10-Q 1 0001.txt FORM 10-Q SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 QUARTERLY REPORT PURSUANT TO SECTION 13 AND 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarter ended June 30, 2000 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 (210) 822-2828 (Address and telephone number of principal executive offices) 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 shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes __x__ No _____ Indicate the number of shares outstanding of each class of the issuer's classes of common stock, as of the latest practicable date. Class Outstanding at August 10, 2000 - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - Common Stock, $.10 par value 380,219,251 CLEAR CHANNEL COMMUNICATIONS, INC. AND SUBSIDIARIES INDEX Page No. - - - - - Part I -- Financial Information Item 1. Unaudited Financial Statements Consolidated Balance Sheets at June 30, 2000 and 3 December 31, 1999 Consolidated Statements of Operations for the six and 5 three months ended June 30, 2000 and 1999 Consolidated Statements of Cash Flows for the six months 6 ended June 30, 2000 and 1999 Notes to Consolidated Financial Statements 8 Item 2. Management's Discussion and Analysis of 11 Financial Condition and Results of Operations Item 3. Quantitative and Qualitative Disclosures About 15 Market Risk Part II -- Other Information Item 4. Submission of Matters to a Vote of Security Holders 16 Item 6. Exhibits and reports on Form 8-K 18 (a) Exhibits (b) Reports on Form 8-K Signatures 19 Index to Exhibits 20 PART I Item 1. UNAUDITED FINANCIAL STATEMENTS CLEAR CHANNEL COMMUNICATIONS, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS ASSETS (In thousands of dollars) June 30, December 31, 2000 1999 (Unaudited) (*) Current Assets Cash and cash equivalents $ 56,893 $ 76,724 Accounts receivable, less allowance of $36,731 at June 30, 2000 and $26,095 at December 31, 1999 844,366 724,900 Other current assets 143,313 123,485 Total Current Assets 1,044,572 925,109 Property, Plant and Equipment Land, buildings and improvements 367,349 338,764 Structures and site leases 2,118,701 1,870,731 Transmitter and studio equipment 451,163 427,063 Furniture and other equipment 275,952 222,581 Construction in progress 125,901 89,901 3,339,066 2,949,040 Less accumulated depreciation (602,177) (470,916) 2,736,889 2,478,124 Intangible Assets Contracts 808,487 817,227 Licenses and goodwill 12,231,656 11,809,882 Other intangible assets 89,327 80,102 13,129,470 12,707,211 Less accumulated amortization (1,052,133) (758,889) 12,077,337 11,948,322 Other Assets Restricted cash -- 4,349 Notes receivable 129,675 53,675 Investments in, and advances to, nonconsolidated affiliates 386,918 380,918 Other assets 339,269 251,604 Other investments 933,400 779,411 Total Assets $ 17,648,060 $ 16,821,512 * From audited financial statements See Notes to Consolidated Financial Statements CLEAR CHANNEL COMMUNICATIONS, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS LIABILITIES AND SHAREHOLDERS' EQUITY (In thousands of dollars) June 30, December 31, 2000 1999 (Unaudited) (*) Current Liabilities Accounts payable $ 211,902 $ 196,222 Accrued interest 19,367 16,449 Accrued expenses 264,798 337,939 Accrued income taxes 87,894 29,769 Current portion of long-term debt 30,510 30,361 Other current liabilities 77,094 74,775 Total Current Liabilities 691,565 685,515 Long-term debt 4,875,879 4,093,543 Liquid Yield Option Notes 493,879 490,809 Deferred income taxes 1,340,070 1,289,783 Other long-term liabilities 129,256 149,032 Minority interest 17,103 28,793 Shareholders' Equity Common stock 33,897 33,861 Additional paid-in capital 9,231,175 9,216,957 Common stock warrants 250,583 252,862 Retained earnings 287,966 296,132 Other comprehensive income 295,317 282,745 Other 2,304 2,304 Cost of shares held in treasury (934) (824) Total shareholders equity 10,100,308 10,084,037 Total Liabilities and Shareholders Equity $ 17,648,060 $ 16,821,512 * From audited financial statements See Notes to Consolidated Financial Statements CLEAR CHANNEL COMMUNICATIONS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED) (In thousands of dollars, except per share data) Six Months Ended Three Months Ended June 30, June 30, June 30, June 30, 2000 1999 2000 1999 Gross revenue $ 1,950,017 $ 1,117,737 $ 1,078,642 $ 696,130 Less: agency commissions 201,603 123,259 112,767 78,439 ------- ------- ------- ------ Net revenue 1,748,414 994,478 965,875 617,691 Operating expenses 1,082,690 601,371 562,729 356,549 Depreciation and amortization 448,741 265,027 228,687 154,379 Corporate expenses 52,445 28,331 27,867 15,884 ------ ------ ------ ------ Operating income 164,538 99,749 146,592 90,879 Interest expense 125,460 78,842 69,911 47,010 Gain on sale of stations -- 136,925 -- 136,925 Other income (expense) - net 1,624 14,967 1,226 4,048 ----- ------ ----- ----- Income before income taxes and equity in earnings of nonconsolidated affiliates 40,702 172,799 77,907 184,842 Income taxes 58,472 