iHeartMedia 2002 Annual Report Download - page 55

certain transactions with affiliates, pay dividends, consolidate or effect certain asset sales. The AMFM long-term bonds have cross-default and
cross-acceleration provisions among the AMFM long-term bonds only.
Our domestic credit facilities include a provision for an increase in fees of 12.5 basis points on borrowings and 5 basis points on amounts
available for future borrowings in the event that both of our long-term debt ratings drop below our current ratings of BBB-/Baa3. Conversely, if
our long-term debt ratings improve, we have a proportionate decrease in fees. Our $150.0 million international credit facility includes a put
option in the event that our long-term debt ratings fall below BB+/Ba1. We believe there are no other agreements that contain provisions that
trigger an event upon a change in long-term debt ratings that would have a material impact to our financial statements.
At December 31, 2002, we were in compliance with all debt covenants. We expect to remain in compliance throughout 2003.
Uses of Capital
Acquisitions
Ackerley Merger
On June 14, 2002, we consummated our merger with The Ackerley Group, Inc. (“Ackerley”). Pursuant to the terms of the merger
agreement, each share of Ackerley ordinary and Class B common stock was exchanged for 0.35 shares of our common stock. After canceling
1.2 million shares of Ackerley common stock that we held prior to the signing of the merger agreement, approximately 12.0 million shares of
our common stock were issued to Ackerley shareholders. We also assumed all of Ackerley’s outstanding employee stock options, which at the
time of the merger were exercisable for approximately 114,000 shares of our common stock. The merger was valued at approximately
$493.0 million based on the number of our common shares issued, which were at the average share price at the signing of the merger
agreement, the historical cost of the Ackerley shares we held prior to the merger date and the fair value of the employee stock options at the
merger date. In addition, we assumed all of Ackerley’s outstanding debt, which had a fair value of $319.0 million at the merger date. We
refinanced Ackerley’s credit facility and made a tender offer for Ackerley’s public debt concurrent with the merger. The tender offer was
finalized on July 3, 2002 at a price of $1,129 per $1,000 tendered, resulting in the repurchase of substantially all of Ackerley’s public debt. This
merger resulted in the recognition of approximately $361.0 million of goodwill. This purchase price allocation is preliminary pending
completion of third-party appraisals and other fair value analysis of assets and liabilities. The results of operations of Ackerley have been
included in the Company’s financial statements beginning June 14, 2002.
Other
In addition to the acquisition of Ackerley, during the year ended December 31, 2002 we acquired 27 radio stations in 17 markets for $53.3
million in cash and $23.6 million in restricted cash. We also acquired approximately 225 outdoor display faces in 22 domestic markets and
approximately 9,050 display faces in six international markets for a total of $123.5 million in cash. Our outdoor segment also acquired
investments in nonconsolidated affiliates for a total of $2.1 million in cash. During the year ended December 31, 2002, our live entertainment
segment acquired music, racing events, promotional and exhibition related assets for $18.5 million in cash primarily related to deferred
consideration on prior year acquisitions. Also, our national representation business acquired new contracts for a total of $16.5 million in cash
and our television business acquired broadcasting assets for $3.8 million in cash during the year ended December 31, 2002.
Future acquisitions of radio broadcasting stations, outdoor advertising facilities, live entertainment assets and other media-related properties
affected in connection with the implementation of our acquisition strategy are expected to be financed from increased borrowings under our
existing credit facilities, additional public equity and debt offerings and cash flow from operations.
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