within the meaning of Section 4975 of the Code or Title I, Part 4
or ERISA which is not exempt under applicable law, regulations
and administrative exemptions;
none of the Company nor any Subsidiary or ERISA
Affiliate has incurred any outstanding liability under Section
4062 of ERISA to the PBGC, to a trust established under Section
4041 or 4042 of ERISA, or to a trustee appointed under Section
4042 of ERISA;
none of the Company Employee Benefit Plans contains any
provisions which would prohibit the transactions contemplated by
this Agreement or which would give rise to any severance,
termination or other payments or liabilities as a result of the
transactions contemplated by this Agreement, and as of the
Closing Date no payment that is owed or may become due any
director, officer, employee, or agent of the Company, a
Subsidiary or an ERISA Affiliate will be non-deductible by the
Company, Subsidiary or ERISA Affiliate by reason of Section 280G
of the Code or under Section 4999 of the Code;
the Company has no liability (whether actual,
contingent, with respect to any of its assets or otherwise) with
respect to any Employee Benefit Plan maintained by any ERISA
Affiliate which is not a Subsidiary;
no reportable event (as defined in Section 4043 of
ERISA and the regulations thereunder, excluding any such event
with respect to which the Department of Labor has waived the
requirement of 30-days notice) has occurred with respect to any
Company Employee Pension Plan;
none of the Company nor any Subsidiary or ERISA
Affiliate has knowledge of any facts or circumstances that may
give rise to any liability of any the Company, a Subsidiary or an
ERISA Affiliate to the PBGC under Title IV of ERISA (other than
liability under Section 4007 of ERISA); and
except to the extent advance notice may be required by
applicable law, each of the Company Employee Benefit Plans
(including without limitation each such plan covering retirees of
the Company, a Subsidiary or an ERISA Affiliate, or the
beneficiaries of such retirees) may be terminated or amended by
its sponsoring employer, in any manner and at any time, without
the consent of and without any further liability to its
participants and beneficiaries for benefits that may be accrued
or expenses that may be incurred after the date of such
termination or amendment.
With respect to each Multiemployer Plan or Multiple
Employer Plan,
none of the Company nor any Subsidiary or ERISA
Affiliate has incurred any liability under Title IV of ERISA as a
result of any withdrawal from the Multiemployer Plan or Multiple
Employer Plan which has not been fully satisfied;
to the knowledge of the Company, its Subsidiaries and
any ERISA Affiliates, no event has occurred or circumstance
exists that presents a risk of the occurrence of any withdrawal
from, or the termination, reorganization, or insolvency of, the
Multiemployer Plan or Multiple Employer Plan that could result in
withdrawal or other liability of the Company, a Subsidiary an
ERISA Affiliate under Sections 4201, 4063 or 4064 of ERISA;
none of the Company nor any Subsidiary or ERISA
Affiliate has received notice from the Multiemployer Plan that is
in reorganization or is insolvent that increased contributions
may be required to avoid a reduction in plan benefits or the
imposition of any excise tax, or that such plan intends to
terminate or has terminated; and
to the knowledge of the Company, its Subsidiaries and
any ERISA Affiliates, no Multiemployer Plan is a party to any
pending merger or asset or liability transfer or is subject to
any proceeding brought by the PBGC.
Except as disclosed on Schedule 3(s)(iv), the Company
has not prepaid or prefunded any Company Welfare Plan through a
trust, reserve, premium stabilization or similar account, other
than pursuant to any insurance contract which does not include a
"fund" as defined in Sections 419(e)(3) and (4) of the Code; all
contributions by the Company, a Subsidiary or an ERISA Affiliate
to a voluntary employees' beneficiary association, as defined in
Section 501(c)(9) of the Code, whose members include employees of
the Company, a Subsidiary or an ERISA Affiliate ("VEBA") are
deductible under the Code; the Internal Revenue Service has
issued a determination letter that such VEBA is exempt from
federal income tax and no event has occurred or circumstance
exists that will or could give rise to disqualification or loss
of tax-exempt status of such VEBA; no amount or any asset of such
VEBA is subject to tax as unrelated business taxable income.
The Company, its Subsidiaries and ERISA Affiliates do
not have material potential withdrawal liability with respect to
the Multiemployer Plans (being the aggregate potential withdrawal
liabilities of the Company, its Subsidiaries and ERISA Affiliates
with respect to all Multiemployer Plans).
Representations and Warranties of the Stockholders. Each of the
Stockholders hereby severally represents and warrants to
Purchaser, solely as to himself or itself and not with respect to
any other Stockholder, that the following representations and
warranties are, as of the date hereof, and will be, as of the
Closing Date, true and correct:
Title; Agreements. Except for the Stockholders
Agreement and except with respect to Optionees who do not
exercise their Company Stock Options on or prior to the Closing
Date, and except with respect to the lien of the Escrow
Agreement, such Stockholder holds of record and holds
beneficially the number of shares of Company Common Stock set
forth opposite its or his name on Exhibit A, free and clear of
any and all Encumbrances or other restrictions on transfer.
Except for the Stockholders Agreement and other than this
Agreement, such Stockholder is not a party to any voting trust,
proxy or other agreement or understanding with respect to any
capital stock of the Company.
Execution and Effect of Agreement. Such Stockholder
has the full right, power (corporate or otherwise) and authority
to execute and deliver this Agreement and to perform its or his
obligations hereunder, and to consummate the transactions
contemplated hereby. The execution and delivery of this
Agreement by such Stockholder, and the consummation by such
Stockholder of the transactions contemplated hereby have been
duly authorized by all necessary action (corporate or otherwise)
and no other proceeding on the part of such Stockholder is
necessary to authorize the execution, delivery and performance of
this Agreement and the transactions contemplated hereby. This
Agreement has been duly executed and delivered by such
Stockholder and constitutes the legal, valid and binding
obligation of such Stockholder, enforceable against such
Stockholder in accordance with its terms, except as limited by
(A) the Bankruptcy and Equity Exceptions and (B) the effect of
laws governing the enforceability of agencies and obligations
after death or incapacity.
Investment. Such Stockholder:
understands that the shares of Purchaser Common Stock
to be acquired by him pursuant to Section 2 hereof have not been,
and will not be, except as contemplated by the Registration
Rights Agreement, registered under the Securities Act, or under
any state securities laws, and are being offered and sold in
reliance upon federal and state exemptions for transactions not
involving any public offering;
is acquiring the shares of Purchaser Common Stock
solely for his or its own account for investment purposes, and
not with a view to the distribution thereof, except as
contemplated by the Registration Rights Agreement;
is a sophisticated investor with knowledge and
experience in business and financial matters;
has received certain information concerning Purchaser
and has had the opportunity to obtain additional information as
desired in order to evaluate the merits and the risks inherent in
holding the shares of Purchaser Common Stock; and
is able to bear the economic risk and lack of liquidity
inherent in holding the shares of Purchaser Common Stock.
Representations and Warranties of Purchaser. Purchaser hereby
represents and warrants to the Company and the Stockholders that
the following representations and warranties are, as of the date
hereof, and will be, as of the Closing Date, true and correct:
Organization and Good Standing. Each of Purchaser and
its subsidiaries is a corporation duly organized, validly
existing and in good standing under the laws of its state of
incorporation. Purchaser and each of its subsidiaries has full
corporate power and authority to own its properties and carry on
its business as it is now being conducted. Purchaser and each of
its subsidiaries is duly qualified to do business as a foreign
corporation and is in good standing under the laws of (i) each
jurisdiction in which it owns real property and (ii) each other
jurisdiction in which the conduct of its business or the
ownership of its assets requires such qualification and where a
failure to be so qualified or in good standing would not be
material to the Purchaser and its subsidiaries, taken as a whole.
The copies of Purchaser's Certificate of Incorporation and
By-Laws (together with all amendments thereto) which have been
previously delivered or made available to the Company and the
Stockholders are correct and complete as of the date hereof.
Capitalization. The authorized capital stock of Purchaser
consists of (i) 100,000,000 shares of Purchaser Common Stock (of
which 76,965,200 shares were outstanding as of December 31, 1996)
and (ii) 2,000,000 shares of Preferred Stock, par value $.01 per
share, of which no shares are outstanding as of the date hereof.
All of the outstanding shares of capital stock of Purchaser have
been, and the shares of Purchaser Common Stock to be issued
pursuant to this Agreement will be, validly issued and are fully
paid and non-assessable. As of December 31, 1996, Purchaser had
reserved 3,801,890 shares of Purchaser Common Stock for issuance
upon exercise of outstanding employee and director stock options.
Since December 31, 1996 through the date hereof, Purchaser has
not issued any shares of its capital stock except upon the
exercise of employee stock options. Except as set forth above or
contemplated by this Agreement or as disclosed in the Purchaser
SEC Documents and or the Purchaser Financial Statements, as of
the date hereof, there are no outstanding subscriptions, options,
warrants, rights, convertible securities or other agreements or
commitments of any character obligating Purchaser to issue any
securities, except pursuant to benefit plans described in the
Purchaser SEC Documents. There are no agreements granting
registration rights to any stockholders (other than the
Registration Rights Agreement contemplated by this Agreement)
with respect to the capital stock of Purchaser.
Execution and Effect of Agreement. Purchaser has the
corporate power and authority to enter into this Agreement, to
perform its obligations hereunder and to consummate the
transactions contemplated hereby. The execution and delivery of
this Agreement by Purchaser and the consummation by Purchaser of
the transactions contemplated hereby have been duly authorized by
all necessary corporate action on the part of Purchaser, and no
other corporate proceeding on the part of Purchaser is necessary
to authorize the execution, delivery and performance of this
Agreement and the transactions contemplated hereby. This
Agreement has been duly executed and delivered by Purchaser and
constitutes the legal, valid and binding obligation of Purchaser,
enforceable against it in accordance with its terms, except as
limited by the Bankruptcy and Equity Exceptions.
Restrictions. Neither the execution or delivery of
this Agreement by Purchaser nor the consummation of the
transactions contemplated hereby, (i) will violate any statute,
regulation, rule, injunction, judgment, order, decree, ruling,
charge or restriction of any government, governmental agency, or
court to which Purchaser of any of its subsidiaries is a party or
to which any of them is bound or subject, or the provisions of
the charter or bylaws of Purchaser or any of its subsidiaries, or
(ii) subject to modification of Purchaser's credit agreements to
permit consummation of the transactions contemplated by this
Agreement, will conflict in any material respect with or result
in a material breach of, or give rise to a right of termination
of, or accelerate the performance required by, any terms of any
material agreement to which Purchaser or any subsidiary is a
party, or constitute a default in any material respect
thereunder, or result in the creation of any lien, security
interest, mortgage, pledge, hypothecation, easement or
conditional sale or other title retention agreement upon any of
their respective assets (except encumbrances that individually
and in the aggregate are not material).
Litigation; Consents. There is no action, suit,
proceeding or formal governmental inquiry or investigation
pending against Purchaser which seeks to restrain or prohibit or
otherwise challenges the consummation, legality or validity of
the transactions contemplated hereby, and, except as expressly
contemplated hereby, no consent, approval or authorization of any
governmental authority on the part of Purchaser is required in
connection with the execution and delivery of this Agreement or
the consummation of any of the transactions contemplated hereby.
There is no action, suit, proceeding or formal governmental
inquiry or investigation pending against Purchaser or any of its
subsidiaries which is material to Purchaser and its subsidiaries,
taken as a whole.
SEC Reports. Purchaser has filed with the Commission
all forms, reports, schedules, statements and other documents
required to be filed by it and its subsidiaries under the
Exchange Act or the Securities Act since January 1, 1994 (as such
documents have been amended since the time of their filing,
collectively, the "Purchaser SEC Documents"). As of their
respective dates or, if amended, as of the date of the last such
amendment, the Purchaser SEC Documents (i) did not contain any
untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary in order to make
the statements therein, in light of the circumstances under which
they were made, not misleading and (ii) complied in all material
respects with the applicable requirements of the Exchange Act and
the Securities Act, as the case may be. Each of the consolidated
financial statements (the "Purchaser Financial Statements")
included in the Purchaser SEC Documents have been prepared from,
and are in accordance with, the books and records of Purchaser
and/or its consolidated subsidiaries, comply in all material
respects with applicable accounting requirements and the rules
and regulations of the Commission with respect thereto, have been
prepared in accordance with generally accepted accounting
principles applied on a consistent basis during the periods
involved (except as may be indicated in the notes thereto) and
fairly present in all material respects the consolidated
financial position and the consolidated results of operations and
cash flows of Purchaser and its consolidated subsidiaries as at
the dates thereof or for the periods presented therein.
Purchaser has delivered to each of the Company and the
Stockholders a correct and complete copy of each Purchaser SEC
Document (together with all exhibits and schedules thereto and as
amended to date) filed since January 1, 1996. Since the date of
the most recent Purchaser SEC Document, there has been no
material adverse change in the business (as presently conducted
or presently expected to be conducted), financial condition or
results of operations of Purchaser and its subsidiaries, taken as
a whole.
Investment. Purchaser is not acquiring the Company
Common Stock with a view to or for sale in connection with any
distribution thereof within the meaning of the Securities Act.
Covenants of the Stockholders, the Company and Purchaser.
Filings and Other Actions. Upon the terms and subject
to the conditions contained herein, each of the parties hereto
agrees: (i) to take all such action as may reasonably be
required under state blue sky or securities laws in connection
with the transactions contemplated hereby; (ii) to cooperate with
one another in determining whether any filings are required to be
made with, or consents or permits are required to be obtained
from, any governmental authority in any jurisdiction or any
lender, lessor or other third party in connection with the
contracts, the proprietary rights and leases, or otherwise, prior
to the Closing Date in connection with the consummation of the
transactions contemplated hereby and cooperate in making any such
filings promptly and in seeking timely to obtain any such
consents and permits; (iii) to make their respective filings
promptly and any other required or requested submissions under
the Hart-Scott-Rodino Act, to furnish to each other party hereto
all such information in its possession as may be necessary for
the completion of such filings and submissions to be filed by the
other party, and to use their Best Efforts to obtain an early
termination of the applicable waiting period; (iv) to use their
Best Efforts to defend all actions challenging this Agreement or
the consummation of the transactions contemplated hereby and use
their Best Efforts to lift or rescind any injunction or
restraining order or other court order adversely affecting the
ability of the parties to consummate the transactions
contemplated hereby; and (v) to use Best Efforts to take, or
cause to be taken, all actions and to do, or cause to be done,
all other things necessary, proper or advisable to consummate and
make effective the transactions contemplated hereby.
Access to Documents; Opportunity to Ask Questions.
From and after the date hereof and until the Closing Date, the
Company shall, and shall cause the Subsidiaries to make available
for inspection by Purchaser or its Representatives, upon
reasonable advance notice, during normal business hours and in a
manner so as not to interfere with normal business operations,
the Company's and the Subsidiaries' corporate or comparable
records, books of account, contracts and all other documents
reasonably requested by Purchaser or its Representatives in order
to permit Purchaser and such Representatives to make reasonable
inspection and examination of the business and affairs of the
Company and the Subsidiaries. The Company shall also make
available, upon reasonable advance notice, during normal business
hours and in a manner so as not to interfere with normal business
operations, any real property owned or leased by the Company or
its Subsidiaries for environmental site assessments, including
well sampling and subsurface investigation. The Company shall
further cause the managerial employees, counsel, environmental
consultants and regular independent certified public accountants
of the Company and the Subsidiaries to be available upon
reasonable advance notice to answer questions of Purchaser's
Representatives concerning the business and affairs of the
Company and the Subsidiaries and shall further cause them to make
available all relevant books and records in connection with such
inspection and examination and, in the case of environmental
consultants, to make available all environmental data and reports
in their possession relating to the Company and its Subsidiaries,
and, at Purchaser's sole election and expense, to update
previously prepared environmental reports relating to the Company
and its Subsidiaries. Each of Purchaser and its respective
Representatives will treat and hold as such any confidential
information it receives from any of the Company and its
Subsidiaries in the course of the reviews contemplated by this
Section 6(b), will not use any of the confidential information
except in connection with this Agreement, and, if this Agreement
is terminated for any reason whatsoever, agrees to return to the
Company all tangible embodiments (and all copies) therefor which
are in its possession.
Indemnification of Directors and Officers of the Company.
Purchaser will not take any action to alter or impair any
exculpatory or indemnification provisions existing at the date
hereof in any indemnification agreement or in the Certificate of
Incorporation or Bylaws of the Company for the benefit of any
individual now or hereafter and prior to the Closing Date serving
as a director or officer of the Company.
Conduct of Business. From and after the date hereof
and until the Closing Date, the Company shall conduct and cause
the business of the Subsidiaries to be conducted in the ordinary
course, consistent with the present conduct of their business.
During such period of time, except upon the prior written consent
of Purchaser, the Company shall not and shall not permit any
Subsidiaries to: (i) amend its Certificate of Incorporation or
By-Laws or comparable organizational documents (except to the
extent reflected in the Disclosure Letter); (ii) issue any
additional shares of capital stock or issue, sell or grant any
option or right to acquire or otherwise dispose of or commit to
dispose of any of its authorized but unissued capital stock or
other corporate securities (except upon exercise of Company Stock
Options currently outstanding); (iii) declare or pay any
dividends or make any other distribution in cash or property on
its capital stock or other equity interests, except to the
Company or a Subsidiary; (iv) repurchase or redeem any shares of
its stock or other equity interests; (v) voluntarily incur any
obligation or liability, except obligations and liabilities
incurred in the ordinary course of business or permitted by
clause (x) below; (vi) except as disclosed on Schedule 6(d),
enter into any employment agreement or alter any bonus,
profit-sharing, incentive, or other compensation arrangement for
any of its officers or directors (other than make changes which
do not increase the compensation or benefits provided by the
foregoing), or otherwise materially change personnel policies,
compensation programs or benefit plans, except for changes in the
ordinary course of business; (vii) mortgage, pledge, or otherwise
encumber any part of its assets, tangible or intangible, except
Permitted Encumbrances; (viii) sell, transfer or acquire any
properties or assets, tangible or intangible, other than in the
ordinary course of business, and except as set forth in Schedule
3(n) hereto; (ix) except as set forth on Schedule 6(d) hereto,
merge or consolidate with any corporation, acquire control or
acquire any capital stock or other securities, or all or
substantially all of the assets, of any other corporation or
business entity, or take any steps incident to or in furtherance
of any such actions whether by entering into an agreement
providing therefor or otherwise; (x) other than the ADCO Note and
except in connection with the transactions set forth on
Schedule 6(d) hereto or to fund working capital requirements
arising in the ordinary course of business consistent with the
1997 budget heretofore provided to Purchaser (the "1997 Budget"),
incur Indebtedness in excess of the level outstanding at
December 31, 1996; (xi) incur any capital expenditures beyond
those set forth in the 1997 Budget; or (xii) take any other
action not contemplated hereby which would cause any of the
representations and warranties made by the Company and the
Stockholders in this Agreement not to be true and correct in all
material respects on and as of the Closing Date with the same
force and effect as if such representations and warranties had
been made on and as of the Closing Date.
Notification of Certain Matters. The Company and the
Stockholders shall give prompt notice to Purchaser, and Purchaser
shall give prompt notice to the Company and the Stockholders, of
(i) the occurrence, or failure to occur, of any event which
occurrence or failure would be likely to cause any representation
or warranty contained in this Agreement, the Disclosure Letter
(as updated pursuant to Section 15 hereof) or any written
certificate or schedule delivered pursuant hereto to be untrue or
inaccurate at any time from the date hereof until the Closing
Date and (ii) any material failure of the Company, the
Stockholders, Purchaser or any of their respective Affiliates, as
the case may be, or of any officer, director, employee or agent
thereof, to comply with or satisfy any covenant, condition or
agreement to be complied with or satisfied by it under this
Agreement; provided, however, that no such notification shall
affect the representations or warranties of the parties or the
conditions to the obligations to the parties hereunder.
Board of Directors of Purchaser.
(i) On the Closing Date, Purchaser shall appoint Karl Eller to
its Board of Directors, and shall thereafter cause Karl Eller to
be included in the annual slate of directors to be proposed by
the management of Purchaser until such time as either Purchaser
owns less than a majority of the Company Common Stock or Karl
Eller is no longer the Chief Executive Officer or Chairman of the
Board of the Company.
(ii) If, 180 days after the Closing Date, H&F Funds shall own
more than 5.25 million Registrable Shares (as defined in the
Registration Rights Agreement), upon request of Hellman &
Friedman Capital Partners III ("HFCP III"), Purchaser will cause
its Board of Directors to be increased by one, and will promptly
appoint or cause to be elected as a director of Purchaser a
nominee of HFCP III, and shall thereafter cause such nominee (or
any successor designated by HFCP III) to be included in the
annual slate of directors to be proposed by the management of
Purchaser until such time as H&F Funds own less than 5.25 million
Registrable Shares.
Company Stock Options. Within ten (10) days from the
date hereof the Stockholders and the Company shall cause any
Optionees listed on Exhibit A hereto who have not executed this
Agreement on the date hereof to execute a counterpart to this
Agreement.
Registration Statement. Purchaser agrees in good faith
to commence working promptly after the date of this Agreement on
preparation of a registration statement to cover the offering
contemplated by Section 2(g) of the Registration Rights Agreement
and will use its Best Efforts to file such registration
statement, and to have it become effective, as soon as
practicable after the Closing Date.
