FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
QUARTERLY REPORT PURSUANT TO SECTION 13 AND 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarter ended June 30, 2000 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 East Basse Road
San Antonio, Texas 78209
(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 10, 2000
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
Common Stock, $.10 par value 380,219,251
<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, 2000 and 3
December 31, 1999
Consolidated Statements of Operations for the six and 5
three months ended June 30, 2000 and 1999
Consolidated Statements of Cash Flows for the six months 6
ended June 30, 2000 and 1999
Notes to Consolidated Financial Statements 8
Item 2. Management's Discussion and Analysis of 11
Financial Condition and Results of Operations
Item 3. Quantitative and Qualitative Disclosures About 15
Market Risk
Part II -- Other Information
Item 4. Submission of Matters to a Vote of Security Holders 16
Item 6. Exhibits and reports on Form 8-K 18
(a) Exhibits
(b) Reports on Form 8-K
Signatures 19
Index to Exhibits 20
<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,
2000 1999
(Unaudited) (*)
Current Assets
Cash and cash equivalents $ 56,893 $ 76,724
Accounts receivable, less allowance of
$36,731 at June 30, 2000 and
$26,095 at December 31, 1999 844,366 724,900
Other current assets 143,313 123,485
Total Current Assets 1,044,572 925,109
Property, Plant and Equipment
Land, buildings and improvements 367,349 338,764
Structures and site leases 2,118,701 1,870,731
Transmitter and studio equipment 451,163 427,063
Furniture and other equipment 275,952 222,581
Construction in progress 125,901 89,901
3,339,066 2,949,040
Less accumulated depreciation (602,177) (470,916)
2,736,889 2,478,124
Intangible Assets
Contracts 808,487 817,227
Licenses and goodwill 12,231,656 11,809,882
Other intangible assets 89,327 80,102
13,129,470 12,707,211
Less accumulated amortization (1,052,133) (758,889)
12,077,337 11,948,322
Other Assets
Restricted cash -- 4,349
Notes receivable 129,675 53,675
Investments in, and advances to,
nonconsolidated affiliates 386,918 380,918
Other assets 339,269 251,604
Other investments 933,400 779,411
Total Assets $ 17,648,060 $ 16,821,512
* 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,
2000 1999
(Unaudited) (*)
Current Liabilities
Accounts payable $ 211,902 $ 196,222
Accrued interest 19,367 16,449
Accrued expenses 264,798 337,939
Accrued income taxes 87,894 29,769
Current portion of long-term debt 30,510 30,361
Other current liabilities 77,094 74,775
Total Current Liabilities 691,565 685,515
Long-term debt 4,875,879 4,093,543
Liquid Yield Option Notes 493,879 490,809
Deferred income taxes 1,340,070 1,289,783
Other long-term liabilities 129,256 149,032
Minority interest 17,103 28,793
Shareholders' Equity
Common stock 33,897 33,861
Additional paid-in capital 9,231,175 9,216,957
Common stock warrants 250,583 252,862
Retained earnings 287,966 296,132
Other comprehensive income 295,317 282,745
Other 2,304 2,304
Cost of shares held in treasury (934) (824)
Total shareholders equity 10,100,308 10,084,037
Total Liabilities and
Shareholders Equity $ 17,648,060 $ 16,821,512
* From audited financial statements
See Notes to Consolidated Financial Statements
<PAGE>
CLEAR CHANNEL COMMUNICATIONS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
(In thousands of dollars, except per share data)
<TABLE>
Six Months Ended Three Months Ended
June 30, June 30, June 30, June 30,
2000 1999 2000 1999
<S> <C> <C> <C> <C>
Gross revenue $ 1,950,017 $ 1,117,737 $ 1,078,642 $ 696,130
Less: agency commissions 201,603 123,259 112,767 78,439
------- ------- ------- ------
Net revenue 1,748,414 994,478 965,875 617,691
Operating expenses 1,082,690 601,371 562,729 356,549
Depreciation and amortization 448,741 265,027 228,687 154,379
Corporate expenses 52,445 28,331 27,867 15,884
------ ------ ------ ------
Operating income 164,538 99,749 146,592 90,879
Interest expense 125,460 78,842 69,911 47,010
Gain on sale of stations -- 136,925 -- 136,925
Other income (expense) - net 1,624 14,967 1,226 4,048
----- ------ ----- -----
Income before income taxes and equity
in earnings of nonconsolidated affiliates 40,702 172,799 77,907 184,842
Income taxes 58,472 82,852 53,339 79,962
------ ------ ------ ------
Income (loss) before equity in earnings
of nonconsolidated affiliates (17,770) 89,947 24,568 104,880
Equity in earnings of nonconsolidated
affiliates 9,603 3,817 6,667 1,620
----- ----- ----- -----
Net income (loss) (8,167) 93,764 31,235 106,500
