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Proc-Type: 2001,MIC-CLEAR
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<SEC-DOCUMENT>0000950134-01-002330.txt : 20010321
<SEC-HEADER>0000950134-01-002330.hdr.sgml : 20010321
ACCESSION NUMBER: 0000950134-01-002330
CONFORMED SUBMISSION TYPE: 10-K
PUBLIC DOCUMENT COUNT: 9
CONFORMED PERIOD OF REPORT: 20001231
FILED AS OF DATE: 20010320
FILER:
COMPANY DATA:
COMPANY CONFORMED NAME: CLEAR CHANNEL COMMUNICATIONS INC
CENTRAL INDEX KEY: 0000739708
STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-ADVERTISING [7310]
IRS NUMBER: 741787536
STATE OF INCORPORATION: TX
FISCAL YEAR END: 1231
FILING VALUES:
FORM TYPE: 10-K
SEC ACT:
SEC FILE NUMBER: 001-09645
FILM NUMBER: 1572138
BUSINESS ADDRESS:
STREET 1: 200 E BASSE RD
CITY: SAN ANTONIO
STATE: TX
ZIP: 78209
BUSINESS PHONE: 2108222828
MAIL ADDRESS:
STREET 1: 200 EAST BASSE ROAD
CITY: SAN ANTONIO
STATE: TX
ZIP: 78209
</SEC-HEADER>
<DOCUMENT>
<TYPE>10-K
<SEQUENCE>1
<FILENAME>h85063e10-k.txt
<DESCRIPTION>FORM 10-K FOR FISCAL YEAR END DECEMBER 31, 2000
<TEXT>
<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-K
[x] Annual report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 For the fiscal year ended December 31, 2000, or
[ ] Transition report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 For the transition period from ________ to
_________.
COMMISSION FILE NUMBER
1-9645
CLEAR CHANNEL COMMUNICATIONS, INC.
(Exact name of registrant as specified in its charter)
Texas 74-1787539
(State of Incorporation) (I.R.S. Employer Identification No.)
200 East Basse Road
San Antonio, Texas 78209
Telephone (210) 822-2828
(Address, including zip code, and telephone number,
including area code, of registrant's principal executive offices)
Securities registered pursuant to Section 12(b) of the Act: Common
Stock, $.10 par value per share.
Securities registered pursuant to Section 12(g) of the Act: None.
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 by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. ___
On March 9, 2001, the aggregate market value of the Common Stock beneficially
held by non-affiliates of the Company was approximately $32.4 billion. (For
purposes hereof, directors, executive officers and 10% or greater shareholders
have been deemed affiliates).
On March 9, 2001, there were 587,320,053 outstanding shares of Common Stock,
excluding 121,491 shares held in treasury.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of our Definitive Proxy Statement for the 2001 Annual Meeting, expected
to be filed within 120 days of our fiscal year end, are incorporated by
reference into Part III.
<PAGE> 2
CLEAR CHANNEL COMMUNICATIONS, INC.
INDEX TO FORM 10-K
<TABLE>
<CAPTION>
Page
Number
PART I.
- -------
<S> <C> <C>
Item 1. Business..................................................................................... 3
Item 2. Properties...................................................................................30
Item 3. Legal Proceedings........................................................................... 31
Item 4. Submission of Matters to a Vote of Security Holders..........................................31
PART II.
- --------
Item 5. Market for Registrant's Common Stock and Related Stockholder Matters.........................32
Item 6. Selected Financial Data......................................................................33
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations..........................................................34
Item 7A. Quantitative and Qualitative Disclosures about Market Risk ..................................49
Item 8. Financial Statements and Supplementary Data .................................................50
Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure..........................................................84
PART III.
- ---------
Item 10. Directors and Executive Officers of the Registrant...........................................85
Item 11. Executive Compensation.......................................................................87
Item 12. Security Ownership of Certain Beneficial Owners and Management...............................87
Item 13. Certain Relationships and Related Transactions...............................................87
PART IV.
- --------
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K.............................88
</TABLE>
2
<PAGE> 3
PART I
ITEM 1. BUSINESS
THE COMPANY
Clear Channel Communications, Inc. is a diversified media company with
three reportable business segments: radio broadcasting, outdoor advertising and
live entertainment. We were incorporated in Texas in 1974. As of December 31,
2000, we owned, programmed, or sold airtime for 1,105 domestic radio stations
and two international radio stations and owned a leading national radio network.
In addition, at December 31, 2000, we had equity interests in various domestic
and international radio broadcasting companies. We were also one of the world's
largest outdoor advertising companies based on total advertising display
inventory of 149,171 domestic display faces and 549,094 international display
faces. In addition, we were one of the world's largest diversified promoters,
producers and venue operators for live entertainment events. As of December 31,
2000, we owned or operated 120 live entertainment venues. We also own or program
19 television stations, own a media representation firm, represent professional
athletes and have operations in the Internet industry, all of which, along with
corporate expense, is within the category "other". The following table presents
each segment's percentage of total revenues for the year ended December 31,
2000:
<TABLE>
<CAPTION>
Percentage of
Segment Revenues
------- -----------------
<S> <C>
Radio Broadcasting 45%
Outdoor Advertising 32%
Live Entertainment 17%
Other 6%
----
Total 100%
</TABLE>
Our principal executive offices are located at 200 East Basse Road, San
Antonio, Texas 78209 (telephone: 210-822-2828).
RADIO BROADCASTING
Radio Stations
As of December 31, 2000, we owned, programmed or sold airtime for 346 AM
and 759 FM domestic radio stations, of which, 498 radio stations were in the top
100 markets, according to the Arbitron winter 2000 ranking of U.S. markets. In
addition, we currently own two international FM radio stations and various
interests in domestic and international radio broadcasting companies, which we
account for under the equity method of accounting. Our radio stations employ
various formats for their programming. A station's format is important in
determining the size and characteristics of its listening audience. Advertisers
tailor their advertisements to appeal to selected population or demographic
segments.
Most of our radio revenue is generated from the sale of national and
local advertising. Additional revenue is generated from network compensation
payments, barter and other miscellaneous transactions. Advertising rates charged
by a radio station are based primarily on the station's ability to attract
audiences having certain demographic characteristics in the market area which
advertisers want to reach, as well as the number of stations competing in the
market.
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<PAGE> 4
Advertising rates generally are the highest during morning and evening
drive-time hours. Depending on the format of a particular station, there are
predetermined numbers of advertisements that are broadcast each hour. We
determine the number of advertisements broadcast hourly that can maximize
available revenue dollars without jeopardizing listening levels. Although the
number of advertisements broadcast during a given time period may vary, the
total number of advertisements broadcast on a particular station generally does
not vary significantly from year to year.
Our radio broadcasting results are dependent on a number of factors,
including the general strength of the economy, population growth, ability to
provide popular programming, relative efficiency of radio broadcasting compared
to other advertising media, signal strength, technological capabilities and
developments and governmental regulations and policies.
Radio Networks
As of December 31, 2000, we owned one of the leading national radio
networks, based on a total audience of over 180 million weekly listeners. The
network syndicates talk programming including such talent as Rush Limbaugh, Dr.
Laura Schlessinger, Jim Rome, and music programming including such talent as
Rick Dees and Casey Kasem. We also operated several news and agricultural radio
networks serving Oklahoma, Texas, Iowa, Kentucky, Virginia, Alabama, Tennessee,
Florida and Pennsylvania.
OUTDOOR ADVERTISING
As of December 31, 2000, we owned or operated a total of 698,265
advertising display faces. We currently provide outdoor advertising services in
over 52 domestic markets and over 43 international countries. Our display faces
include billboards of various sizes, wallscapes, transit displays and street
furniture displays. Additionally, we currently own various interests in outdoor
advertising companies, which we account for under the equity method of
accounting.
Most of our outdoor revenue is derived from local sales. Local
advertisers tend to have smaller advertising budgets and require greater
assistance from our production and creative personnel to design and produce
advertising copy. In local sales, we often expend more sales efforts on
educating customers regarding the benefits of outdoor media and helping
potential clients develop an advertising strategy using outdoor advertising.
While price and availability are important competitive factors, service and
customer relationships are also critical components of local sales.
Advertising rates are based on a particular display's exposure, or
number of "impressions" delivered, in relation to the demographics of the
particular market and its location within that market. The number of
"impressions" delivered by a display is measured by the number of vehicles
passing the site during a defined period and is weighted to give effect to such
factors as its proximity to other displays, the speed and viewing angle of
approaching traffic, the national average of adults riding in vehicles and
whether the display is illuminated. The number of impressions delivered by a
display is verified by independent auditing companies.
Our billboards consist of various sized panels on which advertising
copy is displayed. Bulletin advertising copy is either printed with
computer-generated graphics on a single sheet of vinyl that is "wrapped" around
an outdoor advertising structure, placed on lithographed or silk-screened paper
sheets supplied by the advertiser that are pasted and applied like wallpaper to
the face of the display, or hand painted and attached to the structure. Over 90%
of our billboard inventory has been retrofitted for vinyl. Billboards are
generally mounted on structures we own and are located on sites that are either
owned or
4
<PAGE> 5
leased by us or on which we have acquired a permanent easement. Lease contracts
are negotiated with both public and private landlords.
Wallscapes are essentially billboards painted on vinyl surfaces or
directly on the sides of buildings, typically four stories or less. Because of
their greater impact and higher cost, larger billboards are usually located on
major highways and freeways. Some of our billboards are illuminated, and located
at busy traffic interchanges to offer maximum visual impact to vehicular
audiences. Wallscapes are located on major freeways, commuter and tourist routes
and in downtown business districts. Smaller billboards are concentrated on city
streets targeting pedestrian traffic.
Transit advertising incorporates all advertising on or in transit
systems, including the interiors and exteriors of buses, trains, trams and
taxis, and advertising at rail stations and airports. Transit advertising
posters range from vinyl sheets, which are applied directly to transit vehicles,
to billboards and panels mounted in station or airport locations. Transit
advertising contracts are negotiated with public transit authorities and private
transit operators, either on a fixed revenue guarantee or a revenue-share basis.
Street furniture panels are developed and marketed under our global
Adshel brand. Street furniture panels include bus shelters, free standing units,
pillars and columns. The most numerous are bus shelters which are back
illuminated and reach vehicular and pedestrian audiences. Street furniture is
growing in popularity with local authorities. Bus shelters are usually
constructed, owned and maintained by the outdoor service provider under
revenue-sharing arrangements with a municipality or transit authority. Street
furniture contracts are usually won in a competitive tender and last between 10
and 15 years. Tenders are won on the basis of revenues and community-related
products offered to municipalities, including bus shelters, public toilets and
information kiosks.
LIVE ENTERTAINMENT
We significantly expanded our presence in the live entertainment
industry with our August 2000 acquisition of SFX Entertainment, Inc. We are one
of the world's largest producers, promoters and marketers of live entertainment.
Last year, more than 60 million people attended approximately 26,000 of our
events, including: live music events; Broadway and touring Broadway shows;
family entertainment shows; and specialized sports and motor sports events. As
of December 31, 2000, we owned or operated a total of 92 domestic venues and 28
international venues. We also produce touring and original Broadway shows and
derive revenues from our theater operations. Additionally, we currently own
various interests in live entertainment companies, which we account for under
the equity method of accounting.
We derive revenues from our venue operations primarily from ticket
sales, rental income, corporate sponsorships and advertising, concessions, and
merchandise. A venue operator typically receives for each event it hosts a fixed
fee or percentage of ticket sales for use of the venue, as well as fees
representing a percentage of total concession sales from the vendors and total
merchandise sales from the performer or tour producer. We typically receive 100%
of sponsorship and advertising revenues and a rebate of a portion of ticketing
surcharges.
OTHER
Television
As of December 31, 2000, we owned, programmed or sold airtime for 19
television stations. Our television stations are affiliated with various
television networks, including FOX, UPN, ABC, NBC and CBS. Television revenue is
generated primarily from the sale of local and national advertising, as well as
from fees received from the affiliate television networks. Advertising rates
depend primarily on the
5
<PAGE> 6
quantitative and qualitative characteristics of the audience we can deliver to
the advertiser. Local advertising is sold by our sales personnel, while national
advertising is sold by national sales representatives.
The primary sources of programming for our ABC, NBC and CBS affiliated
television stations are their respective networks, which produce and distribute
programming in exchange for each station's commitment to air the programming at
specified times and for commercial announcement time during the programming. We
supply the majority of programming to our FOX and UPN affiliates by selecting
and purchasing syndicated television programs. We compete with other television
stations within each market for these broadcast rights.
The second source of programming is the production of local news
programming on the FOX, CBS, ABC and NBC affiliate stations in Jacksonville,
Florida; Harrisburg, Pennsylvania; Memphis, Tennessee; Mobile, Alabama;
Providence, Rhode Island; Cincinnati, Ohio; and Albany, New York. Local news
programming traditionally has appealed to a target audience of adults 25 to 54
years of age. Because these viewers generally have increased buying power
relative to viewers in other demographic groups, they are one of the most
sought-after target audiences for advertisers. With such programming, these
stations are able to attract advertisers to which they otherwise would not have
access.
Media Representation
As a result of our August 30, 2000 merger with AMFM Inc., we now own
the Katz Media Group, a full-service media representation firm that sells
national spot advertising time for clients in the radio and television
industries throughout the United States. Katz Media is one of the largest media
representation firms in the country, representing over 2,000 radio stations, 368
television stations and growing interests in cable television stations.
Katz Media representation operations generate revenues primarily
through contractual commissions realized from the sale of national spot
advertising air time. National spot advertising is commercial air time sold to
advertisers on behalf of radio and television stations and cable systems located
outside the local markets of those stations and systems. Katz Media represents
its media clients pursuant to media representation contracts, which typically
have terms of up to ten years in initial length.
Sports Representation
As a result of our merger with SFX, we now operate in the sports
representation business. Our full-service sports marketing and management
operations specialize in the representation of professional athletes, integrated
event management, television programming/production, and marketing consulting
services. Among our clients are several hundred professional athletes, including
Michael Jordan, Kobe Bryant (basketball), Roger Clemens (baseball), Greg Norman
(golf), Andre Agassi (tennis), Jerry Rice (football) and David Beckham (soccer -
UK).
Our sports representation operations generate revenue primarily through
the negotiation of professional sports contracts and endorsement contracts for
clients. The amount of endorsement and other revenues that our clients generate
is a function of, among other things, the clients' professional performances and
public appeal.
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<PAGE> 7
Internet Group
Our Internet group was formed in the fall of 2000. The goal of the
Internet group is to develop and maintain an integral web network across all of
our businesses, including radio broadcasting, outdoor advertising and live
entertainment.
COMPANY STRATEGY
Since our inception, we have focused on helping our clients distribute
their marketing messages in the most efficient ways possible. We believe our
ultimate success is measured by how well we assist our clients in selling their
products and services. To this end, we have assembled a variety of media assets
designed to provide the most efficient and cost-effective ways for our clients
to reach consumers. These assets are comprised of radio and television
broadcasting assets, outdoor advertising displays and live entertainment venues
and productions. We have combined these assets with the talent and motivation of
our entrepreneurial managers to create strong internal growth. We plan to
continue this effort in order to serve our clients, listeners, viewers,
audiences and investors.
A portion of our growth has been achieved through acquiring highly
complementary assets in radio and television broadcasting, outdoor advertising
and live entertainment. We have found that geographically diversified assets
give our clients more flexibility in the distribution of their messages, and
therefore allows us to provide these clients with a higher level of service. To
this end, we evaluate potential acquisitions based on the returns they can
potentially provide on invested capital, as well as the positive impact they
might have on our existing businesses. In addition, given our experience in the
industries in which we operate, we are able to improve the operations of assets
we acquire, thus further enhancing our value of those assets.
Additionally, we seek to create situations in which we own more than
one type of medium in the same market. Aside from the provision of added
flexibility to our clients, this "cross-ownership" allows us ancillary benefits,
such as the use of otherwise vacant outdoor advertising space to promote our
broadcasting assets, or the sharing of on-air talent across our broadcasting
assets to promote one of our live entertainment events or venues.
To support our radio broadcasting, outdoor advertising and live
entertainment strategies, we have decentralized our operating structure in order
to place authority, autonomy and accountability at the market level which
provides local management with tools necessary to serve our clients. We believe
that one of our strongest competitive advantages is our unique blend of highly
experienced corporate and local market management. We believe that the
combination of historically stable revenue growth within the industries we
operate, coupled with a fixed expense structure and minimal requirements for
ongoing capital expenditures, as well as our financial discipline, gives us an
excellent forum in which to generate free cash flow and provide value to our
investors.
RADIO BROADCASTING
Our radio broadcasting strategy entails improving the ongoing
operations of our existing stations, as well as the acquisition of stations. Our
acquisition strategy has created a national footprint that allows us to deliver
targeted messages for specific audiences to advertisers on a local, regional,
and national basis. We believe in clustering our radio stations in markets to
increase our individual market share thereby allowing us to offer our
advertisers more advertising options that can reach many audiences. We believe
owning multiple radio stations in a market allows us to provide our listeners
with a more diverse programming selection and a more efficient means for our
advertisers to reach those listeners. By
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clustering our stations, we are also able to operate our stations with more
highly skilled local management teams and eliminate duplicative operating and
overhead expenses. In addition to the economies of scale associated with our
national footprint and our clustering of stations in our markets, our management
seeks to improve the performance of our existing stations through effective
programming, reduction of costs, and aggressive promotion, marketing, and sales.
By complementing our radio operations with our other businesses, we are able to
increase revenue and profitability through synergies such as cross selling and
cross promoting utilizing our outdoor advertising and entertainment operations.
OUTDOOR ADVERTISING
Our outdoor advertising strategy involves expanding our market presence
and improving the operating results of our existing operations. By acquiring
additional displays in our existing markets and expanding into new markets, we
strive to increase our market share while managing our advertising rates to
maximize revenues. We focus on attracting new categories of advertisers to the
outdoor medium through significant investments in sales, marketing, creative,
and research services. We take advantage of technological advances that increase
our sales force productivity, production department efficiency, and the quality
of our product. We will continue to take advantage of the fragmented outdoor
advertising industry in our international markets, which presents us with
opportunities to increase our profitability both from our existing operations
and from acquisitions.
LIVE ENTERTAINMENT
Our entry into live entertainment operations allowed us to take
advantage of the natural synergies between radio and live music events and to
gain immediate industry leadership. We can now leverage our broadcasting assets
to reach listeners who have an affinity for music to promote our live
entertainment events and ultimately increase ticket revenue. Our entry into the
live entertainment industry enables us to reach revenue sources that we had not
reached in the past. Our strategy involves improving operating results driven
primarily by our ability to increase the utilization of venues, the number of
tickets sold per event, sponsorship opportunities, and radio audiences. We
strive to form strategic alliances with top brands for marketing opportunities,
complete our footprint with investments in music and theater, and foster
collaborations with our other media businesses.
RECENT DEVELOPMENTS
AMFM Merger
On August 30, 2000, we closed our merger with AMFM Inc. Pursuant to the
terms of the merger agreement, each share of AMFM common stock was exchanged for
0.94 shares of our common stock. Approximately 205.4 million shares of our
common stock were issued in the AMFM merger, valuing the merger, based on the
average market price of our common stock at the signing of the merger agreement,
at $15.9 billion plus the assumption of AMFM's outstanding debt of $3.5 billion.
Additionally, we assumed AMFM options and common stock warrants with a fair
value of $1.2 billion, which are convertible, subject to applicable vesting,
into approximately 25.5 million shares of our common stock. We refinanced $540.0
million of AMFM's $3.5 billion of long-term debt at the closing of the merger
using our credit facilities. The AMFM merger was accounted for as a purchase
with resulting goodwill of approximately $7.1 billion, which is being amortized
over 25 years on a straight-line basis. This purchase price allocation is
preliminary pending completion of appraisals and other fair value analysis of
assets and liabilities. The results of operations of AMFM have been included in
our financial statements beginning August 30, 2000.
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<PAGE> 9
Included in the purchase price of AMFM is $439.9 million of restricted
cash related to the disposition of AMFM assets in connection with the merger. In
addition, we swapped assets valued at $228.0 million and received proceeds of
$839.7 million in transactions with third parties in order to comply with
governmental directives regarding the AMFM merger, which resulted in a gain of
$805.2 million and an increase in income tax expense (at our statutory rate of
38%) of $306.0 million in 2000. We deferred a portion of this tax expense based
on our ability to replace the majority of the stations sold with qualified
assets. A portion of the proceeds from divestitures is being held in restricted
trusts until suitable replacement properties are identified. The following table
details the reconciliation of divestiture and acquisition activity in the
restricted trust accounts.
<TABLE>
<CAPTION>
(In thousands)
<S> <C>
Restricted cash resulting from Clear Channel divestitures $ 839,717
Restricted cash purchased in AMFM merger 439,896
Restricted cash used in acquisitions (670,228)
Interest, net of fees 18,756
-----------
Restricted cash balance at December 31, 2000 $ 628,141
===========
</TABLE>
In addition, we agreed to sell AMFM's 26.2 million shares in Lamar
Advertising Company by December 31, 2002. Furthermore, our investment must be
passive while we hold any interest in Lamar. As such, we account for this
investment under the cost method of accounting.
SFX Merger
On August 1, 2000, we consummated our merger with SFX Entertainment,
Inc. Pursuant to the terms of the merger agreement, each share of SFX Class A
common stock was exchanged for 0.6 shares of our common stock and each share of
SFX Class B common stock was exchanged for one share of our common stock.
Approximately 39.2 million shares of our common stock were issued in the SFX
merger. Based on the average market price of our common stock at the signing of
the merger agreement, the merger was valued at $2.9 billion plus the assumption
of SFX's outstanding debt of $1.5 billion. Additionally, we assumed all
outstanding SFX options and warrants with a fair value of $211.8 million, which
are exercisable for approximately 5.6 million shares of our common stock. We
refinanced $815.8 million of SFX's $1.5 billion of long-term debt at the closing
of the merger using our credit facilities. The SFX merger was accounted for as a
purchase with resulting goodwill of approximately $4.1 billion, which is being
amortized over 20 years on a straight-line basis. This purchase price allocation
is preliminary pending completion of appraisals and other fair value analysis of
assets and liabilities. The results of operations of SFX have been included in
our financial statements beginning August 1, 2000.
A number of lawsuits were filed by holders of SFX Class A common stock
alleging, among other things, that the difference in consideration for the Class
A and Class B shares constituted unfair consideration to the Class B holders and
that the SFX board breached its fiduciary duties and that we aided and abetted
the actions of the SFX board. On September 28, 2000, we issued approximately .4
million shares of our common stock, valued at $29.3 million, as settlement of
these lawsuits and have included the value of such shares as part of the
purchase price.
Future Acquisitions
We frequently evaluate strategic opportunities both within and outside
our existing lines of business and from time to time enter into letters of
intent to purchase assets. Although we have no
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definitive agreements with respect to significant acquisitions not set forth in
this report, we expect from time to time to pursue additional acquisitions and
may decide to dispose of certain businesses. Such acquisitions or dispositions
could be material.
Public Offerings
On June 14, 2000, we completed a debt offering of $250.0 million
floating rate notes due June 15, 2002 and $750.0 million 7.875% notes due June
15, 2005. The net proceeds of approximately $993.9 million were used to reduce
the outstanding balance on our credit facilities.
On July 3, 2000, we completed a debt offering of Euro 650.0 million
6.50% notes due July 7, 2005. Interest on the notes is payable annually in
arrears on July 7 of each year. The net proceeds of approximately $610.8 million
were used to reduce the outstanding balance on our credit facilities.
On September 7, 2000, we completed a debt offering of $750.0 million
7.25% senior notes due September 15, 2003 and $750.0 million 7.65% senior notes
due on September 15, 2010. Interest is payable on both series of notes on March
15 and September 15 of each year. The net proceeds of approximately $1.5 billion
were used to reduce the outstanding balance of our credit facilities.
Shelf Registration Statement
To facilitate possible future acquisitions as well as public offerings,
we filed a shelf registration statement on Form S-3 on July 21, 2000 covering a
combined $3.0 billion of debt securities, junior subordinated debt securities,
preferred stock, common stock, warrants, stock purchase contracts and stock
purchase units. The shelf registration statement also covers preferred
securities that may be issued from time to time by our three Delaware statutory
business trusts and guarantees of such preferred securities. After completing
the debt offering during September 2000, the amount of securities available
under the shelf registration statement at December 31, 2000 was $1.5 billion.
EMPLOYEES
At February 28, 2001 we had approximately 31,850 domestic employees and
4,500 international employees: approximately 36,000 in operations and
approximately 350 in corporate and other activities. In addition, our live
entertainment operations hire approximately 20,000 seasonal employees during
peak time periods.
OPERATING SEGMENTS
Clear Channel consists of three reportable operating segments: radio
broadcasting, outdoor advertising, and live entertainment. The radio
broadcasting segment includes radio stations for which we are the licensee and
for which we program and/or sell air time under local marketing agreements or
joint sales agreements. The radio broadcasting segment also operates radio
networks. The outdoor advertising segment includes advertising display faces for
which we own or operate under lease management agreements. The live
entertainment segment includes venues that we own or operate, the production of
Broadway shows and theater operations.
Information relating to the operating segments of our radio
broadcasting, outdoor advertising and live entertainment operations for 2000,
1999 and 1998 are included in "Note M: Segment Data" in the Notes to
Consolidated Financial Statements in Item 8 filed herewith.
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The following table sets forth certain selected information with regard
to our radio broadcasting stations, outdoor advertising display faces and live
entertainment venues that we own or operate. At December 31, 2000, we owned,
programmed, or sold airtime for 346 AM and 761 FM radio stations. At December
31, 2000, we owned or operated 149,171 domestic display faces and 549,094
international display faces. We also owned or operated 120 live entertainment
venues at December 31, 2000.
<TABLE>
<CAPTION>
Radio Outdoor Live
Market Broadcasting Advertising Entertainment
Market Rank* Stations Display Faces Venues
------ ---- -------- ------------- ------
<S> <C> <C> <C> <C>
New York, NY 1 5 13,301 6
Los Angeles, CA 2 8 13,593 3
Chicago, IL 3 5 15,612 4
San Francisco, CA 4 7 6,983 6
Philadelphia, PA 5 6 4,290 6
Dallas, TX 6 5 5,593
Detroit, MI 7 7 1,014 6
Boston, MA 8 3 4,283 8
Washington, DC 9 8 2,482 4
Houston, TX 10 8 5,269 2
Atlanta, GA 11 5 7,003 3
Miami, FL 12 7 4,844 2
Seattle, WA 14 100 1
San Diego, CA 15 9 829
Phoenix, AZ 16 8 1,554 1
Minneapolis, MN 17 7 1,837 1
Long Island, NY 18 2
St. Louis, MO 19 6 321 2
Baltimore, MD 20 3 1,441
Tampa, FL 21 9 2,490
Pittsburgh, PA 22 6 39 2
Denver, CO 23 9 628 1
Cleveland, OH 24 5 1,264
Portland, OR 25 5 51
Cincinnati, OH 26 8 16 3
San Jose, CA 27 2 886
Riverside, CA 28 4
Sacramento, CA 29 4 1,117 2
Kansas City, KS/MO 30 101 3
Milwaukee, WI 31 6 1,682 2
San Antonio, TX 32 7 3,401 2
Providence, RI 33 4
Columbus, OH 34 5 1,502 1
Salt Lake City, UT 35 11 52
Norfolk, VA 36 4 11 3
Charlotte, NC 37 5 30 1
Indianapolis, IN 38 3 1,653 2
Orlando, FL 39 7 2,825
Las Vegas, NV 40 4 7,139
</TABLE>
11
<PAGE> 12
<TABLE>
<CAPTION>
Radio Outdoor Live
Market Broadcasting Advertising Entertainment
Market Rank* Stations Display Faces Venues
------ ---- -------- ------------- ------
<S> <C> <C> <C> <C>
New Orleans, LA 41 7 7,452 1
Greensboro, NC 42 4
Nashville, TN 43 5 6 1
Hartford, CT 44 5 17 2
Memphis, TN 46 6 2,465
Raleigh, NC 48 5 10 1
Austin, TX 49 8 13
West Palm Beach, FL 50 8 594 2
Jacksonville, FL 51 11 1,065
Rochester, NY 52 8 2
Louisville, KY 53 8 18 1
Oklahoma City, OK 54 7 1,079
Birmingham, AL 55 6 8
Dayton, OH 56 6
Richmond, VA 57 6 12
Greenville, SC 58 5 8
Albany, NY 59 7 1
Honolulu, HI 60 7
Tucson, AZ 61 5 1,498
Tulsa, OK 62 6 1,121
Brownsville & McAllen, TX 63 2 35
Wikes Barre - Scranton, PA 64 39
Fresno, CA 65 9 286
Grand Rapids, MI 66 7
Allentown, PA 67 4
Akron, OH 68 2 1,007
Knoxville, TX 69 13
El Paso, TX 70 5 1,386
Ft Myers, FL 71 5
Albuquerque, NM 72 8 1,026 1
Omaha, NE 73 4 32
Monterey, CA 74 6 27
Syracuse, NY 75 5 6
Wilmington, DE 76 4 1,052
Harrisburg, PA 77 6 36
Sarasota, FL 78 6
Toledo, OH 79 5
Springfield, MA 80 4 1
Baton Rouge, LA 82 6 20
Little Rock, AR 83 5 891
Wichita, KS 84 4 685
Stockton, CA 85 6 56
Bakersfield, CA 86 200
Charleston, SC 87 7 10
Mobile, AL 88 6
Columbia, SC 89 6
</TABLE>
12
<PAGE> 13
<TABLE>
<CAPTION>
Radio Outdoor Live
Market Broadcasting Advertising Entertainment
Market Rank* Stations Display Faces Venues
------ ---- -------- ------------- ------
<S> <C> <C> <C> <C>
Gainsville-Ocala, FL 90 1,104
Spokane, WA 91 6 20
Des Moines, IA 92 5 678
Colorado Springs, CO 94 3 15
Melbourne, FL 95 4 830
Youngstown, OH 97 11 8
Lafayette, LA 100 11
Various U.S. Cities 101-150 138 3,823 2
Various U.S. Cities 151-200 127 2,474
Various U.S. Cities 201-250 114 218
Various U.S. Cities 251+ 72 754
Various U.S. Cities unranked 156 1,827
INTERNATIONAL:
Australia - New Zealand (a), (b) n/a 10,068
Belgium n/a 17,067
Brazil n/a 3,522
Canada (b) n/a 650 1
China (b) n/a 16,391
Czech Republic (a) n/a
Denmark n/a 2 4,493
Finland n/a 1,690
France (c) n/a 134,555
Germany (b) n/a
Great Britain (a) n/a 48,489 26
Hong Kong (b) n/a 3,575
India (b) n/a 196
Ireland n/a 5,583
Italy n/a 10,591
Mexico (a) n/a 2,754
Netherlands (c) n/a
Norway (a) n/a 10,434
Peru n/a 1,268
Poland n/a 11,042
Singapore (b) n/a 678
Spain n/a 19,908
Sweden n/a 33,826 1
Switzerland n/a 13,338
Taiwan n/a 1,730
Thailand (b) n/a 399
Turkey n/a 1,868
Small transit displays (d) n/a 194,979
------- ---------- ------
Total 1,107 (a) 698,265 (b) 120 (c)
===== ======= ===
</TABLE>
* Per Arbitron Rankings for Winter 2000
- ----------
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<PAGE> 14
(a) Includes 79 radio stations programmed pursuant to a local marketing
agreement (FCC licenses not owned by Clear Channel), 21 radio stations for
which we sell airtime pursuant to a joint sales agreement (FCC license not
owned by Clear Channel), one radio station programmed by another party
pursuant to a local marketing agreement and one radio station programmed
by another party pursuant to a joint sales agreement. Excluded from the
above table are four Mexican radio stations that we provide programming to
and sell airtime under exclusive sales agency arrangements.
Excluded from the 1,107 radio stations owned or operated are radio
stations in Australia, New Zealand, Czech Republic, Great Britain, Mexico
and Norway. We own a 50%, 33%, 50%, 32%, 40% and 50% equity interest in
companies that have radio broadcasting operations in these markets,
respectively. Also excluded from the 1,107 radio stations owned or
operated are radio stations operated by Hispanic Broadcasting Corporation,
a leading domestic Spanish-language radio broadcaster. We own a 26%
non-voting equity interest in Hispanic Broadcasting Corporation.
(b) Excluded from the 698,265 outdoor display faces owned or operated are
display faces in Australia -New Zealand, Canada, China, Germany, Hong
Kong, India, Singapore and Thailand. We own a 50%, 50%, 50%, 10%, 50%,
20%, 30% and 31.9% equity interest in companies that have outdoor
advertising operations in these markets, respectively.
(c) Venues include 65 theaters, 40 amphitheaters, 10 clubs, 3 arenas, a
concert hall and an arena/motor racing circuit. Of these 120 venues, we
own 31, lease 42 with lease expiration dates from August 2001 to August
2045, lease 3 with lease terms in excess of 100 years, and operate 44
under various operating agreements.
Excluded from the 120 live entertainment venues owned or operated are 14
venues in France and Netherlands. We own various equity interest in
companies that have live entertainment operations in these markets.
(d) Small transit displays are small display faces on the interior and
exterior of various public transportation vehicles.
Below is a discussion of our operations within each segment that are not
presented in the above table.
RADIO BROADCASTING
In addition to the radio stations listed above, our radio broadcasting
segment includes a national radio network that produces more than 60 syndicated
radio programs and services for more than 7,800 radio stations including Rush
Limbaugh, The Dr. Laura Show and The Rick Dees Weekly Top 40, which are three of
the top rated radio programs in the United States. We also own various sports,
news and agriculture networks.
OUTDOOR ADVERTISING
In addition to the outdoor advertising display faces listed above, our
outdoor advertising segment operates numerous smaller displays, such as cube
displays in retail malls.
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LIVE ENTERTAINMENT
In addition to the live entertainment venues listed above, our live
entertainment segment produces touring and original Broadway shows. Touring
Broadway shows are typically revivals of previous commercial successes or new
productions of theatrical shows currently playing on Broadway in New York City.
We invest in original Broadway productions as a lead producer or as a limited
partner in productions produced by others. Frequently, we obtain touring rights
and favorable scheduling for the productions in order to distribute them across
its presenting network.
OTHER
Television
As of December 31, 2000, we owned, programmed or sold airtime for 19
television stations. Our television stations are affiliated with various
television networks, including FOX, UPN, ABC, NBC and CBS.
Media Representation
In connection with the AMFM merger, we now own the Katz Media Group, a
full-service media representation firm that sells national spot advertising time
for clients in the radio and television industries throughout the United States.
Katz Media is one of the largest media representation firms in the country,
representing over 2,000 radio stations, 368 television stations and growing
interests in cable television stations.
Sports Representation
As a result of our merger with SFX, we now operate in the sports
representation business. Among our clients are several hundred professional
athletes, including Michael Jordan, Kobe Bryant (basketball), Roger Clemens
(baseball), Greg Norman (golf), Andre Agassi (tennis), Jerry Rice (football) and
David Beckham (soccer - UK).
Internet Group
Our Internet group was formed in the fall of 2000. The goal of the
Internet group is to develop and maintain an integral web network across all of
our businesses, including radio broadcasting, outdoor advertising and live
entertainment.
COMPETITION
Our business segments are in highly competitive industries, and we may
not be able to maintain or increase our current audience ratings and advertising
revenues. Our radio stations and outdoor advertising properties compete for
audiences and advertising revenues with other radio stations and outdoor
advertising companies, as well as with other media, such as newspapers,
magazines, cable television, and direct mail, within their respective markets.
Audience ratings and market shares are subject to change, which could have an
adverse effect on our revenues in that market. Our live entertainment operations
compete with other venues to serve artists likely to perform in that general
region and, in the markets in which we promote musical concerts, we face
competition from promoters, as well as from certain artists who promote their
own concerts. Other variables that could affect our financial performance
include:
- - economic conditions, both general and relative to the broadcasting,
outdoor and live entertainment
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<PAGE> 16
industries;
- - shifts in population and other demographics;
- - the level of competition for advertising dollars;
- - fluctuations in operating costs;
- - technological changes and innovations;
- - changes in labor conditions; and
- - changes in governmental regulations and policies and actions of federal
regulatory bodies.
REGULATION OF OUR BUSINESS
Existing Regulation and 1996 Legislation
Television and radio broadcasting are subject to the jurisdiction of
the FCC under the Communications Act of 1934. The Communications Act prohibits
the operation of a television or radio broadcasting station except under a
license issued by the FCC and empowers the FCC, among other things, to:
- - issue, renew, revoke and modify broadcasting licenses;
- - assign frequency bands;
- - determine stations' frequencies, locations, and power;
- - regulate the equipment used by stations;
- - adopt other regulations to carry out the provisions of the
Communications Act;
- - impose penalties for violation of such regulations; and
- - impose fees for processing applications and other administrative
functions.
The Communications Act prohibits the assignment of a license or the transfer of
control of a licensee without prior approval of the FCC. Under the
Communications Act, the FCC also regulates certain aspects of the operation of
cable television systems and other electronic media that compete with
broadcasting stations.
The Telecommunications Act of 1996 represented the most comprehensive
overhaul of the country's telecommunications laws in more than 60 years. The
Communications Act originated at a time when telephone and broadcasting
technologies were quite distinct and addressed different consumer needs. As a
consequence, both the statute and its implementing regulatory scheme were
designed to compartmentalize the various sectors of the telecommunications
industry. The 1996 Act removed or relaxed the statutory barriers to telephone
company entry into the video programming delivery business, to cable company
provision of telephone service, and to common ownership of broadcast television
and cable properties.
The 1996 Act also significantly changed both the process for renewal of
broadcast station licenses and the broadcast ownership rules. The 1996 Act
established a "two-step" renewal process that limits the FCC's discretion to
consider applications filed in competition with an incumbent's renewal
application. The 1996 Act also substantially liberalized the national broadcast
ownership rules, eliminating the national radio limits and easing the national
restrictions on TV ownership. The 1996 Act also relaxed local radio ownership
restrictions, but left local TV ownership restrictions in place pending further
FCC review.
This new regulatory flexibility has engendered aggressive local,
regional, and/or national acquisition campaigns. Removal of previous station
ownership limitations on leading media companies,
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<PAGE> 17
such as existing networks and major station groups, increased sharply the
competition for and the prices of attractive stations.
License Grant and Renewal
Prior to the passage of the 1996 Act, television and radio broadcasting
licenses generally were granted or renewed for periods of five and seven years,
respectively, upon a finding by the FCC that the "public interest, convenience,
and necessity" would be served thereby. At the time an application is made for
renewal of a television or radio license, parties in interest may file petitions
to deny the application, and others may object informally to grant of the
application. Such parties, including members of the public, may comment upon
matters related to whether renewal is warranted, including the service the
station has provided during the preceding license term. Prior to passage of the
1996 Act, any person or entity also was permitted to file a competing
application for authority to operate on the station's channel and replace the
incumbent licensee. Renewal applications were granted without a hearing if there
were no competing applications and if issues raised by petitioners to deny or
informal objectors to such applications were not serious enough to cause the FCC
to order a hearing. If competing applications were filed, or if sufficiently
serious issues were raised by a petitioner or objector, a full hearing was
required.
Under the 1996 Act, the statutory restriction on the length of
broadcast licenses has been amended, and the FCC now grants broadcast licenses
to both television and radio stations for terms of up to eight years. The 1996
Act also requires renewal of a broadcast license if the FCC finds that
- - the station has served the public interest, convenience, and necessity;
- - there have been no serious violations of either the Communications Act
or the FCC's rules and regulations by the licensee; and
- - there have been no other serious violations which taken together
constitute a pattern of abuse.
In making its determination, the FCC may still consider petitions to deny and
informal objections, and may order a hearing if such petitions or objections
raise sufficiently serious issues. The FCC, however, may no longer consider
whether the public interest would be better served by a person or entity other
than the renewal applicant. Instead, under the 1996 Act, competing applications
for the incumbent's spectrum may be accepted only after the FCC has denied the
incumbent's application for renewal of license.
Although in the vast majority of cases broadcast licenses are renewed
by the FCC even when petitions to deny or informal objections are filed, there
can be no assurance that any of our stations' licenses will be renewed at the
expiration of their terms.
Multiple Ownership Restrictions
The FCC has promulgated rules that, among other things, limit the
ability of individuals and entities to own or have an "attributable interest" in
broadcast stations and other specified mass media entities. Prior to the passage
of the 1996 Act, these rules included limits on the number of radio and
television stations that could be owned on both a national and local basis. On a
national basis, the rules generally precluded any individual or entity from
having an attributable interest in more than 20 AM radio stations, 20 FM radio
stations and 12 television stations. Moreover, the aggregate audience reach of
the co-owned television stations could not exceed 25% of all U.S. television
households.
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<PAGE> 18
The 1996 Act completely revised the television and radio ownership
rules via changes the FCC implemented in two orders issued on March 8, 1996.
With respect to television, the 1996 Act and the FCC's subsequently issued
orders eliminated the 12-station national limit for station ownership and
increased the national audience reach limitation from 25% to 35%. On a local
basis, however, the 1996 Act did not alter FCC rules prohibiting an individual
or entity from holding an attributable interest in more than one television
station in a market. The 1996 Act did require the FCC to conduct a rulemaking
proceeding, however, to determine whether to retain or modify this so-called "TV
duopoly rule," including narrowing the rule's geographic scope and permitting
some two-station combinations at least in certain (large) markets. In August
1999, the FCC completed this rulemaking and adopted a revised TV duopoly rule,
which it slightly modified in January 2001. Under the current rule, permissible
common ownership of television stations is dictated by Nielsen Designated Market
Areas, or "DMAs." A company may own two television stations in a DMA if the
stations' Grade B contours do not overlap. Conversely, a company may own
television stations in separate DMAs even if the stations' service contours do
overlap. Furthermore, a company may own two television stations in a DMA with
overlapping Grade B contours if (i) at least eight independently owned and
operating full-power television stations, the Grade B contours of which overlap
with that of at least one of the commonly owned stations, will remain in the DMA
after the combination; and (ii) at least one of the commonly owned stations is
not among the top four stations in the market in terms of audience share. The
FCC will presumptively waive these criteria and allow the acquisition of a
second same-market television station where the station being acquired is shown
to be "failed" or "failing" (under specific FCC definitions of those terms), or
authorized but unbuilt. A buyer seeking such a waiver must also demonstrate, in
most cases, that it is the only buyer ready, willing, and able to operate the
station, and that sale to an out-of-market buyer would result in an artificially
depressed price. Since the FCC's revision of the local television ownership
rule, we have acquired a second television station in each of four DMAs where we
previously owned a television station.
With respect to radio licensees, the 1996 Act and the FCC's
subsequently issued rule changes eliminated the national ownership restriction,
allowing one entity to own nationally any number of AM or FM broadcast stations.
The 1996 Act and the FCC's implementing rules also greatly eased local radio
ownership restrictions. The maximum allowable number of radio stations that may
be commonly owned in a market varies depending on the total number of radio
stations in that market, as determined using a method prescribed by the FCC. In
markets with 45 or more stations, one company may own, operate, or control eight
stations, with no more than five in any one service (AM or FM). In markets with
30-44 stations, one company may own seven stations, with no more than four in
any one service; in markets with 15-29 stations, one entity may own six
stations, with no more than four in any one service. In markets with 14 stations
or less, one company may own up to five stations or 50% of all of the stations,
whichever is less, with no more than three in any one service. These new rules
permit common ownership of substantially more stations in the same market than
did the FCC's prior rules, which at most allowed ownership of no more than two
AM stations and two FM stations even in the largest markets.
Irrespective of FCC rules governing radio ownership, however, the
Antitrust Division of the United States Department of Justice and the Federal
Trade Commission have the authority to determine that a particular transaction
presents antitrust concerns. Following the passage of the 1996 Act, the
Antitrust Division has become more aggressive in reviewing proposed acquisitions
of radio stations, particularly in instances where the proposed purchaser
already owns one or more radio stations in a particular market and seeks to
acquire additional radio stations in the same market. The Antitrust Division
has, in some cases, obtained consent decrees requiring radio station
divestitures in a particular market based on allegations that acquisitions would
lead to unacceptable concentration levels. The FCC has also been more aggressive
in independently examining issues of market concentration when considering radio
station acquisitions. The FCC has delayed its approval of numerous proposed
radio station purchases by various parties because of
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market concentration concerns, and generally will not approve radio acquisitions
when the Antitrust Division has expressed concentration concerns, even if the
acquisition complies with the FCC's numerical station limits. Moreover, in
recent years the FCC has followed a policy of giving specific public notice of
its intention to conduct additional ownership concentration analysis, and
soliciting public comment on "the issue of concentration and its effect on
competition and diversity," with respect to certain applications for consent to
radio station acquisitions based on advertising revenue shares or other
criteria.
Additionally, the FCC has recently solicited public comment on a
variety of possible changes in the methodology by which it defines a radio
"market" and counts stations for purposes of determining compliance with the
local radio ownership restrictions. If adopted, any such changes could limit our
ability to make future acquisitions of radio stations. Moreover, in the same
proceeding, the FCC has announced a policy of deferring, until the rulemaking is
completed, certain pending and future radio sale applications which raise
"concerns" about how the FCC counts the number of stations a company may own in
a market. This deferral policy has delayed FCC approval of a number of
acquisitions we currently have pending, and may delay additional acquisitions
for which we seek FCC approval in the near future.
In 1992, the FCC adopted rules with respect to so-called local
marketing agreements, or "LMAs", by which the licensee of one radio station
provides substantially all the programming for another licensee's station in the
same market and sells all of the advertising within that programming. Under
these rules, an entity that owns one or more radio stations in a market and
programs a station in the same market pursuant to an LMA is required, under
certain circumstances, to count the LMA station toward its local radio ownership
limits even though it does not own the station. As a result, in a market where
we own one or more radio stations, we generally cannot provide programming under
an LMA to another radio station if we cannot acquire that station under the
local radio ownership rules.
In August 1999, the FCC adopted rules for television LMAs similar to
those that govern radio LMAs. As is the case for radio LMAs, an entity that owns
a television station and programs more than 15% of the broadcast time on another
television station in the same market is now required to count the LMA station
toward its television ownership limits even though it does not own the station.
Thus, in the future with respect to markets in which we own television stations,
we generally will not be able to enter into an LMA with another television
station in the same market if we cannot acquire that station under the revised
television duopoly rule.
In adopting these new rules concerning television LMAs, however, the
FCC provided "grandfathering" relief for LMAs that were in effect at the time of
the rule change. Television LMAs that were in place at the time of the new rules
and were entered into before November 5, 1996, were allowed to continue at least
through 2004, when the FCC is scheduled to undertake a comprehensive review and
re-evaluation of its broadcast ownership rules. Such LMAs entered into after
November 5, 1996 were allowed to continue until August 5, 2001 at which point
they must be terminated unless they comply with the revised television duopoly
rule.
We provide programming under LMAs to television stations in four
markets where we also own a television station. In one additional market, a
third party which owns a television station in that market also programs our
station under an LMA (we have agreed to sell our television station in that
market to the third-party programmer). Each of our television LMAs was entered
into before November 5, 1996. Therefore, under the FCC's August 1999 decision,
each of our television LMAs is permitted to continue through at least the year
2004. Moreover, we may seek permanent grandfathering of our television LMAs by
demonstrating to the FCC, among other things, the public interest benefits the
LMAs have produced and the extent to which the LMAs have enabled the stations
involved to convert to digital operation. Finally, in
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one market in which we own a television station and program a second station
under an LMA, the FCC's revised television duopoly rule permits us to own two
television stations. Accordingly, we have applied for FCC approval to acquire
our LMA station in that market.
A number of cross-ownership rules pertain to licensees of television
and radio stations. FCC rules, the Communications Act or both generally prohibit
an individual or entity from having an attributable interest in both a
television station and a cable television system that is located in the same
market, and from having an attributable interest in a radio or television
station and a daily newspaper located in the same market.
Prior to August 1999, FCC rules also generally prohibited common
ownership of a television station and one or more radio stations in the same
market, although the FCC in many cases allowed such combinations under waivers
of the rule. In August 1999, however, the FCC comprehensively revised its
radio/television cross-ownership rule. The revised rule permits the common
ownership of one television and up to seven same-market radio stations, or up to
two television and six same-market radio stations, if the market will have at
least twenty separately owned broadcast, newspaper and cable "voices" after the
combination. Common ownership of up to two television and four radio stations is
permissible when ten "voices" will remain, and common ownership of up to two
television stations and one radio station is permissible in all markets
regardless of voice count. The radio/television limits, moreover, are subject to
the compliance of the television and radio components of the combination with
the television duopoly rule and the local radio ownership limits, respectively.
Waivers of the radio/television cross-ownership rule are available only where
the station being acquired is "failed" (i.e., off the air for at least four
months or involved in court-supervised involuntary bankruptcy or insolvency
proceedings). A buyer seeking such a waiver must also demonstrate, in most
cases, that it is the only buyer ready, willing, and able to operate the
station, and that sale to an out-of-market buyer would result in an artificially
depressed price.
There are 14 markets where we own both radio and television stations.
In the majority of these markets, the number of radio stations we own complies
with the limit imposed by the revised rule. In those markets where our number of
radio stations exceeds the limit under the revised rule, we are nonetheless
authorized to retain our present television/radio combinations at least until
2004, when the FCC is scheduled to undertake a comprehensive review and
re-evaluation of its broadcast ownership rules. As with grandfathered television
LMAs, we may seek permanent authorization for our non-compliant radio/television
combinations by demonstrating to the FCC, among other things, the public
interest benefits the combinations have produced and the extent to which the
combinations have enabled the television stations involved to convert to digital
operation.
Expansion of our broadcast operations in particular areas and
nationwide will continue to be subject to the FCC's ownership rules and any
further changes the FCC or Congress may adopt. Significantly, the 1996 Act
requires the FCC to review its remaining ownership rules biennially as part of
its regulatory reform obligations to determine whether its various rules are
still necessary. The first such biennial review concluded on June 20, 2000, with
the FCC's issuance of a report retaining the 35% national television reach
limitation, the cable system/television station cross-ownership rule, and the
limits on the number of radio stations a company may own in a given market. In
its report, however, the FCC stated its intention to commence separate
proceedings requesting specific comment on
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- - possible revisions to the manner in which the FCC counts stations for
purposes of the local radio multiple ownership rule;
- - the possible modification of the dual network rule to allow one of the
four major national networks to merge with one of the newer networks;
and
- - whether the prohibition on common ownership of a daily newspaper and a
radio or TV broadcast station in the same market should be "tailored" to
cover "only those circumstances in which it is necessary to protect the
public interest."
The FCC has commenced its separate proceedings related to the dual
network rule and station counting for purposes of the local radio multiple
ownership rule. It has not yet commenced its proceeding with respect to the
newspaper/broadcast cross-ownership rule. In January 2001, the FCC completed its
2000 biennial review, making no additional relevant changes to its ownership
rules.
We cannot predict the impact of future biennial reviews or any other
agency or legislative initiatives upon the FCC's broadcast rules. Further, the
1996 Act's relaxation of the FCC's ownership rules has increased the level of
competition in many markets in which our stations are located.
Under the FCC's ownership rules, a direct or indirect purchaser of
certain types of our securities could violate FCC regulations or policies if
that purchaser owned or acquired an "attributable" interest in other media
properties in the same areas as our stations or in a manner otherwise prohibited
by the FCC. All officers and directors of a licensee and any direct or indirect
parent, general partners, limited partners and limited liability company members
who are not properly "insulated" from management activities, and stockholders
who own five percent or more of the outstanding voting stock of a licensee or
its parent, either directly or indirectly, generally will be deemed to have an
attributable interest in the licensee. Certain institutional investors who exert
no control or influence over a licensee may own up to twenty percent of a
licensee's or its parent's outstanding voting stock before attribution occurs.
Under current FCC regulations, debt instruments, non-voting stock, and properly
insulated limited partnership and limited liability company interests as to
which the licensee certifies that the interest holders are not "materially
involved" in the management and operation of the subject media property
generally are not subject to attribution unless such interests implicate the
FCC's "equity/debt plus," or "EDP," rule. Under the EDP rule, an aggregate
interest in excess of 33% of a licensee's total asset value (equity plus debt)
is attributable if the interest holder is either a major program supplier
(providing over 15% of the licensee's station's total weekly broadcast
programming hours) or a same-market media owner (including broadcasters, cable
operators, and newspapers). To the best of our knowledge at present, none of our
officers, directors or five percent stockholders holds an interest in another
television station, radio station, cable television system or daily newspaper
that is inconsistent with the FCC's ownership rules and policies.
Alien Ownership Restrictions
The Communications Act restricts the ability of foreign entities or
individuals to own or hold certain interests in broadcast licenses. Foreign
governments, representatives of foreign governments, non-U.S. citizens,
representatives of non-U.S. citizens, and corporations or partnerships organized
under the laws of a foreign nation are barred from holding broadcast licenses.
Non-U.S. citizens, collectively, may own or vote up to twenty percent of the
capital stock of a corporate licensee. A broadcast license may not be granted to
or held by any corporation that is controlled, directly or indirectly, by any
other corporation more than one-fourth of whose capital stock is owned or voted
by non-U.S. citizens or their representatives, by foreign governments or their
representatives, or by non-U.S. corporations, if the FCC finds that the public
interest will be served by the refusal or revocation of such license. The FCC
has interpreted this
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provision of the Communications Act to require an affirmative public interest
finding before a broadcast license may be granted to or held by any such
corporation, and the FCC has made such an affirmative finding only in limited
circumstances. Since we serve as a holding company for subsidiaries that serve
as licensees for our stations, we are effectively restricted from having more
than one-fourth of our stock owned or voted directly or indirectly by non-U.S.
citizens or their representatives, foreign governments, representatives of
non-foreign governments, or foreign corporations.
Other Regulations Affecting Broadcast Stations
General. The FCC has significantly reduced its past regulation of
broadcast stations, including elimination of formal ascertainment requirements
and guidelines concerning amounts of certain types of programming and commercial
matter that may be broadcast. There are, however, FCC rules and policies, and
rules and policies of other federal agencies, that regulate matters such as
network-affiliate relations, the ability of stations to obtain exclusive rights
to air syndicated programming, cable and satellite systems' carriage of
syndicated and network programming on distant stations, political advertising
practices, application procedures and other areas affecting the business or
operations of broadcast stations.
Public Interest Programming. Broadcasters are required to air
programming addressing the needs and interests of their communities of license,
and to place "issues/programs lists" in their public inspection files to provide
their communities with information on the level of "public interest" programming
they air. In October 2000, the FCC commenced a proceeding seeking comment on
whether it should adopt a standardized form for reporting information on a
station's public interest programming and whether it should require television
broadcasters to post the new form - as well as all other documents in their
public inspection files - either on station websites or the websites of state
broadcasters' associations.
Children's Television Programming. The FCC has adopted rules to
implement the Children's Television Act of 1990, which, among other provisions,
limits the permissible amount of commercial matter in children's programs and
requires each television station to present "educational and informational"
children's programming. The FCC also has adopted renewal processing guidelines
effectively requiring television stations to broadcast an average of three hours
per week of children's educational programming.
Closed Captioning/Video Description. The FCC has adopted rules
requiring closed captioning of broadcast television programming. By January 1,
2006, subject to certain exceptions, television broadcasters must provide closed
captioning for 100% of their programming.
Television Violence. The 1996 Act contains a number of provisions
relating to television violence. First, pursuant to the 1996 Act, the television
industry has developed a ratings system which the FCC has approved. In addition,
the 1996 Act requires that all television license renewal applications contain
summaries of written comments and suggestions received by the station from the
public regarding violent programming.
Equal Employment Opportunity. In April 1998, the U.S. Court of Appeals
for the D.C. Circuit concluded that the affirmative action requirements of the
FCC's Equal Employment Opportunity ("EEO") regulations were unconstitutional.
The FCC responded to the court's ruling in September 1998 by suspending certain
reporting requirements and commencing a proceeding to consider new rules that
would not be subject to the court's constitutional objections. In January 2000,
the FCC adopted new EEO rules, which (1) required broadcast licensees to widely
disseminate information about job openings to all segments of the community; (2)
gave broadcasters the choice of implementing two FCC-suggested
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supplemental recruitment measures or, alternatively, designing their own broad
recruitment/outreach programs; and (3) imposed significant reporting
requirements concerning broadcasters' recruitment efforts. In January 2001,
however, the same court of appeals struck down the FCC's new EEO rules. The FCC
thereafter suspended the rules, except for the general obligation not to engage
in employment discrimination based on race, color, religion, national origin or
sex. The FCC has several procedural options which it may pursue in order to
revive at least some part of its EEO rules. We cannot predict how long the
suspension period may last or what actions, if any, the FCC may take in this
area in the future.
Digital Television Service. The FCC has taken a number of steps to
implement digital television broadcasting service in the U.S. In December 1996,
the FCC adopted a digital television broadcast standard and, in April 1997, it
adopted decisions in several pending rulemaking proceedings that established
service rules and a plan for implementing digital television. The FCC adopted a
digital television table of allotments that provides all authorized television
stations with a second channel on which to broadcast a digital television
signal. The broadcaster will be required to "simulcast" its traditional free,
analog, over-the-air service on its digital channel as follows: in 2003, it must
simulcast 50% of the traditional broadcast service on its digital spectrum; in
2004, it must simulcast 75% of the traditional broadcast service; in 2005 it
must simulcast 100% of the traditional broadcast service. The FCC has attempted
to provide digital television coverage areas that are comparable to stations'
existing service areas. The FCC has ruled that television broadcast licensees
may use their digital channels for a wide variety of services such as
high-definition television, multiple standard definition television programming,
audio, data, and other types of communications, subject to the requirement that
each broadcaster provide at least one free video channel equal in quality to the
current technical standard. Digital television channels will generally be
located in the range of channels from channel 2 through channel 51.
Stations were required to construct their DTV facilities and be on the
air with a digital signal according to a schedule set by the FCC based on the
type of station and the size of the market in which it is located. For example,
all ABC, CBS, NBC and FOX network affiliates in the 10 largest markets were
required to be on the air with a digital signal by May 1, 1999. Affiliates of
the four major networks in the top 30 markets were required to be transmitting
digital signals by November 1, 1999. (Our WFTC-TV in Minneapolis, Minnesota was
awaiting a construction permit for its DTV facilities from the FCC and,
therefore, did not meet this deadline.) All other commercial broadcasters must
follow suit by May 1, 2002.
In January 2001, the FCC issued an order on DTV transition issues which
sets a number of additional deadlines for commercial broadcasters. By December
31, 2003, commercial stations with both analog and digital channel assignments
within the DTV core spectrum (channels 2-51) must elect the channel they will
use for broadcasting after the DTV transition is concluded. On December 31,
2004, commercial broadcasters not replicating their existing analog service
areas will lose interference protection in those portions of their existing
service areas not covered by their digital signal. On the same date, new minimum
signal strength standards for coverage of stations' communities of license will
become effective.
The FCC's plan calls for the digital television transition period to
end in the year 2006, at which time the FCC expects that television broadcasters
will cease non-digital broadcasting and return one of their two channels to the
government, allowing that spectrum to be recovered for other uses. Some of the
vacated spectrum has been allocated to public safety communications, while the
remainder will be auctioned for use by other telecommunications services. The
Balanced Budget Act of 1997, however, allows broadcasters to keep both their
analog and digital licenses until at least 85% of the television households in
their respective markets can receive a digital signal. Local zoning laws and the
lack of qualified tall-tower builders to construct the facilities needed for DTV
operations, as well as other factors including the pace of DTV receiver
production and sales, may cause delays in the transition. The FCC will
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review the progress of DTV periodically and make adjustments to the 2006 target
date if necessary. In addition, the FCC has commenced a proceeding to consider
setting strict time limits within which local zoning authorities must act on
zoning petitions by local television stations.
Implementation of digital television will improve the technical quality
of television signals received by viewers and will give television broadcasters
the flexibility to provide new services, including high definition television or
multiple programs of standard definition television and data transmission.
However, the implementation of digital television will also impose substantial
additional costs on television stations because of the need to replace equipment
and because some stations will need to operate at higher utility costs. There
can be no assurance that our television stations will be able to increase
revenue to offset such costs. In addition, the 1996 Act allows the FCC to charge
a spectrum fee to broadcasters who use the digital spectrum to offer
subscription-based services. The FCC has adopted rules that require broadcasters
to pay a fee of 5% of gross revenues received from ancillary or supplementary
uses of the digital spectrum for which they charge subscription fees. We cannot
predict what future actions the FCC might take with respect to digital
television, nor can we predict the effect of the FCC's present digital
television implementation plan or such future actions on our business. We will
incur considerable expense in the conversion to digital television and are
unable to predict the extent or timing of consumer demand for digital television
services.
Digital Audio Radio Service. The FCC has adopted spectrum allocation
and service rules for satellite digital audio radio service. Satellite digital
audio radio service systems potentially could provide regional or nationwide
distribution of radio programming with fidelity comparable to compact discs. The
FCC has authorized two companies to launch and operate satellite digital audio
radio service systems. Sirius Satellite Radio Inc. has launched three
satellites. XM Radio's first of two satellite launches is scheduled for March
2001. Both licensees expect to begin providing service by the end of 2001. The
FCC also has undertaken an inquiry regarding rules for the terrestrial broadcast
of digital audio radio service signals, addressing, among other things, the need
for spectrum outside the existing FM band and the role of existing broadcasters.
We cannot predict the impact of either satellite or terrestrial digital audio
radio service on our business.
Low Power FM Radio Service. In January 2000, the FCC created two new
classes of noncommercial low power FM radio stations ("LPFM"). One class (LP100)
will operate with a maximum power of 100 watts and a service radius of about 3.5
miles. The other class (LP10) will operate with a maximum power of 10 watts and
a service radius of about 1 to 2 miles. In establishing the new LPFM service,
the FCC said that its goal is to create a class of radio stations designed "to
serve very localized communities or underrepresented groups within communities."
The FCC has begun accepting applications for LPFM stations. In December 2000,
Congress passed the Radio Broadcasting Preservation Act of 2000. This
legislation requires the FCC to maintain interference protection requirements
between LPFM stations and full-power radio stations on third-adjacent channels.
It also requires the FCC to conduct field tests to determine the impact of
eliminating such requirements. We cannot predict the number of LPFM stations
that will be authorized to operate or the impact of such stations on our
business.
Congress and the FCC currently have under consideration, and may in the
future adopt, new laws, regulations and policies regarding a wide variety of
matters that could affect, directly or indirectly, the operation and ownership
of our broadcast properties. In addition to the changes and proposed changes
noted above, such matters include, for example, spectrum use fees, political
advertising rates, and potential restrictions on the advertising of certain
products such as beer and wine. Other matters that could affect our broadcast
properties include technological innovations and developments generally
affecting competition in the mass communications industry, such as direct
broadcast satellite service, the continued
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establishment of wireless cable systems and low power television stations,
"streaming" of audio and video programming via the Internet, digital television
and radio technologies, the establishment of a low power FM radio service, and
the advent of telephone company participation in the provision of video
programming service.
The foregoing is a brief summary of certain provisions of the
Communications Act, the 1996 Act, the 1992 Cable Act, and specific regulations
and policies of the FCC thereunder. This description does not purport to be
comprehensive and reference should be made to the Communications Act, the 1996
Act, the 1992 Cable Act, the FCC's rules and the public notices and rulings of
the FCC for further information concerning the nature and extent of federal
regulation of broadcast stations. Proposals for additional or revised
regulations and requirements are pending before and are being considered by
Congress and federal regulatory agencies from time to time. Also, various of the
foregoing matters are now, or may become, the subject of court litigation, and
we cannot predict the outcome of any such litigation or its impact on our
broadcasting business.
Outdoor Advertising
The outdoor advertising industry is subject to extensive governmental
regulation at the federal, state and local level. These regulations include
restrictions on the construction, repair, upgrading, height, size and location
of and, in some instances, content of advertising copy being displayed on
outdoor advertising structures. In addition, the outdoor advertising industry is
subject to certain foreign governmental regulation. Compliance with existing and
future regulations could have a significant financial impact on us.
Federal law, principally the Highway Beautification Act of 1965,
requires, as a condition to federal highway assistance, states to implement
legislation to restrict billboards located within 660 feet of, or visible from,
highways except in commercial or industrial areas and requires certain
additional size, spacing and other limitations. Every state has implemented
regulations at least as restrictive as the Highway Beautification Act, including
a ban on the construction of new billboards along federally-aided highways and
the removal of any illegal signs on these highways at the owner's expense and
without any compensation. Federal law does not require removal of existing
lawful billboards, but does require payment of compensation if a state or
political subdivision compels the removal of a lawful billboard along a
federally aided primary or interstate highway. State governments have purchased
and removed legal billboards for beautification in the past, using federal
funding for transportation enhancement programs, and may do so in the future.
States and local jurisdictions have, in some cases, passed additional
regulations on the construction, size, location and, in some instances,
advertising content of outdoor advertising structures adjacent to
federally-aided highways and other thoroughfares. From time to time governmental
authorities order the removal of billboards by the exercise of eminent domain
and certain jurisdictions have also adopted amortization of billboards in
varying forms. Amortization permits the billboard owner to operate its billboard
only as a non-conforming use for a specified period of time, after which it must
remove or otherwise conform its billboard to the applicable regulations at its
own cost without any compensation. Several municipalities within our existing
markets have adopted amortization ordinances. Restrictive regulations also limit
our ability to rebuild or replace nonconforming billboards. We can give no
assurance that we will be successful in negotiating acceptable arrangements in
circumstances in which our billboards are subject to removal or amortization,
and what effect, if any, such regulations may have on our operations.
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In addition, we are unable to predict what additional regulations may be
imposed on outdoor advertising in the future. The outdoor advertising industry
is heavily regulated and at various times and in various markets can be expected
to be subject to varying degrees of regulatory pressure affecting the operation
of advertising displays. Legislation regulating the content of billboard
advertisements and additional billboard restrictions has been introduced in
Congress from time to time in the past. Changes in laws and regulations
affecting outdoor advertising at any level of government, including laws of the
foreign jurisdictions in which we operate, could have a material adverse effect
on us.
Tobacco and Alcohol Advertising
The outdoor advertising industry is subject to regulations related to
outdoor tobacco advertising. In addition, recent settlement agreements and
potential legislation related to outdoor tobacco advertising have and will
likely continue to affect our outdoor advertising operations. Out-of-court
settlements between the major U.S. tobacco companies and all 50 states include a
ban on the outdoor advertising of tobacco products.
In addition to the above settlement agreements, state and local
governments are also regulating the outdoor advertising of alcohol and tobacco
products. For example, several states and cities have laws restricting tobacco
billboard advertising near schools and other locations frequented by children.
Some cities have proposed even broader restrictions, including complete bans on
outdoor tobacco advertising on billboards, kiosks, and private business window
displays. It is possible that state and local governments may propose or pass
similar ordinances to limit outdoor advertising of alcohol and other products or
services in the future. Legislation regulating tobacco and alcohol advertising
has also been introduced in a number of European countries in which we conduct
business, and could have a similar impact. Any significant reduction in alcohol
related advertising due to content-related restrictions could cause a reduction
in our direct revenue from such advertisements and a simultaneous increase in
the available space on the existing inventory of billboards in the outdoor
advertising industry.
Antitrust Matters
An important element of our growth strategy involves the acquisition of
additional radio stations, outdoor advertising display faces and live
entertainment properties, many of which are likely to require preacquisition
antitrust review by the Federal Trade Commission and the Antitrust Division.
Following passage of the 1996 Act, the Antitrust Division has become more
aggressive in reviewing proposed acquisitions of radio stations and radio
station networks, particularly in instances where the proposed acquiror already
owns one or more radio stations in a particular market and the acquisition
involves another radio station in the same market. Recently, the Antitrust
Division, in some cases, has obtained consent decrees requiring radio station
divestitures in a particular market based on allegations that acquisitions would
lead to unacceptable concentration levels. There can be no assurance that the
Antitrust Division or the FTC will not seek to bar us from acquiring additional
radio and television stations or outdoor advertising display faces in any market
where our existing stations or display faces already have a significant market
share. In addition, the antitrust laws of foreign jurisdictions will apply if we
acquire international broadcasting properties.
Environmental Matters
As the owner, lessee or operator of various real properties and
facilities, we are subject to various federal, state and local environmental
laws and regulations. Historically, compliance with such laws and regulations
has not had a material adverse effect on our business. There can be no
assurance, however,
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that compliance with existing or new environmental laws and regulations will not
require us to make significant expenditures in the future.
FINANCIAL LEVERAGE
We currently use a significant portion of our operating income for debt
service. Our leverage could make us vulnerable to an increase in interest rates
or a downturn in the operating performance of our radio broadcast, outdoor
advertising or live entertainment properties or a decline in general economic
conditions. At December 31, 2000, we had debt outstanding of approximately $10.7
billion and shareholders' equity of $30.3 billion. We expect to continue to
borrow funds to finance acquisitions of radio broadcasting, outdoor advertising
and live entertainment properties, as well as for other purposes. We may borrow
up to $3.0 billion under credit facilities at floating rates currently equal to
the London InterBank Offered Rate plus .625% and an additional $1.9 billion
under a credit facility at floating rates currently equal to the London
InterBank Offered Rate plus .4%.
DEPENDENCE ON KEY PERSONNEL
Our business is dependent upon the performance of certain key employees,
including our chief executive officer and other executive officers. We also
employ or independently contract with several on-air personalities with
significant loyal audiences in their respective markets. Although we have
entered into long-term agreements with certain of our executive officers and key
on-air talent to protect our interests, we can give no assurance that all such
key personnel will remain with us or will retain their audiences.
INTERNATIONAL BUSINESS RISKS
Doing business in foreign countries carries with it certain risks that
are not found in doing business in the U.S. We currently derive a portion of our
revenues from international radio broadcasting, outdoor advertising and live
entertainment operations in Europe, Asia, Mexico, South America, Canada,
Australia and New Zealand. The risks of doing business in foreign countries
which could result in losses against which we are not insured include:
- - potential adverse changes in the diplomatic relations of foreign
countries with the U.S.;
- - hostility from local populations;
- - the adverse effect of currency exchange controls;
- - restrictions on the withdrawal of foreign investment and earnings;
- - government policies against businesses owned by foreigners;
- - expropriations of property;
- - the potential instability of foreign governments;
- - the risk of insurrections;
- - risks of renegotiation or modification of existing agreements with
governmental authorities;
- - foreign exchange restrictions; and
- - changes in taxation structure.
EXCHANGE RATE RISK
Because we own assets overseas and derive revenues from our
international operations, we may incur currency translation losses due to
changes in the values of foreign currencies and in the value of the U.S. dollar.
We cannot predict the effect of exchange rate fluctuations upon future operating
results. To
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reduce a portion of our exposure to the risk of international currency
fluctuations, we maintain a hedge by incurring debt in various other currencies.
We review this hedge position monthly. We currently maintain no other derivative
instruments to reduce the exposure to translation and/or transaction risk, but
may adopt other hedging strategies in the future.
OUR ACQUISITION STRATEGY COULD POSE RISKS
Operational Risks. We intend to grow through the acquisition of radio
broadcasting companies and assets, outdoor advertising companies, individual
outdoor advertising display faces, live entertainment companies and assets and
other assets that we believe will assist our clients in marketing their products
and services. Our acquisition strategy involves numerous risks, including:
- - certain of our acquisitions may prove unprofitable and fail to generate
anticipated cash flows;
- - successfully managing a rapidly expanding and significantly larger portfolio
of broadcasting and outdoor advertising properties, possibly needing to
recruit additional senior management and expand corporate infrastructure;
- - successfully managing our new live entertainment assets;
- - encountering difficulties in the integration of operations and systems;
- - our management's attention may be diverted from other business concerns; and
- - we may lose key employees of acquired companies or stations.
Capital Requirements Necessary for Additional Acquisitions. We will face
stiff competition from other radio broadcasting, outdoor advertising and live
entertainment companies for acquisition opportunities. If the prices sought by
sellers of these companies continue to rise, we may find fewer acceptable
acquisition opportunities. In addition, the purchase price of possible
acquisitions could require additional debt or equity financing on our part. We
can give no assurance that we will obtain the needed financing or that we will
obtain such financing on attractive terms. Additional indebtedness could
increase our leverage and make us more vulnerable to economic downturns and may
limit our ability to withstand competitive pressures. Additional equity
financing could result in dilution to our stockholders.
NEW TECHNOLOGIES MAY AFFECT OUR BROADCASTING OPERATIONS
The FCC is considering ways to introduce new technologies to the
broadcasting industry, including satellite and terrestrial delivery of digital
audio broadcasting and the standardization of available technologies which
significantly enhance the sound quality of AM broadcasts. We are unable to
predict the effect such technologies will have on our broadcasting operations,
but the capital expenditures necessary to implement such technologies could be
substantial. We also face risks in implementing the conversion of our television
stations to digital television, which the FCC has ordered and for which it has
established a timetable. We will incur considerable expense in the conversion to
digital television and are unable to predict the extent or timing of consumer
demand for any such digital television services. Moreover, the FCC may impose
additional public service obligations on television broadcasters in return for
their use of the digital television spectrum. This could add to our operational
costs. One issue yet to be resolved is the extent to which cable systems will be
required to carry broadcasters' new digital channels. Our television stations
are highly dependent on their carriage by cable systems in the areas they serve.
Thus, FCC rules that impose no or limited obligations on cable systems to carry
the digital television signals of television broadcast stations in their local
markets could adversely affect our television operations.
CAUTION CONCERNING FORWARD LOOKING STATEMENTS
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The Private Securities Litigation Reform Act of 1995 provides a safe
harbor for forward-looking statements made by us or on our behalf. Except for
the historical information, this report contains various forward-looking
statements which represent our expectations or beliefs concerning future events,
including the future levels of cash flow from operations. Management believes
that all statements that express expectations and projections with respect to
future matters, including the strategic fit of radio assets; expansion of market
share; our ability to capitalize on synergies between the live entertainment and
radio broadcasting businesses; our ability to negotiate contracts having more
favorable terms; and the availability of capital resources; are forward-looking
statements within the meaning of the Private Securities Litigation Reform Act.
We caution that these forward-looking statements involve a number of risks and
uncertainties and are subject to many variables which could have an adverse
effect upon our financial performance. These statements are made on the basis of
management's views and assumptions, as of the time the statements are made,
regarding future events and business performance. There can be no assurance,
however, that management's expectations will necessarily come to pass.
A wide range of factors could materially affect future developments and
performance, including:
- - the impact of general economic conditions in the U.S. and in other countries
in which we currently do business;
- - our ability to integrate the operations of recently acquired companies;
- - shifts in population and other demographics;
- - industry conditions, including competition;
- - fluctuations in operating costs;
- - technological changes and innovations;
- - changes in labor conditions;
- - fluctuations in exchange rates and currency values;
- - capital expenditure requirements;
- - legislative or regulatory requirements;
- - interest rates;
- - the effect of leverage on our financial position and earnings;
- - taxes;
- - access to capital markets; and
- - certain other factors set forth in our SEC filings.
This list of factors that may affect future performance and the accuracy
of forward-looking statements is illustrative, but by no means exhaustive.
Accordingly, all forward-looking statements should be evaluated with the
understanding of their inherent uncertainty.
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ITEM 2. PROPERTIES
CORPORATE
Our corporate headquarters is in San Antonio, Texas, primarily housed in
our company owned 55,000 square foot corporate office building. In addition, we
own an 8,000 square foot data center and lease approximately 31,000 square feet
of office space in San Antonio with the lease expiring in December 2002.
OPERATIONS
Radio Broadcasting
The headquarters of our radio operations is in 21,201 square feet of
leased office space in Covington, Kentucky. The lease on this premise expires in
November 2008. The types of properties required to support each of our radio
stations include offices, studios, transmitter sites and antenna sites. A radio
station's studios are generally housed with its offices in downtown or business
districts. A radio station's transmitter sites and antenna sites are generally
located in a manner that provides maximum market coverage.
Outdoor Advertising
The headquarters of our domestic outdoor advertising operations is in
15,505 square feet of leased office space in Phoenix, Arizona. The lease on this
premise expires in April 2006. The headquarters of our international outdoor
advertising operations is in 8,688 square feet of leased office space in London,
England. The lease on this premise expires in June 2014. The types of properties
required to support each of our outdoor advertising branches include offices,
production facilities and structure sites. An outdoor branch and production
facility is generally located in an industrial/warehouse district.
We own or have permanent easements on relatively few parcels of real
property that serve as the sites for our outdoor displays. Our remaining outdoor
display sites are leased. Our leases are for varying terms ranging from
month-to-month to year-to-year and can be for terms of ten years or longer, and
many provide for renewal options. There is no significant concentration of
displays under any one lease or subject to negotiation with any one landlord. We
believe that an important part of our management activity is to negotiate
suitable lease renewals and extensions.
Live Entertainment
The headquarters of our live entertainment operations is in 100,227
square feet of leased office space in Houston, Texas. The lease on this premise
expires in March 2009. The types of properties required to support each of our
live entertainment operations include offices and venues. Our live entertainment
venues generally include offices and are located in major metropolitan areas.
The studios and offices of our radio stations, outdoor advertising
branches and live entertainment venues are located in leased or owned
facilities. These leases generally have expiration dates that range from one to
twenty years. We either own or lease our transmitter and antenna sites. These
leases generally have expiration dates that range from five to fifteen years. We
do not anticipate any difficulties in renewing those leases that expire within
the next several years or in leasing other space, if required. We own
substantially all of the equipment used in our radio broadcasting, outdoor
advertising and live entertainment businesses.
As noted in Item 1 above, as of December 31, 2000, we own or program
1,107 radio stations, own or lease approximately 698,265 outdoor advertising
display faces and own or operate 120 entertainment venues in various markets
throughout the world. See "Business -- Operating Segments." Therefore, no
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one property is material to our overall operations. We believe that our
properties are in good condition and suitable for our operations.
ITEM 3. LEGAL PROCEEDINGS
From time to time we become involved in various claims and lawsuits
incidental to our business, including defamation actions. In the opinion of our
management, after consultation with counsel, any ultimate liability arising out
of currently pending claims and lawsuits will not have a material effect on our
financial condition or operations.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
There were no matters submitted to a vote of security holders in the fourth
quarter of fiscal year 2000.
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PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
Our common stock trades on the New York Stock Exchange under the symbol
"CCU." There were approximately 3,120 shareholders of record as of March 9,
2001. This figure does not include an estimate of the indeterminate number of
beneficial holders whose shares may be held of record by brokerage firms and
clearing agencies. The following table sets forth, for the calendar quarters
indicated, the reported high and low sales prices of the common stock as
reported on the NYSE.
<TABLE>
<CAPTION>
CLEAR CHANNEL
COMMON STOCK
-------------
MARKET PRICE
------------
HIGH LOW
---- ---
<S> <C> <C>
1999
First Quarter........................................ $ 68.1875 $ 52.0000
Second Quarter....................................... 74.3750 64.2500
Third Quarter........................................ 80.8125 60.7500
Fourth Quarter....................................... 91.5000 68.5000
2000
First Quarter........................................ 95.5000 60.0000
Second Quarter....................................... 83.0000 62.0625
Third Quarter........................................ 85.8125 54.7500
Fourth Quarter....................................... 61.0000 43.8750
</TABLE>
DIVIDEND POLICY
Presently, we expect to retain our earnings for the development and
expansion of our business and do not anticipate paying cash dividends in 2001.
However, any future decision by our Board of Directors to pay cash dividends
will depend on, among other factors, our earnings, financial position, and
capital requirements.
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ITEM 6. SELECTED FINANCIAL DATA
(In thousands, except per share data)
<TABLE>
<CAPTION>
As of and for the Years ended December 31, (2)
-----------------------------------------
2000 1999 1998 1997 1996
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
RESULTS OF OPERATIONS INFORMATION:
Gross revenue $ 5,847,900 $ 2,992,018 $ 1,522,551 $ 790,178 $ 398,094
============ ============ ============ ============ ============
Net revenue $ 5,345,306 $ 2,678,160 $ 1,350,940 $ 697,068 $ 351,739
Operating expenses 3,480,706 1,632,115 767,265 394,404 198,332
Non-cash compensation expense 16,032 -- -- -- --
Depreciation and amortization 1,401,063 722,233 304,972 114,207 45,790
Corporate expenses 142,627 70,146 37,825 20,883 8,527
------------ ------------ ------------ ------------ ------------
Operating income 304,878 253,666 240,878 167,574 99,090
Interest expense 383,104 179,404 135,766 75,076 30,080
Gain on sale of assets related to mergers 783,743 138,659 -- -- --
Equity in earnings (loss) of
nonconsolidated affiliates 25,155 18,183 10,305 9,132 (3,441)
Other income (expense) - net (17,133) 7,292 12,810 11,579 2,230
------------ ------------ ------------ ------------ ------------
Income before income taxes and
extraordinary item 713,539 238,396 128,227 113,209 67,799
Income taxes 464,731 152,741 74,196 49,633 30,103
------------ ------------ ------------ ------------ ------------
Income before extraordinary item 248,808 85,655 54,031 63,576 37,696
Extraordinary item -- (13,185) -- -- --
------------ ------------ ------------ ------------ ------------
Net income $ 248,808 $ 72,470 $ 54,031 $ 63,576 $ 37,696
============ ============ ============ ============ ============
Net income per common share (1)
Basic:
Income before extraordinary item $ .59 $ .27 $ .23 $ .36 $ .26
Extraordinary item -- (.04) -- -- --
------------ ------------ ------------ ------------ ------------
Net income $ .59 $ .23 $ .23 $ .36 $ .26
============ ============ ============ ============ ============
Diluted:
Income before extraordinary item .57 $ .26 $ .22 $ .33 $ .25
Extraordinary item -- (.04) -- -- --
------------ ------------ ------------ ------------ ------------
Net income $ .57 $ .22 $ .22 $ .33 $ .25
============ ============ ============ ============ ============
Cash dividends per share $ -- $ -- $ -- $ -- $ --
============ ============ ============ ============ ============
BALANCE SHEET DATA:
Current assets $ 2,343,217 $ 925,109 $ 409,960 $ 210,742 $ 113,164
Property, plant and equipment - net 4,255,234 2,478,124 1,915,787 746,284 147,838
Total assets 50,056,461 16,821,512 7,539,918 3,455,637 1,324,711
Current liabilities 2,128,550 685,515 258,144 86,852 43,462
Long-term debt, net of current maturities 10,100,028 4,093,543 2,323,643 1,540,421 725,132
Shareholders' equity 30,347,173 10,084,037 4,483,429 1,746,784 513,431
</TABLE>
(1) All per share amounts have been adjusted to reflect the two-for-one stock
split effected in July 1998.
(2) Acquisitions and dispositions significantly impact the comparability of the
historical consolidated financial data reflected in this schedule of
Selected Financial Data.
The Selected Financial Data should be read in conjunction with Management's
Discussion and Analysis.
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<PAGE> 34
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITION
OVERVIEW
Management's discussion and analysis of the results of operation and
financial condition of Clear Channel Communications, Inc. and its subsidiaries
should be read in conjunction with the Consolidated Financial Statements and
related Footnotes. The discussion is presented on both a consolidated and
segment basis. During the third quarter of 2000, as a result of the acquisitions
of AMFM Inc. and SFX Entertainment, Inc., we redefined our reportable operating
segments. Accordingly, all prior years have been reclassified to conform to the
2000 presentation. The new reportable operating segments are: RADIO BROADCASTING
which includes all domestic and international radio assets and radio networks;
OUTDOOR ADVERTISING which includes domestic and international billboards,
transit displays, street furniture and other outdoor advertising media; and LIVE
ENTERTAINMENT which includes live music, theatrical, family entertainment and
motor sports events. Included in the "other" segment is television broadcasting,
sports representation, our media representation business, Katz Media, and
Internet businesses as well as corporate expenses.
We continued our strong financial performance in 2000 with record
operating growth. This performance was the result of the strength of our
management, the growth characteristics of the industries in which we operate and
our financial discipline. During 2000, we completed several acquisitions that
continued our strategic focus on building a national radio platform, filling out
our outdoor advertising markets and creating a platform of media and
entertainment assets, enabling us to provide a fuller breadth of marketing
solutions for our clients. The most significant transactions are as follows:
AMFM INC.
On August 30, 2000, we completed the merger with AMFM. The AMFM assets
provided a strategic fit with our radio assets to form a national radio
platform, positioning our radio segment to expand its market share. Also, as a
result of this merger, we have significant overlap such that we now have radio
operations in most every domestic market where we operate outdoor or television
assets.
Pursuant to the terms of the merger agreement, each share of AMFM common
stock was exchanged for 0.94 shares of our common stock. Approximately 205.4
million shares of our common stock were issued in the AMFM merger, valuing the
merger, based on the average market price of our common stock at the signing of
the merger agreement, at $15.9 billion plus the assumption of AMFM's outstanding
debt of approximately $3.5 billion. Additionally, we assumed stock options and
common stock warrants with a fair value of $1.2 billion, which are convertible,
subject to applicable vesting, into approximately 25.5 million shares of our
common stock. We refinanced $540.0 million of AMFM's $3.5 billion of long-term
debt at the closing of the merger using our credit facilities. The AMFM merger
was accounted for as a purchase with resulting goodwill of approximately $7.1
billion, which is being amortized over 25 years on a straight-line basis. The
results of operations of AMFM have been included in our financial statements
beginning August 30, 2000.
SFX ENTERTAINMENT, INC.
We closed the merger with SFX on August 1, 2000. With this acquisition,
we are able to capitalize on the natural synergies between live entertainment
and radio broadcasting and gain immediate industry leadership. In addition, the
SFX acquisition strategically fits with our other businesses as live
entertainment provides our existing clients an additional avenue for reaching
their target consumers.
Pursuant to the terms of the merger agreement, each share of SFX Class A
common stock was
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<PAGE> 35
exchanged for 0.6 shares of our common stock and each share of SFX Class B
common stock was exchanged for one share of our common stock. Approximately 39.2
million shares of our common stock were issued in the SFX merger. Based on the
average market price of our common stock at the signing of the merger agreement,
the merger was valued at $2.9 billion plus the assumption of SFX's outstanding
debt of approximately $1.5 billion. Additionally, we assumed all stock options
and common stock warrants with a fair value of $211.8 million, which are
exercisable for approximately 5.6 million shares of our common stock. We
refinanced $815.8 million of SFX's $1.5 billion of long-term debt at the closing
of the merger using our credit facilities. This merger has been accounted for as
a purchase with resulting goodwill of approximately $4.1 billion, which is being
amortized over 20 years on a straight-line basis. The results of operations of
SFX have been included in our financial statements beginning August 1, 2000.
A number of lawsuits were filed by holders of SFX Class A common stock
alleging, among other things, that the difference in consideration for the Class
A and Class B shares constituted unfair consideration to the Class B holders,
that the SFX board breached its fiduciary duties and that we aided and abetted
the actions of the SFX board. On September 28, 2000, we issued approximately .4
million shares of our common stock, valued at $29.3 million, as settlement of
these lawsuits and have included the value of these shares as part of the
purchase price.
DONREY MEDIA GROUP
On September 1, 2000, we completed the acquisition of the assets of
Donrey Media Group for $372.6 million in cash consideration. The Donrey
acquisition added ten additional markets to our outdoor advertising business,
including Las Vegas, Nevada; Albuquerque, New Mexico; Columbus, Ohio; Oklahoma
City, Oklahoma; Tulsa, Oklahoma; Little Rock, Arkansas; Fort Smith, Arkansas;
and Wichita, Kansas. Donrey added markets that benefit our customers trying to
target these growing areas with our extensive sales network. We funded the
acquisition with advances on our credit facilities. The acquisition was
accounted for as a purchase, with resulting goodwill of approximately $290.3
million, which is being amortized over 25 years on a straight-line basis. The
results of operations of the Donrey markets have been included in our financial
statements beginning September 1, 2000.
ACKERLEY'S SOUTH FLORIDA OUTDOOR ADVERTISING DIVISION
On January 5, 2000, we closed the acquisition of Ackerley's South
Florida outdoor advertising division for $300.2 million. Ackerley complements
the existing outdoor and radio assets we have in South Florida. We funded the
acquisition with advances on our credit facilities. The acquisition was
accounted for as a purchase, with resulting goodwill of approximately $208.3
million, which is amortized over 25 years on a straight-line basis. The results
of operations of Ackerley have been included in our financial statements
beginning January 5, 2000.
RESULTS OF OPERATIONS
We evaluate the operating performance of our businesses using several
measures, one of them being EBITDA (defined as net revenue less operating and
corporate expenses). EBITDA eliminates the uneven effect across our business
segments, as well as in comparison to other companies, of considerable amounts
of non-cash depreciation and amortization recognized in business combinations
accounted for under the purchase method. We have used the purchase method of
accounting for all mergers and acquisitions in the history of our company.
Non-cash depreciation and amortization is significant due to the consolidation
in our industry. While we and many in the financial community consider EBITDA to
be an important measure of operating performance, it should be considered in
addition to, but not as a substitute for or superior to, other measures of
financial performance prepared in accordance with
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<PAGE> 36
generally accepted accounting principles such as operating income and net
income.
We measure the performance of our operating segments and managers based
on a like period pro forma measurement. Like period pro forma includes
adjustments to the prior period for all acquisitions. For each acquisition other
than the AMFM merger, an adjustment was made to the prior period to include the
operating results of the acquisition for the corresponding period of time that
the acquisition was owned in the current period. Due to the significance of the
AMFM merger, its results of operations are included in both 1999 and 2000 for
the twelve-month period. Results of operations from divested assets are excluded
from all periods presented. We believe that like period pro forma is the best
measure of our operating performance as it includes the performance of assets
for the period of time we managed the assets.
Like period pro forma is compared in constant U.S. dollars (i.e. a
currency exchange adjustment is made to the 2000 actual results to present
foreign revenues and expenses in 1999 dollars) allowing for comparison of
operations independent of foreign exchange movements. We also include our
proportionate share of the results of operations of actively managed equity
investments in the like period pro forma. These investments include Australian
Radio Network, New Zealand Radio Network, Grupo ACIR, and White Horse Media and
other less significant investments.
The following tables set forth our consolidated and segment results of
operations on both a reported and a like period pro forma basis.
FISCAL YEAR 2000 COMPARED TO FISCAL YEAR 1999
CONSOLIDATED
(In thousands)
<TABLE>
<CAPTION>
Reported Basis: Years Ended December 31,
- --------------- ------------------------- % Change
2000 1999 2000 v. 1999
---- ---- ------------
<S> <C> <C> <C>
Net Revenue $5,345,306 $2,678,160 100%
Operating Expenses 3,480,706 1,632,115 113%
Corporate Expenses 142,627 70,146 103%
---------- ----------
EBITDA $1,721,973 $ 975,899 76%
========== ==========
</TABLE>
<TABLE>
<CAPTION>
Pro Forma Basis: Years Ended December 31,
- ---------------- ------------------------- % Change
2000 1999 2000 v. 1999
---- ---- ------------
<S> <C> <C> <C>
Net Revenue $6,891,290 $6,098,744 13%
Operating Expenses 4,330,370 3,962,343 9%
Corporate Expenses 207,473 186,365 11%
---------- ----------
EBITDA $2,353,447 $1,950,036 21%
========== ==========
</TABLE>
Net revenue and operating expenses increased on a reported basis due to
our 1999 and 2000 acquisitions as well as internal growth. Included in our
fiscal year 2000 reported basis amounts are the net revenues and operating
expenses for a twelve-month period from our 1999 acquisitions, the most
significant being Jacor Communications in May 1999 and Dame Media Inc. and
Dauphin OTA in July 1999. Also included in our fiscal year 2000 reported basis
amounts are the net revenues and operating expenses of our 2000 acquisitions for
the time period that we operated them in fiscal year 2000. Our 2000
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<PAGE> 37
acquisitions included Ackerley in January 2000, SFX in August 2000, AMFM in
August 2000, and Donrey in September 2000. Corporate expenses increased on a
reported basis due to the above acquisitions and some duplication of efforts at
the corporate level due to the integration of AMFM into Clear Channel.
