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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-K
[X] Annual report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 For the fiscal year ended December 31, 1997, or
[ ] Transition report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 For the transition period from ________ to
_________.
COMMISSION FILE NUMBER
1-9645
CLEAR CHANNEL COMMUNICATIONS, INC.
(Exact name of registrant as specified in its charter)
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Texas 74-1787539
(State of Incorporation) (I.R.S. Employer Identification No.)
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200 Concord Plaza, Suite 600
San Antonio, Texas 78216
Telephone (210) 822-2828
(Address, including zip code, and telephone number,
including area code, of registrant's principal executive offices)
Securities registered pursuant to Section 12(b) of the Act: Common Stock, $.10
par value per share.
Securities registered pursuant to Section 12(g) of the Act: .None.
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. YES X NO
--- ---
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to
this Form 10-K.
---
On March 6, 1998, the aggregate market value of the Common Stock beneficially
held by non-affiliates of the Company was approximately $6,439 million. (For
purposes hereof, directors, executive officers and 10% or greater shareholders
have been deemed affiliates).
On March 6, 1998, there were 98,387,626 outstanding shares of Common Stock,
excluding 39,694 shares held in treasury.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Company's Annual Report to Shareholders for the year ended
December 31, 1997 are incorporated by reference into Parts I, II, and IV.
Portions of the Company's Definitive Proxy Statement for the 1998 Annual
Meeting dated March 24, 1998 are incorporated by reference into Part III.
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HEFTEL BROADCASTING CORPORATION
INDEX TO FORM 10-K
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Page
Number
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PART I.
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Item 1. Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Item 2. Properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Item 3. Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
Item 4. Submission of Matters to a Vote of Security Holders . . . . . . . . . . . . . . . . . . 28
PART II.
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Item 5. Market for Registrant's Class A Common Stock and
Related Stockholder Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
Item 6. Selected Financial Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations . . . . . . . . . . . . . . . . . . . . . . . . 29
Item 7A. Quantitative and Qualitative Disclosures about Market Risk . . . . . . . . . . . . . . 29
Item 8. Financial Statements and Supplementary Data . . . . . . . . . . . . . . . . . . . . . . 29
Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure . . . . . . . . . . . . . . . . . . . . . . . . 29
PART III.
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Item 10. Directors and Executive Officers of the Registrant . . . . . . . . . . . . . . . . . . 30
Item 11. Executive Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
Item 12. Security Ownership of Certain Beneficial Owners and Management . . . . . . . . . . . . 32
Item 13. Certain Relationships and Related Transactions . . . . . . . . . . . . . . . . . . . . 32
PART IV.
- --------
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K . . . . . . . . . . . 33
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PART I
ITEM 1. BUSINESS
THE COMPANY
The Company, which began operations in 1972, is a diversified media
company that owns or programs radio and television stations and is one of the
largest domestic outdoor advertising companies based on its total advertising
display faces. In addition, the Company currently owns a 50% equity interest in
the Australian Radio Network Pty. Ltd., which operates radio stations in
Australia; a one-third equity interest in the New Zealand Radio Network, which
operates radio stations throughout New Zealand; a 32.3% non-voting equity
interest in Heftel Broadcasting Corporation (Nasdaq: HBCCA) ("Heftel"), a
leading domestic Spanish-language radio broadcaster; and a 30% equity interest
in American Tower Corporation, a leading domestic provider of wireless
transmission sites.
The radio stations currently owned or programmed by the Company are
principally located in the South, Southeast, Southwest, Northeast and Midwest.
These radio stations employ a wide variety of programming formats, such as
News/Talk/Sports, Country, Adult Contemporary, Urban and Album Rock. The
television stations currently owned or programmed by the Company are located in
the South, Southeast, Northeast and Midwest. These television stations are
affiliated with various television networks, including the FOX television
network, the UPN television network, the ABC television network, the NBC
television network and the CBS television network. Additionally, the Company
operates radio networks serving Oklahoma, Texas, Iowa, Kentucky, Virginia,
Alabama, Tennessee, Florida and Pennsylvania. The Company's outdoor advertising
properties are located primarily in the South, Southeast, Midwest, and West.
During 1997, the Company derived approximately 48% of its net revenue from
radio operations, approximately 22% from television operations, and
approximately 30% from outdoor advertising operations.
The Company has its principal executive offices at 200 Concord Plaza,
Suite 600, San Antonio, Texas 78216 (telephone: 210-822-2828).
COMPANY STRATEGY
The Company's overall strategy is to acquire and develop a diverse
array of media assets which enable the Company to assist its customers in
employing the most effective and cost-efficient methods to market their
products and services. Accordingly, the Company has assembled a diversified
portfolio of assets encompassing radio broadcasting, television broadcasting
and outdoor advertising. The Company plans to use this diversified collection
of assets, along with the operating expertise of its management, to continue
generating internal growth. The Company believes it can augment this internal
growth with the opportunistic acquisition of additional media assets. Such
potential acquisitions will be evaluated based on their strategic value to the
Company, their potential to deliver attractive rates of return to the Company's
shareholders, to add revenue and cash flow to its operating results, and to
improve the performance of the Company's existing assets. Historically, the
Company has been able to generate significant returns for its investors while
maintaining financial flexibility through the prudent use of leverage. The
Company believes that this prudent use of leverage has also contributed to the
Company's relatively low cost of capital. The Company believes that focusing on
its clients' goals, creating a sales-intensive operating organization, and
maintaining a conservative financial position are synergistic aspects of its
operating strategy.
The Company believes that the potential exists for cooperation between
its various business segments and that it can help its customers market their
products and services more effectively and efficiently by offering greater
flexibility in the choice of media outlets for marketing messages. The
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Company is now able to offer additional advertising solutions for its customers
in those markets where it simultaneously operates radio stations with
television stations or outdoor advertising displays. In this way, the Company
believes that its combination of assets will allow it to offer greater value to
its customers. Additionally, the Company intends to use its various business
segments to cross-promote one another when possible.
Broadcast Strategy
The Company's broadcast strategy is to identify and acquire
under-performing stations on favorable terms and to utilize management's
extensive operating experience to improve the performance of such stations
through effective programming, reduction of costs, and aggressive promotion,
marketing and sales. In addition, the Company employs a marketing strategy that
emphasizes direct sales to local customers rather than through advertising
agencies and other intermediaries. The Company believes that this focus has
enabled its stations to achieve market revenue shares exceeding their audience
shares.
The Company believes that clustering broadcasting assets together in
markets leads to substantial operating advantages. The Company attempts to
cluster radio stations in each of its principal markets, and believes that by
controlling a larger share of the total advertising inventory in a particular
market, it can offer advertisers more attractive packages of advertising
options. The Company also believes that its cluster approach will allow it to
operate its stations with more highly skilled local management teams and
eliminate duplicative operating and overhead expenses. Within its television
group, the Company's goal is to own and program one station in each of its
markets and to program an additional station under a Local Marketing Agreement
("LMA") in each such market. In seven of its television markets, the Company
already programs an additional television station under an LMA.
Outdoor Advertising Strategy
The Company's outdoor advertising strategy is to expand its market
presence in the outdoor advertising business and improve its operating results
by (i) managing the advertising rates and occupancy levels of its displays to
maximize market revenues; (ii) attracting new categories of advertisers to the
outdoor medium through significant investments in sales and marketing
resources; (iii) increasing focus on local advertising sales; (iv) constructing
new displays and upgrading its existing displays; (v) taking advantage of
technological advances which increase both sales force productivity and
production department efficiency; (vi) acquiring additional displays in its
existing markets and expanding into additional markets where the Company
already has a broadcasting presence as well as into the country's largest media
markets and their surrounding regional areas; and (vii) making opportunistic
acquisitions of displays in new markets. The Company believes this strategy
enhances its ability to effectively respond to advertisers' needs.
To support this outdoor advertising operating strategy, the Company
has decentralized its operating structure related to outdoor advertising in
order to place authority, autonomy and accountability at the market level and
provide local management with the tools necessary to oversee sales, display
development, administration and production and to identify suitable acquisition
candidates. The Company also maintains a fully-staffed sales and marketing
office in New York which services national outdoor advertising accounts and
supports the Company's local sales force in each market. The Company believes
that one of its strongest competitive advantages is its unique blend of highly
experienced corporate and local market management.
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RECENT DEVELOPMENTS
Grupo Acir Acquisition
On March 12, 1998, the Company entered into a definitive agreement to
acquire 40% of the equity of Grupo Acir Communicaciones, S.A. de C.V. ("Grupo
Acir") for $57,500,000 (the "Grupo Acir Acquisition"). Grupo Acir is one of the
largest radio broadcasters in Mexico. It owns or programs affiliations 164
stations serving 72 markets in Mexico. Of the 164 stations, 65 are owned and
operated by Grupo Acir and 99 are affiliated with one of its eight national
digital networks. Seven of these owned stations are located in Mexico City,
Mexico's largest media market.
Due to constraints under Mexican Law, the Company's investment is
being made through a Mexican trustee which will vote the Company's shares.
Consummation of the Grupo Acir Acquisition is subject to numerous closing
conditions, including, without limitation, receiving all required regulatory
approvals of the Mexican government.
More Group Acquisition
On March 5, 1998, the Company agreed to make a cash offer (the "More
Group Acquisition") for all of the issued and to be issued shares of More Group
Plc, an outdoor advertising company organized under the laws of the United
Kingdom (the "More Group"), for j10.425 per share (approximately $17.20 per
share on March 5, 1998). As of such date, the aggregate consideration for all
of such shares was approximately $735.7 million. This offer was recommended to
More Group shareholders by More Group's board of directors. More Group operates
in 22 countries and has approximately 90,000 display faces, including
approximately 50,000 street furniture panels and approximately 40,000
billboards.
Consummation of the More Group Acquisition is subject to acceptance by
the holders of at least 90% of the total shares of More Group or such lesser
percentage as the Company may decide. This condition will not be satisfied
unless the Company shall have acquired or agreed to acquire More Group shares
carrying in aggregate more than 50% of the voting rights then exercisable at a
general meeting of More Group. The More Group Acquisition is also subject to
the receipt of all necessary approvals, including regulatory approvals, there
being no material adverse change in the business of More Group and its
subsidiaries taken as a whole, and numerous other conditions.
Universal Outdoor Merger
On October 23, 1997, the Company and Universal Outdoor Holdings, Inc.
("Universal") entered into a Merger Agreement (the "Merger Agreement").
Universal is a leading outdoor advertising company operating approximately
34,000 advertising display faces predominantly in the Midwest, Northeast and
Southeast. Pursuant to the Merger Agreement, a wholly-owned subsidiary of the
Company will be merged with and into Universal, with Universal continuing as
the surviving corporation and a wholly owned subsidiary of the Company (the
"Universal Merger"). On February 6, 1998, the stockholders of Universal voted
to approve the Universal Merger.
Subject to the terms and conditions of the Merger Agreement, each
share of Universal common stock outstanding immediately prior to the
consummation of the Universal Merger will be converted into 0.67 shares of the
Company's Common Stock. Outstanding warrants and options to acquire shares of
Universal common stock held by certain senior level employees of Universal will
be canceled in exchange for shares of the Company's Common Stock. It is
anticipated that approximately 19.3 million shares of the Company's Common
Stock will be issued in the Universal Merger, representing approximately 15.7%
of the shares of the Company's Common Stock expected to be outstanding after
the Universal Merger.
In connection with the Universal Merger, Daniel L. Simon, the current
President and Chief Executive Officer of Universal, entered into an employment
agreement with the Company pursuant to
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which he will become, upon consummation of the Universal Merger, the Vice
Chairman and Chief Operating Officer of Universal, Eller Media Corporation, a
subsidiary of the Company ("Eller Media"), their respective subsidiaries and
affiliate companies and any successor company or affiliates of the Company
which are in the business of outdoor advertising.
Consummation of the Universal Merger is subject to numerous closing
conditions, including the receipt of all regulatory approvals and other
necessary approvals.
Paxson Radio Acquisition
On October 1, 1997, the Company acquired six radio news and sports
networks and approximately 350 outdoor advertising display faces from Paxson
Communications Corp. ("Paxson"). On December 8, 1997, the Company acquired 43
radio stations from Paxson and certain affiliates of Paxson (the "Paxson Radio
Acquisition"). The total purchase price for such acquisitions was approximately
$629 million in cash. Prior to the consummation of the acquisition of the radio
stations on December 8, 1997, the Company entered into a commercial time
brokerage agreement with respect to most of such radio stations and commercial
time sales agreements with respect to certain other radio stations. All of the
radio stations and display faces referred to above are located in Florida
except for four radio stations located in Tennessee.
In connection with the acquisitions of seven of the radio stations
from Paxson in the Jacksonville, Florida and the Mobile, Alabama/Pensacola,
Florida markets, the Company received temporary waivers of the Federal
Communications Commission's ("FCC") one-to-a-market rule which generally
prohibits the common ownership of radio and television stations in the same
market. Such waivers are conditioned upon the outcome of the FCC's pending
ownership attribution rulemaking proceeding. Some divestitures could be
required at the conclusion of the rulemaking proceeding. Should divestitures be
necessary, the Company will be required to submit applications to the FCC
seeking consent to sell any nonconforming stations within six months following
finality of the rulemaking.
On December 8, 1997, the Company acquired options from Paxson to
purchase a radio station in Tampa, Florida and a radio station in Pensacola,
Florida for a total of approximately $3 million in cash. The Company and Paxson
are parties to commercial time sales agreements with respect to such stations.
The Company presently intends to exercise its option to acquire the radio
station in Tampa, Florida for approximately $1 million and has divested an
existing radio station it owned in Tampa in order to obtain FCC approval of the
exercise of such option.
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Eller Media Acquisition
On April 10, 1997, the Company acquired approximately 93% of the then
outstanding stock of Eller Media for a total consideration of approximately
$627 million, consisting of approximately $329 million in cash and 6,643,636
shares of the Company Common Stock (approximately $298 million in the Company
Common Stock based on a price per share of $44.8625 per share) (the "Eller
Media Acquisition"). Immediately following the consummation of the Eller Media
Acquisition, the Company retired approximately $417 million of Eller Media's
outstanding bank debt through borrowings under the Credit Facility. In
addition, the Company issued options (with an estimated fair value of
approximately $51 million) to purchase 1,468,182 shares of the Company Common
Stock in connection with the assumption of Eller Media's outstanding stock
options. The Company also agreed to issue 147,858 shares of Common Stock
pursuant to certain phantom stock plan obligations assumed by the Company as
part of the Eller Media Acquisition. The holders of the approximately 7% of the
then outstanding capital stock of Eller Media not purchased by the Company have
the right to require the Company to acquire such stock for 1,081,469 shares of
the Company's Common Stock until April 10, 2002. From and after April 10, 2004
(or before such date upon the occurrence of certain events), the Company will
have the right to acquire this minority interest stake in Eller Media for
1,081,469 shares of Common Stock. On April 29, 1997, Karl Eller, the Chief
Executive Officer of Eller Media, was appointed to the Company's Board of
Directors. Mr. Eller currently is employed by the Company to run Eller Media as
a subsidiary of the Company pursuant to an employment contract which is due to
expire on August 18, 1999. In addition, Mr. Eller and other members of the
Eller Media management team have a significant stake in the Company's stock
options through the conversion of existing Eller Media stock options into
options to purchase the Company's Common Stock.
Heftel Broadcasting Corporation
On February 14, 1997, the Company's nonconsolidated affiliate, Heftel,
then the largest Spanish language radio broadcasting company, completed a
merger with Tichenor Media System, Inc. ("Tichenor" and the "Tichenor Merger"),
then the third largest Spanish language radio broadcasting company. Following
the Tichenor Merger, Heftel owns or programs 36 radio stations in 11 markets.
As a result of the Tichenor Merger, the sale by the Company of 350,000 shares
of Heftel's voting common stock and subsequent issuances of common stock by
Heftel, the Company's total ownership interest in Heftel has been reduced to
approximately 28.7% of the total outstanding common stock of Heftel (voting and
non- voting). In the Tichenor Merger, all of the voting common stock of Heftel
owned by the Company and shares of Tichenor's common stock owned by the Company
were converted into shares of convertible nonvoting common stock of Heftel on a
one- for-one basis in order to comply with the cross-interest policy of the
Federal Communications Commission. See "-- Regulation of the Company's
Business."
Other Completed and Pending Acquisitions
During the period from December 31, 1997 through March 12, 1998, the
Company completed the acquisition of 21 additional radio stations for
approximately $110.7 million in five markets and completed the acquisition of
or obtained the rights to lease 4,592 display faces for approximately $103.5
million in nine markets.
During the period from December 31, 1997 through March 12, 1998, in
addition to the pending Universal Merger and More Group Acquisition, the
Company entered into definitive agreements to purchase 16 display faces for
approximately $2.2 million in four markets. In addition, acquisitions to
purchase four additional radio stations for approximately $9.8 million in two
markets are pending pursuant to definitive agreements executed prior to
December 31, 1997. All of these acquisitions of broadcast properties are
subject to the approval of the FCC and, in some cases, the Federal Trade
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Commission (the "FTC") and the Antitrust Division of the United States
Department of Justice (the "Antitrust Division"), as well as certain other
closing conditions.
Public Offerings
On May 19, 1997, the Company completed the offering and sale of
5,093,790 shares of Common Stock in an underwritten public offering for a total
of $279,564,544 in proceeds. On May 21, 1997, the Company sold an additional
1,000,000 shares of Common Stock in connection with the exercise of an
underwriters' over-allotment option for a total of $47,334,000 in proceeds. On
September 18, 1997, the Company completed the offering and sale of 8,000,000
shares of Common Stock in a block trade with Salomon Brothers Inc for a total
of $504,000,000 in proceeds. On October 15, 1997, the Company completed the
offering and sale of $300,000,000 aggregate principal amount of 7.25%
Debentures due October 15, 2027 in an underwritten public offering for a total
of $292,689,000 in proceeds. On March 30, 1998, the Company completed the
offering and sale of 6,000,000 shares of Common Stock and $500,000,000
aggregate principal amount of 2.625% Senior Convertible Notes due April 1, 2003
in concurrent public offerings for a total of $578,160,000 and $492,500,000 in
proceeds, respectively. The proceeds from the various offerings were used to
repay borrowings outstanding under the Company's revolving credit facility, to
finance acquisitions and for general corporate purposes.
EMPLOYEES
At January 1, 1998, the Company had approximately 5,400 domestic employees:
3,500 in radio operations, 800 in television operations, 1,000 in outdoor
operations and 100 in corporate activities.
INDUSTRY SEGMENTS
The Company consists of three principal business segments -- radio
broadcasting, television broadcasting and outdoor advertising. The radio
segment includes both stations for which the Company is the licensee and
stations for which the Company programs and/or sells air time under LMAs or
joint sales agreements ("JSAs"). The radio segment also operates eleven
networks. The television segment includes both television stations for which
the Company is the licensee and stations programmed under LMAs. The outdoor
advertising segment has advertising display faces in 15 major domestic markets.
Information relating to the industry segments of the Company's
operations, currently radio, television and outdoor for 1997, and radio and
television for 1996 and 1995 is included in "Note K: Segment Data" in the Notes
to Consolidated Financial Statements in the Company's Annual Report to
Shareholders and hereby is incorporated by reference as well as the information
set forth under "Radio Broadcasting," "Television Broadcasting" and "Outdoor
Advertising."
Radio Broadcasting
The following table sets forth certain selected information with
regard to each of the Company's 56 AM and 117 FM radio stations which it owned
or programmed, or for which it sold airtime, as of December 31, 1997.
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<TABLE>
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AM FM
MARKET STATIONS STATIONS TOTAL
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ARKANSAS
Little Rock . . . . . . . . . . . . . . . . . . . . . . -- 5 5
CALIFORNIA
Monterrey . . . . . . . . . . . . . . . . . . . . . . . 2(a) 4(a) 6
CONNECTICUT
New Haven . . . . . . . . . . . . . . . . . . . . . . . 2 1 3
FLORIDA
Florida Keys . . . . . . . . . . . . . . . . . . . . . -- 3 3
Ft. Myers/Naples . . . . . . . . . . . . . . . . . . . 1 4 5
Jacksonville . . . . . . . . . . . . . . . . . . . . . 2 4 6
Miami/Ft. Lauderdale . . . . . . . . . . . . . . . . . 3 5 8
Orlando . . . . . . . . . . . . . . . . . . . . . . . . 2 4 6
Panama City . . . . . . . . . . . . . . . . . . . . . . 1 4 5
Pensacola . . . . . . . . . . . . . . . . . . . . . . . -- 2(b) 2
Tallahassee 1 4 5
Tampa/St. Petersburg . . . . . . . . . . . . . . . . . 4(c) 5 9
West Palm Beach . . . . . . . . . . . . . . . . . . . . 1 2 3
KENTUCKY
Louisville . . . . . . . . . . . . . . . . . . . . . . 3 4 7
LOUISIANA
New Orleans . . . . . . . . . . . . . . . . . . . . . . 2 5 7
MASSACHUSETTS
Springfield . . . . . . . . . . . . . . . . . . . . . . 1 1 2
MICHIGAN
Grand Rapids . . . . . . . . . . . . . . . . . . . . . 2 4 6
NEW YORK
Albany . . . . . . . . . . . . . . . . . . . . . . . . 1(d) 3(d) 4
NORTH CAROLINA
Winston-Salem . . . . . . . . . . . . . . . . . . . . . 1 2 3
Raleigh . . . . . . . . . . . . . . . . . . . . . . . . 1 4 5
OHIO
Cleveland . . . . . . . . . . . . . . . . . . . . . . . 1 2 3
Dayton . . . . . . . . . . . . . . . . . . . . . . . 1(a) 2(a) 3
OKLAHOMA
Oklahoma City . . . . . . . . . . . . . . . . . . . . . 3(c) 4 7
Tulsa . . . . . . . . . . . . . . . . . . . . . . . . . 2(c) 4(b)(c) 6
PENNSYLVANIA
Lancaster . . . . . . . . . . . . . . . . . . . . . . . 1 1 2
Reading . . . . . . . . . . . . . . . . . . . . . . . . 1 1 2
RHODE ISLAND
Providence . . . . . . . . . . . . . . . . . . . . . . -- 2 2
SOUTH CAROLINA
Columbia . . . . . . . . . . . . . . . . . . . . . . . 1 3 4
TENNESSEE
Cookeville . . . . . . . . . . . . . . . . . . . . . . 2 2 4
Memphis . . . . . . . . . . . . . . . . . . . . . . . . 3 4 7
TEXAS
Austin . . . . . . . . . . . . . . . . . . . . . . . . 1 3 4
El Paso . . . . . . . . . . . . . . . . . . . . . . . . 1 2 3
Houston . . . . . . . . . . . . . . . . . . . . . . . . 3(e) 4(c) 7
San Antonio . . . . . . . . . . . . . . . . . . . . . . 2 3(b) 5
VIRGINIA
Norfolk . . . . . . . . . . . . . . . . . . . . . . . . -- 4 4
Richmond . . . . . . . . . . . . . . . . . . . . . . . 3 3 6
WISCONSIN
Milwaukee . . . . . . . . . . . . . . . . . . . . . . . 1 3 4
--- --- ----
Total . . . . . . . . . . . . . . . . . . . . 56 117 173
== === ===
</TABLE>
_________________
(a) Stations programmed pursuant to an LMA (FCC licenses not owned by the
Company).
(b) Includes one station for which the Company sells airtime pursuant to a
JSA (FCC license not owned by the Company).
(c) Includes one station programmed pursuant to an LMA (FCC license not
owned by the Company).
(d) Stations owned by Radio Enterprises, Inc., in which the Company owns
an 80% interest.
(e) Includes two stations which are owned by CCC-Houston AM, Ltd., in
which the Company owns an 80% interest.
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The Company also owns the Kentucky News Network based in Louisville,
Kentucky, the Virginia News Network based in Richmond, Virginia, the Oklahoma
News Network based in Oklahoma City, Oklahoma, the Voice of Southwest
Agriculture Network based in San Angelo, Texas, the Clear Channel Sports
Network based both in College Station, Texas, and Des Moines, Iowa, the Alabama
Radio Network based in Birmingham, Alabama, the Tennessee Radio Network based
in Nashville, Tennessee, the University of Miami Sports Network based in Miami,
Florida, the Florida Radio Network based in Orlando, Florida, the University of
Florida Sports Network based in Gainesville, Florida and Orlando, Florida, and
the Penn State Sports Network based in Trevose, Pennsylvania.
In addition, the Company owns a 50% equity interest in the Australian
Radio Network Pty, Ltd., which operates ten radio stations in Australia, a
one-third equity interest in the New Zealand Radio Network, which operates 52
radio stations throughout New Zealand, a 50% equity interest in Radio Bonton,
a.s., which operates a radio station in the Czech Republic, and a 32.3%
non-voting equity interest in Heftel Broadcasting Corporation, a leading
domestic Spanish- language broadcaster which operates 36 radio stations in the
11 domestic markets.
The Company's radio stations employ various formats for their
programming. A station's format is important in determining the size and
characteristics of its listening audience. Advertising rates charged by a radio
station are based primarily on the station's ability to attract audiences
having certain demographic characteristics in the market area which advertisers
want to reach, as well as the number of stations competing in the market.
Advertisers often tailor their advertisements to appeal to selected population
or demographic segments. The Company pays the cost of producing the programming
for each station. Generally, the Company designs formats for its own stations,
but has also used outside consultants and program syndicators for program
material. Most of the Company's radio revenue is generated from the sale of
local advertising. Additional revenue is generated from the sale of national
advertising, network compensation payments and barter and other miscellaneous
transactions.
The Company has focused its sales effort on selling directly to local
advertisers. Direct contact with its customers has aided the Company's sales
personnel in developing long-standing customer relationships, which the Company
believes are a competitive advantage. The Company's sales personnel are paid on
a commission basis, which emphasizes this direct local focus. The Company
believes that this focus has enabled some of its stations to achieve market
revenue shares exceeding their audience shares in a given year. Each of the
Company's radio stations also engages independent sales representatives to
assist it in obtaining national advertising. The representatives obtain
advertising through national advertising agencies and receive a commission from
the Company based on the Company's net revenue from the advertising obtained.
In February 1996, the Company formed an alliance with one of the nation's
largest national advertising representation firms, whereby the firm will
dedicate certain personnel to work exclusively for the Company's radio
stations. The Company believes this arrangement will help its stations to
achieve higher shares of national advertising revenue.
The major costs associated with radio broadcasting are related to
personnel and programming. In an effort to monitor these costs, corporate
management routinely reviews staffing levels and programming costs. Combined
with the centralized accounting functions, this monitoring enables the Company
to effectively control expenses. Corporate management also advises local
station managers on programming and other broad policy matters and is
responsible for long-range planning, allocating resources and financial
reporting and controls.
10
<PAGE> 11
Television Broadcasting
The following table sets forth certain selected information with
regard to each of the Company's 18 television stations and one satellite
station which it owned or programmed as of December 31, 1997.
<TABLE>
<CAPTION>
NETWORK
MARKET AFFILIATION
------ -----------
<S> <C>
ALBANY/SCHENECTADY/TROY, NEW YORK
WXXA-TV . . . . . . . . . . . . . . . . . . . . . . . . . . . . . FOX
HARRISBURG/LEBANON/LANCASTER/YORK, PENNSYLVANIA
WHP-TV . . . . . . . . . . . . . . . . . . . . . . . . . . . . . CBS
WLYH-TV(a) . . . . . . . . . . . . . . . . . . . . . . . . . . . UPN
JACKSONVILLE, FLORIDA
WAWS-TV . . . . . . . . . . . . . . . . . . . . . . . . . . . . . FOX
WTEV-TV(a) . . . . . . . . . . . . . . . . . . . . . . . . . . . UPN
LITTLE ROCK, ARKANSAS
KLRT-TV . . . . . . . . . . . . . . . . . . . . . . . . . . . . . FOX
KASN-TV(a) . . . . . . . . . . . . . . . . . . . . . . . . . . . UPN
MEMPHIS, TENNESSEE
WPTY-TV . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ABC
WLMT-TV(a) . . . . . . . . . . . . . . . . . . . . . . . . . . . UPN
MINNEAPOLIS, MINNESOTA
WFTC-TV . . . . . . . . . . . . . . . . . . . . . . . . . . . . . FOX
MOBILE, ALABAMA/PENSACOLA, FLORIDA
WPMI-TV . . . . . . . . . . . . . . . . . . . . . . . . . . . . . NBC
WJTC-TV(a) . . . . . . . . . . . . . . . . . . . . . . . . . . . UPN
PROVIDENCE/NEW BEDFORD, RHODE ISLAND
WPRI-TV . . . . . . . . . . . . . . . . . . . . . . . . . . . . . CBS
WNAC-TV(a) . . . . . . . . . . . . . . . . . . . . . . . . . . . FOX
TUCSON, ARIZONA
KTTU-TV(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . UPN
TULSA, OKLAHOMA
KOKI-TV . . . . . . . . . . . . . . . . . . . . . . . . . . . . . FOX
KTFO-TV(a) . . . . . . . . . . . . . . . . . . . . . . . . . . . UPN
WICHITA, KANSAS
KSAS-TV . . . . . . . . . . . . . . . . . . . . . . . . . . . . . FOX
SALINA, KANSAS
KAAS-TV(c) . . . . . . . . . . . . . . . . . . . . . . . . . . . FOX
</TABLE>
_________________
(a) LMA (FCC license not owned by the Company).
(b) Station programmed by another party pursuant to an LMA.
(c) Satellite station of KSAS-TV in Wichita, Kansas.
The Company purchases the broadcast rights for the majority of its
television programming for its Fox and UPN affiliates from various syndicators.
The Company competes with other television stations within each market for
these broadcast rights. These programming costs have declined in the past five
years due to the decrease in the number of stations in the Company's markets
competing for the same programming; however, they are expected to increase
slightly in the foreseeable future. Moreover, the affiliation changes to NBC
in Mobile, Alabama and to ABC in Memphis, Tennessee have reduced the Company's
need to obtain outside programming.
The primary sources of programming for the Company's affiliated
television stations are their respective networks, which produce and distribute
programming in exchange for each station's commitment to air the programming at
specified times and for commercial announcement time during
11
<PAGE> 12
the programming. For 1996, the Fox, NBC and ABC networks' primary programming
was intended to appeal primarily to a target audience of 18-49 year old adults,
while the CBS network's primary programming was intended to appeal primarily to
a target audience of 25-54 year old adults.
The second source of programming is the production of local news
programming on the Fox, CBS, ABC and NBC affiliate stations in Jacksonville,
Florida; Harrisburg, Pennsylvania; Memphis, Tennessee; Mobile, Alabama;
Providence, Rhode Island; and Albany, New York, respectively. Local news
programming traditionally has appealed to a target audience of adults 25 to 54
years of age. Because these viewers generally have increased buying power
relative to viewers in other demographic groups, they are one of the most
sought-after target audiences for advertisers. With such programming, these
stations are able to attract advertisers to which they otherwise would not have
access.
Each Fox contract currently runs for a five year term expiring in
1998, except for the Fox contract for WXXA-TV Albany, New York, which expires
in 1999, and may be renewed by Fox or the Company. Based on the performance of
its Fox- affiliated stations to date, the Company expects it will continue to
be able to renew its Fox contracts, although no assurances in this regard can
be given. The network affiliation agreements with ABC (for WPTY-TV in Memphis,
Tennessee, effective December 1, 1995), CBS (for WHP-TV in Harrisburg,
Pennsylvania, renewed and effective December 18, 1995), NBC (for WPMI-TV in
Mobile, Alabama, effective January 1, 1996) and UPN (for KTTU-TV in Tucson,
Arizona, entered into in 1995) run for ten-year terms.
Revenue is generated primarily from the sale of local and national
advertising, as well as from fees received from the affiliate television
networks. Advertising rates depend primarily on the quantitative and
qualitative characteristics of the audience the Company can deliver to the
advertiser. Local advertising is sold by the Company's sales personnel, while
national advertising is sold by independent national sales representatives. The
Company's broadcasting revenue is seasonal, with the fourth quarter typically
generating the highest level of revenue and the first quarter typically
generating the lowest. The fourth quarter generally reflects higher advertising
in preparation for the holiday season and the effect of political advertising
in election years.
The Company's broadcasting results are dependent on a number of
factors, including the general strength of the economy, population growth,
ability to provide popular programming, relative efficiency of radio and
television broadcasting compared to other advertising media, signal strength,
technological capabilities and developments and governmental regulations and
policies.
The major costs associated with television broadcasting are related to
personnel and programming. In an effort to monitor these costs, corporate
management routinely reviews staffing levels and programming costs. Combined
with the centralized accounting functions, this monitoring enables the Company
to effectively control expenses. Corporate management also advises local
station managers on programming and other broad policy matters and is
responsible for long-range planning, allocating resources and financial
reporting and controls.
Outdoor Advertising
Following the consummation of the Eller Media Acquisition, the
Company, through its wholly owned subsidiary, Eller Media, became one of the
largest domestic outdoor advertising companies based on its total advertising
display faces.
The following table sets forth certain selected information with
regard to each of the Company's outdoor advertising display faces as of
December 31, 1997:
12
<PAGE> 13
<TABLE>
<CAPTION>
TOTAL
DISPLAY
MARKET FACES(A)
------ --------
<S> <C>
ARIZONA:
Phoenix . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 359
CALIFORNIA:
Los Angeles(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,863
San Francisco/Oakland(c) . . . . . . . . . . . . . . . . . . . . . . . . . . . 10,355
MIDWEST:
Chicago . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,838
Cleveland(d) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,258
Milwaukee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,187
SOUTHEAST:
Atlanta . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,628
Miami . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,052
Tampa(e) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,362
TEXAS:
Dallas/Fort Worth . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,110
El Paso . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,353
Houston . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,214
San Antonio . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,463
CONVENIENCE STORES:
Various . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,921
UNION PACIFIC SOUTHERN PACIFIC(F):
Various . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,697
-------
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57,660
======
</TABLE>
_________________
(a) Display faces primarily include 20'x60' bulletins, 14 x48 bulletins,
12 x25 Premier Panels(TM), 25 x25 Premier Plus Panels(TM), 12 x25
30-sheet posters, 6 x12 8-sheet posters, and various transit
displays.
(b) Includes Los Angeles, San Diego, Orange, Riverside, San Bernardino and
Ventura counties.
(c) Includes San Francisco, Oakland, San Jose, Santa Cruz, Sacramento and
Solano counties.
(d) Includes Akron and Canton.
(e) Includes Sarasota, Orlando and Bradenton.
(f) Represents licenses managed under Union Pacific Southern Pacific
License Management Agreement.
The outdoor advertising industry is comprised of several large outdoor
advertising and media companies with operations in multiple markets, as well as
many smaller and local companies operating a limited number of structures in a
single or few local markets. While the industry has experienced some
consolidation within the past few years, the OAAA estimates that there are
still approximately 1,000 companies in the outdoor advertising industry
operating approximately 396,000 billboard displays. The Company expects the
trend of consolidation in the outdoor advertising industry to continue.
The Company's outdoor advertising strategy is to expand its market
presence and improve its operating results by (i) managing the advertising
rates and occupancy levels of its displays to maximize market revenues; (ii)
attracting new categories of advertisers to the outdoor medium through
significant investments in sales and marketing resources; (iii) increasing
focus on local advertising sales; (iv) constructing new displays and upgrading
its existing displays; (v) taking advantage of technological advances which
increase both sales force productivity and production department efficiency;
and (vi) acquiring additional displays in its existing markets and expanding
into additional markets where the Company already has a broadcasting presence
as well as into the country's largest media markets and
13
<PAGE> 14
their surrounding regional areas. The Company believes this operating strategy
enhances its ability to effectively respond to advertisers' needs.
To support this operating strategy, the Company has decentralized its
operating structure in order to place authority, autonomy and accountability
for its outdoor advertising segment at the market level and provide local
management with the tools necessary to oversee sales, display development,
administration and production and to identify suitable acquisition candidates.
The Company also maintains a fully-staffed sales and marketing office in New
York which services national outdoor advertising accounts and supports the
Company's local sales force in each market. The Company believes that one of
its strongest competitive advantages is its unique blend of highly experienced
corporate and local market management.
The Company focuses its efforts on local sales. Local advertisers tend
to have smaller advertising budgets and require greater assistance from the
Company's production and creative personnel to design and produce advertising
copy. In local sales, the Company often expends more sales efforts on
educating customers regarding the benefits of outdoor media and helping
potential customers develop an advertising strategy using outdoor advertising.
While price and availability are important competitive factors, service and
customer relationships are also critical components of local sales.
The Company operates the following types of outdoor advertising
billboards and displays:
o Bulletins generally are 14 feet high by 48 feet wide (672 square feet
wide) or 20 feet high by 60 feet wide (1,200 square feet) and consist
of panels on which advertising copy is displayed. Bulletin advertising
copy is either printed with computer-generated graphics on a single
sheet of vinyl that is "wrapped" around the structure, or is hand
painted and attached to the outdoor advertising structure. Bulletins
also include "wallscapes" that are painted on vinyl surfaces or
directly on the sides of buildings, typically four stories or less.
Because of their greater impact and higher cost, bulletins are usually
located on major highways and freeways. In addition, wallscapes are
located on major freeways, commuter and tourist routes and in downtown
business districts.
o Premier Panels(TM) generally are 12 feet high by 25 feet wide (300
square feet) and have vinyl wrapped around the display face. Premier
Panels(TM) are built on superior 30-sheet poster locations that
deliver a "bulletin- like" display. The Company also offers unique
Premier Plus(TM)panels, 25 feet high by 25 feet wide (625 square
feet), that consist of two stacked 30-sheet posters which are
converted into one larger individual display face.
o 30-sheet posters generally are 12 feet high by 25 feet wide (300
square feet) and are the most common type of billboard. Advertising
copy for 30-sheet posters consists of lithographed or silk-screened
paper sheets supplied by the advertiser that are pasted and applied
like wallpaper to the face of the display. Thirty-sheet posters are
typically concentrated on major surface arteries.
o 8-sheet posters usually are 6 feet high by 12 feet wide (72 square
feet). Displays are prepared and mounted in the same manner as
30-sheet posters. Most 8-sheet posters, because of their smaller size,
are concentrated on city streets targeting pedestrian traffic.
o Transit displays are lithographed or silk-screened paper sheets
located on bus and commuter train exteriors, commuter rail terminals,
interior train cars, bus shelters and subway platforms. The Company's
transit customers include the San Francisco Bay Area Rapid Transit
(BART) and the Metropolitan Rail (METRA) in Chicago.
Billboards generally are mounted on structures owned by the outdoor
advertising company and located on sites that are either owned or leased by it
or on which it has acquired a permanent easement.
14
<PAGE> 15
Bus shelters are usually constructed, owned and maintained by the outdoor
service provider under revenue-sharing arrangements with a municipality or
transit authority. During 1997, the Company invested approximately $14.2
million for new display construction and for ongoing enhancement of its
existing display inventory. Over 90% of the Company's bulletin inventory has
been retrofitted for vinyl. Advertising rates are based on a particular
display's exposure (or number of "impressions" delivered) in relation to the
demographics of the particular market and its location within that market. The
number of "impressions" delivered by a display is measured by the number of
vehicles passing the site during a defined period and is weighted to give
effect to such factors as its proximity to other displays, the speed and
viewing angle of approaching traffic, the national average of adults riding in
vehicles and whether the display is illuminated. The number of impressions
delivered by a display is verified by independent auditing companies.
The Company has a diversified customer base in its outdoor advertising
segment of over 3,000 advertisers and advertising agency clients. The size and
geographic diversity of the Company's markets allow it to attract national
advertisers, often by packaging displays in several of its markets in a single
contract to allow a national advertiser to simplify its purchasing process and
present its message in several markets. National advertisers generally seek
wide exposure in major markets and therefore tend to make larger purchases. The
Company competes for national advertisers primarily on the basis of price,
location of displays, availability and service.
COMPETITION
The Company's three business segments are in highly competitive
industries. The Company's radio and television stations and outdoor advertising
properties compete for audiences and advertising revenues with other radio and
television stations and outdoor advertising companies, as well as with other
media, such as newspapers, magazines, cable television, and direct mail, within
their respective markets. Audience ratings and market shares are subject to
change and any adverse change in a particular market could have a material
adverse effect on the Company's revenue in that market. Future operations are
subject to many variables which could have an adverse effect upon the Company's
financial performance, including economic conditions, both general and relative
to the broadcasting industry; shifts in population and other demographics; the
level of competition for advertising dollars; fluctuations in operating costs;
technological changes and innovations; changes in labor conditions; and changes
in governmental regulations and policies and actions of federal regulatory
bodies. There can be no assurance that the Company will be able to maintain or
increase its current audience ratings and advertising revenues.
REGULATION OF THE COMPANY'S BUSINESS
Existing Regulation and 1996 Legislation
Television and radio broadcasting are subject to the jurisdiction of
the Federal Communications Commission ("FCC") under the Communications Act of
1934, as amended (the "Communications Act"). The Communications Act prohibits
the operation of a television or radio broadcasting station except under a
license issued by the FCC and empowers the FCC, among other things, to issue,
renew, revoke and modify broadcasting licenses; assign frequency bands;
determine stations' frequencies, locations, and power; regulate the equipment
used by stations; adopt other regulations to carry out the provisions of the
Communications Act; impose penalties for violation of such regulations; and
impose fees for processing applications and other administrative functions. The
Communications Act prohibits the assignment of a license or the transfer of
control of a licensee without prior approval of the FCC. Under the
Communications Act, the FCC also regulates certain aspects of the operation of
cable television systems and other electronic media that compete with broadcast
stations.
15
<PAGE> 16
The Telecommunications Act of 1996 ("the 1996 Act") represented the
most comprehensive overhaul of the country's telecommunications laws in more
than 60 years. The Communications Act originated at a time when telephone and
broadcasting technologies were quite distinct and addressed different consumer
needs. As a consequence, both the statute and its implementing regulatory
scheme were designed to compartmentalize the various sectors of the
telecommunications industry. The 1996 Act removed or relaxed the statutory
barriers to telephone company ("telephone company") entry into the video
programming delivery business, to cable company provision of telephone service,
and to common ownership of broadcast television and cable properties.
The 1996 Act also significantly changed both the process for renewal
of broadcast station licenses and the broadcast ownership rules. First, the
1996 Act established a "two-step" renewal process that limits the FCC's
discretion to consider applications filed in competition with an incumbent's
renewal application. The 1996 Act also substantially liberalized the national
broadcast ownership rules, eliminating the national radio limits and easing the
national restrictions of TV ownership. The 1996 Act also relaxed local radio
ownership restrictions, but left local TV restrictions in place pending further
FCC review. The FCC has already implemented some of these changes through
Commission Orders.
This new regulatory flexibility has engendered aggressive local,
regional, and/or national acquisition campaigns. Removal of previous station
ownership limitations on leading incumbents (i.e., existing networks and major
station groups) has increased sharply the competition for and the prices of
attractive stations.
License Grant and Renewal
Prior to the passage of the 1996 Act, television and radio
broadcasting licenses generally were granted or renewed for a period of five
and seven years, respectively, upon a finding by the FCC that the "public
interest, convenience, and necessity" would be served thereby. At the time an
application is made for renewal of a television or radio license, parties in
interest may file petitions to deny the application, and such parties,
including members of the public, may comment upon the service the station has
provided during the preceding license term. In addition, prior to passage of
the 1996 Act, any person was permitted to file a competing application for
authority to operate on the station's channel and replace the incumbent
licensee. Renewal applications were granted without a hearing if there were no
competing applications or if issues raised by petitioners to deny such
applications were not serious enough to cause the FCC to order a hearing. If
competing applications were filed, a full comparative hearing was required.
Under the 1996 Act, the statutory restriction on the length of
broadcast licenses has been amended to allow the FCC to grant broadcast
licenses for terms of up to eight years. The 1996 Act also requires renewal of
a broadcast license if the FCC finds that (1) the station has served the public
interest, convenience, and necessity; (2) there have been no serious violations
of either the Communications Act or the FCC's rules and regulations by the
licensee; and (3) there have been no other serious violations which taken
together constitute a pattern of abuse. In making its determination, the FCC
may still consider petitions to deny but cannot consider whether the public
interest would be better served by a person other than the renewal applicant.
Instead, under the 1996 Act, competing applications for the same frequency may
be accepted only after the Commission has denied an incumbent's application for
renewal of license.
Although in the vast majority of cases broadcast licenses are granted
by the FCC even when petitions to deny are filed against them, there can be no
assurance that any of the Company's stations' licenses will be renewed.
16
<PAGE> 17
Multiple Ownership Restrictions
The FCC has promulgated rules that, among other things, limit the
ability of individuals and entities to own or have an official position or
ownership interest above a certain level (an "attributable" interest, as
defined more fully below) in broadcast stations, as well as other specified
mass media entities. Prior to the passage of the 1996 Act, these rules
included limits on the number of radio and television stations that could be
owned on both a national and local basis. On a national basis, the rules
generally precluded any individual or entity from having an attributable
interest in more than 20 AM radio stations, 20 FM radio stations and 12
television stations. Moreover, the aggregate audience reach of the co-owned
television stations could not exceed 25% of all U.S. television households.
The 1996 Act completely revised the television and radio ownership
rules via changes the FCC implemented in two orders issued on March 8, 1996.
With respect to television, the 1996 Act and the FCC's subsequently issued
orders eliminated the 12-station limit for station ownership and increased the
national audience reach limitation from 25% to 35%. On a local basis, however,
the 1996 Act did not alter current FCC rules limiting an individual entity to
maintaining an attributable interest in only one television station in a
market. The 1996 Act did require the FCC to conduct a rulemaking proceeding,
however, to determine whether to narrow the geographic scope of the local
television cross-ownership rule (the so-called "TV duopoly rule") to permit
some two-station combinations in certain (large) markets. At the time of the
passage of the 1996 Act, the FCC had already initiated a rulemaking to consider
whether the television duopoly rule should be retained, modified or eliminated.
That proceeding remains pending.
With respect to radio licensees, the 1996 Act and the FCC's
subsequently issued rule changes eliminated the national ownership restriction,
allowing any one entity to own nationally any number of AM or FM broadcast
stations. The 1996 Act and the FCC's new rules also greatly eased local radio
ownership restrictions. As with the old rules, the maximum allowable varies
depending on the number of radio stations within a market. In markets with
more than 45 stations, one company may own, operate, or control eight stations,
with no more than five in any one service (AM or FM). In markets of 30-44
stations, one company may own seven stations, with no more than four in any one
service; in markets with 15-29 stations, one entity may own six stations, with
no more than four in any one service. In markets with 14 commercial stations
or less, one company may own up to five stations or 50% of all of the stations,
whichever is less, with no more than three in any one service.
In 1992, the FCC placed limitations on LMAs through which the licensee
of one radio station provides the programming for another licensee's station in
the same market. Stations operating in the same service (e.g., where both
stations are AM) and in the same market are prohibited from simulcasting more
than 25% of their programming. Moreover, in determining the number of stations
that a single entity may control, an entity programming a station pursuant to
an LMA is required, under certain circumstances, to count that station toward
its maximum even though it does not own the station. In a pending rulemaking,
the FCC is seeking comment on issues of control and attribution with respect to
time brokerage agreements or LMAs entered into by television stations.
A number of cross-ownership rules pertain to licensees of television
and radio stations. FCC rules, the Communications Act or both generally
prohibit an individual or entity from having an attributable interest in both a
television station and a radio station, daily newspaper or cable television
system that is located in the same local market area served by the television
station. The FCC has employed a liberal waiver policy with respect to the
TV/radio cross-ownership restriction (the so-called "one-to-a-market" rule),
generally permitting common ownership of one AM, one FM and one TV station in
any of the 25 largest markets, provided there are at least 30 separately owned
stations remaining after the proposed sale. The 1996 Act directed the
Commission to extend its one-to-a-market waiver policy to the top 50 markets,
consistent with the public interest, convenience and necessity. Moreover, in a
pending rulemaking the FCC has proposed eliminating the one-to-a-market rule
entirely.
17
<PAGE> 18
The 1996 Act eliminated a statutory prohibition against common
ownership of television broadcast stations and cable systems serving the same
area, but left the current FCC rule in place. The 1996 Act stipulates that the
FCC should not consider the repeal of the statutory ban in any review of its
applicable rules. The legislation also eliminated the FCC's former
network/cable cross-ownership limitations, but allowed the FCC to adopt
regulations if necessary to ensure carriage, appropriate channel positioning,
and nondiscriminatory treatment of non-affiliated broadcast stations on
network-owned cable systems. The FCC eliminated the restriction and determined
that additional safeguards were not necessary at this time.
The 1996 Act does not alter the FCC's newspaper/broadcast
cross-ownership restrictions. However, the FCC is considering whether to
change the policy pursuant to which it considers waivers of the radio/newspaper
cross-ownership rule. Finally, the 1996 Act and the FCC's subsequently issued
rule changes revised the long-standing "dual network" rule to permit television
broadcast stations to affiliate with an entity that maintains two or more
networks, unless the combination is composed of (a) two of the four existing
networks (ABC, CBS, NBC or Fox) or (b) any of the four existing networks and
one of the two emerging networks (WBN or UPN).
Expansion of the Company's broadcast operations in particular areas
and nationwide will continue to be subject to the FCC's ownership rules and any
further changes the FCC or Congress may adopt. Significantly, the 1996 Act
requires the Commission to review its remaining ownership rules biennially as
part of its regulatory reform obligations to determine whether its various
rules are still necessary. The first such biennial review commenced March 13,
1998, with the FCC's adoption of a notice of inquiry soliciting comment on its
ownership rules. The Company cannot predict the impact of the biennial review
process or any other agency or legislative initiatives upon the FCC's broadcast
rules. Further, the 1996 Act's relaxation of the FCC's ownership rules has
increased the level of competition in one or more of the markets in which the
Company's stations are located.
Under the FCC's ownership rules, a direct or indirect purchaser of
certain types of securities of the Company could violate FCC regulations if
that purchaser owned or acquired an "attributable" or "meaningful" interest in
other media properties in the same areas as stations owned by the Company or in
a manner otherwise prohibited by the FCC. All officers and directors of a
licensee, as well as general partners, limited partners who are not properly
"insulated" from management activities, and stockholders who own five percent
or more of the outstanding voting stock of a licensee (either directly or
indirectly), generally will be deemed to have an attributable interest in the
license. Certain institutional investors who exert no control or influence
over a licensee may own up to ten percent of such outstanding voting stock
before attribution occurs. Under current FCC regulations, debt instruments,
non-voting stock, properly insulated limited partnership interests (as to which
the licensee certifies that the limited partners are not "materially involved"
in the management and operation of the subject media property) and voting stock
held by minority stockholders in cases in which there is a single majority
stockholder generally are not subject to attribution. The FCC's
"cross-interest" policy, which precludes an individual or entity from having a
"meaningful" (even though not attributable) interest in one media property and
an attributable interest in a broadcast, cable or newspaper property in the
same area, may be invoked in certain circumstances to reach interests not
expressly covered by the multiple ownership rules.
A rulemaking proceeding pending at the FCC is designed to permit a
"thorough review of [its] broadcast media attribution rules." Among the issues
on which comment was sought were (i) whether to change the voting stock
attribution benchmarks from five percent to ten percent and, for passive
investors, from ten percent to twenty percent; (ii) whether there are any
circumstances in which non-voting stock interests, which are currently
considered non-attributable, should be considered attributable; (iii) whether
the FCC should eliminate its single majority shareholder exception (pursuant to
which voting interests in excess of five percent are not considered
recognizable if a single shareholder owns
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more than fifty percent of the voting power); (iv) whether to relax insulation
standards for business development companies and other widely-held limited
partnerships; (v) how to treat limited liability companies and other new
business forms for attribution purposes; (vi) whether to eliminate or codify
the cross-interest policy; and (vii) whether to adopt a new policy which would
consider whether multiple cross interests or other significant business
relationships (such as time brokerage agreements, debt relationships or
holdings of nonattributable interests), which individually do not raise
concerns, raise issues with respect to diversity and competition. The
Commission also is to consider whether to make debt attributable in certain
instances as well as the circumstances, if any, in which television LMAs should
be considered to be an attributable interest. The Company cannot predict with
certainty when this proceeding will be concluded or whether any of these
standards will be changed. Should the attribution rules be changed, the
Company is unable to predict what effect, if any, such changes would have on
the Company or its activities. To the best of the Company's knowledge at
present, no officer, director or five percent stockholder of the Company holds
an interest in another television station, radio station, cable television
system or daily newspaper that is inconsistent with the FCC's ownership rules
and policies or the Company's continued ownership of its television stations.
Alien Ownership Restrictions
The Communications Act restricts the ability of foreign entities or
individuals to own or hold certain interests in broadcast licenses. Foreign
governments, representatives of foreign governments, non-U.S. citizens,
representatives of non-U.S. citizens, and corporations or partnerships
organized under the laws of a foreign nation are barred from holding broadcast
licenses. Non-U.S. citizens, collectively, may directly or indirectly own or
vote up to twenty percent of the capital stock of a licensee. In addition, a
broadcast license may not be granted to or held by any corporation that is
controlled, directly or indirectly, by any other corporation more than
one-fourth of whose capital stock is owned or voted by non-U.S. citizens or
their representatives, by foreign governments or their representatives, or by
non-U.S. corporations, if the FCC finds that the public interest will be served
by the refusal or revocation of such license. The FCC has interpreted this
provision of the Communications Act to require an affirmative public interest
finding before a broadcast license may be granted to or held by any such
corporation, and the FCC has made such an affirmative finding only in limited
circumstances. The Company, which serves as a holding company for subsidiaries
that serve as licensees for the stations, therefore may be restricted from
having more than one-fourth of its stock owned or voted directly or indirectly
by non-U.S. citizens, foreign governments, representatives of non- foreign
governments, or foreign corporations. The Communications Act previously also
prohibited grant of a broadcast station license (i) to any corporation with an
alien officer or director, or (ii) to any corporation controlled by another
corporation with any alien officers or more than one-fourth alien directors.
The restrictions on non-U.S. citizens serving as officers or directors of
licensees and their parent corporations were eliminated, however, by the 1996
Act.
Other Regulations Affecting Broadcast Stations
The FCC has significantly reduced its past regulation of broadcast
stations, including elimination of formal ascertainment requirements and
guidelines concerning amounts of certain types of programming and commercial
matter that may be broadcast. In 1990, the U.S. Supreme Court refused to
review a lower court decision that upheld the FCC's 1987 action invalidating
most aspects of the Fairness Doctrine, which had required broadcasters to
present contrasting views on controversial issues of public importance. The
FCC may, however, continue to regulate other aspects of fairness obligations in
connection with certain types of broadcasts. The United States Court of
Appeals for the District of Columbia Circuit has scheduled for oral argument on
May 8, 1998 a petition of the Radio and Television New Directors Association
and the National Association of Broadcasters seeking to repeal the FCC's
personal attack and political editorial rules. In addition,
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there are FCC rules and policies, and rules and policies of other federal
agencies, that regulate matters such as network-affiliate relations, the
ability of stations to obtain exclusive rights to air syndicated programming,
cable systems' carriage of syndicated and network programming on distant
stations, political advertising practices, equal employment opportunity,
application procedures and other areas affecting the business or operations of
broadcast stations. The FCC has adopted rules to implement the Children's
Television Act of 1990 ("Children's Television Act"), which, among other
provisions, limits the permissible amount of commercial matter in children's
programs and requires each television station to present "educational and
informational" children's programming. The FCC also has adopted renewal
processing guidelines effectively requiring television stations to broadcast an
average of three hours per week of children's educational programming. In
addition, the FCC has adopted rules that require television stations to
broadcast, over an 8 to 10 year transition period which commenced on January 1,
1998, increasing and set percentages of closed captioned programming. The
closed captioning rules are currently under reconsideration at the FCC.
Recent Developments, Proposed Legislation and Regulation
In January 1996, the Supreme Court refused to review lower court
decisions that upheld the FCC's restrictions on the broadcast of indecent
material and also upheld the agency's policy of imposing substantial monetary
sanctions on repeat offenders of the indecency rules. The rules require
stations to limit the airing of indecent programming to a 10 p.m.-6 a.m. "safe
harbor" period.
On March 13, 1998, the FCC approved a television programming rating
system developed by the television industry which will allow parents to
"black-out" programs that contain material they consider inappropriate for
children. On March 13, 1998, the FCC also adopted technical requirements for
the implementation of the so-called "v-chip technology" which will enable
parents to program television sets so that certain programming will be
inaccessible to children.
Congress and the FCC currently have under consideration, and may in
the future adopt, new laws, regulations and policies regarding a wide variety
of matters that could affect, directly or indirectly, the operation and
ownership of the Company's broadcast properties. In addition to the changes
and proposed changes noted above, such matters include, for example, the
license renewal process, spectrum use fees, political advertising rates,
potential restrictions on the advertising of certain products (beer and wine,
for example), the rules and policies to be applied in enforcing the FCC's equal
employment opportunity regulations, and additional closed captioning
requirements for emergency information. Other matters that could affect the
Company's broadcast properties include technological innovations and
developments generally affecting competition in the mass communications
industry, such as the recent initiation of direct broadcast satellite service,
the continued establishment of wireless cable systems and low power television
stations, and the advent of telephone company participation in the provision of
video programming service.
Distribution of Video Services by Telephone Companies. Recent actions
by Congress, the FCC and the courts all presage significant future involvement
in the provision of video services by telephone companies. The Company cannot
predict either the timing or the extent of such involvement. These developments
all relate to a former provision of the Communications Act that prohibited a
local telephone company from providing video programming directly to
subscribers within the company's telephone service areas. As applied by
government regulators historically, the former provision prevented telephone
companies from providing cable service over either the telephone network or a
separate cable system located within the telephone service area. That
provision has now been superseded by the 1996 Act, which provides for telephone
company entry into the distribution of video services either under the laws and
rules applicable to cable systems as operators of so-called "wireless cable
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systems", as common carriers or under new rules devised by the FCC for "open
video systems" subject to certain common carrier requirements.
The 1996 Act also eliminated the FCC's "video dialtone" ("VDT") rules,
which allowed telephone companies to provide a transport "platform" to multiple
video programmers (including, potentially, competing program packages) on a
non-discriminatory, common carrier basis. (The legislation does not affect any
VDT systems approved prior to enactment of the 1996 Act). Congress instead has
determined that telephone companies may offer video programming either as a
traditional cable operator, as a so-called "wireless cable" operator, as a
common carrier, or through operation of an "open video system." Although
Congress specifically preempted the FCC's VDT rules, the legislation's
directives for open video systems resemble the rules adopted or proposed for
VDT systems in certain respects. These include the requirements that (1) the
operator of an open video system offer carriage capacity to various video
programming providers under nondiscriminatory rates, terms, and conditions; and
(2) if demand for carriage exceeds the channel capacity of the open video
system, the operator generally is barred from devoting more than one-third of
the system's capacity to programming provided by itself or an affiliate.
The 1992 Cable Act. On October 5, 1992, Congress enacted the Cable
Television Consumer Protection and Competition Act of 1992 (the "1992 Cable
Act"). The FCC began implementing the requirements of the 1992 Cable Act in
1993, and final implementation proceedings remain pending regarding certain of
the rules and regulations previously adopted. Certain statutory provisions,
such as signal carriage, retransmission consent, and equal employment
opportunity requirements, have a direct effect on television broadcasting.
Other provisions are focused exclusively on the regulation of cable television
but can still be expected to have an indirect effect on the Company because of
the competition between over-the-air television stations and cable systems.
The signal carriage, or "must carry," provisions of the 1992 Cable Act
require cable operators to carry the signals of local commercial and
non-commercial television stations and certain low power television stations.
Systems with 12 or fewer usable activated channels and more than 300
subscribers must carry the signals of at least three local commercial
television stations. A cable system with more than 12 usable activated
channels, regardless of the number of subscribers, must carry the signals of
all local commercial television stations, up to one-third of the aggregate
number of usable activated channels of such a system. The 1992 Cable Act also
includes a retransmission consent provision that prohibits cable operators and
other multi-channel video programming distributors ("MVPDs") from carrying
broadcast signals without obtaining the station's consent in certain
circumstances. The "must carry" and retransmission consent provisions are
related in that a local television broadcaster, on a cable system-by-cable
system basis, must make a choice once every three years whether to proceed
under the "must carry" rules or to waive the right to mandatory but
uncompensated carriage and negotiate a grant of retransmission consent to
permit the cable system to carry the station's signal, in most cases in
exchange for some form of consideration from the cable operator. Cable systems
and other MVPDs must obtain retransmission consent to carry all distant
commercial stations other than "super stations" delivered via satellite.
On March 31, 1997, in a 5-4 decision, the U.S. Supreme court upheld
the constitutionality of the must-carry provisions of the 1992 Cable Act. As a
result, the regulatory scheme promulgated by the FCC to implement the
must-carry provisions of the 1992 Cable Act will remain in effect. Whether and
to what extent such must-carry rights will extend to the new digital television
signals (see below) to be broadcast by licensed television stations (including
those owned by the Company) over the next several years is still a matter to be
determined in a rulemaking proceeding likely to be initiated by the FCC in
1998.
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The 1992 Cable Act also codified the FCC's basic equal employment
opportunity ("EEO") rules and the use of certain EEO reporting forms currently
filed by radio and television broadcast stations. In addition, pursuant to the
1992 Cable Act's requirements, the FCC has adopted new rules providing for a
review of the EEO performance of each broadcast station at the mid-point of its
license term (in addition to renewal time). Such a review will give the FCC an
opportunity to evaluate whether the licensee is in compliance with the FCC's
processing criteria and notify the licensee of any deficiency in its employment
profile. Among the other rulemaking proceedings conducted by the FCC to
implement provisions of the 1992 Cable Act have been those concerning cable
rate regulation, cable technical standards, cable multiple ownership limits and
competitive access to programming.
The 1992 Cable Act was amended in several important respects by the
1996 Act. Most notably, as discussed above, the 1996 Act repealed the
cross-ownership ban between cable and telephone entities and the FCC's current
video dialtone rules. These provisions, among others, foreshadow significant
future involvement in the provision of video services by telephone companies.
The Company cannot predict the impact that telephone company entry into video
programming will have upon the broadcasting industry.
The 1996 Act also repealed or curtailed several cable-related
ownership and cross-ownership restrictions. For example, as noted above, the
1996 Act eliminated the broadcast network/cable cross-ownership limitations and
the statutory prohibition on TV/cable cross-ownership.
Advanced Television Service. On April 3, 1997, the FCC announced that
it had adopted rules that will allow television broadcasters to provide digital
television ("DTV") to consumers. The FCC also adopted a table of allotments
for DTV, which will provide eligible existing broadcasters with a second
channel on which to provide DTV service. On February 23, 1998, in response to
numerous petitions for reconsideration, the FCC announced its adoption of
orders affirming, with some modifications, the FCC's April 3, 1997 decisions.
The FCC's DTV allotment plan is based on the use of a "core" DTV spectrum
between channels 2-51. Ultimately, the FCC plans to recover the channels
currently used for analog broadcasting and will decide at a later date the use
of the spectrum ultimately recovered. Television broadcasters will be allowed
to use their channels according to their best business judgment. Such uses can
include multiple standard definition program channels, data transfer,
subscription video, interactive materials, and audio signals, although
broadcasters will be required to provide a free digital video programming
service that is at least comparable to today's analog service. Broadcasters
will not be required to air "high definition" programming or, initially, to
simulcast their analog programming on the digital channel. Affiliates of ABC,
CBS, NBC and FOX in the top 10 television markets will be required to be on the
air with a digital signal by May 1, 1999. Affiliates of those networks in
markets 11-30 will be required to be on the air with digital by November 1,
1999, and remaining commercial broadcasters by May 1, 2002. The FCC stated
that broadcasters will remain public trustees and that it will issue a notice
to determine the extent of broadcasters' future public interest obligations.
The Company will incur considerable expense in the conversion of DTV and is
unable to predict the extent of timing of consumer demand for any such DTV
services.
Digital Audio Radio Service. In January 1995, the FCC adopted rules to
allocate spectrum for satellite digital audio radio service ("DARS").
Satellite DARS systems potentially could provide for regional or nationwide
distribution of radio programming with fidelity comparable to compact disks.
An auction for satellite DARS spectrum was held in April 1997, and the
Commission has issued two authorizations to launch and operate satellite DARS
service. The FCC also has undertaken an inquiry into the terrestrial broadcast
of DARS signals, addressing, among other things, the need for spectrum outside
the existing FM band and the role of existing broadcasters. Further,
laboratory testing of a
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number of competing in-band on-channel DARS technologies, has been done with
many of the systems progressing to the next stage of field testing. The
Company cannot predict the impact of either satellite DARS service or
terrestrial DARS service on its business.
Direct Broadcast Satellite Systems. The FCC has authorized the
provision of video programming directly to home subscribers through
high-powered direct broadcast satellites ("DBS"). DBS systems currently are
capable of broadcasting as many as 175 channels of digital television service
directly to subscribers equipped with 18-inch receive dishes and decoders.
Currently, several entities, including DirecTV, Inc., an affiliate of Hughes
Communications Galaxy, United States Satellite Broadcasting Company and
EchoStar Satellite Corporation ("EchoStar"), provide DBS service to consumers
throughout the country. Other DBS operators hold licenses, but have not yet
commenced service.
Generally, the signal of local television broadcast stations are not
carried on DBS systems. In early 1997, however, EchoStar and ASkyB, a joint
venture of MCI Telecommunications and The News Corporation, proposed to launch
a 500-channel service, including local broadcast signals. Although the
proposed transaction collapsed, the desire among some DBS providers to
retransmit local television station signals continues. In response to a
petition by EchoStar, the United States Copyright Office has opened a
proceeding to determine whether local retransmission of television station
signals to subscribers within those stations' local markets is permissible
under a separate compulsory copyright license available to satellite
distributors. EchoStar has started distributing local signals to major
markets, via either off- air antenna to served households or via satellite to
unserved households.
Following the collapse of the deal to merge ASkyB into EchoStar, MCI
agreed to sell its DBS authorization to PRIMESTAR Partners, LP, a fixed
satellite service similar to DBS, in which the country's five largest cable
operators have interests. The transaction has been opposed and regulatory
approval for the deal is pending.
In February 1998, the FCC initiated a rulemaking proceeding to
consider streamlining rules for the DBS service and to consider whether rules
should be adopted to limit or prohibit the common ownership of cable and DBS
interests.
As part of the 1996 Act, Congress required the FCC to promulgate
regulations to prohibit restrictions that impair a viewer's ability to receive
video programming services through over-the-air reception devices, multipoint
distribution service, or direct broadcast satellite services. The legislation
also awarded the FCC exclusive jurisdiction to regulate the provision of
direct-to-home satellite services, and limited the authority of local
jurisdictions to tax direct-to-home satellite service providers.
The foregoing does not purport to be a complete summary of all the
provisions of the Communications Act, the 1996 Act, or the 1992 Cable Act, nor
of the regulations and policies of the FCC thereunder. Proposals for
additional or revised regulations and requirements are pending before and are
being considered by Congress and federal regulatory agencies from time to time.
Also, various of the foregoing matters are now, or may become, the subject of
court litigation, and the Company cannot predict the outcome of any such
litigation or the impact on its broadcast business.
Outdoor Advertising
The outdoor advertising industry is subject to governmental regulation
at the federal, state and local level. Federal law, principally the Highway
Beautification Act of 1965, encourages states, by the threat of withholding
federal appropriations for the construction and improvement of highways within
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such states, to implement legislation to restrict billboards located within 660
feet of, or visible from, interstate and primary highways except in commercial
or industrial areas. All of the states have implemented regulations at least as
restrictive as the Highway Beautification Act, including the prohibition on the
construction of new billboards adjacent to federally-aided highways and the
removal at the owner's expense and without any compensation of any illegal
signs on such highways. The Highway Beautification Act, and the various state
statutes implementing it, require the payment of just compensation whenever
governmental authorities require legally erected and maintained billboards to
be removed from federally-aided highways.
The states and local jurisdictions have, in some cases, passed
additional and more restrictive regulations on the construction, repair,
upgrading, height, size and location of, and, in some instances, content of
advertising copy being displayed on outdoor advertising structures adjacent to
federally-aided highways and to other thoroughfares. Such regulations, often in
the form of municipal building, sign or zoning ordinances, specify minimum
standards for the height, size and location of billboards. In some cases, the
construction of new billboards or relocation of existing billboards is
prohibited. Some jurisdictions also have restricted the ability to enlarge or
upgrade existing billboards, such as converting from wood to steel or from
non-illuminated to illuminated structures. From time to time governmental
authorities order the removal of billboards by the exercise of eminent domain.
Amortization of billboards has also been adopted in varying forms in
certain jurisdictions. Amortization permits the billboard owner to operate its
billboard as a non-conforming use for a specified period of time, after which
it must remove or otherwise conform its billboards to the applicable
regulations at its own cost without any compensation. Amortization and other
regulations requiring the removal of billboards without compensation have been
subject to litigation in state and federal courts and cases have reached
differing conclusions as to the constitutionality of these regulations. Some
local jurisdictions, within the Company's existing markets (Houston and San
Francisco) have adopted amortization ordinances. The Houston ordinance has been
the subject of litigation for over five years and is currently not being
enforced. The Company believes that its operations will not be materially
effected by this ordinance even if it is enforced. The Company's operations
have not been materially affected by the San Francisco amortization ordinances
since its signs conform to effective ordinances and state law currently
prevents the effectiveness of other ordinances which require removal of signs
without compensation. There can be no assurance that the Company will be
successful in negotiating acceptable arrangements in circumstances in which its
displays are subject to removal or amortization, and what effect, if any, such
regulations may have on the Company's operations.
In addition, the Company is unable to predict what additional
regulations may be imposed on outdoor advertising in the future. Legislation
regulating the content of billboard advertisements and additional billboard
restrictions have been introduced in Congress from time to time in the past.
Changes in laws and regulations affecting outdoor advertising at any level of
government could have a material adverse effect on the Company.
Tobacco and Alcohol Advertising
In August 1996, the U.S. Food and Drug Administration ("FDA") issued
final regulations governing certain marketing practices in the tobacco
industry, including a prohibition of tobacco product billboard advertisements
within 1,000 feet of schools and playgrounds and a requirement that all tobacco
product advertisements on billboards be in black and white and contain only
text. These regulations, which were due to become effective in August 1997,
were challenged by members of the tobacco and advertising industry in a lawsuit
brought in North Carolina federal district court. In that case, the court
upheld the authority of the FDA to regulate tobacco products by limiting access
of such products to persons under 18 years of age and by requiring tobacco
manufacturers to label such products in accordance with FDA regulations.
Nevertheless, the court struck down the FDA restrictions on the
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promotion and advertising of tobacco products. Both industry and the FDA have
appealed this decision. Arguments before the Fourth Circuit were heard on
August 11, 1997, and it is unclear what action an appellate court will take in
this matter. To date, the FDA's regulations covering promotion and advertising
of tobacco products have not become effective and no decision by the court has
been reached. On a pro forma basis assuming the Eller Media Acquisition
occurred on January 1, 1997, less than 12% and 5% of the Company's outdoor
advertising 1997 net revenues were derived from tobacco and alcohol
advertising, respectively.
Regardless of whether the FDA is found to have jurisdiction over
promotion and advertising of tobacco, and thus have the ability to place limits
on billboard advertising, it appears that the FTC has begun to take regulatory
action in this area. The FTC has wide-ranging authority over advertising
practices, and it is within its regulatory authority to investigate unfair and
deceptive trade practices, including advertising, pertaining to FDA-regulated
products. In May 1997, the FTC charged the R.J. Reynolds Company ("R.J.
Reynolds") with unfair trade practices regarding the promotion of tobacco
products to children through the use of the "Joe Camel" advertising campaign.
The FTC sought an order that would, among other things, prohibit R.J. Reynolds
from using the "Joe Camel" campaign to advertise to children and require R.J.
Reynolds to institute corrective advertising to discourage persons under age 18
from smoking. In July 1997, it was reported that R.J. Reynolds decided to
terminate the "Joe Camel" campaign. The remaining issues in the litigation are
still pending. While the action against R.J. Reynolds was not focused directly
on billboard advertising, because of increasing regulatory and political
pressure it is possible that the FTC will take further action to limit the
content and placement of outdoor advertising, including, without limitation,
the content and placement of outdoor advertising relating to the sale of
tobacco products to children.
Outdoor advertising of tobacco products also may be affected by state
law or city regulations. For example, California and Texas have passed
legislation to restrict tobacco billboard advertising near locations frequented
by children. The Texas law levies a tax on tobacco billboards to raise money
for tobacco education programs. As a result of law suits brought in Texas and
Florida, several tobacco companies have entered settlement agreements with
these respective state governments. Part of the settlement agreement in Texas
includes the elimination of billboard and other outdoor advertising of tobacco
products. This agreement may be superseded by the national settlement agreement
pending before Congress. The settlement agreement in Florida also calls for the
discontinuation of all billboard advertising for tobacco products in the state.
The Florida ban on billboard advertising reportedly went into effect on
February 9, 1998. Other states are considering state-wide bans on tobacco
billboard advertising or may do so in the future.
With regard to city governments, in 1995, the Court of Appeals for the
Fourth Circuit upheld the validity of a Baltimore, Maryland city ordinance
prohibiting the placement of outdoor advertisements of cigarettes in publicly
visible locations, such as billboards, signboards and sides of buildings.
Subsequently, the United States Supreme Court declined to review an appeal of
this case. Following the Baltimore ordinance, several city governments have
introduced legislation to ban outdoor tobacco advertising near schools and
other locations where children are likely to assemble or to ban tobacco
billboard advertising citywide. The City of Chicago, Illinois where the Company
transacts business, has recently enacted a ban on tobacco and alcohol billboard
advertising in certain parts of the city. The Chicago ordinance is being
challenged in court on constitutional free-speech grounds. In addition, the
City Council of New York City, New York recently passed a bill which bars
outdoor tobacco advertising within 1,000 feet of schools, playgrounds, day care
centers, youth centers and amusement arcades.
Some cities are proposing even broader restrictions. For instance, a
San Francisco, California Board of Supervisors committee recently proposed a
complete ban on outdoor tobacco advertising, including a ban on billboards,
kiosks and even private business window displays. Milwaukee, Wisconsin has
proposed an ordinance that would ban outdoor advertising for tobacco products
in most public
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places, except interstate highways, industrial areas, and sport and convention
sites. The Milwaukee ordinance also would prohibit convenience stores from
displaying tobacco-related posters in windows and would limit tobacco-related
signs inside stores to black and white ads with no artwork.
County governments also have taken action in this area. A local
council in Anne Arundel County, Maryland voted to ban most tobacco billboard
advertising in the county. Similarly, Clark and Skamania counties in Washington
State have issued regulations prohibiting tobacco billboard advertising from
areas that youths frequent, such as schools and parks. Finally, King County,
Washington and a company that owns almost all of the billboard display faces in
the county have entered into an agreement whereby the company will voluntarily
discontinue all tobacco advertising on billboards throughout the county. It is
likely that other state, city, or local governments have or will pass similar
ordinances to limit outdoor advertising of tobacco products in the future.
In addition to the decisions mentioned above, certain cigarette
manufacturers who are defendants in numerous class action suits throughout the
U.S. have proposed an out of court settlement with respect to such suits that
includes restrictions on billboard advertising by these and other cigarette
manufacturers. It has been reported that, as a part of the proposed settlement,
the tobacco industry will agree to a complete ban on all outdoor advertising,
such as on billboards, in stadiums, and in store window displays. The proposed
settlement agreement is pending before Congress. President Clinton and
Congressional leaders have met to discuss bipartisan cooperation on tobacco
control legislation in an effort to work out a compromise. It appears that
restrictions on tobacco billboard advertising may be implemented through
legislation, although some have argued that it would be unconstitutional for
Congress to impose such restrictions without the consent of the tobacco
industry. If legislation is not enacted, it is likely that restrictions on
billboard advertising nevertheless will be achieved through consensual
agreement between the tobacco industry and state and federal governments.
There can be no assurance as to the effect of these regulations,
potential legislation or settlement discussions on the Company's business and
on their net revenues and financial position. A reduction in billboard
advertising by the tobacco industry would cause an immediate reduction in the
Company's direct revenue from such advertisers and would simultaneously
increase the available space on the existing inventory of billboards in the
outdoor advertising industry. This could in turn result in a lowering of
outdoor advertising rates in each of the Company's outdoor advertising markets
or limit the ability of industry participants to increase rates for some period
of time.
Any regulatory change or settlement agreement restricting the
Company's or the tobacco industry's ability to utilize outdoor advertising for
tobacco products could have a material adverse effect on the Company.
Antitrust Matters
An important element of the Company's growth strategy involves the
acquisition of additional radio and television stations and outdoor advertising
display faces, many of which are likely to require preacquisition antitrust
review by the Federal Trade Commission (the "FTC") and the Antitrust Division
of the United States Department of Justice (the "Antitrust Division").
Following passage of the 1996 Act, the Antitrust Division has become more
aggressive in reviewing proposed acquisitions of radio stations and radio
station networks, particularly in instances where the proposed acquirer already
owns one or more radio stations in a particular market and the acquisition
involves another radio station in the same market. Recently, the Antitrust
Division has obtained consent decrees requiring an acquirer to dispose of at
least one radio station in a particular market where the acquisition otherwise
would have resulted in a concentration of market share by the acquirer. There
can be no assurance that the Antitrust Division or the FTC will not seek to bar
the Company from acquiring additional radio stations or outdoor
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advertising display faces in a market where the Company's existing stations or
display faces already have a significant market share.
Environmental Matters
As the owner, lessee or operator of various real properties and
facilities, the Company is subject to various federal, state and local
environmental laws and regulations. Historically, compliance with such laws
and regulations has not had a material adverse effect on the Company's
business. There can be no assurance, however, that compliance with existing or
new environmental laws and regulations will not require the Company to make
significant expenditures in the future.
INTERNATIONAL BUSINESS RISKS AND EXCHANGE RATE RISK
The Company currently derives a portion of its earnings from
international operations. The risks of doing business in foreign countries
include potential adverse changes in the diplomatic relations of foreign
countries with the United States, hostility from local populations, adverse
effects of currency exchange controls, restrictions on the withdrawal of
foreign investment and earnings, government policies against businesses owned
by non-nationals, expropriations of property, the potential instability of
foreign governments and the risk of insurrections that could result in losses
against which the Company is not insured. The Company's international
operations also are subject to economic uncertainties, including, among others,
risks of renegotiation or modification of existing agreements or arrangements
with governmental authorities, foreign exchange restrictions and changes in
taxation structure.
A portion of the Company's earnings are derived from international
operations and a portion of the Company's assets are invested overseas.
Accordingly, fluctuations in the values of foreign currencies and in the value
of the U.S. dollar may cause currency translation losses for the Company or
reduced earnings, or both. The Company cannot predict the effect of exchange
rate fluctuations upon future operating results.
CERTAIN FORWARD-LOOKING STATEMENTS
This report, including the documents incorporated by reference,
contain forward-looking statements within the meaning of Section 27A of the
Securities Act of 1933, as amended (the "1933 Act"). Discussions containing
such forward- looking statements may be found in the material set forth under
"Business," as well as within the report generally. In addition, when used in
this report, the words "believes," "anticipates," "expects" and similar
expressions are intended to identify forward-looking statements. Such
statements are subject to a number of risks and uncertainties. Actual results
in the future could differ materially from those described in the
forward-looking statements as a result of the risk factors set forth herein and
the matters set forth in this report generally. The Company undertakes no
obligation to publicly release the results of any revisions to these
forward-looking statements that may be made to reflect any future events or
circumstances.
ITEM 2. PROPERTIES
The Company's corporate headquarters is in San Antonio, Texas. The
lease agreement for the approximately 12,000 square feet of office space in San
Antonio expires on February 28, 2001.
The types of properties required to support each of the Company's
radio and television stations and outdoor advertising branches listed in Item 1
above include offices, studios, transmitter sites, antenna sites and production
facilities. A radio or television station's studios are generally housed with
its offices in
27
<PAGE> 28
downtown or business districts. A radio or television station's transmitter
sites and antenna sites generally are located in a manner that provides maximum
market coverage. An outdoor branch and production facility is generally
located in an industrial/warehouse district.
The studios and offices of the Company's radio and television stations
and outdoor advertising branches are located in leased or owned facilities.
These leases generally have expiration dates that range from one to twenty
years. The Company either owns or leases its transmitter and antenna sites.
These leases generally have expiration dates that range from five to fifteen
years. The Company does not anticipate any difficulties in renewing those
leases that expire within the next several years or in leasing other space, if
required. The Company owns substantially all of the equipment used in its
broadcasting and outdoor businesses.
The Company owns or has permanent easements on relatively few parcels
of real property that serve as the sites for its outdoor displays. The
Company's remaining outdoor display sites are leased. The Company's leases are
for varying terms ranging from month-to-month or year-to-year to terms of ten
years or longer, and many provide for renewal options. There is no significant
concentration of displays under any one lease or subject to negotiation with
any one landlord. The Company believes that an important part of its
management activity is to negotiate suitable lease renewals and extensions.
As noted in Item 1 above, as of December 31, 1997, the Company owns or
programs 173 radio stations and 18 television stations, and owns or leases
approximately 57,660 outdoor advertising display faces in various markets
throughout the United States. See "Business -- Industry Segments." Therefore,
no one property is material to the Company's overall operations. The Company
believes that its properties are in good condition and suitable for its
operations.
ITEM 3. LEGAL PROCEEDINGS
The Company from time to time becomes involved in various claims and
lawsuits incidental to its business, including defamation actions. In the
opinion of management, after consultation with counsel, any ultimate liability
arising out of currently pending claims and lawsuits will not have a material
effect on the financial condition or operations of the Company.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
There were no matters submitted to a vote of security holders in the
fourth quarter of fiscal year 1997.
28
<PAGE> 29
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The information required by Item 5 is included in "Note M: Quarterly
Results of Operations" to the Company's Consolidated Financial Statements in
the Company's Annual Report to Shareholders and is incorporated herein by
reference. There were approximately 466 shareholders of record as of March 6,
1998.
Presently, the Company expects to retain its earnings for the
development and expansion of its business and does not anticipate paying cash
dividends in 1998. However, any future decision by the Board of Directors to
pay cash dividends will depend, among other factors, the Company's earnings,
financial position, capital requirements and loan covenant restrictions. The
Company's current bank credit agreement allows for the payment of dividends
subject to certain loan covenant restrictions. There are no restrictions on
dividends payable wholly in capital stock of the Company. At March 6, 1998 the
market price of the Company's Common Stock was $94.25 per share.
ITEM 6. SELECTED FINANCIAL DATA
The information required by Item 6 is incorporated by reference to the
information set forth under the caption "Selected Financial Data" in the
Company's Annual Report to Shareholders.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
The information required by Item 7 is included in the information set
forth under the caption "Management's Discussion and Analysis of Financial
Condition and Results of Operations" in the Company's Annual Report to
Shareholders and is incorporated herein by reference.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
The information required by Item 7A. is included in the information
set for the under the caption "Quantitative and Qualitative Disclosures about
Market Risk" in the Company's Annual Report to Shareholders and is incorporated
herein by reference.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The information required by Item 8 and the Report of Independent
Auditors is included in the "1997 Financial Report" in the Company's Annual
Report to Shareholders and is incorporated herein by reference.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
Not Applicable
29
<PAGE> 30
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The Company believes that one of its most important assets is its
experienced management team. With respect to its operations, general managers
are responsible for the day-to-day operation of their respective broadcasting
stations or outdoor branch locations. The Company believes that the autonomy of
its general managers enables it to attract top quality managers capable of
implementing the Company's aggressive marketing strategy and reacting to
competition in the local markets. Most general managers have stock options in
the Company. As an additional incentive, a portion of each manager's
compensation is related to the performance of the profit centers for which he
or she is responsible. In an effort to monitor expenses, corporate management
routinely reviews staffing levels and operating costs. Combined with the
centralized accounting functions, this monitoring enables the Company to
control expenses effectively. Corporate management also advises local general
managers on broad policy matters and is responsible for long-range planning,
allocating resources, and financial reporting and controls.
The information required by Item 10 with respect to the directors and
nominees for election to the Board of Directors of the Company is incorporated
by reference to the information set forth under the caption "Election of
Directors" and "Compliance With Section 16(A) of the Exchange Act," in the
Company's Definitive Proxy Statement dated March 24, 1998.
The following information is submitted with respect to the executive
officers of the Company as of December 31, 1997.
<TABLE>
<CAPTION>
Age on
December 31, Officer
Name 1997 Position Since
<S> <C> <C> <C>
L. Lowry Mays 62 Chairman/Chief Executive Officer 1972
Mark P. Mays 34 President 1989
Randall T. Mays 32 Executive Vice President/Chief Financial Officer 1993
Herbert W. Hill, Jr. 38 Senior Vice President/Chief Accounting Officer 1989
Kenneth E. Wyker 36 Vice President/Legal Affairs 1993
S. Houston Lane IV 25 Vice President/Finance 1997
J. Stanley Webb 54 Senior Vice President/Radio Operations 1984
George Sosson 47 Senior Vice President/Radio Operations 1996
James D. Smith 49 Senior Vice President/Capital Asset Management 1984
Dave Ross 47 Vice President/GM WHYI-FM, WBGG-FM 1994
William R. Riordan 40 Exec. Vice President/COO Clear Channel Television 1990
Karl Eller 69 Chief Executive Officer - Eller Media 1997
Scott Eller 41 President - Eller Media 1997
Paul Meyer 55 Executive Vice President/
General Counsel - Eller Media 1997
Timothy Donmoyer 32 Executive Vice President/
Chief Financial Officer - Eller Media 1997
</TABLE>
The officers named above serve until the next Board of Directors
meeting immediately following the Annual Meeting of Shareholders.
Mr. L. Mays is the founder of the Company and was the President and
Chief Executive Officer of the Company and its predecessor from 1972 to
February 1997. Since that time, Mr. L. Mays has
30
<PAGE> 31
served as Chairman and Chief Executive Officer of the Company. He has been a
director of the Company since its inception.
Mr. M. Mays was Senior Vice President of Operations from February 1993
until his appointment as President in February 1997. Prior thereto he was Vice
President and Treasurer of the Company for the remainder of the relevant five-
year period.
Mr. R. Mays was appointed Executive Vice President/Chief Financial
Officer in February 1997. Prior thereto, he was Vice President/Treasurer since
he joined the Company in January 1993. Prior thereto, he was an associate for
Goldman Sachs & Co. for the remainder of the relevant five-year period.
Mr. H. Hill was appointed Senior Vice President/Chief Accounting
Officer in February 1997. Prior thereto, he was the Vice President/Controller
of the Company since January 1989 and Principal Financial Officer since June
1991
Mr. K. Wyker was appointed Senior Vice President for Legal Affairs in
February 1997. Prior thereto he was Vice President/General Counsel since he
joined the Company in July 1993. Prior thereto, he was Corporate Counsel at
Greater Media for the remainder of the relevant five-year period.
Mr. H. Lane was appointed Vice President/Finance in February 1997.
Prior thereto, he was an analyst with Credit Suisse First Boston from July 1995
to February 1997. Prior thereto, he was a student at the University of Texas
for the remainder of the relevant five-year period.
Mr. J. Stanley Webb was appointed Senior Vice President/Radio
Operations in May, 1996. Prior thereto, he was Vice President/General Manager
of the Company's radio stations in Austin, Texas for the remainder of the
relevant five-year period.
Mr. George Sosson was appointed Senior Vice President/Radio Operations
in August 1996. He was an equity investor and managing General Partner of
Radio Equity Partners, LP from 1993 to the time he joined the Company. Prior
thereto, he was Vice President responsible for the operations of all of the FM
radio stations owned by CBS for the remainder of the relevant five-year period.
Mr. J. Smith was appointment as Senior Vice President/Capital
Management in January 1997. Prior thereto, he was Vice President/General
Manager of the Company's radio stations in Tulsa, Oklahoma for the remainder of
the relevant five-year period.
Mr. D. Ross, was elected as an officer of the Company in October 1994.
Prior thereto, he was Executive Vice President and General Manager of WHYI-FM
with Metroplex Communications, Inc. for the remainder of the relevant five-year
period.
Mr. W. Riordan was appointed Executive Vice President and Chief
Operating Officer of Clear Channel Television, Inc. in November 1995. Prior
thereto, he was General Manager of WFTC-TV from August 1993 to November 1995.
Prior thereto, he served as General Manager of KSAS-TV for the relevant
five-year period.
Mr. K. Eller was appointed Chief Executive Officer - Eller Media in
April 1997. Prior thereto, he was the Chief Executive Officer of Eller Media
Company from August 1995 to April 1997 and he was the Chief Executive Officer
of Eller Outdoor Advertising for the remainder of the relevant five-year
period.
Mr. S. Eller was appointed President - Eller Media in April 1997.
Prior thereto, he was the President of Eller Media Company from August 1996 to
April 1997. Prior thereto, he as the Executive
31
<PAGE> 32
Vice President of Eller Media Company from August 1995 to August 1996. Prior
thereto, he was the Executive Vice President of Eller Outdoor Advertising for
the remainder of the relevant five-year period
Mr. P. Meyer was appointed Executive Vice President/General Counsel -
Eller Media in April 1997. Prior thereto, he was Executive Vice President and
General Counsel of Eller Media Company from April 1996 to April 1997. Prior
thereto, he was Managing Partner of Meyer, Hendricks, Bivens & Moyes, LLC., and
its predecessor law firms for the remainder of the relevant five-year period.
Mr. T. Donmoyer was appointed Executive Vice President/Chief Financial
Officer - Eller Media in April 1997. Prior thereto, he was Executive Vice
President and Chief Financial Officer of Eller Media Company from October 1995
to April 1997. Prior thereto, he was an Associate Director of Bear, Stearns &
Co., Inc. for the remainder of the relevant five-year period.
There is no family relationship between any of the executive officers
of the Company except that Mark P. Mays, President/COO and Randall T. Mays,
Executive Vice President/CFO, are the sons of the Chairman/CEO, L. Lowry Mays.
In addition, Scott Eller, President of Eller Media is the son of the Chief
Executive Officer of Eller Media, Karl Eller.
ITEM 11. EXECUTIVE COMPENSATION
The information required by Item 11 is incorporated by reference to
the information set forth under the caption "Executive Compensation" in the
Company's Definitive Proxy Statement dated March 24, 1998.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information required by Item 12 is incorporated by reference to
the Company's Definitive Proxy Statement dated March 24, 1998 under the
headings "Security Ownership of Certain Beneficial Owners and Management."
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required by Item 13 is incorporated by reference to
the Company's Definitive Proxy Statement dated March 24, 1998 under the heading
"Certain Transactions."
32
<PAGE> 33
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULE AND REPORTS ON FORM 8-K
(a)1. Financial Statements.
The following consolidated financial statements included in the Company's
Annual Report to Shareholders are incorporated by reference in Item 8.
Consolidated Balance Sheets as of December 31, 1997 and 1996
Consolidated Statements of Earnings for the Years Ended December 31, 1997, 1996
and 1995.
Consolidated Statements of Changes in Shareholders' Equity for the
Years Ended December 31, 1997, 1996 and 1995.
Consolidated Statements of Cash
Flows for the Years Ended December 31, 1997, 1996 and 1995.
Notes to Consolidated Financial Statements
(a)2. Financial Statement Schedule.
The following financial statement schedule of the Company for the years ended
December 31, 1997, 1996 and 1995 and related report of independent auditors are
filed as part of this report and should be read in conjunction with the
consolidated financial statements.
33
<PAGE> 34
SCHEDULE II
VALUATION AND QUALIFYING ACCOUNTS
Allowance for doubtful accounts
In thousands of dollars
<TABLE>
<CAPTION>
Charges
Balance at to Costs, Write-off Balance
Beginning Expenses of Accounts at end of
Description of period and other Receivable Period
----------- ---------- --------- ---------- ---------
<S> <C> <C> <C> <C>
$1,004(1)
2,352
Year ended
December 31,
1995 $3,118 $3,356 $2,664 $3,810
------- ------- ------- -------
$2,880(1)
2,376
Year ended
December 31,
1996 $3,810 $5,256 $2,999 $6,067
------- ------- ------- -------
$4,251(1)
4,006
Year ended
December 31,
1997 $6,067 $8,257 $4,474 $9,850
------- ------- ------- -------
</TABLE>
(1) Allowance for accounts receivable acquired in acquisitions net
of deletions related to dispositions.
34
<PAGE> 35
SCHEDULE II
VALUATION AND QUALIFYING ACCOUNTS
Accumulated Amortization of Intangibles
In thousands of dollars
<TABLE>
<CAPTION>
Charges
Balance at to Costs, Balance
Beginning Expenses at end of
Description of period and other Deletions (1) Period
----------- ---------- --------- ------------- ---------
<S> <C> <C> <C> <C>
Year ended
December 31,
1995 $33,862 $18,389 $ 59 $52,192
------- ------- ------- -------
Year ended
December 31,
1996 $52,192 $26,454 $78,646
------- ------- ------- -------
Year ended
December 31,
1995 $78,646 $62,507 $ 87 $141,066
------- ------- ------- -------
</TABLE>
(1) Related to disposition of stations and fully amortized intangible assets.
All other schedules for which provision is made in the applicable accounting
regulation of the Securities and Exchange Commission are not required under the
related instructions or are inapplicable, and therefore have been omitted.
(a)3. Exhibits.
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
<S> <C>
2.1 Agreement and Plan of Merger dated as of October 23, 1997, among Universal Outdoor Holdings,
Inc., the Company, and UH Merger Sub, Inc. (incorporated by reference to the exhibits of the
Company's Current Report on Form 8-K dated November 3, 1997).
3.1 Current Articles of Incorporation of the Company (incorporated by reference to the exhibits of
the Company's Registration Statement on Form S-3 (Reg. No. 333-33371) dated September 9, 1997).
3.2 Second Amended and Restated Bylaws of the Company (incorporated by reference to the exhibits of
the Company's Registration Statement on Form S-3 (Reg. No. 333-33371) dated September 9, 1997).
</TABLE>
35
<PAGE> 36
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
<S> <C>
4.1 Buy-Sell Agreement by and between Clear Channel Communications, Inc., L. Lowry Mays, B. J.
McCombs, John M. Schaefer and John W. Barger, dated May 31, 1977 (incorporated by reference to
the exhibits of the Company's Registration Statement on Form S-1 (Reg. No. 33-289161) dated
April 19, 1984).
4.2 Senior Indenture dated October 1, 1997, by and between Clear Channel Communications, Inc. and
The Bank of New York as Trustee (incorporated by reference to exhibit 4.2 of the Company's
Quarterly Report on Form 10-Q for the quarter ended September 30, 1997).
10.1 Incentive Stock Option Plan of Clear Channel Communications, Inc. as of January 1, 1984
(incorporated by reference to the exhibits of the Company's Registration Statement on Form S-1
(Reg. No. 33-289161) dated April 19, 1984).
10.2 Australia Radio Network Shareholders Agreement dated February 1995 by and between APN
Broadcasting Investments Pty Ltd, Australian Provincial Newspapers Holdings Limited, APN
Broadcasting Pty Ltd, Clear Channel Radio, Inc. and Clear Channel Communications, Inc.
(incorporated by reference to the exhibits of the Company's Current Report on Form 8-K dated
May 26, 1995).
10.3 Clear Channel Communications, Inc. 1994 Incentive Stock Option Plan (incorporated by reference
to the exhibits of the Company's Registration Statement on Form S-8 dated November 20, 1995).
10.4 Clear Channel Communications, Inc. 1994 Nonqualified Stock Option Plan (incorporated by
reference to the exhibits of the Company's Registration Statement on Form S-8 dated November
20, 1995).
10.5 Clear Channel Communications, Inc. Directors' Nonqualified Stock Option Plan (incorporated by
reference to the exhibits of the Company's Registration Statement on Form S-8 dated November
20, 1995).
10.6 Option Agreement for Officer (incorporated by reference to the exhibits of the Company's
Registration Statement on Form S-8 dated November 20, 1995).
10.7 Asset Purchase Agreement, dated as of May 9, 1996, by and among REP New England G.P., REP
Southeast G.P., REP Ft. Myers G.P., REP Rhode Island G.P., REP Florida G.P., REP WHYN G.P., REP
WWBB G.P., S.E. Licensee G.P., REP WCKT G.P., RI Licensee G.P., Radio Station Management, Inc.,
Clear Channel Radio, Inc., and Clear Channel Radio Licenses, Inc. (incorporated by reference to
the exhibits of the Company's Current Report on Form 8-K dated June 5, 1996).
10.8 Tender Offer Agreement dated June 1, 1996 by and between Clear Channel Radio, Inc. and Heftel
Broadcasting Corporation (incorporated by reference to the exhibits of the Company's
Registration Statement on Form S-3 dated June 14, 1996).
10.9 Stock Purchase Agreement dated June 1, 1996 by and between Clear Channel Radio, Inc. and Heftel
Broadcasting Corporation dated June 1, 1996 (incorporated by reference to the exhibits of the
Company's Registration Statement on Form S-3 dated June 14, 1996).
</TABLE>
36
<PAGE> 37
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
<S> <C>
10.10 Employment Agreement dated February 10, 1997 by and between Clear Channel Communications, Inc.
and L. Lowry Mays (incorporated by reference to exhibit 10.12 of the Company's Annual Report on
Form 10-K dated March 31, 1997).
10.11 Stock Purchase Agreement dated February 25, 1997 by and among Clear Channel Communications,
Inc., Eller Media Corporation and the Stockholders of Eller Media Corporation (incorporated by
reference to the exhibits of the Company's Annual Report on Form 10-K dated March 31, 1997).
10.12 Amendment to Stock Purchase Agreement dated April 10, 1997 by and between Clear Channel
Communications, Inc., Eller Media Corporation and the Stockholders of Eller Media Corporation
(incorporated by reference to the exhibits of the Company's Current Report on Form 8-K dated
April 17, 1997).
10.13 Registration Rights Agreement dated April 10, 1997 by and between Clear Channel Communications,
Inc. and the Stockholders of Eller Media Corporation (incorporated by reference to the exhibits
of the Company's Current Report on Form 8-K dated April 17, 1997).
10.14 Stockholders Agreement dated April 10, 1997 by and between Clear Channel Communications, Inc.
and EM Holdings LLC (incorporated by reference to the exhibits of the Company's Current Report
on Form 8-K dated April 17, 1997).
10.15 Escrow Agreement dated April 10, 1997 by and between Clear Channel Communications, Inc., EM
Holdings LLC and Chase Trust Company of California (incorporated by reference to the exhibits
of the Company's Current Report on Form 8-K dated April 17, 1997).
10.16 Third Amended and Restated Credit Agreement by and among Clear Channel Communications, Inc.,
NationsBank of Texas, N.A., as administrative lender, the First National Bank of Boston, as
documentation agent, the Bank of Montreal and Toronto Dominion (Texas), Inc., as co-syndication
agents, and certain other lenders dated April 10, 1997 (the "Credit Facility") (incorporated by
reference to the exhibits of the Company's Amendment No. 1 to the Registration Statement on
Form S-3 (Reg. No. 333-25497) dated May 9, 1997).
10.17 Asset Purchase Agreement dated August 25, 1997 by and among Paxson Communications Corporation,
Clear Channel Metroplex, Inc., Clear Channel Metroplex Licenses, Inc. and Clear Channel
Communications, Inc. (incorporated by reference to the exhibits of the Company's Registration
Statement on Form S-3 (Reg. No. 333-33371) dated September 9, 1997).
10.18 Asset Purchase Agreement dated August 25, 1997 by and among Paxson Communications Corporation,
L. Paxson, Inc., Clear Channel Metroplex, Inc., Clear Channel Metroplex Licenses, Inc. and
Clear Channel Communications, Inc. (incorporated by reference to the exhibits of the Company's
Registration Statement on Form S-3 (Reg. No. 333-33371) dated September 9, 1997).
</TABLE>
37
<PAGE> 38
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
<S> <C>
10.19 First Amendment to the Credit Facility dated September 17, 1997 (incorporated by reference to
exhibit 4.1 to the Company's Current Report on Form 8-K filed October 14, 1997).
10.20 Voting Agreement dated as of October 23, 1997 by and among Clear Channel Communications, Inc.
and Daniel L. Simon (incorporated by reference to the exhibits of the Company's Current Report
on Form 8-K dated November 3, 1997).
10.21 Voting Agreement dated as of October 23, 1997 by and among Clear Channel Communications, Inc.
and Daniel L. Simon (incorporated by reference to the exhibits of the Company's Current Report
on Form 8-K dated November 3, 1997).
10.22 Resale Agreement dated as of October 23, 1997 by and among Clear Channel Communications, Inc.
and Brian T. Clingen (incorporated by reference to the exhibits of the Company's Registration
Statement on Form S-4 (Reg. No. 333-43747) dated January 5, 1998).
10.23 Second Amendment to the Credit Facility dated November 7, 1997.
10.24 Third Amendment to the Credit Facility dated December 29, 1997.
13 Annual Report to Shareholders.
21 Subsidiaries of the Company.
23.1 Consent of Ernst & Young LLP.
23.2 Consent of KPMG.
23.3 Consent of KPMG Peat Marwick LLP.
24 Power of Attorney (included on signature page)
27 Financial Data Schedule
99.1 Report of Independent Auditors on Financial Statement Schedule - Ernst & Young LLP.
99.2 Report of Independent Auditors - KPMG
99.3 Report of Independent Auditors - KPMG Peat Marwick LLP
</TABLE>
(b) Reports on Form 8-K.
The Company filed a report on Form 8-K dated October 14, 1997 which
reported that the Company had amended its Third Amended and Restated Credit
Agreement to eliminate the requirement that the Company's Restricted
Subsidiaries execute Subsidiary Guarantees.
The Company filed a report on Form 8-K dated October 31, 1997 which
reported that the Company had entered into a Agreement and Plan of Merger with
Universal Outdoor Holdings, Inc.
38
<PAGE> 39
pursuant to which a wholly-owned subsidiary of the Company would be merged with
and into Universal Outdoor Holdings, Inc. with Universal Outdoor Holdings, Inc.
surviving the merger and becoming a wholly-owned subsidiary of the Company.
The Universal Merger is described under the caption "Recent Developments" in
Item 1 of Part I of this Form 10-K.
The Company filed a report on Form 8-K dated December 22, 1997 which
reported the Company's acquisition of substantially all of the assets of 43
radio stations, six radio news and sports networks and approximately 350
outdoor advertising display faces owned by Paxson Communications Corporation in
the states of Florida and Tennessee. The report included the Combined Balance
Sheet of Paxson Radio, a division of Paxson Communications Corporation ("Paxson
Radio"), at December 31, 1996, and the related Combined Statement of Operations
and Divisional Equity and Combined Statement of Cash Flows for the year ended
December 31, 1996, with a Report of Independent Certified Public Accountants
dated November 3, 1997. Also included were unaudited quarterly financial
information including the Combined Balance Sheet of Paxson Radio at September
30, 1997, and the related Combined Statement of Operations and Divisional
Equity and Combined Statement of Cash Flows for the nine months ended September
30, 1997 and 1996. Also included were an unaudited pro forma condensed
consolidated balance sheet of the Company and its subsidiaries at December 31,
1996, unaudited pro forma condensed consolidated statements of operations of
the Company and its subsidiaries for the year ended December 31, 1996 and the
nine months ended September 30, 1997. The Paxson Radio Acquisition is
described under the caption "Recent Developments" in Item 1 of Part I of this
Form 10-K.
39
<PAGE> 40
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized, on March 30, 1998.
CLEAR CHANNEL COMMUNICATIONS, INC.
By: /s/ L. Lowry Mays
L. Lowry Mays
Chairman and Chief Executive
Officer
Each person whose signature appears below authorizes L. Lowry Mays,
Mark P. Mays, Randall T. Mays and Herbert W. Hill, Jr., or any one of them,
each of whom may act without joinder of the others, to execute in the name of
each such person who is then an officer or director of the Registrant and to
file any amendments to this annual report on Form 10-K necessary or advisable
to enable the Registrant to comply with the Securities Exchange Act of 1934, as
amended, and any rules, regulations and requirements of the Securities and
Exchange Commission in respect thereof, which amendments may make such changes
in such report as such attorney-in-fact may deem appropriate.
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
NAME TITLE DATE
---- ----- ----
<S> <C> <C>
/S/ L. Lowry Mays Chairman, Chief Executive Officer and Director March 30, 1998
L. Lowry Mays
/S/ Randall T. Mays Senior Vice President and Chief Financial March 30, 1998
Randall T. Mays Officer (Principal Financial Officer)
/S/ Herbert W. Hill, Jr. Senior Vice President and Chief Accounting March 30, 1998
Herbert W. Hill, Jr. Officer (Principal Accounting Officer)
/S/ B. J. McCombs Director March 30, 1998
B. J. McCombs
/S/ Allan D. Feld Director March 30, 1998
Alan D. Feld
/S/ Theodore H. Strauss Director March 30, 1998
Theodore H. Strauss
/S/ John H. Williams Director March 30, 1998
John H. Williams
/S/ Karl Eller Director March 30, 1998
Karl Eller
</TABLE>
40
<PAGE> 41
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
<S> <C>
2.1 Agreement and Plan of Merger dated as of October 23, 1997, among Universal Outdoor Holdings,
Inc., the Company, and UH Merger Sub, Inc. (incorporated by reference to the exhibits of the
Company's Current Report on Form 8-K dated November 3, 1997).