Other comprehensive income (loss), net of tax:
Foreign currency translation adjustments (60,544) (52,946) (48,039) (25,954)
Unrealized gains on securities:
Unrealized holding gain (loss)
arising during period 73,116 (27,640) (27,060) 840
Less: reclassification adjustment for gains
included in net income - (14,905) - (7,371)
------ ------- ------ ------
Comprehensive income (loss) $ 4,405 $ (1,727) $ (43,864) $ 74,015
Net income (loss) per common share:
Basic $ (.02) $ .33 $ .09 $ .35
Diluted $ (.02) $ .32 $ .09 $ .33
See Notes to Consolidated Financial Statements
</TABLE>
<PAGE>
CLEAR CHANNEL COMMUNICATIONS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(In thousands of dollars)
Six Months Ended
June 30, June 30,
2000 1999
Cash flows from operating activities:
Net income (loss) $ (8,167) $ 93,764
Reconciling Items:
Depreciation 143,141 106,747
Amortization of intangibles 305,600 158,280
Deferred taxes 15,856 59,514
Amortization of film rights 11,180 8,514
Amortization of deferred financing charges, bond
premiums and accretion of note discounts 7,365 1,863
Payments on film liabilities (10,646) (8,395)
(Recognition) deferral of deferred income 2,554 6,284
(Gain) loss on disposal of assets (2,204) (139,268)
Gain on sale of other investments -- (22,930)
Equity in earnings of nonconsolidated affiliates (6,239) (570)
Increase (decrease) minority interest 4 (308)
Changes in operating assets and liabilities:
(Increase) decrease accounts receivable (108,225) (45,184)
(Decrease) increase accounts payable, accrued
expenses and other (99,840) (84,602)
Increase (decrease) accrued interest 2,918 2,820
(Increase) decrease in federal income tax receivable 23,050 --
Increase (decrease) accrued income and other taxes 38,300 (9,173)
------ ------
Net cash provided by operating activities 314,647 127,356
<PAGE>
CLEAR CHANNEL COMMUNICATIONS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(In thousands of dollars)
Six Months Ended
June 30, June 30,
2000 1999
Cash flows from investing activities:
Decrease (increase) in restricted cash $ 4,349 $ (142,061)
Increase in notes receivable - net (76,000) --
Increase in investments in and advances to
nonconsolidated affiliates - net (3,657) (1,173)
Purchases of investments (41,842) (8,582)
Proceeds from sale of investments -- 29,659
Purchases of property, plant and equipment (201,602) (75,932)
Proceeds from disposal of assets 3,377 207,294
Acquisition of broadcasting assets (48,981) (32,743)
Acquisition of outdoor assets (772,148) (401,597)
Increase in other-net (11,230) (11,218)
Net cash used in investing activities (1,147,734) (436,353)
Cash flows from financing activities:
Proceeds from issuance of long-term debt 2,587,661 1,352,453
Payments on long-term debt (1,782,801) (1,578,416)
Proceeds from exercise of stock options and
stock purchase plan 6,187 51,948
Proceeds from issuance of common stock -- 512,916
Proceeds from exercise of common stock warrants 2,209 -
Net cash provided by financing activities 813,256 338,901
Net (decrease) increase in cash and
cash equivalents (19,831) 29,904
Cash and cash equivalents at beginning of period 76,724 36,498
Cash and cash equivalents at end of period $ 56,893 $ 66,402
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 1999 Annual Report on Form 10-K.
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
1999 consolidated financial statements to conform to the 2000 presentation.
Note 2: RECENT ACCOUNTING PRONOUNCEMENTS
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133 Accounting for Derivative
Instruments and Hedging Activities. Statement 133 establishes new rules for
the recognition and measurement of derivatives and hedging activities.
Statement 133 is amended by Statement 137 Accounting for Derivative
Instruments and Hedging Activities - Deferral of the Effective Date of FASB
Statement No. 133, and is effective for years beginning after June 15,
2000. The Company plans to adopt this statement in fiscal year 2001.
Management does not believe adoption of this statement will materially
impact the Companys financial position or results of operations.
In December 1999, the SEC issued Staff Accounting Bulletin 101, Revenue
Recognition in Financial Statements, (SAB 101). The bulletin summarizes
certain of the SEC staffs views in applying generally accepted accounting
principles to revenue recognition. SAB 101, as amended through June 26,
2000 is required to be implemented in the fourth quarter of 2000. The
Company is currently reviewing the requirements of SAB 101 and assessing
its impact on the Companys financial position and results of operations.
Note 3: RECENT DEVELOPMENTS
On August 1, 2000, the Company consummated its merger with SFX
Entertainment, Inc. (SFX). SFX is one of the worlds largest diversified
promoter, producer and venue operator for live entertainment events. This
merger was a tax-free, stock-for-stock transaction. Each SFX Class A
shareholder received 0.6 shares of the Companys common stock for each SFX
share and each SFX Class B shareholder received one share of the Companys
common stock for each SFX share, on a fixed exchange basis. The Company
will issue an aggregate of approximately 40.9 million shares of Clear
Channel Common Stock in exchange for shares of SFX Class A and Class B
common stock, valuing the merger at approximately $3.2 billion plus the
assumption of SFXs debt of approximately $1.5 billion.
On January 5, 2000, the Company closed the acquisition of the Ackerley
Group Inc.s South Florida outdoor advertising division (Ackerley) for
approximately $300.2 million. The acquisition adds approximately 3,500
display faces and enhances the Companys position in Florida.
On October 2, 1999, the Company entered into a definitive merger agreement
with AMFM Inc. (AMFM). Under the terms of the merger agreement, AMFM
stockholders will receive 0.94 shares of the Companys common stock for
each share of AMFM common stock held on the closing date of the
transaction, on a fixed exchange basis, valuing the merger, based on
average share value at the signing of the merger agreement, at
approximately $17.1 billion plus the assumption of AMFMs debt. AMFM will
become a wholly-owned subsidiary of the Company. On April 26, 2000 and
April 27, 2000, stockholders of both companies approved the merger. On July
20, 2000, the U.S. Department of Justice preliminarily cleared the merger
after the Company and AMFM agreed to divest 108 stations in 27 markets and
also to dispose of AMFMs approximate 30% equity interest in Lamar
Advertising Company. The Company and AMFM are currently negotiating with
the U.S. Department of Justice to create appropriate documentation of the
agreement reached. To date, the Company and AMFM have signed definitive
agreements to sell 101 radio stations for aggregate proceeds of
approximately $4.2 billion. Of these stations, 44 are owned and operated by
the Company. As the transaction is currently structured, a further seven
stations currently owned by AMFM will be put into trust until the eventual
sale of these stations can be approved by the various regulatory agencies.
Completion of these sales is subject to the completion of this merger,
obtaining regulatory approvals and other closing conditions. It is expected
that the merger will be consummated during the third quarter of 2000. The
accompanying financial statements do not include any adjustments related to
the merger and divestitures.
The results of operations for the six-month periods ending June 30, 2000
and 1999 do not include the operations of AMFM or SFX. The results of
operations for the six month periods ending June 30, 2000 and 1999 do
include the operations of Ackerley, Jacor Communications, Inc., (Jacor),
Dame Media, Inc., (Dame) and Dauphin OTA, (Dauphin) from the respective
dates of acquisition or merger as appropriate. Assuming the
mergers/acquisitions of Ackerley, Jacor, Dame and Dauphin had all occurred
at January 1, 1999, unaudited pro forma consolidated results of operations
for the six months ended June 30, 1999 would have been as follows:
Pro Forma (Unaudited)
Six Months Ended June 30, 1999
In thousands, except per share data
Net revenue $ 1,411,674
Net income (loss) $ (155,268)
Net income (loss) per share:
Basic $ (.49)
Diluted $ (.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
mergers/acquisitions of Ackerley, Jacor, Dame and Dauphin occurred at the
beginning of 1999, nor is it indicative of future results of operations.
The Company had other acquisitions during the first six months of 2000 and
during 1999, the effects of which, individually and in aggregate, were not
material to the Companys consolidated financial position or results of
operations.
On June 14, 2000 the Company completed a debt offering of $250.0 million
floating rate notes due June 15, 2002 and $750.0 million 7.875% Notes due
June 15, 2005. The net proceeds to the Company of approximately $993.9
million were used to reduce the outstanding balance on the Companys
domestic credit facility.
On July 3, 2000 the Company completed a debt offering of Euro 650.0 million
6.50% Notes due July 7, 2005. Interest on the notes is payable annually in
arrears on July 7 of each year. The net proceeds to the Company of
approximately $612.9 million were used to reduce the outstanding balance on
the Companys domestic credit facility.
To facilitate possible future acquisitions as well as public offerings, the
Company filed a registration statement on Form S-3 on July 21, 2000
covering a combined $3.0 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 Companys three Delaware statutory
business trusts and guarantees of such preferred securities by the Company.
<PAGE>
<TABLE>
Note 4 SEGMENT DATA
In thousands of dollars
Six Months Ended Three Months Ended
June 30, June 30, June 30, June 30,
2000 1999 2000 1999
Net revenue
<S> <C> <C> <C> <C>
Broadcasting $ 954,340 $ 499,336 $ 526,079 $ 347,763
Outdoor 794,074 495,142 439,796 269,928
Consolidated $ 1,748,414 $ 994,478 $ 965,875 $ 617,691
Operating expenses
Broadcasting $ 580,948 $ 298,940 $ 303,644 $ 200,627
Outdoor 501,742 302,431 259,085 155,922
Consolidated $ 1,082,690 $ 601,371 $ 562,729 $ 356,549
Depreciation and Amortization
Broadcasting $ 248,043 $ 105,754 $ 125,299 $ 77,769
Outdoor 200,698 159,273 103,388 76,610
Consolidated $ 448,741 $ 265,027 $ 228,687 $ 154,379
Operating income
Broadcasting $ 91,319 $ 78,426 $ 77,777 $ 59,452
Outdoor 73,219 21,323 68,815 31,427
Consolidated $ 164,538 $ 99,749 $ 146,592 $ 90,879
Total identifiable assets
Broadcasting $ 10,888,535 $ 9,636,320 $ 10,888,535 $ 9,636,320
Outdoor 6,759,525 6,191,846 6,759,525 6,191,846
Consolidated $ 17,648,060 $ 15,828,166 $ 17,648,060 $ 15,828,166
</TABLE>
Net revenue of $388,597 and $215,664 for the six and three months ended
June 30, 2000, respectively and $173,975 and $96,806 for the six and three
months ended June 30, 1999, respectively, and identifiable assets of
$2,226,769 and $1,643,391 as of June 30, 2000 and 1999, respectively are
included in the data above and are derived from the Companys foreign
operations.
<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, 2000 to Three and Six
Months Ended June 30, 1999.
<TABLE>
(In thousands of dollars, except per share data)
Six Months As-Reported Pro Forma Three Months As-Reported Pro Forma
Ended June 30, % Increase % Increase Ended June 30, % Increase % Increase
Consolidated 2000 1999 (Decrease) (Decrease) 2000 1999 (Decrease) (Decrease)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net revenue $ 1,748,414 $ 994,478 75.8 % 23.9% $ 965,874 $617,69156.4 %25.8%
Operating expenses 1,082,690 601,371 80.0 % 18.9% 562,729 356,549 57.8 % 20.4%
Depreciation and
amortization 448,741 265,027 69.3 % 19.7% 228,687 154,379 48.1 % 21.6%
Operating income 164,538 99,749 65.0 % 85.4% 146,591 90,879 61.3 % 56.4%
Interest expense 125,460 78,842 59.1 % 69,911 47,010 48.7 %
Net income (loss) (8,167) 93,764 (108.7)% 31,234 106,500 (70.7)%
Net income (loss) per share:
Basic $ (.03) $ .33 (106.1)% $ .09 $ .35 (74.3)%
Diluted $ (.03) $ .32 (106.3)% $ .09 $ .33 (72.7)%
</TABLE>
The majority of the growth
The majority of the increase in as reported depreciation and amortization
was primarily due to the acquisition of the tangible and intangible assets
associated with the above-mentioned business combinations. Corporate
expenses increased 85% for the first six months of 2000 versus the first
six months of 1999 as a result of the expansion of the corporate operations
of the Company related to the aforementioned acquisitions. Interest expense
increased as a result of greater average borrowing levels as a result of
the aforementioned acquisitions and higher average borrowing rates. During
the six-months ended June 30, 2000, the Company had approximately 47% of
its debt based on LIBOR. LIBOR rates increased 24.8% from an average of
4.96% in the first half of 1999 to an average 6.19% during the first half
of 2000. This increase in average borrowing rates was partially offset by
the issuance of convertible notes in the fourth quarter of 1999 at 1.5%
annual interest. Equity in earnings of nonconsolidated affiliates increased
152% primarily from the improved operating results from our equity
investments in China, New Zealand and Australia. Income tax expense
decreased due to the reduction in pre tax income. The effective tax rate
increased from 48% in the first half of 1999 to 144% in the first half of
this year resulting from the increased nondeductible amortization expenses
associated with the aforementioned acquisitions. The majority of the
decrease in net income is due to a one time after tax gain of approximately
$85 million included the three and six-month periods ended June 30, 1999,
which related to the sale of stations associated with the governmental
directives regarding the Jacor merger. The Company did not sell any
stations during the first six months of 2000.
Pro Forma presentation referred to above assumes the acquisition and/or
merger of Ackerley, Jacor, Dauphin and Dame occurred on January 1, 1999.
Pro Forma net revenue increased due to improved advertising rates in the
broadcasting segment. In addition, increased advertising rates and other
less significant acquisitions within the outdoor segment also contributed
to the increase in pro forma net revenue. Pro Forma operating expenses
increased primarily from the incremental selling costs related to the
additional revenues. The majority of the increase in pro forma operating
income for the three and six month periods ended June 30 was due to
improved operations during the second quarter within both the broadcasting
and outdoor segments.