Conditions Precedent to Purchaser's Obligation. The obligation
of Purchaser to consummate the transactions contemplated hereby
are subject to the satisfaction, on or prior to the Closing Date,
of the following conditions, any of which may be waived by
Purchaser in writing:
Each of the representations and warranties (as updated
pursuant to Section 15 hereof and as in effect on the Closing
Date) of the Company and the Stockholders contained in Sections 3
and 4 hereof shall be true and correct in all material respects
as of the Closing Date with the same force and effect as though
the same had been made on and as of the Closing Date, except for
those given as of a particular date, which shall be true and
correct in all material respects as of such date, and except for
changes therein permitted or contemplated hereby.
The Company and the Stockholders shall have performed
and complied in all material respects with each of the covenants
and provisions in this Agreement required herein to be performed
or complied with by the Company and the Stockholders between the
date hereof and the Closing Date.
No action or proceeding shall have been instituted or
threatened against Purchaser, the Stockholders, the Company or
the Subsidiaries before any court or other governmental body,
seeking to restrain or prohibit the consummation of the
transactions contemplated hereby, which in the reasonable opinion
of Purchaser makes it inadvisable to consummate such
transactions.
Purchaser shall have received a certificate to the
effect set forth in subsections (a) and (b) above, dated the
Closing Date, signed by a duly authorized officer of the Company
and each Stockholder, or a duly authorized officer thereof (as to
himself or itself and not with respect to any other Stockholder,
in the case of representations, warranties and covenants made by
the Stockholders).
Purchaser shall have received a certificate of a duly
authorized officer of the Company, dated the Closing Date,
setting forth resolutions of the Board of Directors of the
Company generally authorizing the execution and delivery of this
Agreement and the consummation of the transactions contemplated
hereby and certifying that such resolutions were duly adopted and
have not been rescinded or amended as of the Closing Date.
Purchaser shall have received such evidence as
Purchaser may reasonably request in order to establish the power
and authority of the Stockholders to consummate the transactions
contemplated by this Agreement.
The waiting period (and any extension thereof) under
the Hart-Scott-Rodino Act shall have expired or been terminated
and the parties shall have received all other required
authorizations, consents and approvals of government and
governmental agencies.
The Company and the Stockholders shall have made all
deliveries and taken all actions required by Section 9(c) hereof.
The consents of all persons who are parties to any
agreements with the Company which, if not obtained, would be
material to the continued operation of the Company and its
Subsidiaries (other than the Chase Credit Agreement), shall have
been obtained and copies thereof shall have been provided to
Purchaser.
Purchaser shall have received the opinion of Latham &
Watkins, counsel for the Company and certain Stockholders, and
the opinion of Heller, Ehrman, White & McAuliffe, counsel for
certain other Stockholders, as to such matters to be mutually
agreed upon.
The Optionees listed on Exhibit A hereto who have not
executed this Agreement on the date hereof shall have executed
counterpart pages to this Agreement.
The Stockholders Agreement shall have been terminated.
Conditions Precedent to the Company's and the Stockholders'
Obligations. The obligations of the Company and the Stockholders
to consummate the transactions contemplated hereby are subject to
the satisfaction, on or prior to the Closing Date, of the
following conditions, any of which may be waived by the Company
and the Stockholders in writing:
Each of the representations and warranties of Purchaser
contained in Section 5 hereof shall be true and correct in all
material respects as of the Closing Date with the same force and
effect as though the same had been made on and as of the Closing
Date, except for those given as of a particular date, which shall
be true and correct in all material respects as of such date, and
except for changes therein permitted or contemplated hereby.
Purchaser shall have performed and complied in all material
respects with each of the covenants and provisions in this
Agreement required herein to be performed or complied with by
Purchaser between the date hereof and the Closing Date.
No action or proceeding, shall have been instituted or
threatened against Purchaser, the Stockholders, the Company or
the Subsidiaries before any court or other governmental body,
seeking to restrain or prohibit the consummation of the
transactions contemplated hereby, which in the reasonable opinion
of the Company or any Stockholder makes it inadvisable to
consummate such transactions.
The Company and the Stockholders shall have received a
certificate to the effect set forth in subsections (a) and (b)
above, dated the Closing Date, signed by a duly authorized
officer of Purchaser.
The Company and the Stockholders shall have received a
certificate of a duly authorized officer of Purchaser, dated the
Closing Date, setting forth the resolutions of the Board of
Directors of Purchaser authorizing the execution and delivery of
this Agreement and the consummation of the transactions
contemplated hereby, and certifying that such resolutions were
duly adopted and have not been rescinded or amended as of the
Closing Date.
The waiting period (and any extension thereof) under the
Hart-Scott-Rodino Act shall have expired or been terminated and
the parties shall have received all other required
authorizations, consents and approvals of governments and
governmental agencies.
Purchaser shall have made all deliveries and taken all
actions required by Section 9(c) hereof.
The Stockholders shall have received the opinion of Piper &
Marbury L.L.P., counsel for Purchaser, as to such matters to be
mutually agreed upon.
Closing Date; Closing.
Except as hereinafter provided, the closing hereunder
(herein called the "Closing") shall take place at the offices of
Latham & Watkins, 633 West Fifth Street, Suite 4000, Los Angeles,
California 90071 at 10:00 A.M. on the later of (i) the Business
Day that is or next follows seven (7) days after the earlier to
occur of: (A) written notice has been received by any party
hereto of the early termination of the waiting period under the
Hart-Scott-Rodino Act; (B) the waiting period under the Hart-
Scott-Rodino Act has expired; or (C) if the waiting period under
the Hart-Scott-Rodino Act has been extended, written notice has
been received by any party hereto that such waiting period has
been terminated (but in no event later than June 30, 1997); or
(ii) April 10, 1997, unless otherwise mutually agreed to in
writing by Purchaser, the Company and the Stockholders.
Notwithstanding the foregoing, Purchaser may, at its option,
extend the April 10, 1997 date set forth in the foregoing clause
(ii) to a date not later than April 30, 1997, provided that the
Cash Consideration shall be increased by $89,000 per day from and
including April 11, 1997 through and including the Closing Date
as so extended. The date of the Closing is referred to in this
Agreement as the "Closing Date."
All proceedings to be taken and all documents to be executed
and delivered by the Company and the Stockholders in connection
with the consummation of the transactions contemplated hereby
shall be reasonably satisfactory in form and substance to
Purchaser and its counsel. All proceedings to be taken and all
documents to be executed and delivered by Purchaser in connection
with the consummation of the transactions contemplated hereby
shall be reasonably satisfactory in form and substance to the
Company and the Stockholders and their respective counsel. All
proceedings to be taken and all documents to be executed and
delivered by all parties at the Closing shall be deemed to have
been taken and executed simultaneously and no proceedings shall
be deemed taken nor any documents executed or delivered until all
have been taken, executed and delivered.
At the Closing the following actions shall be taken:
The Company and the Stockholders will deliver the
certificates, and other items described in Section 7 or as
otherwise reasonably required by Purchaser and such other
evidence of the performance of all of the covenants and the
satisfaction of all conditions required of the Company and the
Stockholders by this Agreement as Purchaser shall reasonably
require.
Purchaser will deliver the certificates, and other items
described in Section 8 or as otherwise reasonably required by the
Company and the Stockholders and such other evidence of the
performance of all the covenants and the satisfaction of all
conditions required of Purchaser by this Agreement and as the
Company and the Stockholders shall reasonably require.
Each of the Stockholders will deliver to Purchaser
certificates representing all of his or its Shares, duly endorsed
in blank or, in lieu thereof, accompanied by stock powers duly
executed in blank, and in proper form for transfer.
Purchaser will deliver to each of the Stockholders or, in
accordance with instructions provided by such Stockholder, to the
Stockholder Representative, the Purchase Price in the amounts set
forth on Exhibit B hereto, subject to the Escrow Agreement.
Purchaser and each Stockholder who chooses to be a party
shall enter into the Registration Rights Agreement.
Purchaser, the Stockholder Representative and the Escrow
Agent shall enter into the Escrow Agreement and Purchaser shall
deposit the Escrowed Shares with the Escrow Agent.
Purchaser and each holder of Company Stock Options
outstanding immediately prior to the Closing Date shall enter
into an Option Assumption Agreement.
Purchaser and each holder of a Restated Option shall enter
into a Restated Option Agreement.
Purchaser shall appoint Karl Eller to its Board of
Directors.
No Brokers. The Company and the Stockholders represent to
Purchaser, and Purchaser represents to the Company and the
Stockholders, that they respectively have had no dealings with
any broker or finder in connection with the transactions
contemplated by this Agreement, except that Purchaser has engaged
the services and will pay the fees and expenses of Daniels &
Associates, and except that the Company and the Stockholders have
engaged the services, and the Stockholders will pay, the fees and
expenses of Alex. Brown & Sons Incorporated.
Survival of Representations and Warranties. The parties
hereto agree that the representations and warranties (in each
case, as updated pursuant to Section 15 hereof and as in effect
on the Closing Date), and the covenants and agreements contained
in this Agreement or in any certificate, document or instrument
delivered in connection herewith, shall survive the execution and
delivery of this Agreement, and the Closing hereunder, regardless
of any investigation made by the parties hereto; provided,
however, that, except for claims or actions with respect to
Section 4(a), any claims or actions with respect thereto shall
terminate unless within twelve (12) months from the Closing Date
written notice of such claims is given to the Stockholder
Representative, in the case of claims made pursuant to
Section 12(a) hereof, or to Purchaser, in the case of claims made
pursuant to Section 12(b) hereof, or such actions are commenced
within such twelve-month period; and provided further, that
nothing in this Section 11 shall (a) affect the obligations of
Purchaser under the Option Assumption Agreements or the
Registration Rights Agreement, (b) limit the indemnification
obligations of the parties under Section 12 with respect to
claims timely made or actions timely commenced in accordance with
the provisions of this Section 11 and Section 12 or (c) limit
Purchaser's obligations pursuant to Sections 2(c), 6(c) and 6(f)
of this Agreement or the Stockholders' obligations pursuant to
Section 16(b) of this Agreement.
Indemnification.
By the Stockholders.
(i)Each of the Stockholders severally (on a pro rata
basis as provided in the Escrow Agreement), but not jointly,
agrees to indemnify and hold Purchaser and its Affiliates
harmless from and against any and all losses, claims, demands,
liabilities, obligations, damages, deficiencies, assessments,
judgments, payments, penalties, costs and expenses (including
without limitation reasonable attorneys' fees, any amounts paid
in investigation, defense or settlement of any of the foregoing
and interest) (herein, "Damages") incurred in connection with,
arising out of, resulting from or incident to, (A) any breach of
any representation or warranty (as updated pursuant to Section 15
hereof and as in effect on the Closing Date) made by the Company
and the Stockholders in this Agreement (other than the
representations and warranties made in Section 4(a) hereof),
(B) any breach of any covenant or agreement made by the Company
and the Stockholders in this Agreement, (C) any liability or
obligation which the Company or its Subsidiaries pays or becomes
obligated to pay after December 31, 1996 and prior to twelve
months after the Closing Date in respect of costs of defense,
settlement or resolution of any litigation matter which has been
disclosed on Schedule 3(p) to this Agreement, to the extent, and
only to the extent, that such costs in the aggregate, after
giving credit for any insurance recoveries to which the Company
or the Subsidiaries is entitled, exceeds the aggregate amount of
the Company's reserves therefor on the Balance Sheet, or (D) any
Pre-Agreement Disclosure Matter (as hereinafter defined). The
parties hereby acknowledge and agree that after the Closing Date
recourse against the Escrowed Shares constitutes the sole remedy,
at law or in equity, that Purchaser may have against the
Stockholders, and that the Escrowed Shares shall be Purchaser's
exclusive method of receiving indemnification from the
Stockholders, pursuant to this Section 12(a)(i). Notwithstanding
the foregoing, Purchaser may not receive any of the Escrowed
Shares in connection with Damages arising from breaches or
inaccuracies pursuant to this Section 12(a)(i) unless the
aggregate of such Damages indemnified against shall exceed
$10 million, in which event such indemnification shall be
effective with respect to all Damages in excess of such amount,
and shall be limited to the Escrowed Shares. For purposes of
determining the Stockholders' indemnification obligations
pursuant to this Section 12(a)(i), each representation and
warranty stated in Sections 3 and 4 hereof shall be deemed to
exclude any materiality standard, materiality exception and
materiality qualification stated therein. The parties
acknowledge that the limitations on liability of the Stockholders
in this Section 12(a)(i) contained were an essential inducement
to the Stockholders to cause them to enter into and perform this
Agreement, and without which they would not have done so.
(ii)Each of Stockholders, severally but not jointly,
agrees to indemnify and hold Purchaser and its Affiliates
harmless from and against any and all Damages incurred in
connection with, arising out of, resulting from or incident to,
any breach of the representations and warranties contained in
Section 4(a) hereof.
By Purchaser. Purchaser agrees to indemnify and hold each of the
Stockholders and their respective Affiliates harmless from and
against any and all Damages incurred in connection with, arising
out of, resulting from or incident to, (i) any breach of any
representation or warranty made by Purchaser in this Agreement,
(ii) any breach of any covenant or agreement made by Purchaser in
this Agreement, or (iii) operation of the business of the Company
and the Subsidiaries after the Closing Date.
Damages. The term "Damages" as used in this Section 12 is not
limited to matters asserted by third parties against any
indemnified party, but includes Damages incurred or sustained by
any indemnified party in the absence of third party claims. Any
Damages otherwise due and payable under this Section 12 shall be
(i) decreased to the extent of any reduction of Tax liability
that is realizable by the indemnified party upon payment of an
indemnifiable loss and (ii) increased to the extent of any
increase in Tax liability that is imposed on the indemnified
party upon the receipt of an indemnity payment pursuant to this
Section 12. In addition, Damages shall be determined net of any
insurance recoveries by any indemnified party and shall be net of
any indemnity to which the Company is entitled pursuant to that
certain Stock Purchase Agreement, dated as of July 14, 1995, by
and between Eller Investment Company, Inc., an Arizona
corporation, and General Electric Capital Corporation, a New York
corporation.
Defense of Claims.
(i) If a claim for Damages (a "Claim") is to be made by a party
entitled to indemnification hereunder against the indemnifying
party, the party claiming such indemnification shall, subject to
Section 11, give written notice (a "Claim Notice") to the
indemnifying party as soon as practicable after the party
entitled to indemnification becomes aware of any fact, condition
or event which may give rise to Damages for which indemnification
may be sought under this Section 12. Such Claim Notice shall
specify the nature and amount of the Claim asserted, if actually
known to the party entitled to indemnification hereunder. If any
lawsuit or enforcement action is filed against any party entitled
to the benefit of indemnity hereunder, written notice thereof
shall be given to the indemnifying party as promptly as
practicable (and in any event within fifteen (15) calendar days
after the service of the citation or summons). Subject to the
limitations of Section 11, the failure of any indemnified party
to give timely notice hereunder shall not affect rights to
indemnification hereunder, except to the extent that the
indemnifying party demonstrates actual damage caused by such
failure. After such notice, if the indemnifying party shall
acknowledge in writing to the indemnified party that the
indemnifying party shall be obligated under the terms of its
indemnity hereunder in connection with such lawsuit or action,
then the indemnifying party shall be entitled, if it so elects at
its own cost and expense, (A) to take control of the defense and
investigation of such lawsuit or action, (B) to employ and engage
attorneys of its own choice to handle and defend the same unless
the named parties to such action or proceeding include both the
indemnifying party and the indemnified party and the indemnified
party has been advised in writing by counsel that there may be
one or more legal defenses available to such indemnified party
that are different from or additional to those available to the
indemnifying party, in which event the indemnified party shall be
entitled, at the indemnifying party's cost and expense, to
separate counsel of its own choosing, and (C) to compromise or
settle such claim, which compromise or settlement shall be made
only with the written consent of the indemnified party, such
consent not to be unreasonably withheld. If the indemnifying
party fails to assume the defense of such claim within thirty
(30) calendar days after receipt of the Claim Notice, the
indemnified party against which such claim has been asserted will
(upon delivering notice to such effect to the indemnifying party)
have the right to undertake, at the indemnifying party's cost and
expense, the defense, compromise or settlement of such claim on
behalf of and for the account and risk of the indemnifying party;
provided, however, that such Claim shall not be compromised or
settled without the written consent of the indemnifying party,
which consent shall not be unreasonably withheld. In the event
the indemnified party assumes the defense of the claim, the
indemnified party will keep the indemnifying party reasonably
informed of the progress of any such defense, compromise or
settlement. The indemnifying party shall be liable for any
settlement of any action effected pursuant to and in accordance
with this Section 12 and for any final judgment (subject to any
right of appeal), and the indemnifying party agrees to indemnify
and hold harmless an indemnified party from and against any
Damages by reason of such settlement or judgment.
(ii) In the case of any enforcement action involving a
Tax, the contest rights of the indemnifying party set forth in
the fourth sentence of Section 12(d)(i) shall not apply to such
action unless the action is limited to matters which solely
affect liability in respect of a Pre-Closing Tax Period. In any
action involving a Tax which is not so limited, the indemnified
party shall be entitled at its own expense (A) to take control of
the defense and investigation of such action, (B) to employ and
engage attorneys of its own choice to handle and defend the same,
and (C) to compromise or settle such action, which compromise or
settlement shall be made only with the written consent of the
indemnifying party, such consent not to be unreasonably withheld.
(iii) In the event that any action, suit, proceeding
or investigation relating hereto or to the transactions
contemplated by this Agreement is commenced, the parties hereto
agree to cooperate to defend against and respond thereto and make
available to each other such personnel, witnesses, books,
records, documents or other information within its control that
are necessary or appropriate for such defense.
Brokers and Finders. Pursuant to the provisions of this Section
12 and subject to the limitations of Section 11, each of
Purchaser and the Stockholder shall indemnify, hold harmless and
defend the other party from the payment of any and all broker's
and finder's expenses, commissions, fees or other forms of
compensation which may be due or payable from or by the
indemnifying party, or may have been earned by any third party
acting on behalf of the indemnifying party in connection with the
negotiation and execution hereof and the consummation of the
transactions contemplated hereby.
Exclusive Remedy. Except as set forth in Sections 14 and 15(c),
the rights of indemnification provided to Purchaser and the
Stockholders in this Section 12 are intended to be the sole
remedies of such parties for any claim by either Purchaser
against the Stockholders or by the Stockholders against
Purchaser, and the parties intend, to the maximum possible
extent, to preclude any other claims, on whatever cause of action
predicated.
Stockholder Representative.
The Stockholders irrevocably make, constitute and
appoint Paul J. Meyer as their agent (the "Stockholder
Representative") and authorize and empower him to fulfill the
role of Stockholder Representative hereunder. In the event of
the resignation of a Stockholder Representative, the resigning
Stockholder Representative shall appoint a successor either from
among the Stockholders or who shall otherwise be acceptable to
Purchaser and who shall agree in writing to accept such
appointment, and the resigning Stockholder Representative's
resignation shall not be effective until such a successor shall
exist. The Stockholders entitled to receive a majority of the
Escrowed Shares may remove the Stockholder Representative at any
time. If a Stockholder Representative should die or become
incapacitated or be removed by the Stockholders and pursuant to
this Section 13, his successor shall be appointed within 21 days
of his death or incapacity by the remaining Stockholders entitled
to receive a majority of the Escrowed Shares, and such successor
either shall be a Stockholder or shall otherwise be acceptable to
Purchaser. If the Stockholders fail to appoint a successor
within such 21-day period, then Purchaser shall have the right to
appoint the successor from among the Stockholders. The choice of
a successor Stockholder Representative appointed in any manner
permitted above shall be final and binding upon all of the
Stockholders. The decisions and actions of any successor
Stockholder Representative shall be, for all purposes, those of a
Stockholder Representative as if originally named herein.
Each Stockholder by the execution of this Agreement
hereby irrevocably makes, constitutes and appoints the
Stockholder Representative as such person's true and lawful
attorney in fact and agent, for such person and in such person's
name, (i) to receive all notices and communications directed to
such Stockholder under this Agreement and the Escrow Agreement,
(ii) to execute and deliver any and all documents required to be
executed and delivered by such Stockholder pursuant to this
Agreement in order to effect the transactions contemplated by
this Agreement, (iii) upon the specific request of any
Stockholder, to receive and provide receipt for all consideration
required to be delivered to such Stockholder under this
Agreement, (iv) to perform any and all actions required to be
taken by such Stockholder in connection with any claim for
indemnity pursuant to the provisions of Section 12 of this
Agreement and (iv) to execute and deliver all instruments and
documents of every kind incident to the foregoing to all intents
and purposes and with the same effect as such Stockholder could
do personally, and each such Stockholder hereby ratifies and
confirms as his or her own act, all that the Stockholder
Representative shall do or cause to be done pursuant to the
provisions hereof. Notwithstanding the foregoing, except with
respect to administrative and other ministerial tasks, the
Stockholder Representative is required and entitled to act only
at the written direction of Stockholders entitled to receive a
majority of the Escrowed Shares.
It is acknowledged by the Stockholders appointing the
Stockholder Representative that the designation of the
Stockholder Representative as attorney-in-fact is coupled with an
interest and is binding upon such Stockholders notwithstanding
the death, incapacity or dissolution of any such Stockholder. If
any such event shall occur prior to the completion of the
transactions contemplated by this Agreement, the Stockholder
Representative is, nevertheless, to the extent that he is legally
able to do so, authorized and directed to complete all
transactions and act pursuant to this authority as if such event
had not occurred. Purchaser is entitled to deal solely with the
Stockholder Representative in connection with this Agreement and
is entitled to rely upon the provisions hereof and the authority
granted to the Stockholder Representative to act on behalf of the
Stockholders.
The Stockholder Representative's acceptance of his
duties under this Agreement is subject to the following terms and
conditions, which the parties hereto agree shall govern and
control with respect to his rights, duties, liabilities and
immunities as Stockholder Representative (but not in his capacity
as a Stockholder or as an officer, director, or employee of the
Company):
(i) The Stockholder Representative makes no
representation and has no responsibility as to the validity of
this Agreement or of any other instrument referred to herein, or
as to the correctness of any statement contained herein, and he
shall not be required to inquire as to the performance of any
obligation under this Agreement.
(ii) The Stockholder Representative shall be protected
in acting upon written notice, request, waiver, consent, receipt
or other paper or document, not only as to its due execution and
the validity and effectiveness of its provisions, but also as to
the truth of any information therein contained, which he in good
faith believes to be genuine and what it purports to be.
(iii) The Stockholder Representative shall not be
liable for any error of judgment, or for any act done or step
taken or omitted by him in good faith, or for any mistake of fact
or law, or for anything which he may do or refrain from doing in
connection therewith, except his own gross negligence or willful
misconduct.
(iv) The Stockholder Representative may consult with
competent and responsible legal counsel selected by him, and he
shall not be liable for any action taken or omitted by him in
good faith in accordance with the advice of such counsel.
(v) The Stockholders shall bear pro rata all expenses
(including transfer taxes and other governmental charges)
incurred by the Stockholder Representative in connection with his
duties hereunder and shall indemnify him against and save him
harmless from any and all claims, liabilities, costs, payments
and expenses, including fees of counsel (who may be selected by
the Stockholder Representative), for anything done or omitted by
him in the performance of this Agreement or the Escrow Agreement,
except as a result of his own gross negligence or willful
misconduct.
(vi) The Stockholder Representative shall have no
duties or responsibilities except those expressly set forth
herein. He shall not be bound by any modification of this
Agreement unless in writing and signed by the other parties
hereto and if his duties as Stockholder Representative hereunder
are affected, unless he shall have given prior written consent
thereto.
Specific Performance. The parties hereto acknowledge that
irreparable damage would result if this Agreement is not
specifically enforced. Therefore, the rights and obligations of
the parties under the Agreement, including, without limitation,
their respective rights and obligations to sell and purchase the
Shares, shall be enforceable by a decree of specific performance
issued by any court of competent jurisdiction, and appropriate
injunctive relief may be applied for and granted in connection
therewith. Such remedies shall, however, be cumulative and not
exclusive and shall be in addition to any other remedies which
any party may have under this Agreement or otherwise.
Termination; Amendments to Disclosure Letter.
Termination. Anything contained in this Agreement to the
contrary notwithstanding, this Agreement may be terminated:
At any time on or prior to the Closing Date, by the
mutual consent in writing of Purchaser, the Company and the
Stockholders;
Purchaser may terminate this Agreement by giving
written notice to the Company and the Stockholders at any time
prior to the Closing Date (A) in the event the Company or the
Stockholders have breached any representation or warranty (as
updated pursuant to this Section 15 and as in effect on the
Closing Date), or covenant contained in this Agreement in any
material respect, Purchaser has notified the Company and the
Stockholders of the breach, and the breach has continued without
cure for a period of 30 days after the notice of breach, or
(B) the Average Share Price is less than $36.37, or (C) if the
Closing shall not have occurred on or before the Closing Date
specified in Section 9(a) (unless the failure results primarily
from Purchaser breaching any representation, warranty or covenant
contained in this Agreement); or
The Company or the Stockholders may terminate this
Agreement by giving written notice to Purchaser at any time prior
to the Closing Date (A) in the event Purchaser has breached any
representation, warranty or covenant contained in this Agreement
in any material respect, the Company or the Stockholders have
notified Purchaser of the breach, and the breach has continued
without cure for a period of 30 days after the notice of breach,
or (B) the Average Share Price is less than $36.37, or (C) if the
Closing shall not have occurred on or before the Closing Date
specified in Section 9(a) (unless the failure results primarily
from the Company or the Stockholders breaching any
representation, warranty or covenant contained in this
Agreement).
Amendments to Disclosure Letter. Between the date hereof and the
Closing Date, the Company and the Stockholders may add to the
Disclosure Letter by notification in writing to Purchaser of the
matter to be added, which may be matters relating to events first
arising after the date of this Agreement ("Post-Agreement Date
Disclosure Matters") or may be matters which relate to events
first arising prior to the date of this Agreement and which, if
not so added to the Disclosure Letter, would constitute a breach
of the representations and warranties provided by the Company and
the Stockholders on the date of this Agreement ("Pre-Agreement
Date Disclosure Matters" and, collectively with the Post-
Agreement Date Disclosure Matters, the "New Disclosure Matters").
If the aggregate dollar amount involved in the New Disclosure
Matters exceeds $5,000,000, Purchaser may, at its election by
written notice to the Company and the Stockholders on or before
the Closing Date, either (i) accept the Disclosure Letter as so
modified and close the transactions contemplated hereby, in which
case the Disclosure Letter as so modified will be deemed to have
been delivered on or before the date of this Agreement or
(ii) terminate this Agreement. If the aggregate dollar amount
involved in the Pre-Agreement Date Disclosure Matters exceeds
$5,000,000, the Company and the Stockholders may terminate this
Agreement by written notice to Purchaser, unless Purchaser agrees
in writing that the aggregate indemnity obligation of the
Stockholders in respect of such Pre-Agreement Date Disclosure
Matters pursuant to Section 12(a)(i) will in all events be
limited to $5,000,000. Nothing contained herein will preclude
Purchaser from alleging that any matter disclosed in a proposed
modification to the Disclosure Letter which is not subject to
quantification does not give rise to a right not to close under
this Agreement because of the inability of the Company and the
Stockholders to satisfy the condition set forth in Section 7(a)
hereof due to such New Disclosure Matter. Notwithstanding the
foregoing, it is understood that the Company will as soon as
practicable furnish to Purchaser its audited financial statements
for the year 1996 in substitution for its unaudited 1996
financial statements (as contemplated by the definition
"Financial Statements"), and it is agreed that Purchaser shall
have no right to object to such substitution unless the audited
1996 financial statements contain material adjustments or
disclosures not contained in the unaudited 1996 financial
statements.
Consequences of Termination. In the event that this Agreement
shall be terminated pursuant to this Section 15, (i) each party
will redeliver all documents, work papers and other material of
any other party relating to the transactions contemplated hereby,
whether so obtained before or after the execution hereof, to the
party furnishing the same, and (ii) all further obligations of
the parties under this Agreement shall terminate without further
liability of any party to any other party (except that each party
shall remain liable for any willful or intentional breach of any
representation, warranty or covenant contained herein, as to
which all remedies, including the availability of specific
performance or other injunctive relief, shall remain available);
provided, however, that the confidentiality provisions contained
in Section 16 below shall survive such termination.
Confidentiality; Press Releases.
Purchaser agrees to keep non-public information regarding the
Company and the Subsidiaries confidential until the Closing Date
and agrees that it will only use such information in connection
with the transactions contemplated by this Agreement and not
disclose any of such information other than (i) to Purchaser's
Representatives who are involved with the transactions
contemplated by this Agreement, (ii) to the extent such
information presently is or hereafter becomes available, on a
non-confidential basis, from a source other than the Stockholders
or the Company, and (iii) to the extent disclosure is required by
law, regulation or judicial order by any governmental authority.
The Company and the Stockholders agree to keep non-
public information regarding Purchaser, and the Stockholders
agree to keep non-public information regarding the Company and
the Subsidiaries, confidential and agree that they will only use
such information in connection with the transactions contemplated
by this Agreement and not disclose any of such information other
than (i) to the Stockholders' and the Company's respective
Representatives who are involved with the transactions
contemplated by this Agreement, (ii) to the extent such
information presently is or hereafter becomes available, on a
non-confidential basis, from a source other than Purchaser, and
(iii) to the extent disclosure is required by law, regulation or
judicial order by any governmental authority.
Prior to any disclosure required by law, regulation or
judicial order, Purchaser, the Company or the Stockholders, as
the case may be, shall advise each of the others of such
requirement so that it may seek a protective order.
Prior to Closing or thereafter, none of Purchaser, the
Company or the Stockholders shall make any press release or
public announcement in connection with the transactions
contemplated hereby without the prior written consent of the
other parties or, if required by law, without prior consultation
with the other parties.
Notices. Any notices or other communications required
or permitted hereunder, shall be sufficiently given if in writing
and personally delivered or sent by pre-paid first class mail,
overnight courier, telex or facsimile, addressed as follows or to
such other address as the parties shall have given notice of
pursuant hereto:
In the case of Purchaser:
Clear Channel Communications, Inc.
200 Concord Plaza
Suite 600
San Antonio, Texas 78216
Attention: Randall T. Mays
Telecopy: 210-822-2299
With a copy to:
Clear Channel Communications, Inc.
200 Concord Plaza
Suite 600
San Antonio, Texas 78216
Attention: Kenneth E. Wyker, Esq.
Telecopy: 210-822-2299
Piper & Marbury L.L.P.
36 South Charles Street
Baltimore, Maryland 21201
Attention: R.W. Smith, Jr., Esq.
Telecopy: 410-576-1700
In the case of the Company or the Stockholders:
Eller Media Corporation
2850 East Camelback Road, Suite 300
Phoenix, Arizona 85016
Attention: Paul J. Meyer, Esq.
Telecopy: 602-381-5740
Paul J. Meyer, Esq.
c/o Eller Media Corporation
2850 East Camelback Road
Suite 300
Phoenix, Arizona 85016
Telecopy: 602-957-8602
With a copy to:
H & F Investors III, Inc.
One Maritime Plaza, 12th Fl.
San Francisco, California 94111
Attention: John L. Bunce, Jr.
Telecopy: 415-788-0176
Heller, Ehrman, White & McAuliffe
333 Bush Street
San Francisco, California 94104
Attention: Paul J. Mundie, Esq.
Telecopy: 415-772-6168
Latham & Watkins
633 West Fifth Street, Suite 4000
Los Angeles, California 90071
Attention: Thomas W. Dobson, Esq.
Telecopy: 213-891-8763
All such notices an communications shall be deemed to have
been duly given: when personally delivered; three Business Days
after being deposited in the mail, as aforesaid; next day, if by
overnight courier with guaranteed delivery; when answered back,
if telexed; and when receipt is acknowledged, if transmitted by
facsimile.
Entire Agreement. This Agreement together with all exhibits and
schedules hereto (including the Disclosure Letter as updated
pursuant to Section 15 hereof) represent the entire understanding
and agreement among the parties hereto with respect to the
subject matter hereof and supersedes all prior understandings and
agreements, whether written or oral, and can be amended,
supplemented or changed, and any provision hereof can be waived,
only by written instrument making specific reference to this
Agreement signed by the party against whom enforcement of any
such amendment, supplement, modification or waiver is sought,
including, in the case of the Stockholders, all Stockholders who
are a party to this Agreement at the time such enforcement is
sought. No waiver of any of the provisions of this Agreement
shall be deemed or shall constitute a waiver of any other
provision hereof (whether or not similar), nor shall such waiver
constitute a continuing waiver unless otherwise expressly
provided.
Successors. This Agreement shall be binding upon and shall inure
to the benefit of the parties hereto and their respective
successors and assigns; provided, however, that this Agreement
and all rights and obligations hereunder may not be assigned or
transferred without the prior written consent of the other
parties hereto, except that Purchaser may assign its rights
hereunder to a wholly owned subsidiary.
Choice of Law.
This Agreement shall be construed, interpreted and the
rights of the parties determined in accordance with the laws of
the State of Delaware (without reference to the choice of law
provisions of Delaware law) except with respect to matters of law
concerning the internal corporate affairs of any corporate entity
which is a party to or the subject of this Agreement, and as to
those matters the law of the jurisdiction under which the
respective entity derives its powers shall govern.
Each of the parties hereto irrevocably consents to the
service of any process, pleading, notices or other papers by the
mailing of copies thereof by registered, certified or first class
mail, postage prepaid, to such party at such party's address set
forth herein, or by any other method provided or permitted under
Delaware law. Additionally, each party hereby appoints RL&F
Service Corp., One Rodney Square, Wilmington, Delaware 19810, as
agent for service of process in Delaware.
Each party irrevocably and unconditionally agrees and
consents that any suit, action or other legal proceeding arising
out of or related to this Agreement shall be brought and heard in
New Castle County, State of Delaware, and each party irrevocably
consents to personal jurisdiction in any and all tribunals in
said County.
To the extent that Purchaser has or hereafter may acquire
any immunity from jurisdiction of any court or from any legal
process (whether through service or notice, attachment prior to
judgment, attachment in aid of execution, execution or otherwise)
with respect to itself or its property, Purchaser hereby
irrevocably waives such immunity in respect of their obligations
pursuant to this Agreement.
No Reliance on Other Information. Except for the representations
and warranties contained in this Agreement, none of the parties
hereto nor any Representative or Affiliate or other person acting
for any of them makes any other representation or warranty,
express or implied.
Expenses. Whether or not the transactions contemplated hereby
are consummated, (a) Purchaser shall pay all of its legal,
accounting and other out-of-pocket expenses incident to the
transactions contemplated hereby and (ii) the Stockholders shall
pay their own and the Company's legal, accounting and other out-
of-pocket expenses incident to the transactions contemplated
hereby, provided however, that Purchaser, on the one hand, and
the Stockholders, on the other, shall divide and share equally
filing fees in connection with government filings necessary to
consummate the transactions contemplated hereby (provided that if
this Agreement is terminated, each party shall attempt to obtain
any available refunds of such fees or otherwise utilize such fees
in other transactions such that expense to the parties is
minimized).
Severability. If at any time subsequent to the date hereof, any
provision of this Agreement shall be held by any court of
competent jurisdiction to be illegal, void or unenforceable, such
provision shall be of no force and effect, but the illegality or
unenforceability of such provision shall have no effect upon and
shall not impair the enforceability of any other provision of
this Agreement.
Titles. The titles, captions or headings of the Sections herein
are inserted for convenience of reference only and are not
intended to be a part of or to affect the meaning or
interpretation of this Agreement.
Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, but all
of which taken together shall constitute one and the same
instrument.
No Third-Party Beneficiaries. No person (other than parties to
this Agreement or their respective successors or permitted
assigns) shall have or be construed to have any legal or equity
right, remedy or claim under or in respect of or by virtue of
this Agreement or any provision herein contained; provided,
however, that the provisions of Section 6(c) above concerning
indemnification are intended for the benefit of the individuals
specified therein, and their respective legal representatives,
successors and assigns; and provided further, that Section 2(c)
above concerning the Restated Options is intended for the benefit
of holders of Company Stock Option Agreements and their
respective legal representatives, successors and assigns.
Construction. The parties have participated jointly in the
negotiation and drafting of this Agreement. In the event an
ambiguity or question of intent or interpretation arises, this
Agreement shall be construed as if drafted jointly by the parties
and no presumption or burden of proof shall arise favoring or
disfavoring any party by virtue of authorship of any provision of
this Agreement.
Cumulative Remedies. All rights and remedies of any party hereto
are cumulative of each other and of every right or remedy such
party may otherwise have at law or in equity, and the exercise of
one or more rights or remedies shall not prejudice or impair the
concurrent or subsequent exercise of other rights or remedies.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have duly executed
this Agreement as of the date first above written.
PURCHASER
By
Name:
Title:
ELLER MEDIA CORPORATION
By
Name:
Title:
HELLMAN & FRIEDMAN
CAPITAL PARTNERS III, L.P.
By:
Its General Partner,
H&F Investors III
By:
Its Managing General Partner,
Hellman & Friedman Associates III, L.P.
By: Its Managing General Partner,
H&F Investors III, Inc.
By:_____________________
Its:
H&F ORCHARD PARTNERS III, L.P.
By:Its General Partner,
H&F Investors III
By:Its Managing General Partner,
Hellman & Friedman Associates
III, L.P.
By:Its Managing General Partner,
H&F Investors III, Inc.
By:_____________________
Its:
H&F INTERNATIONAL PARTNERS III, L.P.
By: Its General Partner,
H&F Investors III
By:Its Managing General Partner,
Hellman & Friedman Associates
III, L.P.
By:Its Managing General Partner,
H&F Investors III, Inc.
By:_____________________
Its:
EM HOLDINGS LLC
By:_________________________
Its:
____________________________
H. Irving Grousbeck
AMERICAN MEDIA MANAGEMENT, INC.
By:_________________________
Its:
____________________________
Richard Reiss, Jr.
____________________________
Glenn Krevlin, as Trustee fbo
Nina Krevlin, Glenn Krevlin,
Michael Krevlin and Jill Krevlin
____________________________
K. Tucker Andersen
____________________________
Bruce Halle
____________________________
Timothy J. Donmoyer
<PAGE>
____________________________
Karl Eller
____________________________
Paul J. Meyer
____________________________
Patricia Salas Pineda
EXHIBIT A
Stockholders
EXHIBIT B
Purchase Price Allocation
EXHIBIT C
Form of Escrow Agreement
EXHIBIT D
Form of Option Assumption Agreement
EXHIBIT E
Form of Registration Rights Agreement
EXHIBIT F
Escrow Allocation
EXHIBIT G
Company Stock Option Rollover Example<PAGE>
EXHIBIT 13.1 - ANNUAL REPORT TO SHAREHOLDERS
1996 ACCOMPLISHMENTS
Record Revenues
Achieved record revenues of $398 million, an increase of 41
Percent over 1995.
Record Operating Profits at the Station Level.
Earned $153 million in station operating income before
depreciation and amortization, an increase of 36 percent over
1995.
Record After-tax Cash Flow
Generated more than $107 million in after tax cash flow, an
increase of 51 percent over 1995.
Record After Tax Cash Flow Per Share
Reported after tax cash flow per share of $1.44, adjusted for a
two-for-one stock split on December 2, 1996, an increase of 43
percent over 1995.
Long-term Stock Price Performance
Clear Channel's common stock price per share increased 64 percent
during 1996 and has compounded at an annual average rate of 82
percent over the last five years and 50 percent over the last
decade.
Increased Access to Capital
Improved financial availability and flexibility by completing a
new $1.3 billion revolving credit facility and raising $311
million in equity financing.
Domestic Radio Acquisitions
Acquired 35 FM and 14 AM radio stations in 20 markets.
Domestic Television Acquisitions
Acquired WPRI-TV, the CBS affiliate in Providence, RI and entered
into a local marketing agreement with WNAC-TV, the FOX affiliate
serving Providence.
Spanish Language Broadcasting
Acquired a temporary controlling interest in Heftel Broadcasting
Corporation and subsequently merged Heftel with Tichenor Media
System, Inc. The combined company is the largest Spanish
language radio broadcaster in the United States. Clear Channel
owns 32.3 percent of the merged company.
International Acquisitions
Acquired a one-third interest in the largest radio group in New
Zealand. Additionally, Australian Radio Network, of which Clear
Channel owns 50 percent, acquired four radio stations: one in
Brisbane, one in Western Sydney and two in Adelaide, Australia.
Local Television News Expansion
Launched extensive local news operations in Memphis, TN; Mobile,
AL/Pensacola, FL; Jacksonville, FL and Albany, NY.
Strengthened Management
Strengthened management at all levels and updated the Company's
stretegic plan. George Sosson, Stan Webb and James Smith were
promoted to the position of Senior Vice President in the radio
division.
Financial Highlights
In thousands except per share amounts
1996 1995 Change
Gross broadcasting
revenue $398,094 $283,357 41%
Station operating
income before
depreciation and
amortization 153,407 112,555 36%
Operating income 99,090 71,372 39%
Net income 37,696 32,014 18%
Net income
per share (1) $ .50 $ .46 9%
After tax cash
flow (2) 107,318 71,140 51%
After tax cash flow
per share (1) (2) $1.44 $1.01 43%
(1) Adjusted for a two-for-one stock split effective December 2,
1996.
(2) Defined as net income before unusual items plus
depreciation, intangible amortization (including nonconsolidated
affiliates) and deferred taxes.
Financial Highlights
This section of the Annual Report contains four graphs,
showing for the past five years: Gross broadcasting revenue (in
millions), Station operating income before depreciation and
amortization (in millions), After tax cash flow (in millions),
and After tax cash flow per share. The amounts for each of the
five years for these four items were as shown in the following
table:
1996 1995 1994 1993 1992
Gross broadcasting revenue
$398.1 $283.4 $200.7 $135.7 $94.5
Station operating income before depreciation and amortization
153.4 112.6 72.7
42.2 28.7
After tax cash flow
107.3 71.1 46.9 26.6 17.1
After tax cash flow per share
$1.44 $1.01 $ 0.68 $ 0.43 $.29
LETTER TO SHAREHOLDERS
Dear Fellow Shareholders:
Nineteen ninety-six was the most successful year in your
Company's history. Financial results again achieved record levels
in our core business of radio and television broadcasting. After
tax cash flow per share, the most important measure of your
Company's financial performance, increased 43 percent from $1.01
in 1995 to $1.44 in 1996.
Gross revenues increased from $283.4 million to $398.1
million from 1995 to 1996, an increase of 41 percent, while
station operating income before depreciation and amortization
increased from $112.6 million to $153.4 million over the same
period. This stronger financial performance contributed to the
increase in your Company's stock price which, after a two-for-one
stock split effective December 2, 1996, increased 64 percent
during the year. Your Company's stock price has compounded at an
annual average rate of 50% over the last decade, making it one of
the best performing stocks over that period.
Nineteen ninety-six was a year of continued growth and
unique opportunities for your Company. At the beginning of the
year we owned, programmed or sold airtime on, 43 radio stations
and 16 television stations in 21 markets domestically, as well as
a 50 percent interest in the Australian Radio Network and a 21%
stake in Heftel Broadcasting Corporation, the largest Spanish
language radio broadcaster in the United States.
Subsequent to the passage of the Telecommunications Act of
1996, your Company has doubled in size and currently owns,
programs or sells air time on 109 radio stations (including
pending transactions) and 18 television stations in 32 markets in
the United States. Additionally, your Company expanded into New
Zealand with a one-third interest in that country's largest radio
broadcaster and added to its operations in Australia. Your
Company acquired a temporary controlling interest in Heftel
Broadcasting Corporation on August 5, 1996. Subsequently, Heftel
Broadcasting Corporation merged with Tichenor Media System, Inc.
to form a Spanish language radio broadcasting company which
reaches each of the top ten Hispanic markets in the United
States. Clear Channel remains the largest stockholder in the
newly-merged company, with a 32.3% stake.
RADIO
Your Company moved swiftly to take advantage of the
Telecommunications Act of 1996 and made significant investments
in many of its existing radio markets and entered several new
markets.
In Grand Rapids, Michigan, the broadcasting assets of WOOD-
AM/FM and WBCT-FM were purchased. Subsequently, your Company also
closed on the acquisition of WCUZ-AM/FM and WAKX-FM (now WVTI-FM)
in that market.
Additional stations were acquired to add to the Company's
presence in Tulsa and Richmond. In Tulsa, your Company entered
into an agreement to acquire KOAS-FM and KQLL-AM/FM. In Richmond,
WTVR-AM/FM was acquired.
In Louisville, your Company broadened its operations by
acquiring WWKY-AM, WTFX-FM, WHKW-FM, WKJK-AM and WQMF-FM,
increasing its ownership to 4 FM and 3 AM radio stations in that
market.
In May, Clear Channel closed on its purchase of US Radio,
Inc., which owned or programmed 19 radio stations in eight
markets, including Milwaukee, WI; Norfolk, VA; Raleigh, NC;
Reading, PA; Memphis, TN; Little Rock, AR; and Houston and
El Paso, TX.
Your Company has entered into and completed several
transactions which will strengthen its position in these markets.
In Milwaukee, a definitive agreement was executed to purchase
WOKY-AM and WMIL-FM. In Norfolk, WMYK-FM and WSVY-FM were added.
Your Company has also entered into a definitive agreement to
purchase WFXC-FM, WFXK-FM, and WDUR-AM, and acquired WZZU-FM
which will enhance its position in Raleigh, NC. In Lancaster,
PA, which overlaps the Harrisburg television market and is
adjacent to your Company's profitable radio operations in
Reading, PA, Clear Channel has entered into a definitive
agreement to purchase WLAN-AM/FM. In Memphis, TN, your Company
acquired KJMS-FM and KWAM-AM.
During the third and fourth quarters of 1996, the
Acquisition of Radio Equity Partners, L.P. (REP) was completed.
REP had operations which overlapped with your Company in New
Orleans, Memphis, Oklahoma City and Providence. Additionally, REP
brought your company its first radio operations in the markets of
Springfield, MA; Winston-Salem/Greensboro, NC; Columbia, SC and
Fort Myers/Naples, FL. This acquisition created strategic radio
clusters in each of these markets.
Your Company has continued its trend of consolidation by
adding to its position in several of these markets. In New
Orleans, the addition of KHOM-FM brings your Company's radio
operations to 5 FMs and 2 AMs in the Crescent City. Additionally,
a definitive agreement to acquire WKII-AM, WFSN-FM and WOLZ-FM in
Fort Myers, FL has been executed.
In 1996, Clear Channel also made an equity investment of an
80% interest in Radio Enterprises, Inc., which is headed by Jim
Arcara, the former president of the radio division of the
American Broadcasting Company, and his son, David Arcara. Radio
Enterprises, Inc. owns or has entered into agreements to acquire
WQBK-AM/FM, WQBJ-FM and WXCR-FM, all of which serve Albany, NY
where your Company owns WXXA-TV, the FOX affiliated television
station.
TELEVISION
During 1996, several long term operating investments were
made in the television division. WPRI-TV, the CBS affiliate in
Providence, RI, was added to the Clear Channel family. Concurrent
with that acquisition, your Company entered into a local
marketing agreement to program and sell advertising time on WNAC-
TV, the FOX affiliate in Providence.
Since November of 1995, when your Company began its first
local news operations in Memphis, Clear Channel has been adding
news operations in its other television markets. By the end of
1996 news operations were launched in four markets: Memphis,
Mobile/Pensacola, Jacksonville and Albany. In addition, your
Company invested significant capital and other resources to
upgrade its news franchises in Harrisburg and Providence. In the
short term these news department start-ups have resulted in
reduced profitability, but it is expected that during 1997 and
1998, each of these operations will become more profitable and
contribute meaningfully to your Company's long-term performance.
SPANISH LANGUAGE RADIO
Over the last twelve months, Clear Channel acted as the
catalyst in the formation of the leading Spanish language radio
broadcaster in the United States. In June 1996, your Company
extended a tender offer for all of the outstanding stock of
Heftel Broadcasting Corporation (Heftel) which it did not already
own. Your Company increased its stake in Heftel in August 1996
from 21.4 percent to 63.2 percent through this tender offer and a
related stock purchase agreement entered into with former
Officers of Heftel. Subsequently, Heftel merged with Tichenor
Media System, Inc. (Tichenor) in February 1997 (the Tichenor
merger), forming the largest Spanish language radio broadcaster
in the United States, with strong franchises in each of the top
ten Hispanic markets.
Heftel also completed an equity offering of 4.8 million
shares of class A common stock (the Heftel offering) and
established a $500 million revolving line of credit. Heftel is
well positioned with its strong operating foundation and its
relatively unlevered balance sheet to continue to be the leading
Spanish language radio broadcaster in the United States.
After the Tichenor merger and the Heftel offering, your
Company holds a 32.3% stake in Heftel. Heftel is publicly traded
on the NASDAQ under the symbol HBCCA.
INTERNATIONAL
In 1996, the New Zealand government privatized Radio New
Zealand Commercial. The successful acquiror was New Zealand Radio
Network (NZRN) a consortium consisting of three equal partners:
Clear Channel, Australian Provincial Newspapers Ltd., (which is
also your Company's partner in ARN), and Wilson & Horton, which
is the largest publisher in New Zealand. Subsequently, NZRN added
to its operations by acquiring Prospect, Ltd. which strengthened
NZRN's presence in Auckland, the largest market in New Zealand.
NZRN is the dominant radio broadcaster in New Zealand. It owns 52
radio stations in New Zealand and controls approximately 60% of
that country's radio revenues.
In Australia, your Company added to its investment in the
Australian Radio Network (ARN). ARN acquired radio stations 5AD
and 5DN in Adelaide, the capital of South Australia, as well as
radio station 5BH in Brisbane, the capital of Queensland. ARN
also acquired ONE-FM in Western Sydney, which will complement
ARN's two FM radio stations in Sydney. ARN also divested two
small stations in Albury/Wodonga. In total, ARN owns 10 stations
all in capital cities of Australia including Sydney, Melbourne,
Brisbane, Adelaide, and Canberra.
Your Company continues to look for attractive investments in
other countries outside of the United States. Management will
continue to analyze international investment opportunities in
countries where we find higher rates of advertising growth, sound
political infrastructure, moderate currency risk and attractive
industry dynamics.
OUTDOOR ADVERTISING
On February 25, 1997 your Company entered into a definitive
agreement to acquire the stock of Eller Media Company for $1.15
billion. Eller Media is the oldest, largest and most established
outdoor advertising company in the United States, controlling
over 50,000 display faces. Founded in 1901 by Walter Foster and
George W. Kleiser, the company's rich history of leadership set
standards that would pioneer the modern outdoor industry.
Approaching its 100th anniversary, Eller Media Company remains
the outdoor advertising industry leader.
Today, Eller Media reaches 26 major metropolitan markets
throughout the United States and is the nation's largest outdoor
advertising provider. Coverage areas include: Los Angeles, San
Diego, San Francisco, Sacramento, Chicago, Milwaukee, Cleveland,
Akron/Canton, Dallas/Ft. Worth, Houston, San Antonio, El Paso,
Phoenix, Atlanta, Tampa Bay and Miami/Fort Lauderdale. Eller
Media continues to broaden its presence in major metropolitan
markets with strategic acquisitions and aggressive expansion.
Eller Media operates a wide array of outdoor products that
is unmatched in the out-of-home advertising industry. Its
products include traditional outdoor displays, such as large
freeway bulletins and 30-sheet posters, transit shelters,
commuter rail panels, buses, point-of-purchase signage and
wallscape murals.
Eller Media will operate as an autonomous wholly-owned
subsidiary of Clear Channel and will continue to be led by its
current CEO, Karl Eller. Mr. Eller' s outdoor advertising
experience spans 44 years. During that time he served as
President/CEO of Combined Communications, which was acquired by
Gannett. A true entrepreneur, Mr. Eller has also served as
President/CEO of Columbia Pictures Communications and Circle K
Corporation. The University of Arizona School of Business bears
his name. Mr. Eller will join Clear Channel's Board of Directors
upon the closing of this acquisition.
CAPITAL MARKETS
In an effort to continue to be flexible and take advantage
of attractive investment opportunities, Clear Channel refinanced
its existing Credit Facility and increased the amount available
under the line to $1.3 billion. Additionally, your Company issued
approximately 7.7 million shares (adjusted for a two-for-one
stock split effective December 2, 1996) of common stock in June
1996. The net result of these actions gives your Company a
strengthened balance sheet with significant acquisition capacity.
DEREGULATION
The Telecommunications Act of 1996 (the Act) significantly
relaxed ownership regulations with regard to both radio and
television stations. Your Company continues to believe that the
potential consolidation afforded by the Act will improve the
operating characteristics of the entire broadcasting industry.
STRATEGIC DIRECTION
Your Company continues to be committed to its proven
corporate strategy:
Decentralized, flexible, entrepreneurial
business units that place an emphasis on
simplifying structures and procedures,
Sound centralized financial management,
Growth through internal expansion of
existing broadcast properties, supplemented
by strategic acquisitions,
Internal capital investment to improve quality and
market leadership,
Insistence on adherence to the highest
standards of integrity and business
conduct, and
Significant attention to long-term
strategic planning.
The future of our core businesses is bright, and the markets
we serve continue to improve. Our position in each of these
Markets remains one of leadership. To the over 3,200 members of
our team who made 1996 possible, I personally thank you. And to
our shareholders, you may continue to expect that our team is
committed to enhancing the long-term value of your investment.
Lowry Mays
Chairman and CEO
March 3, 1997
FAMILY TREE
RADIO
TEXAS
San Antonio
WOAI AM
News/Talk/Sports
1200 KHz
KQXT FM
Adult Contemporary
101.9 MHz
KTKR AM
Sportstalk/Play-by-Play
760 KHz
KAJA FM
Country
97.3 MHz
KSJL FM(1)
Urban Adult Contemporary
96.1 MHz
Houston
KHYS FM(1)
Rhythmic CHR
98.5 MHz
KPRC AM
News/Talk/Sports
950 KHz
KSEV AM
News/Talk/Sports
700 KHz
KMJQ FM
Urban Adult Contemporary
102.1 MHz
KBXX FM
Urban Contemporary
97.9 MHz
KJOJ FM
CHR Rhythmic
103.3 MHz
KJOJ AM
Christian
880 KHz
Austin
KEYI FM
Oldies
103.5 MHz
KFON AM
Sports
1490 KHz
KPEZ FM
Classic Rock
102.3 MHz
KHFI FM
Contemporary Hits
96.7 MHz
El Paso
KPRR FM
Contemporary Hits
102.1 MHz
KHEY FM
Country
96.3 MHz
KHEY AM
Country
690 KHz
CONNECTICUT
New Haven
WKCI FM
Contemporary Hits
101.3 MHz
WAVZ AM
Nostalgia
1300 KHz
WELI AM
News/Talk
960 KHz
OKLAHOMA
Tulsa
KAKC AM
News/Sports/Oldies
1300 KHz
KMOD FM
Adult Oriented Rock
97.5 MHz
KQLL AM(1)(2)
Sports/Talk
1430 KHz
KQLL FM(1)(2)
Oldies
106.1 MHz
KOAS FM(1)(2)
Smooth Jazz
92.1 MHz
Oklahoma City
KXXY FM
Country
96.1 MHz
KEBC AM
Sports Talk News/Spanish
1340 KHz
KTST FM
Country
101.9 MHz
KTOK AM
News/Talk/Sports
1000 KHz
KNRX FM
New Alternative Rock
94.7 MHz
KJYO FM
Contemporary Hits
102.7 MHz
WKY AM(1)
News/Talk
930 KHz
KENTUCKY
Louisville
WHAS AM
News/Talk/Sports
840 KHz
WAMZ FM
Country
97.5 MHz
WKJK AM
Country
1080 KHz
WTFX FM
Modern Rock
100.5 MHz
WWKY AM
News/Talk/Sports
790 KHz
WHKW FM
Country
98.9 MHz
WQMF FM
Classic Rock
95.7 MHz
FLORIDA
Tampa
WMTX AM
Sports/Talk
1040 KHz
WMTX FM
Hot Adult Contemporary
95.7 MHz
WRBQ AM
Adult Urban Contemporary
1380 KHz
WRBQ FM
Country
104.7 MHz
Miami
WHYI FM
Contemporary Hits
100.7 MHz
WBGG FM
Classic Rock
105.9 MHz
Ft. Myers/Naples
WCKT FM
Country
107.1 MHz
WXRM FM
Soft Adult Contemporary
105.5 MHz
WKII AM(1)(2)
Nostalgia
1070 KHz
WFSN FM(1)(2)
Country
100.1 MHz
WOLZ FM(1)(2)
Oldies
95.3 MHz
VIRGINIA
Richmond
WRVA AM
News/Talk/Sports
1140 KHz
WRNL AM
Sports
910 KHz
WRVQ FM
Contemporary Hits
94.5 MHz
WRXL FM
Adult Oriented Rock
102.1 MHz
WTVR FM
Soft AC
98.1 MHz
WTVR AM
Nostalgia
1380 KHz
Norfolk
WOWI FM
Urban Contemporary
102.9 MHz
WJCD FM
Smooth Jazz
105.3 MHz
WMYK FM
Rhythmic CHR
92.1 MHz
WSVY FM
Adult Urban Contemporary
107.7 MHz
LOUISIANA
New Orleans
WODT AM
Blues
1280 KHz
WQUE FM
Urban Contemporary
93.3 MHz
WYLD AM
Gospel
940 KHz
WYLD FM
Urban Adult Contemporary
98.5 MHz
WNOE FM
Country
101.1 MHz
KKND FM
Alternative Rock
106.7 MHz
KHOM FM
Contemporary Hits
104.1 MHz
OHIO
Cleveland
WENZ FM
Alternative Rock
107.9 MHz
WNCX FM
Classic Rock
98.5 MHz
WERE AM
News/Talk
1300 KHz
TENNESSEE
Memphis
WHRK FM
Urban Contemporary
97.1 MHz
WDIA AM
Adult Urban
1070 KHz
KJMS FM
Urban Adult Contemporary
101.1 MHz
KWAM AM
Religious
990 KHz
WEGR FM
Classic Rock
102.7 MHz
WREC AM
News/Talk
600 KHz
WRXQ FM
Alternative Rock
95.7 MHz
N. CAROLINA
Raleigh
WQOK FM
Urban Contemporary
97.5 MHz
WZZU FM
Classic Hits
103.9 MHz
WDUR AM(2)
Urban Oldies
1490 KHz
WFXC FM(2)
Urban Adult
107.1 MHz
WFXK FM(2)
Urban Adult
104.3 MHz
Greensboro
WXRA FM
Alternative Rock
94.5 MHz
WTQR FM
Country
104.1 MHz
WSJS AM
News/Talk
600 KHz
WISCONSIN
Milwaukee
WKKV FM
Urban Contemporary
100.7 MHz
WMIL FM(2)
Country
106.1 MHz
WOKY AM(2)
Adult Standards
920 KHz
ARKANSAS
Little Rock
KDDK FM
Country
100.3 MHz
KMJX FM
Classic Rock
105.1 MHz
PENNSYLVANIA
Reading
WRAW AM
Oldies
340 KHz
WRFY FM
Rock Hits
102.5 MHz
Lancaster
WLAN AM(1)(2)
Big Band
1390 KHz
WLAN FM(1)(2)
Hot AC
96.9 MHz
MICHIGAN
Grand Rapids
WOOD AM
News/Talk/Sports
1300 KHz
WOOD FM
Adult Contemporary
105.7 MHz
WBCT FM
Country
93.7 MHz
WCUZ AM
News/Talk/Sports
1230 KHz
WCUZ FM
Country
101.3 MHz
WVTI FM
Hot Adult Contemporary
96.1 MHz
RHODE ISLAND
Providence
WWBB FM
Oldies
101.5 MHz
WWRX FM
Classic Rock
103.7 MHz
MASSACHUSETTS
Springfield
WHYN AM
News/Talk/Sports
560 KHz
WHYN FM
Adult Contemporary
93.1 MHz
SOUTH CAROLINA
Columbia
WWDM FM
Urban Contemporary
101.3 MHz
WARQ FM
Alternative Rock
93.5 MHz
NEW YORK
Albany
WQBK FM(3)
Alternative Rock
103.9 MHz
WQBJ FM(3)
Alternative Rock
103.5 MHz
WQBK AM(3)
News/Talk
1300 KHz
WXCR FM(3)
Classic Rock
102.3 MHz
TELEVISION
ALABAMA
Mobile
WPMI-TV-NBC 15
ARIZONA
Tucson
KTTU-TV-UPN 18
FLORIDA
Jacksonville
WAWS-TV
FOX 30
WTEV-TV
UPN 47(1)
Pensacola
WJTC-TV
UPN 44(1)
OKLAHOMA
Tulsa
KTFO-TV
UPN 41(1)
KOKI-TV
FOX 23
TENNESSEE
Memphis
WLMT-TV
UPN 30(1)
WPTY-TV
ABC 24
KANSAS
Wichita
KSAS-TV
FOX 24
ARKANSAS
Little Rock
KLRT-TV
FOX 16
KASN-TV
UPN 38(1)
NEW YORK
Albany
WXXA-TV
FOX 23
PENNSYLVANIA
Harrisburg
WHP-TV
CBS 21
WLYH-TV
UPN 15(1)
MINNESOTA
Minneapolis
WFTC-TV
FOX 29
RHODE ISLAND
Providence
WPRI-TV
CBS 12
WNAC-TV
FOX 64(1)
NETWORKS
KENTUCKY
Louisville
Kentucky News Network
VIRGINIA
Richmond
Virginia Radio Network
OKLAHOMA
Oklahoma City
Oklahoma News Network
Clear Channel Sports
TEXAS
College Station
Clear Channel Sports
San Angelo
Voice of Southwest Agriculture Radio Network
IOWA
DES MOINES
Clear Channel Sports
OUTDOOR
ARIZONA
Phoenix
CALIFORNIA
San Francisco
Sacramento
Los Angeles
San Diego
FLORIDA
Tampa Bay
Miami/Ft. Lauderdale
GEORGIA
Atlanta
ILLINOIS
Chicago
OHIO
Cleveland
Akron/Canton
TEXAS
Dallas/Ft.Worth
El Paso
Houston
San Antonio
WISCONSIN
Milwaukee
(2)
(1) Joint Sales Agreement or Local Marketing Agreement(2)Pending
Acquisition(3) Pending acquisition by Radio Enterprises, Inc.
DOMESTIC OPERATIONS
This section of the Annual Report to Shareholders contains a
map of the continental United States (with a legend) showing the
domestic markets in which Clear Channel has each of the following
operating units:
Corporate office in San Antonio, TX, Radio stations in 26
markets, Television stations in eleven markets, Outdoor
advertising (pending acquisition at December 31, 1996) in 15
markets, Radio networks in six markets, Joint sales / local
marketing agreements in ten markets and Pending radio station
acquisitions in seven markets
AUSTRALIAN RADIO NETWORK
This section of the Annual Report to Shareholders contains a
map of Australia (with a legend) showing the markets in which ARN
has each of the following operating units:
ARN headquarters in Sydney, Australia, A radio network based
in Sydney and Ten radio stations in Sydney, Melbourne, Brisbane,
Adelaide and Canberra, Australia.
NEW ZEALAND RADIO NETWORK
This section of the Annual Report to Shareholders contains a
map of New Zealand (with a legend) showing the markets in which
NZRN has each of the following operating units: Fifty-two
Community radio, ZM & Classic Rock Network, Classic Hits FM
stations, and Newstalk ZB radio stations throughout New Zealand.
INVESTMENT HIGHLIGHTS
This section of the Annual Report to Shareholders contains
two graphs. The first graph shows the five-year cumulative
return on Clear Channel's common stock. The year-end value of
$1,000 invested in Clear Channel common stock on December 31,
1991 was $1,804, $5,090, $7,019, $12,206, and $19,986 at December
31, 1992, 1993, 1994, 1995 and 1996, respectively, which
represents a compound annual growth rate of approximately 82%.
The second graph shows Clear Channel' stock price
performance compared to the Paul Kagan Associates, Inc.
Broadcasting Average and the S&P 500 as indicated in the
following table (indexed to December 31, 1991 = 1.000):
1996 1995 1994 1993 1992
Clear Channel Communications, Inc.
19.986 12.206 7.019 5.090 1.804
Paul Kagan Associates, Inc. Broadcast Average
2.943 2.471 1.781 1.609 1.200
S&P 500
1.778 1.478 1.102 1.119 1.045
PRO FORMA DOMESTIC REVENUE BY MARKET
This section of the Annual Report to Shareholders contains a
pie chart showing the domestic markets in which Clear Channel
operates and the percent of total pro forma broadcast revenue for
the year ended December 31, 1996 that was generated in each
market. The pro forma broadcast revenues for the year ended
December 31, 1996 were calculated as if all of the radio and
television stations acquired in 1996 had been acquired on January
1, 1996. The markets and their applicable percentages were as
follows:
Albany 2.2%
Austin 2.2%
Cleveland 2.4%
Columbia 1.3%
El Paso 0.8%
Ft. Myers/Naples 0.7%
Grand Rapids 2.9%
Greensboro 2.8%
Harrisburg 2.4%
Houston 8.2%
Jacksonville 4.1%
Little Rock 3.4%
Louisville 4.8%
Memphis 8.3%
Miami/Ft. Lauderdale 3.5%
Milwaukee 0.7%
Minneapolis 5.7%
Mobile/Pensacola 2.8%
New Haven 1.5%
New Orleans 3.9%
Norfolk 1.9%
Oklahoma City 4.5%
Providence 7.5%
Raleigh 1.1%
Reading/Lancaster 1.6%
Richmond 4.3%
San Antonio 3.5%
Springfield, MA 1.0%
Tampa 3.8%
Tucson 0.1%
Tulsa 4.3%
Wichita 1.8%
____
100.0%
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
COMPARISON OF 1996 vs 1995
Consolidated
Net broadcasting revenue in 1996 increased
41% to $351,739,000 from $250,059,000. Station operating expenses
in 1996 increased 44% to $198,332,000, compared to $137,504,000
for 1995. Station operating income before depreciation and
amortization in 1996 increased to $153,407,000 from $112,555,000,
or 36%. Depreciation and amortization increased 36% to
$45,790,000 from $33,769,000. Interest expense increased to
$30,080,000 from $20,751,000, or 45%. Other income (expense)
increased from $(803,000) to $2,230,000. Net income was
$37,696,000 for 1996, compared to $32,014,000 in 1995. Income
tax expense (based on income before equity in net income/loss
of, and other income from, nonconsolidated affiliates) in 1996
was $28,386,000, reflecting an average annual effective tax rate
of 40%, compared to $20,292,000, or a 41% effective rate in 1995.
Equity in net income (loss) of, and other income from,
nonconsolidated affiliates decreased to $(5,158,000) in 1996 from
$2,489,000 in 1995.
The majority of the increase in net
broadcasting revenue was due to the additional revenue associated
with the radio and television stations acquired in 1996 and the
inclusion of a full year of operations for those stations
acquired in 1995. These stations are as follows:
Acquisition Date Network or Station Location
1996 Acquisitions
February 14, 1996 WOOD-AM/FM, WBCT-FM Grand Rapids, MI
May 15, 1996 US Radio, Inc.(USR)
KHEY-AM/FM, KPRR-FM El Paso, TX
KJOJ-FM, KJOJ-AM(2) Houston, TX
KMJX-FM, KDDK-FM Little Rock, AR
WHRK-FM, WDIA-AM Memphis, TN
WKKV-FM Milwaukee, WI
WJCD-FM, WOWI-FM Norfolk, VA
WQOK-FM, WZZU-FM(2) Raleigh, NC
WRAW-AM, WRFY-FM Reading, PA
May 31, 1996 WENZ-FM(3) Cleveland,OH
June 1, 1996 WTVR-AM/FM Richmond, VA
July 1, 1996 WPRI-TV Providence, RI
WNAC-TV(1) Providence, RI
August 1, 1996 KEYI-FM (3), KFON-AM(3) Austin, TX
August 1, 1996 Radio Equity
Partners, LP (REP)
WARQ-FM, WWDM-FM Columbia, SC
WXRM-FM, WCKT-FM Ft. Myers/Naples,FL
WSJS-AM, WTQR-FM,
WXRA-FM Greensboro, NC
WNOE-FM, KLJZ-FM
(now KKND-FM) New Orleans, LA
WHYN-AM/FM Springfield, MA
KXXY-AM (now KEBC-AM),
KXXY-FM, KTST-FM Oklahoma City, OK
October 1, 1996 WHKW-AM
(now WKJK-AM), WWKY-AM,
WTFX-FM Louisville, KY
WSVY-FM (2)(3) Norfolk, VA
October 11, 1996 WCUZ-AM/FM Grand Rapids, MI
November 27, 1996 WMYK-FM (2)(3) Norfolk, VA
December 3, 1996 Radio Equity
Partners, LP (REP)
WRXQ-FM, WEGR-FM,
WREC-AM Memphis, TN
WWBB-FM, WWRX-FM Providence, RI
December 16, 1996 KJMS-FM, KWAM-AM Memphis, TN
1995 Acquisitions
January 1, 1995 KMJQ-FM Houston, TX
January 1, 1995 KPRC-AM (4), KSEV-AM(4) Houston, TX
October 17, 1995 Voice of Southwest
Agriculture San Angelo, TX
October 31, 1995 WHP-TV,
WLYH-TV(1) Harrisburg, PA
(1) The Company operates this station under a
local marketing
agreement and does not own the FCC license.
(2) The Company did not acquire the license for
this station but assumed the local marketing agreement (LMA) or
joint sales agreement (JSA) as broker for this station upon
acquisition of the former broker (either USR or REP, as the case
may be),which originally executed such agreement. The Company
subsequently closed the acquisition of this station and now owns
the FCC license.
(3) The Company did not own the license for this
station prior to this date, but did program the station under an
LMA or participate in a JSA prior to this date. The results of
operations of this station have been included in prior period(s).
The Company acquired the license of this station on the date
indicated, thus, no longer programs this station under an LMA or
participates in a JSA.
(4) The Company acquired an 80% interest in this
station.
Station operating expenses rose due to the
increase in selling expenses associated with this revenue
increase and the additional operating expenses associated with
the above acquisitions. The major cause of the increase in
depreciation and amortization was the acquisition of the tangible
and intangible assets associated with the purchases of the above
mentioned stations. The majority of the increase in interest
expense was due to an increase in the average amount of debt
outstanding, which was partially offset by a decrease in the
average interest rate from 6.8% in 1995 to 6.3% in 1996. Income
tax expense increased because of the increase in earnings.
The equity in net income (loss) of, and other
income from, nonconsolidated affiliates resulted from: one, the
Company's purchase in May 1995 of a 50% interest in the
Australian Radio Network Pty Ltd. (ARN), which owns and operates
radio stations and a radio representation company in Australia;
two, the purchase in May 1995 of 21.4%, and the purchase in
August 1996 of an additional 41.8%, of the outstanding common
stock of Heftel Broadcasting Corporation (Heftel), a publicly-
traded Spanish-language radio broadcaster in the United States;
and three, the purchase in July 1996 of a 33.33% (one-third)
interest in the New Zealand Radio Network (NZRN), which owns and
operates 52 radio stations in New Zealand. The majority of the
decrease in equity in net income (loss) of, and other income
from, nonconsolidated affiliates was due to the Company's equity
interest in certain employment contract payments, severance
costs, and other write-offs totaling $44,731,000 related to
Heftel's reorganization. All of these equity investments are
included in results of operations for the Company's radio
segment.
RADIO
Net broadcasting revenue in 1996 increased 51%
to $217,189,000 from $144,244,000. Station operating expenses
increased 45% to $126,628,000, compared to $87,531,000 for 1995.
Station operating income before depreciation and amortization in
1996 increased to $90,561,000 from $56,713,000, or 60%.
Depreciation and amortization increased 39% to $27,756,000 from
$19,981,000. Station operating income increased 71% to
$62,805,000 in 1996 from $36,732,000 in 1995.
The majority of the increase in net
broadcasting revenue, station operating income, station operating
expenses and depreciation and amortization was due to the
aforementioned radio and network acquisitions. At December 31,
1996, the radio segment included 91 stations for which the
company owned the Federal Communications Commission (FCC) license
and 15 stations operated under local marketing or time brokerage
agreements, all of which operated in 26 different markets.
With the passage of the Telecommunications Act
(the Act) in February 1996, the limit on the maximum number of
licenses that one company may own in the United States was
eliminated, and the limit on the number of licenses that one
company may own in any given market was changed. This limit
depends on the size of the market; in the largest markets, for
example, one company may not own more than eight licenses total,
with no more than five licenses of one service (AM or FM). This
allows the Company significant flexibility in future growth in
its radio broadcasting operations.
TELEVISION
Net broadcasting revenue in 1996 increased 27%
to $134,550,000 from $105,815,000. Station operating expenses in
1996 increased 43% to $71,704,000 compared to $49,973,000 for
1995. Station operating income before depreciation and
amortization in 1996 increased to $62,846,000 from $55,842,000,
or 13%. Depreciation and amortization increased 31% to
$18,034,000 from $13,788,000. Station operating income increased
7% to $44,812,000 in 1996 from $42,054,000 in 1995.
The majority of the increase in net
broadcasting revenue was due to the inclusion of the
aforementioned television acquisitions in 1996 and 1995. Station
operating expenses rose due to the increase in selling expenses
associated with these revenue increases, the inclusion of the
aforementioned television acquisitions in 1996 and 1995, and the
start-up costs of the news departments at four television
stations. The major cause of the increase in depreciation and
amortization was the acquisition of tangible and intangible
assets associated with the purchase of the aforementioned
television stations. At December 31, 1996, the television segment
included eleven television stations for which the Company owned
the FCC license and seven stations which the Company operated
under time sales or time brokerage agreements, all of which
operated in eleven different markets.
With passage of the Act in February 1996, the
restrictions on ownership of television stations include a
national ownership limit of stations that reach no more that 35%
of the total United States television audience and the limit of
one license per market for any one broadcaster. This allows the
Company greater opportunity to expand into additional markets in
television broadcasting.
Comparison of 1995 vs. 1994
Consolidated
Net broadcasting revenue in 1995 increased 40%
to $250,059,000 from $178,053,000 in 1994. Station operating
expenses in 1995 increased 30% to $137,504,000 compared to
$105,380,000 for 1994. Station operating income before
depreciation and amortization in 1995 increased to $112,555,000
from $72,673,000, or 55%. Depreciation and amortization
increased 37% to $33,769,000 in 1995 from $24,669,000 in 1994.
Interest expense increased to $20,751,000 from $7,669,000 or
171%. Net income was $32,014,000 in 1995 compared to $22,009,000
for 1994. Equity in net income of, and other income from,
nonconsolidated affiliates was $2,489,000 in 1995. Income tax
expense (based on income before equity in net income/loss of, and
other income from, non- consolidated affiliates) in 1995 was
$20,292,000, reflecting an annual effective rate of 41%, compared
to $14,387,000, or a 40% effective rate in 1994.
The majority of the increase in net
broadcasting revenue was due to the additional revenue associated
with radio and television stations acquired in 1995 and the
inclusion of a full year of operations for those stations
acquired in 1994. These stations are as follows:
Acquisition Date Network or Station Location
1995 Acquisitions
January 1, 1995 KMJQ-FM Houston, TX
January 1, 1995 KPRC-AM(2), KSEV-AM(2) Houston, TX
October 17, 1995 Voice of
Southwest Agriculture San Angelo, TX
October 31, 1995 WHP-TV,WLYH-TV(1) Harrisburg, PA
1994 Acquisitions
January 14, 1994 KEBC-FM (now KNRX-FM) Oklahoma City, OK
February 28, 1994 KLRT-TV, KASN-TV (1) Little Rock, AR
March 9, 1994 WAXY-FM
(now WBGG-FM) Miami, FL
August 15,1994 KBXX-FM Houston, TX
October 12, 1994 METROPLEX
COMMUNICATIONS, INC. Miami, FL
WHYI-FM Lauderdale, FL
WMTX-AM/FM Tampa, FL
WERE-AM, WNCX-FM Cleveland, OH
November 1, 1994 WENZ-FM (3) Cleveland, OH
December 1, 1994 WXXA-TV Albany, NY
(1) The Company programs this station under a time sales or time
brokerage agreement and does not own the FCC license.
(2) The Company acquired an 80% interest in this station.
(3) The Company programmed this station under a local marketing
agreement but subsequently closed the acquisition of this station
and now owns the FCC license.
Station operating expenses rose due to the increase in
selling expenses associated with this revenue increase and the
additional operating expenses associated with the above
acquisitions. The major cause of the increase in depreciation and
amortization was the acquisition of the tangible and intangible
assets associated with the purchases of the above mentioned
stations. The majority of the increase in interest expense was
due to an increase in the average amount of debt outstanding and
an increase in the average interest rate from 5.7% in 1994 to
6.8% in 1995.
The equity in net income of, and other income from, non-
consolidated affiliates resulted from the Company's purchase of a
50% interest in the Australian Radio Network Pty Ltd (ARN), which
owns and operates radio stations and a radio representation
company in Australia and the purchase of 21.4% of the common
stock of Heftel Broadcasting Corporation (Heftel), a Spanish-
language radio broadcaster in the United States. Income tax
expense was up due to the increase in earnings.
Net income rose for the above stated reasons, but was
partially offset by a $2,315,000, or 45%, increase in corporate
related expenses warranted by the increase in current business
activity.
RADIO
Net broadcasting revenue in 1995 increased 50% to
$144,244,000 from $95,863,000 in 1994. Station operating
expenses increased 36% to $87,531,000 in 1995, compared to
$64,149,000 for 1994. Station operating income before
depreciation and amortization in 1995 increased to $56,713,000
from $31,714,000, or 79%. Depreciation and amortization increased
62% to $19,981,000 from $12,324,000. Station operating income
increased from $19,390,000 in 1994 to $36,732,000 in 1995, or
89%.
The majority of the increase in net broadcasting revenue,
station operating expenses and depreciation and amortization was
due to the aforementioned radio and network acquisitions. The
increase in station operating income was primarily due to the
inclusion of the operating results of the above stated
acquisitions. At December 31, 1995 the radio segment included 36
stations for which the Company owned the Federal Communications
Commission (FCC) license and seven stations programmed under
local marketing or time brokerage agreements. These 43 stations
operated in 12 different markets. The radio segment also operated
five networks.
TELEVISION
Net broadcasting revenue in 1995 increased 29% to
$105,815,000 from $82,190,000. Station operating expenses in
1995 increased 21% to $49,973,000 compared to $41,232,000 for
1994. Station operating income before depreciation and
amortization in 1995 increased to $55,842,000 from $40,958,000,
or 36%. Depreciation and amortization increased 12% to
$13,788,000 from $12,344,000. Station operating income increased
to $42,054,000 from $28,614,000, or 47%.
The majority of the increase in net broadcasting revenue was
due to the increase in advertising revenue resulting from
improved ratings at the majority of the television stations, the
additional revenue associated with the television stations
acquired in 1995, and the inclusion of a full year of operations
for those stations acquired in 1994. Station operating expenses
rose due to the increase in selling expenses associated with
these revenue increases, the expenses associated with the start
up of two news departments, and the operating expenses of the
newly acquired stations. The major cause of the increase in
depreciation and amortization was the acquisition of the tangible
and intangible assets associated with the purchase of the
aforementioned stations. At December 31, 1995, the television
segment included ten television stations for which the Company
owned the license and six stations which were operated under
local marketing or time brokerage agreements. These 16 stations
operated in ten different markets.
LIQUIDITY AND CAPITAL RESOURCES
The major sources of capital for the Company historically
have been cash flows from operations, advances on its revolving
long-term line of credit facility (the credit facility), and
funds provided by an initial common stock offering in 1984 and
subsequent stock offerings in July 1991, October 1993 and June
1996. Historically, cash flows have exceeded earnings by a
significant amount due to the high amortization and depreciation
associated with the broadcasting industry.
Effective August 1, 1996 the Company refinanced its credit
facility, increasing the total funds available to $1.04 billion.
The credit facility converts into a reducing revolving line of
credit on the last business day of September 1999, with quarterly
repayment of the outstanding principal balance to begin the last
business day of December 1999 and continue during the subsequent
five year period, with the entire balance to be repaid by the
last business day of September 2004.
During 1996, the Company used the credit facility to finance
the purchase of broadcasting assets (radio and television
stations) and an equity interest in the broadcasting operations
of NZRN and an additional equity interest in ARN and Heftel. In
addition to these acquisitions, the Company loaned $52,750,000 to
third parties in order to facilitate the purchase of certain
broadcasting assets. The loans have been recorded as notes
receivable, while the interest income related to these loans is
being recorded in other income. The Company received repayment of
$40,000,000 in February 1997 and expects to receive payment of
the remainder of these notes receivable during the first half of
1997. Advances on the credit facility related to such purchases
of broadcasting assets, equity investments and loans totaled
$718,575,000. The Company made principal payments on the credit
facility totaling $326,400,000, including $287,400,000 which
represents a portion of the proceeds from the Company's stock
offering in June 1996.
Based on the weighted average balance of debt outstanding
under the line of credit for the year ended December 31, 1996, a
1% increase in interest rates would result in a net after tax
charge to the Company's earnings of approximately $3,179,000. In
addition, other notes payable amounting to $9,436,000 were
outstanding at December 31, 1996. The Company also had
$16,701,000 in unrestricted cash and cash equivalents at December
31, 1996.
During the first quarter of 1997, the Company purchased the
broadcasting assets of radio stations WQMF-FM in Louisville,
Kentucky for approximately $13,500,000; WZZU-FM in Raleigh, North
Carolina for approximately $7,500,000; KHOM-FM in New Orleans,
Louisiana for approximately $6,854,000; and KJOJ-AM in Houston,
Texas for approximately $984,000, using the credit facility and
cash flows from operations to fund the acquisitions.
After giving effect to transactions and paydowns subsequent
to December 31, 1996, the Company had $705,825,000 outstanding
under the credit facility, with $316,450,000 available for future
borrowings. Interest rates on most of these borrowings adjust
every 30 days.
In January 1997, the Company announced that it entered into
two separate definitive agreements to acquire WFSN-FM, WKII-AM
and WOLZ-FM in Ft. Myers, Florida for approximately $11,000,000
and WMIL-FM and WOKY-AM in Milwaukee, Wisconsin for approximately
$40,000,000. Both of these transactions are subject to federal
regulatory approvals.
In February 1997 the Company entered into a definitive
agreement to purchase the stock of Eller Media Corporation
(Eller), a privately-held corporation, subject to federal
regulatory approvals, for total consideration of approximately
$1.15 billion, consisting of a combination of approximately $750
million in cash and the issuance to Eller shareholders of
approximately $400 million in the Company's common stock.
The Company anticipates financing the cash portion of the
Eller acquisition and the other pending acquisitions with its
line of credit facility and is currently negotiating to expand
its credit facility to $1.75 billion. The Company believes it
will be successful in expanding the credit facility. After giving
effect to transactions and paydowns subsequent to December 31,
1996 and these pending transactions, the Company would have
$1,506,825,000 outstanding under this newly-expanded line of
credit. With $9,575,000 unavailable due to guarantees and
$8,150,000 unavailable due to letters of credit, the total amount
available under this newly-expanded line of credit would be
$225,450,000.
The Company expects that cash flow from operations in 1997
will be sufficient to make all required interest and principal
payments on long-term debt.
CAPITAL EXPENDITURES AND PROGRAM COMMITMENTS
Capital expenditures of $19,723,000 during 1996 included
$2,728,000 and $4,719,000 for land and buildings and broadcasting
and other equipment, respectively, for the radio segment and
$3,171,000 and $9,105,000 for land and buildings, and
broadcasting and other equipment, respectively, for the
television segment. The majority of the increase in capital
outlays in 1996 was attributable to the start-up of news
departments at four of the stations in the television segment and
the purchase of land and buildings in the radio and television
segments.
Capital outlays are expected to increase very little in
1997, reflective only of the growth in the number of radio and
television stations. As the operator of 18 television stations
and various sports networks, the Company will continue to enter
into programming commitments to purchase the broadcast rights to
various feature films, syndicated shows, sports events and other
programming. Total commitments for such programming at December
31, 1996 were $19,027,000. These commitments were not available
for television or radio broadcast at December 31, 1996 but are
expected to become available over the next few years, at which
time the commitments will be recorded. Most commitments will then
be payable over a period not exceeding five years.
