10-Q 1 q10am301.txt AMFM 10Q FOR MARCH 31, 2001 FORM 10-Q SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 QUARTERLY REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarter ended March 31, 2001 Commission file number 000-22486 AMFM Operating Inc. (an indirect, wholly-owned subsidiary of Clear Channel Communications, Inc.) (Exact name of registrant as specified in its charter) Delaware 13-3649750 (State of Incorporation) (I.R.S. Employer Identification No.) 200 East Basse Road San Antonio, Texas 78209 (210) 822-2828 (Address and telephone number of principal executive offices) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No[ ] Indicate the number of shares outstanding of each class of the issuer's classes of common stock, as of the latest practicable date: As of May 14, 2001, 1,040 shares of common stock of the Registrant's common stock were outstanding. The registrant meets the conditions set forth in General Instruction H(1)(a) and (b) of Form 10-Q and is therefore filing this report with the reduced disclosure format. AMFM OPERATING INC. INDEX Page No. - - - - - Part I -- Financial Information Item 1. Unaudited Financial Statements Consolidated Balance Sheets at March 31, 2001 and December 31, 2000 3 Consolidated Statements of Operations for the three months ended March 31, 2001 and 2000 5 Consolidated Statements of Cash Flows for the three months ended March 31, 2001 and 2000 6 Notes to Consolidated Financial Statements 7 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 12 Part II -- Other Information Item 6. Exhibits and reports on Form 8-K 14 (a) Exhibits (b) Reports on Form 8-K Signatures 14 Index to Exhibits 15 PART I Item 1. UNAUDITED FINANCIAL STATEMENTS AMFM OPERATING INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS ASSETS (In thousands) March 31, December 31, 2001 2000 (Unaudited) (Audited) ------------- ------------- Current Assets Cash and cash equivalents $ 6,058 $ 18,502 Restricted cash -- 131,562 Accounts receivable, less allowance of $15,813 at March 31, 2001 and $19,714 at December 31, 2000 391,576 494,033 Other current assets 54,812 67,944 ------------ ------------ Total Current Assets 452,446 712,041 Property, Plant and Equipment Land, buildings and improvements 159,444 147,713 Transmitter and studio equipment 264,906 244,306 Furniture and other equipment 73,834 65,041 Construction in progress 12,991 11,496 ------------ ------------ 511,175 468,556 Less accumulated depreciation (35,166) (15,477) ------------ ------------ 476,009 453,079 Intangible Assets Contracts 131,347 126,054 Licenses and goodwill 24,156,147 23,914,326 ------------ ------------ 24,287,494 24,040,380 Less accumulated amortization (566,828) (324,463) ------------ ------------ 23,720,666 23,715,917 Other Assets Restricted cash 9,326 189,466 Notes receivable 4,665 4,575 Assets held in trust -- 79,251 Other assets 32,891 32,617 Other investments 722,550 1,015,567 ------------ ------------ Total Assets $ 25,418,553 $ 26,202,513 ============ ============ See Notes to Consolidated Financial Statements

-3- AMFM OPERATING INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS LIABILITIES AND SHAREHOLDER'S EQUITY (In thousands) March 31, December 31, 2001 2000 (Unaudited) (Audited) ------------- ------------- Current Liabilities Accounts payable $ 37,183 $ 73,766 Accrued interest 38,797 19,015 Accrued expenses 217,834 261,228 Accrued income taxes 40,592 492,842 Deferred income 3,607 2,191 ------------ ------------ Total Current Liabilities 338,013 849,042 Long-term debt 1,436,336 1,438,396 Clear Channel promissory note 1,463,378 1,567,634 Deferred income taxes 5,149,834 5,180,044 Other long-term liabilities 29,927 36,985 Shareholder's Equity Common stock 1 1 Additional paid-in capital 17,346,238 17,346,238 Retained earnings (230,276) (89,246) Accumulated other comprehensive income (114,898) (126,581) ------------ ------------ Total shareholder's equity 17,001,065 17,130,412 ------------ ------------ Total Liabilities and Shareholder's Equity $ 25,418,553 $ 26,202,513 ============ ============ See Notes to Consolidated Financial Statements

