<PAGE> 1
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2000
COMMISSION FILE NUMBER 000-22486
AMFM OPERATING INC.
(AN INDIRECT, WHOLLY-OWNED SUBSIDIARY OF
CLEAR CHANNEL COMMUNICATIONS, INC.)
(Exact Name of Registrant as Specified in its Charter)
DELAWARE
(State or other jurisdiction of
incorporation or organization)
13-3649750
(I.R.S. Employer Identification Number)
1845 WOODALL RODGERS FREEWAY, SUITE 1300, DALLAS, TEXAS 75201
(Address of principal executive offices, including zip code)
(214) 922-8700
(Registrant's telephone number, including area code)
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for 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 each of the issuer's classes of
common stock, as of the latest practicable date: As of November 14, 2000, 1,040
shares of common stock of the Registrant's common stock were outstanding.
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<PAGE> 2
INDEX
<TABLE>
<CAPTION>
PAGE
NUMBER
------
PART I. FINANCIAL INFORMATION
<S> <C> <C>
Item 1. Financial Statements.............................................................. 3
Condensed Consolidated Balance Sheets as of December 31, 1999 and September 30,
2000 (unaudited)................................................................ 3
Condensed Consolidated Statements of Operations for the three months ended
September 30, 1999, the period from July 1 to August 30, 2000 and the period
from August 31 to September 30, 2000 (unaudited)................................ 4
Condensed Consolidated Statements of Operations for the nine months ended
September 30, 1999, the period from January 1 to August 30, 2000 and the period
from August 31 to September 30, 2000 (unaudited)................................ 5
Condensed Consolidated Statement of Equity for the nine months ended September
30, 2000 (unaudited)............................................................ 6
Condensed Consolidated Statements of Cash Flows for the nine months ended
September 30, 1999, the period from January 1 to August 30, 2000 and the period
from August 31 to September 30, 2000 (unaudited)................................ 7
Notes to Condensed Consolidated Financial Statements (unaudited).................. 8
Item 2. Management's Discussion and Analysis of Financial Condition and Results of
Operations...................................................................... 18
Item 3. Quantitative and Qualitative Disclosures About Market Risk........................ 25
PART II. OTHER INFORMATION
Item 1. Legal Proceedings................................................................. 25
Item 6. Exhibits and Reports on Form 8-K.................................................. 26
Signature......................................................................... 29
</TABLE>
2
<PAGE> 3
PART I -- FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
AMFM OPERATING INC. AND SUBSIDIARIES
(AN INDIRECT, WHOLLY-OWNED SUBSIDIARY OF CLEAR CHANNEL COMMUNICATIONS, INC.)
CONDENSED CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS, EXCEPT FOR SHARE DATA)
<TABLE>
<CAPTION>
PRE-MERGER POST-MERGER
------------ -------------
DECEMBER 31, SEPTEMBER 30,
1999 2000
------------ -------------
(UNAUDITED)
ASSETS
<S> <C> <C>
Current assets:
Cash and cash equivalents ......................................................... $ 14,634 $ 29,409
Accounts receivable, less allowance for doubtful accounts of $21,428 in
1999 and $26,628 in 2000 ........................................................ 531,818 511,958
Other current assets .............................................................. 95,358 75,524
------------ ------------
Total current assets ....................................................... 641,810 616,891
Property and equipment, net ......................................................... 471,051 443,623
Intangible assets, net .............................................................. 10,352,530 24,010,909
Restricted cash ..................................................................... -- 350,505
Assets held in trust ................................................................ -- 133,399
Investments in non-consolidated affiliates .......................................... 1,103,442 1,200
Other investments ................................................................... 54,178 1,038,957
Other assets, net ................................................................... 196,858 36,244
------------ ------------
$ 12,819,869 $ 26,631,728
============ ============
LIABILITIES AND SHAREHOLDER'S EQUITY
Current liabilities:
Accounts payable and accrued expenses ............................................. $ 282,171 $ 477,533
Income taxes payable .............................................................. 8,406 413,502
------------ ------------
Total current liabilities .................................................... 290,577 891,035
Clear Channel promissory note ....................................................... -- 1,336,510
Long-term debt ...................................................................... 5,644,517 1,807,612
Deferred tax liabilities ............................................................ 1,716,441 5,289,986
Other liabilities ................................................................... 60,154 39,945
------------ ------------
Total liabilities .......................................................... 7,711,689 9,365,088
------------ ------------
Commitments and contingencies
Shareholder's equity:
Common stock, $.01 par value. 200,000 shares authorized; 1,040 shares issued
and outstanding .................................................................. 1 1
Paid-in capital ................................................................... 5,555,926 17,440,191
Accumulated deficit ............................................................... (447,747) (27,521)
Other comprehensive income (loss) ................................................. -- (146,031)
------------ ------------
Total shareholder's equity ................................................. 5,108,180 17,266,640
------------ ------------
$ 12,819,869 $ 26,631,728
============ ============
</TABLE>
See accompanying notes to condensed consolidated financial statements.
3
<PAGE> 4
AMFM OPERATING INC. AND SUBSIDIARIES
(AN INDIRECT, WHOLLY-OWNED SUBSIDIARY OF CLEAR CHANNEL COMMUNICATIONS, INC.)
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
SEPTEMBER 30, 2000
--------------------------------------
PRE-MERGER PRE-MERGER POST-MERGER
--------------- --------------- ---------------
THREE MONTHS PERIOD FROM PERIOD FROM
ENDED JULY 1 TO AUGUST 31 TO
SEPTEMBER 30, AUGUST 30, SEPTEMBER 30,
1999 2000 2000
--------------- --------------- ---------------
<S> <C> <C> <C>
Gross revenues ........................................ $ 667,300 $ 436,259 $ 194,343
Less agency commissions ............................. 74,863 50,019 21,483
--------------- --------------- ---------------
Net revenues ..................................... 592,437 386,240 172,860
Operating expenses ................................... 303,492 193,351 86,954
Depreciation and amortization ........................ 230,571 149,087 86,763
Corporate general and administrative ................. 13,491 14,247 4,489
Non-cash compensation ................................ 6,148 302 3,151
Merger and non-recurring costs ....................... 30,977 92,411 --
--------------- --------------- ---------------
Operating income (loss) .......................... 7,758 (63,158) (8,497)
Interest expense ..................................... 119,922 69,254 19,743
Gain (loss) on disposition of assets ................. 208,950 1,543,634 (509)
Gain on disposition of representation contracts ...... 9,431 11,930 585
Other income ......................................... 1,222 488 2,387
--------------- --------------- ---------------
Income (loss) before income taxes ................ 107,439 1,423,640 (25,777)
Income tax expense .................................... 40,250 526,249 1,744
--------------- --------------- ---------------
Income (loss) before equity in net loss of
affiliates and extraordinary item.................. 67,189 897,391 (27,521)
Equity in net loss of affiliates ...................... 2,416 15,199 --
--------------- --------------- ---------------
Income (loss) before extraordinary item ............. 64,773 882,192 (27,521)
Extraordinary loss, net of income tax benefit ......... -- 9,253 --
--------------- --------------- ---------------
Net income (loss) ........................... 64,773 872,939 (27,521)
Dividends and accretion on preferred stock ............ 4,256 -- --
--------------- --------------- ---------------
Net income (loss) attributable to common stock ...... 60,517 872,939 (27,521)
Other comprehensive loss, net of tax:
Unrealized holding loss arising during period ....... -- -- 146,031
--------------- --------------- ---------------
Comprehensive income (loss) ........................... $ 60,517 $ 872,939 $ (173,552)
=============== =============== ===============
</TABLE>
See accompanying notes to condensed consolidated financial statements.
4
<PAGE> 5
AMFM OPERATING INC. AND SUBSIDIARIES
(AN INDIRECT, WHOLLY-OWNED SUBSIDIARY OF CLEAR CHANNEL COMMUNICATIONS, INC.)
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30, 2000
--------------------------------------
PRE-MERGER PRE-MERGER POST-MERGER
--------------- --------------- ---------------
NINE MONTHS PERIOD FROM PERIOD FROM
ENDED JANUARY 1 TO AUGUST 31 TO
SEPTEMBER 30, AUGUST 30, SEPTEMBER 30,
1999 2000 2000
--------------- --------------- ---------------
<S> <C> <C> <C>
Gross revenues ........................................ $ 1,552,143 $ 1,747,968 $ 194,343
Less agency commissions ............................. 175,295 202,557 21,483
--------------- --------------- ---------------
Net revenues ..................................... 1,376,848 1,545,411 172,860
Operating expenses ................................... 731,260 819,924 86,954
Depreciation and amortization ........................ 523,454 578,913 86,763
Corporate general and administrative ................. 44,103 43,559 4,489
Non-cash compensation ................................ 6,148 36,137 3,151
Merger and non-recurring costs ....................... 47,321 111,357 --
--------------- --------------- ---------------
Operating income (loss) .......................... 24,562 (44,479) (8,497)
Interest expense ..................................... 301,301 293,133 19,743
Gain (loss) on disposition of assets ................. 221,356 1,574,738 (509)
Gain on disposition of representation contracts ...... 18,284 28,919 585
Other income ......................................... 10,490 1,481 2,387
--------------- --------------- ---------------
Income (loss) before income taxes ................ (26,609) 1,267,526 (25,777)
Income tax expense .................................... 16,060 514,640 1,744
--------------- --------------- ---------------
Income (loss) before equity in net loss of
affiliates and extraordinary item ................. (42,669) 752,886 (27,521)
Equity in net loss of affiliates ...................... 2,616 62,790 --
--------------- --------------- ---------------
Income (loss) before extraordinary item ............. (45,285) 690,096 (27,521)
Extraordinary loss, net of income tax benefit ......... -- 21,602 --
--------------- --------------- ---------------
Net income (loss) ........................... (45,285) 668,494 (27,521)
Dividends and accretion on preferred stock ............ 4,256 -- --
--------------- --------------- ---------------
Net income (loss) attributable to common stock ...... (49,541) 668,494 (27,521)
Other comprehensive loss, net of tax:
Unrealized holding loss arising during period ....... -- -- 146,031
--------------- --------------- ---------------
Comprehensive income (loss) ........................... $ (49,541) $ 668,494 $ (173,552)
=============== =============== ===============
</TABLE>
See accompanying notes to condensed consolidated financial statements.
5
<PAGE> 6
AMFM OPERATING INC. AND SUBSIDIARIES
(AN INDIRECT, WHOLLY-OWNED SUBSIDIARY OF CLEAR CHANNEL COMMUNICATIONS, INC.)
CONDENSED CONSOLIDATED STATEMENT OF EQUITY
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2000
(UNAUDITED)
(IN THOUSANDS, EXCEPT FOR SHARE DATA)
<TABLE>
<CAPTION>
PRE-MERGER
----------------------------------------------------------------------------------
COMMON STOCK RETAINED OTHER TOTAL
----------------- PAID-IN EARNINGS COMPREHENSIVE SHAREHOLDER'S
SHARES AMOUNT CAPITAL (DEFICIT) LOSS EQUITY
------ ------- ------------ ------------ ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Balances at December 31, 1999 ............... 1,040 $ 1 $ 5,555,926 $ (447,747) $ -- $ 5,108,180
Capital contributed from parent ............. -- -- 147,388 -- -- 147,388
Stock option compensation ................... -- -- 36,137 -- -- 36,137
Distributions to parent ..................... -- -- 12,062 -- -- 12,062
Dividends to parent ......................... -- -- -- 2,989 -- 2,989
Net income attributable to common stock ..... -- -- -- 668,494 -- 668,494
------ ------- ------------ ------------ -------- ------------
Balances at August 30, 2000 ................. 1,040 $ 1 $ 5,751,513 $ 223,736 $ -- $ 5,975,250
====== ======= ============ ============ ======== ============
</TABLE>
<TABLE>
<CAPTION>
POST-MERGER
----------------------------------------------------------------------------------
COMMON STOCK OTHER TOTAL
----------------- PAID-IN ACCUMULATED COMPREHENSIVE SHAREHOLDER'S
SHARES AMOUNT CAPITAL (DEFICIT) LOSS EQUITY
------ ------- ------------ ------------ ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Initial capitalization, August 31, 2000 ....... 1,040 $ 1 $ 17,437,040 $ -- $ -- $ 17,437,041
Stock option compensation ..................... -- -- 3,151 -- -- 3,151
Unrealized loss on investments, net of tax .... -- -- -- -- (146,031) (146,031)
Net income attributable to common stock ....... -- -- -- (27,521) -- (27,521)
------ -------- ------------ ------------ ------------ ------------
Balances at September 30, 2000 ................ 1,040 $ 1 $ 17,440,191 $ (27,521) $ (146,031) $ 17,266,640
====== ======== ============ ============ ============ ============
</TABLE>
See accompanying notes to condensed consolidated financial statements.
