iHeartMedia 2002 Annual Report Download - page 82

agreement, at $15.9 billion plus the assumption of AMFM’s outstanding debt of $3.5 billion. Additionally, the Company assumed 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 the Company’s common stock. The Company refinanced $540.0 million of AMFM’s long-term debt at the closing of the merger
using its credit facility. The AMFM merger was accounted for as a purchase with resulting goodwill of approximately $7.1 billion, which prior
to the Company adopting Statement No. 142 as discussed in Note B had been amortizing over 25 years on a straight-line basis. The Company’s
adoption of Statement No. 142 resulted in an impairment charge at the Radio reporting unit relating to goodwill. In addition, the Company
recorded an impairment charge relating to FCC licenses. The goodwill and FCC licenses values recorded in this merger were included in the
Company’s impairment test. The results of operations of AMFM have been included in the financial statements of the Company beginning
August 30, 2000.
In connection with the AMFM merger and governmental directives, the Company divested 39 radio stations for $1.2 billion, resulting in a gain
on sale of $805.2 million and an increase in income tax expense of $306.0 million. The Company deferred a portion of this tax expense based
on its replacing the stations sold with qualified assets. Of the $1.2 billion proceeds, $839.7 million was placed in restricted trusts for the
purchase of replacement properties. In addition, restricted cash of $439.9 million was acquired from AMFM related to the divestiture of
AMFM radio stations in connection with the merger.
SFX Merger
On August 1, 2000, the Company consummated its merger with SFX Entertainment, Inc. (“SFX”). Pursuant to the terms of the merger
agreement, each share of SFX Class A common stock was exchanged for 0.6 shares of the Company’scommonstockandeachshareofSFX
Class B common stock was exchanged for one share of the Company’s common stock. Approximately, 39.2 million shares of the Company’s
common stock were issued in the SFX merger. Based on the average market price of the Company’s 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 $1.5 billion. Additionally, the Company
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 the Company’s common stock. The Company refinanced $815.8 million of SFX’s $1.5 billion of long-term debt at the closing of the
merger using its credit facilities. The SFX merger was accounted for as a purchase with resulting goodwill of approximately $4.1 billion, which
prior to the Company adopting Statement No. 142 as discussed in Note B had been amortizing over 20 years on a straight-line basis. The
Company’s adoption of Statement No. 142 resulted in an impairment charge at the Entertainment reporting unit relating to goodwill. The
goodwill recorded by this merger was included in the impairment test. The results of operations of SFX have been included in the financial
statements of the Company 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 and that the SFX board breached its fiduciary duties and
that the Company aided and abetted the actions of the SFX board. On September 28, 2000, the Company issued approximately .4 million
shares of its common stock, valued at $29.3 million, as settlement of these lawsuits and has included the value of these shares as part of the
purchase price.
During 2001, the Company made adjustments to finalize the purchase price allocation for the AMFM and SFX mergers, resulting in additional
goodwill, recorded in 2001, of approximately $272.8 million.
Donrey Media Group
On September 1, 2000, the Company completed its acquisition of the assets of Donrey Media Group (“Donrey”) for $372.6 million in cash
consideration. The Company funded the acquisition with advances on its credit facilities. The acquisition was accounted for as a purchase, with
resulting goodwill of approximately $290.3 million, which prior to the Company adopting Statement No. 142 as discussed in Note B had been
amortizing over 25 years on a straight-line basis. The Company’s adoption of Statement No. 142 resulted in an impairment charge at the
Outdoor reporting unit relating to goodwill. The goodwill recorded in this acquisition was included in the impairment test. The results of
operations of the Donrey markets have been included in the financial statements of the Company beginning September 1, 2000.
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