On a pro forma basis, net revenues increased in fiscal year 2000 due to
higher advertising rates in our radio and outdoor businesses as well as
increased inventory demand within the advertising industry. The increase in the
number of live entertainment events and the number of show dates in fiscal year
2000 also contributed to the increase of net revenue on a pro forma basis.
Operating expenses increased on a pro forma basis in fiscal year 2000 due
primarily to the increase in selling costs related to the increase in net
revenue. Corporate expenses increased on a pro forma basis in fiscal year 2000
due to additional costs associated with the integration of the numerous
acquisitions mentioned above.
Other Income and Expense Information
Non-cash compensation expense of $16.0 million was recorded in fiscal
year 2000. In the AMFM merger, we assumed stock options granted to AMFM
employees that are now convertible into Clear Channel stock. To the extent that
these employees' options continue to vest, we will recognize non-cash
compensation expense over the remaining vesting period. Vesting dates range from
January 2001 to April 2005. If no employees forfeit their unvested options by
leaving the company, we expect to recognize non-cash compensation expense of
approximately $28.1 million over the remaining vesting period.
Depreciation and amortization expense increased from $722.2 million in
1999 to $1.4 billion in 2000, a 94% increase. The increase is due primarily to
additional amortization of approximately $315.7 million for the FCC licenses and
goodwill from the AMFM acquisition and amortization of approximately $88.3
million for the goodwill from the SFX acquisition. The remaining increase is due
to additional depreciation and amortization associated with the other less
significant acquisitions accounted for under the purchase method as well as the
inclusion of a full year of depreciation and amortization associated with
acquisitions completed during 1999.
Interest expense was $383.1 million and $179.4 million in 2000 and 1999,
respectively, an increase of $203.7 million or 114%. Approximately 89% of the
increase was due to the overall increase in average amounts of debt outstanding
and approximately 11% of the increase was due to increases in LIBOR. Currently,
approximately 50% of our debt bears interest rates based upon LIBOR. During
2000, LIBOR rates increased from 5.82% at December 31, 1999 to 6.57% at December
31, 2000.
The gain on sale of assets related to mergers of $783.7 million in 2000
is primarily due to the sale of 39 stations in connection with governmental
directives regarding the AMFM merger, which realized a gain of $805.2 million.
This gain for 2000 was partially offset by a loss of $5.8 million related to the
sale of 1.3 million shares of Lamar Advertising Company that we acquired in the
AMFM merger; and a net loss of $15.7 million related to write-downs of
investments acquired in mergers. The gain in 1999 of $138.7 million relates to
the sale of 12 radio stations as a result of governmental directives related to
the Jacor merger.
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<PAGE> 38
Equity in earnings of nonconsolidated affiliates for 2000 was $25.2
million as compared to $18.2 million for 1999. The increase was due to improved
operations primarily in our international outdoor equity investments.
Other income (expense) net was an expense of $17.1 million in 2000 as
compared to income of $7.3 million in 1999. The additional expense recognized in
2000 related primarily to the reimbursements of capital costs within certain
operating contracts. The income amount in 1999 includes a $22.9 million gain on
sale of marketable securities.
Income tax expense was $464.7 million in 2000, an increase of 204% or
$312.0 million from 1999 income tax expense of $152.7 million. The increase is
primarily related to the taxes on the gain on sale of assets related to mergers
recorded in 2000. The provision for income taxes represents federal, state and
foreign income taxes on earnings before income taxes. The annual effective tax
rates of 65% for 2000 and 64% for 1999 were both adversely affected by
amortization of intangibles in excess of amounts that are deductible for tax
purposes.
For the reasons described above, net income of $248.8 million for 2000
increased $176.3 million, or 243%, from $72.5 million for 1999.
RADIO BROADCASTING
(In thousands)
<TABLE>
<CAPTION>
As Reported
Years Ended December 31, % Change % Change
------------------------- As Reported Pro Forma
2000 1999 2000 v. 1999 2000 v. 1999
---- ---- ------------ ------------
<S> <C> <C> <C> <C>
Net Revenue $2,431,544 $1,230,754 98% 15%
Operating Expenses 1,385,848 731,062 90% 9%
---------- ----------
EBITDA $1,045,696 $ 499,692 109% 22%
========== ==========
</TABLE>
Net revenues and operating expenses increased on a reported basis due to
our 2000 and 1999 acquisitions and internal growth. Included in our fiscal year
2000 reported basis amounts are net revenues and operating expenses for a
twelve-month period from our acquisition of Jacor that was acquired in May 1999
and Dame Media which was acquired in July 1999. In addition, our acquisition of
AMFM in August 2000 increased net revenues and operating expenses in fiscal year
2000.
On a pro forma basis, net revenue increased due to various factors.
During the first part of fiscal year 2000, advertising rates were significantly
higher than the prior year as rates reacted to inventory sell-outs primarily
related to the rapid growth period of the Internet industry as well as an
overall increase in advertising demand across the industry. Although some of our
larger markets continued to enjoy significantly higher rates in the second part
of fiscal year 2000, when the Internet industry demand slowed, rates in our
other markets normalized compared to the prior year. In addition, our national
platform approach to selling advertising to our national clients helped increase
our overall rates, especially in our larger markets. On a pro forma basis,
operating expenses increased primarily due to incremental selling costs
associated with the increase in net revenue.
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<PAGE> 39
OUTDOOR ADVERTISING
(In thousands)
<TABLE>
<CAPTION>
As Reported
Years Ended December 31, % Change % Change
------------------------- As Reported Pro Forma
2000 1999 2000 v. 1999 2000 v. 1999
---- ---- ------------ ------------
<S> <C> <C> <C> <C>
Net Revenue $1,729,438 $1,253,732 38% 14%
Operating Expenses 1,078,540 785,636 37% 9%
---------- ----------
EBITDA $ 650,898 $ 468,096 39% 24%
========== ==========
</TABLE>
Net revenues and operating expenses increased on a reported basis due to
our 2000 and 1999 acquisitions and internal growth. Included in our fiscal year
2000 reported basis amounts are net revenues and operating expenses for a
twelve-month period from our acquisition of Dauphin in July 1999 and other less
significant acquisitions. In addition, net revenues and operating expenses
increased on a reported basis in fiscal year 2000 due to our acquisitions of
Ackerley in January 2000, and Donrey in September 2000, as well as less
significant acquisitions to fill out our existing markets.
On a pro forma basis, net revenues increased due to various factors.
Higher rates and improved occupancy in fiscal year 2000 as compared to fiscal
year 1999 increased net revenue for the entire year. In addition, our national
platform approach to selling advertising to our national customers helped
increase our overall rates, especially in our larger markets. High growth rates
were primarily achieved internationally in our United Kingdom and France
markets. On a pro forma basis, operating expenses increased primarily due to
incremental selling costs associated with the increase in net revenue.
LIVE ENTERTAINMENT
(In thousands)
<TABLE>
<CAPTION>
As Reported
Years Ended December 31, % Change % Change
----------------------- As Reported Pro Forma
2000 1999 2000 v. 1999 2000 v. 1999
---- ---- ------------ ------------
<S> <C> <C> <C> <C>
Net Revenue $902,374 $ -- n/a 11%
Operating Expenses 830,717 -- n/a 12%
-------- --------
EBITDA $ 71,657 $ -- n/a ( 1%)
======== ========
</TABLE>
We entered the live entertainment business with our acquisition of SFX
in August 2000. On a pro forma basis, net revenue increased due to an increase
in the number of events and the number of show dates in fiscal year 2000 as
compared to fiscal year 1999. Expenses increased on a pro forma basis as
numerous contracts with less favorable terms signed by prior management were
fulfilled during the five-month period after our acquisition. Our future
expectation is to have contracts with more favorable terms, resulting in more
profitable shows.
39
<PAGE> 40
FISCAL YEAR 1999 COMPARED TO FISCAL YEAR 1998
CONSOLIDATED
(In thousands)
<TABLE>
<CAPTION>
Reported Basis: Years Ended December 31,
- --------------- ------------------------- % Change
1999 1998 1999 v. 1998
---- ---- ------------
<S> <C> <C> <C>
Net Revenue $2,678,160 $1,350,940 98%
Operating Expenses 1,632,115 767,265 113%
Corporate Expenses 70,146 37,825 85%
---------- ----------
EBITDA $ 975,899 $ 545,850 79%
========== ==========
</TABLE>
The growth in net revenue and operating expenses was primarily due to
the acquisitions of Universal Outdoor in April of 1998, More Group in July 1998,
Jacor in May 1999 and Dame Media and Dauphin in July 1999. The acquisitions of
Jacor and Dame Media added approximately 230 radio stations and Premiere Radio
Networks and contributed 27% of 1999 net revenue. The acquisition of Dauphin
added approximately 103,000 display faces, including joint ventures, and
contributed 5% of 1999 net revenue.
Other Income and Expense Information
Depreciation and amortization expense increased from $305.0 million in
1998 to $722.2 million in 1999, a 137% increase, primarily due to the
acquisition of the tangible and intangible assets associated with the
acquisitions of Jacor in May 1999 and Dauphin and Dame Media in July 1999 as
well as the inclusion of a full year's depreciation and amortization expense
relating to the acquisitions of Universal in April 1998 and More Group in July
1998.
Interest expense increased 32% from $135.8 million in 1998 to $179.4
million in 1999 primarily due to higher average interest rates and an increase
in the average amount of debt outstanding, which resulted from the
above-mentioned acquisitions.
Equity in earnings of nonconsolidated affiliates increased 77% to $18.2
million in 1999 over $10.3 million in 1998 primarily due to the improvement in
the operating results of Hispanic Broadcasting Corporation and Grupo ACIR
Comunicaciones.
Income tax expense increased 106% from $74.2 million in 1998 to $152.7
million in 1999 primarily from the increase in the average effective tax rate
from 58% in 1998 to 64% in 1999, and the increase in income before income taxes.
The effective tax rate increased as a result of the increase in nondeductible
amortization expense principally associated with the acquisition of Jacor.
Net income increased from $54.0 million in 1998 to $72.5 million in 1999
due to a $138.7 million gain realized during 1999 relating to the divestiture of
certain stations in connection with governmental directives associated with the
Jacor merger. This gain was partially offset by higher interest expense, higher
depreciation and amortization and the extraordinary loss related to the early
extinguishment of debt acquired in the Jacor merger.
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<PAGE> 41
RADIO BROADCASTING
(In thousands)
<TABLE>
<CAPTION>
Reported Basis: Years Ended December 31,
- --------------- ------------------------- % Change
1999 1998 1999 v. 1998
---- ---- ------------
<S> <C> <C> <C>
Net Revenue $1,230,754 $ 474,936 159%
Operating Expenses 731,062 284,798 157%
---------- ----------
EBITDA $ 499,692 $ 190,138 163%
========== ==========
</TABLE>
The majority of the increase in net revenue and operating expenses was
due to the acquisitions of Jacor in May 1999 and Dame Media in July 1999. Net
revenue also increased due to increased advertising rates associated with
improved ratings within our radio stations.
OUTDOOR ADVERTISING
(In thousands)
<TABLE>
<CAPTION>
Reported Basis: Years Ended December 31,
- --------------- ------------------------ % Change
1999 1998 1999 v. 1998
---- ---- ------------
<S> <C> <C> <C>
Net Revenue $1,253,732 $ 709,189 77%
Operating Expenses 785,636 395,127 99%
---------- ----------
EBITDA $ 468,096 $ 314,062 49%
========== ==========
</TABLE>
The majority of the increase in net revenue and operating expenses was
due to the inclusion of a full year's operating results of Universal, acquired
in April 1998 and More Group, acquired in July 1998 and the inclusion of the
partial year's operating results of Dauphin, which was acquired in July 1999. In
addition, increased occupancy and advertising rates were achieved in 1999.
LIQUIDITY AND CAPITAL RESOURCES
We expect to fund anticipated cash requirements (including acquisitions,
anticipated capital expenditures, share repurchases, payments of principal and
interest on outstanding indebtedness and commitments) with cash flows from
operations and various externally generated funds.
SOURCES OF CAPITAL
As of December 31, 2000 and 1999 we had the following debt outstanding:
<TABLE>
<CAPTION>
(In millions) December 31,
-----------------------------------
2000 1999
---- ----
<S> <C> <C>
Credit facilities - domestic $ 3,203.8 $ 1,227.6
Credit facility - international 118.3 120.4
Senior convertible notes 1,575.0 1,575.0
Liquid Yield Option Notes 497.1 490.8
Long-term bonds 5,153.6 1,171.4
Other borrowings 117.0 47.8
----------- -----------
Total $ 10,664.8 $ 4,633.0
=========== ===========
</TABLE>
We had $196.8 million in unrestricted cash and cash equivalents on hand
at December 31, 2000.
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<PAGE> 42
DOMESTIC CREDIT FACILITIES
We currently have three separate domestic credit facilities. These
provide cash for both working capital needs as well as to fund certain
acquisitions.
The first credit facility is a $1.9 billion revolving credit facility,
of which, $1.8 billion was outstanding at December 31, 2000 and, taking into
account outstanding letters of credit, $86.0 million was available for future
borrowings. This credit facility began reducing on September 30, 2000, with
quarterly repayment of the outstanding principal balance to continue over the
next five years and the entire balance to be repaid by the last business day of
June 2005. During the year, we made principal payments totaling $3.5 billion and
drew down $4.6 billion on this credit facility.
The second facility was a 364-day multi-currency revolving credit
facility for $1.0 billion. During the first eight months of the year, we made
principal payments on this credit facility totaling $1.4 billion and drew down
$1.0 billion. On August 30, 2000, we repaid all outstanding borrowings,
terminated the $1.0 billion facility and entered into a new $1.5 billion credit
facility, concurrent with the closing of the AMFM merger. This new facility is a
$1.5 billion, 364-day revolving credit facility, which we have the option upon
maturity to convert into a term loan with a five-year maturity. At December 31,
2000, the outstanding balance was $.1 billion with $1.4 billion available for
future borrowings under this $1.5 billion credit facility.
Also, on August 30, 2000, we entered into a third facility for $1.5
billion. This is a five-year multi-currency revolving credit facility. At
December 31, 2000, the outstanding balance was $1.3 billion with $.2 billion
available for future borrowings under this $1.5 billion credit facility
As of March 15, 2001, the credit facilities aggregate outstanding
balance was $3.1 billion and, taking into account outstanding letters of credit,
$1.7 billion was available for future borrowings.
INTERNATIONAL CREDIT FACILITY
We entered into a new $150.0 million five-year revolving credit facility
with a group of international banks on December 8, 2000. This facility
refinanced a previous 88.0 million British pound credit facility. The facility
allows for borrowings in various foreign currencies, which are used to hedge net
assets in those currencies and provides funds to our international operations
for certain working capital needs and smaller acquisitions. At December 31,
2000, approximately $31.7 million was available for future borrowings and $118.3
million was outstanding under this credit facility. The credit facility expires
on December 8, 2005.
LIQUID YIELD OPTION NOTES
We assumed 4.75% Liquid Yield Option Notes ("LYONs") due 2018 and 5.50%
LYONs due 2011 as a part of the merger with Jacor. At the date of acquisition,
the assumed fair value of the LYONs was $490.1 million. Each LYON has a
principal amount at maturity of $1,000 and is convertible, at the option of the
holder, at any time on or prior to maturity, into our common stock at a
conversion rate of 7.227 shares per LYON and 15.522 shares per LYON for the 2018
and 2011 issues, respectively. The LYONs aggregated balance, net of conversions
to common stock, amortization of purchase accounting premium, and accretion of
interest, at December 31, 2000 was $497.1 million.
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<PAGE> 43
LONG-TERM BONDS
On June 14, 2000, we completed a debt offering of $250.0 million
Floating Rate Notes due June 15, 2002 and $750.0 million 7.875% Notes due June
15, 2005. Interest is payable on June 15 and December 15 on the 7.875% Notes and
is payable quarterly on the Floating Rate Notes. The Floating Rate Notes rate
per annum is equal to LIBOR plus .55%. On June 14, 2000 we entered into interest
rate swap agreements that effectively float the interest on the $750.0 million
7.875% notes based upon LIBOR. The aggregate net proceeds of approximately
$993.9 million were used to reduce the outstanding balance on our credit
facilities.
On July 3, 2000, we completed a debt offering of Euro 650.0 million
6.50% Notes due July 7, 2005. Interest on the notes is payable annually in
arrears on July 7 of each year. The net proceeds of approximately $610.8 million
were used to reduce the outstanding balance on our credit facilities.
On September 7, 2000, we completed a debt offering of $750.0 million in
7.25% Senior Notes due September 15, 2003 and $750.0 million in 7.65% Senior
Notes due on September 15, 2010. Interest is payable on both series of notes on
March 15 and September 15 of each year. On September 7, 2000, we entered into an
interest rate swap agreement that effectively floats the interest based upon
LIBOR for the $750 million of the 7.25% Senior Notes. The aggregate net proceeds
of approximately $1.5 billion were used to reduce the outstanding balance of our
credit facilities.
JACOR LONG-TERM BONDS
On December 14, 1999, we completed a tender offer for the 10.125% Senior
Subordinated Notes due June 15, 2006; 9.75% Senior Subordinated Notes due
December 15, 2006; 8.75% Senior Subordinated Notes due June 15, 2007; and 8.0%
Senior Subordinated Notes due February 15, 2010 acquired in the Jacor merger. An
agent acting on our behalf redeemed notes with a redemption value of
approximately $570.4 million. Cash settlement of the amount due to the agent was
completed on January 14, 2000. After redemption, approximately $1.0 million face
value of the notes remain outstanding.
AMFM LONG-TERM BONDS
We assumed long-term bonds with a face value of $2.8 billion and fair
value of $3.0 billion in the AMFM merger. On September 29, 2000, we redeemed all
of the outstanding 9% Senior Subordinated Notes due 2008, originally issued by
Chancellor Media Corporation or one of its subsidiaries, for $829.0 million
subject to change of control provisions in the bond indentures. In October 2000,
we redeemed, subject to change of control provisions in the bond indentures, all
of the outstanding 9.25% Senior Subordinated Notes due 2007, originally issued
by Capstar Radio Broadcasting Partners, Inc., the 12% Exchange Debentures due
2009, originally issued by Capstar Broadcasting Partners, Inc. and the 12.75%
Senior Discount Notes due 2009, originally issued by Capstar Broadcasting
Partners, Inc., for a total of $508.5 million.
On October 6, 2000, we made payments of $231.4 million pursuant to
mandatory offers required to repurchase due to a change of control on the
following series of AMFM debt: 8% Senior Notes due 2008, 8.125% Senior
Subordinated Notes due 2007 and 8.75% Senior Subordinated Notes due 2007,
originally issued by Chancellor Media Corporation or one of its subsidiaries, as
well as the 12.625% Exchange Debentures due 2006, originally issued by SFX
Broadcasting. The aggregate remaining balance of these series of AMFM long-term
bonds was $1.4 billion at December 31, 2000.
Chancellor Media Corporation, Capstar Radio Broadcasting Partners,
Capstar Broadcasting Partners, Inc. and AMFM Operating Inc., or their successors
are all indirect wholly-owned subsidiaries of
43
<PAGE> 44
Clear Channel Communications. The debt redemptions were financed with borrowings
under our domestic credit facilities.
SFX LONG-TERM BONDS
We assumed long-term bonds with a face value of $550.0 million in the
SFX merger. On October 10, 2000, we launched a tender offer for any and all of
the 9.125% Senior Subordinated Notes due 2008. An agent acting on our behalf
redeemed notes with a redemption value of approximately $602.9 million. Cash
settlement of the amount due to the agent was completed in a series of
transactions from November 8, 2000 to November 20, 2000. After redemption,
approximately $1.6 million face value of the notes remains outstanding. The
tender offer was financed with borrowings under our credit facilities.
At December 31, 2000, we were in compliance with all debt covenants and
had satisfied all financial ratios and tests under the indentures. We expect to
be in compliance and satisfy all such covenants and ratios as may be applicable
from time to time during 2001.
SHELF REGISTRATION
On July 21, 2000, we filed a Registration Statement on Form S-3 covering
a combined $3.0 billion of debt securities, junior subordinated debt securities,
preferred stock, common stock, warrants, stock purchase contracts and stock
purchase units (the "shelf registration statement"). The shelf registration
statement also covers preferred securities that may be issued from time to time
by our three Delaware statutory business trusts and guarantees of such preferred
securities by us. In September 2000, we issued $1.5 billion of debt securities
registered under the shelf registration statement, leaving $1.5 billion
available for future issuance.
AUTHORIZED SHARES OF COMMON STOCK
On April 27, 2000, our shareholders approved an increase to the number
of shares of common stock authorized for issuance from 900 million to 1.5
billion in order to have additional shares available for possible future
acquisitions or financing transactions, stock splits, stock dividends and other
issuances, or to satisfy requirements for additional reservations of shares by
reason of future transactions which might require increased reservations. We
currently have no plans to issue any of the additional shares of common stock.
RESTRICTED CASH
In connection with the AMFM merger and governmental directives, we
divested 39 radio stations for $1.2 billion. Of these proceeds, $839.7 million
was placed in restricted trusts for the purchase of replacement properties. In
addition, restricted cash of $439.9 million was acquired from AMFM related to
the divestiture of AMFM radio stations in connection with the merger. The
following table details the reconciliation of divestiture and acquisition
activity in the restricted trust accounts:
<TABLE>
<CAPTION>
(In thousands)
<S> <C>
Restricted cash resulting from Clear Channel divestitures $ 839,717
Restricted cash purchased in AMFM merger 439,896
Restricted cash used in acquisitions (670,228)
Interest, net of fees 18,756
------------
Restricted cash balance at December 31, 2000 628,141
Less current portion 308,691
------------
Long-term restricted cash $ 319,450
============
</TABLE>
44
<PAGE> 45
On February 21, 2001, the restricted trusts expired and the $308.7
million not expended on replacement radio assets was refunded to us. The amount
was used to reduce the outstanding balance of our domestic credit facilities.
USES OF CAPITAL
ACQUISITIONS
During 2000, including the acquisitions discussed above, we acquired
approximately 24,000 additional outdoor display faces in 30 domestic markets and
approximately 54,500 additional display faces in 17 international markets for a
total of $1.7 billion in cash. We also acquired 148 radio stations in 45 markets
for $113.1 million in cash and $670.2 million in restricted cash. In the live
entertainment segment, we acquired sporting, music and theatrical event
promotions, racing promotion, and venue management assets for $86.6 million in
cash.
We intend to continue to pursue businesses that fit our strategic goals.
There are currently no significant acquisitions or mergers pending. From January
1, 2001 through February 28, 2001, we have acquired 120 radio stations
(primarily through the use of our restricted cash), 531 outdoor display faces
and our live entertainment segment acquired sporting and music event promotions.
CAPITAL EXPENDITURES
Capital expenditures in 2000 increased from $238.7 million in 1999 to
$495.6 million in 2000. Overall, capital expenditures increased due to recent
acquisitions and the increase in the number of radio stations, billboards and
displays owned in 2000 as compared to 1999. In addition, we incurred capital
expenditures related to our new live entertainment segment in 2000 that we did
not incur in 1999. The increase in 2000 primarily relates to more spending
relating to facility consolidation resulting from our acquisitions,
technological upgrades of operating assets, a one-time capital expenditure in
conjunction with the long-term extension of a certain operating contract, and
the construction of new revenue-producing advertising displays. In 1999, capital
expenditures included non-recurring expenditures relating to the implementation
of Year 2000 compliant systems and integration of the Jacor stations.
<TABLE>
<CAPTION>
(In millions)
2000 Capital Expenditures
---------------------------------------------------------------
Radio Outdoor Entertainment Other Total
----- ------- ------------- ----- -----
<S> <C> <C> <C> <C> <C>
Recurring $ 23.6 $ 84.8 $ 12.7 $ 18.3 $ 139.4
Non-recurring projects 116.3 12.8 30.1 40.4 199.6
Revenue producing -- 152.7 3.9 -- 156.6
-------- -------- ------- ------ --------
$ 139.9 $ 250.3 $ 46.7 $ 58.7 $ 495.6
======== ======== ======= ====== ========
</TABLE>
Our radio capital expenditures in 2000 are related primarily to
expenditures associated with the consolidation of operations in certain markets
in conjunction with acquisitions that are expected to result in improved
operating results in such markets. In addition, our radio capital expenditures
in 2000 include approximately $12.5 million in technological upgrades of our
operating assets, $29.6 million related to assets purchased in a contract
extension negotiation, and expenditures related to the integration of the AMFM
stations.
45
<PAGE> 46
Our outdoor advertising capital expenditures in 2000 are related
primarily to the construction of new revenue producing advertising displays as
well as replacement expenditures on our existing advertising displays.
Our live entertainment capital expenditures in 2000 include expenditures
primarily related to a consolidated sales and operations facility, new venues
and improvements to existing venues.
Included in "other" capital expenditures for 2000 is the construction of
a new corporate headquarters facility to accommodate our growth, upgrades of our
television related operating assets, and other technological expenditures.
SHARE REPURCHASE
In October 2000 the Board of Directors authorized the repurchase of up
to $1.0 billion of Clear Channel common stock in the open market. As of December
31, 2000, we had purchased 100,000 shares of common stock for an aggregate
purchase price of $4.7 million, including brokers fees and commissions, which
are held in treasury.
COMMITMENTS AND CONTINGENCIES
See Note G of Notes to the Consolidated Financial Statements for a
description of our future minimum lease commitments.
There are various lawsuits and claims pending against us. We believe
that any ultimate liability resulting from those actions or claims will not have
a material adverse effect on our results of operations, financial position or
liquidity.
Certain agreements relating to acquisitions provide for purchase price
adjustments and other future contingent payments based on the financial
performance of the acquired companies. We will continue to accrue additional
amounts related to such contingent payments if and when it is determinable that
the applicable financial performance targets will be met. The aggregate of these
contingent payments, if performance targets are met, would not significantly
impact our financial position or results of operations.
DEBT MATURITIES
The scheduled maturities of our credit facilities through December 31,
2005 are $10.8 million in 2001, $306.2 million in 2002, $437.5 million 2003,
$437.5 million in 2004 and $2.0 billion in 2005. Our maturities of all long-term
debt outstanding at December 31, 2000, are $67.7 million in 2001, $1.6 billion
in 2002, $1.8 billion in 2003, $.4 billion in 2004, $3.5 billion in 2005, and
$3.4 billion thereafter.
MARKET RISK
INTEREST RATE RISK
At December 31, 2000, approximately 50% of our long-term debt, including
fixed rate debt on which we have entered interest rate swap agreements, bears
interest at variable rates. Accordingly, our earnings and after tax cash flow
are affected by changes in interest rates. Assuming the current level of
borrowings at variable rates and assuming a two percentage point change in the
year's average interest rate under these borrowings, it is estimated that our
2000 interest expense would have changed by $101.7
46
<PAGE> 47
million and that our 2000 net income would have changed by $63.1 million. In the
event of an adverse change in interest rates, management may take actions to
further mitigate its exposure. However, due to the uncertainty of the actions
that would be taken and their possible effects, the analysis assumes no such
actions. Further the analysis does not consider the effects of the change in the
level of overall economic activity that could exist in such an environment.
We have entered into interest rate swap agreements that effectively
float interest at rates based upon LIBOR on $1.5 billion of our current fixed
rate borrowings. These agreements expire from September 2003 to June 2005. The
fair value of these agreements at December 31, 2000 was $49.0 million.
EQUITY PRICE RISK
The carrying value of our available-for-sale equity securities is
affected by changes in their quoted market prices. It is estimated that a 20%
change in the market prices of these securities would change their carrying
value at December 31, 2000 by $307.2 million and would change comprehensive
income by $199.7 million.
In connection with the completion of the AMFM merger, Clear Channel and
AMFM entered into a Consent Decree with the Department of Justice regarding our
investment in Lamar Advertising Company. The Consent Decree, among other things,
required us to sell all of our shares of Lamar by December 31, 2002. In
accordance with ABP 16, Business Combinations, our 26.2 million shares of Lamar
were recorded at their quoted market price on the closing date of the merger,
which was significantly higher than AMFM's historical purchase price. We will be
exposed to changes in Lamar's market price, which may result in large gains and
losses related to this disposition in future periods.
FOREIGN CURRENCY
We have operations in 43 countries throughout Europe, Asia, Australia
and North and South America. Foreign operations are measured in their local
currencies except in our hyper-inflationary countries in which we operate. As a
result, our financial results could be affected by factors such as changes in
foreign currency exchange rates or weak economic conditions in the foreign
markets in which we have operations. To mitigate a portion of the exposure to
risk of currency fluctuations throughout Europe and Asia, we have a natural
hedge through borrowings in Euros, Sterling and other currencies. This hedge
position is reviewed monthly. We maintain no derivative instruments to mitigate
the exposure to translation and/or transaction risk. However, this does not
preclude the adoption of specific hedging strategies in the future. Our foreign
operations reported a loss of $9.3 million for the year ended December 31, 2000.
It is estimated that a 10% change in the value of the U.S. dollar to foreign
currencies would change net loss for the year ended December 31, 2000 by $.9
million.
Our earnings are also affected by fluctuations in the value of the U.S.
dollar as compared to foreign currencies as a result of our investments in
various countries, all of which are accounted for under the equity method. It is
estimated that the result of a 10% fluctuation in the value of the dollar
relative to these foreign currencies at December 31, 2000 would change net
income for the year ended December 31, 2000 by approximately $.1 million. This
analysis does not consider the implications that such fluctuations could have on
the overall economic activity that could exist in such an environment in the
U.S. or the foreign countries or on the results of operations of these foreign
entities.
RECENT ACCOUNTING PRONOUNCEMENTS
47
<PAGE> 48
In June 1998, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 133 Accounting for Derivative Instruments
and Hedging Activities ("Statement 133"). Statement 133 establishes new rules
for the recognition and measurement of derivatives and hedging activities.
Statement 133 is amended by Statement 137 Accounting for Derivative Instruments
and Hedging Activities - Deferral of the Effective Date of FASB Statement No.
133, and Statement 138 Accounting for Derivative Instruments and Hedging
Activities (an amendment to Statement 133), is effective for years beginning
after June 15, 2000. We adopted this statement January 1, 2001. Had we elected
early adoption of Statement 133, total assets and long-term debt at December 31,
2000 would have increased by $49.0 million each. As part of our adoption of
Statement 133 on January 1, 2001, we reclassified 2.0 million shares of our
investment in American Tower Corporation that had been classified as
available-for-sale securities under Financial Accounting Standards No. 115
Accounting for Certain Investments in Debt and Equity Securities ("Statement
115") to a trading securities classification. In accordance with Statement 115
and Statement 133, on January 1, 2001, the shares were transferred to a trading
classification at their fair market value of $76.2 million, and an unrealized
pretax holding gain of $69.7 million was recognized in earnings.
In December 1999, the SEC issued Staff Accounting Bulletin 101, Revenue
Recognition in Financial Statements, ("SAB 101"). The bulletin summarizes
certain of the SEC staff's views in applying generally accepted accounting
principles to revenue recognition. SAB 101, as amended through June 26, 2000, is
required to be implemented in the fourth quarter of 2000. Accordingly, we have
implemented SAB 101 in the financial statements filed herewith. Implementation
of this statement did not impact our financial position or results of
operations.
In March 2000, the Financial Accounting Standards Board issued FASB
Interpretation No. 44. "Accounting for Certain Transactions involving Stock
Compensation" ("FIN 44"). FIN 44 provides guidance for issues arising in
applying APB Opinion No. 25 "Accounting for Stock Issued to Employees." FIN 44
applies specifically to new awards, exchanges of awards in a business
combination, modification to outstanding awards, and changes in grantee status
that occur on or after July 1, 2000, except for the provisions related to
repricings and the definition of an employee which apply to awards issued after
December 15, 1998. The requirements of FIN 44 are consistent with our existing
accounting policies.
The Financial Accounting Standards Board has proposed new accounting for
business combinations that, among other things, would change the accounting for
goodwill and other intangibles recorded in business acquisitions as of the date
of the new Statement. An important part of the proposed Statement is that
amortization of goodwill and certain other intangibles with indefinite lives
would cease for both assets acquired prior to the effective date of the
Statement and for any new goodwill and other intangibles acquired after the
effective date of the Statement. Rather than amortizing these assets, goodwill
and other intangibles would be reviewed for impairment using a "market value"
approach. The proposed Statement is expected to be finalized in June 2001. As
our amortization of goodwill and certain other intangibles is a significant
non-cash expense that we currently record, this proposed Statement, if finalized
in its current form, will have a material impact on our financial statements. We
feel that it is not appropriate to forecast the impact until the proposed
Statement is finalized.
48
<PAGE> 49
INFLATION
Inflation has affected our performance in terms of higher costs for
wages, salaries and equipment. Although the exact impact of inflation is
indeterminable, we believe we have offset these higher costs by increasing the
effective advertising rates of most of our broadcasting stations and outdoor
display faces.
RATIO
The ratio of earnings to fixed charges is as follows:
<TABLE>
<CAPTION>
Year Ended December 31,
- -----------------------------------------------------------------------------
2000 1999 1998 1997 1996
---- ---- ---- ---- ----
<S> <C> <C> <C> <C>
2.20 2.04 1.83 2.32 3.63
</TABLE>
The ratio of earnings to fixed charges was computed on a total
enterprise basis. Earnings represent income from continuing operations before
income taxes less equity in undistributed net income (loss) of unconsolidated
affiliates plus fixed charges. Fixed charges represent interest, amortization of
debt discount and expense, and the estimated interest portion of rental charges.
We had no preferred stock outstanding for any period presented.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
Required information is within Item 7
49
<PAGE> 50
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
MANAGEMENT'S REPORT ON FINANCIAL STATEMENTS
The consolidated financial statements and notes related thereto were prepared by
and are the responsibility of management. The financial statements and related
notes were prepared in conformity with accounting principles generally accepted
in the United States and include amounts based upon management's best estimates
and judgments.
It is management's objective to ensure the integrity and objectivity of its
financial data through systems of internal controls designed to provide
reasonable assurance that all transactions are properly recorded in our books
and records, that assets are safeguarded from unauthorized use, and that
financial records are reliable to serve as a basis for preparation of financial
statements.
The financial statements have been audited by our independent auditors, Ernst &
Young LLP, to the extent required by auditing standards generally accepted in
the United States and, accordingly, they have expressed their professional
opinion on the financial statements in their report included herein.
The Board of Directors meets with the independent auditors and management
periodically to satisfy itself that they are properly discharging their
responsibilities. The independent auditors have unrestricted access to the
Board, without management present, to discuss the results of their audit and the
quality of financial reporting and internal accounting controls.
/s/ Lowry Mays
Chairman/Chief Executive Officer
/s/ Herbert W. Hill, Jr.
Senior Vice President/Chief Accounting Officer
50
<PAGE> 51
REPORT OF INDEPENDENT AUDITORS
SHAREHOLDERS AND BOARD OF DIRECTORS
CLEAR CHANNEL COMMUNICATIONS, INC.
We have audited the accompanying consolidated balance sheets of Clear Channel
Communications, Inc. and subsidiaries (the Company) as of December 31, 2000 and
1999, and the related consolidated statements of earnings, changes in
shareholders' equity, and cash flows for each of the three years in the period
ended December 31, 2000. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits. The financial statements of Hispanic
Broadcasting Corporation (formerly Heftel Broadcasting Corporation), in which
the Company has a 26% equity interest, have been audited by other auditors whose
reports have been furnished to us; insofar as our opinion on the consolidated
financial statements relates to data included for Hispanic Broadcasting
Corporation for 1999 and 1998, it is based solely on their reports.
We conducted our audits in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits and the reports of other auditors
provide a reasonable basis for our opinion.
In our opinion, based on our audits and the reports of other auditors, the
consolidated financial statements referred to above present fairly, in all
material respects, the consolidated financial position of Clear Channel
Communications, Inc. and subsidiaries at December 31, 2000 and 1999, and the
consolidated results of their operations and their cash flows for each of the
three years in the period ended December 31, 2000, in conformity with accounting
principles generally accepted in the United States.
/s/ ERNST & YOUNG LLP
San Antonio, Texas
February 23, 2001
51
<PAGE> 52
CONSOLIDATED BALANCE SHEETS
ASSETS
(In thousands)
<TABLE>
<CAPTION>
December 31,
-------------------------------
2000 1999
---- ----
<S> <C> <C>
CURRENT ASSETS
Cash and cash equivalents $ 196,838 $ 76,724
Restricted cash 308,691 --
Accounts receivable, less allowance of
$60,631 in 2000 and $26,095 in 1999 1,557,048 724,900
Prepaid expenses 146,767 35,791
Other current assets 133,873 87,694
-------------- -------------
TOTAL CURRENT ASSETS 2,343,217 925,109
PROPERTY, PLANT
AND EQUIPMENT
Land, buildings and improvements 1,197,951 338,764
Structures and site leases 2,395,934 1,870,731
Transmitter and studio equipment 744,571 427,063
Furniture and other equipment 479,532 222,581
Construction in progress 222,286 89,901
-------------- -------------
5,040,274 2,949,040
Less accumulated depreciation 785,040 470,916
-------------- -------------
4,255,234 2,478,124
INTANGIBLE ASSETS
Contracts 1,075,472 817,227
Licenses and goodwill 40,973,198 11,809,882
Other intangible assets 175,451 80,102
-------------- -------------
42,224,121 12,707,211
Less accumulated amortization 1,731,557 758,889
-------------- -------------
40,492,564 11,948,322
OTHER
Restricted cash 319,450 4,349
Notes receivable 99,818 53,675
Investments in, and advances to,
nonconsolidated affiliates 427,303 380,918
Other assets 513,773 251,604
Other investments 1,605,102 779,411
-------------- -------------
TOTAL ASSETS $ 50,056,461 $ 16,821,512
============== =============
</TABLE>
See Notes to Consolidated Financial Statements
52
<PAGE> 53
LIABILITIES AND SHAREHOLDERS' EQUITY
(In thousands, except share data)
<TABLE>
<CAPTION>
December 31,
-------------------------------
2000 1999
---- ----
<S> <C> <C>
CURRENT LIABILITIES
Accounts payable $ 383,588 $ 196,222
Accrued interest 105,581 16,449
Accrued expenses 886,904 319,690
Accrued income taxes 445,499 29,769
Current portion of long-term debt 67,736 48,610
Deferred income 218,670 54,113
Other current liabilities 20,572 20,662
-------------- -------------
TOTAL CURRENT LIABILITIES 2,128,550 685,515
Long-term debt 10,100,028 4,093,543
Liquid Yield Option Notes 497,054 490,809
Deferred income taxes 6,771,198 1,289,783
Other long-term liabilities 150,713 149,032
Minority interest 61,745 28,793
SHAREHOLDERS' EQUITY
Preferred Stock - Class A, par value $1.00
per share, authorized 2,000,000 shares,
no shares issued and outstanding -- --
Preferred Stock, - Class B, par value $1.00
per share, authorized 8,000,000 shares,
no shares issued and outstanding -- --
Common Stock, par value $.10 per share,
authorized 1,500,000,000 and 900,000,000
shares, issued and outstanding 585,766,166
and 338,609,503 shares in 2000 and 1999,
respectively 58,577 33,861
Additional paid-in capital 29,558,908 9,216,957
Common stock warrants 249,312 252,862
Retained earnings 544,940 296,132
Accumulated other comprehensive income (32,433) 282,745
Other (26,298) 2,304
Cost of shares (115,557 in 2000 and 11,612
in 1999) held in treasury (5,833) (824)
-------------- -------------
TOTAL SHAREHOLDERS' EQUITY 30,347,173 10,084,037
-------------- -------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 50,056,461 $ 16,821,512
============== =============
</TABLE>
See Notes to Consolidated Financial Statements
53
<PAGE> 54
CONSOLIDATED STATEMENTS OF EARNINGS
(In thousands, except per share data)
<TABLE>
<CAPTION>
Year Ended December 31,
-------------------------------------------
2000 1999 1998
---- ---- ----
<S> <C> <C> <C>
REVENUE
Gross revenue $ 5,847,900 $ 2,992,018 $ 1,522,551
Less: agency commissions 502,594 313,858 171,611
------------- ------------- -------------
Net revenue 5,345,306 2,678,160 1,350,940
EXPENSE
Operating expenses 3,480,706 1,632,115 767,265
Non-cash compensation expense 16,032 -- --
Depreciation and amortization 1,401,063 722,233 304,972
Corporate expenses 142,627 70,146 37,825
------------- ------------- -------------
Operating income 304,878 253,666 240,878
Interest expense 383,104 179,404 135,766
Gain on sale of assets related to mergers 783,743 138,659 --
Equity in earnings of
nonconsolidated affiliates 25,155 18,183 10,305
Other income (expense) - net (17,133) 7,292 12,810
------------- ------------- -------------
Income before income taxes and extraordinary item 713,539 238,396 128,227
Income taxes 464,731 152,741 74,196
------------- ------------- -------------
Income before extraordinary item 248,808 85,655 54,031
Extraordinary item -- (13,185) --
------------- -------------- -------------
Net income 248,808 72,470 54,031
Other comprehensive income, net of tax:
Foreign currency translation adjustments (92,296) (47,814) 5,801
Unrealized gain (loss) on securities:
Unrealized holding gain (loss) (193,634) 182,315 162,925
Less: reclassification adjustment for gains
on SFX shares held prior to merger (36,526) -- --
Less: reclassification adjustment for
(gain) loss included in net income 7,278 (14,904) (25,494)
------------- -------------- -------------
Comprehensive income (loss) $ (66,370) $ 192,067 $ 197,263
============= ============= =============
PER SHARE DATA
Net income per common share:
Basic:
Income before extraordinary item $ .59 $ .27 $ .23
Extraordinary item -- (.04) --
------------- -------------- -------------
Net income $ .59 $ .23 $ .23
============= ============= =============
Diluted:
Income before extraordinary item $ .57 $ .26 $ .22
Extraordinary item -- (.04) --
------------- -------------- -------------
Net income $ .57 $ .22 $ .22
============= ============= =============
</TABLE>
See Notes to Consolidated Financial Statements
54
<PAGE> 55
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
(In thousands)
<TABLE>
<CAPTION>
Accumulated
Additional Common Other
Common Paid-in Stock Retained Comprehensive Treasury
Stock Capital Warrants Earnings Income Other Stock Total
----- ------- -------- -------- ------ ----- ----- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balances at December 31, 1997 $ 9,823 $ 1,541,865 $ -- $ 169,631 $ 19,916 $ 6,236 $ (687) $ 1,746,784
Net income 54,031 54,031
Proceeds from sale of Common
Stock 2,100 1,279,318 1,281,418
Common Stock issued related to
Eller put/call agreement 13 5,820 5,833
Common Stock and stock options
issued for business acquisitions 1,929 1,199,928 1,201,857
Exercise of stock options 89 52,782 (1,311) (1,286) 50,274
Currency translation adjustment 5,801 5,801
Unrealized gains on investments 137,431 137,431
Stock split 12,416 (12,416) --
------- ----------- --------- --------- --------- ---------- ------- -----------
Balances at December 31, 1998 26,370 4,067,297 -- 223,662 163,148 4,925 (1,973) 4,483,429
Net income 72,470 72,470
Proceeds from sale of Common
Stock 805 512,112 512,917
Common Stock issued related to
Eller put/call agreement 190 130,440 130,630
Common Stock, stock options and
common stock warrants issued
for business acquisitions 6,180 4,413,530 253,428 4,673,138
Conversion of Liquid
Yield Option Notes 10 3,271 3,281
Exercise of stock options and
common stock warrants 306 90,307 (566) (2,621) (2,953) 84,473
Charitable donation of
treasury shares 4,102 4,102
Currency translation adjustment (47,814) (47,814)
Unrealized gains on investments 167,411 167,411
------- ----------- --------- --------- --------- ---------- ------- -----------
Balances at December 31, 1999 33,861 9,216,957 252,862 296,132 282,745 2,304 (824) 10,084,037
Net income 248,808 248,808
Common Stock, stock options and
common stock warrants issued
for business acquisitions 24,497 20,258,721 (61) 20,283,157
Deferred compensation acquired (49,311) (49,311)
Purchase of treasury shares (4,745) (4,745)
Conversion of Liquid
Yield Option Notes 76 76
Exercise of stock options and
common stock warrants 219 83,154 (3,550) (203) 79,620
Amortization and adjustment of
deferred compensation 20,709 20,709
Currency translation adjustment (92,296) (92,296)
Unrealized gains (losses) on
investments (222,882) (222,882)
------- ----------- --------- --------- ---------- ---------- ------- -----------
Balances at December 31, 2000 $58,577 $29,558,908 $ 249,312 $ 544,940 $ (32,433) $ (26,298) $(5,833) $30,347,173
======= =========== ========= ========= ========== ========== ======= ===========
</TABLE>
See Notes to Consolidated Financial Statements
55
<PAGE> 56
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
<TABLE>
<CAPTION>
Year Ended December 31,
--------------------------------------------
2000 1999 1998
---- ---- ----
<S> <C> <C> <C>
CASH FLOWS FROM
OPERATING ACTIVITIES:
Net income $ 248,808 $ 72,470 $ 54,031
Reconciling Items:
Depreciation 367,639 263,242 134,042
Amortization of intangibles 1,033,424 458,991 170,930
Deferred taxes 386,711 31,653 35,329
Amortization of deferred financing charges, bond
premiums and accretion of note discounts 16,038 5,667 2,444
Amortization of deferred compensation 16,032 -- --
(Recognition) deferral of deferred income (121,539) 18,647 (11,371)
Loss (gain) on sale of assets (780,926) (141,556) 13,845
Loss (gain) on sale of other investments 5,369 (22,930) (39,221)
Equity in earnings of non-
consolidated affiliates (20,820) (10,775) (4,471)
Extraordinary item -- 13,185 --
Increase (decrease) other, net 8,002 15,489 (6,474)
Changes in operating assets and liabilities, net of
effects of acquisitions:
Decrease (increase) in accounts receivable (5,721) (87,529) (47,699)
Increase (decrease) in accounts payable,
accrued expenses and other liabilities (356,131) 1,757 9,663
Increase (decrease) in accrued interest (3,388) (10,778) (12,309)
Increase (decrease) in accrued income taxes (38,413) 31,873 (19,750)
----------- ---------- -----------
Net cash provided by operating activities 755,085 639,406 278,989
</TABLE>
56
<PAGE> 57
<TABLE>
<CAPTION>
Year Ended December 31,
----------------------------------------------
2000 1999 1998
---- ---- ----
CASH FLOWS FROM
INVESTING ACTIVITIES:
<S> <C> <C> <C>
(Investment) in liquidation of restricted cash (183,896) 78,651 --
Cash acquired in stock-for-stock mergers 311,861 -- --
(Increase) decrease in notes receivable, net (15,807) -- (18,302)
Decrease (increase) in investments in, and
advances to nonconsolidated affiliates - net (8,044) (36,647) (91,527)
Purchases of investments (55,275) (174,698) (44,931)
Proceeds from sale of investments 61,277 29,659 56,408
Purchases of property, plant and equipment (495,551) (238,738) (141,938)
Proceeds from disposal of assets 392,729 12,203 7,977
Proceeds from divestitures placed in restricted cash 839,717 205,800 --
Acquisition of radio broadcasting assets (113,094) (209,185) (209,327)
Acquisition of radio broadcasting assets
with restricted cash (670,228) (246,228) --
Acquisition of outdoor advertising assets (1,684,506) (854,135) (1,102,668)
Acquisition of live entertainment assets (86,596) -- --
Decrease (increase) in other - net (48,241) (40,852) (58,010)
------------- ------------ -----------
Net cash used in investing activities (1,755,654) (1,474,170) (1,602,318)
CASH FLOWS FROM
FINANCING ACTIVITIES:
Draws on credit facilities 7,904,488 2,414,480 1,953,076
Payments on credit facilities (7,199,185) (3,085,486) (2,195,365)
Proceeds from long-term debt 3,128,386 1,005,830 882,592
Payments on long-term debt (2,757,223) (9,023) (631,516)
Proceeds from exercise of stock options, stock
purchase plan and common stock warrants 48,962 36,273 44,965
Payments for purchase of treasury shares (4,745) -- --
Proceeds from issuance of common stock -- 512,916 1,281,418
------------ ------------ -----------
Net cash provided by financing activities 1,120,683 874,990 1,335,170
------------ ------------ -----------
Net increase in cash and cash equivalents 120,114 40,226 11,841
Cash and cash equivalents at beginning of year 76,724 36,498 24,657
------------ ------------ -----------
Cash and cash equivalents at end of year $ 196,838 $ 76,724 $ 36,498
============ ============ ===========
SUPPLEMENTAL DISCLOSURE
OF CASH FLOW INFORMATION
Cash paid during the year for:
Interest $ 358,504 $ 201,127 $ 130,049
Income taxes 96,643 58,005 10,856
</TABLE>
See Notes to Consolidated Financial Statements
57
<PAGE> 58
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE A - SUMMARY OF
SIGNIFICANT ACCOUNTING POLICIES
NATURE OF BUSINESS
Clear Channel Communications, Inc., incorporated in Texas in 1974, is a
diversified media company with three principal business segments: radio
broadcasting, outdoor advertising and live entertainment. The Company owns,
programs and sells airtime for various radio stations. The Company also is one
of the world's largest outdoor advertising companies based on total advertising
display inventory in the United States and internationally. In addition, the
Company is one of the world's largest diversified promoters, producers and venue
operators of live entertainment events based on the total number of events,
productions and owned or operated venues.
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of the Company and
its subsidiaries, substantially all of which are wholly-owned. Significant
intercompany accounts have been eliminated in consolidation. Investments in
nonconsolidated affiliates are accounted for using the equity method of
accounting. Certain amounts in prior years have been reclassified to conform to
the 2000 presentation.
CASH AND CASH EQUIVALENTS
Cash and cash equivalents include all highly liquid investments with an original
maturity of three months or less.
LAND LEASES AND OTHER STRUCTURE LICENSES
Most of the Company's outdoor advertising structures are located on leased land.
Domestic land rents are typically paid in advance for periods ranging from one
to twelve months. International land rents are paid both in advance and in
arrears, for periods ranging from one to twelve months. Most international
street furniture advertising display faces are licensed through municipalities
for up to 20 years. The street furniture licenses often include a percent of
revenue to be paid along with a base rent payment. Prepaid land leases are
recorded as an asset and expensed ratably over the related rental term and
license and rent payments in arrears are recorded as an accrued liability.
PREPAID EXPENSES
Included in prepaid expenses are event expenses including show advances and
deposits and other costs directly related to future entertainment events. Such
costs are charged to operations upon completion of the related events.
PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment are stated at cost. Depreciation is computed
principally using the straight-line method at rates that, in the opinion of
management, are adequate to allocate the cost of such assets over their
estimated useful lives, which are as follows:
Buildings and improvements- 10 to 30 years
Structures and site leases - 2 to 20 years
Transmitter and studio equipment - 7 to 15 years
Furniture and other equipment - 2 to 10 years
Leasehold improvements - generally life of lease
58
<PAGE> 59
Expenditures for maintenance and repairs are charged to operations as incurred,
whereas expenditures for renewal and betterments are capitalized.
INTANGIBLE ASSETS
Intangible assets are stated at cost and are being amortized using the
straight-line method. Excess cost over the fair value of net assets acquired
(goodwill) and certain licenses are amortized generally over 20 to 25 years.
Transit and street furniture contract intangibles are amortized over the
respective lives of the agreements, typically four to eleven years. Contracts
are amortized over the respective lives of the agreements. Other intangible
assets are amortized over their appropriate lives.
The periods of amortization are evaluated annually to determine whether
circumstances warrant revision.
LONG-LIVED ASSETS
The Company periodically evaluates the propriety of the carrying amount of
goodwill and other intangible assets and related amortization periods to
determine whether current events or circumstances warrant adjustments to the
carrying value and/or revised estimates of amortization periods. These
evaluations consist of the projection of undiscounted cash flows over the
remaining amortization periods of the related intangible assets. The projections
are based on historical trend lines of actual results, adjusted for expected
changes in operating results. To the extent such projections indicate that
undiscounted cash flows are not expected to be adequate to recover the carrying
amount of the related intangible assets, such carrying amounts are written down
to fair value by charges to expense. At this time, the Company believes that no
impairment of goodwill or other intangible assets has occurred and that no
revisions to the amortization periods are warranted.
OTHER INVESTMENTS
Other investments are composed primarily of equity securities. These securities
are classified as available-for-sale and carried at fair value based on quoted
market prices. Securities are carried at historical value when quoted market
prices are unavailable. The net unrealized gains or losses on these investments,
net of tax, are reported as a separate component of shareholders' equity. The
average cost method is used to compute the realized gains and losses on sales of
equity securities.
EQUITY METHOD INVESTMENTS
Investments in companies 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 company are accounted for under the
equity method. The Company does not recognize gains or losses upon the issuance
of securities by any of its equity method investees.
FINANCIAL INSTRUMENTS
Due to their short maturity, the carrying amounts of accounts and notes
receivable, accounts payable, accrued liabilities, and short-term borrowings
approximated their fair values at December 31, 2000 and 1999. The carrying
amounts of long-term debt and Liquid Yield Option Notes approximated their fair
value at the end of 2000 and 1999, except as disclosed in Note D and Note F,
respectively.
INCOME TAXES
The Company accounts for income taxes using the liability method. Under this
method, deferred tax assets and liabilities are determined based on differences
between financial reporting bases and tax bases of assets and liabilities and
are measured using the enacted tax rates expected to apply to taxable income in
the periods in which the deferred tax asset or liability is expected to be
realized or settled. As all earnings from
59
<PAGE> 60
the Company's foreign operations are permanently reinvested and not distributed,
the Company's income tax provision does not include additional U.S. taxes on
foreign operations.
REVENUE RECOGNITION
Radio broadcasting revenue is recognized as advertisements or programs are
broadcast and is generally billed monthly. Outdoor advertising provides services
under the terms of contracts covering periods up to three years, which are
generally billed monthly. Revenue for outdoor advertising space rental is
recognized ratably over the term of the contract. Payments received in advance
of billings are recorded as deferred income. Entertainment revenue from the
presentation and production of an event is recognized on the date of the
performance. Revenue collected in advance of the event is recorded as deferred
income until the event occurs. Entertainment revenue collected from advertising
and other revenue, which is not related to any single event, is classified as
deferred revenue and generally amortized over the operating season during the
term of the contract.
Revenue from barter transactions is recognized when advertisements are broadcast
or outdoor advertising space is utilized. Merchandise or services received are
charged to expense when received or used.
The Company believes that the credit risk, with respect to trade receivables is
limited due to the large number and the geographic diversification of its
customers.
INTEREST RATE PROTECTION AGREEMENTS
Periodically, the Company enters into interest rate swap agreements to modify
the interest characteristics of its outstanding debt. Each interest rate swap
agreement is designated with all or a portion of the principal balance and term
of a specific debt obligation. These agreements involve the exchange of amounts
based on a fixed interest rate for amounts based on variable interest rates over
the life of the agreement without an exchange of the notional amount upon which
the payments are based. The differential to be paid or received as interest rate
change is accrued and recognized as an adjustment to interest expense related to
the debt. The fair value of the swap agreements and changes in the fair value as
a result of changes in market interest rates are not recognized in these
consolidated financial statements.
FOREIGN CURRENCY
Results of operations for foreign subsidiaries and foreign equity investees are
translated into U.S. dollars using the average exchange rates during the year.
The assets and liabilities of those subsidiaries and investees, other than those
of operations in highly inflationary countries, are translated into U.S. dollars
using the exchange rates at the balance sheet date. The related translation
adjustments are recorded in a separate component of shareholders' equity,
"Currency translation adjustment". Foreign currency transaction gains and
losses, as well as gains and losses from translation of financial statements of
subsidiaries and investees in highly inflationary countries, are included in
operations.
STOCK BASED COMPENSATION
The Company accounts for its stock-based award plans in accordance with
Accounting Principles Board ("APB") Opinion No. 25, Accounting for Stock Issued
to Employees, and related interpretations, under which compensation expense is
recorded to the extent that the current market price of the underlying stock
exceeds the exercise price. Note J provides pro forma net income and pro forma
earnings per share disclosures as if the stock-based awards had been accounted
for using the provisions of Statement of Financial Accounting Standards ("SFAS")
No. 123, Accounting for Stock-Based Compensation.
60
<PAGE> 61
USE OF ESTIMATES
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the amounts reported in the financial statements and accompanying notes.
Actual results could differ from those estimates.
NEW ACCOUNTING PRONOUNCEMENTS
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133 Accounting for Derivative Instruments and
Hedging Activities ("Statement 133"). Statement 133 establishes new rules for
the recognition and measurement of derivatives and hedging activities. Statement
133 is amended by Statement 137 Accounting for Derivative Instruments and
Hedging Activities - Deferral of the Effective Date of FASB Statement No. 133,
and Statement 138 Accounting for Derivative Instruments and Hedging Activities
(an amendment to Statement 133), is effective for years beginning after June 15,
2000. The Company adopted this statement January 1, 2001. Had the Company
elected early adoption of Statement 133, total assets and long-term debt at
December 31, 2000 would have increased $49.0 million each. As part of the
adoption of Statement 133 on January 1, 2001, the Company reclassified 2.0
million shares of its investment in American Tower Corporation that had been
classified as available-for-sale securities under Financial Accounting Standards
No. 115 Accounting for Certain Investments in Debt and Equity Securities
("Statement 115") to a trading securities classification. In accordance with
Statement 115 and Statement 133, on January 1, 2001, the shares were transferred
to a trading classification at their fair market value of $76.2 million, and an
unrealized holding gain of $69.7 million was recognized in earnings.
In December 1999, the SEC issued Staff Accounting Bulletin 101, Revenue
Recognition in Financial Statements, ("SAB 101"). The bulletin summarizes
certain of the SEC staff's views in applying generally accepted accounting
principles to revenue recognition. SAB 101, as amended through June 26, 2000 is
required to be implemented in the fourth quarter of 2000. Accordingly, the
Company has implemented SAB 101 in the financial statements filed herewith.
Implementation of this statement did not materially impact the financial
position or results of operations of the Company.
In March 2000, the Financial Accounting Standards Board issued FASB
Interpretation No. 44. "Accounting for Certain Transactions involving Stock
Compensation" ("FIN 44"). FIN 44 provides guidance for issues arising in
applying APB Opinion No. 25 "Accounting for Stock Issued to Employees." FIN 44
applies specifically to new awards, exchanges of awards in a business
combination, modification to outstanding awards, and changes in grantee status
that occur on or after July 1, 2000, except for the provisions related to
repricings and the definition of an employee which apply to awards issued after
December 15, 1998. The requirements of FIN 44 are consistent with the Company's
existing accounting policies.
NOTE B - BUSINESS ACQUISITIONS
2000 ACQUISITIONS:
ACKERLEY'S SOUTH FLORIDA OUTDOOR ADVERTISING DIVISION
On January 5, 2000, the Company closed its acquisition of Ackerley's South
Florida outdoor advertising division ("Ackerley") for $300.2 million. The
Company funded the acquisition with advances on its credit facilities. The
acquisition was accounted for as a purchase, with resulting goodwill of
approximately
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<PAGE> 62
$208.3 million, which is being amortized over 25 years on a straight-line basis.
The results of operations of Ackerley have been included in the financial
statements of the Company beginning January 5, 2000.
AMFM MERGER
On August 30, 2000, the Company closed its merger with AMFM Inc. ("AMFM")
Pursuant to the terms of the merger agreement, each share of AMFM common stock
was exchanged for 0.94 shares of the Company's common stock. Approximately 205.4
million shares of the Company's common stock were issued in the AMFM merger,
valuing the merger, based on the average market price of the Company's common
stock at the signing of the merger agreement, at $15.9 billion plus the
assumption of AMFM's outstanding debt of $3.5 billion. Additionally, the Company
assumed options and common stock warrants with a fair value of $1.2 billion,
which are convertible, subject to applicable vesting, into approximately 25.5
million shares of the Company's common stock. The Company refinanced $540.0
million of AMFM's long-term debt at the closing of the merger using its credit
facility. The AMFM merger was accounted for as a purchase with resulting
goodwill of approximately $7.1 billion, which is being amortized over 25 years
on a straight-line basis. This purchase price allocation is preliminary pending
completion of appraisals and other fair value analysis of assets and
liabilities. The results of operations of AMFM have been included in the
financial statements of the Company beginning August 30, 2000.
In connection with the AMFM merger and governmental directives, the Company
divested 39 radio stations for $1.2 billion, resulting in a gain on sale of
$805.2 million and an increase in income tax expense of $306.0 million. The
Company deferred a portion of this tax expense based on its replacing the
stations sold with qualified assets. Of the $1.2 billion proceeds, $839.7
million was placed in restricted trusts for the purchase of replacement
properties. In addition, restricted cash of $439.9 million was acquired from
AMFM related to the divestiture of AMFM radio stations in connection with the
merger. The following table details the reconciliation of divestiture and
acquisition activity in the restricted trust accounts:
<TABLE>
<CAPTION>
(In thousands)
<S> <C>
Restricted cash resulting from Clear Channel divestitures $ 839,717
Restricted cash purchased in AMFM merger 439,896
Restricted cash used in acquisitions (670,228)
Interest, net of fees 18,756
------------
Restricted cash balance at December 31, 2000 628,141
Less current portion 308,691
------------
Long-term restricted cash $ 319,450
============
</TABLE>
On February 21, 2001, the restricted trusts expired and the $308.7 million not
expended on replacement radio assets was refunded to the Company.
SFX MERGER
On August 1, 2000, the Company consummated its merger with SFX Entertainment,
Inc. ("SFX") Pursuant to the terms of the merger agreement, each share of SFX
Class A common stock was exchanged for 0.6 shares of the Company's common stock
and each share of SFX Class B common stock was exchanged for one share of the
Company's common stock. Approximately, 39.2 million shares of the Company's
common stock were issued in the SFX merger. Based on the average market price of
the Company's common stock at the signing of the merger agreement, the merger
was valued at $2.9 billion plus the assumption of SFX's outstanding debt of $1.5
billion. Additionally, the Company assumed all
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<PAGE> 63
stock options and common stock warrants with a fair value of $211.8 million,
which are exercisable for approximately 5.6 million shares of the Company's
common stock. The Company refinanced $815.8 million of SFX's $1.5 billion of
long-term debt at the closing of the merger using its credit facilities. The SFX
merger was accounted for as a purchase with resulting goodwill of approximately
$4.1 billion, which is being amortized over 20 years on a straight-line basis.
This purchase price allocation is preliminary pending completion of appraisals
and other fair value analysis of assets and liabilities. The results of
operations of SFX have been included in the financial statements of the Company
beginning August 1, 2000.
A number of lawsuits were filed by holders of SFX Class A common stock alleging,
among other things, that the difference in consideration for the Class A and
Class B shares constituted unfair consideration to the Class B holders and that
the SFX board breached its fiduciary duties and that the Company aided and
abetted the actions of the SFX board. On September 28, 2000, the Company issued
approximately .4 million shares of its common stock, valued at $29.3 million, as
settlement of these lawsuits and has included the value of these shares as part
of the purchase price.
DONREY MEDIA GROUP
On September 1, 2000, the Company completed its acquisition of the assets of
Donrey Media Group ("Donrey") for $372.6 million in cash consideration. The
Company funded the acquisition with advances on its credit facilities. The
acquisition was accounted for as a purchase, with resulting goodwill of
approximately $290.3 million, which is amortized over 25 years on a
straight-line basis. The results of operations of the Donrey markets have been
included in the financial statements of the Company beginning September 1, 2000.
OTHER
In addition to the acquisitions discussed above, the Company acquired
substantially all of the assets of 148 radio stations, 66,286 outdoor display
faces and the live entertainment segment acquired sporting, music and theatrical
events promotions, racing promotion, and venue management assets. The aggregate
cash paid for these acquisitions was approximately $1.2 billion.
The Company has entered in various acquisition agreements that provide for
purchase price adjustments and other future contingent payments based on the
financial performance of the acquired company. The Company will continue to
accrue additional amounts related to such contingent payments when it can be
determined that the applicable financial targets will be reached and the amount
can be estimated.
The results of operations for 2000 and 1999 include the operations of each
business acquired from the respective date of acquisition. Unaudited pro forma
consolidated results of operations, assuming the 1999 acquisitions of Jacor,
Dame Media and Dauphin and the 2000 acquisitions of Ackerley, SFX, AMFM and
Donrey had occurred at January 1, 1999, would have been as follows:
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<PAGE> 64
(In thousands, except per share data)
<TABLE>
<CAPTION>
Pro Forma (Unaudited)
Year Ended December 31,
----------------------------
2000 1999
---- ----
<S> <C> <C>
Net revenue $ 7,997,849 $ 6,615,391
Net loss $ (711,133) $ (502,044)
Net loss per common share:
Basic and Diluted $ (1.22) $ (.86)
</TABLE>
The pro forma information above is presented in response to applicable
accounting rules relating to business acquisitions and is not necessarily
indicative of the actual results that would have been achieved had these
acquisitions occurred at the beginning of 1999, nor is it indicative of future
results of operations. The Company made other acquisitions during 2000, the
effects of which, individually and in aggregate, were not material to the
Company's consolidated financial position or results of operations.
1999 ACQUISITIONS:
DAME MEDIA
On July 1, 1999, the Company closed its merger with Dame Media, Inc. ("Dame
Media"). Pursuant to the terms of the agreement, the Company exchanged
approximately 1.0 million shares of its common stock for 100% of the outstanding
stock of Dame Media, valuing this merger at approximately $65.0 million. In
addition the Company assumed $32.7 million of long term debt, which was
immediately refinanced utilizing the Company's credit facility. Dame Media's
operations include 21 radio stations in five markets located in New York and
Pennsylvania. The Company began consolidating the results of operations on July
1, 1999.
DAUPHIN
On June 11, 1999, the Company acquired a 50.5% equity interest in Dauphin OTA,
("Dauphin") a French company engaged in outdoor advertising. In August 1999 the
Company completed its tender offer for over 99% of the remaining shares
outstanding. At December 31, 1999, all of the shares had been surrendered for an
aggregate cost of approximately $487.2 million. Dauphin's operations include
approximately 103,000 outdoor advertising display faces in France, Spain, Italy,
and Belgium. This acquisition is being accounted for as a purchase with
resulting goodwill of approximately $449.7 million, which is being amortized
over 25 years on a straight-line basis. The Company began consolidating the
results of operations on the date of acquisition.
JACOR
On May 4, 1999, the Company closed its merger with Jacor Communications, Inc.
("Jacor"). Pursuant to the terms of the agreement, each share of Jacor common
stock was exchanged for 1.1573151 shares of the Company's common stock or
approximately 60.9 million shares valued at $4.2 billion. In addition, the
Company assumed approximately $1.4 billion of Jacor's long-term debt, as well as
Jacor's Liquid Yield Option Notes with a fair value of approximately $490.1
million, which are convertible into approximately 7.1 million shares of the
Company's common stock. The Company also assumed options, stock appreciation
rights and common stock warrants with a fair value of $414.9 million, which are
convertible into approximately 9.2 million shares of the Company's common stock.
The Company refinanced $850.0
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million of Jacor's long-term debt at the closing of the merger using the
Company's credit facility. Subject to a change in control tender, the Company
redeemed an additional $22.1 million of Jacor's long-term debt. Included in the
Jacor assets acquired is $83.0 million of restricted cash related to the
disposition of Jacor assets in connection with the merger. This merger has been
accounted for as a purchase with resulting goodwill of approximately $3.1
billion, which is being amortized over 25 years on a straight-line basis. The
results of operations of Jacor have been included in the Company's financial
statements beginning May 4, 1999.
In order to comply with governmental directives regarding the Jacor merger, the
Company divested certain assets valued at $205.8 million and swapped other
assets valued at $35.0 million in transactions with various third parties,
resulting in a gain on sale of assets related to mergers of $138.7 million and
an increase in income tax expense (at the Company's statutory rate of 38%) of
$52.0 million during 1999. The Company deferred the majority of this tax expense
based on its replacing the stations sold with qualified assets. The proceeds
from divestitures were held in restricted trusts until the replacement
properties were purchased.
The following table details the reconciliation of divestiture and acquisition
activity in the restricted trust accounts:
(In thousands)
<TABLE>
<S> <C>
Restricted cash resulting from Clear Channel divestitures $ 205,800
Restricted cash purchased in Jacor Merger 83,000
Restricted cash used in acquisitions (246,228)
Restricted cash refunded (41,451)
Other changes to restricted cash 3,228
---------
Restricted cash balance at December 31, 1999 $ 4,349
=========
</TABLE>
During 2000, this restricted trust expired and the residual balance was refunded
to the Company.
OTHER
Also during 1999, the Company acquired substantially all of the assets of nine
radio stations in six domestic markets, 2,789 outdoor display faces in 29
domestic markets and in malls throughout the U.S. and 72,326 outdoor display
faces in eight international markets. The aggregate cash paid for these
acquisitions was approximately $739.3 million.
The results of operations for 1999 and 1998 include the operations of each
station, for which the Company purchased the license, as well as all other
businesses acquired, from the respective date of acquisition. Unaudited pro
forma consolidated results of operations, assuming the acquisitions of Dauphin,
Dame and Jacor as well as significant acquisitions from 1998 had occurred at
January 1, 1998, would have been as follows:
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<PAGE> 66
(In thousands, except per share data)
<TABLE>
<CAPTION>
Pro Forma (Unaudited)
Year Ended December 31,
----------------------------
1999 1998
---- ----
<S> <C> <C>
Net revenue $ 3,082,640 $ 2,629,290
Net loss $ (65,728) $ (125,633)
Net loss per common share:
Basic and Diluted $ (.20) $ (.41)
</TABLE>
The pro forma information above is presented in response to applicable
accounting rules relating to business acquisitions and is not necessarily
indicative of the actual results that would have been achieved had the
acquisitions occurred at the beginning of 1998, nor is it indicative of future
results of operations. The Company made other acquisitions during 1999, the
effects of which, individually and in aggregate, were not material to the
Company's consolidated financial position or results of operations.
The following is a summary of the assets acquired and the consideration given
for acquisitions:
(In thousands)
<TABLE>
<CAPTION>
2000 1999
---- ----
<S> <C> <C>
Property, plant and equipment $ 1,703,871 $ 654,430
Accounts receivable 826,426 329,999
Goodwill and FCC licenses 29,705,197 7,465,495
Investments 1,316,241 20,210
Other assets 1,611,208 672,330
------------- -----------
35,162,943 9,142,464
Long-term debt (4,999,900) (1,942,185)
Other liabilities (2,016,676) (511,407)
Deferred tax (5,223,905) (789,186)
SFX shares held prior to merger (84,881) --
Common stock issued (20,283,157) (4,673,138)
-------------- -----------
(32,608,519) (7,915,916)
------------- -----------
Total cash consideration 2,554,424 1,226,548
Less: Restricted cash used 670,228 246,228
------------- -----------
Cash paid for acquisitions $ 1,884,196 $ 980,320
============= ===========
</TABLE>
RESTRUCTURING
Due to the AMFM and SFX mergers, the Company formalized a plan to restructure
the AMFM and SFX operations. The Company communicated to all effected employees
that the AMFM corporate offices in Dallas and Austin, Texas would close by March
31, 2001 and that the SFX corporate office in New York would close by June 30,
2001. Other operations of AMFM have or will be either discontinued or integrated
into existing similar operations. As of December 31, 2000, the restructuring has
resulted in the actual termination of 361 employees and the pending termination
of approximately 100 more employees. It is expected that the majority of the
restructuring will be completed by June 30, 2001. The Company has recorded a
liability in purchase accounting primarily related to severance for terminated
employees as follows:
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(In thousands)
<TABLE>
<CAPTION>
December 31,
------------------
2000 1999
---- ----
<S> <C> <C>
Severance costs:
Severance accrual at January 1 $ 1,882 $ 975
Estimated costs charged to restructuring
accrual in purchase accounting 147,525 13,000
Adjustments to purchase accounting (1,735) --
Payments charged against restructuring
accrual (37,407) (12,093)
----------- -----------
Remaining severance accrual $ 110,265 $ 1,882
=========== ===========
Lease termination and other restructuring costs:
Lease accrual at January 1 $ 2,466 $ 5,000
Estimated costs charged to restructuring
accrual in purchase accounting 46,473 --
Adjustments to purchase accounting (2,466) --
Payments charged against restructuring
accrual (3,447) (2,534)
----------- -----------
Remaining lease and other restructuring cost accrual $ 43,026 $ 2,466
=========== ===========
</TABLE>
NOTE C - INVESTMENTS
The Company's most significant investments in non-consolidated affiliates are
listed below:
AUSTRALIAN RADIO NETWORK
The Company owns a fifty-percent (50%) interest in Australian Radio Network
("ARN"), an Australian company that owns and operates radio stations, a
narrowcast radio broadcast service and a radio representation company in
Australia.
HISPANIC BROADCASTING CORPORATION
The Company owns 26% of the total number of shares of Hispanic Broadcasting
Corporation ("HBC"), a leading domestic Spanish-language radio broadcaster. At
December 31, 2000, the fair market value of the Company's shares of HBC was $2.1
billion.
GRUPO ACIR COMUNICACIONES
In April 1998 the Company purchased a forty-percent (40%) interest in Grupo ACIR
Comunicaciones ("ACIR"), a Mexican radio broadcasting company. ACIR owns and
operates 157 radio stations throughout Mexico.
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<PAGE> 68
WHITE HORSE
In April 1998 the Company purchased a fifty-percent (50%) interest in Hainan
White Horse Advertising Media Investment Co. Ltd. ("White Horse"), a Chinese
company that operates street furniture displays throughout China.
SUMMARIZED FINANCIAL INFORMATION
The following table summarizes the Company's investments in these
nonconsolidated affiliates:
(In thousands)
<TABLE>
<CAPTION>
White All
ARN HBC ACIR Horse Others Total
--- --- ---- ----- ------ -----
<S> <C> <C> <C> <C> <C> <C>
At December 31, 1999 $ 65,364 $ 146,775 $ 54,265 $ 39,971 $ 74,543 $ 380,918
Acquisition of new investments -- -- -- -- 31,240 31,240
Additional investment, net (5,898) -- 11 -- 12,412 6,525
Equity in net earnings 2,153 10,854 3,136 3,009 5,080 24,232
Amortization of excess cost -- -- (1,896) -- (1,024) (2,920)
Foreign currency transaction
adjustment (492) -- -- -- -- (492)
Foreign currency translation
adjustment (3,321) -- (73) 71 (8,877) (12,200)
--------- ---------- --------- --------- --------- -----------
At December 31, 2000 $ 57,806 $ 157,629 $ 55,443 $ 43,051 $ 113,374 $ 427,303
========= ========== ========= ========= ========= ===========
</TABLE>
These investments are not consolidated, but are accounted for under the equity
method of accounting, whereby the Company records its investments in these
entities in the balance sheet as "Investments in, and advances to,
nonconsolidated affiliates." The Company's interests in their operations are
recorded in the statement of earnings as "Equity in earnings of nonconsolidated
affiliates." Other income derived from transactions with nonconsolidated
affiliates consists of interest, management fees and other transaction gains,
which aggregated $4.3 million in 2000, $7.4 million in 1999 and $5.8 million in
1998, and are recorded in the Consolidated Statement of Earnings as "Equity in
earnings of nonconsolidated affiliates." Accumulated undistributed earnings
included in Retained Earnings for these investments was $39.0 million, $18.2
million and $7.4 million for December 31, 2000, 1999 and 1998, respectively.
OTHER INVESTMENTS
Other investments at December 31, 2000 and 1999 include marketable equity
securities recorded at market value of $1.6 billion and $.8 billion (cost basis
of $1.4 billion and $.3 billion), respectively. In connection with the
completion of the AMFM merger, Clear Channel and AMFM entered into a Consent
Decree with the Department of Justice regarding AMFM's investment in Lamar
Advertising Company. The Consent Decree, among other things, required the
Company to sell all of its 26.2 million shares of Lamar by December 31, 2002 and
relinquish all shareholder rights during the disposition period. As a result,
the Company does not exercise significant influence and has accounted for this
investment under the cost method of accounting. During 2000, a loss of $5.8
million was realized on the sale of 1.3 million shares of Lamar, which was
recorded in "Gain on sale of assets related to mergers." During 1999 and 1998,
gains of $22.9 million and $39.2 million were realized on the sale of various
available-for-sale marketable equity securities, which was recorded in "Other
income (expense) - net", respectively. At December 31, 2000 and
68
<PAGE> 69
1999, accumulated unrealized gains, net of tax, of $105.7 million and $328.6
million, respectively, were recorded as a separate component of shareholders'
equity.
NOTE D - LONG-TERM DEBT
Long-term debt at December 31, 2000 and 1999 consisted of the following:
(In thousands)
<TABLE>
<CAPTION>
December 31,
---------------------
2000 1999
---- ----
<S> <C> <C>
Revolving line of credit facilities $ 3,203,756 $ 743,750
Multi-currency revolving line of credit facility -- 483,868
Senior Notes:
1.5% Convertible Notes Due 2002 1,000,000 1,000,000
Floating Rate Notes Due 2002 250,000 --
2.625% Convertible Notes Due 2003 575,000 575,000
7.25% Senior Notes Due 2003 750,000 --
7.875% Notes Due 2005 750,000 --
6.5% Notes (denominated in Euro) Due 2005 612,560 --
6.6250% Senior Notes Due 2008 125,000 125,000
7.65% Senior Notes Due 2010 750,000 --
6.875% Senior Debentures Due 2018 175,000 175,000
7.25% Debentures Due 2027 300,000 300,000
Various subsidiary level notes 1,441,070 571,405
Other long-term debt 235,378 168,130
------------- --------------
10,167,764 4,142,153
Less: current portion 67,736 48,610
------------- --------------
Total long-term debt $ 10,100,028 $ 4,093,543
============= ==============
</TABLE>
REVOLVING LINE OF CREDIT FACILITIES
The Company has three separate revolving lines of credit facilities. Interest
rates for each facility are based upon prime, LIBOR, or Federal funds rates at
the Company's discretion. The first is a $1.9 billion revolving long-term line
of credit facility payable to banks, which converted into a reducing revolving
line of credit on the last business day of September 2000, with quarterly
repayment of the principal to continue through the last business day of June
2005, when the commitment must be paid in full. At December 31, 2000, $1.8
billion was outstanding and $.1 billion was available for future borrowings. The
second is a new $1.5 billion credit facility, entered into in August 2000. This
is a five-year multi-currency revolving credit facility. At December 31, 2000,
$1.3 billion was outstanding and $.2 billion was available for future
borrowings. The third is a $1.5 billion credit facility that is a 364-day
revolving credit facility, which the Company has the option upon maturity to
convert into a term loan with a five-year maturity. At December 31, 2000, the
outstanding balance was $.1 billion and $1.4 billion was available for future
borrowings.
At December 31, 2000, interest rates on the revolving line of credit facilities
varied from 5.575% to 7.335%.
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<PAGE> 70
MULTI-CURRENCY REVOLVING LINE OF CREDIT FACILITY
The Company had a 364-day multi-currency revolving credit facility for $1.0
billion. On August 30, 2000, in conjunction with the closing of the new $1.5
billion credit facility, the Company repaid all outstanding borrowings and
terminated the facility.
SENIOR NOTES
All fees and initial offering discounts are being amortized as interest expense
over the life of the note. The aggregate face value and market value of the
senior notes was approximately $5.3 billion and $5.2 billion, respectively at
December 31, 2000.
1.5% Convertible Notes: The notes are convertible into the Company's common
stock at any time following the date of original issuance, unless previously
redeemed, at a conversion price of $105.82 per share, subject to adjustment in
certain events. The Company has reserved 9,453,582 of its common stock for the
conversion of these notes.
2.625% Convertible Notes: The notes are convertible into the Company's common
stock at any time following the date of original issuance, unless previously
redeemed, at a conversion price of $61.95 per share, subject to adjustment in
certain events. The Company has reserved 9,281,679 of its common stock for the
conversion of these notes. The notes are redeemable, in whole or in part, at the
option of the Company at any time on or after April 1, 2001 and until March 31,
2002 at 101.050%; on or after April 1, 2002 and until March 31, 2003 at
100.525%; and on or after April 1, 2003 at 100%, plus accrued interest.
VARIOUS SUBSIDIARY LEVEL NOTES
The aggregate face value and market value of the various subsidiary level notes
was approximately $1.4 billion at December 31, 2000.
Notes assumed in Jacor Merger: On December 14, 1999 the Company completed a
tender offer for the 10.125% senior subordinated notes due June 15, 2006; 9.75%
senior subordinated notes due December 15, 2006; 8.75% senior subordinated notes
due June 15, 2007; and 8.0% senior subordinated notes due February 15, 2010. An
agent acting on behalf of the Company redeemed notes with a face value of
approximately $516.6 million and a redemption value of $570.4 million. Cash
settlement of the amount due to the agent was completed on January 14, 2000 and
was funded through the Company's credit facilities. Including premiums,
discounts, and agency fees, the Company recognized approximately $13.2 million
as an extraordinary charge against net income, net of tax of approximately $8.1
million. After redemption, approximately $1.0 million of the notes remain
outstanding at December 31, 2000.
Notes assumed in SFX Merger: On October 10, 2000, the Company, launched a tender
offer for any and all of its 9.125% Senior Subordinated Notes due 2008. An agent
acting on the Company's behalf redeemed notes with a redemption value of
approximately $602.9 million. Cash settlement of the amount due to the agent was
completed in November 2000. After redemption, approximately $1.6 million of the
notes remain outstanding at December 31, 2000.
Notes assumed in AMFM Merger: On September 29, 2000, the Company redeemed all of
the outstanding 9% Senior Subordinated Notes due 2008, originally issued by
Chancellor Media Corporation or one of its subsidiaries, for $829.0 million
subject to change of control provisions in the indentures. In October, the
Company redeemed, also subject to change of control provisions in the
indentures, all of the outstanding 9.25% Senior Subordinated Notes due 2007,
originally issued by Capstar Radio Broadcasting Partners, Inc. the 12% Exchange
Debentures due 2009, originally issued by Capstar Broadcasting Partners, Inc.
and the 12.75% Senior Discount Notes due 2009, originally issued by Capstar
Broadcasting Partners, Inc., for
70
<PAGE> 71
a total of $508.5 million. On October 6, 2000, the Company made payments of
$231.4 million pursuant to mandatory offers to repurchase due to a change of
control on the following series of AMFM debt: 8% Senior Notes due 2008, 8.125%
Senior Subordinated Notes due 2007 and 8.75% Senior Subordinated Notes due 2007,
originally issued by Chancellor Media Corporation or one of its subsidiaries, as
well as the 12.625% Exchange Debentures due 2006, originally issued by SFX
Broadcasting (AMFM Operating Inc.). The aggregate remaining balance of these
series of AMFM long-term bonds was $1.4 billion at December 31, 2000.
Chancellor Media Corporation, Capstar Radio Broadcasting Partners, Inc., Capstar
Broadcasting Partners, Inc., SFX Broadcasting, and AMFM Operating Inc., or their
successors are all indirect wholly-owned subsidiaries of the Company.
Future maturities of long-term debt at December 31, 2000 are as follows:
(In thousands)
<TABLE>
<S> <C>
2001 $ 67,736
2002 1,570,304
2003 1,773,644
2004 445,074
2005 3,504,150
Thereafter 2,806,856
-------------
$ 10,167,764
=============
</TABLE>
NOTE E - FINANCIAL INSTRUMENTS
The Company is exposed to market risks, such as changes in interest rate and
currency exchange rates. To manage the volatility relating to these exposures,
the Company enters into various derivative transactions. The financial impact of
these hedging instruments are offset in part or in whole by corresponding
changes in the underlying exposures being hedged. The Company does not hold or
issue derivative financial instruments for trading purposes.
INTEREST RATE MANAGEMENT
The Company's policy is to manage interest cost using a mix of fixed and
variable rate debt. To manage this mix in a cost-efficient manner, the Company
enters into interest rate swaps in which the Company agrees to exchange, at
specified variables, the difference between fixed and variable interest amounts
calculated by reference to an agreed-upon notional principal amount. These swaps
are designated to hedge underlying debt obligations. The terms of the underlying
debt and the interest rate swap agreement coincide, therefore the hedge will
perfectly offset the changes in the fair value of the underlying debt.
Currently, the interest rate differential is reflected as an adjustment to
interest expense over the life of the swap. The incremental effect on interest
expense for 2000 was not material.
At December 31, 2000, the notional amount of interest rate swaps and the
underlying principal amount of the debt were $1.5 billion. The fair value of the
underlying debt and the related interest rate swaps as of December 31, 2000, was
$1.5 billion and $49 million, respectively.
71
<PAGE> 72
CURRENCY RATE MANAGEMENT
As a result of the Company's foreign operations, the Company is exposed to
foreign currency exchange risks related to its net assets in foreign countries.
To manage the risk, from time to time the Company enters into foreign
denominated debt to hedge movements in currency exchange rates.
The Company's major foreign currency exposure involves markets operating in
Euros and the British pound. The primary purpose of the Company's foreign
currency hedging activities is to offset the changes in the fair value of the
underlying debt with the translation gain or losses associated with the
Company's foreign operating results. Since the debt is denominated in the same
currency of the foreign operation, the hedge will offset the changes in the
foreign currency and the change in the corresponding net investment.
At December 31, 2000, the notional amount and fair value of foreign currency
denominated debt was $787.2 million and $824.5 million, respectively. Currency
translation gains and (losses) related to such debt was $30.0 million, $24.4
million and $(3.0) million in 2000, 1999 and 1998, respectively.
NOTE F - LIQUID YIELD OPTION NOTES
The Company assumed two issues of Liquid Yield Option Notes ("LYONs") as a part
of the merger with Jacor on May 4, 1999.
LYONs due 2018
The Company assumed 4.75% LYONs due 2018 with a fair value of $225.4 million.
Each LYON has a principal amount at maturity of $1,000 and is convertible, at
the option of the holder, at any time on or prior to maturity, into the
Company's common stock at a conversion rate of 7.227 shares per LYON. The LYONs
due 2018 had a balance, net of redemptions, conversions to common stock,
amortization of premium, and accretion of interest, at December 31, 2000, of
$237.0 million and approximate fair value of $208.0 million. At December 31,
2000, approximately 3.1 million shares of common stock were reserved for the
conversion of the LYONs due 2018.
The LYONs due 2018 are not redeemable by the Company prior to February 9, 2003.
Thereafter, the LYONs are redeemable for cash at any time at the option of the
Company in whole or in part, at redemption prices equal to the issue price plus
accrued original issue discount to the date of redemption.
The LYONs due 2018 can be purchased by the Company, at the option of the holder,
on February 9, 2003; February 9, 2008; and February 9, 2013; for a purchase
price of $494.52, $625.35 and $790.79, respectively, representing a 4.75% yield
per annum to the holder on such date. The Company, at its option, may elect to
pay the purchase price on any such purchase date in cash or common stock, or any
combination thereof.
LYONs due 2011
The Company assumed 5.5% LYONs due 2011 with a fair value of $264.8 million.
Each LYON has a principal amount at maturity of $1,000 and is convertible, at
the option of the holder, at any time on or prior to maturity, into the
Company's common stock at a conversion rate of 15.522 shares per LYON. The LYONs
due 2011 had a balance, net of redemptions, conversions to common stock,
amortization of premium, and accretion of interest, at December 31, 2000, of
$260.1 million and approximate fair value of $200.2 million. At December 31,
2000, approximately 3.9 million shares of common stock were reserved
72
<PAGE> 73
for the conversion of the LYONs due 2011.
The LYONs due 2011 are not redeemable by the Company prior to June 12, 2001.
Thereafter, the LYONs are redeemable for cash at any time at the option of the
Company in whole or in part, at redemption prices equal to the issue price plus
accrued original issue discount to the date of redemption.
The LYONs due 2011 can be purchased by the Company, at the option of the holder,
on June 12, 2001 and June 12, 2006 for a purchase price of $581.25 and $762.39,
respectively, representing a 5.5% yield per annum to the holder on such date.
The Company, at its option, may elect to pay the purchase price on any such
purchase date in cash or common stock, or any combination thereof.
NOTE G - COMMITMENTS
The Company leases office space, certain broadcasting facilities, equipment and
the majority of the land occupied by its outdoor advertising structures under
long-term operating leases. Some of the lease agreements contain renewal options
and annual rental escalation clauses (generally tied to the consumer price index
or a maximum of 5%), as well as provisions for the payment of utilities and
maintenance by the Company. As of December 31, 2000, the Company's future
minimum rental commitments, under noncancelable lease agreements with terms in
excess of one year, consist of the following:
(In thousands)
<TABLE>
<S> <C>
2001 $ 346,187
2002 312,225
2003 272,892
2004 227,864
2005 194,371
Thereafter 1,220,989
------------
$ 2,574,528
============
</TABLE>
Rent expense charged to operations for 2000, 1999 and 1998 was $429.5 million,
$306.4 million and $200.6 million, respectively.
NOTE H - CONTINGENCIES
From time to time, claims are made and lawsuits are filed against the Company,
arising out of the ordinary business of the Company. In the opinion of the
Company's management, liabilities, if any, arising from these actions are either
covered by insurance or accrued reserves, or would not have a material adverse
effect on the financial condition of the Company.
In various areas in which the Company operates, outdoor advertising is the
object of restrictive and, in some cases, prohibitive zoning and other
regulatory provisions, either enacted or proposed. The impact to the Company of
loss of displays due to governmental action has been somewhat mitigated by
federal and state laws mandating compensation for such loss and constitutional
restraints.
As of December 31, 2000 and 1999, the Company guaranteed third party debt of
approximately $280.0 million and $40.1 million, respectively, primarily related
to long-term operating contracts. A substantial
73
<PAGE> 74
portion of the debt is secured by the third party's associated operating assets.
NOTE I - INCOME TAXES
Significant components of the provision for income taxes are as follows:
(In thousands)
<TABLE>
<CAPTION>
2000 1999 1998
---- ---- ----
<S> <C> <C> <C>
Current - federal $ 63,366 $ 82,452 $ 36,084
Deferred - domestic 340,999 30,111 30,627
Deferred - state 29,228 13,275 4,702
Deferred - foreign 16,484 (10,049) --
State 10,364 14,547 3,156
Foreign 4,290 14,324 (373)
----------- ---------- -----------
Total $ 464,731 $ 144,660 $ 74,196
=========== ========== ===========
</TABLE>
Included in current - federal for 1999 is $8.1 million of benefit related to the
extraordinary loss resulting from early extinguishment of long-term debt.