6
<PAGE> 7
AMFM OPERATING INC. AND SUBSIDIARIES
(AN INDIRECT, WHOLLY-OWNED SUBSIDIARY OF CLEAR CHANNEL COMMUNICATIONS, INC.)
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30, 2000
------------------------------
PRE-MERGER PRE-MERGER POST-MERGER
----------- ----------- -----------
NINE MONTHS PERIOD FROM PERIOD FROM
ENDED JANUARY 1 TO AUGUST 31 TO
SEPTEMBER 30, AUGUST 30, SEPTEMBER 30,
1999 2000 2000
------------- ------------- -------------
<S> <C> <C> <C>
Net cash provided by operating activities ................... $ 242,692 $ 354,266 $ 15,400
----------- ----------- -----------
Cash flows from investing activities:
Acquisitions, net of cash acquired ........................ (495,746) (5,255) --
Proceeds from sale of assets .............................. 744,254 2,325,502 --
Purchases of property and equipment ....................... (30,083) (28,752) (5,866)
Construction of advertising structures .................... (22,716) -- --
Payments made for purchases of representation contracts ... (27,151) (17,397) (4,712)
Payments received from sales of representation contracts .. 18,193 11,938 1,149
Other ..................................................... (20,421) (11,640) (1,200)
----------- ----------- -----------
Net cash provided by (used by) investing activities 166,330 2,274,396 (10,629)
----------- ----------- -----------
Cash flows from financing activities:
Proceeds of long-term debt ................................ 643,000 412,500 --
Borrowings from Clear Channel ............................. -- 540,000 862,388
Payments on long-term debt ................................ (965,799) (3,582,478) (829,013)
Payments on Clear Channel borrowings ...................... -- -- (65,878)
Contributions from parent ................................. 18,577 65,338 --
Dividends to parent ....................................... (14,802) (9,453) --
Distributions to parent ................................... (55,853) (12,062) --
Other ..................................................... (4,242) -- --
----------- ----------- -----------
Net cash used by financing activities ............. (379,119) (2,586,155) (32,503)
----------- ----------- -----------
Increase (decrease) in cash and cash equivalents ............ 29,903 42,507 (27,732)
Cash and cash equivalents at beginning of period ............ 12,256 14,634 57,141
----------- ----------- -----------
Cash and cash equivalents at end of period .................. $ 42,159 $ 57,141 $ 29,409
=========== =========== ===========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
7
<PAGE> 8
AMFM OPERATING INC. AND SUBSIDIARIES
(AN INDIRECT, WHOLLY-OWNED SUBSIDIARY OF CLEAR CHANNEL COMMUNICATIONS, INC.)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(DOLLARS IN THOUSANDS)
1. CLEAR CHANNEL MERGER
On August 30, 2000, Clear Channel Communications, Inc. ("Clear Channel")
acquired AMFM Inc. ("AMFM"), indirect parent of AMFM Operating Inc. (the
"Company" or "AMFM Operating"), pursuant to a merger agreement dated October 2,
1999. As a result of the merger, AMFM stockholders received 0.94 shares of Clear
Channel common stock, on a fixed exchange basis, for each share of AMFM common
stock held on the closing date of the transaction and AMFM became a wholly-owned
subsidiary of Clear Channel. In order to obtain antitrust and Federal
Communications Commission approval for the merger, the Company completed the
divestiture of 58 radio stations in 22 markets for aggregate gross proceeds of
approximately $2,761,000, including the receipt of 36 radio stations and
restricted cash of $440,000 (the "Divestitures"). A pre-tax gain of
approximately $1,401,000 was recognized as a result of the Divestitures. A
further eight stations with a net asset value of $132,883 at August 30, 2000
were placed into trust pending their eventual sale. All eight stations are
currently under contract for sale and awaiting regulatory approval. While in
trust, the Company cannot manage or operate these stations.
The combined company is still in the process of finalizing plans to
restructure the former AMFM operations. To date, the following decisions have
been communicated to affected employees:
o The Dallas, Texas, and Austin, Texas, corporate offices will
be closed by March 31, 2001;
o Chancellor Marketing Group ("CMG"), the Company's full-service
sales promotion firm which develops integrated marketing
programs, will generally be discontinued as a separate entity.
Operations of CMG will be continued by the local radio market,
resulting in the closure of the Richmond, Virginia, corporate
office and most of the separate CMG sales offices;
o Katz Media Group, Inc., the Company's full-service media
representation firm, will restructure its radio operations
into five separate business units;
o StarSystem(TM), the Company's programming distribution
network, will be consolidated into one location in Austin,
Texas;
o The operations of The AMFM Radio Networks, which broadcasts
advertising and syndicated programming, will be integrated
into Premiere Radio Networks, Clear Channel's radio
syndication business; and
o The assets of LAN International's Norway operations will be
sold to local management.
Additionally, the Company is reviewing individual markets to determine where
synergies can be achieved within clusters and by centralizing certain functions
previously performed at the local level. To date, the restructuring has resulted
in the actual or pending termination of approximately 400 employees. It is
expected that the majority of the restructuring will be completed during the
first half of 2001.
A liability for the restructuring of approximately $185,000 has been
recorded in the post-merger opening balance sheet of the Company to account for
these costs. The majority of the costs relate to severance for terminated
employees. Approximately $40,000 of the costs relate to the termination of
various contracts, primarily leases, which the Company will exit as a result of
the restructuring. Between August 30 and September 30, 2000, approximately
$12,871 has been charged against the restructuring liability, primarily relating
to severance.
8
<PAGE> 9
AMFM OPERATING INC. AND SUBSIDIARIES
(AN INDIRECT, WHOLLY-OWNED SUBSIDIARY OF CLEAR CHANNEL COMMUNICATIONS, INC.)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
2. ACCOUNTING POLICY CHANGES
The Company has changed certain accounting policies and estimates used in
the preparation of its financial statements to conform with Clear Channel or due
to other changes in circumstances. The most significant changes are as follows:
Investment in Lamar Advertising Company
To complete the merger, Clear Channel and AMFM entered into a consent decree
with the Department of Justice. The consent decree, among other things, required
the Company to discontinue any and all control over the Company's approximate
28% equity (11% voting) interest in Lamar Advertising Company ("Lamar"). The
Company had previously accounted for its investment in Lamar using the equity
method. Since the Company may no longer exercise significant influence over the
operations of Lamar, the Company will use the cost method for periods subsequent
to the merger date and will account for differences between the cost and fair
market value in accordance with SFAS No. 115, Accounting for Certain Investments
in Debt and Equity Securities. As of September 30, 2000, the Company's
investment in Lamar is carried at fair value based on quoted market prices.
Clear Channel Push-Down Accounting Adjustments
Clear Channel accounted for its acquisition of AMFM as a purchase and
purchase accounting adjustments, including goodwill, have been pushed down and
are reflected in the financial statements of the Company and its subsidiaries
for the period subsequent to August 30, 2000. The financial statements for the
Company for the periods ended prior to August 30, 2000 were prepared using the
Company's historical basis of accounting and are designated "Pre-Merger." The
comparability of the operating results for the Pre-Merger periods and the
periods reflecting push-down accounting are affected by the purchase accounting
adjustments, including the amortization of intangibles over a period of 25
years. Prior to the merger, intangible assets were generally amortized over a
period of 15 years. The purchase accounting adjustments are based on preliminary
estimates and are subject to change.
Investment in Z-Spanish Media
On August 10, 2000, the Company received cash proceeds of $38,440 in return
for approximately 77% of its cost basis investment in Z-Spanish Media, which was
acquired by Entravision Communications Corporation on August 16, 2000, and
recognized a pre-tax gain of approximately $19,261. The Company's investment in
Z-Spanish Media was carried at historical value as of December 31, 1999. Due to
the availability of a quoted market price for Entravision Communications
Corporation, the Company's investment is carried at fair value as of September
30, 2000.
3. BASIS OF PRESENTATION
The accompanying unaudited interim financial statements include the accounts
of AMFM Operating and its subsidiaries. Subsequent to August 30, 2000, AMFM
Operating is an indirect wholly-owned subsidiary of Clear Channel. Prior to
Clear Channel's acquisition of AMFM, AMFM Operating was an indirect wholly-owned
subsidiary of AMFM. All significant intercompany balances and transactions have
been eliminated in consolidation and, in the opinion of management, all
adjustments (consisting of normal recurring accruals) necessary to present
fairly the financial position, results of operations and cash flows have been
recorded. Investments in which the Company owns 20 percent to 50 percent of the
voting common stock or otherwise exercises significant influence over operating
and financial policies of the investee are accounted for using the equity
method. Interim period results are not necessarily indicative of results to be
expected for the year.
These financial statements should be read in conjunction with the
consolidated financial statements and the notes thereto included in the
Company's Annual Report on Form 10-K for the year ended December 31, 1999. The
year-end consolidated balance sheet data was derived from the audited financial
statements, but does not include all disclosures required by generally accepted
accounting principles. Certain reclassifications have been made to prior period
condensed consolidated financial statements to conform to the current period
presentation.
9
<PAGE> 10
AMFM OPERATING INC. AND SUBSIDIARIES
(AN INDIRECT, WHOLLY-OWNED SUBSIDIARY OF CLEAR CHANNEL COMMUNICATIONS, INC.)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
On November 19, 1999, AMFM completed the combination of the outstanding
bonds, bank indebtedness and preferred stock of its direct and indirect
subsidiaries into two entities, Capstar Broadcasting Partners, Inc. ("Capstar
Partners") and AMFM Operating, through a series of related transactions,
including contributions of stock and mergers of its direct and indirect
subsidiaries (the "Corporate Reorganization"). As part of the combination,
Capstar Broadcasting Corporation ("Capstar Broadcasting") was merged into AMFM's
direct subsidiary Chancellor Mezzanine Holdings Corporation. In addition,
Capstar Radio Broadcasting Partners, Inc. ("Capstar Radio") and Chancellor Media
Corporation of Los Angeles ("CMCLA") merged into Capstar Communications, Inc.
("Capstar Communications"), which assumed all of the outstanding bonds and bank
indebtedness of Capstar Radio and CMCLA. The combined entity was renamed AMFM
Operating Inc. and became a wholly-owned subsidiary of Capstar Partners, which
is a wholly-owned subsidiary of AMFM. All of the operating subsidiaries of AMFM,
except for the subsidiaries engaged in AMFM's Internet initiatives, became
directly or indirectly owned by AMFM Operating.
As CMCLA, Capstar Radio and Capstar Communications, a wholly-owned indirect
subsidiary of Capstar Radio, were under the common control of AMFM, the
Corporate Reorganization was accounted for by the Company in a manner similar to
a pooling of interests. The accounts of CMCLA and its subsidiaries are included
in the Company's financial statements as of and for all periods presented
herein. Subsequent to July 13, 1999, the date of AMFM's acquisition of Capstar
Broadcasting, which included Capstar Radio, the Company's financial statements
also include the accounts of Capstar Radio and its subsidiaries. A
reconciliation of net revenues and net income (loss) amounts reported by the
Company's predecessor, CMCLA, prior to the Corporate Reorganization to amounts
presented in the Company's financial statements follows:
<TABLE>
<CAPTION>
THREE MONTHS NINE MONTHS
ENDED ENDED
SEPTEMBER 30, SEPTEMBER 30,
1999 1999
------------- -------------
<S> <C> <C>
Net revenues:
Reported by predecessor .... $ 440,074 $ 1,224,485
Pooling adjustments ........ 152,363 152,363
----------- -----------
As adjusted ................ $ 592,437 $ 1,376,848
=========== ===========
Net income (loss):
Reported by predecessor .... $ 122,941 $ 12,883
Pooling adjustments ........ (58,168) (58,168)
----------- -----------
As adjusted ................ $ 64,773 $ (45,285)
=========== ===========
</TABLE>
4. OTHER ACQUISITIONS AND DISPOSITIONS
Other than the Divestitures, the Company has completed the following
transactions since January 1, 2000:
On January 14, 2000, the Company sold the capital stock of its Puerto Rico
subsidiaries to Spanish Broadcasting System of Puerto Rico, Inc. for $90,860 in
cash and recognized a pre-tax gain of approximately $22,800. The Company owned
and operated eight radio stations in Puerto Rico.
On January 31, 2000, the Company sold radio stations KIOK-FM, KALE-AM and
KEGX-FM in Richland, Washington and KTCR-AM in Kennewick, Washington to New
Northwest Broadcasters II, Inc. for $3,781 in cash.
On January 31, 2000, the Company acquired radio station KQOD-FM in Stockton,
California from Carson Group, Inc. for a purchase price of $5,255 in cash,
including direct acquisition costs. The Company had previously been operating
KQOD-FM under a local marketing agreement effective September 20, 1999.
On June 30, 2000, the Company sold radio station KSKY-AM in Dallas in
exchange for radio station KPRZ-FM (now known as KMOM-FM) in Colorado Springs
plus $7,500 in cash from Bison Media, Inc. and recorded a preliminary pre-tax
gain of approximately $8,300.
10
<PAGE> 11
AMFM OPERATING INC. AND SUBSIDIARIES
(AN INDIRECT, WHOLLY-OWNED SUBSIDIARY OF CLEAR CHANNEL COMMUNICATIONS, INC.)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
On August 25, 2000, the Company acquired KOST-FM and KFI-AM in Los Angeles
plus $1,732 in cash from Cox Radio, Inc. ("Cox") in exchange for 13 of its radio
stations including WEDR-FM in Miami, WFOX-FM in Atlanta, WEFX-FM, WNLK-AM,
WKHL-FM and WSTC-AM in Stamford/Norwalk, WFYV-FM, WAPE-FM, WBWL-AM, WKQL-FM,
WMXQ-FM and WOKV-AM in Jacksonville and WPLR-FM and the local sales rights of a
14th station, WYBC-FM, in New Haven. The Company recorded a pre-tax gain of
approximately $123,619 on the exchange. The Company began programming KOST-FM
and KFI-AM in Los Angeles and Cox began programming the 13 Company stations
under time brokerage agreements effective October 1, 1999.
The foregoing acquisitions were accounted for as purchases. Accordingly, the
accompanying consolidated financial statements include the results of operations
of the acquired entities from their respective dates of acquisition.
A summary of the net assets acquired in the nine-month period ended
September 30, 2000 follows:
<TABLE>
<CAPTION>
NINE MONTHS
ENDED
SEPTEMBER 30,
2000
-------------
<S> <C>
Property and equipment ................ $ 15,464
Intangible assets ..................... 465,291
--------
Total net assets acquired.... 480,755
Less:
Assets transferred in exchange ..... 475,500
--------
Cash paid for acquisitions... $ 5,255
========
</TABLE>
The unaudited pro forma condensed consolidated results of operations data,
as if the acquisitions and dispositions through September 30, 2000, including
the Divestitures, occurred at January 1, 1999, follow:
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30, 2000
-----------------------------
PRE-MERGER PRE-MERGER POST-MERGER
---------- ---------- -------------
NINE MONTHS PERIOD FROM PERIOD FROM
ENDED JANUARY 1 TO AUGUST 31 TO
SEPTEMBER 30, AUGUST 30, SEPTEMBER 30,
1999 2000 2000
------------ ------------ -------------
<S> <C> <C> <C>
Net revenues ................................ $1,359,877 $1,364,478 $ 172,860
Income (loss) before extraordinary item ..... 5,769 766,780 (27,521)
Net income (loss) ........................... 5,769 745,178 (27,521)
</TABLE>
The pro forma results are not necessarily indicative of the financial
results that would have occurred if the transactions had been in effect for the
entire periods presented.
11
<PAGE> 12
AMFM OPERATING INC. AND SUBSIDIARIES
(AN INDIRECT, WHOLLY-OWNED SUBSIDIARY OF CLEAR CHANNEL COMMUNICATIONS, INC.)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
5. CLEAR CHANNEL PROMISSORY NOTE AND LONG-TERM DEBT
Long-term debt consists of the following at December 31, 1999 and September
30, 2000:
<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 30,
1999 2000
------------ -------------
<S> <C> <C>
Clear Channel Promissory Note $ -- $1,336,510
========== ==========
Long-Term Debt:
Senior Credit Facility ........ $2,850,000 $ --
8% Senior Notes ............... 750,000 775,890
9% Notes ...................... 750,000 --
8 1/8% Notes .................. 500,000 522,668
9 3/8% Notes .................. 200,000 --
8 3/4% Notes .................. 200,000 212,536
12 5/8% Notes ................. 164,954 160,006
9 1/4% Notes .................. 129,388 135,837
10 1/2% Notes ................. 100,000 500
10 3/4% Notes ................. 175 175
---------- ----------
Total long-term debt... $5,644,517 $1,807,612
========== ==========
</TABLE>
(a) Clear Channel Promissory Note
On August 30, 2000, the Company repaid its then outstanding senior credit
facility with proceeds from the Divestitures and $540,000 borrowed from Clear
Channel. The $540,000 and additional draws of $862,388 to repay the 9% Senior
Subordinated Notes due 2008 (the "9% Notes"), offset by repayments of $65,878
generated by the Company's operations, are evidenced by a promissory note with
Clear Channel. The promissory note bears interest at 7% per annum and matures on
August 30, 2010 or upon demand. The Company is entitled to borrow additional
funds and to prepay outstanding borrowings, subject to the terms of the
promissory note.
(b) Other Outstanding Debt
At September 30, 2000, the Company has outstanding $750,000 aggregate
principal amount of its 8% Senior Notes due 2008 (the "8% Senior Notes"),
$500,000 aggregate principal amount of its 8 1/8% Senior Subordinated Notes due
2007 (the "8 1/8% Notes"), $200,000 aggregate principal amount of its 8 3/4%
Senior Subordinated Notes due 2007 (the "8 3/4% Notes"), $141,806 aggregate
principal amount of its 12 5/8% Senior Subordinated Exchange Debentures due
2006, $125,775 aggregate principal amount of its 9 1/4% Senior Subordinated
Notes due 2007 (the "9 1/4% Notes"), $500 aggregate principal amount of its 10
1/2% Notes, and $175 aggregate principal amount of its 10 3/4% Senior
Subordinated Notes due 2006.
(c) Debt Redemptions from January 1 to September 30, 2000
Following is a summary of significant changes to the Company's long-term
debt instruments from January 1 to September 30, 2000. Redemptions occurring
prior to the merger with Clear Channel resulted in an extraordinary charge for
the net of tax difference between proceeds and the book value of such debt. The
Company's debt was revalued as of the Clear Channel merger date and subsequent
redemptions have been made with proceeds equal to the revalued amount.
Therefore, no extraordinary charge resulted from redemptions made subsequent to
the Clear Channel merger.
Senior Credit Facility
On August 30, 2000, the Company terminated its senior credit facility
agreement and paid off the outstanding balance with proceeds from the
Divestitures and borrowings of $540,000 under the Clear Channel promissory note.
An extraordinary charge of $9,253 (net of a tax benefit of $4,982) was recorded
in connection with the termination of the agreement.
12
<PAGE> 13
AMFM OPERATING INC. AND SUBSIDIARIES
(AN INDIRECT, WHOLLY-OWNED SUBSIDIARY OF CLEAR CHANNEL COMMUNICATIONS, INC.)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
9% Notes
On September 29, 2000, the Company completed the redemption of all of its
outstanding 9% Notes for an aggregate repurchase cost of $862,388, which
included the principal amount of the notes of $750,000, premiums on the
repurchase of the notes of $79,013, and accrued and unpaid interest on the notes
from April 1 through September 30, 2000 of $33,375. The repurchase was funded
with borrowings under the Clear Channel promissory note.
9 3/8% Notes
On February 15, 2000, the Company completed the redemption of all of its
outstanding 9 3/8% Senior Subordinated Notes due 2004 for an aggregate
repurchase cost of $216,355, which included the principal amount of the notes of
$200,000, premiums on the repurchase of the notes of $9,376, and accrued and
unpaid interest on the notes from October 1, 1999 through February 14, 2000 of
$6,979. An extraordinary charge of $6,094 (net of a tax benefit of $3,282) was
recorded in connection with the redemption.
10 1/2% Notes
On June 2, 2000, the Company completed a cash tender offer to acquire its
outstanding 10 1/2% Senior Subordinated Notes due 2007 (the "10 1/2% Notes").
Prior to the initiation of the tender offer, the Company received the
irrevocable consent of the holder of the majority of the notes to certain
amendments, which eliminated most of the restrictive covenants and certain other
provisions of the indenture pursuant to which the notes were issued. Of the
$100,000 principal value, approximately $99,400 was accepted for payment for an
aggregate repurchase cost of approximately $112,995, including premiums on the
repurchase of the notes of $9,592, accrued and unpaid interest on the notes from
January 16 through June 1, 2000 of $3,972 and other transaction costs of $31. An
extraordinary charge of $6,255 (net of a tax benefit of $3,368) was recorded in
connection with the redemption. On June 29, 2000, the Company purchased an
additional $100 principal amount of the 10 1/2% Senior Subordinated Notes due
2007 for an aggregate purchase price of approximately $114.
(d) Debt Redemptions Subsequent to September 30, 2000
The merger with Clear Channel resulted in a change of control with respect
to the Company's outstanding indebtedness and the Company offered to purchase
the notes from the holders thereof at an offer price in cash equal to 101% of
the aggregate principal amount plus accrued and unpaid interest. The Company
closed the acquisition of accepted tenders on October 6, 2000, and paid for the
change in control offers using borrowings under the Clear Channel promissory
note. The Company repurchased the following notes upon completion of the change
in control offers:
o $78,695, or 10.5%, of the aggregate principal amount of the 8% Senior
Notes for aggregate proceeds of $82,193, including premiums on the
repurchase of the notes of $787 and accrued and unpaid interest on the
notes of $2,711;
o $135,628, or 27.1%, of the aggregate principal amount of the 8 1/8%
Notes for aggregate proceeds of $140,382, including premiums on the
repurchase of the notes of $1,356 and accrued and unpaid interest on
the notes of $3,398; and
o $14,747, or 7.4%, of the aggregate principal amount of the 8 3/4% Notes
for aggregate proceeds of $15,292, including premiums on the repurchase
of the notes of $147 and accrued and unpaid interest on the notes of
$398.
On October 25, 2000, the Company completed the redemption of all of its
outstanding 9 1/4% Notes for an aggregate repurchase cost of $139,290, which
included the principal amount of the notes of $125,775, premiums on the
repurchase of the notes of $9,831, and accrued and unpaid interest on the notes
from July 1 to October 24, 2000 of $3,684. The repurchase was funded with
borrowings under the Clear Channel promissory note.
13
<PAGE> 14
AMFM OPERATING INC. AND SUBSIDIARIES
(AN INDIRECT, WHOLLY-OWNED SUBSIDIARY OF CLEAR CHANNEL COMMUNICATIONS, INC.)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
6. CONTINGENCIES
In September 1998, a stockholder class action complaint was filed in the
Delaware Court of Chancery by a stockholder purporting to act individually and
on behalf of all other persons, other than defendants, who own securities of
AMFM and are similarly situated. The defendants named in the case are AMFM,
Hicks Muse, Thomas O. Hicks, Jeffrey A. Marcus, James E. de Castro, Eric C.
Neuman, Lawrence D. Stuart, Jr., Steven Dinetz, Thomas J. Hodson, Perry Lewis,
John H. Massey and Vernon E. Jordan, Jr. The plaintiff alleges breach of
fiduciary duties, gross mismanagement, gross negligence or recklessness, and
other matters relating to the defendants' actions in connection with the Capstar
merger. The plaintiff sought to certify the complaint as a class action, enjoin
consummation of the Capstar merger, order defendants to account to plaintiff and
other alleged class members for damages, and award attorneys' fees and other
costs. The Company believes that the lawsuit is without merit and intends to
vigorously defend the action.
On April 11, 2000, an action was commenced in New York Supreme Court, New
York County, by Interep National Radio Sales, Inc. seeking $47,118 in damages,
plus interest, from Clear Channel Communications, Inc. and $19,691 in damages,
plus interest, from Katz Communications, Inc., a co-defendant and an indirect
wholly-owned subsidiary of the Company. The complaint alleges, among other
things, that Clear Channel wrongfully terminated a February 3, 1996 agreement
between Clear Channel and Interep under which Interep agreed to act as Clear
Channel's exclusive advertising representative by procuring advertising time on
Clear Channel's radio stations and also under which Interep, Clear Channel and
Katz executed certain "triparty agreements" in which Interep agreed to buy out
the existing representation agreement of Clear Channel's then current
representative, Katz, for $23,000. The complaint also alleges that Interep's
representation agreement, by its terms, could not be terminated by Clear Channel
until February 1, 2005 and that Clear Channel's November 30, 1999 termination of
Interep constituted a breach of the representation agreement. The complaint
alleges further that Clear Channel and Katz continue to demand that Interep make
all buy out payments to Katz as set forth in the various triparty agreements.
$5,188 of the requested damages correspond to buyouts in excess of the pro rata
amount attributable to the time Interep had the right to represent the bought
out stations and $280 of the requested damages correspond to a refund of a
portion of a "signing bonus" paid by Interep to Clear Channel upon the execution
of Interep's representation agreement. The complaint does not specify the basis
for the remaining damages sought by Interep. Although this matter is in the
early stages of litigation, Katz has pending before the Court a motion to
dismiss entirely all the claims asserted by Interep against it.
On July 13, 2000, a lawsuit was filed in the Supreme Court of the State of
New York, County of Westchester by plaintiff Charles E. Armstrong against AMFM
Inc. and AMFM Interactive, Inc. The complaint alleges that AMFM Inc. and AMFM
Interactive, Inc. breached an alleged employment agreement and also an alleged
agreement to issue stock options to the plaintiff. The plaintiff seeks a
declaration regarding his rights and obligations under the alleged employment
agreement and compensatory and punitive damages in excess of $50,000. AMFM Inc.
and AMFM Interactive, Inc. deny the existence of any employment agreement, and
also deny that they have breached any agreement to issue stock options to Mr.
Armstrong. AMFM Inc. and AMFM Interactive, Inc. are vigorously defending the
action.
The Company is also involved in various other claims and lawsuits which are
generally incidental to its business. The Company is also 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 effect on its
consolidated financial position, results of operations or cash flows.
7. NON-CASH COMPENSATION
The Company recorded non-cash compensation of $36,137 for the period from
January 1, 2000, to August 30, 2000, primarily related to amendments made to the
stock option agreements of certain operating personnel terminated upon
implementation of the Company's market strategy. During the period from August
31 to September 30, 2000, the Company recorded non-cash compensation of $3,151,
primarily related to the vesting of executive stock options.
14
<PAGE> 15
AMFM OPERATING INC. AND SUBSIDIARIES
(AN INDIRECT, WHOLLY-OWNED SUBSIDIARY OF CLEAR CHANNEL COMMUNICATIONS, INC.)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
8. MERGER AND NON-RECURRING COSTS
Merger and non-recurring costs consist of the following:
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, 2000 SEPTEMBER 30, 2000
--------------------------- ----------------------------
PRE-MERGER PRE-MERGER POST-MERGER PRE-MERGER PRE-MERGER POST-MERGER
------------ ----------- ------------ ------------ ---------- -------------
THREE MONTHS PERIOD FROM PERIOD FROM NINE MONTHS PERIOD FROM PERIOD FROM
ENDED JULY 1 TO AUGUST 31 TO ENDED JANUARY 1 TO AUGUST 31 TO
SEPTEMBER 30, AUGUST 30, SEPTEMBER 30, SEPTEMBER 30, AUGUST 30, SEPTEMBER 30,
1999 2000 2000 1999 2000 2000
------------- ----------- ------------- -------------- ------------ -------------
<S> <C> <C> <C> <C> <C> <C>
Severance(a) ............ $ 6,027 $ 1,142 $ -- $ 18,223 $ 10,455 $ --
Merger and other(b) ..... 24,950 91,269 -- 29,098 100,902 --
---------- ----------- -------- ------------- ------------- --------
$ 30,977 $ 92,411 $ -- $ 47,321 $ 111,357 $ --
========== ----------- ======== ============= ============= ========
</TABLE>
----------
(a) 1999
----
On March 15, 1999, the Company announced an executive realignment and
recorded a charge of $12,196 for executive severance and other costs.
In 1999, the Company announced its market strategy, whereby each
cluster of stations in a market will be managed as a single business
unit. In connection with this strategy, certain personnel, consisting
primarily of operating personnel, have been terminated and other
personnel-related costs have been incurred to align formats within a
market to target certain demographics. The Company incurred costs of
$6,027 during the third quarter of 1999, of which $5,694 related to
personnel costs.
2000
----
On February 16, 2000, the Company announced the retirement of James
E. de Castro as Vice-Chairman of AMFM Inc., President and Chief
Executive Officer of AMFM Radio Group and Chairman and Chief
Executive Officer of AMFM Interactive, Inc., effective February 18,
2000. In connection with Mr. de Castro's retirement, the Company
recorded a charge of $5,340 for severance costs.
The Company incurred costs related to the continued implementation of
its market strategy of $1,142 for the period from July 1 to August
30, 2000 and $5,115 for the period from January 1 to August 30, 2000,
of which $864 and $4,104, respectively, related to personnel costs.
Subsequent to the Clear Channel merger, restructuring costs directly
attributable to the Company's operations are included in the
restructuring liability (see Note 1). At September 30, 2000,
approximately $5,400 of the total costs incurred to date were accrued
and are expected to be paid during the remainder of 2000.
(b) 1999
----
In connection with the Company's decision in 1999 to sharpen its
focus on domestic radio and media representation, management decided
to discontinue Katz Media's international operations and streamline
its television representation business, sell the Company's outdoor
advertising business, terminate its contracts to acquire Grupo Radio
and assign its contract to acquire Petry Media Corporation ("Petry")
to LIN Television Corporation. During the first quarter of 1999, the
Company recorded a charge of $4,148 to write off transaction costs
incurred in connection with the Petry transaction and, during the
third quarter of 1999, the Company recorded a charge of $23,555,
which included $3,814 related to personnel costs and other charges
related to the termination of contractual obligations and legal and
advisory fees. Additionally, the Company incurred developmental costs
of $1,395 related to the Galaxy(TM) system, the Company's proprietary
traffic system.
15
<PAGE> 16
AMFM OPERATING INC. AND SUBSIDIARIES
(AN INDIRECT, WHOLLY-OWNED SUBSIDIARY OF CLEAR CHANNEL COMMUNICATIONS, INC.)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
2000
----
The Company incurred costs related to the Clear Channel merger of
$89,460 for the period from July 1 to August 30, 2000 and $96,264 for
the period from January 1 to August 30, 2000. The Clear Channel
merger costs include a non-cash compensation charge of $67,758,
primarily related to executive stock options which became exercisable
upon the merger date. Subsequent to the merger, restructuring costs
directly attributable to the Company's operations are included in the
restructuring liability (see Note 1). Additionally, the Company
incurred developmental costs related to the Galaxy(TM) system, the
Company's proprietary traffic system, of $661 for the period from
July 1 to August 30, 2000 and $2,758 for the period from January 1 to
August 30, 2000 and other non-recurring charges of $1,148 for the
period from July 1 to August 30, 2000 and $1,880 for the period from
January 1 to August 30, 2000.
9. SEGMENT DATA
Prior to AMFM's merger with Clear Channel, the Company managed its business
under two operating segments consisting of radio broadcasting and new media. The
radio broadcasting and new media operations will now be managed on a combined
basis under Clear Channel's radio operating segment. The Company also operated
in the outdoor advertising operating segment until the sale of its outdoor
advertising business to Lamar on September 15, 1999. Separate financial data for
the radio and outdoor advertising operating segments is provided below.
Previously reported amounts have been restated to conform to the Company's
current segment reporting.
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, 2000 SEPTEMBER 30, 2000
------------------------- ------------------------------
PRE-MERGER PRE-MERGER POST-MERGER PRE-MERGER PRE-MERGER POST-MERGER
---------- ---------- ----------- ---------- ---------- -----------
THREE MONTHS PERIOD FROM PERIOD FROM NINE MONTHS PERIOD FROM PERIOD FROM
ENDED JULY 1 TO AUGUST 31 TO ENDED JANUARY 1 TO AUGUST 31 TO
SEPTEMBER 30, AUGUST 30, SEPTEMBER 30, SEPTEMBER 30, AUGUST 30, SEPTEMBER 30,
1999 2000 2000 1999 2000 2000
------------- ----------- ------------- ------------- ------------ ---------------
<S> <C> <C> <C> <C> <C> <C>
Radio:
Net revenues ............... $ 546,700 $ 386,240 $ 172,860 $ 1,220,221 $ 1,545,411 $ 172,860
Operating expenses ......... 277,670 193,351 86,954 646,677 819,924 86,954
Depreciation and
amortization ............ 194,810 149,087 86,763 416,380 578,913 86,763
Merger and non-
recurring costs ........ 8,646 92,411 -- 8,646 111,357 --
Operating income (loss) .... 60,628 (63,158) (8,497) 133,173 (44,479) (8,497)
Outdoor:
Net revenues ............... 45,737 -- -- 156,627 -- --
Operating expenses ......... 25,822 -- -- 84,583 -- --
Depreciation and
amortization ............ 30,536 -- -- 94,062 -- --
Merger and non-
recurring costs ........ 2,154 -- -- 2,154 -- --
Operating loss ............. (13,731) -- -- (31,007) -- --
</TABLE>
16
<PAGE> 17
AMFM OPERATING INC. AND SUBSIDIARIES
(AN INDIRECT, WHOLLY-OWNED SUBSIDIARY OF CLEAR CHANNEL COMMUNICATIONS, INC.)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
Certain depreciation and amortization expenses, corporate general and
administrative expenses, non-cash compensation and merger and non-recurring
costs for the three months and nine months ended September 30, 1999 were not
allocated to operating segments and must be included to reconcile to the
Company's consolidated financial statements. Reconciling financial data is
provided below:
<TABLE>
<CAPTION>
PRE-MERGER PRE-MERGER
---------- ----------
THREE MONTHS NINE MONTHS
ENDED ENDED
SEPTEMBER 30, SEPTEMBER 30,
1999 1999
-------------- -------------
<S> <C> <C>
Unallocated depreciation and amortization .................. $ 5,225 $13,012
Unallocated corporate general and administrative expenses ... 7,589 21,923
Unallocated non-cash compensation ........................... 6,148 6,148
Unallocated merger and non-recurring costs .................. 20,177 36,521
</TABLE>
The radio segment included total identifiable assets of $12,819,869 at
December 31, 1999 and $26,631,728 at September 30, 2000.
10. RELATED PARTY TRANSACTIONS
As of September 30, 2000, the Company has outstanding a promissory note
payable of $1,336,510 representing borrowings from Clear Channel used to pay off
the Company's senior credit facility and 9% Notes less repayments of $65,878.
Borrowings under the promissory note bear interest at 7% per annum. Interest
expense on borrowings under the promissory note for the period from August 30 to
September 30, 2000 was $3,318. Additionally, the Company's Katz Media Group,
Inc. provides media representation services to Clear Channel and the Company
receives syndicated programming services from Clear Channel's Premiere Radio
Networks, marketing services from Clear Channel's Critical Mass Media and
outdoor advertising services from Clear Channel's Eller Media. Revenues and
expenses from these intercompany transactions are not material.
11. RECENTLY ISSUED ACCOUNTING PRONOUNCEMENT
In June 1998, the Financial Accounting Standards Board issued SFAS No. 133,
Accounting for Derivative Instruments and Hedging Activities. This statement
establishes accounting and reporting standards for derivative instruments and
hedging activities. SFAS No. 133, as amended by SFAS No. 137, is effective for
all fiscal quarters of all fiscal years beginning after June 15, 2000. During
October 2000, the Company terminated all of its outstanding interest rate swaps
and received proceeds of approximately $4,600. Due to the termination of the
swaps, management does not anticipate that this statement will have any impact
on the Company's consolidated financial statements.
17
<PAGE> 18
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
CLEAR CHANNEL MERGER
On August 30, 2000, Clear Channel Communications, Inc. ("Clear Channel")
acquired AMFM Inc. ("AMFM"), indirect parent of AMFM Operating Inc. ("AMFM
Operating" or the "Company"), pursuant to a merger agreement dated October 2,
1999. As a result of the merger, AMFM stockholders received 0.94 shares of Clear
Channel common stock, on a fixed exchange basis, for each share of AMFM common
stock held on the closing date of the transaction and AMFM became a wholly-owned
subsidiary of Clear Channel. In order to obtain antitrust and Federal
Communications Commission approval for the merger, the Company completed the
divestiture of 58 radio stations in 22 markets for aggregate gross proceeds of
approximately $2.8 billion, including the receipt of 36 radio stations and
restricted cash of $0.4 billion (the "Divestitures"). A further eight stations
with a net asset value of $132.9 million at August 30, 2000 were placed into
trust pending their eventual sale. All eight stations are currently under
contract for sale and awaiting regulatory approval. While in trust, the Company
cannot manage or operate these stations.