-4- AMFM OPERATING INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED) (In thousands) Three Months Ended March 31, March 31, 2001 2000 Post-Merger Pre-Merger ------------- ------------- Gross revenue $ 478,592 $ 588,884 Less: agency commissions 47,844 67,614 ----------- ----------- Net revenue 430,748 521,270 Operating expenses 251,936 308,088 Non-cash compensation expense 2,394 34,878 Depreciation and amortization 262,077 209,568 Corporate expenses 11,868 15,302 Merger and non-recurring costs -- 11,115 ----------- ----------- Operating loss (97,527) (57,681) Interest expense 47,126 113,888 Gain on sale of assets 2,789 39,036 Loss on sale of marketable securities 35,359 -- Equity in earnings (loss) of nonconsolidated affiliates -- (24,631) Other income (expense) - net (1,879) -- ----------- ----------- Loss before income taxes and extraordinary item (179,102) (157,164) Income tax (expense) benefit 38,072 6,311 ----------- ----------- Loss before extraordinary item (141,030) (150,853) Extraordinary item -- (6,094) ----------- ----------- Net loss (141,030) (156,947) Other comprehensive income (loss), net of tax: Unrealized gain (loss) on securities: Unrealized holding gain (loss) arising during period (11,300) -- Less: reclassification adjustment for (gains) losses included in net loss 22,983 -- ----------- ----------- Comprehensive loss $ (129,347) $ (156,947) =========== ===========- See Notes to Consolidated Financial Statements

-5- AMFM OPERATING INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) (In thousands) Three Months Ended March 31, March 31, 2001 2000 Post-Merger Pre-Merger ------------- ------------- Net cash (used by) provided by operating activities $ (288,982) $ 190,720 Cash flows from investing activities: Liquidation of restricted cash, net 311,094 -- Proceeds from divestitures placed in restricted cash 3,000 -- Proceeds from sale of marketable securities 275,634 -- Purchases of property, plant and equipment (25,767) (9,451) Proceeds from disposal of assets 1,305 93,711 Acquisition of operating assets (423) (5,255) Acquisition of radio stations with restricted cash (185,532) -- Increase in other-net 1,483 (3,888) ----------- ----------- Net cash provided by (used in) investing activities 380,794 75,117 Cash flows from financing activities: Payments on Clear Channel promissory note (104,256) -- Proceeds of long-term debt -- 212,500 Payments on long-term debt -- (470,793) Contributions from AMFM -- 20,303 Distributions to AMFM -- (4,534) Dividends to AMFM -- (9,453) ----------- ----------- Net cash (used in) provided by financing activities (104,256) (251,977) ----------- ----------- Net increase (decrease) in cash and cash equivalents (12,444) 13,860 Cash and cash equivalents at beginning of period 18,502 14,634 ----------- ----------- Cash and cash equivalents at end of period $ 6,058 $ 28,494 =========== =========== See Notes to Consolidated Financial Statements

