<PAGE> 1
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------------
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
DATE OF REPORT (DATE OF EARLIEST EVENT REPORTED): AUGUST 30, 2000
---------------------
AMFM OPERATING INC.
(Exact name of Registrant as specified in its charter)
<TABLE>
<S> <C> <C>
----------------------------------------------------------------------------------------------------------------------
DELAWARE 000-22486 13-3649750
(State or other (Commission File Number) (I.R.S. Employer
jurisdiction of incorporation) Identification Number)
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1845 WOODALL RODGERS FREEWAY, SUITE 1300
DALLAS, TEXAS 75201
(Address of principal (Zip code)
executive offices)
----------------------------------------------------------------------------------------------------------------------
</TABLE>
Registrant's telephone number, including area code: (214) 922-8700
NOT APPLICABLE
(Former name or former address, if changed since last report)
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<PAGE> 2
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS.
On August 30, 2000, Clear Channel Communications, Inc. consummated its
acquisition of AMFM Inc., indirect parent of AMFM Operating Inc. (the
"Company"), pursuant to a merger agreement under which AMFM stockholders will
receive 0.94 Clear Channel shares for each AMFM share held in a tax-free
exchange. In order to obtain antitrust and Federal Communications Commission
approval for the merger, the Company has 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. A further eight stations,
valued at $0.2 billion, were put into trust until the eventual sale of these
stations. Following is a list of the divestitures:
<TABLE>
<CAPTION>
Date
of Proceeds
Buyer Divestiture (in thousands) Market Stations
----- ----------- -------------- ------ --------
<S> <C> <C> <C> <C>
Barnstable Broadcasting, Inc. 8/24/00 $ 45,160(1) Des Moines, IA KGGO-FM/KHKI-FM
Greenville, SC WROQ-FM
Blue Chip Broadcasting, Inc. 8/22/00 2,000 Cincinnati, OH WUBE-AM
Chase Radio Partners(2) 8/24/00 12,704 Biloxi, MI WKNN-FM/WMJY-FM
Waco, TX KBRQ-FM
Cox Radio, Inc. 8/30/00 219,000 Richmond, VA WKHK-FM/WKLR-FM/WMXB-FM
Houston, TX KKBQ-FM/KLDE-FM
Cumulus Media, Inc. 8/30/00 75,870(3) Cedar Rapids, IA KDAT-FM/KHAK-FM/KRNA-FM
Melbourne, FL WHKR-FM
Shreveport, LA KMJJ-FM/KRMD-AM/KRMD-FM/KBED-FM
Emmis Communications Corporation 8/24/00 107,000 Denver, CO KXPK-FM
Phoenix, AZ KKFR-FM
Infinity Broadcasting Corporation 8/24/00 1,368,635 Cincinnati, OH WUBE-FM
Cleveland, OH WDOK-FM/WQAL-FM/WZJM-FM
Denver, CO KDJM-FM/KIMN-FM/KXKL-FM
Greensboro, NC WMFR-FM
Orlando, FL WJHM-FM/WOCL-FM/WOMX-FM
Phoenix, AZ KMLE-FM/KOOL-FM/KZON-FM
San Diego, CA KPLN-FM/KYXY-FM
Radio One, Inc. 8/25/00 661,017 Cleveland, OH WJMO-AM/WZAK-FM
Dallas, TX KBFB-FM
Los Angeles, CA KKBT-FM
Miami, FL WVCG-AM
Regent Communications, Inc. 8/24/00 169,396(4) Albany, NY WABT-FM/WGNA-AM/WGNA-FM
Grand Rapids, MI WGRD-FM/WLHT-FM/WTRV-FM/WNWZ-AM
</TABLE>
<PAGE> 3
<TABLE>
<S> <C> <C> <C> <C>
Saga Communications, Inc. 8/30/00 12,000 Springfield, MA WHMP-FM/WHMP-AM
Salem Communications Corporation 8/24/00 150,600 Cincinnati, OH WBOB-AM/WYGY-FM
Cleveland, OH WKNR-AM/WRMR-AM
Dallas, TX KDGE-FM
Denver, CO KALC-FM
C. Giddens Trust(5) 8/29/00 N/A Denver, CO KVOD-AM
Harrisburg, PA WNCE-FM/WNNK-FM/WTCY-AM/
WTPA-FM
Houston, TX KQUE-AM
Pensacola, FL WMEZ-FM/WXBM-FM
</TABLE>
(1) Includes the receipt of radio stations WKDD-FM and WTOU-AM in Akron, Ohio.
(2) Stations sold to Chase Radio Partners will continue to be operated by the
Company under a joint sales agreement ("JSA").
(3) Includes the receipt of radio stations WQKL-FM, WIQB-FM, WTKA-AM and WYBN-AM
in Ann Arbor, Michigan; WUSY-FM, WUUS-AM (formerly WLMX-AM), WRXR-FM
(formerly WLMX-FM), WLOV-FM and WKXJ-FM in Chattanooga, Tennessee; WATQ-FM,
WBIZ-AM/FM, WMEQ-AM/FM and WQRB-FM in Eau Claire, Wisconsin; KTEX-FM and
KBFM-FM in McAllen, Texas; and WLVW-FM, WQHQ-FM, WTGM-AM, WAWR-AM, WOSC-FM,
WJDY-AM, WWFG-FM, WLBW-FM and WSBY-FM in Salisbury/Ocean City, Maryland.
(4) Includes the receipt of radio stations WYHT-FM, WSWR-FM and WMAN-AM in
Mansfield, Ohio and KATJ-FM, KZXY-FM, KIXA-FM, KROY-AM and KIXW-AM in
Victorville, California.
(5) In order to comply with the Communications Act of 1934 and the consent
decree entered into with the Department of Justice, eight stations have
been placed into the C. Giddens Trust pending their eventual sale.
While in trust, the Company cannot manage or operate these stations.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
(b) UNAUDITED PRO FORMA FINANCIAL INFORMATION.
Unaudited pro forma financial information required pursuant to
Article 11 of Regulation S-X as of June 30, 2000 and for the year
ended December 31, 1999 and the six months ended June 30, 2000 is filed
herewith beginning on page P-1.
(c) EXHIBITS.
<TABLE>
<S> <C>
2.1(1) Agreement and Plan of Merger dated as of October 2, 1999,
among Clear Channel, CCU Merger Sub, Inc. and AMFM Inc.
10.1(2) 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(2) 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(2) 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(2) 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(2) 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(2) 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(2) 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(2) 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(2) 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(2) 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(2) 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(2) Asset Purchase Agreement between Capstar TX Limited Partnership and
Salem Communications Corporation dated March 5, 2000.
10.13(2) 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(2) 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(3) 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(3) 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(3) 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(3) 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(3) 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.
</TABLE>
(1) Incorporated by reference to Exhibits to the Current Report on Form 8-K
of Clear Channel Communications, Inc. filed on October 5, 1999.
(2) Incorporated by reference to Exhibits to the Current Report on Form
8-K of Clear Channel Communications, Inc. filed on September 6, 2000.
(3) Incorporated by reference to Exhibits to the Current Report on Form
8-K of Capstar Broadcasting Partners, Inc. filed on September 11, 2000.
<PAGE> 4
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
AMFM OPERATING INC.
(Registrant)
By: /s/ ERIC C. SIMONTIS
------------------------------------------------
Eric C. Simontis
Vice President and
Controller
Date: September 11, 2000
<PAGE> 5
UNAUDITED PRO FORMA COMBINED CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS
The following unaudited pro forma combined condensed consolidated
financial statements of AMFM Operating Inc. (the "Company") give effect to the
divestiture of 58 radio stations in 22 markets and the placement of a further
eight radio stations into trust (the "Divestitures"), which were required in
order to obtain antitrust and Federal Communications Commission approval for the
merger between Clear Channel Communications, Inc. ("Clear Channel") and AMFM
Inc. ("AMFM"), indirect parent of the Company, which was consummated on August
30, 2000. Additionally, the consent decree entered into by AMFM and Clear
Channel required the Company to discontinue any and all control over the
Company's approximate 30% ownership (11% voting) interest in Lamar Advertising
Company ("Lamar"). The Company had previously accounted for this investment
under the equity method. With the loss of control, the Company will now account
for this investment under the cost method.
The unaudited pro forma combined condensed consolidated balance sheet
at June 30, 2000 was prepared based upon the historical balance sheet of the
Company, adjusted for the Divestitures, the change in the accounting for the
Company's investment in Lamar from the equity method to the cost method and
certain charges related to AMFM's stock option plans, as if such transactions
had occurred on June 30, 2000. The unaudited pro forma combined condensed
consolidated statements of operations for the year ended December 31, 1999 and
for the six months ended June 30, 2000 give effect to the Divestitures and the
change in accounting for the Company's investment in Lamar from the equity
method to the cost method as if such transactions had occurred on January 1,
1999, and were prepared based upon the historical statements of operations of
the Company, adjusted to reflect the operations of Capstar Broadcasting
Corporation, which was acquired by AMFM on July 13, 1999, the acquisition of
KKFR-FM and KFYI-AM from The Broadcast Group, Inc., the disposition of WMVP-AM
to ABC, Inc. and the disposition of the Company's outdoor advertising business
to Lamar as if such transactions had occurred on January 1, 1999.
The unaudited pro forma combined condensed financial statements do not
give effect to purchase accounting adjustments, including goodwill, that will be
recorded by Clear Channel and reflected in the Company's financial statements
for periods subsequent to the merger. The unaudited pro forma combined condensed
financial statements should be read in conjunction with the historical financial
statements of the Company.
The unaudited pro forma combined condensed financial statements are not
necessarily indicative of the actual results of operations or financial position
that would have occurred had the Divestitures and the above described
acquisitions, dispositions and other transactions occurred on the dates
indicated nor are they necessarily indicative of future operating results or
financial position.
P-1
<PAGE> 6
AMFM OPERATING INC.
UNAUDITED PRO FORMA COMBINED CONDENSED CONSOLIDATED BALANCE SHEET
AT JUNE 30, 2000
(IN THOUSANDS OF DOLLARS)
<TABLE>
<CAPTION>
OTHER
COMPANY PRO FORMA COMPANY
HISTORICAL DIVESTITURES(1) ADJUSTMENTS PRO FORMA
----------- --------------- ----------- -----------
<S> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents.... $ 40,577 $ -- $ -- $ 40,577
Accounts receivable, net..... 547,935 -- -- 547,935
Other current assets......... 61,789 175,067 -- 236,856
----------- ----------- ----------- -----------
Total current assets....... 650,301 175,067 -- 825,368
Property and equipment, net.... 442,661 (63,377) -- 379,284
Intangible assets, net......... 9,902,702 (1,416,310) -- 8,486,392
Other assets:
Investments in
nonconsolidated
affiliates................. 1,058,154 -- (1,046,176)(2) 11,978
Other assets................. 239,028 -- 1,046,176(2) 1,285,204
----------- ----------- ----------- -----------
TOTAL ASSETS............... $12,292,846 $(1,304,620) -- $10,988,226
=========== =========== =========== ===========
LIABILITIES AND STOCKHOLDER'S
EQUITY
Current liabilities:
Accounts payable and accrued
expenses................... $ 267,187 $ -- $ -- $ 267,187
Long-term debt................. 5,347,310 (1,886,993) -- 3,460,317
Deferred tax liabilities....... 1,646,968 (214,158) (28,742)(3) 1,404,068
Other liabilities.............. 49,052 -- -- 49,052
Stockholder's equity:
Common stock................. 1 -- -- 1
Additional paid-in capital... 5,631,532 -- 82,119(3) 5,713,651
Retained earnings
(accumulated deficit)...... (649,204) 796,531 (53,377)(3) 93,950
----------- ----------- ----------- -----------
Total stockholder's
equity................... 4,982,329 796,531 28,742 5,807,602
----------- ----------- ----------- -----------
TOTAL LIABILITIES AND
STOCKHOLDER'S EQUITY..... $12,292,846 $(1,304,620) -- $10,988,226
=========== =========== =========== ===========
</TABLE>
See accompanying notes to Unaudited Pro Forma Financial Information
P-2
<PAGE> 7
AMFM OPERATING INC.
UNAUDITED PRO FORMA COMBINED CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1999
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
OTHER COMPANY AS LAMAR
COMPANY PRO FORMA ADJUSTED FOR TRANSACTION
HISTORICAL(4) DIVESTITURES(5) ADJUSTMENTS THE MERGER HISTORICAL(7)
------------- --------------- ----------- ------------ -------------
<S> <C> <C> <C> <C> <C>
Net revenue................................ $1,977,888 $ (269,411) $ -- $1,708,477 $(156,627)
Operating expenses......................... 1,048,711 (148,153) -- 900,558 (84,583)
Depreciation and amortization.............. 731,514 (115,134) -- 616,380 (94,062)
Noncash compensation expense............... 6,443 -- -- 6,443 --
Merger and non-recurring costs............. 63,719 -- -- 63,719 (2,154)
Corporate expenses......................... 57,559 -- -- 57,559 (6,835)
---------- ---------- ---------- ---------- ---------
Operating income (loss).................... 69,942 (6,124) -- 63,818 31,007
Interest expense........................... 414,993 (146,242) -- 268,751 (171)
Interest income............................ 10,644 -- -- 10,644 --
Gain on disposition of assets.............. 221,312 -- -- 221,312 947
Gain on disposition of representation
contracts................................ 18,173 -- -- 18,173 --
Other income (expense)..................... -- -- -- -- --
---------- ---------- ---------- ---------- ---------
Income (loss) before income taxes, equity
in earnings (loss) of nonconsolidated
affiliates and extraordinary item........ (94,922) 140,118 -- 45,196 32,125
Income tax (expense) benefit............... (3,027) (17,840) -- (20,867) (8,867)
---------- ---------- ---------- ---------- ---------
Income before equity in earnings (loss) of
nonconsolidated affiliates and
extraordinary item....................... (97,949) 122,278 -- 24,329 23,258
Equity in earnings (loss) of
nonconsolidated affiliates............... (28,192) -- 23,008(6) (5,184) --
---------- ---------- ---------- ---------- ---------
Net income (loss) before extraordinary
item..................................... (126,141) 122,278 23,008 19,145 23,258
Preferred stock dividends.................. 5,591 -- -- 5,591 --
---------- ---------- ---------- ---------- ---------
Income (loss) attributable to common shares
outstanding.............................. $ (131,732) $ 122,278 $ 23,008 $ 13,554 $ 23,258
========== ========== ========== ========== =========
<CAPTION>
PRO FORMA CAPSTAR AS PRO FORMA PRO FORMA
ADJUSTMENTS ADJUSTED FOR ADJUSTMENTS ADJUSTMENTS
FOR THE THE COMPLETED FOR THE FOR THE
LAMAR CAPSTAR CAPSTAR OTHER COMPLETED COMPANY
TRANSACTION TRANSACTIONS(11) MERGER TRANSACTIONS(17) PRO FORMA
------------ ---------------- ------------- --------------- ----------
<S> <C> <C> <C> <C> <C>
Net revenue................................ $ -- $ 347,290 $(31,397)(12) $ (705) $1,867,038
Operating expenses......................... -- 207,000 (4,221)(12) (116) 1,018,638
Depreciation and amortization.............. -- 78,214 (26,832)(12) 2,839 723,516
146,977(13)
Noncash compensation expense............... -- 20,284 -- -- 26,727
Merger and non-recurring costs............. -- 51,288 (47,510)(14) -- 65,343
Corporate expenses......................... -- 13,874 -- -- 64,598
--------- --------- -------- ------- ----------
Operating income (loss).................... -- (23,370) (99,811) (3,428) (31,784)
Interest expense........................... (36,128)(8) 67,385 1,406(15) 3,009 304,252
Interest income............................ -- 100 (9,650)(12) -- 1,094
Gain on disposition of assets.............. (209,970)(9) -- -- -- 12,289
Gain on disposition of representation
contracts................................ -- -- -- -- 18,173
Other income (expense)..................... -- (46) -- -- (46)
--------- --------- -------- ------- ----------
Income (loss) before income taxes, equity
in earnings (loss) of nonconsolidated
affiliates and extraordinary item........ (173,842) (90,701) (110,867) (6,437) (304,526)
Income tax (expense) benefit............... 60,845(10) 17,105 38,803(16) 2,253 89,272
--------- --------- -------- ------- ----------
Income before equity in earnings (loss) of
nonconsolidated affiliates and
extraordinary item....................... (112,997) (73,596) (72,064) (4,184) (215,254)
Equity in earnings (loss) of
nonconsolidated affiliates............... (2,444) -- -- (7,628)
--------- --------- -------- ------- ----------
Net income (loss) before extraordinary
item..................................... (112,997) (76,040) (72,064) (4,184) (222,882)
Preferred stock dividends.................. -- 8,365 -- -- 13,956
--------- --------- -------- ------- ----------
Income (loss) attributable to common shares
outstanding.............................. $(112,997) $ (84,405) $(72,064) $(4,184) $ (236,838)
========= ========= ======== ======= ==========
</TABLE>
See accompanying notes to Unaudited Pro Forma Financial Information
P-3
<PAGE> 8
AMFM OPERATING INC.
UNAUDITED PRO FORMA COMBINED CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
SIX MONTHS ENDED JUNE 30, 2000
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
OTHER
COMPANY PRO FORMA COMPANY
HISTORICAL DIVESTITURES(5) ADJUSTMENTS PRO FORMA
---------- --------------- ----------- -------------
<S> <C> <C> <C> <C>
Net revenue................... $1,159,171 $(139,275) $ -- $1,019,896
Operating expenses............ 626,573 (75,239) -- 551,334
Depreciation an
amortization................ 429,827 (55,771) -- 374,056
Noncash compensation
expense..................... 35,835 -- -- 35,835
Merger and non-recurring
costs....................... 18,946 -- -- 18,946
Corporate expenses............ 29,312 -- -- 29,312
--------- -------- --------- ---------
Operating income (loss)....... 18,678 (8,265) -- 10,413
Interest expense.............. 223,879 (73,121) -- 150,758
Interest income............... 993 -- -- 993
Gain on disposition of
assets...................... 31,104 -- -- 31,104
Gain on disposition of
representation contracts.... 16,989 -- -- 16,989
--------- -------- --------- ---------
Income (loss) before income
taxes, equity in earnings
(loss) of nonconsolidated
affiliates and extraordinary
item........................ (156,115) 64,856 -- (91,259)
Income tax (expense)
benefit..................... 11,609 (8,731) -- 2,878
--------- -------- --------- ---------
Income (loss) before equity in
earnings (loss) of
nonconsolidated affiliates
and extraordinary item...... (144,506) 56,125 -- (88,381)
Equity in earnings (loss) of
nonconsolidated
affiliates.................. (47,591) -- 40,707(6) (6,884)
--------- -------- --------- ---------
Income (loss) attributable to
common shares outstanding... $(192,097) $ 56,125 $ 40,707 $ (95,265)
========= ======== ========= =========
</TABLE>
See accompanying notes to Unaudited Pro Forma Financial Information
P-4
<PAGE> 9
AMFM OPERATING INC.
NOTES TO UNAUDITED PRO FORMA COMBINED
CONDENSED CONSOLIDATED FINANCIAL INFORMATION
(IN THOUSANDS OF DOLLARS)
ADJUSTMENTS TO THE UNAUDITED PRO FORMA COMBINED CONDENSED CONSOLIDATED BALANCE
SHEET
(1) Reflects 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 the placement of a further eight radio stations into trust. The
divestitures were required in order to obtain antitrust and Federal
Communications Commission approval for the merger between Clear Channel
Communications, Inc. and AMFM Inc., indirect parent of the Company, which was
consummated on August 30, 2000. Adjustments are as follows:
<TABLE>
<CAPTION>
INCREASE
(DECREASE)
-----------
<S> <C>
Increase in other current assets due to a
reclassification of net assets transferred to trust....... $ 175,067
Decrease in property, plant and equipment, net of
accumulated depreciation.................................. (63,377)
Decrease in intangible assets, net of accumulated
amortization ............................................. (1,416,310)
Decrease in long-term debt resulting from the use of net
proceeds.................................................. (1,886,993)
Decrease in deferred income taxes........................... (214,158)
Increase in retained earnings resulting from the gain on the
sale of stations, net of tax at the Company's assumed tax
rate of 39%............................................... 796,531
</TABLE>
(2) As a condition for approval of the merger with Clear Channel from the
Department of Justice, the Company is prohibited from exercising any governance
rights over Lamar. Since the Company may no longer exercise significant
influence over the operations of Lamar, the Company's investment in Lamar will
be accounted for using the cost method instead of the equity method subsequent
to the merger date. This adjustment reclassifies the Company's investment in
Lamar from an equity method investment to a cost method investment.
(3) Reflects the adjustments to record (1) estimated stock option compensation
expense of $38,064, net of a tax benefit of $20,497, relating to certain
executive stock options that became exercisable upon the Clear Channel merger
and (2) estimated charges of $15,313, net of a tax benefit of $8,245, related to
amendments made to AMFM's stock option plans on July 5, 2000 to provide that all
unvested options will accelerate and vest for employees terminated as a result
of the Clear Channel merger.
P-5
<PAGE> 10
AMFM OPERATING INC.
NOTES TO UNAUDITED PRO FORMA COMBINED
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
ADJUSTMENTS TO THE UNAUDITED PRO FORMA COMBINED CONDENSED CONSOLIDATED
STATEMENTS OF OPERATIONS
(4) The Company began operating KKFR-FM and KFYI-AM in Phoenix under a time
brokerage agreement effective November 5, 1998. Therefore, the results of
operations of KKFR-FM and KFYI-AM are included in the Company's historical
operations for the year ended December 31, 1999.
The Company entered into a time brokerage agreement to sell substantially all of
the broadcast time of WMVP-AM in Chicago effective September 10, 1998.
Therefore, substantially all of the results of operations of WMVP-AM are
excluded from the Company's historical operations for the year ended December
31, 1999.
(5) Divestitures
<TABLE>
<CAPTION>
INCREASE (DECREASE)
TO INCOME
-------------------------
12/31/99 6/30/00
---------- ---------
<S> <C> <C>
Decrease in revenue................................................ $(269,411) $(139,275)
Decrease in operating expenses..................................... 148,153 75,239
Decrease in depreciation and amortization, of which
$94,376 and $42,468 for 12/31/99 and 6/30/00,
respectively, results in a permanent difference and
will not be deducted for federal income tax purposes............. 115,134 55,771
Decrease in interest expense associated with the
reduction of long-term debt resulting from the use of
net proceeds..................................................... 146,242 73,121
Increase in income tax expense associated with the pro
forma adjustments at the Company's assumed tax rate
of 39%........................................................... (17,840) (8,731)
</TABLE>
An estimated pre-tax gain of approximately $1.3 billion, representing the gain
from the sale of the divested radio stations partially offset by stock
compensation charges directly attributable to the Divestitures, has not been
included in the unaudited pro forma condensed consolidated statement of
operations due to its non-recurring nature.
(6) As a condition for approval of the merger with Clear Channel from the
Department of Justice, the Company is prohibited from exercising any governance
rights over Lamar. Since the Company may no longer exercise significant
influence over the operations of Lamar, the Company's investment in Lamar will
be accounted for using the cost method instead of the equity method subsequent
to the merger date. This adjustment removes the historical equity in losses of
Lamar of $23,008 for the year ended December 31, 1999 and $40,707 for the six
months ended June 30, 2000.
(7) On September 15, 1999, the Company completed the sale to Lamar of all of the
outstanding common stock of the subsidiaries which held all of The Company's
assets used in its outdoor advertising business. The Company received net cash
proceeds of approximately $700,000 and 26,227,273 shares of class A common
stock, par
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<PAGE> 11
AMFM OPERATING INC.
NOTES TO UNAUDITED PRO FORMA COMBINED
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
value $.01 per share, of Lamar. This adjustment removes the historical results
of operations of the Company's outdoor advertising business.
(8) Reflects the net decrease in interest expense of $36,128 for the year ended
December 31, 1999 in connection with the additional bank borrowings related to
the outdoor advertising acquisitions completed during 1999 and the paydown of
debt resulting from the net proceeds of $700,000 received from Lamar.
(9) Reflects the elimination of the nonrecurring gain of $209,970 incurred in
connection with the Company's sale of its outdoor advertising business.
(10) Reflects the tax effect of the pro forma adjustments.
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<PAGE> 12
AMFM OPERATING INC.
NOTES TO UNAUDITED PRO FORMA COMBINED
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(11) Reflects the historical operations of Capstar for the period from January 1
to July 13, 1999 and pro forma adjustments:
<TABLE>
<CAPTION>
PERIOD FROM JANUARY 1 CAPSTAR PRO FORMA CAPSTAR
TO JULY 13, 1999 HISTORICAL ADJUSTMENTS PRO FORMA
--------------------- ---------- ----------- ---------
<S> <C> <C> <C>
Net revenues.................................... $ 347,290 $ -- $ 347,290
Operating expenses.............................. 207,000 -- 207,000
Depreciation and amortization................... 78,214 -- 78,214
Noncash compensation expense.................... 20,284 -- 20,284
LMA fees........................................ 387 (387)(a) --
Merger and non-recurring costs.................. 51,288 -- 51,288
Corporate expenses.............................. 13,874 -- 13,874
--------- ----- ---------
Operating income................................ (23,757) 387 (23,370)
Interest expense................................ 67,385 -- 67,385
Interest income................................. 100 -- 100
Other income (expense).......................... (46) -- (46)
--------- ----- ---------
Income (loss) before income taxes............... (91,088) 387 (90,701)
Income tax (expense) benefit.................... 17,240 (135)(b) 17,105
--------- ----- ---------
Income (loss) before equity in net loss of
nonconsolidated affiliates.................... (73,848) 252 (73,596)
Equity in net loss of nonconsolidated
affiliates.................................... (2,444) -- (2,444)
--------- ----- ---------
Net income (loss)............................... (76,292) 252 (76,040)
Preferred stock dividends....................... 8,365 -- 8,365
--------- ----- ---------
Income (loss) attributable to common
shares outstanding............................ $ (84,657) $ 252 $ (84,405)
========= ===== =========
</TABLE>
---------------
(a) Reflects the elimination of $387 of time brokerage (LMA) fees paid by
Capstar for the period from January 1 to July 13, 1999 related to
acquired radio stations that were previously operated under time
brokerage agreements.
(b) Reflects the tax effect of the pro forma adjustments.
ADJUSTMENTS TO UNAUDITED PRO FORMA COMBINED CONDENSED CONSOLIDATED STATEMENT OF
OPERATIONS RELATED TO THE CAPSTAR MERGER.
(12) Reflects the elimination of intercompany transactions between the Company
and Capstar for the Company's media representation services provided to Capstar,
Capstar's participation in The AMFM Radio Networks, fees paid by the Company to
Capstar under time brokerage (LMA) agreements and interest income on Capstar's
note payable to the Company of $150,000 for the period from January 1 to July
13, 1999.
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<PAGE> 13
AMFM OPERATING INC.
NOTES TO UNAUDITED PRO FORMA COMBINED
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(13) Reflects incremental amortization related to the Capstar merger and is
based on the allocation of the total consideration as follows:
<TABLE>
<CAPTION>
PERIOD FROM
JANUARY 1 TO
JULY 13, 1999
-------------
<S> <C>
Amortization expense on $5,892,486 of intangible assets..... $210,602
Less: historical amortization expense....................... (63,625)
--------
Adjustment for net increase in amortization expense......... $146,977
========
</TABLE>
Historical depreciation expense of Capstar as adjusted for the completed
Capstar transactions is assumed to approximate depreciation expense on a
pro forma basis.
(14) Reflects the elimination of financial advisory and other expenses of
Capstar in connection with the Capstar merger of $47,510 for the period from
January 1 to July 13, 1999.
(15) Reflects the adjustment to record interest expense of $1,406 for the year
ended December 31, 1999 on additional bank borrowings related to estimated
financial advisors, legal, accounting and other professional fees incurred by
the Company and Capstar.
(16) Reflects the tax effect of the pro forma adjustments.
(17) Adjustments to Unaudited Pro Forma Combined Condensed Consolidated
Statement of Operations Related to the Other Completed Transactions
On April 16, 1999, the Company sold WMVP-AM in Chicago to ABC, Inc. for
$21,000 in cash. The Company entered into a time brokerage agreement to sell
substantially all of the broadcast time of WMVP-AM effective September 10, 1998.
On July 1, 1999, the Company acquired KKFR-FM and KFYI-AM in Phoenix from
The Broadcast Group, Inc. for $90,000 in cash. The Company began operating
KKFR-FM and KFYI-AM under a time brokerage agreement effective November 5, 1998.
The combined condensed statement of operations for the other completed
transactions for the year ended December 31, 1999 is summarized below:
<TABLE>
<CAPTION>
CHICAGO PRO FORMA
DISPOSITION ADJUSTMENTS FOR OTHER
YEAR ENDED HISTORICAL THE OTHER COMPLETED COMPLETED
DECEMBER 31, 1999 1/1-4/16 TRANSACTIONS TRANSACTIONS
----------------- ----------- ------------------- ------------
<S> <C> <C> <C>
Net revenues................................ $(705) $ -- $ (705)
Operating expenses.......................... (116) -- (116)
Depreciation and amortization............... -- 2,839(a) 2,839
----- ------- -------
Operating loss.............................. (589) (2,839) (3,428)
Interest expense............................ -- 3,009(b) 3,009
----- ------- -------
Loss before income taxes.................... (589) (5,848) (6,437)
Income tax benefit.......................... -- 2,253(c) 2,253
----- ------- -------
Income (loss)............................... $(589) $(3,595) $(4,184)
===== ======= =======
</TABLE>
P-9
<PAGE> 14
AMFM OPERATING INC.
NOTES TO UNAUDITED PRO FORMA COMBINED
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
---------------
(a) Reflects incremental amortization related to the assets acquired in the
Phoenix acquisition and is based on the allocation of the total
consideration as follows:
<TABLE>
<CAPTION>
INCREMENTAL INTANGIBLE HISTORICAL ADJUSTMENT
YEAR ENDED AMORTIZATION ASSETS, AMORTIZATION AMORTIZATION FOR NET
DECEMBER 31, 1999 PERIOD(I) NET EXPENSE(I) EXPENSE INCREASE
----------------- ------------ ---------- ------------ ------------ ----------
<S> <C> <C> <C> <C> <C>
Phoenix acquisition..... 1/1-7/1 $85,160 $2,839 $ -- $2,839
</TABLE>
(i) Intangible assets are amortized on a straight-line basis over an
estimated average 15 year life. The incremental amortization period
represents the period of the year that the acquisition was not
completed.
Historical depreciation expense for the Phoenix acquisition is assumed
to approximate depreciation expense on a pro forma basis.
(b) Reflects the adjustment to interest expense as follows:
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31, 1999
-----------------
<S> <C>
Additional bank borrowings related to other completed
transactions.............................................. $69,000
-------
Interest expense at 7.75%................................... 5,348
Less: historical interest expense recognized subsequent to
the completed
transaction............................................... 2,339
-------
Net increase in interest expense............................ $ 3,009
=======
</TABLE>
(c) Reflects the tax effect of the pro forma adjustments.
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