(to be merged with and into
Clear Channel Communications, Inc.)
10.75% Senior Cash Pay Notes due 2016
11.00%/11.75% Senior Toggle Notes due 2016
MORGAN STANLEY & CO. INCORPORATED
CITIGROUP GLOBAL MARKETS INC.
CREDIT SUISSE SECURITIES (USA) LLC
GREENWICH CAPITAL MARKETS, INC.
WACHOVIA CAPITAL MARKETS, LLC
c/o Deutsche Bank Securities Inc.
60 Wall Street
New York, New York 10005
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“The Securities covered hereby have not been registered under the U.S. Securities Act of 1933, as amended (the “Act”), and may not be offered or sold within the United States or to, or for the account or benefit of, U.S. persons (i) as part of their distribution at any time or (ii) otherwise until 40 days after the later of the commencement of the offering and the date of closing of the offering, except in either case in accordance with |
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Regulation S or Rule 144A under the Act. Terms used in this paragraph have the meanings given to them by Regulation S”; and |
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Very truly yours, BT TRIPLE CROWN MERGER CO., INC. | ||||
By: | /s/ John Connaughton | |||
Name: | John Connaughton | |||
Title: | ||||
The foregoing Agreement is hereby confirmed | ||||||
and accepted as of the date first above written. | ||||||
DEUTSCHE BANK SECURITIES INC. | ||||||
By: | /s/ David Flannery | |||||
Name: | David Flannery | |||||
Title: | Managing Director | |||||
By: | /s/ Scott Sartorios | |||||
Name: | Scott Sartorios | |||||
Title: | Director |
and accepted as of the date first above written.
MORGAN STANLEY & CO. INCORPORATED | ||||||
By: | /s/ Henry F. D’Alessandro | |||||
Name: | Henry F. D’Alessandro | |||||
Title: | Managing Director |
and accepted as of the date first above written.
CITIGROUP GLOBAL MARKETS INC. | ||||||
By: | /s/ Ross A. MacIntyre | |||||
Name: | Ross A. MacIntyre | |||||
Title: | Managing Director |
and accepted as of the date first above written.
CREDIT SUISSE SECURITIES (USA) LLC | ||||||
By: | /s/ SoVonna Day-Gions | |||||
Name: | SoVonna Day-Gions | |||||
Title: | Managing Director |
and accepted as of the date first above written.
GREENWICH CAPITAL MARKETS, INC. | ||||||
By: | /s/ Michael F. Newcomb II | |||||
Name: | Michael F. Newcomb II | |||||
Title: | Managing Director |
and accepted as of the date first above written.
WACHOVIA CAPITAL MARKETS, LLC | ||||||
By: | /s/ James Jefferies | |||||
Name: | James Jefferies | |||||
Title: | Managing Director |
Principal Amount | ||||||||
of Senior Cash | Principal Amount of | |||||||
Pay Notes To Be | Senior Toggle Notes | |||||||
Initial Purchasers | Purchased | To Be Purchased | ||||||
Deutsche Bank Securities Inc. | 183,750,000.00 | 249,375,000.00 | ||||||
Morgan Stanley & Co. Incorporated | 183,751,000.00 | 249,375,000.00 | ||||||
Citigroup Global Markets Inc. | 183,750,000.00 | 249,375,000.00 | ||||||
Credit Suisse Securities (USA) LLC. | 142,913,000.00 | 193,954,000.00 | ||||||
Greenwich Capital Markets, Inc. | 142,913,000.00 | 193,954,000.00 | ||||||
Wachovia Capital Markets, LLC. | 142,923,000.00 | 193,967,000.00 | ||||||
Total | $ | 980,000,000.00 | $ | 1,330,000,000.00 | ||||
• | will be unsecured senior obligations of the Issuer; | ||
• | will bepari passuin right of payment with all existing and future unsubordinated Indebtedness (including the Senior Credit Facilities and the Existing Senior Notes); | ||
• | will be effectively subordinated to all existing and future Secured Indebtedness of the Issuer to the extent of the value of the assets securing such Indebtedness (including the Senior Credit Facilities); | ||
• | will be senior in right of payment to all Subordinated Indebtedness of the Issuer; | ||
• | will be initially guaranteed by Holdings and each of the Issuer’s Restricted Subsidiaries that guarantee the General Credit Facilities (i) on an unsecured senior subordinated basis with respect to such Guarantor’s guarantee under Designated Senior Indebtedness and (ii) on a senior unsecured basis with respect to all of the applicable Guarantor’s existing and future unsecured senior debt other than such Guarantor’s guarantee under Designated Senior Indebtedness; and | ||
• | will be subject to registration with the SEC pursuant to the Registration Rights Agreement. |
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Non-Payment Default previously existed or was continuing shall constitute a new Non-Payment Default for this purpose).
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• | entirely in cash (“Cash Interest”); | ||
• | entirely by increasing the principal amount of the outstanding Senior Toggle Notes or by issuing PIK Notes (“PIK Interest”); or | ||
• | on 50% of the outstanding principal amount of the Senior Toggle Notes in cash and on 50% of the principal amount by increasing the principal amount of the outstanding Senior Toggle Notes or by issuing PIK Notes (“Partial PIK Interest”). |
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Year | Percentage | |||
2012 | 105.375% | |||
2013 | 102.688% | |||
2014 and thereafter | 100.000% |
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Year | Percentage | |||
2012 | 105.500 | % | ||
2013 | 102.750 | % | ||
2014 and thereafter | 100.000 | % |
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then-existing financial resources. Therefore, sufficient funds may not be available when necessary to make any required repurchases.
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Form 8-K, or any successor or comparable form; and
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set-off) and which are within the general parameters customary in the banking industry;
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MORGAN STANLEY & CO. INCORPORATED
CITIGROUP GLOBAL MARKETS INC.
CREDIT SUISSE SECURITIES (USA) LLC
GREENWICH CAPITAL MARKETS, INC.
WACHOVIA CAPITAL MARKETS, LLC
c/o Deutsche Bank Securities Inc.
60 Wall Street
New York, New York 10005
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Very truly yours, CLEAR CHANNEL COMMUNICATIONS, INC. | ||||
By: | ||||
Name: | ||||
Title: | ||||
[GUARANTORS] | ||||
By: | ||||
Name: | ||||
Title: |
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DEUTSCHE BANK SECURITIES INC. | ||||
By: | ||||
Name: | ||||
Title: | ||||
By: | ||||
Name: | ||||
Title: | ||||
MORGAN STANLEY SENIOR FUNDING INC. | ||||
By: | ||||
Name: | ||||
Title: | ||||
By: | ||||
Name: | ||||
Title: | ||||
CITIGROUP GLOBAL MARKETS INC. | ||||
By: | ||||
Name: | ||||
Title: | ||||
CREDIT SUISSE SECURITIES (USA) LLC | ||||
By: | ||||
Name: | ||||
Title: |
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GREENWICH CAPITAL MARKETS, INC. | |||||
By: | |||||
Name: | |||||
Title: | |||||
WACHOVIA CAPITAL MARKETS, LLC | |||||
By: | |||||
Name: | |||||
Title: |
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Address: | ||||
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OFFERING MEMORANDUM | CONFIDENTIAL |
to be merged with and into
Clear Channel Communications, Inc.
$980,000,000 10.75% Senior Cash Pay Notes due 2016
$1,330,000,000 11.00%/11.75% Senior Toggle Notes due 2016
Deutsche Bank Securities | Morgan Stanley | Citi | ||
Credit Suisse | RBS Greenwich Capital | Wachovia Securities |
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• | our financial performance through the date of the completion of the Transactions (as defined in this offering memorandum); | ||
• | the possibility that the Transactions may involve unexpected costs; | ||
• | the impact of the substantial indebtedness incurred to finance the consummation of the Transactions; | ||
• | the outcome of any legal proceedings instituted against us or others in connection with the proposed Transactions; | ||
• | the effect of the announcement of the Transactions on our customer relationships, operating results and business generally; | ||
• | business uncertainty and contractual restrictions that may exist during the pendency of the Transactions; | ||
• | changes in interest rates; | ||
• | the amount of the costs, fees, expenses and charges related to the Transactions; | ||
• | diversion of management’s attention from ongoing business concerns; | ||
• | the need to allocate significant amounts of cash flow to make payments on our indebtedness, which in turn could reduce our financial flexibility and ability to fund other activities; and |
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• | the other factors described in this offering memorandum under the heading “Risk Factors.” |
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• | Americas Outdoor Advertising.We are the largest outdoor media company in the Americas, which includes the United States, Canada and Latin America. We own or operate approximately 209,000 displays in our Americas Outdoor Advertising segment. Our outdoor assets consist of billboards, street furniture and transit displays, airport displays, mall displays, and wallscapes and other spectaculars which we believe are in premier real estate locations in each of our markets throughout the Americas. We have operations in 49 of the top 50 markets in the United States, including all of the top 20 markets. For the last twelve months ended March 31, 2008, Americas Outdoor Advertising represented 21% of our net revenue and 27% of pro forma Adjusted EBITDA. | ||
• | International Outdoor Advertising.We are a leading outdoor media company internationally with operations in Asia, Australia and Europe. We own or operate approximately 688,000 displays in 34 countries, including key positions in attractive international growth markets. Our international outdoor assets consist of billboards, street furniture displays, transit displays and other out-of-home advertising displays. For the last twelve months ended March 31, 2008, International Outdoor Advertising represented 26% of our net revenue and 14% of pro forma Adjusted EBITDA. |
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• | Radio Broadcasting.We are the largest radio broadcaster in the United States. As of December 31, 2007, we owned 890 domestic radio stations, with 275 stations operating in the top 50 markets. Our portfolio of stations offers a broad assortment of programming formats, including adult contemporary, country, contemporary hit radio, rock, urban and oldies, among others, to a total weekly listening base of approximately 103 million individuals. In addition, we owned 115 smaller market non-core radio stations, of which 63 were sold subsequent to December 31, 2007, and 32 of which were subject to sale under definitive asset purchase agreements at March 31, 2008. We also operate a national radio network that produces, distributes, or represents more than 70 syndicated radio programs and services for more than 5,000 radio stations. Some of our more popular syndicated programs includeRush Limbaugh, Steve Harvey, Ryan SeacrestandJeff Foxworthy.We also own various sports, news and agriculture networks as well as equity interests in various international radio broadcasting companies located in Australia, Mexico and New Zealand. For the last twelve months ended March 31, 2008, Radio Broadcasting represented 50% of our net revenue and 58% of pro forma Adjusted EBITDA. | ||
• | Other.The “other” (“Other”) category includes our media representation business, Katz Media Group, Inc. (“Katz Media”), and general support services and initiatives which are ancillary to our other businesses. Katz Media is 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 represents over 3,200 radio stations and 380 television stations. For the last twelve months ended March 31, 2008, the Other category represented 3% of our net revenue and 1% of pro forma Adjusted EBITDA. |
• | Our outdoor advertising business is focused on urban markets with dense populations. Our real estate locations in these urban markets provide outstanding reach and therefore a compelling value proposition for our advertisers, enabling us to achieve more attractive economics. In the United States, we believe we hold the #1 market share in eight of the top 10 markets and are either #1 or #2 in 18 of the top 20 markets. Internationally, we believe we hold leading positions in France, Italy, Spain and the United Kingdom, as well as several attractive growth countries, including Australia and China. | ||
• | Our scale has enabled cost-effective investment in new display technologies, such as digital billboards, which we believe will continue to support future growth. This |
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technology will enable us to transition from selling space on a display to a single advertiser to selling time on that display to multiple advertisers, creating new revenue opportunities from both new and existing clients. We have enjoyed significantly higher revenue per digital billboard than the revenue per vinyl billboard with relatively minimal capital costs. | |||
• | We own the #1 or #2 ranked radio station clusters in eight of the top 10 markets and in 18 of the top 25 markets in the United States. We have an average market share of 26% in the top 25 markets. With a total weekly listening base of approximately 103 million individuals, our portfolio of 890 stations generated twice the revenue as the next largest competitor in 2007. With over 5,000 sales people in local markets, we believe the aggregation of our local sales forces comprises the media industry’s largest local-based sales force with national scope. Our national scope has facilitated cost-effective investment in unique yield management and pricing systems that enable our local salespeople to maximize revenue. Additionally, our scale has allowed us to implement industry-changing initiatives that we believe differentiate us from the rest of the radio industry and position us to outperform other radio broadcasters. |
• | The domestic outdoor industry is regulated by the federal government as well as state and municipal governments. Statutes and regulations govern the construction, repair, maintenance, lighting, spacing, location, replacement and content of outdoor advertising structures. Due to such regulation, it has become increasingly difficult to construct new outdoor advertising structures. Further, for many of our existing billboards, a permit for replacement cannot be sought by our competitors or landlords. As a result, our existing billboards in top demographic areas, which we believe are in premier locations, have significant value. | ||
• | Ownership and operation of radio broadcast stations is governed by the Federal Communications Commission’s (“FCC”) licensing process, which limits the number of radio licenses available in any market. Any party seeking to acquire or transfer radio licenses must go through a detailed review process with the FCC. Over several decades, we have aggregated multiple licenses in local market clusters across the United States. A cluster of multiple radio stations in a market allows us to provide listeners with more diverse programming and advertisers with a more efficient means to reach those listeners. In addition, we are also able to operate our market clusters efficiently by eliminating duplicative operating expenses and realizing economies of scale. |
• | Compelling Value Propositions.Outdoor media and radio broadcasting offer compelling value propositions to advertisers by providing the #1 and #2 most cost-effective media advertising outlets, respectively, as measured by cost per thousand persons reached (“CPM”). According to the Radio Advertising Bureau, radio advertising’s return on investment is 49% higher than that of television advertising. With low CPMs, we believe outdoor media and radio broadcasting have opportunity for growth even in relatively softer advertising environments. |
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• | Unparalleled Audience Reach.According to Arbitron, 98% of Americans travel in a car each month, with an average of 310 miles traveled per week. The captive in-car audience is protected from media fragmentation and is subject to increasing out-of-home advertiser exposures as time and distance of commutes increase. Additionally, radio programming reaches 93% of all United States consumers in a given week, with the average consumer listening for almost three hours per day. On a weekly basis, this represents nearly 233 million unique listeners. | ||
• | Valuable Out-of-home Position.Both outdoor media and radio broadcasting reach potential consumers outside of the home, a valuable position as it is closer to the purchase decision. Today, consumers spend a significant portion of their day out-of-home, while out-of-home media (outdoor and radio) garner a disproportionately smaller share of media spending than in-home media. We believe this discrepancy represents an opportunity for growth. |
• | United States outdoor advertising revenue has grown to approximately $7 billion in 2007, representing a 9% compound annual growth rate (“CAGR”) since 1970. Growth has come via traditional billboards along highways and major roadways, as well as alternative advertising including transit displays, street furniture and mall displays. The outdoor industry has experienced only two negative growth years between 1970 and 2007. Additionally, the growth rate in the two years following an economic recession has averaged 8%. Outdoor media continues to be one of the fastest growing forms of advertising. According to the eMarketer industry forecast, total outdoor advertising is expected to grow at an 8% CAGR from 2007 to 2011, driven by an increased share of media spending due to the high value proposition of outdoor relative to other media and the rollout of digital billboards. | ||
• | United States radio advertising revenue has grown to approximately $19 billion in 2007, representing an 8% CAGR since 1970. Radio broadcasting has been one of the most resilient forms of advertising, weathering several competitive and technological advancements over time, including the introduction of television, audio cassettes, CDs and other portable audio devices, and remaining an important component of local advertiser marketing budgets. The radio industry has experienced only three negative growth years from 1970 through 2007. Historically, the growth rate in the two years following an economic recession has averaged 9%. While revenue in the radio industry (according to the Radio Advertising Bureau) declined during 2007 and the first three months of 2008, the eMarketer industry forecast expects radio broadcast advertising to grow at a stable 3% CAGR from 2007 to 2011. We expect growth to be driven by increased advertising, due to a captive audience spending more time in their cars and the adoption of new technologies such as high definition (“HD”) radio. |
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• | Alternative Devices.The FM radio feature is increasingly integrated into MP3 players and cell phones. This should expand FM listenership by “putting a radio in every pocket” with free music and local content and represents the first meaningful increase in the radio installed base in more than 25 years. | ||
• | HD Radio.HD radio enables crystal clear reception, interactive features, data services and new applications. For example, the interactive capabilities of HD radio will potentially permit us to participate in commercial download services. Further, HD radio allows for many more stations, providing greater variety of content which we believe will enable advertisers to target consumers more effectively. On December 6, 2005, we joined a consortium of radio operators in announcing plans to create the HD Digital Radio Alliance to lobby auto makers, radio manufacturers and retailers for the rollout of digital radios. We plan to continue to develop compelling HD content and applications and to support the alliance to foster industry conversion. We currently operate 804 HD stations, comprised of 454 HD and 350 HD2 signals. | ||
• | Internet.Clear Channel websites had over 10.5 million unique visitors in April 2008, making the collection of these websites one of the top five trafficked music websites. Streaming audio via the Internet provides increased listener reach and new listener applications as well as new advertising capabilities. | ||
• | Mobile.We have pioneered mobile applications which allow subscribers to use their cell phones to interact directly with the station, including finding titles or artists, requesting songs and downloading station wallpapers. |
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Total radio stations announced as being marketed for sale on November 16, 2006 | 448 | |||
Total radio stations no longer being marketed for sale | (173 | ) | ||
Adjusted number of radio stations being marketed for sale (“non-core” radio stations) | 275 | |||
Non-core radio stations sold through March 31, 2008 | (223 | ) | ||
Remaining non-core radio stations at March 31, 2008 classified as discontinued operations | 52 | |||
Non-core radio stations under definitive asset purchase agreements | (32 | ) | ||
Non-core radio stations being marketed for sale | 20 | |||
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Bain Capital/ | ||||
THL/Co-Investors | Mays/Management | Public | ||
66-82%(1) | 2-4%(1) | 14-30%(1) | ||
CC Media Holdings, Inc. (DE) (CCM Parent) | ||||
Clear Channel Capital II, LLC (DE) | ||||
Clear Channel Capital I, LLC (DE)(4)(6) | ||||
$4,275 million aggregate principal amount of existing notes to remain outstanding(2) | Clear Channel Communications, Inc. (TX) (Clear Channel) | $15,770.638 million senior secured credit facilities:(4) $2,000 million revolving credit facility $1,425 million term loan A facility(5) $10,700 million term loan B facility $705.638 million term loan C – asset sale facility $1,250 million delayed draw term loan facilities $690 million receivables based credit facility(4)(5) $980 million senior cash pay notes offered hereby(6) $1,330 million senior toggle notes offered hereby(6) | ||
Other operating subsidiaries(3)(6) | ||||
89%(7) | ||||
Clear Channel Outdoor Holdings, Inc.(3) (DE) (Non-guarantor subsidiary) | Public 11%(7) |
(1) | Ownership percentages assume that no additional equity consideration is issued. For more information regarding ownership of the outstanding capital stock of CCM Parent upon the consummation of the Transactions, see “—The Transactions.” | |
(2) | Consists of $4,275 million aggregate principal amount of Clear Channel’s existing notes which will remain outstanding following the closing of the Transactions. Clear Channel’s existing notes will not be guaranteed by Clear Channel’s subsidiaries following the closing of the Transactions. The aggregate principal amount of Clear Channel’s existing notes to remain outstanding assumes the repurchase of $750 million of its outstanding senior notes due 2010. | |
(3) | There is an additional $119 million aggregate principal amount of subsidiary indebtedness which will remain outstanding following the closing of the Transactions. The aggregate principal amount of subsidiary indebtedness to remain outstanding assumes the repurchase of $645 million aggregate principal amount of AMFM Operating Inc.’s outstanding 8.0% senior notes due 2008. | |
(4) | The new senior secured credit facilities and the new receivables based credit facility are guaranteed on a senior basis by Clear Channel Capital I, LLC and Clear Channel’s material wholly-owned domestic restricted subsidiaries. For information regarding adjustments and reallocations of the new senior secured credit facilities and new receivables based credit facility and the estimated borrowings thereunder upon the closing of the Transactions, see “— Sources and Uses.” | |
(5) | The amount available under the term loan A facility and the receivables based credit facility are subject to adjustment as described under “Description of Other Indebtedness”. |
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(6) | The notes offered hereby are guaranteed on a senior basis by Clear Channel Capital I, LLC and all of Clear Channel’s wholly-owned domestic restricted subsidiaries that guarantee Clear Channel’s new senior secured credit facilities and the receivables based credit facility, except that such guarantees are subordinated to each such guarantor’s guarantee of such facilities. | |
(7) | Clear Channel Outdoor Holdings, Inc. (“CCOH”) became a publicly traded company on November 11, 2005 through an initial public offering in which CCOH sold 35 million shares, or 10%, of its common stock. Prior to CCOH’s public offering, it was an indirect wholly-owned subsidiary of Clear Channel. Since that time, CCOH has issued additional shares of common stock to the public. Pursuant to a cash management arrangement between Clear Channel and CCOH evidenced by tandem cash management notes, substantially all of the cash generated from CCOH’s domestic operations is transferred daily into Clear Channel accounts and is available for general corporate purposes, including making payments on Clear Channel’s indebtedness. Additionally, on August 2, 2005, CCOH distributed a note in the original principal amount of $2.5 billion to Clear Channel as a dividend. See “Certain Relationships and Related Transactions — Intercompany Notes.” |
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Sources | ||||
(In millions) | ||||
Senior secured credit facilities: | ||||
Revolving credit facility (1) | ||||
Domestic based borrowings | — | |||
Foreign subsidiary borrowings | $ | 80 | ||
Term loan A facility (2) | 1,425 | |||
Term loan B facility (3) | 10,700 | |||
Term loan C-asset sale facility (4) | 706 | |||
Delayed draw term loan facilities (5) | 750 | |||
Receivables based credit facility (2) | 440 | |||
Senior cash pay notes offered hereby | 980 | |||
Senior toggle notes offered hereby | 1,330 | |||
Cash | 169 | |||
Existing debt to remain outstanding (6) | 4,394 | |||
Common equity (7) | 3,519 | |||
Total Sources | $ | 24,493 | ||
Uses | ||||
(In millions) | ||||
Purchase of common stock (8) | $ | 17,959 | ||
Refinance existing debt (9) | 1,593 | |||
Existing debt to remain outstanding (6) | 4,394 | |||
Fees, expenses and other related costs of the Transactions (10) | 547 | |||
Total Uses | $ | 24,493 | ||
(1) | Our senior secured credit facilities provide for a $2,000 million 6-year revolving credit facility, of which $150 million will be available in alternative currencies. We will have the ability to designate one or more of our foreign restricted subsidiaries as borrowers under a foreign currency sublimit of the revolving credit facility. Consistent with our international cash management practices, at or promptly after the consummation of the Transactions, we expect one of our foreign subsidiaries to borrow $80 million under the revolving credit facility’s sublimit for foreign based subsidiary borrowings to refinance our existing foreign subsidiary intercompany borrowings. The foreign based borrowings allow us to efficiently manage our liquidity needs in local countries, mitigating foreign exchange exposure and cash movement among different tax jurisdictions. Based on estimated cash levels (including estimated cash levels of our foreign subsidiaries), we do not expect to borrow any additional amounts under the revolving credit facility at the closing of the Transactions. | |
(2) | The aggregate amount of the 6-year term loan A facility will be the sum of $1,115 million plus the excess of $750 million over the borrowing base availability under our receivables based credit facility on the closing of the Transactions. The aggregate amount of our receivables based credit facility will correspondingly be reduced by the excess of $750 million over the borrowing base availability on the closing of the Transactions. Assuming that the borrowing base availability under the receivables based credit facility is $440 million, the term loan A facility would be $1,425 million and the aggregate receivables based credit facility (without regard to borrowing base limitations) would be $690 million. However, our actual borrowing base availability may be greater or less than this amount. | |
(3) | Our senior secured credit facilities provide for a $10,700 million 7.5-year term loan B facility. | |
(4) | Our senior secured credit facilities provide for a $705.638 million 7.5-year term loan C–asset sale facility. To the extent specified assets are sold after March 27, 2008 and prior to the closing of the Transactions, actual borrowings under the term loan C–asset sale facility will be reduced by the net cash proceeds received therefrom. Proceeds from the sale of specified assets after the closing of the Transactions will be applied to prepay the term loan C– |
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asset sale facility (and thereafter to prepay any remaining term loan facilities) without right of reinvestment under our senior secured credit facilities. In addition, if the net proceeds of any other asset sales are not reinvested, but instead applied to prepay the senior secured credit facilities, such proceeds would first be applied to the term loan C—asset sale facility and thereafter pro rata to the remaining term loan facilities. | ||
(5) | Our senior secured credit facilities provide for two 7.5-year delayed draw term loans facilities aggregating $1,250 million. Proceeds from the delayed draw 1 term loan facility, available in the aggregate amount of $750 million, can only be used to redeem any of our existing senior notes due 2010. Proceeds from the delayed draw 2 term loan facility, available in the aggregate amount of $500 million, can only be used to redeem any of our existing 4.25% senior notes due 2009. Upon the consummation of the Transactions, we expect to borrow all amounts available to us under the delayed draw 1 term loan facility in order to redeem substantially all of our outstanding senior notes due 2010. We do not expect to borrow any amount available to us under the delayed draw 2 term loan facility upon the consummation of the Transactions. Any unused commitment to lend will expire on September 30, 2010 in the case of the delayed draw 1 term loan facility and on the second anniversary of the closing in the case of the delayed draw 2 term loan facility. | |