82,852 53,339 79,962 ------ ------ ------ ------ Income (loss) before equity in earnings of nonconsolidated affiliates (17,770) 89,947 24,568 104,880 Equity in earnings of nonconsolidated affiliates 9,603 3,817 6,667 1,620 ----- ----- ----- ----- Net income (loss) (8,167) 93,764 31,235 106,500 Other comprehensive income (loss), net of tax: Foreign currency translation adjustments (60,544) (52,946) (48,039) (25,954) Unrealized gains on securities: Unrealized holding gain (loss) arising during period 73,116 (27,640) (27,060) 840 Less: reclassification adjustment for gains included in net income - (14,905) - (7,371) ------ ------- ------ ------ Comprehensive income (loss) $ 4,405 $ (1,727) $ (43,864) $ 74,015 Net income (loss) per common share: Basic $ (.02) $ .33 $ .09 $ .35 Diluted $ (.02) $ .32 $ .09 $ .33 See Notes to Consolidated Financial Statements
CLEAR CHANNEL COMMUNICATIONS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) (In thousands of dollars) Six Months Ended June 30, June 30, 2000 1999 Cash flows from operating activities: Net income (loss) $ (8,167) $ 93,764 Reconciling Items: Depreciation 143,141 106,747 Amortization of intangibles 305,600 158,280 Deferred taxes 15,856 59,514 Amortization of film rights 11,180 8,514 Amortization of deferred financing charges, bond premiums and accretion of note discounts 7,365 1,863 Payments on film liabilities (10,646) (8,395) (Recognition) deferral of deferred income 2,554 6,284 (Gain) loss on disposal of assets (2,204) (139,268) Gain on sale of other investments -- (22,930) Equity in earnings of nonconsolidated affiliates (6,239) (570) Increase (decrease) minority interest 4 (308) Changes in operating assets and liabilities: (Increase) decrease accounts receivable (108,225) (45,184) (Decrease) increase accounts payable, accrued expenses and other (99,840) (84,602) Increase (decrease) accrued interest 2,918 2,820 (Increase) decrease in federal income tax receivable 23,050 -- Increase (decrease) accrued income and other taxes 38,300 (9,173) ------ ------ Net cash provided by operating activities 314,647 127,356 CLEAR CHANNEL COMMUNICATIONS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) (In thousands of dollars) Six Months Ended June 30, June 30, 2000 1999 Cash flows from investing activities: Decrease (increase) in restricted cash $ 4,349 $ (142,061) Increase in notes receivable - net (76,000) -- Increase in investments in and advances to nonconsolidated affiliates - net (3,657) (1,173) Purchases of investments (41,842) (8,582) Proceeds from sale of investments -- 29,659 Purchases of property, plant and equipment (201,602) (75,932) Proceeds from disposal of assets 3,377 207,294 Acquisition of broadcasting assets (48,981) (32,743) Acquisition of outdoor assets (772,148) (401,597) Increase in other-net (11,230) (11,218) Net cash used in investing activities (1,147,734) (436,353) Cash flows from financing activities: Proceeds from issuance of long-term debt 2,587,661 1,352,453 Payments on long-term debt (1,782,801) (1,578,416) Proceeds from exercise of stock options and stock purchase plan 6,187 51,948 Proceeds from issuance of common stock -- 512,916 Proceeds from exercise of common stock warrants 2,209 - Net cash provided by financing activities 813,256 338,901 Net (decrease) increase in cash and cash equivalents (19,831) 29,904 Cash and cash equivalents at beginning of period 76,724 36,498 Cash and cash equivalents at end of period $ 56,893 $ 66,402 See Notes to Consolidated Financial Statements CLEAR CHANNEL COMMUNICATIONS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) Note 1: PREPARATION OF INTERIM FINANCIAL STATEMENTS The consolidated financial statements have been prepared by Clear Channel Communications, Inc. (the Company) pursuant to the rules and regulations of the Securities and Exchange Commission ("SEC") and, in the opinion of management, include all adjustments (consisting only of normal recurring accruals and adjustments necessary for adoption of new accounting standards) necessary to present fairly the results of the interim periods shown. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to such SEC rules and regulations. Management believes that the disclosures made are adequate to make the information presented not misleading. The results for the interim periods are not necessarily indicative of results for the full year. The financial statements contained herein should be read in conjunction with the consolidated financial statements and notes thereto included in the Company's 1999 Annual Report on Form 10-K. The consolidated financial statements include the accounts of the Company and its subsidiaries, the majority of which are wholly-owned. 