UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of The Securities Exchange Act of 1934
Date of report: January 18, 2002
CLEAR CHANNEL COMMUNICATIONS, INC.
(Exact Name of Registrant as Specified in Its Charter)
TEXAS 1-9645 74-1787536
(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification No.)
200 East Basse Road, San Antonio, Texas 78209
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (210) 822-2828
ITEM 5. OTHER EVENTS.
On August 1, 2000, Clear Channel Communications, Inc., (the "Company" or
"Registrant"), a Texas corporation, and SFX Entertainment, Inc., a Delaware
corporation ("SFX"), consummated a merger (the "SFX Merger") whereby CCU II
Merger Sub, Inc., a Delaware corporation and a wholly-owned subsidiary of the
Company, was merged with and into SFX pursuant to the Agreement and Plan of
merger (the "SFX Merger Agreement"), dated February 29, 2000, as amended. As a
result of the SFX Merger, SFX has become a wholly-owned subsidiary of the
Company. The SFX Merger was a tax-free, stock-for-stock transaction.
Pursuant to the terms and conditions set forth in the SFX Merger Agreement, SFX
Class A shareholders received 0.6 shares of Clear Channel Communications, Inc.
common stock for each SFX share and SFX Class B shareholders received one share
of Clear Channel Communications, Inc. common stock for each SFX share. The
Company issued an aggregate of approximately 39.2 million shares of Clear
Channel Common Stock in exchange for shares of SFX Class A and Class B common
stock.
On August 30, 2000, the Company and AMFM Inc., a Delaware corporation ("AMFM"),
consummated a merger (the "AMFM Merger") whereby CCU Merger Sub, Inc., a
Delaware corporation and a wholly-owned subsidiary of the Company, was merged
with and into AMFM pursuant to the Agreement and Plan of merger (the "AMFM
Merger Agreement"), dated October 2, 1999. As a result of the AMFM Merger, AMFM
has become a wholly-owned subsidiary of the Company. The AMFM Merger was a
tax-free, stock-for-stock transaction.
Pursuant to the terms and conditions set forth in the AMFM Merger Agreement,
AMFM shareholders received 0.94 shares of Clear Channel Communications, Inc.
common stock for each AMFM share. The Company issued an aggregate of
approximately 205.4 million shares of Clear Channel Common Stock in exchange for
shares of AMFM common stock.
The purpose of this filing is to make public the unaudited pro forma combined
condensed consolidated statement of operations for the year ended December 31,
2000 reflecting the pro forma effect of the AMFM and SFX mergers.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(b) Pro Forma Financial Information.
UNAUDITED PRO FORMA COMBINED CONDENSED
CONSOLIDATED STATEMENT OF OPERATIONS
The following unaudited pro forma combined condensed consolidated statement
of operations for the year ended December 31, 2000 was prepared based upon the
historical consolidated statement of operations of Clear Channel, adjusted to
reflect:
- the merger with SFX Entertainment, Inc. ("SFX"), which closed on August
1, 2000, as if such merger had occurred on January 1, 2000,
- the merger with AMFM Inc. ("AMFM"), which closed on August 30, 2000, as
if such merger had occurred on January 1, 2000,
- the sale of radio stations Clear Channel and AMFM divested and the
change in the accounting for AMFM's approximate 30% ownership (11%
voting) in Lamar Advertising from the equity method to the cost method
due to the discontinuance of any and all control over the operations of
Lamar Advertising per governmental directives as if such transactions
had occurred on January 1, 2000, and
- Certain other AMFM financing transactions as if such transactions had
occurred on January 1, 2000.
For accounting purposes, Clear Channel has accounted for the acquisitions
of SFX and AMFM as purchases; accordingly, the net assets of SFX and AMFM have
been adjusted to their estimated fair values based upon purchase price
allocations.
The unaudited pro forma combined condensed consolidated statement of
operations should be read in conjunction with the historical financial
statements and the notes thereto of Clear Channel incorporated by reference in
this document.
The unaudited pro forma combined condensed consolidated statement of
operations is not necessarily indicative of the actual results of operations
that would have been achieved had the above described transactions occurred on
the dates indicated nor is it necessarily indicative of future operating
results.
