iHeartMedia 2000 Annual Report Download - page 34

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Item 7. Management’s Discussion and Analysis of Results of Operations and Financial Condition
OVERVIEW
Management’ s discussion and analysis of the results of operation and financial condition of Clear
Channel Communications, Inc. and its subsidiaries should be read in conjunction with the Consolidated
Financial Statements and related Footnotes. The discussion is presented on both a consolidated and
segment basis. During the third quarter of 2000, as a result of the acquisitions of AMFM Inc. and SFX
Entertainment, Inc., we redefined our reportable operating segments. Accordingly, all prior years have
been reclassified to conform to the 2000 presentation. The new reportable operating segments are: Radio
Broadcasting which includes all domestic and international radio assets and radio networks; Outdoor
Advertising which includes domestic and international billboards, transit displays, street furniture and
other outdoor advertising media; and Live Entertainment which includes live music, theatrical, family
entertainment and motor sports events. Included in the “other” segment is television broadcasting, sports
representation, our media representation business, Katz Media, and Internet businesses as well as
corporate expenses.
We continued our strong financial performance in 2000 with record operating growth. This
performance was the result of the strength of our management, the growth characteristics of the industries
in which we operate and our financial discipline. During 2000, we completed several acquisitions that
continued our strategic focus on building a national radio platform, filling out our outdoor advertising
markets and creating a platform of media and entertainment assets, enabling us to provide a fuller breadth
of marketing solutions for our clients. The most significant transactions are as follows:
AMFM Inc.
On August 30, 2000, we completed the merger with AMFM. The AMFM assets provided a
strategic fit with our radio assets to form a national radio platform, positioning our radio segment to
expand its market share. Also, as a result of this merger, we have significant overlap such that we now
have radio operations in most every domestic market where we operate outdoor or television assets.
Pursuant to the terms of the merger agreement, each share of AMFM common stock was
exchanged for 0.94 shares of our common stock. Approximately 205.4 million shares of our common
stock were issued in the AMFM merger, valuing the merger, based on the average market price of our
common stock at the signing of the merger agreement, at $15.9 billion plus the assumption of AMFM’ s
outstanding debt of approximately $3.5 billion. Additionally, we assumed stock options and common
stock warrants with a fair value of $1.2 billion, which are convertible, subject to applicable vesting, into
approximately 25.5 million shares of our common stock. We refinanced $540.0 million of AMFM’ s $3.5
billion of long-term debt at the closing of the merger using our credit facilities. The AMFM merger was
accounted for as a purchase with resulting goodwill of approximately $7.1 billion, which is being
amortized over 25 years on a straight-line basis. The results of operations of AMFM have been included
in our financial statements beginning August 30, 2000.
SFX Entertainment, Inc.
We closed the merger with SFX on August 1, 2000. With this acquisition, we are able to
capitalize on the natural synergies between live entertainment and radio broadcasting and gain immediate
industry leadership. In addition, the SFX acquisition strategically fits with our other businesses as live
entertainment provides our existing clients an additional avenue for reaching their target consumers.
Pursuant to the terms of the merger agreement, each share of SFX Class A common stock was
exchanged for 0.6 shares of our common stock and each share of SFX Class B common stock was
exchanged for one share of our common stock. Approximately 39.2 million shares of our common stock