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. All significant intercompany transactions are eliminated in the consolidation process. Certain reclassifications have been made to the 1999 consolidated financial statements to conform to the 2000 presentation. Note 2: RECENT 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 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 is effective for years beginning after June 15, 2000. The Company plans to adopt this statement in fiscal year 2001. Management does not believe adoption of this statement will materially impact the Companys financial position or results of operations. In December 1999, the SEC issued Staff Accounting Bulletin 101, Revenue Recognition in Financial Statements, (SAB 101). The bulletin summarizes certain of the SEC staffs 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. The Company is currently reviewing the requirements of SAB 101 and assessing its impact on the Companys financial position and results of operations. Note 3: RECENT DEVELOPMENTS On August 1, 2000, the Company consummated its merger with SFX Entertainment, Inc. (SFX). SFX is one of the worlds largest diversified promoter, producer and venue operator for live entertainment events. This merger was a tax-free, stock-for-stock transaction. Each SFX Class A shareholder received 0.6 shares of the Companys common stock for each SFX share and each SFX Class B shareholder received one share of the Companys common stock for each SFX share, on a fixed exchange basis. The Company will issue an aggregate of approximately 40.9 million shares of Clear Channel Common Stock in exchange for shares of SFX Class A and Class B common stock, valuing the merger at approximately $3.2 billion plus the assumption of SFXs debt of approximately $1.5 billion. On January 5, 2000, the Company closed the acquisition of the Ackerley Group Inc.s South Florida outdoor advertising division (Ackerley) for approximately $300.2 million. The acquisition adds approximately 3,500 display faces and enhances the Companys position in Florida. On October 2, 1999, the Company entered into a definitive merger agreement with AMFM Inc. (AMFM). Under the terms of the merger agreement, AMFM stockholders will receive 0.94 shares of the Companys common stock for each share of AMFM common stock held on the closing date of the transaction, on a fixed exchange basis, valuing the merger, based on average share value at the signing of the merger agreement, at approximately $17.1 billion plus the assumption of AMFMs debt. AMFM will become a wholly-owned subsidiary of the Company. On April 26, 2000 and April 27, 2000, stockholders of both companies approved the merger. On July 20, 2000, the U.S. Department of Justice preliminarily cleared the merger after the Company and AMFM agreed to divest 108 stations in 27 markets and also to dispose of AMFMs approximate 30% equity interest in Lamar Advertising Company. The Company and AMFM are currently negotiating with the U.S. Department of Justice to create appropriate documentation of the agreement reached. To date, the Company and AMFM have signed definitive agreements to sell 101 radio stations for aggregate proceeds of approximately $4.2 billion. Of these stations, 44 are owned and operated by the Company. As the transaction is currently structured, a further seven stations currently owned by AMFM will be put into trust until the eventual sale of these stations can be approved by the various regulatory agencies. Completion of these sales is subject to the completion of this merger, obtaining regulatory approvals and other closing conditions. It is expected that the merger will be consummated during the third quarter of 2000. The accompanying financial statements do not include any adjustments related to the merger and divestitures. The results of operations for the six-month periods ending June 30, 2000 and 1999 do not include the operations of AMFM or SFX. The results of operations for the six month periods ending June 30, 2000 and 1999 do include the operations of Ackerley, Jacor Communications, Inc., (Jacor), Dame Media, Inc., (Dame) and Dauphin OTA, (Dauphin) from the respective dates of acquisition or merger as appropriate. Assuming the mergers/acquisitions of Ackerley, Jacor, Dame and Dauphin had all occurred at January 1, 1999, unaudited pro forma consolidated results of operations for the six months ended June 30, 1999 would have been as follows: Pro Forma (Unaudited) Six Months Ended June 30, 1999 In thousands, except per share data Net revenue $ 1,411,674 Net income (loss) $ (155,268) Net income (loss) per share: Basic $ (.49) Diluted $ (.44) 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 mergers/acquisitions of Ackerley, Jacor, Dame and Dauphin occurred at the beginning of 1999, nor is it indicative of future results of operations. The Company had other acquisitions during the first six months of 2000 and during 1999, the effects of which, individually and in aggregate, were not material to the Companys consolidated financial position or results of operations. On June 14, 2000 the Company 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 to the Company of approximately $993.9 million were used to reduce the outstanding balance on the Companys domestic credit facility. On July 3, 2000 the Company 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 to the Company of approximately $612.9 million were used to reduce the outstanding balance on the Companys domestic credit facility. To facilitate possible future acquisitions as well as public offerings, the Company filed a 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). The shelf registration statement also covers preferred securities that may be issued from time to time by the Companys three Delaware statutory business trusts and guarantees of such preferred securities by the Company. Note 4 SEGMENT DATA In thousands of dollars Six Months Ended Three Months Ended June 30, June 30, June 30, June 30, 2000 1999 2000 1999 Net revenue Broadcasting $ 954,340 $ 499,336 $ 526,079 $ 347,763 Outdoor 794,074 495,142 439,796 269,928 Consolidated $ 1,748,414 $ 994,478 $ 965,875 $ 617,691 Operating expenses Broadcasting $ 580,948 $ 298,940 $ 303,644 $ 200,627 Outdoor 501,742 302,431 259,085 155,922 Consolidated $ 1,082,690 $ 601,371 $ 562,729 $ 356,549 Depreciation and Amortization Broadcasting $ 248,043 $ 105,754 $ 125,299 $ 77,769 Outdoor 200,698 159,273 103,388 76,610 Consolidated $ 448,741 $ 265,027 $ 228,687 $ 154,379 Operating income Broadcasting $ 91,319 $ 78,426 $ 77,777 $ 59,452 Outdoor 73,219 21,323 68,815 31,427 Consolidated $ 164,538 $ 99,749 $ 146,592 $ 90,879 Total identifiable assets Broadcasting $ 10,888,535 $ 9,636,320 $ 10,888,535 $ 9,636,320 Outdoor 6,759,525 6,191,846 6,759,525 6,191,846 Consolidated $ 17,648,060 $ 15,828,166 $ 17,648,060 $ 15,828,166
Net revenue of $388,597 and $215,664 for the six and three months ended June 30, 2000, respectively and $173,975 and $96,806 for the six and three months ended June 30, 1999, respectively, and identifiable assets of $2,226,769 and $1,643,391 as of June 30, 2000 and 1999, respectively are included in the data above and are derived from the Companys foreign operations. Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Results of Operations Comparison of Three and Six Months Ended June 30, 2000 to Three and Six Months Ended June 30, 1999. (In thousands of dollars, except per share data) Six Months As-Reported Pro Forma Three Months As-Reported Pro Forma Ended June 30, % Increase % Increase Ended June 30, % Increase % Increase Consolidated 2000 1999 (Decrease) (Decrease) 2000 1999 (Decrease) (Decrease) Net revenue $ 1,748,414 $ 994,478 75.8 % 23.9% $ 965,874 $617,69156.4 %25.8% Operating expenses 1,082,690 601,371 80.0 % 18.9% 562,729 356,549 57.8 % 20.4% Depreciation and amortization 448,741 265,027 69.3 % 19.7% 228,687 154,379 48.1 % 21.6% Operating income 164,538 99,749 65.0 % 85.4% 146,591 90,879 61.3 % 56.4% Interest expense 125,460 78,842 59.1 % 69,911 47,010 48.7 % Net income (loss) (8,167) 93,764 (108.7)% 31,234 106,500 (70.7)% Net income (loss) per share: Basic $ (.03) $ .33 (106.1)% $ .09 $ .35 (74.3)% Diluted $ (.03) $ .32 (106.3)% $ .09 $ .33 (72.7)%
The majority of the growth The majority of the increase in as reported depreciation and amortization was primarily due to the acquisition of the tangible and intangible assets associated with the above-mentioned business combinations. Corporate expenses increased 85% for the first six months of 2000 versus the first six months of 1999 as a result of the expansion of the corporate operations of the Company related to the aforementioned acquisitions. Interest expense increased as a result of greater average borrowing levels as a result of the aforementioned acquisitions and higher average borrowing rates. During the six-months ended June 30, 2000, the Company had approximately 47% of its debt based on LIBOR. LIBOR rates increased 24.8% from an average of 4.96% in the first half of 1999 to an average 6.19% during the first half of 2000. This increase in average borrowing rates was partially offset by the issuance of convertible notes in the fourth quarter of 1999 at 1.5% annual interest. Equity in earnings of nonconsolidated affiliates increased 152% primarily from the improved operating results from our equity investments in China, New Zealand and Australia. Income tax expense decreased due to the reduction in pre tax income. The effective tax rate increased from 48% in the first half of 1999 to 144% in the first half of this year resulting from the increased nondeductible amortization expenses associated with the aforementioned acquisitions. The majority of the decrease in net income is due to a one time after tax gain of approximately $85 million included the three and six-month periods ended June 30, 1999, which related to the sale of stations associated with the governmental directives regarding the Jacor merger. The Company did not sell any stations during the first six months of 2000. Pro Forma presentation referred to above assumes the acquisition and/or merger of Ackerley, Jacor, Dauphin and Dame occurred on January 1, 1999. Pro Forma net revenue increased due to improved advertising rates in the broadcasting segment. In addition, increased advertising rates and other less significant acquisitions within the outdoor segment also contributed to the increase in pro forma net revenue. Pro Forma operating expenses increased primarily from the incremental selling costs related to the additional revenues. The majority of the increase in pro forma operating income for the three and six month periods ended June 30 was due to improved operations during the second quarter within both the broadcasting and outdoor segments. Liquidity and Capital Resources The major sources of capital for the Company have been cash flow from operations, advances on its domestic revolving long-term line of credit (the domestic credit facility), and funds provided by various stock, convertible and other bond offerings, and other borrowings. As of June 30, 2000 and December 31, 1999, the Company had the following debt outstanding: (In millions of dollars) June 30, 2000 December 31, 1999 Credit facility - domestic $ 1,040.0 $ 743.8 Credit facility - multi-currency 537.2 483.9 Credit facility - international 107.6 120.4 Senior convertible notes 1,575.0 1,575.0 Liquid Yield Option Notes 493.9 490.8 Long-term bonds 1,601.2 1,171.4 Other borrowings 45.4 29.4 Total $ 5,400.3 $ 4,614.7 In addition, the Company had $56.9 million in unrestricted cash and cash equivalents on hand at June 30, 2000. The Board of Directors approved an increase to the number of the Companys authorized shares of common stock from 900 million to 1.5 billion in order to have additional shares available for possible future acquisition 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. The Company currently has no plans to issue any of the additional shares of common stock. On July 21, 2000 the Company 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 the Companys three Delaware statutory business trusts and guarantees of such preferred securities by the Company. Credit Facility: Domestic: The Company has a revolving credit facility for $2.0 billion, of which at June 30, 2000, $1.0 billion is outstanding and $1.0 billion is available for future borrowings. The credit facility converts into a reducing revolving line of credit on the last business day of September 2000, with quarterly repayment of the outstanding principal balance to begin the last business day of September 2000 and continue during the subsequent five year period, with the entire balance to be repaid by the last business day of June 2005. During the first six months of the year, the Company made principal payments on the credit facility totaling $1.1 billion and drew down $1.4 billion. Multi-Currency: The Company has a 364-day multi-currency revolving credit facility for $1 billion. This credit facility matures on September 7, 2000 at which time the Company has the option to convert this facility to a four-year term loan. This credit facility allows for borrowings in various foreign currencies, which are used to hedge net assets in those currencies. At June 30, 2000, the Company had Euro 478.9 million, or approximately $457.2 million plus additional U.S. dollar borrowings for a total of approximately $537.2 million outstanding and approximately $462.8 million available for future borrowings under this facility. International: The Company has an Lira88 million, or approximately $133.2 million, revolving credit facility with a group of international banks. This international credit facility allows for borrowings in various foreign currencies, which are used to hedge net assets in those currencies. At June 30, 2000, approximately $25.6 million, was available for future borrowings and $107.6 million, was outstanding. This credit facility converted into a reducing revolving facility on January 10, 2000 with an initial payment of Lira12 million made in January 2000. An additional payment of Lira12 million is due on January 10, 2001. The credit facility expires on January 10, 2002. At June 30, 2000, interest rates varied from 4.00% to 7.22%. Liquid Yield Option Notes: The Company assumed Liquid Yield Option Notes (LYONs) as a part of the merger with Jacor. The Company assumed 4-3/4% LYONs due 2018 and 5-1/2% LYONs due 2011 with an aggregated fair value of $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 the Companys 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 premium, and accretion of interest, at June 30, 2000 was $493.9 million. Long Term Bonds: 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 of Jacor Communications Company, an indirect wholly owned subsidiary of the Company. An agent acting on the Companys behalf redeemed notes with a value of approximately $571.4 million. Cash settlement of the amount due to the agent was completed on January 14, 2000. After redemption, approximately $1.2 million face value of the notes remain outstanding. On June 14, 2000 the Company 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. On June 14, 2000 the Company entered into interest rate swap agreements that effectively float the interest on $750.0 million based upon LIBOR. The net proceeds to the Company of approximately $993.9 million were used to reduce the outstanding balance on the Companys domestic credit facility. On July 3, 2000 the Company 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 to the Company of approximately $612.9 million were used to reduce the outstanding balance on the Companys domestic credit facility. USES OF FUNDS AND CAPITAL RESOURCES Ackerley Acquisition: On January 5, 2000, the Company closed the acquisition of the Ackerley for approximately $300.2 million. The acquisition adds approximately 3,500 display faces and enhances the Companys position in Florida. SFX Merger: On August 1, 2000, the Company consummated its merger with SFX Entertainment, Inc. (SFX). SFX is one of the worlds largest diversified promoter, producer and venue operator for live entertainment events. This merger was a tax-free, stock-for-stock transaction. Each SFX Class A shareholder received 0.6 shares of the Companys common stock for each SFX share and each SFX Class B shareholder received one share of the Companys common stock for each SFX share, on a fixed exchange basis. The Company will issue an aggregate of approximately 40.9 million shares of Clear Channel Common Stock in exchange for shares of SFX Class A and Class B common stock, valuing the merger at $3.2 billion plus the assumption of SFXs debt of approximately $1.5 billion. Other: During the first six months of 2000, in addition to the acquisition of Ackerley, the Company has acquired approximately 2,400 additional outdoor faces in 39 domestic markets and in malls throughout the U.S. and 20,600 additional display faces in 23 international markets for a total of $471.9 million. The Company also acquired 12 radio stations in five markets and acquired the remaining 20% minority interest in two radio stations in one market for a total of $47.5 million during the first six months of 2000. In addition, the Company acquired a software company, which is developing broadcasting software for $1.5 million. During the first six months of 2000, the Company had capital expenditures of $201.6 million, of which, $94.1 million was within the broadcasting segment and $107.5 million was within the outdoor segment. Capital expenditures included $73.3 million for one-time expenditures primarily related to facility consolidations and a one-time capital expenditure in conjunction with the long-term extension of certain operating contracts. Construction of new revenue-producing advertising displays totaled $63.3 million. Future acquisitions of broadcasting stations, outdoor advertising facilities and other media-related properties affected in connection with the implementation of the Companys acquisition strategy are expected to be financed from increased borrowings under the existing credit facilities, additional public equity and debt offerings and cash flow from operations. The Company believes that cash flow from operations as well as the proceeds from securities offerings made from time to time will be sufficient to make all required future interest and principal payments on the credit facilities, senior convertible notes and bonds, and will be sufficient to fund all anticipated capital expenditures. Pending Transactions: AMFM Merger: On October 2, 1999, the Company entered into a definitive merger agreement with AMFM Inc. (AMFM). Under the terms of the merger agreement, AMFM stockholders will receive 0.94 shares of the Companys common stock for each share of AMFM common stock held on the closing date of the transaction, on a fixed exchange basis, valuing the merger, based on average share value at the signing of the merger agreement, at approximately $17.1 billion plus the assumption of AMFMs debt. AMFM will become a wholly-owned subsidiary of the Company. On April 26, 2000 and April 27, 2000, stockholders of both companies approved the merger. On July 20, 2000, the U.S. Department of Justice preliminarily cleared the merger after the Company and AMFM agreed to divest 108 stations in 27 markets and also to dispose of AMFMs approximate 30% equity interest in Lamar Advertising Company. The Company and AMFM are currently negotiating with the U.S. Department of Justice to create appropriate documentation of the agreement reached. To date, the Company and AMFM have signed definitive agreements to sell 101 radio stations for aggregate proceeds of approximately $4.2 billion. Of these stations, 44 are owned and operated by the Company. As the transaction is currently structured, a further seven stations currently owned by AMFM will be put into trust until the eventual sale of these stations can be approved by the various regulatory agencies. Completion of these sales is subject to the completion of this merger, obtaining regulatory approvals and other closing conditions. It is expected that the merger will be consummated during the third quarter of 2000. The accompanying financial statements do not include any adjustments related to the merger and divestitures. Ratio: The ratio of earnings to fixed charges is as follows: 6 Months ended June 30, Year Ended 2000 1999 1999 1998 1997 1996 1995 1.25 3.06 2.04 1.83 2.32 3.63 3.32 The ratio of earnings to fixed charges has been computed on a total enterprise basis. Earnings represent income from continuing operations before income taxes less equity in earnings (loss) of nonconsolidated affiliates plus fixed charges. Fixed charges represent interest, amortization of debt discount and expense, and the estimated interest portion of rental charges. The Company had no preferred stock outstanding and paid no dividends thereon for any period presented. Risks Regarding Forward Looking Statements Except for the historical information, this report contains various forward-looking statements which represent the Companys expectations or beliefs concerning future events, including the future levels of cash flow from operations. The Company cautions 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 the Companys financial performance. These variables include economic conditions, the ability of the Company to integrate the operations of Jacor, Dame, Dauphin, Ackerley and SFX the ability of the Company to consummate the pending merger with AMFM, shifts in population and other demographics, level of competition for advertising dollars, fluctuations in operating costs, technological changes and innovations, changes in labor conditions, changes in governmental regulations and policies and certain other factors set forth in the Companys SEC filings. Actual results in the future could differ materially from those described in the forward-looking statements. Item 3. Quantitative and Qualitative Disclosures About Market Risk. Interest Rate Risk At June 30, 2000, approximately 47.8% of the Companys long-term debt, including fixed rate debt on which the Company has entered interest rate swap agreements, bears interest at variable rates. Accordingly, the Companys 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 first six months of 2000 average interest rate under these borrowings, it is estimated that the Companys first six months of 2000 interest expense would have changed by $51.5 million and that the Companys first six months of 2000 net income would have changed by $30.9 million. In the event of an adverse change in interest rates, management would likely 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. The Company currently hedges a portion of its outstanding debt with interest rate swap agreements that effectively fix the interest at rates from 4.5% to 8.0% on $68.7 million of its current borrowings. These agreements expire from October 2000 to December 2000. The fair value of these agreements at June 30, 2000 and settlements of interest during the first six months of 2000 were not material. Equity Price Risk The carrying value of the Companys 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 June 30, 2000 by $178.5 million and would change comprehensive income by $116.0 million. Foreign Currency The Company has operations in 42 countries throughout Europe, Asia and South America. All foreign operations are measured in their local by factors such as changes in foreign currency exchange rates or weak economic conditions in the foreign markets in which the Company has operations. To mitigate a portion of the exposure to risk of currency fluctuations throughout Europe and Asia to the British pound, the Company has a natural hedge through borrowings in some other currencies. Additionally, the Company has a natural hedge through borrowings in Euros to mitigate a portion of the exposure to risk of currency fluctuations in Western Europe. This hedge position is reviewed monthly. The Company maintains 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. The Companys foreign operations reported a loss of $27.5 million for the first six months of 2000. It is estimated that a 5% change in the value of the U.S. dollar to the British pound would change net loss for the first six months of 2000 by $1.4 million. The Companys 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 Australia, New Zealand and Mexico, 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 June 30, 2000 would change net income for the first six months of 2000 by approximately $223,500. 