iHeartMedia 2000 Annual Report Download - page 35

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were issued in the SFX merger. Based on the average market price of our common stock at the signing of
the merger agreement, the merger was valued at $2.9 billion plus the assumption of SFX’ s outstanding
debt of approximately $1.5 billion. Additionally, we assumed all stock options and common stock
warrants with a fair value of $211.8 million, which are exercisable for approximately 5.6 million shares of
our common stock. We refinanced $815.8 million of SFX’ s $1.5 billion of long-term debt at the closing
of the merger using our credit facilities. This merger has been accounted for as a purchase with resulting
goodwill of approximately $4.1 billion, which is being amortized over 20 years on a straight-line basis.
The results of operations of SFX have been included in our financial statements beginning August 1,
2000.
A number of lawsuits were filed by holders of SFX Class A common stock alleging, among other
things, that the difference in consideration for the Class A and Class B shares constituted unfair
consideration to the Class B holders, that the SFX board breached its fiduciary duties and that we aided
and abetted the actions of the SFX board. On September 28, 2000, we issued approximately .4 million
shares of our common stock, valued at $29.3 million, as settlement of these lawsuits and have included
the value of these shares as part of the purchase price.
Donrey Media Group
On September 1, 2000, we completed the acquisition of the assets of Donrey Media Group for
$372.6 million in cash consideration. The Donrey acquisition added ten additional markets to our outdoor
advertising business, including Las Vegas, Nevada; Albuquerque, New Mexico; Columbus, Ohio;
Oklahoma City, Oklahoma; Tulsa, Oklahoma; Little Rock, Arkansas; Fort Smith, Arkansas; and Wichita,
Kansas. Donrey added markets that benefit our customers trying to target these growing areas with our
extensive sales network. We funded the acquisition with advances on our credit facilities. The acquisition
was accounted for as a purchase, with resulting goodwill of approximately $290.3 million, which is being
amortized over 25 years on a straight-line basis. The results of operations of the Donrey markets have
been included in our financial statements beginning September 1, 2000.
Ackerley’s South Florida Outdoor Advertising Division
On January 5, 2000, we closed the acquisition of Ackerley’ s South Florida outdoor advertising
division for $300.2 million. Ackerley complements the existing outdoor and radio assets we have in
South Florida. We funded the acquisition with advances on our credit facilities. The acquisition was
accounted for as a purchase, with resulting goodwill of approximately $208.3 million, which is amortized
over 25 years on a straight-line basis. The results of operations of Ackerley have been included in our
financial statements beginning January 5, 2000.
RESULTS OF OPERATIONS
We evaluate the operating performance of our businesses using several measures, one of them
being EBITDA (defined as net revenue less operating and corporate expenses). EBITDA eliminates the
uneven effect across our business segments, as well as in comparison to other companies, of considerable
amounts of non-cash depreciation and amortization recognized in business combinations accounted for
under the purchase method. We have used the purchase method of accounting for all mergers and
acquisitions in the history of our company. Non-cash depreciation and amortization is significant due to
the consolidation in our industry. While we and many in the financial community consider EBITDA to
be an important measure of operating performance, it should be considered in addition to, but not as a
substitute for or superior to, other measures of financial performance prepared in accordance with
generally accepted accounting principles such as operating income and net income.
We measure the performance of our operating segments and managers based on a like period pro