10Q298.doc, 08/13/98 10:11 AM Page 17 of 21
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
QUARTERLY REPORT UNDER SECTION 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarter ended June 30, 1998 Commission file number 1-9645
CLEAR CHANNEL COMMUNICATIONS, INC.
(Exact name of registrant as specified in its charter)
Texas 74-1787539
(State of Incorporation) (I.R.S. Employer Identification No.)
200 Concord Plaza, Suite 600
San Antonio, Texas 78216-6940
(210) 822-2828
(Address and telephone number
of principal executive offices)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for shorter period that the registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes __x__ No _____
Indicate the number of shares outstanding of each class of the issuer's
classes of common stock, as of the latest practicable date.
Class Outstanding at August 13, 1998
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
Common Stock, $.10 par value 248,333,084
<PAGE>
CLEAR CHANNEL COMMUNICATIONS, INC. AND SUBSIDIARIES
INDEX
Page No.
- - - - - - -
Part I -- Financial Information
Item 1. Unaudited Financial Statements
Consolidated Balance Sheets at June 30, 1998
and December 31, 1997 3
Consolidated Statements of Earnings for the six
and three months ended June 30, 1998 and 1997 5
Consolidated Statements of Cash Flows for the
six months ended June 30, 1998 and 1997 6
Notes to Consolidated Financial Statements 8
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 11
Item 3. Quantitative and Qualitative Disclosures
About Market Risk 14
Part II -- Other Information
Item 4. Submission of Matters to a Vote of Security Holders 15
Item 6. Exhibits and reports on Form 8-K 16
(a) Exhibits
(b) Reports on Form 8-K
Signatures 17
Index to Exhibits 18
<PAGE>
PART I
Item 1. UNAUDITED FINANCIAL STATEMENTS
CLEAR CHANNEL COMMUNICATIONS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
ASSETS
(In thousands of dollars)
June 30, December 31,
1998 1997
(Unaudited) (*)
---------------- ---------------
Current Assets
Cash and cash equivalents $ 58,374 $ 24,657
Income tax receivable -- 3,202
Accounts receivable, less allowance
of $17,938 at June 30, 1998 and
$9,850 at December 31, 1997 265,676 155,962
Film rights - current 11,247 14,826
-------------- --------------
Total Current Assets 335,297 198,647
Property, Plant and Equipment
Land, buildings and improvements 121,653 84,118
Structures and site leases 1,195,573 487,857
Transmitter and studio equipment 230,179 215,755
Furniture and other equipment 84,764 46,584
Construction in progress 210,865 39,992
-------------- --------------
1,843,034 874,306
Less accumulated depreciation (176,957) (128,022)
-------------- --------------
1,666,077 746,284
Intangible Assets
Network affiliation agreements 33,727 33,727
Licenses and goodwill 4,418,434 2,175,944
Covenants not-to-compete 24,892 24,892
Other intangible assets 33,560 19,593
--------------- ---------------
4,510,613 2,254,156
Less accumulated amortization (204,324) (141,066)
---------------- ---------------
4,306,289 2,113,090
Other Assets
Notes receivable -- 35,373
Film rights 10,252 14,171
Investments in, and advances to,
nonconsolidated affiliates 294,035 266,691
Other assets 133,392 30,122
Other investments 99,550 51,259
--------------- ---------------
Total Assets $6,844,892 $3,455,637
========= =========
* From audited financial statements
See Notes to Consolidated Financial Statements
<PAGE>
CLEAR CHANNEL COMMUNICATIONS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
LIABILITIES AND SHAREHOLDERS' EQUITY
(In thousands of dollars)
June 30, December 31,
1998 1997
(Unaudited) (*)
---------------- ---------------
Current Liabilities
Accounts payable $ 56,861 $ 11,904
Accrued interest 29,145 9,950
Accrued expenses 141,058 34,489
Accrued income taxes 16,672 --
Deferred income 1,300 1,340
Current portion of long-term debt 4,094 13,294
Current portion of film rights
liability 12,320 15,875
-------------- -------------
Total Current Liabilities 261,450 86,852
Long-term debt 2,137,601 1,540,421
Film rights liability 11,057 15,551
Deferred income taxes 59,456 10,114
Deferred income 9,100 9,750
Other long-term liabilities 90,251 25,378
Convertible debt 575,000 ----
Minority interest 125,729 20,787
Shareholders' Equity
Common stock 12,414 9,823
Additional paid-in capital 3,330,115 1,541,865
Retained earnings 203,119 169,631
Other 1,087 2,398
Unrealized gain on investments 30,376 23,754
Cost of shares held in treasuy (1,863) (687)
--------------- --------------
Total shareholders' equity 3,575,248 1,746,784
--------------- --------------
Total Liabilities and
Shareholders' Equity $ 6,844,892 $ 3,455,637
========== ==========
* From audited financial statements
See Notes to Consolidated Financial Statements
<PAGE>
CLEAR CHANNEL COMMUNICATIONS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
(UNAUDITED)
(In thousands of dollars, except per share data)
<TABLE>
<CAPTION>
Six Months Ended Three Months Ended
June 30, June 30, June 30, June 30,
1998 1997 1998 1997
-------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
Gross revenue $ 590,810 $ 323,031 $ 360,961 $ 212,200
Less agency commissions 67,140 37,963 40,933 25,421
-------------- -------------- -------------- --------------
Net revenue 523,670 285,068 320,028 186,779
Operating expenses 289,342 166,733 165,568 103,678
Depreciation and amortization 113,440 48,670 70,428 32,724
-------------- -------------- -------------- --------------
Operating income before corporate expenses 120,888 69,665 84,032 50,377
Corporate expenses 13,779 7,871 7,870 5,017
-------------- -------------- -------------- --------------
Operating income 107,109 61,794 76,162 45,360
Interest expense 53,733 32,314 28,032 21,268
Other income (expense) - net 10,198 5,199 7,403 (1,060)
-------------- -------------- -------------- --------------
Income before income taxes 63,574 34,679 55,533 23,032
Income taxes 36,619 17,307 32,360 12,345
-------------- -------------- -------------- --------------
Income before equity in earnings
of nonconsolidated affiliates 26,955 17,372 23,173 10,687
Equity in earnings of nonconsolidated affiliates 6,533 5,321 4,736 4,407
-------------- -------------- -------------- --------------
Net income $ 33,488 $ 22,693 $ 27,909 $ 15,094
============= ============== ============= ============
Net income per common share:
Basic $ .30 $ .28 $ .22 $ .18
================= ============== ============= ============
Diluted $ .29 $ .26 $ .22 $ .16
================ ============== ============= ============
</TABLE>
See Notes to Consolidated Financial Statements
<PAGE>
CLEAR CHANNEL COMMUNICATIONS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(In thousands of dollars)
Six Months Ended
June 30, June 30,
1998 1997
-------------- ------------
Cash flows from operating activities:
Net income $ 33,488 $ 22,693
Reconciling Items:
Depreciation 49,954 23,416
Amortization of intangibles 63,485 25,254
Deferred taxes 9,342 2,756
Amortization of film rights 8,409 8,132
Payments on film liabilities (8,961) (8,446)
Recognition of deferred income (690) (730)
Loss on disposal of assets 389 467
Gain on sale of other investments (18,812) ----
Equity in earnings of
nonconsolidated affiliates (3,549) (4,327)
Dividend and other payments from
nonconsolidated affiliates 1,399 --
Decrease minority interest (3) (271)
Changes in operating assets and
liabilities:
(Increase) decrease accounts
receivable (18,515) (6,577)
(Decrease) increase accounts
payable (5,047) 1,146
Increase (decrease) accrued
interest 3,669 (2,336)
Increase (decrease) accrued
expenses and other liabilities 5,072 (363)
Increase (decrease) accrued
income and other taxes 19,874 5,269
--------------- --------------
Net cash provided by operating
activities $ 139,504 $ 66,083
<PAGE>
CLEAR CHANNEL COMMUNICATIONS, INC. AND SUBSIDIARIES
SCHEDULE RECONCILING NET INCOME TO NET CASH
FLOWS PROVIDED BY OPERATING ACTIVITIES
(UNAUDITED)
(In thousands of dollars)
Six Months Ended
June 30, June 30,
1998 1997
------------ -------------
Cash flows from investing activities:
Decrease in notes receivable - net $ 35,373 $ 52,750
Increase in investments in and
advances to nonconsolidated
affiliates - net (57,697) (37,340)
Purchases of investments (17,193) (24,279)
Proceeds from sale of investments 25,768 ----
Purchases of property, plant and equipment (27,775) (12,689)
Proceeds from disposal of assets 3,626 267
Acquisition of broadcasting assets (168,247) (91,765)
Acquisition of outdoor assets (864,847) (766,039)
Increase in other intangible assets (8,278) (3,684)
(Increase) decrease in other-net (3,722) 2,364
----------- -----------
Net cash used in investing activities (1,082,992) (880,415)
Cash flows from financing activities:
Proceeds of long-term debt 1,694,813 883,434
Payments on long-term debt (1,864,151) (346,650)
Payments of current maturities (131) (686)
Proceeds from exercise of stock options 3,415 2,210
Proceeds from issuance of common stock 577,250 288,443
Proceeds from issuance of convertible
debt 566,009 ---
------------ ------------
Net cash provided by financing
activities 977,205 826,751
Net increase in cash and cash
equivalents 33,717 12,419
Cash and cash equivalents at
beginning of period 24,657 16,701
------------- -------------
Cash and cash equivalents at
end of period $ 58,374 $ 29,120
========= =========
See Notes to Consolidated Financial Statements
<PAGE>
CLEAR CHANNEL COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
Note 1: PREPARATION OF INTERIM FINANCIAL STATEMENTS
The consolidated financial statements have been prepared by Clear Channel
Communications, Inc. (the "Company") pursuant to the rules and regulations of
the Securities and Exchange Commission ("SEC") and, in the opinion of
management, include all adjustments (consisting only of normal recurring
accruals and adjustments necessary for adoption of new accounting standards)
necessary to present fairly the results of the interim periods shown. Certain
information and footnote disclosures normally included in financial statements
prepared in accordance with generally accepted accounting principles have been
condensed or omitted pursuant to such SEC rules and regulations. Management
believes that the disclosures made are adequate to make the information
presented not misleading. The results for the interim periods are not
necessarily indicative of results for the full year. The financial statements
contained herein should be read in conjunction with the consolidated financial
statements and notes thereto included in the Company's 1997 Annual Report.
The consolidated financial statements include the accounts of the Company and
its subsidiaries, the majority of which are wholly-owned. Investments in
companies in which the Company owns 20 percent to 50 percent of the voting
common stock or otherwise exercises significant influence over operating and
financial policies of the company are accounted for under the equity method. All
significant intercompany transactions are eliminated in the consolidation
process. Certain reclassifications have been made to the 1997 consolidated
financial statements to conform to the 1998 presentation.
Note 2: RECENT ACCOUNTING PRONOUNCEMENTS
As of January 1, 1998, the Company adopted Statement of Financial Accounting
Standards No. 130 Reporting Comprehensive Income. Statement 130 establishes new
rules for the reporting and display of comprehensive income and its components;
however, the adoption of this Statement had no impact on the Company's net
income or shareholders' equity. Statement 130 requires unrealized gains or
losses on the Company's available-for-sale securities and foreign currency
translation adjustments, which prior to adoption were reported separately in
shareholders' equity, to be included in comprehensive income.
During the second quarter of 1998 and 1997, total comprehensive income amounted
to $27.9 million and $15.1 million respectively. During the six months ended
June 30, 1998 and 1997, total comprehensive income amounted to $40.1 million and
$22.7 million respectively. The primary component of other comprehensive income
was unrealized gains on the Company's available-for-sale securities.
Note 3: RECENT DEVELOPMENTS
On January 21, 1998 the Company's affiliate, Heftel Broadcasting Corporation
("Heftel"), of which the Company owned 32.3% of the outstanding common stock,
issued 5,075,000 additional shares of its common stock decreasing the Company's
total ownership to approximately 29.1% of Heftel's aggregate outstanding Class A
and Class B common stock.
On April 1, 1998, the Company closed its merger with Universal Outdoor Holdings,
Inc. ("Universal"). Pursuant to the terms of the agreement, each share of
Universal common stock was exchanged for .67 shares of the Company's common
stock or approximately 19.3 million shares. Universal's operations include
approximately 34,000 outdoor advertising display faces in 23 major metropolitan
markets. This acquisition is being accounted for as a purchase with resulting
goodwill of approximately $1.3 billion based on a preliminary purchase price
allocations, which is being amortized over 25 years on a straight-line basis.
On June 25, 1998, the Company completed the first closing of its tender offer
for all of the issued and to be issued shares of More Group Plc., ("More"), an
outdoor advertising company based in the United Kingdom. More's operations
include approximately 90,000 outdoor advertising display faces in 22 countries.
At June 30, 1998, through a series of transactions including the first closing
of the tender offer, the Company had purchased 35,857,951 shares, or 86% of
issued share capital of More for (pound)11.10 per share, or approximately
US$18.33 per share totaling approximately $657.3 million. In addition the
Company assumed approximately $137.7 million in long-term debt from More. The
Company's pro-rata share of the earnings of More for the month of June, which
was $1.1 million, was accounted for under the equity method and was recorded in
"Equity in earnings of nonconsolidated affiliates" in the second quarter. As of
June 30, 1998, a preliminary purchase price allocation for More was included in
the Company's accounts resulting in a $110.8 million addition to minority
interest for the approximately 14% of shares not purchased as of June 30, 1998.
The Company consolidated the assets and liabilities of More as of June 30, 1998
and will begin consolidating the results of operations July 1, 1998.
<PAGE>
Through subsequent closings, on August 6, 1998, the Company has purchased 100%
of the issued share capital of More. The aggregate consideration for all such
shares purchased was approximately (pound)462.3 million or $768.1 million.
The results of operations for the six month periods ending June 30, 1998 and
1997 include the operations of Eller Media ("Eller"), Paxson Radio ("Paxson"),
Universal and More from the respective dates of acquisition or merger as
appropriate. Assuming the acquisitions of Eller, Paxson and More, and the merger
with Universal had occurred at January 1, 1997, unaudited pro forma consolidated
results of operations for the six months ended June 30, 1998 and 1997 would have
been as follows:
Pro Forma (Unaudited)
Six Months Ended June 30,
In thousands, except per share data
1998 1997
---- ----
Net revenue $ 723,636 $ 599,080
Net (loss) $ (21,798) $ (47,194)
Net (loss) per share:
Basic $ (.17) $ (.44)
Diluted $ (.17) $ (.44)
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 the
acquisitions of Eller, Paxson and More, and the merger with Universal occurred
at the beginning of 1997, nor is it indicative of future results of operations.
The Company had other acquisitions during the six months ended June 30, 1998 and
1997, the effects of which, individually and in aggregate, were not material to
the Company's consolidated financial position or results of operations.
To facilitate possible future acquisitions, on March 16, 1998 the Company filed
a 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 that 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 March 30, 1998, the Company completed its offering of six million shares of
common stock under the shelf registration statement. Also, on March 30, 1998 the
Company completed its offering of $500 million aggregate principal amount of
2.625% Senior Convertible Notes due April 1, 2003, under the shelf registration
statement. On April 28, 1998, the Company issued an additional $75 million
aggregate principal amount of 2.625% Senior Convertible Notes due April 1, 2003.
The net proceeds to the Company of $577.2 million, $492.5 million and $73.5
million, respectively were used to reduce the outstanding balance on the credit
facility.
On May 6, 1998, The Company amended the shelf registration statement to increase
the amount of securities registered pursuant to the registration statement filed
on March 16, 1998 back to $1.5 billion. On June 16, 1998, the Company completed
its offering of $175 million 6.875% senior debentures due June 15, 2018 and $125
million 6.625% senior notes due June 15, 2008 under the shelf registration
statement. The net proceeds of approximately $296 million, in aggregate, were
used to purchase issued share capital of More.
<PAGE>
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Results of Operations
Comparison of Three and Six Months Ended June 30, 1998 to Three and Six Months
Ended June 30, 1997.
(In thousands of dollars, except per share data)
<TABLE>
<CAPTION>
Six Months As-Reported Pro Forma Three Months As-Reported Pro Forma
Ended June 30, % Increase % Increase Ended June 30, % Increase %Increase
Consolidated 1998 1997 (Decrease) (Decrease) 1998 1997 (Decrease) (Decrease)
------------ ---- ---- ---------- ---------- ---- ---- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net revenue $523,670 $285,068 84% 21% $320,028 $186,779 71% 27%
Operating expenses 289,342 166,733 74% 18% 165,568 103,678 60% 22%
Depreciation and
amortization 113,440 48,670 133% 12% 70,428 32,724 115% 15%
Operating income 107,109 61,794 73% 46% 76,162 45,360 68% 57%
Interest expense 53,733 32,314 66% 28,032 21,268 32%
Net income 33,488 22,693 48% 27,909 15,094 85%
Net income per share:
Basic $ .30 $ .28 7% $ .22 $ .18 22%
Diluted $ .29 $ .26 12% $ .22 $ .16 38%
</TABLE>
The majority of the growth in the "as reported" net revenue and operating
expenses for the three months ended June 30, 1998 was due to the merger with
Universal Outdoor Holdings Inc. ("Universal") on April 1, 1998. The majority of
the growth in the "as reported" net revenue and operating expenses for the six
months ended June 30, 1998 was due to the merger with Universal and the
acquisitions of the Eller Media Company ("Eller") in April of 1997 and Paxson
Radio ("Paxson"), which has been included in the operations of the Company since
October of 1997. In addition 28 radio stations and 4,748 outdoor display faces
were purchased during the first six months of 1998, the effects of which,
individually and in the aggregate, were not material to the Company's
consolidated financial position or results of operations. The tangible and
intangible assets associated with the purchase the above-mentioned radio and
outdoor operations account for the majority of the increase in "as reported"
depreciation and amortization. Interest expense increased as a result of greater
average borrowing level, which resulted from the above-mentioned radio and
outdoor acquisitions. This increase in interest expense for the second quarter
of 1998 was partially offset by the issuance of 2.625% senior convertible notes
dated April 1, 1998. The majority of the increase in "as reported" net income
also was primarily due to the inclusion of operations resulting from the
aforementioned business acquisitions.
Pro forma presentation referred to above assumes the acquisition and/or merger
of Eller, Paxson, Universal and More Group Plc., ("More") occurred on January 1,
1997. Pro forma net revenue increased due to improved advertising rates in the
broadcasting segment and improved occupancy and increased advertising rates
within the outdoor segment. Pro forma operating expenses increased primarily
from the incremental selling costs related to the additional revenues.
<PAGE>
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"), and funds provided by various stock, convertible and other
bond offerings, and other borrowings. As of June 30, 1998 and December 31, 1997,
the Company had the following debt outstanding:
(In millions of dollars)
June 30, 1998 December 31, 1997
------------- -----------------
Credit facility $1,350.7 $1,215.2
Senior convertible notes 575.0 --
Long-term bonds 600.0 300.0
Other borrowings 191.0 38.5
----------- -----------
Total $2,716.7 $1,553.7
======= =======
In addition, the Company had $58.4 million in unrestricted cash and cash
equivalents on hand at June 30, 1998.
On March 16, 1998 the Company filed a 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 that 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. Due to various debt and
equity offerings during March and April, on May 6, 1998, the Company amended the
shelf registration statement to increase the amount of securities registered
pursuant to the registration statement filed on March 16, 1998 back to $1.5
billion.
On June 29, 1998 the Company filed a registration statement on Form S-4 covering
1,500,000 shares of common stock, which may be offered and issued by the Company
from time to time in connection with the acquisition directly or indirectly by
the Company of various businesses or properties, or interests therein.
Credit Facility:
On July 1, 1998, the Company expanded its revolving credit facility from $1.75
billion to $2 billion, of which $1,350.7 million is outstanding and, taking into
account other guarantees, $628.1 million is available for future borrowings. 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. During the first six months of the year, the
Company made principal payments on the credit facility totaling $1,235.3 million
including $566.0 million and $577.2 million from the net proceeds from the
convertible debt offering and the equity offering, respectively and drew down
$1,370.8 million. Funding for the majority of the Company's acquisitions and the
refinancing of long-term debt in the merger with Universal was provided by the
Company's credit facility.
Equity Offerings:
On March 30, 1998, the Company completed an offering of six million shares of
common stock. The net proceeds to the Company were $577.2 million, which was
used to pay down the outstanding balance under the credit facility.
Senior Convertible Notes Offering:
On March 30, and April 28, 1998 the Company completed an offering of $500
million and $75 million aggregate principal amounts, respectively, of 2.625%
senior convertible notes due April 1, 2003 resulting in net proceeds to the
Company of $492.5 million and $73.5 million, respectively, which was used to pay
down the outstanding balance under the credit facility. The notes are
convertible into the Company's common stock at any time following the date of
original issuance, unless previously redeemed, at a conversion price of $123.90
per share, subject to adjustment in certain events. Interest on the notes is
payable semiannually on each April 1 and October 1, beginning October 1, 1998.
The notes are redeemable, in whole or in part, at the option of the Company at
any time on or after April 1, 2001 and until March 31, 2002 at 101.050%; on or
after April 1, 2002 and until March 31, 2003 at 100.525%; and on or after April
1, 2003 at 100%, plus accrued interest.