Significant components of the Company's deferred tax liabilities and assets as
of December 31, 2000 and 1999 are as follows:
(In thousands)
<TABLE>
<CAPTION>
2000 1999
---- ----
<S> <C> <C>
Deferred tax liabilities:
Intangibles and fixed assets $ 6,597,084 $ 1,158,688
Unrealized gain in marketable securities 232,273 181,114
Accrued liabilities 120,636 --
Foreign 115,039 98,720
Equity in earnings 5,156 --
Other 4,914 1,612
------------- -------------
Total deferred tax liabilities 7,075,102 1,440,134
Deferred tax assets:
Accrued expenses 144,917 10,651
Long-term debt 93,284 76,864
Operating loss carryforwards 15,454 84,934
Bad debt reserves 22,355 6,271
Deferred income 11,403 --
Other 16,491 9,248
------------- -------------
Total gross deferred tax assets 303,904 187,968
Valuation allowance -- 37,617
------------- -------------
Total deferred tax assets 303,904 150,351
------------- -------------
Net deferred tax liabilities $ 6,771,198 $ 1,289,783
============= =============
</TABLE>
The reconciliation of income tax computed at the U.S. federal statutory tax
rates to income tax expense is:
74
<PAGE> 75
(In thousands)
<TABLE>
<CAPTION>
2000 1999 1998
------------------ ------------------ ------------------
Amount Percent Amount Percent Amount Percent
------ ------- ------ ------- ------ -------
<S> <C> <C> <C> <C> <C> <C>
Income tax expense
at statutory rates $ 249,739 35% $ 83,439 35 % $44,880 35%
State income taxes, net
of federal tax benefit 25,686 3% 18,084 8 % 5,108 4%
Amortization of goodwill 169,365 24% 54,279 23 % 21,365 17%
Other, net 19,941 3% (11,142) (5)% 2,843 2%
--------- ----- -------- ------ ------- ------
$ 464,731 65% $144,660 61% $74,196 58%
========= ===== ======== ====== ======= ======
</TABLE>
Included in the above reconciliation of income tax for 1999 is $8.1 million of
benefit related to extraordinary loss resulting from early extinguishment of
long-term debt.
The Company has certain net operating loss carryforwards amounting to $40.7
million, which expire in the year 2018. These loss carryforwards were generated
by certain acquired companies prior to their acquisition by the Company. During
the current year, the Company utilized $188.4 million in net operating loss
carryforwards.
The Company established a valuation allowance against its acquired operating
loss carryforwards generated by certain companies acquired during 1999 and 1998
following an assessment of the likelihood of realizing such amounts. During
2000, based on a reassessment of the likelihood of the realization of future
benefits, the Company reduced the valuation allowance to zero.
NOTE J - CAPITAL STOCK
ELLER PUT/CALL AGREEMENT
The holders of the approximately 7% of the outstanding capital stock of Eller,
not purchased by the Company in April 1997, had the right to put such stock to
the Company for approximately 2.2 million shares of the Company's common stock
until April 10, 2002. During 1998, the former Eller stockholders exercised their
put right for 260,000 shares of the Company's common stock. In June 1999, the
former Eller stockholders and the Company terminated the put rights agreement
and at which time the Eller stockholders received the remaining 1.9 million
shares of the Company's common stock.
COMMON STOCK WARRANTS
The Company assumed two issues of fully exercisable common stock warrants as a
part of the merger with Jacor in 1999 with a fair value of $253.4 million.
Warrants expiring September 18, 2001
The Company assumed 21.6 million common stock warrants that expire on September
18, 2001. Each warrant represents the right to receive .2355422 shares of the
Company's common stock, at an exercise price of $24.19 per full share of the
Company's common stock. The Company issued 220 and 5,850 shares of common in
2000 and 1999, respectively, on exercises of these common stock warrants. At
December 31, 2000, approximately 5.1 million shares of common stock were
reserved for the conversion of these warrants.
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<PAGE> 76
Warrants expiring February 27, 2002
The Company assumed 3.6 million common stock warrants that expire on February
27, 2002. Each warrant represents the right to receive .1304410 shares of the
Company's common stock, at an exercise price of $34.56 per full share of the
Company's common stock. The Company issued 99,550 and 8,255 shares of common in
2000 and 1999, respectively, on exercises of these common stock warrants. At
December 31, 2000, approximately .4 million shares of common stock were reserved
for the conversion of these warrants.
STOCK OPTIONS
The Company has granted options to purchase its common stock to employees and
directors of the Company and its affiliates under various stock option plans at
no less than the fair market value of the underlying stock on the date of grant.
These options are granted for a term not exceeding ten years and are forfeited
in the event the employee or director terminates his or her employment or
relationship with the Company or one of its affiliates. All option plans contain
anti-dilutive provisions that require the adjustment of the number of shares of
the Company common stock represented by each option for any stock splits or
dividends.
As a result of the mergers with Jacor in 1999 and AMFM and SFX in 2000, the
Company assumed stock options that were granted to employees and affiliates of
these companies. These options were granted in accordance with each respective
company's policy and under the terms of each respective company's stock option
plans. Pursuant to the respective merger agreements, the Company assumed the
obligation to fulfill all options granted in accordance with the original grant
terms.
The following table presents a summary of the Company's stock options
outstanding at and stock option activity during the years ended December 31,
2000, 1999 and 1998.
<TABLE>
<CAPTION>
(In thousands, except per share data) Weighted
Average
Exercise Price
Options (1) Per Share
----------- ---------
<S> <C> <C>
Options outstanding at January 1, 1998 5,858 8.00
Options granted in acquisitions 215 25.00
Options granted 1,401 44.00
Options exercised (3) (1,339) 5.00
Options forfeited (128) 43.00
------
Options outstanding at December 31, 1998 6,007 17.00
======
Weighted average fair value of options granted during 1998 21.00
Options outstanding at January 1, 1999 6,007 17.00
Options assumed in acquisitions 3,666 28.00
Options granted 1,580 63.00
Options exercised (3) (2,989) 13.00
Options forfeited (214) 38.00
------
Options outstanding at December 31, 1999 8,050 32.00
======
Weighted average fair value of options granted during 1999 26.00
</TABLE>
76
<PAGE> 77
<TABLE>
<CAPTION>
(In thousands, except per share data) Weighted
Average
Exercise Price
Options (1) Per Share
----------- ---------
<S> <C> <C>
Options outstanding at January 1, 2000 8,050 32.00
Options assumed in acquisitions (2) 31,075 40.00
Options granted 3,540 62.00
Options exercised (3) (1,915) 21.00
Options forfeited (638) 55.00
-------
Options outstanding at December 31, 2000 (4) 40,112 41.00
=======
Weighted average fair value of options granted during 2000 46.00
</TABLE>
(1) Adjusted to reflect two-for-one stock split paid on July 1998.
(2) Includes 2.6 million options assumed in the AMFM merger that will vest from
January 2001 to April 2005. Non-cash compensation expense of $16.0 million
was recorded in 2000, which relates primarily to options held by employees
within the Company's radio broadcasting operations.
(3) The Company recognized an income tax benefit of $30.6 million, $48.2 million
and $5.3 million relating to the options exercised during 2000, 1999 and
1998, respectively.
(4) Of the 40.1 million options outstanding at December 31, 2000, 33.2 million
were exercisable at a weighted average exercise price of $38.24. There were
12.7 million shares available for future grants under the various option
plans at December 31, 2000. Vesting dates range from February 2001 to
October 2005, and expiration dates range from February 2001 to October 2010
at exercise prices and average contractual lives as follows:
<TABLE>
<CAPTION>
(In thousands of shares)
Outstanding Weighted Average Exercisable Weighted
Range of as of Remaining Weighted Average as of Average
Exercise Prices 12/31/00 Contractual Life Exercise Price 12/31/00 Exercise Price
--------------- -------- ---------------- -------------- -------- --------------
<S> <C> <C> <C> <C> <C>
$ 0.0000 -$ 11.2467 3,800 1.9 $ 5.4315 3,800 $ 5.4315
11.2468 - 22.4933 2,810 4.6 15.6382 2,314 15.1000
22.4934 - 33.7400 7,530 4.9 27.2304 7,371 27.2104
33.7401 - 44.9867 5,387 6.0 42.5789 4,730 42.7850
44.9868 - 56.2334 12,171 6.9 49.7825 11,011 49.6714
56.2335 - 67.4800 6,303 5.3 61.9523 2,863 60.7268
67.4801 - 78.7267 1,417 6.2 71.7202 600 73.3870
78.7268 - 89.9734 595 4.5 83.2357 471 82.9732
89.9735 - 101.2200 74 3.3 97.4899 64 98.3194
101.2201 - 112.4667 25 0.9 112.4667 25 112.4667
------ ---- ---------- ------ ----------
40,112 5.5 $ 41.3460 33,249 $ 38.2413
</TABLE>
The fair value for these options was estimated at the date of grant using a
Black-Scholes option pricing model with the following weighted average
assumptions for 2000, 1999 and 1998: risk-free interest rates of 6.0%, 6.0% and
5.0% for 2000, 1999 and 1998, respectively; a dividend yield of 0%; the
volatility factors of the expected market price of the Company's common stock
used was 34%, 30% and 36% for 2000, 1999 and 1998, respectively; and the
weighted average expected life of the option was eight years for all
77
<PAGE> 78
options granted on or after July 27, 2000 and six years for options granted
prior to July 27, 2000.
Pro forma net income and earnings per share, assuming that the Company had
accounted for its employee stock options using the fair value method and
amortized such to expense over the options' vesting period is as follows:
<TABLE>
<CAPTION>
2000 1999 1998
---- ---- ----
<S> <C> <C> <C>
Net income before extraordinary item (in thousands)
As reported $ 248,808 $ 85,655 $ 54,031
Pro forma $ 219,898 $ 70,781 $ 47,982
Net income before extraordinary item per common share
Basic:
As reported $ .59 $ .27 $ .23
Pro forma $ .52 $ .23 $ .20
Diluted:
As reported $ .57 $ .26 $ .22
Pro forma $ .50 $ .21 $ .20
</TABLE>
COMMON STOCK RESERVED FOR FUTURE ISSUANCE
Common stock is reserved for future issuances of, approximately 55.7 million
shares for issuance upon the various stock option plans to purchase the
Company's common stock (including 40.1 million options currently granted), 9.3
million shares for issuance upon conversion of the Company's 2.625% Senior
Convertible Notes, 9.5 million for issuance upon conversion of the Company's
1.5% Senior Convertible Notes, 7.0 million for issuance upon conversion of the
Company's LYONs and 5.5 million for issuance upon conversion of the Company's
Common Stock Warrants.
78
<PAGE> 79
RECONCILIATION OF EARNINGS PER SHARE
(In thousands, except per share data)
<TABLE>
<CAPTION>
2000 1999 1998
---- ---- ----
<S> <C> <C> <C>
NUMERATOR:
Net income before extraordinary item $ 248,808 $ 85,655 $ 54,031
Extraordinary item -- (13,185) --
--------- --------- ---------
Net income 248,808 72,470 54,031
Effect of dilutive securities:
Eller put/call option agreement -- (2,300) (4,299)
Convertible debt - 2.625% issued in 1998 9,811 * 9,811 * 7,358
Convertible debt - 1.5% issued in 1999 9,750 * 964 * --
LYONs - 1996 issue -- (311) --
LYONs - 1998 issue 4,595 * 2,944 * --
Less: Anti-dilutive items (24,156) (13,719) --
--------- --------- ---------
-- (2,611) 3,059
Numerator for net income per
common share - diluted $ 248,808 $ 69,859 $ 57,090
========= ========= =========
DENOMINATOR:
Weighted average common shares 423,969 312,610 236,060
Effect of dilutive securities:
Stock options and common stock warrants 10,872 8,395 4,098
Eller put/call option agreement -- 847 1,972
Convertible debt - 2.625% issued in 1998 9,282 * 9,282 * 6,993
Convertible debt - 1.5% issued in 1999 9,454 * 927 * --
LYONs - 1996 issue 3,870 2,556 --
LYONs - 1998 issue 3,085 * 2,034 * --
Less: Anti-dilutive items (21,821) (12,243) --
--------- --------- ---------
14,742 11,798 13,063
Denominator for net income
per common share - diluted 438,711 324,408 249,123
========= ========= =========
Net income per common share:
Basic:
Net income before extraordinary item .59 $ .27 $ .23
Extraordinary item -- (.04) --
--------- --------- ---------
Net income $ .59 $ .23 $ .23
========= ========= =========
Diluted:
Net income before extraordinary item .57 $ .26 $ .22
Extraordinary item -- (.04) --
--------- --------- ---------
Net income $ .57 $ .22 $ .22
========= ========= =========
</TABLE>
* Denotes items that are anti-dilutive to the calculation of earnings per share.
79
<PAGE> 80
NOTE K - EMPLOYEE STOCK AND SAVINGS PLANS
The Company has various 401(K) savings and other plans for the purpose of
providing retirement benefits for substantially all employees. Both the
employees and the Company make contributions to the plan. The Company matches a
portion of an employee's contribution. Company matched contributions vest to the
employees based upon their years of service to the Company. Contributions to
these plans of $12.5 million, $7.9 million and $3.8 million were charged to
expense for 2000, 1999 and 1998, respectively.
In 2000, the Company initiated a non-qualified employee stock purchase plan for
all eligible employees. Under the plan, shares of the company's common stock may
be purchased at 85% of the market value on the day of purchase. Employees may
purchase shares having a value not exceeding ten percent (10%) of their annual
gross compensation or $25,000, whichever is lower. During 2000, employees
purchased 118,941 shares at a weighted average share price of $64.00.
NOTE L - OTHER INFORMATION
(In thousands)
<TABLE>
<CAPTION>
For the year ended December 31,
-------------------------------
2000 1999 1998
---- ---- ----
<S> <C> <C> <C>
The following details the components of "Other
income (expense) - net":
Gain (loss) on sale of marketable securities $ (5,369) $ 22,930 $39,221
Reimbursement of capital cost (14,370) -- --
Gain (loss) on disposal of fixed assets 1,901 2,897 (13,845)
Minority interest (4,059) (2,769) (327)
Compensation expense relating to subsidiary options -- -- (8,791)
IRS and legal settlements -- -- (7,400)
Charitable contribution of treasury shares -- (4,102) --
Other 4,764 (11,664) 3,952
--------- -------- -------
Total Other income (expense) - net $ (17,133) $ 7,292 $12,810
========= ======== =======
The following details the income tax expense
(benefit) on items of other comprehensive income:
Foreign currency translation adjustments $ 4,270 $ 3,036 $ 3,124
Unrealized gains on securities:
Unrealized holding gain (loss) arising
during period $(104,264) $ 98,170 $87,729
Less: reclassification adjustment for gains
on SFX shares held prior to merger $ (19,668) $ -- $ --
Less: reclassification adjustments for gain
(loss) included in net income $ 3,919 $ (8,026) $(13,727)
</TABLE>
80
<PAGE> 81
<TABLE>
<CAPTION>
(In thousands)
As of December 31,
------------------
2000 1999
---- ----
<S> <C> <C>
The following details the components of "Other
current assets":
Current film rights $ 17,533 $ 19,584
Inventory 37,017 42,672
Other 79,323 25,438
---------- -----------
Total Other current assets $ 133,873 $ 87,694
========== ===========
The following details the components of "Accrued expenses":
Acquisition reserves $ 384,025 $ 61,922
Accrued liabilities - other 502,879 257,768
---------- -----------
Total Accrued expenses $ 886,904 $ 319,690
========== ===========
The following details the components of "Accumulated
other comprehensive income":
Cumulative currency translation adjustment $ (138,147) $ (45,851)
Cumulative unrealized gain on investments 105,714 328,596
---------- -----------
Total Accumulated other comprehensive income $ (32,433) $ 282,745
========== ===========
</TABLE>
NOTE M - SEGMENT DATA
As a result of the fiscal year 2000 acquisitions of SFX and AMFM, the Company
determined that three reportable operating segments - radio broadcasting,
outdoor advertising and live entertainment best reflect how the Company is
currently managed. Prior years presented have been reclassified to be consistent
with the 2000 presentation. Revenue and expenses earned and charged between
segments are recorded at fair value.
At December 31, 2000, the radio broadcasting segment included 1,007 radio
stations for which the Company is the licensee and 100 radio stations operated
under lease management or time brokerage agreements. Of these stations, 1,105
operate in domestic markets and two stations operate in internationally. The
radio broadcasting segment also operates various radio networks.
At December 31, 2000, the outdoor advertising segment owned or operated 698,265
advertising display faces. Of these, 149,171 are in over 52 domestic markets and
the remaining 549,094 displays are in over 43 international markets.
At December 31, 2000, the live entertainment segment owned or operated 120
venues. Of these, 92 venues are in 38 domestic markets and the remaining 28
venues are in three international markets.
"Other" includes television broadcasting, sports representation, media
representation, Internet businesses and corporate expenses.
81
<PAGE> 82
(In thousands)
<TABLE>
<CAPTION>
2000 1999 1998
---- ---- ----
<S> <C> <C> <C>
Net revenue
Radio Broadcasting $ 2,431,544 $ 1,230,754 $ 474,936
Outdoor Advertising 1,729,438 1,253,732 709,189
Live Entertainment 902,374 -- --
Other 364,210 199,532 171,021
Eliminations (82,260) (5,858) (4,206)
----------- ----------- -----------
Consolidated $ 5,345,306 $ 2,678,160 $ 1,350,940
Operating expenses
Radio Broadcasting $ 1,385,848 $ 731,062 $ 284,798
Outdoor Advertising 1,078,540 785,636 395,127
Live Entertainment 830,717 -- --
Other 267,861 121,275 91,546
Eliminations (82,260) (5,858) (4,206)
----------- ----------- -----------
Consolidated $ 3,480,706 $1,632,115 $ 767,265
Depreciation
Radio Broadcasting $ 84,345 $ 47,890 $ 23,821
Outdoor Advertising 228,630 201,083 97,461
Live Entertainment 23,354 -- --
Other 31,310 14,269 12,760
----------- ----------- -----------
Consolidated $ 367,639 $ 263,242 $ 134,042
Amortization of intangibles
Radio Broadcasting $ 714,398 $ 276,295 $ 59,298
Outdoor Advertising 208,719 171,215 100,168
Live Entertainment 91,040 -- --
Other 19,267 11,481 11,464
----------- ----------- -----------
Consolidated $ 1,033,424 $ 458,991 $ 170,930
Operating income
Radio Broadcasting $ 241,043 $ 165,264 $ 110,799
Outdoor Advertising 171,974 64,859 92,307
Live Entertainment (54,782) -- --
Other (53,357) 23,543 37,772
----------- ----------- -----------
Consolidated $ 304,878 $ 253,666 $ 240,878
Total identifiable assets
Radio Broadcasting $33,685,182 $ 9,562,183 $ 1,912,683
Outdoor Advertising 7,683,182 5,056,549 4,887,490
Live Entertainment 5,233,960 -- --
Other 3,454,137 2,202,780 739,745
----------- ----------- -----------
Consolidated $50,056,461 $16,821,512 $ 7,539,918
Capital expenditures
Radio Broadcasting $ 139,923 $ 58,346 $ 12,318
Outdoor Advertising 250,271 154,133 95,124
Live Entertainment 46,707 -- --
Other 58,650 26,259 34,496
----------- ----------- -----------
Consolidated $ 495,551 $ 238,738 $ 141,938
</TABLE>
82
<PAGE> 83
Net revenue of $1.0 billion, $567.2 million and $175.1 million and identifiable
assets of $2.7 billion, $1.3 billion and $1.2 billion derived from the Company's
foreign operations are included in the data above for the years ended December
31, 2000, 1999 and 1998, respectively.
NOTE N - QUARTERLY RESULTS OF OPERATIONS (UNAUDITED)
(In thousands, except per share data)
<TABLE>
<CAPTION>
March 31, June 30, September 30, December 31,
--------- -------- ------------- ------------
2000 1999 2000 1999 2000 1999 2000 1999
---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Gross revenue $871,375 $421,607 $1,078,642 $ 696,13 $1,684,787 $887,854 $2,213,096 $ 986,42
======== ======== ========== ======== ========== ======== ========== ========
Net revenue 782,539 $376,787 $ 965,875 $617,691 $1,576,719 $796,157 $2,020,173 $887,525
Operating expenses 519,961 244,822 562,729 356,549 1,062,284 495,800 1,335,732 534,944
Non-cash compensation -- -- -- -- 3,151 -- 12,881 --
Depreciation and
amortization 220,054 110,648 228,687 154,379 372,059 208,627 580,263 248,579
Corporate expenses 24,578 12,447 27,867 15,884 39,417 16,254 50,765 25,561
-------- -------- ---------- -------- ---------- -------- ---------- --------
Operating income 17,946 8,870 146,592 90,879 99,808 75,476 40,532 78,441
Interest expense 55,549 30,731 69,911 44,949 105,335 50,962 152,309 52,762
Gain (loss) on sale of assets
related to mergers -- -- -- 136,925 805,183 -- (21,440) 1,734
Equity in earnings of
nonconsolidated affiliates 2,936 2,196 6,667 1,620 8,433 2,925 7,119 11,442
Other income (expenses) 398 9,818 1,226 1,987 (8,964) (2,221) (9,793) (2,292)
-------- -------- ---------- -------- ---------- -------- ---------- --------
Income (loss) before income
taxes and extraordinary items (34,269) (9,847) 84,574 186,462 799,125 25,218 (135,891) 36,563
Income taxes (1) 5,133 2,889 53,339 79,962 350,198 23,695 56,061 46,195
-------- -------- ---------- -------- ---------- -------- ---------- --------
Income (loss) before
extraordinary item (39,402) (12,736) 31,235 106,500 448,927 1,523 (191,952) (9,632)
Extraordinary item -- -- -- -- -- -- -- (13,185)
-------- -------- ---------- -------- ---------- -------- ---------- --------
Net income (loss) $(39,402) $(12,736) $ 31,235$ 106,500 $448,927 $ 1,523 $ (191,952) $(22,817)
======== ======== ========== ======== ========== ======== ========== ========
Net income (loss) per
common share:
Basic:
Income (loss) before
extraordinary item $ (.12) $ (.05) $ .09 $ .35 $ 1.04 $ .00 $ (.33) $ (.03)
Extraordinary item -- -- -- -- -- -- -- (.04)
-------- -------- ---------- -------- ---------- -------- ---------- --------
Net income (loss) $ (.12) $ (.05) $ .09 $ .35 $ 1.04 $ .00 $ (.33) $ (.07)
======== ======== ========== ======== ========== ======== ========== ========
Diluted:
Income (loss) before
extraordinary item $ (.12) $ (.05) $ .09 $ .33 $ .96 $ .00 $ (.33) $ (.03)
Extraordinary item -- -- -- -- -- -- -- (.04)
-------- -------- ---------- -------- ---------- -------- ---------- --------
Net income (loss) $ (.12) $ (.05) $ .09 $ .33 $ .96 $ .00 $ (.33) $ (.07)
======== ======== ========== ======== ========== ======== ========== ========
Stock price:
High $95.5000 $68.1875 $ 83.0000 $74.3750 $ 85.8125 $80.8125 $ 61.0000 $91.5000
Low 60.0000 52.0000 62.0625 64.2500 54.7500 60.7500 43.8750 68.5000
</TABLE>
(1) Income tax expense in the quarters ended September 30, 2000 and December 31,
2000 includes estimated taxes related to divestiture gains.
The Company's Common Stock is traded on the New York Stock Exchange under the
symbol CCU.
83
<PAGE> 84
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
Not Applicable
84
<PAGE> 85
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
We believe that one of our most important assets is our experienced
management team. With respect to our operations, managers are responsible for
the day-to-day operation of their respective location. We believe that the
autonomy of our management enables us to attract top quality managers capable of
implementing our aggressive marketing strategy and reacting to competition in
the local markets. Most of our managers have options to purchase our common
stock. As an additional incentive, a portion of each manager's compensation is
related to the performance of the profit centers for which he or she is
responsible. In an effort to monitor expenses, corporate management routinely
reviews staffing levels and operating costs. Combined with the centralized
financial functions, this monitoring enables us to control expenses effectively.
Corporate management also advises local managers on broad policy matters and is
responsible for long-range planning, allocating resources, and financial
reporting and controls.
The information required by this item with respect to the directors and
nominees for election to our Board of Directors is incorporated by reference to
the information set forth under the caption "Election of Directors" and
"Compliance With Section 16(A) of the Exchange Act," in our Definitive Proxy
Statement, which will be filed with the Securities and Exchange Commission
within 120 days of our fiscal year end.
The following information is submitted with respect to our executive
officers as of December 31, 2000.
<TABLE>
<CAPTION>
Age on
December 31, Officer
Name 2000 Position Since
<S> <C> <C> <C>
L. Lowry Mays 65 Chairman/Chief Executive Officer 1972
Mark P. Mays 37 President/Chief Operating Officer 1989
Randall T. Mays 35 Executive Vice President/Chief Financial Officer 1993
Herbert W. Hill, Jr. 41 Senior Vice President/Chief Accounting Officer 1989
Kenneth E. Wyker 39 Senior Vice President/General Counsel and Secretary 1993
W. A. Ripperton Riordan 43 Executive Vice President/Chief Operating Officer - 1995
Television
Karl Eller 72 Chief Executive Officer - Eller Media 1997
Roger Parry 47 Chief Executive Officer - Clear Channel International 1998
Paul Meyer 58 President/Chief Operating Officer - Eller Media 1999
Juliana F. Hill 31 Senior Vice President/Finance 1999
Randy Michaels 48 Chairman/Chief Executive Officer - Radio Group 1999
Brian Becker 44 Chairman/Chief Executive Officer - Live Entertainment 2000
Kenneth J. O'Keefe 46 President/Chief Operating Officer - Radio Group 2000
</TABLE>
The officers named above serve until the next Board of Directors meeting
immediately following the Annual Meeting of Shareholders.
Mr. L. Mays is our founder and was our President and Chief Executive
Officer from 1972 to February 1997. Since that time, Mr. L. Mays has served as
our Chairman and Chief Executive Officer. He has been one of our directors since
our inception. Mr. L. Mays is the father of Mark P. Mays, our
85
<PAGE> 86
President and Chief Operating Officer, and Randall T. Mays, our Executive Vice
President and Chief Financial Officer.
Mr. M. Mays was our Senior Vice President of Operations from February
1993 until his appointment as our President and Chief Operating Officer in
February 1997. He has been one of our directors since May 1998. Mr. M. Mays is
the son of L. Lowry Mays, our Chairman and Chief Executive Officer and the
brother of Randall T. Mays, our Executive Vice President and Chief Financial
Officer.
Mr. R. Mays was appointed Executive Vice President and Chief Financial
Officer in February 1997. Prior thereto, he served as our Vice President and
Treasurer since he joined us in January 1993. Mr. R. Mays is the son of L. Lowry
Mays, our Chairman and Chief Executive Officer and the brother of Mark P. Mays,
our President and Chief Operating Officer.
Mr. Hill was appointed Senior Vice President and Chief Accounting
Officer in February 1997. Prior thereto, he served as our Vice
President/Controller since January 1989.
Mr. Wyker was appointed Senior Vice President, General Counsel and
Secretary in February 1997. Prior thereto he served as Vice President for Legal
Affairs since he joined us in July 1993.
Mr. Riordan was appointed Executive Vice President/Chief Operating
Officer - Television in November 1995. Mr. Riordan tendered his resignation
effective February 15, 2001.
Mr. Eller was appointed Chief Executive Officer - Eller Media in April
1997. Prior thereto, he was the Chief Executive Officer of Eller Media Company
from August 1995 to April 1997.
Mr. Parry was appointed Chief Executive Officer - Clear Channel
International in June 1998. Prior thereto, he was the Chief Executive of More
Group plc for the remainder of the relevant five-year period.
Mr. Meyer was appointed President - Eller Media in March 1999. Prior
thereto he was the Executive Vice President and General Counsel of Eller Media
from March 1996 to March 1999.
Ms. Hill was appointed Senior Vice President/Finance in May 2000. Prior
thereto, she was Vice President/Finance and Strategic Development from March
1999 to May 2000. She was an Associate at US WEST Communications from August
1998 to March 1999 and she was a student at J.L. Kellogg Graduate School of
Management, Northwestern University from September 1996 to June 1998. She was an
Audit Manager of Ernst & Young LLP for the remainder of the relevant five-year
period.
Mr. Michaels was appointed Chairman/Chief Executive Officer of our Radio
Group in May 2000. Prior thereto he was President of Radio from May 1999 to May
2000. Prior thereto he was the Chief Executive Officer of Jacor Communications,
Inc. from November 1996 to May 1999 and he was President and Company Chief
Operating Officer of Jacor Communications, Inc. for the remainder of the
relevant five-year period.
Mr. Becker was appointed Chairman/Chief Executive Officer - Live
Entertainment in October 2000. Prior thereto he was the Executive Vice President
of SFX Entertainment, Inc. from February 1998 to October 2000 and he was Chief
Executive Officer of PACE Entertainment Corp. for the remainder of the relevant
five-year period.
86
<PAGE> 87
Mr. O'Keefe was appointed President/Chief Operating Officer - Radio
Group in October 2000. Prior thereto he was the President and Chief Executive
Officer of the AMFM Radio Group from February 2000 to October 2000 and he was
the Executive Vice President of AMFM Inc. since September 1997. Mr. O'Keefe had
been an Executive Vice President of Evergreen Media Corporation for the
remainder of the relevant five-year period.
ITEM 11. EXECUTIVE COMPENSATION
The information required by this item is incorporated by reference to
the information set forth under the caption "Executive Compensation" in our
Definitive Proxy Statement, expected to be filed within 120 days of our fiscal
year end.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information required by this item is incorporated by reference to
our Definitive Proxy Statement under the headings "Security Ownership of Certain
Beneficial Owners and Management", expected to be filed within 120 days of our
fiscal year end.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required by this item is incorporated by reference to
our Definitive Proxy Statement under the heading "Certain Transactions",
expected to be filed within 120 days of our fiscal year end.
87
<PAGE> 88
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULE AND REPORTS ON FORM 8-K
(a)1. Financial Statements.
The following consolidated financial statements are included in Item 8.
Consolidated Balance Sheets as of December 31, 2000 and 1999 Consolidated
Statements of Earnings for the Years Ended December 31, 2000, 1999 and 1998.
Consolidated Statements of Changes in Shareholders' Equity for the Years Ended
December 31, 2000, 1999 and 1998.
Consolidated Statements of Cash Flows for the Years Ended December 31, 2000,
1999 and 1998.
Notes to Consolidated Financial Statements
(a)2. Financial Statement Schedules.
The following financial statement schedules for the years ended December 31,
2000, 1999 and 1998 and related report of independent auditors are filed as part
of this report and should be read in conjunction with the consolidated financial
statements.
Schedule II Valuation and Qualifying Accounts
All other schedules for which provision is made in the applicable accounting
regulation of the Securities and Exchange Commission are not required under the
related instructions or are inapplicable, and therefore have been omitted.
88
<PAGE> 89
SCHEDULE II
VALUATION AND QUALIFYING ACCOUNTS
Allowance for Doubtful Accounts
(In thousands)
<TABLE>
<CAPTION>
Charges
Balance at to Costs, Write-off Balance
Beginning Expenses of Accounts at end of
Description of period and other Receivable Other (1) Period
- ----------- --------- --------- ----------- --------- ---------
<S> <C> <C> <C> <C> <C>
Year ended
December 31,
1998 $ 9,850 $ 6,031 $ 7,840 $ 5,467 $13,508
======= ======= ======= ======= =======
Year ended
December 31,
1999 $13,508 $12,975 $15,640 $15,252 $26,095
======= ======= ======= ======= =======
Year ended
December 31,
2000 $26,095 $34,168 $36,065 $36,433 $60,631
======= ======= ======= ======= =======
</TABLE>
(1) Allowance for accounts receivable acquired in acquisitions net of deletions
related to dispositions.
89
<PAGE> 90
SCHEDULE II
VALUATION AND QUALIFYING ACCOUNTS
Deferred Tax Asset Valuation Allowance
(In thousands)
<TABLE>
<CAPTION>
Charges
Balance at to Costs, Balance
Beginning Expenses at end of
Description of period and other Deletions (2) Other (1) Period
----------- ---------- --------- ------------- --------- ---------
<S> <C> <C> <C> <C> <C>
Year ended
December 31,
1998 $ -- $ -- $ -- $ 19,837 $19,837
========= ========= ========= ========= =======
Year ended
December 31,
1999 $ 19,837 $ -- $ -- $ 17,780 $37,617
========= ========= ========= ========= =======
Year ended
December 31,
2000 $ 37,617 $ -- $ 37,617 $ -- $ --
========= ========= ========= ========= =======
</TABLE>
(1) Related to allowance for net operating loss carryforwards assumed in
acquisitions.
(2) Based on the Company's reassessment of the likelihood of the realization of
future benefits, the valuation allowance was reduced to zero.
90
<PAGE> 91
(a)3. Exhibits.
EXHIBIT
NUMBER DESCRIPTION
2.1 Agreement and Plan of Merger dated as of October 8, 1998, as amended on
November 11, 1998, among Clear Channel Communications, Inc., CCU Merger
Sub, Inc. and Jacor Communications, Inc. (incorporated by reference to
Annex A to the Company's Registration Statement on Form S-4 (Reg. No.
333-72839) dated February 23, 1999).
2.2 Agreement and Plan of Merger dated as of October 2, 1999, among Clear
Channel, CCU Merger Sub, Inc. and AMFM Inc. (incorporated by reference
to the exhibits of Clear Channel's Current Report on Form 8-K filed
October 5, 1999).
2.3 Agreement and Plan of Merger dated as of February 28, 2000, among Clear
Channel, CCU II Merger Sub, Inc. and SFX Entertainment, Inc.
(incorporated by reference to the exhibits of Clear Channel's Current
Report on Form 8-K filed February 29, 2000).
3.1 Current Articles of Incorporation of the Company (incorporated by
reference to the exhibits of the Company's Registration Statement on
Form S-3 (Reg. No. 333-33371) dated September 9, 1997).
3.2 Second Amended and Restated Bylaws of the Company (incorporated by
reference to the exhibits of the Company's Registration Statement on
Form S-3 (Reg. No. 333-33371) dated September 9, 1997).
3.3 Amendment to the Company's Articles of Incorporation (incorporated by
reference to the exhibits to the Company's Quarterly Report on Form 10-Q
for the quarter ended September 30, 1998).
3.4 Second Amendment to Clear Channel's Articles of Incorporation
(incorporated by reference to the exhibits to Clear Channel's Quarterly
Report on Form 10-Q for the quarter ended March 31, 1999).
3.5 Third Amendment to Clear Channel's Articles of Incorporation
(incorporated by reference to the exhibits to Clear Channel's Quarterly
Report on Form 10-Q for the quarter ended May 31, 2000).
4.1 Buy-Sell Agreement by and between Clear Channel Communications, Inc., L.
Lowry Mays, B. J. McCombs, John M. Schaefer and John W. Barger, dated
May 31, 1977 (incorporated by reference to the exhibits of the Company's
Registration Statement on Form S-1 (Reg. No. 33-289161) dated April 19,
1984).
4.2 Senior Indenture dated October 1, 1997, by and between Clear Channel
Communications, Inc. and The Bank of New York as Trustee (incorporated
by reference to exhibit 4.2 of the Company's Quarterly Report on Form
10-Q for the quarter ended September 30, 1997).
91
<PAGE> 92
EXHIBIT
NUMBER DESCRIPTION
4.3 First Supplemental Indenture dated March 30, 1998 to Senior Indenture
dated October 1, 1997, by and between the Company and The Bank of New
York, as Trustee (incorporated by reference to the exhibits to the
Company's Quarterly Report on Form 10-Q for the quarter ended March 31,
1998).
4.4 Second Supplemental Indenture dated June 16, 1998 to Senior Indenture
dated October 1, 1997, by and between Clear Channel Communications, Inc.
and the Bank of New York, as Trustee (incorporated by reference to the
exhibits to the Company's Current Report on Form 8-K dated August 27,
1998).
4.5 Third Supplemental Indenture dated June 16, 1998 to Senior Indenture
dated October 1, 1997, by and between Clear Channel Communications, Inc.
and the Bank of New York, as Trustee (incorporated by reference to the
exhibits to the Company's Current Report on Form 8-K dated August 27,
1998).
4.6 Fourth Supplement Indenture dated November 24, 1999 to Senior Indenture
dated October 1, 1997, by and between Clear Channel and The Bank of New
York as Trustee.
4.7 Fifth Supplemental Indenture dated June 21, 2000, to Senior Indenture
dated October 1, 1997, by and between Clear Channel Communications, Inc.
and The Bank of New York, as Trustee (incorporated by reference to the
exhibits of Clear Channel's registration statement on Form S-3 (Reg. No.
333-42028) dated July 21, 2000).
4.8 Sixth Supplemental Indenture dated June 21, 2000, to Senior Indenture
dated October 1, 1997, by and between Clear Channel Communications, Inc.
and The Bank of New York, as Trustee (incorporated by reference to the
exhibits of Clear Channel's registration statement on Form S-3 (Reg. No.
333-42028) dated July 21, 2000).
4.9 Seventh Supplemental Indenture dated July 7, 2000, to Senior Indenture
dated October 1, 1997, by and between Clear Channel Communications, Inc.
and The Bank of New York, as Trustee (incorporated by reference to the
exhibits of Clear Channel's registration statement on Form S-3 (Reg. No.
333-42028) dated July 21, 2000).
4.10 Eighth Supplemental Indenture dated September 12, 2000, to Senior
Indenture dated October 1, 1997, by and between Clear Channel
Communications, Inc. and The Bank of New York, as Trustee (incorporated
by reference to the exhibits to Clear Channel's Quarterly Report on Form
10-Q for the quarter ended September 30, 2000).
4.11 Ninth Supplemental Indenture dated September 12, 2000, to Senior
Indenture dated October 1, 1997, by and between Clear Channel
Communications, Inc. and The Bank of New York, as Trustee (incorporated
by reference to the exhibits to Clear Channel's Quarterly Report on Form
10-Q for the quarter ended September 30, 2000).
10.1 Incentive Stock Option Plan of Clear Channel Communications, Inc. as of
January 1, 1984 (incorporated by reference to the exhibits of the
Company's Registration Statement on Form S-1 (Reg. No. 33-289161) dated
April 19, 1984).
92
<PAGE> 93
EXHIBIT
NUMBER DESCRIPTION
10.2 Clear Channel Communications, Inc. 1994 Incentive Stock Option Plan
(incorporated by reference to the exhibits of the Company's Registration
Statement on Form S-8 dated November 20, 1995).
10.3 Clear Channel Communications, Inc. 1994 Nonqualified Stock Option Plan
(incorporated by reference to the exhibits of the Company's Registration
Statement on Form S-8 dated November 20, 1995).
10.4 Clear Channel Communications, Inc. Directors' Nonqualified Stock Option
Plan (incorporated by reference to the exhibits of the Company's
Registration Statement on Form S-8 dated November 20, 1995).
10.5 Option Agreement for Officer (incorporated by reference to the exhibits
of the Company's Registration Statement on Form S-8 dated November 20,
1995).
10.6 Registration Rights Agreements dated as October 8, 1998, by and among
the Company and the Zell/Chilmark Fund, L.P., Samstock, L.L.C., the SZ2
(IGP) Partnership and Samuel Zell (incorporated by reference to the
exhibits to the Company's Quarterly Report on Form 10-Q for the quarter
ended September 30, 1998).
10.7 The Clear Channel Communications, Inc. 1998 Stock Incentive Plan
(incorporated by reference to Appendix A to the Company's Definitive 14A
Proxy Statement dated March 24, 1998).
10.8 Voting Agreement dated as of October 8, 1998, by and among Jacor
Communications, Inc. and L. Lowry Mays, Mark P. Mays and Randall T. Mays
and certain related family trusts (incorporated by reference to the
exhibits to the Company's Quarterly Report on Form 10-Q for the quarter
ended September 30, 1998).
10.9 Shareholders Agreement dated October 2, 1999, by and among Clear
Channel, L. Lowry Mays, 4-M Partners, Ltd., Hicks, Muse, Tate & Furst
Equity Fund II, L.P., HM2/HMW, L.P., HM2/Chancellor, L.P.,
HM4/Chancellor, L.P., Capstar Broadcasting Partners, L.P., Capstar BT
Partners, L.P., Capstar Boston Partners, L.L.C., and Thomas O. Hicks.
10.10 Registration Rights Agreement dated as of October 2, 1999, among Clear
Channel and Hicks, Muse, Tate & Furst Equity Fund II, L.P., HM2/HMW,
L.P., HM2/Chancellor, L.P., HM4/Chancellor, L.P., Capstar Broadcasting
Partners, L.P., Capstar BT Partners, L.P., Capstar Boston Partners,
L.L.C., Thomas O. Hicks, John R. Muse, Charles W. Tate, Jack D. Furst,
Michael J. Levitt, Lawrence D. Stuart, Jr., David B Deniger and Dan H.
Blanks.
10.11 Voting Agreement dated as of October 2, 1999, by and among Clear Channel
and Thomas O. Hicks (incorporated by reference to exhibits to Amendment
No. 6 to Schedule 13D of Thomas O. Hicks, et. Al., filed on October 14,
1999).
10.12 Voting Agreement dated as of October 2, 1999, by and among AMFM and L.
Lowry Mays and 4-M Partners, Ltd. (incorporated by reference to exhibits
to Schedule 13D of L. Lowry Mays, et. Al., filed on October 14, 1999).
93
<PAGE> 94
EXHIBIT
NUMBER DESCRIPTION
10.13 Voting Agreement dated as of October 2, 1999, by and among Clear Channel
and HM2/HMW, L.P., HM2/Chancellor, L.P., HM4/Chancellor, L.P. and
Capstar Broadcasting Partners, L.P. (incorporated by reference to
exhibits to Amendment No. 6 to Schedule 13D of Thomas O. Hicks, et. Al.,
filed on October 14, 1999).
10.14 Employment Agreement by and between Clear Channel Communications, Inc.
and L. Lowry Mays dated October 1, 1999. (incorporated by reference to
the exhibits to Clear Channel's Quarterly Report on Form 10-Q for the
quarter ended September 30, 1999).
10.15 Employment Agreement by and between Clear Channel Communications, Inc.
and Mark P. Mays dated October 1, 1999. (incorporated by reference to
the exhibits to Clear Channel's Quarterly Report on Form 10-Q for the
quarter ended September 30, 1999).
10.16 Employment Agreement by and between Clear Channel Communications, Inc.
and Randall T. Mays dated October 1, 1999. (incorporated by reference to
the exhibits to Clear Channel's Quarterly Report on Form 10-Q for the
quarter ended September 30, 1999).
10.17 Fourth Amended and Restated Credit Agreement by and among Clear Channel
Communications, Inc., Bank of America, N.A., as administrative agent,
Fleet National Bank, as documentation agent, the Bank of Montreal and
Toronto Dominion (Texas), Inc., as co-syndication agents, and certain
other lenders dated June 15, 2000 (incorporated by reference to the
exhibits of Clear Channel's registration statement on Form S-3 (Reg. No.
333-42028) dated July 21, 2000).
10.18 Credit Agreement among Clear Channel Communications, Inc., Bank of
America, N.A., as administrative agent, Chase Securities Inc., as
syndication agent, and certain other lenders dated August 30, 2000.
11 Statement re: Computation of Per Share Earnings.
12 Statement re: Computation of Ratios.
21 Subsidiaries of the Company.
23.1 Consent of Ernst & Young LLP.
23.2 Consent of KPMG LLP.
24 Power of Attorney (included on signature page).
99.1 Report of Independent Auditors on Financial Statement Schedules - Ernst
& Young LLP.
99.2 Report of Independent Auditors - KPMG LLP.
94
<PAGE> 95
(b) Reports on Form 8-K.
We filed a report on Form 8-K dated October 6, 2000 that reported that
we had issued a press release on October 5, 2000 announcing that our Board of
Directors had authorized the repurchase of up to $1 billion of our common stock
over the next 12 months.
We filed a report on Form 8-K dated December 13, 2000 that reported that
we had issued a press release on December 12, 2000 announcing that we extended
our offer to exchange Euro 650,000,000 6.5% Notes due 2005 issued by us in July
2000.
We filed a report on Form 8-K dated December 20, 2000 that reported that
we had issued a press release that day announcing that we extended our offer to
exchange Euro 650,000,000 6.5% Notes due 2005 issued by us in July 2000.
95
<PAGE> 96
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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, on March 15, 2001.
CLEAR CHANNEL COMMUNICATIONS, INC.
By:/S/ L. Lowry Mays
L. Lowry Mays
Chairman and Chief Executive Officer
POWER OF ATTORNEY
Each person whose signature appears below authorizes L. Lowry Mays, Mark
P. Mays, Randall T. Mays and Herbert W. Hill, Jr., or any one of them, each of
whom may act without joinder of the others, to execute in the name of each such
person who is then an officer or director of the Registrant and to file any
amendments to this annual report on Form 10-K necessary or advisable to enable
the Registrant to comply with the Securities Exchange Act of 1934, as amended,
and any rules, regulations and requirements of the Securities and Exchange
Commission in respect thereof, which amendments may make such changes in such
report as such attorney-in-fact may deem appropriate.
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed by the following persons on behalf of the Registrant
and in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
NAME TITLE DATE
---- ----- ----
<S> <C> <C>
/S/ L. Lowry Mays Chairman, Chief Executive Officer and March 15, 2001
L. Lowry Mays Director
/S/ Mark P. Mays President and Chief Operating Officer March 15, 2001
Mark P. Mays and Director
/S/ Randall T. Mays Executive Vice President and Chief March 15, 2001
Randall T. Mays Financial Officer (Principal Financial
Officer) and Director
/S/ Herbert W. Hill, Jr. Senior Vice President and Chief March 15, 2001
Herbert W. Hill, Jr. Accounting Officer (Principal
Accounting Officer)
/S/ Robert L. Crandall Director March 15, 2001
Robert L. Crandall
</TABLE>
<PAGE> 97
<TABLE>
<CAPTION>
NAME TITLE DATE
---- ----- ----
<S> <C> <C>
/S/ Karl Eller Director March 15, 2001
Karl Eller
/S/ Alan D. Feld Director March 15, 2001
Alan D. Feld
/S/ Thomas O. Hicks Director March 15, 2001
Thomas O. Hicks
/S/ Vernon E. Jordan, Jr. Director March 15, 2001
Vernon E. Jordan, Jr.