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. Part II -- OTHER INFORMATION Item 4. Submission of Matters to a Vote of Security Holders An annual meeting of shareholders of the Company was held on April 27, 2000. The shareholders approved the issuance of shares of the Companys common stock in the merger with AMFM. The shareholders approved the election of Robert L. Crandall, Thomas O. Hicks, Vernon E. Jordan, Jr., Michael J. Levitt and Perry J. Lewis as directors to fill five additional seats to be created on the Companys board upon completion of the merger with AMFM. L. Lowry Mays, Karl Eller, Mark P. Mays, Randall T. Mays, Alan D. Feld, B. J. McCombs, Theodore H. Strauss and John H. Williams were elected as directors of the Company, each to hold office until the next annual meeting of shareholders or until his successor has been elected and qualified, subject to earlier resignation and removal. The shareholders approved the adoption of the Clear Channel Communications, Inc. Annual Incentive Plan. The shareholders approved an amendment to the Companys Articles of Incorporation increasing the number of authorized shares of Common Stock from 900 million to 1.5 billion. The shareholders approved the selection of Ernst & Young LLP as independent auditors for the year ending December 31, 2000. The results of voting at the annual meeting of the shareholders were as follows: Proposal No. 1 (approval of issuance of common shares in merger with AMFM) For Withhold/Against Exceptions/Abstain 277,353,732 951,517 1,191,234 Proposal No. 2 (Election of Five New Directors) Nominee For Withheld Robert L. Crandall 256,643,491 22,852,992 Thomas O. Hicks 256,677,508 22,818,975 Vernon E. Jordan Jr. 256,466,048 23,030,435 Michael J. Levitt 256,655,761 22,840,722 Perry J. Lewis 256,660,843 22,835,640 Proposal No. 3 (Election of Directors) Nominee For Withheld L. Lowry Mays 256,670,995 22,825,488 Karl Eller 256,649,375 22,847,108 Mark P. Mays 256,659,690 22,836,793 Randall T. Mays 256,651,140 22,845,343 Alan D. Feld 249,589,409 29,907,074 B.J. McCombs 256,662,079 22,834,404 Theodore H. Strauss 257,110,768 22,385,715 John H. Williams 257,124,257 22,372,226 Proposal No. 4 (Adoption of the Incentive Plan) For Withhold/Against Exceptions/Abstain 295,868,990 5,572,267 1,122,691 Proposal No. 5 (Amendment of the Articles of Incorporation to Increase Common Stock to 1.5 billion) For Withhold/Against Exceptions/Abstain 287,342,604 14,579,626 641,918 Proposal No. 6 (Selection of Ernst & Young LLP as Independent Auditors for the year ending December 31, 2000) For Withhold/Against Exceptions/Abstain 301,888,681 57,364 618,103 Item 6. Exhibits and Reports on Form 8-K (a) Exhibits. See Exhibit Index on Page 20 (b) Reports on Form 8-K Filing Date Items Reported Financial Statements Reported 8-K 5/11/00 Item 5. Announce None merger of Jacor Com- munications, Inc. into Clear Channel Com- munications, Inc. 8-K 6/9/00 Item 5. Announce None the intent to issue debt denominated in Euros 8-K 6/14/00 Item 5. Make public December 31, 1999 for the financial information AMFM Inc. March 31, of pending merger targets, 2000 for AMFM Inc. AMFM Inc. and SFX December 31, 1999 for Entertainment, Inc. Signatures Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. CLEAR CHANNEL COMMUNICATIONS, INC. August 11, 2000 /s/ Herbert W. Hill, Jr. Herbert W. Hill, Jr. Senior Vice President and Chief Accounting Officer INDEX TO 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 Companys 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 the Companys 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 the Companys 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 Companys 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 Companys Registration Statement on Form S-3 (Reg. No. 333-33371) dated September 9, 1997). 3.3 Amendment to the Companys Articles of Incorporation (incorporated by reference to the exhibits to the Companys Quarterly Report on Form 10-Q for the quarter ended September 30, 1998). 3.4 Second Amendment to the Companys Articles of Incorporation (incorporated by reference to the exhibits to the Companys Quarterly Report on Form 10-Q for the quarter ended March 31, 1999) 3.5 Third Amendment to the Companys Articles of Incorporation. (incorporated by reference to the exhibits to the Companys Quarterly Report on Form 10-Q for the quarter ended March 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 Companys 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 Companys 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 Companys 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 Companys 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 Companys 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 the between Clear Channel and The Bank of New York as Trustee (incorporated by reference to the exhibits of the Companys Annual Report on Form 10-K for the year ended December 31, 1999). 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 Channels 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 Channels 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 Channels registration statement on Form S-3 (Reg. No. 333-42028) dated July 21, 2000). 4.10 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 Channels registration statement on Form S-3 (Reg. No. 333-42028) dated July 21, 2000). 11 Statement re: Computation of Earnings Per Share. 12 Statement re: Computation of Ratios. 27.1 Financial Data Schedule at June 30, 2000 27.2 Financial Data Schedule at June 30, 1999 (incorporated by reference to exhibit 27.1 of the Companys Quarterly Report on Form 10-Q for the quarter ended June 30, 1999).