CLEAR CHANNEL
UNAUDITED PRO FORMA COMBINED CONDENSED CONSOLIDATED
STATEMENT OF OPERATIONS
(IN THOUSANDS OF DOLLARS, EXCEPT PER SHARE DATA)
YEAR ENDED DECEMBER 31, 2000
PRO FORMA
CLEAR SFX PRO FORMA AMFM ADJUSTMENTS
CHANNEL HISTORICAL SFX MERGER HISTORICAL TO AMFM
HISTORICAL 6/30/2000 ADJUSTMENTS(A) 8/31/2000 AMFM(B) DIVESTITURES(C)
---------- ---------- -------------- ---------- ----------- ---------------
Net revenue....................... $5,345,306 $1,034,175 $ (7,250) $1,545,411 $ -- $(179,839)
Operating expenses................ 3,480,706 945,662 (1,032) 819,924 -- (97,032)
Non-cash compensation expense..... 16,032 -- -- 36,137 -- --
Depreciation and amortization..... 1,401,063 97,220 33,119 588,633 -- (60,399)
Merger, nonrecurring & sys. dev.
expenses........................ -- 108,566 (13,000) 112,357 (96,264) --
Corporate expenses................ 142,627 13,670 -- 43,559 -- --
---------- ---------- -------- ---------- -------- ---------
Operating income (loss)........... 304,878 (130,943) (26,337) (55,199) 96,264 (22,408)
Interest expense.................. 383,104 73,983 (3,408) 319,840 (1,520) (101,944)
Gain (loss) on sale of assets
related to mergers.............. 783,743 -- -- 1,666,385 -- --
Equity in earnings (loss) of
nonconsolidated affiliates...... 25,155 -- 954 (61,851) 53,376 --
Other income (expense) -- net..... (17,133) 3,973 -- 30,535 -- --
---------- ---------- -------- ---------- -------- ---------
Income (loss) before income taxes,
and credit on preferred stock
subsidiary...................... 713,539 (200,953) (21,975) 1,260,030 151,160 79,536
Income tax (expense) benefit...... (464,731) (4,300) (1,363) (533,664) (34,224) (13,332)
Credit on preferred stock of
subsidiary...................... -- -- -- 3,310 (3,310) --
---------- ---------- -------- ---------- -------- ---------
Net income (loss)................. 248,808 (205,253) (23,338) 729,676 113,626 66,204
Preferred stock dividends......... -- -- -- 321 (321) --
---------- ---------- -------- ---------- -------- ---------
Net income (loss) attributable to
common shareholders............. $ 248,808 $ (205,253) $(23,338) $ 729,355 $113,947 $ 66,204
========== ========== ======== ========== ======== =========
Net income (loss) attributable to
common shareholders per common
share:
Basic........................... $ .59
==========
Diluted......................... $ .57
==========
PRO FORMA CLEAR
CLEAR CHANNEL AMFM MERGER CHANNEL
DIVESTITURES(D) ADJUSTMENTS(E) PRO FORMA
--------------- -------------- ----------
Net revenue....................... $(65,100) $ (16,738) $7,655,965
Operating expenses................ (31,946) (5,651) 5,110,631
Non-cash compensation expense..... -- 8,136 60,305
Depreciation and amortization..... (9,259) 149,126 2,199,503
Merger, nonrecurring & sys. dev.
