<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 8-K/A
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
The Securities Exchange Act of 1934
Date of Report (Date of earliest event reported)
September 4, 1998
(June 25, 1998)
Clear Channel Communications, Inc.
(Exact name of registrant as specified in its charter)
Texas
(State of Incorporation)
1-9645 74-1787536
(Commission File Number) (I.R.S. Employer Identification No.)
200 Concord Plaza, Suite 600
San Antonio, Texas 78216
(210) 822-2828
(Address and telephone number of principal executive offices)
<PAGE> 2
Clear Channel Communications, Inc.
Form 8-K/A
Item 5 OTHER EVENTS.
On July 10, 1998, Clear Channel Communications, Inc., a Texas corporation (the
Company), filed a current report on Form 8-K. The Company is filing this
amendment to include information required under item 7 (a) and item 7 (b).
Item 7 FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial Statements of Businesses Acquired.
<PAGE> 3
More Group Plc.
Financial Statements and reconciliation to US GAAP
Year ended 31 December 1997
<PAGE> 4
Index
2 Report of Independent Auditors
3 Consolidated profit and loss account
4 Balance sheet
5 Consolidated cash flow statement
6 Statement of total recognised gains and losses and reconciliation of movements
in shareholders' funds
7 Accounting policies
9 Notes to the accounts
1
<PAGE> 5
REPORT OF INDEPENDENT AUDITORS
To the Board of Directors and the Shareholders of More Group Plc
We have audited the accompanying consolidated balance sheet of More Group Plc
and its subsidiary undertakings (together, "the Group") as of 31 December 1997
and the related consolidated profit and loss account, and statements of cash
flows and total recognised gains and losses for the year then ended all
expressed in pounds sterling. These financial statements are the responsibility
of the Company's Directors. Our responsibility is to express an opinion on these
financial statements on the basis of our audit.
We conducted our audit in accordance with generally accepted auditing standards
in the United Kingdom, which are substantially the same as auditing standards
generally accepted in the United States. These standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free from 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 our audit provides 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 the Group as of 31
December 1997 and the consolidated profit and cash flows for the year then ended
in accordance with generally accepted accounting principles in the United
Kingdom.
Accounting principles generally accepted in the United Kingdom vary in certain
important respects from accounting principles generally accepted in the United
States. The application of the latter would have affected the determination of
consolidated shareholders' equity as at 31 December 1997 expressed in pounds
sterling and consolidated net profit for the year then ended also expressed in
pounds sterling to the extent summarised in note 29 to the financial statements.
/s/ PRICE WATERHOUSE
Price Waterhouse
Chartered Accountants and Registered Auditors
London, England
5 March 1998
(except as to the information presented
in Note 29, for which the date is 13 August 1998)
2
<PAGE> 6
Consolidated profit and loss account
For the year ended 31st December
<TABLE>
<CAPTION>
1997
Notes (pound)000
<S> <C> <C>
- --------------------------------------------------------------------------------------------------------------------------
Turnover
Group and share of joint ventures 145,649
Less: share of joint ventures (1,250)
Continuing operations: Ongoing 141,626
Acquisitions in 1997 2,773
- --------------------------------------------------------------------------------------------------------------------------
Group turnover 1 144,399
- --------------------------------------------------------------------------------------------------------------------------
Operating profit
Continuing operations: Ongoing 28,427
Acquisitions in 1997 250
- --------------------------------------------------------------------------------------------------------------------------
Group operating profit 28,677
Share of operating profit/(loss) in:
Joint ventures (481)
Associated undertakings 62
- --------------------------------------------------------------------------------------------------------------------------
Total operating profit 1, 3 28,258
Restructuring and closure costs on termination of operations (2,305)
Less: 1996 provision 2,305
Loss on termination of operations --
- --------------------------------------------------------------------------------------------------------------------------
Profit on ordinary activities before interest 28,258
Net interest payable 6 (2,722)
- --------------------------------------------------------------------------------------------------------------------------
Profit on ordinary activities before taxation 25,536
Taxation 7 (7,555)
- --------------------------------------------------------------------------------------------------------------------------
Profit after taxation 17,981
Equity minority interests 34
- --------------------------------------------------------------------------------------------------------------------------
Profit for the financial year 18,015
Dividends 8 (6,827)
- --------------------------------------------------------------------------------------------------------------------------
Retained profit for the financial year 18 11,188
- --------------------------------------------------------------------------------------------------------------------------
Earnings per 10 pence Ordinary share 9 43.3p
Dividends per 10 pence Ordinary share 8 16.4p
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>
3
<PAGE> 7
Balance sheet
At 31st December
<TABLE>
<CAPTION>
1997
Notes (pound)000
<S> <C> <C>
- --------------------------------------------------------------------------------------------------------------------------
Fixed assets
Tangible assets 10 70,322
- --------------------------------------------------------------------------------------------------------------------------
Investments
Investments in joint ventures
Share of gross assets 3,016
Share of gross liabilities (2,631)
385
Investments in associates 429
Trade and other investments 287
- --------------------------------------------------------------------------------------------------------------------------
11 1,101
- --------------------------------------------------------------------------------------------------------------------------
71,423
- --------------------------------------------------------------------------------------------------------------------------
Current assets
Stocks 12 4,048
Debtors 13 39,826
Cash and deposits 21,216
- --------------------------------------------------------------------------------------------------------------------------
65,090
Creditors - amounts falling due within one year 14 (52,325)
- --------------------------------------------------------------------------------------------------------------------------
Net current assets/(liabilities) 12,765
- --------------------------------------------------------------------------------------------------------------------------
Total assets less current liabilities 84,188
Creditors - amounts falling due after one year 15 (57,710)
Provisions for liabilities and charges 16 (1,969)
- --------------------------------------------------------------------------------------------------------------------------
Net assets 24,509
- --------------------------------------------------------------------------------------------------------------------------
Capital and reserves
Called up share capital 17 4,163
Reserves 18 19,319
- --------------------------------------------------------------------------------------------------------------------------
Equity shareholders' funds 23,482
Equity minority interests 1,027
- --------------------------------------------------------------------------------------------------------------------------
24,509
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>
4
<PAGE> 8
Consolidated cash flow statement
For the year ended 31st December
<TABLE>
<CAPTION>
1997
Notes (pound)000
<S> <C> <C>
- --------------------------------------------------------------------------------------------------------------------------
Cash flow from operating activities 22 38,343
Returns on investments and servicing of finance 23 (2,470)
Taxation (3,991)
- --------------------------------------------------------------------------------------------------------------------------
Free cash flow 31,882
Capital expenditure 23 (21,007)
Acquisitions and disposals 23 (9,037)
Equity dividends paid (6,365)
- --------------------------------------------------------------------------------------------------------------------------
Cash flow before use of liquid resources and financing (4,527)
Management of liquid resources 23 (1,982)
Financing: Issue of shares 23 353
Increase in debt 23 19,858
20,211
- --------------------------------------------------------------------------------------------------------------------------
Increase in cash in the year 13,702
- --------------------------------------------------------------------------------------------------------------------------
Reconciliation of net cash flow to movement in net debt
Increase in cash in the year 13,702
Cash flow from increase in debt (19,858)
Cash flow from management of liquid resources 1,982
- --------------------------------------------------------------------------------------------------------------------------
Change in net debt resulting from cash flows (4,174)
Loans acquired with subsidiary undertakings (10)
Translation difference 1,702
- --------------------------------------------------------------------------------------------------------------------------
Movement in net debt in the year (2,482)
Net debt at 1st January (34,089)
- --------------------------------------------------------------------------------------------------------------------------
Net debt at 31st December 24 (36,571)
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>
5
<PAGE> 9
Statement of total recognised gains and losses
For the year ended 31st December
<TABLE>
<CAPTION>
1997
(pound)000
<S> <C>
- --------------------------------------------------------------------------------------------------------------------------
Profit for the financial year 18,015
Exchange adjustments on foreign currency net investments (291)
- --------------------------------------------------------------------------------------------------------------------------
Total recognised gains 17,724
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>
There is no material difference between the reported profits for 1997 and the
result for the year restated on an historical cost basis.
Reconciliation of movements in shareholders' funds
For the year ended 31st December
<TABLE>
<CAPTION>
1997
(pound)000
<S> <C>
- --------------------------------------------------------------------------------------------------------------------------
Total recognised gains 17,724
Dividends (6,827)
Ordinary shares issued in the year 113
Adjustment to goodwill written off in respect
of gain on sale of joint venture (note 19) 3,824
Goodwill written off (note 19) (10,459)
- --------------------------------------------------------------------------------------------------------------------------
Net addition to shareholders' funds 4,375
Opening shareholders' funds 19,107
- --------------------------------------------------------------------------------------------------------------------------
Closing shareholders' funds 23,482
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>
6
<PAGE> 10
Accounting policies
Accounting convention
The accounts are prepared under the historical cost convention, as modified by
the revaluation of certain fixed assets, and in accordance with applicable
accounting standards.
Basis of consolidation
The consolidated accounts comprise the accounts of More Group Plc and all of
its subsidiary undertakings for the year ended 31st December 1997. The
consolidated profit and loss account includes the results of subsidiary
undertakings acquired during the year from their effective dates of acquisition.
A subsidiary undertaking is an entity in which the Group has a long term
investment and controls a majority of the voting rights or exercises a dominant
influence, or which is managed on a unified basis with another subsidiary
undertaking.
A joint venture is an entity in which the Group has a long term investment
and which is jointly controlled by the Group and at least one other party. Joint
ventures are included in the consolidated profit and loss account and balance
sheet using the gross equity method.
An associated undertaking is an entity in which the Group has a long term
investment and is in a position to exercise significant influence. The Group's
share of profits less losses of associated undertakings is included in the
consolidated profit and loss account. The consolidated balance sheet includes,
as an investment, the Group's share of net assets of associated undertakings at
acquisition plus the Group's share of retained profits.
Accounting for acquisitions
On acquisition, fair values are attributed to the net assets acquired.