<PAGE>
Liquidity and Capital Resources
The major sources of capital for the Company have been cash flow from
operations, advances on its domestic revolving long-term line of credit
(the domestic credit facility), and funds provided by various stock,
convertible and other bond offerings, and other borrowings. As of June 30,
2000 and December 31, 1999, the Company had the following debt outstanding:
(In millions of dollars)
June 30, 2000 December 31, 1999
Credit facility - domestic $ 1,040.0 $ 743.8
Credit facility - multi-currency 537.2 483.9
Credit facility - international 107.6 120.4
Senior convertible notes 1,575.0 1,575.0
Liquid Yield Option Notes 493.9 490.8
Long-term bonds 1,601.2 1,171.4
Other borrowings 45.4 29.4
Total $ 5,400.3 $ 4,614.7
In addition, the Company had $56.9 million in unrestricted cash and cash
equivalents on hand at June 30, 2000.
The Board of Directors approved an increase to the number of the Companys
authorized shares of common stock from 900 million to 1.5 billion in order
to have additional shares available for possible future acquisition or
financing transactions, stock splits, stock dividends and other issuances,
or to satisfy requirements for additional reservations of shares by reason
of future transactions which might require increased reservations. The
Company currently has no plans to issue any of the additional shares of
common stock.
On July 21, 2000 the Company filed a registration statement on Form S-3
covering a combined $3.0 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 Companys three Delaware statutory
business trusts and guarantees of such preferred securities by the Company.
Credit Facility:
Domestic: The Company has a revolving credit facility for $2.0 billion, of
which at June 30, 2000, $1.0 billion is outstanding and $1.0 billion 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 $1.1
billion and drew down $1.4 billion.
Multi-Currency: The Company has a 364-day multi-currency revolving credit
facility for $1 billion. This credit facility matures on September 7, 2000
at which time the Company has the option to convert this facility to a
four-year term loan. This credit facility allows for borrowings in various
foreign currencies, which are used to hedge net assets in those currencies.
At June 30, 2000, the Company had Euro 478.9 million, or approximately
$457.2 million plus additional U.S. dollar borrowings for a total of
approximately $537.2 million outstanding and approximately $462.8 million
available for future borrowings under this facility.
International: The Company has an Lira88 million, or approximately $133.2
million, revolving credit facility with a group of international banks.
This international credit facility allows for borrowings in various foreign
currencies, which are used to hedge net assets in those currencies. At June
30, 2000, approximately $25.6 million, was available for future borrowings
and $107.6 million, was outstanding. This credit facility converted into a
reducing revolving facility on January 10, 2000 with an initial payment of
Lira12 million made in January 2000. An additional payment of Lira12
million is due on January 10, 2001. The credit facility expires on January
10, 2002. At June 30, 2000, interest rates varied from 4.00% to 7.22%.
<PAGE>
Liquid Yield Option Notes:
The Company assumed Liquid Yield Option Notes (LYONs) as a part of the
merger with Jacor. The Company assumed 4-3/4% LYONs due 2018 and 5-1/2%
LYONs due 2011 with an aggregated fair value of $490.1 million. Each LYON
has a principal amount at maturity of $1,000 and is convertible, at the
option of the holder, at any time on or prior to maturity, into the
Companys common stock at a conversion rate of 7.227 shares per LYON and
15.522 shares per LYON for the 2018 and 2011 issues, respectively. The
LYONs aggregated balance, net of conversions to common stock, amortization
of premium, and accretion of interest, at June 30, 2000 was $493.9 million.
Long Term Bonds:
On December 14, 1999 the Company completed a tender offer for the 10.125%
Senior Subordinated Notes due June 15, 2006; 9.75% Senior Subordinated
Notes due December 15, 2006; 8.75% Senior Subordinated Notes due June 15,
2007; and 8.0% Senior Subordinated Notes due February 15, 2010 of Jacor
Communications Company, an indirect wholly owned subsidiary of the Company.
An agent acting on the Companys behalf redeemed notes with a value of
approximately $571.4 million. Cash settlement of the amount due to the
agent was completed on January 14, 2000. After redemption, approximately
$1.2 million face value of the notes remain outstanding.
On June 14, 2000 the Company completed a debt offering of $250.0 million
floating rate notes due June 15, 2002 and $750.0 million 7.875% Notes due
June 15, 2005. On June 14, 2000 the Company entered into interest rate swap
agreements that effectively float the interest on $750.0 million based upon
LIBOR. The net proceeds to the Company of approximately $993.9 million were
used to reduce the outstanding balance on the Companys domestic credit
facility.
On July 3, 2000 the Company completed a debt offering of Euro 650.0 million
6.50% Notes due July 7, 2005. Interest on the notes is payable annually in
arrears on July 7 of each year. The net proceeds to the Company of
approximately $612.9 million were used to reduce the outstanding balance on
the Companys domestic credit facility.
USES OF FUNDS AND CAPITAL RESOURCES
Ackerley Acquisition:
On January 5, 2000, the Company closed the acquisition of the Ackerley for
approximately $300.2 million. The acquisition adds approximately 3,500
display faces and enhances the Companys position in Florida.
SFX Merger:
On August 1, 2000, the Company consummated its merger with SFX
Entertainment, Inc. (SFX). SFX is one of the worlds largest diversified
promoter, producer and venue operator for live entertainment events. This
merger was a tax-free, stock-for-stock transaction. Each SFX Class A
shareholder received 0.6 shares of the Companys common stock for each SFX
share and each SFX Class B shareholder received one share of the Companys
common stock for each SFX share, on a fixed exchange basis. The Company
will issue an aggregate of approximately 40.9 million shares of Clear
Channel Common Stock in exchange for shares of SFX Class A and Class B
common stock, valuing the merger at $3.2 billion plus the assumption of
SFXs debt of approximately $1.5 billion.
Other:
During the first six months of 2000, in addition to the acquisition of
Ackerley, the Company has acquired approximately 2,400 additional outdoor
faces in 39 domestic markets and in malls throughout the U.S. and 20,600
additional display faces in 23 international markets for a total of $471.9
million. The Company also acquired 12 radio stations in five markets and
acquired the remaining 20% minority interest in two radio stations in one
market for a total of $47.5 million during the first six months of 2000. In
addition, the Company acquired a software company, which is developing
broadcasting software for $1.5 million.
During the first six months of 2000, the Company had capital expenditures
of $201.6 million, of which, $94.1 million was within the broadcasting
segment and $107.5 million was within the outdoor segment. Capital
expenditures included $73.3 million for one-time expenditures primarily
related to facility consolidations and a one-time capital expenditure in
conjunction with the long-term extension of certain operating contracts.
Construction of new revenue-producing advertising displays totaled $63.3
million.
Future acquisitions of broadcasting stations, outdoor advertising
facilities and other media-related properties affected in connection with
the implementation of the Companys acquisition strategy are expected to be
financed from increased borrowings under the existing credit facilities,
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 from time to time will be sufficient to make
all required future interest and principal payments on the credit
facilities, senior convertible notes and bonds, and will be sufficient to
fund all anticipated capital expenditures.
Pending Transactions:
AMFM Merger:
On October 2, 1999, the Company entered into a definitive merger agreement
with AMFM Inc. (AMFM). Under the terms of the merger agreement, AMFM
stockholders will receive 0.94 shares of the Companys common stock for
each share of AMFM common stock held on the closing date of the
transaction, on a fixed exchange basis, valuing the merger, based on
average share value at the signing of the merger agreement, at
approximately $17.1 billion plus the assumption of AMFMs debt. AMFM will
become a wholly-owned subsidiary of the Company. On April 26, 2000 and
April 27, 2000, stockholders of both companies approved the merger. On July
20, 2000, the U.S. Department of Justice preliminarily cleared the merger
after the Company and AMFM agreed to divest 108 stations in 27 markets and
also to dispose of AMFMs approximate 30% equity interest in Lamar
Advertising Company. The Company and AMFM are currently negotiating with
the U.S. Department of Justice to create appropriate documentation of the
agreement reached. To date, the Company and AMFM have signed definitive
agreements to sell 101 radio stations for aggregate proceeds of
approximately $4.2 billion. Of these stations, 44 are owned and operated by
the Company. As the transaction is currently structured, a further seven
stations currently owned by AMFM will be put into trust until the eventual
sale of these stations can be approved by the various regulatory agencies.
Completion of these sales is subject to the completion of this merger,
obtaining regulatory approvals and other closing conditions. It is expected
that the merger will be consummated during the third quarter of 2000. The
accompanying financial statements do not include any adjustments related to
the merger and divestitures.
Ratio:
The ratio of earnings to fixed charges is as follows:
6 Months ended
June 30, Year Ended
2000 1999 1999 1998 1997 1996 1995
1.25 3.06 2.04 1.83 2.32 3.63 3.32
The ratio of earnings to fixed charges has been computed on a total
enterprise basis. Earnings represent income from continuing operations
before income taxes less equity in earnings (loss) of nonconsolidated
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.
Risks Regarding Forward Looking Statements
Except for the historical information, this report contains various
forward-looking statements which represent the Companys 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 Companys financial
performance. These variables include economic conditions, the ability of
the Company to integrate the operations of Jacor, Dame, Dauphin, Ackerley
and SFX the ability of the Company to consummate the pending merger with
AMFM, 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
Companys SEC filings. Actual results in the future could differ materially
from those described in the forward-looking statements.
<PAGE>
Item 3. Quantitative and Qualitative Disclosures About Market Risk.
Interest Rate Risk
At June 30, 2000, approximately 47.8% of the Companys long-term debt,
including fixed rate debt on which the Company has entered interest rate
swap agreements, bears interest at variable rates. Accordingly, the
Companys 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 2000
average interest rate under these borrowings, it is estimated that the
Companys first six months of 2000 interest expense would have changed by
$51.5 million and that the Companys first six months of 2000 net income
would have changed by $30.9 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.
The Company currently hedges a portion of its outstanding debt with
interest rate swap agreements that effectively fix the interest at rates
from 4.5% to 8.0% on $68.7 million of its current borrowings. These
agreements expire from October 2000 to December 2000. The fair value of
these agreements at June 30, 2000 and settlements of interest during the
first six months of 2000 were not material.
Equity Price Risk
The carrying value of the Companys 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, 2000 by $178.5 million and would change
comprehensive income by $116.0 million.
Foreign Currency
The Company has operations in 42 countries throughout Europe, Asia and
South America. All foreign operations are measured in their local
by factors such as changes in foreign currency exchange rates or weak
economic conditions in the foreign markets in which the Company has
operations. To mitigate a portion of the exposure to risk of currency
fluctuations throughout Europe and Asia to the British pound, the Company
has a natural hedge through borrowings in some other currencies.
Additionally, the Company has a natural hedge through borrowings in Euros
to mitigate a portion of the exposure to risk of currency fluctuations in
Western Europe. This hedge position is reviewed monthly. The Company
maintains no derivative instruments to mitigate the exposure to translation
and/or transaction risk. However, this does not preclude the adoption of
specific hedging strategies in the future. The Companys foreign operations
reported a loss of $27.5 million for the first six months of 2000. It is
estimated that a 5% change in the value of the U.S. dollar to the British
pound would change net loss for the first six months of 2000 by $1.4
million.
The Companys earnings are also affected by fluctuations in the value of
the U.S. dollar as compared to foreign currencies as a result of our
investments in Australia, New Zealand and Mexico, all 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 these foreign
currencies at June 30, 2000 would change net income for the first six
months of 2000 by approximately $223,500. This analysis does not consider
the implications that such fluctuations could have on the overall economic
activity that could exist in such an environment in the U.S. or the foreign
countries or on the results of operations of these foreign entities.
<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 April 27,
2000. The shareholders approved the issuance of shares of the Companys
common stock in the merger with AMFM. The shareholders approved the
election of Robert L. Crandall, Thomas O. Hicks, Vernon E. Jordan, Jr.,
Michael J. Levitt and Perry J. Lewis as directors to fill five additional
seats to be created on the Companys board upon completion of the merger
with AMFM. L. Lowry Mays, Karl Eller, Mark P. Mays, Randall T. 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
approved the adoption of the Clear Channel Communications, Inc. Annual
Incentive Plan. The shareholders approved an amendment to the Companys
Articles of Incorporation increasing the number of authorized shares of
Common Stock from 900 million to 1.5 billion. The shareholders approved the
selection of Ernst & Young LLP as independent auditors for the year ending
December 31, 2000.
The results of voting at the annual meeting of the shareholders were as follows:
Proposal No. 1
(approval of issuance of common shares in merger with AMFM)
For Withhold/Against Exceptions/Abstain
277,353,732 951,517 1,191,234
Proposal No. 2
(Election of Five New Directors)
Nominee For Withheld
Robert L. Crandall 256,643,491 22,852,992
Thomas O. Hicks 256,677,508 22,818,975
Vernon E. Jordan Jr. 256,466,048 23,030,435
Michael J. Levitt 256,655,761 22,840,722
Perry J. Lewis 256,660,843 22,835,640
Proposal No. 3
(Election of Directors)
Nominee For Withheld
L. Lowry Mays 256,670,995 22,825,488
Karl Eller 256,649,375 22,847,108
Mark P. Mays 256,659,690 22,836,793
Randall T. Mays 256,651,140 22,845,343
Alan D. Feld 249,589,409 29,907,074
B.J. McCombs 256,662,079 22,834,404
Theodore H. Strauss 257,110,768 22,385,715
John H. Williams 257,124,257 22,372,226
Proposal No. 4
(Adoption of the Incentive Plan)
For Withhold/Against Exceptions/Abstain
295,868,990 5,572,267 1,122,691
Proposal No. 5
(Amendment of the Articles of Incorporation to Increase Common Stock
to 1.5 billion)
For Withhold/Against Exceptions/Abstain
287,342,604 14,579,626 641,918
Proposal No. 6 (Selection of Ernst & Young LLP as Independent Auditors for
the year ending December 31, 2000)
For Withhold/Against Exceptions/Abstain
301,888,681 57,364 618,103
<PAGE>
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits. See Exhibit Index on Page 20
(b) Reports on Form 8-K
Filing Date Items Reported Financial Statements
Reported
8-K 5/11/00 Item 5. Announce None
merger of Jacor Com-
munications, Inc. into
Clear Channel Com-
munications, Inc.