-6- AMFM OPERATING INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) Note 1: PREPARATION OF INTERIM FINANCIAL STATEMENTS AMFM Operating Inc., (the "Company") together with its subsidiaries, is an indirect, wholly-owned subsidiary of Clear Channel Communications, Inc., ("Clear Channel") a diversified media company with operations in radio broadcasting, outdoor advertising and live entertainment. Prior to Clear Channel's acquisition of AMFM Inc. ("AMFM"), in August 2000, the Company was an indirect, wholly-owned subsidiary of AMFM. The consolidated financial statements have been prepared by the Company pursuant to the rules and regulations of the Securities and Exchange Commission ("SEC") and, in the opinion of management, include all adjustments (consisting of normal recurring accruals and adjustments necessary for adoption of new accounting standards) necessary to present fairly the results of the interim periods shown. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to such SEC rules and regulations. Management believes that the disclosures made are adequate to make the information presented not misleading. Due to seasonality and other factors, the results for the interim periods are not necessarily indicative of results for the full year. The financial statements contained herein should be read in conjunction with the consolidated financial statements and notes thereto included in the Company's 2000 Annual Report on Form 10-K. Clear Channel accounted for its acquisition of AMFM as a purchase and purchase accounting adjustments, including goodwill, have been pushed down and are reflected in the financial statements of the Company and its subsidiaries for the three months ended March 31, 2001. The financial statements for the Company for the three months ended March 31, 2000 were prepared using the Company's historical pre-merger basis of accounting and are designated "Pre-Merger." The comparability of the operating results for the Pre-Merger periods and the periods reflecting push-down accounting are affected by the purchase accounting adjustments, including the amortization of intangibles over a period of 25 years. Prior to the merger, intangible assets were generally amortized over a period of 15 years. The purchase accounting adjustments are preliminary pending completion of appraisals and other fair value analysis of assets and liabilities. The consolidated financial statements include the accounts of the Company and its subsidiaries, the majority of which are wholly-owned. Investments in companies in which the Company owns 20 percent to 50 percent of the voting common stock or otherwise exercises significant influence over operating and financial policies of the company are accounted for under the equity method. All significant intercompany transactions are eliminated in the consolidation process. Certain reclassifications have been made to the 2000 consolidated financial statements to conform to the 2001 presentation. Note 2: RECENT ACCOUNTING PRONOUNCEMENTS On January 1, 2001, the Company adopted Financial Accounting Standards No. 133, Accounting for Derivative Instruments and Hedging Activities ("Statement 133"), as amended. As of the effective date of Statement 133 and as of March 31, 2001, the Company has no derivative instruments. Adoption of this statement had no impact on the Company's consolidated financial statements. Note 3: ACQUISITIONS AND DISPOSITIONS In connection with the completion of the Company's merger with Clear Channel in August 2000, the Company and Clear Channel entered into a Consent Decree with the Department of Justice regarding the Company's investment in Lamar Advertising Company ("Lamar"). The Consent Decree, among other things, required the Company to sell all of its 26.2 million shares of Lamar by December 31, 2002 and relinquish all shareholder rights during the disposition period. As a result, although the Company's holdings are greater than 20%, the Company does not exercise significant influence and therefore has accounted for the investment under the cost method of accounting post-merger. As of March 31, 2001, the Company held 18.4 million shares of Lamar common stock. -7- Restructuring The combined company has formalized plans to restructure the former AMFM operations. To date, the following decisions have been communicated to affected employees: o The Dallas and Austin, Texas, corporate offices closed on March 31, 2001; o Chancellor Marketing Group ("CMG"), the Company's full-service sales promotion firm, which develops integrated marketing programs, has been discontinued as a separate entity. Operations of CMG are now performed by the local radio markets, resulting in the December 31, 2000 closure of the Richmond, Virginia, corporate office and most of the separate CMG sales offices; o The Company's full-service media representation firm is in the process of restructuring its radio operations into five separate business units; o StarSystem(TM), the Company's programming distribution network, is being consolidated into current operations; and o The operations of The AMFM Radio Networks, which broadcasts advertising and syndicated programming, have been operationally integrated into Premiere Radio Networks, Clear Channel's radio syndication business. Additionally, the Company is reviewing individual markets to determine where synergies can be achieved within clusters and by centralizing certain functions previously performed at the local level. To date, the restructuring has resulted in the actual or pending termination of approximately 400 employees. It is expected that the majority of the restructuring will be completed by June 30, 2001. A liability for the restructuring of approximately $160.5 million has been recorded in the post-merger opening balance sheet of the Company to account for these costs. The majority of the costs relate to severance and other costs for terminated employees. Approximately $42.9 million of the costs relate to the termination of various contracts, primarily leases, which the Company has or will exit as a result of the restructuring. During the first quarter of 2001, approximately $7.9 million has been charged against the restructuring liability, primarily relating to severance. Pro Forma The results of operations for the three-month period ending March 31, 2000 include the operations of 58 radio stations that were divested in conjunction with governmental directives relating to the merger with Clear Channel. Assuming the divestitures had all occurred at January 1, 2000, unaudited pro forma consolidated results of operations for the three months ended March 31, 2000 would have been as follows: (In thousands) Net revenue $ 449,044 Net loss before extraordinary loss $ (121,564) Net loss $ (127,658) The pro forma information above is presented in response to applicable accounting rules relating to business acquisitions and dispositions and is not necessarily indicative of the actual results that would have been achieved had the divestitures occurred at the beginning of 2000, nor is it indicative of future results of operations. -8- Note 4: CLEAR CHANNEL PROMISSORY NOTE AND LONG-TERM DEBT Long-term debt consists of the following: (In millions) March 31, December 31, 2001 2000 --------------- --------------- Clear Channel Promissory Note (a)..............................$ 1,463.4 $ 1,567.6 =============== =============== Long-Term Debt: 8% Senior Notes (b).......................................... 695.3 695.8 8.125% Notes (c)............................................. 384.5 385.1 8.75% Notes (d).............................................. 196.9 197.3 12.625% Notes (e)............................................ 158.9 159.5 Other........................................................ .7 .7 --------------- --------------- Total long-term debt.................................$ 1,436.3 $ 1,438.4 =============== ===============

(a) Clear Channel Promissory Note The promissory note bears interest at 7% per annum and matures on August 30, 2010 or upon demand. The Company is entitled to borrow additional funds and to repay outstanding borrowings, subject to the terms of the promissory note. (b) 8% Senior Notes On November 17, 1998, the Company issued $750.0 million aggregate principal amount of 8% Senior Notes due 2008 (the "8% Senior Notes"). Interest on the 8% Senior Notes is payable semiannually, commencing on May 1, 1999. The 8% Senior Notes mature on November 1, 2008 and are redeemable, in whole or in part, at the option of the Company at a redemption price equal to 100% plus the Applicable Premium (as defined in the indenture governing the 8% Senior Notes) plus accrued and unpaid interest. Upon the occurrence of a change in control (as defined in the indenture governing the 8% Senior Notes), the holders of the 8% Senior Notes have the right to require the Company to repurchase all or any part of the 8% Senior Notes at a purchase price equal to 101% plus accrued and unpaid interest. The Clear Channel merger resulted in a change of control with respect to the 8% Senior Notes. (c) 8.125% Notes On December 22, 1997, the Company issued $500.0 million aggregate principal amount of 8.125% Senior Subordinated Notes due 2007 (the "8.125% Notes"). Interest on the 8.125% