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FORM 10-Q/A
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 September 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.
<TABLE>
<CAPTION>
Class Outstanding at November 10, 2000
---------------------------- --------------------------------
<S> <C>
Common Stock, $.10 par value 584,757,113
</TABLE>
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The Company is filing this amendment to its Quarterly Report on Form 10-Q dated
November 14, 2000, in order to correct certain typographical errors present in
Part I, Item 2 "Management's Discussion and Analysis of Financial Condition and
Results of Operations." Following is the complete text, as amended, of Part I,
Item 2 "Management's Discussion and Analysis of Financial Condition and Results
of Operations."
PART I
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
RESULTS OF OPERATIONS
Comparison of Three and Nine Months Ended September 30, 2000 to Three and Nine
Months Ended September 30, 1999.
(In thousands of dollars, except per share data)
<TABLE>
<CAPTION>
Nine Months Three Months
Ended September 30, As-Reported Pro Forma Ended September 30, As-Reported Pro Forma
------------------------ % Increase % Increase ------------------- % Increase % Increase
Consolidated 2000 1999 (Decrease) (Decrease) 2000 1999 (Decrease) (Decrease)
------------ ----------- ----------- ---------- ----------- ----------- --------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net revenue $ 3,325,133 $ 1,790,635 85.7% 25.9% $ 1,576,719 $ 796,157 98.0% 23.1%
Operating expenses 2,144,974 1,097,171 95.5% 28.3% 1,062,284 495,800 114.3% 29.9%
Depreciation and
amortization 820,800 473,654 73.3% 10.2% 372,059 208,627 78.3% 3.8%
Operating income 264,346 175,225 50.9% 60.0% 99,808 75,476 32.2% 1,360.6%
Interest expense, net 230,795 126,233 82.8% 105,335 50,962 106.7%
Net income (loss) 440,760 95,288 362.6% 448,927 1,523 29,376.5%
Net income (loss) per share:
Basic $ 1.19 $ .31 279.9% $ 1.04 $ .00 n/a
Diluted $ 1.13 $ .31 264.4% $ .96 $ .00 n/a
</TABLE>
The majority of the growth in the "as-reported" net revenue and operating
expenses for the three and nine months ended September 30, 2000 was due to the
acquisitions of AMFM Inc. ("AMFM") on August 30, 2000, SFX Entertainment, Inc.
("SFX") on August 1, 2000, Donrey Media Group ("Donrey") on September 1, 2000,
Ackerley's South Florida outdoor advertising division ("Ackerley") on January 5,
2000, Jacor Communications, Inc. ("Jacor") in May 1999, and Dame Media, Inc.,
("Dame") and Dauphin OTA, ("Dauphin") in July 1999. In addition, 55 radio
stations and approximately 65,000 outdoor display faces were purchased, in
multiple transactions, during the first nine months of 2000, the effects of
which, individually and in the aggregate, were not material to the Company's
consolidated financial position or results of operations. Corporate expenses
increased 106% for the first nine months of 2000 versus the first nine months of
1999 as a result of the integration of corporate operations of the Company and
the aforementioned acquisitions.
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. Interest expense
increased as a result of greater average borrowing levels related to the
aforementioned acquisitions and higher average borrowing rates. During the nine
months ended September 30, 2000, approximately 35% of the Company's debt had a
floating interest rate based on LIBOR. LIBOR rates increased 25% from an average
of 5.18% in the first nine months of 1999 to an average 6.48% during the first
nine months 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
168% primarily due to the improved operating results from our equity investments
in Mexico, New Zealand and Australia. The majority of the increase in pre-tax
income is due to a one-time gain of $805.2 million included in the three and
nine-month periods ended September 30, 2000, which related to the sale of
stations associated with the governmental directives regarding the AMFM merger.
Income tax expense increased due to the increase in pre-tax income. The
effective tax rate decreased from 55% in the first nine months of 1999 to 49% in
the first nine months of this year resulting from the one-time gain on sale of
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stations offset by the increased nondeductible amortization expenses associated
with the aforementioned acquisitions.
The pro Forma presentation referred to above assumes the acquisitions of and/or
mergers with AMFM, SFX, Donrey, Ackerley, Jacor, Dauphin and Dame occurred on
January 1, 1999. Pro Forma net revenue increased due to improved advertising
rates and improved sell-out rates in the radio segment. In addition, increased
advertising rates and other less significant acquisitions within the outdoor
segment contributed to the increase in pro forma net revenue. An increase in
music tour dates within the entertainment 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
and expenses associated with the additional music tour dates. The majority of
the increase in pro forma operating income for the three and nine month periods
ended September 30, 2000 was due to improved operations during the period
primarily in the radio and outdoor segments.
LIQUIDITY AND CAPITAL RESOURCES
The major sources of capital for the Company have been cash flow from
operations, advances on its revolving lines of credit, and funds provided by
various stock, convertible and other bond offerings. As of September 30, 2000
and December 31, 1999, the Company had the following debt outstanding:
<TABLE>
<CAPTION>
(In millions of dollars)
September 30, 2000 December 31, 1999
------------------ -----------------
<S> <C> <C>
Credit facilities - domestic $ 1,974.7 $ 1,227.7
Credit facility - international 103.2 120.4
Senior convertible notes 1,575.0 1,575.0
Liquid Yield Option Notes 495.4 490.8
Long-term bonds 6,461.5 1,171.4
Other borrowings 45.9 29.4
------------ ------------
Total $ 10,655.7 $ 4,614.7
============ ============
</TABLE>
In addition, the Company had $384.8 million in unrestricted cash and cash
equivalents on hand at September 30, 2000.
On April 27, 2000, shareholders of the Company approved an increase to the
number of the Company's shares of common stock authorized for issuance 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 Company's three Delaware statutory business trusts and
guarantees of such preferred securities by the Company. In September 2000, the
Company issued $1.5 billion of debt securities registered under the shelf
registration statement, leaving $1.5 billion available for future issuance.
DOMESTIC CREDIT FACILITIES:
The Company has a $1.95 billion revolving credit facility, of which at September
30, 2000, $1.8 billion was outstanding and $135.0 million was available for
future borrowings. The credit facility began reducing on September 30, 2000,
with quarterly repayment of the outstanding principal balance to continue over
the next five years, with the entire balance to be repaid by the last business
day of June 2005. During the first nine months of the year, the Company made
principal payments on this credit facility totaling $3.4 billion and drew down
$4.4 billion.
The Company had a 364-day multi-currency revolving credit facility for $1.0
billion. On August 30, 2000, in conjunction with the closing of a new $3.0
billion credit facility, the Company repaid all outstanding borrowings and
terminated the facility. During the first eight months of the year, the Company
made principal payments on the credit facility totaling $1.4 billion and drew
down $1.0 billion.
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The Company entered into a $3.0 billion credit facility on August 30, 2000,
concurrent with the closing of the AMFM merger. $1.5 billion of this facility is
a five-year multi-currency revolving credit facility and $1.5 billion is a
364-day revolving credit facility, which the Company has the option upon
maturity to convert into a term loan with a five-year maturity. At September 30,
2000, the outstanding balance was 127.2 million British pounds, or approximately
$187.7 million, and $2.8 billion was available for future borrowings under the
$3.0 billion credit facility.
INTERNATIONAL CREDIT FACILITY:
The Company has an 88.0 million British pounds, or approximately $129.8 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 September
30, 2000, approximately $26.6 million was available for future borrowings and
$103.2 million was outstanding under this credit facility. This credit facility
converted into a reducing revolving facility on January 10, 2000, with an
initial payment of 12.0 million British pounds made in January 2000. An
additional payment of 12.0 million British pounds is due on January 10, 2001.
The credit facility expires on January 10, 2002. At September 30, 2000, interest
rates varied from 4.50% to 7.85%.
LIQUID YIELD OPTION NOTES:
The Company assumed Liquid Yield Option Notes ("LYONs") as a part of the merger
with Jacor. The Company assumed 4.75% LYONs due 2018 and 5.50% 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 Company's 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
September 30, 2000 was $495.4 million.
LONG-TERM BONDS:
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. Interest is payable on June 15 and December 15 on the 7.875% Notes and
is payable quarterly on the Floating Rate Notes. 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
Company's credit facilities.
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 Company's
credit facilities.
On September 7, 2000, the Company completed a debt offering of $750.0 million
7.25% Senior Notes due September 15, 2003 and $750.0 million 7.65% Senior Notes
due on September 15, 2010. Interest is payable on both series of notes on March
15 and September 15 of each year. On September 7, 2000, the Company entered into
an interest rate swap agreement that effectively floats the interest based upon
LIBOR for $750 million of the 7.25% Senior Notes. The net proceeds to the
Company of approximately $1.5 billion were used to reduce the outstanding
balance of the Company's credit facilities.
JACOR 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
Company's 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 $1.0 million face value of the notes
remain outstanding.
AMFM LONG-TERM BONDS:
The Company assumed long-tern bonds with a face value of $2.8 billion in the
AMFM merger. On September 29, 2000, the Company redeemed all of the outstanding
9% Senior Subordinated Notes due 2008, originally issued by
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Chancellor Media Corporation or one of its subsidiaries, for $829.0 million
subject to change of control provisions in the indentures. Subsequent to the end
of the third quarter, the Company redeemed, also subject to change of control
provisions in the indentures, all of the outstanding 9.25% Senior Subordinated
Notes due 2007, originally issued by Capstar Radio Broadcasting Partners, the
12% Exchange Debentures due 2009, originally issued by Capstar Broadcasting
Partners, Inc. and the 12.75% Senior Discount Notes due 2009, originally issued
by Capstar Broadcasting Partners, Inc., for a total of $508.5 million.
On October 6, 2000, the Company made change of control payments of $231.4
million pursuant to its offers to purchase due to a change of control on the
following series of AMFM debt: 8% Senior Notes due 2008, 8.125% Senior
Subordinated Notes due 2007 and 8.75% Senior Subordinated Notes due 2007,
originally issued by Chancellor Media Corporation or one of its subsidiaries, as
well as the 12.625% Exchange Debentures due 2006, originally issued by SFX
Broadcasting (AMFM Operating, Inc.).
Chancellor Media Corporation, Capstar Radio Broadcasting Partners, Capstar
Broadcasting Partners, Inc. and AMFM Operating Inc., or their successors are all
indirect wholly-owned subsidiaries of the Company. The redemption and change of
control payments were financed with borrowings under the Company's credit
facilities.
SFX LONG-TERM BONDS:
The Company assumed long-term bonds with a face value of $550.0 million in the
SFX merger. On October 10, 2000, SFX Entertainment, Inc., a wholly-owned
subsidiary of the Company launched a tender offer for any and all of its 9.125%
Senior Subordinated Notes due 2008. An agent acting on the Company's behalf
redeemed notes with a value of approximately $598.1 million. Cash settlement of
the amount due to the agent was completed on November 13, 2000. After
redemption, approximately $6.0 million face value of the notes remain
outstanding. The tender offer was financed with borrowings under the Company's
credit facilities.
FUTURE CONTINGENT PAYMENTS:
Certain of the agreements relating to SFX acquisitions provide for purchase
price adjustments and other future contingent payments based on the financial
performance of the acquired companies. The Company will continue to accrue
additional amounts related to such contingent payments if and when it is
determinable beyond a reasonable doubt that the applicable financial performance
targets will be met.
USES OF FUNDS AND CAPITAL RESOURCES
AMFM MERGER
On August 30, 2000, the Company closed the merger with AMFM Inc. ("AMFM").
Pursuant to the terms of the merger agreement, each share of AMFM common stock
was exchanged for 0.94 shares of the Company's common stock. Approximately 205.4
million shares of the Company's stock were issued in the AMFM merger, valuing
the merger, based on average share value at the signing of the merger agreement,
at $15.9 billion plus the assumption of AMFM's outstanding debt of $3.5 billion.
Additionally, the Company assumed options and common stock warrants with a fair
value of 1.3 billion, which are convertible, subject to applicable vesting, into
approximately 25.5 million shares of the Company's common stock. The Company
refinanced $540.0 million of AMFM's long-term debt at the closing of the merger
using the Company's credit facility. This merger has been accounted for as a
purchase with resulting goodwill of approximately $7.1 billion, which is being
amortized over 25 years on a straight-line basis. This purchase price allocation
is preliminary pending completion of appraisals and other fair value analysis of
assets and liabilities. The results of operations of AMFM have been included in
the Company's financial statements beginning August 30, 2000.
SFX MERGER:
On August 1, 2000, the Company consummated its merger with SFX Entertainment,
Inc. ("SFX"). Pursuant to the terms of the merger agreement, each share of SFX
Class A common stock was exchanged for 0.6 shares of the Company's common stock
and each share of SFX Class B common stock was exchanged for one share of the
Company's common stock. Approximately, 39.1 million shares of the Company's
common stock were issued in the SFX merger. Based on average share value at the
signing of the merger agreement, this merger is valued at $2.9 billion plus the
assumption of SFX's outstanding debt of $1.5 billion. Additionally, the Company
assumed all options and warrants with a fair value of $211.8 million, which are
exercisable for approximately 5.6 million shares
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of the Company's common stock. The Company refinanced $815.8 million of SFX's
long-term debt at the closing of the merger using the Company's credit facility.
This merger has been accounted for as a purchase with resulting goodwill of
approximately $4.1 billion, which is being amortized over 20 years on a
straight-line basis. This purchase price allocation is preliminary pending
completion of appraisals and other fair value analysis of assets and
liabilities. The results of operations of SFX have been included in the
Company's financial statements beginning August 1, 2000.
A number of lawsuits were filed by holders of SFX Class A common stock alleging,
among other things, that the difference in consideration for the Class A and
Class B shares constituted unfair consideration to the Class B holders and that
the SFX board breached its fiduciary duties and that the Company aided and
abetted the actions of the SFX board. On September 28, 2000, the Company issued
396,943 shares of its common stock, valued at $29.3 million, as settlement of
these lawsuits and has included the value as part of the purchase price.
OUTDOOR ACQUISITION:
On January 5, 2000, the Company closed the acquisition of Ackerley for
approximately $300.2 million in cash. The acquisition adds approximately 3,500
display faces and enhances the Company's position in Florida. On September 1,
2000, the Company purchased Donrey for $381.5 million in cash. The acquisition
adds outdoor assets to domestic markets where the Company operates other media.
STOCK REPURCHASE:
On October 5, 2000, the Board of Directors authorized the repurchase of up to $1
billion of the Company's common stock.
OTHER:
During the first nine months of 2000, in addition to the acquisitions mentioned
above, the Company acquired approximately 10,000 additional outdoor faces in 39
domestic markets and in malls throughout the U.S. and 55,000 additional display
faces in 23 international markets for a total of $773.3 million in cash. The
Company also acquired 55 radio stations in 17 markets for a total of $194.6
million in cash during the first nine months of 2000. In addition, the Company
acquired a software company for $1.5 million in cash, which is developing
broadcasting software.
During the first nine months of 2000, the Company had capital expenditures of
$320.4 million as follows by segment:
<TABLE>
<S> <C>
Radio $122.7
Outdoor $166.4
Live Entertainment $ 19.1
Other $ 12.2
</TABLE>
Capital expenditures included $114.3 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 $102.0
million.
Future acquisitions of broadcasting stations, outdoor advertising facilities,
other media-related properties and live entertainment venues affected in
connection with the implementation of the Company's 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.
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RATIO:
The ratio of earnings to fixed charges is as follows:
<TABLE>
<CAPTION>
Nine Months ended
September 30, Year Ended
------------------ ----------------------------------------------
2000 1999 1999 1998 1997 1996 1995
---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
3.58 2.32 2.04 1.83 2.32 3.63 3.32
</TABLE>
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 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 in the U.S. and in other countries where the Company
currently does business, the ability of the Company to integrate the operations
of Jacor, Dame, Dauphin, Ackerley, SFX, AMFM and Donrey, 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, exchange
rates and currency values, capital expenditure requirements, interest rates,
taxes, access to capital markets, the effect of leverage on the Company's
financial position and earnings 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.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this amendment to be signed on its behalf by the
undersigned thereunto duly authorized.
CLEAR CHANNEL COMMUNICATIONS, INC.
November 16, 2000 /s/ Herbert W. Hill, Jr.
Herbert W. Hill, Jr.
Senior Vice President and
Chief Accounting Officer