(6) | We anticipate that a portion of our existing senior notes and other existing subsidiary indebtedness will remain outstanding after the closing of the Transactions. The aggregate principal amount of the existing senior notes and the subsidiary indebtedness that is estimated to remain outstanding is $4,275 million and $119 million, respectively, at March 31, 2008. The aggregate principal amount of the existing senior notes and the subsidiary indebtedness to remain outstanding assumes the repurchase of $750 million of our outstanding senior notes due 2010 and the repurchase of $645 million aggregate principal amount of AMFM Operating Inc.’s outstanding 8.0% senior notes due 2008. | |
(7) | Represents total equity as a result of rollover equity of our existing shareholders who have elected to receive shares of CCM Parent as merger consideration, rollover equity from the Mays family, restricted stock and estimated cash equity contributed to us indirectly by CCM Parent from cash equity investments in CCM Parent by entities associated with the Sponsors and their co-investors. Actual cash equity would be decreased by the amount of Clear Channel cash available on the closing date to be used in the Transactions, subject to a minimum of $3,000 million total equity. | |
(8) | The amount assumes, as of March 31, 2008, approximately 498.0 million issued and outstanding common shares and the settlement of 836,800 outstanding employee stock options at a per share price of $36.00, payable in either cash or rollover equity as selected by existing shareholders (subject to aggregate caps and individual limits). | |
(9) | Represents the refinancing of $125 million of our senior notes due June 2008, the repurchase of $645 million aggregate principal amount of AMFM Operating Inc.’s outstanding 8.0% senior notes due 2008 and the repurchase of $750 million of our outstanding senior notes due 2010, plus any premiums related thereto and accrued and unpaid interest thereon. | |
(10) | Reflects estimated fees, expenses and other costs incurred in connection with the Transactions, including placement and other financing fees, advisory fees, transaction fees paid to affiliates of the Sponsors, costs associated with certain restricted stock grants to management, change-in-control payments, excess cash and other transaction costs and professional fees. All fees, expenses and other costs are estimates and actual amounts may differ from those set forth in this offering memorandum. |
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Issuer | BT Triple Crown Merger Co., Inc. prior to the merger, and Clear Channel, as the surviving corporation in the merger. | |
Notes Offered | $980,000,000 aggregate principal amount of 10.75% senior cash pay notes due 2016 and $1,330,000,000 aggregate principal amount of 11.00%/11.75% senior toggle notes due 2016. | |
Maturity | The senior cash pay notes will mature on August 1, 2016 and the senior toggle notes will mature on August 1, 2016. | |
Interest Rate | Interest on the senior cash pay notes will be payable in cash and will accrue at a rate of 10.75% per annum. | |
Cash interest on the senior toggle notes will accrue at a rate of 11.00% per annum, and PIK Interest will accrue at a rate of 11.75% per annum. We may elect, at our option, to either (a) pay interest on the entire principal amount of the outstanding senior toggle notes in cash, (b) pay interest by increasing the principal amount of the senior toggle notes or issuing new senior toggle notes (any such increase or issuance, a “PIK Election”) on 100% of the principal amount of the outstanding senior toggle notes or (c) pay interest on 50% of such principal amount in cash and make a PIK Election with respect to interest on the remaining 50% of such principal amount. Interest on the senior toggle notes will be paid in cash on the first interest payment date. | ||
Interest Payment Dates | Interest on the notes will be payable on February 1 and August 1 of each year, beginning on February 1, 2009 and will accrue from the issue date of the notes. | |
Ranking | The notes will be our senior unsecured obligations and will: |
• | rank senior in right of payment to our future debt and other obligations that are, by their terms, expressly subordinated in right of payment to the notes; | |||
• | rank equally in right with all of our existing and future unsecured senior debt and other obligations that are not, by their terms, expressly subordinated in right of payment to the notes; and |
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• | be effectively subordinated to all of our existing and future secured debt, to the extent of the value of the assets securing that debt, including our senior secured credit facilities and our receivables based credit facility, and be structurally subordinated to all obligations of each of our subsidiaries that is not a guarantor of the notes. |
Similarly, the guarantees will be senior unsecured obligations of the guarantors and will: |
• | rank senior in right of payment to all of the applicable guarantor’s future debt and other obligations that are, by their terms, expressly subordinated in right of payment to the notes; | |||
• | rank equally in right with all of the applicable guarantor’s existing and future unsecured senior debt and other obligations that are not, by their terms, expressly subordinated in right of payment to the notes; | |||
• | be subordinated in right of payment to the applicable guarantor’s guarantee of our senior secured credit facilities and our receivables based credit facility; and | |||
• | be effectively subordinated to all of the applicable guarantor’s existing and future secured debt, to the extent of the value of the assets securing that debt, and be structurally subordinated to all obligations of each of such applicable guarantor’s subsidiaries that is not also a guarantor of the notes. |
Guarantees | Our direct parent and our wholly-owned domestic restricted subsidiaries on the issue date that guarantee the obligations under our senior secured credit facilities and our receivables based credit facility will guarantee the notes with unconditional guarantees. Any of our subsidiaries that is released as a guarantor of our senior secured credit facilities and our receivables based credit facility will automatically be released as a guarantor of the notes. | |
On a pro forma basis after giving effect to the Transactions, the non-guarantor subsidiaries would have accounted for approximately $3.4 billion, or 49%, of our total net revenue, approximately $1.1 billion, or 46%, of our EBITDA and approximately $983 million, or 43%, of our Adjusted EBITDA, in each case, for the last twelve months ended March 31, 2008, and approximately $12.7 billion, or 44%, of our total assets as of March 31, 2008. See “Risk Factors- Risks Related to the Notes and this Offering—The notes are structurally subordinated to the liabilities of our |
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subsidiaries that do not guarantee the notes. Your right to receive payments on the notes could be adversely affected if any of our non-guarantor subsidiaries or non-wholly-owned subsidiaries declare bankruptcy, liquidate, or reorganize.” |
Optional Redemption | We may redeem the notes, in whole or in part, at any time on or after August 1, 2012 at the redemption prices set forth in “Description of the Notes—Optional Redemption.” In addition, we may redeem some or all of the notes at any time prior to August 1, 2012 at a price equal to 100% of the principal amount of such notes plus accrued and unpaid interest thereon to the redemption date and a “make-whole premium” (as described in “Description of the Notes— Optional Redemption”). | |
Special Redemption Amount | On August 1, 2015 (the “Special Redemption Date”), we will be required to redeem for cash a portion (the “Special Redemption Amount”) of the senior toggle notes equal to the product of (x) $30 million and (y) a fraction which, for the avoidance of doubt, cannot exceed one, the numerator of which is the aggregate principal amount outstanding on such date of the senior toggle notes for United States federal income tax purposes and the denominator of which is $1,330,000,000, as determined by us in good faith and rounded to the nearest $2,000 (such redemption, the “Special Redemption”). The redemption price for each portion of a senior toggle note so redeemed pursuant to the Special Redemption will equal 100% of the principal amount of such portion plus any accrued and unpaid interest thereon to the Special Redemption Date. | |
AHYDO Catch-Up Payments | On the first interest payment date following the fifth anniversary of the “issue date” (as defined in Treasury Regulation Section 1.1273-2(a)(2)) of each series of notes (i.e., the senior cash pay notes and the senior toggle notes) and on each interest payment date thereafter, we will redeem a portion of the principal amount of each then outstanding note in such series in an amount equal to the AHYDO Catch-Up Payment for such interest payment date with respect to such note. The “AHYDO Catch-Up Payment” for a particular interest payment date with respect to each note in a series means the minimum principal prepayment sufficient to ensure that as of the close of such interest payment date, the aggregate amount which would be includible in gross income with respect to such note before the close of such interest payment date (as described in Section 163(i)(2)(A) of the Internal Revenue Code of 1986, as amended (the “Code”)) does not exceed the sum (described in Section 163(i)(2)(B) of the Code) of (i) the aggregate amount of interest to be paid on such note |
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(including for this purpose any AHYDO Catch-Up Payments) before the close of such interest payment date plus (ii) the product of the “issue price” of such note as defined in Section 1273(b) of the Code (that is, the first price at which a substantial amount of the notes in such series is sold, disregarding for this purpose sales to bond houses, brokers or similar persons acting in the capacity of underwriters, placement agents or wholesalers) and its yield to maturity (within the meaning of Section 163(i)(2)(B) of the Code), with the result that such note is not treated as having “significant original issue discount” within the meaning of Section 163(i)(1)(C) of the Code; provided, however, for avoidance of doubt, that if the yield to maturity of such note is less than the amount described in Section 163(i)(1)(B) of the Code, the AHYDO Catch-Up Payment shall be zero for each interest payment date with respect to such note. It is intended that no senior cash pay note and that no senior toggle note will be an “applicable high yield discount obligation” (an “AHYDO”) within the meaning of Section 163(i)(1) of the Code, and this provision will be interpreted consistently with such intent. The computations and determinations required in connection with any AHYDO Catch-Up Payment will be made by us in our good faith reasonable discretion and will be binding upon the holders absent manifest error. | ||
Optional Redemption After Certain Equity Offerings | At any time (which may be more than once) on or prior to August 1, 2011, we may choose to redeem up to 40% of any series of the outstanding notes with the net cash proceeds that we raise in one or more equity offerings, as long as: |
• | we pay 110.75% of the aggregate principal amount of the senior cash pay notes being redeemed or 111.00% of the aggregate principal amount of the senior toggle notes being redeemed, in each case plus accrued and unpaid interest thereon to the applicable redemption date; | |||
• | we redeem the notes within 180 days of completing the applicable public equity offering; and | |||
• | at least 50% of the aggregate principal amount of the senior cash pay notes or the senior toggle notes, as applicable, issued as of such redemption date remains outstanding afterwards. |
Change of Control Offer | If we experience a change of control, we must give holders of the notes the opportunity to sell us their notes at 101% of the aggregate principal amount thereof, plus accrued and unpaid interest thereon. |
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We might not be able to pay you the required price for notes you present to us at the time of a change of control, because: |
• | we might not have enough funds at that time; or | |||
• | the terms of our senior secured credit facilities and our receivables based credit facility may prevent us from paying. |
Asset Sale Proceeds | If we or any of our restricted subsidiaries engages in certain asset sales, we or such restricted subsidiary generally must either invest the net cash proceeds from such sales in our business within a period of time, repay senior debt (including our senior secured credit facilities of our receivables based credit facility), or make an offer to purchase a principal amount of the notes equal to the excess net cash proceeds (if applicable, on a pro rata basis with other senior debt). The purchase price of the notes will be 100% of their principal amount, plus accrued and unpaid interest thereon. | |
Certain Covenants | The indenture governing the notes will contain covenants limiting our ability and the ability of our restricted subsidiaries to: |
• | incur additional debt or issue preferred stock of restricted subsidiaries; | |||
• | pay dividends or distributions on or repurchase capital stock of the issuer or its restricted subsidiaries; | |||
• | make certain investments; | |||
• | create liens on assets of the issuer or its restricted subsidiaries to secure debt; | |||
• | enter into transactions with affiliates; and | |||
• | merge or consolidate with another company. These covenants are subject to a number of important limitations and exceptions. See “Description of the Notes.” |
Exchange Offer; Registration Rights | We will use commercially reasonable efforts to enter into a registration rights agreement with the initial purchasers within five business days following the issue date of the notes. | |
Pursuant to such registration rights agreement, we will use our commercially reasonable efforts to register notes |
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(which we will refer to as the “exchange notes”) having substantially identical terms as the notes with the SEC as part of an offer to exchange freely tradable exchange notes for the notes (the “exchange offer”). Subject to the terms and conditions set forth in the registration rights agreement, we will use our commercially reasonable efforts to cause the exchange offer to be completed within 300 days after the issue date of the notes or, if required, to file one or more resale shelf registration statements within 300 days after the issue date of the notes and declared effective within the time frames specified in the registration rights agreement. | ||
If we fail to meet the targets listed above (a “registration default”), the annual interest rate on the notes will increase by 0.25%. The annual interest rate on the notes will increase by an additional 0.25% for each subsequent 90-day period during which the registration default continues, up to a maximum additional interest rate of 0.50% per year over the interest rate shown on the cover of this offering memorandum. If we correct the registration default, the interest rate on the notes will revert to the original level. | ||
If we must pay additional interest, we will pay it to you in the same manner and on the same dates that we make other interest payments on the notes, until we correct the registration default. | ||
Transfer Restrictions | We have not registered the notes under the Securities Act. | |
The notes are subject to restrictions on transfer and may only be offered or sold in transactions exempt from or not subject to the registration requirements of the Securities Act. See “Notice to Investors.” | ||
Use of Proceeds | We are using the money raised from the notes to finance, in part, the Transactions. See “Use of Proceeds.” | |
Risk Factors | Investing in the notes involves substantial risks. See “Risk Factors” for a description of certain of the risks you should consider before investing in the notes. |
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Historical | Pro Forma | |||||||||||||||||||||||
Year ended | Three Months | Twelve Months | ||||||||||||||||||||||
December 31, | Ended March 31, | Ended March 31, | ||||||||||||||||||||||
2007 | 2006 | 2005 | 2008 | 2007 | 2008 (1) | |||||||||||||||||||
(Dollars in millions) | (unaudited) | (unaudited) | ||||||||||||||||||||||
Statement of Operations: | ||||||||||||||||||||||||
Revenue | $ | 6,921 | $ | 6,568 | $ | 6,127 | $ | 1,564 | $ | 1,505 | $ | 6,980 | ||||||||||||
Direct operating expenses (excludes depreciation and amortization) (2) | 2,733 | 2,532 | 2,352 | 706 | 628 | 2,811 | ||||||||||||||||||
Selling, general and administrative expenses (excludes depreciation and amortization) (2) | 1,762 | 1,709 | 1,651 | 426 | 416 | 1,772 | ||||||||||||||||||
Depreciation and amortization | 567 | 600 | 594 | 152 | 140 | 694 | ||||||||||||||||||
Corporate expenses (excludes depreciation and amortization) (2) | 181 | 196 | 167 | 46 | 48 | 189 | ||||||||||||||||||
Merger expenses | 7 | 8 | — | 1 | 2 | — | ||||||||||||||||||
Gain on disposition of assets—net | 14 | 71 | 50 | 2 | 7 | 9 | ||||||||||||||||||
Operating income | 1,685 | 1,594 | 1,413 | 235 | 278 | 1,523 | ||||||||||||||||||
Interest expense | 452 | 484 | 443 | 100 | 118 | 1,633 | ||||||||||||||||||
Gain (loss) on marketable securities | 7 | 2 | (1 | ) | 6 | 1 | 13 | |||||||||||||||||
Equity in earnings of nonconsolidated affiliates | 35 | 38 | 38 | 83 | 5 | 113 | ||||||||||||||||||
Other income (expense) —net | 6 | (9 | ) | 11 | 12 | — | 17 | |||||||||||||||||
Income before income taxes, minority interest and discontinued operations | 1,281 | 1,141 | 1,018 | 236 | 166 | 33 | ||||||||||||||||||
Income tax benefit (expense) | (441 | ) | (470 | ) | (403 | ) | (67 | ) | (71 | ) | 60 | |||||||||||||
Minority interest expense, net of tax | 47 | 32 | 18 | 8 | — | 55 | ||||||||||||||||||
Income before discontinued operations | 793 | 639 | 597 | 161 | 95 | $ | 38 | |||||||||||||||||
Income from discontinued operations, net | 146 | 53 | 339 | 638 | 7 | |||||||||||||||||||
Net income | $ | 939 | $ | 692 | $ | 936 | $ | 799 | $ | 102 | ||||||||||||||
Cash Flow Data: | ||||||||||||||||||||||||
Cash interest expense (3) | $ | 462 | $ | 461 | $ | 430 | $ | 122 | $ | 142 | $ | 1,415 | ||||||||||||
Capital expenditures (4) | 363 | 337 | 303 | 94 | 65 | 392 | ||||||||||||||||||
Net cash provided by operating activities | $ | 1,576 | $ | 1,748 | $ | 1,304 | $ | 368 | $ | 321 | ||||||||||||||
Net cash used in investing activities | (483 | ) | (607 | ) | (350 | ) | (154 | ) | (71 | ) | ||||||||||||||
Net cash used in financing activities | (1,431 | ) | (1,179 | ) | (1,061 | ) | (754 | ) | (283 | ) | ||||||||||||||
Net cash provided by discontinued operations | 366 | 69 | 157 | 998 | 26 | |||||||||||||||||||
Other Financial Data: | ||||||||||||||||||||||||
Total debt (5) | $ | 19,861 | ||||||||||||||||||||||
Total guaranteed/subsidiary debt (6) | 16,530 | |||||||||||||||||||||||
EBITDA (7) | $ | 2,293 | $ | 2,223 | $ | 2,056 | $ | 482 | $ | 423 | 2,347 | |||||||||||||
OIBDAN (7) | 2,289 | 2,173 | 1,963 | 396 | 421 | 2,263 | ||||||||||||||||||
Adjusted EBITDA (7) | 2,302 | |||||||||||||||||||||||
Ratio of total debt to Adjusted EBITDA | 8.6 | x | ||||||||||||||||||||||
Ratio of total guaranteed/subsidiary debt to Adjusted EBITDA | 7.2 | x | ||||||||||||||||||||||
Balance Sheet Data: | ||||||||||||||||||||||||
Cash and cash equivalents | $ | 145 | $ | 116 | $ | 84 | $ | 602 | $ | 109 | $ | 433 | ||||||||||||
Working capital (8) | 856 | 850 | 748 | 846 | 773 | 889 | ||||||||||||||||||
Total assets | 18,806 | 18,887 | 18,719 | 19,053 | 18,686 | 28,499 | ||||||||||||||||||
Total debt | 6,575 | 7,663 | 7,047 | 5,942 | 7,425 | 19,861 | ||||||||||||||||||
Shareholders’ equity (9) | 8,797 | 8,042 | 8,826 | 9,662 | 8,129 | 2,644 |
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(1) | Information for the twelve months ended March 31, 2008 is presented on a pro forma basis to give effect to the merger transaction. Pro forma adjustments are made to depreciation and amortization, corporate expenses, merger expenses, interest expense and income tax (benefit) expense. | |
(2) | Includes non-cash compensation expense. | |
(3) | Pro forma cash interest expense, a non-GAAP financial measure, includes cash paid for interest expense and excludes amortization of deferred financing costs and purchase accounting discount. Pro forma cash interest expense assumes that the PIK Election has not been made. The actual interest rates on the indebtedness incurred to consummate the Transactions and this offering could vary from those used to compute cash interest expense. | |
(4) | Capital expenditures include additions to our property, plant and equipment and do not include any proceeds from disposal of assets, nor any expenditures for acquisitions of operating (revenue-producing) assets. | |
(5) | Represents the sum of the indebtedness to be incurred in connection with the closing of the Transactions, which will be guaranteed by Clear Channel Capital I, LLC and our material wholly-owned domestic restricted subsidiaries, and existing indebtedness of us and our restricted subsidiaries anticipated to remain outstanding after the closing of the Transactions. The existing indebtedness amount reflects purchase accounting fair value adjustments of a negative $931 million related to our existing senior notes. | |
(6) | Represents total debt described in footnote 5 above, less the amount of our existing senior notes anticipated to remain outstanding after the closing of the Transactions, which are not guaranteed by, or direct obligations of, our subsidiaries. | |
(7) | The following table discloses the Company’s EBITDA (income (loss) from continuing operations before interest expense, income tax (benefit) expense, depreciation and amortization, (gain) loss on marketable securities and minority interest expense, net of tax), OIBDAN (defined as EBITDA excluding non-cash compensation expense and the following line items presented in the Statement of Operations: merger expenses; gain (loss) on disposition of assets—net; equity in earnings of nonconsolidated affiliates and other income (expense)—net) and Adjusted EBITDA (OIBDAN adjusted for the annual management fee to be paid to the Sponsors, if any, and other items described below), which are non-GAAP financial measures. Generally, a non-GAAP financial measure is a numerical measure of a company’s performance, financial position, or cash flows that either excludes or includes amounts that are not normally included or excluded in the most directly comparable measure calculated and presented in accordance with GAAP. EBITDA, OIBDAN and Adjusted EBITDA do not represent and should not be considered as alternatives to net income or cash flow from operations, as determined under GAAP. We believe that EBITDA, OIBDAN and Adjusted EBITDA provide investors with helpful information with respect to our operations and cash flows. We present EBITDA, OIBDAN and Adjusted EBITDA to provide additional information with respect to our ability to meet our future debt service, capital expenditures and working capital requirements. Some adjustments to EBITDA may not be in accordance with current SEC practice or with regulations adopted by the SEC that apply to registration statements filed under the Securities Act and periodic reports presented under the Exchange Act. Accordingly, Adjusted EBITDA may be presented differently in filings made with the SEC than as presented in this offering memorandum. | |
EBITDA, OIBDAN and Adjusted EBITDA have limitations as analytical tools, and you should not consider them either in isolation or as substitutes for analyzing our results as reported under GAAP. Some of these limitations are: |
• | EBITDA, OIBDAN and Adjusted EBITDA do not reflect (i) changes in, or cash requirements for, our working capital needs; (ii) our interest expense, or the cash requirements necessary to service interest or principal payments, on our debt; (iii) our tax expense or the cash requirements to pay our taxes; and (iv) our historical cash expenditures or future requirements for capital expenditures or contractual commitments; | ||
• | although depreciation and amortization are non-cash charges, the assets being depreciated and amortized will often have to be replaced in the future, and EBITDA, OIBDAN and Adjusted EBITDA do not reflect any cash requirements for such replacements; and | ||
• | other companies in our industry may calculate EBITDA, OIBDAN and Adjusted EBITDA differently, limiting their usefulness as comparative measures. |
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Historical | Pro Forma | |||||||||||||||||||||||
Twelve Months | ||||||||||||||||||||||||
Three Months Ended | Ended | |||||||||||||||||||||||
Year Ended December 31, | March 31, | March 31, | ||||||||||||||||||||||
2007 | 2006 | 2005 | 2008 | 2007 | 2008(a) | |||||||||||||||||||
(Dollars in millions) | (unaudited) | (unaudited) | ||||||||||||||||||||||
Income (loss) from continuing operations | $ | 793 | $ | 639 | $ | 597 | $ | 161 | $ | 95 | $ | 38 | ||||||||||||
Interest expense | 452 | 484 | 443 | 100 | 118 | 1,633 | ||||||||||||||||||
Income tax (benefit) expense | 441 | 470 | 403 | 67 | 71 | (60 | ) | |||||||||||||||||
Depreciation and amortization | 567 | 600 | 594 | 152 | 140 | 694 | ||||||||||||||||||
(Gain) loss on marketable securities | (7 | ) | (2 | ) | 1 | (6 | ) | (1 | ) | (13 | ) | |||||||||||||
Minority interest expense, net of tax | 47 | 32 | 18 | 8 | — | 55 | ||||||||||||||||||
EBITDA | $ | 2,293 | $ | 2,223 | $ | 2,056 | $ | 482 | $ | 423 | $ | 2,347 | ||||||||||||
Non-cash compensation | 44 | 42 | 6 | 10 | 8 | 55 | ||||||||||||||||||
Gain on disposition of assets — net | (14 | ) | (71 | ) | (50 | ) | (2 | ) | (7 | ) | (9 | ) | ||||||||||||
Merger expenses | 7 | 8 | — | 1 | 2 | — | ||||||||||||||||||
Equity in earnings of nonconsolidated affiliates | (35 | ) | (38 | ) | (38 | ) | (83 | ) | (5 | ) | (113 | ) | ||||||||||||
Other (income) expense—net | (6 | ) | 9 | (11 | ) | (12 | ) | — | (17 | ) | ||||||||||||||
OIBDAN | $ | 2,289 | $ | 2,173 | $ | 1,963 | $ | 396 | $ | 421 | $ | 2,263 | ||||||||||||
Cash received from nonconsolidated affiliates (b) | 32 | |||||||||||||||||||||||
Non-core radio EBITDA (c) | 3 | |||||||||||||||||||||||
Non-cash rent expense (d) | 4 | |||||||||||||||||||||||
Adjusted EBITDA | $ | 2,302 | ||||||||||||||||||||||
(a) | Information for the twelve months ended March 31, 2008 is presented on a pro forma basis to give effect to the merger transaction. Pro forma adjustments are made to depreciation and amortization, corporate expenses, merger expenses, interest expense and income tax (benefit) expense. | |
(b) | Represents expected recurring cash dividends received from nonconsolidated affiliates as the equity in earnings from these investments has been deducted in the calculation of OIBDAN. | |
(c) | Represents the EBITDA from our non-core radio stations that were not sold as of March 31, 2008 and whose results of operations are included in “Income from discontinued operations, net” in the income statement. | |
(d) | Represents the difference between cash rent expense and GAAP rent expense. |
(8) | Working capital is defined as (i) current assets except for cash, cash from discontinued operations, income taxes receivable and current deferred tax assets less (ii) current liabilities except for current portion of long-term debt, accrued interest, income taxes payable, current deferred tax liabilities and income taxes payable from discontinued operations. | |
(9) | The pro forma amount represents total shareholders’ equity from equity investments of $3,449 million, excluding $40 million of restricted stock of CCM Parent, presented on a pro forma basis less accounting adjustments of $805 million mainly related to continuing shareholders’ basis in accordance with Emerging Issues Task Force Issue 88-16,Basis in Leveraged Buyout Transactions(“EITF 88-16”). |
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• | increase our vulnerability to general adverse economic, competitive and industry conditions; | ||
• | limit our ability to obtain additional financing in the future for working capital, capital expenditures, acquisitions, general corporate purposes, or other purposes on satisfactory terms, or at all; | ||
• | require us to dedicate a substantial portion of our cash flow from operations to the payment of our indebtedness, thereby reducing the funds available to us for operations and any future business opportunities; | ||
• | expose us to the risk of increased interest rates as certain of our borrowings, including borrowings under our new senior secured credit facilities and our receivables based credit facility, are at variable rates of interest; | ||
• | restrict us from making strategic acquisitions or cause us to make non-strategic divestitures; | ||
• | limit our planning flexibility for, or ability to react to, changes in our business and the industries in which we operate; |
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• | limit our ability to adjust to changing market conditions; and | ||
• | place us at a competitive disadvantage with competitors who may have less indebtedness and other obligations or greater access to financing. |
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• | incur or guarantee additional debt or issue certain preferred stock; | ||
• | pay dividends or make distributions on our capital stock, or redeem, repurchase, or retire our capital stock and subordinated debt; | ||
• | make certain investments; | ||
• | create liens on our or our restricted subsidiaries’ assets to secure debt; | ||
• | create restrictions on the payment of dividends or other amounts to us from our restricted subsidiaries that are not guarantors of the notes; | ||
• | enter into transactions with affiliates; | ||
• | merge or consolidate with another person, or sell or otherwise dispose of all or substantially all of our assets; | ||
• | sell certain assets, including capital stock of our subsidiaries; | ||
• | alter the business that we conduct; and | ||
• | designate our subsidiaries as unrestricted subsidiaries. |
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• | intended to hinder, delay, or defraud creditors; or | ||
• | received less than reasonably equivalent value or fair consideration for the incurrence of such guarantee; and | ||
• | was insolvent or rendered insolvent by reason of such incurrence; or | ||
• | was engaged in a business or transaction for which the subsidiary guarantor’s remaining assets constituted unreasonably small capital; or | ||
• | intended to incur, or believed that it would incur, debts beyond its ability to pay such debts as they mature. |
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• | the sum of its debts, including contingent liabilities, was greater than the then fair saleable value of all of its assets; or | ||
• | if the present fair saleable value of its assets was less than the amount that would be required to pay its probable liability on its existing debts, including contingent liabilities, as they become absolute and mature; or | ||
• | it could not pay its debts as they become due. |
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• | our operating performance and financial condition; | ||
• | our prospects or the prospects for companies in our industry generally; | ||
• | the fact that the notes will not be registered under the Securities Act; | ||
• | the interest of securities dealers in making a market in the notes; | ||
• | the market for similar securities; | ||
• | prevailing interest rates; and | ||
• | the other factors described in this offering memorandum under “Risk Factors.” |
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• | exposure to local economic conditions; | ||
• | potential adverse changes in the diplomatic relations of foreign countries with the United States; | ||
• | 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; | ||
• | investment restrictions or requirements; | ||
• | 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; | ||
• | withholding and other taxes on remittances and other payments by subsidiaries; and | ||
• | changes in taxation structure. |
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• | certain of our acquisitions may prove unprofitable and fail to generate anticipated cash flows; | ||
• | to successfully manage our large portfolio of broadcasting, outdoor advertising and other properties, we may need to: |
• | recruit additional senior management as we cannot be assured that senior management of acquired companies will continue to work for us and, in this highly competitive labor market, we cannot be certain that any of our recruiting efforts will succeed, and | ||
• | expand corporate infrastructure to facilitate the integration of our operations with those of acquired properties, because the failure to do so may cause us to lose the benefits of any expansion that we decide to undertake by leading to disruptions in our ongoing businesses or by distracting our management; |
• | entry into markets and geographic areas where we have limited or no experience; | ||
• | we may encounter 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. |
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• | unfavorable economic conditions, both general and relative to the radio broadcasting, outdoor advertising and all related media industries, which may cause companies to reduce their expenditures on advertising; | ||
• | unfavorable shifts in population and other demographics which may cause us to lose advertising customers as people migrate to markets where we have a smaller presence, or which may cause advertisers to be willing to pay less in advertising fees if the general population shifts into a less desirable age or geographical demographic from an advertising perspective; | ||
• | an increased level of competition for advertising dollars, which may lead to lower advertising rates as we attempt to retain customers or which may cause us to lose customers to our competitors who offer lower rates that we are unable or unwilling to match; | ||
• | unfavorable fluctuations in operating costs which we may be unwilling or unable to pass through to our customers; | ||
• | technological changes and innovations that we are unable to adopt or are late in adopting that offer more attractive advertising or listening alternatives than what we currently offer, which may lead to a loss of advertising customers or to lower advertising rates; | ||
• | the impact of potential new royalties charged for terrestrial radio broadcasting which could materially increase our expenses; | ||
• | unfavorable changes in labor conditions which may require us to spend more to retain and attract key employees; and | ||
• | changes in governmental regulations and policies and actions of federal regulatory bodies which could restrict the advertising media which we employ or restrict some or all of our customers that operate in regulated areas from using certain advertising media, or from advertising at all. |
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Sources | |||
(In millions) | |||
Senior secured credit facilities: | |||
Revolving credit facility (1) | |||
Domestic based borrowings | — | ||
Foreign subsidiary borrowings | $ | 80 | |
Term loan A facility (2) | 1,425 | ||
Term loan B facility (3) | 10,700 | ||
Term loan C—asset sale facility (4) | 706 | ||
Delayed draw term loan facilities (5) | 750 | ||
Receivables based credit facility (2) | 440 | ||
Senior cash pay notes offered hereby | 980 | ||
Senior toggle notes offered hereby | 1,330 | ||
Cash | 169 | ||
Existing debt to remain outstanding (6) | 4,394 | ||
Common equity (7) | 3,519 | ||
Total Sources | $ | 24,493 | |
Uses | |||
(In millions) | |||
Purchase of common stock (8) | $ | 17,959 | |
Refinance existing debt (9) | 1,593 | ||
Existing debt to remain outstanding(6) | 4,394 | ||
Fees, expenses and other related costs of the Transactions (10) | 547 | ||
Total Uses | $ | 24,493 | |
(1) | Our senior secured credit facilities provide for a $2,000 million 6-year revolving credit facility, of which $150 million will be available in alternative currencies. We will have the ability to designate one or more of our foreign restricted subsidiaries as borrowers under a foreign currency sublimit of the revolving credit facility. Consistent with our international cash management practices, at or promptly after the consummation of the Transactions, we expect one of our foreign subsidiaries to borrow $80 million under the revolving credit facility’s sublimit for foreign based subsidiary borrowings to refinance our existing foreign subsidiary intercompany borrowings. The foreign based borrowings allow us to efficiently manage our liquidity needs in local countries, mitigating foreign exchange exposure and cash movement among different tax jurisdictions. Based on estimated cash levels (including estimated cash levels of our foreign subsidiaries), we do not expect to borrow any additional amounts under the revolving credit facility at the closing of the Transactions. | |
(2) | The aggregate amount of the 6-year term loan A facility will be the sum of $1,115 million plus the excess of $750 million over the borrowing base availability under our receivables based credit facility on the closing of the Transactions. The aggregate amount of our receivables based credit facility will correspondingly be reduced by the excess of $750 million over the borrowing base availability on the closing of the Transactions. Assuming that the borrowing base availability under the receivables based credit facility is $440 million, the term loan A facility would be $1,425 million and the aggregate receivables based credit facility (without regard to borrowing base limitations) would be $690 million. However, our actual borrowing base availability may be greater or less than this amount. | |
(3) | Our senior secured credit facilities provide for a $10,700 million 7.5-year term loan B facility. | |
(4) | Our senior secured credit facilities provide for a $705.638 million 7.5-year term loan C—asset sale facility. To the extent specified assets are sold after March 27, 2008 and prior to the closing of the Transactions, actual borrowings under the term loan C—asset sale facility will be reduced by the net cash proceeds received therefrom. Proceeds from the sale of specified assets after the closing of the Transactions will be applied to prepay the term loan C— asset sale facility (and thereafter to prepay any remaining term loan facilities) without right of reinvestment under our senior secured credit facilities. In addition, if the net proceeds of any other asset sales are not reinvested, but |
50
instead applied to prepay the senior secured credit facilities, such proceeds would first be applied to the term loan C—asset sale facility and thereafter pro rata to the remaining term loan facilities. | ||
(5) | Our senior secured credit facilities provide for two 7.5-year delayed draw term loans facilities aggregating $1,250 million. Proceeds from the delayed draw 1 term loan facility, available in the aggregate amount of $750 million, can only be used to redeem any of our existing senior notes due 2010. Proceeds from the delayed draw 2 term loan facility, available in the aggregate amount of $500 million, can only be used to redeem any of our existing 4.25% senior notes due 2009. Upon the consummation of the Transactions, we expect to borrow all amounts available to us under the delayed draw 1 term loan facility in order to redeem substantially all of our outstanding senior notes due 2010. We do not expect to borrow any amount available to us under the delayed draw 2 term loan facility upon the consummation of the Transactions. Any unused commitment to lend will expire on September 30, 2010 in the case of the delayed draw 1 term loan facility and on the second anniversary of the closing in the case of the delayed draw 2 term loan facility. | |
(6) | We anticipate that a portion of our existing senior notes and other existing subsidiary indebtedness will remain outstanding after the closing of the Transactions. The aggregate principal amount of the existing senior notes and the subsidiary indebtedness that is estimated to remain outstanding is $4,275 million and $119 million, respectively, at March 31, 2008. The aggregate principal amount of the existing senior notes and the subsidiary indebtedness to remain outstanding assumes the repurchase of $750 million of our outstanding senior notes due 2010 and the repurchase of $645 million aggregate principal amount of AMFM Operating Inc.’s outstanding 8.0% senior notes due 2008. | |
(7) | Represents total equity as a result of rollover equity of our existing shareholders who have elected to receive shares of CCM Parent as merger consideration, rollover equity from the Mays family, restricted stock and estimated cash equity contributed to us indirectly by CCM Parent from cash equity investments in CCM Parent by entities associated with the Sponsors and their co-investors. Actual cash equity would be decreased by the amount of Clear Channel cash available on the closing date to be used in the Transactions, subject to a minimum of $3,000 million total equity. | |
(8) | The amount assumes, as of March 31, 2008, approximately 498.0 million issued and outstanding common shares and the settlement of 836,800 outstanding employee stock options at a per share price of $36.00, payable in either cash or rollover equity as selected by existing shareholders (subject to aggregate caps and individual limits). | |
(9) | Represents the refinancing of $125 million of our senior notes due June 2008, the repurchase of $645 million aggregate principal amount of AMFM Operating Inc.’s outstanding 8.0% senior notes due 2008 and the repurchase of $750 million of our outstanding senior notes due 2010, plus any premiums related thereto and accrued and unpaid interest thereon. | |
(10) | Reflects estimated fees, expenses and other costs incurred in connection with the Transactions, including placement and other financing fees, advisory fees, transaction fees paid to affiliates of the Sponsors, costs associated with certain restricted stock grants to management, change-in-control payments, excess cash and other transaction costs and professional fees. All fees, expenses and other costs are estimates and actual amounts may differ from those set forth in this offering memorandum. |
51
As of March 31, | ||||||||
2008 | ||||||||
Historical | Pro Forma | |||||||
(In millions) | ||||||||
Cash and Cash Equivalents | $ | 602 | $ | 433 | ||||
Debt: | ||||||||
Existing revolving credit facility | ||||||||
Domestic based borrowings | $ | — | $ | — | ||||
Foreign subsidiary borrowings | — | — | ||||||
Senior secured credit facilities: | — | — | ||||||
Revolving credit facility (1) | ||||||||
Domestic based borrowings | — | — | ||||||
Foreign subsidiary borrowings | — | 80 | ||||||
Term loan A facility (2) | — | 1,425 | ||||||
Term loan B facility (3) | — | 10,700 | ||||||
Term loan C—asset sale facility (4) | — | 706 | ||||||
Delayed draw term loan facilities (5) | — | 750 | ||||||
Receivables based credit facility (2) | — | 440 | ||||||
Senior cash pay notes offered hereby | — | 980 | ||||||
Senior toggle notes offered hereby | — | 1,330 | ||||||
Existing subsidiary debt (6) | 766 | 119 | ||||||
Total guaranteed/subsidiary debt (7)(8) | $ | 766 | $ | 16,530 | ||||
Existing structurally subordinated Clear Channel notes to remain outstanding (8)(9) | 5,176 | 3,331 | ||||||
Total Debt | 5,942 | 19,861 | ||||||
Total Shareholders’ Equity (10) | 9,662 | 2,644 | ||||||
Total Capitalization | $ | 15,604 | $ | 22,505 | ||||
(1) | Our senior secured credit facilities provide for a $2,000 million 6-year revolving credit facility, of which $150 million will be available in alternative currencies. We will have the ability to designate one or more of our foreign restricted subsidiaries as borrowers under a foreign currency sublimit of the revolving credit facility. Consistent with our international cash management practices, we expect one of our foreign subsidiaries to borrow $80 million under the revolving credit facility’s sublimit for foreign based subsidiary borrowings to refinance our existing foreign subsidiary intercompany borrowings. The foreign based borrowings allow us to efficiently manage our liquidity needs in local countries, mitigating foreign exchange exposure and cash movement among different tax jurisdictions. Based on estimated cash levels (including estimated cash levels of our foreign subsidiaries), we do not expect to borrow any additional amounts under the revolving credit facility at the closing of the Transactions. | |
(2) | The aggregate amount of the 6-year term loan A facility will be the sum of $1,115 million plus the excess of $750 million over the borrowing base availability under our receivables based credit facility on the closing of the Transactions. The aggregate amount of our receivables based credit facility will correspondingly be reduced by the excess of $750 million over the borrowing base availability on the closing of the Transactions. Assuming that the borrowing base availability under the receivables based credit facility is $440 million, the term loan A facility would be $1,425 million and the aggregate receivables based credit facility (without regard to borrowing base limitations) would be $690 million. However, our actual borrowing base availability may be greater or less than this amount. |
52
(3) | Our senior secured credit facilities provide for a $10,700 million 7.5-year term loan B facility. | |
(4) | Our senior secured credit facilities provide for a $705.638 million 7.5-year term loan C—asset sale facility. To the extent specified assets are sold after March 27, 2008 and prior to the closing of the Transactions, actual borrowings under the term loan C—asset sale facility will be reduced by the net cash proceeds received therefrom. Proceeds from the sale of specified assets after the closing of the Transactions will be applied to prepay the term loan C— asset sale facility (and thereafter to prepay any remaining term loan facilities) without right of reinvestment under our senior secured credit facilities. In addition, if the net proceeds of any other asset sales are not reinvested, but instead applied to prepay the senior secured credit facilities, such proceeds would first be applied to the term loan C—asset sale facility and thereafter pro rata to the remaining term loan facilities. | |
(5) | Our senior secured credit facilities provide for two 7.5-year delayed draw term loans facilities aggregating $1,250 million. Proceeds from the delayed draw 1 term loan facility, available in the aggregate amount of $750 million, can only be used to redeem any of our existing senior notes due 2010. Proceeds from the delayed draw 2 term loan facility, available in the aggregate amount of $500 million, can only be used to redeem any of our existing 4.25% senior notes due 2009. Upon the consummation of the Transactions, we expect to borrow all amounts available to us under the delayed draw 1 term loan facility in order to redeem substantially all of our outstanding senior notes due 2010. We do not expect to borrow any amount available to us under the delayed draw 2 term loan facility upon the consummation of the Transactions. Any unused commitment to lend will expire on September 30, 2010 in the case of the delayed draw 1 term loan facility and on the second anniversary of the closing in the case of the delayed draw 2 term loan facility. | |
(6) | Represents existing subsidiary indebtedness which is anticipated to remain outstanding after the closing of the Transactions. The aggregate principal amount of subsidiary indebtedness to remain outstanding assumes the repurchase of $645 million aggregate principal amount of AMFM Operating Inc.’s outstanding 8.0% senior notes due 2008. | |
(7) | Represents the sum of the indebtedness to be incurred in connection with the closing of the Transactions, which will be guaranteed by Clear Channel Capital I, LLC and our material wholly-owned domestic restricted subsidiaries, and existing indebtedness of us and our restricted subsidiaries anticipated to remain outstanding after the closing of the Transactions, which amount reflects the purchase accounting fair value adjustments. | |
(8) | Represents total debt, less the amount of our existing senior notes anticipated to remain outstanding after the closing of the Transactions, which are not guaranteed by, or direct obligations of, our subsidiaries. | |
(9) | Represents our existing senior notes, which are not guaranteed by, or direct obligations of, our subsidiaries, a portion of which is anticipated to remain outstanding after the closing of the Transactions. The aggregate principal amount of our existing senior notes to remain outstanding assumes the repurchase of $750 million of our outstanding senior notes due 2010. The pro forma amount includes purchase accounting fair value adjustments of $(931) million. | |
(10) | The pro forma amount represents total shareholders’ equity from equity investments of $3,449 million, excluding $40 million of restricted stock of CCM Parent, presented on a pro forma basis less an accounting adjustment of $805 million mainly related to continuing shareholders’ basis in accordance with EITF 88-16. See “Unaudited Pro Forma Condensed Consolidated Financial Statements—Notes to Unaudited Pro Forma Condensed Consolidated Financial Data.” |
53
54
55
AT MARCH 31, 2008
(In thousands)
Clear | ||||||||||||
Channel | Transaction | |||||||||||
Historical | Adjustments | Pro Forma | ||||||||||
ASSETS | ||||||||||||
Current assets: | ||||||||||||
Cash and cash equivalents | $ | 602,112 | $ | (168,897 | )(G) | $ | 433,215 | |||||
Accounts receivable, net | 1,681,514 | — | 1,681,514 | |||||||||
Prepaid expenses | 125,387 | — | 125,387 | |||||||||
Other current assets | 270,306 | 43,015 | (A), (B) | 313,321 | ||||||||
Total Current Assets | 2,679,319 | (125,882 | ) | 2,553,437 | ||||||||
Property, plant & equipment, net | 3,074,741 | 148,701 | (A) | 3,223,442 | ||||||||
Property, plant and equipment from discontinued operations, net | 15,487 | 4,482 | (A) | 19,969 | ||||||||
Definite-lived intangibles, net | 489,542 | 437,067 | (A) | 926,609 | ||||||||
Indefinite-lived intangibles — licenses | 4,213,262 | 2,420,063 | (A) | 6,633,325 | ||||||||
Indefinite-lived intangibles — permits | 252,576 | 2,954,805 | (A) | 3,207,381 | ||||||||
Goodwill | 7,268,059 | 3,246,222 | (A) | 10,514,281 | ||||||||
Goodwill and intangible assets from discontinued operations, net | 31,889 | 3,263 | (A) | 35,152 | ||||||||
Other assets: | ||||||||||||
Notes receivable | 11,630 | — | 11,630 | |||||||||
Investments in, and advances to, nonconsolidated affiliates | 296,481 | 221,897 | (A) | 518,378 | ||||||||
Other assets | 361,281 | 134,826 | (A), (B) | 496,107 | ||||||||
Other investments | 351,216 | — | 351,216 | |||||||||
Other assets from discontinued operations | 7,728 | — | 7,728 | |||||||||
Total Assets | $ | 19,053,211 | $ | 9,445,444 | $ | 28,498,655 | ||||||
LIABILITIES AND SHAREHOLDERS’ EQUITY | ||||||||||||
Accounts payable, accrued expenses and accrued interest | $ | 1,037,592 | $ | — | $ | 1,037,592 | ||||||
Current portion of long-term debt | 869,631 | — | 869,631 | |||||||||
Deferred income | 242,861 | — | 242,861 | |||||||||
Accrued income taxes | 148,833 | — | 148,833 | |||||||||
Total Current Liabilities | 2,298,917 | — | 2,298,917 | |||||||||
Long-term debt | 5,072,000 | 13,919,095 | (A), (C) | 18,991,095 | ||||||||
Other long-term obligations | 167,775 | — | 167,775 | |||||||||
Deferred income taxes | 830,937 | 2,576,190 | (A), (D) | 3,407,127 | ||||||||
Other long-term liabilities | 560,945 | (31,761 | )(A), (E) | 529,184 | ||||||||
Minority interest | 460,728 | — | 460,728 | |||||||||
Shareholders’ Equity | ||||||||||||
Common stock | 49,817 | (49,317 | )(F) | 500 | ||||||||
Additional paid-in capital | 26,871,648 | (24,228,319 | )(F) | 2,643,329 | (G) | |||||||
Retained deficit | (17,689,490 | ) | 17,689,490 | (F) | — | |||||||
Accumulated other comprehensive income | 436,544 | (436,544 | )(F) | — | ||||||||
Cost of shares held in treasury | (6,610 | ) | 6,610 | (F) | — | |||||||
Total Shareholders’ Equity | 9,661,909 | (7,018,080 | )(F) | 2,643,829 | (G) | |||||||
Total Liabilities and Shareholders’ Equity | $ | 19,053,211 | $ | 9,445,444 | $ | 28,498,655 | ||||||
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OPERATIONS
YEAR ENDED DECEMBER 31, 2007
(In thousands)
Clear | ||||||||||||
Channel | Transaction | |||||||||||
Historical | Adjustments | Pro Forma | ||||||||||
Revenue | $ | 6,921,202 | $ | — | $ | 6,921,202 | ||||||
Operating expenses: | ||||||||||||
Direct operating expenses (excludes depreciation and amortization) | 2,733,004 | — | 2,733,004 | |||||||||
Selling, general and administrative expenses (excludes depreciation and amortization) | 1,761,939 | — | 1,761,939 | |||||||||
Depreciation and amortization | 566,627 | 115,324 | (H) | 681,951 | ||||||||
Corporate expenses (excludes depreciation and amortization) | 181,504 | 9,729 | (K) | 191,233 | ||||||||
Merger expenses | 6,762 | (6,762 | )(J) | — | ||||||||
Gain on disposition of assets — net | 14,113 | — | 14,113 | |||||||||
Operating income (loss) | 1,685,479 | (118,291 | ) | 1,567,188 | ||||||||
Interest expense | 451,870 | 1,181,169 | (l) | 1,633,039 | ||||||||
Gain on marketable securities | 6,742 | — | 6,742 | |||||||||
Equity in earnings of nonconsolidated affiliates | 35,176 | — | 35,176 | |||||||||
Other income (expense) — net | 5,326 | — | 5,326 | |||||||||
Income (loss) before income taxes and minority interest | 1,280,853 | (1,299,460 | ) | (18,607 | ) | |||||||
Income tax (expense) benefit | (441,148 | ) | 490,238 | (D) | 49,090 | |||||||
Minority interest expense, net of tax | 47,031 | — | 47,031 | |||||||||
Income (loss) from continuing operations | $ | 792,674 | $ | (809,222 | ) | $ | (16,548 | ) | ||||
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OPERATIONS
THREE MONTHS ENDED MARCH 31, 2007
(In thousands)
Clear Channel | Transaction | |||||||||||
Historical | Adjustments | Pro Forma | ||||||||||
Revenue | $ | 1,505,077 | $ | — | $ | 1,505,077 | ||||||
Operating expenses: | ||||||||||||
Direct operating expenses (excludes depreciation and amortization) | 627,879 | — | 627,879 | |||||||||
Selling, general and administrative expenses (excludes depreciation and amortization) | 416,319 | — | 416,319 | |||||||||
Depreciation and amortization | 139,685 | 28,831 | (H) | 168,516 | ||||||||
Corporate expenses (excludes depreciation and amortization) | 48,150 | 2,432 | (K) | 50,582 | ||||||||
Merger expenses | 1,686 | (1,686 | )(J) | — | ||||||||
Gain on disposition of assets—net | 6,947 | — | 6,947 | |||||||||
Operating income (loss) | 278,305 | (29,577 | ) | 248,728 | ||||||||
Interest expense | 118,077 | 290,183 | (l) | 408,260 | ||||||||
Gain on marketable securities | 395 | — | 395 | |||||||||
Equity in earnings of nonconsolidated affiliates | 5,264 | — | 5,264 | |||||||||
Other income (expense) — net | (12 | ) | — | (12 | ) | |||||||
Income (loss) before income taxes and minority interest | 165,875 | (319,760 | ) | (153,885 | ) | |||||||
Income tax (expense) benefit | (70,466 | ) | 120,619 | (D) | 50,153 | |||||||
Minority interest expense, net of tax | 276 | — | 276 | |||||||||
Income (loss) from continuing operations | $ | 95,133 | $ | (199,141 | ) | $ | (104,008 | ) | ||||
58
OPERATIONS
THREE MONTHS ENDED MARCH 31, 2008
(In thousands)
Clear | ||||||||||||
Channel | Transaction | |||||||||||
Historical | Adjustments | Pro Forma | ||||||||||
Revenue | $ | 1,564,207 | $ | — | $ | 1,564,207 | ||||||
Operating expenses: | ||||||||||||
Direct operating expenses (excludes depreciation and amortization) | 705,947 | — | 705,947 | |||||||||
Selling, general and administrative expenses (excludes depreciation and amortization) | 426,381 | — | 426,381 | |||||||||
Depreciation and amortization | 152,278 | 28,831 | (H) | 181,109 | ||||||||
Corporate expenses (excludes depreciation and amortization) | 46,303 | 2,432 | (K) | 48,735 | ||||||||
Merger expenses | 389 | (389 | )(J) | — | ||||||||
Gain on disposition of assets—net | 2,097 | — | 2,097 | |||||||||
Operating income (loss) | 235,006 | (30,874 | ) | 204,132 | ||||||||
Interest expense | 100,003 | 308,313 | (l) | 408,316 | ||||||||
Gain on marketable securities | 6,526 | — | 6,526 | |||||||||
Equity in earnings of nonconsolidated affiliates | 83,045 | — | 83,045 | |||||||||
Other income (expense) — net | 11,787 | — | 11,787 | |||||||||
Income (loss) before income taxes and minority interest | 236,361 | (339,187 | ) | (102,826 | ) | |||||||
Income tax (expense) benefit | (66,581 | ) | 128,002 | (D) | 61,421 | |||||||
Minority interest expense, net of tax | 8,389 | — | 8,389 | |||||||||
Income (loss) from continuing operations | $ | 161,391 | $ | (211,185 | ) | $ | (49,794 | ) | ||||
59
OPERATIONS
TWELVE MONTHS ENDED MARCH 31, 2008
(In thousands)
Clear Channel | Transaction | |||||||||||
Historical | Adjustments | Pro Forma | ||||||||||
Revenue | $ | 6,980,332 | $ | — | $ | 6,980,332 | ||||||
Operating expenses: | ||||||||||||
Direct operating expenses (excludes depreciation and amortization) | 2,811,072 | — | 2,811,072 | |||||||||
Selling, general and administrative expenses (excludes depreciation and amortization) | 1,772,001 | — | 1,772,001 | |||||||||
Depreciation and amortization | 579,220 | 115,324 | (H) | 694,544 | ||||||||
Corporate expenses (excludes depreciation and amortization) | 179,657 | 9,729 | (K) | 189,386 | ||||||||
Merger expenses | 5,465 | (5,465 | )(J) | — | ||||||||
Gain on disposition of assets—net | 9,263 | — | 9,263 | |||||||||
Operating income (loss) | 1,642,180 | (119,588 | ) | 1,522,592 | ||||||||
Interest expense | 433,796 | 1,199,299 | (l) | 1,633,095 | ||||||||
Gain on marketable securities | 12,873 | — | 12,873 | |||||||||
Equity in earnings of nonconsolidated affiliates | 112,957 | — | 112,957 | |||||||||
Other income (expense) — net | 17,125 | — | 17,125 | |||||||||
Income (loss) before income taxes and minority interest | 1,351,339 | (1,318,887 | ) | 32,452 | ||||||||
Income tax (expense) benefit | (437,263 | ) | 497,621 | (D) | 60,358 | |||||||
Minority interest expense, net of tax | 55,144 | — | 55,144 | |||||||||
Income (loss) from continuing operations | $ | 858,932 | $ | (821,266 | ) | $ | 37,666 | |||||
60
CONDENSED CONSOLIDATED FINANCIAL DATA
9.9% | 100 bps increase | 100 bps decrease | ||||||||||
(In thousands) | ||||||||||||
Definite-lived intangibles, net | $ | 926,609 | $ | (4,851 | ) | $ | 4,851 | |||||
Indefinite-lived intangibles—Licenses | 6,633,325 | (26,859 | ) | 26,859 | ||||||||
Indefinite-lived intangibles—Permits | 3,207,381 | (32,795 | ) | 32,795 | ||||||||
Goodwill | 10,514,281 | (33,388 | ) | 33,388 | ||||||||
Total assets | 28,498,655 | (102,093 | ) | 102,093 | ||||||||
Total shareholders’ equity | 2,643,829 | (82,664 | ) | 82,664 | ||||||||
Income (loss) from continuing operations for the year ended December 31, 2007 | (16,548 | ) | 2,071 | (2,071 | ) | |||||||
Income (loss) from continuing operations for the three months ended March 31, 2008 | (49,794 | ) | 518 | (518 | ) | |||||||
Income (loss) from continuing operations for the three months ended March 31, 2007 | (104,008 | ) | 518 | (518 | ) | |||||||
Income (loss) from continuing operations for the last twelve months ended March 31, 2008 | 37,666 | 2,071 | (2,071 | ) |
61
(In thousands) | ||||
Consideration for Equity (i) | $ | 17,928,262 | ||
Rollover of restricted stock awards | 13,567 | |||
Estimated transaction costs | 235,359 | |||
Total Consideration | 18,177,188 | |||
Less: Net assets acquired | 9,661,909 | |||
Less: Adjustment for historical carryover basis per EITF 88-16 | 818,369 | |||
Excess Consideration to be Allocated | $ | 7,696,910 | ||
Allocation: | ||||
Fair Value Adjustments: | ||||
Other current assets (B) | $ | (4,108 | ) | |
Property, plant and equipment, net | 148,701 | |||
Property, plant and equipment from discontinued operations, net | 4,482 | |||
Definite-lived intangibles (ii) | 437,067 | |||
Indefinite-lived intangibles — Licenses (iii) | 2,420,063 | |||
Indefinite-lived intangibles — Permits (iii) | 2,954,805 | |||
Intangible assets from discontinued operations, net | 3,263 | |||
Investments in, and advances to, nonconsolidated affiliates | 221,897 | |||
Other assets (B) | (162,736 | ) | ||
Long-term debt (C) | 931,310 | |||
Deferred income taxes recorded for fair value adjustments to assets and liabilities (D) | (2,576,190 | ) | ||
Other long term liabilities (E) | 31,761 | |||
Termination of interest rate swaps (C) | 40,373 | |||
Goodwill (iv) | 3,246,222 | |||
Total Adjustments | $ | 7,696,910 | ||
(i) | Consideration for equity: |
Total shares outstanding (1) | 498,007 | |||
Multiplied by: Price per share (2) | $ | 36.00 | ||
$ | 17,928,262 | |||
(1) | Total shares outstanding include 836,800 equivalent shares subject to employee stock options. | |
(2) | Price per share is assumed to be $36.00 per share, which is equal to the amount of the cash consideration. | |
(ii) | Identifiable intangible assets acquired subject to amortization includes contracts amortizable over a weighted average amortization period of approximately 5.1 years. | |
(iii) | The licenses and permits were deemed to be indefinite-lived assets that can be separated from any other asset, do not have legal, regulatory, contractual, competitive, economic, or other factors that limit the useful lives and require no material levels of maintenance to retain their cash flows. As such, licenses and permits are not currently subject to amortization. Annually, the licenses and permits will be reviewed for impairment and useful lives evaluated to determine whether facts and circumstances continue to support an indefinite life for these assets. | |
(iv) | The pro forma adjustment to goodwill consists of: |
Removal of historical goodwill | $ | (7,268,059 | ) | |
Goodwill arising from the merger | 10,514,281 | |||
$ | 3,246,222 | |||
62
Total debt to be redeemed (i) | $ | (1,519,860 | ) | |
Issuance of debt in merger (ii) | 16,410,638 | |||
Fair value adjustment ($1,047,090 related to senior notes less $12,119 related to other fair value adjustments and $103,661 related to historical carryover basis per EITF 88-16) | (931,310 | ) | ||
Less: termination of interest rate swaps in connection with the merger | (40,373 | ) | ||
Debt adjustment ($13,919,095 long-term less $0 current portion) | $ | 13,919,095 | ||
(i) | Total Debt to be Redeemed: |
Clear Channel bank credit facilities (1) | $ | 125,000 | ||
Clear Channel senior notes due 2010 | 750,000 | |||
AMFM Operating Inc. 8% senior notes due 2008 | 644,860 | |||
Total | $ | 1,519,860 | ||
(1) | The pro forma balance of $125 million on our bank credit facilities reflects the June 15, 2008 maturity of our 6.625% senior notes due 2008. | |
(ii) | Issuance of Debt in the Merger: |
Senior secured credit facilities: | ||||
Revolving credit facility | ||||
Domestic based borrowings | $ | — | ||
Foreign subsidiary borrowings | 80,000 | |||
Term loan A facility | 1,425,000 | |||
Term loan B facility | 10,700,000 | |||
Term loan C — asset sale facility | 705,638 | |||
Delayed draw term loan facilities | 750,000 | |||
Receivables based credit facility | 440,000 | |||
Notes offered hereby | 2,310,000 | |||
Total | $ | 16,410,638 | ||
63
64
(In thousands) | ||||
Fair value of shareholders’ equity at March 31, 2008 | $ | 17,928,262 | ||
Net cash proceeds from debt due to merger (i) | (14,479,631 | ) | ||
Fair value of equity after merger (ii) | $ | 3,448,631 | ||
Pro forma shareholder’s equity under EITF 88-16 | ||||
Fair value of equity after merger | $ | 3,448,631 | ||
Less: 9.9% of fair value of equity after merger ($3,448,631 multiplied by 9.9%) | (341,414 | ) | ||
Plus: 9.9% of shareholders’ historical carryover basis (9,661,909 multiplied by 9.9%) | 956,529 | |||
Less: Deemed dividend (14,479,631 multiplied by 9.9%) | (1,433,484 | ) | ||
Adjustment for historical carryover basis per EITF 88-16 | (818,369 | ) | ||
Adjustment for rollover of restricted stock awards | $ | 13,567 | ||
Total pro forma shareholders’ equity under EITF 88-16 (iii) | $ | 2,643,829 | ||
(i) | Net increase in debt in merger: |
Issuance of debt in merger | $ | 16,410,638 | ||
Total debt redeemed | (1,519,860 | ) | ||
Total decrease in cash | 168,897 | |||
Estimated transaction and loan costs | (580,044 | ) | ||
Total increase in debt due to merger | $ | 14,479,631 | ||
(ii) | For purposes of the unaudited pro forma condensed consolidated financial data, the management of CCM Parent has assumed that the fair value of equity after the merger is $3.4 billion. | |
(iii) | Total pro forma shareholders’ equity under EITF 88-16: |
Common stock, par value $.001 per share | $ | 500 | ||
Additional paid-in capital | 2,643,329 | |||
$ | 2,643,829 | |||
Three | Three | Twelve | ||||||||||||||
Months | Months | Months | ||||||||||||||
Year Ended | Ended | Ended | Ended | |||||||||||||
December 31, | March 31, | March 31, | March 31, | |||||||||||||
2007 | 2008 | 2007 | 2008 | |||||||||||||
(In thousands) | ||||||||||||||||
Interest expense on revolving credit facility (1) | $ | 14,476 | $ | 3,619 | $ | 3,619 | $ | 14,476 | ||||||||
Interest expense on receivables based credit facility (2) | 23,356 | 5,895 | 5,839 | 23,412 | ||||||||||||
Interest expense on term loan facilities (3) | 867,229 | 216,807 | 216,807 | 867,229 | ||||||||||||
Interest expense on notes offered hereby (4) | 251,650 | 62,913 | 62,913 | 251,650 | ||||||||||||
Amortization of deferred financing fees and fair value adjustments on Clear Channel senior notes (5) | 232,887 | 58,222 | 58,222 | 232,887 | ||||||||||||
Reduction in interest expense on debt redeemed | (208,429 | ) | (39,143 | ) | (57,217 | ) | (190,355 | ) | ||||||||
Total pro forma interest adjustment | $ | 1,181,169 | $ | 308,313 | $ | 290,183 | $ | 1,199,299 | ||||||||
65
(1) | Pro forma interest expense reflects an $80 million outstanding balance on the $2,000 million revolving credit facility at a rate equal to an applicable margin (assumed to be 3.4%) over LIBOR (assumed to be 2.7%) plus a commitment fee of 0.5% on the assumed undrawn balance of the revolving credit facility. For each 0.125% per annum change in LIBOR, annual interest expense on the revolving credit facility would change by $0.1 million. | |
(2) | Reflects pro forma interest expense on the receivables based credit facility at a rate equal to an applicable margin (assumed to be 2.4%) over LIBOR (assumed to be 2.7%) and assumes a commitment fee of 0.375% on the unutilized portion of the receivables based credit facility. For each 0.125% per annum change in LIBOR, annual interest expense on the receivables based credit facility would change by $0.6 million. | |
(3) | Reflects pro forma interest expense on the term loan facilities at a rate equal to an applicable margin over LIBOR. The pro forma adjustment assumes margins of 3.4% to 3.65% and LIBOR of 2.7%. Assumes a commitment fee of 1.82% on the unutilized portion of the delayed draw term loan facilities. For each 0.125% per annum change in LIBOR, annual interest expense on the term loan facilities would change by $17.0 million. | |
(4) | Assumes a fixed rate of 10.75% on the senior cash pay notes offered hereby and a fixed rate of 11.00% on the senior toggle notes offered hereby. |
(i) | These pro forma financial statements include the assumptions that interest expense is calculated at the rates under each tranche of the debt per the purchase agreement and that the PIK Election has not been made in all available periods to the fullest extent possible. |
The table below quantifies the effects for the period presented of two possible alternate scenarios available to Clear Channel with regard to the payment of required interest, a) paying 100% payment-in-kind (“PIK”) for all periods presented and b) electing to pay 50% in cash and 50% through use of the PIK Election for all periods presented: |
100% PIK | 50% Cash/50% PIK | |||||||||||||||
Increase in | Increase | Increase in | Increase | |||||||||||||
interest | in net | interest | in net | |||||||||||||
expense | loss | expense | loss | |||||||||||||
Year ended December 31, 2007 | $ | 14,566 | $ | 9,031 | $ | 7,283 | $ | 4,515 | ||||||||
Three months ended March 31, 2008 | 7,219 | 4,476 | 3,610 | 2,238 | ||||||||||||
Three months ended March 31, 2007 | 2,494 | 1,547 | 1,247 | 773 | ||||||||||||
Twelve months ended March 31, 2008 | 19,291 | 11,960 | 9,646 | 5,980 |
The use of the 100% PIK Election will increase cash balances by approximately $146 million, net of tax, in the first year that the debt is outstanding. The use of the 50% cash pay / 50% PIK Election will increase cash balances by approximately $73 million, net of tax, in the first year that the debt is outstanding. |
(5) | Represents debt issuance costs associated with our new bank facilities amortized over 6 years for the receivables based credit facility and the revolving credit facility, 6 to 7.5 years for the term loan facilities and 8 years for the notes offered hereby. |
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Three Months Ended | ||||||||||||||||||||||||||||
Year Ended December 31, | March 31, | |||||||||||||||||||||||||||
2007(1) | 2006(2) | 2005 | 2004 | 2003 | 2008 | 2007 | ||||||||||||||||||||||
(In thousands) | (Unaudited) | |||||||||||||||||||||||||||
Statement of Operations: | ||||||||||||||||||||||||||||
Revenue | $ | 6,921,202 | $ | 6,567,790 | $ | 6,126,553 | $ | 6,132,880 | $ | 5,786,048 | $ | 1,564,207 | $ | 1,505,077 | ||||||||||||||
Operating expenses: | ||||||||||||||||||||||||||||
Direct operating expenses (excludes depreciation and amortization) | 2,733,004 | 2,532,444 | 2,351,614 | 2,216,789 | 2,024,442 | 705,947 | 627,879 | |||||||||||||||||||||
Selling, general and administrative expenses (excludes depreciation and amortization) | 1,761,939 | 1,708,957 | 1,651,195 | 1,644,251 | 1,621,599 | 426,381 | 416,319 | |||||||||||||||||||||
Depreciation and amortization | 566,627 | 600,294 | 593,477 | 591,670 | 575,134 | 152,278 | 139,685 | |||||||||||||||||||||
Corporate expenses (excludes depreciation and amortization) | 181,504 | 196,319 | 167,088 | 163,263 | 149,697 | 46,303 | 48,150 | |||||||||||||||||||||
Merger expenses | 6,762 | 7,633 | — | — | — | 389 | 1,686 | |||||||||||||||||||||
Gain on disposition of assets—net | 14,113 | 71,571 | 49,656 | 43,040 | 7,377 | 2,097 | 6,947 | |||||||||||||||||||||
Operating income | 1,685,479 | 1,593,714 | 1,412,835 | 1,559,947 | 1,422,553 | 235,006 | 278,305 | |||||||||||||||||||||
Interest expense | 451,870 | 484,063 | 443,442 | 367,511 | 392,215 | 100,003 | 118,077 | |||||||||||||||||||||
Gain (loss) on marketable securities | 6,742 | 2,306 | (702 | ) | 46,271 | 678,846 | 6,526 | 395 | ||||||||||||||||||||
Equity in earnings of nonconsolidated affiliates | 35,176 | 37,845 | 38,338 | 22,285 | 20,669 | 83,045 | 5,264 | |||||||||||||||||||||
Other income (expense)—net | 5,326 | (8,593 | ) | 11,016 | (30,554 | ) | 20,407 | 11,787 | (12 | ) | ||||||||||||||||||
Income before income taxes, minority interest, discontinued operations and cumulative effect of a change in accounting principle | 1,280,853 | 1,141,209 | 1,018,045 | 1,230,438 | 1,750,260 | 236,361 | 165,875 | |||||||||||||||||||||
Income tax expense | 441,148 | 470,443 | 403,047 | 471,504 | 753,564 | 66,581 | 70,466 | |||||||||||||||||||||
Minority interest expense, net of tax | 47,031 | 31,927 | 17,847 | 7,602 | 3,906 | 8,389 | 276 | |||||||||||||||||||||
Income before discontinued operations and cumulative effect of a change in accounting principle | 792,674 | 638,839 | 597,151 | 751,332 | 992,790 | 161,391 | 95,133 | |||||||||||||||||||||
Income from discontinued operations, net (3) | 145,833 | 52,678 | 338,511 | 94,467 | 152,801 | 638,262 | 7,089 | |||||||||||||||||||||
Income before cumulative effect of a change in accounting principle | 938,507 | 691,517 | 935,662 | 845,799 | 1,145,591 | 799,653 | 102,222 | |||||||||||||||||||||
Cumulative effect of a change in accounting principle, net of tax of, $2,959,003 in 2004(4) | — | — | — | (4,883,968 | ) | — | — | — | ||||||||||||||||||||
Net income (loss) | $ | 938,507 | $ | 691,517 | $ | 935,662 | $ | (4,038,169 | ) | $ | 1,145,591 | $ | 799,653 | $ | 102,222 | |||||||||||||
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Three Months Ended | ||||||||||||||||||||||||||||
Year Ended December 31, | March 31, | |||||||||||||||||||||||||||
2007 | 2006 | 2005 | 2004 | 2003 | 2008 | 2007 | ||||||||||||||||||||||
(In thousands) | (Unaudited) | |||||||||||||||||||||||||||
Balance Sheet Data: | ||||||||||||||||||||||||||||
Current assets | $ | 2,294,583 | $ | 2,205,730 | $ | 2,398,294 | $ | 2,269,922 | $ | 2,185,682 | $ | 2,679,319 | $ | 2,065,806 | ||||||||||||||
Property, plant and equipment—net, including discontinued operations (5) | 3,215,088 | 3,236,210 | 3,255,649 | 3,328,165 | 3,476,900 | 3,090,228 | 3,188,918 | |||||||||||||||||||||
Total assets | 18,805,528 | 18,886,455 | 18,718,571 | 19,959,618 | 28,352,693 | 19,053,211 | 18,686,330 | |||||||||||||||||||||
Current liabilities | 2,813,277 | 1,663,846 | 2,107,313 | 2,184,552 | 1,892,719 | 2,298,917 | 1,815,182 | |||||||||||||||||||||
Long-term debt, net of current maturities | 5,214,988 | 7,326,700 | 6,155,363 | 6,941,996 | 6,898,722 | 5,072,000 | 6,862,109 | |||||||||||||||||||||
Shareholders’ equity | 8,797,491 | 8,042,341 | 8,826,462 | 9,488,078 | 15,553,939 | 9,661,909 | 8,128,722 | |||||||||||||||||||||
Statement of Cash Flows Data: | ||||||||||||||||||||||||||||
Net cash flows provided by (used in): | ||||||||||||||||||||||||||||
Operating activities | $ | 1,576,428 | $ | 1,748,057 | $ | 1,303,880 | $ | 367,772 | $ | 321,463 | ||||||||||||||||||
Investing activities | (482,677 | ) | (607,011 | ) | (349,796 | ) | (154,257 | ) | (71,021 | ) | ||||||||||||||||||
Financing activities | (1,431,014 | ) | (1,178,610 | ) | (1,061,392 | ) | (754,449 | ) | (283,165 | ) | ||||||||||||||||||
Discontinued operations | 366,411 | 69,227 | 157,118 | 997,898 | 25,913 | |||||||||||||||||||||||
Other Financial Data: | ||||||||||||||||||||||||||||
Capital expenditures | $ | 363,309 | $ | 336,739 | $ | 302,655 | $ | 93,693 | $ | 64,986 | ||||||||||||||||||
Ratio of earnings to fixed charges | 2.38 | x | 2.27 | x | 2.24 | x | 2.76 | x | 3.56 | x | 1.72 | x | 1.78 | x |
(1) | Effective January 1, 2007, we adopted Financial Accounting Standards Board Interpretation No. 48,Accounting for Uncertainty in Income Taxes(“FIN 48”). In accordance with the provisions of FIN 48, the effects of adoption were accounted for as a cumulative-effect adjustment recorded to the balance of retained earnings on the date of adoption. The adoption of FIN 48 resulted in a decrease of $0.2 million to the January 1, 2007 balance of “Retained deficit”, an increase of $101.7 million in “Other long-term liabilities” for unrecognized tax benefits and a decrease of $123.0 million in “Deferred income taxes”. | |
(2) | Effective January 1, 2006, we adopted Statement of Financial Accounting Standards No. 123 (revised 2004),Share- Based Payment (“Statement123(R)”). In accordance with the provisions of Statement 123(R), we elected to adopt the standard using the modified prospective method. | |
(3) | Includes the results of operations of our live entertainment and sports representation businesses, which we spun-off on December 21, 2005, our television business sold on March 14, 2008 and certain of our non-core radio stations. | |
(4) | We recorded a non-cash charge of $4.9 billion, net of deferred taxes of $3.0 billion, as a cumulative effect of a change in accounting principle during the fourth quarter of 2004 as a result of the adoption of EITF Topic D-108, Useof the Residual Method to Value Acquired Assets other than Goodwill (“TopicD-108”). | |
(5) | Excludes the property, plant and equipment—net of our live entertainment and sports representation businesses, which we spun-off on December 21, 2005. |
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FINANCIAL CONDITION AND RESULTS OF OPERATIONS
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Total radio stations announced as being marketed for sale on November 16, 2006 | 448 | |||
Total radio stations no longer being marketed for sale | (173 | ) | ||
Adjusted number of radio stations being marketed for sale (non-core radio stations) | 275 | |||
Non-core radio stations sold through March 31, 2008 | (223 | ) | ||
Remaining non-core radio stations at March 31, 2008 classified as discontinued operations | 52 | |||
Non-core radio stations under definitive asset purchase agreements | (32 | ) | ||
Non-core radio stations being marketed for sale | 20 | |||
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Three | ||||||||||||
Months | ||||||||||||
Year Ended | Ended | |||||||||||
December 31 | March 31, | |||||||||||
2007 | 2008 | 2007 | ||||||||||
(In millions) | ||||||||||||
Americas Outdoor Advertising | ||||||||||||
Direct Operating Expenses | $ | 5.7 | $ | 1.1 | $ | 0.8 | ||||||
SG&A | 2.2 | 0.4 | 0.3 | |||||||||
International Outdoor Advertising | ||||||||||||
Direct Operating Expenses | $ | 1.2 | $ | 0.3 | $ | 0.2 | ||||||
SG&A | 0.5 | 0.1 | 0.1 | |||||||||
Radio Broadcasting | ||||||||||||
Direct Operating Expenses | $ | 10.0 | $ | 2.2 | $ | 2.0 | ||||||
SG&A | 12.2 | 2.6 | 2.5 | |||||||||
Other | ||||||||||||
Direct Operating Expenses | $ | — | $ | — | $ | — | ||||||
SG&A | — | — | — | |||||||||
Corporate | $ | 12.2 | $ | 2.9 | $ | 2.4 |
76
Three Months Ended | % | |||||||||||
March 31, | Change | |||||||||||
2008 | 2007 | |||||||||||
(In thousands) | ||||||||||||
Revenue | $ | 1,564,207 | $ | 1,505,077 | 4 | % | ||||||
Operating expenses: | ||||||||||||
Direct operating expenses (excludes depreciation and amortization) | 705,947 | 627,879 | 12 | % | ||||||||
Selling, general and administrative expenses (excludes depreciation and amortization) | 426,381 | 416,319 | 2 | % | ||||||||
Depreciation and amortization | 152,278 | 139,685 | 9 | % | ||||||||
Corporate expenses (excludes depreciation and | 46,303 | 48,150 | (4 | %) | ||||||||
Merger expenses | 389 | 1,686 | ||||||||||
Gain on disposition of assets—net | 2,097 | 6,947 | ||||||||||
Operating income | 235,006 | 278,305 | (16 | %) | ||||||||
Interest expense | 100,003 | 118,077 | ||||||||||
Gain on marketable securities | 6,526 | 395 | ||||||||||
Equity in earnings of nonconsolidated affiliates | 83,045 | 5,264 | ||||||||||
Other income (expense) — net | 11,787 | (12 | ) | |||||||||
Income before income taxes, minority interest expense and discontinued operations | 236,361 | 165,875 | ||||||||||
Income tax expense: | ||||||||||||
Current | (23,833 | ) | (32,359 | ) | ||||||||
Deferred | (42,748 | ) | (38,107 | ) | ||||||||
Income tax expense | (66,581 | ) | (70,466 | ) | ||||||||
Minority interest expense, net of tax | 8,389 | 276 | ||||||||||
Income before discontinued operations | 161,391 | 95,133 | ||||||||||
Income from discontinued operations, net | 638,262 | 7,089 | ||||||||||
Net income | $ | 799,653 | $ | 102,222 | ||||||||
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Three Months Ended | ||||||||||||
March 31, | % | |||||||||||
2008 | 2007 | Change | ||||||||||
(In thousands) | ||||||||||||
Revenue | $ | 333,362 | $ | 317,023 | 5 | % | ||||||
Direct operating expenses | 156,245 | 134,914 | 16 | % | ||||||||
Selling, general and administrative expenses | 58,375 | 54,243 | 8 | % | ||||||||
Depreciation and amortization | 50,099 | 46,561 | 8 | % | ||||||||
Operating income | $ | 68,643 | $ | 81,305 | (16 | %) | ||||||
79
Our International Outdoor Advertising operating results were as follows: |
Three Months Ended | ||||||||||||
March 31, | % | |||||||||||
2008 | 2007 | Change | ||||||||||
(In thousands) | ||||||||||||
Revenue | $ | 442,217 | $ | 373,833 | 18 | % | ||||||
Direct operating expenses | 314,589 | 259,291 | 21 | % | ||||||||
Selling, general and administrative expenses | 86,235 | 73,290 | 18 | % | ||||||||
Depreciation and amortization | 54,991 | 49,109 | 12 | % | ||||||||
Operating income | $ | (13,598 | ) | $ | (7,857 | ) | NA | |||||
80
Three Months Ended | ||||||||||||
March 31, | % | |||||||||||
2008 | 2007 | Change | ||||||||||
(In thousands) | ||||||||||||
Revenue | $ | 769,611 | $ | 799,201 | (4 | %) | ||||||
Direct operating expenses | 231,496 | 234,518 | (1 | %) | ||||||||
Selling, general and administrative expenses | 269,282 | 276,693 | (3 | %) | ||||||||
Depreciation and amortization | 31,487 | 29,901 | 5 | % | ||||||||
Operating income | $ | 237,346 | $ | 258,089 | (8 | %) | ||||||
Three Months Ended | ||||||||
March 31, | ||||||||
2008 | 2007 | |||||||
(In thousands) | ||||||||
Americas Outdoor Advertising | $ | 68,643 | $ | 81,305 | ||||
International Outdoor Advertising | (13,598 | ) | (7,857 | ) | ||||
Radio Broadcasting | 237,346 | 258,089 | ||||||
Other | (8,644 | ) | (6,195 | ) | ||||
Gain on disposition of assets—net | 2,097 | 6,947 | ||||||
Corporate and merger expenses | (50,838 | ) | (53,984 | ) | ||||
Consolidated operating income | $ | 235,006 | $ | 278,305 | ||||
81
Year Ended | ||||||||||||
December 31, | % | |||||||||||
2007 | 2006 | Change | ||||||||||
(In thousands) | ||||||||||||
Revenue | $ | 6,921,202 | $ | 6,567,790 | 5 | % | ||||||
Operating expenses: | ||||||||||||
Direct operating expenses (excludes depreciation and amortization) | 2,733,004 | 2,532,444 | 8 | % | ||||||||
Selling, general and administrative expenses (excludes depreciation and amortization) | 1,761,939 | 1,708,957 | 3 | % | ||||||||
Depreciation and amortization | 566,627 | 600,294 | (6 | )% | ||||||||
Corporate expenses (excludes depreciation and amortization) | 181,504 | 196,319 | (8 | )% | ||||||||
Merger expenses | 6,762 | 7,633 | ||||||||||
Gain on disposition of assets—net | 14,113 | 71,571 | ||||||||||
Operating income | 1,685,479 | 1,593,714 | 6 | % | ||||||||
Interest expense | 451,870 | 484,063 | ||||||||||
Gain (loss) on marketable securities | 6,742 | 2,306 | ||||||||||
Equity in earnings of nonconsolidated affiliates | 35,176 | 37,845 | ||||||||||
Other income (expense) — net | 5,326 | (8,593 | ) | |||||||||
Income before income taxes, minority interest expense and discontinued operations | 1,280,853 | 1,141,209 | ||||||||||
Income tax expense: | ||||||||||||
Current | 252,910 | 278,663 | ||||||||||
Deferred | 188,238 | 191,780 | ||||||||||
Income tax expense | 441,148 | 470,443 | ||||||||||
Minority interest expense, net of tax | 47,031 | 31,927 | ||||||||||
Income before discontinued operations | 792,674 | 638,839 | ||||||||||
Income from discontinued operations, net | 145,833 | 52,678 | ||||||||||
Net income | $ | 938,507 | $ | 691,517 | ||||||||
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84
Year Ended December 31, | % | |||||||||||
2007 | 2006 | Change | ||||||||||
(In thousands) | ||||||||||||
Revenue | $ | 1,485,058 | $ | 1,341,356 | 11 | % | ||||||
Direct operating expenses | 590,563 | 534,365 | 11 | % | ||||||||
Selling, general and administrative expenses | 226,448 | 207,326 | 9 | % | ||||||||
Depreciation and amortization | 189,853 | 178,970 | 6 | % | ||||||||
Operating income | $ | 478,194 | $ | 420,695 | 14 | % | ||||||
85
Year Ended December 31, | % | |||||||||||
2007 | 2006 | Change | ||||||||||
(In thousands) | ||||||||||||
Revenue | $ | 1,796,778 | $ | 1,556,365 | 15 | % | ||||||
Direct operating expenses | 1,144,282 | 980,477 | 17 | % | ||||||||
Selling, general and administrative expenses | 311,546 | 279,668 | 11 | % | ||||||||
Depreciation and amortization | 209,630 | 228,760 | (8 | )% | ||||||||
Operating income | $ | 131,320 | $ | 67,460 | 95 | % | ||||||
Year Ended December 31, | % | |||||||||||
2007 | 2006 | Change | ||||||||||
(In thousands) | ||||||||||||
Revenue | $ | 3,558,534 | $ | 3,567,413 | 0 | % | ||||||
Direct operating expenses | 982,966 | 994,686 | (1 | )% | ||||||||
Selling, general and administrative expenses | 1,190,083 | 1,185,770 | 0 | % | ||||||||
Depreciation and amortization | 107,466 | 125,631 | (14 | )% | ||||||||
Operating income | $ | 1,278,019 | $ | 1,261,326 | 1 | % | ||||||
86
Year Ended December 31, | ||||||||
2007 | 2006 | |||||||
(In thousands) | ||||||||
Americas Outdoor Advertising | $ | 478,194 | $ | 420,695 | ||||
International Outdoor Advertising | 131,320 | 67,460 | ||||||
Radio Broadcasting | 1,278,019 | 1,261,326 | ||||||
Other | (11,659 | ) | (4,225 | ) | ||||
Gain on disposition of assets—net | 14,113 | 71,571 | ||||||
Merger expenses | (6,762 | ) | (7,633 | ) | ||||
Corporate | (197,746 | ) | (215,480 | ) | ||||
Consolidated operating income | $ | 1,685,479 | $ | 1,593,714 | ||||
87
Year Ended December 31, | % | |||||||||||
2006 | 2005 | Change | ||||||||||
(In thousands) | ||||||||||||
Revenue | $ | 6,567,790 | $ | 6,126,553 | 7 | % | ||||||
Operating expenses: | ||||||||||||
Direct operating expenses (excludes depreciation and amortization) | 2,532,444 | 2,351,614 | 8 | % | ||||||||
Selling, general and administrative expenses (excludes depreciation and amortization) | 1,708,957 | 1,651,195 | 3 | % | ||||||||
Depreciation and amortization | 600,294 | 593,477 | 1 | % | ||||||||
Corporate expenses (excludes depreciation and amortization) | 196,319 | 167,088 | 17 | % | ||||||||
Merger expenses | 7,633 | — | ||||||||||
Gain on disposition of assets—net | 71,571 | 49,656 | 44 | % | ||||||||
Operating income | 1,593,714 | 1,412,835 | 13 | % | ||||||||
Interest expense | 484,063 | 443,442 | ||||||||||
Gain (loss) on marketable securities | 2,306 | (702 | ) | |||||||||
Equity in earnings of nonconsolidated affiliates | 37,845 | 38,338 | ||||||||||
Other income (expense) — net | (8,593 | ) | 11,016 | |||||||||
Income before income taxes, minority interest expense and discontinued operations | 1,141,209 | 1,018,045 | ||||||||||
Income tax expense: | ||||||||||||
Current | 278,663 | 33,765 | ||||||||||
Deferred | 191,780 | 369,282 | ||||||||||
Income tax benefit (expense) | 470,443 | 403,047 | ||||||||||
Minority interest expense, net of tax | 31,927 | 17,847 | ||||||||||
Income before discontinued operations | 638,839 | 597,151 | ||||||||||
Income from discontinued operations, net | 52,678 | 338,511 | ||||||||||
Net income | $ | 691,517 | $ | 935,662 | ||||||||
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Year Ended December 31, | % | |||||||||||
2006 | 2005 | Change | ||||||||||
(In thousands) | ||||||||||||
Revenue | $ | 1,341,356 | $ | 1,216,382 | 10 | % | ||||||
Direct operating expenses | 534,365 | 489,826 | 9 | % | ||||||||
Selling, general and administrative expenses | 207,326 | 186,749 | 11 | % | ||||||||
Depreciation and amortization | 178,970 | 180,559 | (1 | )% | ||||||||
Operating income | $ | 420,695 | $ | 359,248 | 17 | % | ||||||
Year Ended December 31, | % | |||||||||||
2006 | 2005 | Change | ||||||||||
(In thousands) | ||||||||||||
Revenue | $ | 1,556,365 | $ | 1,449,696 | 7 | % | ||||||
Direct operating expenses | 980,477 | 915,086 | 7 | % | ||||||||
Selling, general and administrative expenses | 279,668 | 291,594 | (4 | )% | ||||||||
Depreciation and amortization | 228,760 | 220,080 | 4 | % | ||||||||
Operating income | $ | 67,460 | $ | 22,936 | 194 | % | ||||||
91
Year Ended December 31, | % | |||||||||||
2006 | 2005 | Change | ||||||||||
(In thousands) | ||||||||||||
Revenue | $ | 3,567,413 | $ | 3,380,774 | 6 | % | ||||||
Direct operating expenses | 994,686 | 924,635 | 8 | % | ||||||||
Selling, general and administrative expense | 1,185,770 | 1,140,694 | 4 | % | ||||||||
Depreciation and amortization | 125,631 | 128,443 | (2 | )% | ||||||||
Operating income | $ | 1,261,326 | $ | 1,187,002 | 6 | % | ||||||
Year Ended December 31, | ||||||||
2006 | 2005 | |||||||
(In thousands) | ||||||||
Americas Outdoor Advertising | $ | 420,695 | $ | 359,248 | ||||
International Outdoor Advertising | 67,460 | 22,936 | ||||||
Radio Broadcasting | 1,261,326 | 1,187,002 | ||||||
Other | (4,225 | ) | (20,061 | ) | ||||
Gain on disposition of assets—net | 71,571 | 49,656 | ||||||
Merger expenses | (7,633 | ) | — | |||||
Corporate | (215,480 | ) | (185,946 | ) | ||||
Consolidated operating income | $ | 1,593,714 | $ | 1,412,835 | ||||
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Three Months Ended | ||||||||||||||||||||
Year Ended December 31, | March 31, | |||||||||||||||||||
2007 | 2006 | 2005 | 2008 | 2007 | ||||||||||||||||
(In thousands) | ||||||||||||||||||||
Cash provided by (used in): | ||||||||||||||||||||
Operating activities | $ | 1,576,428 | $ | 1,748,057 | $ | 1,303,880 | $ | 367,772 | $ | 321,463 | ||||||||||
Investing activities | (482,677 | ) | (607,011 | ) | (349,796 | ) | (154,257 | ) | (71,021 | ) | ||||||||||
Financing activities | (1,431,014 | ) | (1,178,610 | ) | (1,061,392 | ) | (754,449 | ) | (283,165 | ) | ||||||||||
Discontinued operations | 366,411 | 69,227 | 157,118 | 997,898 | 25,913 |
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Three Months Ended | Year Ended | |||||||
March 31, | December 31, | |||||||
2008 | 2007 | |||||||
(In millions) | ||||||||
Credit facilities | $ | — | $ | 174.6 | ||||
Long-term bonds (a) | 5,823.1 | 6,294.5 | ||||||
Other borrowings | 118.5 | 106.1 | ||||||
Total debt | 5,941.6 | 6,575.2 | ||||||
Less: Cash and cash equivalents | 602.1 | 145.1 | ||||||
$ | 5,339.5 | $ | 6,430.1 | |||||
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(a) | Includes $2.3 million and $3.2 million at March 31, 2008 and December 31, 2007, respectively, in unamortized purchase accounting fair value adjustment premiums related to the merger with AMFM Operating Inc. Also includes positive $40.4 million and $11.4 million related to purchase accounting fair value adjustments for interest rate swap agreements at March 31, 2008 and December 31, 2007, respectively. |
Amount | ||||||||||||
per | ||||||||||||
Common | Total | |||||||||||
Declaration Date | Share | Record Date | Payment Date | Payment | ||||||||
(In millions, except per share data) | ||||||||||||
October 25, 2006 | 0.1875 | December 31, 2006 | January 15, 2007 | $ | 92.6 | |||||||
February 21, 2007 | 0.1875 | March 31, 2007 | April 15, 2007 | 93.0 | ||||||||
April 19, 2007 | 0.1875 | June 30, 2007 | July 15, 2007 | 93.4 | ||||||||
July 27, 2007 | 0.1875 | September 30, 2007 | October 15, 2007 | 93.4 | ||||||||
December 3, 2007 | 0.1875 | December 31, 2007 | January 15, 2008 | 93.4 |
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Three Months Ended March 31, 2008 | ||||||||||||||||||||
Americas | International | |||||||||||||||||||
Radio | Outdoor | Outdoor | Corporate | |||||||||||||||||
Broadcasting | Advertising | Advertising | and Other | Total | ||||||||||||||||
(In millions) | ||||||||||||||||||||
Non-revenue producing | $ | 18.4 | $ | 9.6 | $ | 13.4 | $ | 2.0 | $ | 43.4 | ||||||||||
Revenue producing | — | 20.5 | 29.8 | — | 50.3 | |||||||||||||||
$ | 18.4 | $ | 30.1 | $ | 43.2 | $ | 2.0 | $ | 93.7 | |||||||||||
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Payment due by Period | ||||||||||||||||||||
Less than 1 | 1 to 3 | 3 to 5 | More than | |||||||||||||||||
Contractual Obligations | Total | year | Years | Years | 5 Years | |||||||||||||||
(In thousands) | ||||||||||||||||||||
Long-term debt | ||||||||||||||||||||
Credit facility | $ | 174,619 | — | $ | 174,619 | — | — | |||||||||||||
Senior notes (1) | 5,650,000 | $ | 625,000 | 1,500,000 | $ | 1,300,000 | $ | 2,225,000 | ||||||||||||
Subsidiary long-term debt (2) | 750,979 | 732,047 | 11,972 | 2,250 | 4,710 | |||||||||||||||
Interest payments on long-term debt | 1,799,610 | 365,285 | 548,355 | 311,044 | 574,926 | |||||||||||||||
Non-cancelable operating leases | 2,711,559 | 372,474 | 632,063 | 472,761 | 1,234,261 | |||||||||||||||
Non-cancelable contracts | 3,269,567 | 776,203 | 1,081,912 | 655,293 | 756,159 | |||||||||||||||
Employment/talent contracts | 436,526 | 177,552 | 188,343 | 65,417 | 5,214 | |||||||||||||||
Capital expenditures | 159,573 | 106,187 | 45,930 | 7,224 | 232 | |||||||||||||||
Other long-term obligations (3) | 272,601 | — | 13,424 | 107,865 | 151,312 | |||||||||||||||
Total (4) | $ | 15,225,034 | $ | 3,154,748 | $ | 4,196,618 | $ | 2,921,854 | $ | 4,951,814 | ||||||||||
(1) | The balance includes the portion of the principal amount of the senior notes due 2010 to be repaid by our delayed draw 1 term loan facility. | |
(2) | The balance includes the $644.9 million principal amount of the 8% senior notes due 2008 discussed above. | |
(3) | Other long-term obligations consist of $70.5 million related to asset retirement obligations recorded pursuant to Statement of Financial Accounting Standards No. 143,Accounting for Asset Retirement Obligations,which assumes the underlying assets will be removed at some period over the next 50 years. Also included is $103.0 million related to the maturity value of loans secured by forward exchange contracts that we accrete to maturity using the effective interest method and can be settled in cash or the underlying shares. These contracts had an accreted value of $86.9 million and the underlying shares had a fair value of $124.4 million recorded on our consolidated balance sheets at December 31, 2007. Also included is $75.6 million related to deferred compensation and retirement plans and $23.5 million of various other long-term obligations. | |
(4) | Excluded from the table is $144.4 million related to the fair value of cross-currency swap agreements and secured forward exchange contracts. Also excluded is $294.5 million related to various obligations with no specific contractual commitment or maturity, $237.1 million of which relates to unrecognized tax benefits recorded pursuant to FIN 48. |
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Three Months Ended | ||||||||||||||||||||||||
March 31, | Year Ended December 31, | |||||||||||||||||||||||
2008 | 2007 | 2007 | 2006 | 2005 | 2004 | 2003 | ||||||||||||||||||
1.72 | 1.78 | 2.38 | 2.27 | 2.24 | 2.76 | 3.56 |
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• | Americas Outdoor Advertising.We are the largest outdoor media company in the Americas, which includes the United States, Canada and Latin America. We own or operate approximately 209,000 displays in our Americas Outdoor Advertising segment. Our outdoor assets consist of billboards, street furniture and transit displays, airport displays, mall displays, and wallscapes and other spectaculars which we believe are in premier real estate locations in each of our markets throughout the Americas. We have operations in 49 of the top 50 markets in the United States, including all of the top 20 markets. For the last twelve months ended March 31, 2008, Americas Outdoor Advertising represented 21% of our net revenue and 27% of pro forma Adjusted EBITDA. | ||
• | International Outdoor Advertising.We are a leading outdoor media company internationally with operations in Asia, Australia and Europe. We own or operate approximately 688,000 displays in 34 countries, including key positions in attractive international growth markets. Our international outdoor assets consist of billboards, street furniture displays, transit displays and other out-of-home advertising displays. For the last twelve months ended March 31, 2008, International Outdoor Advertising represented 26% of our net revenue and 14% of pro forma Adjusted EBITDA. | ||
• | Radio Broadcasting.We are the largest radio broadcaster in the United States. As of December 31, 2007, we owned 890 domestic radio stations, with 275 stations operating in the top 50 markets. Our portfolio of stations offers a broad assortment of programming formats, including adult contemporary, country, contemporary hit radio, rock, urban and oldies, among others, to a total weekly listening base of approximately 103 million individuals. In addition, we owned 115 smaller market non-core radio stations, of which 63 were sold subsequent to December 31, 2007, and 32 of which were subject to sale under definitive asset purchase agreements at March 31, 2008. We also operate a national radio network that produces, distributes, or represents more than 70 syndicated radio programs and services for more than 5,000 radio stations. Some of our more popular syndicated programs includeRush Limbaugh, Steve Harvey, Ryan SeacrestandJeff Foxworthy.We also own various sports, news and agriculture networks as well as equity interests in various international radio broadcasting companies located in Australia, Mexico and New Zealand. For the last twelve months ended March 31, 2008, Radio Broadcasting represented 50% of our net revenue and 58% of pro forma Adjusted EBITDA. | ||
• | Other.The Other category includes our media representation business, Katz Media, and general support services and initiatives which are ancillary to our other businesses. Katz Media is 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 represents over 3,200 radio stations and 380 television stations. For the last twelve months ended March 31, 2008, the Other category represented 3% of our net revenue and 1% of pro forma Adjusted EBITDA. |
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• | Our outdoor advertising business is focused on urban markets with dense populations. Our real estate locations in these urban markets provide outstanding reach and therefore a compelling value proposition for our advertisers, enabling us to achieve more attractive economics. In the United States, we believe we hold the #1 market share in eight of the top 10 markets and are either #1 or #2 in 18 of the top 20 markets. Internationally, we believe we hold leading positions in France, Italy, Spain and the United Kingdom, as well as several attractive growth countries, including Australia and China. | ||
• | Our scale has enabled cost-effective investment in new display technologies, such as digital billboards, which we believe will continue to support future growth. This technology will enable us to transition from selling space on a display to a single advertiser to selling time on that display to multiple advertisers, creating new revenue opportunities from both new and existing clients. We have enjoyed significantly higher revenue per digital billboard than the revenue per vinyl billboard with relatively minimal capital costs. | ||
• | We own the #1 or #2 ranked radio station clusters in eight of the top 10 markets and in 18 of the top 25 markets in the United States. We have an average market share of 26% in the top 25 markets. With a total weekly listening base of approximately 103 million individuals, our portfolio of 890 stations generated twice the revenue as the next largest competitor in 2007. With over 5,000 sales people in local markets, we believe the aggregation of our local sales forces comprises the media industry’s largest local-based sales force with national scope. Our national scope has facilitated cost-effective investment in unique yield management and pricing systems that enable our local salespeople to maximize revenue. Additionally, our scale has allowed us to implement industry-changing initiatives that we believe differentiate us from the rest of the radio industry and position us to outperform other radio broadcasters. |
• | The domestic outdoor industry is regulated by the federal government as well as state and municipal governments. Statutes and regulations govern the construction, repair, maintenance, lighting, spacing, location, replacement and content of outdoor advertising structures. Due to such regulation, it has become increasingly difficult to construct new outdoor advertising structures. Further, for many of our existing billboards, a permit for replacement cannot be sought by our competitors or landlords. As a result, our existing billboards in top demographic areas, which we believe are in premier locations, have significant value. |
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• | Ownership and operation of radio broadcast stations is governed by the FCC’s licensing process, which limits the number of radio licenses available in any market. Any party seeking to acquire or transfer radio licenses must go through a detailed review process with the FCC. Over several decades, we have aggregated multiple licenses in local market clusters across the United States. A cluster of multiple radio stations in a market allows us to provide listeners with more diverse programming and advertisers with a more efficient means to reach those listeners. In addition, we are also able to operate our market clusters efficiently by eliminating duplicative operating expenses and realizing economies of scale. |
• | Compelling Value Propositions.Outdoor media and radio broadcasting offer compelling value propositions to advertisers by providing the #1 and #2 most cost-effective media advertising outlets, respectively, as measured by cost per thousand persons reached. According to the Radio Advertising Bureau, radio advertising’s return on investment is 49% higher than that of television advertising. With low CPMs, we believe outdoor media and radio broadcasting have opportunity for growth even in relatively softer advertising environments. | ||
• | Unparalleled Audience Reach.According to Arbitron, 98% of Americans travel in a car each month, with an average of 310 miles traveled per week. The captive in-car audience is protected from media fragmentation and is subject to increasing out-of-home advertiser exposures as time and distance of commutes increase. Additionally, radio programming reaches 93% of all United States consumers in a given week, with the average consumer listening for almost three hours per day. On a weekly basis, this represents nearly 233 million unique listeners. | ||
• | Valuable Out-of-home Position.Both outdoor media and radio broadcasting reach potential consumers outside of the home, a valuable position as it is closer to the purchase decision. Today, consumers spend a significant portion of their day out-of-home, while out-of-home media (outdoor and radio) garner a disproportionately smaller share of media spending than in-home media. We believe this discrepancy represents an opportunity for growth. |
Consistent, Defensible Growth Profile.Both outdoor advertising and radio in the United States have demonstrated consistent growth over the last 40 years and are resilient in economic downturns. |
• | United States outdoor advertising revenue has grown to approximately $7 billion in 2007, representing a 9% CAGR since 1970. Growth has come via traditional billboards along highways and major roadways, as well as alternative advertising including transit displays, street furniture and mall displays. The outdoor industry has experienced only two negative growth years between 1970 and 2007. Additionally, the growth rate in the two years following an economic recession has averaged 8%. Outdoor media continues to be one of the fastest growing forms of advertising. According to the eMarketer industry forecast, total outdoor advertising is expected to grow at an 8% CAGR from 2007 to 2011, driven by an increased share of media spending due to the high value proposition of outdoor relative to other media and the rollout of digital billboards. |
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• | United States radio advertising revenue has grown to approximately $19 billion in 2007, representing an 8% CAGR since 1970. Radio broadcasting has been one of the most resilient forms of advertising, weathering several competitive and technological advancements over time, including the introduction of television, audio cassettes, CDs and other portable audio devices, and remaining an important component of local advertiser marketing budgets. The radio industry has experienced only three negative growth years from 1970 through 2007. Historically, the growth rate in the two years following an economic recession has averaged 9%. While revenue in the radio industry (according to the Radio Advertising Bureau) declined during 2007 and the first three months of 2008, the eMarketer industry forecast expects radio broadcast advertising to grow at a stable 3% CAGR from 2007 to 2011. We expect growth to be driven by increased advertising, due to a captive audience spending more time in their cars and the adoption of new technologies such as HD radio. |
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• | Alternative Devices.The FM radio feature is increasingly integrated into MP3 players and cell phones. This should expand FM listenership by “putting a radio in every pocket” with free music and local content and represents the first meaningful increase in the radio installed base in more than 25 years. | ||
• | HD Radio.HD radio enables crystal clear reception, interactive features, data services and new applications. For example, the interactive capabilities of HD radio will potentially permit us to participate in commercial download services. Further, HD radio allows for many more stations, providing greater variety of content which we believe will enable advertisers to target consumers more effectively. On December 6, 2005, we joined a consortium of radio operators in announcing plans to create the HD Digital Radio Alliance to lobby auto makers, radio manufacturers and retailers for the rollout of digital radios. We plan to continue to develop compelling HD content and applications and to support the alliance to foster industry conversion. We currently operate 804 HD stations, comprised of 454 HD and 350 HD2 signals. | ||
• | Internet.Clear Channel websites had over 10.5 million unique visitors in April 2008, making the collection of these websites one of the top five trafficked music websites. Streaming audio via the Internet provides increased listener reach and new listener applications as well as new advertising capabilities. | ||
• | Mobile.We have pioneered mobile applications which allow subscribers to use their cell phones to interact directly with the station, including finding titles or artists, requesting songs and downloading station wallpapers. |
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Year Ended December 31, | ||||||||||||
2007 | 2006 | 2005 | ||||||||||
Billboards | ||||||||||||
Bulletins (1) | 52 | % | 52 | % | 54 | % | ||||||
Posters | 16 | 18 | 19 | |||||||||
Street furniture displays | 4 | 4 | 4 | |||||||||
Transit displays | 16 | 14 | 11 | |||||||||
Other displays (2) | 12 | 12 | 12 | |||||||||
Total | 100 | % | 100 | % | 100 | % | ||||||
(1) | Includes digital displays. | |
(2) | Includes spectaculars, mall displays and wallscapes. |
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• | Bulletins.Bulletins vary in size, with the most common size being 14 feet high by 48 feet wide. Almost all of the advertising copy displayed on bulletins is computer printed on vinyl and transported to the bulletin where it is secured to the display surface. Because of their greater size and impact, we typically receive our highest rates for bulletins. Bulletins generally are located along major expressways, primary commuting routes and main intersections that are highly visible and heavily trafficked. Our clients may contract for individual bulletins or a network of bulletins, meaning the clients’ advertisements are rotated among bulletins to increase the reach of the campaign. Our client contracts for bulletins generally have terms ranging from one month to one year. | ||
• | Posters.Posters are available in two sizes, 30-sheet and eight-sheet displays. The 30-sheet posters are approximately 11 feet high by 23 feet wide, and the eight-sheet posters are approximately five feet high by 11 feet wide. Advertising copy for posters is printed using silk-screen or lithographic processes to transfer the designs onto paper that is then transported and secured to the poster surfaces. Posters generally are located in commercial areas on primary and secondary routes near point-of-purchase locations, facilitating advertising campaigns with greater demographic targeting than those displayed on bulletins. Our poster rates typically are less than our bulletin rates, and our client contracts for posters generally have terms ranging from four weeks to one year. Two types of posters are premiere panels and squares. Premiere displays are innovative hybrids between bulletins and posters that we developed to provide our clients with an alternative for their targeted marketing campaigns. The premiere displays utilize one or more poster panels, but with vinyl advertising stretched over the panels similar to bulletins. Our intent is to combine the creative impact of bulletins with the additional reach and frequency of posters. |
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DMA® | Street | |||||||||||||||||||||||||||
Region | Billboards | Furniture | Transit | Other | Total | |||||||||||||||||||||||
Rank | Markets | Bulletins | Posters | Displays | Displays | Displays (1) | Displays | |||||||||||||||||||||
United States | ||||||||||||||||||||||||||||
1 | New York, NY | • | • | • | • | • | 16,936 | |||||||||||||||||||||
2 | Los Angeles, CA | • | • | • | • | • | 11,583 | |||||||||||||||||||||
3 | Chicago, IL | • | • | • | • | • | 15,293 | |||||||||||||||||||||
4 | Philadelphia, PA | • | • | • | • | • | 6,618 | |||||||||||||||||||||
5 | Dallas-Ft. Worth, TX | • | • | • | • | • | 9,981 | |||||||||||||||||||||
6 | San Francisco-Oakland-San Jose, CA | • | • | • | • | • | 8,971 | |||||||||||||||||||||
7 | Boston, MA (Manchester, NH) | • | • | • | • | • | 7,219 | |||||||||||||||||||||
8 | Atlanta, GA | • | • | • | • | 3,091 | ||||||||||||||||||||||
9 | Washington, DC (Hagerstown, MD) | • | • | • | • | • | 3,403 | |||||||||||||||||||||
10 | Houston, TX | • | • | • | (2) | • | 4,542 | |||||||||||||||||||||
11 | Detroit, Ml | • | • | • | 606 | |||||||||||||||||||||||
12 | Phoenix, AZ | • | • | • | • | 2,155 | ||||||||||||||||||||||
13 | Tampa-St. Petersburg (Sarasota), FL | • | • | • | • | • | 2,428 | |||||||||||||||||||||
14 | Seattle-Tacoma, WA | • | • | • | • | 11,092 | ||||||||||||||||||||||
15 | Minneapolis-St. Paul, MN | • | • | • | • | 2,552 | ||||||||||||||||||||||
16 | Miami-Ft. Lauderdale, FL | • | • | • | • | • | 4,003 | |||||||||||||||||||||
17 | Cleveland-Akron (Canton), OH | • | • | • | • | 3,484 | ||||||||||||||||||||||
18 | Denver, CO | • | • | 861 | ||||||||||||||||||||||||
19 | Orlando-Daytona Beach- Melbourne, FL | • | • | • | • | 4,166 | ||||||||||||||||||||||
20 | Sacramento-Stockton-Modesto, CA | • | • | • | • | • | 1,509 | |||||||||||||||||||||
21 | St. Louis, MO | • | • | 279 | ||||||||||||||||||||||||
22 | Pittsburgh, PA | • | • | (2) | • | 674 | ||||||||||||||||||||||
23 | Portland, OR | • | • | • | • | 1,417 | ||||||||||||||||||||||
24 | Baltimore, MD | • | • | • | • | • | 2,533 | |||||||||||||||||||||
25 | Charlotte, NC | • | 12 | |||||||||||||||||||||||||
26 | Indianapolis, IN | • | • | • | • | 1,871 | ||||||||||||||||||||||
27 | San Diecio, CA | • | • | • | • | 871 | ||||||||||||||||||||||
28 | RalGigh-Durham (Fayetteville), NC | • | 449 | |||||||||||||||||||||||||
29 | Hartford-NGW Haven, CT | • | (2) | • | 374 | |||||||||||||||||||||||
30 | Nashville, TN | • | • | • | 652 | |||||||||||||||||||||||
31 | Kansas City, KS/MO | • | (2) | 324 | ||||||||||||||||||||||||
32 | Columbus, OH | • | • | • | • | 1,525 | ||||||||||||||||||||||
33 | Cincinnati, OH | • | • | 12 | ||||||||||||||||||||||||
34 | Milwaukee, Wl | • | • | • | • | • | 5,838 | |||||||||||||||||||||
35 | Salt Lake City, UT | • | • | 66 | ||||||||||||||||||||||||
36 | Greenville-Spartanburg,SC-Asheville, NC-Anderson, SC | • | • | 88 | ||||||||||||||||||||||||
37 | San Antonio, TX | • | • | • | (2) | • | 3,799 | |||||||||||||||||||||
38 | West Palm Beach-Ft. Pierce, FL | • | • | • | • | • | 782 | |||||||||||||||||||||
39 | Grand Rapids-Kalamazoo-Battle Creek, Ml | • | 100 | |||||||||||||||||||||||||
40 | Birmingham, AL | 0 | ||||||||||||||||||||||||||
41 | Harrisburg-Lancaster-Lebanon-York, PA | • | • | 171 |
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DMA® | Street | |||||||||||||||||||||||||||
Region | Billboards | Furniture | Transit | Other | Total | |||||||||||||||||||||||
Rank | Markets | Bulletins | Posters | Displays | Displays | Displays (1) | Displays | |||||||||||||||||||||
42 | Norfolk-Portsmouth- Newport News, VA | • | • | • | • | 470 | ||||||||||||||||||||||
43 | Las Vegas, NV | • | • | • | • | • | 13,362 | |||||||||||||||||||||
44 | Albuquerque-Santa Fe, NM | • | • | • | 1,420 | |||||||||||||||||||||||
45 | Oklahoma City, OK | • | 3 | |||||||||||||||||||||||||
46 | Greensboro-High Point-Winston Salem, NC | • | 999 | |||||||||||||||||||||||||
47 | Memphis, TN | • | • | • | • | • | 2,305 | |||||||||||||||||||||
48 | Louisville, KY | • | • | 134 | ||||||||||||||||||||||||
49 | Jacksonville, FL | • | • | • | • | 991 | ||||||||||||||||||||||
50 | Buffalo, NY | • | 483 | |||||||||||||||||||||||||
51-100 | Various United States Cities | • | • | • | (2) | • | 12,925 | |||||||||||||||||||||
101-150 | Various United States Cities | • | • | • | • | • | (2) | 5,491 | ||||||||||||||||||||
151+ | Various United States Cities | • | • | • | • | 2,458 | ||||||||||||||||||||||
Non-United States Markets | ||||||||||||||||||||||||||||
n/a | Aruba | • | 213 | |||||||||||||||||||||||||
n/a | Australia | • | 810 | |||||||||||||||||||||||||
n/a | Barbados | • | 61 | |||||||||||||||||||||||||
n/a | Bahamas | • | 194 | |||||||||||||||||||||||||
n/a | Belize | • | 155 | |||||||||||||||||||||||||
n/a | Brazil | • | • | • | 7,089 | |||||||||||||||||||||||
n/a | Canada | • | • | • | 4,314 | |||||||||||||||||||||||
n/a | Chile | • | • | 1,166 | ||||||||||||||||||||||||
n/a | Costa Rica | • | 210 | |||||||||||||||||||||||||
n/a | Dominican Republic | • | 285 | |||||||||||||||||||||||||
n/a | Grenada | • | 155 | |||||||||||||||||||||||||
n/a | Guam | • | 144 | |||||||||||||||||||||||||
n/a | Jamaica | • | 213 | |||||||||||||||||||||||||
n/a | Mexico | • | • | 5,016 | ||||||||||||||||||||||||
n/a | Netherlands Antilles | • | 1,019 | |||||||||||||||||||||||||
n/a | New Zealand | • | 1,392 | |||||||||||||||||||||||||
n/a | Peru | • | • | • | • | • | 2,860 | |||||||||||||||||||||
n/a | Saint Kitts and Nevis | • | 144 | |||||||||||||||||||||||||
n/a | Saint Lucia | • | 100 | |||||||||||||||||||||||||
n/a | Virgin Islands | • | 260 | |||||||||||||||||||||||||
Total Americas Outdoor Advertising Displays | 209,171 | |||||||||||||||||||||||||||
(1) | Includes wallscapes, spectaculars, mall and digital displays. Includes other small displays not counted as separate displays in this offering memorandum since their contribution to our revenue is not material. | |
(2) | We have access to additional displays through arrangements with local advertising and other companies. |
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Year Ended | ||||||||||||
December 31, | ||||||||||||
2007 | 2006 | 2005 | ||||||||||
Billboards (1) | 39 | % | 41 | % | 44 | % | ||||||
Street furniture displays | 37 | 37 | 34 | |||||||||
Transit displays (2) | 8 | 9 | 9 | |||||||||
Other displays (3) | 16 | 13 | 13 | |||||||||
Total | 100 | % | 100 | % | 100 | % | ||||||
(1) | Includes revenue from spectaculars and neon displays. | |
(2) | Includes small displays. | |
(3) | Includes advertising revenue from mall displays, other small displays and non-advertising revenue from sales of street furniture equipment, cleaning and maintenance services and production revenue. |
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Street | ||||||||||||||||||||
Furniture | Transit | Other | Total | |||||||||||||||||
International Markets | Billboards (1) | Displays | Displays (2) | Displays (3) | Displays | |||||||||||||||
France | • | • | • | • | 162,386 | |||||||||||||||
United Kingdom | • | • | • | • | 69,418 | |||||||||||||||
Italy | • | • | 57,533 | |||||||||||||||||
China | • | • | • | • | 62,573 | |||||||||||||||
Australia/New Zealand | • | • | 16,958 | |||||||||||||||||
Sweden | • | • | • | • | 111,479 | |||||||||||||||
Switzerland | • | • | • | 17,663 | ||||||||||||||||
Belgium | • | • | • | • | 23,486 | |||||||||||||||
Norway | • | • | • | 18,357 | ||||||||||||||||
Ireland | • | • | 7,581 | |||||||||||||||||
Denmark | • | • | • | • | 33,986 | |||||||||||||||
Turkey | • | • | • | • | 10,439 | |||||||||||||||
India | • | • | • | 695 | ||||||||||||||||
Finland | • | • | • | • | 23,031 | |||||||||||||||
Poland | • | • | • | 13,204 | ||||||||||||||||
Holland | • | • | 3,326 | |||||||||||||||||
Baltic States/Russia | • | • | 16,135 | |||||||||||||||||
Greece | • | • | 1,219 | |||||||||||||||||
Singapore | • | 3,847 | ||||||||||||||||||
Japan | • | 53 | ||||||||||||||||||
Germany | • | 53 | ||||||||||||||||||
Hungary | • | 30 | ||||||||||||||||||
Austria | • | 13 | ||||||||||||||||||
United Arab Emirates | • | 1 | ||||||||||||||||||
Czech Republic | • | 7 | ||||||||||||||||||
Ukraine | • | 2 | ||||||||||||||||||
Indonesia | • | 1 | ||||||||||||||||||
Portugal | • | 15 | ||||||||||||||||||
Slovenia | • | 1 | ||||||||||||||||||
Total International Outdoor Advertising Displays | 687,966 | |||||||||||||||||||
(1) | Includes spectaculars and neon displays. | |
(2) | Includes small displays. | |
(3) | Includes mall displays and other small displays counted as separate displays in this offering memorandum since they form a substantial part of our network and International Outdoor Advertising revenue. |
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In addition to the displays listed above, as of December 31, 2007, we had equity investments in various out-of-home advertising companies that operate in the following markets: |
Street | ||||||||||||||||||||
Equity | Furniture | Transit | ||||||||||||||||||
Market | Company | Investment | Billboards (1) | Displays | Displays | |||||||||||||||
Outdoor Advertising Companies | ||||||||||||||||||||
South Africa (2) | Clear Channel Independent | 50.0 | % | • | • | • | ||||||||||||||
Italy | Alessi | 34.3 | % | • | • | • | ||||||||||||||
Italy | AD Moving SpA | 17.5 | % | • | ||||||||||||||||
Hong Kong | Buspak | 50.0 | % | • | ||||||||||||||||
Spain | Clear Channel CEMUSA | 50.0 | % | • | ||||||||||||||||
Thailand | Master & More | 32.5 | % | • | • | |||||||||||||||
Belgium | MTB | 49.0 | % | • | ||||||||||||||||
Belgium | Streep | 25.0 | % | • | ||||||||||||||||
Denmark | City Reklame | 45.0 | % | • | ||||||||||||||||
Other Media Companies | ||||||||||||||||||||
Norway | CAPA | 50.0 | % |
(1) | Includes spectaculars and neon displays. | |
(2) | On January 17, 2008, we entered into an agreement to sell our investment in Clear Channel Independent. We closed the transaction on March 28, 2008. |
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Number | ||||||||
Market | of | |||||||
Market | Rank* | Stations | ||||||
New York, NY | 1 | 5 | ||||||
Los Angeles, CA | 2 | 8 | ||||||
Chicago, IL | 3 | 7 | ||||||
San Francisco, CA | 4 | 7 | ||||||
Dallas-Ft. Worth, TX | 5 | 6 | ||||||
Houston-Galveston, TX | 6 | 8 | ||||||
Philadelphia, PA | 7 | 6 | ||||||
Atlanta, GA | 8 | 6 | ||||||
Washington, DC | 9 | 8 | ||||||
Boston, MA | 10 | 4 | ||||||
Detroit, Ml | 11 | 7 | ||||||
Miami-Ft. Lauderdale-Hollywood, FL | 12 | 7 | ||||||
Seattle-Tacoma, WA | 14 | 6 | ||||||
Phoenix, AZ | 15 | 8 | ||||||
Minneapolis-St. Paul, MN | 16 | 7 | ||||||
San Diego, CA | 17 | 8 | ||||||
Nassau-Suffolk (Long Island), NY | 18 | 2 | ||||||
Tampa-St. Petersburg-Clearwater, FL | 19 | 8 | ||||||
St. Louis, MO | 20 | 6 | ||||||
Baltimore, MD | 21 | 3 | ||||||
Denver-Boulder, CO | 22 | 8 | ||||||
Portland, OR | 23 | 5 | ||||||
Pittsburgh, PA | 24 | 6 | ||||||
Charlotte-Gastonia-Rock Hill, NC-SC | 25 | 5 | ||||||
Riverside-San Bernardino, CA | 26 | 6 | ||||||
Sacramento, CA | 27 | 4 | ||||||
Cleveland, OH | 28 | 6 | ||||||
Cincinnati, OH | 29 | 8 | ||||||
San Antonio, TX | 30 | 5 | ||||||
Salt Lake City-Ogden-Provo, UT | 31 | 6 | ||||||
Las Vegas, NV | 33 | 4 | ||||||
Orlando, FL | 34 | 7 | ||||||
San Jose, CA | 35 | 3 | ||||||
Milwaukee-Racine, WI | 36 | 6 | ||||||
Columbus, OH | 37 | 7 | ||||||
Providence-Warwick-Pawtucket, RI | 39 | 4 | ||||||
Indianapolis, IN | 40 | 3 | ||||||
Norfolk-Virginia Beach-Newport News, VA | 41 | 4 | ||||||
Austin, TX | 42 | 6 | ||||||
Raleigh-Durham, NC | 43 | 4 | ||||||
Nashville, TN | 44 | 5 | ||||||
Greensboro-Winston Salem-High Point, NC | 45 | 5 | ||||||
West Palm Beach-Boca Raton, FL | 46 | 6 | ||||||
Jacksonville, FL | 47 | 7 | ||||||
Oklahoma City, OK | 48 | 6 | ||||||
Memphis, TN | 49 | 7 | ||||||
Hartford-New Britain-Middletown, CT | 50 | 5 | ||||||
Louisville, KY | 53 | 8 | ||||||
Rochester, NY | 54 | 7 | ||||||
New Orleans, LA | 55 | 7 | ||||||
Richmond, VA | 56 | 6 | ||||||
Birmingham, AL | 57 | 5 | ||||||
McAllen-Brownsville-Harlingen, TX | 58 | 5 | ||||||
Greenville-Spartanburg, SC | 59 | 6 | ||||||
Dayton, OH | 60 | 8 | ||||||
Tucson, AZ | 61 | 7 | ||||||
Ft. Myers-Naples-Marco Island, FL | 62 | 6 | ||||||
Albany-Schenectady-Troy, NY | 63 | 7 | ||||||
Honolulu, HI | 64 | 6 | ||||||
Tulsa, OK | 65 | 6 | ||||||
Fresno, CA | 66 | 8 | ||||||
Grand Rapids, MI | 67 | 7 | ||||||
Allentown-Bethlehem, PA | 68 | 4 | ||||||
Albuquerque, NM | 69 | 7 | ||||||
Omaha-Council Bluffs, NE-IA | 72 | 5 | ||||||
Sarasota-Bradenton, FL | 73 | 6 | ||||||
Akron, OH | 74 | 5 | ||||||
Wilmington, DE | 75 | 2 | ||||||
El Paso, TX | 76 | 5 | ||||||
Bakersfield, CA | 77 | 6 | ||||||
Harrisburg-Lebanon-Carlisle, PA | 78 | 6 | ||||||
Stockton, CA | 79 | 6 | ||||||
Baton Rouge, LA | 80 | 6 | ||||||
Monterey-Salinas-Santa Cruz, CA | 81 | 5 | ||||||
Syracuse, NY | 82 | 7 | ||||||
Little Rock, AR | 84 | 5 | ||||||
Springfield, MA | 86 | 5 | ||||||
Charleston, SC | 87 | 6 | ||||||
Toledo, OH | 88 | 5 | ||||||
Columbia, SC | 90 | 6 | ||||||
Des Moines, IA | 91 | 5 | ||||||
Spokane, WA | 92 | 6 | ||||||
Mobile, AL | 93 | 4 | ||||||
Colorado Springs, CO | 95 | 3 | ||||||
Ft. Pierce-Stuart-Vero Beach, FL | 96 | 6 | ||||||
Melbourne-Titusville-Cocoa, FL | 97 | 4 | ||||||
Wichita, KS | 98 | 4 |
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Number | ||||||||
Market | of | |||||||
Market | Rank* | Stations | ||||||
Madison, WI | 99 | 6 | ||||||
Various United States Cities | 101-150 | 104 | ||||||
Various United States Cities | 151-200 | 87 | ||||||
Various United States Cities | 201-250 | 52 | ||||||
Various United States Cities | 251+ | 69 | ||||||
Various United States Cities | unranked | 69 | ||||||
Non-core radio (1) | 115 | |||||||
Total (2)(3) | 1,005 | |||||||
* | Per Arbitron Rankings as of January 2, 2008. | |
(1) | Included in the 115 non-core radio stations are 63 stations which were sold subsequent to December 31, 2007, and 32 stations which were subject to sale under definitive asset purchase agreements at March 31, 2008. | |
(2) | In connection with the merger, we have agreed with regulatory authorities to divest of a total of 62 stations (47 core radio stations and 15 non-core radio stations). | |
(3) | Excluded from the 1,005 radio stations owned or operated by us are five radio stations programmed pursuant to a LMA or shared services agreement (where the FCC licenses are not owned by us) and one Mexican radio station that we provide programming to and for which we sell airtime for under exclusive sales agency arrangements. Also excluded are radio stations in Australia, Mexico and New Zealand. We own a 50%, 40% and 50% equity interest in companies that have radio broadcasting operations in these markets, respectively. On May 28, 2008, we entered into a definitive agreement to sell our 40% equity interest in the Mexican radio broadcasting company, Grupo Acir, for total consideration of $94 million. The sale is subject to Mexican regulatory approvals and is expected to close in June 2008. At closing, the buyer will purchase half of our equity interest and is obligated to purchase our remaining equity interest in Grupo Acir within five years from the closing date. |
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• | issue, renew, revoke and modify broadcasting licenses; | ||
• | assign frequency bands; |
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• | 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 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 violations which taken together constitute a pattern of abuse. |
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The following table sets forth information regarding the individuals who are expected to serve as CCM Parent’s directors and executive officers following consummation of the Transactions. |
Name | Age | Position | ||||
Mark P. Mays | 44 | Director and Chief Executive Officer | ||||
Randall T. Mays | 43 | Director and President | ||||
David Abrams | 47 | Director | ||||
Steve Barnes | 48 | Director | ||||
Richard J. Bressler | 50 | Director | ||||
Charles A. Brizius | 39 | Director | ||||
John Connaughton | 42 | Director | ||||
Ed Han | 33 | Director | ||||
Jonathon S. Jacobson | 47 | Director | ||||
Ian K. Loring | 42 | Director | ||||
Scott M. Sperling | 50 | Director | ||||
Kent R. Weldon | 41 | Director | ||||
L. Lowry Mays | 72 | Chairman Emeritus | ||||
Paul J. Meyer | 65 | Global President and Chief Operating Officer — Clear Channel Outdoor, Inc. | ||||
John E. Hogan | 51 | President/Chief Executive Officer — Clear Channel Radio |
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After the Transactions, the outstanding capital stock of CCM Parent will be owned as follows: |
• | up to 30% of CCM Parent’s outstanding capital stock and voting power (assuming that there is no issuance of additional equity consideration and excluding any shares of Class A common stock of CCM Parent held by our management as a result of certain rollover investments described below) will be held in the form of shares of Class A common stock issued to former Clear Channel shareholders who elect to receive shares of Class A common stock in connection with the merger; and | ||
• | the remaining shares of outstanding capital stock of CCM Parent (approximately 70% assuming that there is no issuance of additional equity consideration and that our shareholders elect to receive the maximum permitted amount of stock consideration in the merger, subject to reduction on account of equity securities of CCM Parent held by our management described below) will be held in the form of Class B common stock and Class C common stock issued to affiliates of the Sponsors as part of the equity financing. |
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Other than with respect to 580,361 shares of our common stock included within Mr. L. Lowry Mays’ rollover commitment described above, shares of CCM Parent Class A common stock issued pursuant to the foregoing arrangements will not reduce the shares of CCM Parent Class A common stock available for issuance as stock consideration. |
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• | a $1,425 million term loan A facility, subject to adjustment as described below, with a maturity of six years; | ||
• | a $10,700 million term loan B facility with a maturity of seven years and six months; | ||
• | a $706 million term loan C—asset sale facility, subject to reduction as described below, with a maturity of seven years and six months; | ||
• | $1,250 million delayed draw term loan facilities with maturities of seven years and six months, up to $750 million of which may be drawn on or after the closing date to purchase or repay our outstanding senior notes due 2010, and the remainder of which will be available after the closing date to purchase or repay our outstanding 4.25% senior notes due 2009; and | ||
• | a $2,000 million revolving credit facility with a maturity of six years, including a letter of credit sub-facility and a swingline loan sub-facility. |
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• | with respect to loans under the term loan A facility and the revolving credit facility, (i) 2.40%, in the case of base rate loans and (ii) 3.40%, in the case of Eurodollar loans; and | ||
• | with respect to loans under the term loan B facility, term loan C—asset sale facility and delayed draw term loan facilities, (i) 2.65%, in the case of base rate loans and (ii) 3.65%, in the case of Eurodollar loans. |
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• | 50% (which percentage will be reduced to 25% and to 0% based upon our leverage ratio) of our annual excess cash flow (as calculated in accordance with the senior secured credit facilities), less any voluntary prepayments of term loans and revolving credit loans (to the extent accompanied by a permanent reduction of the commitment) and subject to customary credits; | ||
• | 100% of the net cash proceeds of sales or other dispositions (including casualty and condemnation events) of specified assets being marketed for sale, subject to certain exceptions; | ||
• | 100% (which percentage will be reduced to 75% and 50% based upon our leverage ratio) of the net cash proceeds of sales or other dispositions by us or our wholly-owned restricted subsidiaries (including casualty and condemnation events) of assets other than specified assets being marketed for sale, subject to reinvestment rights and certain other exceptions; and | ||
• | 100% of the net cash proceeds of any incurrence of certain debt, other than debt permitted under our senior secured credit facilities. |
The foregoing prepayments with the net cash proceeds of certain incurrences of debt and annual excess cash flow will be applied (i) first to the term loans other than the term loan C—asset sale facility loans (on a pro rata basis) and (ii) second to the term loan C—asset sale facility loans, in each case to the remaining installments thereof in direct order of maturity. The foregoing prepayments with the net cash proceeds of the sale of assets (including casualty and condemnation events) will be applied (i) first to the term loan C—asset sale facility loans and (ii) second to the other term loans (on a pro rata basis), in each case to the remaining installments thereof in direct order of maturity. |
• | the term loan A facility will amortize in quarterly installments commencing on the first interest payment date after the second anniversary of the closing date in annual amounts equal to 5% of the original funded principal amount of such facility in years three and four, 10% thereafter, with the balance being payable on the final maturity date of such term loans; and | ||
• | the term loan B facility, term loan C—asset sale facility and delayed draw term loan facilities will amortize in quarterly installments on the first interest payment date after |
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the third anniversary of the closing date, in annual amounts equal to 2.5% of the original funded principal amount of such facilities in years four and five and 1% thereafter, with the balance being payable on the final maturity date of such term loans. |
• | a first-priority lien on the capital stock of the Company; | ||
• | 100% of the capital stock of any future material wholly-owned domestic license subsidiary that is not a “Restricted Subsidiary” under the indenture governing our Existing Notes; | ||
• | certain specified assets of the Company and the guarantors that do not constitute “principal property” (as defined in the indenture governing our Existing Notes), including certain specified assets being marketed for sale; | ||
• | certain specified assets of the Company and the guarantors that constitute “principal property” (as defined in the indenture governing our Existing Notes) securing obligations under the senior secured credit facilities up to the maximum amount permitted to be secured by such assets without requiring equal and ratable security under the indenture governing our Existing Notes; and | ||
• | a second-priority lien on the accounts receivable and related assets securing our receivables based credit facility. |
• | the receipt of executed counterparts of the definitive credit agreement by Clear Channel Capital I, LLC, the Company and each subsidiary co-borrower; | ||
• | the consummation of the merger in accordance with the merger agreement; | ||
• | the absence of amendments or waivers to certain provisions of the merger agreement in a manner materially adverse to the lenders without their consent; and | ||
• | the receipt of equity contributions (including the value of all equity of CCM Parent issued to our existing shareholders and management in connection with the Transactions) in an amount determined in accordance with the senior secured credit facilities, but in any event not less than $3 billion. |
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• | incur additional indebtedness; | ||
• | create liens on assets; | ||
• | engage in mergers, consolidations, liquidations and dissolutions; | ||
• | sell assets; | ||
• | pay dividends and distributions or repurchase our capital stock; | ||
• | make investments, loans, or advances; | ||
• | prepay certain junior indebtedness; | ||
• | engage in certain transactions with affiliates; | ||
• | amend material agreements governing certain junior indebtedness; and | ||
• | change our lines of business. |
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The Notes: | |||
• | will be unsecured senior obligations of the Issuer; | ||
• | will bepari passu inright of payment with all existing and future unsubordinated Indebtedness (including the Senior Credit Facilities and the Existing Senior Notes); | ||
• | will be effectively subordinated to all existing and future Secured Indebtedness of the Issuer to the extent of the value of the assets securing such Indebtedness (including the Senior Credit Facilities); | ||
• | will be senior in right of payment to all Subordinated Indebtedness of the Issuer; | ||
• | will be initially guaranteed by Holdings and each of the Issuer’s Restricted Subsidiaries that guarantee the General Credit Facilities (i) on an unsecured senior subordinated basis with respect to such Guarantor’s guarantee under Designated Senior Indebtedness and (ii) on a senior unsecured basis with respect to all of the applicable Guarantor’s existing and future unsecured senior debt other than such Guarantor’s guarantee under Designated Senior Indebtedness; and |
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• | will be subject to registration with the SEC pursuant to the Registration Rights Agreement. |
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• | entirely in cash(“Cash Interest”); | ||
• | entirely by increasing the principal amount of the outstanding Senior Toggle Notes or by issuing PIK Notes(“PIK Interest”);or | ||
• | on 50% of the outstanding principal amount of the Senior Toggle Notes in cash and on 50% of the principal amount by increasing the principal amount of the outstanding Senior Toggle Notes or by issuing PIK Notes(“Partial PIK Interest”). |
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Year | Percentage | |||
2012 | 105.375 | % | ||
2013 | 102.688 | % | ||
2014 and thereafter | 100.000 | % |
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Year | Percentage | |||
2012 | 105.500 | % | ||
2013 | 102.750 | % | ||
2014 and thereafter | 100.000 | % |
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The Issuer will not, and will not permit any of its Restricted Subsidiaries to, consummate an Asset Sale, unless: |
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Form 8-K, or any successor or comparable form; and
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Each purchaser of notes will be deemed to have represented and agreed as follows: |
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• | to legal entities which are authorized or regulated to operate in the financial markets or, if not so authorized or regulated, whose corporate purpose is solely to invest in securities; | ||
• | to any legal entity which has two or more of (i) an average of at least 250 employees during the last financial year; (ii) a total balance sheet of more than €43,000,000 and (iii) an annual net turnover of more than €50,000,000, as shown in its last annual or consolidated accounts; or | ||
• | in any other circumstances which do not require the publication by us of a prospectus pursuant to Article 3 of the Prospectus Directive. For the purposes of this provision, the expression an “offer of notes to the public” in relation to any notes in any Relevant Member State means the communication in any form and by any means of sufficient information on the terms of the offer and the notes to be offered so as to enable an investor to decide to purchase or subscribe the notes, as the same may be varied in that Member State by any measure implementing the Prospectus Directive in that Member State and the expression “Prospectus Directive” means Directive 2003/71/EC and includes any relevant implementing measure in each Relevant Member State. |
• | it has only communicated or caused to be communicated, and will only communicate or cause to be communicated, an invitation or inducement to engage in investment |
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activity (within the meaning of Section 21 of the Financial Services and Markets Act 2000 (“FSMA”)) received by it in connection with the issue or sale of the notes in circumstances in which Section 21(1) of the FSMA does not apply to us; and | |||
• | it has complied and will comply with all applicable provisions of the FSMA with respect to anything done by it in relation to the notes in, from, or otherwise involving the United Kingdom. |
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• | a dealer in securities or currencies; | ||
• | a financial institution; | ||
• | a regulated investment company; | ||
• | a real estate investment trust; | ||
• | a tax-exempt organization; | ||
• | an insurance company; | ||
• | a person holding the notes as part of a hedging, integrated, conversion, or constructive sale transaction or a straddle; | ||
• | a trader in securities that has elected the mark-to-market method of accounting for your securities; | ||
• | a person liable for alternative minimum tax; | ||
• | a pass-through entity or a person who is an investor in a pass-through entity that holds the notes; | ||
• | a former United States citizen or long-term resident subject to taxation as an expatriate under Section 877 of the Code; or | ||
• | a United States Holder (as defined below) whose “functional currency” is not the United States dollar. |
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• | an individual citizen or resident of the United States, including an alien individual who is a lawful permanent resident of the United States or who meets the “substantial presence” test under Section 7701(b) of the Code; |
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• | a corporation (or any other entity treated as a corporation for United States federal income tax purposes) created or organized in or under the laws of the United States, any state thereof or the District of Columbia; | ||
• | an estate the income of which is subject to United States federal income taxation regardless of its source; or | ||
• | a trust if it (1) is subject to the primary supervision of a court within the United States and one or more United States persons (within the meaning of the Code) have the authority to control all substantial decisions of the trust or (2) has a valid election in effect under applicable United States Treasury regulations to be treated as a United States person. |
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• | You generally will recognize gain or loss equal to the difference between the sum of the cash and the fair market value of any property you receive in exchange and your adjusted tax basis in the senior toggle note (or the PIK senior toggle note). | ||
• | In general, your adjusted tax basis in a senior toggle note is your cost of the senior toggle note, increased by OID previously included in income (as adjusted by any acquisition premium) and the amount of market discount, if any, previously included in income in respect of the senior toggle note and decreased by any cash payments previously received by such holder on the senior toggle note. | ||
• | Subject to the market discount rules discussed above, your gain or loss generally will be a capital gain or loss and will be a long-term capital gain or loss if at the time of the disposition you have held the senior toggle note for more than one year. Otherwise, your gain or loss generally will be a short-term gain or loss. For some non-corporate taxpayers (including individuals) long-term capital gains are eligible for reduced rates of taxation. The deductibility of capital losses is subject to limitations. |
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• | interest (including OID) paid on the notes is not effectively connected with your conduct of a trade or business in the United States; | ||
• | you do not actually or constructively own 10% or more of the total combined voting power of all classes of our stock entitled to vote; | ||
• | you are not a controlled foreign corporation for United States federal income tax purposes that is related to us (actually or constructively) through stock ownership; | ||
• | you are not a bank receiving interest (including OID) on a note on an extension of credit made pursuant to a loan arrangement entered into in the ordinary course of your trade or business; and | ||
• | either (1) you provide your name and address on an IRS Form W-8BEN (or other applicable form), and certify, under penalties of perjury, that you are not a United States person (within the meaning of the Code), or (2) you hold your notes through certain financial intermediaries and you or the financial intermediaries satisfy the certification requirements of applicable United States Treasury regulations. Special rules apply to Non-United States Holders that are pass-through entities rather than corporations or individuals. |
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• | the gain is effectively connected with your conduct of a trade or business in the United States (and, if required by an applicable income tax treaty, is attributable to a United States permanent establishment) in which case you will be subject to United States federal income tax as described in the preceding paragraph; or | ||
• | you are an individual who is present in the United States for 183 days or more in the taxable year of such disposition, and certain other conditions are met (in which case, except as otherwise provided by an applicable income tax treaty, the gain generally will be subject to a flat 30% United States federal income tax). |
261
• | fails to furnish its taxpayer identification number (“TIN”), which, for an individual, is ordinarily his or her social security number; | ||
• | furnishes an incorrect TIN; | ||
• | is notified by the IRS that it has failed to properly report payments of interest (including OID) or dividends; or | ||
• | fails to certify, under penalties of perjury, that it has furnished a correct TIN and that the IRS has not notified the United States Holder that it is subject to backup withholding. |
262
• | whether the acquisition and holding of the notes (and exchange notes) is in accordance with the documents and instruments governing such ERISA Plan; and | ||
• | whether the acquisition and holding of the notes (and exchange notes) is solely in the interest of ERISA Plan participants and beneficiaries and otherwise consistent with the fiduciary’s responsibilities and in compliance with the applicable requirements of ERISA or the Code, including, in particular, any diversification, prudence and liquidity requirements. |
263
• | Prohibited Transaction Class Exemption (“PTCE”) 90-1, regarding investments by insurance company pooled separate accounts; | ||
• | PTCE 91-38, regarding investments by bank collective investment funds; | ||
• | PTCE 84-14, regarding transactions effected by qualified professional asset managers; | ||
• | PTCE 96-23, regarding transactions effected by in-house asset managers; and | ||
• | PTCE 95-60, regarding investments by insurance company general accounts. |
264
265
266
Page | ||||
Audited Consolidated Financial Statements of Clear Channel Communications, Inc. | ||||
Report of Independent Registered Public Accounting Firm | F-2 | |||
Consolidated Balance Sheets as of December 31, 2007 and 2006 | F-3 | |||
Consolidated Statements of Operations for the years ended December 31, 2007, 2006 and 2005 | F-5 | |||
Consolidated Statements of Changes in Shareholders’ Equity as of December 31, 2007, 2006, 2005 and 2004 | F-6 | |||
Consolidated Statements of Cash Flows for the years ended December 31, 2007, 2006 and 2005 | F-7 | |||
Notes to Consolidated Financial Statements | F-9 | |||
Unaudited Consolidated Financial Statements of Clear Channel Communications, Inc. | ||||
Consolidated Balance Sheets as of March 31, 2008 and December 31, 2007 | F-49 | |||
Consolidated Statements of Operations for the three months ended March 31, 2008 and 2007 | F-51 | |||
Condensed Consolidated Statements of Cash Flows for the three months ended March 31, 2008 and 2007 | F-52 | |||
Notes to Consolidated Financial Statements | F-53 |
F-1
February 14, 2008,
except for Notes B, Q and R, as to which the date is
May 22, 2008
F-2
December 31, | December 31, | |||||||
2007 | 2006 | |||||||
(In thousands) | ||||||||
ASSETS | ||||||||
CURRENT ASSETS | ||||||||
Cash and cash equivalents | $ | 145,148 | $ | 116,000 | ||||
Accounts receivable, net of allowance of $59,169 in 2007 and $56,068 in 2006 | 1,693,218 | 1,619,858 | ||||||
Prepaid expenses | 116,902 | 122,000 | ||||||
Other current assets | 243,248 | 244,103 | ||||||
Income taxes receivable | — | 7,392 | ||||||
Current assets from discontinued operations | 96,067 | 96,377 | ||||||
Total Current Assets | 2,294,583 | 2,205,730 | ||||||
PROPERTY, PLANT AND EQUIPMENT | ||||||||
Land, buildings and improvements | 840,832 | 789,639 | ||||||
Structures | 3,901,941 | 3,601,653 | ||||||
Towers, transmitters and studio equipment | 600,315 | 626,682 | ||||||
Furniture and other equipment | 527,714 | 530,560 | ||||||
Construction in progress | 119,260 | 90,767 | ||||||
5,990,062 | 5,639,301 | |||||||
Less accumulated depreciation | 2,939,698 | 2,631,973 | ||||||
3,050,364 | 3,007,328 | |||||||
Property, plant and equipment from discontinued operations, net | 164,724 | 228,882 | ||||||
INTANGIBLE ASSETS | ||||||||
Definite-lived intangibles, net | 485,870 | 522,493 | ||||||
Indefinite-lived intangibles—licenses | 4,201,617 | 4,211,685 | ||||||
Indefinite-lived intangibles—permits | 251,988 | 260,950 | ||||||
Goodwill | 7,210,116 | 7,234,235 | ||||||
Intangible assets from discontinued operations, net | 219,722 | 376,964 | ||||||
OTHER ASSETS | ||||||||
Notes receivable | 12,388 | 6,318 | ||||||
Investments in, and advances to, nonconsolidated affiliates | 346,387 | 311,258 | ||||||
Other assets | 303,791 | 249,524 | ||||||
Other investments | 237,598 | 244,980 | ||||||
Other assets from discontinued operations | 26,380 | 26,108 | ||||||
Total Assets | $ | 18,805,528 | $ | 18,886,455 | ||||
F-3
December 31, | December 31, | |||||||
2007 | 2006 | |||||||
(In thousands, except share data) | ||||||||
CURRENT LIABILITIES | ||||||||
Accounts payable | $ | 165,533 | $ | 151,577 | ||||
Accrued expenses | 912,665 | 884,479 | ||||||
Accrued interest | 98,601 | 112,049 | ||||||
Accrued income taxes | 79,973 | — | ||||||
Current portion of long-term debt | 1,360,199 | 336,375 | ||||||
Deferred income | 158,893 | 134,287 | ||||||
Current liabilities from discontinued operations | 37,413 | 45,079 | ||||||
Total Current Liabilities | 2,813,277 | 1,663,846 | ||||||
Long-term debt | 5,214,988 | 7,326,700 | ||||||
Other long-term obligations | 127,384 | 68,509 | ||||||
Deferred income taxes | 793,850 | 729,804 | ||||||
Other long-term liabilities | 567,848 | 673,954 | ||||||
Long-term liabilities from discontinued operations | 54,330 | 31,910 | ||||||
Minority interest | 436,360 | 349,391 | ||||||
Commitments and contingent liabilities (Note 1) | ||||||||
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 shares, issued 498,075,417 and 493,982,851 shares in 2007 and 2006, respectively | 49,808 | 49,399 | ||||||
Additional paid-in capital | 26,858,079 | 26,745,687 | ||||||
Retained deficit | (18,489,143 | ) | (19,054,365 | ) | ||||
Accumulated other comprehensive income | 383,698 | 304,975 | ||||||
Cost of shares (157,744 in 2007 and 114,449 in 2006) held in treasury | (4,951 | ) | (3,355 | ) | ||||
Total Shareholders’ Equity | 8,797,491 | 8,042,341 | ||||||
Total Liabilities and Shareholders’ Equity | $ | 18,805,528 | $ | 18,886,455 | ||||
F-4
Year Ended December 31, | ||||||||||||
2007 | 2006 | 2005 | ||||||||||
(In thousands, except per share data) | ||||||||||||
Revenue | $ | 6,921,202 | $ | 6,567,790 | $ | 6,126,553 | ||||||
Operating expenses: | ||||||||||||
Direct operating expenses (includes share-based payments of $16,975, $16,142 and $212 in 2007, 2006 and 2005, respectively and excludes depreciation and amortization) | 2,733,004 | 2,532,444 | 2,351,614 | |||||||||
Selling, general and administrative expenses (includes share-based payments of $14,884, $16,762 and $0 in 2007, 2006 and 2005, respectively and excludes depreciation and amortization) | 1,761,939 | 1,708,957 | 1,651,195 | |||||||||
Depreciation and amortization | 566,627 | 600,294 | 593,477 | |||||||||
Corporate expenses (includes share-based payments of $12,192, $9,126 and $5,869 in 2007, 2006 and 2005, respectively and excludes depreciation and amortization) | 181,504 | 196,319 | 167,088 | |||||||||
Merger expenses | 6,762 | 7,633 | — | |||||||||
Gain on disposition of assets—net | 14,113 | 71,571 | 49,656 | |||||||||
Operating income | 1,685,479 | 1,593,714 | 1,412,835 | |||||||||
Interest expense | 451,870 | 484,063 | 443,442 | |||||||||
Gain (loss) on marketable securities | 6,742 | 2,306 | (702 | ) | ||||||||
Equity in earnings of nonconsolidated affiliates | 35,176 | 37,845 | 38,338 | |||||||||
Other income (expense)—net | 5,326 | (8,593 | ) | 11,016 | ||||||||
Income before income taxes, minority interest and discontinued operations | 1,280,853 | 1,141,209 | 1,018,045 | |||||||||
Income tax expense: | ||||||||||||
Current | 252,910 | 278,663 | 33,765 | |||||||||