8-K 6/9/00 Item 5. Announce None
the intent to issue debt
denominated in Euros
8-K 6/14/00 Item 5. Make public December 31, 1999 for
the financial information AMFM Inc. March 31,
of pending merger targets, 2000 for AMFM Inc.
AMFM Inc. and SFX December 31, 1999 for
Entertainment, Inc.
<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.
August 11, 2000 /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 8, 1998, as amended on
November 11, 1998, among Clear Channel Communications, Inc., CCU
Merger Sub, Inc. and Jacor Communications, Inc. (incorporated by
reference to Annex A to the Companys Registration Statement on
Form S-4 (Reg. No. 333-72839) dated February 23, 1999).
2.2 Agreement and Plan of Merger dated as of October 2, 1999, among Clear
Channel, CCU Merger Sub, Inc. and AMFM Inc. (incorporated by reference
to the exhibits of the Companys Current Report on Form 8-K filed
October 5, 1999.)
2.3 Agreement and Plan of Merger dated as of February 28, 2000, among Clear
Channel, CCU II Merger Sub, Inc. and SFX Entertainment, Inc.
(incorporated by reference to the exhibits of the Companys Current
Report on Form 8-K filed February 29, 2000.)
3.1 Current Articles of Incorporation of the Company (incorporated by
reference to the exhibits of the Companys 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 Companys Registration Statement on
Form S-3 (Reg. No. 333-33371) dated September 9, 1997).
3.3 Amendment to the Companys Articles of Incorporation (incorporated by
reference to the exhibits to the Companys Quarterly Report on Form
10-Q for the quarter ended September 30, 1998).
3.4 Second Amendment to the Companys Articles of Incorporation
(incorporated by reference to the exhibits to the Companys Quarterly
Report on Form 10-Q for the quarter ended March 31, 1999)
3.5 Third Amendment to the Companys Articles of Incorporation.
(incorporated by reference to the exhibits to the Companys
Quarterly Report on Form 10-Q for the quarter ended March 31, 2000)
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
Companys 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 Companys Quarterly Report on Form
10-Q for the quarter ended September 30, 1997).
4.3 First Supplemental Indenture dated March 30, 1998 to Senior Indenture
dated October 1, 1997, by and between the Company and The Bank of New
York, as Trustee (incorporated by reference to the exhibits to the
Companys Quarterly Report on Form 10-Q for the quarter ended March 31,
1998).
4.4 Second Supplemental Indenture dated June 16, 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 exhibits to the Companys Current Report on Form 8-K dated August
27, 1998).
4.5 Third Supplemental Indenture dated June 16, 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 exhibits to the Companys Current Report on Form 8-K dated August
27, 1998).
4.6 Fourth Supplement Indenture dated November 24, 1999 to Senior Indenture
dated October 1, 1997, by the between Clear Channel and The Bank of New
York as Trustee (incorporated by reference to the exhibits of the
Companys Annual Report on Form 10-K for the year ended December 31,
1999).
4.7 Fifth Supplemental Indenture dated June 21, 2000, 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 exhibits of Clear Channels registration statement on
Form S-3 (Reg. No. 333-42028) dated July 21, 2000).
4.8 Sixth Supplemental Indenture dated June 21, 2000, 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 exhibits of Clear Channels registration statement on
Form S-3 (Reg. No. 333-42028) dated July 21, 2000).
4.9 Seventh Supplemental Indenture dated July 7, 2000, 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 exhibits of Clear Channels
registration statement on Form S-3 (Reg. No. 333-42028) dated July
21, 2000).
4.10 Fourth Amended and Restated Credit Agreement by and among Clear Channel
Communications, Inc., Bank of America, N.A., as administrative agent,
Fleet National Bank, as documentation agent, the Bank of Montreal and
Toronto Dominion (Texas), Inc., as co-syndication agents, and
certain other lenders dated June 15, 2000 (incorporated by reference
to the exhibits of Clear Channels registration statement on Form
S-3 (Reg. No. 333-42028) dated July 21, 2000).
11 Statement re: Computation of Earnings Per Share.
12 Statement re: Computation of Ratios.
27.1 Financial Data Schedule at June 30, 2000
27.2 Financial Data Schedule at June 30, 1999 (incorporated by reference to
exhibit 27.1 of the Companys Quarterly Report on Form 10-Q for the
quarter ended June 30, 1999).
