<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------
FORM 8-K/A
Amendment No. 1
CURRENT REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
DATE OF REPORT (DATE OF EARLIEST EVENT REPORTED): JULY 1, 1999
AMFM INC.
(Exact name of Registrant as specified in charter)
DELAWARE 000-21570 75-2247099
(State or other jurisdiction (Commission file number) (I.R.S. employer
of incorporation) identification no.)
1845 WOODALL RODGERS FREEWAY, SUITE 1300
DALLAS, TEXAS 75201
(Address of principal executive offices)
Registrants' telephone number, including area code: (214) 922-8700
----------
<PAGE> 2
This Amendment to the Current Report on Form 8-K dated July 1, 1999 and filed on
July 15, 1999 by AMFM Inc. (formerly Chancellor Media Corporation) is submitted
to provide pro forma financial information for the July 13, 1999 merger between
AMFM Inc. and Capstar Broadcasting Corporation and the July 1, 1999 acquisition
of KKFR-FM and KFYI-AM in Phoenix from The Broadcast Group, Inc.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS.
7(b) Pro Forma Financial Information
Pro forma information required pursuant to Article 11 of
Regulation S-X as of March 31, 1999 and for the year ended
December 31, 1998 and the three months ended March 31, 1999 is
filed herewith beginning on page P-1.
2
<PAGE> 3
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on its behalf by
the undersigned hereunto duly authorized.
AMFM Inc.
Date: August 2, 1999 By: /s/ W. SCHUYLER HANSEN
-------------------------------------
W. Schuyler Hansen
Senior Vice President and
Chief Accounting Officer
3
<PAGE> 4
PRO FORMA FINANCIAL INFORMATION
The unaudited pro forma financial information of AMFM Inc. (together with
its subsidiaries, the "Company") reflects the combination of consolidated
historical financial data of the Company and each of the significant radio
transactions completed by the Company during 1998 and 1999. The unaudited pro
forma balance sheet data at March 31, 1999 presents adjustments for the
significant transactions completed subsequent to March 31, 1999 as if each such
transaction had occurred at March 31, 1999. The unaudited pro forma statement of
operations data for the twelve months ended December 31, 1998 and for the three
months ended March 31, 1999 excludes extraordinary items and presents
adjustments for (a) the merger between the Company and Capstar Broadcasting
Corporation (the "Capstar Merger"), including the effect of significant
transactions completed by Capstar Broadcasting Corporation ("Capstar") during
1998 and 1999, (b) the acquisition of KKFR-FM and KFYI-AM in Phoenix from The
Broadcast Group, Inc. (the "Phoenix Acquisition") and (c) the disposition of
WMVP-AM in Chicago to ABC, Inc., as if each such transaction occurred on January
1, 1998. Pro forma adjustments relating to the acquisitions of Martin Media
L.P., Martin & MacFarlane, Inc. and certain affiliated companies and the outdoor
advertising division of Whiteco Industries, Inc. have not been included in the
pro forma financial statements due to the pending sale of the Company's outdoor
advertising division.
The purchase method of accounting has been used in the preparation of the
unaudited pro forma financial information. Under this method of accounting, the
aggregate purchase price is allocated to assets acquired and liabilities assumed
based on their estimated fair values. For purposes of the unaudited pro forma
financial information, the purchase prices of the assets acquired have been
allocated based primarily on publicly available information or information
furnished by management of the acquired or to be acquired assets. The final
allocation of the respective purchase prices of the assets acquired are
determined a reasonable time after consummation of such transactions and are
based on a complete evaluation of the assets acquired and liabilities assumed.
Accordingly, the information presented herein may differ from the final purchase
price allocation; however, such allocations are not expected to differ
materially from the preliminary amounts.
In the opinion of the Company's management, all adjustments have been made
that are necessary to present fairly the pro forma data.
The unaudited pro forma financial information should be read in conjunction
with the respective financial statements and related notes thereto of the
Company which have previously been reported. The unaudited pro forma financial
information is presented for illustrative purposes only and is not necessarily
indicative of the results of operations or financial position that would have
been achieved had the transactions reflected therein been consummated as of the
dates indicated, or of the results of operations or financial positions for any
future periods or dates.
P-1
<PAGE> 5
AMFM INC.
UNAUDITED PRO FORMA BALANCE SHEET
AT MARCH 31, 1999
(IN THOUSANDS)
<TABLE>
<CAPTION>
COMPANY AS
ADJUSTED
CAPSTAR AS PRO FORMA PRO FORMA FOR THE
ADJUSTED FOR ADJUSTMENTS ADJUSTMENTS CAPSTAR MERGER
COMPANY THE COMPLETED FOR THE FOR THE AND THE
HISTORICAL CAPSTAR CAPSTAR PHOENIX PHOENIX
AT 3/31/99 TRANSACTIONS (1) MERGER ACQUISITION(4) ACQUISITION
---------- ---------------- ----------- -------------- --------------
<S> <C> <C> <C> <C> <C>
ASSETS:
Current assets............................... $ 388,262 $ 134,842 $ -- $ -- $ 523,104
Property and equipment, net.................. 1,395,898 263,710 -- 1,750 1,661,358
Intangible assets, net....................... 5,294,161 4,414,003 1,651,663 (2) 88,250 11,448,077
Other assets................................. 369,269 45,337 (150,000)(3) -- 264,606
---------- ----------- ----------- -------- -----------
Total assets......................... $7,447,590 $ 4,857,892 $ 1,501,663 $ 90,000 $13,897,145
========== =========== =========== ======== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY:
Current liabilities:
Accounts payable and accrued expenses........ $ 275,865 $ 90,387 $ -- $ -- $ 366,252
Current portion of long-term debt............ -- 39,891 -- -- 39,891
--------- ----------- ----------- -------- -----------
Total current liabilities............ 275,865 130,278 -- -- 406,143
Long-term debt, excluding current portion.... 4,378,000 1,985,878 73,588 (2) 90,000 6,377,466
(150,000)(3)
Deferred tax liabilities..................... 455,903 1,183,136 336,169 (2) -- 1,975,208
Other liabilities............................ 52,518 (848) -- -- 51,670
---------- ----------- ----------- -------- -----------
Total liabilities.................... 5,162,286 3,298,444 259,757 90,000 8,810,487
Redeemable preferred stock................... -- 269,267 35,962 (2) -- 305,229
STOCKHOLDERS' EQUITY:
Preferred stock.............................. 409,500 -- -- -- 409,500
Common stock................................. 1,431 1,076 (543)(2) -- 1,964
Additional paid-in capital................... 2,262,916 1,517,365 980,508 (2) -- 4,760,789
Stock subscriptions receivable............... -- (2,773) -- -- (2,773)
Unearned compensation........................ -- (4,397) 4,397 (2) -- --
Accumulated deficit.......................... (388,543) (221,090) 221,582 (2) -- (388,051)
---------- ----------- ----------- -------- -----------
Total stockholders' equity........... 2,285,304 1,290,181 1,205,944 -- 4,781,429
---------- ----------- ----------- -------- -----------
Total liabilities and stockholders'
equity............................. $7,447,590 $ 4,857,892 $ 1,501,663 $ 90,000 $13,897,145
========== =========== =========== ======== ===========
<CAPTION>
PRO FORMA
ADJUSTMENTS
FOR OTHER
COMPLETED COMPANY
TRANSACTION(5) PRO FORMA
-------------- -----------
<S> <C> <C>
ASSETS:
Current assets............................... $ -- $ 523,104
Property and equipment, net.................. (2,067) 1,659,291
Intangible assets, net....................... (4,467) 11,443,610
Other assets................................. -- 264,606
---------- -----------
Total assets......................... $ (6,534) $13,890,611
========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY:
Current liabilities:
Accounts payable and accrued expenses........ $ -- $ 366,252
Current portion of long-term debt............ -- 39,891
---------- -----------
Total current liabilities............ -- 406,143
Long-term debt, excluding current portion.... (21,000) 6,356,466
Deferred tax liabilities..................... 5,063 1,980,271
Other liabilities............................ -- 51,670
---------- -----------
Total liabilities.................... (15,937) 8,794,550
Redeemable preferred stock................... -- 305,229
STOCKHOLDERS' EQUITY:
Preferred stock.............................. -- 409,500
Common stock................................. -- 1,964
Additional paid-in capital................... -- 4,760,789
Stock subscriptions receivable............... -- (2,773)
Unearned compensation........................ -- --
Accumulated deficit.......................... 9,403 (378,648)
---------- -----------
Total stockholders' equity........... 9,403 4,790,832
---------- -----------
Total liabilities and stockholders'
equity............................. $ (6,534) $13,890,611
========== ===========
</TABLE>
See accompanying notes to Unaudited Pro Forma Financial Information
P-2
<PAGE> 6
AMFM INC.
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1998
(IN THOUSANDS, EXCEPT FOR PER SHARE DATA)
<TABLE>
<CAPTION>
CAPSTAR AS PRO FORMA PRO FORMA
ADJUSTED FOR ADJUSTMENTS THE ADJUSTMENTS
THE COMPLETED FOR THE BROADCAST FOR THE
YEAR ENDED COMPANY CAPSTAR CAPSTAR GROUP, INC. PHOENIX
DECEMBER 31, 1998 HISTORICAL(6) TRANSACTIONS(7) MERGER HISTORICAL ACQUISITION
- ----------------- ------------ --------------- ----------- --------------- ------------
<S> <C> <C> <C> <C> <C>
Gross revenues ...................... $ 1,440,357 $ 723,889 $ (56,261)(8) $ 13,101 $ (1,049)(13)
Less: agency commissions ............ (166,501) (66,173) -- (1,329) --
------------ --------------- ----------- --------------- ------------
Net revenues ........................ 1,273,856 657,716 (56,261) 11,772 (1,049)
Operating expenses excluding
depreciation and amortization ...... 682,061 378,805 (4,400)(8) 6,149 --
Depreciation and amortization ....... 446,338 139,265 (49,425)(8) 188 5,780(14)
288,055 (9)
Corporate general and
administrative ..................... 36,722 28,995 -- -- --
Stock option compensation............ -- 21,401 -- -- --
Merger, nonrecurring and systems
development expense ................ 63,661 20,433 (8,000)(10) -- --
------------ --------------- ----------- --------------- ------------
Operating income (loss) ............. 45,074 68,817 (282,491) 5,435 (6,829)
Interest expense .................... 217,136 177,462 (10,600)(8) 332 5,968(15)
1,750 (11)
Interest income ..................... (15,650) (3,842) 10,600 (8) -- --
Gain on disposition of assets ....... (123,845) -- -- -- --
Gain on disposition of
representation contracts ........... (32,198) -- -- -- --
Loss on investment in limited
liability companies................. -- 28,565 -- -- --
Other (income) expense .............. (3,221) 1,521 -- -- --
------------ --------------- ----------- --------------- ------------
Other (income) expense, net ......... 42,222 203,706 1,750 332 5,968
------------ --------------- ----------- --------------- ------------
Income (loss) before income
taxes .............................. 2,852 (134,889) (284,241) 5,103 (12,797)
Income tax expense (benefit) ........ 33,751 (39,109) (99,484)(12) 1,850 (4,543)(16)
Dividends and accretion on
preferred stock of subsidiary ...... 17,601 25,586 -- -- --
------------ --------------- ----------- --------------- ------------
Income (loss) ....................... (48,500) (121,366) (184,757) 3,253 (8,254)
Preferred stock dividends ........... 25,670 -- -- -- --
------------ --------------- ----------- --------------- ------------
Income (loss) attributable to common
stockholders ....................... $ (74,170) $ (121,366) $ (184,757) $ 3,253 $ (8,254)
============ =============== =========== =============== ============
Basic and diluted loss per common
share .............................. $ (0.54)
============
Weighted average common shares
outstanding(17)..................... 137,979 53,324
============ ===========
</TABLE>
<TABLE>
<CAPTION>
COMPANY AS
ADJUSTED FOR
THE CAPSTAR
MERGER AND OTHER
YEAR ENDED THE PHOENIX COMPLETED COMPANY
DECEMBER 31, 1998 ACQUISITION TRANSACTION(17) PRO FORMA
- ----------------- ------------ ---------------- ------------
<S> <C> <C> <C>
Gross revenues ...................... $ 2,120,037 $ (11,530) $ 2,108,507
Less: agency commissions ............ (234,003) 1,221 (232,782)
------------ ------------ ------------
Net revenues ........................ 1,886,034 (10,309) 1,875,725
Operating expenses excluding
depreciation and amortization ...... 1,062,615 (13,271) 1,049,344
Depreciation and amortization ....... 830,201 (592) 829,609
Corporate general and
administrative ..................... 65,717 -- 65,717
Stock option compensation............ 21,401 -- 21,401
Merger, nonrecurring and systems
development expense ................ 76,094 -- 76,094
------------ ------------ ------------
Operating income (loss) ............. (169,994) 3,554 (166,440)
Interest expense .................... 392,048 (1,470) 390,578
Interest income ..................... (8,892) -- (8,892)
Gain on disposition of assets ....... (123,845) -- (123,845)
Gain on disposition of
representation contracts ........... (32,198) -- (32,198)
Loss on investment in limited
liability companies................. 28,565 -- 28,565
Other (income) expense .............. (1,700) -- (1,700)
------------ ------------ ------------
Other (income) expense, net ......... 253,978 (1,470) 252,508
------------ ------------ ------------
Income (loss) before income
taxes .............................. (423,972) 5,024 (418,948)
Income tax expense (benefit) ........ (107,535) 1,758 (105,777)
Dividends and accretion on
preferred stock of subsidiary ...... 43,187 -- 43,187
------------ ------------ ------------
Income (loss) ....................... (359,624) 3,266 (356,358)
Preferred stock dividends ........... 25,670 -- 25,670
------------ ------------ ------------
Income (loss) attributable to common
stockholders ....................... $ (385,294) $ 3,266 $ (382,028)
============ ============ ============
Basic and diluted loss per common
share .............................. $ (2.01) $ (2.00)
============ ============
Weighted average common shares
outstanding(18)..................... 191,303 191,303
============ ============
</TABLE>
See accompanying notes to Unaudited Pro Forma Financial Information
P-3
<PAGE> 7
AMFM INC.
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 1999
(IN THOUSANDS, EXCEPT FOR PER SHARE DATA)
<TABLE>
<CAPTION>
CAPSTAR AS PRO FORMA PRO FORMA
ADJUSTED FOR ADJUSTMENTS ADJUSTMENTS
THE COMPLETED FOR THE FOR THE
THREE MONTHS ENDED COMPANY CAPSTAR CAPSTAR PHOENIX
MARCH 31, 1999 HISTORICAL(6) TRANSACTIONS(7) MERGER ACQUISITION
- ------------------ ------------ --------------- ------------ ------------
<S> <C> <C> <C> <C>
Gross revenues .............................. $ 394,123 $ 163,573 $ (14,043)(8) $ --
Less: agency commissions .................... (43,858) (14,597) -- --
------------ ------------ ----------- ------------
Net revenues ................................ 350,265 148,976 (14,043) --
Operating expenses excluding
depreciation and amortization .............. 208,510 97,076 (1,400)(8) --
Depreciation and amortization ............... 147,744 37,875 (12,356)(8) 1,471 (14)
69,795(9)
Corporate general and
administrative ............................. 17,814 6,814 -- --
Stock option compensation.................... -- 2,045 -- --
Merger, nonrecurring and systems
development expense ........................ 28,979 2,548 (1,137)(10) --
------------ ------------ ----------- ------------
Operating income (loss) ..................... (52,782) 2,618 (68,945) (1,471)
Interest expense ............................ 89,023 45,277 (4,500)(8) 1,575 (15)
438 (11)
Interest income ............................. (4,631) (232) 4,500 (8) --
Gain on disposition of
representation contracts ................... (3,603) -- -- --
Other (income) expense....................... -- 467 -- --
------------ ------------ ----------- ------------
Other (income) expense net .................. 80,789 45,512 438 1,575
------------ ------------ ------------ ------------
Income (loss) before income
taxes ...................................... (133,571) (42,894) (69,383) (3,046)
Income tax expense (benefit) ................ (30,126) (12,987) (24,284)(12) (1,066)(16)
Dividends and accretion on preferred
stock of subsidiary......................... -- 6,899 -- --
------------ ------------ ------------ ------------
Income (loss) ............................... (103,445) (36,806) (45,099) (1,980)
Preferred stock dividends ................... 6,417 -- -- --
------------ ------------ ------------ ------------
Income (loss) attributable to
common stockholders ........................ $ (109,862) $ (36,806) $ (45,099) $ (1,980)
============ ============ ============ ============
Basic and diluted loss per common
share ...................................... $ (0.77)
============
Weighted average common shares
outstanding(17)............................. 142,960 53,324
============ ============
<CAPTION>
COMPANY AS
ADJUSTED
FOR THE
CAPSTAR
MERGER
AND THE OTHER
THREE MONTHS ENDED PHOENIX COMPLETED COMPANY
MARCH 31, 1999 ACQUISITION TRANSACTION(17) PRO FORMA
- ------------------ ------------ --------------- ------------
<S> <C> <C> <C>
Gross revenues .............................. $ 543,653 $ -- $ 543,653
Less: agency commissions .................... (58,455) -- (58,455)
------------ ------------ ------------
Net revenues ................................ 485,198 -- 485,198
Operating expenses excluding
depreciation and amortization .............. 304,186 -- 304,186
Depreciation and amortization ............... 244,529 -- 244,529
Corporate general and
administrative ............................. 24,628 -- 24,628
Stock option compensation.................... 2,045 -- 2,045
Merger, nonrecurring and systems
development expense ........................ 30,390 -- 30,390
------------ ------------ ------------
Operating income (loss) ..................... (120,580) -- (120,580)
Interest expense ............................ 131,813 (368) 131,445
Interest income ............................. (363) -- (363)
Gain on disposition of
representation contracts ................... (3,603) -- (3,603)
Other (income) expense....................... 467 -- 467
------------ ------------ ------------
Other (income) expense net .................. 128,314 (368) 127,946
------------ ------------ ------------
Income (loss) before income
taxes ...................................... (248,894) 368 (248,526)
Income tax expense (benefit) ................ (68,463) 129 (68,334)
Dividends and accretion on preferred
stock of subsidiary......................... 6,899 -- 6,899
------------ ------------ ------------
Income (loss) ............................... (187,330) 239 (187,091)
Preferred stock dividends ................... 6,417 -- 6,417
------------ ------------ ------------
Income (loss) attributable to
common stockholders ........................ $ (193,747) $ 239 $ (193,508)
============ ============ ============
Basic and diluted loss per common
share ...................................... $ (0.99) $ (0.99)
============ ============
Weighted average common shares
outstanding(18)............................. 196,284 196,284
============ ============
</TABLE>
See accompanying notes to Unaudited Pro Forma Financial Information
P-4
<PAGE> 8
NOTES TO UNAUDITED PRO FORMA FINANCIAL INFORMATION
ADJUSTMENTS TO THE UNAUDITED PRO FORMA BALANCE SHEET RELATED TO CAPSTAR AS
ADJUSTED FOR THE COMPLETED CAPSTAR TRANSACTIONS
(1) The historical balance sheet of Capstar at March 31, 1999 and the pro
forma adjustments related to the completed Capstar transactions are
summarized below:
<TABLE>
<CAPTION>
CAPSTAR AS
PRO FORMA ADJUSTED FOR
ADJUSTMENTS FOR THE
CAPSTAR THE COMPLETED COMPLETED
HISTORICAL CAPSTAR CAPSTAR
AT 3/31/99 TRANSACTIONS TRANSACTIONS
------------ --------------- ------------
<S> <C> <C> <C>
ASSETS:
Current assets.................... $ 127,957 $ 6,885 (a) $ 134,842
Property and equipment, net....... 252,004 11,706 (a) 263,710
Intangible assets, net............ 4,210,887 203,116 (a) 4,414,003
Other assets...................... 37,837 7,500 (a) 45,337
---------- -------- ----------
Total assets............. $4,628,685 $229,207 $4,857,892
========== ======== ==========
LIABILITIES AND STOCKHOLDERS'
EQUITY:
Current liabilities:
Accounts payable and accrued
expenses........................ $ 85,860 $ 4,527 (a) $ 90,387
Current portion of long-term
debt............................ 39,891 -- 39,891
---------- -------- ----------
Total current
liabilities............ 125,751 4,527 130,278
Long-term debt, excluding current
portion......................... 1,769,923 191,955 (a) 1,985,878
24,000 (b)
Deferred tax liabilities.......... 1,149,563 33,573 (a) 1,183,136
Other liabilities................. -- (848)(a) (848)
---------- -------- ----------
Total liabilities........ 3,045,237 253,207 3,298,444
Redeemable preferred stock........ 269,267 -- 269,267
STOCKHOLDERS' EQUITY:
Common stock...................... 1,076 -- 1,076
Additional paid-in capital........ 1,504,144 13,221 (c) 1,517,365
Stock subscriptions receivable.... (2,773) -- (2,773)
Unearned compensation............. (4,397) -- (4,397)
Accumulated deficit............... (183,869) (24,000)(b) (221,090)
(13,221)(c)
---------- -------- ----------
Total stockholders'
equity................. 1,314,181 (24,000) 1,290,181
---------- -------- ----------
Total liabilities and
stockholders' equity... $4,628,685 $229,207 $4,857,892
========== ======== ==========
</TABLE>
- -------------------------
(a) Reflects the completed Capstar transactions as follows:
<TABLE>
<CAPTION>
PURCHASE PRICE ALLOCATION FINANCING
----------------------------------------------------------------------------------------- ----------
PROPERTY INCREASE
AND INTANGIBLE DEFERRED (DECREASE)
COMPLETED CAPSTAR PURCHASE CURRENT EQUIPMENT, ASSETS, OTHER CURRENT TAX OTHER IN LONG-
TRANSACTIONS PRICE ASSETS NET(i) NET(ii) ASSETS LIABILITIES LIABILITIES LIABILITIES TERM DEBT
- ----------------- -------- ------- ---------- ---------- ------ ----------- ----------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Triathlon Acquisition(iii)... $201,955 $ 8,795 $16,158 $216,910 $ -- $(5,891) $(33,573)(iv) $ (444) $201,955
Other Triathlon
Transactions(v)............ (10,000) (1,910) (4,452) (13,794) 7,500 1,364 -- 1,292 (10,000)
-------- ------- ------- -------- ------ ------- -------- ------ --------
Total................ $191,955 $ 6,885 $11,706 $203,116 $7,500 $(4,527) $(33,573) $ 848 $191,955
======== ======= ======= ======== ====== ======= ======== ====== ========
</TABLE>
(i) The amounts allocated to net property and equipment are based on
preliminary appraisals provided by the management of Capstar.
P-5
<PAGE> 9
(ii) Capstar, on a preliminary basis, has allocated the intangible assets
resulting from the Triathlon acquisition to broadcast licenses and
goodwill with estimated average lives of 40 years. The amounts allocated
are preliminary and are based upon historical information from prior radio
acquisitions.
(iii) On April 30, 1999, Capstar acquired 22 FM and 10 AM radio stations and
related broadcast equipment through the acquisition of Triathlon
Broadcasting Company ("Triathlon") for an aggregate purchase price of
approximately $201,955 which included (a) the conversion of each
outstanding share of each class of Triathlon common stock into the right
to receive $13.00 in cash, resulting in cash payments of approximately
$63,688; (b) the conversion of each outstanding depositary share of
Triathlon, representing one-tenth interest in a share of Triathlon's 9%
mandatory convertible preferred stock, into the right to receive $10.83 in
cash, resulting in cash payments of approximately $63,182 plus accrued and
unpaid dividends of $443; (c) additional consideration of $0.11 per
depositary share based upon the average closing price for Triathlon's
common stock for the twenty days prior to the closing related to the
settlement of a depositary shareholder lawsuit on February 12, 1999,
resulting in cash payments of $642; (d) the conversion of each outstanding
share of Triathlon's Series B convertible preferred stock into the right
to receive $.01 in cash, resulting in cash payments of approximately $6;
(e) the conversion to cash of warrants, stock options, and stock
appreciation rights resulting in cash payments of approximately $2,650;
(f) the assumption of long-term debt of $62,485 and (g) estimated
acquisition costs of $8,859. Triathlon operated radio stations in six
markets: Wichita, Kansas; Colorado Springs, Colorado; Lincoln, Nebraska;
Omaha, Nebraska; Spokane, Washington; and Tri-Cities, Washington.
(iv) Reflects a deferred tax liability related to the difference between the
financial statement carrying amount and the tax basis of assets acquired
in the stock acquisition of Triathlon.
(v) In order to consummate the Triathlon acquisition, Capstar was required
to dispose of KSPZ-FM (owned by Triathlon) in the Colorado Springs market
and KNSS-AM (owned by Capstar) and KFH-AM, KEYN-FM, KQAM-AM and KWSJ-FM
(owned by Triathlon) in the Wichita, Kansas market. Capstar entered into
an exchange agreement and an asset purchase agreement with Citadel
Broadcasting Company wherein, upon consummation of the Triathlon
acquisition, Capstar exchanged KSPZ-FM for KKLI-FM in Colorado Springs,
Colorado and sold stations KTWK-AM and KVOR-AM in Colorado Springs,
Colorado and KEYF-FM and KEYF-AM in Spokane, Washington (all of which were
owned by Triathlon) for approximately $10,000 in cash. Prior to
consummation of the Triathlon acquisition, Triathlon sold Pinnacle Sports
Productions, LLC. Upon consummation of the Triathlon acquisition, the
Wichita, Kansas stations were placed in a trust pending the sale of the
stations. The trustee is actively seeking the sale of the Wichita, Kansas
stations. Capstar also contributed the Muzak affiliate territory in Omaha,
Nebraska acquired as part of the Triathlon acquisition to Muzak Holdings
LLC in exchange for an additional 2.74% voting interest in Muzak Holdings
LLC.
(b) Reflects additional bank borrowings of $24,000 required to finance
estimated financial advisory and other expenses to be incurred by Capstar
in connection with the Capstar merger. This amount includes $10,000
that was paid in cash to Hicks, Muse, Tate & Furst Incorporated ("Hicks
Muse") at the closing of the merger. Hicks Muse also received options to
purchase 969,616 shares of AMFM Inc. common stock at an exercise price of
$52.00 per share, with the exercisability of the options generally
conditioned upon the average fair market value of AMFM Inc. common stock,
calculated on a daily basis, being equal to or exceeding $100.00 per share
for a period of 30 consecutive trading days during the five year period
following the merger.
(c) Reflects the adjustment to record estimated stock option compensation
expense of $13,221 relating to the vesting of certain executive warrants in
connection with the Capstar merger.
P-6
<PAGE> 10
ADJUSTMENTS TO UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET RELATED TO
THE CAPSTAR MERGER
(2) Merger Purchase Price Information. In connection with the Capstar
merger, each outstanding share of Capstar common stock was converted
into the right to receive 0.4955 shares of the combined entity. For
purposes of the unaudited pro forma condensed combined financial
statements, the fair market value of common stock is calculated by
using $44.75 per share which is based on the market price of AMFM Inc.
(formerly Chancellor Media Corporation) common stock on the
announcement date of the Capstar merger on August 26, 1998. The
aggregate purchase price is summarized below:
<TABLE>
<S> <C> <C>
EXCHANGE OF CAPSTAR COMMON STOCK:
Shares of Capstar common stock outstanding.................. 107,616,456
Exchange ratio.............................................. 0.4955
-----------
Shares of AMFM Inc. common stock issued in connection
with the Capstar merger................................... 53,323,954
===========
AGGREGATE PURCHASE PRICE:
Estimated fair value of common stock to be issued in
connection with the Capstar merger (53,323,954 shares @
$44.75 per share)......................................... $2,386,247
Capstar debt and equity assumed at fair values:
Long-term debt outstanding:
Capstar Credit Facility................................ 1,151,955
12 3/4% Senior Discount Notes due 2009................. 232,680
9 1/4% Senior Subordinated Notes due 2007.............. 202,580
10 3/4% Senior Subordinated Notes due 2006............. 330,195
11 3/8% Senior Subordinated Notes due 2000............. 566
Note payable to affiliate.............................. 150,000
Capital lease obligation and other notes payable....... 6,381
-----------
Total long-term debt outstanding.......................... 2,074,357
12% senior exchangeable preferred stock................... 142,352
12 5/8% Series E cumulative exchangeable preferred
stock.................................................. 162,877
Stock options and warrants issued by Capstar.............. 90,951
Financial advisors, legal, accounting and other transaction
costs..................................................... 25,000
Estimated fair value of stock options issued to Hicks
Muse for financial advisory and other transaction costs... 21,700
----------
Aggregate purchase price.................................... $4,903,484
==========
</TABLE>
P-7
<PAGE> 11
To record the aggregate purchase price of the Capstar merger and eliminate
certain Capstar historical balances as follows:
<TABLE>
<CAPTION>
ELIMINATION
OF CAPSTAR
HISTORICAL
BALANCES
AS ADJUSTED
FOR THE
PURCHASE COMPLETED CAPSTAR
PRICE CAPSTAR MERGER NET
ALLOCATION TRANSACTIONS FINANCING ADJUSTMENT
----------- ------------ ----------- ----------
<S> <C> <C> <C> <C>
Current assets......................... $ 134,842 $ (134,842) $ -- $ --
Property and equipment, net(a)......... 263,710 (263,710) -- --
Intangible assets(a)................... 6,065,666 (4,414,003) -- 1,651,663
Other assets........................... 45,337 (45,337) -- --
Current liabilities.................... (90,387) 90,387 -- --
Long-term debt(b)...................... -- 2,025,769 (2,099,357) (73,588)
Deferred tax liability(c).............. (1,519,305) 1,183,136 -- (336,169)
Other liabilities...................... 848 (848) -- --
Redeemable preferred stock(d).......... -- 269,267 (305,229) (35,962)
Common stock(e)........................ -- 1,076 (533) 543
Additional paid-in capital(f).......... -- 1,517,857 (2,498,365) (980,508)
Stock subscription receivable.......... 2,773 (2,773) -- --
Unearned compensation.................. -- (4,397) -- (4,397)
Accumulated deficit.................... -- (221,582) -- (221,582)
----------- ----------- ----------- ----------
Aggregate purchase price............... $ 4,903,484 $ -- $(4,903,484) $ --
=========== =========== =========== ==========
</TABLE>
- -------------------------
(a) The Company has assumed that historical balances of net property and
equipment acquired approximate fair value for the preliminary allocation
of the purchase price. The Company, on a preliminary basis, has
allocated $4,546,361 of intangible assets to broadcast licenses and
$1,519,305 to goodwill, each with an estimated average life of 15 years.
This preliminary allocation is based upon historical information from
prior radio acquisitions.
(b) Reflects the adjustment to record debt assumed or incurred by the
Company including (i) the fair value of Capstar's long-term debt of
$2,074,357 and (ii) additional bank borrowings of $25,000 required to
finance estimated financial advisors, legal, accounting and other
transaction costs.
(c) Reflects the adjustment to record a $1,519,305 deferred tax liability
related to the difference between the financial statement carrying
amount and the tax basis of Capstar acquired assets.
(d) Reflects the adjustment to record the estimated fair value of redeemable
preferred stock to be assumed by the Company including (i) Capstar's 12%
senior exchangeable preferred stock of $142,352 and (ii) Capstar's
12 5/8% series E cumulative exchangeable preferred stock of $162,877.
(e) Reflects 53,323,954 shares of AMFM Inc. common stock at a par value of
$0.01 to be issued in connection with the Capstar merger.
(f) Reflects additional paid-in capital of $2,385,714 related to 53,323,954
shares of AMFM Inc. common stock issued in connection with the Capstar
merger, the fair value of stock options and warrants assumed by AMFM
Inc. of $90,951 and the fair value of stock options issued to Hicks Muse
of $21,700. The fair value of the Capstar stock options and warrants was
estimated using the Black-Scholes option pricing model and the Capstar
merger exchange ratio of 0.4955 applied to Capstar's outstanding options
and warrants and exercise prices.
P-8
<PAGE> 12
At March 31, 1999, Capstar had 4,034,336 options outstanding with
exercise prices ranging from $7.10 to $21.63 and 2,696,406 warrants
outstanding with exercise prices ranging from $14.00 to $18.10.
(3) Reflects the elimination of the $150,000 Capstar loan in connection
with the Capstar merger. The Company made this loan to Capstar on May
29, 1998.
ADJUSTMENTS TO UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET RELATED TO
THE PHOENIX ACQUISITION
(4) On July 1, 1999, the Company acquired KKFR-FM and KFYI-AM in Phoenix
from The Broadcast Group, Inc. for $90,000 in cash plus various other
direct acquisition costs. Reflects the Phoenix Acquisition as follows:
<TABLE>
<CAPTION>
PURCHASE PRICE ALLOCATION FINANCING
------------------------------------ ----------
PROPERTY INCREASE
AND INTANGIBLE IN
PURCHASE EQUIPMENT, ASSETS, LONG-TERM
PRICE NET(a) NET(b) DEBT
---------- ----------- ---------- ----------
<S> <C> <C> <C> <C>
Phoenix Acquisition... $90,000 $1,750 $88,250 $90,000
</TABLE>
- -------------------------
(a) The Company has assumed that historical balances of net property and
equipment approximate fair value for the preliminary allocation of the
purchase price. Such amounts are based primarily on information provided by
management of the company acquired.
(b) The Company, on a preliminary basis, has allocated the intangible assets to
broadcast licenses with an estimated average life of 15 years. The amounts
are based upon historical information from prior acquisitions.
ADJUSTMENTS TO THE UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET RELATED
TO THE OTHER COMPLETED TRANSACTIONS
(5) Reflects the other significant completed transaction that was completed
after March 31, 1999 as follows:
<TABLE>
<CAPTION>
PURCHASE PRICE ALLOCATION FINANCING
-------------------------------------------------------------------- -------------
OTHER PROPERTY AND INTANGIBLE DEFERRED DECREASE IN
COMPLETED EQUIPMENT, ASSETS, TAX ACCUMULATED LONG-TERM
TRANSACTION SALES PRICE NET NET LIABILITIES DEFICIT DEBT
- ----------- ----------- ------------- ---------- ----------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Chicago Disposition(a).... $(21,000) $(2,067) $(4,467) $(5,063) $(9,403) $(21,000)
</TABLE>
- -------------------------
(a) On April 16, 1999, the Company sold WMVP-AM in Chicago to ABC, Inc.
for $21,000 in cash and recognized a pre-tax gain of $14,466. The
Company had previously entered into a time brokerage agreement
effective September 10, 1998 to sell substantially all of the
broadcast time of WMVP-AM pending completion of the sale. The amounts
allocated to accumulated deficit and deferred tax liabilities
represent the gain on the disposition of WMVP-AM, net of taxes of
$5,063.
P-9
<PAGE> 13
(6) The Company began operating KKFR-FM and KFYI-AM in Phoenix under a time
brokerage agreement effective November 5, 1998. Therefore, the results of
operations of KKFR-FM and KFYI-AM are included in the Company's historical
operations subsequent to this date during 1998 and for the three months
ended March 31, 1999.
The Company entered into a time brokerage agreement to sell substantially
all of the broadcast time of WMVP-AM in Chicago effective September 10,
1998. Therefore, the results of operations of WMVP-AM are excluded from the
Company's historical operations subsequent to this date during 1998 and for
the three months ended March 31, 1999.
ADJUSTMENTS TO CAPSTAR'S HISTORICAL CONDENSED STATEMENT OF OPERATIONS RELATED TO
THE COMPLETED CAPSTAR TRANSACTIONS
(7) Capstar's historical condensed statement of operations for the year ended
December 31, 1998 and the three months ended March 31, 1999 and pro forma
adjustments related to the completed Capstar transactions is summarized
below:
<TABLE>
<CAPTION>
PRO FORMA CAPSTAR
ADJUSTMENTS AS ADJUSTED
COMPLETED FOR THE FOR THE
CAPSTAR COMPLETED COMPLETED
YEAR ENDED CAPSTAR TRANSACTIONS CAPSTAR CAPSTAR
DECEMBER 31, 1998 HISTORICAL HISTORICAL(A) TRANSACTIONS TRANSACTIONS
- ----------------- ---------- ------------- ------------ ------------
<S> <C> <C> <C> <C>
Gross revenues........................ $568,050 $ 155,839 $ -- $ 723,889
Less: agency commissions.............. (50,583) (15,590) -- (66,173)
-------- --------- -------- ---------
Net revenues.......................... 517,467 140,249 -- 657,716
Operating expenses excluding
depreciation and amortization....... 304,565 74,240 -- 378,805
Depreciation and amortization......... 96,207 17,662 25,396 (B) 139,265
Corporate general and
administrative...................... 23,678 5,317 -- 28,995
Stock option compensation............. 21,260 74,340 (74,199)(C) 21,401
LMA fees.............................. 4,103 697 (4,800)(D) --
Other nonrecurring costs.............. 12,970 35,318 (11,255)(E) 20,433
(16,600)(F)
-------- --------- -------- ---------
Operating income (loss)............... 54,684 (67,325) 81,458 68,817
Interest expense...................... 121,145 37,502 18,815 (G) 177,462
Interest income....................... (3,423) (419) -- (3,842)
Loss on investments in limited
liability companies................. 28,565 -- -- 28,565
Other (income) expense................ 183 4,501 (3,163)(H) 1,521
-------- --------- -------- ---------
Income (loss) before income taxes..... (91,786) (108,909) 65,806 (134,889)
Income tax expense (benefit).......... (24,317) 210 (15,002)(I) (39,109)
Dividends and accretion on preferred
stock of subsidiary................. 21,987 -- 17,264 (J) 25,586
(13,665)(K)
-------- --------- -------- ---------
Net income (loss)..................... (89,456) (109,119) 77,209 (121,366)
Preferred stock dividends............. -- 22,771 (17,264)(J) --
(5,507)(L)
-------- --------- -------- ---------
Income (loss) attributable to common
stockholders........................ $(89,456) $(131,890) $ 99,980 $(121,366)
======== ========= ======== =========
</TABLE>
P-10
<PAGE> 14
<TABLE>
<CAPTION>
PRO FORMA CAPSTAR
ADJUSTMENTS AS ADJUSTED
COMPLETED FOR THE FOR THE
CAPSTAR COMPLETED COMPLETED
THREE MONTHS ENDED CAPSTAR TRANSACTIONS CAPSTAR CAPSTAR
MARCH 31, 1999 HISTORICAL HISTORICAL(A) TRANSACTIONS TRANSACTIONS
- ------------------ ---------- ------------- ------------ ------------
<S> <C> <C> <C> <C>
Gross revenues........................ $155,721 $ 7,852 $ -- $163,573
Less: agency commissions.............. (13,716) (881) -- (14,597)
-------- ------- ------- --------
Net revenues.......................... 142,005 6,971 -- 148,976
Operating expenses excluding
depreciation and amortization....... 92,186 4,890 -- 97,076
Depreciation and amortization......... 36,439 994 442 (B) 37,875
Corporate general and
administrative...................... 6,306 508 -- 6,814
Stock option compensation............. 2,002 43 -- 2,045
LMA fees.............................. 319 -- (319)(D) --
Other nonrecurring costs.............. 2,548 -- -- 2,548
-------- ------- ------- --------
Operating income (loss)............... 2,205 536 (123) 2,618
Interest expense...................... 40,958 1,297 3,022 (G) 45,277
Interest income....................... (216) (16) -- (232)
Other (income) expense................ 145 322 -- 467
-------- ------- ------- --------
Income (loss) before income taxes..... (38,682) (1,067) (3,145) (42,894)
Income tax expense (benefit).......... (13,640) -- 653 (I) (12,987)
Dividends and accretion on preferred
stock of subsidiary................. 6,899 -- -- 6,899
-------- ------- ------- --------
Net income (loss)..................... (31,941) (1,067) (3,798) (36,806)
Preferred stock dividends............. -- 1,377 (1,377)(L) --
-------- ------- ------- --------
Income (loss) attributable to common
stockholders........................ $(31,941) $(2,444) $(2,421) $(36,806)
======== ======= ======= ========
</TABLE>
P-11
<PAGE> 15
(A) The detail of the historical financial data of significant stations to be
acquired or disposed of in the completed transactions by Capstar for the
year ended December 31, 1998 and the three months ended March 31, 1999 has
been obtained from the historical financial statements of the respective
stations and is summarized below:
<TABLE>
<CAPTION>
OTHER
PATTERSON SFX SFX OTHER COMPLETED
ACQUISITION ACQUISITION TRANSACTIONS TRIATHLON TRIATHLON CAPSTAR
YEAR ENDED HISTORICAL HISTORICAL HISTORICAL HISTORICAL TRANSACTIONS TRANSACTIONS
DECEMBER 31, 1998 1/1-1/29(i) 1/1-5/29(ii) 1/1-5/29(iii) 1/1-12/31(iv) 1/1-12/31(v) HISTORICAL
----------------- ----------- ------------- ------------- ------------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Gross revenues................ $ 3,853 $ 141,369 $(24,457) $45,025 $(9,951) $ 155,839
Less: agency commissions...... (350) (16,692) 5,430 (4,442) 464 (15,590)
------- --------- -------- ------- ------- ---------
Net revenues.................. 3,503 124,677 (19,027) 40,583 (9,487) 140,249
Operating expenses excluding
depreciation and
amortization................. 2,523 78,235 (26,309) 26,727 (6,936) 74,240
Depreciation and
amortization................. 497 17,668 (4,875) 4,794 (422) 17,662
Corporate general and
administrative............... 171 3,069 -- 2,077 -- 5,317
Stock option compensation..... -- 74,199 -- 141 -- 74,340
LMA fees...................... -- 697 -- -- -- 697
Other nonrecurring costs...... -- 35,318 -- -- -- 35,318
------- --------- -------- ------- ------- ---------
Operating income (loss)....... 312 (84,509) 12,157 6,844 (2,129) (67,325)
Interest expense.............. 645 30,867 (4) 5,994 -- 37,502
Interest income............... -- (352) -- (67) -- (419)
Other expense................. 3,163 -- 145 1,193 -- 4,501
------- --------- -------- ------- ------- ---------
Income (loss) before income
taxes........................ (3,496) (115,024) 12,016 (276) (2,129) (108,909)
Income tax expense............ -- 210 -- -- -- 210
------- --------- -------- ------- ------- ---------
Net income (loss)............. (3,496) (115,234) 12,016 (276) (2,129) (109,119)
Preferred stock dividends..... -- 17,264 -- 5,507 -- 22,771
------- --------- -------- ------- ------- ---------
Income (loss) attributable to
common stockholders.......... $(3,496) $(132,498) $ 12,016 $(5,783) $(2,129) $(131,890)
======= ========= ======== ======= ======= =========
<CAPTION>
OTHER COMPLETED
TRIATHLON TRIATHLON CAPSTAR
THREE MONTHS ENDED HISTORICAL ACQUISITIONS TRANSACTIONS
MARCH 31, 1999 1/1-3/31(iv) 1/1-3/31(v) HISTORICAL
------------------ ------------ ------------ ------------
<S> <C> <C> <C>
Gross revenues................ $10,699 $(2,847) $ 7,852
Less: agency commissions...... (968) 87 (881)
------- ------- -------
Net revenues.................. 9,731 (2,760) 6,971
Operating expenses excluding
depreciation and
amortization................ 6,819 (1,929) 4,890
Depreciation and
amortization................ 1,202 (208) 994
Corporate general and
administrative.............. 508 -- 508
Stock option compensation..... 43 -- 43
LMA fees...................... -- -- --
Other nonrecurring costs...... -- -- --
------- ------- -------
Operating income (loss)....... 1,159 (623) 536
Interest expense.............. 1,297 -- 1,297
Interest income............... (16) -- (16)
Other expense................. 322 -- 322
------- ------- -------
Income (loss) before income
taxes....................... (444) (623) (1,067)
Income tax expense............ -- -- --
------- ------- -------
Net income (loss)............. (444) (623) (1,067)
Preferred stock dividends..... 1,377 -- 1,377
------- ------- -------
Income (loss) attributable to
common stockholders......... $(1,821) $ (623) $(2,444)
======= ======= =======
</TABLE>
- ---------------
(i) In January 1998, Capstar acquired 39 radio stations (25 FM and 14 AM) from
Patterson Broadcasting, Inc. for approximately $227,186 in cash.
P-12
<PAGE> 16
(ii) On May 29, 1998, Capstar acquired SFX, a radio broadcasting company which
owned 81 radio stations (60 FM and 21 AM) and operated two additional
radio stations (1 FM and 1 AM) under time brokerage or joint sales
agreements (the "SFX Acquisition"). The acquisition was effected through
the merger of a wholly owned subsidiary of Capstar with and into SFX, with
SFX surviving the merger as a wholly owned subsidiary of Capstar. The
total consideration paid for all of the outstanding common equity interest
of SFX was approximately $1,279,656, including direct costs of the
acquisition.
(iii) Other SFX transactions include the following transactions related to
stations acquired by Capstar from SFX on May 29, 1998:
(a) On February 20, 1998, the Company entered into an agreement to acquire
from Capstar KTXQ-FM and KBFB-FM in Dallas/Ft. Worth, KODA-FM, KKRW-FM
and KQUE-AM in Houston, KPLN-FM and KYXY-FM in San Diego and WPHH-FM,
WJJJ-FM, WXDX-FM and WDVE-FM in Pittsburgh (collectively, the
"Capstar/SFX Stations") for an aggregate purchase price of
approximately $637,500 in a series of purchases and exchanges over a
period of three years (the "Capstar/SFX Transaction"). In connection
with the Capstar/SFX Transaction, Capstar entered into a time brokerage
agreement with the Company to sell substantially all of the
broadcasting time of ten of the Capstar/SFX Stations (9 FM and 1 AM)
effective May 29, 1998 pending consummation of the Capstar merger.
Reflects the adjustment to eliminate the results of operations of the
Capstar/SFX Stations operated by the Company under time brokerage
agreements and to record the related time brokerage (LMA) fee revenue
of $20,594 for the period January 1, 1998 to May 29, 1998.
(b) In connection with the SFX Acquisition, Capstar was required to dispose
of certain stations acquired from SFX due to governmental restrictions
on multiple station ownership. On May 29, 1998, Capstar completed the
following disposition and exchange transactions to comply with the
multiple ownership rules:
-the sale of one FM station in Houston, Texas to HBC Houston, Inc. for
approximately $54,000;
-the sale of four radio stations (3 FM and 1 AM) in Long Island, New
York to Cox Radio, Inc. for approximately $46,000;
-the sale of four radio stations (3 FM and 1 AM) in Greenville, South
Carolina to Clear Channel Radio, Inc. for approximately $35,000;
-the sale of one FM station in Daytona Beach, Florida to Clear Channel
Metroplex, Inc. for approximately $11,500;
-the assignment of four radio stations (2 FM and 2 AM) in Fairfield,
Connecticut with an aggregate fair market value of $15,000 to a trust
pending the sale to a third party; and
-the exchange of KODA-FM in Houston, Texas to the Company for two FM
stations in Jacksonville, Florida (valued at $53,000) and $90,250 in
cash, which was used by Capstar to acquire three stations (2 FM and 1
AM) in Austin, Texas through a qualified intermediary.
Reflects the adjustment to eliminate the results of operations of the SFX
stations disposed by Capstar and to record the results of operations for
the stations received in the exchange transaction for the period January
1, 1998 to May 29, 1998.
(iv) On April 30, 1999, Capstar acquired Triathlon for an aggregate purchase
price of approximately $201,955. Triathlon then operated 32 radio stations
(22 FM and 10 AM) in six markets: Wichita, Kansas; Colorado Springs,
Colorado; Lincoln, Nebraska; Omaha, Nebraska; Spokane, Washington; and
Tri-Cities, Washington.
(v) In order to consummate the acquisition of Triathlon, Capstar was required
to dispose of KSPZ-FM (owned by Triathlon) in the Colorado Springs market
and KNSS-AM (owned by Capstar Broadcasting) and KFH-AM, KEYN-FM, KQAM-AM
and KWSJ-FM (owned by Triathlon) in the Wichita, Kansas market. Capstar
entered into an exchange agreement and an asset purchase agreement with
Citadel Broadcasting Company wherein, upon consummation of the Triathlon
acquisition, Capstar exchanged KSPZ-FM for KKLI-FM in Colorado Springs,
Colorado and sold stations KTWK-AM and KVOR-AM in Colorado Springs,
Colorado and KEYF-FM and KEYF-AM in Spokane, Washington (all of which were
owned by Triathlon) for approximately $10,000 in cash. Prior to
consummation of the Triathlon acquisition, Triathlon sold Pinnacle Sports
Productions, LLC. Upon consummation of the Triathlon acquisition, the
Wichita, Kansas stations were placed in a trust pending the sale of the
stations. The trustee is actively seeking the sale of the Wichita, Kansas
stations. Capstar also contributed the Muzak affiliate territory in Omaha,
Nebraska acquired as part of the Triathlon Acquisition to Muzak Holdings
LLC in exchange for an additional 2.74% voting interest in Muzak Holdings
LLC.
P-13
<PAGE> 17
(B) Reflects incremental amortization related to the completed transactions
and is based on the following allocation to intangible assets:
<TABLE>
<CAPTION>
INCREMENTAL HISTORICAL ADJUSTMENT
COMPLETED TRANSACTIONS AMORTIZATION INTANGIBLE AMORTIZATION AMORTIZATION FOR NET
YEAR ENDED DECEMBER 31, 1998 PERIOD(i) ASSETS, NET EXPENSE EXPENSE INCREASE
---------------------------- ------------ ----------- ------------ ------------ ----------
<S> <C> <C> <C> <C> <C>
Patterson Acquisition............ 1/1-1/29 $ 268,219 $ 540 $ 356 $ 184
SFX Acquisition.................. 1/1-5/29 3,194,742 33,057 9,515 23,542
Triathlon Acquisition............ 1/1-12/31 216,910 5,423 3,408 2,015
Other Triathlon Transactions..... 1/1-12/31 (13,794) (345) -- (345)
---------- ------- ------- -------
$3,666,077 $38,675 $13,279 $25,396
========== ======= ======= =======
</TABLE>
<TABLE>
<CAPTION>
INCREMENTAL HISTORICAL ADJUSTMENT
COMPLETED TRANSACTIONS AMORTIZATION INTANGIBLE AMORTIZATION AMORTIZATION FOR NET
THREE MONTHS ENDED MARCH 31, 1999 PERIOD(i) ASSETS, NET EXPENSE EXPENSE INCREASE
--------------------------------- ------------ ----------- ------------ ------------ ----------
<S> <C> <C> <C> <C> <C>
Triathlon Acquisition............. 1/1-3/31 $216,910 $1,356 $828 $ 528
Other Triathlon Transactions...... 1/1-3/31 (13,794) (86) -- (86)
-------- ------ ---- ------
$203,116 $1,270 $828 $ 442
======== ====== ==== ======
</TABLE>
- ---------------
(i) The incremental amortization period represents the period of the year
that the acquisition was not completed. Intangible assets consist of
broadcast licenses of $3,632,504 for 1998 and $169,543 for 1999 and
goodwill of $33,573 for 1998 and 1999 resulting from the recognition
of deferred tax liabilities in connection with the Triathlon
acquisition and are amortized on a straight-line basis over estimated
average lives of 40 years. Actual amortization may differ based upon
final purchase price allocations.
(C) Reflects the elimination of non-recurring transaction-related compensation
expense of $74,199 attributable to the voluntary settlement of the
outstanding options, SARs and unit purchase options by SFX in connection
with Capstar's acquisition of SFX.
P-14
<PAGE> 18
(D) Reflects the elimination of $4,800 of time brokerage (LMA) fees for the
year ended December 31, 1998, of which $4,103 were paid by Capstar and
$697 by SFX, and $319 of time brokerage (LMA) fees paid by Capstar for the
three months ended March 31, 1999 related to acquired radio stations that
were previously operated under time brokerage agreements.
(E) Reflects the elimination of non-recurring transaction-related charges of
$11,255 recorded by SFX in connection with Capstar's acquisition of SFX
and the spin-off of SFX Entertainment, Inc. These charges consist
primarily of legal, accounting and regulatory fees.
(F) Reflects the elimination of the consent solicitation payments to the
holders of the 10 3/4% Senior Subordinated Notes due 2006 and 12 5/8%
series E cumulative exchangeable preferred stock of SFX incurred in
connection with the spin-off of SFX Entertainment of $16,600. The spin-off
of SFX Entertainment was consummated in April 1998.
(G) Reflects the adjustment to interest expense in connection with the
consummation of the completed Capstar transactions:
<TABLE>
<CAPTION>
THREE MONTHS
YEAR ENDED ENDED
DECEMBER 31, 1998 MARCH 31, 1999
----------------- --------------
<S> <C> <C>
Additional bank borrowings related to completed
acquisitions....................................... $1,554,027 $191,955
Additional bank borrowings related to estimated
financial advisors, legal, accounting and other
professional fees.................................. 24,000 24,000
---------- --------
1,578,027 215,955
---------- --------
Interest expense at 8.00%............................ $ 126,242 $ 4,319
Less: historical interest expense recognized
subsequent to completed acquisition................ (69,925) --
---------- --------
Incremental interest expense......................... 56,317 4,319
Less: historical interest expense recognized by the
acquired company................................... (37,502) (1,297)
---------- --------
Net increase in interest expense..................... $ 18,815 $ 3,022
========== ========
</TABLE>
(H) Adjustment represents the elimination of $3,163 of transaction expenses
recorded by Patterson in connection with Capstar's acquisition of
Patterson.
(I) Reflects the tax effect of the pro forma adjustments.
P-15
<PAGE> 19
(J) Reclassification of SFX's historical preferred stock dividends of $17,264
to Capstar's dividends on preferred stock of subsidiaries.
(K) Reflects the elimination of a portion of the redeemable preferred stock
dividends related to the SFX Acquisition and the subsequent redemption of
$119,600 and $500 liquidation preference on July 3, 1998 and July 10,
1998, respectively, of the 12 5/8% series E cumulative preferred stock of
SFX as follows:
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
1998
------------
<S> <C>
Dividends on 6% series C redeemable preferred stock
redeemed as part of the SFX Merger on May 29,
1998................................................ $ (112)
Dividends on 6 1/2% series D cumulative convertible
exchangeable preferred stock redeemed as part of the
SFX Merger on May 29, 1998.......................... (5,841)
Dividends on 12 5/8% series E cumulative exchangeable
preferred stock of $119,500 and $500 for the period
January 1, 1998 to the redemption dates of July 3,
1998 and July 10, 1998, respectively................ (7,712)
--------
Total adjustment for net decrease in dividends and
accretion........................................... $(13,665)
========
</TABLE>
(L) Reflects the elimination of Triathlon's preferred stock dividends of
$5,507 for the year ended December 31, 1998 and $1,377 for the three
months ended March 31, 1999. The Triathlon preferred stock was redeemed in
connection with Capstar's acquisition of Triathlon in 1999.
P-16
<PAGE> 20
ADJUSTMENTS TO UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
RELATED TO THE CAPSTAR MERGER
(8) Reflects the elimination of intercompany transactions between the Company
and Capstar for the Company's media representation services provided to
Capstar, Capstar's participation in the Company's The AMFM Radio Networks,
fees paid by the Company to Capstar under time brokerage (LMA) agreements
and interest on Capstar's note payable to the Company of $150,000 for the
year ended December 31, 1998 and the three months ended March 31, 1999.
(9) Reflects incremental amortization related to the Capstar merger and is
based on the allocation of the total consideration as follows:
<TABLE>
<CAPTION>
THREE MONTHS
ENDED
YEAR ENDED MARCH 31,
DECEMBER 31, 1998 1999
----------------- ------------
<S> <C> <C>
Amortization expense on $6,065,666 of intangible
assets................................................ $ 404,378 $101,094
Less: historical amortization expense................... (116,323) (31,299)
--------- --------
Adjustment for net increase in amortization expense..... $ 288,055 $ 69,795
========= ========
</TABLE>
Historical depreciation expense of Capstar as adjusted for the completed
Capstar transactions is assumed to approximate depreciation expense on a
pro forma basis. Actual depreciation and amortization may differ based upon
final purchase price allocations.
(10) Reflects the elimination of financial advisory and other expenses of
Capstar in connection with the Capstar merger of $8,000 for the year ended
December 31, 1998 and $1,137 for the three months ended March 31, 1999.
(11) Reflects the adjustment to record interest expense of $1,750 for the year
ended December 31, 1998 and $438 for the three months ended March 31, 1999
on additional bank borrowings related to estimated financial advisors,
legal, accounting and other professional fees of $25,000 at 7.0%.
(12) Reflects the tax effect of the pro forma adjustments.
P-17
<PAGE> 21
ADJUSTMENTS TO UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
RELATED TO THE PHOENIX ACQUISITION
(13) Reflects the elimination of revenue related to the time brokerage agreement
between The Broadcast Group Inc. and the Company. The Company began
operating KKFR-FM and KFYI-AM in Phoenix under the time brokerage agreement
effective November 5, 1998.
(14) Reflects incremental amortization related to the assets acquired in the
Phoenix Acquisition and is based on the allocation of the total
consideration as follows:
<TABLE>
<CAPTION>
INCREMENTAL INTANGIBLE HISTORICAL ADJUSTMENT
YEAR ENDED AMORTIZATION ASSETS, AMORTIZATION AMORTIZATION FOR NET
DECEMBER 31, 1998 PERIOD(i) NET EXPENSE(i) EXPENSE INCREASE
- ------------------- ------------ ---------- ------------ ------------ ----------
<S> <C> <C> <C> <C> <C>
Phoenix Acquisition........... 1/1-12/31 $88,250 $5,883 $103 $5,780
======= ====== ==== ======
</TABLE>
<TABLE>
<CAPTION>
INCREMENTAL INTANGIBLE HISTORICAL ADJUSTMENT
THREE MONTHS ENDED AMORTIZATION ASSETS, AMORTIZATION AMORTIZATION FOR NET
MARCH 31, 1999 PERIOD(i) NET EXPENSE(i) EXPENSE INCREASE
- ------------------- ------------ ---------- ------------ ------------ ----------
<S> <C> <C> <C> <C> <C>
Phoenix Acquisition........... 1/1-3/31 $88,250 $1,471 $-- $1,471
======= ====== === ======
</TABLE>
- -------------------------
(i) Intangible assets are amortized on a straight-line basis over an
estimated average 15 year life. The incremental amortization period
represents the period of the year that the acquisition was not
completed.
Historical depreciation expense for the Phoenix Acquisition is assumed to
approximate depreciation expense on a pro forma basis. Actual depreciation
and amortization may differ based upon final purchase price allocations.
(15) Reflects the adjustment to interest expense in connection with the
consummation of the Phoenix Acquisition:
<TABLE>
<CAPTION>
THREE MONTHS
YEAR ENDED ENDED
DECEMBER 31, MARCH 31,
1998 1999
------------ ------------
<S> <C> <C>
Interest expense on additional bank borrowings of $90,000
related to the Phoenix Acquisition at 7.0%.............. $ 6,300 $ 1,575
Less: historical interest expense recognized by the
acquired company........................................ (332) --
------- --------
Net increase in interest expense.......................... $ 5,968 $ 1,575
======= ========
</TABLE>
(16) Reflects the tax effect of the pro forma adjustments.
P-18
<PAGE> 22
ADJUSTMENTS TO UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
RELATED TO THE OTHER COMPLETED TRANSACTION
(17) The condensed combined statement of operations for the other completed
transaction for the year ended December 31, 1998 and for the three months
ended March 31, 1999 are summarized below:
<TABLE>
<CAPTION>
CHICAGO PRO FORMA
DISPOSITION ADJUSTMENTS FOR COMPANY
YEAR ENDED HISTORICAL THE OTHER COMPLETED COMPLETED
DECEMBER 31, 1998 1/1-12/31 (a) TRANSACTION TRANSACTION
- ----------------- ------------ ------------------- ------------
<S> <C> <C> <C>
Gross revenues .............................. $ (11,530) $ -- $ (11,530)
Less: agency commissions .................... 1,221 -- 1,221
------------ ------------ ------------
Net revenues ................................ (10,309) -- (10,309)
Operating expenses excluding
depreciation and amortization ............. (13,271) -- (13,271)
Depreciation and amortization ............... (592) -- (592)
Corporate general and
administrative ............................ -- -- --
------------ ------------ ------------
Operating income (loss) ..................... 3,554 -- 3,554
Interest expense ............................ -- (1,470)(b) (1,470)
Interest income ............................. -- -- --
Other (income) expense ...................... -- -- --
------------ ------------ ------------
Income (loss) before income
taxes ..................................... 3,554 1,470 5,024
Income tax expense .......................... -- 1,758 (c) 1,758
Dividends and accretion on
preferred stock of subsidiary ............. -- -- --
------------ ------------ ------------
Net income (loss) ........................... 3,554 (288) 3,266
Preferred stock dividends ................... -- -- --
------------ ------------ ------------
Income (loss) attributable to
common stockholders ....................... $ 3,554 $ (288) $ 3,266
============ ============ ============
</TABLE>
<TABLE>
<CAPTION>
PRO FORMA
ADJUSTMENTS
THREE MONTHS ENDED FOR THE OTHER
MARCH 31, 1999 COMPLETED TRANSACTION
- ------------------ ----------------------
<S> <C>
Gross revenues .................................. $ --
Less: agency commissions ........................ --
----------
Net revenues .................................... --
Operating expenses excluding depreciation and
amortization .................................. --
Depreciation and amortization ................... --
----------
Operating income (loss) ......................... --
Interest expense ................................ (368)(b)
----------
Income (loss) before income taxes ............... 368
Income tax expense .............................. 129(c)
----------
Net income (loss) ............................... 239
Preferred stock dividends ....................... --
----------
Income (loss) attributable to common
stockholders .................................. $ 239
==========
</TABLE>
- ---------------
(a) On April 16, 1999, the Company sold WMVP-AM in Chicago to ABC, Inc. for
$21,000 in cash. The Company entered into a time brokerage agreement to
sell substantially all of the broadcast time of WMVP-AM effective September
10, 1998.
P-19
<PAGE> 23
(b) Reflects the adjustment to interest expense as follows:
<TABLE>
<CAPTION>
THREE MONTHS
YEAR ENDED ENDED
DECEMBER 31, MARCH 31,
1998 1999
------------ ------------
<S> <C> <C>
Completed disposition....................................... $(21,000) $(21,000)
-------- --------
Interest expense at 7.0%.................................... $ (1,470) $ (368)
======== ========
</TABLE>
(c) Reflects the tax effect of the pro forma adjustments.
(18) The pro forma combined loss per common share data is computed by dividing
pro forma loss attributable to common stockholders by the weighted average
common shares assumed to be outstanding. A summary of shares used in the
pro forma combined loss per common share calculation follows:
<TABLE>
<CAPTION>
THREE MONTHS
YEAR ENDED ENDED
DECEMBER 31, 1998 MARCH 31, 1999
----------------- --------------
<S> <C> <C>
Historical weighted average shares outstanding....... 137,979 142,960
Incremental weighted average shares relating to:
53,323,954 shares of Common Stock to be issued in
connection with the Capstar merger.............. 53,324 53,324
-------- --------
Shares used in the pro forma combined earnings per
share calculation.................................. 191,303 196,284
======== ========
</TABLE>
P-20