The combined company is still in the process of finalizing plans to
restructure the former AMFM operations. To date, the following decisions have
been communicated to affected employees:
o The Dallas, Texas, and Austin, Texas, corporate offices will
be closed by March 31, 2001;
o Chancellor Marketing Group ("CMG"), the Company's full-service
sales promotion firm which develops integrated marketing
programs, will generally be discontinued as a separate entity.
Operations of CMG will be continued by the local radio market,
resulting in the closure of the Richmond, Virginia, corporate
office and most of the separate CMG sales offices;
o Katz Media Group, Inc., the Company's full-service media
representation firm, will restructure its radio operations
into five separate business units;
o StarSystem(TM), the Company's programming distribution
network, will be consolidated into one location in Austin,
Texas;
o The operations of The AMFM Radio Networks, which broadcasts
advertising and syndicated programming, will be integrated
into Premiere Radio Networks, Clear Channel's radio
syndication business; and
o The assets of LAN International's Norway operations will be
sold to local management.
Additionally, the Company is reviewing individual markets to determine where
synergies can be achieved within clusters and by centralizing certain functions
previously performed at the local level. To date, the restructuring has resulted
in the actual or pending termination of approximately 400 employees. It is
expected that the majority of the restructuring will be completed during the
first half of 2001. A liability for the restructuring of approximately $185.0
million has been recorded in the post-merger opening balance sheet of the
Company to account for these costs. The majority of the costs relate to
severance for terminated employees. Approximately $40.0 million of the costs
relate to the termination of various contracts, primarily leases, which the
Company will exit as a result of the restructuring. Between August 30 and
September 30, 2000, approximately $12.9 million has been charged against the
restructuring liability, primarily relating to severance.
The Company has changed certain accounting policies and estimates used in
the preparation of its financials statements to conform with Clear Channel or
due to other changes in circumstances. The most significant changes are as
follows:
Investment in Lamar Advertising Company. To complete the merger, Clear Channel
and AMFM entered into a consent decree with the Department of Justice. The
consent decree, among other things, required the Company to discontinue any and
all control over the Company's approximate 28% equity (11% voting) interest in
Lamar Advertising Company ("Lamar"). The Company had previously accounted for
its investment in Lamar using the equity method. Since the Company may no longer
exercise significant influence over the operations of Lamar, the Company will
use the cost method for periods subsequent to the merger date and will account
for differences between the cost and fair market value in accordance with
Statement of Financial Accounting Standards No. 115, Accounting for Certain
Investments in Debt and Equity Securities. As of September 30, 2000, the
Company's investment in Lamar is carried at fair value based on quoted market
prices.
Clear Channel Push-Down Accounting Adjustments. Clear Channel accounted for its
acquisition of AMFM as a purchase and purchase accounting adjustments, including
goodwill, have been pushed down and are reflected in the financial statements of
the Company and its subsidiaries for the period subsequent to August 30, 2000.
The financial statements for the Company for the periods ended prior to August
30, 2000 were prepared using the Company's historical basis of accounting. The
comparability of the operating
18
<PAGE> 19
results for the pre-merger periods and the periods reflecting push-down
accounting are affected by the purchase accounting adjustments, including the
amortization of intangibles over a period of 25 years. Prior to the merger,
intangible assets were generally amortized over a period of 15 years. The
purchase accounting adjustments are based on preliminary estimates and are
subject to change.
Investment in Z-Spanish Media. On August 10, 2000, the Company received cash
proceeds of $38.4 million in return for approximately 77% of its cost basis
investment in Z-Spanish Media, which was acquired by Entravision Communications
Corporation on August 16, 2000. The Company's investment in Z-Spanish Media was
carried at historical value as of December 31, 1999. Due to the availability of
a quoted market price for Entravision Communications Corporation, the Company's
investment is carried at fair value as of September 30, 2000.
GENERAL
As of September 30, 2000, AMFM Operating owned and operated, programmed or
sold air time for 415 radio stations (294 FM and 121 AM) in 99 markets in the
United States, including nine radio stations programmed under time brokerage or
joint sales agreements and excluding eight radio stations held in trust. The
Company's radio operations also include Katz Media Group, Inc., a full-service
media representation firm that sells national spot advertising time for its
clients in the radio and television industries throughout the United States and
for the Company's portfolio of stations, and a national radio network, The AMFM
Radio Networks, which broadcasts advertising and syndicated programming shows to
a national audience.
On July 13, 1999, AMFM acquired Capstar Broadcasting Corporation ("Capstar
Broadcasting") and its subsidiaries through a merger of a wholly-owned
subsidiary of AMFM into Capstar Broadcasting, with Capstar Broadcasting
surviving as a wholly-owned direct subsidiary of AMFM. As a result of the
Capstar merger, all of the then outstanding shares of Capstar Broadcasting
common stock were converted into 0.4955 of a share of AMFM common stock, or
approximately 53.6 million shares of AMFM common stock in the aggregate.
Immediately prior to the Capstar merger, the portfolio of Chancellor Media
Corporation of Los Angeles ("CMCLA"), an indirect subsidiary of AMFM, included
124 radio stations (92 FM and 32 AM). As a result of the Capstar merger, CMCLA
added 338 radio stations (239 FM and 99 AM) to its portfolio and assumed the
outstanding options, warrants and other equity rights in Capstar Broadcasting
representing up to an additional 3.2 million shares of AMFM common stock.
On November 19, 1999, AMFM completed the combination of the outstanding
bonds, bank indebtedness and preferred stock of its direct and indirect
subsidiaries into two entities, Capstar Broadcasting Partners, Inc. ("Capstar
Partners") and AMFM Operating, through a series of related transactions,
including contributions of stock and mergers of its direct and indirect
subsidiaries (the "Corporate Reorganization"). As part of the combination,
Capstar Broadcasting was merged into AMFM's direct subsidiary Chancellor
Mezzanine Holdings Corporation. In addition, Capstar Radio Broadcasting
Partners, Inc. ("Capstar Radio") and CMCLA merged into Capstar Communications,
Inc. ("Capstar Communications"), which assumed all of the outstanding bonds and
bank indebtedness of Capstar Radio and CMCLA. The combined entity was renamed
AMFM Operating Inc. and became a wholly-owned subsidiary of Capstar Partners.
All of the operating subsidiaries of AMFM, except for the subsidiaries engaged
in AMFM's Internet initiatives, became directly or indirectly owned by AMFM
Operating.
As CMCLA, Capstar Radio and Capstar Communications, a wholly-owned indirect
subsidiary of Capstar Radio, were under the common control of AMFM, the
Corporate Reorganization was accounted for by the Company in a manner similar to
a pooling of interests. The accounts of CMCLA and its subsidiaries are included
in the Company's financial statements for all periods and dates presented
herein. Subsequent to July 13, 1999, the date of AMFM's acquisition of Capstar
Broadcasting, which included Capstar Radio, the Company's financial statements
also include the accounts of Capstar Radio and its subsidiaries.
19
<PAGE> 20
The Company's results of operations for the three months and nine months
ended September 30, 2000 are not comparable to the results of operations for the
three months and nine months ended September 30, 1999 due to the impact of the
Clear Channel purchase accounting adjustments, the Divestitures, the Corporate
Reorganization and the Company's other various acquisitions and dispositions.
Other transactions completed from October 1, 1999 through September 30, 2000
include:
o the disposition of 12 radio stations (ten FM and two AM) for
approximately $94.6 million in cash;
o the disposition of 14 radio stations (nine FM and five AM) and the
local sales rights of one FM station in exchange for three radio
stations (two FM and one AM) and approximately $9.2 million in cash;
o the acquisition of two FM radio stations for approximately $9.0 million
in cash.
Seasonal revenue fluctuations are common in the radio industry and are due
primarily to fluctuations in advertising expenditures by local and national
advertisers. Advertising expenditures are typically lower in the first and third
calendar quarters and higher in the second and fourth calendar quarters of each
year. The Company's 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.
RESULTS OF OPERATIONS
Nine Months Ended September 30, 2000 Compared To Nine Months Ended September 30,
1999 (dollars in thousands)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30
------------------------------ % INCREASE
2000 1999 (DECREASE)
----------- ----------- ----------
<S> <C> <C> <C>
Net revenues ..................................... $ 1,718,271 $ 1,376,848 24.8%
Operating expenses ............................... 906,878 731,260 24.0%
Depreciation and amortization .................... 665,676 523,454 27.2%
Merger and non-recurring costs ................... 111,357 47,321 135.3%
Operating income (loss) .......................... (52,976) 24,562 --
Interest expense ................................. 312,876 301,301 3.8%
Gain on disposition of assets .................... 1,574,229 221,356 611.2%
Gain on disposition of representation contracts .. 29,504 18,284 61.4%
Net income (loss) attributable to common stock ... 640,973 (49,541) --
</TABLE>
The increase in net revenues and operating expenses for the nine months
ended September 30, 2000 compared to the nine months ended September 30, 1999 is
primarily attributable to the net impact of the various acquisitions and
dispositions discussed elsewhere herein and the positive effects of the market
strategy implemented in many major markets at the end of the third quarter of
1999. The 1999 net revenues and operating expenses include net revenues of
$156.6 million and operating expenses of $84.6 million related to the Company's
outdoor advertising business, which was sold to Lamar on September 15, 1999. On
a pro forma basis for all stations owned and operated as of September 30, 2000,
net revenues increased 13.0% and operating expenses increased 7.9%. Depreciation
and amortization for the nine months ended September 30, 2000 compared to the
nine months ended September 30, 1999 increased due to the revaluation of fixed
and intangible assets due to the Clear Channel merger and other acquisitions
completed by the Company during 1999 and through September 30, 2000, partially
offset by the Divestitures and the change in the amortization period for
intangible assets to 25 years as a result of the Clear Channel merger versus 15
years prior to the merger.
During the nine months ended September 30, 2000, the Company recorded merger
and non-recurring costs of $96.3 million related to the Clear Channel merger,
$5.3 million related to severance costs in connection with the retirement of
James E. de Castro, $5.1 million related to the costs to terminate employees and
close certain facilities in connection with the implementation of the Company's
market strategy, and other costs of $4.7 million including developmental costs
associated with the Galaxy(TM) system, the Company's proprietary traffic system.
During the nine months ended September 30, 1999, the Company recorded merger and
non-recurring costs of $39.9 million related to the write-off of Petry Media
Corporation transactions costs, executive severance and other costs related to
the executive management realignment, and various internal costs related to the
Company's decision to sharpen its focus on domestic radio and media
representation, $6.0 million related to the costs to terminate employees and
close certain facilities in connection with the implementation of the Company's
market strategy, and other costs of $1.4 million including developmental costs
associated with the Galaxy(TM) system, the Company's proprietary traffic system.
20
<PAGE> 21
Interest expense for the nine months ended September 30, 2000 compared to
same period in 1999 increased primarily due to (i) additional debt recorded in
connection with the Capstar merger on July 13, 1999; (ii) additional bank
borrowings required to finance the various acquisitions discussed elsewhere
herein and (iii) the exchange of the 12 5/8% Series E cumulative exchangeable
preferred stock of the Company for 12 5/8% Senior Subordinated Exchange
Debentures due 2006 on November 23, 1999. This increase was partially offset by
(i) cash proceeds from the Divestitures, cash proceeds from the sale of the
Company's outdoor advertising business to Lamar on September 15, 1999 and cash
proceeds from other various dispositions discussed elsewhere herein, all of
which were used to reduce the senior credit facility; (ii) the repurchase of a
majority of the 10 3/4% Senior Subordinated Notes due 2006 on November 12, 1999;
(iii) the repurchase of the 9 3/8% Senior Subordinated Notes due 2004 on
February 15, 2000; and (iv) the repurchase of a majority of the 10 1/2% Senior
Subordinated Notes due 2007 on June 2, 2000.
The gain on disposition of assets for the nine months ended September 30,
2000 related primarily to a gain of $1.4 billion from the Divestitures. During
the nine months ended September 30, 2000, the Company also recognized a gain of
$123.6 million related to the acquisition on August 25, 2000 of KOST-FM and
KFI-AM in Los Angeles plus $1.7 million in cash from Cox Radio, Inc. in exchange
for 13 of its radio stations including WEDR-FM in Miami, WFOX-FM in Atlanta,
WEFX-FM, WNLK-AM, WKHL-FM and WSTC-AM in Stamford/Norwalk, WFYV-FM, WAPE-FM,
WBWL-AM, WKQL-FM, WMXQ-FM and WOKV-AM in Jacksonville and WPLR-FM and the local
sales rights of a 14th station, WYBC-FM, in New Haven; a gain of $19.3 million
related to the sale of a portion of the Company's cost basis investment in
Z-Spanish Media; a gain of $22.8 million related to the January 14, 2000 sale of
the capital stock of AMFM's Puerto Rico subsidiaries to Spanish Broadcasting
System of Puerto Rico, Inc.; and a gain of $8.3 million related to the June 30,
2000 exchange of KSKY-AM in Dallas for KPRZ-FM (now known as KMOM-FM) in
Colorado Springs plus $7.5 million in cash from Bison Media, Inc. The gain on
disposition of assets for the nine months ended September 30, 1999 related
primarily to a gain of $210.0 million recognized upon the sale of the Company's
outdoor advertising business to Lamar on September 15, 1999 and a gain of $14.5
million from the sale of WMVP-AM in Chicago to ABC, Inc. on April 16, 1999.
The gain on disposition of representation contracts represents the sales
proceeds received from successor representation firms for the buyout of existing
media representation contracts, net of any remaining deferred costs associated
with obtaining the original representation contract. While the consolidation of
the radio broadcasting industry has resulted in an increase in buyout activity,
the impact on future periods cannot be predicted.
Three Months Ended September 30, 2000 Compared To Three Months Ended September
30, 1999 (dollars in thousands)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
SEPTEMBER 30
------------------------------ % INCREASE
2000 1999 (DECREASE)
----------- ----------- ----------
<S> <C> <C> <C>
Net revenues ..................................... $ 559,100 $ 592,437 (5.6)%
Operating expenses ............................... 280,305 303,492 (7.6)%
Depreciation and amortization .................... 235,850 230,571 2.3%
Merger and non-recurring costs ................... 92,411 30,977 198.3%
Operating income (loss) .......................... (71,655) 7,758 --
Interest expense ................................. 88,997 119,922 (25.8)%
Gain on disposition of assets .................... 1,543,125 208,950 638.5%
Gain on disposition of representation contracts .. 12,515 9,431 32.7%
Net income attributable to common stock .......... 845,418 60,517 1297.0%
</TABLE>
The decrease in net revenues and operating expenses for the three months
ended September 30, 2000 compared to the three months ended September 30, 1999
is primarily attributable to the net impact of the Divestitures and other
various acquisitions and dispositions discussed elsewhere herein. The 1999 net
revenues and operating expenses include net revenues of $45.7 million and
operating expenses of $25.8 million related to the Company's outdoor advertising
business, which was sold to Lamar on September 15, 1999. Depreciation and
amortization for the three months ended September 30, 2000 compared to the three
months ended September 30, 1999 increased due to the revaluation of fixed and
intangible assets due to the Clear Channel merger and other acquisitions
completed by the Company during 1999 and through September 30, 2000, partially
offset by the Divestitures and the change in the amortization period for
intangible assets to 25 years as a result of the Clear Channel merger versus 15
years prior to the merger.
21
<PAGE> 22
During the three months ended September 30, 2000, the Company recorded
merger and non-recurring costs of $89.5 million related to the Clear Channel
merger, $1.1 million related to the costs to terminate employees and close
certain facilities in connection with the implementation of the Company's market
strategy, and other costs of $1.8 million including developmental costs
associated with the Galaxy(TM) system, the Company's proprietary traffic system.
During the three months ended September 30, 1999, the Company recorded merger
and non-recurring costs of $23.6 million related to executive severance and
other costs related to the executive management realignment, and various
internal costs related to the Company's decision to sharpen its focus on
domestic radio and media representation, $6.0 million related to the costs to
terminate employees and close certain facilities in connection with the
implementation of the Company's market strategy, and other costs of $1.4 million
including developmental costs associated with the Galaxy(TM) system, the
Company's proprietary traffic system.
Interest expense for the three months ended September 30, 2000 compared to
the three months ended September 30, 1999 decreased primarily due to (i) cash
proceeds from the Divestitures, cash proceeds from the sale of the Company's
outdoor advertising business to Lamar on September 15, 1999 and cash proceeds
from other various dispositions discussed elsewhere herein, all of which were
used to reduce the senior credit facility; (ii) the repurchase of a majority of
the 10 3/4% Senior Subordinated Notes due 2006 on November 12, 1999; (iii) the
repurchase of the 9 3/8% Senior Subordinated Notes due 2004 on February 15,
2000; and (iv) the repurchase of a majority of the 10 1/2% Senior Subordinated
Notes due 2007 on June 2, 2000. This decrease was partially offset by (i)
additional debt recorded in connection with the Capstar merger on July 13, 1999;
(ii) additional bank borrowings required to finance the various acquisitions
discussed elsewhere herein and (iii) the exchange of the 12 5/8% Series E
cumulative exchangeable preferred stock of the Company for 12 5/8% Senior
Subordinated Exchange Debentures due 2006 on November 23, 1999.
The gain on disposition of assets for the three months ended September 30,
2000 related primarily to a gain of $1.4 billion from the Divestitures. During
the three months ended September 30, 2000, the Company also recognized a gain of
$123.6 million related to the acquisition on August 25, 2000 of KOST-FM and
KFI-AM in Los Angeles plus $1.7 million in cash from Cox Radio, Inc. in exchange
for 13 of its radio stations including WEDR-FM in Miami, WFOX-FM in Atlanta,
WEFX-FM, WNLK-AM, WKHL-FM and WSTC-AM in Stamford/Norwalk, WFYV-FM, WAPE-FM,
WBWL-AM, WKQL-FM, WMXQ-FM and WOKV-AM in Jacksonville and WPLR-FM and the local
sales rights of a 14th station, WYBC-FM, in New Haven and a gain of $19.3
million related to the sale of a portion of the Company's cost basis investment
in Z-Spanish Media. The gain on disposition of assets for the three months ended
September 30, 1999 related primarily to a gain of $210.0 million recognized upon
the sale of the Company's outdoor advertising business to Lamar on September 15,
1999.
The gain on disposition of representation contracts represents the sales
proceeds received from successor representation firms for the buyout of existing
media representation contracts, net of any remaining deferred costs associated
with obtaining the original representation contract. While the consolidation of
the radio broadcasting industry has resulted in an increase in buyout activity,
the impact on future periods cannot be predicted.
LIQUIDITY AND CAPITAL RESOURCES
Overview
The Company historically has generated sufficient cash flow from operations
to finance its existing operational requirements and debt service requirements,
and the Company anticipates that this will continue to be the case. Operating
activities provided net cash of $369.7 million and $242.7 million for the nine
months ended September 30, 2000 and 1999, respectively. The Company historically
has used the proceeds of bank debt and private and public debt and AMFM equity
offerings, supplemented by cash flow from operations not required to fund
operational requirements and debt service, to fund implementation of the
Company's acquisition strategy. Just prior to the merger, the Company
extinguished its senior credit facility, which had previously been used to
supplement cash generated from operations. Following its merger with Clear
Channel, the Company will receive any supplemental financing required directly
from Clear Channel in the form of borrowings under a promissory note bearing
interest at 7%.
The instruments governing the Company's indebtedness contain certain
covenants that restrict or, in some cases, prohibit the ability of the Company
to pay dividends and make other distributions. These restrictions are not
anticipated to have an impact on the Company's ability to meet its cash
obligations.
22
<PAGE> 23
Financing Transactions
On January 11, 2000, the Company completed a change of control offer to
purchase all of its outstanding 12 5/8% Senior Subordinated Exchange Debentures
due 2006 at an offer price in cash equal to 101% of the aggregate principal
amount, plus accrued and unpaid interest. AMFM Operating repurchased $1.2
million, or 0.9%, of the aggregate outstanding principal amount of the
debentures for an aggregate repurchase cost of $1.3 million.
On February 15, 2000, the Company completed the redemption of all of its
outstanding 9 3/8% Senior Subordinated Notes due 2004 for an aggregate
repurchase cost of $216.4 million, which included the principal amount of the
notes of $200.0 million, premiums on the repurchase of the notes of $9.4
million, and accrued and unpaid interest on the notes from October 1, 1999
through February 14, 2000 of $7.0 million.
On June 2, 2000, the Company completed a cash tender offer to acquire all of
its outstanding 10 1/2% Senior Subordinated Notes due 2007 at a purchase price
equal to $1,096.50 per $1,000 principal amount tendered, plus accrued and unpaid
interest. Prior to the initiation of the tender offer, the Company received the
irrevocable consent of the holder of the majority of the notes to certain
amendments, which eliminated most of the restrictive covenants and certain other
provisions of the indenture pursuant to which the notes were issued. Of the
$100.0 million principal, approximately $99.4 million was accepted for payment
for an aggregate repurchase cost of approximately $113.0 million, including
premiums on the repurchase of the notes of $9.6 million and accrued and unpaid
interest on the notes from January 16 through June 1, 2000 of $4.0 million.
On August 30, 2000, the Company terminated its senior credit facility
agreement and paid off the outstanding balance with proceeds from the
Divestitures and borrowings from Clear Channel of $540.0 million pursuant to a
promissory note which bears interest at 7%. Subsequent repurchases of the notes
discussed below were funded by additional draws under the Clear Channel
promissory note.
On September 29, 2000, the Company completed the redemption of all of its
outstanding 9% Senior Subordinated Notes due 2008 for an aggregate repurchase
cost of $862.4 million, which included the principal amount of the notes of
$750.0 million, premiums on the repurchase of the notes of $79.0 million, and
accrued and unpaid interest on the notes from April 1 through September 30, 2000
of $33.4 million.
The merger with Clear Channel resulted in a change of control with respect
to the Company's outstanding indebtedness and the Company offered to purchase
the notes from the holders thereof at an offer price in cash equal to 101% of
the aggregate principal amount plus accrued and unpaid interest. The Company
closed the acquisition of accepted tenders on October 6, 2000. The Company
repurchased the following notes upon completion of the change in control offers:
o $78.7 million, or 10.5%, of the aggregate principal amount of the 8%
Senior Notes due 2008 for aggregate proceeds of $82.2 million,
including premiums on the repurchase of the notes of $0.8 million and
accrued and unpaid interest on the notes of $2.7 million;
o $135.6 million, or 27.1%, of the aggregate principal amount of the 8
1/8% Senior Subordinated Notes due 2007 for aggregate proceeds of
$140.4 million, including premiums on the repurchase of the notes of
$1.4 million and accrued and unpaid interest on the notes of $3.4
million; and
o $14.7 million, or 7.4%, of the aggregate principal amount of the 8 3/4%
Senior Subordinated Notes due 2007 for aggregate proceeds of $15.3
million, including premiums on the repurchase of the notes of $0.2
million and accrued and unpaid interest on the notes of $0.4 million.
On October 25, 2000, the Company completed the redemption of all of its
outstanding 9 1/4% Notes for an aggregate repurchase cost of $139.3 million,
which included the principal amount of the notes of $125.8 million, premiums on
the repurchase of the notes of $9.8 million, and accrued and unpaid interest on
the notes from July 1 to October 24, 2000 of $3.7 million.
23
<PAGE> 24
Outstanding Debt
Clear Channel Promissory Note. The Clear Channel promissory note bears
interest at 7% per annum and matures on August 30, 2010 or upon demand. The
Company is entitled to borrow additional funds and to prepay outstanding
borrowings, subject to the terms of the promissory note. As of September 30,
2000, the outstanding principal balance of the promissory note was $1.3 billion.
AMFM Operating 8% Senior Notes. AMFM Operating's 8% Senior Notes due 2008
are senior unsecured obligations of AMFM Operating and rank equal in right of
payment to the obligations of AMFM Operating and all other indebtedness of AMFM
Operating not expressly subordinated to the 8% Senior Notes due 2008. The 8%
Senior Notes due 2008 are fully and unconditionally guaranteed, on a joint and
several basis, by all of AMFM Operating's direct and indirect wholly owned
subsidiaries other than certain inconsequential subsidiaries (the "Subsidiary
Guarantors"). As of October 31, 2000, the outstanding principal balance was
$671.3 million. Interest payment requirements on the 8% Senior Notes due 2008
are approximately $53.7 million per year.
AMFM Operating Senior Subordinated Notes. AMFM Operating's 8 3/4% Senior
Subordinated Notes due 2007, 10 1/2% Senior Subordinated Notes due 2007, 8 1/8%
Senior Subordinated Notes due 2007, 10 3/4% Senior Subordinated Notes due 2006
and 12 5/8% Senior Subordinated Exchange Debentures due 2006 (collectively, the
"Subordinated Notes") are unsecured obligations of AMFM Operating. The
Subordinated Notes are subordinated in right of payment to all existing and any
future senior indebtedness of AMFM Operating. The Subordinated Notes are fully
and unconditionally guaranteed, on a joint and several basis, by the Subsidiary
Guarantors. As of October 31, 2000, the total outstanding principal balance on
the Subordinated Notes was approximately $692.2 million. Interest payment
requirements on the Subordinated Notes are approximately $63.8 million per year,
payable in semi-annual payments.
AMFM Operating's 8% Senior Notes due 2008 and the Subordinated Notes contain
customary restrictive covenants, which, among other things and with certain
exceptions, limit the ability of the Company to incur additional indebtedness
and liens in connection therewith, enter into certain transactions with
affiliates, pay dividends, consolidate, merge or effect certain asset sales,
issue additional stock, effect an asset swap and make acquisitions. As of
October 31, 2000, the Company remains in compliance with these covenants.
Principal Liquidity Requirements
The principal liquidity requirements of the Company (in addition to debt
service and tax liabilities) will be for working capital, general corporate
purposes, capital expenditures, and, as opportunities arise, to acquire
additional radio stations or complementary broadcast-related businesses. The
Company believes that disposition of certain assets and cash from operating
activities, together with available borrowings under the Clear Channel
promissory note, should be sufficient to permit the Company to meet its
obligations. As of September 30, 2000, Clear Channel had available the following
credit facilities: a credit facility for $3.0 billion (consisting of a $1.5
billion five-year multi-currency revolving credit facility and a $1.5 billion
364-day revolving credit facility), of which $0.2 billion is outstanding and
$2.8 billion is available for future borrowings; a revolving credit facility for
approximately $2.0 billion, of which $1.8 billion is outstanding and $0.2
billion is available for future borrowings; and an international revolving
credit facility with a group of international banks for 88.0 million British
pounds, or approximately $129.8 million, of which approximately $103.2 million
is outstanding and $26.6 million is available for future borrowings.
In the future, the Company may require additional financing. The Company
evaluates potential acquisition opportunities on an ongoing basis and has had,
and continues to have, preliminary discussions concerning the purchase of
additional stations and other assets. The Company expects that in connection
with the financing of future acquisitions, it may consider disposing of stations
in its current markets.
FORWARD-LOOKING STATEMENTS
Certain statements used in the preceding and following discussion and
elsewhere in this Quarterly Report on Form 10-Q are forward-looking statements
within the meaning of Section 27A of the Securities Act of 1933, as amended, and
Section 21E of the Securities Exchange Act of 1934, as amended. These
forward-looking statements about the financial condition, prospects, operations
and business of the Company are generally accompanied by words such as
"believes," "expects," "plans," "anticipates," "intends," "likely," "estimates,"
or similar expressions. These forward-looking statements are subject to numerous
risks, uncertainties and other factors, some of which are beyond the control of
the Company, that could cause actual results to differ materially from those
forecasted or anticipated in such forward-looking statements.
24
<PAGE> 25
These risks, uncertainties and other factors include, but are not limited
to: the potential negative consequences of the substantial indebtedness of the
Company; the restrictions imposed on the Company by the agreements governing its
debt instruments; the competitive nature of the radio business; the potential
adverse effects of the recent volatility of internet related stocks and dot-com
advertisers; the potential adverse effects on station licenses and ownership of
regulation of the radio broadcasting industry; and the difficulty of integrating
substantial acquisitions and entering new lines of business.
Because such forward-looking statements are subject to risks and
uncertainties, readers are cautioned not to place undue reliance on these
forward-looking statements, which reflect management's view only as of the date
of this Quarterly Report on Form 10-Q. The Company undertakes no obligation to
update such statements or publicly release the result of any revisions to these
forward-looking statements which it may make to reflect events or circumstances
after the date of this report or to reflect the occurrence of unanticipated or
unforeseen events.
RECENTLY ISSUED ACCOUNTING PRONOUNCEMENT
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133, Accounting for Derivative Instruments
and Hedging Activities. This statement establishes accounting and reporting
standards for derivative instruments and hedging activities. SFAS No. 133, as
amended by SFAS No. 137, is effective for all fiscal quarters of all fiscal
years beginning after June 15, 2000. During October 2000, the Company terminated
all of its outstanding interest rate swaps and received proceeds of
approximately $4.6 million. Due to the termination of the swaps, management does
not anticipate that this statement will have any impact on the Company's
consolidated financial statements.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
INTEREST RATE RISK MANAGEMENT
The Company's exposure to market risk associated with changes in interest
rates relates primarily to its debt obligations. As of September 30, 2000, the
Company had outstanding fixed rate debt of $3.1 billion, including a promissory
note payable to Clear Channel of $1.3 billion with an interest rate of 7% and
other notes of $1.8 billion with an average interest rate of 7.67%. The fair
value of the Company's long-term debt approximates the recorded value at
September 30, 2000. The Company terminated all of its outstanding interest rate
swaps during October 2000 and received proceeds of approximately $4.6 million.
PART II -- OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
In September 1998, a stockholder class action complaint was filed in the
Delaware Court of Chancery by a stockholder purporting to act individually and
on behalf of all other persons, other than defendants, who own securities of
AMFM and are similarly situated. The defendants named in the case are AMFM,
Hicks Muse, Thomas O. Hicks, Jeffrey A. Marcus, James E. de Castro, Eric C.
Neuman, Lawrence D. Stuart, Jr., Steven Dinetz, Thomas J. Hodson, Perry Lewis,
John H. Massey and Vernon E. Jordan, Jr. The plaintiff alleges breach of
fiduciary duties, gross mismanagement, gross negligence or recklessness, and
other matters relating to the defendants' actions in connection with the Capstar
merger. The plaintiff sought to certify the complaint as a class action, enjoin
consummation of the Capstar merger, order defendants to account to plaintiff and
other alleged class members for damages, and award attorneys' fees and other
costs. The Company believes that the lawsuit is without merit and intends to
vigorously defend the action.
On April 11, 2000 an action was commenced in New York Supreme Court, New
York County, by Interep National Radio Sales, Inc. seeking $47.1 million in
damages, plus interest, from Clear Channel Communications, Inc. and $19.7
million in damages, plus interest, from Katz Communications, Inc., a
co-defendant and an indirect wholly-owned subsidiary of the Company. The
complaint alleges, among other things, that Clear Channel wrongfully terminated
a February 3, 1996 agreement between Clear Channel and Interep under which
Interep agreed to act as Clear Channel's exclusive advertising representative by
procuring advertising time on Clear Channel's radio stations and also under
which Interep, Clear Channel and Katz executed certain "triparty agreements" in
which Interep agreed to buy out the existing representation agreement of Clear
Channel's then current representative, Katz, for $23.0 million. The complaint
also alleges that Interep's representation agreement, by its terms, could not be
terminated by Clear Channel until February 1, 2005 and that Clear Channel's
November 30, 1999 termination of Interep constituted a breach of the
representation agreement. The complaint alleges further that Clear Channel and
Katz continue to demand that Interep make all buy out payments to Katz as set
forth in the various triparty agreements. $5.2 million of the requested damages
correspond to buyouts in excess of the pro
25
<PAGE> 26
rata amount attributable to the time Interep had the right to represent the
bought out stations and $0.3 million of the requested damages correspond to a
refund of a portion of a "signing bonus" paid by Interep to Clear Channel upon
the execution of Interep's representation agreement. The complaint does not
specify the basis for the remaining damages sought by Interep. Although this
matter is in the early stages of litigation, Katz has pending before the Court a
motion to dismiss entirely all the claims asserted by Interep against it.
On July 13, 2000, a lawsuit was filed in the Supreme Court of the State of
New York, County of Westchester by plaintiff Charles E. Armstrong against AMFM
Inc. and AMFM Interactive, Inc. The complaint alleges that AMFM Inc. and AMFM
Interactive, Inc. breached an alleged employment agreement and also an alleged
agreement to issue stock options to the plaintiff. The plaintiff seeks a
declaration regarding his rights and obligations under the alleged employment
agreement and compensatory and punitive damages in excess of $50.0 million. AMFM
Inc. and AMFM Interactive, Inc. deny the existence of any employment agreement,
and also deny that they have breached any agreement to issue stock options to
Mr. Armstrong. AMFM and AMFM Interactive, Inc. are vigorously defending the
action.
The Company is also involved in various other claims and lawsuits which are
generally incidental to its business. The Company is also 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 effect on its
consolidated financial position, results of operations or cash flows.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
EXHIBIT
NO. DESCRIPTION OF EXHIBIT
------- ----------------------
4.1* -- Intercompany Promissory Note between AMFM Operating Inc. and
Clear Channel Communications, Inc. dated August 30, 2000.
10.1(1) -- Asset Purchase Agreement between Clear Channel Broadcasting,
Inc., Clear Channel Broadcasting Licenses, Inc., Citicasters
Co., Capstar Radio Operating Company, Capstar TX Limited
Partnership, AMFM Ohio, Inc., and AMFM Radio Licenses LLC,
(the "Seller") and Chase Radio Properties, LLC, (the "Buyer")
dated March 3, 2000.
10.2(1) -- Amendment to Asset Purchase Agreement between Clear Channel
Broadcasting, Inc., Clear Channel Broadcasting Licenses, Inc.,
Citicasters Co., Capstar Radio Operating Company, Capstar TX
Limited Partnership, AMFM Ohio, Inc., and AMFM Radio Licenses
LLC, (the "Seller") and Chase Radio Properties, LLC, (the
"Buyer") dated March 14, 2000.
10.3(1) -- Second Amendment to Asset Purchase Agreement between Clear
Channel Broadcasting, Inc., Clear Channel Broadcasting
Licenses, Inc., Citicasters Co., Capstar Radio Operating
Company, Capstar TX Limited Partnership, AMFM Ohio, Inc., and
AMFM Radio Licenses LLC, (the "Seller") and Chase Radio
Properties, LLC, (the "Buyer") dated July 10, 2000.
10.4(1) -- Third Amendment to Asset Purchase Agreement between Clear
Channel Broadcasting, Inc., Clear Channel Broadcasting
Licenses, Inc., Citicasters Co., Capstar Radio Operating
Company, Capstar TX Limited Partnership, AMFM Ohio, Inc., and
AMFM Radio Licenses LLC, (the "Seller") and Chase Radio
Properties, LLC, (the "Buyer") dated July 17, 2000.
10.5(1) -- Asset Purchase Agreement between Clear Channel Broadcasting,
Inc., Clear Channel Broadcasting Licenses, Inc., Citicasters
Co., Capstar Radio Operating Company, Capstar TX Limited
Partnership, AMFM Texas Broadcasting, LP and AMFM Texas
Licenses Limited Partnership, (the "Seller") and Cox Radio,
Inc. and CXR Holdings, Inc. (the "Buyer") dated March 3, 2000.
10.6(1) -- Asset Purchase Agreement between Capstar Radio Operating
Company and Capstar TX Limited Partnership, (the "Seller") and
Cumulus Broadcasting, Inc. and Cumulus Licensing Corp. (the
"Buyer") dated March 5, 2000.
26
<PAGE> 27
10.7(1) -- Asset Exchange Agreement between Capstar Radio Operating
Company and Capstar TX Limited Partnership, (the "Seller") and
Cumulus Broadcasting, Inc. and Cumulus Licensing Corp. (the
"Exchange Party") dated March 5, 2000.
10.8(1) -- Amendment to Asset Exchange Agreement between Capstar Radio
Operating Company and Capstar TX Limited Partnership, (the
"Seller") and Cumulus Broadcasting, Inc. and Cumulus Licensing
Corp. (the "Exchange Party") dated June 5, 2000.
10.9(1) -- Second Amendment to Asset Exchange Agreement between Capstar
Radio Operating Company and Capstar TX Limited Partnership,
(the "Seller") and Cumulus Broadcasting, Inc., Cumulus
Licensing Corp. and Cumulus Wireless Services, Inc. (the
"Exchange Party") dated July 17, 2000.
10.10(1) -- Asset Purchase Agreement between AMFM Houston, Inc., AMFM
Ohio, Inc. and AMFM Radio Licenses, LLC, (the "Seller") and
Emmis Communications Corporation, (the "Buyer") dated June 19,
2000.
10.11(1) -- Asset Purchase Agreement between Capstar TX Limited
Partnership, (the "Seller") and Saga Communications of New
England, Inc., (the "Buyer") dated March 6, 2000.
10.12(1) -- Asset Purchase Agreement between Capstar TX Limited
Partnership and Salem Communications Corporation dated March
5, 2000.
10.13(1) -- Asset Exchange Agreement between Clear Channel Broadcasting,
Inc., Clear Channel Broadcasting Licenses, Inc., Capstar Radio
Operating Company and Capstar TX Limited Partnership, (the
"Seller") and Barnstable Broadcasting, Inc., OBC Broadcasting,
Inc. and Two Rivers Broadcasting Limited Partnership, (the
"Buyer") dated March 7, 2000.
10.14(1) -- Asset Purchase Agreement between Clear Channel Broadcasting,
Inc., Clear Channel Broadcasting Licenses, Inc., Capstar TX
Limited Partnership, AMFM Ohio, Inc., Cleveland Radio Licenses
LLC, AMFM San Diego, Inc., AMFM Houston, Inc., AMFM Radio
Licenses, LLC and Zebra Broadcasting Corporation, (the
"Seller") and CBS Radio, Inc. (the "Buyer") dated March 3,
2000.
10.15(2) -- Asset Purchase Agreement among AMFM Ohio, Inc., AMFM Radio
Licenses LLC, Blue Chip Broadcasting, Ltd. and Blue Chip
Broadcasting Licenses, Ltd. dated March 3, 2000.
10.16(2) -- Asset Purchase Agreement between Clear Channel Broadcasting,
Inc., Clear Channel Broadcasting Licenses, Inc., AMFM
Operating Inc., AMFM Ohio, Inc., AMFM Houston, Inc., AMFM
Radio Licenses, LLC, Zebra Broadcasting Corporation, Cleveland
Radio Licenses, LLC, Capstar TX Limited Partnership and Radio
One, Inc. dated March 11, 2000.
10.17(2) -- Amendment to Asset Purchase Agreement between Clear Channel
Broadcasting, Inc., Clear Channel Broadcasting Licenses, Inc.,
AMFM Operating Inc., AMFM Ohio, Inc., AMFM Houston, Inc., AMFM
Radio Licenses, LLC, Zebra Broadcasting Corporation, Cleveland
Radio Licenses, LLC, Capstar TX Limited Partnership and Radio
One, Inc. dated August 24, 2000.
10.18(2) -- Asset Exchange Agreement among Clear Channel Broadcasting,
Inc., Clear Channel Broadcasting Licenses, Inc., Capstar Radio
Operating Company, Capstar TX Limited Partnership, Regent
Broadcasting of Victorville, Inc., Regent Licensee of
Victorville, Inc., Regent Broadcasting of Palmdale, Inc.,
Regent Licensee of Palmdale, Inc., Regent Broadcasting of
Mansfield, Inc. and Regent Licensee of Mansfield, Inc. dated
March 12, 2000.
10.19(2) -- Trust agreement between Clear Channel Communications, Inc.,
Clear Channel Broadcasting, Inc., Clear Channel Broadcasting
Licenses, Inc., AMFM Radio Licenses, L.L.C., AMFM Ohio, Inc.,
Capstar TX Limited Partnership, Capstar Radio Operating
Company, and Charles E. Giddens (the "Trustee") dated August
28, 2000 and effective August 29, 2000.
27.1(3) -- Financial Data Schedule of AMFM Operating Inc.
------------
27
<PAGE> 28
* The Company has not filed long-term debt instruments where the total
amount under such instruments is less than ten percent of the total
assets of the Company and its subsidiaries on a consolidated basis.
However, the Company will furnish a copy of such instruments to the
Commission upon request.
(1) Incorporated by reference to Exhibits to the Current Report on Form 8-K
of Clear Channel Communications, Inc. filed on September 6, 2000.
(2) Incorporated by reference to Exhibits to the Current Report on Form 8-K
of Capstar Broadcasting Partners, Inc. filed on September 11, 2000.
(3) Filed herewith.
(b) Reports on Form 8-K
1. Current Report on Form 8-K (Items 2 and 7), dated and filed September 11,
2000, announcing the divestiture of 58 radio stations required to obtain
antitrust and Federal Communications Commission approval for the merger between
AMFM Inc. and Clear Channel Communications, Inc.
2. Current Report on Form 8-K (Items 4 and 7), dated and filed September 29,
2000, to report a change in AMFM Operating's certifying accountant from
PricewaterhouseCoopers LLP to Ernst & Young LLP.
28
<PAGE> 29
SIGNATURE
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 OPERATING INC.
By: /s/ ERIC C. SIMONTIS
-----------------------------
Eric C. Simontis
Vice President and Controller
Date: November 14, 2000
29
<PAGE> 30
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<S> <C> <C>
4.1* -- Intercompany Promissory Note between AMFM Operating Inc. and
Clear Channel Communications, Inc. dated August 30, 2000.
10.1(1) -- Asset Purchase Agreement between Clear Channel Broadcasting,
Inc., Clear Channel Broadcasting Licenses, Inc., Citicasters
Co., Capstar Radio Operating Company, Capstar TX Limited
Partnership, AMFM Ohio, Inc., and AMFM Radio Licenses LLC,
(the "Seller") and Chase Radio Properties, LLC, (the "Buyer")
dated March 3, 2000.
10.2(1) -- Amendment to Asset Purchase Agreement between Clear Channel
Broadcasting, Inc., Clear Channel Broadcasting Licenses, Inc.,
Citicasters Co., Capstar Radio Operating Company, Capstar TX
Limited Partnership, AMFM Ohio, Inc., and AMFM Radio Licenses
LLC, (the "Seller") and Chase Radio Properties, LLC, (the
"Buyer") dated March 14, 2000.
10.3(1) -- Second Amendment to Asset Purchase Agreement between Clear
Channel Broadcasting, Inc., Clear Channel Broadcasting
Licenses, Inc., Citicasters Co., Capstar Radio Operating
Company, Capstar TX Limited Partnership, AMFM Ohio, Inc., and
AMFM Radio Licenses LLC, (the "Seller") and Chase Radio
Properties, LLC, (the "Buyer") dated July 10, 2000.
10.4(1) -- Third Amendment to Asset Purchase Agreement between Clear
Channel Broadcasting, Inc., Clear Channel Broadcasting
Licenses, Inc., Citicasters Co., Capstar Radio Operating
Company, Capstar TX Limited Partnership, AMFM Ohio, Inc., and
AMFM Radio Licenses LLC, (the "Seller") and Chase Radio
Properties, LLC, (the "Buyer") dated July 17, 2000.
10.5(1) -- Asset Purchase Agreement between Clear Channel Broadcasting,
Inc., Clear Channel Broadcasting Licenses, Inc., Citicasters
Co., Capstar Radio Operating Company, Capstar TX Limited
Partnership, AMFM Texas Broadcasting, LP and AMFM Texas
Licenses Limited Partnership, (the "Seller") and Cox Radio,
Inc. and CXR Holdings, Inc. (the "Buyer") dated March 3, 2000.
10.6(1) -- Asset Purchase Agreement between Capstar Radio Operating
Company and Capstar TX Limited Partnership, (the "Seller") and
Cumulus Broadcasting, Inc. and Cumulus Licensing Corp. (the
"Buyer") dated March 5, 2000.
10.7(1) -- Asset Exchange Agreement between Capstar Radio Operating
Company and Capstar TX Limited Partnership, (the "Seller") and
Cumulus Broadcasting, Inc. and Cumulus Licensing Corp. (the
"Exchange Party") dated March 5, 2000.
10.8(1) -- Amendment to Asset Exchange Agreement between Capstar Radio
Operating Company and Capstar TX Limited Partnership, (the
"Seller") and Cumulus Broadcasting, Inc. and Cumulus Licensing
Corp. (the "Exchange Party") dated June 5, 2000.
10.9(1) -- Second Amendment to Asset Exchange Agreement between Capstar
Radio Operating Company and Capstar TX Limited Partnership,
(the "Seller") and Cumulus Broadcasting, Inc., Cumulus
Licensing Corp. and Cumulus Wireless Services, Inc. (the
"Exchange Party") dated July 17, 2000.
10.10(1) -- Asset Purchase Agreement between AMFM Houston, Inc., AMFM
Ohio, Inc. and AMFM Radio Licenses, LLC, (the "Seller") and
Emmis Communications Corporation, (the "Buyer") dated June 19,
2000.
10.11(1) -- Asset Purchase Agreement between Capstar TX Limited
Partnership, (the "Seller") and Saga Communications of New
England, Inc., (the "Buyer") dated March 6, 2000.
10.12(1) -- Asset Purchase Agreement between Capstar TX Limited
Partnership and Salem Communications Corporation dated March
5, 2000.
</TABLE>
<PAGE> 31
<TABLE>
<S> <C> <C>
10.13(1) -- Asset Exchange Agreement between Clear Channel Broadcasting,
Inc., Clear Channel Broadcasting Licenses, Inc., Capstar Radio
Operating Company and Capstar TX Limited Partnership, (the
"Seller") and Barnstable Broadcasting, Inc., OBC Broadcasting,
Inc. and Two Rivers Broadcasting Limited Partnership, (the
"Buyer") dated March 7, 2000.
10.14(1) -- Asset Purchase Agreement between Clear Channel Broadcasting,
Inc., Clear Channel Broadcasting Licenses, Inc., Capstar TX
Limited Partnership, AMFM Ohio, Inc., Cleveland Radio Licenses
LLC, AMFM San Diego, Inc., AMFM Houston, Inc., AMFM Radio
Licenses, LLC and Zebra Broadcasting Corporation, (the
"Seller") and CBS Radio, Inc. (the "Buyer") dated March 3,
2000.
10.15(2) -- Asset Purchase Agreement among AMFM Ohio, Inc., AMFM Radio
Licenses LLC, Blue Chip Broadcasting, Ltd. and Blue Chip
Broadcasting Licenses, Ltd. dated March 3, 2000.
10.16(2) -- Asset Purchase Agreement between Clear Channel Broadcasting,
Inc., Clear Channel Broadcasting Licenses, Inc., AMFM
Operating Inc., AMFM Ohio, Inc., AMFM Houston, Inc., AMFM
Radio Licenses, LLC, Zebra Broadcasting Corporation, Cleveland
Radio Licenses, LLC, Capstar TX Limited Partnership and Radio
One, Inc. dated March 11, 2000.
10.17(2) -- Amendment to Asset Purchase Agreement between Clear Channel
Broadcasting, Inc., Clear Channel Broadcasting Licenses, Inc.,
AMFM Operating Inc., AMFM Ohio, Inc., AMFM Houston, Inc., AMFM
Radio Licenses, LLC, Zebra Broadcasting Corporation, Cleveland
Radio Licenses, LLC, Capstar TX Limited Partnership and Radio
One, Inc. dated August 24, 2000.
10.18(2) -- Asset Exchange Agreement among Clear Channel Broadcasting,
Inc., Clear Channel Broadcasting Licenses, Inc., Capstar Radio
Operating Company, Capstar TX Limited Partnership, Regent
Broadcasting of Victorville, Inc., Regent Licensee of
Victorville, Inc., Regent Broadcasting of Palmdale, Inc.,
Regent Licensee of Palmdale, Inc., Regent Broadcasting of
Mansfield, Inc. and Regent Licensee of Mansfield, Inc. dated
March 12, 2000.
10.19(2) -- Trust agreement between Clear Channel Communications, Inc.,
Clear Channel Broadcasting, Inc., Clear Channel Broadcasting
Licenses, Inc., AMFM Radio Licenses, L.L.C., AMFM Ohio, Inc.,
Capstar TX Limited Partnership, Capstar Radio Operating
Company, and Charles E. Giddens (the "Trustee") dated August
28, 2000 and effective August 29, 2000.
27.1(3) -- Financial Data Schedule of AMFM Operating Inc.
</TABLE>
------------
* The Company has not filed long-term debt instruments where the total
amount under such instruments is less than ten percent of the total
assets of the Company and its subsidiaries on a consolidated basis.
However, the Company will furnish a copy of such instruments to the
Commission upon request.
(1) Incorporated by reference to Exhibits to the Current Report on Form 8-K
of Clear Channel Communications, Inc. filed on September 6, 2000.
(2) Incorporated by reference to Exhibits to the Current Report on Form 8-K
of Capstar Broadcasting Partners, Inc. filed on September 11, 2000.
(3) Filed herewith.