expenses........................ -- (1,000) 110,659
Corporate expenses................ -- -- 199,856
-------- ----------- ----------
Operating income (loss)........... (23,895) (167,349) (24,989)
Interest expense.................. (27,964) (10,047) 632,044
Gain (loss) on sale of assets
related to mergers.............. -- (2,297,658) 152,470
Equity in earnings (loss) of
nonconsolidated affiliates...... -- -- 17,634
Other income (expense) -- net..... -- -- 17,375
-------- ----------- ----------
Income (loss) before income taxes,
and credit on preferred stock
subsidiary...................... 4,069 (2,454,960) (469,554)
Income tax (expense) benefit...... (2,244) 966,063 (87,795)
Credit on preferred stock of
subsidiary...................... -- -- --
-------- ----------- ----------
Net income (loss)................. 1,825 (1,488,897) (557,349)
Preferred stock dividends......... -- -- --
-------- ----------- ----------
Net income (loss) attributable to
common shareholders............. $ 1,825 $(1,488,897) $ (557,349)
======== =========== ==========
Net income (loss) attributable to
common shareholders per common
share:
Basic........................... $ (.95)
==========
Diluted......................... $ (.95)
==========
CLEAR CHANNEL
NOTES TO UNAUDITED PRO FORMA COMBINED
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(A) The pro forma SFX merger adjustments for the six month period ended June 30,
2000 are as follows:
INCREASE (DECREASE)
TO INCOME
-------------------
(1) Decrease in revenue due to the elimination of services SFX
provided to Clear Channel and services Clear Channel
provided to SFX and the reclassification of earnings from
equity method investments out of net revenue (SFX's policy)
into equity in earnings of nonconsolidated affiliates (Clear
Channel's policy)........................................... $ (7,250)
(2) Change in operating expense due to the elimination of
services SFX provided to Clear Channel and services Clear
Channel provided to SFX of $6,296, offset by the increase in
operating expenses resulting from change in classification
of integration and start-up costs of $5,264 from treatment
as depreciation expense (SFX's policy) to treatment as
operating expense (Clear Channel's policy).................. 1,032
(3) Increase in amortization expense resulting from the
additional goodwill created by the merger, other intangible
assets acquired in the merger and a change in the life of
intangible assets amortization from an average of 15 years
(SFX's policy) to an average of 20 years (Clear Channel's
policy) of $38,383 partially offset by the reclassification
of $5,264 from depreciation expense to operating expense.... (33,119)
(4) Decrease in merger and non-recurring costs due to the
elimination of direct merger related expenses............... 13,000
(5) Decrease in interest expense resulting from the amortization
of premium on long-term debt resulting from the mark-up to
fair value.................................................. 3,408
(6) Increase in equity in earnings (loss) of nonconsolidated
affiliates resulting from the reclassification of earnings
from equity method investments out of revenue (SFX's policy)
into equity in earnings of nonconsolidated affiliates (Clear
Channel's policy)........................................... 954
(7) Increase in income tax expense associated with the tax
effect of adjustment (3) at Clear Channel's estimated tax
rate of 40%................................................. (1,363)
(B) The pro forma adjustments to AMFM historical for the eight months ended
August 31, 2000 are as follows:
INCREASE (DECREASE)
TO INCOME
-------------------
(8) Decrease in merger, nonrecurring and sys. dev. expenses to
eliminate AMFM's historical merger costs associated with the
Clear Channel merger........................................ 96,264
(9) Reflects the net decrease in interest expense related to the
purchase of $200,000 of aggregate principal amount of AMFM's
9 3/8% Senior Subordinated Notes due 2004 and estimated fees
and expenses which was completed on February 15, 2000,
funded with borrowings under the credit agreement, and the
net decrease in interest expense related to the purchase of
$99,400 aggregate principal amount of AMFM's 10 1/2% Senior
Subordinated Notes due 2007 and estimated fees and expenses
which was completed on June 2, 2000, funded with borrowings
under the credit agreement.................................. 1,520
CLEAR CHANNEL
NOTES TO UNAUDITED PRO FORMA COMBINED
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
INCREASE (DECREASE)
TO INCOME
-------------------
(10) As a condition for approval of the merger with Clear Channel
from the Department of Justice, AMFM is prohibited from
exercising any governance rights over Lamar. Since AMFM may
no longer exercise significant influence over the operations
of Lamar, AMFM's investment in Lamar will be accounted for
using the cost method instead of the equity method
subsequent to the merger date. This adjustment removes the
historical equity in losses of Lamar for the period from
January 1 to August 30, 2000................................ 53,376
(11) Reflects the tax effect of the pro forma adjustments........ (34,224)
(12) Reflects the elimination of the credit on exchange of
preferred stock of subsidiary for the period from January 1
to August 30, 2000 related to the exchange of the 12% Senior
Exchangeable Preferred Stock of AMFM for 12% Subordinated
Exchange Debentures due 2009 completed effective January 1,
2000........................................................ (3,310)
(13) Reflects the elimination of preferred stock dividends
related to the conversion of AMFM's 7% Convertible Preferred
Stock to AMFM common stock on January 19, 2000 pursuant to a
notice of redemption issued to holders...................... 321