Adjustments are also made to bring the accounting policies of businesses
acquired into alignment with those of the Group. The difference between the fair
value of the consideration paid and the fair value of the net assets acquired is
treated as goodwill and taken to reserves in the year of acquisition.
Tangible fixed assets
Costs relating to advertising structures are shown at historical cost and are
depreciated on a straight line basis over periods from two to 15 years,
dependent upon the estimated useful lives of the assets concerned. Costs
represent materials, direct labour and appropriate overheads.
The cost or valuation of other fixed assets is written off in equal annual
instalments over their expected useful lives as follows:
<TABLE>
<CAPTION>
Period (years)
<S> <C>
-----------------------------------------
Freehold buildings 50
Leasehold properties Period of lease
Plant and machinery 2-10
Motor vehicles 4
Fixtures and fittings 3-10
-----------------------------------------
</TABLE>
Investments in subsidiary undertakings
Investments in subsidiary undertakings are stated at Directors' valuation equal
to their net assets at the end of the financial year, including acquisition
goodwill where appropriate. Differences between cost and valuation are taken to
the revaluation reserve.
Stocks
Stocks are stated at the lower of cost and net realisable value. Cost represents
materials, direct labour and appropriate production overheads.
Deferred taxation
Deferred taxation is provided on differences arising from the inclusion of
income and expenditure in taxation computations in periods different from those
in which they are included in the accounts except where the tax reduction or
increase is expected to continue for the foreseeable future.
7
<PAGE> 11
Foreign exchange
The trading results of foreign subsidiary undertakings are translated at the
average exchange rate for the year, and their net assets are translated at the
rate of exchange ruling at the balance sheet date. Differences on exchange
arising from the translation of the opening balance sheets of, or investments
in, foreign subsidiary undertakings are offset against exchange differences
arising on related foreign currency borrowings and are taken directly to
reserves. Other exchange differences are reflected in the profit and loss
account.
Pension costs
Retirement benefits to employees in the Group are funded by contributions from
group companies and employees. The cost of providing retirement benefits is
charged against profits over the expected service lives of employees in
accordance with the recommendations of consulting actuaries.
Lease commitments
Assets purchased under hire purchase agreements and finance lease contracts are
capitalised at their fair value with the related commitments shown under
liabilities. Operating lease commitments are provided for in the accounts at the
time the rental liabilities arise.
Research and development
Research and development expenditure is written off in the year in which it is
incurred.
Turnover
Turnover is represented by gross billings net of agents' commissions and
excludes value added tax and transactions between group undertakings.
8
<PAGE> 12
(FOR A DESCRIPTION OF THE GROUP'S ACCOUNTING POLICIES PLEASE SEE PAGES 7 AND 8)
1 Segmental information
The Group's only class of business is outdoor advertising. The geographical
analysis by origin and destination is as follows:
<TABLE>
<CAPTION>
1997 1997 1997
Turnover Operating profit Net assets
(pound)000 (pound)000 (pound)000
<S> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------------------------
Great Britain 78,547 17,506 45,753
Ireland 10,473 2,057 7,910
Belgium 11,094 1,531 1,600
France 10,375 429 4,912
Nordic Region 32,284 8,113 13,539
Asia Pacific 1,746 (757) 3,581
USA 1,130 (621) 322
- -----------------------------------------------------------------------------------------------------------------------
145,649 28,258 77,617
Less: Share of joint ventures (1,250)
- -----------------------------------------------------------------------------------------------------------------------
Group turnover 144,399
- -----------------------------------------------------------------------------------------------------------------------
Net interest payable (2,722)
- -----------------------------------------------------------------------------------------------------------------------
Profit before taxation 25,536
- -----------------------------------------------------------------------------------------------------------------------
Unallocated net liabilities (16,537)
- -----------------------------------------------------------------------------------------------------------------------
Capital employed 61,080
Net debt (36,571)
- -----------------------------------------------------------------------------------------------------------------------
Net assets 24,509
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>
The geographical analysis of net assets shows operating net assets which, in the
opinion of the Directors, represent the best estimate of net asset utilisation.
Operating net assets exclude net debt, taxation, dividends, deferred
consideration, pension fund prepayment and provisions for liabilities and
charges.
2 Operating costs
<TABLE>
<CAPTION>
1997
(pound)000
<S> <C>
- --------------------------------------------------------------------------------------------------------------------------
Cost of sales
Continuing operations: Ongoing 71,372
Acquisitions in 1997 1,603
- --------------------------------------------------------------------------------------------------------------------------
72,975
- --------------------------------------------------------------------------------------------------------------------------
Administrative expenses
Continuing operations: Ongoing 41,827
Acquisitions in 1997 920
- --------------------------------------------------------------------------------------------------------------------------
42,747
- --------------------------------------------------------------------------------------------------------------------------
115,722
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>
9
<PAGE> 13
3 Operating profit
<TABLE>
<CAPTION>
1997
(pound)000
<S> <C>
- --------------------------------------------------------------------------------------------------------------------------
Operating profit is stated after charging:
Group employment costs (note 5) 27,369
Depreciation of tangible fixed assets 10,850
Loss on disposal of tangible fixed assets 2,460
Auditors' remuneration 279
Remuneration to UK Auditor for non-audit work 152
Research and development 1,334
Leasing charges - Operating (land and buildings) 1,772
- Operating (other) 2,702
- --------------------------------------------------------------------------------------------------------------------------
The audit fee for the Company included within the Group fee was (pound)39,000.
The loss on disposal of tangible fixed assets principally relates to accelerated
depreciation on assets taken out of service.
4 Remuneration of Directors
1997
(pound)000
- --------------------------------------------------------------------------------------------------------------------------
Salaries, fees and taxable benefits 762
Performance related pay 171
Consultancy fees 31
Company pension contribution to defined contribution schemes 88
Compensation for termination of service contract 141
- --------------------------------------------------------------------------------------------------------------------------
1,193
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>
Emoluments for Directors are summarised in the following table:
<TABLE>
<CAPTION>
Performance Pension
Salary and fees Taxable benefits related pay contributions Total
- -------------------------------------------------------------------------------------------------------------
1997 1997 1997 1997 1997
(pound)000 (pound)000 (pound)000 (pound)000 (pound)000
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Non-Executive Chairman
F W Knight 47 - - - 47
Executive Directors
R G Parry 270 14 102 45 431
C V Slevin 160 16 33 12 221
B P Turnbull 130 8 36 31 205
P A Hall
(resigned 22nd May 1997) 37 4 - - 41
Non-Executive Directors
J F B Hunter 22 - - - 22
J Bullock
(appointed 1st January 1997) 21 - - - 21
K J Guerra
(appointed 1st January 1997) 21 - - - 21
The Lord Lane of Horsell
(resigned 24th April 1997) 10 - - - 10
P H Kent
(resigned 24th April 1997) 2 - - - 2
- -------------------------------------------------------------------------------------------------------------
720 42 171 88 1,021
- -------------------------------------------------------------------------------------------------------------
</TABLE>
10
<PAGE> 14
4 Remuneration of Directors continued
In addition to the above:
(a) Mr P H Kent had an interest in a contract with the Company through his own
consultancy, Peter Kent & Associates. This provided the Group with marketing
and public relations consultancy services. The cost of these consultancy
services for the period ended 24th April 1997, when he resigned from the
Board, was (pound)30,980.
(b) Mr P A Hall received (pound)141,000 compensation for termination of service
contract.
(c) Mr R G Parry participates in a Long Term Incentive Scheme, which consisted
of two three year Plans as at 31st December 1997. The first Plan ("the 1996
Plan") covers the financial years 1996 to 1998. The second Plan ("the 1997
Plan") covers the financial years 1997 to 1999. The amount due to Mr R G
Parry under each Plan will depend on the percentage increase in the share
price of the Company over the period of that Plan compared to the percentage
increase in the FT-SE Mid 250 index ("the Index") over the same period. The
maximum amount due under each Plan, if the percentage increase in the
Company's share price were at least twice the percentage increase in the
Index, would be: (i) for the 1996 Plan, a cash amount equal to 130 per cent
of his 1998 basic salary (ii) for the 1997 Plan, a cash amount equal to 62.5
per cent of his 1999 basic salary and, in each case, an allocation of
Ordinary shares in the Company of equivalent value.
Directors' pension arrangements
Directors' pension benefits relating to defined contribution schemes are
disclosed in the table above.
In addition, Mr C V Slevin, Mr B P Turnbull and Mr P A Hall are members of the
More Group defined benefit scheme. Details of their defined benefit pension
provisions are shown below.
<TABLE>
<CAPTION>
Directors' Additional Total pension
contributions pension earned to
Age at during earned during 31st December
31st December the year the year 1997
Director 1997 (pound)000 (pound)000 (pound)000
<S> <C> <C> <C> <C>
- -------------------------------------------------------------------------------------------------------------------------
C V Slevin 58 13 12 55
B P Turnbull 53 10 6 19
P A Hall* 54 3 3 33
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>
*For PA Hall, the information in the table relates to the period prior to his
resignation on 22nd May 1997.
Directors' contributions are those paid or payable by the Director under the
terms of the More Group Plc Retirement Benefits Scheme, and exclude Additional
Voluntary Contributions.
Additional pension earned during the year excludes any increase for
inflation.
Total pension earned is the amount which would be paid annually on retirement
at age 60 based on service to 31st December 1997 or earlier resignation. Post
retirement pensions are increased annually by 3 per cent. Following death in
retirement, a spouse's pension equal to two-thirds of the Director's pension is
payable.
Directors' share options
Details of Ordinary shares of 10 pence each over which Directors held options
during the year are shown below:
<TABLE>
<CAPTION>
Number of options
- -------------------------------------------------------------------------------------------------------------------------
At Granted At Earliest
1st Jan during 31st Dec Exercise exercise Expiry
Director 1997 year 1997 price (p) date date
<S> <C> <C> <C> <C> <C> <C>
- -------------------------------------------------------------------------------------------------------------------------
R G Parry 202,920 - 202,920 473 11th Oct 1998 10th Oct 2005
3,731 - 3,731 462 1st Dec 2000 31st May 2001
C V Slevin 101,460 - 101,460 370 29th Sept 1997 28th Sept 2004
16,233 - 16,233 616 10th May 1999 9th May 2003
B P Turnbull 4,393 - 4,393 392 24th June 1999 23rd Dec 1999
5,396 - 5,396 556 16th April 1999 15th April 2006
27,597 - 27,597 616 10th May 1999 9th May 2003
- 6,240 6,240 641 25th Mar 2000 24th Mar 2004
- -------------------------------------------------------------------------------------------------------------------------
361,730 6,240 367,970
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>
No options were exercised by any Directors during the year.
11
<PAGE> 15
4 Remuneration of Directors continued
Options by exercise price
<TABLE>
<CAPTION>
Number of options
- -------------------------------------------------------------------------------------------------------------------------
At Granted At
1st Jan during 31st Dec Exercise
Scheme 1997 year 1997 price (p)
<S> <C> <C> <C> <C>
- -------------------------------------------------------------------------------------------------------------------------
1994 Approved Executive Share Option Scheme 101,460 - 101,460 370
202,920 - 202,920 473
5,396 - 5,396 556
1996 Unapproved Executive Share Option Scheme 43,830 43,830 616
- 6,240 6,240 641
Savings Related Share Option Scheme 4,393 - 4,393 392
3,731 - 3,731 462
- -------------------------------------------------------------------------------------------------------------------------
361,730 6,240 367,970
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>
Market price
The market price of the Ordinary shares at the close of business on 31st
December 1997 was 753 pence. The lowest and highest price of the shares in the
year were 554 pence and 770 pence respectively.
5 Employee information
<TABLE>
<CAPTION>
1997
(pound)000
<S> <C>
- -------------------------------------------------------------------------------------------------------------------------
Group employment costs - all employees including Executive Directors:
Wages and salaries 22,731
Social security costs 3,776
Pension costs (note 27) 862
- -------------------------------------------------------------------------------------------------------------------------
27,369
- -------------------------------------------------------------------------------------------------------------------------
1997
Number
- -------------------------------------------------------------------------------------------------------------------------
The average number of persons employed by the Group during the year, including
Executive Directors, is analysed below by function:
Production and maintenance 483
Sales and marketing 188
Development 76
Operations 107
Administration and regional management 177
- -------------------------------------------------------------------------------------------------------------------------
1,031
- -------------------------------------------------------------------------------------------------------------------------
6 Net interest payable
1997
(pound)000
- -------------------------------------------------------------------------------------------------------------------------
Interest payable on bank overdrafts and other loans wholly
repayable within five years 3,252
Interest receivable (530)
- -------------------------------------------------------------------------------------------------------------------------
2,722
- -------------------------------------------------------------------------------------------------------------------------
7 Taxation
1997
(pound)000
- -------------------------------------------------------------------------------------------------------------------------
United Kingdom corporation tax at 31.5 per cent 5,224
Deferred taxation 1,445
Overseas taxation 826
Adjustments to prior years 46
Tax on share of profits of associated undertakings 14
- -------------------------------------------------------------------------------------------------------------------------
7,555
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>
12
<PAGE> 16
8 Dividends
<TABLE>
<CAPTION>
1997
(pound)000
<S> <C>
- -------------------------------------------------------------------------------------------------------------------------
The following dividends have been paid or declared in the year:
Paid:
Interim dividend of 3.9 pence on Ordinary shares
(paid 10th November 1997) 1,623
Declared:
Second interim dividend of 12.5 pence on
Ordinary shares (payable 14th April 1998) 5,204
- -------------------------------------------------------------------------------------------------------------------------
6,827
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>
9 Earnings per 10 pence Ordinary share
The calculation of earnings per share is based on earnings of (pound)18,015,000
being the consolidated protax, minority interests and, in 1996 Preference
dividends, and the weighted average of 41,603,121 Ordinary shares of 10 pence
each in issue during the year. No material dilution of earnings per share would
arise if all outstanding share options were exercised.
10 Tangible fixed assets
<TABLE>
<CAPTION>
Freehold Motor vehicles,
land and Leasehold plant and Advertising
buildings properties equipment structures Total
The Group (pound)000 (pound)000 (pound)000 (pound)000 (pound)000
<S> <C> <C> <C> <C> <C>
- -------------------------------------------------------------------------------------------------------------------------
Cost or valuation at 1st January 1997 6,128 1,948 10,811 85,647 104,534
Exchange adjustments (154) (59) (234) (3,522) (3,969)
Additions 21 496 3,025 17,612 21,154
Acquisitions of subsidiary undertakings 105 4 94 613 816
Disposals (101) (34) (227) (5,840) (6,202)
- -------------------------------------------------------------------------------------------------------------------------
Cost or valuation at 31st December 1997 5,999 2,355 13,469 94,510 116,333
- -------------------------------------------------------------------------------------------------------------------------
At 31st December 1997
At cost 2,071 2,320 13,469 94,510 112,370
At valuation 3,928 35 - - 3,963
- -------------------------------------------------------------------------------------------------------------------------
5,999 2,355 13,469 94,510 116,333
- -------------------------------------------------------------------------------------------------------------------------
Accumulated depreciation at 1st January 1997 776 740 7,108 31,342 39,966
Exchange adjustments (76) (28) (129) (1,163) (1,396)
Depreciation for the year 57 128 1,528 9,137 10,850
Disposals (1) (21) (149) (3,238) (3,409)
- -------------------------------------------------------------------------------------------------------------------------
Accumulated depreciation at 31st December 1997 756 819 8,358 36,078 46,011
- -------------------------------------------------------------------------------------------------------------------------
Net book value at 31st December 1997 5,243 1,536 5,111 58,432 70,322
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>
Leasehold properties are all leased for periods of less than 50 years with the
exception of those shown at valuation which are for periods of more than 50
years.
The net book value of assets held under finance leases at 31st December 1997
was (pound)36,000.
Freehold land and buildings and leasehold properties shown at valuation were
valued in 1989. If all freehold and leasehold properties which are included
above at cost or valuation had been included at cost, the resulting total
amounts for those categories would have been as follows:
<TABLE>
<CAPTION>
Freehold Leasehold
1997 1997
(pound)000 (pound)000
<S> <C> <C>
- -------------------------------------------------------------------------------------------------------------------------
Cost 2,598 2,320
Depreciation (665) (882)
- -------------------------------------------------------------------------------------------------------------------------
1,933 1,438
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>
13
<PAGE> 17
11 Investments
<TABLE>
<CAPTION>
1997
(pound)000
<S> <C>
- -------------------------------------------------------------------------------------------------------------------------
Investments at 1st January 791
Exchange adjustments (165)
Disposals (619)
Additions 1,527
Retained losses of joint ventures (481)
Retained profits of associated undertakings 48
- -------------------------------------------------------------------------------------------------------------------------
Investments at 31st December 1,101
- -------------------------------------------------------------------------------------------------------------------------
Investments comprise
Trade investments 286
Cost of shares in joint ventures 904
Retained losses of joint ventures (519)
Cost of shares in associated undertakings 356
Retained profits of associated undertakings 73
Other quoted investments at cost 1
- -------------------------------------------------------------------------------------------------------------------------
1,101
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>
At 31st December 1997, except where indicated, the Company held, directly or
indirectly through a wholly owned intermediate holding company, 100 per cent of
the issued share capital of the following operating companies. The principal
activity of these companies is outdoor advertising. Only principal operating
subsidiary undertakings, joint ventures and associated undertakings are shown
below. A list of all subsidiary undertakings, joint ventures and associated
undertakings is attached to the More Group Plc annual return to be filed with
the Registrar of Companies.
<TABLE>
<CAPTION>
Country of
incorporation
and operation
<S> <C>
- -------------------------------------------------------------------------------------------------------------------------
More Group UK Limited United Kingdom
Allied Outdoor Advertising Limited United Kingdom
The Canton Property Investment Company Limited United Kingdom
The Kildoon Property Company Limited United Kingdom
More Group NI Limited United Kingdom
More Group Ireland Limited Republic of Ireland
Nitelites (Ireland) Limited (60%) Republic of Ireland**
More Group France SA France
More Group Belgium SA Belgium
Publifer SA (50%) Belgium
SAPE Belgium SA Belgium
More Group (Taiwan) Limited Taiwan
More Group Norge AS Norway
More Group Sverige AB Sweden
Wennergren-Williams Outdoor Media AB Sweden*
More Group Danmark A/S (97%) Denmark**
Aras A/S (97%) Denmark**
Expoplakat AS (40%) Estonia
Adshel Inc (87.5%) USA
Adshel Street Furniture Pty Limited (50%) Australia
Capital City Posters Pte Ltd (30%) Singapore
Master & More Co., Ltd (31.9%) Thailand
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>
* Wennergren-Williams Outdoor Media AB also has operations in the Baltic States.
** The minority interests of 40 per cent in Nitelites (Ireland) Limited and 3
per cent in More Group Danmark A/S (and its subsidiary Aras A/S) were purchased
on 30th January 1998 and 1st February 1998 respectively.
14
<PAGE> 18
12 Stocks
<TABLE>
<CAPTION>
1997
(pound)000
<S> <C>
- -------------------------------------------------------------------------------------------------------------------------
Raw materials 4,048
- -------------------------------------------------------------------------------------------------------------------------
13 Debtors
1997
(pound)000
- -------------------------------------------------------------------------------------------------------------------------
Due within one year
Trade debtors 24,950
Amounts owed by joint ventures 1,993
Other debtors 4,963
Prepayments and accrued income 5,523
- -------------------------------------------------------------------------------------------------------------------------
37,429
- -------------------------------------------------------------------------------------------------------------------------
Due after one year
Other debtors 1,881
Prepayments and accrued income 516
- -------------------------------------------------------------------------------------------------------------------------
2,397
- -------------------------------------------------------------------------------------------------------------------------
39,826
- -------------------------------------------------------------------------------------------------------------------------
14 Creditors - amounts falling due within one year
1997
(pound)000
- -------------------------------------------------------------------------------------------------------------------------
Bank loans 404
Overdrafts 2,337
Trade creditors 9,763
Bills of exchange payable 432
Corporation tax 7,931
Other taxation and social security 4,740
Other creditors 4,846
Accruals and deferred income 16,653
Obligations under finance leases 15
Dividends proposed 5,204
- -------------------------------------------------------------------------------------------------------------------------
52,325
- -------------------------------------------------------------------------------------------------------------------------
15 Creditors - amounts falling due after one year
1997
(pound)000
- -------------------------------------------------------------------------------------------------------------------------
Bank loans 54,486
12 per cent unsecured debenture stock 2009 95
Bills of exchange payable 10
Other creditors 3,111
Obligations under finance leases repayable
between one and five years 8
- -------------------------------------------------------------------------------------------------------------------------
57,710
- -------------------------------------------------------------------------------------------------------------------------
Bank loans are repayable as follows:
Between two and five years 54,486
- -------------------------------------------------------------------------------------------------------------------------
54,486
- -------------------------------------------------------------------------------------------------------------------------
There are no charges on the assets of any group undertakings.
</TABLE>
15
<PAGE> 19
16 Provisions for liabilities and charges
<TABLE>
<CAPTION>
Amount Total
provided potential
1997 1997
The Group (pound)000 (pound)000
<S> <C> <C>
- -------------------------------------------------------------------------------------------------------------------------
Deferred taxation
Capital allowances in excess of depreciation 1,770 5,958
Pension costs 277 277
Overseas tax losses (54) (475)
Other timing differences (24) (308)
- -------------------------------------------------------------------------------------------------------------------------
Deferred tax balance 1,969 5,452
- -------------------------------------------------------------------------------------------------------------------------
The movement in the deferred tax provision is as follows:
1997
(pound)000
- -------------------------------------------------------------------------------------------------------------------------
Balance at 1st January 555
Exchange adjustments (31)
Charged to the profit and loss account 1,445
- -------------------------------------------------------------------------------------------------------------------------
Balance at 31st December 1,969
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>
No provision has been made for taxation that would arise in the event of the
foreign subsidiary undertakings distributing the balance of their reserves as
there is currently no intention to remit such amounts to the UK.
No provision has been made for potential taxation liabilities which might
arise in the event of disposal of properties revalued in the books since the
Directors are of the opinion that any gain which might arise would qualify for
roll-over relief.
17 Called up share capital
<TABLE>
<CAPTION>
Issued
Authorised and fully paid
1997 1997
(pound)000 (pound)000
<S> <C> <C>
- ---------------------------------------------------------------------------------------------------------------------------
Ordinary shares of 10 pence each at 31st December 6,000 4,163
- ---------------------------------------------------------------------------------------------------------------------------
Allotments during the year
1997 1997
Number (pound)000
- ---------------------------------------------------------------------------------------------------------------------------
Ordinary shares in issue at 1st January 41,593,142 4,159
Issued under 1984 Approved Executive Share Option Scheme 14,650 1
Issued under 1994 Approved Executive Share Option Scheme 15,219 2
Issued under Savings Related Share Option Scheme 11,500 1
- ---------------------------------------------------------------------------------------------------------------------------
Ordinary shares in issue at 31st December 41,634,511 4,163
- ---------------------------------------------------------------------------------------------------------------------------
Contingent rights to the allotment of shares
1997
Number
- ---------------------------------------------------------------------------------------------------------------------------
Options over Ordinary shares outstanding at 1st January 756,474
New options granted during the year 435,365
Options exercised during the year (41,369)
Options lapsed during the year (2,520)
- ---------------------------------------------------------------------------------------------------------------------------
Options over Ordinary shares outstanding at 31st December 1,147,950
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
16
<PAGE> 20
17 Called up share capital continued
Options outstanding
The following options over Ordinary shares, which were outstanding at 31st
December 1997 under the 1984 Approved Executive Share Option Scheme, the 1994
Approved Executive Share Option Scheme, the 1996 Unapproved Executive Share
Option Scheme and the Savings Related Share Option Scheme, are exercisable
between three and ten years after the date of grant:
<TABLE>
<CAPTION>
Number of
Ordinary shares Price (p)
<S> <C> <C>
- -------------------------------------------------------------------------------------------------------------------------
Date granted:
9th March 1992 21,159 239
14th April 1993 25,190 246
4th May 1994 15,598 392
29th September 1994 101,460 370
11th October 1995 202,920 473
27th October 1995 16,316 462
16th April 1996 104,304 556
10th May 1996 225,638 616
25th March 1997 332,282 641
3rd October 1997 103,083 710
- -------------------------------------------------------------------------------------------------------------------------
1,147,950
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>
18 Reserves
<TABLE>
<CAPTION>
Profit and loss Revaluation Share premium Legal
account reserve account reserve Total
The Group (pound)000 (pound)000 (pound)000 (pound)000 (pound)000
<S> <C> <C> <C> <C> <C>
- -------------------------------------------------------------------------------------------------------------------------
Reserves at 1st January 1997* (51,227) 2,961 62,675 539 14,948
Retained profit for the year 11,188 - - - 11,188
Exchange adjustments (291) - - - (291)
Transfers (299) - - 299 -
Realised gain on sale of property 19 (19) - - -
Premium on shares issued during the year - - 109 - 109
Adjustment to goodwill written off in respect of
gain on sale of joint venture (note 20) 3,824 - - - 3,824
Goodwill written off (note 20) (10,459) - - - (10,459)
- -------------------------------------------------------------------------------------------------------------------------
Reserves at 31st December 1997 (47,245) 2,942 62,784 838 19,319
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>
* Reflects reclassification of reserve amounts from those previously reported.
Exchange gains amounting to (pound)1,757,000 arising in respect of foreign
currency borrowings have been offset against exchange losses within the Group's
reserves.
The accumulated goodwill written off against the Group's profit and loss
reserves at 31st December 1997 was (pound)85,297,000.
17
<PAGE> 21
19 Acquisitions
1997 acquisitions
During the year, the Group acquired Aras A/S, SAPE Belgium SA and a 50 per cent
interest in Publifer SA which has also been consolidated in the Group accounts.
The book values and fair values of the net assets of these undertakings
immediately prior to acquisition, in aggregate, were as follows:
<TABLE>
<CAPTION>
Accounting policy Provisional
Book value Revaluations adjustments fair value
(pound)000 (pound)000 (pound)000 (pound)000
<S> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------------------------------------------------
Tangible fixed assets 1,142 (174)(a) (152)(b) 816
Current assets 3,155 - - 3,155
Cash less bank loans 1,653 - - 1,653
Creditors due within one year (2,766) - - (2,766)
- ----------------------------------------------------------------------------------------------------------------------------
Total net assets 3,184 (174) (152) 2,858
- ----------------------------------------------------------------------------------------------------------------------------
Share of net assets acquired 1,880
- ----------------------------------------------------------------------------------------------------------------------------
Total consideration 6,863
Provisional fair value of net assets acquired (as above) (1,880)
- ----------------------------------------------------------------------------------------------------------------------------
Total goodwill on acquisition 4,983
Goodwill absorbed by minority interests (116)
- ----------------------------------------------------------------------------------------------------------------------------
Goodwill attributable to the Group 4,867
- ----------------------------------------------------------------------------------------------------------------------------
</TABLE>
The consideration was satisfied in the form of cash.
Notes
(a) This item represents accelerated depreciation on fixed assets whose
estimated economic lives have been shortened.
(b) Intangible assets held on the acquired undertakings' balance sheets have
been written off to reserves in accordance with the Group's accounting
policy.
Goodwill written off to reserves in the year is made up as follows:
<TABLE>
<CAPTION>
1997
(pound)000
<S> <C>
- -------------------------------------------------------------------------------------------------------------------------
Goodwill on acquisitions (as above) 4,867
Goodwill on purchase of interest in Adshel Street Furniture Pty Limited 3,483
Goodwill on purchase of minority interests 2,109
- -------------------------------------------------------------------------------------------------------------------------
Total goodwill written off to reserves (note 18) 10,459
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>
1996 acquisitions
In 1997, the Group realised a gain of (pound)3,824,000 on the sale of its 50 per
cent interest in Saga Plakatreklame AS, acquired in 1996 as part of the
acquisition of Wennergren-Williams, to its joint venture partner Fram Management
AS following a decision by that partner to seek a dissolution of the
partnership. In February 1998, the Group agreed to acquire the entire outdoor
advertising business of Fram Management AS including the business of Saga
Plakatreklame AS. In accordance with accounting standard FRS 7, the gain has
been recorded as a fair value adjustment to the net assets of
Wennergren-Williams at acquisition date resulting in a corresponding reduction
of (pound)3,824,000 in goodwill written off to reserves.
18
<PAGE> 22
20 Contingent liabilities
The Company has granted in respect of the financial year ended 31st December
1997, irrevocable guarantees of the liabilities of More Group Ireland Limited
and More O'Ferrall Ireland Limited, which companies have availed themselves of
the exemption provided by Section 17 of the Irish Companies (Amendment) Act,
1986.
21 Lease commitments
<TABLE>
<CAPTION>
The Group had the following annual anticipated commitments under operating
leases as at 31st December 1997:
Land and buildings Other commitments
<S> <C> <C>
- -------------------------------------------------------------------------------------------------------------------------
1997 1997
(pound)000 (pound)000
- -------------------------------------------------------------------------------------------------------------------------
Operating leases which expire:
Within one year 18 261
Between two and five years 101 1,800
After five years 1,703 6
- -------------------------------------------------------------------------------------------------------------------------
Payments to be made during next year 1,822 2,067
- -------------------------------------------------------------------------------------------------------------------------
22 Reconciliation of operating profit to operating cash flows
1997
(pound)000
- -------------------------------------------------------------------------------------------------------------------------
Operating profit 28,258
Depreciation charge 10,850
Loss on disposal of tangible fixed assets 2,460
Share of profit of associated undertakings (62)
Share of loss of joint ventures 481
Cash flow on termination of operations (1,674)
Increase in stocks (412)
Increase in debtors (3,931)
Increase in creditors 2,373
- -------------------------------------------------------------------------------------------------------------------------
Net cash inflow from operating activities 38,343
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>
19
<PAGE> 23
23 Analysis of cash flows for headings summarised in the cash flow statement
<TABLE>
<CAPTION>
1997
(pound)000
<S> <C>
- -------------------------------------------------------------------------------------------------------------------------
Returns on investments and servicing of finance
Interest received 491
Interest paid (2,925)
Dividends paid to minority interests (32)
Interest element of finance lease rental payments (4)
- -------------------------------------------------------------------------------------------------------------------------
Net cash outflow for returns on investments and servicing of finance (2,470)
- -------------------------------------------------------------------------------------------------------------------------
Capital expenditure
Purchase of tangible fixed assets (21,340)
Receipts from the sale of tangible fixed assets 333
- -------------------------------------------------------------------------------------------------------------------------
Net cash outflow for capital expenditure (21,007)
- -------------------------------------------------------------------------------------------------------------------------
Acquisitions and disposals
Purchase of subsidiary undertakings (6,863)
Purchase of outstanding minority interests (2,661)
Payment of deferred consideration (609)
Net cash acquired with subsidiary undertakings 1,663
Investments in associated undertakings and joint ventures (4,724)
Sale of associated undertaking 4,443
Purchase of other investments (286)
- -------------------------------------------------------------------------------------------------------------------------
Net cash outflow for acquisitions and disposals (9,037)
- -------------------------------------------------------------------------------------------------------------------------
Management of liquid resources
Increase in bills of exchange payable 151
Cash placed on short term deposit (2,133)
- -------------------------------------------------------------------------------------------------------------------------
Net cash outflow from management of liquid resources (1,982)
- -------------------------------------------------------------------------------------------------------------------------
Financing
Issue of Ordinary share capital 113
Issue of minority shares in subsidiary undertaking 240
- -------------------------------------------------------------------------------------------------------------------------
Net cash inflow from issue of share capital 353
- -------------------------------------------------------------------------------------------------------------------------
Debt due within one year:
increase in short term borrowings 394
Debt due beyond a year:
new unsecured loans 19,508
redemption of debenture stock (24)
Capital element of finance lease rental payments (20)
- -------------------------------------------------------------------------------------------------------------------------
Net cash inflow from increase in debt 19,858
- -------------------------------------------------------------------------------------------------------------------------
Net cash inflow from financing 20,211
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>
20
<PAGE> 24
24 Analysis of net debt
<TABLE>
<CAPTION>
At Acquisitions At
1st January Cash (excl. cash Exchange 31st December
1997 flow and overdrafts) movement 1997
(pound)000 (pound)000 (pound)000 (pound)000 (pound)000
<S> <C> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------------------
Cash 6,681 12,657 - (501) 18,837
Overdrafts (3,545) 1,045 - 163 (2,337)
- -----------------------------------------------------------------------------------------------------------------
3,136 13,702 - (338) 16,500
- -----------------------------------------------------------------------------------------------------------------
Debt due within one year - (394) (10) - (404)
Debt due after one year (37,141) (19,484) - 2,044 (54,581)
Finance leases (43) 20 - - (23)
- -----------------------------------------------------------------------------------------------------------------
(37,184) (19,858) (10) 2,044 (55,008)
- -----------------------------------------------------------------------------------------------------------------
Deposits 286 2,133 - (40) 2,379
Bills of exchange (327) (151) - 36 (442)
- -----------------------------------------------------------------------------------------------------------------
(41) 1,982 - (4) 1,937
- -----------------------------------------------------------------------------------------------------------------
(34,089) (4,174) (10) 1,702 (36,571)
- -----------------------------------------------------------------------------------------------------------------
</TABLE>
25 Subsequent events
In January 1998, the Group completed the acquisition of the whole of the issued
share capital of CSC of Washington D.C. Inc. for (pound)6.9 million in cash.
In February 1998, the Group agreed to acquire the entire outdoor advertising
business of Fram Management AS for a guaranteed consideration of (pound)21.1
million. Additional consideration not exceeding (pound)5.9 million may be
payable after two years depending on the future profitability of the business
acquired.
On 5th March 1998, the Board announced an offer on behalf of Clear Channel
Communications, Inc to purchase the entire issued and to be issued share capital
of the Company for (pound)446 million in cash (including payment of the second
interim Ordinary dividend).
26 Related party transactions
As at 31st December 1997, the Group had made loans of (pound)2.0 million to
Adshel Street Furniture Pty Limited, its 50 per cent Australian joint venture.
Details of the principal subsidiary and associated undertakings are shown in
note 11. In accordance with accounting standard FRS 8, transactions or balances
between Group entities that have been eliminated on consolidation are not
reported.
Details of Directors' remuneration and transactions with Directors are set
out in note 4.
27 Pensions
Defined benefit scheme
The Group's principal defined benefit scheme is operated for certain United
Kingdom and Republic of Ireland employees and provides benefits based on final
pensionable salary. The assets of the scheme are held in trust in an
independently managed fund and are therefore completely separate from the assets
of the Group. The pension scheme is independently advised and its accounts are
independently audited.
Amounts are charged to the profit and loss account so as to spread the cost
of pensions over employees' expected working lives. These amounts are determined
by a qualified actuary on the basis of triennial valuations using the projected
unit method.
The most recent actuarial valuation of the pension scheme was at 1st January
1995. The actuarial assumptions which have the most significant effects on the
results of the valuation are those relating to the rate of return on investments
and the rates of increase in salaries and pensions. It was assumed that:
1 the existing assets be valued by discounting projected future income from the
underlying investments, allowing for 9 per cent per annum growth in the
income;
2 the salaries increase by 7 per cent per annum;
3 the present and future pensions increase at the rate of 3 per cent per annum;
4 the projected liabilities and assets be discounted at 9 per cent per annum.
The members' contributions during the year were at an average of 4.5 per cent of
pensionable salary. The Group contributions were nil.
As at the date of the last actuarial valuation, the assessed market value of the
scheme's assets was (pound)7,079,000 which was sufficient to cover 134 per cent
of the benefits that had accrued to members, after allowing for expected future
increases in earnings.
An amount of (pound)839,000 is included in prepayments, which represents the
recognition of the pension surplus at 1st January 1989 adjusted for the
subsequent regular costs, notional interest and amortisation of the surplus. The
additional surplus arising at 1st January 1995 is being amortised over the
employees' expected working lives.
An actuarial valuation of the pension scheme as at 1st January 1998 is
currently in progress.
21
<PAGE> 25
27 Pensions continued
Defined contribution schemes
The Group also operates defined contribution pension schemes for certain United
Kingdom employees. The only other defined contributions schemes within the Group
are operated by third parties for certain employees of foreign subsidiary
undertakings. Contributions to these schemes are charged to the profit and loss
account as they arise.
Pension charge for the year
<TABLE>
<CAPTION>
1997
(pound)000
<S> <C>
- -------------------------------------------------------------------------------------------------------------------------
Defined benefit scheme 225
Defined contribution schemes 637
- -------------------------------------------------------------------------------------------------------------------------
862
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>
The 1997 defined benefit charge is stated after crediting notional interest of
(pound)102,000 and surplus amortisation of (pound)26,000 and charging regular
cost of (pound)353,000.
Other retirement benefit costs
Certain current and former Directors are provided with post retirement medical
insurance. The method of accounting for these benefits is on a basis similar to
that used for pension obligations. The actuarial valuation of past service
liabilities is being provided by an increased annual charge of (pound)24,000 per
annum over six years. The principal assumption used is that medical costs will
rise at 9 per cent per annum.
28 Companies Act 1985
The Consolidated Financial Statements do not constitute "statutory accounts"
within the meaning of the Companies Act 1985 of Great Britain for the period
presented. Statutory accounts for the year ended 31 December 1997 have been
filed with the United Kingdom's Registrar of Companies. The auditors have
reported on these accounts. Their reports were unqualified and did not contain
statements under Section 237 (2) or (3) of that Act.
These Consolidated Financial Statements exclude certain parent company
statements and other information required by the Companies' Act 1985. However,
they include all material disclosures required by generally accepted accounting
principles in the United Kingdom including those Companies Act 1985 disclosures
relating to the profit and loss account and balance sheet items.
22
<PAGE> 26
29 Differences between US and UK Accounting Policies
More Group Plc prepares its audited financial statements in accordance with
accounting principles generally accepted in the United Kingdom (UK GAAP). Such
principles vary in significant respects from those generally accepted in the
United States (US GAAP). The following tables summarise the significant
adjustments to consolidated attributable profit (net income under US GAAP) and
shareholders' funds (shareholders' equity under US GAAP) which would result from
the application of US GAAP instead of UK GAAP.
<TABLE>
<CAPTION>
1997
Reconciliation of net income Reference (pound)'000
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Attributable Profit (UK GAAP)* 18,015
Amortisation of goodwill (a) (3,809)
Earnings in equity accounted joint ventures (b) 56
Pension costs (c) 227
Revaluation of property - depreciation (e) 9
Stock-based compensation (f) (824)
Re-structuring costs (g) (259)
Movement in value of financial instruments (h) (71)
Deferred tax:
Application of full liability method (d) 897
Tax effect of US GAAP adjustments (d) 10
- ----------------------------------------------------------------------------------------------------------------------------
Approximate net income (US GAAP) 14,251
- ----------------------------------------------------------------------------------------------------------------------------
Basic Earnings per share (US GAAP) (j) 0.34
Diluted Earnings per share (US GAAP) (j) 0.34
Reconciliation of shareholders' equity Reference (pound)'000
- ----------------------------------------------------------------------------------------------------------------------------
Shareholders' funds (UK GAAP)* 23,482
Goodwill (a) 80,314
Accumulated amortisation of goodwill (a) (6,415)
Investments in joint ventures (b) 3,539
Pension costs (c) 787
Revaluation of property (e) (2,942)
Accumulated depreciation on revalued assets (e) 102
Dividend payable (i) 5,204
Financial instruments (h) (71)
Deferred tax:
Application of full liability method (d) (1,061)
Tax effect of US GAAP adjustments (d) (246)
- ----------------------------------------------------------------------------------------------------------------------------
Approximate shareholders' equity (US GAAP) 102,693
- ----------------------------------------------------------------------------------------------------------------------------
</TABLE>
* Figures as per the 1997 audited accounts
23
<PAGE> 27
The significant differences applicable to More Group Plc's financial statements
are summarised below.
(a) Goodwill
Under UK GAAP goodwill arising on acquisitions of subsidiary and associated
undertakings is either capitalised and amortised through income over its
expected life (with a maximum of 20 years) or charged directly against reserves
in the year of acquisition. The Group has charged goodwill directly against
reserves. In the event of subsequent disposal, any goodwill previously charged
directly against reserves is written back and is reflected in the profit or loss
on disposal.
Under US GAAP goodwill is capitalised and amortised through income over the
estimated period of benefit and is written off when judged to be irrecoverable.
Goodwill written off against reserves under UK GAAP has been reinstated and is
being amortised over 20 years.
(b) Investment in joint ventures
Under UK GAAP the excess of purchase price over the book value of net assets
related to investments in joint ventures accounted for under the equity method
is classified as goodwill and taken directly to reserves. Income in joint
ventures is based upon the UK GAAP results.
Under US GAAP the excess of purchase price over the book value of net assets
related to investments in joint ventures accounted for under the equity method
is capitalised as part of investments in joint ventures and amortised over the
estimated period of benefit (in this case 20 years). The share in income of
joint ventures is based upon results determined under US GAAP.
(c) Pension costs
Under UK GAAP pension fund assets are assessed actuarially at the present value
of the expected future investment income, consistent with UK Statement of
Standard Accounting Practice (SSAP) 24. Most liabilities are discounted at a
long-term interest cost and most variations from regular cost are expressed as a
percentage of payroll and spread over the average remaining service lives of
current employees.
For US GAAP purposes, Statement of Financial Accounting Standards (SFAS) No 87,
"Employers Accounting for Pensions", was effectively adopted as of 1 January
1997 with the transition asset being amortised over the remaining service life
of the current employees. On 1 January 1997 there was a surplus in the pension
scheme of (pound)3.1 million. At that time the expected average remaining
service life was fifteen years. On adoption, eight years after the date
specified by SFAS No. 87, 8/15 of the deficit was reflected directly in opening
equity at January 1, date of adoption , under US GAAP. The remaining 7/15 is
being amortised over seven years.
(d) Deferred tax
Under UK GAAP deferred taxation is provided on major differences arising from
the inclusion of income and expenditure in taxation computations in periods
different from those in which they are included in the accounts to the extent
that it is believed they will reverse in the future.
Under SFAS No 109, deferred tax is provided for on a full liability method.
Deferred tax assets or liabilities are recognised for differences between the
financial and tax basis of assets and liabilities. A deferred tax asset will be
recognised on overseas tax losses when it is considered that these are more
likely than not to give rise to a future tax benefit. A valuation allowance is
established when it is more likely than not that some portion or all of the
deferred tax assets will not be realised.
(e) Revaluation of property
Under UK GAAP property is carried either at original cost or at subsequent
valuation less related depreciation, calculated on the revalued amount where
applicable. Revaluation surpluses are taken directly to shareholders' funds,
while deficits below cost, less any related depreciation, are included in
attributable profit. Depreciation is charged on the cost or revalued amount over
the estimated useful life.
Under US GAAP upward revaluations of property are not permitted. The historical
cost of property is depreciated over the estimated useful life.
(f) Stock-based compensation
Under UK GAAP the Group does not recognise compensation under its stock option
schemes as options are granted at exercise prices equal to the market price on
the date of grant, irrespective of any performance criteria.
Under US GAAP compensation expense associated with shares issued through stock
option schemes, which include performance related criteria, is recognised as the
difference between the quoted market price of the stock and the exercise price
of the option, on a variable basis through to the measurement date (the date on
which the performance criteria are fulfilled). Compensation costs, as determined
above, are charged to expense over the period in which the related service is
provided. For fixed plans, compensation cost for stock options is measured as
the excess, if any, of the quoted market price at the measurement date over the
exercise price.
24
<PAGE> 28
(g) Restructuring costs
Under UK GAAP restructuring costs are provided for in the period in which a
demonstrable commitment to incur the costs is made.
Under US GAAP items must meet specific criteria (as outlined in EITF 94 - 3) to
be classified as restructuring or exit costs. Costs which do not qualify are
recognised as liabilities when an obligation exists to pay cash or otherwise
sacrifice assets and are classified as an operating expense of the business in
the period in which such obligations are incurred.
(h) Financial instruments
Under UK GAAP contracts entered into for the purpose of hedging the company's
overall exposure to interest rate fluctuations, which are undertaken at no cash
cost to the company are reflected, where effective, as an adjustment to interest
expense.
Under US GAAP financial instruments which are used to reduce exposure to
financial risk, but which do not qualify as hedges of firm commitments, are
carried at market value. Related gains or losses are recognised through the
income statement as changes in the market value of the hedge contract occur.
(i) Dividend payable
Under UK GAAP dividends declared after the period end are accrued, and recorded
in the period to which they relate.
Under US GAAP dividends are recorded in the period in which they are formally
declared and approved by the shareholders.
(j) Earnings per share (EPS)
Under UK GAAP Basic EPS is calculated based on income available to Ordinary
shareholders divided by the weighted-average number of common shares outstanding
during the period. Diluted EPS is disclosed where such amount differs from Basic
EPS by 5% or more.
Under US GAAP EPS is calculated in accordance with the provisions of SFAS 128.
Basic EPS is calculated based on income available to common stockholders divided
by the weighted-average number of common shares outstanding during the period.
Diluted EPS, which is also calculated similarly under UK and US GAAP, considers
the effect of issuing all potentially dilutive common shares. Diluted EPS is
required to be disclosed irrespective of the significance of the difference from
Basic EPS.
(k) Cash flow information
Under UK GAAP cash flows are presented for operating activities, returns on
investments and servicing of finance, taxation, capital expenditure and
financial investment, acquisitions and disposals, equity dividends paid, and
management of liquid resources and financing.
Under US GAAP cash flows are classified as resulting from operating, investing,
and financing activities. Changes in the balances of overdrafts are classified
within financing activities. Under UK GAAP cash flows represent movements on
cash in hand and deposits repayable on demand, less overdrafts repayable on
demand.
Under US GAAP the cashflow statement shows movements in cash and cash
equivalents. Cash equivalents are short-term, highly liquid investments that are
both readily convertible to known amounts of cash and so near their maturity
that they present insignificant risk of changes in value because of changes in
interest rates. Generally, only investments with original maturities of three
months or less qualify under this definition. A consolidated statement of cash
flow is set out below in accordance with the classification requirements and
definition of cash under US GAAP.
<TABLE>
<CAPTION>
1997
Summary of US GAAP cash flow (pound)'000
- ------------------------------------------------------------------ --------------------------------------------------------
<S> <C>
Cash provided by operating activities 31,914
Cash used in investing activities (32,026)
Cash provided by financing activities 12,769
Effect of exchange rate changes on cash (501)
- ------------------------------------------------------------------ ---------------------------------------------------------
Net increase in cash and cash equivalents 12,156
Cash and cash equivalents at the beginning of the year 6,681
- ------------------------------------------------------------------ ---------------------------------------------------------
Cash and cash equivalents at the end of the year 18,837
- ------------------------------------------------------------------ ---------------------------------------------------------
</TABLE>
25
<PAGE> 29
(b) Pro Forma Financial Information.
UNAUDITED PRO FORMA COMBINED CONDENSED FINANCIAL STATEMENTS
The following unaudited pro forma combined condensed financial statements give
effect to the acquisition of More Group Plc. ("More") by the Company. For
accounting purposes, the Company will account for the acquisition as a purchase;
accordingly the net assets of More have been adjusted to their estimated fair
values based upon a preliminary purchase price allocation.
The unaudited pro forma combined condensed statement of operations for the year
ended December 31, 1997 gives effect to the acquisition as if it had occurred on
January 1, 1997. The unaudited pro forma combined condensed balance sheet at
December 31, 1997 gives effect to the acquisition as if it had occurred on
December 31, 1997.
The unaudited pro forma combined condensed statement of operations was prepared
based upon the historical statement of operations of the Company, adjusted to
reflect the acquisitions of Eller Media, Inc. ("Eller") and Paxson Radio
("Paxson") and the merger with Universal Outdoor Holdings, Inc. ("Universal") as
if such acquisitions and merger had occurred on January 1, 1997 ("Clear Channel
Pro Forma"), and based upon the historical statement of operations of More
adjusted to conform with U.S. Generally Accepted Accounting Principles. The
unaudited pro forma combined condensed balance sheet was prepared based upon the
historical balance sheet of the Company adjusted to reflect the merger with
Universal as if such merger had occurred on December 31, 1997 and the historical
balance sheet of More adjusted to conform with U.S. Generally Accepted
Accounting Principles. Certain amounts in More's financial statements have been
reclassified to conform to the Company's 1997 presentation.
The unaudited pro forma combined condensed financial statements should be read
in conjunction with the historical financial statements of More included herein
and the historical financial statements of the Company.
The unaudited pro forma combined condensed financial statements are not
necessarily indicative of the actual results of operations or financial position
that would have occurred had the acquisition and the above described
acquisitions and merger and transactions of the Company and More occurred on the
dates indicated nor are they necessarily indicative of future operating results
or financial position.
<PAGE> 30
CLEAR CHANNEL AND MORE
UNAUDITED PRO FORMA COMBINED CONDENSED BALANCE SHEET
(Dollars in thousands)
December 31, 1997
<TABLE>
<CAPTION>
Clear Channel
Clear Channel More Pro Forma and More
Pro Forma Historical Adjustment Pro Forma
--------- ---------- ---------- ---------
<S> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 9,746 $ 35,023 $ (8,590) $ 36,179
Accounts receivable, net 191,838 41,187 -- 233,025
Film rights - current 14,826 -- -- 14,826
Other current assets 18,004 6,683 -- 24,687
----------- ----------- ----------- -----------
Total Current Assets 234,414 82,893 (8,590) 308,717
Property, plant & equipment, net 1,368,463 111,399 -- 1,479,862
Intangible assets:
Network affiliation agreements 33,727 -- -- 33,727
Licenses and goodwill 3,338,738 132,582 596,581 4,067,901
Covenants not-to-compete 33,976 -- -- 33,976
Other intangible assets 19,593 -- -- 19,593
----------- ----------- ----------- -----------
3,426,034 132,582 596,581 4,155,197
Less accumulated amortization (142,956) (10,590) 10,590 (142,956)
----------- ----------- ----------- -----------
3,283,078 121,992 607,171 4,012,241
Other assets:
Notes receivable 35,373 -- -- 35,373
Film rights 14,171 -- -- 14,171
Investments in, and advances
to, nonconsolidated affiliates 266,691 10,481 -- 277,172
Other assets 48,539 22,566 -- 71,105
Other investments 51,259 472 -- 51,731
----------- ----------- ----------- -----------
TOTAL ASSETS $ 5,301,988 $ 349,803 $ 598,581 $ 6,250,372
=========== =========== =========== ===========
</TABLE>
<PAGE> 31
CLEAR CHANNEL AND MORE
UNAUDITED PRO FORMA COMBINED CONDENSED BALANCE SHEET
(Dollars in thousands)
December 31, 1997
<TABLE>
<CAPTION>
Clear Channel
Clear Channel More Pro Forma and More
Pro Forma Historical Adjustment Pro Forma
--------- ---------- ---------- ---------
<S> <C> <C> <C> <C>
LIABILITIES
Current liabilities:
Accounts payable $ 17,416 $ 33,449 $ -- $ 50,865
Accrued interest 9,950 459 -- 10,409
Accrued expenses 61,666 20,793 -- 82,459
Deferred income 1,340 6,238 -- 7,578
Short-term debt -- 7,607 -- 7,607
Current portion of long-term debt 25,668 -- -- 25,668
Current portion of film rights liability 15,875 -- -- 15,875
Income tax liability -- 13,094 -- 13,094
----------- ----------- ----------- -----------
Total Current Liabilities 131,915 81,640 -- 213,555
Long-term debt 2,048,021 90,612 768,107 2,906,740
Film rights liability 15,551 -- -- 15,551
Deferred income taxes 101,944 5,406 -- 107,350
Deferred income - long-term 9,750 -- -- 9,750
Other long-term liabilities 25,378 924 -- 26,302
Minority interest 20,787 1,695 -- 22,482
Shareholders' equity:
Preferred stock -- -- -- --
Common stock 11,752 6,872 (6,872) 11,752
Additional paid-in capital 2,741,794 103,801 (103,801) 2,741,794
Retained earnings 169,631 55,398 (55,398) 169,631
Other 2,398 3,455 (3,455) 2,398
Unrealized gain on investments 23,754 -- -- 23,754
Cost of shares held in treasury (687) -- -- (687)
----------- ----------- ----------- -----------
Total Shareholders' Equity 2,948,642 169,526 (169,526) 2,948,642
----------- ----------- ----------- -----------
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $ 5,301,988 $ 349,803 $ 598,581 $ 6,250,372
=========== =========== =========== ===========
</TABLE>
<PAGE> 32
CLEAR CHANNEL AND MORE
UNAUDITED PRO FORMA COMBINED CONDENSED
STATEMENT OF OPERATIONS
(In thousands, except per share data)
Year ended December 31, 1997
<TABLE>
<CAPTION>
Clear Channel
Clear Channel More Pro Forma and More
Pro Forma Historical Adjustment Pro Forma
--------- ---------- ---------- ---------
<S> <C> <C> <C> <C>
Net revenue $ 1,041,453 $ 232,530 $ -- $ 1,273,983
Operating expenses 591,937 157,859 -- 749,796
Depreciation and amortization 243,064 23,592 23,033 289,689
Noncash compensation expense -- 1,327 (1,327) --
Corporate expenses 23,201 7,474 -- 30,675
----------- ----------- ----------- -----------
Operating income (loss) 183,251 42,278 (21,706) 203,823
Interest expense 163,205 4,383 50,849 218,437
Other income (expense) - net 3,842 (3,655) -- 187
----------- ----------- ----------- -----------
Income (loss) before income taxes 23,888 34,240 (72,555) (14,427)
Income tax (expense) benefit (32,465) (10,705) 17,379 (25,791)
----------- ----------- ----------- -----------
Income before equity in earnings
(loss) of nonconsolidated affiliates (8,577) 23,535 (55,176) (40,218)
Equity in earnings (loss) of
nonconsolidated affiliates 6,615 (586) -- 6,029
----------- ----------- ----------- -----------
Net income (loss) $ (1,962) $ 22,949 $ (55,176) $ (34,189)
=========== =========== =========== ===========
Net income (loss) per common share:
Basic $ (0.02) $ (0.31)
=========== ===========
Diluted $ (0.05) $ (0.33)
=========== ===========
Other Data:
After-tax cash flow (1) $ 276,764 $ 47,868 $ (33,470) $ 291,162
=========== =========== =========== ===========
After-tax cash flow per
common share - Diluted (2) $ 2.45 $ 2.58
=========== ===========
</TABLE>
(1) After-tax cash flow is defined as net income (loss) before unusual items
plus depreciation, amortization of intangibles (including nonconsolidated
affiliates) and deferred tax. After-tax cash flow is not presented as a measure
of operating results and does not purport to represent cash provided by
operating activities. After-tax cash flow should not be considered in isolation
or as a substitute for measures of performance prepared in accordance with
generally accepted accounting principles.
(2) After-tax cash flow per share is defined as after-tax cash flow divided by
weighted average common shares and common share equivalents outstanding assuming
dilution.
<PAGE> 33
CLEAR CHANNEL AND MORE
NOTES TO UNAUDITED PRO FORMA COMBINED CONDENSED FINANCIAL STATEMENTS
(In thousands of dollars)
The pro forma adjustments at December 31, 1997 are as follows:
<TABLE>
<CAPTION>
Increase
(Decrease)
----------
<S> <C> <C>
(a) Decrease in Cash and cash equivalents due to the estimated acquisition expenses. $ (8,590)
(b) Increase in Licenses and goodwill due to the additional goodwill created as a 596,581
result of the acquisition of $729,163 offset by the elimination of existing
goodwill of $132,582.
(c) Decrease in Accumulated amortization to eliminate the existing accumulated 10,590
amortization related to the $132,582 of goodwill that was eliminated.
(d) Increase in Long-term debt due to additional borrowing to fund the acquisition 768,107
cost.
(e) Decrease in Common stock due to the elimination of More's shareholder's equity. (6,872)
(f) Decrease in Additional paid-in capital due to the elimination of More's (103,801)
shareholder's equity.
(g) Decrease in Retained earnings due to the elimination of More's shareholder's (55,398)
equity.
(h) Decrease in Other due to the elimination of More's shareholder's equity. (3,455)
</TABLE>
The pro forma adjustments for the year ended December 31, 1997 are as follows:
<TABLE>
<CAPTION>
Increase
(Decrease)
----------
Income
<S> <C> <C>
(i) Increase in amortization expense resulting from the additional goodwill created $ (23,033)
by the acquisition.
(j) Decrease in Noncash compensation to reverse the effect of Financial Accounting 1,327
Standards Board Statement No. 123 ("FAS 123") from the statement of operations as
the Company elected to follow Accounting Principles Board Opinion Number 25 ("APB
25") for earnings presentation and implemented FAS 123 for footnote disclosure
only.
</TABLE>
<TABLE>
<S> <C> <C>
(k) Increase in interest expense due to financing the acquisition price of More at (50,849)
the Company's average interest rate of 6.62% for 1997.
(l) The tax effect of adjustment (j) at the 1997 UK statutory rate of 31.5% offset by 17,379
the tax benefit of adjustment (k) at the Company's federal U.S. tax rate in 1997
of 35%.
</TABLE>
<PAGE> 34
CLEAR CHANNEL
UNAUDITED PRO FORMA COMBINED CONDENSED BALANCE SHEET
(Dollars in thousands)
December 31, 1997
<TABLE>
<CAPTION>
Clear Channel Universal Pro Forma Clear Channel
Historical Historical Adjustment (3) Pro Forma
---------- ---------- ------------- ---------
<S> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 24,657 $ 89 $ (15,000) $ 9,746
Accounts receivable, net 155,962 35,876 -- 191,838
Film rights - current 14,826 -- -- 14,826
Other current assets 3,202 14,802 -- 18,004
----------- ----------- ----------- -----------
Total Current Assets 198,647 50,767 (15,000) 234,414
Property, plant & equipment, net 746,284 622,179 -- 1,368,463
Intangible assets:
Network affiliation agreements 33,727 -- -- 33,727
Licenses and goodwill 2,175,944 260,504 902,290 3,338,738
Covenants not-to-compete 24,892 9,084 -- 33,976
Other intangible assets 19,593 -- -- 19,593
----------- ----------- ----------- -----------
2,254,156 269,588 902,290 3,426,034
Less accumulated amortization (141,066) (20,103) 18,213 (142,956)
----------- ----------- ----------- -----------
2,113,090 249,485 920,503 3,283,078
Other assets:
Notes receivable 35,373 -- -- 35,373
Film rights 14,171 -- -- 14,171
Investments in, and advances
to, nonconsolidated affiliates 266,691 -- -- 266,691
Other assets 30,122 18,417 -- 48,539
Other investments 51,259 -- -- 51,259
----------- ----------- ----------- -----------
TOTAL ASSETS $ 3,455,637 $ 940,848 $ 905,503 $ 5,301,988
=========== =========== =========== ===========
</TABLE>
<PAGE> 35
CLEAR CHANNEL
UNAUDITED PRO FORMA COMBINED CONDENSED BALANCE SHEET
(Dollars in thousands)
December 31, 1997
<TABLE>
<CAPTION>
Clear Channel Universal Pro Forma Clear Channel
Historical Historical Adjustment (3) Pro Forma
---------- ---------- ------------- ---------
<S> <C> <C> <C> <C>
LIABILITIES
Current liabilities:
Accounts payable $ 11,904 $ 5,512 $ -- $ 17,416
Accrued interest 9,950 -- -- 9,950
Accrued expenses 34,489 27,177 -- 61,666
Deferred income 1,340 -- -- 1,340
Current portion of long-term debt 13,294 12,374 -- 25,668
Current portion of film rights liability 15,875 -- -- 15,875
----------- ----------- ----------- -----------
Total Current Liabilities 86,852 45,063 -- 131,915
Long-term debt 1,540,421 507,600 -- 2,048,021
Film rights liability 15,551 -- -- 15,551
Deferred income taxes 10,114 91,830 -- 101,944
Deferred income - long-term 9,750 -- -- 9,750
Other long-term liabilities 25,378 -- -- 25,378
Minority interest 20,787 -- -- 20,787
Shareholders' equity:
Preferred stock -- -- -- --
Common stock 9,823 268 1,661 11,752
Additional paid-in capital 1,541,865 374,129 825,800 2,741,794
Retained earnings/
(accumulated deficit) 169,631 (87,541) 87,541 169,631
Other 2,398 9,499 (9,499) 2,398
Unrealized gain on investments 23,754 -- -- 23,754
Cost of shares held in treasury (687) -- -- (687)
----------- ----------- ----------- -----------
Total Shareholders' Equity 1,746,784 296,355 905,503 2,948,642
----------- ----------- ----------- -----------
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $ 3,455,637 $ 940,848 $ 905,503 $ 5,301,988
=========== =========== =========== ===========
</TABLE>
<PAGE> 36
CLEAR CHANNEL
UNAUDITED PRO FORMA COMBINED CONDENSED CONSOLIDATED
STATEMENT OF OPERATIONS
(In thousands, except per share data)
Year ended December 31, 1997
<TABLE>
<CAPTION>
Clear Channel/
Clear Channel Eller Pro Forma Eller Paxson
Historical Historical Adjustment (1) Pro Forma Historical
---------- ---------- -------------- --------- ----------
<S> <C> <C> <C> <C> <C>
Net revenue $ 697,068 $ 56,642 $ -- $ 753,710 $ 78,104
Operating expenses 394,404 33,804 -- 428,208 63,362
Depreciation and amortization 114,207 10,547 5,974 130,728 12,101
Noncash compensation expense -- -- -- -- --
Corporate expenses 20,883 2,318 -- 23,201 4,059
----------- ----------- ----------- ----------- -----------
Operating income (loss) 167,574 9,973 (5,974) 171,573 (1,418)
Interest expense 75,076 8,565 2,518 86,159 1,370
Other income (expense) - net 11,579 (4,082) -- 7,497 (1,034)
----------- ----------- ----------- ----------- -----------
Income (loss) before income taxes 104,077 (2,674) (8,492) 92,911 (3,822)
Income tax (expense) benefit (47,116) (3) 1,315 (45,804) --
----------- ----------- ----------- ----------- -----------
Income before equity in earnings
(loss) of nonconsolidated affiliates 56,961 (2,677) (7,177) 47,107 (3,822)
Equity in earnings (loss) of non-
consolidated affiliates 6,615 -- -- 6,615 --
----------- ----------- ----------- ----------- -----------
Net income (loss) $ 63,576 $ (2,677) $ (7,177) $ 53,722 $ (3,822)
=========== =========== =========== =========== ===========
Net income (loss) per common share:
Basic $ .72 $ .60
=========== ==========
Diluted $ .67 $ .54
=========== ==========
<CAPTION>
Clear Channel/
Pro Forma Eller/Paxson Universal Pro Forma Clear Channel
Adjustment (2) Pro Forma Historical Adjustment (3) Pro Forma
-------------- --------- ---------- -------------- ---------
<S> <C> <C> <C> <C> <C>
Net revenue $ -- $ 831,814 $ 209,639 $ -- $ 1,041,453
Operating expenses (1,246) 490,324 101,613 -- 591,937
Depreciation and amortization 9,377 152,206 59,977 30,881 243,064
Noncash compensation expense -- -- 8,289 (8,289) --
Corporate expenses (4,059) 23,201 -- -- 23,201
----------- ----------- ----------- ----------- -----------
Operating income (loss) (4,072) 166,083 39,760 (22,592) 183,251
Interest expense 29,276 116,805 46,400 -- 163,205
Other income (expense) - net -- 6,463 (2,621) -- 3,842
----------- ----------- ----------- ----------- -----------
Income (loss) before income taxes (33,348) 55,741 (9,261) (22,592) 23,888
Income tax (expense) benefit 13,339 (32,465) -- -- (32,465)
----------- ----------- ----------- ----------- -----------
Income before equity in earnings
(loss) of nonconsolidated affiliates (20,009) 23,276 (9,261) (22,592) (8,577)
Equity in earnings (loss) of non-
consolidated affiliates -- 6,615 -- -- 6,615
----------- ----------- ----------- ----------- -----------
Net income (loss) $ (20,009) $ 29,891 $ (9,261) $ (22,592) $ (1,962)
=========== =========== =========== =========== ===========
Net income (loss) per common share:
Basic $ .33 $ (.02)
=========== ===========
Diluted $ .28 $ (.05)
=========== ===========
</TABLE>
<PAGE> 37
CLEAR CHANNEL
NOTES TO UNAUDITED PRO FORMA CONDENSED
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share amounts)
Year ended December 31, 1997
ELLER ACQUISITION
(1) Represents the pro forma effect of the acquisition of Eller assuming it
was acquired January 1, 1997.
<TABLE>
<CAPTION>
Increase
(Decrease)
Income
------
<S> <C> <C>
(a) Increase in amortization of goodwill of $5,205 resulting from the additional $ (5,974)
goodwill created by the acquisition and a decrease in amortizable life from 40
years (Eller) to 25 years (the Company) and additional depreciation of $769
related to the adjustment of fixed assets to fair value.
(b) Increase in interest expense due to a higher amount of average debt (2,518)
outstanding, which was partially offset by a lower average interest rate (6%
average rate for the Company and 8.8% for Eller during the first three months
of 1997).
(c) Tax effect of the above adjustments to depreciation and interest expense at 1,315
the Company's effective federal and state tax rate of 40%.
</TABLE>
PAXSON ACQUISITION
(2) Represents the pro forma effect of the Paxson acquisition assuming it was
acquired January 1, 1997.
<TABLE>
<CAPTION>
Increase
(Decrease)
Income
------
<S> <C> <C>
(a) Elimination of option plan compensation expense resulting from the elimination $ 1,246
of the plan.
(b) Increase in amortization expense resulting from the additional goodwill (9,377)
created by the acquisition.
(c) Elimination of corporate general and administrative expenses resulting from 4,059
the elimination of the Paxson corporate office.
</TABLE>
<PAGE> 38
<TABLE>
<S> <C> <C>
(d) Increase in interest expense (at an average interest rate of 6.5% for the (29,276)
first nine months of 1997) due to additional borrowing on the Company's credit
facility to finance the acquisition cost.
(e) Tax effect of the above adjustment at the Company's effective federal and 13,339
state tax rate of 40%.
</TABLE>
UNIVERSAL MERGER
(3) Represents the pro forma effect of the merger with Universal assuming
it had occurred on January 1, 1997.
The Company and Universal unaudited pro forma combined condensed financial
statements reflect the merger, accounted for as a purchase, as follows:
<TABLE>
<S> <C>
Universal Common Stock outstanding at December 31, 1997 adjusted
to reflect the exercise of all outstanding options and warrants 28,787,442
Exchange ratio .67
-----------
The Company's Common Stock assumed to be issued in connection
with the Merger 19,287,586
Estimated value per share x $62.3125
$ 1,201,858
Estimated transaction costs 15,000
Total estimated purchase price $ 1,216,858
===========
For purpose of these statements, the total estimated purchase price was
allocated as follows:
Total estimated purchase price $ 1,216,858
Universal's net assets at December 31,1997 adjusted for the
elimination of existing goodwill of $242,291 54,064
Estimated excess purchase price (allocated to goodwill) $ 1,162,794
===========
</TABLE>
The estimated excess purchase price allocated to goodwill of $1,162,794 will be
amortized over a 25-year period using the straight line method, which will
result in annual goodwill amortization of $46,512.
The pro forma merger adjustments at December 31, 1997 are as follows:
<TABLE>
<CAPTION>
Increase (Decrease)
------------------
<S> <C>
Cash and cash equivalents $ (15,000)
Licenses and goodwill 902,290
Accumulated Amortization 18,213
Common stock 1,661
Additional paid-in capital 825,800
Retained earnings (accumulated deficit) 87,541
Other shareholders' equity (9,499)
</TABLE>
The pro forma merger adjustments for the year ended December 31, 1997 are as
follows:
<TABLE>
<CAPTION>
Increase (Decrease)
Income
------
<S> <C>
Depreciation and amortization $ (30,881)
Noncash compensation for incentive options 8,289
</TABLE>
<PAGE> 39
(c) Index to Exhibits
23 Consent of Price Waterhouse (Filed herewith.)
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
Clear Channel Communications, Inc.
Date September 4, 1998 By /s/ ERBERT W. HILL, JR.
Herbert W. Hill, Jr.
Senior Vice President/
Chief Accounting Officer
EXHIBIT INDEX
23 Consent of Price Waterhouse (Filed herewith.)
<PAGE> 1
EXHIBIT 23
CONSENT OF INDEPENDENT AUDITORS
We hereby consent to the incorporation by reference in the Prospectuses
constituting part of the Registration Statements on Form S-3 (No. 333-51957) and
Form S-4 (No. 333-57987) and in the Registration Statements on Form S-8 (Nos.
33-64463, 333-29717, and 333-61883) of Clear Channel Communications, Inc. of our
report dated 5 March 1998 (except as to the information presented in Note 29,
for which the date is 13 August 1998) relating to the consolidated financial
statements of More Group Plc. appearing in this Current Report on Form 8-K/A
dated 4 September 1998.
/s/ PRICE WATERHOUSE
Price Waterhouse
Chartered Accountants and Registered Auditors
London, England
September 4, 1998