<PAGE>
Bond Offerings and Refinancings:
On June 16, 1998, the Company completed an offering of $175 million 6.875%
senior debentures due June 15, 2018 and $125 million 6.625% senior notes due
June 15, 2008 under the shelf registration statement. The net proceeds of
approximately $296.0 million, in aggregate, were used to fund the acquisition of
issued share capital of More. Interest on the senior debentures and senior notes
is payable semiannually on each June l5 and December 15, beginning December 15,
1998. In addition, the Company assumed approximately $567 million of Universal's
long-term debt, $242 million of which was refinanced at the closing date using
the Company's credit facility. In May 1998, the Company completed a public
tender offer for the remaining $325 million of 9.75% debentures, the majority of
which were purchased for approximately $374 million leaving approximately $2
million outstanding at June 30, 1998.
Other Borrowings:
Other borrowings consist principally of $137.7 million of long-term debt assumed
as part of the More acquisition. The Company anticipates utilizing the credit
facility to refinance this debt during the third quarter.
Other:
During the first six months of 1998, the Company purchased the broadcasting
assets of certain radio stations in Mobile, Alabama; Monterey, California;
Allentown, Pennsylvania; Jackson, Mississippi; Dayton, Ohio; Daytona Beach,
Florida; Greenville, South Carolina; and El Paso, Texas for approximately $24.1
million, $23.7 million, $29.0 million, $20.0 million, $14.5 million, $11.5
million, $35.0 million and $10.5 million, respectively. Also, during the first
six months of 1998, the Company merged with Universal, acquired 86% of the
common stock of More, and also acquired approximately 4,748 other outdoor
display faces in 16 markets for $1.3 billion, $657.3 million and $152.2 million,
respectively. In addition, the Company purchased capital equipment totaling
$27.8 million.
Future acquisitions of broadcasting stations, outdoor facilities and other
media-related properties, affected in connection with the implementation of the
Company's acquisition strategy are expected to be financed from increased
borrowings under the credit facility, additional public equity and debt
offerings and cash flow from operations. The Company believes that cash flow
from operations as well as the proceeds from securities offerings made by the
Company from time to time will be sufficient to make all required future
interest and principal payments on the credit facility, senior convertible notes
and bonds, and will be sufficient to fund all anticipated capital expenditures.
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
various foreign countries, all of which are accounted for under the equity
method. The Company believes that the foreign currency risks to which it is
exposed are not reasonably likely to have a material adverse effect on the
Company's cash flows, results of operations or financial position given the
concentration of revenue in the United States.
The ratio of earnings to combined fixed charges and preferred stock dividends is
as follows:
6 Months ended
June 30, Year Ended
- ------------------------ --------------------------------------------
1998 1997 1997 1996 1995 1994 1993
- ------ ------ ------ ------ ------ ------ ------
2.15 2.10 2.32 3.63 3.32 5.54 3.81
The ratio of earnings of combined fixed charges and preferred stock dividends
has been computed on a total enterprise basis. Earnings represent income from
continuing operations before income taxes less equity in undistributed net
income (loss) of unconsolidated affiliates plus fixed charges. Fixed charges
represent interest, amortization of debt discount and expense, and the estimated
interest portion of rental charges. The Company had no Preferred Stock
outstanding and paid no dividends thereon for any period presented.
<PAGE>
Risks Regarding Forward Looking Statements
Except for the historical information, this report contains various
"forward-looking statements" which represent the Company's expectations or
beliefs concerning future events, including the future levels of cash flow from
operations. The Company cautions that these forward-looking statements involve a
number of risks and uncertainties and are subject to many variables which could
have an adverse effect upon the Company's financial performance. These variables
include economic conditions, the ability of the Company to integrate the
operations of Eller, Paxson, Universal and More, shifts in population and other
demographics, level of competition for advertising dollars, fluctuations in
operating costs, technological changes and innovations, changes in labor
conditions, changes in governmental regulations and policies, and certain other
factors set forth in the Company's SEC filings. Actual results in the future
could differ materially from those described in the forward-looking statements.
Item 3. Quantitative and Qualitative Disclosures About Market Risk.
Interest Rate Risk:
At June 30, 1998, approximately 54% of the Company's long-term debt bears
interest at variable rates. Accordingly, the Company's earnings 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 first six months of 1998 average interest rate under these borrowings, it is
estimated that the Company's first six months of 1998 interest expense would
have changed by $27.0 million and that the Company's first six months of 1998
net income and after tax cash flow would have changed by $17.6 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, the analysis assumes no
such actions. Further the analysis does not consider the effects of the change
in the level of overall economic activity that could exist in such an
environment.
At June 30, 1998, the Company has several interest rate protection agreements
that it obtained through an acquisition. These agreements, the fair value of
which are not material at June 30, 1998 and are not expected to become material
in the near term, have not been considered in the above analysis as the Company
intends to terminate these agreements during 1998.
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 June 30, 1998 by $12.9 million.
<PAGE>
Part II -- OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders
An annual meeting of shareholders of the Company was held on May 5, 1998. L.
Lowry Mays, Karl Eller, Mark P. Mays, Alan D. Feld, B. J. McCombs, Theodore H.
Strauss and John H. Williams were elected as directors of the Company, each to
hold office until the next annual meeting of shareholders or until his successor
has been elected and qualified, subject to earlier resignation and removal. The
shareholders also approved the Clear Channel Communications, Inc. 1998 Stock
Incentive Plan. Additionally, the shareholders approved the selection of Ernst &
Young LLP as independent auditors for the year ending December 31, 1998. The
shareholders did not approve an amendment to the Company's Articles of
Incorporation increasing the number of authorized shares of Preferred Stock from
2,000,000 to 10,000,000 and the number of authorized shares of Common Stock from
150,000,000 to 600,000,000.
The results of voting at the annual meeting of the shareholders were as follows:
Proposal No. 1
(Election of Directors)
Nominee For Withheld
L.Lowry Mays 86,221,021 1,193,939
Karl Eller 86,214,518 1,200,442
Mark P. Mays 86,220,196 1,194,764
Alan D. Feld 85,886,987 1,527,973
B.J. McCombs 86,217,406 1,197,554
Theodore H. Strauss 86,367,960 1,047,000
John H. Williams 86,376,841 1,038,119
Proposal No. 2
(Approve 1998 Stock Incentive Plan)
For Withhold/Against Exceptions/Abstain
55,185,161 28,232,594 145,996
Proposal No. 3
(Amendment of the Articles of Incorporation)
For Withhold/Against Exceptions/Abstain
52,402,978 32,056,811 103,962
Proposal No. 4
(Selection of Independent Auditors)
For Withhold/Against Exceptions/Abstain
87,378,287 12,054 24,619
A special meeting of shareholders of the Company was held on July 13, 1998. The
shareholders approved an amendment to the Company's Articles of Incorporation to
increase the number of authorized shares of Common Stock of the Company from 150
million to 600 million shares. The Shareholders also approved an amendment to
the Company's Articles of Incorporations to authorize the issuance of eight
million shares of a new class of preferred stock.
The results of voting at the special meeting of the shareholders were as
follows:
Proposal No. 1
(Amendment of the Articles of Incorporation to increase
Common Stock to 600 million)
For Withhold/Against Exceptions/Abstain
98,863,379 16,029,730 35,168
Proposal No. 2
(Amendment of the Articles of Incorporation to authorize
a new class of Preferred Stock)
For Withhold/Against Exceptions/Abstain
83,324,710 27,322,142 4,281,425
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits. See Exhibit Index on Page 18
(b) Reports on Form 8-K
Filing Date Items Reported Financial Statements
Reported
8-K 4/10/98 Item 2. Pro forma Clear Channel
financial statements Communications, Inc.
assuming the merger 12/31/97
between the Company Universal Outdoor
` and Universal Holdings, Inc.
occurred on 1/1/97. 12/31/97
Pro forma statements
12/31/97
8-K 7/10/98 Item 2. Business None, the required
acquisition of More items under item 7(a)
Group Plc. on June and 7(b) will be
25, 1998. filed within 60 days
of this filing.
<PAGE>
Signatures
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
CLEAR CHANNEL COMMUNICATIONS, INC.
Date August 14, 1998 /s/ Herbert W. Hill, Jr.
Herbert W. Hill, Jr.
Senior Vice President and
Chief Accounting Officer
<PAGE>
INDEX TO EXHIBITS
Exhibit Number
Description
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).
4.3 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).
4.4 First Supplemental Indenture dated March 30, 1998 to 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 the Company's Quarterly Report on
Form 10-Q for the quarter ended March 31, 1998).
11 Computation of Earnings Per Share
12 Computation of Ratio of Earnings to Fixed Charges
27 Financial Data Schedule at June 30, 1998
27.1 Financial Data Schedule at June 30, 1997 (incorporated by
reference to exhibit 27 of the Company's Quarterly Report on
Form 10-Q for the quarter ended June 30, 1997).
EXHIBIT 11 - COMPUTATION OF EARNINGS PER SHARE
In thousands of dollars, except per share data
Six months ended
June 30,
1998 1997
---- ----
Numerator:
Net income $ 33,488 $ 22,693
Effect of dilutive securities:
Eller put/call option agreement (2,229) (665)
Convertible debt 2,453 --
------------ -----------
Numerator for net income per
common share - diluted $ 33,712 $ 22,028
======== ========
Denominator:
Weighted average common shares 111,354 82,196
Effect of dilutive securities:
Employee stock options 2,158 2,128
Eller put/call option agreement 1,021 541
Convertible debt 2,333 --
------------- ------------
Dilutive potential common shares 5,512 2,669
Denominator for net income
per common share - diluted 116,866 84,865
======== ========
Net income per common share:
Basic $ .30 $ .28
======== ========
Diluted $ .29 $ .26
======== ========
EXHIBIT 12 - COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
<TABLE>
<CAPTION>
6 months ended
June 30, Year Ended
----------------- ---------------------------------------------------
1998 1997 1997 1996 1995 1994 1993
------ ------ ----- ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C>
Income before income
taxes 63,574 34,679 104,077 71,240 49,817 36,396 15,696
Dividends and other received from
nonconsolidated affiliates 4,010 1,648 4,624 10,430 1,432
--------- -------- ------- ------- -------- -------- --------
Total 67,584 36,327 108,701 81,670 51,249 36,396 15,696
Fixed Charges
Interest expense 53,733 32,315 75,076 30,080 20,752 7,669 5,390
Amortization of loan fees 923 354 1,451 506 1,004 82 5
Interest portion of rentals 4,033 280 6,120 424 361 262 188
--------- --------- ---------- --------- --------- --------- ---------
Total fixed charges 58,689 32,949 82,647 31,010 22,117 8,013 5,583
Preferred stock dividends
Tax effect of preferred dividends 0 0 0 0 0 0 0
After tax preferred dividends 0 0 0 0 0 0 0
--------- --------- ---------- --------- --------- --------- ---------
Total fixed charges and
preferred dividends 58,689 32,949 82,647 31,010 22,117 8,013 5,583
--------- --------- ---------- --------- --------- --------- ---------
Total earnings available for
payment of fixed charges 126,273 69,276 191,348 112,680 73,366 44,409 21,279
====== ===== ===== ===== ===== ===== =====
Ratio of earnings to fixed
Charges 2.15 2.10 2.32 3.63 3.32 5.54 3.81
====== ===== ===== ===== ===== ===== =====
Rental fees and charges 50,417 3,495 76,500 5,299 4,510 3,273 2,344
Interest rate 8% 8% 8% 8% 8% 8% 8%
</TABLE>
EXHIBIT 27 FINANCIAL DATA SCHEDULE
FISCAL-YEAR-END DEC-31-1998
PERIOD-END JUNE-30-1998
CASH 58374401
SECURITIES 0
RECEIVABLES 282064301
ALLOWANCES 17938262
INVENTORY 0
CURRENT-ASSETS 335297151
PP&E 1843033970
DEPRECEATION 176956751
TOTAL-ASSETS 6844891680
CURRENT-LIABILITIES 261450158
BONDS 2712600626
PREFERRED-MANDATORY 0
PREFERRED 0
COMMON 12413844
OTHER-SE 3562834073
TOTAL-LIABILITY-AND-EQUITY 6844891680
SALES 0
TOTAL-REVENUES 523670196
CGS 0
TOTAL-COSTS 289342093
OTHER-EXPENSES 3581178
LOSS-PROVISION 0
INTEREST-EXPENSE 53733492
INCOME-PRETAX 63573933
INCOME-TAX 36618580
INCOME-CONTINUING 33488182
DISCONTINUED 0
EXTRAORDINARY 0
CHANGES 0
NET-INCOME 33488182
EPS-BASIC .30
EPS-DILUTED .29