3.1 Current Articles of Incorporation of the Company (incorporated by reference to the exhibits of
the Company's Registration Statement on Form S-3 (Reg. No. 333-33371) dated September 9, 1997).
3.2 Second Amended and Restated Bylaws of the Company (incorporated by reference to the exhibits of
the Company's Registration Statement on Form S-3 (Reg. No. 333-33371) dated September 9, 1997).
4.1 Buy-Sell Agreement by and between Clear Channel Communications, Inc., L. Lowry Mays, B. J.
McCombs, John M. Schaefer and John W. Barger, dated May 31, 1977 (incorporated by reference to
the exhibits of the Company's Registration Statement on Form S-1 (Reg. No. 33-289161) dated
April 19, 1984).
4.2 Senior Indenture dated October 1, 1997, by and between Clear Channel Communications, Inc. and
The Bank of New York as Trustee (incorporated by reference to exhibit 4.2 of the Company's
Quarterly Report on Form 10-Q for the quarter ended September 30, 1997).
10.1 Incentive Stock Option Plan of Clear Channel Communications, Inc. as of January 1, 1984
(incorporated by reference to the exhibits of the Company's Registration Statement on Form S-1
(Reg. No. 33-289161) dated April 19, 1984).
10.2 Australia Radio Network Shareholders Agreement dated February 1995 by and between APN
Broadcasting Investments Pty Ltd, Australian Provincial Newspapers Holdings Limited, APN
Broadcasting Pty Ltd, Clear Channel Radio, Inc. and Clear Channel Communications, Inc.
(incorporated by reference to the exhibits of the Company's Current Report on Form 8-K dated
May 26, 1995).
10.3 Clear Channel Communications, Inc. 1994 Incentive Stock Option Plan (incorporated by reference
to the exhibits of the Company's Registration Statement on Form S-8 dated November 20, 1995).
10.4 Clear Channel Communications, Inc. 1994 Nonqualified Stock Option Plan (incorporated by
reference to the exhibits of the Company's Registration Statement on Form S-8 dated November
20, 1995).
10.5 Clear Channel Communications, Inc. Directors' Nonqualified Stock Option Plan (incorporated by
reference to the exhibits of the Company's Registration Statement on Form S-8 dated November
20, 1995).
</TABLE>
41
<PAGE> 42
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
<S> <C>
10.6 Option Agreement for Officer (incorporated by reference to the exhibits of the Company's
Registration Statement on Form S-8 dated November 20, 1995).
10.7 Asset Purchase Agreement, dated as of May 9, 1996, by and among REP New England G.P., REP
Southeast G.P., REP Ft. Myers G.P., REP Rhode Island G.P., REP Florida G.P., REP WHYN G.P., REP
WWBB G.P., S.E. Licensee G.P., REP WCKT G.P., RI Licensee G.P., Radio Station Management, Inc.,
Clear Channel Radio, Inc., and Clear Channel Radio Licenses, Inc. (incorporated by reference to
the exhibits of the Company's Current Report on Form 8-K dated June 5, 1996).
10.8 Tender Offer Agreement dated June 1, 1996 by and between Clear Channel Radio, Inc. and Heftel
Broadcasting Corporation (incorporated by reference to the exhibits of the Company's
Registration Statement on Form S-3 dated June 14, 1996).
10.9 Stock Purchase Agreement dated June 1, 1996 by and between Clear Channel Radio, Inc. and Heftel
Broadcasting Corporation dated June 1, 1996 (incorporated by reference to the exhibits of the
Company's Registration Statement on Form S-3 dated June 14, 1996).
10.10 Employment Agreement dated February 10, 1997 by and between Clear Channel Communications, Inc.
and L. Lowry Mays (incorporated by reference to exhibit 10.12 of the Company's Annual Report on
Form 10-K dated March 31, 1997).
10.11 Stock Purchase Agreement dated February 25, 1997 by and among Clear Channel Communications,
Inc., Eller Media Corporation and the Stockholders of Eller Media Corporation (incorporated by
reference to the exhibits of the Company's Annual Report on Form 10-K dated March 31, 1997).
10.12 Amendment to Stock Purchase Agreement dated April 10, 1997 by and between Clear Channel
Communications, Inc., Eller Media Corporation and the Stockholders of Eller Media Corporation
(incorporated by reference to the exhibits of the Company's Current Report on Form 8-K dated
April 17, 1997).
10.13 Registration Rights Agreement dated April 10, 1997 by and between Clear Channel Communications,
Inc. and the Stockholders of Eller Media Corporation (incorporated by reference to the exhibits
of the Company's Current Report on Form 8-K dated April 17, 1997).
10.14 Stockholders Agreement dated April 10, 1997 by and between Clear Channel Communications, Inc.
and EM Holdings LLC (incorporated by reference to the exhibits of the Company's Current Report
on Form 8-K dated April 17, 1997).
10.15 Escrow Agreement dated April 10, 1997 by and between Clear Channel Communications, Inc., EM
Holdings LLC and Chase Trust Company of California (incorporated by reference to the exhibits
of the Company's Current Report on Form 8-K dated April 17, 1997).
10.16 Third Amended and Restated Credit Agreement by and among Clear Channel Communications, Inc.,
NationsBank of Texas, N.A., as administrative lender, the First National Bank of Boston, as
documentation agent, the Bank of Montreal and Toronto Dominion (Texas), Inc., as co-syndication
agents, and certain other lenders dated April 10, 1997 (the "Credit Facility") (incorporated by
reference to the exhibits of the Company's Amendment No. 1 to the Registration Statement on
Form S-3 (Reg. No. 333-25497) dated May 9, 1997).
</TABLE>
42
<PAGE> 43
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
<S> <C>
10.17 Asset Purchase Agreement dated August 25, 1997 by and among Paxson Communications Corporation,
Clear Channel Metroplex, Inc., Clear Channel Metroplex Licenses, Inc. and Clear Channel
Communications, Inc. (incorporated by reference to the exhibits of the Company's Registration
Statement on Form S-3 (Reg. No. 333-33371) dated September 9, 1997).
10.18 Asset Purchase Agreement dated August 25, 1997 by and among Paxson Communications Corporation,
L. Paxson, Inc., Clear Channel Metroplex, Inc., Clear Channel Metroplex Licenses, Inc. and
Clear Channel Communications, Inc. (incorporated by reference to the exhibits of the Company's
Registration Statement on Form S-3 (Reg. No. 333-33371) dated September 9, 1997).
10.19 First Amendment to the Credit Facility dated September 17, 1997 (incorporated by reference to
exhibit 4.1 to the Company's Current Report on Form 8-K filed October 14, 1997).
10.20 Voting Agreement dated as of October 23, 1997 by and among Clear Channel Communications, Inc.
and Daniel L. Simon (incorporated by reference to the exhibits of the Company's Current Report
on Form 8-K dated November 3, 1997).
10.21 Voting Agreement dated as of October 23, 1997 by and among Clear Channel Communications, Inc.
and Daniel L. Simon (incorporated by reference to the exhibits of the Company's Current Report
on Form 8-K dated November 3, 1997).
10.22 Resale Agreement dated as of October 23, 1997 by and among Clear Channel Communications, Inc.
and Brian T. Clingen (incorporated by reference to the exhibits of the Company's Registration
Statement on Form S-4 (Reg. No. 333-43747) dated January 5, 1998).
10.23 Second Amendment to the Credit Facility dated November 7, 1997.
10.24 Third Amendment to the Credit Facility dated December 29, 1997.
13 Annual Report to Shareholders.
21 Subsidiaries of the Company.
23.1 Consent of Ernst & Young LLP.
23.2 Consent of KPMG.
23.3 Consent of KPMG Peat Marwick LLP.
24 Power of Attorney (included on signature page)
27 Financial Data Schedule
99.1 Report of Independent Auditors on Financial Statement Schedule - Ernst & Young LLP.
99.2 Report of Independent Auditors - KPMG
99.3 Report of Independent Auditors - KPMG Peat Marwick LLP
</TABLE>
43
<PAGE> 1
EXHIBIT 10.23
SECOND AMENDMENT TO THIRD AMENDED
AND RESTATED CREDIT AGREEMENT
THIS SECOND AMENDMENT TO THIRD AMENDED AND RESTATED CREDIT AGREEMENT
(this "Amendment") is dated as of the 7th day of November, 1997, and entered
into among Clear Channel Communications, Inc., a Texas corporation (herein,
together with its successors and assigns, called the "Company"), the Lenders (as
defined in the Credit Agreement as defined below), NATIONSBANK OF TEXAS, N.A., a
national banking association, as Administrative Lender for itself and the
Lenders (the "Administrative Lender"), THE FIRST NATIONAL BANK OF BOSTON, as
Documentation Agent, BANK OF MONTREAL, as Co- Syndication Agent and TORONTO
DOMINION (TEXAS), INC., as Co-Syndication Agent.
WITNESSETH:
WHEREAS, the Company, the Lenders and the Administrative Lender entered
into a Third Amended and Restated Credit Agreement, dated April 10, 1997 (as
amended, restated or otherwise modified from time to time, the "Credit
Agreement");
WHEREAS, the Company, the Lenders and the Administrative Lender entered
into a First Amendment to the Third Amended and Restated Credit Agreement, dated
as of September 17, 1997;
WHEREAS, the Company has requested that the Credit Agreement be amended
to remove the limit on Institutional Debt that may be issued during the term of
the Credit Agreement and to allow additional Institutional Debt to be issued
with a final maturity date prior to the Maturity Date of the Credit Agreement;
WHEREAS, the Lenders, the Administrative Lender and the Company have
agreed to amend the Credit Agreement upon the terms and conditions set forth
below;
NOW, THEREFORE, for valuable consideration hereby acknowledged, the
Company, the Lenders and the Administrative Lender agree as follows:
SECTION 1. Definitions. In General. Unless specifically defined or
redefined below, capitalized terms used herein shall have the meanings ascribed
thereto in the Credit Agreement.
SECTION 2. Section 7.1(f). Section 7.1(f) of the Credit Agreement is
hereby amended and restated in its entirety to read as follows:
1
<PAGE> 2
(f) So long as there exists no Default or Event of Default
both before and after giving effect to the issuance of any
Institutional Debt, Institutional Debt in an unlimited amount at any
time outstanding; provided, that, (i) such debt is unsecured, (ii) such
debt is at all times on terms and conditions reasonably satisfactory to
the Determining Lenders, including but not limited to the absence of
financial covenants and restrictions and events of default that are
more restrictive than those under this Agreement, (iii) except as
provided in the immediately following proviso, such debt has a final
maturity and Weighted Average Life to Maturity (computed from the date
of incurrence of such debt) at least one day longer than the Maturity
Date and the Weighted Average Life to Maturity of the Obligations, and
(iv) the Net Cash Proceeds from the issuance of such debt are applied
in accordance with Section 2.5(d) hereof; provided, however,
notwithstanding anything contained in Section 7.1(f)(iii) hereof to the
contrary, Institutional Debt otherwise permitted under this Section
7.1(f) in the aggregate principal amount not to exceed $500,000,000 may
have a final maturity of any date prior to the Maturity Date.
SECTION 3. Conditions Precedent. This Second Amendment shall not be
effective until the Administrative Lender shall have received executed signature
pages from the Company, the Administrative Lender and Determining Lenders.
SECTION 4. Representations and Warranties. The Company represents and
warrants to the Lenders and the Administrative Lender that (a) this Second
Amendment constitutes its legal, valid, and binding obligation, enforceable in
accordance with the terms hereof (subject as to enforcement of remedies to any
applicable bankruptcy, reorganization, moratorium, or other laws or principles
of equity affecting the enforcement of creditors' rights generally), (b) there
exists no Default or Event of Default under the Credit Agreement, (c) its
representations and warranties set forth in the Credit Agreement and other Loan
Documents are true and correct on the date hereof, (d) it has complied with all
agreements and conditions to be complied with by it under the Credit Agreement
and the other Loan Documents by the date hereof, and (e) the Credit Agreement,
as amended hereby, and the other Loan Documents remain in full force and effect.
SECTION 5. Entire Agreement; Ratification. THE CREDIT AGREEMENT AND
THE OTHER LOAN DOCUMENTS REPRESENT THE FINAL AGREEMENT BETWEEN THE PARTIES AND
MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL
AGREEMENT OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE
PARTIES. EXCEPT AS MODIFIED OR SUPPLEMENTED HEREBY, THE CREDIT AGREEMENT, THE
OTHER LOAN DOCUMENTS AND ALL OTHER DOCUMENTS AND AGREEMENTS EXECUTED IN
CONNECTION THEREWITH SHALL CONTINUE IN FULL FORCE AND EFFECT.
-2-
<PAGE> 3
SECTION 6. Counterparts. This Second Amendment may be executed in any
number of counterparts, all of which taken together shall constitute one and the
same instrument. In making proof hereof, it shall not be necessary to produce or
account for any counterpart other than one signed by the party against which
enforcement is sought.
SECTION 7. GOVERNING LAW. THIS SECOND AMENDMENT SHALL BE CONSTRUED IN
ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF TEXAS, BUT GIVING EFFECT TO
THE FEDERAL LAWS OF THE UNITED STATES.
SECTION 8. CONSENT TO JURISDICTION. THE COMPANY HEREBY IRREVOCABLY
SUBMITS TO THE NON-EXCLUSIVE JURISDICTION OF ANY UNITED STATES FEDERAL OR TEXAS
STATE COURT SITTING IN DALLAS IN ANY ACTION OR PROCEEDING ARISING OUT OF OR
RELATING TO ANY LOAN DOCUMENTS AND THE COMPANY IRREVOCABLY AGREES THAT ALL
CLAIMS IN RESPECT OF SUCH ACTION OR PROCEEDING MAY BE HEARD AND DETERMINED IN
ANY SUCH COURT AND IRREVOCABLY WAIVES ANY OBJECTION IT MAY NOW OR HEREAFTER HAVE
AS TO THE VENUE OF ANY SUCH SUIT, ACTION OR PROCEEDING BROUGHT IN SUCH A COURT
OR THAT SUCH COURT IS AN INCONVENIENT FORUM. NOTHING HEREIN SHALL LIMIT THE
RIGHT OF THE ADMINISTRATIVE LENDER OR ANY LENDER TO BRING PROCEEDINGS AGAINST
THE COMPANY IN THE COURTS OF ANY OTHER JURISDICTION. ANY JUDICIAL PROCEEDING BY
THE COMPANY AGAINST THE ADMINISTRATIVE LENDER OR ANY LENDER OR ANY AFFILIATE OF
THE ADMINISTRATIVE LENDER OR ANY LENDER INVOLVING, DIRECTLY OR INDIRECTLY, ANY
MATTER IN ANY WAY ARISING OUT OF, RELATED TO, OR CONNECTED WITH ANY LOAN PAPER
SHALL BE BROUGHT ONLY IN A COURT IN DALLAS, TEXAS.
SECTION 9. WAIVER OF JURY TRIAL. THE COMPANY, THE ADMINISTRATIVE LENDER
AND EACH LENDER HEREBY WAIVES TRIAL BY JURY IN ANY JUDICIAL PROCEEDING
INVOLVING, DIRECTLY OR INDIRECTLY, ANY MATTER (WHETHER SOUNDING IN TORT,
CONTRACT OR OTHERWISE) IN ANY WAY ARISING OUT OF, RELATED TO, OR CONNECTED WITH
ANY LOAN PAPER OR THE RELATIONSHIP ESTABLISHED THEREUNDER.
================================================================================
THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK.
================================================================================
-3-
<PAGE> 4
IN WITNESS WHEREOF, this Second Amendment to Third Amended and Restated
Credit Agreement is executed as of the date first set forth above.
CLEAR CHANNEL COMMUNICATIONS, INC.
By: /s/ Randall T. Mays
-------------------------------
Name: Randall T. Mays
Title: Vice President
-4-
<PAGE> 5
NATIONSBANK OF TEXAS, N.A.,
Individually and as Administrative
Lender
/s/ Rosario Echeverria
------------------------
By: Rosario Echeverria
Its: Vice President
901 Main Street
64th Floor
Dallas, Texas 75202
Attn: Rosario Echeverria
Title: Vice President
-5-
<PAGE> 6
BANKBOSTON, N.A., formerly
known as THE FIRST NATIONAL
BANK OF BOSTON, as a Lender
and as Documentation Agent
By: /s/ Lenny Mason
----------------------------
Name: Lenny Mason
Title: Vice President
100 Federal Street
Boston, Massachusetts 02110
Attn: Lenny Mason
Title: Vice President
-6-
<PAGE> 7
BANK OF MONTREAL, as a Lender and as Co-
Syndication Agent
By: /s/ Rene Encarncion
-----------------------------
Name: Rene Encarnacion
Title: Director
430 Park Avenue
New York, New York 10022
Attn: Ola Anderssen
Title: Associate
-7-
<PAGE> 8
TORONTO DOMINION (TEXAS), INC., as a
Lender and as Co-Syndication Agent
By: /s/ Darlene Riedel
--------------------------------
Name: Darlene Riedel
Title: Vice President
Houston Agency
909 Fannin Street, 17th Floor
Houston, Texas 77010
Attn: Lisa Allison
Title:
-8-
<PAGE> 9
ABN AMRO BANK, N.V., HOUSTON AGENCY
By: /s/ Laurie C. Tuzo
--------------------------------
Name: Laurie C. Tuzo
Title: Group Vice President
By: /s/ David P. Orr
--------------------------------
Name: David P. Orr
Title: Vice President
Three Riverway, Suite 1700
Houston, Texas 77056
Attn: Ms. Laurie C. Tuzo
Title: Group Vice President
-9-
<PAGE> 10
BANK BRUSSELS LAMBERT,
New York Branch
By:
--------------------------------
Name: -------------------------
Title: -------------------------
By:
--------------------------------
Name: -------------------------
Title: -------------------------
630 Fifth Avenue, 6th floor
New York, New York 10111
Attn: Craig Hallsteen
Title: Vice President
-10-
<PAGE> 11
BANK OF HAWAII
By: /s/ Robert L. Wilson
---------------------------------
Name: Robert L. Wilson
Title: Vice President
1850 N. Central Avenue
Suite 400
Phoenix, Arizona 85004
Attn: Elizabeth McLean
Title:
-11-
<PAGE> 12
BANK OF IRELAND - DUBLIN BRANCH
By: /s/ Carmel McBride
---------------------------------
Name:
Title:
Corporate Banking, B-2, Head Office
Lower Baggot Street
Dublin 2, Ireland
Attn: Carmel McBride
Title: Vice President
-12-
<PAGE> 13
THE BANK OF NEW YORK
By: /s/ Edward Ryan, Jr.
--------------------------------
Name: Edward Ryan, Jr.
Title: Senior Vice President
One Wall Street
16th Floor South
New York, New York 10286
Attn: Ted Ryan
Title:
-13-
<PAGE> 14
THE BANK OF NOVA SCOTIA
By: /s/ Vincent J. Fitgerald, Jr.
-----------------------------------
Name: Vincent J. Fitzgerald, Jr.
Title: Authorized Signatory
One Liberty Plaza
26th Floor
New York, New York 10006
Attn: Paul Weissenberger
Title: Relationship Manager
-14-
<PAGE> 15
NATEXIS BANQUE BFCE, (formerly known as
Banque Francaise Du Commerce Exterieur)
By: /s/ Ivan Kraus
-----------------------------------
Name: Ivan Kraus
Title: Associate
By: /s/ Kevin Dooley
-----------------------------------
Name: Kevin Dooley
Title: Vice President
645 Fifth Avenue
20th Floor
New York, New York 10022
Attn: Frederick Kammler
Title:
-15-
<PAGE> 16
BANQUE PARIBAS
By:
---------------------------------
Name:
Title:
By:
---------------------------------
Name:
Title:
2029 Century Park East
Suite 3900
Los Angeles, California 90067
Attn: Bryan Petermann
Title: Vice President
-16-
<PAGE> 17
BARCLAYS BANK PLC
By: /s/ James K. Downey
----------------------------------
Name: James K. Downey
Title: Associate Director
BZW Division
388 Market Street, Suite 1700
San Francisco, California 94111
-17-
<PAGE> 18
CREDIT AGRICOLE INDOSUEZ
(f/k/a Caisse Nationale De Credit
Agricole)
By: /s/ Dean Balice
---------------------------------
Name: Dean Balice
Title: Senior Vice President
By: /s/ David Bouhl, F.V.P.
---------------------------------
Name: David Bouhl, F.V.P.
Title: Head of Corporate Banking
600 Travis, Suite 2340
Houston, Texas 77002
Attn: Ken Coulter
Title: Vice President
-18-
<PAGE> 19
THE CHASE MANHATTAN BANK, N.A.
By:
---------------------------------
Name:
Title:
270 Park Avenue
37th Floor
New York, New York 10017
Attn: James Kuster
Title: Managing Director
-19-
<PAGE> 20
CIBC INC.
By: /s/ Susan Hanna
-------------------------------
Name: Susan Hanna
Title: DIRECTOR, CIBC WOOD GUNDY
SECURITY CORP., AS AGENT
425 Lexington Avenue
New York, New York 10017
Attn: Susan Hanna
Title: DIRECTOR, CIBC WOOD GUNDY
SECURITY CORP., AS AGENT
-20-
<PAGE> 21
COMPAGNIE FINANCIERE DE CIC ET DE
L'UNION EUROPEENNE
By: /s/ Anthony Rock
---------------------------------
Name: Anthony Rock
Title: Vice President
By: /s/ Marcus Edward
---------------------------------
Name: Marcus Edward
Title: Vice President
520 Madison Avenue
37th Floor
New York, New York 10022
Attn: Marcus Edward
Title: Vice President
-21-
<PAGE> 22
CORESTATES BANK, N.A.
By:
---------------------------------
Name:
Title:
1339 Chestnut Street
Philadelphia, Pennsylvania 19107
Attn: Anthony B. Parisi
Title:
-22-
<PAGE> 23
CREDIT SUISSE FIRST BOSTON
By: /s/ Todd C. Morgan
---------------------------------
Name: Todd C. Morgan
Title: Vice President
By: /s/ Judith E. Smith
---------------------------------
Name: Judith E. Smith
Title: Director
Eleven Madison Avenue
19th Floor
New York, New York 10010-3629
Attn: Joe Coneeny
Title: Managing Director
-23-
<PAGE> 24
CRESTAR BANK
By: /s/ J. Eric Millham
---------------------------------
Name: J. Eric Millham
Title: Vice President
919 E. Main Street
22th Floor
Richmond, Virginia 23219
Attn: Eric Millham
Title: Vice President
-24-
<PAGE> 25
THE DAI-ICHI KANGYO BANK, LTD.
By: /s/ Kazuki Shimizu
---------------------------------
Name: Kazuki Shimizu
Title: Vice President
One World Trade Center
48th Floor
New York, New York 10048
Attn: Seiji Imai
Title: Vice President
-25-
<PAGE> 26
FIRST UNION NATIONAL BANK
By: /s/ Bruce Loftin
---------------------------------
Name: Bruce Loftin
Title: Senior Vice President
Capital Markets Group - Communications
One First Union Center
301 South College Street, 5th Floor
Charlotte, North Carolina 28288-0735
Attn: Adrienne T. Musgnug
Title: Vice President
-26-
<PAGE> 27
FLEET BANK, N.A.
By: /s/ Michael A. Cerullo
---------------------------------
Name: Michael A. Cerullo
Title: Vice President
Mail Stop NYNYS16K
1185 Avenue of the Americas
16th Floor
New York, New York 10036
Attn: Michael A. Cerullo
Title: Vice President
-27-
<PAGE> 28
THE FUJI BANK, LIMITED
By: /s/ Philip C. Lauinger III
---------------------------------
Name: Philip C. Lauinger III
Title: Vice President & Manager
One Houston Center
Suite 4100
1221 McKinney Street
Houston, Texas 77010
Attn: Phillip C. Lauinger III
Title: Vice President and Manager
-28-
<PAGE> 29
HIBERNIA NATIONAL BANK
By: /s/ Troy J. Villafarra
---------------------------------
Name: Troy J. Villafarra
Title: Vice President
313 Carondelet Street
New Orleans, Louisiana 70130
Attn: Troy Villafarra
Title: Vice President
-29-
<PAGE> 30
INDUSTRIAL BANK OF JAPAN
By: /s/ Kevin Egan
---------------------------------
Name: Kevin Egan
Title: Vice President
1251 Avenue of the Americas
32nd Floor
New York, New York 10020-1104
Attn: Jeff Cole
Title:
-30-
<PAGE> 31
KEY CORPORATE CAPITAL INC.
By: /s/ Kenneth J. Keeler
---------------------------------
Name: Kenneth J. Keeler
Title: Vice President
Media & Telecommunications
Finance Division
127 Public Square
Cleveland, Ohio 44114-1306
Attn: Jason R. Weaver
Title: Assistant Vice President
-31-
<PAGE> 32
THE LONG-TERM CREDIT BANK OF JAPAN,
LIMITED, NEW YORK BRANCH
By: /s/ Sadao Muraoka
---------------------------------
Name: Sadao Muraoka
Title: Head of Southwest Region
165 Broadway
New York, New York 10006
-32-
<PAGE> 33
MELLON BANK, N.A.
By: /s/ Nathan H. Kehm
---------------------------------
Name: Nathan H. Kehm
Title: Assistant Vice President
One Mellon Bank Center, Room 4440
Pittsburgh, Pennsylvania 15258-0001
Attn: Lisa M. Pellow
Title: Vice President
-33-
<PAGE> 34
MICHIGAN NATIONAL BANK
By: /s/ Stephane Lubin
---------------------------------
Name: Stephane Lubin
Title: Relationship Manager
Specialty Industries 10-36
27777 Inkster Road
Farmington Hills, Michigan 48334-1036
Attn: Stephane Lubin
Title: Vice President
-34-
<PAGE> 35
THE MITSUBISHI TRUST AND BANKING
CORPORATION
By: /s/ Beatrice Kossodo
---------------------------------
Name: Beatrice Kossodo
Title: Senior Vice President
520 Madison Avenue, 26th Floor
New York, New York 10022
Attn: David Lerner
Title: Vice President
-35-
<PAGE> 36
PNC BANK, NATIONAL ASSOCIATION
By: /s/ Jeffrey E. Hauser
---------------------------------
Name: Jeffrey E. Hauser
Title: Vice President
1600 Market Street
21st Floor
Philadelphia, Pennsylvania 19103
Attn: Jeff Hauser
Title: Vice President
-36-
<PAGE> 37
THE ROYAL BANK OF SCOTLAND, PLC
By: /s/ Karen Stefancic
---------------------------------
Name: Karen Stefancic
Title: Vice President
88 Pine Street
26th Floor
New York, New York 10005
Attn: Karen Stefancic
Title: Vice President
-37-
<PAGE> 38
THE SANWA BANK, LIMITED, DALLAS AGENCY
By:
---------------------------------
Name:
Title:
4100 W. Texas Commerce Tower
2200 Ross Avenue
Dallas, Texas 75201
Attn: Matthew Patrick
Title: Vice President
-38-
<PAGE> 39
SOCIETE GENERALE
By: /s/ Mark Vigil
---------------------------------
Name: Mark Vigil
Title: Vice President
1221 Avenue of the Americas
New York, New York 10020
Attn: Mark Vigil
Title:
-39-
<PAGE> 40
THE SUMITOMO BANK, LIMITED
By: /s/ Reiji Sato
---------------------------------
Name: Reiji Sato
Title: Joint General Manager
700 Louisiana
Suite 1750
Houston, Texas 77002
Attn: Daniel Payer
Title:
-40-
<PAGE> 41
SUNTRUST BANK, CENTRAL FLORIDA, N.A.
By: /s/ Janet P. Sammons
---------------------------------
Name: Janet P. Sammons
Title: Vice President
200 South Orange Avenue
Orlando, Florida 32801
Attn: Chris Aguilar
Title: First Vice President
-41-
<PAGE> 42
THE TOYO TRUST & BANKING COMPANY,
LTD., NEW YORK BRANCH
By: /s/ Takashi Mikumo
---------------------------------
Name: Takashi Mikumo
Title: Vice President
666 Fifth Avenue
33rd Floor
Attn: Sharon Bonelli
Title: Vice President
-42-
<PAGE> 43
UNION BANK OF CALIFORNIA, N.A.
By: /s/ Christine P. Ball
---------------------------------
Name: Christine P. Ball
Title: Vice President
445 South Figueroa Street
Los Angeles, California 90071
Attn: Christine Ball
Title: Vice President
-43-
<PAGE> 44
WACHOVIA BANK OF GEORGIA, N.A.
By: /s/ Carl E. Peoples
---------------------------------
Name: Carl E. Peoples
Title: Vice President
191 Peachtree Street
28th Floor, Mail Code 370
Atlanta, Georgia 30303
Attn: Carl E. Peoples
Title: Vice President
-44-
<PAGE> 45
WELLS FARGO BANK (TEXAS), N.A., formerly
known as FIRST INTERSTATE BANK OF TEXAS,
N.A.
By: /s/ Susan Coulter
---------------------------------
Name: Susan Coulter
Title: Vice President
100 Congress, Suite 150
Austin, Texas 78701
Attn: Susan Coulter
Title: Vice President
-45-
<PAGE> 46
WESTDEUTSCHE LANDESBANK,
GIROZENTRALE, New York Branch
By: /s/ Kheil A. McIntyre
---------------------------------
Name: Kheil A. McIntyre
Title: Vice President
By: /s/ Salvatore Battinelli
---------------------------------
Name: Salvatore Battinelli
Title: Vice President Credit Dept.
1211 Avenue of the Americas
New York, New York 10036
Attn: Kheil McIntyre
Title: Vice President
-46-
<PAGE> 47
WESTDEUTSCHE LANDESBANK, GIROZENTRALE
By: /s/ Cynthia M. Niesen
---------------------------------
Name: Cynthia M. Niesen
Title: Managing Director
By: /s/ James Veneau
---------------------------------
Name: James Veneau
Title: Analyst
1211 Avenue of the Americas
New York, New York 10036
Attn: Kheil McIntyre
Title: Vice President
-47-
<PAGE> 1
EXHIBIT 10.24
THIRD AMENDMENT TO THIRD AMENDED
AND RESTATED CREDIT AGREEMENT
THIS THIRD AMENDMENT TO THIRD AMENDED AND RESTATED CREDIT
AGREEMENT (this "Amendment") and limited conditional waiver (the "Waiver") are
dated as of the 29th day of December, 1997, and entered into among Clear Channel
Communications, Inc., a Texas corporation (herein, together with its successors
and assigns, called the "Company"), the Lenders (as defined in the Credit
Agreement as defined below), NATIONSBANK OF TEXAS, N.A., a national banking
association, as Administrative Lender for itself and the Lenders (the
"Administrative Lender"), THE FIRST NATIONAL BANK OF BOSTON, as Documentation
Agent, BANK OF MONTREAL, as Co-Syndication Agent and TORONTO DOMINION (TEXAS),
INC., as Co-Syndication Agent.
WITNESSETH:
WHEREAS, the Company, the Lenders and the Administrative Lender entered
into a Third Amended and Restated Credit Agreement, dated April 10, 1997 (as
amended, restated or otherwise modified from time to time, the "Credit
Agreement");
WHEREAS, the Company, the Lenders and the Administrative Lender entered
into a First Amendment to the Third Amended and Restated Credit Agreement, dated
as of September 17, 1997;
WHEREAS, the Company, the Lenders and the Administrative Lender entered
into a Second Amendment to the Third Amended and Restated Credit Agreement,
dated as of November 7, 1997;
WHEREAS, the Company has informed the Administrative Lender that an
Event of Default has been triggered under the Credit Agreement as a result of
its Restricted Subsidiaries incurring in excess of $20,000,000 in Indebtedness
in violation of Section 7.1(h) of the Credit Agreement and requested a Waiver of
the corresponding Event of Default pursuant to Sections 8.01 (a), 8.1(c) and
8.1(e) of the Credit Agreement;
WHEREAS, the Company has requested that the Credit Agreement be amended
to extend by one year the period during which a non-binding post-closing
syndication may occur;
WHEREAS, the Company has requested that the Credit Agreement be amended
to allow for an increase in the general Indebtedness basket from $20,000,000 to
$50,000,000;
-1-
<PAGE> 2
WHEREAS, the Lenders, the Administrative Lender and the Company have
agreed to amend the Credit Agreement and waive the Event of Default upon the
terms and conditions set forth below;
NOW, THEREFORE, for valuable consideration hereby acknowledged, the
Company, the Lenders and the Administrative Lender agree as follows:
SECTION 1. Definitions.
(a) In General. Unless specifically defined or redefined below,
capitalized terms used herein shall have the meanings ascribed thereto in the
Credit Agreement.
(b) Definition of Syndication Date. The definition of "Syndication
Date" is hereby amended and restated in its entirety as follows:
"Syndication Date" means the earlier of (a) the date notice is
delivered to Borrower informing Borrower that the Commitment has
increased to an amount not to exceed $2,000,000,000 and is available to
be drawn as designated by Borrower or (b) December 31, 1998; provided,
however, that no more than one such syndication shall occur during such
period.
SECTION 2. Section 5.13. Section 5.13 of the Credit Agreement is hereby
amended and restated in its entirety to read as follows:
Section 5.13 Syndication. The Borrower shall assist the
Administrative Lender and the Lenders in attempting to syndicate up to
an additional $250,000,000 in excess of $1,750,000,000; it being
understood that neither the Administrative Lender nor any Lender is
obligated to syndicate such additional $250,000,000 or participate or
obtain other lenders to participate in such syndication. The Borrower's
assistance shall include, without limitation, (a) providing all
information reasonably deemed necessary by the Administrative Lender
and its Affiliates to assist in such syndication, (b) making available
appropriate officers and representatives of the Borrower and its
Subsidiaries to participate in information meetings for potential
syndicate members and participants as the Administrative Lender and its
Affiliates may reasonably request, and (c) in assembling and updating
from time to time an information package for delivery to potential
syndicate members and participants (the "Syndication Book"). The
Borrower agrees it will be responsible for the contents of the
Syndication Book (insofar as information furnished by it is concerned)
and prior to dissemination by the Administrative Lender and its
Affiliates of the Syndication Book. The Borrower will notify
Administrative Lender and Lenders on or before December 31, 1998 of any
increase in the Commitment above $1,750,000,000 as a result of any
syndication.
-2-
<PAGE> 3
SECTION 3. Section 7.1(h). Section 7.1(h) of the Credit Agreement is
hereby amended and restated in its entirety to read as follows:
(a) Indebtedness (in addition to the Indebtedness otherwise
permitted pursuant to this Section 7.1) of its Restricted Subsidiaries
not to exceed $50,000,000 in aggregate principal amount outstanding at
any time; and
SECTION 4. Limited Conditional Waiver. The Company's request for a
limited conditional waiver of its violation of Section 7.1(h) of the Credit
Agreement caused by the incurrence of approximately $26,000,000 of Indebtedness
by its Restricted Subsidiaries as a result of the Indebtedness of Eller Media
resulting from its acquisitions and the related Events of Default pursuant to
Sections 8.1(a), 8.1(c) and 8.01(e) of the Credit Agreement are hereby granted
on a one-time only basis subject to the conditions precedent stated below.
SECTION 5. Conditions Precedent. This Third Amendment shall not be
effective until the Administrative Lender shall have received executed signature
pages from the Company, the Administrative Lender and Determining Lenders.
SECTION 6. Representations and Warranties. The Company represents and
warrants to the Lenders and the Administrative Lender that (a) this Third
Amendment constitutes its legal, valid, and binding obligation, enforceable in
accordance with the terms hereof (subject as to enforcement of remedies to any
applicable bankruptcy, reorganization, moratorium, or other laws or principles
of equity affecting the enforcement of creditors' rights generally), (b) there
exists no Default or Event of Default under the Credit Agreement other than as
identified herein, (c) its representations and warranties set forth in the
Credit Agreement and other Loan Documents are true and correct on the date
hereof, (d) it has complied with all agreements and conditions to be complied
with by it under the Credit Agreement and the other Loan Documents by the date
hereof, and (e) the Credit Agreement, as amended hereby, and the other Loan
Documents remain in full force and effect.
SECTION 7. Entire Agreement; Ratification. THE CREDIT AGREEMENT AND
THE OTHER LOAN DOCUMENTS REPRESENT THE FINAL AGREEMENT BETWEEN THE PARTIES AND
MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL
AGREEMENT OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE
PARTIES. EXCEPT AS MODIFIED OR SUPPLEMENTED HEREBY, THE CREDIT AGREEMENT, THE
OTHER LOAN DOCUMENTS AND ALL OTHER DOCUMENTS AND AGREEMENTS EXECUTED IN
CONNECTION THEREWITH SHALL CONTINUE IN FULL FORCE AND EFFECT.
SECTION 8. Counterparts. This Third Amendment may be executed in any
number of counterparts, all of which taken together shall constitute one and the
same instrument. In making
-3-
<PAGE> 4
proof hereof, it shall not be necessary to produce or account for any
counterpart other than one signed by the party against which enforcement is
sought.
SECTION 9. GOVERNING LAW. THIS THIRD AMENDMENT SHALL BE CONSTRUED IN
ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF TEXAS, BUT GIVING EFFECT TO
THE FEDERAL LAWS OF THE UNITED STATES.
SECTION 10. CONSENT TO JURISDICTION. THE COMPANY HEREBY IRREVOCABLY
SUBMITS TO THE NON-EXCLUSIVE JURISDICTION OF ANY UNITED STATES FEDERAL OR TEXAS
STATE COURT SITTING IN DALLAS IN ANY ACTION OR PROCEEDING ARISING OUT OF OR
RELATING TO ANY LOAN DOCUMENTS AND THE COMPANY IRREVOCABLY AGREES THAT ALL
CLAIMS IN RESPECT OF SUCH ACTION OR PROCEEDING MAY BE HEARD AND DETERMINED IN
ANY SUCH COURT AND IRREVOCABLY WAIVES ANY OBJECTION IT MAY NOW OR HEREAFTER HAVE
AS TO THE VENUE OF ANY SUCH SUIT, ACTION OR PROCEEDING BROUGHT IN SUCH A COURT
OR THAT SUCH COURT IS AN INCONVENIENT FORUM. NOTHING HEREIN SHALL LIMIT THE
RIGHT OF THE ADMINISTRATIVE LENDER OR ANY LENDER TO BRING PROCEEDINGS AGAINST
THE COMPANY IN THE COURTS OF ANY OTHER JURISDICTION. ANY JUDICIAL PROCEEDING BY
THE COMPANY AGAINST THE ADMINISTRATIVE LENDER OR ANY LENDER OR ANY AFFILIATE OF
THE ADMINISTRATIVE LENDER OR ANY LENDER INVOLVING, DIRECTLY OR INDIRECTLY, ANY
MATTER IN ANY WAY ARISING OUT OF, RELATED TO, OR CONNECTED WITH ANY LOAN PAPER
SHALL BE BROUGHT ONLY IN A COURT IN DALLAS, TEXAS.
SECTION 11. WAIVER OF JURY TRIAL. THE COMPANY, THE
ADMINISTRATIVE LENDER AND EACH LENDER HEREBY WAIVES TRIAL BY JURY IN ANY
JUDICIAL PROCEEDING INVOLVING, DIRECTLY OR INDIRECTLY, ANY MATTER (WHETHER
SOUNDING IN TORT, CONTRACT OR OTHERWISE) IN ANY WAY ARISING OUT OF, RELATED TO,
OR CONNECTED WITH ANY LOAN PAPER OR THE RELATIONSHIP ESTABLISHED THEREUNDER.
================================================================================
THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK.
================================================================================
-4-
<PAGE> 5
IN WITNESS WHEREOF, this Third Amendment to Third Amended and Restated
Credit Agreement is executed as of the date first set forth above.
CLEAR CHANNEL COMMUNICATIONS, INC.
By: /s/ Randall T. Mays
---------------------------------
Name: Randall T. Mays
Title: CFO
-5-
<PAGE> 6
NATIONSBANK OF TEXAS, N.A.,
Individually and as Administrative Lender
/s/ Rosario Echeverria
----------------------
By: Rosario Echeverria
Its: Vice President
901 Main Street
64th Floor
Dallas, Texas 75202
Attn: Rosario Echeverria
Title: Vice President
-6-
<PAGE> 7
BANKBOSTON, N.A., formerly
known as THE FIRST NATIONAL
BANK OF BOSTON, as a Lender
and as Documentation Agent
By:
---------------------------------
Name: Mark S. Denomme
Title: Director
100 Federal Street
Boston, Massachusetts 02110
Attn: Lenny Mason
Title: Vice President
-7-
<PAGE> 8
BANK OF MONTREAL, as a Lender and as Co-
Syndication Agent
By: /s/ Rene Encarncion
---------------------------------
Name: Rene Encarnacion
Title: Director
430 Park Avenue
New York, New York 10022
Attn: Ola Anderssen
Title: Associate
-8-
<PAGE> 9
TORONTO DOMINION (TEXAS), INC., as a
Lender and as Co-Syndication Agent
By: /s/ Jimmy Simien
---------------------------------
Name: Jimmy Simien
Title: Vice President
Houston Agency
909 Fannin Street, 17th Floor
Houston, Texas 77010
Attn: Lisa Allison
Title:
-9-
<PAGE> 10
ABN AMRO BANK, N.V., HOUSTON AGENCY
By: /s/ Laurie C. Tuzo
---------------------------------
Name: Laurie C. Tuzo
Title: Group Vice President
By: /s/ David P. Orr
---------------------------------
Name: David P. Orr
Title: Vice President
Three Riverway, Suite 1700
Houston, Texas 77056
Attn: Ms. Laurie C. Tuzo
Title: Group Vice President
-10-
<PAGE> 11
BANK BRUSSELS LAMBERT,
New York Branch
By:
---------------------------------
Name:
Title:
By:
---------------------------------
Name:
Title:
630 Fifth Avenue, 6th floor
New York, New York 10111
Attn: Craig Hallsteen
Title: Vice President
-11-
<PAGE> 12
BANK OF HAWAII
By: /s/ Elizabeth O. Maclean
---------------------------------
Name: Elizabeth O. Maclean
Title: Vice President
1850 N. Central Avenue
Suite 400
Phoenix, Arizona 85004
Attn: Elizabeth McLean
Title:
-12-
<PAGE> 13
BANK OF IRELAND - DUBLIN BRANCH
By: /s/ Carmel McBride
---------------------------------
Name:
Title:
Corporate Banking, B-2, Head Office
Lower Baggot Street
Dublin 2, Ireland
Attn: Carmel McBride
Title: Vice President
-13-
<PAGE> 14
THE BANK OF NEW YORK
By: /s/ Edward Ryan, Jr.
---------------------------------
Name: Edward Ryan, Jr.
Title: Senior Vice President
One Wall Street
16th Floor South
New York, New York 10286
Attn: Ted Ryan
Title:
-14-
<PAGE> 15
THE BANK OF NOVA SCOTIA
By: /s/ Margot C. Bright
---------------------------------
Name: Margot C. Bright
Title: Authorized Signatory
One Liberty Plaza
26th Floor
New York, New York 10006
Attn: Townsend Devereux
Title: Relationship Manager
-15-
<PAGE> 16
NATEXIS BANQUE BFCE, (formerly known as
Banque Francaise Du Commerce Exterieur)
By: /s/ Kevin Dooley
---------------------------------
Name: Kevin Dooley
Title: Vice President
By: /s/ Evan Kraus
---------------------------------
Name: Evan Kraus
Title: Associate
645 Fifth Avenue
20th Floor
New York, New York 10022
Attn: Frederick Kammler
Title:
-16-
<PAGE> 17
BANQUE PARIBAS
By: /s/ David Pastre
---------------------------------
Name: David Pastre
Title: Vice President
By: /s/ Stanley P. Berkman
---------------------------------
Name: Stanley P. Berkman
Title: Managing Director
2029 Century Park East
Suite 3900
Los Angeles, California 90067
-17-
<PAGE> 18
BARCLAYS BANK PLC
By: /s/ James K. Downey
---------------------------------
Name: James K. Downey
Title: Associate Director
BZW Division
388 Market Street, Suite 1700
San Francisco, California 94111
-18-
<PAGE> 19
CREDIT AGRICOLE INDOSUEZ
(f/k/a Caisse Nationale De
Credit Agricole)
By: /s/ Dean Balice
---------------------------------
Name: Dean Balice
Title: Senior Vice President
By: /s/ David Bouhl, F.V.P.
---------------------------------
Name: David Bouhl, F.V.P.
Title: Head of Corporate Banking
600 Travis, Suite 2340
Houston, Texas 77002
Attn: Ken Coulter
Title: Vice President
-19-
<PAGE> 20
THE CHASE MANHATTAN BANK, N.A.
By:
---------------------------------
Name:
Title:
270 Park Avenue
37th Floor
New York, New York 10017
Attn: James Kuster
Title: Managing Director
-20-
<PAGE> 21
CIBC INC.
By: /s/ Susan Hanna
---------------------------------
Name: Susan Hanna
Title: EXECUTIVE DIRECTOR, CIBC
Oppenheimer Corp., AS AGENT
425 Lexington Avenue
New York, New York 10017
Attn: Susan Hanna
Title: EXECUTIVE DIRECTOR, CIBC
Oppenheimer Corp., AS AGENT
-21-
<PAGE> 22
COMPAGNIE FINANCIERE DE CIC ET DE
L'UNION EUROPEENNE
By: /s/ Anthony Rock
---------------------------------
Name: Anthony Rock
Title: Vice President
By: /s/ Marcus Edward
---------------------------------
Name: Marcus Edward
Title: Vice President
520 Madison Avenue
37th Floor
New York, New York 10022
Attn: Marcus Edward
Title: Vice President
-22-
<PAGE> 23
CORESTATES BANK, N.A.
By: /s/ Douglas E. Blackman
---------------------------------
Name: Douglas E. Blackman
Title: Vice President
1339 Chestnut Street
Philadelphia, Pennsylvania 19107
Attn: Douglas E. Blackman
Title: Vice President
-23-
<PAGE> 24
CREDIT SUISSE FIRST BOSTON
By: /s/ Todd C. Morgan
---------------------------------
Name: Todd C. Morgan
Title: Vice President
By: /s/ Judith E. Smith
---------------------------------
Name: Judith E. Smith
Title: Director
Eleven Madison Avenue
19th Floor
New York, New York 10010-3629
Attn: Joe Coneeny
Title: Managing Director
-24-
<PAGE> 25
CRESTAR BANK
By: /s/ J. Eric Millham
---------------------------------
Name: J. Eric Millham
Title: Vice President
919 E. Main Street
22th Floor
Richmond, Virginia 23219
Attn: Eric Millham
Title: Vice President
-25-
<PAGE> 26
THE DAI-ICHI KANGYO BANK, LTD.
By: /s/ Kazuki Shimizu
---------------------------------
Name: Kazuki Shimizu
Title: Vice President
One World Trade Center
48th Floor
New York, New York 10048
Attn: Kazuki Shimizu
Title: Vice President
-26-
<PAGE> 27
FIRST UNION NATIONAL BANK
By: /s/ Bruce Loftin
---------------------------------
Name: Bruce Loftin
Title: Senior Vice President
Capital Markets Group - Communications
One First Union Center
301 South College Street, 5th Floor
Charlotte, North Carolina 28288-0735
Attn: Adrienne T. Musgnug
Title: Vice President
-27-
<PAGE> 28
FLEET BANK, N.A.
By: /s/ Michael A. Cerullo
---------------------------------
Name: Michael A. Cerullo
Title: Vice President
Mail Stop NYNYS16K
1185 Avenue of the Americas
16th Floor
New York, New York 10036
Attn: Michael A. Cerullo
Title: Vice President
-28-
<PAGE> 29
THE FUJI BANK, LIMITED
By: /s/ Philip C. Lauinger III
---------------------------------
Name: Philip C. Lauinger III
Title: Vice President & Manager
One Houston Center
Suite 4100
1221 McKinney Street
Houston, Texas 77010
Attn: Phillip C. Lauinger III
Title: Vice President and Manager
-29-
<PAGE> 30
HIBERNIA NATIONAL BANK
By: /s/ Troy J. Villafarra
---------------------------------
Name: Troy J. Villafarra
Title: Vice President
313 Carondelet Street
New Orleans, Louisiana 70130
Attn: Troy Villafarra
Title: Vice President
-30-
<PAGE> 31
INDUSTRIAL BANK OF JAPAN
By: /s/ Kevin Egan
---------------------------------
Name: Kevin Egan
Title: Vice President
1251 Avenue of the Americas
32nd Floor
New York, New York 10020-1104
Attn: Jeff Cole
Title:
-31-
<PAGE> 32
KEY CORPORATE CAPITAL INC.
By: /s/ Jason R. Weaver
---------------------------------
Name: Jason R. Weaver
Title: Vice President
Media & Telecommunications Finance
Division
127 Public Square
Cleveland, Ohio 44114-1306
Attn: Jason R. Weaver
Title: Assistant Vice President
-32-
<PAGE> 33
THE LONG-TERM CREDIT BANK OF JAPAN,
LIMITED, NEW YORK BRANCH
By:
---------------------------------
Name:
Title:
165 Broadway
New York, New York 10006
-33-
<PAGE> 34
MELLON BANK, N.A.
By: /s/ Thomas P. Joyce
---------------------------------
Name: Thomas P. Joyce
Title: Vice President
One Mellon Bank Center, Room 4440
Pittsburgh, Pennsylvania 15258-0001
Attn: Thomas P. Joyce
Title: Vice President
-34-
<PAGE> 35
MICHIGAN NATIONAL BANK
By: /s/ Draga B. Palincas
---------------------------------
Name: Draga B. Palincas
Title: Vice President
Specialty Industries 10-36
27777 Inkster Road
Farmington Hills, Michigan 48334-1036
Attn: Draga B. Palincas
Title: Vice President
-35-
<PAGE> 36
THE MITSUBISHI TRUST AND BANKING
CORPORATION
By: /s/ Toshihiro Hayashi
---------------------------------
Name: Toshihiro Hayashi
Title: Senior Vice President
520 Madison Avenue, 26th Floor
New York, New York 10022
Attn: David Lerner
Title: Vice President
-36-
<PAGE> 37
PNC BANK, NATIONAL ASSOCIATION
By: /s/ Jeffrey E. Hauser
---------------------------------
Name: Jeffrey E. Hauser
Title: Vice President
1600 Market Street
21st Floor
Philadelphia, Pennsylvania 19103
Attn: Jeff Hauser
Title: Vice President
-37-
<PAGE> 38
THE ROYAL BANK OF SCOTLAND, PLC
By: /s/ Karen Stefancic
---------------------------------
Name: Karen Stefancic
Title: Vice President
88 Pine Street
26th Floor
New York, New York 10005
Attn: Karen Stefancic
Title: Vice President
-38-
<PAGE> 39
THE SANWA BANK, LIMITED
By: /s/ Eric Reimer
---------------------------------
Name: Eric Reimer
Title: Assistant Vice President
4100 W. Texas Commerce Tower
2200 Ross Avenue
Dallas, Texas 75201
Attn: Matthew Patrick
Title: Vice President
-39-
<PAGE> 40
SOCIETE GENERALE
By: /s/ Mark Vigil
---------------------------------
Name: Mark Vigil
Title: Vice President
1221 Avenue of the Americas
New York, New York 10020
Attn: Mark Vigil
Title:
-40-
<PAGE> 41
THE SUMITOMO BANK, LIMITED
By: /s/ Reiji Sato
---------------------------------
Name: Reiji Sato
Title: Joint General Manager
700 Louisiana
Suite 1750
Houston, Texas 77002
Attn: Daniel Payer
Title:
-41-
<PAGE> 42
SUNTRUST BANK, CENTRAL FLORIDA, N.A.
By: /s/ Jorge Arrieta
---------------------------------
Name: Jorge Arrieta
Title: Vice President
200 South Orange Avenue
Orlando, Florida 32801
Attn: Chris Aguilar
Title: First Vice President
-42-
<PAGE> 43
THE TOYO TRUST & BANKING COMPANY,
LTD., NEW YORK BRANCH
By: /s/ Takashi Mikumo
---------------------------------
Name: Takashi Mikumo
Title: Vice President
666 Fifth Avenue
33rd Floor
Attn: Sharon Bonelli
Title: Vice President
-43-
<PAGE> 44
UNION BANK OF CALIFORNIA, N.A.
By: /s/ Christine P. Ball
---------------------------------
Name: Christine P. Ball
Title: Vice President
445 South Figueroa Street
Los Angeles, California 90071
Attn: Christine Ball
Title: Vice President
-44-
<PAGE> 45
WACHOVIA BANK OF GEORGIA, N.A.
By: /s/ David K. Alexander
---------------------------------
Name: David K. Alexander
Title: Senior Vice President
191 Peachtree Street
28th Floor, Mail Code 370
Atlanta, Georgia 30303
Attn: Steven M. Takei
Title: Vice President
-45-
<PAGE> 1
EXHIBIT 13
1997
ACCOMPLISHMENTS
RECORD REVENUES
Achieved record revenues of $790 million, an increase of 98 percent over 1996.
RECORD PROFITS AT THE OPERATING LEVEL
Reported $302.7 million in operating income before depreciation and
amortization, an increase of 97 percent over 1996.
RECORD AFTER TAX CASH FLOW
Produced $213.4 million in after tax cash flow, an increase of 99 percent over
1996.
RECORD AFTER TAX CASH FLOW PER COMMON SHARE-DILUTED
Earned $2.33 of after tax cash flow per common share, an increase of 62 percent
over 1996.
CONTINUED GROWTH OF STOCK PRICE
Clear Channel's common stock price per share increased 120 percent during 1997
and has compounded at an annual average rate of 89 percent over the last five
years and 57 percent over the last ten.
ADDITION TO THE S&P 500
The Company was added to the widely followed S&P 500 in recognition of its
industry leadership.
OUTDOOR ADVERTISING
Emerged as a leader in the Outdoor Advertising Industry by acquiring Eller Media
Company, announcing a proposed merger with Universal Outdoor, and making an
offer to purchase More Group Plc.
PUBLIC DEBT OFFERING
Received an investment grade debt rating from both Moody's and S&P, and
subsequently raised approximately $300 million in the Company's first public
debt offering.
CONTINUED EQUITY FINANCING
Issued approximately $1.1 billion in equity in order to maintain conservative
financial leverage and take advantage of attractive opportunities.
ENLARGED CREDIT FACILITY
Increased the size of the Company's revolving credit facility to $1.75 billion.
DOMESTIC RADIO ACQUISITIONS
Continued the expansion of our radio group by adding 70 stations during 1997,
bringing the total number of stations owned or programmed to 173; most notable
was the acquisition of 43 stations from Paxson Communications Corporation.
INTERNATIONAL RADIO EXPANSION
The Australian Radio Network, which is 50 percent owned by Clear Channel,
acquired two additional stations during 1997. Clear Channel also acquired a 50
percent interest in Radio Bonton s.a., a company which operates one FM radio
station in the Czech Republic. Finally, an agreement was reached with Radio
Shanghai by which Clear Channel will sell airtime on 13 radio stations
broadcasting in Shanghai, China.
WIRELESS COMMUNICATION TOWER INDUSTRY
Invested in American Tower Corporation, which has subsequently announced an
agreement to merge with American Tower Systems and create the definitive leader
in that industry.
ENRICHED MANAGEMENT TEAM
Continued to develop management teams at the local level; these have become the
single greatest strength of the Company. Additionally, through promotions and
recruitment, enhanced the support group overseeing these managers.
FINANCIAL HIGHLIGHTS
In Thousands Except Per Share Amounts
<TABLE>
<CAPTION>
1997 1996 % Change
<S> <C> <C> <C>
Gross revenue $790,178 $398,094 98%
Operating income before
depreciation and amortization 302,664 153,407 97%
Operating income 167,574 99,090 69%
Net income 63,576 37,696 69%
Net income per common share - diluted $ .67 $ 0.51 31%
After tax cash flow(1) 213,445 107,318 99%
After tax cash flow per common
share - diluted (1) $ 2.33 $ 1.44 62%
</TABLE>
(1) Defined as net income before unusual items plus depreciation, amortization
of intangibles (including nonconsolidated affiliates) and deferred taxes.
44
<PAGE> 2
FINANCIAL
HIGHLIGHTS
[GROSS REVENUE GRAPH]
[OPERATING INCOME GRAPH]
[AFTER TAX CASH FLOW GRAPH]
[AFTER TAX CASH FLOW PER COMMON SHARE - DILUTED GRAPH]
Clear Channel Communications, Inc. o 1997 ANNUAL REPORT o 1
45
<PAGE> 3
LETTER TO THE
SHAREHOLDERS
Dear Fellow Shareholders:
I am pleased to report that nineteen ninety-seven was the most
successful year in our Company's history. We enjoyed continued success in our
broadcasting business, setting new records for after tax cash flow. In addition,
our entry into the outdoor advertising business has been well rewarded with
immediate financial success. After tax cash flow per share, the most important
measure of our Company's success, increased sixty-two percent from $1.44 in 1996
to $2.33 in 1997. Gross revenues increased from $398.1 million to $790.2 million
from 1996 to 1997, an increase of ninety-eight percent, while operating income
before depreciation and amortization increased from $153.4 million to $302.7
million over the same period. These strong fundamentals contributed to the
ongoing growth of shareholder value. Clear Channel's common stock price
increased 120 percent during the past year. Our Company's stock price has
compounded at an annual average rate of fifty-seven percent over the last
decade, making it one of the best performing stocks on the New York Stock
Exchange during that period.
BROADCASTING
The Telecommunications Act of 1996 initiated a wave of consolidation in
the radio industry that continued throughout 1997. Since our last annual report,
our Company has increased the number of radio stations, it owns, programs or
sells airtime on from 109 to 184 stations which are located in forty domestic
markets (this includes all pending transactions). In addition to these radio
stations, our Company continues to successfully operate eighteen television
stations in eleven markets across the United States. Clear Channel also
continues to have a significant interest in the field of Spanish language radio
broadcasting through its 32.3% stake in Heftel Broadcasting. Finally, during
1997 Clear Channel added to its international operations by acquiring two new
stations in Australia and one in the Czech Republic.
The largest of our 1997 radio acquisitions was the purchase of Paxson
Communications' forty-three stations during the fourth quarter of 1997. These
assets are an excellent addition to Clear Channel because they are clustered in
Florida, a region of rapid growth and attractive markets. Even in the brief time
since the acquisition, we have begun to capitalize on the excellent local
management and infrastructure at these stations, continuing their tradition of
community service and development into truly excellent performers. The decision
to concentrate on Florida is consistent with our Company's long-standing policy
of making investments that have an inherent growth profile. During 1997 a great
deal of our radio station acquisitions were located in markets where Clear
Channel already had a presence. By making these `tuck-in' acquisitions of
broadcasting stations, we not only improve the operations of the acquired assets
but also enhance the performance of our existing stations in that market.
Stronger station groups allow our Company to provide its clients with more
choices and greater flexibility.
The following 'tuck-in' acquisitions were added during 1997: WZZU-FM,
WFXC-FM, WFXK-FM and WDUR-AM in Raleigh, NC; WQMF-FM and WHKW-FM in Louisville,
KY; KHOM-FM in New Orleans, LA; KJOJ-AM in Houston, TX; WVTI-FM in Grand Rapids,
MI; WMIL-FM, WZTR-FM and WOKY-AM in Milwaukee, WI; WKII-AM, WXRM-FM and WOLZ-FM
in Fort Myers, FL; WMFX-FM and WOIC-AM in Columbia, SC; WLAN-AM/FM in Lancaster,
PA; KMVK-FM, KSSN-FM and KOLL-FM in Little Rock, AR; and KQSY-FM in Tulsa, OK.
During the year we also closed on transactions that added five new markets to
our Company's radio broadcasting operations. WODE-FM and WEEX-AM in Allentown,
PA; KTOM-FM, KDON-FM, KOCN-FM, KRQC-FM, KTOM-AM and KDON-AM in Monterey, CA;
WING-FM, WGTZ-FM and WING-AM in Dayton, OH; WKXI-FM, WJMI-FM, WOAD-AM and
WKXI-AM in Jackson, MS were all deals that added markets to the Clear Channel
family. In Albany, NY Clear Channel has an 80% interest in Radio Enterprises,
Inc., which owns WQBK-FM, WTMM-AM, WQBJ-FM and WXCR-FM.
During the year, our television operations continued in their tradition
of strong performance and leadership. As with our radio business, we continually
strive to give each station an identity consistent with the community it serves
in order to enhance viewer loyalty and distinguish it from its competitors.
Across the
2 o Clear Channel Communications, Inc. o 1997 ANNUAL REPORT
46
<PAGE> 4
Company during 1997, plans were made for the conversion of each of our
television stations to digital broadcasting. We are excited about the
opportunities that this new platform will give Clear Channel to serve our
viewers. Our ongoing strategy of affiliating the majority of our stations with
the most rapidly growing networks gives the entire group a more attractive
growth profile. Additionally, our substantial investment last year in news
operations has begun to pay a healthy dividend to our Company and the viewers it
serves.
SPANISH LANGUAGE BROADCASTING
Clear Channel's investment in Heftel Broadcasting continues to give our
Company a means of participating in the rapidly growing Spanish language
broadcasting arena. We remain very excited about the growth prospects for this
business. Spanish speaking listeners have been a traditionally underserved
demographic group, which allows Heftel the opportunity for rapid expansion.
Heftel is the leading domestic Spanish language radio broadcaster, with stations
in eleven of the top fifteen Spanish language radio markets. Although our
investment is a passive, nonvoting interest, we are confident that Heftel's
outstanding management team will continue to produce long term value for its
shareholders. Heftel's price per share increased in value by 197 percent during
1997, making the value of Clear Channel's stake approximately $664 million at
December 31, 1997.
OUTDOOR ADVERTISING
Nineteen ninety-seven was also a year marked by our Company's entry
into the outdoor advertising sector. Not only did we close on our first major
outdoor acquisition, Eller Media Company, but we also initiated a merger with
Universal Outdoor. On October 23, 1997, our Company entered into a stock for
stock merger agreement with Universal Outdoor valued at approximately $1.7
billion. The proposed merger is expected to close during the first half of 1998,
at which time Universal shareholders will receive .67 shares of Clear Channel
stock for each share of Universal stock held. Through this merger, our Company
will become the largest domestic outdoor advertising company, with a leading
presence in twenty-one of the top thirty-five media markets across the United
States. The Universal transaction adds display faces in twenty-two markets in
which our Company's existing outdoor company did not operate. Additionally,
eight of Universal's outdoor advertising markets overlap with our Company's
existing operations, including such markets as Memphis, Tampa, Jacksonville,
Orlando, Minneapolis, Dallas, Chicago and Milwaukee.
This merger demonstrates our Company's continuing commitment to
leadership in all media segments in which the Company is a participant and is a
testament to our continuing commitment and enthusiasm toward the outdoor
advertising business. Universal was founded in 1973 and has grown rapidly over
the past three years through strategic acquisitions in the middle and eastern
United States. The acquisition is highly complimentary to the Eller operation,
whose geographic concentration is in the middle and western United States.
Additionally, in March of 1998 Clear Channel announced that it had
offered to purchase the stock of More Group Plc. More Group is based in London,
England, and has operations in 22 countries. These countries are located
primarily in Europe. We see this acquisition as a further step in our Company's
international expansion. Our acquisition of More Group will provide us with a
platform to continue to expand on a global basis. It also is an example of our
ability to invest our capital in ways that will augment Clear Channel's growth.
Further information on More Group can be found later in this Annual Report.
Another strategic outdoor acquisition completed during 1997 was our
purchase of the Union Pacific Railroad Company outdoor advertising display
license portfolio, which is comprised of approximately 4,000 licenses to operate
displays on railroad rights-of-way. The Company acquired the right to manage
this portfolio for the next twenty-five years. The agreement also calls for our
Company to develop and manage new displays along the railroad right-of-way,
which is concentrated in California, Illinois and Texas, during the next
twenty-five years.
During 1997, aside from the purchases mentioned above, our Company
completed numerous separate acquisitions of outdoor advertising displays in
eleven markets, including Los Angeles, Dallas, Chicago, Milwaukee, Houston,
Atlanta and San Antonio. These acquisitions enhance our Company's outdoor
advertising coverage in these important markets and further enable us to provide
superior service to our clients. They also create economies of scale and help us
to operate more efficiently and profitably in our served markets.
During the coming year we will continue to focus our attention on
finding innovative new ways to help our clients market their products and
services. We are confident about the growth prospects of our outdoor business.
Additionally, we will remain a consolidator of the industry to the extent that
we are able to make investments that meet our acquisition criteria.
Clear Channel Communications, Inc. o 1997 ANNUAL REPORT o 3
47
<PAGE> 5
INTERNATIONAL
During the past twelve months Clear Channel has continued to extend its
strong position as a broadcaster both in Australia and New Zealand through its
subsidiaries, the Australian Radio Network and the New Zealand Radio Network.
Within both of these countries, consolidation continues to develop in much the
same way that it has in the United States.
1997 also marked the beginning of our Company's radio presence in
Eastern Europe. In May, Clear Channel acquired a fifty-percent interest in Radio
Bonton, a radio station serving the Czech Republic. The owner of the remaining
portion of this station is Bonton s.a., a large, diversified Czech media
company. We are hopeful that this single station will serve as an effective
foothold for further expansion in that region.
Finally, in December of this past year we were successful in drafting
preliminary agreements with Radio Shanghai, which operates thirteen radio
stations and one cable television station serving the Shanghai, China market.
The agreement calls for Clear Channel to assist in selling airtime on these
fourteen stations, which cover approximately fifty million Chinese citizens, and
also calls for sharing of certain training programs and programming content. We
are very pleased with this accord and see it as a platform for our Company's
continued growth in Asia.
Foremost in our minds in pursuing international opportunities is the
maintenance of a conservative and prudent approach toward evaluating the
possibilities for expansion. While we understand that emerging marketplaces hold
strong potential for advertising-based businesses, it is equally important to
proceed at a pace that ensures proper protection of those investments. We are
committed to the continued search for broadcasting and outdoor operations in
countries that enjoy stable currencies, attractive industry dynamics, rapid
growth of advertising expenditures, and sound political infrastructures.
CROSS-MEDIA SYNERGIES
During 1997 our Company renewed its attention to the area of maximizing
the value of owning multiple types of media outlets in a given market. The
benefits to our clients of being able to provide more than one conduit through
which to market their products and services are quite substantial. In addition,
our Company can often utilize capacity within those alternative media to more
effectively market its own services. For example, in the eleven markets where we
have broadcasting and outdoor operations (including all pending transactions),
we use vacant outdoor advertising space to effectively promote listenership or
viewership of our Company's broadcasting stations in that particular market. In
the eight markets where we have radio and television broadcasting operations, we
can utilize unsold airtime in both media to encourage individuals to watch our
television stations or listen to our radio stations. For this reason it is
important that we continue to establish these cross-media overlaps within
markets; we believe the long-term value they create can be significant.
CAPITAL MARKETS
During 1997, Clear Channel received an Investment Grade rating from
both Standard & Poor's Corporate Ratings and Moody's Investors Service on its
Senior Debt. This rating reflects the strength of our Company's balance sheet,
which Management has always felt to be a great asset. The investment grade
rating made it attractive for our Company to enter the public debt markets for
the first time.
In October, our Company raised approximately $300 million, pricing
thirty-year debentures at a coupon of 7.25%. In addition to this issuance of
public debt, Clear Channel refinanced its existing Revolving Credit Facility,
increasing the amount available under that line to $1.75 billion. Clear Channel
continues to have one of the lowest costs of capital of its peers, which we view
as a strategic advantage in our consolidating industries.
In addition, during 1997, our Company continued to improve on its
access to capital by issuing 20,737,426 new common shares which strengthened our
balance sheet and provided additional acquisition capacity, should proper
opportunities become available.
STRATEGIC DIRECTION
Our Company continues to be committed to its proven corporate strategy:
o Decentralized, flexible, entrepreneurial business units that place an
emphasis on simplifying structures and procedures,
o Sound centralized financial management,
o Growth through internal expansion of existing operations, supplemented
by strategic acquisitions,
o Internal capital investment to improve quality and market leadership,
o Insistence on adherence to the highest standards of integrity and
business conduct, and
o Significant attention to long-term strategic planning.
The growth of our core businesses is healthy, and the markets we serve
continue to be excellent environments in which to achieve our long-term goals.
Our position within these markets is, as it has been in the past, one of
leadership. To the over 5,500 members of our team who made 1997 possible, I
personally thank you. And to our shareholders, rest assured that we continue to
work hard to enhance the long-term value of your investment.
/s/ LOWRY MAYS
Lowry Mays
Chairman and CEO
March 9, 1998
4 o Clear Channel Communications, Inc. o 1997 ANNUAL REPORT
48
<PAGE> 6
DOMESTIC
RADIO STATIONS
ALABAMA
Mobile
WKSJ FM
Country
WKSJ AM
Country
WMXC FM
Adult Contemporary
WRKH FM
Classic Rock
WDWG FM
Country
WNTM AM
News/Talk
WNSP FM (1)
Sports
ARKANSAS
Little Rock
KQAR FM
Contemporary Hits
KMJX FM
Classic Rock
KDDK FM
Country
KSSN FM
Country
KOLL FM
Oldies
CALIFORNIA
Monterey
KTOM AM
Country
KDON AM
Contemporary Hits
KOCN FM
Oldies
KDON FM
Contemporary Hits
KRQC FM
Classic Rock
KTOM FM
Country
CONNECTICUT
New Haven
WKCI FM
Contemporary Hits
WAVZ AM
Nostalgia
WELI AM
News/Talk
FLORIDA
Florida Keys
WAVK FM
Adult Contemporary
WKRY FM
Soft Adult Contemporary
WFKZ FM
Adult Contemporary
Ft. Myers/Naples
WCKT FM
Country
WQNU FM
Country
WKII AM
Nostalgia
WXRM FM
Soft Adult Contemporary
WOLZ FM
Oldies
Jacksonville
WZNZ AM
News
WNZS AM
Sports
WFSJ FM
Jazz
WROO FM
Country
WPLA FM
Rock
WBGB FM
Classic Rock
Miami/Ft. Lauderdale
WFTL AM
News
WINZ AM
News/Sports
WIOD AM
News/Talk
WPLL FM
Rock
WLVE FM
Jazz
WZTA FM
Rock
WHYI FM
Contemporary Hits
WBGG FM
Classic Rock
Orlando
WWNZ AM
News
WQTM AM
Sports
WSHE FM
Modern Rock
WJRR FM
Rock
WMGF FM
Adult Contemporary
WTKS FM
Talk
Panama City
WDIZ AM
Sports/Talk
WSHF FM
Adult Contemporary
WPBH FM
Oldies
WFSY FM
Adult Contemporary
WPAP FM
Country
Pensacola
WYCL FM (1)
Oldies
WTKX FM
Rock
Tallahassee
WNLS AM
News/Talk
WJZT FM
Jazz
WTNT FM
Country
WSNI FM
Oldies
WXSR FM
Modern Rock
Tampa/St. Petersburg
WILV FM
Adult Contemporary
WHNZ AM (1)(2)
News
WZTM AM
News
WSJT FM
Jazz
WHPT FM
Classic Rock
WSRR FM
Modern Adult Contemporary
WRBQ AM
Adult Urban Contemporary
WRBQ FM
Country
West Palm Beach
WBZT AM
News/Talk/Sports
WKGR FM
Classic Rock
WOLL FM
Oldies
KENTUCKY
Louisville
WHAS AM
News/Talk/Sports
WAMZ FM
Country
WHKW FM
Country
WTFX FM
Modern Rock
WWKY AM
News/Talk/Sports
WKJK AM
Adult Standards
WQMF FM
Classic Rock
LOUISIANA
New Orleans
WODT AM
Blues
WQUE FM
Urban Contemporary
WYLD AM
Gospel
WYLD FM
Urban Adult Contemporary
WNOE FM
Country
KKND FM
Alternative Rock
KUMX FM
Contemporary Hits
MASSACHUSETTS
Springfield
WHYN AM
News/Talk/Sports
WHYN FM
Adult Contemporary
MICHIGAN
Grand Rapids
WOOD AM
Talk
WOOD FM
Adult Contemporary
WBCT FM
Country
WTKG AM
News/Talk/Sports
WCUZ FM
Country
WVTI FM
Contemporary Hits
MISSISSIPPI
Jackson
WKXI AM
Solid Gold Urban Oldies
WKXI FM
Urban Contemporary
WOAD AM
Urban Contemporary
WJMI FM
Rhythm & Blues
NORTH CAROLINA
Greensboro
WXRA FM
Alternative Rock
WTQR FM
Country
WSJS AM
News/Talk
Raleigh
WQOK FM
Urban Contemporary
WNNL FM
Gospel
WDUR AM
Urban Oldies
WFXC FM
Urban Adult
WFXK FM
Urban Adult
NEW YORK
Albany
WQBK FM
Alternative Rock
WQBJ FM
Alternative Rock
WTMM AM
News/Talk
WXCR FM
Classic Rock
OHIO
Cleveland
WNCX FM
Classic Rock
WERE AM
News/Talk
WENZ FM
Alternative Rock
Dayton
WING FM
Classic Rock
WING AM
News/Talk/Sports
WGTZ FM
Contempory Hits
(1) Joint Sales Agreement or Local Marketing Agreement (2) Pending Acquisition
Clear Channel Communications, Inc. o 1997 ANNUAL REPORT o 5
49
<PAGE> 7
OKLAHOMA
Oklahoma City
KTOK AM
News/Talk/Sports
KEBC AM
News/Talk/Spanish
KJYO FM
Contemporary Hits
WKY AM (1)
News/Talk
KTST FM
Country
KXXY FM
Country
KQSR FM
Soft Rock
Tulsa
KAKC AM
News/Sports/Oldies
KMOD FM Album
Oriented Rock
KQLL AM (1)(2)
Sports/Talk
KQLL FM (1)(2)
Oldies
KOAS FM (1)(2)
Smooth Jazz
KMRX FM
Modern Rock
PENNSYLVANIA
Allentown
WODE FM
Oldies
WEEX AM
Country
Lancaster
WLAN FM
Hot Adult Contemporary
WLAN AM
Big Band
Reading
WRAW AM
Middle of the Road
WRFY FM
Contemporary Hits
RHODE ISLAND
Providence
WWBB FM
Oldies
WWRX FM
Classic Rock
SOUTH CAROLINA
Columbia
WWDM FM
Urban Contemporary
WARQ FM
Alternative Rock
WMFX FM
Classic Rock
WOIC AM
Urban Gold
TENNESSEE
Cookeville
WHUB AM
Country
WPTN AM
News/Talk
WGIC FM
Adult Contemporary
WGSQ FM
Country
Memphis
WHRK FM
Urban Contemporary
WDIA AM
Adult Urban
WEGR FM
Classic Rock
WREC AM
News/Talk
WRXQ FM
Alternative Rock
KJMS FM
Urban Adult Contemporary
KWAM AM
Religious
TEXAS
Austin
KPEZ FM
Classic Rock
KHFI FM
Contemporary Hits
KEYI FM
Oldies
KFON AM
Sports
El Paso
KPRR FM
Contemporary Hits
KHEY FM
Country
KHEY AM
Oldies
Houston
KPRC AM
News/Talk/Sports
KSEV AM
News/Talk/Sports
KMJQ FM
Adult Urban Contemporary
KBXX FM
Urban Contemporary
KHYS FM (1)
Rhythmic CHR
KJOJ AM
Christian/Talk
KJOJ FM
Rhythmic CHR
San Antonio
WOAI AM
News/Talk/Sports
KQXT FM
Adult Contemporary
KTKR AM
News/Talk/Sports
KAJA FM
Country
KSJL FM (1)
Urban Adult Contemporary
VIRGINIA
Norfolk
WOWI FM
Urban Contemporary
WJCD FM
Smooth Jazz
WSVV FM
Adult Urban Contemporary
WSVY FM
Adult Urban Contemporary
Richmond
WRVA AM
News/Talk/Sports
WRNL AM
Sports
WRVQ FM
Contemporary Hits
WRXL FM
Album Oriented Rock
WTVR FM
Soft AC
WTVR AM
Nostalgia
WISCONSIN
Milwaukee
WKKV FM
Urban Contemporary
WMIL FM
Country
WOKY AM
Adult Standards
WZTR FM
Oldies
NETWORKS
ALABAMA
Birmingham
Alabama Radio Network
FLORIDA
Coral Gables
Clear Channel Sports
Gainesville
Clear Channel Sports
Maitland
Florida Radio Network
IOWA
Des Moines
Clear Channel Sports
KENTUCKY
Louisville
Kentucky News Network
OKLAHOMA
Oklahoma City
Oklahoma News Network
PENNSYLVANIA
State College
Clear Channel Sports
TENNESSEE
Nashville
Tennessee Radio Network
TEXAS
San Angelo
Voice of Southwest Agriculture
College Station
Clear Channel Sports
VIRGINIA
Richmond
Virginia News Network
(1) Joint Sales Agreement or Local Marketing Agreement (2) Pending Acquisition
6 o Clear Channel Communications, Inc. o 1997 ANNUAL REPORT
50
<PAGE> 8
DOMESTIC
TELEVISION
ALABAMA
Mobile
WPMI
NBC TV15
WJTC
UPN TV44 (1)
ARIZONA
Tucson
KTTU
UPN TV18
ARKANSAS
Little Rock
KLRT
FOX TV16
KASN
UPN TV38 (1)
FLORIDA
Jacksonville
WAWS
FOX TV30
WTEV
UPN TV47 (1)
KANSAS
Wichita
KSAS
FOX TV24
MINNESOTA
Minneapolis
WFTC
FOX TV29
NEW YORK
Albany
WXXA
FOX TV23
OKLAHOMA
Tulsa
KOKI
FOX TV23
KTFO
UPN TV41 (1)
PENNSYLVANIA
Harrisburg/Lebanon/
Lancaster
WHP
CBS TV21
WLYH
UPN TV15 (1)
RHODE ISLAND
Providence
WPRI
CBS TV12
WNAC
FOX TV64 (1)
TENNESSEE
Memphis
WPTY
ABC TV24
WLMT
UPN TV30 (1)
OUTDOOR
ARIZONA
Phoenix
Bulletins
Tucson
Bulletins (2)
30 Sheet Posters (2)
CALIFORNIA
Los Angeles
Shelters
30 Sheet Posters
Bulletins
Wallscapes
Sacramento
Shelters
30 Sheet Posters
Bulletins
San Diego
Shelters
30 Sheet Posters
Bulletins
San Francisco
Shelters
8 Sheet Posters
30 Sheet Posters
Bulletins
Transits
Wallscapes
DELAWARE
Wilmington
8 Sheet Posters (2)
30 Sheet Posters (2)
Bulletins (2)
FLORIDA
Jacksonville
30 Sheet Posters (2)
Bulletins (2)
Miami
Shelters
Ocala/Gainesville
30 Sheet Posters (2)
Bulletins (2)
Orlando
Bulletins
30 Sheet Posters (2)
Tampa
Shelters
30 Sheet Posters
Bulletins
GEORGIA
Atlanta
8 Sheet Posters
30 Sheet Posters
Bulletins
ILLINOIS
Chicago
8 Sheet Posters (2)
30 Sheet Posters (2)
Bulletins
Transits (2)
Wallscapes (2)
INDIANA
Indianapolis
8 Sheet Posters (2)
30 Sheet Posters (2)
Bulletins (2)
Transit (2)
IOWA
Des Moines
8 Sheet Posters (2)
30 Sheet Posters (2)
Bulletins (2)
MARYLAND
Baltimore
Shelters (2)
30 Sheet Posters (2)
Bulletins (2)
Transits (2)
Salisbury
30 Sheet Posters (2)
Bulletins (2)
MINNESOTA
Minneapolis
30 Sheet Posters (2)
Bulletins (2)
NEW YORK
New York
8 Sheet Posters (2)
30 Sheet Posters (2)
Bulletins (2)
OHIO
Akron/Canton
30 Sheet Posters
Bulletins
Cleveland
30 Sheet Posters
Bulletins
Wallscapes
PENNSYLVANIA
Philadelphia
Shelters (2)
30 Sheet Posters (2)
Bulletins (2)
SOUTH CAROLINA
Myrtle Beach
30 Sheet Posters (2)
Bulletins (2)
TENNESSEE
Chatanooga
30 Sheet Posters (2)
Bulletins (2)
Memphis
Shelters (2)
8 Sheet Posters (2)
30 Sheet Posters (2)
Bulletins (2)
TEXAS
Dallas
8 Sheet Posters (2)
30 Sheet Posters (2)
Bulletins
El Paso
8 Sheet Posters
30 Sheet Posters
Bulletins
Houston
8 Sheet Posters
30 Sheet Posters
Bulletins
San Antonio
8 Sheet Posters
30 Sheet Posters
Bulletins
WISCONSIN
Milwaukee
8 Sheet Posters (2)
30 Sheet Posters
Bulletins
ATLANTIC COAST
Bulletins (2)
GULF COAST
Bulletins (2)
WASHINGTON D.C.
30 Sheet Posters (2)
Bulletins (2)
MALL MEDIA
250 throughout
United States
(1) Joint Sales Agreement or Local Marketing Agreement (2) Pending Acquisition
Clear Channel Communications, Inc. o 1997 ANNUAL REPORT o 7
51
<PAGE> 9
INVESTMENT HIGHLIGHTS
[TEN YEAR CUMULATIVE RETURN]
[PERFORMANCE GRAPH]
8 o Clear Channel Communications, Inc. o 1997 ANNUAL REPORT
52
<PAGE> 10
PRO FORMA DOMESTIC
REVENUE BY MARKET
[WORLD]
Clear Channel Communications, Inc. o 1997 ANNUAL REPORT o 9
53
<PAGE> 11
DOMESTIC OPERATIONS
[MAP OF THE UNITED STATES]
10 o Clear Channel Communications, Inc. o 1997 ANNUAL REPORT
[PICTURE OF AUSTRALIA]
AUSTRALIAN RADIO NETWORK
2WS FM
Sydney, NSW
Hits and Memories
101.7 MHz
MIX106 FM
Sydney, NSW
Soft Adult Contemporary
106.5 MHz
ONE FM
Western Sydney, NSW
Adult Contemporary
101.1 MHz
GOLD104 FM
Melbourne, Victoria
Gold
104.3 MHz
TTFM FM
Melbourne, Victoria
Hot Adult Contemporary
101.1 MHz
4KQ AM
Brisbane, Queensland
Adult Contemporary
693 KHz
4BH AM
Brisbane, Queensland
Soft Adult Contemporary
882 KHz
106.3 FM
Canberra
Adult Contemporary
106.3 MHz
5AD FM
Adelaide, SA
Adult Contemporary
105.3 MHz
5DN AM
Adelaide, SA
News/Talk
1323 KHz
[PICTURE OF NEW ZEALAND]
RADIO NEW ZEALAND NETWORK
COMMUNITY RADIO
Radio Waitomo
Te Kuiti
1170AM
Radio Forestland
Tokoroa
1413AM
King Country Radio
Taumarunui
1512AM
Lakeland FM
Taupo
96.7FM
Gisborne's
2ZG 945AM
Hawera's 2ZH 1557AM
River City FM
Wanganui
89.6FM
Radio Wairarapa
Masterton
846AM
Radio Marlborough
Blenheim
97FM, 1539AM & 1584AM
Radio Scenicland
Greymouth
90.5FM,
Greymouth 93.1 & 91.1FM
Reefton 97.3FM
Westport 90.9FM
Buller 1287AM
South Westland
Ashburton's
3ZE 92.5FM & 873AM
Radio Waitaki
Oamaru
1395AM
CLASSIC HITS FM
97FM
Auckland
90FM
Wellington
98FM
Christchurch
1026AM
Radio Northland
98.6FM
Hamilton's ZHFM
95BOP FM
Bay of Plenty
97FM
Rotorua
89FM
Bay City Radio, Hawkes Bay
90FM
Taranaki
97.8FM
Manawatu
90FM
Nelson
99FM
Timaru
89FM
Dunedin
98.8FM
Invercargill's ZAFM
ZM & CLASSIC ROCK
91ZM
Wellington 90.9 & 93.5FM
91ZM
Christchurch 91.3FM
93ZM
Whangarei 93.1FM
96ZM
Dunedin 95.8FM
98.3FM
Rotoru
Classic Rock
96FM Napier
Classic Rock
Q91FM 90.6
NEWSTALK ZB
Auckland
1080AM & 89.4FM
Wellington
1035AM
Christchurch
1098AM
Waikato
1296AM
Bay of Plenty
1008AM
Hawkes Bay
1278AM
Taranaki
1053AM & 1557AM
Manawatu
927AM
Dunedin
1044AM
Southland
864AM
Clear Channel Communications, Inc. o 1997 ANNUAL REPORT o 11
54
<PAGE> 12
MORE GROUP PLC
[GEOGRAPHIC REVENUE DISTRIBUTION - 1997 CHART]
[PRODUCT LINE REVENUE DISTRIBUTION - 1997 CHART]
On March 5, 1998, Clear Channel Communications, Inc., announced that it
had reached an agreement with the board of More Group Plc regarding the terms of
a recommended cash offer to acquire all of the issued shares of More Group. The
offer values each More Group share at (pound)10.30.
More Group is one of the world's leading outdoor advertising companies.
It employs more than 1,000 people in 22 countries and operates over 90,000 fixed
advertising panels worldwide. Although the majority of its assets are located in
Europe, the Company also has operations in the United States, Asia, and
Australia. The company operates a number of brands - Adshel (50,000 street
furniture panels), More O'Ferrall, Superboards and WW (40,000 billboards) and
More Trans (Transport contracts).
From an established, market-leading base in the UK and Ireland, More
has developed organically and by acquisition to become one of the world's
leading outdoor advertising companies. In addition to developing its market
shares through innovative product engineering, More has been at the forefront of
consolidation activity in Europe and Asia. It has now established strong market
share throughout the world and is well placed to secure further street furniture
and transport tenders in its domestic market and internationally.
[CHART]
12 o Clear Channel Communications, Inc. o 1997 ANNUAL REPORT
55
<PAGE> 13
CORPORATE
OFFICERS
CORPORATE
Lowry Mays
Chairman
Chief Executive Officer
Mark P. Mays
President
Chief Operating Officer
Randall Mays
Executive Vice President
Chief Financial Officer
Kathryn Johnson
Vice President
Communications
Herbert W. Hill, Jr.
Senior Vice President
Chief Accounting Officer
David Wilson
Vice President
Controller
Kenneth E. Wyker
Senior Vice President for
Legal Affairs
Demetra Koelling
Vice President
Corporate Counsel
Rick Wolf
Vice President
Corporate Counsel
Houston Lane
Vice President
Finance
Ida Chycinski
Vice President
Cash Management
Deborah Williams
Vice President
Corporate Taxation
Dr. Ed Cohen
Vice President
Research
Susan Ross
Director of
Corporate Reporting
RADIO
James Smith
Senior Vice President
Operations & Capital
Management
George L. Sosson
Senior Vice President
Operations-East
Stan Webb
Senior Vice President
Operations-Central
Peter Ferrara
Senior Vice President
Operations-Florida
Radio
Vice Presidents
David Arcara, Albany
Jeff Frank, Allentown
Judy Lakin, Austin
Walt Tiburski, Cleveland
Steve Patterson, Columbia
Dave Thomas, Cookeville
David Macejko, Dayton
Bill Struck, El Paso
Jim Keating, Ft. Myers
Skip Essick, Grand Rapids
Howard Nemenz,
Greensboro
Carl Hamilton, Houston
Ernest Jackson, Houston
Dan Patrick, Houston
Kevin Webb, Jackson
Linda Byrd, Jacksonville
Joel Day, Florida Keys
Mike Shannon,
Lancaster/Reading Richard D. Booth,
Little Rock
Bob Scherer, Louisville
Mark Thomas, Louisville
Bruce Demps, Memphis
Sherri Sawyer, Memphis
David Ross, Miami
Ronna Woulfe, Miami
Terry Wood, Milwaukee
David Coppock, Mobile
Miles Chandler, Montery
Faith Zila, New Haven
Earnest James,
New Orleans
Janet Armstead, Norfolk
John Moen, Oklahoma City
Jenny Sue Rhoades,
Orlando
Jimmy Vineyard,
Panama City
Jeanie Hufford, Pensacola
Matt Chase, Providence
Wayne Jefferson, Raleigh
Carl McNeill, Richmond
Linda Forem, Richmond
Reggie Jordan, Richmond
Robert T. Cohen,
San Antonio
Elizabeth D. Kocurek,
San Antonio
Gary James, Springfield
David Manning, Tallahassee
Skip Schmidt, Tampa
Kevin Malone, Tampa
Allen McLaughlin, Tulsa
David D'Eugenio,
West Palm Beach
RADIO NETWORKS
VICE PRESIDENTS
Rick Green,
Clear Channel News Networks
Kevin Moore,
Clear Channel Sports Networks
OUTDOOR
ELLER MEDIA COMPANY
Karl Eller, Chairman & CEO
Scott Eller, President
Tim Donmoyer,
CFO/Exec. VP
DIVISION PRESIDENTS
John Jacobs, Atlanta
Ken Blakey, Chicago
Bill Platko, Cleveland
Gene Leehan, Dallas
S. Doak Hoover, El Paso
Michelle Costa, Houston
Paul Sara, Milwaukee
Dennis Wazaney, New York
Bill Hooper,
Northern California
Bruce Seidel,
Orange County
Manny Molina, Phoenix
Dan Creel, San Antonio
Ignacio Ayala,
South Florida
George Manyak,
Southern California
S. Wayne Mock, Tampa Bay
TELEVISION
Rip Riordan
Executive Vice President/
Chief Operating Officer
TELEVISION
VICE PRESIDENTS
David M. D'Antuono,
Albany
John F. Feeser, III,
Harrisburg
Josh McGraw, Jacksonville
Chuck Spohn, Little Rock
Jack L. Peck, Memphis
Steve Spendlove,
Minneapolis
Sharon Moloney, Mobile
Deborah J. Sinay,
Providence
Jack Jacobson, Tuscon
Hal Capron, Tulsa
Randy Pratt, Wichita
INTERNATIONAL
Richard D. Novik
President
Mary Ann Chapman
Vice President Business Development - China
AUSTRALIA
John Hamilton
Chief Financial Officer
NEW ZEALAND
Stephen Barron
Chief Executive
BOARD OF DIRECTORS
Lowry Mays
Chairman
Chief Executive Officer
Alan D. Feld
Partner: Akin, Gump, Strauss, Hauer and Feld
Red McCombs
Private Investor
Theodore H. Strauss*
Senior Managing Director: Bear, Stearns & Co., Inc.
John H. Williams*
Senior Vice President: Everen Securities, Inc.
Karl Eller
Chairman & CEO: Eller Media Company
FORM 10-K
ANNUAL REPORT
A copy of the Company's Annual Report on Form 10-K filed with the Securities
and Exchange Commission may be obtained without charge upon written request to:
Herbert W. Hill, Jr. Senior Vice President Clear Channel Communications, Inc.
P.O. Box 659512 San Antonio, Texas 78265-9512
INDEPENDENT
AUDITORS
Ernst & Young, LLP
San Antonio, Texas
TRANSFER AGENT AND REGISTRAR
Bank of New York
101 Barclay Street
12 Floor West
New York, NY 10286
ANNUAL
MEETING OF
SHAREHOLDERS
The annual meeting of shareholders will be held at 200 Concord Plaza on the 1st
floor in the Conference Room, San Antonio, Texas, at 11:00 am CDT on Tuesday,
May 5, 1998
56
<PAGE> 14
[LOGO]
CLEAR CHANNEL COMMUNICATIONS, INC.
[MAP]
MAILING ADDRESS
P.O. BOX 659512
SAN ANTONIO, TEXAS
78265-9512
CORPORATE ADDRESS
200 CONCORD PLAZA
SUITE 600
SAN ANTONIO, TEXAS
78216-6940
210.822.2828
FACSIMILE 210.822.2299
WORLD WIDE WEB ADDRESS
WWW.CLEARCHANNEL.COM
57
<PAGE> 15
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
COMPARISON OF 1997 VS. 1996
CONSOLIDATED
Consolidated net revenue in 1997 increased 98% to $697.1 million from
$351.7 million. Operating expenses increased 99% to $394.4 million, compared to
$198.3 million for 1996. Operating income before depreciation and amortization
in 1997 increased to $302.7 million from $153.4 million, or 97%. Depreciation
and amortization increased 149% to $114.2 million from $45.8 million. Interest
expense increased to $75.1 million from $30.1 million, or 150%. Other income
(expense) -- net increased to $11.6 million from $2.2 million. Net income was
$63.6 million for 1997, compared to $37.7 million in 1996. The corresponding
earnings per common share-diluted was $.67 and $.51 for 1997 and 1996,
respectively. Income tax expense (based on income before equity in earnings
(loss) of nonconsolidated affiliates) in 1997 was $47.1 million, reflecting an
annual average effective tax rate of 45%, compared to $28.4 million, or a 40%
effective rate in 1996. Equity in earnings (loss) of nonconsolidated affiliates
increased to $6.6 million in 1997 from $(5.2) million in 1996.
The predominant reasons for the increase in net revenue and operating
expenses are two fold: first, the revenue and expenses associated with the
operations of Eller Media Corporation (Eller), an outdoor media company acquired
in April of 1997. This new outdoor segment, including subsequent acquisitions
and license management agreements of approximately 7,000 display faces,
contributed 30% of the Company's revenue and 27% of the Company's operating
expenses during 1997. Second, net revenue and operating expense increased from
radio stations and networks acquired during 1997 and a full year of operations
for those radio and television stations acquired during 1996. Station and
network acquisitions are as follows:
<TABLE>
<CAPTION>
ACQUIRED BEGAN
LICENSE(1) OPERATIONS(2) STATION OR NETWORK LOCATION
- ---------- ------------- ------------------ --------
<C> <C> <S> <C>
11/97 11/97 KQSY-FM (now KMRX-FM) Tulsa, OK
10/97 10/97 KMVK-FM (now KDDK-FM),
KSSN-FM and KOLL-FM Little Rock, AR
10/97 10/97 Penn State Sports Network State College, PA
10/97 10/97 Miami Hurricane Sports Network Coral Gables, FL
10/97 10/97 Florida Gators Sports Network Gainesville, FL
10/97 10/97 Tennessee Radio Network Nashville, TN
10/97 10/97 Florida Radio Network Maitland, FL
10/97 10/97 Alabama Radio Network Birmingham, AL
10/97 10/97 WZTR-FM Milwaukee, WI
12/97 10/97 Paxson Radio (Paxson)
WHUB-AM, WPTN-AM,
WGIC-FM and WGSQ-FM Cookeville, TN
WAVK-FM, WKRY-FM and WFKZ-FM Florida Keys, FL
WZNZ-AM, WNZS-AM, WFSJ-FM
WROO-FM, WPLA-FM and WTLK-FM Jacksonville, FL
WFTL-AM, WINZ-AM, WIOD-AM
WPLL-FM, WLVE-FM and WZTA-FM Miami, FL
WTKX-FM Pensacola, FL
WWNZ-AM, WQTM-AM, WSHE-FM
WJRR-FM, WMGF-FM and WTKS-FM Orlando, FL
WDIZ-AM, WSHF-FM, WPBH-FM,
</TABLE>
58
<PAGE> 16
<TABLE>
<CAPTION>
ACQUIRED BEGAN
LICENSE(1) OPERATIONS(2) STATION OR NETWORK LOCATION
- ---------- ------------- ------------------ --------
<C> <C> <S> <C>
WFSY-FM and WPAP-FM Panama City, FL
WNLS-AM, WJZT-FM, WTNT-FM
WSNI-FM and WXSR-FM Tallahassee, FL
WKES-FM (now WILV-FM),
WZTM-AM, WSJT-FM and WHPT-FM Tampa, FL
WBZT-AM, WKGR-FM
and WOLL-FM West Palm Beach, FL
10/97 WYCL-FM Pensacola, FL
10/97 WHNZ-AM Tampa/St. Petersburg, FL
9/97 9/97 WDUR-AM, WFXC-FM
and WFXK-FM Raleigh, NC
9/97 KTOM-AM/FM, KDON-AM/FM,
KOCN-FM and KRQC-FM Monterey, CA
8/97 8/97 WMFX-FM, WOIC-AM Columbia, SC
4/97 4/97 WKII-AM, WOLZ-FM
and WFSN-FM (now WXRM-FM) Fort Myers, FL
3/97 3/97 WMIL-FM and WOKY-AM Milwaukee, WI
2/97 2/97 KHOM-FM (now KUMX-FM) New Orleans, LA
2/97 2/97 WAKX-FM (now WVTI-FM) Grand Rapids, MI
1/97 1/97 WQMF-FM and WHKW-FM Louisville, KY
12/96 12/96 Radio Equity Partners, LP (REP)
WRXQ-FM, WEGR-FM, WREC-AM Memphis, TN
WWBB-FM and WWRX-FM Providence, RI
12/96 12/96 KJMS-FM and KWAM-AM Memphis, TN
10/96 10/96 WHKW-AM (now WKJK-AM),
WWKY-AM and WTFX-FM Louisville, KY
8/97 10/96 WLAN-AM/FM Lancaster, PA
8/96 8/96 Radio Equity Partners, LP (REP)
WARQ-FM, WWDM-FM Columbia, SC
WXRM-FM (now WQNU-FM)
and WCKT-FM Ft. Myers/Naples, FL
WSJS-AM, WTQR-FM, WXRA-FM Greensboro, NC
WNOE-FM, KLJZ-FM (now KKND-FM) New Orleans, LA
WHYN-AM/FM Springfield, MA
KXXY-AM (now KEBC-AM),
KXXY-FM and KTST-FM Oklahoma City, OK
3/97 8/96 Radio Enterprises, Inc.(3)
WQBJ-FM, WXCR-FM,
WQBK-AM (now WTMM-AM),
and WQBK-FM Albany, NY
7/96 7/96 WPRI-TV Providence, RI
7/96 WNAC-TV Providence, RI
6/96 6/96 WTVR-AM/FM Richmond, VA
1/97 5/96 WZZU-FM (now WNNL-FM) Raleigh, NC
2/97 5/96 KJOJ-AM Houston, TX
5/96 5/96 US Radio, Inc. (USR)
KHEY-AM/FM and KPRR-FM El Paso, TX
KJOJ-FM Houston, TX
KMJX-FM, KDDK-FM (now KQAR-FM) Little Rock, AR
WHRK-FM and WDIA-AM Memphis, TN
WKKV-FM Milwaukee, WI
</TABLE>
59
<PAGE> 17
<TABLE>
<CAPTION>
ACQUIRED BEGAN
LICENSE(1) OPERATIONS(2) STATION OR NETWORK LOCATION
- ---------- ------------- ------------------ --------
<C> <C> <S> <C>
WJCD-FM and WOWI-FM Norfolk, VA
WQOK-FM Raleigh, NC
WRAW-AM, WRFY-FM Reading, PA
10/96 5/96 WSVY-FM Norfolk, VA
10/96 5/96 WCUZ-AM (now WTKG-AM)
and WCUZ-FM Grand Rapids, MI
11/96 5/96 WMYK-FM (now WSVV-FM) Norfolk, VA
5/96 KQLL-AM/FM and KOAS-FM Tulsa, OK
2/96 2/96 WOOD-AM/FM, WBCT-FM Grand Rapids, MI
10/95 10/95 Voice of Southwest Agriculture
Radio Network San Angelo, TX
10/95 10/95 WHP-TV Harrisburg, PA
10/95 WLYH-TV Harrisburg, PA
7/95 WKY-AM Oklahoma City, OK
6/95 WTEV-TV Jacksonville, FL
1/95 1/95 KMJQ-FM Houston, TX
1/95 1/95 KPRC-AM and KSEV-AM(3) Houston, TX
5/96 11/94 WENZ-FM Cleveland, OH
8/96 3/93 KEYI-FM and KFON-AM Austin, TX
</TABLE>
- ---------------
(1) Represents the date in which the Company consummated the purchase of the
FCC license.
(2) Represents the date from which the results of the stations operations are
included with the results of the Company. This date may precede the
acquisition date as a result of the Company executing a local marketing
agreement (LMA) or joint sales agreement (JSA) as broker for the station.
(3) The Company acquired an 80% interest in these stations.
The tangible and intangible assets acquired through the purchases of Eller
and the above mentioned stations and networks account for the majority of the
increase in depreciation and amortization for 1997. Interest expense increased
as a result of greater average borrowing levels and higher average borrowing
rates, 6.3% in 1996 to 6.6% in 1997. Other income increased primarily as a
result of a $6.2 million gain from the sale of 350,000 shares of common stock in
Heftel Broadcasting. Income tax expense rose due to the increase in taxable
earnings as well as an increase in the average effective tax rate from 40% in
1996 to 45% in 1997. The effective tax rate increased as a result of the
increase in nondeductible amortization expense principally associated with the
acquisition of Eller.
Equity in earnings (loss) of nonconsolidated affiliates increased in 1997
primarily as a result of the solid financial performance by Heftel. An
additional increase resulted from the purchase of a 30% interest in American
Tower Corporation, the leading independent domestic owner and operator of
wireless communication towers. These increases were partially offset by an
eroding currency valuation in Australia and New Zealand. Equity in earnings
(loss) of nonconsolidated affiliates is included in the results of operations
for the Company's radio segment.
RADIO
Net revenue in 1997 increased 53% to $332.6 million from $217.2 million.
Operating expenses increased 59% to $201.2 million, compared to $126.6 million
for 1996. Operating income before depreciation and amortization in 1997
increased to $131.4 million from $90.6 million, or 45%. Depreciation and
amortization increased 74% to $48.5 million from $27.8 million in 1996.
Operating income increased 32% to $82.9 million in 1997 from $62.8 million in
1996.
60
<PAGE> 18
The majority of the increase in net revenue, operating expenses and
depreciation and amortization was due to the aforementioned radio and network
acquisitions. At December 31, 1997, the radio segment included 156 stations for
which the Company owned the Federal Communications Commission (FCC) license and
17 stations programmed under local marketing or time brokerage agreements. These
173 radio stations operate in 40 different markets.
TELEVISION
Net revenue in 1997 increased 17% to $157.1 million from $134.6 million.
Operating expenses in 1997 increased 19% to $85.1 million compared to $71.7
million for 1996. Operating income before depreciation and amortization in 1997
increased to $71.9 million from $62.8 million, or 14%. Depreciation and
amortization decreased .6% to $17.9 million from $18.0 million. Operating income
increased 21% to $54.0 million in 1997 from $44.8 million in 1996.
The increase in net revenue was primarily due to a full year of operations
for the aforementioned television acquisitions that occurred in July of 1996 and
from improved ratings at several of the television stations. Operating expenses
rose predominately due to the inclusion of a full year of operations for the
aforementioned television station acquisitions and the increase in selling
expenses related to the increase in revenue. At December 31, 1997, the
television segment included 11 television stations for which the Company owned
the FCC license and seven stations for which the Company programmed under time
sales or time brokerage agreements. These 18 television stations operate in 11
different markets.
OUTDOOR
Net revenue and operating expenses in 1997 was $207.4 million and $108.1
million, respectively. Operating income before depreciation and amortization in
1997 was $99.3 million. Depreciation and amortization was $47.8 million
resulting in operating income of $51.5 million in 1997.
Assuming the acquisition of Eller was effective at the beginning of 1996,
pro forma net revenue in 1997 would have increased 11% to $264.1 million from
1996 pro forma of $237.0 million. Pro forma operating expenses in 1997 increased
.1% to $141.9 million compared to $141.8 million for 1996 pro forma. Pro forma
operating income before depreciation and amortization in 1997 increased to
$122.2 million from $95.2 million, or 28%. Pro forma depreciation and
amortization increased .2% to $64.3 million from $64.2 million. Pro forma
operating income increased 86% to $57.8 million in 1997 from $31.0 million in
1996.
Pro forma revenue increased primarily due to improved occupancy and
increased rates for usage of display faces. This also resulted in the increased
pro forma operating income before depreciation and amortization and pro forma
operating income. At December 31, 1997, the outdoor segment operated 57,660
display faces in 17 different markets.
COMPARISON OF 1996 VS. 1995
CONSOLIDATED
Consolidated net revenue in 1996 increased 41% to $351.7 million from
$250.1 million. Operating expenses in 1996 increased 44% to $198.3 million,
compared to $137.5 million for 1995. Operating income before depreciation and
amortization in 1996 increased to $153.4 million from $112.6 million, or 36%.
Depreciation and amortization increased 36% to $45.8 million from $33.8 million.
Interest expense increased to $30.1 million from $20.8 million, or 45%. Other
income (expense) increased from $(.8) million to $2.2 million. Net income was
$37.7 million for 1996, compared to $32.0 million in 1995. Income tax expense
(based on income before equity in net income/loss of, and other income from,
nonconsolidated affiliates) in 1996 was $28.4 million, reflecting an annual
average effective tax rate of 40%, compared to $20.3 million, or a 41% effective
rate in 1995. Equity in net income (loss) of, and other income from,
nonconsolidated affiliates decreased to $(5.2) million in 1996 from $2.5 million
in 1995.
61
<PAGE> 19
The majority of the increase in net revenue was due to the additional
revenue associated with the radio and television stations acquired in 1996 and
the inclusion of a full year of operations for those stations acquired in 1995.
These stations are listed in the aforementioned table.
Operating expenses rose due to the increase in selling expenses associated
with this revenue increase and the additional operating expenses associated with
the above acquisitions. The major cause of the increase in depreciation and
amortization was the acquisition of the tangible and intangible assets
associated with the purchases of the above mentioned stations. The majority of
the increase in interest expense was due to an increase in the average amount of
debt outstanding which was partially offset by a decrease in the average
interest rate from 6.8% in 1995 to 6.3% in 1996. Income tax expense increased
because of the increase in earnings.
The equity in net income (loss) of, and other income from, nonconsolidated
affiliates resulted from: one, the Company's purchase in May 1995 of a 50%
interest in the Australian Radio Network Pty. Ltd. (ARN), which owns and
operates radio stations and a radio representation company in Australia; two,
the purchase in May 1995 of 21.4%, and the purchase in August 1996 of an
additional 41.8%, of the outstanding common stock of Heftel Broadcasting
Corporation (Heftel), a publicly-traded Spanish-language radio broadcaster in
the United States; and three, the purchase in July 1996 of a 33.33% (one-third)
interest in the New Zealand Radio Network (NZRN), which owns and operates 52
radio stations in New Zealand. The majority of the decrease in equity in net
income (loss) of, and other income from, nonconsolidated affiliates was due to
the Company's equity interest in certain employment contract payments, severance
costs, and other write-offs totaling $44.7 million related to Heftel's
reorganization. All of these equity investments are included in results of
operations for the Company's radio segment.
RADIO
Net revenue in 1996 increased 51% to $217.2 million from $144.2 million.
Operating expenses increased 45% to $126.6 million, compared to $87.5 million
for 1995. Operating income before depreciation and amortization in 1996
increased to $90.6 million from $56.7 million, or 60%. Depreciation and
amortization increased 39% to $27.8 million from $20 million. Operating income
increased 71% to $62.8 million in 1996 from $36.7 million in 1995.
The majority of the increase in net revenue, operating expenses and
depreciation and amortization was due to the aforementioned radio and network
acquisitions. At December 31, 1996, the radio segment included 91 stations for
which the Company owned the FCC license and 15 stations programmed under local
marketing or time brokerage agreements, all of which operated in 26 different
markets.
With the passage of the Telecommunications Act (the Act) in February 1996,
the limit on the maximum number of licenses that one company may own in the
United States was eliminated, and the limit on the number of licenses that one
company may own in any given market was changed. This limit depends on the size
of the market; in the largest markets, for example, one company may not own more
than eight licenses total, with no more than five licenses of one service (AM or
FM). This allows the Company significant flexibility in future growth in its
radio broadcasting operations.
TELEVISION
Net revenue in 1996 increased 27% to $134.6 million from $105.8 million.
Operating expenses in 1996 increased 43% to $71.7 million compared to $50.0
million for 1995. Operating income before depreciation and amortization in 1996
increased to $62.8 million from $55.8 million, or 13%. Depreciation and
amortization increased 31% to $18.0 million from $13.8 million. Operating income
increased 7% to $44.8 million in 1996 from $42.1 million in 1995.
The majority of the increase in net revenue was due to the inclusion of the
aforementioned television acquisitions in 1996 and 1995. Operating expenses rose
due to the increase in selling expenses associated with these revenue increases,
the inclusion of the aforementioned television acquisitions in 1996 and 1995,
and the start-up costs of the news departments at four television stations.
62
<PAGE> 20
The major cause of the increase in depreciation and amortization was the
acquisition of tangible and intangible assets associated with the purchase of
the aforementioned television stations. At December 31, 1996, the television
segment included eleven television stations for which the Company owned the FCC
license and seven stations, which the Company programmed under time sales or
time brokerage agreements, all of which operated in eleven different markets.
With passage of the Act in February 1996, the restrictions on ownership of
television stations include a national ownership limit of stations that reach no
more than 35% of the total United States television audience and the limit of
one license per market for any one broadcaster. This allows the Company greater
opportunity to expand into additional markets in television broadcasting.
LIQUIDITY AND CAPITAL RESOURCES
The major sources of capital for the Company have been cash flow from
operations, advances on its revolving long-term line of credit facility (the
Credit Facility), other borrowings, and funds provided by the initial stock
offering in 1984 and subsequent stock offerings in July 1991, October 1993, June
1996, May 1997 and September 1997. Historically, cash flow has exceeded earnings
by a significant amount due to high amortization and depreciation expense.
Effective April 10, 1997, the Company refinanced the Credit Facility,
increasing the borrowing limit to $1.75 billion. The Credit Facility converts
into a reducing revolving line of credit on the last business day of September
2000, with quarterly repayment of the outstanding principal balance to begin the
last business day of September 2000 and continue during the subsequent five year
period, with the entire balance to be repaid by the last business day of June
2005.
On September 9, 1997, the Company filed a shelf registration statement on
Form S-3 covering a combined $1.5 billion of debt securities, junior
subordinated debt securities, preferred stock, common stock, warrants, stock
purchase contracts and stock purchase units (the shelf registration statement).
The shelf registration statement also covers preferred securities which may be
issued from time to time by the Company's three Delaware statutory business
trusts and guarantees of such preferred securities by the Company.
On October 9, 1997 the Company completed an offering of $300 million, 7.25%
debentures due October 15, 2027 resulting in net proceeds to the Company of
$294.3 million. Interest on the debentures is payable semiannually on each April
15 and October 15, beginning April 15, 1998. The Company, at its option, may at
any time redeem all or any portion of the debentures at a redemption price equal
to 100% of the principal amount, or the sum of the present values of the
remaining scheduled payments of principal and interest thereon discounted to the
date of redemption on a semiannual basis at the applicable Treasury Yield plus
25 basis points, plus accrued interest to the date of redemption, whichever is
greater.
On May 14, 1997, the Company completed an offering of 6,093,790 shares of
Common Stock. On September 12, 1997, the Company completed an offering of
8,000,000 shares of Common Stock. The net proceeds to the Company were
approximately $288.4 million and $503.3 million, respectively.
During 1997, the Company used the Credit Facility and cash flow from
operations to purchase broadcasting assets (radio stations) totaling $784.2
million, outdoor assets (display faces and license management agreements)
totaling $490.3 million and equity interest in American Tower Corporation for
$32.5 million. In addition to these acquisitions, the Company loaned $35.4
million to third parties in order to facilitate the purchase of certain
broadcast assets and refinanced $417 million of long-term debt assumed as a part
of the acquisition of Eller. Advances on the Credit Facility totaled $1,695.4
million. The Company made principal payments on the Credit Facility totaling
$1,197.3 million, including $748.0 million, which represents a portion of the
proceeds from the Company's stock offerings in May 1997 and September 1997, and
$292.7 million, which represents a portion of the proceeds from the Company's
debt offering in October 1997.
Through mid-February of 1998, the Company purchased the broadcasting assets
of certain radio stations in Mobile, AL, Monterey, CA, Allentown, PA and in
Jackson, MS for approximately $24.0 million, $23.2 million, $29.0 million, and
$20.0 million, respectively. The Credit Facility and cash flow from operations
63
<PAGE> 21
provided funding. After giving effect to the above-mentioned transactions and
other borrowings of $16.8 million, the Company had $1,328.2 million outstanding
under the Credit Facility, with $384.5 million available for future borrowings.
Interest rates on most of the borrowings adjust every 30 days. Based on the
$1,215.2 million outstanding debt under the Credit Facility at December 31,
1997, a 1% increase in interest rates would result in a net after tax charge to
the Company's earnings of approximately $7.5 million. In addition, other notes
payable amounting to $38.5 million were outstanding at December 31, 1997. The
Company also had $24.7 million in unrestricted cash and cash equivalents at
December 31, 1997.
The Company expects that cash flow from operations in 1998 will be
sufficient to make all required interest and principal payments on long-term
debt.
On October 23, 1997 the Company entered into a definitive agreement to
merge with Universal Outdoor Holdings, Inc., (Universal) an international
corporation with over 34,000 display faces in 23 markets. The merger, which is
subject to certain closing conditions and regulatory approvals, is structured as
an exchange of stock; each share of Universal common stock will be exchanged for
.67 shares of the Company's stock. On February 6, 1998, the Universal common
stock shareholders voted to approve the adoption of the agreement and plan of
merger between Universal and the Company. Upon consummation of this merger, the
Company will issue approximately 19.3 million shares of its common stock and
assume approximately $566 million in long-term debt. The Company intends to
account for this merger as a purchase transaction and expects to consummate this
merger during the first half of 1998.
On March 5, 1998 the Company announced an agreement with the Board of
Directors of More Group Plc (More Group), an outdoor advertising company based
in the United Kingdom, regarding the terms of a recommended cash offer to
acquire all of the issued shares of More Group. The offer values each More Group
share at L10.30 or approximately $17.00. The total value of this transaction
will be approximately $735.7 million. This transaction is subject to certain
regulatory approvals and other closing conditions. If these conditions are met,
this transaction is expected to close during 1998. The Company intends to fund
this transaction through the Credit Facility and additional funds generated from
either equity and/or debt offerings.
CAPITAL EXPENDITURES AND PROGRAM COMMITMENTS
Capital expenditures in 1997 increased 57% to $31.0 million from $19.7
million in 1996. The majority of the increase was attributable to the purchase
of display structures in the outdoor segment.
Capital expenditures made during 1997 were as follows:
<TABLE>
<CAPTION>
RADIO TELEVISION(1) OUTDOOR
----- ------------- -------
IN MILLIONS OF DOLLARS
<S> <C> <C> <C>
Land and buildings.......................................... $4.6 $2.5 $ 1.7
Broadcasting and other equipment............................ $4.4 $4.5 --
Display structures and other equipment...................... -- -- $13.3
---- ---- -----
$9.0 $7.0 $15.0
</TABLE>
- ---------------
(1) Capital expenditures related to the conversion to digital television are
expected to begin in the last quarter of 1998 and to be completed by the end
of 2002.
The Company's television stations and sports networks have entered into
programming commitments to purchase the broadcast rights to various feature
films, syndicated shows, sports events and other programming. Total commitments
for such programming at December 31, 1997 were $38.8 million. These commitments
were not available for broadcast at December 31, 1997, but are expected to
become available over the next few years, at which time the commitments will be
recorded. Most commitments are payable over a period not exceeding five years.
The Company anticipates funding any subsequent broadcasting or outdoor capital
expenditures and program commitments with the Credit Facility and cash flow
generated from operations.
64
<PAGE> 22
MANAGEMENT'S REPORT ON FINANCIAL STATEMENTS
The consolidated financial statements and notes related thereto were
prepared by and are the responsibility of management. The financial statements
and related notes were prepared in conformity with generally accepted
accounting principles and include amounts based upon management's best
estimates and judgments.
It is management's objective to ensure the integrity and objectivity
of its financial data through systems of internal controls designed to provide
reasonable assurance that all transactions are properly recorded in the
Company's books and records, that assets are safeguarded from unauthorized use,
and that financial records are reliable to serve as a basis for preparation of
financial statements.
The financial statements have been audited by our independent
auditors, Ernst & Young LLP, to the extent required by generally accepted
auditing standards and, accordingly, they have expressed their professional
opinion on the financial statements in their report included herein.
The Board of Directors meets with the independent auditors and
management periodically to satisfy itself that they are properly discharging
their responsibilities. The independent auditors have unrestricted access to
the Board, without management present, to discuss the results of their audit
and the quality of financial reporting and internal accounting controls.
Lowry Mays
Chairman/Chief Executive Officer
Herbert W. Hill, Jr.
Senior Vice President/Chief Accounting Officer
65
<PAGE> 23
REPORT OF INDEPENDENT AUDITORS
SHAREHOLDERS AND
BOARD OF DIRECTORS
CLEAR CHANNEL
COMMUNICATIONS, INC.
We have audited the accompanying consolidated balance sheets of Clear Channel
Communications, Inc. and Subsidiaries (the Company) as of December 31, 1997 and
1996, and the related consolidated statements of earnings, changes in
shareholders' equity and cash flows for each of the three years in the period
ended December 31, 1997. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits. The financial statements of Heftel
Broadcasting Corporation, in which the Company has a 32% interest and of
Australian Radio Network Pty Ltd, in which the Company has a 50% interest, have
been audited by other auditors whose reports have been furnished to us; insofar
as our opinion on the consolidated financial statements relates to data included
for Heftel Broadcasting Corporation for 1997 and for the Australian Radio
Network Pty Ltd, for 1996, it is based solely on their reports.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, based on our audits and the reports of other auditors, the
consolidated financial statements referred to above present fairly, in all
material respects, the consolidated financial position of Clear Channel
Communications, Inc. and Subsidiaries at December 31, 1997 and 1996, and the
consolidated results of their operations and their cash flows for each of the
three years in the period ended December 31, 1997, in conformity with generally
accepted accounting principles.
Ernst & Young LLP
San Antonio, Texas
March 11, 1998
66
<PAGE> 24
CLEAR CHANNEL COMMUNICATIONS, INC.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
ASSETS
------
In thousands of dollars
December 31,
1997 1996
<S> <C> <C>
Current Assets
Cash and cash equivalents $ 24,657 $ 16,701
Accounts receivable, less allowance of
$9,850 in 1997 and $6,067 in 1996 155,962 79,182
Film rights - current 14,826 14,188
Income tax receivable 3,202 3,093
Total Current Assets 198,647 113,164
Property, plant
and equipment
Land, buildings and improvements 84,118 46,550
Structures and site leases 487,857
Transmitter and studio equipment 215,755 153,255
Furniture and other equipment 46,584 21,164
Construction in progress 39,992 4,284
874,306 225,253
Less accumulated depreciation 128,022 77,415
746,284 147,838
Intangible Assets
Network affiliation agreements 33,727 33,727
Licenses and goodwill 2,175,944 764,233
Covenants not-to-compete 24,892 22,992
Other intangible assets 19,593 8,712
2,254,156 829,664
Less accumulated amortization 141,066 78,646
2,113,090 751,018
Other
Notes receivable 35,373 52,750
Film rights 14,171 13,437
Investments in, and advances to,
nonconsolidated affiliates 266,691 230,660
Other assets 30,122 10,807
Other investments 51,259 5,037
Total Assets $3,455,637 $1,324,711
</TABLE>
67
<PAGE> 25
CLEAR CHANNEL COMMUNICATIONS, INC.
CONSOLIDATED BALANCE SHEETS
LIABILITIES AND SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
December 31,
1997 1996
<S> <C> <C>
CURRENT LIABILITIES
Accounts payable $ 11,904 $ 9,865
Accrued interest 9,950 6,272
Accrued expenses 34,489 8,236
Deferred income 1,340 1,300
Current portion of long-term debt 13,294 1,479
Current portion of film rights liability 15,875 16,310
Total Current Liabilities 86,852 43,462
Long-term debt 1,540,421 725,132
Film rights liability 15,551 13,797
Deferred income taxes 10,114 11,283
Deferred income 9,750 11,250
Other long-term liabilities 25,378 --
Minority interest 20,787 6,356
SHAREHOLDERS' EQUITY
Preferred Stock, par value $1.00 per share,
authorized 2,000,000 shares, no shares
issued and outstanding -- --
Common Stock, par value $.10 per share,
authorized 150,000,000 and 100,000,000
shares, issued and outstanding
98,232,893 and 76,992,078 shares in
1997 and 1996, respectively 9,823 7,699
Additional paid-in capital 1,541,865 398,622
Retained earnings 169,631 106,055
Other 2,398 1,226
Unrealized gain on investments 23,754 --
Cost of shares (38,207 in 1997 and 26,878
in 1996) held in treasury (687) (171)
Total Shareholders' Equity 1,746,784 513,431
Total Liabilities And
Shareholders' Equity $ 3,455,637 $ 1,324,711
</TABLE>
See Notes to Consolidated Financial Statements
68
<PAGE> 26
CLEAR CHANNEL COMMUNICATIONS, INC.
CONSOLIDATED STATEMENTS OF EARNINGS
In thousands of dollars, except per share data
<TABLE>
<CAPTION>
Year Ended December 31,
1997 1996 1995
<S> <C> <C> <C>
Gross revenue $ 790,178 $ 398,094 $ 283,357
Less: agency commissions 93,110 46,355 33,298
Net revenue 697,068 351,739 250,059
Operating expenses 394,404 198,332 137,504
Depreciation and amortization 114,207 45,790 33,769
Operating income before corporate expenses 188,457 107,617 78,786
Corporate expenses 20,883 8,527 7,414
Operating income 167,574 99,090 71,372
Interest expense 75,076 30,080 20,752
Other income (expense) - net 11,579 2,230 (803)
Income before income taxes 104,077 71,240 49,817
Income taxes 47,116 28,386 20,292
Income before equity in earnings
(loss) of nonconsolidated affiliates 56,961 42,854 29,525
Equity in earnings (loss) of
nonconsolidated affiliates 6,615 (5,158) 2,489
Net income $ 63,576 $ 37,696 $ 32,014
Net income per common share:
Basic $ .72 $ .51 $ .46
Diluted $ .67 $ .51 $ .46
</TABLE>
See Notes to Consolidated Financial Statements
69
<PAGE> 27
CLEAR CHANNEL COMMUNICATIONS, INC.
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
In thousands of dollars
Cumulative
Additional Translation Unrealized
Common Paid-in Retained Adjustment Gain on Treasury
Stock Capital Earnings and Other Investments Stock Total
------- ----------- ---------- ----------- ----------- -------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Balances at January 1, 1995 $1,723 $92,535 $36,346 $ -- $ -- $ (71) $130,533
Net income for year 32,014 32,014
Exercise of stock options 7 627 (100) 534
Currency translation adjustment 102 102
Unrealized gains on investments,
net of tax 530 530
Stock split 1,729 (1,729) --
------ ---------- -------- ------ ------- ------ ----------
Balances at December 31, 1995 3,459 91,433 68,360 102 530 (171) 163,713
Net income for year 37,695 37,695
Exercise of stock options 5 301 306
Proceeds from sale of Common Stock 385 310,738 311,123
Currency translation adjustment 1,124 1,124
Reversal of unrealized gains on
investments, net of tax (530) (530)
Stock split 3,850 (3,850) --
------ ---------- -------- ------ ------- ------ ----------
Balances at December 31, 1996 7,699 398,622 106,055 1,226 -- (171) 513,431
Net income for year 63,576 63,576
Proceeds from sale of Common Stock 1,409 790,310 791,719
Common Stock and stock option
issued for business acquisition 665 348,023 6,633 355,321
Exercise of stock options 50 4,910 (397) (516) 4,047
Currency translation adjustment (5,064) (5,064)
Unrealized gains on investments,
net of tax 23,754 23,754
------ ---------- -------- ------ ------- ------ ----------
Balances at December 31, 1997 $9,823 $1,541,865 $169,631 $2,398 $23,754 $ (687) $1,746,784
====== ========== ======== ====== ======= ====== ==========
</TABLE>
See Notes to Consolidated Financial Statements
70
<PAGE> 28
CLEAR CHANNEL COMMUNICATIONS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
In thousands of dollars
Year Ended December 31,
1997 1996 1995
<S> <C> <C> <C>
Cash Flows From
Operating Activities:
Net income $ 63,576 $ 37,696 $ 32,014
Reconciling Items:
Depreciation 51,700 19,337 15,380
Amortization of intangibles 62,507 26,453 18,389
Deferred taxes 18,300 5,730 2,953
Amortization of film rights 16,735 15,038 11,263
Payments on film liabilities (17,289) (14,627) (10,353)
Recognition of deferred income (1,460) (810) --
(Gain) loss on disposal of assets (1,129) (41) 405
Gain on sale of other investments (3,819) -- --
Equity in (earnings) loss of non-
consolidated affiliates (2,778) 7,933 --
Dividends received from nonconsolidated
affiliates -- 7,207 --
Decrease minority interest (617) -- --
Changes in operating assets and liabilities:
Increase accounts receivable (20,752) (10,606) (11,545)
Increase deferred income -- 13,360 --
Increase (decrease) accounts payable (5,271) 4,489 (372)
Increase (decrease) accrued interest 3,598 5,764 (233)
Increase (decrease) accrued expenses
and other liabilities 1,628 (320) 3,831
Increase (decrease) accrued income
and other taxes (109) (8,999) 2,598
Net cash provided by operating activities $ 164,820 $ 107,604 $ 64,330
</TABLE>
71
<PAGE> 29
<TABLE>
<CAPTION>
Year Ended December 31,
1997 1996 1995
<S> <C> <C> <C>
Cash Flows From
Investing Activities:
Decrease in restricted cash $ -- $ -- $ 38,500
Decrease (increase) in notes receivable - net 17,377 (52,750) --
Increase in investments in and advances
to nonconsolidated affiliates - net (38,317) (163,295) (81,279)
Purchases of investments (25,101) (3,113) (500)
Proceeds from sale of investments 6,333 -- --
Purchases of property, plant and equipment (30,956) (19,723) (15,110)
Proceeds from disposal of assets 2,410 16 383
Acquisition of broadcasting assets (784,204) (550,630) (105,136)
Acquisition of outdoor assets (490,345) -- --
Increase in other intangible assets (10,881) (2,895) (1,870)
(Increase) decrease in other-net 7,891 (4,374) 5,340
Net cash used in investing activities (1,345,793) (796,764) (159,672)
Cash Flows From
Financing Activities:
Proceeds of long-term debt 2,013,160 718,575 162,600
Payments on long-term debt (1,614,821) (326,400) (64,800)
Payments of current maturities (5,176) (3,134) (4,419)
Proceeds from exercise of stock options 4,047 306 534
Proceeds from issuance of common stock 791,719 311,123 --
Net cash provided by financing activities 1,188,929 700,470 93,915
Net increase (decrease) in cash and
cash equivalents 7,956 11,310 (1,427)
Cash and cash equivalents at
beginning of year 16,701 5,391 6,818
Cash and cash equivalents
at end of year $ 24,657 $ 16,701 $ 5,391
</TABLE>
See Notes to Consolidated Financial Statements
72
<PAGE> 30
CLEAR CHANNEL COMMUNICATIONS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation:
The consolidated financial statements include the accounts of the Company and
its subsidiaries, substantially all of which are wholly-owned. Significant
intercompany accounts have been eliminated in consolidation. Investments in
nonconsolidated affiliates are accounted for using the equity method of
accounting. Certain amounts in prior years have been reclassified to conform to
the 1997 presentation.
Cash and Cash Equivalents:
Cash and cash equivalents include all highly liquid investments with an original
maturity of three months or less.
Prepaid Land Lease:
Most of the Company's outdoor advertising structures are located on leased land.
Land rents are typically paid in advance for periods ranging from one to twelve
months. Prepaid land leases are expensed ratably over the related rental term.
Film Rights:
The capitalized costs of film rights are recorded when the license period begins
and the film rights are available for use. The rights are amortized based on the
number of showings or license period.
Unamortized film rights assets are classified as current or noncurrent based on
estimated usage. Amortization of film rights is included in operating expenses.
Film rights liabilities are classified as current or noncurrent based on
anticipated payments.
Property, Plant and Equipment:
Property, plant and equipment are stated at cost. Depreciation is computed
principally by the straight-line method at rates that, in the opinion of
management, are adequate to allocate the cost of such assets over their
estimated useful lives, which are as follows:
Buildings - 10 to 30 years
Structures and site leases - 10 to 20 years
Transmitter and studio equipment - 7 to 15 years
Furniture and other equipment - 5 to 10 years
Leasehold improvements - generally life of lease
Expenditures for maintenance and repairs are charged to operations as incurred,
whereas expenditures for renewal and betterments are capitalized.
73
<PAGE> 31
Intangible Assets:
Intangible assets are stated at cost and are being amortized using the
straight-line method.
Excess cost over the fair value of net assets acquired (goodwill) and certain
licenses are generally amortized over 25 years. Covenants not-to-compete are
amortized over the respective lives of the agreements. Network affiliation
agreements are amortized over 10 years. Leases are amortized over the remaining
lease terms.
The periods of amortization are evaluated annually to determine whether
circumstances warrant revision.
Long-Lived Assets:
Impairment losses on long lived assets (including related goodwill) are
recognized when indicators of impairment are present and the estimated future
undiscounted cash flows are not sufficient to recover the assets' carrying
value.
Other Investments:
Other investments are composed primarily of equity securities. These securities
are classified as available-for-sale and carried at fair value based on quoted
market prices. The unrealized gains or losses on these investments, net of tax,
are reported as a separate component of shareholders' equity. The average cost
method is used to compute the realized gains and losses on sales of equity
securities.
Financial Instruments:
The carrying amounts of financial instruments approximate their fair value.
Income Taxes:
The Company accounts for income taxes using the liability method. Under this
method, deferred tax assets and liabilities are determined based on differences
between financial reporting bases and tax bases of assets and liabilities and
are measured using the enacted tax rates expected to apply to taxable income in
the periods in which the deferred tax asset or liability is expected to be
realized or settled.
Revenue Recognition:
Radio and television broadcast revenue is recognized as advertisements or
programs are broadcast and is generally billed monthly. Outdoor advertising
provides services under the terms of contracts covering periods up to three
years, which are generally billed monthly. Revenue for outdoor advertising space
rental is recognized ratably over the term of the contract. Revenues from
design, production and certain other services are recognized as the services are
provided. Payments received in advance of billings are recorded as deferred
revenue.
Revenue from barter transactions is recognized when advertisements are broadcast
or outdoor advertising space is utilized. Merchandise or services received are
charged to expense when received or used.
Interest Rate Protection Agreements:
Periodically, the Company enters into interest rate swap agreements to modify
the interest characteristics of its outstanding debt. Each interest rate swap
agreement is designated with all or a portion of the principal balance and term
of a specific debt obligation. These agreements involve the exchange of amounts
based on a fixed interest rate for amounts based on variable interest rates over
the life of the agreement without an exchange of the notional amount upon which
the payments are based. The differential to be paid or received as interest
rates change is accrued and recognized as an adjustment to interest expense
related to the debt. The fair value of the swap agreements and changes in the
fair value as a result of changes in market interest rates are not significant.
Foreign Currency:
Foreign currency translation adjustments, which result from the translation of
financial statement information into U.S. dollars for the Company's investments
in Australian Radio Network Pty Ltd. (ARN) and New Zealand Radio Network (NZRN),
are accounted for as a separate component of shareholders' equity. Transaction
gains or losses are recorded as income or expense as incurred.
Stock Based Compensation:
The Company uses the intrinsic value method in accounting for its stock based
employee compensation plan.
74
<PAGE> 32
Use of Estimates:
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the amounts reported in the financial statements and accompanying notes.
Actual results could differ from those estimates.
Earnings Per Share:
In 1997, the Company adopted Statement of Financial Accounting Standards No.
128, Earnings Per Share. The adoption of this new accounting standard, which
required the restatement of all presented periods' earnings per share data, did
not have a material impact on the Company.
NOTE B - BUSINESS ACQUISITIONS
In April of 1997, the Company acquired approximately 93% of the outstanding
stock of Eller Media, Inc. (Eller). Eller's operations included approximately
50,000 outdoor advertising display faces in 15 major metropolitan markets. As
consideration for the stock acquired, the Company paid cash of approximately
$329 million and issued common stock of the Company in the aggregate value of
approximately $298 million. In addition, the Company issued options on the
Company's common stock with an aggregate value of approximately $51 million in
connection with the assumption of Eller's outstanding stock options. In
addition, the Company assumed approximately $417 million of Eller's long-term
debt, which was refinanced at the closing date using the Company's credit
facility. This acquisition was accounted for as a purchase with resulting
goodwill of approximately $655 million. Subsequent to the acquisition of Eller,
the Company has acquired approximately 3,000 additional display faces and
executed license management agreements for approximately 4,000 display faces,
for an aggregate consideration of $161.7 million.
Also during 1997, the Company acquired substantially all of the broadcasting
assets of 70 radio stations, including four stations that the Company acquired
an 80% interest therein, and six news, sports and agricultural networks in 22
markets. The most significant acquisition was 43 radio stations, six news,
sports and agricultural networks and approximately 350 display faces acquired
from Paxson Communications, Inc. for approximately $629 million during the
fourth quarter of 1997. During 1996 the Company acquired substantially all of
the broadcasting assets of 49 radio stations, and two television stations in 20
markets. During 1995, the Company acquired substantially all of the broadcasting
assets of three radio stations, including two stations that the Company acquired
an 80% interest therein, two television stations and one news and agricultural
network in three markets. At December 31, 1997, the Company programmed 17 radio
stations and seven television stations under a local marketing agreement or a
joint sales agreement and does not own the FCC license.
The following is a summary of the assets acquired and the consideration given
for the above stated acquisitions:
<TABLE>
<CAPTION>
In thousands of dollars
1997 1996 1995
<S> <C> <C> <C>
Property, plant and
equipment $ 629,207 $ 47,579 $ 15,013
Accounts receivable 56,028 15,656 3,095
Licenses, goodwill and
other assets 1,460,505 488,251 93,716
Total assets acquired 2,145,740 551,486 111,824
Less:
Seller financing (1,400) -- --
Liabilities assumed (507,456) (856) (5,288)
Minority interest (15,047) -- --
Common Stock and
stock options issued (348,688) -- --
Cash paid for
acquisitions $ 1,274,549 $ 550,630 $ 105,136
</TABLE>
75
<PAGE> 33
The results of operations for 1997, 1996, and 1995 include the operations of
each station, for which the Company purchased the license, from the respective
date of acquisition. Unaudited pro forma consolidated results of operations,
assuming each of the acquisitions had occurred at January 1, 1995, would have
been as follows:
<TABLE>
<CAPTION>
Pro Forma (Unaudited)
Year Ended December 31,
In thousands of dollars, except per share data
1997 1996 1995
<S> <C> <C> <C>
Net revenue $ 831,814 $ 670,481 $ 665,015
Net income (loss) $ 29,891 $ (22,773) $ (23,930)
Net income (loss) per
common share-diluted $ .28 $ (.30) $ (.32)
</TABLE>
The pro forma information above is presented in response to applicable
accounting rules relating to business acquisitions and is not necessarily
indicative of the actual results that would have been achieved had each of the
businesses been acquired at the beginning of 1995, nor is it indicative of
future results of operations.
NOTE C - INVESTMENTS
Australian Radio Network:
In May of 1995, the Company purchased a 50% interest in ARN, an Australian
company that owns and operates radio stations, a narrowcast radio broadcast
service and a radio representation company in Australia.
New Zealand Radio Network:
In July 1996 the Company purchased a one-third interest in NZRN, which purchased
all of the stock of Radio New Zealand Commercial, formerly a government-owned
company consisting of 52 radio stations throughout New Zealand.
Heftel Broadcasting Corporation:
In May of 1995, the Company purchased 21.4% of the outstanding common stock of
Heftel Broadcasting Corporation (Heftel) a Spanish-language radio broadcaster in
the United States. In August of 1996, the Company purchased an additional 41.8%
of the outstanding common stock of Heftel. In January of 1997, the Company
purchased an interest from the Tichenor family, which was subsequently exchanged
for Heftel common stock at the time of Heftel's merger with Tichenor Media
System, Inc. (Tichenor), another Spanish-language radio broadcaster with
stations in major Hispanic markets in the United States. In February of 1997,
the Company sold 350,000 shares of its Heftel common stock as a selling
shareholder in a secondary stock offering in which Heftel issued an additional
4.8 million shares of common stock. The Company recognized a gain of
approximately $6.2 million as a result of this transaction. Also, Heftel issued
another 5.6 million shares of its common stock in connection with its merger
with Tichenor. As a result of these transactions, the Company's interest in
Heftel was 32.3% of the total number of shares of Heftel's common stock
outstanding at December 31, 1997.
American Tower Corporation:
In July of 1997 the Company purchased a thirty percent (30%) interest in
American Tower Corporation (ATC), the leading independent domestic owner and
operator of wireless communication towers.
The following table summarizes the Company's investments in these
nonconsolidated affiliates:
<TABLE>
<CAPTION>
In thousands of dollars
ARN NZRN Heftel ATC Total
<S> <C> <C> <C> <C> <C>
At December 31, 1996 $73,242 $29,393 $128,025 $ -- $230,660
Acquisition of 30% of ATC 32,510 32,510
Additional investment, net 8,807 944 (3,989) 45 5,807
Equity in net
earnings (loss) 1,323 (4,202) 6,909 274 4,304
Amortization of
excess cost -- -- (1,097) (429) (1,526)
Foreign currency translation
adjustment (2,763) (2,301) -- -- (5,064)
At December 31, 1997 $80,609 $23,834 $129,848 $32,400 $266,691
</TABLE>
76
<PAGE> 34
These investments are not consolidated, but are accounted for under the equity
method of accounting, whereby the Company records its investments in these
entities in the balance sheet as "Investments in, and advances to,
nonconsolidated affiliates". The Company's interests in their operations are
recorded in the income statement as "Equity in earnings (loss) of
nonconsolidated affiliates". Other income derived from transactions with
nonconsolidated affiliates consists of interest and management fees which
aggregated $6.4 million in 1997, $4.5 million in 1996 and $1.4 million in 1995,
less applicable income taxes of $2.5 million in 1997, $1.7 million in 1996 and
$.4 million in 1995. Equity in the undistributed earnings (loss) included in
"Retained earnings" for these investments was $2.1 million and $(2.2) million
for December 31, 1997 and 1996, respectively.
Summarized Financial Information:
The following table presents summarized financial information for ARN and
Heftel:
Balance sheet information at December 31, 1997:
<TABLE>
<CAPTION>
In thousands of dollars
ARN(1) Heftel
<S> <C> <C>
Current assets $ 12,633 $36,695
Noncurrent assets 215,119 475,554
Current liabilities 31,263 25,725
Noncurrent liabilities 121,705 96,564
Shareholders' equity 74,784 389,960
Income statement information for period investment held in 1997:
Net revenues $72,116 $136,584
Operating expenses 52,077 82,064
Net income 10,749 18,772
</TABLE>
(1) For presentation purposes only, data for ARN has been translated into U.S.
dollars at the December 31, 1997 exchange rate and has been presented in
conformity with Australian GAAP. The Company's equity in net income of ARN,
which is based on U.S. GAAP, is not directly comparable to net income reported
by ARN. The most significant difference involves the charge against results of
operations for the amortization of radio licenses under U.S. GAAP, which is not
recorded under Australian GAAP. The Company's share of such amortization for its
investment in ARN was $2.9 million for the year ended December 31, 1997.
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<PAGE> 35
Notes Receivable:
During 1997 and 1996, the Company provided approximately $35.4 million and $52.8
million respectively, in financing to third parties. The financing provided in
1997 was used to affect the acquisition of radio broadcasting operations. A
total of $21.4 million was relieved as consideration for six FCC licenses
acquired during January 1998. The remaining $14 million will be relieved as
consideration for three FCC licenses expected to be acquired during the first
half of 1998. The financing provided in 1996 was in the form of loans secured by
the assets of certain radio stations. These loans, which were paid in full
during 1997, were accounted for as notes receivable, with the related interest
income recorded in other income.
Other Investments:
Other investments at December 31, 1997 include marketable equity securities
recorded at market value of $62.2 million (cost basis of $23.9 million). During
1997, realized gains of $3.8 million were recorded in "Other income (expense) -
net." At December 31, 1997, unrealized gains, net of tax, of $23.8 million were
recorded as a separate component of shareholders equity.
NOTE D -
LONG-TERM DEBT
Long-term debt at December 31, 1997 and 1996 consisted of the following:
<TABLE>
<CAPTION>
In thousands of dollars
December 31,
1997 1996
<S> <C> <C>
Debentures, 7.25%, interest
payable semi-annually on
April 15 and October 15,
beginning April 15, 1998,
principal to be paid in full
on October 15, 2027.(1) $ 300,000 $ --
Revolving long-term line of
credit facility payable to banks,
three years interest only through
September 1999, payable quarterly,
rate based upon prime, LIBOR or
Fed funds rate, (6.3% at December
31, 1997) at the Company's
discretion, principal to be paid
in full by June 2005, $534.8 million
remains undrawn, secured by 100%
of the Common Stock of the Company's
wholly owned subsidiaries (2) 1,215,221 717,175
Other long-term debt 38,494 9,436
1,553,715 726,611
Less: current portion 13,294 1,479
Total long-term debt $1,540,421 $725,132
</TABLE>
(1) Proceeds from issuance of debentures totaled $294.3 million, net of fees and
initial offering discount. The fees and initial offering discount are being
amortized as interest expense over 30 years and at December 31, 1997, were $5.7
million.
(2) This facility converts into a reducing revolving line of credit on the last
business day of September 2000, with quarterly repayment of the principal to
begin on that date and continue quarterly through the last business day of June
2005, when the commitment must be paid in full. Of the $534.8 million undrawn,
$9.6 million is unavailable due to a guarantee and $27.7 million is unavailable
due to letters of credit. This leaves $497.5 million available at December 31,
1997 for future borrowings under the credit facility.
78
<PAGE> 36
The Company's current line of credit agreement with banks contains certain
covenants that substantially restrict, among other matters, the payment of cash
dividends and the pledging of assets.
Future maturities of long-term debt at December 31, 1997 are as follows:
<TABLE>
<CAPTION>
In thousands of dollars
<S> <C>
1998 $13,294
1999 7,344
2000 2,185
2001 2,200
2002 88,994
2003 and thereafter 1,439,698
$1,553,715
</TABLE>
The Company currently hedges a portion of its outstanding debt with interest
rate swap agreements that effectively fix the interest at rates from 5.5% to
8.5% on $565 million of its current borrowings. These agreements expire from
February 1998 to October 2000. The fair value of these agreements at December
31, 1997 and settlements of interest during 1997 were not material.
NOTE E - COMMITMENTS
The Company leases office space, certain broadcasting facilities, equipment and
the majority of the land occupied by its outdoor advertising structures under
long-term operating leases. Some of the lease agreements contain renewal options
and annual rental escalation clauses (generally tied to the consumer price index
or a maximum of 5%), as well as provisions for the payment of utilities and
maintenance by the Company. As of December 31, 1997, the Company's future
minimum rental commitments, under noncancelable lease agreements with terms in
excess of one year, consist of the following:
<TABLE>
<CAPTION>
In thousands of dollars
<S> <C>
1998 $37,596
1999 32,448
2000 26,714
2001 22,898
2002 18,315
2003 and thereafter 71,064
$209,035
</TABLE>
Rent expense charged to operations for 1997, 1996 and 1995 was $76.5 million,
$5.3 million and $4.5 million, respectively.
The Company's film rights commitments and related film assets are recorded on
the earliest date the rights are available for telecast. At December 31, 1997,
the future payments on these film rights liabilities are as follows:
<TABLE>
<CAPTION>
In thousands of dollars
<S> <C>
1998 $15,875
1999 9,359
2000 5,472
2001 676
2002 44
$31,426
</TABLE>
79
<PAGE> 37
Commitments for additional film license agreements in the amount of $26.3
million have been executed; however, they are not included in the amounts above
because the programs were not available for telecast as of December 31, 1997. In
addition, commitments for sports rights have been executed in the amount of $8.3
million for future radio and television broadcast of sporting events.
NOTE F - CONTINGENCIES
From time to time, claims are made and lawsuits are filed against the Company,
arising out of the ordinary business of the Company. In the opinion of the
Company's management, liabilities, if any, arising from these actions are either
covered by insurance or adequate reserves, or would not have a material adverse
effect on the financial condition of the Company.
In various areas in which the Company operates, outdoor advertising is the
object of restrictive and, in some cases, prohibitive zoning and other
regulatory provisions, either enacted or proposed. The impact to the Company of
loss of displays due to governmental action has been somewhat mitigated by
federal and state laws mandating compensation for such loss and constitutional
restraints.
NOTE G - INCOME TAXES
Significant components of the provision for income taxes are as follows:
<TABLE>
<CAPTION>
In thousands of dollars
1997 1996 1995
<S> <C> <C> <C>
Current - federal $28,321 $22,214 $16,085
Deferred 18,299 5,730 2,953
State 3,012 2,159 1,692
Total $49,632 $30,103 $20,730
</TABLE>
Included in current-federal is $2.5 million, $1.7 million and $.4 million for
1997, 1996 and 1995, respectively, related to taxes on other income from
nonconsolidated affiliates, which has been included as a reduction in "Equity in
earnings (loss) of nonconsolidated affiliates". The remaining $47.1 million,
$28.4 million and $20.3 million for 1997, 1996 and 1995, respectively, have been
reflected as income tax expense.
Significant components of the Company's deferred tax liabilities and assets as
of December 31, 1997 and 1996 are as follows:
<TABLE>
<CAPTION>
In thousands of dollars
1997 1996
<S> <C> <C>
Deferred Tax Liabilities:
Excess tax depreciation $18,190 $7,409
Excess tax amortization 13,514 4,868
Film amortization 809 809
Basis reduction of
acquired assets 2,670 413
Gain on sale of assets 3,175 --
Other 752 --
Total deferred tax liabilities 39,110 13,499
Deferred Tax Assets:
Gain on sale of assets 386 374
Deferred income 6,291 --
Operating loss carry forwards 11,087 1,581
Accrued expenses 8,603 --
Bad debt reserves 1,903 --
Other 726 261
Total deferred tax assets 28,996 2,216
Net deferred tax liabilities $10,114 $11,283
</TABLE>
The reconciliation of income tax computed at the U.S. federal statutory tax
rates to income tax expense is:
80
<PAGE> 38
In thousands of dollars
<TABLE>
<CAPTION>
1997 1996 1995
Amount Percent Amount Percent Amount Percent
<S> <C> <C> <C> <C> <C> <C>
Income tax expense
at statutory rates $38,772 35% $26,651 35% $17,926 35%
State income taxes, net
of federal tax benefit 1,958 2% 1,403 2% 1,100 2%
Amortization of goodwill 7,093 6% 1,493 2% 1,543 4%
Other - net 1,809 2% 556 1% 161
$49,632 45% $30,103 40% $20,730 41%
</TABLE>
The Company has certain net operating loss carryforwards amounting to
approximately $29.2 million, which expire beginning in the year 2011.
NOTE H - CAPITAL STOCK
Stock Splits and Dividends:
In October 1996 and October 1995, the Board of Directors authorized two-for-one
stock splits distributed on December 2, 1996 and November 30, 1995,
respectively, to stockholders of record on November 13, 1996 and November 15,
1995, respectively.
A total of 38.5 million and 17.3 million shares, respectively, were issued in
connection with the 1996 and 1995 stock splits. All share, per share, stock
price and stock option amounts shown in the financial statements (except the
Consolidated Statement of Changes in Shareholders' Equity) and related footnotes
have been restated to reflect the stock splits.
Eller Put/Call Agreement:
The Company granted to the former Eller stockholders certain demand and
piggyback registration rights relating to the shares of common stock received by
them. The holders of the remaining outstanding shares of Eller capital stock,
not purchased by the Company, have the right to put such stock to the Company
for approximately 1.1 million shares of the Company's common stock until April
10, 2002. From and after April 10, 2004, the Company will have the right to call
this minority interest stake in Eller for 1.1 million shares of the Company's
common stock.
<TABLE>
<CAPTION>
Reconciliation Of
Earnings Per Share:
In thousands, except per share data
1997 1996 1995
Numerator:
<S> <C> <C> <C>
Net income $63,576 $37,696 $32,014
Effect of dilutive securities:
Eller put/call agreement (2,577) -- --
Numerator for net income per
common share-diluted $60,999 $37,696 $32,014
Denominator:
Weighted average
common shares 88,480 73,422 69,092
Effect of dilutive securities:
Employee stock options 2,220 1,208 978
Eller put/call agreement 815 -- --
Dilutive potential
common shares 3,035 1,208 978
Denominator for net income
per common
share-diluted 91,515 74,630 70,070
Net income per common share:
Basic $.72 $.51 $.46
Diluted $.67 $.51 $.46
</TABLE>
81
<PAGE> 39
Stock Options:
The Company has granted options to purchase its common stock to employees and
directors of the Company and its affiliates under various stock option plans at
no less than the fair market value of the underlying stock on the date of grant.
These options are granted for a term not exceeding ten years and are forfeited
in the event the employee or director terminates his or her employment or
relationship with the Company or one of its affiliates. All option plans contain
antidilutive provisions that require the adjustment of the number of shares of
the Company common stock represented by each option for any stock splits or
dividends.
The following table presents a summary of the Company's stock options
outstanding at and stock option activity during the years ended December 31,
1997, 1996 and 1995:
<TABLE>
<CAPTION>
In thousands, except per share data
Weighted Average Price
Options Per Share
<S> <C> <C>
Options outstanding at
January 1, 1997 1,638 $9.00
Options granted in acquisition 1,468 13.00
Options granted 346 44.00
Options exercised (495) 5.00
Options forfeited (28) 34.00
Options outstanding at
December 31, 1997 (1) 2,929 16.00
Weighted average fair value of
options granted during 1997 35.00
Options outstanding at
January 1, 1996 1,528 6.00
Options granted 233 28.00
Options exercised (107) 3.00
Options forfeited (16) 34.00
Options outstanding at
December 31, 1996 1,638 9.00
Weighted average fair value of
options granted during 1996 12.00
Options outstanding at
January 1, 1995 1,657 5.00
Options granted 195 14.00
Options exercised (264) 2.00
Options forfeited (60) 8.00
Options outstanding at
December 31, 1995 1,528 6.00
Weighted average fair value of
options granted during 1995 6.00
</TABLE>
(1) Vesting dates range from March 1993 to October 2002, and expiration dates
range from January 1998 to April 2007 at exercise prices ranging from $3.26 to
$61.00. There were 1.8 million shares available for future grants under the
various option plans at December 31, 1997.
The fair value for these options was estimated at the date of grant using a
Black-Scholes option pricing model with the following weighted-average
assumptions for 1997 and 1996: risk-free interest rates of 6.0%; a dividend
yield of 0%. The volatility factors of the expected market price of the
Company's common stock used was 31% and 34% for 1997 and 1996, respectively,
and the weighted-average expected life of the option was five and six years for
1997 and 1996, respectively.
82
<PAGE> 40
Pro forma net income and earnings per share, assuming that the Company had
accounted for its employee stock options using the fair value method and
amortized such to expense over the options vesting period is as follows:
<TABLE>
<CAPTION>
In thousands, except per share data
1997 1996
<S> <C> <C>
Net Income
As reported $63,576 $37,696
Pro forma $61,739 $37,498
Net income per common share
Basic
As reported $ .72 $ .51
Pro forma $ .70 $ .51
Diluted
As reported $ .67 $ 51
Pro forma $ .67 $ .50
</TABLE>
In February 1991, CCTV, a wholly owned subsidiary of the Company, adopted the
1991 Non-Qualified Stock Option Plan which authorized the granting of options to
purchase 50,000 shares of CCTV Common Stock. In February 1993, CCTV elected to
discontinue the granting of options under this plan. At December 31, 1997, there
were 9,500 options outstanding under this plan, with an exercise date of January
1, 1999.
At December 31, 1997, common shares reserved for future issuance aggregated
approximately six million shares.
NOTE I - EMPLOYEE BENEFIT PLANS
The Company has a 401(k) Savings Plan (Plan) for the purpose of providing
retirement benefits for substantially all employees. Both the employees and the
Company make contributions to the Plan. The Company matches a portion of an
employee's deferred compensation to a maximum of $9,500 in 1997. Company matched
contributions vest to the employees based upon their years of service to the
Company. Contributions to this Plan of $1.2 million, $.7 million and $.5 million
were charged to expense for 1997, 1996 and 1995, respectively.
NOTE J - SUPPLEMENTAL INFORMATION
<TABLE>
<CAPTION>
In thousands of dollars
1997 1996 1995
<S> <C> <C> <C>
Supplemental Cash Flow:
Cash paid for interest $71,399 $24,316 $20,985
Cash paid for taxes 49,741 35,669 18,132
Other Income (Expense) - net:
Realized gains on sale
of marketable securities $10,019
Gain on disposal
of fixed assets 2,027
Minority interest (848)
Interest income
from notes receivable $ 1,779
Depreciation and Amortization:
Goodwill and licenses $49,800 $19,700 $9,900
</TABLE>
<TABLE>
<CAPTION>
1997 1996
<S> <C> <C>
Other Current and Long-Term Liabilities:
Acquisition accrual $15,236
Accrued compensation and benefits 12,159 $6,080
Outdoor advertising structure
takedown accrual 11,539
Accrued insurance 5,915
Accrued property tax 5,089
</TABLE>
83
<PAGE> 41
NOTE K - SEGMENT DATA
The Company consists of three principal business segments radio broadcasting,
television broadcasting and outdoor advertising. At December 31, 1997, the radio
segment included 156 stations for which the Company is the licensee and 17
stations operated under lease management or time brokerage agreements. These 173
stations operate in 40 markets. The radio segment also operates eight networks
including seven news and agriculture and one sports network.
At December 31, 1997, the television segment included 11 television stations for
which the Company is the licensee and seven stations operated under lease
management or time brokerage agreements. These 18 stations operate in 11
markets.
At December 31, 1997, the outdoor segment operated 57,660 advertising display
faces including 3,697 displays under license management agreements. These
display faces are in 17 markets.
Substantially all revenues are from unaffiliated companies.
<TABLE>
<CAPTION>
In thousands of dollars
1997 1996 1995
<S> <C> <C> <C>
Net revenue
Radio $332,571 $217,189 $144,244
Television 157,062 134,550 105,815
Outdoor 207,435 -- --
Consolidated $697,068 $351,739 $250,059
Operating expenses
Radio $201,182 $126,628 $87,531
Television 85,132 71,704 49,973
Outdoor 108,090 -- --
Consolidated $394,404 $198,332 $137,504
Depreciation
Radio $13,252 $8,916 $6,974
Television 11,563 10,420 8,406
Outdoor 26,885 -- --
Consolidated $51,700 $19,336 $15,380
Amortization of intangibles
Radio $35,215 $18,840 $13,007
Television 6,353 7,614 5,382
Outdoor 20,939 -- --
Consolidated $62,507 $26,454 $18,389
Operating income
Radio $82,922 $62,805 $36,732
Television 54,014 44,812 42,054
Outdoor 51,521 -- --
Consolidated $188,457 $107,617 $78,786
Total identifiable assets
Radio $1,840,908 $1,079,853 $340,685
Television 310,693 244,858 222,326
Outdoor 1,304,036 -- --
Consolidated $3,455,637 $1,324,711 $563,011
Capital expenditures
Radio $8,913 $7,447 $5,243
Television 7,011 12,276 9,867
Outdoor 15,032 -- --
Consolidated $30,956 $19,723 $15,110
</TABLE>
84
<PAGE> 42
NOTE L -
SUBSEQUENT EVENTS
In January 1998 the Company closed its acquisitions of WMXC-FM, WNTM-AM,
WDWG-FM, WKSJ-AM, WKSJ-FM and WRKH-FM, and signed a joint sales agreement for
WNSP-FM in Mobile, Alabama for approximately $24.0 million, acquired KDON-FM,
KDON-AM, KRQC-FM, KTOM-FM, KTOM-AM and KOCN-FM in Monterey, CA for approximately
$23.2 million and acquired WODE-AM and WEEX-FM in Allentown, PA for
approximately $29.0 million.
In February 1998 the Company closed its acquisitions of WJMI-FM, WKXI-AM/FM, and
WOAD-AM in Jackson, MS, for approximately $20.0 million.
On October 23, 1997 the Company entered into a definitive agreement to merge
with Universal Outdoor Holdings, Inc., (Universal) an international corporation
with over 34,000 display faces in 23 markets. The merger, which is subject to
certain closing conditions and regulatory approvals, is structured as an
exchange of stock; each share of Universal common stock will be exchanged for
.67 shares of the Company's stock. On February 6, 1998, the Universal common
stock shareholders voted to approve the adoption of the agreement and plan of
merger between Universal and the Company. Upon consummation of this merger, the
Company will issue approximately 19.3 million shares of its common stock (valued
at approximately $1,202 million) and assume approximately $566 million in
long-term debt. The Company intends to account for this merger as a purchase
transaction and expects to consummate this merger during the first half of 1998.
On March 5, 1998 the Company announced an agreement with the Board of Directors
of More Group, Plc (More Group) regarding the terms of a recommended cash offer
to acquire all of the issued shares of More Group. The offer values each More
Group share at (pound)10.30 or approximately $17.00. The total value of this
transaction is approximately (pound)475 million or, $735.7 million. More Group,
based in the United Kingdom, operates over 90,000 advertising displays in 22
countries. This transaction is subject to certain regulatory approvals and other
closing conditions. If these conditions are met, this transaction is expected to
close during 1998.
NOTE M - QUARTERLY RESULTS OF OPERATIONS (Unaudited)
<TABLE>
<CAPTION>
In thousands of dollars, except per share data
March 31, June 30, September 30, December 31,
1997 1996 1997 1996 1997 1996 1997 1996
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Gross revenue $110,831 $70,140 $212,200 $92,406 $209,050 $107,189 $258,097 $128,359
Net revenue $ 98,289 $62,208 $186,779 $81,370 $184,108 $ 94,839 $227,892 $113,322
Operating expenses 63,055 38,230 103,678 43,762 99,809 53,409 127,862 62,931
Depreciation and amortization 15,946 8,755 32,724 10,589 31,546 13,022 33,991 13,424
Operating income before
corporate expenses 19,288 15,223 50,377 27,019 52,753 28,408 66,039 36,967
Corporate expenses 2,854 1,674 5,017 1,804 5,828 2,170 7,184 2,879
Operating income 16,434 13,549 45,360 25,215 46,925 26,238 58,855 34,088
Interest expense 11,046 5,424 21,268 6,322 19,490 8,033 23,272 10,301
Other income
(expense)- net 6,259 206 (1,060) (19) 2,442 480 3,938 1,563
Income before income taxes 11,647 8,331 23,032 18,874 29,877 18,685 39,521 25,350
Income taxes 4,962 2,810 12,345 7,356 14,335 7,261 15,474 10,959
Income before equity in
earnings (loss) of
nonconsolidated affiliates 6,685 5,521 10,687 11,518 15,542 11,424 24,047 14,391
Equity in earnings (loss) of
nonconsolidated affiliates 914 717 4,407 1,030 3,067 (8,375) (1,773) 1,470
Net income $ 7,599 $ 6,238 $ 15,094 $ 12,548 $ 18,609 $ 3,049 $ 22,274 $ 15,861
Net income per
common share: (1)
Basic $ .10 $ .09 $ .18 $ .18 $ .21 $ .04 $ .23 $ .21
Diluted $ .10 $ .09 $ .16 $ .18 $ .19 $ .04 $ .22 $ .20
Stock price: (1)
High $49.6250 $29.5625 $63.3750 $43.3750 $68.7500 $45.2500 $79.4375 $44.5625
Low 34.2500 20.3750 42.7500 26.7500 58.6250 35.6250 60.0000 30.5000
</TABLE>
(1) Adjusted for two-for-one stock split effected in December 1996.
The Company's Common Stock is traded on the New York Stock Exchange under the
symbol CCU.
85
<PAGE> 43
Results of operations information:
In thousands of dollars, except per share data
<TABLE>
<CAPTION>
Year ended December 31,
1997 1996 1995 1994 1993
<S> <C> <C> <C> <C> <C>
Gross revenue $ 790,178 $ 398,094 $ 283,357 $ 200,695 $ 135,680
------------ ------------ ------------ ------------ ------------
Net revenue $ 697,068 $ 351,739 $ 250,059 $ 178,053 $ 121,118
Operating expenses 394,404 198,332 137,504 105,380 78,925
Depreciation and
amortization 114,207 45,790 33,769 24,669 17,447
------------ ------------ ------------ ------------ ------------
Operating income
before corporate
expenses 188,457 107,617 78,786 48,004 24,746
Corporate expenses 20,883 8,527 7,414 5,100 3,464
------------ ------------ ------------ ------------ ------------
Operating income 167,574 99,090 71,372 42,904 21,282
Interest expense 75,076 30,080 20,752 7,669 5,390
Other income
(expense) - net 11,579 2,230 (803) 1,161 (196)
------------ ------------ ------------ ------------ ------------
Income before
income taxes 104,077 71,240 49,817 36,396 15,696
Income taxes 47,116 28,386 20,292 14,387 6,573
------------ ------------ ------------ ------------ ------------
Income before equity
in earnings (loss)
of nonconsolidated
affiliates 56,961 42,854 29,525 22,009 9,123
Equity in earnings
(loss) of noncon-
solidated affiliates 6,615 (5,158) 2,489 0 0
------------ ------------ ------------ ------------ ------------
Net income $ 63,576 $ 37,696 $ 32,014 $ 22,009 $ 9,123
============ ============ ============ ============ ============
Net income per common share: (1)
Basic $ .72 $ .51 $ .46 $ .32 $ .15
============ ============ ============ ============ ============
Diluted $ .67 $ .51 $ .46 $ .32 $ .15
============ ============ ============ ============ ============
Cash dividends
per share (1) -- -- -- -- --
============ ============ ============ ============ ============
Balance Sheet Data:
Current assets $ 198,647 $ 113,164 $ 70,485 $ 53,945 $ 38,191
Property, plant and
equipment - net 746,284 147,838 99,885 85,318 67,750
Total assets 3,455,637 1,324,711 563,011 411,594 227,577
Current liabilities 86,852 43,462 36,005 27,679 26,125
Long-term debt, net of
current maturities 1,540,421 725,132 334,164 238,204 87,815
Shareholders' equity 1,746,784 513,431 163,713 130,533 98,343
</TABLE>
86
<PAGE> 44
(1) All per share amounts have been adjusted to reflect stock splits effected
on the following dates and in the following ratios:
<TABLE>
<S> <C>
Date of Split Ratio of Split
December 1996 two-for-one
November 1995 two-for-one
February 1994 five-for-four
February 1993 five-for-four
</TABLE>
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Interest Rate Risk:
At December 31, 1997, approximately 78% of the Company's long-term debt bears
interest at variable rates. Accordingly, the Company's net income and after
tax cash flow are affected by changes in interest rates. Assuming the current
level of borrowings at variable rates and assuming a two percentage point
change in the 1997 average interest rate under these borrowings, it is
estimated that the Company's 1997 interest expense would have changed by $24.3
million resulting in a change in the Company's 1997 net income and after tax
cash flow of $15.0 million. In the event of an adverse change in interest
rates, management would likely take actions to further mitigate its exposure.
However, due to the uncertainty of the actions that would be taken and their
possible effects, this analysis assumes no such actions. Further this analysis
does not consider the effects of the change in the level of overall economic
activity that could exist in such an environment.
At December 31, 1997, the Company had several interest rate protection
agreements. Originally, Eller Media, Inc. (Eller) put these agreements in
force to mitigate the interest rate risk on its long-term debt. Subsequently,
ownership of these agreements transferred to the Company as a result of its
acquisition of Eller on April 10, 1997. The fair value of these agreements are
not material at December 31, 1997, are not expected to become material in the
near-term, and have not been considered in the above analysis as the Company
intends to terminate these agreements during 1998.
Foreign Currency Risk:
The Company's earnings are affected by fluctuations in the value of the U.S.
dollar as compared to foreign currencies as a result of its investments in
Australia and New Zealand, both of which are accounted for under the equity
method. It is estimated that the result of a 10% fluctuation in the value of
the dollar relative to theses foreign currencies at December 31, 1997 would
change the Company's 1997 net income and after tax cash flow by $0.5 million.
The Company's analysis does not consider the implications that such
fluctuations could have on the overall economic activity that could exist in
such an environment in either the U.S. or the foreign countries or on the
results of operations of these foreign entities.
Equity Price Risk:
The carrying value of the Company's available-for-sale equity securities is
affected by changes in their quoted market prices. It is estimated that a 20%
change in the market prices of these securities would change their carrying
value at December 31, 1997 by $12.4 million.
87
<PAGE> 1
EXHIBIT 21 - Subsidiaries of Registrant, Clear Channel Communications, Inc.
<TABLE>
<CAPTION>
Name State of Incorporation
<S> <C>
Clear Channel Communications
of Memphis, Inc. Texas
Clear Channel Television, Inc. Nevada
Clear Channel Radio, Inc. Nevada
Clear Channel Television Licenses, Inc. Nevada
Clear Channel Radio Licenses, Inc. Nevada
Clear Channel Management, Inc. Delaware
Clear Channel Metroplex, Inc. Nevada
Clear Channel Metroplex Licenses, Inc. Nevada
Clear Channel Holdings, Inc. Nevada
Clear Channel Productions, Inc. Nevada
CCC-Houston A M LTD Texas
CCR Houston-Nevada, Inc. Nevada
Clear Channel Real Estate, Inc. Nevada
American Shelter Company, Inc. Illinois
Blue Wallscapes, Inc. California
CC-MCS, Inc. Texas
Chicago Shelters Advertising, Inc. Illinois
Clear Channel Communications International, Inc. Nevada
Clear Channel Investments, Inc. Nevada
Clear Channel Mexico, Inc. Nevada
Clear Channel Peoples, Inc. Nevada
Eller Investment Company, Inc. Arizona
Eller Media Company Arizona
Eller Outdoor Advertising Co. of Atlanta Arizona
Eller Outdoor Advertising Company Arizona
Eller Outdoor of El Paso, Inc. Texas
Eller Target Media Group, LP California
Eltex Investment Corp. Delaware
Patrick Media Group, Inc. Delaware
Peoples Broadcasting Company Pennsylvania
PMG Holdings, Inc. Delaware
PMG Target Media Holdings, Inc. Delaware
Radio Enterprises, Inc. Delaware
Shelter Advertising of America, Inc. Delaware
Shelter Advertising of Hialeah, Inc. Florida
Trendel Enterprises International, Inc. Florida
Trendel International Development Corp. Florida
Trendel, Inc. Florida
</TABLE>
88
<PAGE> 1
EXHIBIT 23.1 - CONSENT OF INDEPENDENT AUDITORS - ERNST & YOUNG LLP
We consent to the incorporation by reference in this Annual Report
(Form 10-K) of Clear Channel Communications, Inc. of our report dated March 11,
1998 included in the 1997 Annual Report to Shareholders of Clear Channel
Communications, Inc.
We consent to the incorporation by reference in the shelf Registration
Statement (Form S-3 No. 333-47367) and the Registration Statement (Form S-4 No.
333-43747) of Clear Channel Communications, Inc. of our reports dated March 11,
1998 with respect to the consolidated financial statements of Clear Channel
Communications, Inc incorporated by reference in this Annual Report (Form 10-K)
for the year ended December 31, 1997 and with respect to the related financial
statement schedule included in this Annual Report (Form 10-K) for the year
ended December 31, 1997.
We also consent to the incorporation by reference in the Registration
Statements (Forms S-8) pertaining to the 1984 Incentive Stock Option Plan of
Clear Channel Communications, Inc. (No. 33-14193); the Clear Channel
Communications, Inc. Nonqualified Stock Option Plan (No. 33-59772); the Clear
Channel Communications, Inc. 1994 Incentive Stock Option Plan, the Clear
Channel Communications, Inc. 1994 Nonqualified Stock Option Plan, the Clear
Channel Communications, Inc. Directors' Nonqualified Stock Option Plan; the
Option Agreement for Officer (No. 33-64463); and the Non-Qualified Option Grant
to Karl Eller dated April 10, 1997, the Non-Qualified Option Grant to Paul J.
Meyer dated April 10, 1997, the Non-Qualified Option Grant to Timothy J.
Donmoyer dated April 10, 1997, and the Eller Media Company Senior Management
Incentive Plan of Clear Channel Communications, Inc. (No. 333-29717) of our
report dated March 11, 1998 with respect to the consolidated financial
statements of Clear Channel Communications, Inc. included in this Annual Report
(Form 10-K) for the year ended December 31, 1997 and with respect to the
related financial statement schedule included in this Annual report (Form 10-K)
for the year ended December 31, 1997.
ERNST & YOUNG LLP
San Antonio, Texas
March 27, 1998
89
<PAGE> 1
EXHIBIT 23.2 - CONSENT OF INDEPENDENT AUDITORS - KPMG
We consent to the incorporation by reference in the Registration
Statements Form S-3 (No. 333-47367), in Registration Statements on Form S-8
(Nos. 33-14193, 33-59772, 33-64463, and 333-29717), and in the Registration
Statement on Form S-4 (No. 333-43747) of our report dated March 4, 1997,
relating to the 1996 consolidated financial statements of Australian Radio
Network Pty Limited and its controlled entitles (such consolidated financial
statements not separately presented in this Form 10-K), which report appears in
the Annual Report of Clear Channel Communications, Inc. on Form 10-K for the
year ended December 31, 1996.
KPMG
Sydney, Australia
March 30, 1998
90
<PAGE> 1
EXHIBIT 23.3 - CONSENT OF INDEPENDENT AUDITORS - KPMG PEAT MARWICK LLP
We consent to the incorporation by reference in the Registration
Statements of Clear Channel Communications, Inc. on Form S-3 (No. 333-47367)
and Form S-4 (No. 333-43747) of our report on the consolidated financial
statements of Heftel Broadcasting Corporation and subsidiaries as of and for
the year ended December 31, 1997, which report is included in the 1997 Annual
Report on Form 10-K of Clear Channel Communications, Inc.
We also consent to the incorporation by reference of the
aforementioned report in the Registration Statements Form S-8 of the 1984
Incentive Stock Option Plan of Clear Channel Communications, Inc. (No.
33-14193); the Clear Channel Communications, Inc. Nonqualified Stock Option
Plan (No. 33-59772); the Clear Channel Communications, Inc. 1994 Incentive
Stock Option Plan, the Clear Channel Communications, Inc. 1994 Nonqualified
Stock Option Plan, the Clear Channel Communications, Inc. Directors'
Nonqualified Stock Option Plan; the Option Agreement for Officer (No.
33-64463); and the Non-Qualified Option Grant to Karl Eller dated April 10,
1997, the Non-Qualified Option Grant to Paul J. Meyer dated April 10, 1997, the
Non-Qualified Option Grant to Timothy J. Donmoyer dated April 10, 1997, and the
Eller Media Company Senior Management Incentive Plan of Clear Channel
Communications, Inc. (No. 333-29717).
KPMG Peat Marwick LLP
Dallas, Texas
March 30, 1998
91
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> DEC-31-1997
<CASH> 24,657
<SECURITIES> 0
<RECEIVABLES> 155,962
<ALLOWANCES> 9,850
<INVENTORY> 0
<CURRENT-ASSETS> 198,647
<PP&E> 874,306
<DEPRECIATION> 128,022
<TOTAL-ASSETS> 3,455,637
<CURRENT-LIABILITIES> 86,852
<BONDS> 1,540,421
0
0
<COMMON> 9,823
<OTHER-SE> 1,736,961
<TOTAL-LIABILITY-AND-EQUITY> 3,455,637
<SALES> 0
<TOTAL-REVENUES> 697,068
<CGS> 0
<TOTAL-COSTS> 394,404
<OTHER-EXPENSES> 32,462
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 75,070
<INCOME-PRETAX> 104,077
<INCOME-TAX> 47,116
<INCOME-CONTINUING> 63,576
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 63,576
<EPS-PRIMARY> .72
<EPS-DILUTED> .67
</TABLE>
<PAGE> 1
EXHIBIT 99.1 - REPORT OF INDEPENDENT AUDITORS ON FINANCIAL STATEMENT SCHEDULE
We have audited the consolidated financial statements of Clear Channel
Communications, Inc., as of December 31, 1997 and 1996, and for each of the
three years in the period ended December 31, 1997, and have issued our report
thereon dated March 11, 1998. Our audits also included the financial statement
schedule listed in the Index at Item 14(a). This schedule is the
responsibility of the Company's management. Our responsibility is to express
an opinion based on our audits.
In our opinion, the financial statement schedule referred to above, when
considered in relation to the basic financial statements taken as a whole,
presents fairly in all material respects the information set forth therein.
Ernst & Young LLP
March 11, 1998
San Antonio, Texas
<PAGE> 1
EXHIBIT 99.2
REPORT OF INDEPENDENT AUDITORS - KPMG
The Board of Directors of Australian Radio Network Pty Limited.
We have audited the consolidated balance sheet of the Australian Radio
Network Pty Limited and its controlled entities ("Australian Radio Network") as
at December 31, 1996 and 1995, and the related consolidated profit and loss
accounts and statements of cash flows for the years then ended all expressed in
Australian dollars. These consolidated financial statements are the
responsibility of the Australian Radio Network's management. Our
responsibility is to express an opinion on these consolidated financial
statements based on our audits.
We conducted our audits in accordance with the Australian auditing
standards that are substantially equivalent to United States generally accepted
auditing standards. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the consolidated financial statements referred to
above present fairly, in all material respects, the financial position of
Australian Radio Network as at December 31, 1996 and 1995, and the results of
its operations and its cash flows for the years then ended in conformity with
accounting principles generally accepted in Australia.
Generally accepted accounting principles in Australia vary in certain
significant respects from generally accepted accounting principles in the
United States. Application of generally accepted accounting principles in the
United States would have affected results of operations for the year ended
December 31, 1996 and the period May 11, 1995 to December 31, 1995, and
shareholders' equity as of December 31, 1996 and 1995, to the extent summarized
in the information accompanying the annual financial statements.
KPMG
Sydney, Australia
4 March, 1997
<PAGE> 1
EXHIBIT 99.3
REPORT OF INDEPENDENT AUDITORS - KPMG PEAT MARWICK LLP
INDEPENDENT AUDITORS' REPORT
The Board of Directors
Heftel Broadcasting Corporation:
We have audited the consolidated balance sheet of Heftel Broadcasting
Corporation and subsidiaries as of December 31, 1997 and the related
statements of operations, stockholders' equity and cash flows for the year
then ended (not presented separately herein). These consolidated financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated financial
statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the 1997 consolidated financial statements referred to
above present fairly, in all material respects, the financial position of Heftel
Broadcasting Corporation and subsidiaries as of December 31, 1997 and the
results of their operations and their cash flows for the year then ended in
conformity with generally accepted accounting principles.
KPMG Peat Marwick LLP
Dallas, Texas
March 9, 1998