/S/ Michael J. Levitt Director March 15, 2001
Michael J. Levitt
/S/ Perry J. Lewis Director March 15, 2001
Perry J. Lewis
/S/ B. J. McCombs Director March 15, 2001
B. J. McCombs
/S/ Theodore H. Strauss Director March 15, 2001
Theodore H. Strauss
/S/ John H. Williams Director March 15, 2001
John H. Williams
</TABLE>
<PAGE> 98
EXHIBIT
NUMBER DESCRIPTION
2.1 Agreement and Plan of Merger dated as of October 8, 1998, as
amended on November 11, 1998, among Clear Channel
Communications, Inc., CCU Merger Sub, Inc. and Jacor
Communications, Inc. (incorporated by reference to Annex A to
the Company's Registration Statement on Form S-4 (Reg. No.
333-72839) dated February 23, 1999).
2.2 Agreement and Plan of Merger dated as of October 2, 1999, among
Clear Channel, CCU Merger Sub, Inc. and AMFM Inc. (incorporated
by reference to the exhibits of Clear Channel's Current Report
on Form 8-K filed October 5, 1999).
2.3 Agreement and Plan of Merger dated as of February 28, 2000,
among Clear Channel, CCU II Merger Sub, Inc. and SFX
Entertainment, Inc. (incorporated by reference to the exhibits
of Clear Channel's Current Report on Form 8-K filed February 29,
2000).
3.1 Current Articles of Incorporation of the Company (incorporated
by reference to the exhibits of the Company's Registration
Statement on Form S-3 (Reg. No. 333-33371) dated September 9,
1997).
3.2 Second Amended and Restated Bylaws of the Company (incorporated
by reference to the exhibits of the Company's Registration
Statement on Form S-3 (Reg. No. 333-33371) dated September 9,
1997).
3.3 Amendment to the Company's Articles of Incorporation
(incorporated by reference to the exhibits to the Company's
Quarterly Report on Form 10-Q for the quarter ended September
30, 1998).
3.4 Second Amendment to Clear Channel's Articles of Incorporation
(incorporated by reference to the exhibits to Clear Channel's
Quarterly Report on Form 10-Q for the quarter ended March 31,
1999).
3.5 Third Amendment to Clear Channel's Articles of Incorporation
(incorporated by reference to the exhibits to Clear Channel's
Quarterly Report on Form 10-Q for the quarter ended May 31,
2000).
4.1 Buy-Sell Agreement by and between Clear Channel Communications,
Inc., L. Lowry Mays, B. J. McCombs, John M. Schaefer and John W.
Barger, dated May 31, 1977 (incorporated by reference to the
exhibits of the Company's Registration Statement on Form S-1
(Reg. No. 33-289161) dated April 19, 1984).
4.2 Senior Indenture dated October 1, 1997, by and between Clear
Channel Communications, Inc. and The Bank of New York as Trustee
(incorporated by reference to exhibit 4.2 of the Company's
Quarterly Report on Form 10-Q for the quarter ended September
30, 1997).
4.3 First Supplemental Indenture dated March 30, 1998 to Senior
Indenture dated October 1, 1997, by and between the Company and
The Bank of New York, as Trustee (incorporated by reference to
the exhibits to the Company's Quarterly Report on Form 10-Q for
the quarter
<PAGE> 99
EXHIBIT
NUMBER DESCRIPTION
ended March 31, 1998).
4.4 Second Supplemental Indenture dated June 16, 1998 to Senior
Indenture dated October 1, 1997, by and between Clear Channel
Communications, Inc. and the Bank of New York, as Trustee
(incorporated by reference to the exhibits to the Company's
Current Report on Form 8-K dated August 27, 1998).
4.5 Third Supplemental Indenture dated June 16, 1998 to Senior
Indenture dated October 1, 1997, by and between Clear Channel
Communications, Inc. and the Bank of New York, as Trustee
(incorporated by reference to the exhibits to the Company's
Current Report on Form 8-K dated August 27, 1998).
4.6 Fourth Supplement Indenture dated November 24, 1999 to Senior
Indenture dated October 1, 1997, by and between Clear Channel
and The Bank of New York as Trustee.
4.7 Fifth Supplemental Indenture dated June 21, 2000, to Senior
Indenture dated October 1, 1997, by and between Clear Channel
Communications, Inc. and The Bank of New York, as Trustee
(incorporated by reference to the exhibits of Clear Channel's
registration statement on Form S-3 (Reg. No. 333-42028) dated
July 21, 2000).
4.8 Sixth Supplemental Indenture dated June 21, 2000, to Senior
Indenture dated October 1, 1997, by and between Clear Channel
Communications, Inc. and The Bank of New York, as Trustee
(incorporated by reference to the exhibits of Clear Channel's
registration statement on Form S-3 (Reg. No. 333-42028) dated
July 21, 2000).
4.9 Seventh Supplemental Indenture dated July 7, 2000, to Senior
Indenture dated October 1, 1997, by and between Clear Channel
Communications, Inc. and The Bank of New York, as Trustee
(incorporated by reference to the exhibits of Clear Channel's
registration statement on Form S-3 (Reg. No. 333-42028) dated
July 21, 2000).
4.10 Eighth Supplemental Indenture dated September 12, 2000, to
Senior Indenture dated October 1, 1997, by and between Clear
Channel Communications, Inc. and The Bank of New York, as
Trustee (incorporated by reference to the exhibits to Clear
Channel's Quarterly Report on Form 10-Q for the quarter ended
September 30, 2000).
4.11 Ninth Supplemental Indenture dated September 12, 2000, to Senior
Indenture dated October 1, 1997, by and between Clear Channel
Communications, Inc. and The Bank of New York, as Trustee
(incorporated by reference to the exhibits to Clear Channel's
Quarterly Report on Form 10-Q for the quarter ended September
30, 2000).
10.1 Incentive Stock Option Plan of Clear Channel Communications,
Inc. as of January 1, 1984 (incorporated by reference to the
exhibits of the Company's Registration Statement on Form S-1
(Reg. No. 33-289161) dated April 19, 1984).
10.2 Clear Channel Communications, Inc. 1994 Incentive Stock Option
Plan (incorporated by reference to the exhibits of the Company's
Registration Statement on Form S-8 dated November 20, 1995).
<PAGE> 100
EXHIBIT
NUMBER DESCRIPTION
10.3 Clear Channel Communications, Inc. 1994 Nonqualified Stock
Option Plan (incorporated by reference to the exhibits of the
Company's Registration Statement on Form S-8 dated November 20,
1995).
10.4 Clear Channel Communications, Inc. Directors' Nonqualified Stock
Option Plan (incorporated by reference to the exhibits of the
Company's Registration Statement on Form S-8 dated November 20,
1995).
10.5 Option Agreement for Officer (incorporated by reference to the
exhibits of the Company's Registration Statement on Form S-8
dated November 20, 1995).
10.6 Registration Rights Agreements dated as October 8, 1998, by and
among the Company and the Zell/Chilmark Fund, L.P., Samstock,
L.L.C., the SZ2 (IGP) Partnership and Samuel Zell (incorporated
by reference to the exhibits to the Company's Quarterly Report
on Form 10-Q for the quarter ended September 30, 1998).
10.7 The Clear Channel Communications, Inc. 1998 Stock Incentive Plan
(incorporated by reference to Appendix A to the Company's
Definitive 14A Proxy Statement dated March 24, 1998).
10.8 Voting Agreement dated as of October 8, 1998, by and among Jacor
Communications, Inc. and L. Lowry Mays, Mark P. Mays and Randall
T. Mays and certain related family trusts (incorporated by
reference to the exhibits to the Company's Quarterly Report on
Form 10-Q for the quarter ended September 30, 1998).
10.9 Shareholders Agreement dated October 2, 1999, by and among Clear
Channel, L. Lowry Mays, 4-M Partners, Ltd., Hicks, Muse, Tate &
Furst Equity Fund II, L.P., HM2/HMW, L.P., HM2/Chancellor, L.P.,
HM4/Chancellor, L.P., Capstar Broadcasting Partners, L.P.,
Capstar BT Partners, L.P., Capstar Boston Partners, L.L.C., and
Thomas O. Hicks.
10.10 Registration Rights Agreement dated as of October 2, 1999, among
Clear Channel and Hicks, Muse, Tate & Furst Equity Fund II,
L.P., HM2/HMW, L.P., HM2/Chancellor, L.P., HM4/Chancellor, L.P.,
Capstar Broadcasting Partners, L.P., Capstar BT Partners, L.P.,
Capstar Boston Partners, L.L.C., Thomas O. Hicks, John R. Muse,
Charles W. Tate, Jack D. Furst, Michael J. Levitt, Lawrence D.
Stuart, Jr., David B Deniger and Dan H. Blanks.
10.11 Voting Agreement dated as of October 2, 1999, by and among Clear
Channel and Thomas O. Hicks (incorporated by reference to
exhibits to Amendment No. 6 to Schedule 13D of Thomas O. Hicks,
et. Al., filed on October 14, 1999).
10.12 Voting Agreement dated as of October 2, 1999, by and among AMFM
and L. Lowry Mays and 4-M Partners, Ltd. (incorporated by
reference to exhibits to Schedule 13D of L. Lowry Mays, et. Al.,
filed on October 14, 1999).
10.13 Voting Agreement dated as of October 2, 1999, by and among Clear
Channel and HM2/HMW, L.P., HM2/Chancellor, L.P., HM4/Chancellor,
L.P. and Capstar Broadcasting
<PAGE> 101
EXHIBIT
NUMBER DESCRIPTION
Partners, L.P. (incorporated by reference to exhibits to
Amendment No. 6 to Schedule 13D of Thomas O. Hicks, et. Al.,
filed on October 14, 1999).
10.14 Employment Agreement by and between Clear Channel
Communications, Inc. and L. Lowry Mays dated October 1, 1999.
(incorporated by reference to the exhibits to Clear Channel's
Quarterly Report on Form 10-Q for the quarter ended September
30, 1999).
10.15 Employment Agreement by and between Clear Channel
Communications, Inc. and Mark P. Mays dated October 1, 1999.
(incorporated by reference to the exhibits to Clear Channel's
Quarterly Report on Form 10-Q for the quarter ended September
30, 1999).
10.16 Employment Agreement by and between Clear Channel
Communications, Inc. and Randall T. Mays dated October 1, 1999.
(incorporated by reference to the exhibits to Clear Channel's
Quarterly Report on Form 10-Q for the quarter ended September
30, 1999).
10.17 Fourth Amended and Restated Credit Agreement by and among Clear
Channel Communications, Inc., Bank of America, N.A., as
administrative agent, Fleet National Bank, as documentation
agent, the Bank of Montreal and Toronto Dominion (Texas), Inc.,
as co-syndication agents, and certain other lenders dated June
15, 2000.
10.18 Credit Agreement among Clear Channel Communications, Inc., Bank
of America, N.A., as administrative agent, Chase Securities
Inc., as syndication agent, and certain other lenders dated
August 30, 2000.
11 Statement re: Computation of Per Share Earnings.
12 Statement re: Computation of Ratios.
21 Subsidiaries of the Company.
23.1 Consent of Ernst & Young LLP.
23.2 Consent of KPMG LLP.
24 Power of Attorney (included on signature page).
99.1 Report of Independent Auditors on Financial Statement Schedules
- Ernst & Young LLP.
99.2 Report of Independent Auditors - KPMG LLP.
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.18
<SEQUENCE>2
<FILENAME>h85063ex10-18.txt
<DESCRIPTION>CREDIT AGREEMENT DATED AUGUST 20, 2000
<TEXT>
<PAGE> 1
EXHIBIT 10.18
================================================================================
$3,000,000,000
CREDIT AGREEMENT
AMONG
CLEAR CHANNEL COMMUNICATIONS, INC.
BANK OF AMERICA, N.A., AS ADMINISTRATIVE AGENT,
AND
CHASE SECURITIES INC., AS SYNDICATION AGENT
AND
CERTAIN LENDERS
AUGUST 30, 2000
-------------------------------
BANC OF AMERICA SECURITIES, LLC
and
CHASE SECURITIES INC.
AS JOINT LEAD ARRANGERS and JOINT BOOK MANAGERS
================================================================================
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
ARTICLE 1
Definitions
<S> <C>
Section 1.1 Defined Terms............................................... 1
Section 1.2 Amendments and Renewals..................................... 30
Section 1.3 Construction................................................ 30
ARTICLE 2
Loans
Section 2.1 The Loans and Advances Thereunder........................... 31
Section 2.2 Manner of Borrowing and Disbursement........................ 33
Section 2.3 Interest.................................................... 41
Section 2.4 Fees........................................................ 43
Section 2.5 Prepayment.................................................. 44
Section 2.6 Reduction and Change of Commitments......................... 45
Section 2.7 Non-Receipt of Funds by the Administrative Agent............ 46
Section 2.8 Payment of Principal of Advances............................ 46
Section 2.9 Reimbursement............................................... 47
Section 2.10 Manner of Payment........................................... 47
Section 2.11 Lending Offices............................................. 50
Section 2.12 Sharing of Payments......................................... 50
Section 2.13 Calculation of LIBOR Rate, Offshore Dollar Rate and
Approved Offshore Currency Rate............................. 50
Section 2.14 Booking Loans............................................... 50
Section 2.15 Taxes....................................................... 51
Section 2.16 Letters of Credit........................................... 53
Section 2.17 Extension Option and Conversion Option Relating to
the Working Line Loan....................................... 60
Section 2.18 Uncommitted Increase of the Revolving Credit Commitment..... 61
ARTICLE 3
Conditions Precedent
Section 3.1 Conditions Precedent to Closing and the Initial Advance
and the Letters of Credit................................... 63
Section 3.2 Conditions Precedent to All Advances and Letters of Credit.. 65
ARTICLE 4
Representations and Warranties
Section 4.1 Representations and Warranties.............................. 66
Section 4.2 Survival of Representations and Warranties, etc. ........... 74
ARTICLE 5
General Covenants
Section 5.1 Preservation of Existence and Similar Matters............... 74
Section 5.2 Business; Compliance with Applicable Law.................... 75
</TABLE>
ii
<PAGE> 3
<TABLE>
<S> <C>
Section 5.3 Maintenance of Properties................................... 75
Section 5.4 Accounting Methods and Financial Records.................... 75
Section 5.5 Insurance................................................... 75
Section 5.6 Payment of Taxes and Claims................................. 75
Section 5.7 Visits and Inspections...................................... 76
Section 5.8 Payment of Debt for Borrowed Money.......................... 76
Section 5.9 Use of Proceeds............................................. 76
Section 5.10 Indemnity................................................... 76
Section 5.11 Environmental Law Compliance................................ 77
Section 5.12 Conversion of Unrestricted Subsidiaries..................... 78
Section 5.13 Year 2000 Compliance........................................ 78
Section 5.14 AMFM Entities and SFX Entities.............................. 78
Section 5.15 Collateral Sharing and Intercreditor Arrangement............ 80
ARTICLE 6
Information Covenants
Section 6.1 Quarterly Financial Statements and Information.............. 80
Section 6.2 Annual Financial Statements and Information; Certificate
of No Default .............................................. 81
Section 6.3 Compliance Certificates..................................... 81
Section 6.4 Copies of Other Reports and Notices......................... 81
Section 6.5 Notice of Litigation, Default and Other Matters............. 82
Section 6.6 ERISA Reporting Requirements................................ 83
ARTICLE 7
Negative Covenants
Section 7.1 Debt for Borrowed Money..................................... 84
Section 7.2 Liens....................................................... 85
Section 7.3 Investments................................................. 86
Section 7.4 Amendment and Waiver........................................ 86
Section 7.5 Liquidation, Disposition or Acquisition of Assets, Merger,
New Subsidiaries ........................................... 86
Section 7.6 Dividends................................................... 87
Section 7.7 Affiliate Transactions...................................... 87
Section 7.8 Compliance with ERISA....................................... 87
Section 7.9 Leverage Ratio.............................................. 88
Section 7.10 Interest Coverage Ratio. ................................... 88
Section 7.11 Sale and Leaseback.......................................... 88
Section 7.12 Sale or Discount of Receivables............................. 88
Section 7.13 Business of Clear Channel Television Licenses, Inc.
and Clear Channel Broadcasting Licenses, Inc. .............. 88
ARTICLE 8
Default
Section 8.1 Events of Default........................................... 89
Section 8.2 Remedies.................................................... 92
</TABLE>
iii
<PAGE> 4
<TABLE>
ARTICLE 9
Changes in Circumstances
<S> <C>
Section 9.1 LIBOR Basis Determination Inadequate........................ 92
Section 9.2 Offshore Basis Determination Inadequate..................... 93
Section 9.3 Illegality.................................................. 93
Section 9.4 EMU Changes................................................. 93
Section 9.5 Increased Costs............................................. 94
Section 9.6 Effect On Base Rate Advances................................ 95
Section 9.7 Mandatory Revolver Advance.................................. 95
Section 9.8 Capital Adequacy............................................ 96
Section 9.9 Rights of a Borrower in Respect of Consequential Losses..... 96
ARTICLE 10
Agreement Among Lenders
Section 10.1 Agreement Among Lenders..................................... 97
Section 10.2 Lender Credit Decision...................................... 99
Section 10.3 Benefits of Article......................................... 99
ARTICLE 11
Miscellaneous
Section 11.1 Notices..................................................... 99
Section 11.2 Expenses.................................................... 100
Section 11.3 Waivers..................................................... 101
Section 11.4 Determination by the Lenders Conclusive and Binding......... 101
Section 11.5 Set-Off..................................................... 101
Section 11.6 Assignment.................................................. 102
Section 11.7 Counterparts................................................ 104
Section 11.8 Severability................................................ 104
Section 11.9 Interest and Charges........................................ 104
Section 11.10 Headings.................................................... 104
Section 11.11 Amendment and Waiver........................................ 105
Section 11.12 Exception to Covenants...................................... 105
Section 11.13 No Liability of any Issuing Bank............................ 106
Section 11.14 Conversion of Currencies.................................... 106
Section 11.15 Credit Agreement Governs.................................... 106
SECTION 11.16 GOVERNING LAW............................................... 107
SECTION 11.17 WAIVER OF JURY TRIAL........................................ 107
SECTION 11.18 ENTIRE AGREEMENT............................................ 107
Section 11.19 Confidentiality............................................. 107
Section 11.20 Qualified Commercial Loan................................... 108
</TABLE>
iv
<PAGE> 5
SCHEDULES AND EXHIBITS
Schedule 1.2: Lending Offices, including Approved Offshore Lending and
Payment Offices
Schedule 1.3: Existing Liens
Schedule 1.4: Acquired Letters of Credit
Schedule 4.1(a): Subsidiaries
Schedule 4.1(h): Existing Litigation
Schedule 4.1(k): Material Adverse Changes and Defaults or Events of Defaults
Schedule 7.1: Existing Indebtedness
Schedule 7.3: Existing Investments
Exhibit A: Form of Revolving Credit Note
Exhibit B: Form of Swingline Note
Exhibit C: Form of Working Line Note
Exhibit D: Form of Bid Rate Note-Revolving Credit
Exhibit E: Form of Bid Rate Note-Working Line
Exhibit F: Form of SFX/AMFM Limited Subsidiary Guaranty
Exhibit G: Form of Compliance Certificate
Exhibit H: Form of Assignment Agreement
Exhibit I: Form of Intercompany Notes
Exhibit J: Form of Intercompany Note Pledge Agreement
Exhibit K: Form of Notice of Change of Senior Unsecured Debt Rating
Exhibit L: Form of Notice of Borrowing
Exhibit M: Form of Notice of Continuation/Conversion
Exhibit N: Form of Bid Rate Advance Request
Exhibit O: Form of Confirmation of Bid
Exhibit P: Form of Invitation to Bid
Exhibit Q: Form of Notice of Acceptance of Bid
v
<PAGE> 6
CREDIT AGREEMENT
THIS CREDIT AGREEMENT is dated as of August 30, 2000, among CLEAR
CHANNEL COMMUNICATIONS, INC., a Texas corporation ("Borrower"), the Lenders from
time to time party hereto, BANK OF AMERICA, N.A., a national banking
association, as administrative agent for the Lenders and CHASE SECURITIES INC.,
as Syndication Agent.
BACKGROUND
The Borrower has asked, and the Administrative Agent, the Syndication
Agent and certain lenders have agreed to provide, (a) a $3,000,000,000 credit
facility for the Borrower in the form of (i) a $1,500,000,000 five year
revolving credit facility (which will have subfacilities for competitive bid
loans, letters of credit, offshore currencies and swingline borrowings
(swingline borrowings to be available in Dollars and in certain offshore
currencies), and (ii) a $1,500,000,000 364-day working line revolving credit
facility which may be (at the Borrower's option) (A) converted to a term loan
with one payment in full on the maturity date of the revolving credit facility
or (B) with the consent of the Lenders as required herein, extended annually for
additional 364 day periods (but not beyond the maturity of the revolving credit
facility) (which will have a subfacility for competitive bid loans); and (b) an
uncommitted increase possibility of the revolving credit facility by an
aggregate amount of up to $2,000,000,000.
In consideration of the mutual covenants and agreements contained
herein, and other good and valuable consideration hereby acknowledged, the
parties hereto agree as follows:
ARTICLE 1
Definitions
Section 1.1 Defined Terms. For purposes of this Agreement:
"Acquired Letters of Credit" means (a) after the consummation of the
AMFM Acquisition, those stand-by letters of credit described on Schedule 1.4
hereto issued by a Secondary Issuing Bank on behalf of an AMFM Entity, and/or
(b) after the consummation of the SFX Acquisition, those stand-by letters of
credit described on Schedule 1.4 hereto issued by a Secondary Issuing Bank on
behalf of an SFX Entity, and in the case of each letter of credit described in
(a) and (b) above, each
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<PAGE> 7
extension or replacement thereof, or amendment thereto, so long as in each case
the face amount of each such stand-by letter of credit is not increased.
"Acquisition" means (whether by purchase, exchange, issuance of stock or
other equity or debt securities, merger, reorganization or any other method) (i)
any acquisition by the Borrower or any of its Restricted Subsidiaries of any
other Person, which Person shall then become consolidated with the Borrower or
any such Restricted Subsidiary in accordance with GAAP, or (ii) any acquisition
by the Borrower or any of its Restricted Subsidiaries of all or any substantial
amount of the assets of any other Person. For purposes of the preceding
sentence, an amount of assets shall be deemed to be "substantial" if such assets
have a fair market value in excess of $1,000,000; provided, however, that the
purchase of equipment and other goods and services in the ordinary course of
business shall not be deemed to be "Acquisitions".
"ARN" means the Australian Radio Network Limited, PTY, an Australian
propriety company, 50% of whose Capital Stock is owned by the Borrower.
"Additional Costs" has the meaning set forth in Section 9.8 hereof.
"Administrative Agent" means Bank of America, N.A., as administrative
agent for the Lenders, or such successor administrative agent appointed pursuant
to Section 10.1(b) hereof.
"Advance" means a Revolving Credit Advance, an Offshore Bid Rate
Advance, a Working Line Advance, a Base Rate Advance, a Bid Rate Advance or a
LIBOR Advance, as applicable, including, without limitation, any Mandatory
Revolver Advance, and "Advances" means Revolving Credit Advances, Offshore Bid
Rate Advances and Working Line Advances (including all Base Rate Advances and
LIBOR Advances), including, without limitation, any Mandatory Revolver Advance.
"Affiliate" means any Person that directly or indirectly through one or
more Subsidiaries Controls, or is Controlled By or Under Common Control with,
the Borrower.
"Affiliation Agreements" means all affiliation agreements of the
Borrower and each Subsidiary with Fox Broadcasting.
"Agreement" means this Credit Agreement, as amended or renewed from time
to time.
"Agreement Currency" has the meaning specified in Section 11.14 hereof.
"AMFM" means AMFM, Inc.
"AMFM Acquisition" means the acquisition by the Borrower of AMFM and its
direct and indirect subsidiaries in accordance with the terms of the AMFM
Acquisition Documentation.
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<PAGE> 8
"AMFM Acquisition Documentation" means that certain Agreement and Plan
of Merger, dated as of October 2, 1999, among the Borrower, AMFM and CCU Merger
Sub, Inc. and all related documentation in effect on May 1, 2000.
"AMFM Entities" means AMFM and all of its direct and indirect
subsidiaries that are Restricted Subsidiaries at the time of determination.
"AMFM Reduced Public Debt Permitted Amount" means an amount equal to
$125,000,000.
"AMFM/SFX Obligor" means AMFM Operating, Inc., Capstar Broadcasting
Partners, Inc. and SFX Entertainment, Inc., provided that, the term AMFM/SFX
Obligor may include any other AMFM Entity or SFX Entity that receives an
Investment from the Borrower or any Restricted Subsidiary (other than another
AMFM Entity or SFX Entity), so long as the Administrative Agent has consented to
such Person as an AMFM/SFX Obligor in writing.
"Applicable Commitment" means the Revolving Credit Commitment or the
Working Line Commitment, as applicable in the context used.
"Applicable Commitment Fee Percentage" means the per annum commitment
fees set forth below for the Revolving Credit Loan and the Working Line Loan, as
adjusted in each case according to the circumstances set forth below:
<TABLE>
<CAPTION>
Applicable Commitment Fee
Percentages
-----------------------------
Senior Unsecured Revolving Working Line
Debt Ratings Credit Loan Loan
----------- -------------
<S> <C> <C>
BB+/Ba1 or lower 0.225% 0.200%
BBB-/Baa3 0.175% 0.150%
BBB/Baa2 0.125% 0.100%
BBB+/Baa1 or higher 0.100% 0.090%
</TABLE>
On each date on which there is a change in the Borrower's Senior Unsecured Debt
Rating, the Applicable Commitment Fee Percentage payable by the Borrower shall
be subject to reduction or increase, as applicable and as set forth in the table
above, effective on such date. If the Senior Unsecured Debt Rating has ratings
differing (a) by up to one level, the lowest Applicable Commitment Fee
Percentage will apply and (b) by more than one level, the Applicable Commitment
Fee Percentage for the level immediately below the highest Senior Unsecured Debt
Rating will apply.
"Applicable Currency" means, as to any particular payment or Advance,
Dollars or the Approved Offshore Currency in which it is denominated or is
payable.
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<PAGE> 9
"Applicable Environmental Laws" means applicable federal, state or local
laws, rules and regulations pertaining to health or the environment, including
without limitation, the Comprehensive Environmental Response, Compensation, and
Liability Act of 1980, as amended by the Superfund Amendments and
Reauthorization Act of 1986 (as amended from time to time, "CERCLA"), the
Resource Conservation and Recovery Act of 1976, as amended by the Used Oil
Recycling Act of 1980, the Solid Waste Disposal Act amendments of 1980, and the
Hazardous and Solid Waste Amendments of 1984 (as amended from time to time,
"RCRA"), the Texas Water Code, and the Texas Solid Waste Disposal Act.
"Applicable Law" means (i) in respect of any Person, all provisions of
constitutions, statutes, laws, ordinances, rules, regulations and orders of
governmental bodies, or regulatory agencies applicable to such Person, and all
orders and decrees of all courts and arbitrators in proceedings or actions to
which the Person in question is a party and (ii) in respect of contracts made or
performed in the State of Texas, "Applicable Law" shall also mean the laws of
the United States of America, including, without limiting the foregoing, 12 USC
Sections 85 and 86, as amended to the date hereof and as the same may be amended
at any time and from time to time hereafter, and any other statute of the United
States of America now or at any time hereafter prescribing the maximum rates of
interest on loans and extensions of credit, and the laws of the State of Texas,
including, without limitation, Chapter 303 of the Texas Finance Code, as
amended, and any other statute of the State of Texas now or at any time
hereafter prescribing maximum rates of interest on loans and extensions of
credit, including, without limitation and to the extent available, Chapter 306
of the Texas Finance Code, provided however, that the parties hereto agree
pursuant to Texas Finance Code Section 346.004 that the provisions of Chapter
346 of Texas Finance Code, as amended, shall not apply to this Agreement, the
Advances or any other Loan Papers hereunder.
"Applicable Lender" has the meaning specified in Section 11.14 hereof.
"Applicable Margin" means, (a) with respect to LIBOR Advances and
Offshore Advances, 0.750% per annum which may be adjusted based on the below
listed situations, and (b) with respect to Base Rate Advances, 0.000% per annum,
in each case which may be adjusted based on the below listed situations. The
Applicable Margin will be adjusted as set forth in the last paragraph of this
definition to the following per annum percentages set forth in Column B below
applicable in the following situations set forth in Column A below:
<TABLE>
<CAPTION>
Column A Column B
-------- --------
Applicable Margin Percentages
----------------------------------
LIBOR Advances
Senior Unsecured Base Rate and Offshore
Debt Rating Advances Advances
---------------- --------- --------------
<S> <C> <C>
BB+/Ba1 or lower 0.000% 0.750%
</TABLE>
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<PAGE> 10
<TABLE>
<S> <C> <C>
BBB-/Baa3 0.000% 0.625%
BBB/Baa2 0.000% 0.500%
BBB+/Baa1 or higher 0.000% 0.400%
</TABLE>
On each date on which there is a change in the Borrower's Senior Unsecured Debt
Rating, the Applicable Margin payable by the Borrower shall be subject to
reduction or increase, as applicable and as set forth in the table above,
effective on such date. If the Senior Unsecured Debt Rating of the Borrower has
ratings differing (i) by up to one level, the highest Senior Unsecured Debt
Rating will apply and (ii) by more than one level, the Applicable Margin for the
level immediately below the highest Senior Unsecured Debt Rating will apply.
"Applicable Specified Percentage" means with respect to any Lender, in
the case of the Revolving Credit Loan or Revolving Credit Advances, such
Lender's Revolving Credit Specified Percentage, and in the case of the Working
Line Loan or Working Line Advances, such Lender's Working Line Loan Specified
Percentage, as applicable in the context used.
"Approved Offshore Currency" means (a) with respect to Offshore Advances
and Offshore Bid Rate Advances, the Euro, and the lawful currency of
Switzerland, England and Australia, provided that with respect to Offshore
Advances in the opinion of Determining Lenders of the Revolving Credit Lenders
in their aggregate discretion, such currency is at such time freely traded in
the offshore interbank foreign exchange markets and is freely transferable and
freely convertible into Dollars, (b) with respect to Swingline Advances, the
lawful currency of Mexico, Denmark, Norway, Sweden, Turkey, New Zealand,
Singapore, Taiwan, Thailand and Hong Kong, provided that in the opinion of the
Swingline Bank, in its sole discretion, such currency is at such time freely
traded in the offshore interbank foreign exchange markets and is freely
transferable and freely convertible into Dollars, and (c) with respect to any
Letter of Credit, any lawful currency described in clauses (a) and (b), and, at
the sole discretion of the Primary Issuing Bank, any other lawful currency.
"Approved Offshore Currency Payment Office" means the addresses of the
Administrative Agent specified on Schedule 1.2 hereto.
"Approved Offshore Currency Rate" means, for any Offshore Advance,
Offshore Bid Rate Advance or Swingline Advance to be made in an Approved
Offshore Currency for any Interest Period therefor, the interest rate per annum
(rounded upward to the nearest 1/100th of one percent) determined by the
Administrative Agent at approximately 11:00 a.m. (London time), on the date
which is two Business Days before the first day of such Interest Period, as the
offered quotations that appear on Telerate Screen 3740, 3750 and 3751 for
deposits in the applicable Approved Offshore Currency in the applicable
Interbank Market for such Approved Offshore Currency for a length of time
approximately equal to the Interest Period for the Offshore Advance, Offshore
Bid Rate Advance or Swingline Advance sought by the Borrower. If at least two
such offered quotations appear on Telerate Screen 3740, 3750 and 3751, the
Approved Offshore Currency Rate shall be the
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<PAGE> 11
arithmetic mean (rounded upward to the nearest 1/100th of one percent) of such
offered quotations, as determined by the Administrative Agent. If Telerate
Screen 3740, 3750 and 3751 is not available or has been discontinued, the
Approved Offshore Currency Rate shall be the rate per annum that the
Administrative Agent determines to be the arithmetic mean (rounded as aforesaid)
of the per annum rates of interest at which deposits in the applicable Approved
Offshore Currency in an amount approximately equal to the principal amount of,
and for a length of time approximately equal to the Interest Period for, the
Offshore Advance, Offshore Bid Rate Advance or Swingline Advance sought by the
Borrower are offered to the Administrative Agent in immediately available funds
in the applicable Interbank Market for such Approved Offshore Currency, on the
date which is two Business Days prior to the first day of an Interest Period.
"Assignment Agreement" has the meaning ascribed thereto in Section 11.6
hereof.
"Authorized Signatory" means such senior personnel of the Borrower as
may be duly authorized and designated in writing by the Borrower to execute
documents, agreements and instruments on behalf of the Borrower, and to request
Advances and Letters of Credit hereunder.
"Bank Affiliate" means the holding company of any Lender, or any wholly
owned direct or indirect subsidiary of such holding company or of such Lender.
"Base Rate Advance" means any Advance bearing interest at the Base Rate
Basis, including, without limitation, any Mandatory Revolver Advance.
"Base Rate Basis" means, for any day, a per annum interest rate equal to
the lesser of (a) the Highest Lawful Rate on such day, or (b) the Applicable
Margin plus the higher of (i) the sum of (A) 0.50% plus (B) the Federal Funds
Rate on such day or (ii) the Prime Rate on such day. The Base Rate Basis shall
be adjusted automatically as of the opening of business on the effective date of
each change in the Prime Rate or Federal Funds Rate, as the case may be, to
account for such change.
"Bid Rate Advances" means Bid Rate Advances - Revolving Credit and Bid
Rate Advances Working Line, and "Bid Rate Advance" means any Bid Rate Advance -
Revolving Credit or Bid Rate Advance - Working Line, as applicable under the
circumstances used.
"Bid Rate Advance Request" means any certificate signed by an Authorized
Signatory requesting Bid Rate Advances hereunder, which certificate shall be
substantially in the form of Exhibit N hereto.
"Bid Rate Advance - Revolving Credit" means an Advance under the
Revolving Credit Loan in Dollars or Approved Offshore Currencies pursuant to
Section 2.1(a)(iii) hereof, the interest rate on which is determined by
agreement between the Borrower and the Lender making such Advance, which shall
include Offshore Bid Rate Advances made under the Revolving Credit Loan.
"Bid Rate Advance - Working Line" means an Advance under the Working
Line Loan in Dollars pursuant to Section 2.1(b)(ii) hereof, the Margin on which
is determined by agreement between the Borrower and the Lender making such
Advance.
"Bid Rate Borrowing - Revolving Credit" - means any bid rate borrowing
under the Revolving Credit Loan, which shall include borrowings for Offshore Bid
Rate Advances made under the Revolving Credit Loan.
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<PAGE> 12
"Bid Rate Borrowing - Working Line" - means any bid rate borrowing under
the Working Line Loan.
"Bid Rate Borrowings" - means Bid Rate Borrowings - Revolving Credit and
Bid Rate Borrowings - Working Line, and "Bid Rate Borrowing" means any Bid Rate
Borrowing - Revolving Credit or Bid Rate Borrowing - Working Line, as applicable
in the context used.
"Bid Rate Notes" means Bid Rate Notes - Revolving Credit and Bid Rate
Notes - Working Line, and "Bid Rate Note" means any Bid Rate Note - Revolving
Credit or Bid Rate Note - Working Line, as applicable under the circumstances
used.
"Bid Rate Note - Revolving Credit" means any promissory note of the
Borrower evidencing Bid Rate Advances - Revolving Credit requested by a Lender
in accordance with the terms of Section 2.10(g) hereof, substantially in the
form of Exhibit D hereto, together with any extension, renewal or amendment
thereof or substitution therefor.
"Bid Rate Note - Working Line" means any promissory note of the Borrower
evidencing Bid Rate Advances - Working Line requested by a Lender in accordance
with the terms of Section 2.10(g) hereof, substantially in the form of Exhibit E
hereto, together with any extension, renewal or amendment thereof or
substitution therefor.
"Borrower" means Clear Channel Communications, Inc., a Texas
corporation.
"Borrowing" means either a Revolving Credit Borrowing, any borrowing
that is a Mandatory Revolver Advance, a Swingline Borrowing, an Offshore
Borrowing, a Bid Rate Borrowing or a Working Line Borrowing.
"Business Day" means any day other than a Saturday, Sunday or other day
on which commercial banks in (a) Dallas, Texas are authorized or required by
Applicable Law to close or (b) New York City are authorized or required by
applicable law to close or, and, if the applicable Business Day relates to:
(i) a LIBOR Advance, a domestic business day in London, England
(including dealings in United States dollar deposits);
7
<PAGE> 13
(ii) an Offshore Advance or Offshore Bid Rate Advance denominated in
Dollars, any such day on which dealings are carried on in the applicable
offshore Dollar market;
(iii) any borrowing for an Offshore Advance or Offshore Bid Rate Advance
in Euros, any such day which is:
(A) for payments or purchases of the Euro, a TARGET Business Day;
and
(B) for all other purposes, including without limitation the
giving and receiving of notices hereunder, a TARGET Business Day on
which banks are generally open for business in London, Frankfurt and in
any other principal financial center as the Administrative Agent may
from time to time determine for this purpose; and
(iv) any borrowing for an Offshore Advance, Offshore Bid Rate Advance or
Swingline Advance in an Approved Offshore Currency other than the Euro, a day on
which commercial banks are open for foreign exchange business in London,
England, and on which dealings in the relevant Approved Offshore Currency are
carried on in the applicable offshore foreign exchange interbank market in which
disbursement of or payment in such Approved Offshore Currency will be made or
received hereunder.
"Calculation Date" means (i) the last Business Day of each fiscal
quarter, (ii) if a Default exists or an Event of Default exists, at the
discretion of the Administrative Agent or the Revolving Credit Lenders, or (iii)
with respect to any determination related to a Letter of Credit, any Business
Day at the discretion of the Primary Issuing Bank.
"Capital Expenditures" means expenditures for the purchase of tangible
assets of long-term use which are capitalized in accordance with GAAP; provided,
however, Capital Expenditures shall not include assets acquired through trade
without any expenditure of cash, such trade capital expenditures not to exceed
$25,000,000 in aggregate value per year, such valuation to be determined using
the lesser of the fair market value of assets received or the value of air-time
run in exchange for the assets received.
"Capital Stock" means, as to any Person, the equity interests in such
Person, including, without limitation, the shares of each class of capital stock
of any Person that is a corporation and each class of partnership interests
(including, without limitation, general, limited and preference units) in any
Person that is a partnership.
"Capitalized Lease Obligations" means that portion of any obligation of
the Borrower or any Restricted Subsidiary as lessee under a lease which at the
time would be required to be capitalized on a balance sheet prepared in
accordance with GAAP.
"CCC-Houston" means CCC-Houston AM, Ltd., a Texas limited partnership
and a Subsidiary of the Borrower.
8
<PAGE> 14
"Change in Control" means the occurrence of any of the following: (a)
the sale, lease or transfer of all or substantially all of the Borrower's assets
to any Person or group (as such term is used in Section 13(d)(3) of the
Securities Exchange Act of 1934, as amended), or (b) the adoption of a plan
relating to the liquidation or dissolution of the Borrower or (c) (i) the
acquisition by any Person or group (as such term is used in Section 13(d)(3) of
the Securities Exchange Act of 1934, as amended), other than Permitted Holders,
of a direct or indirect majority in interest (more than 50%) of the voting power
of the Capital Stock of the Borrower by way of merger or consolidation or
otherwise except transactions in which more than 50% of the voting power of the
common stock of the transferee are held by the Persons who were holders of the
voting power of such common stock prior to such transfer and (ii) the first day
on which a majority of the members of the board of directors of the Borrower are
not Continuing Directors.
"Closing Date" means the date of this Agreement.
"Code" means the Internal Revenue Code of 1986, as amended.
"Collateral Release Date" means, (a) when applicable to any AMFM Entity
or any Intercompany Notes executed by any AMFM Entity, that date upon which all
public indebtedness of all AMFM Entities in the aggregate is less than or equal
to the AMFM Reduced Public Debt Permitted Amount, and (b) when applicable to any
SFX Entity or any Intercompany Notes executed by any SFX Entity, that date upon
which all public indebtedness of all SFX Entities in the aggregate is less than
or equal to the SFX Reduced Public Debt Permitted Amount.
"Commitment Fees" means the Revolving Credit Commitment Fee and the
Working Line Commitment Fee.
"Commitments" means the Revolving Credit Commitment and the Working Line
Commitment, and "Commitment" means either the Revolving Credit Commitment or the
Working Line Commitment, as applicable in the context used.
"Communications Act" means, collectively, the Communications Act of
1934, as amended by the Telecommunications Act of 1996, and as further amended,
and the rules and regulations promulgated thereunder, as from time to time in
effect.
"Confirmation of Bid" means any certificate executed by an Authorized
Signatory confirming the terms of its Bid Rate Advance, which certificate shall
be in substantially the form of Exhibit O hereto.
"Continuing Directors" means, as of any date of determination, any
member of the board of directors of the Borrower who (a) was a member of such
board of directors on the date hereof or (b) was nominated for election or
elected to such board of directors with the affirmative vote of a majority of
the Continuing Directors who were members of such board of directors at the time
of such nomination or election.
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<PAGE> 15
"Control" or "Controlled By" or "Under Common Control" means possession,
directly or indirectly, of power to direct or cause the direction of management
or policies (whether through ownership of voting securities, by contract or
otherwise); provided, however, that (a) in the event that no one Person owns
more than 50% of the outstanding Capital Stock of a corporation or entity, any
Person which beneficially owns, directly or, by contract or law, indirectly, 10%
or more (in number of votes) of the securities having ordinary voting power for
the election of directors (or other managing authority) of such corporation or
entity shall be conclusively presumed to control such corporation or entity or
(b) in the event that one Person owns greater than 50% of the outstanding
Capital Stock of a corporation or entity, any Person which beneficially owns,
directly or, by contract or law, indirectly, greater than 20% or more (in number
of votes) of the securities having ordinary voting power for the election of
directors (or other managing authority) of such corporation or entity shall be
conclusively presumed to control such corporation.
"Controlled Group" means, as to any Person, all members of a controlled
group of corporations and all trades or businesses (whether or not incorporated)
which are under common control with such Person and which, together with such
Person, are treated as a single employer under Section 414(b), (c), (m) or (o)
of the Code; provided, however, that the Subsidiaries of the Borrower shall be
deemed to be members of the Borrower's Controlled Group, and the Borrower and
any other entities (whether incorporated or not incorporated) which are under
common Control with the Borrower and which, together with the Borrower, are
treated as a single employer under Section 414(b), (c), (m) or (o) of the Code,
shall be deemed to be members of the Borrower's Controlled Group on and after
the Closing Date.
"Conversion Date" means, with respect to the Working Line Loan, the date
upon which (if any) the Working Line Loan converts from a revolving loan to a
term loan, in accordance with the terms of Section 2.17(b) hereof.
"Conversion Option" means, with respect to the Working Line Loan, the
option that may be exercised by the Borrower on the Option Date or the Extension
Final Maturity in accordance with the terms of Section 2.17(b) hereof, to
convert the Working Line Loan to a Term loan.
"Debt for Borrowed Money" means, with respect to any Person or Persons
at any date, without duplication, all indebtedness of such Person or Persons
that constitutes (a) all obligations of such Person or Persons for borrowed
money, or in respect of letters of credit (or applications for letters of
credit) or other similar instruments, (b) obligations of such Person or Persons
evidenced by bonds, debentures, notes or other similar instruments, excluding
any surety, bid, appeal or performance bonds, (c) obligations of such Person or
Persons to pay the deferred purchase price of property or services, but only if
such deferral is in excess of 120 days, provided that, trade accounts payable
and other accrued liabilities arising in the ordinary course of business shall
not be considered Debt for Borrowed Money, (d) Capitalized Lease Obligations of
such Person or Persons, (e) installment payment non-compete agreements for such
Person or Persons (f) debt evidenced by Interest Rate Protection Agreements and
(g) Guaranties relating to obligations of another Person (other than the
Borrower or a Restricted Subsidiary of the Borrower with respect to indebtedness
of another Restricted Subsidiary or the Borrower) of the type described in (a)
through (f) above.
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<PAGE> 16
"Debtor Relief Law" means any applicable liquidation, conservatorship,
bankruptcy, moratorium, rearrangement, insolvency, reorganization or similar
debtor relief law affecting the rights of creditors generally from time to time
in effect.
"Default" means an Event of Default and/or any of the events specified
in Section 8.1, regardless of whether there shall have occurred any passage of
time or giving of notice that would be necessary in order to constitute such
event an Event of Default.
"Default Rate" means a simple per annum interest rate equal to the
lesser of (a) the Highest Lawful Rate, or (b) the sum of the Base Rate Basis
plus two percent.
"Determining Lenders" means, a group of Lenders on any date of
determination that meet or exceed each of the following requirements: (a) with
respect to the Revolving Credit Lenders, (i) any combination of the Revolving
Credit Lenders having at least 51% of the aggregate amount of the Revolving
Credit Advances and Reimbursement Obligations then outstanding, or (ii) if there
are no Revolving Credit Advances or Reimbursement Obligations outstanding
hereunder, any combination of Revolving Credit Lenders whose Revolving Credit
Specified Percentages aggregate at least 51%, and (b) with respect to the
Working Line Lenders, (i) any combination of the Working Line Lenders having at
least 51% of the aggregate amount of the Working Line Advances then outstanding,
or (ii) if there are no Working Line Advances outstanding hereunder, any
combination of Working Line Lenders whose Working Line Specified Percentages
aggregate at least 51%.
"Dividend" means, as to any Person, (a) any declaration or payment of
any dividend (other than a dividend paid solely in shares of the common stock of
such Person) on, or the making of any distribution, loan, advance or Investment
to or in any holder of, any shares of Capital Stock of such Person (other than
salaries and bonuses paid in the ordinary course of business), or (b) any
purchase, redemption, or other acquisition or retirement for value of any shares
of Capital Stock of such Person; provided, however, that the acquisition of
shares of Capital Stock of such Person for the purpose of acquiring a Subsidiary
(whether by merger, consolidation, asset acquisition, stock acquisition, or
otherwise) shall not be deemed a Dividend if (a) such shares are used as a
portion or all of the purchase price for the acquisition of a Subsidiary within
a period of ninety days from the date the initial shares of such Capital Stock
were acquired and (b) except with respect to the acquisition of SFX and AMFM,
such Person shall have given the Administrative Agent prior written notice of
its intention to acquire such Capital Stock for the purpose of acquiring a
Subsidiary.