The pro forma adjustments for the year ended December 31, 2000 relating to
the sale of radio stations Clear Channel and AMFM divested, are as follows:
(C) AMFM Divestitures
INCREASE (DECREASE)
TO INCOME
-------------------
(14) Decrease in revenue......................................... $(179,839)
(15) Decrease in operating expenses.............................. 97,032
(16) Decrease in depreciation and amortization, of which 45,351
results in a permanent difference and will not be deducted
for federal income tax purposes............................. 60,399
(17) Decrease in interest expense associated with the reduction
of long-term debt resulting from the use of net proceeds.... 101,944
(18) Increase in income tax expense associated with the tax
effect of adjustments (13) through (16) at AMFM's estimated
tax rate of 39%............................................. (13,332)
CLEAR CHANNEL
NOTES TO UNAUDITED PRO FORMA COMBINED
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(D) Clear Channel Divestitures
INCREASE (DECREASE)
TO INCOME
-------------------
(19) Decrease in revenue......................................... $(65,100)
(20) Decrease in operating expenses.............................. 31,946
(21) Decrease in depreciation and amortization, of which $1,541
results in a permanent difference and will not be deducted
for federal income tax purposes............................. 9,259
(22) Decrease in interest expense associated with the reduction
of long-term debt resulting from the use of net proceeds.... 27,964
(23) Change in income tax expense associated with the tax effect
of adjustments (18) through (21) at Clear Channel's
estimated tax rate of 40%................................... (2,244)
(E) The pro forma AMFM merger adjustments for the year ended December 31,
2000 are as follows:
INCREASE
(DECREASE)
TO INCOME
-----------
(24) Decrease in revenue due to the elimination of services AMFM
provided to Clear Channel and services Clear Channel
provided to AMFM............................................ $ (16,738)
(25) Decrease in operating expense due to the elimination of
services AMFM provided to Clear Channel and services Clear
Channel provided to AMFM of $16,738, partially offset by the
increase in operating expense resulting from change in
classification for start-up and development costs of $10,087
from treatment as depreciation expense and as merger and
non-recurring costs (AMFM's policy) to treatment as
operating expense (Clear Channel's policy).................. 5,651
(26) Increase in non-cash compensation expense due to the
assumption of unvested options held by AMFM employees....... (8,136)
(27) Increase in amortization expense resulting from the
additional licenses and goodwill created by the merger and a
change in the life of licenses and goodwill amortization
from 15 years (AMFM's policy) to 25 years (Clear Channel's
policy). $39,803 in a permanent difference and will not be
deductible for federal income tax purposes. This is
partially offset by the decrease in amortization expense
resulting from the change of classification of start-up and
development costs of $10,087 from treatment as depreciation
expense (AMFM's policy) to treatment as operating expense
(Clear Channel's policy).................................... (149,126)
(28) Decrease in merger and non-recurring costs resulting from
the change in classification for start-up and development
costs from treatment as merger and non-recurring costs
(AMFM's policy) to treatment as operating expense (Clear
Channel's policy)........................................... 1,000
CLEAR CHANNEL
NOTES TO UNAUDITED PRO FORMA COMBINED
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
INCREASE
(DECREASE)
TO INCOME
-----------
(29) Decrease in interest expense associated with the
amortization of the premium on long term debt resulting from
the mark-up of debt to fair value, partially offset by an
increase in interest expense associated with the increased
long-term debt resulting from the merger expenses of
$250,000.................................................... 10,047
(30) Decrease in gain on sale of assets related to mergers
associated with the realized gain on the sale of radio
stations Clear Channel and AMFM divested in order to obtain
regulatory approvals for the merger......................... (2,297,658)
(31) Decrease in income tax expense associated with the tax
effect of the adjustments in note (25), (26) and (28) at
Clear Channel's estimated tax rate of 40%................... 966,063
There is no dilutive effect related to stock options and other potentially
dilutive securities on weighted-average shares outstanding as a pro forma net
loss is reported for the year ended December 31, 2000. Pro forma basic and
diluted share information is as follows (In thousands):
Clear Channel historical weighted-average shares
outstanding............................................... 423,969
Increase weighted-average common stock outstanding to
account for 39.6 million shares of Clear Channel's common
stock given in the SFX merger weighted for the full
year...................................................... 23,200
Increase weighted-average common stock outstanding to
account for 205.4 million shares of Clear Channel's common
stock given in the AMFM merger weighted for the full
year...................................................... 137,274
-------
Clear Channel pro forma weighted-average shares
outstanding............................................... 584,443
=======
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
CLEAR CHANNEL COMMUNICATIONS, INC.
Date: January 18, 2002 By: /s/ HERBERT W. HILL JR.
----------------------------------------
Herbert W. Hill, Jr.:
Sr. Vice President/Chief Accounting
Officer: