<PAGE> 1
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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 10-Q
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<TABLE>
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[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED MARCH 31, 1999
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM ____________ TO ____________
</TABLE>
COMMISSION FILE NUMBER 0-22486
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CAPSTAR COMMUNICATIONS, INC.
(Exact name of Registrant as specified in its charter)
<TABLE>
<S> <C>
DELAWARE 13-3649750
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
600 CONGRESS AVENUE 78701
SUITE 1400 (Zip Code)
AUSTIN, TEXAS
(Address of principal executive offices)
</TABLE>
(512) 340-7800
(Registrant's telephone number, including area code)
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Indicate by check mark whether Capstar Communications, Inc. ("Capstar
Communications") (1) has filed all reports required to be filed by Section 13 or
15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or
for such shorter period that the registrant was required to file such reports),
and (2) has been subject to such filing requirements for the past 90
days. Yes [X] No [ ]
Indicate the number of shares outstanding of CCI's classes of common stock,
as of the latest practicable date: As of May 1, 1999, 1,006 shares of Class A
Common Stock, par value $.01 per share ("Common Stock"), of Capstar
Communications, Inc. were outstanding. As of such date, there was no public
market for the Common Stock.
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<PAGE> 2
CAPSTAR COMMUNICATIONS, INC. AND SUBSIDIARIES
(FORMERLY KNOWN AS SFX BROADCASTING, INC. AND SUBSIDIARIES)
INDEX TO QUARTERLY REPORT ON FORM 10-Q
MARCH 31, 1999
FORM 10-Q
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
NUMBER
------
<S> <C> <C>
PART I -- FINANCIAL INFORMATION
Item Financial Statements:
1....
CAPSTAR COMMUNICATIONS, INC. AND SUBSIDIARIES
Consolidated Balance Sheets as of December 31, 1998 and
March 31, 1999 (unaudited).................................. 3
Consolidated Statements of Operations for the three months
ended March 31, 1998 (predecessor) and the three months
ended March 31, 1999 (unaudited)............................ 4
Condensed Consolidated Statements of Cash Flows for the
three months ended March 31, 1998 (predecessor) and the
three months ended March 31, 1999 (unaudited)............... 5
Notes to Consolidated Financial Statements (unaudited)...... 6
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations................................... 9
Item 3. Quantitative and Qualitative Disclosure About Market Risk... 15
PART II -- OTHER INFORMATION
Item 1. Legal Proceedings........................................... 16
Item 4. Submission of Matters to a Vote of Security Holders......... 17
Item 6. Exhibits and Reports on Form 8-K............................ 17
</TABLE>
As used in this Quarterly Report on Form 10-Q, unless the context otherwise
requires, (i) "Capstar Communications" refers to Capstar Communications, Inc.,
(formerly known as SFX Broadcasting, Inc.), an indirect subsidiary of Capstar
Radio Broadcasting Partners, Inc., (ii) the "Company" collectively refers to
Capstar Communications and its subsidiaries, (iii) "Capstar Radio" refers to
Capstar Radio Broadcasting Partners, Inc., a direct wholly-owned subsidiary of
Capstar Broadcasting Partners, Inc., (iv) "Capstar Partners" refers to Capstar
Broadcasting Partners, Inc., whose outstanding common stock is owned by Capstar
Broadcasting Corporation, and (v) "Capstar Broadcasting" refers to Capstar
Broadcasting Corporation.
2
<PAGE> 3
PART I -- FINANCIAL INFORMATION
CAPSTAR COMMUNICATIONS, INC. AND SUBSIDIARIES
(FORMERLY KNOWN AS SFX BROADCASTING, INC. AND SUBSIDIARIES)
CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)
<TABLE>
<CAPTION>
ASSETS
DECEMBER 31, MARCH 31,
1998 1999
------------ ----------
<S> <C> <C>
Current assets:
Cash and cash equivalents................................. $ 11,391 $ 8,380
Accounts receivable, net of allowance for doubtful
accounts of $4,511 and $4,660, respectively............ 71,314 59,232
Prepaid and other current assets.......................... 1,660 4,317
---------- ----------
Total current assets.............................. 84,365 71,929
Property and equipment, net............................... 118,163 117,780
Intangibles and other, net................................ 3,323,486 3,301,542
Other assets.............................................. 627 1,947
---------- ----------
Total assets...................................... $3,526,641 $3,493,198
========== ==========
LIABILITIES AND SHAREHOLDER'S EQUITY
Current Liabilities:
Accounts payable.......................................... $ 3,303 $ 2,628
Accrued expenses.......................................... 13,869 12,903
Accrued interest.......................................... 4,136 11,913
Income taxes payable...................................... 35,140 2,203
Current portion of long-term debt......................... 372,903 369,467
---------- ----------
Total current liabilities......................... 429,351 399,114
Long-term debt, net of current portion.................... 325,686 324,622
Deferred income taxes..................................... 1,008,385 1,007,867
---------- ----------
Total liabilities................................. 1,763,422 1,731,603
---------- ----------
Redeemable Preferred Stock, aggregate liquidation preference
of $133,944 and $138,150, respectively.................... 148,669 152,511
---------- ----------
Commitments and contingencies
Shareholder's equity:
Class A Voting Common Stock, $.01 par value; 200,000
shares authorized; 1,006 shares issued and outstanding,
respectively........................................... 1 1
Class B Voting Convertible Common Stock, $.01 par value,
10,000,000 shares, authorized; none issued............. -- --
Additional paid-in capital................................ 1,613,967 1,610,125
Retained earnings (deficit)............................... 582 (1,042)
---------- ----------
Total shareholder's equity........................ 1,614,550 1,609,084
---------- ----------
Total liabilities and shareholder's equity........ $3,526,641 $3,493,198
========== ==========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
3
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CAPSTAR COMMUNICATIONS, INC. AND SUBSIDIARIES
(FORMERLY KNOWN AS SFX BROADCASTING, INC. AND SUBSIDIARIES)
CONSOLIDATED STATEMENTS OF OPERATIONS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)
<TABLE>
<CAPTION>
PREDECESSOR COMPANY
------------------ ------------------
THREE MONTHS ENDED THREE MONTHS ENDED
MARCH 31, MARCH 31,
1998 1999
------------------ ------------------
<S> <C> <C>
Gross broadcast revenue.................................. $ 74,405 $ 94,130
Less: agency commissions................................. (8,654) (8,909)
--------- --------
Net broadcast revenue.................................... 65,751 85,221
--------- --------
Station operating expenses............................... 44,636 49,281
Depreciation, amortization, duopoly integration costs and
acquisition related costs.............................. 10,653 23,060
Corporate expenses....................................... 1,569 1,681
LMA fees................................................. -- 75
Settlement of options and warrants....................... 138 --
Non-recurring and unusual charges, including adjustments
to broadcast rights agreement.......................... 24,974 --
--------- --------
Total operating expenses....................... 81,970 74,097
--------- --------
Operating income (loss).................................. (16,219) 11,124
Investment income........................................ 202 42
Interest expense......................................... (19,190) (13,312)
--------- --------
Loss from continuing operations before income taxes...... (35,207) (2,146)
Income tax expense (benefit)............................. 210 (522)
--------- --------
Loss from continuing operations.......................... (35,417) (1,624)
--------- --------
Discontinued operations:
Loss from operations to be distributed to shareholders,
net of taxes........................................ (97,576) --
--------- --------
Net loss................................................. (132,993) (1,624)
Dividends and accretion on preferred stocks.............. 10,350 3,842
--------- --------
Net loss attributable to common stock.................... $(143,343) $ (5,466)
========= ========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
4
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CAPSTAR COMMUNICATIONS, INC. AND SUBSIDIARIES
(FORMERLY KNOWN AS SFX BROADCASTING, INC. AND SUBSIDIARIES)
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)
<TABLE>
<CAPTION>
PREDECESSOR COMPANY
------------------ ------------------
THREE MONTHS ENDED THREE MONTHS ENDED
MARCH 31, MARCH 31,
1998 1999
------------------ ------------------
<S> <C> <C>
Cash provided by continuing operations................... $ 11,547 $ 3,919
Cash from operating activities of SFX Entertainment...... 9,140 --
--------- --------
Net cash provided by operating activities................ 20,687 3,919
--------- --------
Investing activities:
Proceeds from sales of stations and other assets....... 4,692 --
Deposits and other payments for pending acquisitions... -- (596)
Purchase of property and equipment..................... (3,602) (2,173)
Other investing activities............................. (59) (591)
--------- --------
Net cash used in investing activities.................... 1,031 (3,360)
Cash used in investing activities of SFX Entertainment... (379,782) --
--------- --------
Net cash used in investing activities.................... (378,751) (3,360)
--------- --------
Financing activities:
Payments on long-term debt and credit facilities....... (100) (44,527)
Proceeds from issuance of long-term debt and credit
facilities.......................................... -- 40,957
Proceeds from issuance of common stock................. 3,759 --
Preferred stock dividends.............................. (2,459) --
--------- --------
Net cash provided by (used in) financing activities...... 1,200 (3,570)
Cash provided by financing activities of SFX
Entertainment.......................................... 458,654 --
--------- --------
Net cash provided by (used in) financing activities...... 459,854 (3,570)
--------- --------
Net increase (decrease) in cash and equivalents.......... 101,790 (3,011)
Cash and cash equivalents at beginning of period......... 24,686 11,391
Net increase in cash of SFX Entertainment................ (88,012) --
--------- --------
Cash and cash equivalents at end of period............... $ 38,464 $ 8,380
========= ========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
5
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CAPSTAR COMMUNICATIONS, INC. AND SUBSIDIARIES
(FORMERLY KNOWN AS SFX BROADCASTING, INC. AND SUBSIDIARIES)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1999
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)
NOTE 1 -- BASIS OF PRESENTATION
Information with respect to the three month periods ended March 31, 1998
and 1999 is unaudited. The accompanying unaudited consolidated financial
statements have been prepared in accordance with generally accepted accounting
principles ("GAAP") for interim financial information and with the instructions
to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include
all of the information and footnotes required by GAAP for complete financial
statements. In the opinion of management, the unaudited interim consolidated
financial statements contain all adjustments considered necessary for a fair
presentation. Operating results for the three month period ended March 31, 1999,
are not necessarily indicative of the results that may be expected for the year
ended December 31, 1999, or for any other interim period. For further
information, refer to the consolidated financial statements and footnotes
thereto for Capstar Communications included in its Form 10-K for the year ended
December 31, 1998.
On May 29, 1998, SBI Holding Corporation, a Delaware corporation ("SFX
Parent"), acquired SFX Broadcasting, Inc., which has been renamed Capstar
Communications, Inc. The acquisition was effected through the merger (the "SFX
Merger") of SBI Radio Acquisition Corporation, a Delaware corporation and a
wholly-owned subsidiary of SFX Parent, with and into SFX, with SFX as the
surviving corporation. The acquisition of SFX by SFX Parent resulted in a change
of control of SFX. As a result of the SFX Merger, SFX became an indirect
wholly-owned subsidiary of Capstar Radio.
NOTE 2 -- CHANCELLOR MERGER AGREEMENT
On August 26, 1998, Capstar Broadcasting and Chancellor Media Corporation
("Chancellor Media"), an affiliate of Capstar Broadcasting, entered into a
merger agreement (the merger agreement was subsequently amended and restated
effective April 29, 1999). Under the merger agreement:
- Chancellor Media will acquire Capstar Broadcasting in a merger between a
wholly-owned subsidiary of Chancellor Media and Capstar Broadcasting,
with Capstar Broadcasting surviving the merger as a wholly-owned
subsidiary of Chancellor Media;
- each share of Class A Common Stock, Class B Common Stock and Class C
Common Stock will represent 0.4955 shares of common stock in Chancellor
Media;
- each Capstar Broadcasting stock option and warrant that is outstanding
and unexercised immediately prior to the merger will be assumed by
Chancellor Media and will thereafter be an option or warrant to acquire
0.4955 shares of common stock of Chancellor Media;
- each share of Chancellor Media common stock will remain equal to one
share of Chancellor Media common stock; and
- each share of Chancellor Media preferred stock will remain equal to one
share of Chancellor preferred stock.
The completion of the merger depends on the satisfaction of a number of
conditions. There can be no assurance that all of the conditions to the merger
will be satisfied. Either company may waive compliance with the conditions at
its discretion if permitted by law.
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<PAGE> 7
CAPSTAR COMMUNICATIONS, INC. AND SUBSIDIARIES
(FORMERLY KNOWN AS SFX BROADCASTING, INC. AND SUBSIDIARIES)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 3 -- RECENT ACCOUNTING PRONOUNCEMENT
In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities," which establishes accounting and reporting
standards for derivative instruments and for hedging activities. It requires
that an entity recognize all derivatives as either assets or liabilities in the
statement of financial position and measure those instruments at fair value.
This pronouncement is effective for all fiscal quarters of fiscal years
beginning after June 15, 1999. Management does not believe the implementation of
this accounting pronouncement will have a material effect on its consolidated
financial statements.
NOTE 4 -- COMMITMENTS AND CONTINGENCIES
On August 29, 1997, two lawsuits were commenced against SFX Broadcasting,
Inc. and its directors in the Court of Chancery of the State of Delaware (New
Castle County). The plaintiffs in the lawsuits are Harbor Finance Partners (C.A.
No. 15891) and Steven Lieberman (C.A. No. 15901). The complaints are identical
and allege that the consideration to be paid as a result of the SFX acquisition
by Capstar Broadcasting to the holders of SFX's Class A common stock is unfair
and that the individual defendants have breached their fiduciary duties. Both
complaints seek to have the actions certified as class actions and seek to
enjoin the SFX acquisition by Capstar Broadcasting or, in the alternative,
monetary damages. The defendants have filed answers denying the allegations, and
discovery has commenced. The parties have agreed that the lawsuits may be
consolidated in one action entitled In Re SFX Broadcasting, Inc. Shareholders
Litigation (C.A. No. 15891). On March 17, 1998, the parties entered into a
Memorandum of Understanding, pursuant to which the parties have reached an
agreement providing for a settlement of the action. Pursuant to the settlement,
SFX has agreed not to seek an amendment to the merger agreement to reduce the
consideration to be received by the stockholders of SFX in the SFX acquisition
by Capstar Broadcasting in order to offset SFX Entertainment's indemnity
obligations. The settlement also provides for SFX to pay plaintiff's counsel an
aggregate of $950,000, including all fees and expenses as approved by the court.
The settlement is conditioned on the consummation of the SFX acquisition by
Capstar Broadcasting (which has been consummated), completion of the
confirmatory discovery (which has been completed) and approval of the court.
Pursuant to the settlement, the defendants have denied, and continue to deny,
that they have acted in bad faith or breached any fiduciary duty. The parties
expect to submit the settlement documents soon to the court for its approval.
However, there can be no assurance that the court will approve the settlement.
On July 13, 1998, Noddings Investment Group, Inc. and Noddings Warrant
Limited Partnership filed Civil Action No. 16538 in the Court of Chancery of the
State of Delaware in and for New Castle County against Capstar Communications.
Noddings alleges that Capstar Communications breached a March 23, 1994, Warrant
Agreement that Noddings contends requires Capstar Communications to permit
Noddings to exercise warrants in exchange for cash and shares of stock of SFX
Entertainment, Inc. Specifically, Noddings alleges that Capstar Communications
has violated the Warrant Agreement by permitting Noddings to receive cash in
exchange for its warrants, but refusing to convey shares of stock of SFX
Entertainment. In addition to suing on its own behalf, Noddings is seeking to
prosecute the action on behalf of a putative class comprised of all persons who
owned equivalent warrants on April 21, 1998 (the date immediately following the
record date of the distribution of stock of SFX Entertainment to holders of the
stock of SFX) and their transferees and successors in interest. Noddings has
requested that the Court:
- declare that on the exercise of its warrants Capstar Communications
transmit to plaintiffs and members of the class that it seeks to
represent $22.3725 in cash per warrant and 0.2983 shares of common stock
of SFX Entertainment per warrant,
- require Capstar Communications to pay 0.2983 shares of common stock of
SFX Entertainment per warrant and, (if not previously paid) $22.3725 in
cash, to any putative class member that has exercised or exercises
warrants after April 20, 1998,
7
<PAGE> 8
CAPSTAR COMMUNICATIONS, INC. AND SUBSIDIARIES
(FORMERLY KNOWN AS SFX BROADCASTING, INC. AND SUBSIDIARIES)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
- in the alternative, award plaintiffs and members of the putative class
monetary damages in an amount to be determined at trial, and
- award costs and attorneys' fees.
In March 1999, the court issued an opinion dismissing two of Noddings'
counts and granted summary judgment in favor of Noddings on one count. The court
held that Noddings is entitled to 0.2983 shares of SFX Entertainment, Inc. stock
per warrant. Both parties have filed a notice of appeal.
Capstar Communications is subject to various legal proceedings and claims
that arise in the ordinary course of its business. In the opinion of management,
the amount of ultimate liability with respect to these actions will not have a
material impact on the consolidated financial position or results of operations
or cash flows of Capstar Communications.
8
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
GENERAL
In Management's Discussion and Analysis, management explains the general
financial condition and the results of operations of Capstar Communications
including:
- what factors affect Capstar Communications' business;
- what Capstar Communications' earnings and costs were in 1998 and 1999;
- why those earnings and costs were different from the period before;
- where Capstar Communications' earnings come from;
- how all of this affects Capstar Communications' overall financial
condition;
- what Capstar Communications' expenditures for acquisitions and other
capital needs were in the first quarter of 1999 and what management
expects them to be for the remainder of the year; and
- where cash will come from to pay for future capital expenditures and debt
service obligations.
As you read this Management's Discussion and Analysis, it may be helpful to
refer to Capstar Communications' Consolidated Financial Statements on pages 3
through 5. In Management's Discussion and Analysis, management analyzes and
explains the changes in the specific line items in the consolidated statements
of operations and other data. You should know that these changes are not
historically comparable because of the numerous acquisitions and dispositions
that Capstar Communications completed in 1998. Management's analysis may be
important to you in making decisions about your investments in Capstar
Communications.
Capstar Broadcasting and Chancellor Media have agreed to merge. The merger
with Chancellor Media may impact many of the matters discussed in this
Management's Discussion and Analysis, including earnings, results of operations,
expenses, liquidity and capital resources.
Management believes that it is important to discuss advertising revenues
and seasonal fluctuations of advertising revenues, two factors that have a
strong influence on Capstar Communications' business performance:
- Advertising Revenues. Capstar Communications' revenues are derived
primarily from the sale of time to local and national advertisers. These
revenues are affected by the advertising rates that Capstar
Communications is able to charge and the number of advertisements that
can be broadcast without jeopardizing listener levels (and resulting
ratings). Advertising rates tend to be based upon demand for a station's
advertising inventory and its ability to attract audiences in targeted
demographic groups, as measured principally by Arbitron. Capstar
Communications attempts to maximize revenues for each of its stations by
adjusting rates based upon local market conditions, controlling
advertising inventory and creating demand and audience ratings.
- Seasonality. Seasonal revenue fluctuations are common in the radio
broadcasting industry and are due primarily to fluctuations in
advertising expenditures by local and national advertisers. Advertising
expenditures are typically lowest in the first calendar quarter and
highest in the second and fourth calendar quarters of each year. Capstar
Communications' operating results in any period may be affected by the
occurrence of advertising and promotion expenses that do not produce
commensurate revenues in the period in which the expenditures are made.
Because Arbitron reports audience ratings on a quarterly basis, Capstar
Communications' ability to realize revenues as a result of increased
advertising and promotional expenses and any resulting audience ratings
improvements may be delayed for several months.
In the following analysis, management discusses broadcast cash flow and
EBITDA (before settlement of options and warrants, LMA fees, nonrecurring and
unusual charges and loss from operations to be distributed
9
<PAGE> 10
to shareholders) because they are measures widely used in the broadcasting
industry to evaluate a radio company's operating performance. Broadcast cash
flow consists of operating income before depreciation, amortization, duopoly
integration costs and acquisition related costs, corporate expenses, LMA fees,
settlement of options and warrants and nonrecurring and unusual charges. EBITDA
(before settlement of options and warrants, LMA fees, nonrecurring and unusual
charges and loss from operations to be distributed to shareholders) consists of
operating income before depreciation, amortization, duopoly integration costs
and acquisition related costs, LMA fees, settlement of options and warrants and
nonrecurring and unusual charges. You should know that broadcast cash flow and
EBITDA (before settlement of options and warrants, LMA fees, nonrecurring and
unusual charges and loss from operations to be distributed to shareholders) are
not measures of performance calculated in accordance with GAAP. Accordingly, you
should also review Capstar Communications' operating income, cash flows from
operating activities and other income or cash flow statements that are prepared
in accordance with GAAP.
RESULTS OF OPERATIONS
The following table presents summary supplemental historical consolidated
financial data of Capstar Communications for the three months ended March 31,
1998 and 1999 and should be read in conjunction with the consolidated financial
statements of Capstar Communications and the related notes included elsewhere in
this Quarterly Report on Form 10-Q.
<TABLE>
<CAPTION>
FOR THE THREE MONTHS
ENDED MARCH 31,
-----------------------
1998 1999
---------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
OPERATING DATA:
Net revenue............................................... $ 65,751 $85,221
Station operating expenses................................ 44,636 49,281
Corporate expenses........................................ 1,569 1,681
Depreciation, amortization, duopoly integration costs and
acquisition related costs.............................. 10,653 23,060
Nonrecurring and unusual charges, including adjustments to
broadcast rights agreements............................ 24,974 --
Operating income (loss)................................... (16,219) 11,124
Interest expense.......................................... 19,190 13,312
Loss from continuing operations........................... (35,417) (1,624)
Net loss attributable to common stock..................... $(143,343) $(5,466)
OTHER DATA:
Broadcast cash flow....................................... $ 21,115 $35,940
Broadcast cash flow margin................................ 32.1% 42.2%
EBITDA from continuing operations (before settlement of
options and warrants, LMA fees, nonrecurring and
unusual charges and loss from operations to be
distributed to shareholders)........................... 19,546 34,259
</TABLE>
THREE MONTHS ENDED MARCH 31, 1998 COMPARED TO THREE MONTHS ENDED MARCH 31, 1999
Net Revenue. Due to the impact of synergies realized through association
with Capstar Broadcasting, net revenue increased $19.5 million or 29.6% to $85.2
million for the three months ended March 31, 1999 from $65.7 million for the
three months ended March 31, 1998. On a same station basis, for stations owned
and operated as of March 31, 1999, net revenue increased $7.6 million or 9.8% to
$85.2 million from $77.6 million in the three months ended March 31, 1998. The
increase is primarily attributable to growth in the sale of time to local and
national advertisers.
Station Operating Expenses. Due to the impact of the various acquisitions
and dispositions that Capstar Communications has completed, station operating
expenses increased $4.7 million or 10.4% to $49.3 million for the three months
ended March 31, 1999 from $44.6 million for the three months ended March 31,
1998.
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<PAGE> 11
The increase was attributable to the station operating expenses of the radio
acquisitions during 1998. On a same station basis, for stations owned or
operated as of March 31, 1999, operating expenses increased $4.0 million or 8.8%
to $49.3 million from $45.3 million in the period ended March 31, 1998, and as a
percentage of revenue, on a same station basis, operating expenses declined from
58.4% in 1998 to 57.8% in 1999 as a result of cost saving measures implemented
by the Company in connection with its acquisitions and the spreading of fixed
costs over a larger revenue base.
Corporate Expenses. Corporate expenses increased $112,000 or 7.1% to $1.7
million for the three months ended March 31, 1999 from $1.6 million for the
three months ended March 31, 1998.
Other Operating Expenses. Depreciation and amortization increased $12.4
million or 116.5% to $23.1 million for the three months ended March 31, 1999
from $10.7 million for the three months ended March 31, 1998 primarily due to
the various acquisitions consummated during 1998.
Other Expenses (Income). Interest expense decreased $5.9 million or 30.6%
to $13.3 million in the three months ended March 31, 1999 from $19.2 million
during the same period in 1998 primarily due to lower levels of indebtedness and
lower effective interest rates.
Loss From Continuing Operations. Income (loss) from continuing operations
decreased by $33.8 million to a $1.6 million loss for the three months ended
March 31, 1999 from a $35.4 million loss for the three months ended March 31,
1998.
Broadcast Cash Flow. Due to the impact of the various acquisitions and
dispositions that the Company has completed, broadcast cash flow increased $14.8
million or 70.2% to $35.9 million for the three months ended March 31, 1999 from
$21.1 million for the three months ended March 31, 1998. The broadcast cash flow
margin was 42.2% for the three months ended March 31, 1999 compared to 32.1% for
the three months ended March 31, 1998 due primarily to cost saving measures
implemented by Capstar Communications in connection with its acquisitions, the
spreading of fixed costs over a larger revenue base and significant LMA fees
earned during the period.
EBITDA (before settlement of options and warrants, LMA fees, nonrecurring
and unusual charges and loss from operations to be distributed to shareholders).
Due to the impact of the various acquisitions and dispositions that Capstar
Communications has completed, EBITDA (before settlement of options and warrants,
LMA fees, nonrecurring and unusual charges and loss from operations to be
distributed to shareholders) increased $14.7 million or 75.3% to $34.2 million
for the three months ended March 31, 1999 from $19.5 million for the three
months ended March 31, 1998. The EBITDA (before settlement of options and
warrants, LMA fees, nonrecurring and unusual charges and loss from operations to
be distributed to shareholders) margin for the three months ended March 31, 1999
was 40.2% compared to 29.7% for the three months ended March 31, 1998.
LIQUIDITY AND CAPITAL RESOURCES
Capstar Communications' acquisition strategy requires a great deal of
capital. Capstar Communications has historically used the proceeds of bank debt,
debt offerings, and cash flow from operations to fund the implementation of its
acquisition strategy. Capstar Communications' business has generated sufficient
cash flow from operations to finance its existing operations and debt service
requirements, and management anticipates that this will continue to be the case.
A brief summary of each of Capstar Communications' outstanding debt or preferred
equity instruments follows.
Capstar Communications has outstanding its 10 3/4% CCI Notes and its
11 3/8% CCI Notes. Capstar Communications pays interest of approximately $15.8
million on the 10 3/4% CCI Notes semi-annually on May 15 and November 15 of each
year. The 10 3/4% CCI Notes mature on May 15, 2006. Capstar Communications pays
interest of approximately $32,000 on the 11 3/8% CCI Notes semi-annually on
April 1 and October 1 of each year. The 11 3/8% CCI Notes mature on October 1,
2000. As of March 31, 1999, the outstanding principal balances were $322.6
million and $566,000 on the 10 3/4% CCI Notes and 11 3/8% CCI Notes,
respectively.
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<PAGE> 12
Capstar Communications has outstanding its Series E Cumulative Exchangeable
Preferred Stock ("CCI Series E Preferred Stock"). Capstar Communications is
required to pay dividends on the CCI Series E Preferred Stock semi-annually on
January 15 and July 15 of each year at the rate per share of $12.625 per year.
Until January 15, 2002, Capstar Communications may pay dividends either in cash
or in additional shares of CCI Series E Preferred Stock. Since July 15, 1998,
Capstar Communications has paid the required dividend by issuing additional
shares. Capstar Communications intends to continue to pay the dividend in
additional shares, rather than cash, through January 15, 2002. As of May 1,
1999, 1,346,091 shares of the CCI Series E Preferred Stock were issued and
outstanding with a liquidation preference equal to $100.00 per share or
approximately $134.6 million, excluding accrued dividends of $5.0 million.
The merger with Chancellor Media will result in a change of control under
Capstar Communications' indebtedness and preferred stock, and Capstar
Communications will be obligated to purchase the notes and the preferred stock
from the holders thereof at an offer price in cash equal to 101% of the
aggregate principal amount or liquidation preference, as applicable, plus
accrued and unpaid interest or dividends, as applicable, if any, thereon.
Capstar Communications anticipates that it will pay for the change in control
offers from cash from operating activities.
In connection with the sales of assets and spin-off SFX Entertainment,
Inc., Capstar Communications incurred an estimated federal income tax liability
of approximately $93.0 million. SFX Entertainment, Inc. indemnified Capstar
Communications for all of the estimated tax liability. These estimated federal
income taxes were paid in full prior to March 31, 1999.
Chancellor Media is providing services for ten large market stations owned
by Capstar Communications under separate LMAs with Capstar Broadcasting for
approximately $49.4 million per year. In addition, Chancellor Media has agreed
to acquire such stations in exchange for radio stations to be identified by
Capstar Broadcasting over a three-year period beginning in May 1998, with
corresponding decreases in the amount of the LMA fees as stations are exchanged.
From January 1 to March 31, 1999, Chancellor Media paid Capstar Broadcasting
approximately $12.4 million in LMA fees. For the remainder of 1999, Capstar
Broadcasting expects to receive approximately $37.0 in LMA fees from Chancellor
Media. During the pendency of the merger with Chancellor Media, Capstar
Broadcasting does not anticipate effecting any exchanges with Chancellor Media.
Chancellor Media is currently assessing whether the terms of the letter
agreement will be modified upon the consummation of the merger with Chancellor
Media.
In May 1998, Capstar Communications entered into a loan for approximately
$441.4 million with Capstar Radio, which is payable on the earlier of demand or
May 31, 2005. The loan consists of a $1.4 billion revolver. Borrowings under the
loan bear interest at the per annum interest rate available to Capstar Radio
under its credit facility for revolving loans that are Eurodollar loans with a
three month interest period applicable thereto. Interest is payable quarterly
commencing on August 31, 1998, and thereafter on the last day of each November,
February, May and August during the term of the loan and at maturity. Advances
under the loan may be made only if, among other things, at the time such advance
is made (both before and after giving effect thereto) such additional
indebtedness is permitted pursuant to the terms of the indenture governing the
10 3/4% CCI Notes and the certificate of designation governing the CCI Series E
Preferred Stock. As of March 31, 1999, Capstar Communications had borrowings of
approximately $369.3 million outstanding under the loan with a weighted average
effective interest rate of 7.32% per annum. During the three months ended March
31, 1999, Capstar Communications paid approximately $6.3 million in interest to
Capstar Radio.
In addition to debt service and tax liabilities, Capstar Communications'
principal liquidity requirements in 1999 will be for working capital and general
corporate purposes, including capital expenditures estimated at $20.0 million,
to consummate its pending acquisitions and, as appropriate opportunities arise,
to acquire additional radio stations or complementary broadcast-related
businesses. Capstar Communications believes that cash from operating activities
and LMA fees from Chancellor Media, should be sufficient to permit Capstar
Communications to meet its obligations. In the future, Capstar Communications
may require additional financing, either in the form of additional debt or
equity securities. Capstar Communications evaluates potential acquisition
opportunities on an on-going basis and has had, and continues to have,
12
<PAGE> 13
preliminary discussions concerning the purchase of additional stations. Capstar
Communications expects that in connection with the financing of future
acquisitions, it may consider disposing of stations in its current markets.
Capstar Communications is a holding company with no significant assets other
than the capital stock of its direct and indirect subsidiaries. Consequently,
its sole source of cash from which to service indebtedness is dividends
distributed or other payments made to it by its operating subsidiaries. The
instruments governing Capstar Communications' indebtedness contain certain
covenants that restrict or prohibit the ability of subsidiaries to pay dividends
and make other distributions. These restrictions are not anticipated to have an
impact on Capstar Communications' ability to meet its cash obligations.
Upon completion of the SFX merger, Capstar Communications became subject to
the restrictive covenants found in the instruments governing the outstanding
indebtedness of Capstar Broadcasting, Capstar Partners and Capstar Radio,
including Capstar Broadcasting's outstanding note payable to Chancellor Media,
Capstar Partner's 12 3/4% Senior Discount Notes due 2009 and its 12% Senior
Exchangeable Preferred Stock, par value $.01 per share, Capstar Radio's 9 1/4%
Senior Subordinated Notes due 2007 and Capstar Broadcasting's credit facility.
Net cash provided by operating activities was approximately $20.7 million
and $3.9 million for the three months ended March 31, 1998 and 1999,
respectively. Changes in Capstar Communications' net cash provided by operating
activities are primarily the result of completed acquisitions and station
operating agreements entered into during the periods and their effects on income
from operations and working capital requirements.
Net cash used in investing activities was $378.8 million and $3.4 million
and for the three months ended March 31, 1998 and 1999, respectively. Net cash
provided by financing activities was $459.9 million and $3.6 million for the
three months ended March 31, 1998 and 1999, respectively. These cash flows
primarily reflect borrowings, capital contributions and expenditures for
stations acquisitions and dispositions.
FORWARD LOOKING STATEMENTS
This Quarterly Report on Form 10-Q contains forward looking statements. The
words "anticipate," "believe," "expect," "plan," "intend," "estimate,"
"project," "foresee," "will," "could," "may" and similar expressions are
intended to identify forward looking statements. Such statements reflect Capstar
Communications' current views with respect to future events and financial
performance and involve risks and uncertainties, including without limitation
business conditions and growth in the industry and the general economy,
competitive factors, changes in interest rates, the failure or inability to
renew one or more of Capstar Communications' broadcasting licenses, and
regulatory developments affecting Capstar Communications' operations and the
acquisitions and dispositions described elsewhere in this Quarterly Report on
Form 10-Q. Should one or more of these risks or uncertainties occur, or should
underlying assumptions prove incorrect, actual results may vary materially and
adversely from those indicated.
RECENT ACCOUNTING PRONOUNCEMENT
In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities," which establishes accounting and reporting
standards for derivative instruments and for hedging activities. It requires
that an entity recognize all derivatives as either assets or liabilities in the
statement of financial position and measure those instruments at fair value.
This pronouncement is effective for all fiscal quarters of fiscal years
beginning after June 15, 1999. Management does not believe the implementation of
this accounting pronouncement will have a material effect on its consolidated
financial statements.
IMPACT OF THE YEAR 2000 ISSUE
The Year 2000 issue concerns the inability of computer programs and
embedded computer chips to properly recognize and process date sensitive
information when the year changes to 2000, or "00." Systems that do not properly
recognize such information could generate erroneous data or cause a system to
fail causing a disruption in the operations of a company.
13
<PAGE> 14
A company-wide inventory and assessment of Capstar Communications' systems
and operations began in December 1996, and is continuing, to identify any
software or hardware systems, equipment with embedded chips or processors, and
non-information technology systems, such as telephone, voicemail and HVAC
systems, which do not properly recognize dates after December 31, 1999.
Concurrently with its company-wide assessment, Capstar Communications is
developing and is in the process of implementing its Year 2000 compliance
program. Capstar Communications is utilizing both internal and external
resources to identify its mission critical systems and, upon identification, to
remediate or replace and test systems for Year 2000 compliance. In addition, as
part of its acquisition and consolidation strategy, Capstar Communications
assesses and, as necessary, remediates or replaces the systems of acquired
companies and stations with Year 2000 compliant systems.
Initially, Capstar Communications has identified StarSystem(TM), its
digital automation systems, its advertising scheduling and billing systems and
its accounting systems as the mission critical systems to evaluate for Year 2000
compliance. The list of Capstar Communications' mission critical systems may be
expanded, however, upon completion of its company-wide inventory and assessment.
If remediations or replacements are not made, are not completed on time, or are
insufficient to prevent systems failures or other disruptions, the Year 2000
issue could have a material adverse impact on Capstar Communications' results of
operations and financial condition.
Management has determined that the software underlying StarSystem(TM) is
Year 2000 compliant. StarSystem's(TM) wide area computer network is, however,
dependent on the systems of Capstar Communications' telecommunications services
providers. Capstar Communications sent a questionnaire to each of its
telecommunications services providers asking it to update Capstar Communications
on the status of its Year 2000 compliance. Based on the telecommunications
services providers responses to the questionnaire, the providers appear to be
Year 2000 compliant.
Management has been assured by its vendors that Capstar Communications'
digital automation systems are Year 2000 compliant. Capstar Communications has
tested over 50% of these systems to insure their Year 2000 compliance and
expects to complete testing of all of these systems by the end of 1999.
Capstar Communications employs advertising scheduling and billing systems
at each of its stations. Capstar Communications has received Year 2000
compliance certificates from the vendors providing the software applications
underlying Capstar Communications' existing advertising scheduling and billing
systems, certifying that such applications are Year 2000 compliant. Not all of
the hardware underlying Capstar Communications' existing advertising scheduling
and billing systems are Year 2000 compliant. As part of Capstar Communications'
capital improvement program, Capstar Communications is replacing its non-Year
2000 compliant advertising scheduling and billing systems. Management estimates
that such hardware replacements will be completed by the end of August 1999 at a
total cost of approximately $90,000.
Capstar Communications utilizes purchased software programs for its
financial applications and office automation. Capstar Communications has
received Year 2000 compliance certificates from the vendors providing these
software packages, certifying that such packages are Year 2000 compliant.
Capstar Communications is currently testing these systems to insure their Year
2000 compliance.
Capstar Communications has determined that some of its telephone systems
are not Year 2000 compliant. As part of Capstar Communications' Year 2000
compliance efforts and its capital improvement program, management intends to
remediate or replace such telephone systems by the end of September 1999 at a
current estimated cost of approximately $150,000.
In addition to identifying, assessing and remediating or replacing its
mission critical systems, Capstar Communications is assessing its exposure from
external sources to Year 2000 failures. Capstar Communications relies on
third-party providers for key services such as telecommunications and utilities.
Interruption of these services could, in management's view, have a material
adverse impact on the operations of Capstar Communications. Capstar
Communications has begun sending questionnaires to each of these and other
significant third party providers asking them to update Capstar Communications
on the status of their Year 2000 compliance. Until those questionnaires are
returned and reviewed, Capstar Communications will be
14
<PAGE> 15
unable to fully assess the potential for disruption in its programming and
operations arising from this third party risk. If Capstar Communications does
not receive reasonable assurances regarding Year 2000 compliance from any
provider of these services, Capstar Communications will then develop contingency
plans, to the extent possible, to address its exposure.
Costs specifically associated with ensuring that Capstar Communications'
systems and the systems of third parties on which Capstar Communications is
dependent are Year 2000 compliant are currently expected to be approximately
$1.0 million, of which approximately $700,000 has been incurred to date. These
cost estimates are subject to change once Capstar Communications has fully
assessed its systems and responses are obtained from third party vendors and
service providers. Any change in cost may be material. Funding of these costs is
anticipated to come from cash flows generated by business operations and/or
borrowings under Capstar Communications' credit facility.
Capstar Communications is in the process of identifying the most reasonably
likely worst case scenarios that may affect its operations due to Year 2000
noncompliance of Capstar Communications' systems or the systems of third
parties. Initially, Capstar Communications believes that the failure of its
advertising scheduling and billing systems and the temporary loss of power at
some of its stations due to Year 2000 noncompliance are the most reasonably
likely worst case scenarios. Many of Capstar Communications' stations and
transmitter sites currently have on-site generators in the event of power
outages. As part of Capstar Communications' capital improvement program,
management has begun installation of generators at each of its remaining
stations and transmitter sites and expects to have approximately 98% coverage of
its stations and transmitter sites by year end. Capstar Communications believes
that upgrade of the hardware on its existing advertising scheduling and billing
systems and the installation of generators at substantially all of its stations
will resolve possible disruptions in the business operations of Capstar
Communications that would result from such risks. Capstar Communications may
identify additional worst case scenarios once it has fully assessed its mission
critical systems and obtained responses from third party vendors and service
providers. Capstar Communications expects to develop other contingency plans to
mitigate the possible disruption in business operations that may result from
Capstar Communications' systems or the systems of third parties that are not
Year 2000 compliant.
Based on the nature of Capstar Communications' business and dispersed
geographical locations, Capstar Communications believes that it may experience
some disruption in its business due to the impact of the Year 2000 issue.
Management presently believes, however, that Capstar Communications is taking
appropriate steps to assess and control its Year 2000 issues. If Capstar
Communications does not complete all phases of its Year 2000 compliance program
and remediations or replacements are not made, are not completed on time, or are
insufficient to prevent systems failures or other disruptions, the Year 2000
issue could have a material adverse impact on Capstar Communications' results of
operations and financial condition. Capstar Communications does not currently
have any contingency plans in the event that it does not complete all phases of
its Year 2000 compliance program. Capstar Communications is continually
assessing the status of completion of its Year 2000 compliance program and, as
necessary, will determine whether any such contingency plans are necessary.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK.
Capstar Communications has not entered into derivative financial
instruments, derivative commodity instruments or other similar instruments.
15
<PAGE> 16
PART II -- OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
On August 29, 1997, two lawsuits were commenced against SFX Broadcasting,
Inc. and its directors in the Court of Chancery of the State of Delaware (New
Castle County). The plaintiffs in the lawsuits are Harbor Finance Partners (C.A.
No. 15891) and Steven Lieberman (C.A. No. 15901). The complaints are identical
and allege that the consideration to be paid as a result of the SFX acquisition
by Capstar Broadcasting to the holders of SFX's Class A common stock is unfair
and that the individual defendants have breached their fiduciary duties. Both
complaints seek to have the actions certified as class actions and seek to
enjoin the SFX acquisition by Capstar Broadcasting or, in the alternative,
monetary damages. The defendants have filed answers denying the allegations, and
discovery has commenced. The parties have agreed that the lawsuits may be
consolidated in one action entitled In Re SFX Broadcasting, Inc. Shareholders
Litigation (C.A. No. 15891). On March 17, 1998, the parties entered into a
Memorandum of Understanding, pursuant to which the parties have reached an
agreement providing for a settlement of the action. Pursuant to the settlement,
SFX has agreed not to seek an amendment to the merger agreement to reduce the
consideration to be received by the stockholders of SFX in the SFX acquisition
by Capstar Broadcasting in order to offset SFX Entertainment's indemnity
obligations. The settlement also provides for SFX to pay plaintiff's counsel an
aggregate of $950,000, including all fees and expenses as approved by the court.
The settlement is conditioned on the consummation of the SFX acquisition by
Capstar Broadcasting (which has been consummated), completion of the
confirmatory discovery (which has been completed) and approval of the court.
Pursuant to the settlement, the defendants have denied, and continue to deny,
that they have acted in bad faith or breached any fiduciary duty. The parties
have completed confirmatory discovery in connection with the settlement. The
parties expect to submit the settlement documents soon to the court for its
approval. However, there can be no assurance that the court will approve the
settlement.
On July 13, 1998, Noddings Investment Group, Inc. and Noddings Warrant
Limited Partnership filed Civil Action No. 16538 in the Court of Chancery of the
State of Delaware in and for New Castle County against Capstar Communications.
Noddings alleges that Capstar Communications breached a March 23, 1994, Warrant
Agreement that Noddings contends requires Capstar Communications to permit
Noddings to exercise warrants in exchange for cash and shares of stock of SFX
Entertainment, Inc. Specifically, Noddings alleges that Capstar Communications
has violated the Warrant Agreement by permitting Noddings to receive cash in
exchange for its warrants, but refusing to convey shares of stock of SFX
Entertainment. In addition to suing on its own behalf, Noddings is seeking to
prosecute the action on behalf of a putative class comprised of all persons who
owned equivalent warrants on April 21, 1998 (the date immediately following the
record date of the distribution of stock of SFX Entertainment to holders of the
stock of SFX) and their transferees and successors in interest. Noddings has
requested that the Court:
- declare that on the exercise of its warrants Capstar Communications
transmit to plaintiffs and members of the class that it seeks to
represent $22.3725 in cash per warrant and 0.2983 shares of common stock
of SFX Entertainment per warrant,
- require Capstar Communications to pay 0.2983 shares of common stock of
SFX Entertainment per warrant and, (if not previously paid) $22.3725 in
cash, to any putative class member that has exercised or exercises
warrants after April 20, 1998,
- in the alternative, award plaintiffs and members of the putative class
monetary damages in an amount to be determined at trial, and
- award costs and attorneys' fees.