Deferred | 188,238 | 191,780 | 369,282 | |||||||||
Income tax expense | 441,148 | 470,443 | 403,047 | |||||||||
Minority interest expense, net of tax | 47,031 | 31,927 | 17,847 | |||||||||
Income before discontinued operations | 792,674 | 638,839 | 597,151 | |||||||||
Income from discontinued operations, net | 145,833 | 52,678 | 338,511 | |||||||||
Net income | $ | 938,507 | $ | 691,517 | $ | 935,662 | ||||||
Other comprehensive income, net of tax: | ||||||||||||
Foreign currency translation adjustments | 88,823 | 92,810 | 28,643 | |||||||||
Unrealized gain (loss) on securities and derivatives: | ||||||||||||
Unrealized holding gain (loss) on marketable securities | (8,412 | ) | (60,516 | ) | (48,492 | ) | ||||||
Unrealized holding gain (loss) on cash flow derivatives | (1,688 | ) | 76,132 | 56,634 | ||||||||
Comprehensive income | $ | 1,017,230 | $ | 799,943 | $ | 972,447 | ||||||
Net income per common share: | ||||||||||||
Income before discontinued operations—Basic | $ | 1.60 | $ | 1.27 | $ | 1.09 | ||||||
Discontinued operations—Basic | .30 | .11 | .62 | |||||||||
Net income—Basic | $ | 1.90 | $ | 1.38 | $ | 1.71 | ||||||
Weighted average common shares—basic | 494,347 | 500,786 | 545,848 | |||||||||
Income before discontinued operations—Diluted | $ | 1.60 | $ | 1.27 | $ | 1.09 | ||||||
Discontinued operations—Diluted | .29 | .11 | .62 | |||||||||
Net income —Diluted | $ | 1.89 | $ | 1.38 | $ | 1.71 | ||||||
Weighted average common shares—diluted | 495,784 | 501,639 | 547,151 | |||||||||
Dividends declared per share | $ | .75 | $ | .75 | $ | .69 |
F-5
Accumulated | |||||||||||||||||||||||||||||||||
Common | Other | ||||||||||||||||||||||||||||||||
Shares | Common | Additional | Retained | Comprehensive | Treasury | ||||||||||||||||||||||||||||
Issued | Stock | Paid-in Capital | (Deficit) | Income (Loss) | Other | Stock | Total | ||||||||||||||||||||||||||
(In thousands, except share data) | |||||||||||||||||||||||||||||||||
Balances at December 31, 2004 | 567,572,736 | $ | 56,757 | $ | 29,183,595 | $ | (19,933,777 | ) | $ | 194,590 | $ | (213 | ) | $ | (12,874 | ) | $ | 9,488,078 | |||||||||||||||
Net income | 935,662 | 935,662 | |||||||||||||||||||||||||||||||
Dividends declared | (373,296 | ) | (373,296 | ) | |||||||||||||||||||||||||||||
Spin-off of Live Nation | (687,206 | ) | (29,447 | ) | (716,653 | ) | |||||||||||||||||||||||||||
Gain on sale of subsidiary common stock | 479,699 | 479,699 | |||||||||||||||||||||||||||||||
Purchase of common shares | (1,070,204 | ) | (1,070,204 | ) | |||||||||||||||||||||||||||||
Treasury shares retired and cancelled | (32,800,471 | ) | (3,280 | ) | (1,067,175 | ) | 1,070,455 | — | |||||||||||||||||||||||||
Exercise of stock options and other | 3,515,498 | 352 | 31,012 | 8,558 | 39,922 | ||||||||||||||||||||||||||||
Amortization and adjustment of deferred compensation | 5,800 | 213 | 456 | 6,469 | |||||||||||||||||||||||||||||
Currency translation adjustment | 28,643 | 28,643 | |||||||||||||||||||||||||||||||
Unrealized gains (losses) on cash flow derivatives | 56,634 | 56,634 | |||||||||||||||||||||||||||||||
Unrealized gains (losses) on investments | (48,492 | ) | (48,492 | ) | |||||||||||||||||||||||||||||
Balances at December 31, 2005 | 538,287,763 | 53,829 | 27,945,725 | (19,371,411 | ) | 201,928 | — | (3,609 | ) | 8,826,462 | |||||||||||||||||||||||
Net income | 691,517 | 691,517 | |||||||||||||||||||||||||||||||
Dividends declared | (374,471 | ) | (374,471 | ) | |||||||||||||||||||||||||||||
Subsidiary common stock issued for a business acquisition | 67,873 | 67,873 | |||||||||||||||||||||||||||||||
Purchase of common shares | (1,371,462 | ) | (1,371,462 | ) | |||||||||||||||||||||||||||||
Treasury shares retired and cancelled | (46,729,900 | ) | (4,673 | ) | (1,367,032 | ) | 1,371,705 | — | |||||||||||||||||||||||||
Exercise of stock options and other | 2,424,988 | 243 | 60,139 | 11 | 60,393 | ||||||||||||||||||||||||||||
Amortization and adjustment of deferred compensation | 38,982 | 38,982 | |||||||||||||||||||||||||||||||
Currency translation adjustment | 87,431 | 87,431 | |||||||||||||||||||||||||||||||
Unrealized gains (losses) on cash flow derivatives | 76,132 | 76,132 | |||||||||||||||||||||||||||||||
Unrealized gains (losses) on investments | (60,516 | ) | ( 60,516 | ) | |||||||||||||||||||||||||||||
Balances at December 31, 2006 | 493,982,851 | 49,399 | 26,745,687 | (19,054,365 | ) | 304,975 | — | (3,355 | ) | 8,042,341 | |||||||||||||||||||||||
Cumulative effect of FIN 48 adoption | (152 | ) | (152 | ) | |||||||||||||||||||||||||||||
Net income | 938,507 | 938,507 | |||||||||||||||||||||||||||||||
Dividends declared | (373,133 | ) | (373,133 | ) | |||||||||||||||||||||||||||||
Exercise of stock options and other | 4,092,566 | 409 | 74,827 | (1,596 | ) | 73,640 | |||||||||||||||||||||||||||
Amortization and adjustment of deferred compensation | 37,565 | 37,565 | |||||||||||||||||||||||||||||||
Currency translation adjustment | 88,823 | 88,823 | |||||||||||||||||||||||||||||||
Unrealized gains (losses) on cash flow derivatives | (1,688 | ) | (1,688 | ) | |||||||||||||||||||||||||||||
Unrealized gains (losses) on investments | (8,412 | ) | (8,412 | ) | |||||||||||||||||||||||||||||
Balances at December 31, 2007 | 498,075,417 | $ | 49,808 | $ | 26,858,079 | $ | (18,489,143 | ) | $ | 383,698 | $ | — | $ | (4,951 | ) | $ | 8,797,491 | ||||||||||||||||
F-6
Year Ended December 31, | ||||||||||||
2007 | 2006 | 2005 | ||||||||||
(In thousands) | ||||||||||||
CASH FLOWS PROVIDED BY (USED IN) OPERATING ACTIVITIES: | ||||||||||||
Net income | $ | 938,507 | $ | 691,517 | $ | 935,662 | ||||||
Less: Income from discontinued operations, net | 145,833 | 52,678 | 338,511 | |||||||||
Net income from continuing operations | 792,674 | 638,839 | 597,151 | |||||||||
Reconciling Items: | ||||||||||||
Depreciation | 461,598 | 449,624 | 439,645 | |||||||||
Amortization of intangibles | 105,029 | 150,670 | 153,832 | |||||||||
Deferred taxes | 188,238 | 191,780 | 369,282 | |||||||||
Provision for doubtful accounts | 38,615 | 34,627 | 34,260 | |||||||||
Amortization of deferred financing charges, bond premiums and accretion of note discounts, net | 7,739 | 3,462 | 2,042 | |||||||||
Share-based compensation | 44,051 | 42,030 | 6,081 | |||||||||
(Gain) loss on sale of operating and fixed assets | (14,113 | ) | (71,571 | ) | (49,656 | ) | ||||||
(Gain) loss on forward exchange contract | 3,953 | 18,161 | 18,194 | |||||||||
(Gain) loss on trading securities | (10,696 | ) | (20,467 | ) | (17,492 | ) | ||||||
Equity in earnings of nonconsolidated affiliates | (35,176 | ) | (37,845 | ) | (38,338 | ) | ||||||
Minority interest, net of tax | 47,031 | 31,927 | 17,847 | |||||||||
Increase (decrease) other, net | (91 | ) | 9,027 | (14,530 | ) | |||||||
Changes in operating assets and liabilities, net of effects of acquisitions and dispositions: | ||||||||||||
Decrease (increase) in accounts receivable | (111,152 | ) | (190,191 | ) | (22,179 | ) | ||||||
Decrease (increase) in prepaid expenses | 5,098 | (23,797 | ) | 15,013 | ||||||||
Decrease (increase) in other current assets | 694 | (2,238 | ) | 42,131 | ||||||||
Increase (decrease) in accounts payable, accrued expenses and other liabilities | 27,027 | 86,887 | (42,334 | ) | ||||||||
Federal income tax refund | — | 390,438 | — | |||||||||
Increase (decrease) in accrued interest | (13,429 | ) | 14,567 | 3,411 | ||||||||
Increase (decrease) in deferred income | 26,013 | 6,486 | (18,518 | ) | ||||||||
Increase (decrease) in accrued income taxes | 13,325 | 25,641 | (191,962 | ) | ||||||||
Net cash provided by operating activities | 1,576,428 | 1,748,057 | 1,303,880 |
F-7
Year Ended December 31, | ||||||||||||
2007 | 2006 | 2005 | ||||||||||
(In thousands) | ||||||||||||
CASH FLOWS PROVIDED BY (USED IN) INVESTING ACTIVITIES: | ||||||||||||
Decrease (increase) in notes receivable, net | (6,069 | ) | 1,163 | 755 | ||||||||
Decrease (increase) in investments in, and advances to nonconsolidated affiliates—net | 20,868 | 20,445 | 15,343 | |||||||||
Cross currency settlement of interest | (1,214 | ) | 1,607 | 734 | ||||||||
Purchase of other investments | (726 | ) | (520 | ) | (900 | ) | ||||||
Proceeds from sale of other investments | 2,409 | — | 370 | |||||||||
Purchases of property, plant and equipment | (363,309 | ) | (336,739 | ) | (302,655 | ) | ||||||
Proceeds from disposal of assets | 26,177 | 99,682 | 102,001 | |||||||||
Acquisition of operating assets | (122,110 | ) | (341,206 | ) | (150,819 | ) | ||||||
Decrease (increase) in other—net | (38,703 | ) | (51,443 | ) | (14,625 | ) | ||||||
Net cash used in investing activities | (482,677 | ) | (607,011 | ) | (349,796 | ) | ||||||
CASH FLOWS PROVIDED BY (USED IN) FINANCING ACTIVITIES: | ||||||||||||
Draws on credit facilities | 886,910 | 3,383,667 | 1,934,000 | |||||||||
Payments on credit facilities | (1,705,014 | ) | (2,700,004 | ) | (1,986,045 | ) | ||||||
Proceeds from long-term debt | 22,483 | 783,997 | — | |||||||||
Payments on long-term debt | (343,041 | ) | (866,352 | ) | (236,703 | ) | ||||||
Payment to terminate forward exchange contract | — | (83,132 | ) | — | ||||||||
Proceeds from exercise of stock options, stock purchase plan and common stock warrants | 80,017 | 57,452 | 40,239 | |||||||||
Dividends paid | (372,369 | ) | (382,776 | ) | (343,321 | ) | ||||||
Proceeds from initial public offering | — | — | 600,642 | |||||||||
Payments for purchase of common shares | — | (1,371,462 | ) | (1,070,204 | ) | |||||||
Net cash used in financing activities | (1,431,014 | ) | (1,178,610 | ) | (1,061,392 | ) | ||||||
CASH FLOWS PROVIDED BY (USED IN) DISCONTINUED OPERATIONS: | ||||||||||||
Net cash provided by operating activities | 33,832 | 99,265 | 115,267 | |||||||||
Net cash provided by (used in) investing activities | 332,579 | (30,038 | ) | (198,149 | ) | |||||||
Net cash provided by financing activities | — | — | 240,000 | |||||||||
Net cash provided by discontinued operations | 366,411 | 69,227 | 157,118 | |||||||||
Net increase in cash and cash equivalents | 29,148 | 31,663 | 49,810 | |||||||||
Cash and cash equivalents at beginning of year | 116,000 | 84,337 | 34,527 | |||||||||
Cash and cash equivalents at end of year | $ | 145,148 | $ | 116,000 | $ | 84,337 | ||||||
SUPPLEMENTAL DISCLOSURE: | ||||||||||||
Cash paid during the year for: | ||||||||||||
Interest | $ | 462,181 | $ | 461,398 | $ | 430,382 | ||||||
Income taxes | 299,415 | — | 193,723 |
F-8
F-9
Structures—5 to 40 years
F-10
Furniture and other equipment—3 to 20 years
Leasehold improvements—shorter of economic life or lease term assuming
renewal periods, if appropriate
F-11
F-12
F-13
F-14
F-15
F-16
Total radio stations announced as being marketed for sale on November 16, 2006 | 448 | |||
Total radio stations no longer being marketed for sale | (173 | ) | ||
Adjusted number of radio stations being marketed for sale (“Non-core” radio stations) | 275 | |||
Non-core radio stations sold through March 31, 2008 | (223 | ) | ||
Remaining non-core radio stations at March 31, 2008 classified as discontinued operations | 52 | |||
Non-core radio stations under definitive asset purchase agreements at March 31, 2008 | (32 | ) | ||
Non-core radio stations being marketed for sale | 20 | |||
F-17
Year Ended December 31, | ||||||||||||
2007 | 2006 | 2005 | ||||||||||
(In thousands) | ||||||||||||
Revenue | $ | 442,263 | $ | 531,621 | $ | 483,865 | ||||||
Income before income taxes | $ | 209,882 | $ | 84,969 | $ | 61,282 |
December 31, | ||||||||
2007 | 2006 | |||||||
(In thousands) | ||||||||
Assets | ||||||||
Accounts receivable, net | $ | 76,426 | $ | 75,490 | ||||
Other current assets | 19,641 | 20,887 | ||||||
Total current assets | $ | 96,067 | $ | 96,377 | ||||
Land, buildings and improvements | $ | 73,138 | $ | 116,631 | ||||
Transmitter and studio equipment | 207,230 | 259,435 | ||||||
Other property, plant and equipment | 22,781 | 30,437 | ||||||
Less accumulated depreciation | 138,425 | 177,621 | ||||||
Property, plant and equipment, net | $ | 164,724 | $ | 228,882 | ||||
Definite-lived intangibles, net | $ | 283 | $ | 323 | ||||
Licenses | 107,910 | 119,977 | ||||||
Goodwill | 111,529 | 256,664 | ||||||
Total intangible assets | $ | 219,722 | $ | 376,964 | ||||
Film rights | $ | 18,042 | $ | 20,442 | ||||
Other long-term assets | 8,338 | 5,666 | ||||||
Total non-current assets | $ | 26,380 | $ | 26,108 | ||||
Liabilities | ||||||||
Accounts payable and accrued expenses | $ | 10,565 | $ | 13,911 | ||||
Film liability | 18,027 | 21,765 | ||||||
Other current liabilities | 8,821 | 9,403 | ||||||
Total current liabilities | $ | 37,413 | $ | 45,079 | ||||
Film liability | $ | 19,902 | $ | 22,158 | ||||
Other long-term liabilities | 34,428 | 9,752 | ||||||
Total long-term liabilities | $ | 54,330 | $ | 31,910 | ||||
F-18
2005(1) | ||||
(In thousands) | ||||
Revenue (including sales to other Company segments of $0.7 million) | $ | 2,858,481 | ||
Income before income taxes | $ | (16,215 | ) |
(1) | Includes the results of operations for Live Nation through December 21, 2005. |
2007 | 2006 | |||||||||||||||
Gross | Gross | |||||||||||||||
Carrying | Accumulated | Carrying | Accumulated | |||||||||||||
Amount | Amortization | Amount | Amortization | |||||||||||||
(In thousands) | ||||||||||||||||
Transit, street furniture, and other outdoor contractual rights | $ | 867,283 | $ | 613,897 | $ | 821,364 | $ | 530,063 | ||||||||
Talent contracts | — | — | 125,270 | 115,537 | ||||||||||||
Representation contracts | 400,316 | 212,403 | 349,493 | 175,658 | ||||||||||||
Other | 84,004 | 39,433 | 121,180 | 73,556 | ||||||||||||
Total | $ | 1,351,603 | $ | 865,733 | $ | 1,417,307 | $ | 894,814 | ||||||||
F-19
(In thousands) | ||||
2008 | $ | 87,668 | ||
2009 | 80,722 | |||
2010 | 62,740 | |||
2011 | 50,237 | |||
2012 | 42,067 |
F-20
Americas | International | |||||||||||||||||||
Radio | Outdoor | Outdoor | Other | Total | ||||||||||||||||
(In thousands) | ||||||||||||||||||||
Balance as of December 31, 2005 | $ | 6,110,684 | $ | 405,964 | $ | 343,611 | — | $ | 6,860,259 | |||||||||||
Acquisitions | 42,761 | 249,527 | 42,222 | — | 334,510 | |||||||||||||||
Dispositions | (10,532 | ) | (1,913 | ) | — | — | (12,445 | ) | ||||||||||||
Foreign currency | — | 14,085 | 40,109 | — | 54,194 | |||||||||||||||
Adjustments | (2,300 | ) | 323 | (312 | ) | 6 | (2,283 | ) | ||||||||||||
Balance as of December 31, 2006 | 6,140,613 | 667,986 | 425,630 | 6 | 7,234,235 | |||||||||||||||
Acquisitions | 5,608 | 20,361 | 13,733 | 1,994 | 41,696 | |||||||||||||||
Dispositions | (3,974 | ) | — | — | — | (3,974 | ) | |||||||||||||
Foreign currency | — | 78 | 35,430 | — | 35,508 | |||||||||||||||
Adjustments | (96,720 | ) | (89 | ) | (540 | ) | — | (97,349 | ) | |||||||||||
Balance as of December 31, 2007 | $ | 6,045,527 | $ | 688,336 | $ | 474,253 | $ | 2,000 | $ | 7,210,116 | ||||||||||
F-21
2007 | 2006 | |||||||
(In thousands) | ||||||||
Property, plant and equipment | $ | 28,002 | $ | 49,641 | ||||
Accounts receivable | — | 18,636 | ||||||
Definite lived intangibles | 55,017 | 177,554 | ||||||
Indefinite-lived intangible assets | 15,023 | 32,862 | ||||||
Goodwill | 41,696 | 253,411 | ||||||
Other assets | 3,453 | 6,006 | ||||||
143,191 | 538,110 | |||||||
Other liabilities | (13,081 | ) | (64,303 | ) | ||||
Minority interests | — | (15,293 | ) | |||||
Deferred tax | — | (21,361 | ) | |||||
Subsidiary common stock issued, net of minority interests | — | (67,873 | ) | |||||
(13,081 | ) | (168,830 | ) | |||||
Less: fair value of net assets exchanged in swap | (8,000 | ) | (28,074 | ) | ||||
Cash paid for acquisitions | $ | 122,110 | $ | 341,206 | ||||
F-22
All | ||||||||||||||||
(In thousands) | ARN | ACIR | Others | Total | ||||||||||||
At December 31, 2006 | $ | 145,646 | $ | 68,260 | $ | 97,352 | $ | 311,258 | ||||||||
Acquisition (disposition) of investments, net | — | — | (46 | ) | (46 | ) | ||||||||||
Other, net | (22,259 | ) | — | 2,861 | (19,398 | ) | ||||||||||
Equity in net earnings (loss) | 25,832 | 4,942 | 4,402 | 35,176 | ||||||||||||
Foreign currency transaction adjustment | (2,082 | ) | — | — | (2,082 | ) | ||||||||||
Foreign currency translation adjustment | 18,337 | (297 | ) | 3,439 | 21,479 | |||||||||||
At December 31, 2007 | $ | 165,474 | $ | 72,905 | $ | 108,008 | $ | 346,387 | ||||||||
F-23
Fair | Unrealized | |||||||||||||||||||
Investments | Value | Gains | (Losses) | Net | Cost | |||||||||||||||
(In thousands) | ||||||||||||||||||||
2007 | ||||||||||||||||||||
Available-for sale | $ | 140,731 | $ | 104,996 | $ | — | $ | 104,996 | $ | 35,735 | ||||||||||
Trading | 85,649 | 78,391 | — | 78,391 | 7,258 | |||||||||||||||
Other cost investments | 11,218 | — | — | — | 11,218 | |||||||||||||||
Total | $ | 237,598 | $ | 183,387 | $ | — | $ | 183,387 | $ | 54,211 | ||||||||||
2006 | ||||||||||||||||||||
Available-for sale | $ | 154,297 | $ | 118,563 | $ | — | $ | 118,563 | $ | 35,734 | ||||||||||
Trading | 74,953 | 67,695 | — | 67,695 | 7,258 | |||||||||||||||
Other cost investments | 15,730 | — | — | — | 15,730 | |||||||||||||||
Total | $ | 244,980 | $ | 186,258 | $ | — | $ | 186,258 | $ | 58,722 | ||||||||||
F-24
2007 | 2006 | |||||||
(In thousands) | ||||||||
Balance at January 1 | $ | 59,280 | $ | 49,807 | ||||
Adjustment due to change in estimate of related costs | 8,958 | 7,581 | ||||||
Accretion of liability | 4,236 | 3,539 | ||||||
Liabilities settled | (1,977 | ) | (1,647 | ) | ||||
Balance at December 31 | $ | 70,497 | $ | 59,280 | ||||
December 31, | ||||||||
2007 | 2006 | |||||||
(In thousands) | ||||||||
Bank credit facilities | $ | 174,619 | $ | 966,488 | ||||
Senior Notes: | ||||||||
6.25% Senior Notes Due 2011 | 750,000 | 750,000 | ||||||
3.125% Senior Notes Due 2007 | — | 250,000 | ||||||
4.625% Senior Notes Due 2008 | 500,000 | 500,000 | ||||||
6.625% Senior Notes Due 2008 | 125,000 | 125,000 | ||||||
4.25% Senior Notes Due 2009 | 500,000 | 500,000 | ||||||
7.65% Senior Notes Due 2010 | 750,000 | 750,000 | ||||||
4.5% Senior Notes Due 2010 | 250,000 | 250,000 | ||||||
4.4% Senior Notes Due 2011 | 250,000 | 250,000 | ||||||
5.0% Senior Notes Due 2012 | 300,000 | 300,000 | ||||||
5.75% Senior Notes Due 2013 | 500,000 | 500,000 | ||||||
5.5% Senior Notes Due 2014 | 750,000 | 750,000 | ||||||
4.9% Senior Notes Due 2015 | 250,000 | 250,000 | ||||||
5.5% Senior Notes Due 2016 | 250,000 | 250,000 | ||||||
6.875% Senior Debentures Due 2018 | 175,000 | 175,000 | ||||||
7.25% Senior Debentures Due 2027 | 300,000 | 300,000 | ||||||
Subsidiary level notes | 644,860 | 671,305 | ||||||
Other long-term debt | 106,119 | 164,939 | ||||||
Purchase accounting adjustment and original issue (discount) premium | (11,849 | ) | (9,823 | ) | ||||
Fair value adjustments related to interest rate swaps | 11,438 | (29,834 | ) | |||||
6,575,187 | 7,663,075 | |||||||
Less: current portion | 1,360,199 | 336,375 | ||||||
Total long-term debt | $ | 5,214,988 | $ | 7,326,700 | ||||
F-25
F-26
F-27
(In thousands) | ||||
2008 (1) | $ | 1,357,047 | ||
2009 | 686,514 | |||
2010 (2) | 1,000,077 | |||
2011 | 1,002,250 | |||
2012 | 300,000 | |||
Thereafter | 2,229,710 | |||
Total (3) | $ | 6,575,598 | ||
(1) | The balance includes the $644.9 million principal amount of the 8% Senior Notes due 2008 which the Company received tenders and consents discussed above. | |
(2) | The balance includes the $750.0 million principal amount of the 7.65% Senior Notes due 2010 which the Company received tenders and consents discussed above. | |
(3) | The total excludes the $3.2 million in unamortized fair value purchase accounting adjustment premiums related to the merger with AMFM, the $11.4 million related to fair value adjustments for interest rate swap agreements and the $15.0 million related to original issue discounts. |
F-28
F-29
Non-Cancelable | Non-Cancelable | Capital | ||||||||||
Operating Leases | Contracts | Expenditures | ||||||||||
(In thousands) | ||||||||||||
2008 | $ | 372,474 | $ | 776,203 | $ | 106,187 | ||||||
2009 | 333,870 | 632,680 | 33,171 | |||||||||
2010 | 298,193 | 449,232 | 12,759 | |||||||||
2011 | 252,083 | 399,317 | 5,483 | |||||||||
2012 | 220,678 | 255,976 | 1,741 | |||||||||
Thereafter | 1,234,261 | 756,159 | 232 | |||||||||
Total | $ | 2,711,559 | $ | 3,269,567 | $ | 159,573 | ||||||
F-30
F-31
2007 | 2006 | 2005 | ||||||||||
(In thousands) | ||||||||||||
Current—federal | $ | 187,700 | $ | 211,444 | $ | (20,614 | ) | |||||
Current—foreign | 43,776 | 40,454 | 56,879 | |||||||||
Current—state | 21,434 | 26,765 | (2,500 | ) | ||||||||
Total current | 252,910 | 278,663 | 33,765 | |||||||||
Deferred—federal | 175,524 | 185,053 | 385,471 | |||||||||
Deferred—foreign | (1,400 | ) | (9,134 | ) | (35,040 | ) | ||||||
Deferred—state | 14,114 | 15,861 | 18,851 | |||||||||
Total deferred | 188,238 | 191,780 | 369,282 | |||||||||
Income tax expense | $ | 441,148 | $ | 470,443 | $ | 403,047 | ||||||
2007 | 2006 | |||||||
(In thousands) | ||||||||
Deferred tax liabilities: | ||||||||
Intangibles and fixed assets | $ | 921,497 | $ | 753,178 | ||||
Unrealized gain in marketable securities | 20,715 | 38,485 | ||||||
Foreign | 7,799 | 4,677 | ||||||
Equity in earnings | 44,579 | 26,277 | ||||||
Investments | 17,585 | 13,396 | ||||||
Deferred Income | 4,940 | 4,129 | ||||||
Other | 11,814 | 11,460 | ||||||
Total deferred tax liabilities | 1,028,929 | 851,602 | ||||||
Deferred tax assets: | ||||||||
Accrued expenses | 91,080 | 19,908 | ||||||
Long-term debt | 56,026 | 35,081 | ||||||
Net operating loss/Capital loss carryforwards | 521,187 | 558,371 | ||||||
Bad debt reserves | 14,051 | 14,447 | ||||||
Other | 90,511 | 66,635 | ||||||
Total gross deferred tax assets | 772,855 | 694,442 | ||||||
Valuation allowance | 516,922 | 553,398 | ||||||
Total deferred tax assets | 255,933 | 141,044 | ||||||
Net deferred tax liabilities | $ | 772,996 | $ | 710,558 | ||||
F-32
F-33
2007 | 2006 | 2005 | ||||||||||||||||||||||
Amount | Percent | Amount | Percent | Amount | Percent | |||||||||||||||||||
(In thousands) | ||||||||||||||||||||||||
Income tax expense (benefit) at statutory rates | $ | 448,298 | 35 | % | $ | 399,423 | 35 | % | $ | 356,316 | 35 | % | ||||||||||||
State income taxes, net of federal tax benefit | 35,548 | 3 | % | 42,626 | 4 | % | 16,351 | 2 | % | |||||||||||||||
Foreign taxes | (8,857 | ) | (1 | %) | 6,391 | 1 | % | 6,624 | 1 | % | ||||||||||||||
Nondeductible items | 6,228 | 0 | % | 2,607 | 0 | % | 2,337 | 0 | % | |||||||||||||||
Changes in valuation allowance and other estimates | (34,005 | ) | (3 | %) | 16,482 | 1 | % | 19,673 | 2 | % | ||||||||||||||
Other, net | (6,064 | ) | (0 | %) | 2,914 | 0 | % | 1,746 | 0 | % | ||||||||||||||
$ | 441,148 | 34 | % | $ | 470,443 | 41 | % | $ | 403,047 | 40 | % | |||||||||||||
F-34
Accrued | Gross | |||||||||||
Unrecognized | Interest and | Unrecognized | ||||||||||
Tax Benefits | Penalties | Tax Benefits | ||||||||||
(In thousands) | ||||||||||||
Balance at January 1, 2007 | $ | 326,478 | $ | 89,692 | $ | 416,170 | ||||||
Increases due to tax positions taken during 2007 | 18,873 | — | 18,873 | |||||||||
Increase due to tax positions taken in previous years | 45,404 | 25,761 | 71,165 | |||||||||
Decreases due to settlements with taxing authorities | (196,236 | ) | (72,274 | ) | (268,510 | ) | ||||||
Decreases due to lapse of statute of limitations | (459 | ) | (154 | ) | (613 | ) | ||||||
Balance at December 31, 2007 | $ | 194,060 | $ | 43,025 | $ | 237,085 | ||||||
F-35
Amount | ||||||||||||
per | ||||||||||||
Common | Total | |||||||||||
Declaration Date | Share | Record Date | Payment Date | Payment | ||||||||
(In millions, except per share data) | ||||||||||||
2007: | ||||||||||||
February 21, 2007 | 0.1875 | March 31, 2007 | April 15, 2007 | $ | 93.0 | |||||||
April 19, 2007 | 0.1875 | June 30, 2007 | July 15, 2007 | 93.4 | ||||||||
July 27, 2007 | 0.1875 | September 30, 2007 | October 15, 2007 | 93.4 | ||||||||
December 3, 2007 | 0.1875 | December 31, 2007 | January 15, 2008 | 93.4 | ||||||||
2006: | ||||||||||||
February 14, 2006 | 0.1875 | March 31, 2006 | April 15, 2006 | $ | 95.5 | |||||||
April 26, 2006 | 0.1875 | June 30, 2006 | July 15, 2006 | 94.0 | ||||||||
July 25, 2006 | 0.1875 | September 30, 2006 | October 15, 2006 | 92.4 | ||||||||
October 25, 2006 | 0.1875 | December 31, 2006 | January 15, 2007 | 92.6 |
F-36
2005 | ||||
(In thousands, | ||||
except per | ||||
share data) | ||||
Income before discontinued operations: | ||||
Reported | $ | 597,151 | ||
Add: Share-based payments included in reported net income, net of related tax effects | 6,081 | |||
Deduct: Total share-based payments determined under fair value based method for all awards, net of related tax effects | (30,426 | ) | ||
Pro Forma | $ | 572,806 | ||
Income from discontinued operations, net of tax: | ||||
Reported | $ | 338,511 | ||
Add: Share-based payments included in reported net income, net of related tax effects | 1,313 | |||
Deduct: Total share-based payments determined under fair value based method for all awards, net of related tax effects | 4,067 | |||
Pro Forma | $ | 343,891 | ||
F-37
2005 | ||||
(In thousands, | ||||
except per | ||||
share data) | ||||
Income before discontinued operations per common share: | ||||
Basic: | ||||
Reported | $ | 1.09 | ||
Pro Forma | $ | 1.05 | ||
Diluted: | ||||
Reported | $ | 1.09 | ||
Pro Forma | $ | 1.05 | ||
Discontinued operations, net per common share: | ||||
Basic: | ||||
Reported | $ | .62 | ||
Pro Forma | $ | .63 | ||
Diluted: | ||||
Reported | $ | .62 | ||
Pro Forma | $ | .63 | ||
2007 | 2006 | 2005 | ||||||||||
Expected volatility | 25% | 25% | 25% | |||||||||
Expected life in years | 5.5 - 7 | 5 - 7.5 | 5 - 7.5 | |||||||||
Risk-free interest rate | 4.74% - - 4.81% | 4.61% - - 5.10% | 3.76% - 4.44% | |||||||||
Dividend yield | 1.97% | 2.32% - 2.65% | 1.46% - 2.36% |
F-38
Weighted Average | Aggregate | |||||||||||||||
Remaining | Intrinsic | |||||||||||||||
Options | Price | Contractual Term | Value | |||||||||||||
(In thousands, except per share data) | ||||||||||||||||
Outstanding, January 1, 2007 | 36,175 | $ | 42.18 | |||||||||||||
Granted (a) | 5 | 38.11 | ||||||||||||||
Exercised (b) | (3,021 | ) | 23.10 | |||||||||||||
Forfeited | (422 | ) | 32.05 | |||||||||||||
Expired | (2,094 | ) | 51.67 | |||||||||||||
Outstanding, December 31, 2007 | 30,643 | 43.56 | 2.43 years | $ | 20,879 | |||||||||||
Exercisable | 23,826 | 46.79 | 1.63 years | 4,089 | ||||||||||||
Expect to Vest | 6,817 | 32.26 | 5.2 years | 16,790 |
(a) | The weighted average grant date fair value of options granted during the years ended December 31, 2007, 2006 and 2005 was $10.60, $7.21 and $8.01, respectively. | |
(b) | Cash received from option exercises for the year ended December 31, 2007 was $69.8 million, and the Company received an income tax benefit of $6.5 million relating to the options exercised during the year ended December 31, 2007. The total intrinsic value of options exercised during the years ended December 31, 2007, 2006 and 2005 was $41.2 million, $22.2 million and $10.8 million, respectively. |
Weighted | ||||||||
Average | ||||||||
Grant | ||||||||
Date | ||||||||
Options | Fair Value | |||||||
(In thousands, | ||||||||
except per share data) | ||||||||
Unvested, January 1, 2007 | 7,789 | $ | 10.77 | |||||
Granted | 5 | 10.60 | ||||||
Vested (a) | (556 | ) | 14.23 | |||||
Forfeited | (421 | ) | 10.63 | |||||
Unvested, December 31, 2007 | 6,817 | 10.80 | ||||||
(a) | The total fair value of shares vested during the year ended December 31, 2007 and 2006 was $7.9 million and $95.3 million, respectively. |
F-39
Awards | Price | |||||||
(In thousands, | ||||||||
except per share data) | ||||||||
Outstanding, January 1, 2007 | 2,282 | $ | 32.64 | |||||
Granted | 1,161 | 38.07 | ||||||
Vested (restriction lapsed) | (53 | ) | 34.63 | |||||
Forfeited | (89 | ) | 32.47 | |||||
Outstanding, December 31, 2007 | 3,301 | 34.52 | ||||||
2007 | 2006 | 2005 | ||||||||||
Expected volatility | 27% | 27% | 25% - 27% | |||||||||
Expected life in years | 5.0 - 7.0 | 5.0 - 7.5 | 1.3 - 7.5 | |||||||||
Risk-free interest rate | 4.76% - 4.89% | 4.58% - 5.08% | 4.42% - 4.58% | |||||||||
Dividend yield | 0% | 0% | 0% |
F-40
Weighted | ||||||||||||||||
Average | ||||||||||||||||
Remaining | Aggregate | |||||||||||||||
Contractual | Intrinsic | |||||||||||||||
Options | Price | Term | Value | |||||||||||||
(In thousands, except per share data) | ||||||||||||||||
Outstanding, January 1, 2007 | 7,707 | $ | 23.41 | |||||||||||||
Granted (a) | 978 | 29.02 | ||||||||||||||
Exercised (b) | (454 | ) | 23.85 | |||||||||||||
Forfeited | (71 | ) | 19.83 | |||||||||||||
Expired | (624 | ) | 36.25 | |||||||||||||
Outstanding, December 31, 2007 | 7,536 | 23.08 | 4.2 years | $ | 40,259 | |||||||||||
Exercisable | 2,915 | 26.82 | 1.6 years | $ | 6,900 | |||||||||||
Expect to vest | 4,622 | 20.73 | 5.9 years | $ | 33,359 |
(a) | The weighted average grant date fair value of options granted during the years ended December 31, 2007, 2006 and 2005 was $11.05, $6.76 and $6.51, respectively. | |
(b) | Cash received from option exercises for the year ended December 31, 2007 was $10.8 million. The total intrinsic value of options exercised during the years ended December 31, 2007 and 2006 was $2.0 million and $0.3 million, respectively. |
Weighted | ||||||||
Average | ||||||||
Grant | ||||||||
Date | ||||||||
Options | Fair Value | |||||||
(In thousands, | ||||||||
except per share data) | ||||||||
Unvested, January 1, 2007 | 4,151 | $ | 5.78 | |||||
Granted | 978 | 11.05 | ||||||
Vested (a) | (436 | ) | 4.55 | |||||
Forfeited | (71 | ) | 5.91 | |||||
Unvested, December 31, 2007 | 4,622 | 7.01 | ||||||
(a) | The total fair value of shares vested during the year ended December 31, 2007 and 2006 was $2.0 million and $1.6 million, respectively. |
F-41
Awards | Price | |||||||
(In thousands, | ||||||||
except per share data) | ||||||||
Outstanding, January 1, 2007 | 217 | $ | 18.84 | |||||
Granted | 293 | 29.02 | ||||||
Vested (restriction lapsed) | (10 | ) | 18.37 | |||||
Forfeited | (9 | ) | 20.48 | |||||
Outstanding, December 31, 2007 | 491 | 24.57 | ||||||
F-42
2007 | 2006 | 2005 | ||||||||||
(In thousands, | ||||||||||||
except per share data) | ||||||||||||
NUMERATOR: | ||||||||||||
Income before discontinued operations | $ | 792,674 | $ | 638,839 | $ | 597,151 | ||||||
Income from discontinued operations, net | 145,833 | 52,678 | 338,511 | |||||||||
Net income | 938,507 | 691,517 | 935,662 | |||||||||
Effect of dilutive securities: | ||||||||||||
None | — | — | — | |||||||||
Numerator for net income per common share—diluted | $ | 938,507 | $ | 691,517 | $ | 935,662 | ||||||
DENOMINATOR: | ||||||||||||
Weighted average common shares | 494,347 | 500,786 | 545,848 | |||||||||
Effect of dilutive securities: | ||||||||||||
Stock options and common stock warrants (a) | 1,437 | 853 | 1,303 | |||||||||
Denominator for net income per common share—diluted | 495,784 | 501,639 | 547,151 | |||||||||
Net income per common share: | ||||||||||||
Income before discontinued operations—Basic | $ | 1.60 | $ | 1.27 | $ | 1.09 | ||||||
Discontinued operations—Basic | .30 | .11 | .62 | |||||||||
Net income—Basic | $ | 1.90 | $ | 1.38 | $ | 1.71 | ||||||
Income before discontinued operations—Diluted | $ | 1.60 | $ | 1.27 | $ | 1.09 | ||||||
Discontinued operations —Diluted | .29 | .11 | .62 | |||||||||
Net income—Diluted | $ | 1.89 | $ | 1.38 | $ | 1.71 | ||||||
(a) | 22.2 million, 24.2 million and 27.0 million stock options were outstanding at December 31, 2007, 2006 and 2005, respectively, that were not included in the computation of diluted earnings per share because to do so would have been anti-dilutive as the respective options’ strike price was greater than the current market price of the shares. |
F-43
For the year ended | ||||||||||||
December 31, | ||||||||||||
2007 | 2006 | 2005 | ||||||||||
(In thousands) | ||||||||||||
The following details the components of “Other income (expense)—net”: | ||||||||||||
Foreign exchange gain (loss) | $ | 6,743 | $ | (8,130 | ) | $ | 7,550 | |||||
Other | (1,417 | ) | (463 | ) | 3,466 | |||||||
Total other income (expense)—net | $ | 5,326 | $ | (8,593 | ) | $ | 11,016 | |||||
The following details the income tax expense (benefit) on items of other comprehensive income (loss): | ||||||||||||
Foreign currency translation adjustments | $ | (16,233 | ) | $ | (22,012 | ) | $ | 187,216 | ||||
Unrealized gain (loss) on securities and derivatives: | ||||||||||||
Unrealized holding gain (loss) | $ | (5,155 | ) | $ | (37,091 | ) | $ | (29,721 | ) | |||
Unrealized gain (loss) on cash flow derivatives | $ | (1,035 | ) | $ | 46,662 | $ | 34,711 |
As of December 31, | ||||||||
2007 | 2006 | |||||||
(In thousands) | ||||||||
The following details the components of “Other current assets”: | ||||||||
Inventory | $ | 27,900 | $ | 23,062 | ||||
Deferred tax asset | 20,854 | 19,246 | ||||||
Deposits | 27,696 | 37,234 | ||||||
Other prepayments | 90,631 | 85,180 | ||||||
Other | 76,167 | 79,381 | ||||||
Total other current assets | $ | 243,248 | $ | 244,103 | ||||
As of December 31, | ||||||||
2007 | 2006 | |||||||
(In thousands) | ||||||||
The following details the components of “Accumulated other comprehensive income (loss)”: | ||||||||
Cumulative currency translation adjustment | $ | 314,282 | $ | 225,459 | ||||
Cumulative unrealized gain on investments | 67,693 | 76,105 | ||||||
Cumulative unrealized gain on cash flow derivatives | 1,723 | 3,411 | ||||||
Total accumulated other comprehensive income (loss) | $ | 383,698 | $ | 304,975 | ||||
F-44
Corporate, | ||||||||||||||||||||||||||||
merger | ||||||||||||||||||||||||||||
and gain | ||||||||||||||||||||||||||||
on | ||||||||||||||||||||||||||||
Americas | International | disposition | ||||||||||||||||||||||||||
Radio | Outdoor | Outdoor | of | |||||||||||||||||||||||||
Broadcasting | Advertising | Advertising | Other | assets – net | Eliminations | Consolidated | ||||||||||||||||||||||
(In thousands) | ||||||||||||||||||||||||||||
2007 | ||||||||||||||||||||||||||||
Revenue | $ | 3,558,534 | $ | 1,485,058 | $ | 1,796,778 | $ | 207,704 | $ | — | $ | (126,872 | ) | $ | 6,921,202 | |||||||||||||
Direct operating expenses | 982,966 | 590,563 | 1,144,282 | 78,513 | — | (63,320 | ) | 2,733,004 | ||||||||||||||||||||
Selling, general and administrative expenses | 1,190,083 | 226,448 | 311,546 | 97,414 | — | (63,552 | ) | 1,761,939 | ||||||||||||||||||||
Depreciation and amortization | 107,466 | 189,853 | 209,630 | 43,436 | 16,242 | — | 566,627 | |||||||||||||||||||||
Corporate expenses | — | — | — | — | 181,504 | — | 181,504 | |||||||||||||||||||||
Merger expenses | — | — | — | — | 6,762 | — | 6,762 | |||||||||||||||||||||
Gain on disposition of assets-net | — | — | — | — | 14,113 | — | 14,113 | |||||||||||||||||||||
Operating income (loss) | $ | 1,278,019 | $ | 478,194 | $ | 131,320 | $ | (11,659 | ) | $ | (190,395 | ) | $ | — | $ | 1,685,479 | ||||||||||||
Intersegment revenues | $ | 44,666 | $ | 13,733 | $ | — | $ | 68,473 | $ | — | $ | — | $ | 126,872 | ||||||||||||||
Identifiable assets | $ | 11,732,311 | $ | 2,878,753 | $ | 2,606,130 | $ | 736,037 | $ | 345,404 | $ | — | $ | 18,298,635 | ||||||||||||||
Capital expenditures | $ | 78,523 | $ | 142,826 | $ | 132,864 | $ | 2,418 | $ | 6,678 | $ | — | $ | 363,309 | ||||||||||||||
Share-based payments | $ | 22,226 | $ | 7,932 | $ | 1,701 | $ | — | $ | 12,192 | $ | — | $ | 44,051 |
F-45
Corporate, | ||||||||||||||||||||||||||||
merger | ||||||||||||||||||||||||||||
and gain | ||||||||||||||||||||||||||||
on | ||||||||||||||||||||||||||||
Americas | International | disposition | ||||||||||||||||||||||||||
Radio | Outdoor | Outdoor | of | |||||||||||||||||||||||||
Broadcasting | Advertising | Advertising | Other | assets - net | Eliminations | Consolidated | ||||||||||||||||||||||
(In thousands) | ||||||||||||||||||||||||||||
2006 | ||||||||||||||||||||||||||||
Revenue | $ | 3,567,413 | $ | 1,341,356 | $ | 1,556,365 | $ | 223,929 | $ | — | $ | (121,273 | ) | $ | 6,567,790 | |||||||||||||
Direct operating expenses | 994,686 | 534,365 | 980,477 | 82,372 | — | (59,456 | ) | 2,532,444 | ||||||||||||||||||||
Selling, general and administrative expenses | 1,185,770 | 207,326 | 279,668 | 98,010 | — | (61,817 | ) | 1,708,957 | ||||||||||||||||||||
Depreciation and amortization | 125,631 | 178,970 | 228,760 | 47,772 | 19,161 | — | 600,294 | |||||||||||||||||||||
Corporate expenses | — | — | — | — | 196,319 | — | 196,319 | |||||||||||||||||||||
Merger expenses | — | — | — | — | 7,633 | — | 7,633 | |||||||||||||||||||||
Gain on disposition of assets-net | — | — | — | — | 71,571 | — | 71,571 | |||||||||||||||||||||
Operating income (loss) | $ | 1,261,326 | $ | 420,695 | $ | 67,460 | $ | (4,225 | ) | $ | (151,542 | ) | $ | — | $ | 1,593,714 | ||||||||||||
Intersegment revenues | $ | 40,119 | $ | 10,536 | $ | — | $ | 70,618 | $ | — | $ | — | $ | 121,273 | ||||||||||||||
Identifiable assets | $ | 11,873,784 | $ | 2,820,737 | $ | 2,401,924 | $ | 701,239 | $ | 360,440 | $ | — | $ | 18,158,124 | ||||||||||||||
Capital expenditures | $ | 93,264 | $ | 90,495 | $ | 143,387 | $ | 2,603 | $ | 6,990 | $ | — | $ | 336,739 | ||||||||||||||
Share-based payments | $ | 25,237 | $ | 4,699 | $ | 1,312 | $ | 1,656 | $ | 9,126 | $ | — | $ | 42,030 | ||||||||||||||
2005 | ||||||||||||||||||||||||||||
Revenue | $ | 3,380,774 | $ | 1,216,382 | $ | 1,449,696 | $ | 193,466 | $ | — | $ | (113,765 | ) | $ | 6,126,553 | |||||||||||||
Direct operating expenses | 924,635 | 489,826 | 915,086 | 81,313 | — | (59,246 | ) | 2,351,614 | ||||||||||||||||||||
Selling, general and administrative expenses | 1,140,694 | 186,749 | 291,594 | 86,677 | — | (54,519 | ) | 1,651,195 | ||||||||||||||||||||
Depreciation and amortization | 128,443 | 180,559 | 220,080 | 45,537 | 18,858 | — | 593,477 | |||||||||||||||||||||
Corporate expenses | — | — | — | — | 167,088 | — | 167,088 | |||||||||||||||||||||
Gain on disposition of assets-net | — | — | — | — | 49,656 | — | 49,656 | |||||||||||||||||||||
Operating income (loss) | $ | 1,187,002 | $ | 359,248 | $ | 22,936 | $ | (20,061 | ) | $ | (136,290 | ) | $ | — | $ | 1,412,835 | ||||||||||||
Intersegment revenues | $ | 36,656 | $ | 8,181 | $ | — | $ | 68,928 | $ | — | $ | — | $ | 113,765 | ||||||||||||||
Identifiable assets | $ | 11,766,099 | $ | 2,531,426 | $ | 2,125,470 | $ | 792,381 | $ | 770,169 | $ | — | $ | 17,985,545 | ||||||||||||||
Capital expenditures | $ | 82,899 | $ | 73,084 | $ | 135,072 | $ | 2,655 | $ | 8,945 | $ | — | $ | 302,655 | ||||||||||||||
Share-based payments | $ | 212 | $ | — | $ | — | $ | — | $ | 5,869 | $ | — | $ | 6,081 |
F-46
March 31, | June 30, | September 30, | December 31, | |||||||||||||||||||||||||||||
2007 | 2006 | 2007 | 2006 | 2007 | 2006 | 2007 | 2006 | |||||||||||||||||||||||||
(In thousands, except per share data) | ||||||||||||||||||||||||||||||||
Revenue | $ | 1,505,077 | $ | 1,388,875 | $ | 1,802,192 | $ | 1,714,402 | $ | 1,751,165 | $ | 1,665,380 | $ | 1,862,768 | $ | 1,799,133 | ||||||||||||||||
Operating expenses: | ||||||||||||||||||||||||||||||||
Direct operating expenses | 627,879 | 582,313 | 676,255 | 622,543 | 689,681 | 642,893 | 739,189 | 684,695 | ||||||||||||||||||||||||
Selling, general and administrative expenses | 416,319 | 404,614 | 447,190 | 442,594 | 431,366 | 416,863 | 467,064 | 444,886 | ||||||||||||||||||||||||
Depreciation and amortization | 139,685 | 142,450 | 141,309 | 149,509 | 139,650 | 148,533 | 145,983 | 159,802 | ||||||||||||||||||||||||
Corporate expenses | 48,150 | 40,507 | 43,044 | 48,239 | 47,040 | 48,486 | 43,270 | 59,087 | ||||||||||||||||||||||||
Merger expenses | 1,686 | — | 2,684 | — | 2,002 | — | 390 | 7,633 | ||||||||||||||||||||||||
Gain (loss) on disposition of assets—net | 6,947 | 48,418 | 3,996 | 813 | 678 | 9,012 | 2,492 | 13,328 | ||||||||||||||||||||||||
Operating income | 278,305 | 267,409 | 495,706 | 452,330 | 442,104 | 417,617 | 469,364 | 456,358 | ||||||||||||||||||||||||
Interest expense | 118,077 | 114,376 | 116,422 | 123,298 | 113,026 | 128,276 | 104,345 | 118,113 | ||||||||||||||||||||||||
Gain (loss) on marketable securities | 395 | (2,324 | ) | (410 | ) | (1,000 | ) | 676 | 5,396 | 6,081 | 234 | |||||||||||||||||||||
Equity in earnings of nonconsolidated affiliates | 5,264 | 6,909 | 11,435 | 9,715 | 7,133 | 8,681 | 11,344 | 12,540 | ||||||||||||||||||||||||
Other income (expense) — net | (12 | ) | (648 | ) | 340 | (4,609 | ) | (1,403 | ) | (601 | ) | 6,401 | (2,735 | ) | ||||||||||||||||||
Income before income taxes, minority interest and discontinued operations | 165,875 | 156,970 | 390,649 | 333,138 | 335,484 | 302,817 | 388,845 | 348,284 | ||||||||||||||||||||||||
Income tax expense | 70,466 | 64,531 | 159,786 | 137,332 | 70,125 | 124,706 | 140,771 | 143,874 | ||||||||||||||||||||||||
Minority interest income (expense)—net | (276 | ) | 779 | (14,970 | ) | (13,736 | ) | (11,961 | ) | (3,674 | ) | (19,824 | ) | (15,296 | ) | |||||||||||||||||
Income before discontinued operations | 95,133 | 93,218 | 215,893 | 182,070 | 253,398 | 174,437 | 228,250 | 189,114 | ||||||||||||||||||||||||
Discontinued operations | 7,089 | 3,596 | 20,097 | 15,418 | 26,338 | 11,434 | 92,309 | 22,230 | ||||||||||||||||||||||||
Net income | $ | 102,222 | $ | 96,814 | $ | 235,990 | $ | 197,488 | $ | 279,736 | $ | 185,871 | $ | 320,559 | $ | 211,344 | ||||||||||||||||
Net income per common share: | ||||||||||||||||||||||||||||||||
Basic: | ||||||||||||||||||||||||||||||||
Income before discontinued operations | $ | .19 | $ | .18 | $ | .44 | $ | .36 | $ | .51 | $ | .36 | $ | .46 | $ | .38 | ||||||||||||||||
Discontinued operations | .02 | .01 | .04 | .03 | .06 | .02 | .19 | .05 | ||||||||||||||||||||||||
Net income | $ | .21 | $ | .19 | $ | .48 | $ | .39 | $ | .57 | $ | .38 | $ | .65 | $ | .43 | ||||||||||||||||
Diluted: | ||||||||||||||||||||||||||||||||
Income before discontinued operations | $ | .19 | $ | .18 | $ | .44 | $ | .36 | $ | .51 | $ | .36 | $ | .46 | $ | .38 | ||||||||||||||||
Discontinued operations | .02 | .01 | .04 | .03 | .05 | .02 | .19 | .05 | ||||||||||||||||||||||||
Net income | $ | .21 | $ | .19 | $ | .48 | $ | .39 | $ | .56 | $ | .38 | $ | .65 | $ | .43 | ||||||||||||||||
Dividends declared per share | $ | .1875 | $ | .1875 | $ | .1875 | $ | .1875 | $ | .1875 | $ | .1875 | $ | .1875 | $ | .1875 | ||||||||||||||||
Stock price: | ||||||||||||||||||||||||||||||||
High | $ | 37.55 | $ | 32.84 | $ | 38.58 | $ | 31.54 | $ | 38.24 | $ | 31.64 | $ | 38.02 | $ | 35.88 | ||||||||||||||||
Low | 34.45 | 27.82 | 34.90 | 27.34 | 33.51 | 27.17 | 32.02 | 28.83 |
F-47
F-48
ASSETS
(In thousands)
March 31, | December 31, | |||||||
2008 | 2007 | |||||||
(Unaudited) | (Audited) | |||||||
CURRENT ASSETS | ||||||||
Cash and cash equivalents | $ | 602,112 | $ | 145,148 | ||||
Accounts receivable, net of allowance of $62,791 in 2008 and $59,169 in 2007 | 1,681,514 | 1,693,218 | ||||||
Prepaid expenses | 125,387 | 116,902 | ||||||
Other current assets | 270,306 | 243,248 | ||||||
Current assets from discontinued operations | — | 96,067 | ||||||
Total Current Assets | 2,679,319 | 2,294,583 | ||||||
PROPERTY, PLANT AND EQUIPMENT | ||||||||
Land, buildings and improvements | 851,555 | 840,832 | ||||||
Structures | 3,947,728 | 3,901,941 | ||||||
Towers, transmitters and studio equipment | 586,804 | 600,315 | ||||||
Furniture and other equipment | 526,518 | 527,714 | ||||||
Construction in progress | 128,128 | 119,260 | ||||||
6,040,733 | 5,990,062 | |||||||
Less accumulated depreciation | 2,965,992 | 2,939,698 | ||||||
3,074,741 | 3,050,364 | |||||||
Property, plant and equipment from discontinued operations, net | 15,487 | 164,724 | ||||||
INTANGIBLE ASSETS | ||||||||
Definite-lived intangibles, net | 489,542 | 485,870 | ||||||
Indefinite-lived intangibles — licenses | 4,213,262 | 4,201,617 | ||||||
Indefinite-lived intangibles — permits | 252,576 | 251,988 | ||||||
Goodwill | 7,268,059 | 7,210,116 | ||||||
Intangible assets from discontinued operations, net | 31,889 | 219,722 | ||||||
OTHER ASSETS | ||||||||
Notes receivable | 11,630 | 12,388 | ||||||
Investments in, and advances to, nonconsolidated affiliates | 296,481 | 346,387 | ||||||
Other assets | 361,281 | 303,791 | ||||||
Other investments | 351,216 | 237,598 | ||||||
Other assets from discontinued operations | 7,728 | 26,380 | ||||||
Total Assets | $ | 19,053,211 | $ | 18,805,528 | ||||
F-49
LIABILITIES AND SHAREHOLDERS’ EQUITY
(In thousands)
March 31, | December 31, | |||||||
2008 | 2007 | |||||||
(Unaudited) | (Audited) | |||||||
CURRENT LIABILITIES | ||||||||
Accounts payable | $ | 129,458 | $ | 165,533 | ||||
Accrued expenses | 832,155 | 912,665 | ||||||
Accrued interest | 75,979 | 98,601 | ||||||
Accrued income taxes | 148,833 | 79,973 | ||||||
Current portion of long-term debt | 869,631 | 1,360,199 | ||||||
Deferred income | 242,861 | 158,893 | ||||||
Current liabilities from discontinued operations | — | 37,413 | ||||||
Total Current Liabilities | 2,298,917 | 2,813,277 | ||||||
Long-term debt | 5,072,000 | 5,214,988 | ||||||
Other long-term obligations | 167,775 | 127,384 | ||||||
Deferred income taxes | 830,937 | 793,850 | ||||||
Other long-term liabilities | 560,945 | 567,848 | ||||||
Long-term liabilities from discontinued operations | — | 54,330 | ||||||
Minority interest | 460,728 | 436,360 | ||||||
Commitments and contingent liabilities (Note 5) | ||||||||
SHAREHOLDERS’ EQUITY | ||||||||
Common Stock | 49,817 | 49,808 | ||||||
Additional paid-in capital | 26,871,648 | 26,858,079 | ||||||
Retained deficit | (17,689,490 | ) | (18,489,143 | ) | ||||
Accumulated other comprehensive income | 436,544 | 383,698 | ||||||
Cost of shares held in treasury | (6,610 | ) | (4,951 | ) | ||||
Total Shareholders’ Equity | 9,661,909 | 8,797,491 | ||||||
Total Liabilities and Shareholders’ Equity | $ | 19,053,211 | $ | 18,805,528 | ||||
F-50
(UNAUDITED)
(In thousands, except per share data)
Three Months Ended | ||||||||
March 31, | ||||||||
2008 | 2007 | |||||||
Revenue | $ | 1,564,207 | $ | 1,505,077 | ||||
Operating expenses: | ||||||||
Direct operating expenses (includes share based payments of $3,604 and $3,000 in 2008 and 2007, respectively, and excludes depreciation and amortization) | 705,947 | 627,879 | ||||||
Selling, general and administrative expenses (includes share based payments of $3,135 and $2,831 in 2008 and 2007, respectively, and excludes depreciation and amortization) | 426,381 | 416,319 | ||||||
Depreciation and amortization | 152,278 | 139,685 | ||||||
Corporate expenses (includes share based payments of $2,851 and $2,414 in 2008 and 2007, respectively, and excludes depreciation and amortization) | 46,303 | 48,150 | ||||||
Merger expenses | 389 | 1,686 | ||||||
Gain on disposition of assets — net | 2,097 | 6,947 | ||||||
Operating income | 235,006 | 278,305 | ||||||
Interest expense | 100,003 | 118,077 | ||||||
Gain on marketable securities | 6,526 | 395 | ||||||
Equity in earnings of nonconsolidated affiliates | 83,045 | 5,264 | ||||||
Other income (expense) — net | 11,787 | (12 | ) | |||||
Income before income taxes, minority interest and discontinued operations | 236,361 | 165,875 | ||||||
Income tax benefit (expense): | ||||||||
Current | (23,833 | ) | (32,359 | ) | ||||
Deferred | (42,748 | ) | (38,107 | ) | ||||
Income tax benefit (expense) | (66,581 | ) | (70,466 | ) | ||||
Minority interest expense, net of tax | 8,389 | 276 | ||||||
Income before discontinued operations | 161,391 | 95,133 | ||||||
Income from discontinued operations, net | 638,262 | 7,089 | ||||||
Net income | $ | 799,653 | $ | 102,222 | ||||
Other comprehensive income (loss), net of tax: | ||||||||
Foreign currency translation adjustments | 57,967 | 8,751 | ||||||
Unrealized holding gain (loss) on marketable securities | (5,121 | ) | (6,959 | ) | ||||
Comprehensive income | $ | 852,499 | $ | 104,014 | ||||
Net income per common share: | ||||||||
Income before discontinued operations — Basic | $ | .33 | $ | .19 | ||||
Discontinued operations — Basic | 1.29 | .02 | ||||||
Net income — Basic | $ | 1.62 | $ | .21 | ||||
Weighted average common shares — Basic | 494,749 | 493,843 | ||||||
Income before discontinued operations — Diluted | $ | .32 | $ | .19 | ||||
Discontinued operations — Diluted | 1.29 | .02 | ||||||
Net income — Diluted | $ | 1.61 | $ | .21 | ||||
Weighted average common shares — Diluted | 496,388 | 494,868 | ||||||
Dividends declared per share | $ | — | $ | .1875 |
F-51
(UNAUDITED)
(In thousands)
Three Months Ended | ||||||||
March 31, | ||||||||
2008 | 2007 | |||||||
Cash flows from operating activities: | ||||||||
Net income | $ | 799,653 | $ | 102,222 | ||||
(Income) loss from discontinued operations, net | (638,262 | ) | (7,089 | ) | ||||
161,391 | 95,133 | |||||||
Reconciling items: | ||||||||
Depreciation and amortization | 152,278 | 139,685 | ||||||
Deferred taxes | 42,748 | 38,107 | ||||||
(Gain) loss on disposal of assets | (2,097 | ) | (6,947 | ) | ||||
(Gain) loss forward exchange contract | (13,342 | ) | 2,962 | |||||
(Gain) loss on trading securities | 6,816 | (3,358 | ) | |||||
Provision for doubtful accounts | 10,332 | 9,049 | ||||||
Share-based compensation | 9,590 | 8,245 | ||||||
Equity in earnings of nonconsolidated affiliates | (83,046 | ) | (5,264 | ) | ||||
Other reconciling items— net | 11,724 | 1,047 | ||||||
Changes in operating assets and liabilities: | ||||||||
Changes in other operating assets and liabilities, net of effects of acquisitions and dispositions | 71,378 | 42,804 | ||||||
Net cash provided by operating activities | 367,772 | 321,463 | ||||||
Cash flows from investing activities: | ||||||||
Decrease (increase) in notes receivable— net | (735 | ) | 42 | |||||
Decrease (increase) in investments in and advances to nonconsolidated affiliates— net | 18,376 | 5,911 | ||||||
Sales (purchases) of investments | 487 | (393 | ) | |||||
Purchases of property, plant and equipment | (93,693 | ) | (64,986 | ) | ||||
Proceeds from disposal of assets | 11,345 | 13,078 | ||||||
Acquisition of operating assets, net of cash acquired | (83,897 | ) | (12,189 | ) | ||||
Decrease (increase) in other— net | (6,140 | ) | (12,484 | ) | ||||
Net cash used in investing activities | (154,257 | ) | (71,021 | ) | ||||
Cash flows from financing activities: | ||||||||
Draws on credit facilities | 700,089 | 252,881 | ||||||
Payments on credit facilities | (862,850 | ) | (239,582 | ) | ||||
Payments on long-term debt | (503,017 | ) | (260,416 | ) | ||||
Proceeds from exercise of stock options, stock purchase plan, common stock warrants and other | 5,953 | 56,555 | ||||||
Payments for purchase of common shares | (1,257 | ) | — | |||||
Dividends paid | (93,367 | ) | (92,603 | ) | ||||
Net cash used in financing activities | (754,449 | ) | (283,165 | ) | ||||
Cash flows from discontinued operations: | ||||||||
Net cash (used in) provided by operating activities | (88,121 | ) | 16,685 | |||||
Net cash provided by investing activities | 1,086,019 | 9,228 | ||||||
Net cash provided by (used in) financing activities | — | — | ||||||
Net cash provided by discontinued operations | 997,898 | 25,913 | ||||||
Net (decrease) increase in cash and cash equivalents | 456,964 | (6,810 | ) | |||||
Cash and cash equivalents at beginning of period | 145,148 | 116,000 | ||||||
Cash and cash equivalents at end of period | $ | 602,112 | $ | 109,190 | ||||
F-52
(UNAUDITED)
F-53
Total radio stations announced as being marketed for sale on November 16, 2006 | 448 | |||
Total radio stations no longer being marketed for sale | (173 | ) | ||
Adjusted number of radio stations being marketed for sale (“Non-core” radio stations) | 275 | |||
Non-core radio stations sold through March 31, 2008 | (223 | ) | ||
Remaining non-core radio stations at March 31, 2008 classified as discontinued operations | 52 | |||
Non-core radio stations under definitive asset purchase agreements | (32 | ) | ||
Non-core radio stations being marketed for sale | 20 | |||
F-54
Three Months | ||||||||
2008 | 2007 | |||||||
(In thousands) | ||||||||
Revenue | $ | 69,883 | $ | 117,005 | ||||
Income before income taxes | $ | 695,364 | $ | 9,365 |
F-55
March 31, | December 31, | |||||||
2008 | 2007 | |||||||
(In thousands) | ||||||||
Assets | ||||||||
Accounts receivable, net | $ | — | $ | 76,426 | ||||
Other current assets | — | 19,641 | ||||||
Total current assets | $ | — | $ | 96,067 | ||||
Land, buildings and improvements | $ | 9,393 | $ | 73,138 | ||||
Transmitter and studio equipment | 16,133 | 207,230 | ||||||
Other property, plant and equipment | 2,725 | 22,781 | ||||||
Less accumulated depreciation | 12,764 | 138,425 | ||||||
Property, plant and equipment, net | $ | 15,487 | $ | 164,724 | ||||
Definite-lived intangibles, net | $ | — | $ | 283 | ||||
Licenses | 3,976 | 107,910 | ||||||
Goodwill | 27,913 | 111,529 | ||||||
Total intangible assets | $ | 31,889 | $ | 219,722 | ||||
Film rights | $ | — | $ | 18,042 | ||||
Other long-term assets | 7,728 | 8,338 | ||||||
Total other assets | $ | 7,728 | $ | 26,380 | ||||
Liabilities | ||||||||
Accounts payable and accrued expenses | $ | — | $ | 10,565 | ||||
Film liability | — | 18,027 | ||||||
Other current liabilities | — | 8,821 | ||||||
Total current liabilities | $ | — | $ | 37,413 | ||||
Film liability | $ | — | $ | 19,902 | ||||
Other long-term liabilities | — | 34,428 | ||||||
Total long-term liabilities | $ | — | $ | 54,330 | ||||
F-56
F-57
Quoted Prices in | ||||||||||||
Active markets for | Significant Other | Significant | ||||||||||
Identical Assets | Observable Inputs | Unobservable | ||||||||||
(Level 1) | (Level 2) | Inputs (Level 3) | ||||||||||
(In thousands) | ||||||||||||
Asset / (Liability) | ||||||||||||
Trading securities | $ | 78,833 | $ | — | $ | — | ||||||
Available-for-sale securities | 261,018 | — | — | |||||||||
Derivatives | — | (127,402 | ) | (3,636 | ) | |||||||
Total | $ | 339, 851 | $ | (127,402 | ) | $ | (3,636 | ) | ||||
2008 | ||||
(In thousands) | ||||
Beginning balance at January 1 | $ | (16,978 | ) | |
Unrealized gain included in “Gain on marketable securities” | 13,342 | |||
Ending balance at March 31 | $ | (3,636 | ) | |
March 31, 2008 | December 31, 2007 | |||||||||||||||
Gross Carrying | Accumulated | Gross Carrying | Accumulated | |||||||||||||
Amount | Amortization | Amount | Amortization | |||||||||||||
(In thousands) | ||||||||||||||||
Transit, street furniture, and other outdoor contractual rights | $ | 918,456 | $ | 654,343 | $ | 867,283 | $ | 613,897 | ||||||||
Representation contracts | 403,982 | 222,255 | 400,316 | 212,403 | ||||||||||||
Other | 83,922 | 40,220 | 84,004 | 39,433 | ||||||||||||
Total | $ | 1,406,360 | $ | 916,818 | $ | 1,351,603 | $ | 865,733 | ||||||||
F-58
(In thousands) | ||||
2009 | $ | 85,385 | ||
2010 | 68,020 | |||
2011 | 52,707 | |||
2012 | 43,071 | |||
2013 | 38,261 |
F-59
Americas | International | |||||||||||||||||||
Radio | Outdoor | Outdoor | Other | Total | ||||||||||||||||
(In thousands) | ||||||||||||||||||||
Balance as of December 31, 2007 | $ | 6,045,527 | $ | 688,336 | $ | 474,253 | $ | 2,000 | $ | 7,210,116 | ||||||||||
Acquisitions | — | 25 | 18,465 | — | 18,490 | |||||||||||||||
Dispositions | — | — | — | — | — | |||||||||||||||
Foreign currency | — | (276 | ) | 39,902 | — | 39,626 | ||||||||||||||
Adjustments | (173 | ) | — | — | — | (173 | ) | |||||||||||||
Balance as of March 31, 2008 | $ | 6,045,354 | $ | 688,085 | $ | 532,620 | $ | 2,000 | $ | 7,268,059 | ||||||||||
F-60
F-61
F-62
F-63
Corporate, | ||||||||||||||||||||||||||||
Merger and | ||||||||||||||||||||||||||||
Americas | International | Gain on | ||||||||||||||||||||||||||
Radio | Outdoor | Outdoor | disposition of | |||||||||||||||||||||||||
Broadcasting | Advertising | Advertising | Other | assets – net | Eliminations | Consolidated | ||||||||||||||||||||||
(In thousands) | ||||||||||||||||||||||||||||
Three Months Ended March 31, 2008 | ||||||||||||||||||||||||||||
Revenue | $ | 769,611 | $ | 333,362 | $ | 442,217 | $ | 44,453 | $ | — | $ | (25,436 | ) | $ | 1,564,207 | |||||||||||||
Direct operating expenses | 231,496 | 156,245 | 314,589 | 17,324 | — | (13,707 | ) | 705,947 | ||||||||||||||||||||
Selling, general and administrative expenses | 269,282 | 58,375 | 86,235 | 24,218 | — | (11,729 | ) | 426,381 | ||||||||||||||||||||
Depreciation and amortization | 31,487 | 50,099 | 54,991 | 11,555 | 4,146 | — | 152,278 | |||||||||||||||||||||
Corporate expenses | — | — | — | — | 46,303 | — | 46,303 | |||||||||||||||||||||
Merger expenses | — | — | — | — | 389 | — | 389 | |||||||||||||||||||||
Gain on disposition of assets— net | — | — | — | — | 2,097 | — | 2,097 | |||||||||||||||||||||
Operating income (loss) | $ | 237,346 | $ | 68,643 | $ | (13,598 | ) | $ | (8,644 | ) | $ | (48,741 | ) | $ | — | $ | 235,006 | |||||||||||
Intersegment revenues | $ | 10,964 | $ | 1,677 | $ | — | $ | 12,795 | $ | — | $ | — | $ | 25,436 | ||||||||||||||
Identifiable assets | $ | 11,641,673 | $ | 2,904,243 | $ | 2,877,597 | $ | 721,556 | $ | 853,038 | $ | — | $ | 18,998,107 | ||||||||||||||
Capital expenditures | $ | 18,420 | $ | 30,050 | $ | 43,251 | $ | 905 | $ | 1,067 | $ | — | $ | 93,693 | ||||||||||||||
Share-based payments | $ | 4,809 | $ | 1,538 | $ | 392 | $ | — | $ | 2,851 | $ | — | $ | 9,590 | ||||||||||||||
Three Months Ended March 31, 2007 | ||||||||||||||||||||||||||||
Revenue | $ | 799,201 | $ | 317,023 | $ | 373,833 | $ | 45,674 | $ | — | $ | (30,654 | ) | $ | 1,505,077 | |||||||||||||
Direct operating expenses | 234,518 | 134,914 | 259,291 | 17,705 | — | (18,549 | ) | 627,879 | ||||||||||||||||||||
Selling, general and administrative expenses | 276,693 | 54,243 | 73,290 | 24,198 | — | (12,105 | ) | 416,319 | ||||||||||||||||||||
Depreciation and amortization | 29,901 | 46,561 | 49,109 | 9,966 | 4,148 | — | 139,685 | |||||||||||||||||||||
Corporate expenses | — | — | — | — | 48,150 | — | 48,150 | |||||||||||||||||||||
Merger expenses | — | — | — | — | 1,686 | — | 1,686 | |||||||||||||||||||||
Gain on disposition of assets— net | — | — | — | — | 6,947 | — | 6,947 | |||||||||||||||||||||
Operating income (loss) | $ | 258,089 | $ | 81,305 | $ | (7,857 | ) | $ | (6,195 | ) | $ | (47,037 | ) | $ | — | $ | 278,305 | |||||||||||
Intersegment revenues | $ | 15,282 | $ | 1,883 | $ | — | $ | 13,489 | $ | — | $ | — | $ | 30,654 | ||||||||||||||
Identifiable assets | $ | 11,828,170 | $ | 2,764,927 | $ | 2,391,523 | $ | 654,587 | $ | 332,578 | $ | — | $ | 17,971,785 | ||||||||||||||
Capital expenditures | $ | 14,677 | $ | 22,582 | $ | 24,671 | $ | 1,589 | $ | 1,467 | $ | — | $ | 64,986 | ||||||||||||||
Share-based payments | $ | 4,464 | $ | 1,126 | $ | 241 | $ | — | $ | 2,414 | $ | — | $ | 8,245 |
F-64
F-65
Page | ||||
Offering Memorandum Summary | 1 | |||
Risk Factors | 32 | |||
Use of Proceeds | 50 | |||
Capitalization | 52 | |||
Unaudited Pro Forma Condensed Consolidated Financial Statements | 54 | |||
Selected Historical Consolidated Financial and Other Data | 67 | |||
Management’s Discussion and Analysis of Financial Condition and Results of Operations | 70 | |||
Business | 108 | |||
Management | 139 | |||
Security Ownership of Certain Beneficial Owners and Management | 150 | |||
Certain Relationships and Related Transactions | 152 | |||
Description of Other Indebtedness | 155 | |||
Description of the Notes | 163 | |||
Exchange Offer; Registration Rights | 241 | |||
Notice to Investors | 244 | |||
Book-Entry; Delivery and Form | 248 | |||
Private Placement | 251 | |||
Certain United States Federal Income Tax Considerations | 253 | |||
Certain Considerations for Plan Investors | 263 | |||
Legal Matters | 266 | |||
Independent Registered Public Accounting Firm | 266 | |||
Available Information | 266 | |||
Index to Consolidated Financial Statements | F-1 |
to be merged with and into
Clear Channel Communications, Inc.
Senior Cash Pay Notes due 2016
Senior Toggle Notes due 2016
Morgan Stanley
Citi
Credit Suisse
RBS Greenwich Capital
Wachovia Securities
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DEUTSCHE BANK SECURITIES INC. | ||||
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MORGAN STANLEY SENIOR FUNDING INC. | ||||
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CITIGROUP GLOBAL MARKETS INC. | ||||
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CREDIT SUISSE SECURITIES (USA) LLC | ||||
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GREENWICH CAPITAL MARKETS, INC. | ||||
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WACHOVIA CAPITAL MARKETS, LLC | ||||
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