"Dollar Equivalent" means (a) in relation to any amount denominated in
Dollars, the amount thereof and (b) in relation to an amount denominated in an
Approved Offshore Currency, the amount of such Dollars required to purchase the
relevant stated amount of Approved Offshore Currency at the Exchange Rate on the
date of determination. For the purposes of this Agreement with respect to any
Borrowing, unless otherwise expressly stated herein, the Dollar Equivalent
principal amount of any Advance shall be determined on the date on which the
Notice of Borrowing is received with respect thereto, provided, however, that
the Notice of Borrowing is received by 10 a.m., Dallas, Texas time, at least
four days prior to the requested Borrowing, and shall be recalculated on each
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<PAGE> 17
Calculation Date and on the date on which a Notice of Continuation/Conversion is
received with respect thereto.
"Dollar Equivalent Excess" has the meaning specified in Section 2.5(b)
hereof.
"Dollars" means the lawful currency of the United States of America.
"Eligible Assignee" means (a) a Lender, (ii) a Bank Affiliate, and (iii)
any other financial institution approved by the Administrative Agent and, unless
an Event of Default has occurred and is continuing at the time any assignment is
effected in accordance with Section 11.6 hereof, the Borrower, such approval not
to be unreasonably withheld or delayed by the Borrower or the Administrative
Agent and such approval to be deemed given by the Borrower if no objection is
received by the assigning Lender and the Administrative Agent from the Borrower
within two Business Days after notice of such proposed assignment has been
provided by the assigning Lender to the Borrower; provided, however, that
neither the Borrower nor any of its Affiliates shall qualify as an Eligible
Assignee.
"Eller" means Eller Media Corporation, a Delaware corporation, formerly
known as EMC Group, Inc., formerly Eller Media Company.
"EMU" means Economic and Monetary Union as contemplated in the Treaty.
"EMU Legislation" means (a) the Treaty and (b) legislative measures of
the European Council for the introduction of, changeover to, or operation of,
the Euro, in each case as amended or supplemented from time to time.
"Equity" means shares of Capital Stock, or options, warrants or any
other right to subscribe for or otherwise acquire Capital Stock, of the Borrower
or any Subsidiary.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time, and any regulation promulgated thereunder.
"ERISA Event" means, with respect to the Borrower and its Subsidiaries,
(a) a Reportable Event (other than a Reportable Event not subject to the
provision for 30-day notice to the PBGC under regulations issued under Section
4043 of ERISA), (b) the withdrawal of any such Person or any member of its
Controlled Group from a Plan during a plan year in which it was a "substantial
employer" as defined in Section 4001(a)(2) of ERISA, (c) the filing of a notice
of intent to terminate under Section 4041 of ERISA, (d) the institution of
proceedings to terminate a Plan by the PBGC, (e) the failure to make required
contributions which could result in the imposition of a lien under Section 412
of the Code or Section 302 of ERISA, or (f) any other event or condition which
might reasonably be expected to constitute grounds under Section 4042 of ERISA
for the termination of, or the appointment of a trustee to administer, any Plan
or the imposition of any liability under Title IV of ERISA other than PBGC
premiums due but not delinquent under Section 4007 of ERISA.
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<PAGE> 18
"Euro" means the single currency of Participating Member States
introduced in accordance with the provisions of Article 109(l)4 of the Treaty
and, in respect of all payments to be made under this Agreement in euros, means
immediately available, freely transferable funds.
"Event of Default" means any of the events specified in Section 8.1,
provided that any requirement for notice or lapse of time has been satisfied.
"Exchange Rate" means with respect to any Approved Offshore Currency on
a particular date, the rate at which such Approved Offshore Currency may be
exchanged into Dollars, as set forth on such date on the Reuters currency page
for exchanges of Dollars into such Approved Offshore Currency. In the event that
such rate does not appear on any Reuters currency page, the Exchange Rate with
respect to such Approved Offshore Currency shall be determined by reference to
such other publicly available service for displaying exchange rates as may be
agreed upon by the Administrative Agent and the Borrower or, in the absence of
such agreement, such Exchange Rate shall instead be the arithmetic mean of the
spot rates of exchange for the Administrative Agent and two other money center
banks in the interbank market where the foreign currency exchange operations of
the Administrative Agent and such two other money center banks in respect of
such Approved Offshore Currency are then being conducted, at or about 10:00 a.m.
local time in the offices of such money center banks, at such date for the
purchase of Dollars with such Approved Offshore Currency, for delivery two
Business Days later; provided, however, that if at the time of any such
determination, for any reason, no such spot rate is being quoted by the
Administrative Agent, the Administrative Agent may use any reasonable method it
deems applicable to determine its respective spot rate, and such determination
shall be prima facie evidence of such rate.
"Extension Final Maturity" means, with respect to the Working Line Loan,
the earlier of (a) the Maturity Date and (b) that date which is 364 days after
the most recent Option Date on which the Borrower and the Facility Determining
Lenders agreed in writing to an Extension Option.
"Extension Option" means, with respect to the Working Line Loan, that
option that may be exercised by the Borrower and agreed to by the Facility
Determining Lenders in accordance with the terms of Section 2.17 hereof, to
extend the Working Line Loan an additional 364 day period beyond the most recent
Option Date.
"Facility Determining Lenders" means, on any date of determination, (a)
with respect to the issues only affecting the Revolving Credit Lenders, (i) any
combination of the Revolving Credit Lenders having at least 51% of the aggregate
amount of the Revolving Credit Advances and Reimbursement Obligations then
outstanding, or (ii) if there are no Revolving Credit Advances or Reimbursement
Obligations outstanding hereunder, any combination of Revolving Credit Lenders
whose Revolving Credit Specified Percentages aggregate at least 51%, and (b)
with respect to the issues only affecting Working Line Lenders, (i) any
combination of the Working Line Lenders having at least 51% of the aggregate
amount of the Working Line Advances then outstanding, or (ii) if there are no
Working Line Advances outstanding hereunder, any combination of Working Line
Lenders whose Working Line Specified Percentages aggregate at least 51%.
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<PAGE> 19
"FCC" means the Federal Communications Commission, or any governmental
agency succeeding to the functions thereof.
"Federal Funds Rate" means, for any day, the rate per annum (rounded
upwards if necessary, to the nearest 1/100th of 1%) equal to the weighted
average of the rates on overnight Federal funds transactions with members of the
Federal Reserve System arranged by Federal funds brokers on such day, as
published by the Federal Reserve Bank of New York on the Business Day next
succeeding such day, provided that (a) if such day is not a Business Day, the
Federal Funds Rate for such day shall be such rate on such transactions on the
next preceding Business Day as so published on the next succeeding Business Day,
and (b) if no such rate is so published on such next succeeding Business Day,
the Federal Funds Rate for such day shall be the average rate quoted to the
Administrative Agent on such day on such transactions as determined by
Administrative Agent.
"Fee Letters" means those certain fee letters executed by the Borrower
and the Administrative Agent or the Borrower and the Syndication Agent, or such
other fee letters among the Borrower and any Lenders from time to time executed
in connection herewith, and all replacements, amendments, substitutions and
additions thereto.
"GAAP" means generally accepted accounting principles applied on a
consistent basis, set forth in the Opinions of the Accounting Principles Board
of the American Institute of Certified Public Accountants, or their successors
which are applicable in the circumstances as of the date in question. The
requisite that such principles be applied on a consistent basis shall mean that
the accounting principles observed in a current period are comparable in all
material respects to those applied in a preceding period.
"Guaranty" or "Guaranteed", as applied to an obligation, means and
includes (a) a guaranty, direct or indirect, in any manner, of any part or all
of such obligation, and (b) an agreement, direct or indirect, contingent or
otherwise, the practical effect of which is to assure in any way the payment or
performance (or payment of damages in the event of nonperformance) of any part
or all of such obligation, including, without limiting the foregoing, any
reimbursement obligations with respect to amounts which may be drawn by
beneficiaries of outstanding letters of credit, but excluding endorsement of
checks, drafts and other instruments in the ordinary course of business.
"Highest Lawful Rate" shall mean at the particular time in question the
maximum rate of interest which, under Applicable Law, any Lender is then
permitted to charge on the Obligations. If the maximum rate of interest which,
under Applicable Law, any Lender is permitted to charge on the Obligations shall
change after the date hereof, the Highest Lawful Rate shall be automatically
increased or decreased, as the case may be, from time to time as of the
effective time of each change in the Highest Lawful Rate without notice to the
Borrower. For purposes of determining the Highest Lawful Rate under Applicable
Law, the indicated rate ceiling shall be the lesser of (a)(i) the "weekly
ceiling", as that expression is defined in Section 303.003 of the Texas Finance
Code, as amended, or (ii) if available in accordance with the terms thereof and
at Administrative Agent's option after notice to the Borrower and otherwise in
accordance with the terms of Section 303.103 of the Texas Finance Code, as
amended, the "annualized ceiling" and (b)(i) if the amount outstanding under
this
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<PAGE> 20
Agreement is less than $250,000, twenty-four percent (24%) per annum, or (ii) if
the amount under this Agreement is equal to or greater than $250,000,
twenty-eight (28%) per annum.
"Increased Letter of Credit Costs" has the meaning set forth in Section
2.16(d) hereof.
"Increased Letter of Credit Costs Retroactive Effective Date" has the
meaning set forth in Section 2.16(d) hereof.
"Increased Letter of Credit Costs Set Date" has the meaning set forth in
Section 2.16(d) hereof.
"Indemnified Matters" has the meaning ascribed to it in Section 5.10(a)
hereof.
"Indemnitees" has the meaning ascribed to it in Section 5.10(a) hereof.
"Institutional Debt" means Debt for Borrowed Money which may be raised
by the Borrower in the private placement or public debt markets.
"Intercompany Notes" means those promissory notes payable to the
Borrower or any Restricted Subsidiary from any AMFM/SFX Obligor, in each case
evidencing Investments made by the Borrower or any Restricted Subsidiary in such
AMFM/SFX Obligor, each in the form of Exhibit I hereto.
"Interest Expense" means, for any period, determined in accordance with
GAAP on a consolidated basis for the Borrower and the Restricted Subsidiaries,
the gross interest expense (after giving effect to interest rate swaps, caps,
collars and hedges) for such period on Total Debt, minus the sum of (a) interest
income for such period, plus (b) to the extent not included in the determination
of such gross interest expense, upfront costs or fees expended during such
period in connection with the execution and delivery of documentation relating
to the Loan Papers, provided that, if any upfront costs and fees have been
previously included in a prior period, such costs and fees shall be deducted in
determining Interest Expense for such period. If during any period for which
Interest Expense is being determined the Borrower or any of its Subsidiaries
shall have made an Acquisition or asset disposition, then, for all purposes of
this Agreement, Interest Expense shall be adjusted for the relevant period on a
pro forma basis as if the relevant Acquisition or asset disposition had been
made or consummated on the first day of such period and assuming (i) in the case
of an Acquisition, the principal amount of any Debt for Borrowed Money incurred
in connection with such Acquisition had been outstanding for the entire duration
of such period at the rate of interest applicable to such Debt for Borrowed
Money at the time of incurrence of such Debt for Borrowed Money or (ii) in the
case of any asset disposition, any Debt for Borrowed Money which on a pro forma
basis has been repaid or which is no longer an obligation of the Borrower or any
of its Subsidiaries as a result of such asset disposition had been repaid or was
not an obligation of the Borrower or any of its Subsidiaries as of the first day
of such period.
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"Interest Period" means for (a) any LIBOR Advance, the period beginning
on the day the Advance is made and ending one, two, three, six or, subject to
each Lender's good faith determination of availability, twelve months thereafter
(as the Borrower shall select), provided that, with respect to the LIBOR
Advances under the Working Line Loan, Interest Periods shall never be more than
six months, (b) any Offshore Advance, the period beginning on the day the
Advance is made and ending one, two, or three months thereafter (as the Borrower
shall select), (c) any Bid Rate Advance, the period commencing on the date of
such Advance and ending one, two, three or six months thereafter (as the
Borrower shall select) and (d) any Swingline Advance (i) to be made in Dollars,
the period commencing on the date of such Swingline Advance and ending not less
than 3 calendar days nor more than 90 days thereafter (as the Borrower shall
select) and (ii) to be made in an Approved Offshore Currency, the period
beginning on the day the Advance is made and ending one, two, or three months
thereafter (as the Borrower shall select).
Notwithstanding the foregoing, if (i) any Interest Period would end on a
day which shall not be a Business Day, such Interest Period shall be extended to
the next succeeding Business Day unless, with respect to LIBOR Advances,
Offshore Advances and Swingline Advances made in Approved Offshore Currencies
only, such next succeeding Business Day would fall in the next calendar month,
in which case such Interest Period shall end on the next preceding Business Day
and (ii) no Interest Period may be selected for any Borrowing that ends later
than (A) the Maturity Date, for Advances under the Revolving Credit Loan, and
(B) the Option Date or the Extension Final Maturity, as applicable, for Advances
made under the Working Line Loan. Interest shall accrue from and including the
first day of an Interest Period to but excluding the last day of such Interest
Period.
"Interest Rate Protection Agreement" means an interest rate swap, cap,
collar or similar interest rate protection agreement between the Borrower or any
Restricted Subsidiary of the Borrower and any Lender or any Bank Affiliate.
"Investment" means any direct or indirect purchase or other acquisition
of, or beneficial interest in, Capital Stock or other securities of any other
Person, or any direct or indirect loan, advance (other than advances to
employees for moving and travel expenses, drawing accounts and similar
expenditures in the ordinary course of business) or capital contribution to, or
investment in any other Person, including without limitation the incurrence or
sufferance of Debt for Borrowed Money or accounts receivable of any other Person
that are not current assets or do not arise in the ordinary course of business,
provided that investments constituting Acquisitions shall not be included in
this definition of "Investment", and such definition shall exclude endorsement
of checks, drafts and other instruments in the ordinary course of business.
"Invitation to Bid" means any certificate executed by the Administrative
Agent notifying each Lender of the Borrower's Bid Rate Advance Request, which
certificate shall be in substantially the form of Exhibit P hereto.
"Issuing Banks" means the Primary Issuing Bank and the Secondary Issuing
Banks, and "Issuing Bank" means any of the Primary Issuing Bank or Secondary
Issuing Banks, as applicable in the context used.
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<PAGE> 22
"Jacor Bond Debt and Option Notes" means those 10 and 1/8% Senior
Subordinated Notes due 2006, 9 and 3/4% Senior Subordinated notes due 2006, 8
and 3/4% Senior Subordinated notes due 2007 and 8% Senior Subordinated notes due
2010, Liquid Yield Option Notes due 2011 and those Liquid Yield Option Notes due
2018, in each case issued by Jacor Communications Company, Jacor Communications,
Inc. or a predecessor.
"Judgment Currency" has the meaning specified in Section 11.14 hereof.
"L/C Cash Collateral Account" has the meaning specified in Section
2.16(g) hereof.
"L/C Related Documents" has the meaning specified in Section 2.16(e)
hereof.
"Lender" means each financial institution or fund shown on the signature
pages hereof so long as such financial institution or fund maintains any portion
of any Commitment or is owed any part of the Obligations (including the
Administrative Agent in its individual capacity) or which hereafter becomes a
party hereto pursuant to Section 2.18 hereof, and each Eligible Assignee that
hereafter becomes party hereto pursuant to Section 11.6 hereof.
"Lending Office" means, with respect to a Lender, the office designated
as its office for LIBOR Advances, its Offshore Lending Office, and its office
for Base Rate Advances, each as described on Schedule 1.2 attached hereto, and
such other office of the Lender or any of its affiliates hereafter designated by
notice to the Borrower and the Administrative Agent.
"Letter of Credit" has the meaning specified in Section 2.16(a) hereof.
"Letter of Credit Agreement" has the meaning specified in Section
2.16(b) hereof.
"Letter of Credit Facility" has the meaning specified in Section 2.16(a)
hereof.
"Leverage Ratio" means, for any date of determination, the ratio of
Total Debt as of the date of determination to Operating Cash Flow for the four
most recently ended fiscal quarters preceding such date of determination.
"LIBOR Advance" means any Revolver Advance or Working Advance which the
Borrower requests to be made as a LIBOR Advance or which is reborrowed as a
LIBOR Advance, in accordance with the provisions of Section 2.2 hereof.
"LIBOR Basis" means a simple per annum interest rate equal to the lesser
of (a) the Highest Lawful Rate, or (b) the sum of the LIBOR Rate plus the
Applicable Margin. The LIBOR Basis shall, with respect to LIBOR Advances with
Interest Periods in excess of six months, be subject to premiums assessed by
each Lender, which are payable directly to each Lender.
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"LIBOR Rate" means, for any LIBOR Advance for any Interest Period
therefor, the rate per annum (rounded upwards, if necessary, to the nearest
one-one hundredth (1/100th) of one percent (1%)) appearing on Telerate Page 3750
(or any successor page) as the London interbank offered rate for deposits in
United States dollars at approximately 11:00 a.m. (London time) two Business
Days prior to the first day of such Interest Period. If for any reason such rate
is not available, the term "LIBOR Rate" shall mean, for any LIBOR Advance for
any Interest Period therefor, the rate per annum (rounded upwards, if necessary,
to the nearest one-one hundredth (1/100th) of one percent (1%)) appearing on
Reuters Screen LIBO page as the London interbank offered rate for deposits in
United States dollars at approximately 11:00 a.m. (London time) two Business
Days prior to the first day of such Interest Period for a term comparable to
such Interest Period; provided, however, if more than one rate is specified on
Reuters Screen LIBO Page, the applicable rate shall be the arithmetic mean of
all such rates.
"Lien" means, with respect to any property, any mortgage, lien, pledge,
collateral assignment, hypothecation, charge, security interest, title retention
agreement, levy, execution, seizure, attachment, garnishment or other
encumbrance of any kind in respect of such property, whether or not choate,
vested or perfected.
"Like-Kind Exchange" means the disposition by the Borrower or any
Restricted Subsidiary of certain of their assets, and their acquisition of like
assets, in each case in order to effectuate a like-kind exchange under the Code
and avoid the payment by such Person of federal taxes on the proceeds of the
asset sales.
"Limited Subsidiary Guaranty" means each Limited Subsidiary Guaranty, in
the form of Exhibit F hereto, delivered to the Administrative Agent and
guaranteeing a portion of the Obligations in a maximum aggregate amount for all
such Limited Subsidiary Guaranties not to exceed the Limited Subsidiary Guaranty
Amount, executed from time to time by an AMFM/SFX Obligor, in accordance with
the terms of Section 5.14 hereof.
"Limited Subsidiary Guaranty Amount" means, on any date of determination
after the Acquisition of AMFM or SFX, respectively, and in each case until their
respective Collateral Release Date, an amount equal to the lesser of (a) the
excess, if any, of (i) the aggregate principal amount (which such amount shall
include accretion) of all outstanding and unpaid public and/or high yield
indebtedness owed by all AMFM Entities or all SFX Entities, as applicable, over
(ii) the principal face amount of all Pledged Intercompany Notes of the AMFM/SFX
Obligors, as applicable and (b) the excess, if any, of (i) the aggregate amount
of all Investments made in all AMFM/SFX Obligors by the Borrower and its
Restricted Subsidiaries(other than AMFM Entities and SFX Entities) for the
period from the Closing Date until such date of determination, over (ii) the
aggregate principal amount owing under all Pledged Intercompany Notes as of such
date, provided that the Limited Subsidiary Guaranty Amount shall never be less
than $1,000,000,000 and shall never be more than the greatest amount that would
still permit the issuer under each of the AMFM Entity and SFX Entity indentures
for public indebtedness to incur $1.00 of additional indebtedness (other than
indebtedness specifically permitted thereunder) after giving effect to the
aggregate principal amount then outstanding of all Intercompany Notes executed
by such AMFM Entity or SFX Entity, as
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<PAGE> 24
applicable, and all other indebtedness then outstanding which was permitted to
be incurred under such indentures prior to the date of the SFX Acquisition or
AMFM Acquisition and this Agreement, as applicable.
"Loan Papers" means this Agreement, the Revolving Credit Notes (if any),
the Bid Rate Notes (if any), the Swingline Notes (if any), the Working Line
Notes (if any), each Limited Subsidiary Guaranty, each pledge agreement pledging
a Pledged Intercompany Note, the Fee Letters, each Interest Rate Protection
Agreement, and any other document or agreement executed or delivered from time
to time by the Borrower, any Subsidiary or any other Person in connection
herewith or as security for the Obligations, with, or on behalf of, any Lender
or any Bank Affiliate.
"Loans" means the Revolving Credit Loan and the Working Line Loan, and
"Loan" means either of the Revolving Credit Loan or the Working Line Loan, as
applicable in the context used.
"Local Marketing Agreement" means any time brokerage agreements, local
market affiliation agreements or related or similar agreements entered into
between the Borrower or any Subsidiary and any other Person, as any of the above
may be amended, substituted, replaced or modified.
"Mandatory Revolver Advance" means a Revolver Advance made (a) to repay
either (i) an Offshore Advance pursuant to Section 2.2(e)(ii) hereof or (ii) a
Swingline Advance pursuant to Section 2.2(h) hereof, as appropriate, (b)
pursuant to Section 2.3(f) hereof, or (c) pursuant to Section 9.7 hereof.
"Margin" means, as to any Bid Rate Advance that is (a) an Offshore Bid
Rate Advance, the margin (expressed as a percentage rate per annum in the form
of a decimal to no more than four decimal places) quoted by any Lender offering
a Bid Rate Advance that is an Offshore Bid Rate Advance, pursuant to Section
2.2(i)(iii) hereof to be added or subtracted from the Approved Offshore Currency
Rate or the Offshore Dollar Rate, as the case may be, to determine the interest
rate applicable to such Advance or (b) a domestic Advance made in Dollars, the
margin (expressed as a percentage rate per annum in the form of a decimal to no
more than four decimal places) quoted by any Lender offering a Bid Rate Advance
that is a domestic Advance made in Dollars, pursuant to Section 2.2(i)(iii)
hereof to be added or subtracted from the LIBOR Rate, as the case may be, to
determine the interest rate applicable to such Advance.
"Material Adverse Effect" means any act or circumstance or event that
(a) causes a Default, or (b) otherwise could reasonably be expected to be
material and adverse to the business, consolidated assets, liabilities,
financial condition or results of operations of the Borrower and its Restricted
Subsidiaries, together taken as a whole.
"Material Subsidiaries" means, for purposes of Article 3, the Borrower,
Clear Channel Broadcasting (Nevada), Clear Channel Broadcasting Licensing
(Nevada), Eller Media, Jacor Communications Company, AMFM, Inc, Capstar
Broadcasting Partners, L.P., AMFM Operating, Inc., Katz Media Corp., SFX, More
Group PLC, and Dauphin (OTA).
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"Maturity Date" means August 30, 2005.
"Maximum Amount" means the maximum amount of interest which, under
Applicable Law, the Lenders are permitted to charge on the Obligations.
"Maximum Pledged Intercompany Note Amount" means an amount (on any date
of determination, but adjusted quarterly as set forth below) equal to the lesser
of (a) the aggregate principal amount (which such amount shall include
accretion) of all outstanding and unpaid public and/or high yield indebtedness
owed by all AMFM Entities and all SFX Entities, and (b) 14.5% of the Borrower's
Consolidated Stockholders' Equity as reflected in the most recent audited
balance sheet included in the Annual Shareholders' report of the Borrower,
determined and changed as follows: Subsection (a) in this definition of Maximum
Pledged Intercompany Note Amount will be determined and adjusted quarterly based
on financial information delivered to the Administrative Agent and Lenders in
accordance with the terms of Section 6.1 hereof, and subsection (b) in this
definition of Maximum Pledged Intercompany Note Amount will be determined and
adjusted annually based on financial information delivered to the Administrative
Agent and Lenders in accordance with the terms of Section 6.2 hereof.
"Moody's" means Moody's Investors Services, Inc.
"More Group" means the More Group Plc, a company incorporated in England
(number 309019) of 33 Golden Square, London, W1R 3PA.
"More Group Credit Facility" means that certain unsecured multi-currency
credit facility among Barclays Bank Plc, Bank of Scotland, A1B Group Plc,
Svenska Handelsbank AB, Skandinaviska Engkilda Banken AB, The Chase Manhattan
Bank (as Lenders, as such Lenders may be replaced from time to time) and More
Group, as parent, borrower and guarantor, as such may be amended, modified,
supplemented, refinanced or replaced from time to time, provided that after the
Closing Date (a) no such action shall result in any term being materially more
restrictive than the terms of the More Group Credit Facility documentation
existing on the date hereof taken as a whole, and (b) no such action shall
result in any change that is both material and adverse to the interests of the
Lenders.
"Multiemployer Plan" means, as to any Person, at any time, a
"multiemployer plan" within the meaning of Section 4001(a)(3) of ERISA and to
which such Person or any member of its Controlled Group is making, or is
obligated to make contributions or has made, or been obligated to make,
contributions.
"Necessary Authorization" means any license, permit, consent, approval
or authorization from, or any filing or registration with, any governmental or
other regulatory authority (including without limitation the FCC) necessary or
appropriate to enable the Borrower or any Subsidiary to maintain and operate its
business and properties.
"Net Cash Proceeds" means, with respect to any sale, lease, transfer or
disposition of any asset by any Person or the issuance of Institutional Debt or
Equity by any Person (other than the net
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<PAGE> 26
cash proceeds from the consolidation of any Restricted Subsidiary with another
Restricted Subsidiary), the aggregate amount of cash Received by such Person in
connection with such transaction minus reasonable fees, costs and expenses and
related taxes.
"Notice of Acceptance of Bid" means any certificate signed by an
Authorized Signatory of the Borrower accepting Bid Rate Advances, which
certificate shall be in substantially the form of Exhibit Q hereto.
"Notice of Borrowing" has the meaning ascribed to it in Section 2.2(a)
hereof.
"Notice of Change of Senior Unsecured Debt Rating" means that certain
Notice of Change in the Senior Unsecured Debt Rating in the form of Exhibit K
hereto.
"Notice of Continuation/Conversion" has the meaning specified in Section
2.2(e)(i) hereof.
"Notice of Issuance" has the meaning ascribed to it in Section 2.16(b)
hereof.
"Notes" means, to the extent requested by any Lender in accordance with
the terms of Section 2.10(g) hereof, the Revolving Credit Notes, Swingline
Notes, Bid Rate Notes and Working Line Notes and "Note" means any of the
Revolving Credit Notes, Swingline Notes, Bid Rate Notes or Working Line Notes.
"NRNZ" means NRNZ Holdings, Limited, a New Zealand corporation of which
33 1/3% of the outstanding Capital Stock is owned by the Borrower.
"Obligations" means (a) all obligations of any nature (whether matured
or unmatured, fixed or contingent, including the Reimbursement Obligations) of
the Borrower or any Subsidiary to the Lenders or Bank Affiliates under the Loan
Papers, as they may be amended from time to time, and (b) all obligations of the
Borrower or any Subsidiary for losses, damages, expenses or any other
liabilities of any kind that any Lender or Bank Affiliate may suffer by reason
of a breach by the Borrower or any Subsidiary of any obligation, covenant or
undertaking with respect to any Loan Paper.
"Offshore Advance" means any advance under the Revolving Credit Loan
made (a) in an Approved Offshore Currency, or (b) as an Offshore Advance in
Dollars, in accordance with the terms of Section 2.1(a)(i) hereof.
"Offshore Basis" means a simple per annum interest rate equal to the
lesser of (a) the Highest Lawful Rate, and (b) the sum of (i) the Offshore
Dollar Rate or Approved Offshore Currency Rate, as applicable, plus (ii) the
Applicable Margin.
"Offshore Bid Rate" means a rate per annum equal to (a) the Offshore
Dollar Rate or Approved Offshore Currency Rate, as the case may be, plus or
minus (b) the Margin.
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"Offshore Bid Rate Advance" means any Bid Rate Advance - Revolving
Credit subject to an Offshore Bid Rate.
"Offshore Borrowing" means a borrowing made hereunder consisting of
Offshore Advances or Offshore Bid Rate Advances.
"Offshore Commitment" means, on any date of determination, the lesser of
(a) the Dollar Equivalent of $1,000,000,000 and (b) the Revolving Credit
Commitment minus the sum of (i) the Dollar Equivalent of all outstanding
Revolving Credit Advances plus (ii) the sum of all outstanding Reimbursement
Obligations.
"Offshore Dollar Rate" means, for any Offshore Advance to be made in
Dollars for any Interest Period therefor, the rate per annum (rounded upwards,
if necessary, to the nearest one-one hundredth (1/100th) of one percent (1%))
appearing on Telerate Page 3750 (or any successor page) as the London interbank
offered rate for deposits in United States dollars at approximately 11:00 a.m.
(London time) two Business Days prior to the first day of such Interest Period.
If for any reason such rate is not available, the term "Offshore Dollar Rate"
shall mean, for any Offshore Advance to be made in Dollars for any Interest
Period therefor, the rate per annum (rounded upwards, if necessary, to the
nearest one-one hundredth (1/100th) of one percent (1%)) appearing on Reuters
Screen LIBO page as the London interbank offered rate for deposits in United
States dollars at approximately 11:00 a.m. (London time) two Business Days prior
to the first day of such Interest Period for a term comparable to such Interest
Period; provided, however, if more than one rate is specified on Reuters Screen
LIBO Page, the applicable rate shall be the arithmetic mean of all such rates.
"Offshore Lending Office" means, with respect to a Lender, the office
described on Schedule 1.2 hereto and designated as its Offshore Lending Office
for Offshore Advances, certain Swingline Advances (if applicable) and certain
Bid Rate Advances (if applicable), and such other office of the Lender or any of
its affiliates hereafter designated by notice to the Borrower and the
Administrative Agent.
"Operating Cash Flow" means, for any period, determined in accordance
with GAAP on a consolidated basis for the Borrower and its Restricted
Subsidiaries, the sum of (a) pre-tax net income (excluding therefrom (i) any
items of extraordinary gain, including net gains on the sale of assets other
than asset sales in the ordinary course of business, and (ii) any items of
extraordinary loss, including net losses on the sale of assets other than asset
sales in the ordinary course of business), plus (b) interest expense,
depreciation and amortization (including amortization of film contracts),
deferred and other non-cash charges, and minus (c) cash payments made or
scheduled to be made with respect to film contracts. Operating Cash Flow shall
be adjusted to exclude (i) any extraordinary non-cash items deducted from or
included in the calculation of pre-tax net income and (ii) without duplication,
any accrued but not paid income or loss from Investments. For purpose of
calculation of Operating Cash Flow with respect to assets not owned at all times
during the four fiscal quarters preceding the date of determination of Operating
Cash Flow there shall be (i) included in Operating Cash Flow on a pro forma
basis, the Operating Cash Flow of any assets acquired during
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any of such four fiscal quarters for the twelve month period preceding the date
of determination, and (ii) excluded from Operating Cash Flow on a pro forma
basis, the Operating Cash Flow of any assets disposed of during any of such four
fiscal quarters for the twelve month period preceding the date of determination.
"Operating Lease" means any operating lease, as defined in the Financial
Accounting Standard Board Statement of Financial Accounting Standards No. 13,
dated November, 1976 or otherwise in accordance with GAAP, with an initial or
remaining noncancellable lease term in excess of one year.
"Option Date" means, with respect to the Working Line Loan (a) for the
364 day period after the Closing Date, August 29, 2001, (b) for the 364 day
period after August 29, 2001, August 28, 2002, (c) for the 364 day period after
August 28, 2002, August 27, 2003 and (d) for the 364 day period after August 27,
2003, August 25, 2004.
"Original Credit Facility" means that certain credit facility pursuant
to the terms of the Original Credit Facility Documentation.
"Original Credit Facility Documentation" means that certain Fourth
Amended and Restated Credit Agreement, dated as of June 15, 2000, among the
Borrower, Bank of America, N.A., as administrative agent, Fleet National Bank
(formerly The First National Bank of Boston), as documentation agent, Bank of
Montreal, as co-syndication agent, Toronto Dominion (Texas), Inc., as
co-syndication agent, and the lenders described therein, with Banc of America
Securities LLC, as arranger, and the "Loan Papers" as defined therein, as such
agreement and the loan papers may be amended, increased, restated, replaced or
substituted from time to time.
"Participating Lender" has the meaning specified in Section 2.18 hereof.
"Participating Member State" means each country which from time to time
becomes a Participating Member State as described in EMU Legislation.
"Participation" has the meaning ascribed to it in Section 11.6(c)
hereof.
"Payment Date" means the last day of the Interest Period for any LIBOR
Advance, Offshore Advance, Swingline Advance or Bid Rate Advance.
"PBGC" means the Pension Benefit Guaranty Corporation or any entity
succeeding to any or all of its functions under ERISA.
"Permitted Holders" means L. Lowry Mays, Mark P. Mays, Randall T. Mays
and any person related to any of them by kinship or marriage, trusts or similar
arrangements established solely on the behalf of one or more of them, and
partnerships and other entities that are controlled by them.
"Permitted Liens" means, as applied to any Person:
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(a) any Lien in favor of the Administrative Agent on behalf of the
Lenders to secure the Obligations hereunder;
(b) (i) Liens for taxes not yet delinquent, (ii) Liens created by lease
agreements to secure the payments of rental amounts and other sums not yet due
thereunder, (iii) Liens on leasehold interests created by the lessor in favor of
any mortgagee of the leased premises, and (iv) Liens for taxes, assessments,
governmental charges, levies or claims that are being diligently contested in
good faith by appropriate proceedings and for which adequate reserves shall have
been set aside on such Person's books, but only so long as no foreclosure,
restraint, sale or similar proceedings have been commenced with respect thereto;
(c) Liens of carriers, warehousemen, mechanics, laborers and materialmen
and other similar Liens incurred in the ordinary course of business for sums not
yet due or being contested in good faith, if such reserve or appropriate
provision, if any, as shall be required by GAAP shall have been made therefor;
(d) Liens incurred in the ordinary course of business in connection with
worker's compensation, unemployment insurance or similar legislation;
(e) Easements, right-of-way and zoning restrictions and other similar
encumbrances on the use of real property which do not interfere with the
ordinary conduct of the business of such Person;
(f) Liens created to secure the purchase price of property acquired by
(i) any Restricted Subsidiary, or created to secure Debt for Borrowed Money of
the Restricted Subsidiaries permitted by Section 7.1(b) hereof in an amount not
to exceed $50,000,000 in the aggregate outstanding at any time for all
Restricted Subsidiaries and (ii) the Borrower, or created to secure Debt for
Borrowed Money of the Borrower permitted by the first sentence of Section 7.1
hereof in an amount not to exceed $50,000,000 in the aggregate outstanding at
any time, which, in the case of both (i) and (ii) foregoing, is incurred solely
for the purpose of financing the acquisition of such assets and incurred at the
time of acquisition, so long as (A) each such Lien shall at all times be
confined solely to the asset or assets so acquired (and proceeds thereof and
improvements and accessions thereto), and refinancings thereof, and (B) the
amount of Debt for Borrowed Money related thereto is not increased (except for
prepayment fees and expenses of such refinancing);
(g) Liens in respect of judgments or awards for which appeals or
proceedings for review are being prosecuted and in respect of which a stay of
execution upon any such appeal or proceeding for review shall have been secured,
provided that (i) such Person shall have established adequate reserves for such
judgments or awards, (ii) such judgments or awards shall be fully insured and
the insurer shall not have denied coverage, or (iii) such judgments or awards
shall have been bonded to the satisfaction of the Determining Lenders;
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(h) Any Liens existing on the Closing Date which are described on
Schedule 1.3 hereto or permitted to exist under the terms of Section 7.2 hereof,
and Liens resulting from the refinancing of the related Debt for Borrowed Money,
provided that the Debt for Borrowed Money secured thereby shall not be increased
and the Liens shall not cover additional assets (except improvements and
accessions thereto) of the Borrower or any of its Restricted Subsidiaries; and
(i) Liens securing acquired Debt for Borrowed Money permitted to exist
under Section 7.1(e) hereof, but only to the extent that such Liens and Debt for
Borrowed Money existed prior to the date of the related Acquisition (such Liens
shall not cover additional assets, except improvements and accessions thereto),
and provided that such Lien and such Debt for Borrowed Money were not incurred
in anticipation of the consummation of such Acquisition.
"Person" means an individual, corporation, partnership, trust or
unincorporated organization, limited liability company, or a government or any
agency or political subdivision thereof.
"Plan" means an employee pension benefit plan as defined in Section 3(2)
of ERISA (including a Multiemployer Plan) that is covered by Title IV of ERISA
or subject to the minimum funding standards under Section 412 of the Code and is
maintained for the employees of the Borrower, its Subsidiaries or any member of
their Controlled Group.
"Pledged Intercompany Notes" means Intercompany Notes pledged to the
Administrative Agent on behalf of the Lenders to secure the Obligations in
accordance with the terms of Section 5.14 hereof, pursuant to documentation
substantially in the form of Exhibit J hereto.
"Primary Issuing Bank" means Bank of America, N.A., in its capacity as
issuer of the Primary Letters of Credit.
"Primary Letters of Credit" has the meaning specified in Section 2.16(a)
hereof.
"Prime Rate" means, at any time, the prime interest rate announced or
published by the Administrative Agent from time to time as its reference rate
for the determination of interest rates for loans of varying maturities in
United States dollars to United States residents of varying degrees of
creditworthiness and being quoted at such time by the Administrative Agent as
its "prime rate;" it being understood that such rate may not be the lowest rate
of interest charged by the Administrative Agent.
"Quarterly Date" means March 31, June 30, September 30 and December 31,
beginning September 30, 2000.
"Received" means on any date of determination for any Person with
respect to any sale or disposition, the actual cash amount in the possession of,
under the control of, and at the disposal of, such Person from such sale or
disposition, provided that, so long as there exists no Default, proceeds from
any sale or disposition held in escrow by any "qualified intermediary" as
defined in the Code for a period not in excess of 180 days, for the purpose of
consummating a Like-Kind Exchange,
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which such proceeds are subsequently reinvested in like assets during the 180
day period in accordance with the Code, shall not be deemed to be Received by
such Person unless (or until such time as) such proceeds are not held or
reinvested in accordance with the Code in order to effectuate a Like-Kind
Exchange.
"Refinancing Advance" means any Advance which is used to pay the
principal amount (or any portion thereof) of a LIBOR Advance, Offshore Advance
or Bid Rate Advance at the end of its Interest Period and which, after giving
effect to such application, does not result in an increase in the aggregate
amount of outstanding LIBOR Advances, Base Rate Advances, Offshore Advances, or
Bid Rate Advances at the time of the Refinancing Advance.
"Regulatory Modification" has the meaning set forth in Section 9.8
hereof.
"Regulatory Modification Retroactive Effective Date" has the meaning set
forth in Section 9.8 hereof.
"Regulatory Modification Set Date" has the meaning set forth in Section
9.8 hereof.
"Reimbursement Obligations" means, in respect of any Letters of Credit
as at any date of determination, the Dollar Equivalent of the maximum aggregate
amount which is then available to be drawn under such Letter of Credit (whether
or not the conditions to drawing thereunder have been met) plus any unreimbursed
amounts under Letters of Credit.
"Release Date" means the date on which the notes have been paid, all
other Obligations due and owing have been paid and performed in full, and all of
the Commitments have been terminated.
"Reportable Event" has the meaning set forth in Title IV of ERISA.
"Reset Date" means the first Business Day following the relevant
Calculation Date.
"Restricted Subsidiary" means any Subsidiary of Borrower which is not an
Unrestricted Subsidiary, including, without limitation, ARN and NRNZ, provided
that, upon the acquisition by the Borrower of the AMFM Entities and the SFX
Entities, such Persons shall not be "Restricted Subsidiaries" under the terms of
this document until, in each case, one Business Day has elapsed after their
respective acquisitions by the Borrower, at which time each of the AMFM Entities
and each of the SFX Entities, respectively, shall each be included as a
"Restricted Subsidiary" under this Agreement and the Loan Papers.
"Revolver Advance" means an Advance in Dollars under the Revolving
Credit Loan made by (a) the Lenders in accordance with the terms of Section
2.1(a)(i) hereof or (b) any Issuing Bank in accordance with the terms of Section
2.16(c) hereof, and shall include all Mandatory Revolver Advances.
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"Revolving Credit Advances" means all Advances made under the Revolving
Credit Loan, including (without limitation) all Revolver Advances, Swingline
Advances, Offshore Advances and Bid Rate Advances - Revolving Credit, and
"Revolving Credit Advance" means any Advance made under the Revolving Credit
Loan, which such Advance may be (without limitation) a Revolver Advance,
Swingline Advance, an Offshore Advance or a Bid Rate Advance - Revolving Credit,
as applicable in the context used.
"Revolving Credit Borrowing" means a borrowing made hereunder consisting
of Revolver Advances and/or Offshore Advances, including without limitation, any
borrowing that is Mandatory Revolver Advance.
"Revolving Credit Commitment" means, on any date of determination,
$1,500,000,000, plus any increase to such amount effected by the Borrower from
time to time in accordance with the terms of Section 2.18 hereof, and minus any
reduction of such amount effected by the Borrower from time to time in
accordance with the terms of Section 2.6 hereof.
"Revolving Credit Commitment Fee" has the meaning ascribed thereto in
Section 2.4(a)(i) hereof.
"Revolving Credit Lenders" means, on any date of determination, those
Lenders having Revolving Credit Specified Percentages in excess of zero.
"Revolving Credit Loan" means the loan made in accordance with the
provisions of Section 2.1 hereof.
"Revolving Credit Note" means any promissory note of the Borrower
evidencing Revolver Advances and Offshore Advances under the Revolving Credit
Loan hereunder requested by a Lender in accordance with the terms of Section
2.10(g) hereof, substantially in the form of Exhibit A hereto, together with any
extension, renewal or amendment thereof or substitution therefor.
"Revolving Credit Specified Percentage" means, as to any Lender, the
percentage indicated beside its name on the signature pages hereof designated as
its Revolving Credit Specified Percentage, or as adjusted or specified (i) in
any Assignment and Acceptance, (ii) in any amendment to this Agreement, or (iii)
in connection with any increase in the Revolving Credit Commitment affected in
accordance with Section 2.18 hereof.
"Secondary Issuing Banks" means The Bank of New York, in its capacity as
issuer of certain of the Acquired Letters of Credit and Bankers Trust Company,
in its capacity as issuer of certain of the Acquired Letters of Credit, and
"Secondary Issuing Bank" means either of The Bank of New York, in its capacity
as issuer of certain of the Acquired Letters of Credit, or Bankers Trust
Company, in its capacity as issuer of certain of the Acquired Letters of Credit,
as applicable in the context used.
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"Senior Unsecured Debt Rating" means the Borrower's senior unsecured
debt rating as announced by S&P or Moody's.
"S&P" means Standard & Poor's Ratings Group, a division of The
McGraw-Hill Companies, Inc., a New York corporation.
"SFX" means SFX Entertainment, Inc.
"SFX Acquisition" means the acquisition by the Borrower of SFX and its
direct and indirect subsidiaries in accordance with the terms of the SFX
Acquisition Documentation.
"SFX Acquisition Documentation" means that certain Agreement and Plan of
Merger, dated as of February 28, 2000, among the Borrower, SFX and CCU II Merger
Sub, Inc., and all related documentation in effect on May 1, 2000.
"SFX Entities" means SFX and all of its direct and indirect subsidiaries
that are Restricted Subsidiaries at the time of determination.
"SFX Reduced Public Debt Permitted Amount" means an amount equal to
$25,000,000.
"Solvent", when used with respect to any Person, means that, as of any
date of determination, (a) the amount of the "present fair saleable value" of
the assets of such Person and its subsidiaries, taken as a whole, will, as of
such date, exceed the amount that will be required to pay all "liabilities of
such Person and its Subsidiaries, taken as a whole, contingent or otherwise", as
of such date (as such quoted terms are determined in accordance with applicable
Debtor Relief Laws as such debts become absolute and matured, (b) such Person
and its Subsidiaries, taken as a whole, will not have, as of such date, an
unreasonably small amount of capital with which to conduct their businesses,
taking into account the particular capital requirements of such Person and its
projected capital requirements and availability and (c) such Person and its
Subsidiaries, taken as a whole, will be able to pay their debts as they mature,
taking into account the timing of and amounts of cash to be received by such
Person and its Subsidiaries, taken as a whole, and the timing of and amounts of
cash to be payable on or in respect of indebtedness of such Person and its
Subsidiaries, taken as a whole. For purposes of this definition, (i) "debt"
means liability on a "claim", and (ii) "claim" means any (x) right to payment,
whether or not such a right is reduced to judgment, liquidated, unliquidated,
fixed, contingent, matured, unmatured, disputed, undisputed, real or equitable,
secured or unsecured or (y) right to an equitable remedy for breach of
performance if such breach gives rise to a right of payment, whether or not such
right to an equitable remedy is reduced to judgment, fixed, contingent, matured
or unmatured, disputed, undisputed, secured or unsecured.
"Special Counsel" means the law firm of Donohoe, Jameson & Carroll,
P.C., or such other legal counsel as the Administrative Agent may select.
"Subsidiary" means (a) any corporation of which 50% or more of the
outstanding stock (other than directors' qualifying shares) having ordinary
voting power to elect a majority of its board
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of directors, regardless of the existence at the time of a right of the holders
of any class of securities of such corporation to exercise such voting power by
reason of the happening of any contingency, is at the time owned by the
Borrower, directly or through one or more intermediaries, and (b) any other
entity which is Controlled or then capable of being Controlled by the Borrower,
directly or through one or more intermediaries, whether a Restricted Subsidiary
or Unrestricted Subsidiary.
"Swingline Advance" means an Advance made by the Swingline Bank under
the Swingline Loan.
"Swingline Bank" means Bank of America, N.A. and any successor thereto
appointed in accordance with Section 10.1(b) hereof.
"Swingline Borrowing" means a borrowing made hereunder consisting of
Swingline Advances.
"Swingline Commitment" means, on any date of determination,
$150,000,000.
"Swingline Loan" means that certain swingline facility available to the
Borrower in accordance with the terms of Section 2.1(a)(ii) hereof.
"Swingline Note" means any Swingline Note of the Borrower payable to the
order of the Swingline Bank requested by a Lender in accordance with the terms
of Section 2.10(g) hereof, evidencing Swingline Advances hereunder,
substantially in the form of Exhibit B hereto, together with any extension,
renewal or amendment thereof or substitution therefor.
"Syndication Agent" means Chase Securities Inc.
"TARGET Business Day" means a day when TARGET (Trans-European Automated
Real- time Gross settlement Express Transfer system), or any successor thereto,
is scheduled to be open for business.
"Termination Event" means, with respect to the Borrower, any of its
Subsidiaries or any Plan, (a) a Reportable Event, (b) the withdrawal from a Plan
during a Plan year in which it was a "substantial employer" as defined in
Section 4001(a)(2) of ERISA, (c) the filing of a notice of intent to terminate a
Plan or the treatment of a Plan amendment as a termination under Section 4041 of
ERISA, (d) the institution of proceedings by the Pension Benefit Guaranty
Corporation to terminate a Plan or appoint a trustee to administer a Plan, (e)
the failure to comply with the minimum funding requirements of ERISA with
respect to any Plan, or (f) any other event or condition which might constitute
grounds under Section 4042 of ERISA for the termination of, or the appointment
of a trustee to administer, any Plan.
"Term Loan" has the meaning ascribed thereto in Section 2.17(b) hereof.
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"Total Debt" means, as of any date of determination, determined for the
Borrower and its Restricted Subsidiaries on a consolidated basis, the sum
(without duplication) of (a) all principal and interest owing under the Loan
Papers and (b) all other Debt for Borrowed Money.
"Total Specified Percentage" means, as to any Lender on any date of
determination, the percentage that such Lender's maximum Dollar (or Dollar
Equivalent) commitment to lend under the aggregate Loans on such date, bears to
the sum of the Revolving Credit Commitment plus the Working Line Commitment. If
all or any portion of the Commitments have been terminated or expired, Total
Specified Percentage shall be determined based upon the Commitments most
recently in effect, giving effect to any assignments.
"Treaty" means the Treaty establishing the European Economic Community,
being the Treaty of Rome of March 25, 1957 as amended by the single European Act
1986 and the Maastricht Treaty (which was signed on February 7, 1992 and came
into force on November 1, 1993) as amended, varied or supplemented from time to
time.
"Universal $325 Million 9.75% Bonds" means those certain $325 million in
9.75% bonds of Universal Outdoor Holdings, Inc. maturing October 15, 2006.
"Unrestricted Subsidiary" means those Subsidiaries designated as
Unrestricted Subsidiaries on Schedule 4.1(a) hereto, any entity acquired as an
Acquisition after the Closing Date unless such Investment is designated as a
Restricted Subsidiary by Borrower prior to the completion of such Acquisition,
or by complying with the terms and provisions of Section 5.12(a) hereof. An
Unrestricted Subsidiary may become a Restricted Subsidiary and subject to the
provisions hereof by Borrower's designation thereof in accordance with the terms
and provisions of Section 5.12(b), as applicable.
"Weighted Average Life to Maturity" means, as of the date of
determination, with respect to any debt instrument, the quotient obtained by
dividing (i) the sum of the products of the number of years from the date of
determination to the dates of each successive scheduled principal payment of
such debt instrument by the amount of such principal payment by (ii) the sum of
all such principal payments.
"Working Advance" means an Advance in Dollars made by Lenders under the
Working Line Loan.
"Working Line Advance" means any advance made under the Working Line
Loan, including without limitation, Working Advances and Bid Rate Advances -
Working Line.
"Working Line Borrowing" means a borrowing made hereunder consisting of
Working Advances.
"Working Line Commitment" means, with respect to the Working Line Loan
prior to the Conversion Date, $1,500,000,000, as reduced from time to time
pursuant to Section 2.6 and
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Section 2.17 hereof, provided that, (a) on any Option Date, if the Borrower and
the Facility Determining Lenders have not agreed to an Extension Option or the
Borrower has not exercised its Conversion Option in each case in accordance with
the terms of Section 2.17 hereof, the Working Line Commitment shall mean $0.00,
(b) on and after the Extension Final Maturity, the Working Line Commitment shall
mean $0.00, and (c) on and after the Conversion Date, the Working Line
Commitment shall mean $0.00.
"Working Line Commitment Fee" has the meaning ascribed thereto in
Section 2.4(a)(ii) hereof.
"Working Line Lenders" means, on any date of determination, those
Lenders having Working Line Specified Percentages in excess of zero.
"Working Line Loan" means the revolving 364 day short term revolving
loan made by the Lenders pursuant to Section 2.1(b) of this Agreement (which
such definition shall include the Term Loan, if the Borrower exercises the
Conversion Option).
"Working Line Note" means any Note of the Borrower evidencing Working
Advances hereunder requested by a Lender in accordance with the terms of Section
2.10(g) hereof, substantially in the form of Exhibit C hereto with respect to
Working Advances made under the Working Line Loan, together with any extension,
renewal or amendment thereof, or substitution therefor, and each note evidencing
the Working Line Loan after the Conversion Date, in accordance with the terms of
Section 2.17 hereof, together with any extension, renewal or amendment thereof,
or substitution therefor.
"Working Line Specified Percentage" means, as to any Lender, the
percentage indicated beside its name on the signature pages hereof designated as
its Working Line Specified Percentage, or as adjusted or specified (i) in
accordance with the terms of Section 2.17 hereof, (ii) in any Assignment and
Acceptance or (iii) in any amendment to this Agreement.
"Year 2000 Problem" means the risk that computer applications and
devices containing imbedded computer chips used by the Borrower or any of its
Subsidiaries (or their respective customers and vendors) may be unable to
recognize and perform properly date-sensitive functions involving certain dates
prior to and any date after December 31, 1999.
Section 1.2 Amendments and Renewals. Each definition of an agreement in
this Article 1 shall include such agreement as amended to date, and as amended
or renewed from time to time in accordance with its terms, but only with the
prior written consent of the Determining Lenders or Facility Determining
Lenders, as appropriate.
Section 1.3 Construction. The terms defined in this Article 1 (except as
otherwise expressly provided in this Agreement) for all purposes shall have the
meanings set forth in Section 1.1 hereof, and the singular shall include the
plural, and vice versa, unless otherwise specifically required by the context.
All accounting terms used in this Agreement which are not
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otherwise defined herein shall be construed in accordance with GAAP on a
consolidated basis for the Borrower and its Subsidiaries, unless otherwise
expressly stated herein. To the extent that a material change in GAAP occurs
after the Closing Date, the Borrower and Lenders agree to negotiate in good
faith to effect conforming changes to the financial covenants set forth in
Article 7 hereof.
ARTICLE 2
Loans
Section 2.1 The Loans and Advances Thereunder.
(a) Revolving Credit Loan.
(i) Revolver Advances and Offshore Advances under the Revolving
Credit Loan. Each Lender severally agrees, upon the terms and subject to
the conditions of this Agreement, to make Revolver Advances under the
Revolving Credit Loan in Dollars, and Offshore Advances under the
Revolving Credit Loan in Dollars and Approved Offshore Currencies, to
the Borrower on any Business Day from time to time up to and including
the Maturity Date, in an aggregate amount for both Revolver Advances and
Offshore Advances not to exceed its Revolving Credit Specified
Percentage of the Revolving Credit Commitment (assuming compliance with
all conditions to drawing); provided that at the time of the proposed
incurrence of an Offshore Advance, the aggregate Dollar Equivalent
amount of outstanding Offshore Advances shall not then exceed the
Offshore Commitment. Notwithstanding any provision in any Loan Paper to
the contrary, in no event shall the Lenders be required to make Revolver
Advances or Offshore Advances if after giving effect to the making of
such Revolver Advances or Offshore Advances, (A) (1) the Dollar
Equivalent amount of all outstanding Revolving Credit Advances, plus (2)
all outstanding Reimbursement Obligations would exceed the Revolving
Credit Commitment, or (B) the Dollar Equivalent amount of all
outstanding Offshore Advances would exceed the Offshore Commitment. On
the Maturity Date unless sooner paid as provided herein, the outstanding
Revolver Advances and Offshore Advances shall be repaid in full. No
provision of this Section 2.1(a)(i) shall limit the ability of any
Issuing Bank to make a Revolver Advance pursuant to Section 2.16(c)
hereof.
(ii) Swingline Advances under the Revolving Credit Loan. The
Borrower may request the Swingline Bank to make, and the Swingline Bank
shall make, on the terms and conditions hereinafter set forth, Swingline
Advances under the Revolving Credit Loan in Dollars and Approved
Offshore Currencies for Swingline Advances to the Borrower from time to
time on any Business Day up to and including the Maturity Date in an
aggregate principal Dollar Equivalent amount not to exceed at the time
of the proposed incurrence of a Swingline Advance, the Swingline
Commitment (assuming compliance with all conditions to drawing).
Notwithstanding any provision of any Loan Paper to the contrary, in no
event shall the Swingline Bank be required to make any Swingline Advance
if after giving effect
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to the making of such Advance (A) the Dollar Equivalent principal amount
of all outstanding Swingline Advances would exceed the Swingline
Commitment, or (B) the Dollar Equivalent principal amount of all
Revolving Credit Advances, plus the amount of all Reimbursement
Obligations would exceed the Revolving Credit Commitment.
(iii) Bid Rate Advances under the Revolving Credit Loan. Each
Revolving Credit Lender may, in its sole discretion and on the terms and
conditions set forth in this Agreement, make Bid Rate Advances -
Revolving Credit under the Revolving Credit Loan to the Borrower in
Dollars and Approved Offshore Currencies from time to time on any
Business Day up to and including the Maturity Date in an aggregate
amount not in excess of the difference between (A) the Revolving Credit
Commitment, minus at any one time outstanding (B) the sum of the
aggregate outstanding principal amount of all Revolving Credit Advances
and all Reimbursement Obligations (assuming compliance with all
conditions to drawing). Notwithstanding any provision of any Loan Paper
to the contrary, (A) the Dollar Equivalent of all Bid Rate Advances -
Revolving Credit may not exceed $300,000,000 in the aggregate at any
time, and (B) in no event shall the Revolving Credit Lenders be required
to make any Bid Rate Advance - Revolving Credit if after giving effect
to the making of such Advance (i) the Dollar Equivalent principal amount
of all outstanding Revolving Credit Advances, plus the amount of all
Reimbursement Obligations, would exceed the Revolving Credit Commitment.
There shall not be outstanding to any Lender, at any time, more than
five Bid Rate Advances - Revolving Credit. The Borrower shall select an
Interest Period for each Bid Rate Advance. Each Bid Rate Advance -
Revolving Credit shall be in an aggregate principal amount which is at
least $5,000,000, and which is an integral multiple of $1,000,000 in
excess thereof (or the Dollar Equivalent of each such amount), and each
Bid Rate Advance - Revolving Credit by a Lender shall be in a principal
amount which is at least $1,000,000 and which is an integral multiple of
$1,000,000 in excess thereof (or the Dollar Equivalent of each such
amount). No Lender shall have any obligation to make Bid Rate Advances -
Revolving Credit, and the Borrower shall have no obligation to accept an
offer for Bid Rate Advances - Revolving Credit.
(iv) Revolving Credit Advances, General. All Revolving Credit
Advances shall be used for the purposes set forth in Section 5.9 hereof.
Subject to Section 2.8 hereof, until the Maturity Date, Revolver
Advances, Offshore Advances and Swingline Advances may be repaid and
then reborrowed. On the Maturity Date unless sooner paid as provided
herein, the outstanding Revolving Credit Advances shall be repaid in
full. Any Revolver Advance shall, at the option of the Borrower as
provided in Section 2.2 hereof (and, in the case of LIBOR Advances,
subject to availability and the provisions of Article 9 hereof), be made
as a Base Rate Advance or a LIBOR Advance; provided that there shall not
be outstanding to any Lender, at any one time, more than fifteen LIBOR
Advances under the Revolving Credit Loan. Any Offshore Advance shall,
subject to availability and the provisions of Article 9 hereof, be made
in Dollars or Approved Offshore Currencies, and bear interest at the
Offshore Basis; provided that there shall not be outstanding to any
Lender, at any one time, more than ten Offshore Advances. Any Swingline
Advance shall, subject to availability and the provisions of Article 9
hereof, be made in Dollars or Approved Offshore Currencies, and
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bear interest at , with respect to Swingline Advances made in Dollars,
the Base Rate Basis, and with respect to Swingline Advances made in
Approved Offshore Currencies, the Offshore Basis. Notwithstanding any
provision of any Loan Paper to the contrary, in no event shall the
Lenders be required to make Revolving Credit Advances if after giving
effect to the making of such Revolving Credit Advances (A) the Dollar
Equivalent principal amount of all outstanding Revolving Credit
Advances, plus (B) all outstanding Reimbursement Obligations, would
exceed the Revolving Credit Commitment. No provision of this Section
2.1(a) shall limit the ability of any Issuing Bank to make a Revolver
Advance pursuant to Section 2.16(c) hereof.
(b) Working Line Loan.
(i) Working Advances under the Working Line Loan. Each Lender
severally agrees, on the terms and subject to the conditions of this
Agreement, to make revolving Working Advances under the Working Line
Loan in Dollars to the Borrower on a Business Day during the period from
the Closing Date to the Option Date (or the next Extension Final
Maturity if the Borrower exercised its Extension Option in accordance
with the terms of Section 2.17(a) hereof), in an aggregate principal
amount not to exceed at any time outstanding such Lender's Working Line
Specified Percentage of the Working Line Commitment (assuming compliance
with all conditions to drawings) for the purposes set forth in Section
5.9 hereof. Any Working Advance shall, at the option of the Borrower as
provided in Section 2.2 hereof (and, in the case of LIBOR Advances,
subject to availability and the provisions of Article 9 hereof), be made
as a Base Rate Advance or a LIBOR Advance; provided that there shall not
be outstanding to any Lender, at any one time, more than ten LIBOR
Advances that are Working Advances. On the Conversion Date (if any), in
accordance with the terms of Section 2.17(b) hereof, all outstanding
Working Advances shall convert to a Term Loan in the amount of the
Working Advances outstanding on the Conversion Date, and such Term Loan
shall be due and payable in one payment on the Maturity Date. Subject to
the terms and conditions of this Agreement, until the earlier of the (x)
Option Date (or the Extension Final Maturity if the Borrower exercised
its first Extension Option in accordance with the terms of Section
2.17(a) hereof) and (y) Conversion Date (if any), the Borrower may
borrow, repay and reborrow the Working Advances; provided, however, that
at no time shall the sum of the aggregate outstanding principal amount
of all Working Line Advances exceed the Working Line Commitment. After
the Conversion Date (if any) and prior to the Extension Final Maturity,
no Advances will be available under the Working Line Loan, except
Refinancing Advances.
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(ii) Bid Rate Advances under the Working Line Loan. Each Working
Line Lender may, in its sole discretion and on the terms and conditions
set forth in this Agreement, make Bid Rate Advances - Working Line under
the Working Line Loan to the Borrower in Dollars from time to time in an
aggregate amount not in excess of the difference between (i) the Working
Line Commitment minus (ii) the sum of the aggregate outstanding
principal amount of all Working Line Advances (assuming compliance with
all conditions to drawings) for the purposes set forth in Section 5.9
hereof. There shall not be outstanding to any Lender, at any time, more
than five Bid Rate Advances - Working Line. Each Bid Rate Advance -
Working Line shall be in an aggregate principal amount which is at least
$5,000,000, and which is an integral multiple of $1,000,000 in excess
thereof, and each Bid Rate Advance - Working Line by a Lender shall be
in a principal amount which is at least $1,000,000 and which is an
integral multiple of $1,000,000 in excess thereof. No Lender shall have
any obligation to make Bid Rate Advances - Working Line, and the
Borrower shall have no obligation to accept an offer for Bid Rate
Advances - Working Line.
Section 2.2 Manner of Borrowing and Disbursement.
(a) Base Rate Advances. In the case of Base Rate Advances, the Borrower,
through an Authorized Signatory, shall give the Administrative Agent at least
one Business Day's irrevocable written notice, or irrevocable telephonic notice
followed immediately by written notice in the form of Exhibit L hereto (a
"Notice of Borrowing") (provided, however, that the Borrower's failure to
confirm any telephonic notice in writing shall not invalidate any notice so
given), of its intention to borrow or reborrow a Base Rate Advance hereunder.
Notice shall be given to the Administrative Agent prior to 11:00 a.m., Dallas,
Texas time, in order for such Business Day to count toward the minimum number of
Business Days required. Such Notice of Borrowing shall specify (i) the requested
funding date, which shall be a Business Day, (ii) the amount of the proposed
aggregate Base Rate Advances to be made by Lenders and (iii) whether such Base
Rate Advances are Revolver Advances, Working Advances or Swingline Advances.
(b) LIBOR Advances. In the case of LIBOR Advances, the Borrower, through
an Authorized Signatory, shall give the Administrative Agent at least three
Business Days' irrevocable written notice, or irrevocable telephonic notice
followed immediately by a Notice of Borrowing (provided, however, that the
Borrower's failure to confirm any telephonic notice in writing shall not
invalidate any notice so given), of its intention to borrow or reborrow a LIBOR
Advance hereunder. Notice shall be given to the Administrative Agent prior to
11:00 a.m., Dallas, Texas time, in order for such Business Day to count toward
the minimum number of Business Days required. LIBOR Advances shall in all cases
be subject to availability and to Article 9 hereof. For LIBOR Advances, the
Notice of Borrowing shall specify (i) the requested funding date, which shall be
a Business Day, (ii) the amount of the proposed aggregate LIBOR Advances to be
made by Lenders, (iii) the Interest Period selected by the Borrower, provided
that no such Interest Period shall (A) extend past (I) the Maturity Date, with
respect to the Revolving Credit Loan, and (II) the Option Date or the Extension
Final Maturity, as applicable, with respect to the Working Line Loan, or (B)
prohibit or impair the Borrower's ability to comply with Section 2.8 hereof, and
(iv) whether such LIBOR Advances are Revolver Advances or Working Advances.
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(c) Offshore Advances. In the case of Offshore Advances, the Borrower,
through an Authorized Signatory, shall give the Administrative Agent at least
four Business Days' (or three Business Days' if such Offshore Advances is in
Dollars) irrevocable written notice, or irrevocable telephonic notice followed
immediately by written notice pursuant to a Notice of Borrowing (provided,
however, that the Borrower's failure to confirm any telephonic notice in writing
shall not invalidate any notice so given), of its intention to borrow or
reborrow an Offshore Advance hereunder. Notice shall be given to the
Administrative Agent prior to 10:00 a.m., Dallas, Texas time, in order for such
Business Day to count toward the minimum number of Business Days required.
Offshore Advances shall in all cases be subject to availability and to Article 9
hereof. For Offshore Advances, the Notice of Borrowing shall specify that such
Borrowing is under the Revolving Credit Loan and (i) the requested funding date,
which shall be a Business Day, (ii) whether such Offshore Advance is to be made
in Dollars or in an Approved Offshore Currency and specifying such Approved
Offshore Currency, (iii) the amount of the proposed aggregate Offshore Advances
to be made by Lenders and (iv) the Interest Period selected by the Borrower,
provided that no such Interest Period shall extend past the Maturity Date or
prohibit or impair the Borrower's ability to comply with Section 2.8 hereof.
(d) Swingline Advances. In the case of Swingline Advances, the Borrower,
through an Authorized Signatory, shall give the Swingline Bank and the
Administrative Agent (i) not later than 11:00 a.m., Dallas time, on the Business
Day of the proposed Swingline Advance in the case of a Swingline Advance to be
made as a Base Rate Advance in Dollars, and (ii) at least four Business Days (or
three Business Days if such Offshore Advances is in Dollars) before the date of
any proposed Swingline Advance not described in clause (i), irrevocable
telephonic notice (provided, however, (A) the Borrower shall deliver written
notice at least once a week confirming the telephonic notices given by the
Borrower with respect to Swingline Advances during the immediately preceding
week and (B) that the Borrower's failure to confirm any telephonic notice in
writing shall not invalidate any notice so given), of its intention to borrow or
reborrow a Swingline Advance. Such telephonic notice and the written confirming
Notice of Borrowing shall specify (i) the requested funding date, which shall be
a Business Day, (ii) the amount of the proposed Swingline Advance, (iii) if the
Swingline Advance is not in Dollars, the Approved Offshore Currency for such
Swingline Advance and (iv) the Interest Period for such Swingline Advance. No
Swingline Advance may be continued or converted.
(e) Continuation/Conversion. Subject to Sections 2.1 and 2.9 hereof, at
the end of any applicable Interest Period, the Borrower shall have the option to
continue any LIBOR Advance or Offshore Advance as LIBOR Advances or Offshore
Advances, respectively, in accordance with the following terms, or to convert
any Base Rate Advance into a LIBOR Advance or convert any LIBOR Advance into a
Base Rate Advance in accordance with the following terms:
(i) Conversion of Base Rate Advances to, or Continuation of,
LIBOR Advances and Conversion from a LIBOR Advance into a Base Rate
Advance. The Borrower shall have the option to convert to LIBOR
Advances, or upon the expiration of any Interest Period applicable to a
LIBOR Advance, to continue all or any portion of such LIBOR Advance
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equal to $5,000,000 and integral multiples of $100,000, as a LIBOR
Advance and the succeeding Interest Period of such continued LIBOR
Advance shall commence on the last day of the Interest Period of the
LIBOR Advance to be continued; provided that, (A) no succeeding Interest
Period shall extend beyond (I) the Maturity Date with respect to
continued or converted LIBOR Advances under the Revolving Credit Loan
and (II) the Option Date of the Extension Final Maturity, as applicable,
with respect to continued of converted LIBOR Advances under the Working
Line Loan and (B) notwithstanding anything in this Agreement to the
contrary, no outstanding Advance may be continued as, or converted into,
a LIBOR Advance when any Default or Event of Default has occurred and is
continuing. At least (x) three Business Days prior to a proposed
conversion into a LIBOR Advance or continuation of a LIBOR Advance under
the Revolving Credit Loan or Working Line Loan or (y) one Business Day
prior to a proposed conversion into a Base Rate Advance under the
Revolving Credit Loan or Working Line Loan, the Borrower, through an
Authorized Signatory, shall give the Administrative Agent irrevocable
written notice, or irrevocable telephonic notice followed immediately by
written notice in substantially the form of Exhibit M hereto (a "Notice
of Continuation/Conversion") (provided, however, that the Borrower's
failure to confirm any telephonic notice in writing shall not invalidate
any notice so given), stating (i) the proposed conversion/continuation
date (which shall be a Business Day), (ii) the amount of the Advance to
be converted/continued and whether it is a conversion into or
continuation of a LIBOR Advance or a conversion into a Base Rate
Advance, (iii) in the case of a conversion to, or a continuation of, a
LIBOR Advance, the requested Interest Period and (iv) in the case of a
conversion to, or a continuation of, a LIBOR Advance, that no Default or
Event of Default has occurred and is continuing. If the Borrower,
through an Authorized Signatory, shall fail to give any notice of
continuation of a LIBOR Advance in accordance with this Section 2.2(e),
the Borrower shall be deemed irrevocably to have requested that any such
LIBOR Advance be converted to a Base Rate Advance in the same principal
amount. Notice shall be given to the Administrative Agent prior to 11:00
a.m., Dallas, Texas time, in order for such Business Day to count toward
the minimum number of Business Days required.
(ii) Continuation of Offshore Advances. The Borrower shall have
the option, upon expiration of any Interest Period applicable to an
Offshore Advance, to continue all or any portion of such Offshore
Advance as an Offshore Advance equal to $5,000,000 and integral
multiples of $100,000 (or the Dollar Equivalent of each such amount) in
excess of that amount as an Offshore Advance and the succeeding Interest
Period(s) of such continued Offshore Advance shall commence on the last
day of the Interest Period of the Offshore Advance to be continued;
provided, however, (a) Offshore Advances may not be made as Base Rate
Advances or LIBOR Advances, (b) Offshore Advances may only be continued
in the same currency as the original Borrowing, (c) the Dollar
Equivalent of any Offshore Advance that is continued shall be
recalculated as of the date of the continuation and (d) notwithstanding
anything in this Agreement to the contrary, no outstanding Offshore
Advance may be continued as an Offshore Advance when any Default or
Event of Default has occurred and is continuing. At least four Business
Days (or three Business Days' if such Offshore Advance is in Dollars)
prior to a proposed continuation date, the Borrower, through
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an Authorized Signatory, shall give the Administrative Agent irrevocable
written notice, or irrevocable telephonic notice followed immediately by
a Notice of Continuation/Conversion (provided, however, that the
Borrower's failure to confirm any telephonic notice in writing shall not
invalidate any notice so given), stating (i) the proposed continuation
date (which shall be a Business Day), (ii) the amount of the Offshore
Advance and the Approved Offshore Currency of such Offshore Advance to
be continued if the continued Offshore Advance was made in an Approved
Offshore Currency, (iii) the requested Interest Period and (iv) that no
Default or Event of Default has occurred and is continuing. Notice shall
be given to the Administrative Agent prior to 11:00 a.m., Dallas, Texas
time, in order for such Business Day to count toward the minimum number
of Business Days required. If the Borrower, through an Authorized
Signatory, shall fail to give any notice in accordance with this Section
2.2(e)(ii), the Borrower shall be deemed irrevocably to have requested
(notwithstanding the failure of the Borrower at such time to satisfy
each condition specified in Article 3) that such Offshore Advance be
repaid by an automatic Mandatory Revolver Advance in an amount equal to
the Dollar Equivalent of the amount of such Offshore Advance, and
bearing interest at the Base Rate Basis.
(f) Minimum Amounts. The aggregate amount of Base Rate Advances to be
made by the Lenders on any day shall be in a principal amount which is at least
$1,000,000 and which is an integral multiple of $100,000; provided, however,
that such amount may equal the unused amount of the Revolving Credit Commitment
or the Working Line Commitment, as applicable. The aggregate amount of LIBOR
Advances to be made by the Lenders on any day shall be in a principal amount
which is at least $5,000,000 and which is an integral multiple of $100,000;
provided, however, that such amount may equal the unused amount of the Revolving
Credit Commitment or the Working Line Commitment, as applicable. The aggregate
amount of Offshore Advances having the same Interest Period and to be made by
the Lenders on any day shall be in a Dollar Equivalent principal amount which is
at least $5,000,000 and which is an integral multiple of $100,000 (or the Dollar
Equivalent of each such amount on the date of such Advance). The aggregate
amount of any Swingline Advances to be made by the Swingline Bank on any day
shall be in a principal amount which is at least equal to the Dollar Equivalent
of $100,000 and which is an integral multiple of the Dollar Equivalent of
$100,000 or the Dollar equivalent thereof; provided, however, that such amount
may equal the unused amount of the Swingline Commitment.
(g) Notice and Disbursement. The Administrative Agent shall promptly
notify the Lenders of each notice received from the Borrower pursuant to this
Section. If such notice from the Borrower designated an Offshore Advance or a
Swingline Advance in an Approved Offshore Currency, the Administrative Agent
shall promptly notify the Borrower and the Revolving Credit Lenders or the
Swingline Bank, as appropriate, of the Dollar Equivalent thereof. Failure of the
Borrower to give any notice in accordance with Section 2.2(e) hereof shall
result in a repayment of any existing Offshore Advance or LIBOR Advance on the
applicable Payment Date by a Mandatory Revolver Advance which is a Base Rate
Advance. Each Lender shall, not later than noon, Dallas, Texas time, on the date
of any Revolver Advance, Working Advance and Offshore Advance that is not a
Refinancing Advance, deliver to the Administrative Agent, at its address set
forth herein, such Lender's Applicable Specified Percentage of such Advance in
immediately available funds in
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accordance with the Administrative Agent's instructions, except that if such
Advance is an Offshore Advance denominated in an Approved Offshore Currency,
each Revolving Credit Lender shall make available its funds at such office as
the Administrative Agent has previously specified in a notice to each Lender, in
such funds as are then customary for the settlement of international
transactions in the applicable Approved Offshore Currency and as customary, and
as specified by the Administrative Agent, in each case no later than such local
time as is necessary for such funds to be received and transferred. Prior to
2:00 p.m. in the time zone of the capital city of the currency in which such
Advance is issued, on the date of any Revolver Advance, Working Advance or
Offshore Advance hereunder, the Administrative Agent shall, subject to
satisfaction of the conditions set forth in Article 3, disburse the amounts made
available to the Administrative Agent by the Lenders by (i) transferring such
amounts by wire transfer pursuant to the Borrower's instructions, or (ii) in the
absence of such instructions, crediting such amounts to the account of the
Borrower maintained with the Administrative Agent. All Revolver Advances and
Offshore Advances shall be made by each Lender according to its Revolving Credit
Specified Percentage. All Working Advances shall be made by each Lender
according to its Working Line Specified Percentage. No Lender shall be relieved
of its obligation to fund its (i) Revolving Credit Specified Percentage of any
Revolver Advance or Offshore Advance notwithstanding the fact that at any time
the aggregate outstanding principal amount of all Bid Rate Advances - Revolving
Credit made by such Lender plus its outstanding Revolver Advances and Offshore
Advances exceed its Revolving Credit Specified Percentage of the Revolving
Credit Commitment, or (ii) Working Line Specified Percentage of any Working
Advance notwithstanding the fact that at any time the aggregate outstanding
principal amount of all Bid Rate Advances - Working Line made by such Lender
plus its outstanding Working Advances exceed its Working Line Specified
Percentage of the Working Line Commitment.
(h) Swingline Advances. After confirming with the Administrative Agent
the availability of funds under the Revolving Credit Commitment, the Swingline
Bank shall, not later than 2:00 p.m., Dallas, Texas time, on the date of any
Swingline Advance, deliver to the Administrative Agent at its address set forth
herein, the amount of such Swingline Advance in immediately available funds in
accordance with the Administrative Agent's instructions. Prior to 2:30 p.m.,
Dallas, Texas time, on the date of any Swingline Advance, the Administrative
Agent shall, subject to the conditions set forth in Articles 2 and 3 hereof,
disburse the amount made available to the Administrative Agent by the Swingline
Bank by (i) transferring such amounts by wire transfer pursuant to the
Borrower's instruction or (ii) in the absence of such instructions, crediting
such amounts to the account of the Borrower maintained with the Administrative
Agent. Forthwith upon demand by the Swingline Bank at any time, including after
a Default or Event of Default, and in any event upon the making of the direction
specified by Section 8.2 to authorize the Administrative Agent to declare the
Advances due and payable pursuant to the provisions of Section 8.2, each
Revolving Credit Lender, including the Swingline Bank, notwithstanding the
failure of the Borrower at such time to satisfy each condition specified in
Articles 2 and 3, shall make, by 12:00 noon, Dallas, Texas time, on the first
Business Day following receipt by such Lender of notice from the Swingline Bank,
a Mandatory Revolver Advance which is a Base Rate Advance in an amount equal to
the product of (i) the Revolving Credit Specified Percentage of such Lender
times (ii) the aggregate outstanding principal amount of the Swingline Advances
(to be made in the Dollar Equivalent of such Swingline Advance determined as of
the date of receipt of such notice).
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The proceeds of such Mandatory Revolver Advances shall be applied by the
Administrative Agent to repay the outstanding Swingline Advances.
If for any reason (including any Debtor Relief Law), Revolver Advances
may not be made on the date otherwise required above, each Revolving Credit
Lender hereby agrees that it shall forthwith purchase (as of the date on which
such Revolver Advance would otherwise have occurred, but adjusted for any
payments received from the Borrower on or after such date and prior to such
purchase) from the Swingline Bank such participations in the outstanding
Swingline Advances as shall be necessary to cause the Revolving Credit Lenders
to share in such Swingline Advances ratably based upon their Revolving Credit
Specified Percentages; provided that (i) all interest payable on the Swingline
Advance shall be for the account of the Swingline Bank until the date as of
which the respective participation is required to be purchased and, to the
extent attributable to the purchased participation, shall be payable to the
participating Revolving Credit Lender from and after such date and (ii) at the
time any purchase of participations pursuant to this sentence is actually made,
the purchasing Lender shall be required to pay the appropriate Swingline Bank
interest on the principal amount of the participation purchased for each day
from and including the day upon which such Revolver Advance would otherwise have
occurred to but excluding the date of payment for such participation, at the
overnight Federal Funds Rate for the first five days and at the Base Rate Basis
for each day thereafter.
(i) Bid Rate Advances
(i) With respect to each Bid Rate Borrowing, the Borrower shall
give the Administrative Agent prior to 10:00 a.m. (Dallas, Texas time),
in the case of Offshore Bid Rate Advances, at least five Business Days
prior to the proposed date of Bid Rate Borrowing, and in the case of
Advances bearing interest at a Margin over the LIBOR Rate, at lease four
Business Days prior to the proposed date of Bid Rate Borrowing, written
notice of its intention to borrow Bid Rate Advances pursuant to a Bid
Rate Advance Request. Such Bid Rate Advance Request shall specify (a)
whether such Bid Rate Borrowing is to be made under the Working Line
Loan or the Revolving Credit Loan, (b) the requested date of the Bid
Rate Borrowing, which shall be a Business Day, (c) the aggregate amount
of the proposed Bid Rate Borrowing (which shall be at least $5,000,000
and which is an integral multiple of $1,000,000 in excess thereof), (d)
the Interest Period with respect thereto, provided that such Interest
Period shall not extend past the Maturity Date, the Option Date or the
Conversion Date, as applicable, and (e) if such Advance is a Bid Rate
Advance - Revolving Credit, whether such Advance is to be made in
Dollars in an Approved Offshore Currency and specifying such Approved
Offshore Currency. Bid Rate Advance Requests that do not conform
substantially to the form of Exhibit N hereto may be rejected by the
Administrative Agent, and the Administrative Agent shall give prompt
notice to the Borrower of such rejection. The Borrower shall pay a $500
non-refundable, administrative fee for the account of the Administrative
Agent for each notice of proposed Bid Rate Borrowings. Such fee shall be
paid to the Administrative Agent on the date of delivery of the
Borrower's notice of intention to borrow Bid Rate Advances, and shall
not be refunded, notwithstanding that the
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proposed Bid Rate Borrowing is canceled by the Borrower or no Lender
offers to make a Bid Rate Advance.
(ii) Upon the receipt by the Administrative Agent of a Bid Rate
Advance Request that conforms with the requirements herein, the
Administrative Agent shall, by telecopy in the form of the Invitation to
Bid, (A) with respect to Bid Rate Advances under the Revolving Credit
Loan, invite each Revolving Credit Lender to bid, and (B) with respect
to Bid Rate Advances under the Working Line Loan, invite each Working
Line Lender to bid, in each case on the terms and conditions of this
Agreement, to make Bid Rate Advances - Revolving Credit and Bid Rate
Advances - Working Line, as applicable, pursuant to the Bid Rate Advance
Request.
(iii) Each Revolving Credit Lender shall, if, in its sole
discretion, it elects to do so, irrevocably offer to make one or more
Bid Rate Advances - Revolving Credit to the Borrower and each Working
Line Lender shall, if, in its sole discretion, it elects to do so,
irrevocably offer to make one or more Bid Rate Advances - Working Line,
as applicable, to the Borrower as part of such proposed Bid Rate
Borrowing, in each case at a Margin over the LIBOR Rate, or, if such Bid
Rate Advance is made under the Revolving Credit Loan, at a Margin over
the LIBOR Rate (if made such Advance is to be made domestically in
Dollars)or the Offshore Dollar Rate or Approved Offshore Currency Rate,
as applicable, specified by each such Lender in its sole discretion, by
delivering a Confirmation of Bid to the Administrative Agent before
10:00 a.m. (Dallas, Texas time), four Business Days prior to the
proposed date of any such Bid Rate Borrowing, in the case of a request
for Bid Rate Advances - Revolving Credit that are Offshore Bid Rate
Advances, and three Business Days prior to the proposed date of any such
Bid Rate Borrowing, in the case of a request for Bid Rate Advances -
Revolving Credit and Bid Rate Advances - Working Line that are domestic
Bid Rate Advances to be made in Dollars based on a Margin over the LIBOR
Rate (A) setting forth (1) the minimum amount (which shall be $1,000,000
or an integral multiple of $1,000,000 in excess thereof or the Dollar
Equivalent thereof) and maximum amount of each Bid Rate Advance which
such Lender would be willing to make as part of the proposed Bid Rate
Borrowing (which amounts may exceed an amount equal to (x) such Lender's
Revolving Credit Specified Percentage of the Revolving Credit Commitment
or (y) such Lender's Working Line Specified Percentage of the Working
Line Commitment, as applicable) (2) if such Bid Rate Advance is a Bid
Rate Advance - Revolving Credit, whether such Bid Rate Advance is to be
made as an Offshore Bid Rate Advance or a domestic Advance in Dollars
(and the Approved Offshore Currency, if applicable), and (3) the Margin
therefor, and (B) confirming the Interest Period therefor. Confirmation
of bids that do not conform substantially to Exhibit O hereto may be
rejected by the Administrative Agent, and the Administrative Agent shall
notify the applicable Lender of such rejection as soon as practicable.
If any Lender shall fail to respond to the Administrative Agent by such
time, such Lender shall be deemed to have elected not to make an offer.
Any Confirmation of Bid submitted by a Lender pursuant to this Section
2.2(i) is irrevocable.
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(iv) The Administrative Agent shall promptly notify the Borrower
of the number of Confirmations of Bid, the interest rate(s) and Interest
Period(s) applicable thereto, the maximum principal amount bid at each
interest rate for each Interest Period, and the identity of each Lender
submitting a Confirmation of Bid.
(v) Not later than 12:00 noon (Dallas, Texas time) four Business
Days prior to the proposed date of Bid Rate Borrowing in the case of
Offshore Bid Rate Advances, the Borrower shall, in turn, either
(A) cancel such proposed Bid Rate Borrowing by giving the
Administrative Agent notice to that effect; or
(B) accept one or more of the offers made by any Lender or
Lenders pursuant to clause (iii) above, in its sole discretion,
by giving notice to the Administrative Agent of the amount of
each Bid Rate Advance (which amount shall be equal to or greater
than the minimum amount, and equal to or less than the maximum
amount, for which notification was given to the Borrower by any
Lender for such Bid Rate Advance pursuant to clause (iii) above)
to be made by each Lender as part of such Bid Rate Borrowing, and
reject any remaining offers made by Lenders pursuant to clause
(iii) above by giving the Administrative Agent notice to that
effect; provided, that if offers are made by two or more Lenders
with the same Offshore Bid Rates for a greater aggregate
principal amount than the amount for which such offers are
accepted for the related term, the principal amount of Bid Rate
Advances accepted shall be allocated by the Borrower among such
Lenders as nearly as possible (in multiples not less than
$1,000,000 or the Dollar Equivalent thereof) in proportion to the
aggregate principal amount of such offers, and the aggregate
principal amount of offers accepted by the Borrower shall not
exceed the maximum amount contained in the related Bid Rate
Advance Request.
(vi) The Administrative Agent shall promptly give telephonic
notice to each bidding Lender if any of its offers have been accepted
(and if so, whether it was for a Bid Rate Advance - Revolving Credit or
a Bid Rate Advance - Working Line, in what amount, at what interest rate
and for what Interest Period), and each successful Lender will thereupon
become bound, subject to the other applicable conditions hereof, to make
each Bid Rate Advance for which its offer has been accepted.
(vii) After completing the notifications referred to in clause
(vi) above, the Administrative Agent shall notify each bidding Lender of
(i) the aggregate amount of Bid Rate Advances - Revolving Credit and Bid
Rate Advances - Working Line made in connection with such proposed Bid
Rate Borrowing, (ii) the maturities thereof, and (iii) the lowest and
highest interest rates at which Bid Rate Advances were made for each
maturity.
(viii) If the Administrative Agent shall at any time elect to
submit a bid for a Bid Rate Advance in its capacity as a Lender, it
shall submit such bid directly to the Borrower
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one-half hour earlier than the latest time at which other Lenders are
required to submit their bid to the Administrative Agent pursuant to
Section 2.2(i)(iii) hereof.
(ix) If the Borrower accepts one or more offers made by any
Lender or Lenders pursuant to clause (v)(B) above, each such Lender
shall, unless any applicable condition specified in Article 3 hereof has
not been satisfied, not later than 12:00 noon (Dallas, Texas time) on
the date of a Bid Rate Advance hereunder, make available to the
Administrative Agent the principal amount of each Bid Rate Advance in
immediately available funds, to be disbursed by the Administrative Agent
by wire transfer pursuant to instructions of the Borrower.
Section 2.3 Interest. Each Revolver Advance shall bear interest (at the
election of the Borrower in accordance with Section 2.2 hereof) at the Base Rate
Basis or the LIBOR Basis.
(a) On Base Rate Advances.
(i) The Borrower shall pay interest on the outstanding unpaid
principal amount of each Base Rate Advance, from the date such Advance
is made until it is due (whether at maturity, by reason of acceleration,
by scheduled reduction, or otherwise) or repaid, at a simple interest
rate per annum equal to the Base Rate Basis as in effect from time to
time, provided that interest on Base Rate Advances shall not exceed the
Maximum Amount. If at any time the Base Rate Basis would exceed the
Highest Lawful Rate, interest payable on Base Rate Advances shall be
limited to the Highest Lawful Rate, but the Base Rate Basis shall not
thereafter be reduced below the Highest Lawful Rate until the total
amount of interest accrued on such Advances equals the amount of
interest that would have accrued if the Base Rate Basis had been in
effect at all times.
(ii) Interest on each Base Rate Advance shall be computed on the
basis of a year of 365 or 366 days, as applicable, for the number of
days actually elapsed, and shall be payable in arrears on each Quarterly
Date and on (A) the Maturity Date, with respect to Base Rate Advances
under the Revolving Credit Loan, or (B) the Option Date or the Extension
Final Maturity, as applicable, with respect to Base Rate Advances under
the Working Line Loan.
(b) On LIBOR Advances.
(i) The Borrower shall pay interest on the unpaid principal
amount of each LIBOR Advance, from the date such Advance is made until
it is due (whether at maturity, by reason of acceleration, by scheduled
reduction, or otherwise) or repaid, at a rate per annum equal to the
LIBOR Basis for such Advance. The Administrative Agent, whose
determination shall be conclusive, shall determine the LIBOR Basis on
the second Business Day prior to the applicable funding date and shall
notify the Borrower and the Lenders of such LIBOR Basis.
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(ii) Subject to Section 11.9 hereof, interest on each LIBOR
Advance shall be computed on the basis of a 360-day year for the actual
number of days elapsed, and shall be payable in arrears on the
applicable Payment Date and on (A) the Maturity Date, with respect to
LIBOR Advances under the Revolving Credit Loan, or (B) the Option Date
or the Extension Final Maturity, as applicable, with respect to LIBOR
Advances under the Working Line Loan; provided, however, that if the
Interest Period for such Advance exceeds three months, interest shall
also be due and payable in arrears on each Quarterly Date during such
Interest Period.
(c) On Offshore Advances.
(i) The Borrower shall pay interest on the unpaid principal
amount of each Offshore Advance, from the date such Advance is made
until it is due (whether at maturity, by reason of acceleration, by
scheduled reduction, or otherwise) or repaid, at a rate per annum equal
to the Offshore Basis for such Advance. The Administrative Agent, whose
determination shall be conclusive, shall determine the Offshore Basis on
the second Business Day prior to the applicable funding date and shall
notify the Borrower and the Lenders of such Offshore Basis.
(ii) Subject to Section 11.9 hereof, interest on each Offshore
Advance shall be computed on the basis of a 360-day year for the actual
number of days elapsed, and shall be payable in arrears on the
applicable Payment Date and on the Maturity Date; provided, however,
that if the Interest Period for such Advance exceeds three months,
interest shall also be due and payable in arrears on each Quarterly Date
during such Interest Period.
(d) On Swingline Advances.
(i) The Borrower shall pay interest on the outstanding principal
amount of each Swingline Advance, from the date such Swingline Advance
is made until it is due (whether at maturity, by reason of acceleration
or otherwise) and repaid, at an interest rate per annum equal to (A) (I)
the Offshore Basis, if such Swingline Advance is made in an Approved
Offshore Currency or (II) the Base Rate Basis, if such Swingline Advance
is made in Dollars, in each case in effect from time to time, minus (B)
the discount of such Offshore Basis or Swingline Basis necessary to
allow the Borrower to recapture commitment fees that would be earned by
such Swingline Lender during the term of such Swingline Advance pursuant
to Section 2.4(a)(i) hereof, but in no event higher than the Highest
Lawful Rate.
(ii) Subject to Section 11.9 hereof, interest on Swingline
Advances made in (A) an Approved Offshore Currency shall be computed on
the basis of a 360-day year for the actual number of days elapsed, and
(B) Dollars, shall be computed on the basis of a 365 or 366-day year, as
applicable, for the actual number of days elapsed, and shall be payable
in arrears on each Payment Date and on the Maturity Date.
(e) On Bid Rate Advances. The Borrower shall pay interest on the
outstanding unpaid principal amount of each Bid Rate Advance at a per annum rate
equal to the interest rate agreed to
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by the Borrower and the Lender making such Bid Rate Advance pursuant to Section
2.2(i) hereof. Interest on each Bid Rate Advance shall be computed and shall be
payable at such times as agreed upon between the Borrower and the Lender making
such Advance pursuant to Section 2.2(i) hereof.
(f) Interest if No Notice of Selection of Continuation of an Offshore
Advance or LIBOR Advance, or Interest Period. If the Borrower fails to give the
Administrative Agent timely notice of its selection of the continuation of a
LIBOR Advance or Offshore Advance, or