In March 1999, the court issued an opinion dismissing two of Noddings' counts
and granted summary judgment in favor of Noddings on one count. The court held
that Noddings is entitled to 0.2983 shares of SFX Entertainment, Inc. stock per
warrant. Both parties have filed a notice of appeal.
16
<PAGE> 17
Capstar Communications is also involved in various other claims and
lawsuits which are generally incidental to its business. Capstar Communications
is vigorously contesting all of these matters and believes that the ultimate
resolution of these matters and those mentioned above will not have a material
adverse affect on its consolidated financial position or results of operation.
See Part 1 Item 1 Note 4 to the March 31, 1999 Unaudited Financial
statements.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
Pursuant to the written consent in lieu of a meeting dated March 31, 1999,
of SBI Holding Corporation, the sole stockholder of Capstar Communications, SBI
Holding Corporation approved an amendment and restatement of Capstar
Communication's certificate of incorporation.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<C> <S>
2.1 -- Amended and Restated Agreement and Plan of Merger, dated
as of April 29, 1999, among Chancellor Media Corporation,
Capstar Broadcasting Corporation, CBC Acquisition
Company, Inc. and CMC Merger Sub, Inc.(1)
2.2 -- Amended and Restated Voting Agreement, dated as of April
29, 1999, among Chancellor Media Corporation, Capstar
Broadcasting Corporation, Capstar Broadcasting Partners,
L.P., Thomas O. Hicks and R. Steven Hicks.(1)
10.1 -- Second Amendment to Employment Agreement, dated April 29,
1999, between Capstar Broadcasting Corporation and Paul
D. Stone.(1)
10.2 -- Second Amendment to Employment Agreement, dated April 29,
1999, between Capstar Broadcasting Corporation and
William S. Banowsky, Jr.(1)
10.3 -- Second Amendment to Employment Agreement, dated March 15,
1999, between Capstar Broadcasting Corporation and D.
Geoffrey Armstrong.(1)
10.4 -- Third Amendment to Employment Agreement, dated April 29,
1999, between Capstar Broadcasting Corporation and R.
Steven Hicks.(1)
10.5 -- Second Amendment to Warrant, dated April 29, 1999,
between Capstar Broadcasting Corporation and William S.
Banowsky, Jr.(1)
10.6 -- Second Amendment to Warrant, dated April 29, 1999,
between Capstar Broadcasting Corporation and Paul D.
Stone.(1)
10.7 -- Amendment to Warrants, dated April 29, 1999, between
Capstar Broadcasting Corporation and R. Steven Hicks.(1)
10.8 -- Second Amendment to Warrant, dated March 15, 1999,
between Capstar Broadcasting Corporation and D. Geoffrey
Armstrong.(1)
27.1 -- Financial Data Schedule.*
</TABLE>
- ---------------
* Filed herewith.
(1) Incorporated by reference to Capstar Broadcasting's Quarterly Report on Form
10-Q for the three months ended March 31, 1999, File No. 001-14107.
(b) Reports on Form 8-K
No reports on Form 8-K were filed by Capstar Communications during the
three months ended March 31, 1999.
17
<PAGE> 18
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
Capstar Communications, Inc. has duly caused this report to be signed on its
behalf by the undersigned thereunto duly authorized.
CAPSTAR COMMUNICATIONS, INC.
By: /s/ PAUL D. STONE
----------------------------------
Paul D. Stone
Executive Vice President and
Chief Financial Officer
Date: May 17, 1999
18
<PAGE> 19
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<C> <S>
2.1 -- Amended and Restated Agreement and Plan of Merger, dated
as of April 29, 1999, among Chancellor Media Corporation,
Capstar Broadcasting Corporation, CBC Acquisition
Company, Inc. and CMC Merger Sub, Inc.(1)
2.2 -- Amended and Restated Voting Agreement, dated as of April
29, 1999, among Chancellor Media Corporation, Capstar
Broadcasting Corporation, Capstar Broadcasting Partners,
L.P., Thomas O. Hicks and R. Steven Hicks.(1)
10.1 -- Second Amendment to Employment Agreement, dated April 29,
1999, between Capstar Broadcasting Corporation and Paul
D. Stone.(1)
10.2 -- Second Amendment to Employment Agreement, dated April 29,
1999, between Capstar Broadcasting Corporation and
William S. Banowsky, Jr.(1)
10.3 -- Second Amendment to Employment Agreement, dated March 15,
1999, between Capstar Broadcasting Corporation and D.
Geoffrey Armstrong.(1)
10.4 -- Third Amendment to Employment Agreement, dated April 29,
1999, between Capstar Broadcasting Corporation and R.
Steven Hicks.(1)
10.5 -- Second Amendment to Warrant, dated April 29, 1999,
between Capstar Broadcasting Corporation and William S.
Banowsky, Jr.(1)
10.6 -- Second Amendment to Warrant, dated April 29, 1999,
between Capstar Broadcasting Corporation and Paul D.
Stone.(1)
10.7 -- Amendment to Warrants, dated April 29, 1999, between
Capstar Broadcasting Corporation and R. Steven Hicks.(1)
10.8 -- Second Amendment to Warrant, dated March 15, 1999,
between Capstar Broadcasting Corporation and D. Geoffrey
Armstrong.(1)
27.1 -- Financial Data Schedule.*
</TABLE>
- ---------------
* Filed herewith.
(1) Incorporated by reference to Capstar Broadcasting's Quarterly Report on Form
10-Q for the three months ended March 31, 1999, File No. 001-14107.
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> MAR-31-1999
<CASH> 8,380
<SECURITIES> 0
<RECEIVABLES> 63,892
<ALLOWANCES> 4,660
<INVENTORY> 0
<CURRENT-ASSETS> 71,929
<PP&E> 125,974
<DEPRECIATION> 8,194
<TOTAL-ASSETS> 3,493,198
<CURRENT-LIABILITIES> 399,114
<BONDS> 324,622
152,511
0
<COMMON> 1
<OTHER-SE> 1,609,083
<TOTAL-LIABILITY-AND-EQUITY> 3,493,198
<SALES> 0
<TOTAL-REVENUES> 85,221
<CGS> 0
<TOTAL-COSTS> 48,663
<OTHER-EXPENSES> 24,816
<LOSS-PROVISION> 618
<INTEREST-EXPENSE> 13,312
<INCOME-PRETAX> (2,146)
<INCOME-TAX> (522)
<INCOME-CONTINUING> (1,624)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,624)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