The Company anticipates paying for these program commitments
and capital outlays with cash generated from operations. It
anticipates funding any subsequent radio and television station
acquisitions with the credit facility and cash flows generated
from operations.
OTHER
Accounting Pronouncement
On January 1, 1996, the Company adopted Statement of
Financial Accounting Standards No. 121, Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to Be
Disposed Of. The adoption of this new accounting standard did not
have a material impact on the Company.
The Company has elected to follow Accounting Principles
Board Opinion No. 25 Accounting for Stock Issued to Employees
(APB 25) and related Interpretations in accounting for its
employee stock options. Under APB 25, because the exercise price
of the Company's employee stock options equals the market price
of the underlying stock on the date of grant, no compensation
expense is recognized.
For purposes of proforma disclosures required by Statement
of Financial Accounting Standards No. 123, Accounting for Stock
Based Compensation, the estimated fair value of the options is
amortized to expense over the options+ vesting period. The effect
of this pro forma adjustment is not material to the financial
statements.
Inflation
Inflation has affected the Company's performance in terms of
higher costs for wages, salaries and equipment. Although the
exact impact of inflation is indeterminable, the Company believes
it has offset these higher costs by increasing the effective
advertising rates of most of its radio and television stations.
MANAGEMENT'S REPORT ON FINANCIAL STATEMENTS
The consolidated financial statements and notes related
thereto were prepared by and are the responsibility of
management. The consolidated financial statements and related
notes were prepared in conformity with generally accepted
accounting principles and include amounts based upon management's
best estimates and judgments.
It is management's objective to ensure the integrity and
objectivity of its financial data through systems of internal
controls designed to provide reasonable assurance that all
transactions are properly recorded in the Company's books and
records, that assets are safeguarded from unauthorized use, and
that financial records are reliable to serve as a basis for
preparation of financial statements.
The financial statements have been audited by our
independent auditors, Ernst & Young LLP, to the extent required
by generally accepted auditing standards and, accordingly, they
have expressed their professional opinion on the financial
statements in their report included herein.
The Board of Directors meets with the independent auditors
and management periodically to satisfy itself that they are
properly discharging their responsibilities. The independent
auditors have unrestricted access to the Board, without
management present, to discuss the results of their audit and the
quality of financial reporting and internal accounting controls.
/S/ LOWRY MAYS
Lowry Mays
Chairman/Chief Executive Officer
/S/ HERBERT W. HILL, JR.
Herbert W. Hill, Jr.
Senior Vice President/
Chief Accounting Officer
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
SHAREHOLDERS AND BOARD OF DIRECTORS
CLEAR CHANNEL COMMUNICATIONS, INC.
We have audited the accompanying consolidated balance sheets
of Clear Channel Communications, Inc. and subsidiaries as of
December 31, 1996 and 1995, and the related consolidated
statements of earnings, changes in shareholders' equity and cash
flows for each of the three years in the period ended December
31, 1996. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits. The
financial statements of the Australian Radio Network Pty Ltd, a
corporation in which the Company has a 50% interest, have been
audited by other auditors whose report has been furnished to us;
insofar as our opinion on the consolidated financial statements
relates to data included for the Australian Radio Network Pty
Ltd, it is based solely on their report.
We conducted our audits in accordance with generally
accepted auditing standards. Those standards require that we plan
and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, based on our audits and the report of other
auditors, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated
financial position of Clear Channel Communications, Inc. and
subsidiaries at December 31, 1996 and 1995, and the consolidated
results of their operations and their cash flows for each of the
three years in the period ended December 31, 1996, in conformity
with generally accepted accounting principles.
/s/ ERNST & YOUNG, LLP
San Antonio, Texas
February 17, 1997, except for Note K, as to which the date is
February 25, 1997
CONSOLIDATED BALANCE SHEETS
ASSETS
December 31,
1996 1995
Current Assets
Cash and cash equivalents $16,700,752 $ 5,391,104
Accounts receivable, less
allowance of $ 6,066,794
in 1996 and $3,809,529
in 1995 79,182,580 52,920,450
Film rights - current 14,187,640 12,173,527
Income tax receivable 3,092,693 --
----------- ---------
Total Current Assets 113,163,665 70,485,081
Property, Plant and
Equipment Land 12,235,273 7,821,899
Buildings 28,992,708 17,068,026
Transmitter and studio
equipment
153,254,927 109,517,279
Furniture and other equipment 21,163,668 13,996,987
Leasehold improvements 5,322,365 4,560,289
Construction in progress 4,284,361 5,079,864
----------- ---------
225,253,302 158,044,344
Less accumulated depreciation 77,415,597 58,159,152
----------- ---------
147,837,705 99,885,192
Intangible Assets
Network affiliation
agreements 33,726,904 23,422,904
Licenses and goodwill 764,233,345 286,406,955
Covenants not-to-compete 22,991,932 22,871,932
Other intangible assets 8,711,977 5,816,987
----------- ------------
829,664,158 338,518,778
Less accumulated amortization 78,645,708 52,192,327
----------- ---------
751,018,450 286,326,451
Other
Notes receivable 52,750,000 --
Film rights 13,436,589 15,968,502
Equity investments in, and
advances to, nonconsolidated
affiliates 230,659,734 81,911,343
Other assets 10,807,633 7,021,531
Other investments 5,037,310 1,412,704
----------- ---------
Total Assets $1,324,711,086 $563,010,804
============= ===========
See Notes to Consolidated Financial Statements
LIABILITIES AND SHAREHOLDERS' EQUITY
December 31,
1996 1995
CURRENT LIABILITIES
Accounts payable $9,864,401 $5,314,716
Accrued interest 6,272,193 508,271
Accrued expenses 8,235,966 7,760,002
Income and other taxes --- 5,906,580
Deferred income 1,300,000 ---
Current portion of long-term
debt 1,479,327 3,406,297
Current portion of film rights
liability 16,309,787 13,109,024
--------- ---------
Total Current Liabilities 43,461,674 36,004,890
Long-Term Debt 725,131,618 334,163,729
Film Rights Liability 13,797,015 17,143,812
Deferred Income Taxes 11,283,303 5,552,835
Deferred Income 11,250,000 ---
Minority Interest 6,356,885 6,432,903
SHAREHOLDERS' EQUITY
Preferred Stock, par value $1.00
per share, authorized 2,000,000
shares, no shares issued and
outstanding --- ---
Common Stock, par value $.10 per share,
authorized 100,000,000 shares, issued
and outstanding 76,992,078 and 34,592,695
shares in 1996 and 1995,
respectively 7,699,208 3,459,269
Additional paid-in capital 398,621,825 91,433,138
Retained earnings 106,054,793 68,359,190
Other 1,225,763 632,036
Cost of shares (26,878 in 1996 and 13,439
in 1995) held in treasury (170,998) (170,998)
--------- ---------
Total Shareholders' Equity513,430,591 163,712,635
--------- ---------
Total Liabilities And
Shareholders' Equity $1,324,711,086 $563,010,804
============ ============
See Notes to Consolidated Financial Statements
CONSOLIDATED STATEMENTS OF EARNINGS
Year Ended December 31,
1996 1995 1994
Gross broadcasting
revenue $398,094,474 $283,357,052$200,694,908
Less agency commission 46,355,620 33,297,672 22,642,326
------------ ---------- ----------
Net broadcasting
revenue 351,738,854 250,059,380 178,052,582
Station operating
expenses 198,331,650 137,504,473 105,380,066
Depreciation and
amortization 45,789,764 33,768,882 24,668,540
----------- ---------- ----------
Station operating
income 107,617,440 78,786,025 48,003,976
Corporate general and
administrative expenses 8,527,310 7,414,457 5,099,834
---------- ---------- ----------
Operating income 99,090,130 71,371,568 42,904,142
Interest expense 30,080,410 20,751,454 7,669,000
Other income (expense)
-net 2,230,025 (803,280) 1,161,456
---------- ---------- ----------
Income before income
taxes 71,239,745 49,816,834 36,396,598
Income taxes 28,386,416 20,291,922 14,387,102
---------- ---------- ----------
Income before equity in net income (loss)
of, and other income from,
nonconsolidated
affiliates 42,853,329 29,524,912 22,009,496
Equity in net income (loss) of,
and other income
from, nonconsolidated
affiliates (5,157,726) 2,488,703 --
----------- ---------- ----------
Net income $37,695,603 $ 32,013,615 $22,009,496
========== =========== ==========
Net income per common
share $.50 $.46 $.32
======== ======= ========
Weighted average common
and common share
equivalents outstanding 74,648,777 70,200,796 69,325,812
========= ========== ==========
See Notes to Consolidated Financial Statements<PAGE>
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
<TABLE>
Additional
Common paid-in Retained Treasury
Stock capital earnings Other Stock Total
<S> <C> <C> <C> <C> <C> <C>
Balances
at
January 1,
1994
$1,715,076 $84,635,233 $14,336,079 -($2,343,642) $98,342,746
Net income
for year 22,009,496 22,009,496
Exercise
of stock
options
1,168 2,805,735 (27,440) 2,779,463
Issuance
of 119,048
shares
of Common
Stock to
purchase a
minority
interest 1,891,968 1,609,532 3,501,500
Issuance
of 117,975
shares of
Common Stock
for a
business
acquisition
6,797 3,202,203 691,000 3,900,000
------- --------- ---------- -------- -------- ----------
Balances at
December
31, 1994
1,723,041 92,535,139 36,345,575 -- (70,550) 130,533,205
Net income
for year 32,013,615 32,013,615
Exercise
of stock
options
7,209 627,018 (100,448) 533,779
Currency
translation
adjustment $102,292 102,292
Unrealized
holding
gains on
marketable
securities 529,744 529,744
Stock
split
1,729,019 (1,729,019) --
--------- ---------- -------- ------- -------- ----------
Balances at
December
31, 1995
3,459,269 91,433,138 68,359,190 632,036 (170,998) 163,712,635
Net income
for year 37,695,603 37,695,603
Exercise
of stock
options
5,334 300,571 305,905
Proceeds
from
issuance
of 3,850,000
shares of
Common
Stock
385,000 310,737,721 311,122,721
Currency
translation
adjustment 1,123,471 1,123,471
Reversal
of unrealized
holding
gains on
marketable
securities (529,744) (529,744)
Stock
split
3,849,605 (3,849,605) ---
--------- ----------- ----------- -------- --------- -----------
Balances at
December
31, 1996
$7,699,208$398,621,825 $106,054,793$1,225,763 ($170,998)$513,430,591
====================== ====================== ======================
/TABLE
<PAGE>
See Notes to Consolidated Financial Statements
CONSOLIDATED STATEMENTS OF CASH FLOWS
Year Ended December 31,
1996 1995 1994
Net Cash Flows
Provided By
Operating
Activities $107,603,742 $64,330,005 $41,131,501
Cash Flows From Investing Activities:
Decrease (increase)
in restricted cash -- 38,500,000 (38,500,000)
(Increase) in notes
receivable (52,750,000) - -
(Increase) in equity
investments in,
and advances to,
nonconsolidated
affiliates-net (163,294,851) (81,279,307) -
Purchases of
property, plant
and equipment (19,723,031) (15,109,896) (5,747,166)
Proceeds from
disposal of
property, plant
and equipment 15,508 33,053 130,047
Proceeds from
disposal of
broadcasting
assets --- 350,000 2,025,000
Acquisition of
broadcasting
assets (550,629,549) (105,135,886) (127,427,369)
Purchase of minority
interest --- --- (4,000,000)
(Increase) decrease
in other investments(3,624,606) 4,149,136 (4,135,718)
(Increase) in other
intangible assets (2,894,990) (1,870,183) (1,160,990)
(Increase) decrease
in other-net (3,862,120) 691,503 (1,094,531)
----------- ----------- ------------
Net cash (used in)
investing activities (796,763,639)(159,671,580)(179,910,727)
Cash Flows From Financing Activities:
Proceeds of long-
term debt 718,575,000 162,600,000 165,100,000
Payments on
long-term debt (326,400,000) (64,800,000) (25,800,000)
Payments of current
maturities (3,134,081) (4,418,695) (1,999,492)
Exercise of stock
options 305,905 533,779 2,779,463
Proceeds from
issuance
of common stock 311,122,721 --- ---
----------- ---------- -----------
Net cash provided
by financing
activities 700,469,545 93,915,084 140,079,971
----------- ---------- -----------
Net increase
(decrease)
in cash 11,309,648 (1,426,491) 1,300,745
Cash at beginning
of year
5,391,104 6,817,595 5,516,850
--------- --------- ----------
Cash at end of year$16,700,752 $5,391,104 $6,817,595
=========== ========== ==========
See Notes to Consolidated Financial Statements
SCHEDULE RECONCILING EARNINGS TO NET CASH FLOWS PROVIDED BY OPERATING
ACTIVITIES
Year Ended December 31,
1996 1995 1994
Net Income 37,695,603 32,013,615 22,009,496
Reconciling Items
Depreciation 19,336,390 15,379,826 12,639,104
Amortization
of intangibles 26,453,374 18,389,056 12,029,436
Deferred taxes 5,730,468 2,953,612 188,059
Amortization of
film rights 15,038,223 11,262,835 9,857,530
Payments on
film
liabilities (14,627,200) (10,353,200) (10,037,749)
Recognition of
deferred income (810,000) - -
(Gain) loss
on disposal
of assets (41,402) 404,994 (598,863)
Equity in net
loss of nonconsol-
idated affiliates7,933,364 - -
Dividends received
from nonconsol-
idated affiliates7,206,823 - -
Changes in operating assets and liabilities:
(Increase) accounts
receivable (10,606,199) (11,544,653) (8,408,540)
Increase deferred
income 13,360,000 - -
Increase (decrease)
accounts payable 4,489,685 (372,119) 1,151,467
Increase (decrease)
accrued interest 5,763,922 (233,219) 485,721
Increase (decrease)
accrued expenses (320,036) 3,831,264 (221,855)
Increase (decrease)
income and other
taxes payable (8,999,273) 2,597,994 2,037,695
--------- ---------- ----------
Net cash flows
provided by
operating
activities $107,603,742 $64,330,005 $41,131,501
=========== ========== ==========
See Notes to Consolidated Financial Statements
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation:
The consolidated financial statements include the accounts of the Company
and its subsidiaries, substantially all of which are wholly-owned.
Significant intercompany accounts have been eliminated in consolidation.
Investments in nonconsolidated affiliates are accounted for under the
equity method of accounting. Certain amounts in prior years have been
reclassified to conform to the 1996 presentation.
Property, Plant and Equipment:
Property, plant and equipment are stated at cost. Depreciation is computed
principally by the straight-line method at rates which, in the opinion of
management, are adequate to allocate the cost of such assets over their
estimated useful lives, which are as follows:
Buildings - 10 to 30 years
Transmitter and studio equipment - 7 to 15 years
Furniture and other equipment - 5 to 10 years
Leasehold improvements - generally life of lease
Expenditures for maintenance and repairs are charged to
operations as incurred, whereas expenditures for renewal and betterments
are capitalized.
Intangible Assets:
Intangible assets are stated at cost and are being amortized by the
straight-line method. For the years prior to 1993, excess cost over the
fair value of net assets acquired (goodwill) and certain licenses were
amortized between 25 and 40 years. All goodwill and licenses acquired
subsequent to 1992 are being amortized over 25 years. Amortization of
goodwill and licenses was $19,719,763, $9,918,585 and $4,481,660 in 1996,
1995 and 1994, respectively.
Covenants not-to-compete are amortized over the respective lives of the
agreements. Network affiliation agreements are being amortized over 10
years.
The periods of amortization are evaluated annually to determine whether
circumstances warrant revision.
Film Rights:
The capitalized costs of film rights are recorded when the license period
begins and the film rights are available for use. The rights are amortized
based on the number of showings or license periods.
Unamortized film rights assets are classified as current or noncurrent
based on estimated usage. Amortization of film rights is included in
station operating expenses. Film rights liabilities are classified as
current or noncurrent based on anticipated payments.
Barter Transactions:
Revenue from barter transactions is recognized when advertisements are
broadcast, and merchandise or services received are charged to expense when
received or used.
Income Taxes:
The Company accounts for income taxes using Statement of Financial
Accounting Standards No. 109, Accounting for Income Taxes (SFAS 109). Under
SFAS 109, income taxes for financial reporting purposes are determined
using the liability method. Under this method, deferred tax assets and
liabilities are determined based on differences between financial reporting
bases and tax bases of assets and liabilities and are measured using the
enacted tax rates expected to apply to taxable income in the periods in
which the deferred tax asset or liability is expected to be realized or
settled.
Foreign Currency Gains and Losses:
Foreign currency translation adjustments, which result from the translation
of financial statement information into U.S. dollars for the Company's
investments in Australian Radio Network Pty Ltd. (ARN) and New Zealand
Radio Network (NZRN), are accounted for as a separate component of
shareholders' equity. Transaction gains or losses between the Company and
ARN and NZRN are recorded as income or expense as incurred. See Note I for
further discussion of the Company's equity investments in ARN and NZRN.
Net translation gains resulting from the translation of ARN and NZRN
financial statement information from Australian dollars and New Zealand
dollars, respectively, to U.S. dollars in the reconciliation of Australian
and New Zealand accounting principles to accounting principles generally
accepted in the United States (U.S. GAAP) amounted to $1,123 ,471 in 1996
and $102,292 in 1995. Net transaction gains amounted to $362,030 in 1996
and $101,319 in 1995.
Stock Based Compensation:
Effective January 1, 1996 the Company adopted Statement of Financial
Accounting Standards No. 123, Accounting for Stock Based Compensation and
elected to continue to use the intrinsic value method in accounting for its
stock based employee compensation plan.
Long-Lived Assets:
Effective January 1, 1996 the Company adopted Statement of Financial
Accounting Standard No. 121, Accounting for the Impairment of Long-Lived
Assets and for Long-Lived Assets to be Disposed Of. Impairment losses are
recognized when indicators of impairment are present and the estimated
future undiscounted cash flows are not sufficient to recover the assets'
carrying value or estimated fair value, less costs to sell. The effect of
adopting this Statement was not material to the consolidated financial
statements.
Cash and Cash Equivalents:
Cash and cash equivalents include all highly liquid investments with an
original maturity of three months or less.
Financial Instruments:
The carrying amounts of the Company's financial instruments approximate
their fair value.
Use of Estimates:
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements
and accompanying notes. Actual results could differ from those estimates.
NOTE B - LONG-TERM DEBT
Long-term debt at December 31, 1996 and 1995 consisted of the following:
December 31,
1996 1995
Revolving long-term line of credit
facility payable to banks, three years
interest only through September
1999 payable quarterly, rate based
upon prime, LIBOR or Fed funds
rate at the Company's discretion
(5.9% at December 31, 1996),
principal to be paid in
full by September 2004, $322,825,000
remains un-drawn (1) $717,175,000 $325,000,000
Other long-term debt 9,435,945 12,570,026
------------ ------------
726,610,945 337,570,026
Less: current portion 1,479,327 3,406.297
------------ ------------
Total long-term debt $725,131,618 $334,163,729
============ ============
(1) Principal repayment on the credit facility begins the last business
day of December 1999 and continues quarterly through the last business day
of September 2004, when the commitment must be paid in full. Of the
$322,825,000 undrawn, $9,575,000 is unavailable due to a guarantee as
described in Note I while $8,150,000 is unavailable due to letters of
credit. This leaves $305,100,000 available at December 31, 1996 for future
borrowings under the credit facility.
The Company's current line of credit facility with banks contains
certain covenants which restrict, among other matters, the payment of cash
dividends and pledging of assets.
Future maturities of long-term debt at December 31, 1996 are as follows:
1997 $1,479,327
1998 1,477,280
1999 24,008,713
2000 81,082,188
2001 125,505,625
2002 and thereafter 493,057,812
----------
$726,610,945
==========
Interest paid in 1996, 1995 and 1994 amounted to $24,316,488, $20,984,673
and $7,183,279, respectively.
NOTE C - COMMITMENTS
The Company leases office space and certain broadcasting facilities
and equipment under long-term operating leases. Some of the lease
agreements contain renewal options and annual rental escalation clauses
(generally tied to the consumer price index or a maximum of 5%), as well as
provisions for the payment of utilities and maintenance by the Company. As
of December 31, 1996, the Company's future minimum rental commitments,
under noncancelable lease agreements with terms in excess of one year,
consist of the following:
1997 $4,457,032
1998 3,965,511
1999 3,174,907
2000 2,482,172
2001 1,832,649
2002 and thereafter 8,313,543
----------
$24,225,814
==========
Rent expense charged to operations for 1996, 1995 and 1994 was
$5,298,894, $4,510,413 and $3,272,870, respectively.
The Company's film rights commitments and related film assets are
recorded on the earliest date the rights are available for telecast. At
December 31, 1996, the future payments on these film rights liabilities are
as follows:
1997 $16,309,787
1998 8,254,674
1999 4,823,603
2000 712,377
2001 6,361
2002 and thereafter -
----------
$30,106,802
==========
Commitments for additional film license agreements in the amount of
$17,467,855 have been executed. However, they are not included in the
amounts above because the programs were not available for telecast as of
December 31, 1996. In addition, commitments for sports rights have been
executed in the amount of $1,559,634 for future radio and television
broadcast of sporting events.
NOTE D - STOCK SPLITS AND DIVIDENDS
In October 1996 and 1995, the Board of Directors authorized two-for-
one stock splits distributed on December 2, 1996 and November 30, 1995,
respectively, to stockholders of record on November 13, 1996 and November
15, 1995, respectively.
In February 1994, the Board of Directors authorized a five-for-four
stock split in the form of 25 percent stock dividend distributed on
February 22, 1994 to stockholders of record on February 15, 1994.
A total of 38,496,039; 17,290,188 and 6,860,300 shares, respectively,
were issued in connection with the 1996, 1995 and 1994 stock splits.
Fractional shares were paid in cash based on the closing price on the
record date. All share, per share, stock price and stock option amounts
shown in the financial statements (except the balance sheet and statement
of changes in shareholders' equity) and related footnotes have been
restated to reflect the stock splits.
NOTE E - BUSINESS ACQUISITIONS AND DISPOSITIONS
During 1996, 1995 and 1994, the Company acquired substantially all the
broadcasting assets of the following radio stations, television stations
and news and agricultural networks, which were all principally funded by
borrowings under the credit facility.
Acquisition Date Network or Station Location
1996 Acquisitions
February 14, 1996 WOOD-AM/FM, WBCT-FM Grand Rapids, MI
May 15, 1996 US Radio, Inc. (USR)
KHEY-AM/FM, KPRR-FM El Paso, TX
KJOJ-FM, KJOJ-AM (4) Houston, TX
KMJX-FM, KDDK-FM Little Rock, AR
WHRK-FM, WDIA-AM Memphis, TN
WKKV-FM Milwaukee, WI
WJCD-FM, WOWI-FM Norfolk, VA
WQOK-FM, WZZU-FM (4) Raleigh, NC
WRAW-AM, WRFY-FM Reading, PA
May 31, 1996 WENZ-FM (5) Cleveland, OH
June 1, 1996 WTVR-AM/FM Richmond, VA
July 1, 1996 WPRI-TV Providence, RI
WNAC-TV (3) Providence, RI
August 1, 1996 KEYI-FM (5),
KFON-AM (5) Austin, TX
August 1, 1996 Radio Equity
Partners, LP (REP)
WARQ-FM, WWDM-FM Columbia, SC
WXRM-FM, WCKT-FM Ft. Myers/Naples, FL
WSJS-AM, WTQR-FM,
WXRA-FM Greensboro, NC
WNOE-FM, KLJZ-FM
(now KKND-FM) New Orleans, LA
WHYN-AM/FM Springfield, MA
KXXY-AM (now KEBC-AM)
KXXY-FM, KTST-FM Oklahoma City, OK
October 1, 1996 WHKW-AM
(now WKJK-AM),WWKY-AM,
WTFX-FM Louisville, KY
WSVY-FM (4) (5) Norfolk, VA
October 11, 1996 WCUZ-AM/FM Grand Rapids, MI
November 27, 1996 WMYK-FM (4) (5) Norfolk, VA
December 3, 1996 Radio Equity
Partners, LP (REP)
WRXQ-FM, WEGR-FM,
WREC-AM Memphis, TN
WWBB-FM, WWRX-FM Providence, RI
December 16, 1996 KJMS-FM, KWAM-AM Memphis, TN
1995 Acquisitions
January 1, 1995 KMJQ-FM Houston, TX
January 1, 1995 KPRC-AM (2)/
KSEV-AM (2) Houston, TX
October 17, 1995 Voice of
Southwest Agriculture San Angelo, TX
October 31, 1995 WHP-TV,
WLYH-TV (3) Harrisburg, PA
1994 Acquisitions
January 14, 1994 KEBC-FM
(now KNRX-FM) Oklahoma City, OK
February 28, 1994 KLRT-TV/KASN-TV(3) Little Rock, AR
March 9, 1994 WAXY-FM
(now WBGG-FM) Miami, FL
August 15, 1994 KBXX-FM Houston, TX
October 12, 1994 Metroplex
Communications, Inc. (1)
WHYI-FM Miami, FL
WMTX-AM/FM Tampa, FL
WERE-AM,
WNCX-FM Cleveland, OH
November 1, 1994 WENZ-FM Cleveland, OH
December 1, 1994 WXXA-TV Albany, NY
(1) The Company issued 135,950 shares of Common Stock and released 100,000
shares of treasury stock in conjunction with this purchase.
(2) The Company acquired an 80% interest in this station.
(3) The Company programs this station under a local marketing agreement or
joint sales agreement and does not own the FCC license.
(4) The Company did not acquire the license for this station but assumed
the local marketing agreement (LMA) or joint sales agreement (JSA) as
broker for this station upon acquisition from the former broker (either USR
or REP), which originally executed such agreement. The Company subsequently
closed the acquisition of this station and now owns the applicable license.
(5) The Company did not own the license for this station prior to this
date, but did program the station under an LMA or JSA prior to this date.
The results of operations of this station have been included in prior
period(s). The Company acquired the license of this station on the date
indicated, thus, no longer programs this station under an LMA or JSA.
The following is a summary of the assets acquired and the
consideration given for the above stated acquisitions:
1996 1995 1994
Property, plant
and equipment $47,579,227 $15,012,828 $26,385,571
Accounts
receivable 15,655,931 3,095,279 5,334,476
Licenses,
goodwill
and other
assets 488,250,391 93,716,385 113,444,182
Total assets
acquired 551,485,549 111,824,492 145,164,229
Less:
Seller
financing - (1,400,000) -
Liabilities
assumed (856,000) (5,288,606) (13,836,860)
Common Stock
issued --- --- (3,900,000)
------------ ---------- -----------
Cash paid on
acquisitions $550,629,549 $105,135,886 $127,427,369
============ =========== ===========
The results of operations for 1996, 1995, and 1994 include the
operations of each station from the respective date of acquisition.
Assuming each of the acquisitions had occurred at January 1, 1994,
unaudited pro forma consolidated results of operations would have been as
follows:
Pro Forma (Unaudited)
Year Ended December 31,
in thousands (except per share amounts)
1996 1995 1994
Net broadcasting
revenue $410,318 $365,293 $325,521
Net income $ 45,636 $ 50,055 $ 26,182
Net income
per share $ .61 $ .71 $ .38
The pro forma information above is presented in response to applicable
accounting rules relating to business acquisitions and is not necessarily
indicative of the actual results that would have been achieved had each of
the stations been acquired at the beginning of 1994, nor is it indicative
of future results of operations.
The Company did not sell any radio or television stations during 1996.
In January 1995, the Company sold KYOK-AM in Houston, TX and KHYS-FM in
Port Arthur, TX and KALO-AM in Beaumont/Port Arthur, TX for $2,475,000,
$5,000,000 and $450,000, respectively, to a third party, of which $350,000
was in cash and the remainder in notes receivable. Of the resulting gain,
approximately $324,000 is included in other income, and the remaining
$5,014,000 is deferred. The net assets and operations of these stations
were not significant.
During 1994, the Company sold substantially all the broadcasting
assets of four radio stations. KEYN-FM and KQAM-AM in Wichita, KS were sold
for $2,000,000 to a third party, while KORA-FM and KTAM-AM,in Bryan/College
Station, TX, were sold to a former employee for $25,000 in cash and
$2,200,000 in notes receivable. These transactions resulted in a net gain
of approximately $700,000 which is included in other income. Net assets and
operations of these four radio stations were not significant.
NOTE F - INCOME TAXES
Significant components of the provision for income taxes are as follows:
1996 1995 1994
Current - federal $22,213,972 $16,084,974 $ 12,068,573
Deferred 5,730,468 2,953,612 188,059
State 2,158,976 1,691,824 2,130,470
----------- ---------- ------------
Total $30,103,416 $20,730,410 $14,387,102
=========== ========== ============
Included in current-federal is $1,717,000 and $438,488 for 1996 and
1995, respectively, related to taxes on other income from nonconsolidated
affiliates, which has been included as a reduction in equity in net income
(loss) of, and other income from, nonconsolidated affiliates. The remaining
$28,386,416 and $20,291,922 for 1996 and 1995, respectively, have been
reflected as income tax expense.
Significant components of the Company's deferred tax liabilities and
assets as of December 31, 1996 and 1995 are as follows:
1996 1995
Deferred tax liabilities:
Tax over book depreciation $7,409,317 $6,658,528
Tax over book amortization 4,867,887 -
Film amortization 808,877 778,366
Basis reduction of acquired
assets 413,246 558,000
Other - 326,600
---------- ----------
Total deferred tax
liabilities 13,499,327 8,321,494
Deferred tax assets:
Gain on sale of assets 374,354 360,895
Book over tax amortization - 2,270,963
NOL carryforwards 1,580,419 -
Other 261,251 136,801
---------- ----------
Total deferred tax assets 2,216,024 2,768,659
---------- ---------
Net deferred tax liabilities $11,283,303 $5,552,835
========== ==========
The reconciliation of income tax computed at the U.S. federal statutory tax
rates to income tax expense is:
1996 1995 1994
AmountPercent Amount Percent AmountPercent
Income tax
expense at
statutory
rates
$26,650,911 35%$18,460,409 35%$12,738,809 35%
State income
taxes, net
of federal
tax
benefit 1,403,334 2% 1,099,686 2% 1,384,806 4%
Amortization
of
goodwill 1,493,025 2% 1,543,250 4% 461,261 1%
Other,
net 556,141 1% (372,935) (197,774)
------- -- --------- -- --------- --
$30,103,416 40%$20,730,410 41%$14,387,102 40%
======== ============== =============== ==
Income taxes paid in 1996, 1995 and 1994 amounted to $35,668,689,
$18,132,416, and $13,107,514, respectively.
The Company acquired certain net operating loss carryforwards in
conjunction with its purchase of KLRT/KASN-TV, Metroplex Communications,
Inc. and US Radio, Inc. At December 31, 1996, the remaining carryforward
relating to US Radio amounted to $4,515,482 which expires completely in the
year 2010. The Company had no remaining net operating loss carryforwards
related to KLRT/KASN-TV and Metroplex Communications.
NOTE G - STOCK OPTIONS
The Company has granted options to purchase its common stock to
employees and directors of the Company and its affiliates under various
stock option plans at no less than the fair market value of the underlying
stock on the date of grant. These options are granted for a term not
exceeding ten years and are forfeited in the event the employee or director
terminates his or her employment or relationship with the Company or one of
its affiliates. All option plans contain anti-dilutive provisions that
require the adjustment of the number of shares of the Company common stock
represented by each option for any stock splits or dividends.
The following table presents a summary of the Company's stock options
outstanding at and stock option activity during the years ended December
31, 1996, 1995 and 1994.
Weighted
Average
Exercise
Options Price
Options outstanding at
January 1, 1996 1,528,204 $6.00
Options granted 232,756 28.00
Options exercised (106,688) 3.00
Options forfeited (16,000) 34.00
---------
Options outstanding
at December 31, 1996 (1) 1,638,272 9.00
=========
Weighted average fair value
of options
granted during 1996 12.00
Options outstanding
at January 1, 1995 1,657,009 5.00
Options granted 194,774 14.00
Options exercised (263,754) 2.00
Options forfeited (59,825) 8.00
---------
Options outstanding
at December 31, 1995 1,528,204 6.00
=========
Weighted average fair value
of options granted during 1995 6.00
Options outstanding
at January 1, 1994 1,268,571 4.00
Options granted 473,140 8.00
Options exercised (45,480) 2.00
Options forfeited (39,222) 3.00
---------
Options outstanding
at December 31, 1994 1,657,009 5.00
=========
(1) Vesting dates range from February 1994 to December 2001, and
expiration dates range from February 1997 to February 2004 at exercise
prices ranging from $1.94 to $42.88. There were 2,163,618 shares available
for future grants under the various option plans at December 31, 1996.
Pro forma net income and earnings per share, assuming that the Company had
accounted for its employee stock options using the fair value method and
amortized such to expense over the options' vesting period, would not be
materially different from those reported.
The fair value for these options was estimated at the date of grant using a
Black-Scholes option pricing model with the following weighted-average
assumptions for 1996 and 1995, respectively: risk-free interest rates of
6.0% and 6.0%; a dividend yield of 0% and 0%; volatility factors of the
expected market price of the Company's common stock of 34% and 34%, and a
weighted-average expected life of the option of six years and six years.
In February 1991, Clear Channel Television (CCTV), a wholly owned
subsidiary of the Company, adopted the 1991 Non-Qualified Stock Option Plan
which authorized the granting of options to purchase 50,000 shares of CCTV
Common Stock. In February 1993, CCTV elected to discontinue the granting of
options under this plan. At December 31, 1996, there were 9,500 options
outstanding under this plan, with an exercise date of January 1, 1999.
In addition, in January 1994, an officer of CCTV exercised his option to
purchase 100,000 shares of CCTV's Common Stock at $1.00 per share. In July
1994, the Board of Directors authorized the Company to purchase the 100,000
CCTV shares from said officer. As consideration, the Company paid
$4,000,000 in cash and issued 476,192 shares (adjusted for the Company's
1996 and 1995 two-for-one stock splits) of the Company's Common Stock out
of Treasury. The Company recorded this transaction as an acquisition (and
elimination) of the minority interest in CCTV, with the resulting excess
cost allocated to goodwill.
NOTE H - EMPLOYEE BENEFIT PLANS
Effective March 1, 1987, the Company adopted the Clear Channel
Communications, Inc. 401(K) Savings Plan for the purpose of providing
retirement benefits for substantially all employees. Contributions to the
Plan are made both by the employees and the Company. The Company matches
35% of the first 5% of an employee's deferred compensation to a maximum of
$9,500 in 1996. Company matched contributions vest to the employees based
upon their years of service to the Company. Contributions to this Plan of
$653,082, $461,038 and $398,369 were charged to expense for 1996, 1995 and
1994, respectively. The Company does not offer or provide post-retirement
health care benefits to any of its employees.
NOTE I - INVESTMENTS
Heftel Broadcasting Corporation
On May 24, 1995, the Company purchased 21.4% of the outstanding common
stock of Heftel Broadcasting Corporation (Heftel) a Spanish-language radio
broadcaster in the United States. On August 5, 1996, the Company purchased
an additional 41.8% of the outstanding common stock of Heftel in a
combined transaction involving a purchase of shares of Heftel held by
officers and directors of Heftel and a tender offer for shares of Heftel
held publicly. After the stock purchase and tender offer, the Company
temporarily held approximately 63.2% of the outstanding common stock of
Heftel.
In February 1997, the Company sold 350,000 shares of Heftel common
stock it owned as a selling shareholder in a secondary stock offering in
which Heftel sold an additional 4,830,000 shares of its common stock. Also,
Heftel issued another 5,559,491 shares of its common stock in connection
with its merger with Tichenor Media System, Inc. (Tichenor), another
Spanish-language radio broadcaster with stations in major Hispanic markets
in the United States. The combination of the Company's stock purchase and
tender offer, Heftel's secondary stock offering and the Company's sale of
350,000 shares of Heftel common stock, and Heftel's merger with Tichenor
reduced the Company's interest in Heftel to 32.3% of the total number of
shares of Heftel's common stock outstanding.
Australian Radio Network
On May 11, 1995, the Company purchased a 50% interest in ARN, an
Australian company which owns and operates radio stations and a radio
representation company in Australia.
In 1996, Clear Channel invested additional capital in ARN so that ARN
could purchase the broadcasting assets of two radio stations in Adelaide,
Australia.
New Zealand Radio Network
In July 1996 the Company purchased a one-third interest in NZRN, which
purchased all of the stock of Radio New Zealand Commercial, formerly a
government-owned company consisting of 52 radio stations throughout New
Zealand.
The following table presents a rollforward of the Company's
investments in and advances to ARN, NZRN and Heftel.
ARN NZRN Heftel Total
At December
31, 1995 $61,397,305 --- $20,514,038 $81,911,343
Acquisition
of 1/3 of
NZRN --- $31,254,258 --- 31,254,258
Additional
investment
during the
period 12,984,104 --- 119,056,489 132,040,593
Dividends
and other
returns
of investment
received (7,206,823) --- --- (7,206,823)
Equity in net
income
(loss) of
nonconsol-
idated
affiliates 5,473,583 (1,861,119) (8,962,072) (5,349,608)
Amortization
of excess
cost, included
in equity
in net income --- --- (2,583,756) (2,583,756)
Foreign
currency
translation
gains 1,123,471 -- --- 1,123,471
Unrealized
gains on
marketable
securities (529,744) --- --- (529,744)
---------- --------- ---------- ----------
At December
31, 1996 $73,241,896 $29,393,139 $128,024,699 $230,659,734
=========== =========== =========== ==========
All three of these investments are not consolidated, but are accounted
for under the equity method of accounting, whereby the Company records its
investments in these entities in the balance sheet as -Equity investments
in, and advances to, nonconsolidated affiliates. The Company's interests in
the net income or loss of and the other income, net of taxes, derived from
each of Heftel, ARN and NZRN is reflected in the income statement as
Equity in net income (loss) of, and other income from, nonconsolidated
affiliates. Other income derived from nonconsolidated affiliates consists
of interest and management fees which aggregated $4,493,000 in 1996 and
$1,401,000 in 1995, less applicable income taxes of $1,717,000 in 1996 and
$438,000 in 1995.
ARN in Australian GAAP
NZRN in New Zealand GAAP
The following table presents selected financial information for ARN
and NZRN for the year ended December 31, 1996. For convenience purposes
only, data for ARN and NZRN have been translated from Australian dollars
and New Zealand dollars, respectively, to U.S. dollars at the applicable
December 31, 1996 exchange rates.
Balance sheet information at December 31, 1996:
ARN NZRN
Current assets $15,675,000 $15,620,000
Noncurrent assets 230,486,000 106,094,000
Current liabilities 23,993,000 15,178,000
Noncurrent liabilities 130,628,000 104,524,000
Shareholders' equity 91,540,000 2,012,000
Income statement information for period the investment was held in 1996:
Net broadcasting revenues $74,310,000 $24,966,000
Station operating expenses 52,360,000 21,677,000
Net income 15,480,000 (2,228,000)
The Company's equity in net income of ARN and NZRN, which is based on U.S.
GAAP, is not directly comparable to the net income reported above by ARN
and NZRN. The most significant difference involves the charge against
results of operations for the amortization of radio licenses under U.S.
GAAP, which is not recorded under Australian or New Zealand GAAP. The
Company's share of such amortization for its investment in ARN was
$2,581,000 for the year ended December 31, 1996, and the Company's share of
such amortization for its investment in NZRN for the period this investment
was held in 1996 was $598,000.
Other Investments
In addition, during 1996 and 1995, the Company provided approximately
$52,750,000 and $10,075,000, respectively, in financing to third parties,
which was used to effect the acquisition of radio and television
broadcasting operations. The financing provided in 1996 was in the form of
loans secured by the assets of certain radio stations and the financing
provided in 1995 was in the form of a guarantee of debt of $9,575,000 and a
$500,000 cash advance secured by an option to purchase the broadcasting
assets of a certain television station at a nominal amount. The Company is
accounting for the 1995 transactions in a manner similar to the equity
method, the effect of which was not significant for the years ended
December 31, 1996 and 1995. The $52,750,000 in loans are accounted for as
notes receivable as of December 31, 1996, with the related interest income
recorded in other income. In February 1997 the Company received repayment
of $40,000,000 of the notes receivable.
NOTE J - CONTINGENCIES
From time to time, claims are made and lawsuits are filed against the
Company, arising out of the ordinary business of the Company. In the
opinion of the Company's management, liabilities, if any, arising from
these actions are either covered by insurance or adequate reserves, or
would not have a material adverse effect on the financial condition
or operations of the Company.
NOTE K - SUBSEQUENT EVENTS
In January 1997 the Company closed its acquisitions of the following
stations: WQMF-FM in Louisville, Kentucky for approximately $13,500,000 and
WZZU-FM in Raleigh, North Carolina for approximately $7,500,000. Also in
January 1997, the Company announced that it entered into two separate
definitive agreements to acquire WFSN-FM, WKII-AM and WOLZ-FM in Ft. Myers,
Florida for approximately $11,000,000 and WMIL-FM and WOKY-AM in Milwaukee,
Wisconsin for approximately $40,000,000. Both of these transactions are
subject to federal regulatory approvals.
In February 1997 the Company closed its acquisition of KHOM-FM in New
Orleans, Louisiana for approximately $6,854,000 and KJOJ-AM in Houston,
Texas for approximately $984,000. The Company financed all of these
acquisitions subsequent to December 31, 1996 with its line of credit and
cash flows from operations.
In February 1997 the Company entered into a definitive agreement to
purchase the stock of Eller Media Corporation (Eller), a privately-held
corporation, for total consideration of approximately $1.15 billion,
consisting of approximately $750 million in cash and the issuance to Eller
shareholders of approximately $400 million in the Company's common stock.
This acquisition is subject to federal regulatory approvals and is expected
to close within the next six months.
NOTE L - SEGMENT DATA
The Company consists of two principal business segments - radio
broadcasting and television broadcasting. At December 31, 1996, the radio
segment included 91 stations for which the Company owned the FCC license
and 15 stations operated under local marketing or time brokerage
agreements. These 106 stations operate in 26 different markets. The radio
segment also operates five networks and includes the Company's equity
investments (see Note I).
At December 31, 1996, the television segment included eleven television
stations for which the Company is the licensee and seven stations which are
operated under local marketing or time brokerage agreements. These 18
stations operate in 11 different markets. Substantially all revenues
represent income from unaffiliated companies.
1996 1995 1994
RADIO
Net broadcasting
revenue $217,189,250 $144,244,066 $95,862,834
Station operating
expenses 126,627,982 87,530,942 64,148,412
Depreciation 8,916,495 6,973,801 5,664,700
Amortization of
intangibles 8,839,820 13,007,026 6,659,726
--------- ----------- -----------
Station operating
income 62,804,953 36,732,297 9,389,996
========== ========== ===========
Total identifiable
assets 1,079,853,088 340,684,912 244,296,718
============= =========== ===========
Capital
expenditures 7,446,872 5,242,553 1,888,787
============= =========== ===========
TELEVISION
Net broadcasting
revenue 134,549,604 105,815,314 82,189,748
Station operating
expenses 71,703,668 49,973,531 41,231,654
Depreciation 10,419,89 8,406,025 6,974,404
Amortization of
intangibles 7,613,554 5,382,030 5,369,710
----------- ----------- -----------
Station operating
income 44,812,487 42,053,728 28,613,980
=========== =========== ===========
Total identifiable
assets 244,857,998 222,325,892 167,297,307
=========== =========== ===========
Capital
expenditures 12,276,159 9,867,343 3,858,379
=========== =========== ===========
CONSOLIDATED
Net broadcasting
revenue 351,738,854 250,059,380 178,052,582
Station operating
expenses 198,331,650 137,504,473 105,380,066
Depreciation
19,336,390 15,379,826 12,639,104
Amortization of
intangibles 26,453,374 18,389,056 12,029,436
------------ ------------ -----------
Station operating
income 107,617,440 78,786,025 48,003,976
=========== ============ ============
Total identifiable
assets 1,324,711,086 563,010,804 411,594,025
============= ============ ============
Capital
expenditures 19,723,031 15,109,896 5,747,166
============= ============ ============
<PAGE>
NOTE M - QUARTERLY RESULTS OF OPERATIONS (Unaudited)
<TABLE>
March 31, June 30, September 30, December 31,
1996 1995 1996 1995 1996 1995 1996 1995
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Gross
broadcasting
revenue
$70,139,925 $58,646,216 $92,406,491 $72,342,267$107,189,144 $68,130,871$128,358,914 $84,237,698
=========== =========== =========== ======================= ======================= ===========
Net
broadcasting
revenue
62,208,445 51,857,692 81,368,271 63,727,814 94,839,458 60,038,131 113,322,680 74,435,743
Station
operating
expenses
38,230,252 33,181,977 43,762,099 34,151,824 53,408,934 32,104,322 62,930,365 38,066,350
Depreciation
and
amortization
8,755,025 8,399,455 10,587,534 8,165,573 13,022,189 8,018,075 13,425,016 9,185,779
--------- --------- ---------- --------- ---------- --------- ---------- ---------
Station
operating
income
15,223,168 10,276,260 27,018,638 21,410,417 28,408,335 19,915,734 36,967,299 27,183,614
Corporate
expenses
1,673,571 1,530,324 1,804,011 1,585,898 2,170,128 1,608,243 2,879,600 2,689,992
--------- --------- --------- --------- --------- --------- --------- --------
Operating
income
13,549,597 8,745,936 25,214,627 19,824,519 26,238,207 18,307,491 34,087,699 24,493,622
Interest
expense
(5,423,837) (4,447,973) (6,321,472) (5,214,279) (8,033,067) (5,559,145)(10,302,034) (5,530,057)
Other
income
(expense)
205,815 258,580 (19,358) (241,341) 479,345 (98,095) 1,564,223 (722,424)
------- ------- -------- --------- ------- -------- --------- ---------
Income
before
income
taxes
8,331,575 4,556,543 18,873,797 14,368,899 18,684,485 12,650,251 25,349,888 18,241,141
Income
taxes
2,810,010 1,877,377 7,356,060 5,594,783 7,260,782 5,698,411 10,959,564 7,121,356
--------- --------- --------- --------- --------- --------- ---------- ---------
Income before equity in net income
(loss) of, and other income from,
nonconsolidated affiliate
5,521,565 2,679,166 11,517,737 8,774,116 11,423,703 6,951,840 14,390,324 11,119,785
Equity in
net income
(loss) of,
and other
income from,
non- consolidated
affiliates
716,764 - 1,030,410 363,726 (8,375,072) 1,161,568 1,470,172 963,409
------- -- --------- ------- ----------- --------- --------- ---------
Net
income
$6,238,329 $2,679,166 $12,548,147 $9,137,842 $3,048,631 $8,113,408 $15,860,496 $12,083,194
========== ========== =========== ========== ========== ========== ========== ============
Net income
per common
share (1)
$.09 $.04 $.17 $.13 $.04 $.12 $.20 $.17
==== ==== ==== ==== ==== ==== ==== ====
Weighted average
common and
common shares
equivalents
outstanding (1)
70,409,284 70,078,048 71,839,402 70,111,936 78,240,998 70,204,916 78,187,413 70,252,218
========== ========== ========== ========== ========== ========== ========== ==========
Stock price (1):
High
$29.5625 $15.1250 $43.3750 $17.3750 $45.2500 $20.4375 $44.5625 $22.0625
Low
20.3750 12.5313 26.7500 13.4375 35.6250 15.4063 30.5000 18.1250
/TABLE
<PAGE>
(1)Adjusted for two-for-one stock splits declared by Board of
Directors in October 1996 and 1995.
The Company's Common Stock is traded on the New York Stock
Exchange under the symbol CCU.
SELECTED FINANCIAL DATA
Results of operations information
(In thousands, except for per share data)
Year ended December 31,
1996(4) 1995(4) 1994(4) 1993(3) 1992(2)
Gross
broadcasting
revenue $398,094 $283,357 $200,695 $135,680 $94,472
====== ======== ======== ======== =======
Net
broadcasting
revenue 351,739 250,059 178,053 121,118 84,485
Station
operating
expenses 198,332 137,504 105,380 78,925 55,812
Depreciation
and
amortization 45,790 33,769 24,669 17,447 12,253
------- ------- ------- ------- -------
Station
operating
income 107,617 78,786 48,004 24,746 16,420
Corporate
expenses 8,527 7,414 5,100 3,464 2,890
------- ------- ------- ------- -------
Operating
income 99,090 71,372 42,904 21,282 13,530
Interest
expense (30,080) (20,752) (7,669) (5,390) (4,739)
Other income
(expense) 2,230 (803) 1,161 (196) (1,217)
------ -------- ------- ------- -------
Income before
income taxes 71,240 49,817 36,396 15,696 7,574
Income taxes 28,386 20,292 14,387 6,573 3,281
------- ------- ------- ------ ------
Income before
equity in net
income (loss)
of, and other
income from,
nonconsol-
idated
affiliates 42,854 29,525 22,000 9,123 4,293
Equity in net
income (loss) of,
and other income
from,
nonconsolidated
affiliates (5,158) 2,489 - - -
------- ------- -------- -------- --------
Net income $37,696 $32,014 $22,009 $9,123 $4,293
======= ======= ======= ======= =======
Net income
per common
share (1) $.50 $.46 $.32 $.15 $.07
======= ======= ======= ======= =======
Weighted average
common and common
share
equivalents
outstanding (1) 74,649 70,201 69,326 62,202 59,320
======= ======= ======= ======= =======
Cash dividends
per share (1) - - - - -
======= ======= ======= ======= =======
Balance Sheet Data:
Current assets$113,164 $70,485 $53,945 $38,191 $24,844
Property, plant
and equipment
- -net 147,838 99,885 85,318 67,7504 8,017
Total assets1,324,7115 63,011 411,5942 27,577 146,993
Current
liabilities 43,462 36,005 27,679 26,125 10,073
Long-term
debt, net
of current
maturities 725,132 334,164 238,204 87,815 97,000
Shareholders(1)
equity 513,431 163,713 130,533 98,343 31,055
(1) All per share amounts have been adjusted to reflect stock
splits issued on the following dates and in the following ratios:
Date of Split Ratio of Split
December 1996 Two-for-one
November 1995 two-for-one
February 1994 five-for-four
February 1993 five-for-four
March 1992 five-for-four
Includes eleven months' results of operations of the Kentucky
News Network, nine months' results of operations of WPTY-TV,
eight months' results of operations of WKCI-FM and WAVZ-AM and
six months' results of operations of KEYN-FM, KQAM-AM, WRVA-AM,
WRVQ-FM and WRBQ-AM/FM - all acquired in 1992.
Includes eleven months' results of operations of KQXT-FM, ten
months' results of operations of KHFI-FM, nine months' results
of operations of WYLD-AM/FM, WRXL-FM, WRNL-AM (now WRVH-AM) and
the Virginia News Network, six months' results of operations of
KSJL-AM (now KTKR-AM), four and one half months' results of
operations of WLMT-TV, three months' results of operations of
KITN-TV (now WFTC-TV) and two months' results of operations of
KTFO-TV - all acquired in 1993.
See Note E to Consolidated Financial Statements for information
regarding acquisitions effected during 1996, 1995 and 1994.
CORPORATE OFFICERS
CORPORATE
Lowry Mays
Chairman
Chief Executive Officer
Mark P. Mays
President
Chief Operating Officer
Randall Mays
Executive Vice President
Chief Financial Officer
Herbert W. Hill, Jr.
Senior Vice President
Chief Accounting Officer
Kenneth E. Wyker
Senior Vice President for
Legal Affairs
Jacob T. Gray
Vice President
Controller
Demetra Koelling
Vice President
Corporate Counsel
Houston Lane
Vice President
Finance
Ida Chycinski
Vice President
Cash Management
Deborah Williams
Vice President
Corporate Taxation
RADIO
James Smith
Senior Vice President
Operations & Capital
Management
George L. Sosson
Senior Vice President
Operations-Radio
Stan Webb
Senior Vice President
Operations-Radio
Janet Armstead
Vice President
Norfolk
Richard D. Booth
Vice President
Little Rock
R. Miles Chandler
Vice President
Oklahoma City
Matthew Chase
Vice President
Providence
Bob Cohen
Vice President
San Antonio
Bruce B. Demps
Vice President
Memphis
Edward Essick
Vice President
Grand Rapids
Linda D. Forem
Vice President
Richmond
Carl Hamilton
Vice President
Houston
Ernie Jackson
Vice President
Houston
Earnest L. James
Vice President
New Orleans
Gary James
Vice President
Springfield
Wayne Jefferson
Vice President
Raleigh
Reggie Jordan
Vice President
Richmond
Thomas G. Kennedy III
Vice President
New Orleans
Betty Kocurek
Vice President
San Antonio
Judy Lakin
Vice President
Austin
Kevin Malone
Vice President
Tampa
David F. Manning
Vice President
Tampa
Allen McLaughlin
Vice President
Tulsa
Carl McNeill
Vice President
Richmond
John M. Moen
Vice President
Oklahoma City
Howard T. Nemenz
Vice President
Greensboro
Dan Patrick
Vice President
Houston
Steve Patterson
Vice President
Columbia
Shawn V. Portmann
Vice President
Ft. Myers
David R. Ross
Vice President
Miami
Sherri R. Sawyer
Vice President
Memphis
Robert R. Scherer
Vice President
Louisville
Mike Shannon
Vice President
Reading/Lancaster
William H. Struck
Vice President
El Paso
Walter A. Tiburski
Vice President
Cleveland
J. Tim West
Vice President
Oklahoma City
Terry D. Wood
Vice President
Milwaukee
Faith Zila
Vice President
New Haven
TELEVISION
Rip Riordan
Executive Vice President/
Chief Operating Officer
Television
Hal Capron
Vice President
Tulsa
David M. D'Antuono
Vice President
Albany
John F. Feeser, III
Vice President
Harrisburg
Josh McGraw
Vice President
Jacksonville
Sharon Moloney
Vice President
Mobile
Jack L. Peck
Vice President
Memphis
Randy Pratt
Vice President
Wichita
Deborah J. Sinay
Vice President
Providence
Steve Spendlove
Vice President
Minneapolis
Jerry Whitener
Vice President
Little Rock
CLEAR CHANNEL COMMUNICATIONS INTERNATIONAL
Richard D. Novik
President
AUSTRALIAN RADIO NETWORK
Nigel Milan
Chief Executive Officer
John Hamilton
Chief Financial Officer
NEW ZEALAND RADIO NETWORK
Joan Withers
Chief Executive Officer
BOARD OF DIRECTORS
Lowry Mays
Chairman
Chief Executive Officer
Alan D. Feld
Partner: Akin, Gump, Strauss, Hauer and Feld
Red McCombs
Private Investor
Theodore H. Strauss
Senior Managing Director: Bear, Stearns & Co., Inc.
John H. Williams
Senior Vice President: Everen Securities, Inc.
Member of the Audit Committee
Form 10-K Annual Report
A copy of the Company's Annual Report on Form 10-K filed with the
Securities and Exchange Commission may be obtained without charge
upon written request to:
Herbert W. Hill, Jr.
Senior Vice President
Clear Channel Communications, Inc.
P.O. Box 659512
San Antonio, Texas 78265-9512
Independent Auditors
Ernst & Young, LLP
San Antonio, Texas
Transfer Agent And Registrar Bank of New York
101 Barclay Street
22 Floor West
New York, NY 10286
Annual Meeting of Shareholders
The annual meeting of shareholders will be held at 200 Concord
Plaza on the 1st floor in the Conference Room, San Antonio,
Texas, at 11:00 am CST on Tuesday, April 29, 1997.
Clear Channel Communications, Inc.
Mailing Address:
San Antonio, TX 78265-9512
Corporate Address
200 concord Plaza, Suite 600
San Antonio, TX 78216-6940
210-822-2828
[Facsimile 210-822-2299]
EXHIBIT 21 - Subsidiaries of Registrant, Clear Channel
Communications, Inc.
Name State of Incorporation
Clear Channel Communications
of Memphis, Inc. Texas
Clear Channel Television, Inc. Nevada
Clear Channel Radio, Inc. Nevada
Clear Channel Television Licenses, Inc. Nevada
Clear Channel Radio Licenses, Inc. Nevada
Clear Channel Management, Inc. Delaware
Clear Channel Metroplex, Inc. Nevada
Clear Channel Metroplex Licenses, Inc. Nevada
Clear Channel Holdings, Inc. Nevada
Clear Channel Productions, Inc. Nevada
CCC-Houston A M LTD Texas
CCR Houston-Nevada, Inc. Nevada
Clear Channel Real Estate, Inc. Nevada
EXHIBIT 23.1 - CONSENT OF INDEPENDENT AUDITORS - ERNST & YOUNG
LLP
We consent to the incorporation by reference in this Annual
Report (Form 10-K) of Clear Channel Communications, Inc. of our
report dated February 17, 1997 (except for Note K, as to which
the date is February 25, 1997) included in the 1996 Annual Report
to Shareholders of Clear Channel Communications, Inc.
We also consent to the incorporation by reference in the
Registration Statements (Forms S-8) pertaining to the 1984
Incentive Stock Option Plan of Clear Channel Communications, Inc.
(No. 33-14193); the Clear Channel Communications, Inc.
Nonqualified Stock Option Plan (No. 33-59772); and the Clear
Channel Communications, Inc. 1994 Incentive Stock Option Plan,
Clear Channel Communications, Inc. 1994 Nonqualified Stock Option
Plan, Clear Channel Communications, Inc. Directors' Nonqualified
Stock Option Plan, and Option Agreement for Officer (No. 33-
64463) of our report dated February 17, 1997 (except for Note K,
as to which the date is February 25, 1997) with respect to the
consolidated financial statements of Clear Channel
Communications, Inc. incorporated herein by reference, and our
report dated February 17, 1997 with respect to the financial
statement schedules included in this Annual Report (Form 10-K)
for the year ended December 31, 1996.
ERNST & YOUNG LLP
San Antonio, Texas
March 25, 1997
EXHIBIT 23.2 - CONSENT OF INDEPENDENT AUDITORS - KPMG
We consent to the incorporation by reference in the Registration
Statements (Forms S-8) pertaining to the 1984 Incentive Stock
Option Plan of Clear Channel Communications, Inc. (No. 33-14193);
the Clear Channel Communications, Inc. Nonqualified Stock Option
Plan (No. 33-59772); and the Clear Channel Communications, Inc.
1994 Incentive Stock Option Plan, Clear Channel Communications,
Inc. Directors' Nonqualified Stock Option Plan, and Option
Agreement for Officer (No. 33-64463) of our report dated 4 March,
1997, relating to the consolidated financial statements of
Australian Radio Network Pty Limited and its controlled entitles
(such consolidated financial statements not separately presented
in the Form 10-K referred to below), which report appears in the
December 31, 1996 Annual Report on Form 10-K of Clear Channel
Communications, Inc.
/s/KPMG
Sydney, Australia
March 25, 1997
<PAGE>
EXHIBIT 99.1 - REPORT OF INDEPENDENT AUDITORS ON FINANCIAL
STATEMENT SCHEDULES -- ERNST & YOUNG LLP
We have audited the consolidated financial statements of Clear
Channel Communications, Inc. as of December 31, 1996 and 1995,
and for each of the three years in the period ended December 31,
1996, and have issued our report thereon dated February 17, 1997
(except for Note K, as to which the date is February 25, 1997).
Our audits also included the financial statement schedules listed
in Item 14(a) of this annual Report (Form 10-K). These schedules
are the responsibility of the Company' management. Our
responsibility is to express an opinion based on our audits.
In our opinion, the financial statement schedules referred to
above, when considered in relation to the basic financial
statements taken as a whole, present fairly in all material
respects the information set forth therein.
/s/ENRST & YOUNG LLP
San Antonio, Texas
February 17, 1997
<PAGE>
EXHIBIT 99.2 -- REPORT OF INDEPENDENT AUDITORS - KPMG
The Board of Directors of Australian Radio Network Pty Limited.
We have audited the consolidated balance sheet of the Australian
Radio Network Pty Limited and its controlled entities
("Australian Radio Network") as at December 31, 1996 and 1995,
and the related consolidated profit and loss accounts and
statements of cash flows for the years then ended all expressed
in Australian dollars. These consolidated financial statements
are the responsibility of the Australian Radio Network's
management. Our responsibility is to express an opinion on these
consolidated financial statements based on our audits.
We conducted our audits in accordance with the Australian
auditing standards that are substantially equivalent to United
States generally accepted auditing standards. Those standards
require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the
financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable
basis for our opinion.
In our opinion, the consolidated financial statements referred to
above present fairly, in all material respects, the financial
position of Australian Radio Network as at December 31, 1996 and
1995, and the results of its operations and its cash flows for
the years then ended in conformity with accounting principles
generally accepted in Australia.
Generally accepted accounting principles in Australia vary in
certain significant respects from generally accepted accounting
principles in the United States. Application of generally
accepted accounting principles in the United States would have
affected results of operations for the year ended December 31,
1996 and the period May 11, 1995 to December 31, 1995, and
shareholders' equity as of December 31, 1996 and 1995, to the
extent summarized in the information accompanying the annual
financial statements.
/s/KPMG
Sydney, Australia
4 March, 1997
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the Registrant has duly caused
this report to be signed on its behalf by the undersigned on
March 31, 1997, thereunto duly authorized.
Clear Channel Communications, Inc.
(Registrant)
By /S/ L. Lowry Mays
L. Lowry Mays, Chairman and CEO
Pursuant to the requirements of the Securities Exchange Act of
1934, this report has been signed below by the following persons
on behalf of the Registrant in the capacities and on the date
indicated.
Signature Title Date
/S/ L. Lowry Mays Chairman/ March 31, 1997
L. Lowry Mays Chief Executive Officer
/S/Randall Mays Senior Vice President/ March 31, 1997
Randall Mays Chief Financial Officer
/S/ Herbert W. Hill, Jr.Senior Vice President/March 31, 1997
Herbert W. Hill, Jr. Chief Accounting Officer
/S/ B. J. McCombs
B. J. McCombs Director March 31, 1997
/S/ Alan D. Feld
Alan D. Feld Director March 31, 1997
/S/ Theodore H. Strauss
Theodore H. Strauss Director March 31, 1997
/S/ John H. Williams
John H. Williams Director March 31, 1997
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> DEC-31-1996
<CASH> 16701
<SECURITIES> 0
<RECEIVABLES> 79183
<ALLOWANCES> 6067
<INVENTORY> 0
<CURRENT-ASSETS> 113164
<PP&E> 225253
<DEPRECIATION> 77416
<TOTAL-ASSETS> 1324711
<CURRENT-LIABILITIES> 43462
<BONDS> 725132
0
0
<COMMON> 7699
<OTHER-SE> 505731
<TOTAL-LIABILITY-AND-EQUITY> 1324711
<SALES> 0
<TOTAL-REVENUES> 351739
<CGS> 0
<TOTAL-COSTS> 198332
<OTHER-EXPENSES> 10757
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 30080
<INCOME-PRETAX> 71240
<INCOME-TAX> 28386
<INCOME-CONTINUING> 37696
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<NET-INCOME> 37696
<EPS-PRIMARY> .50
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</TABLE>
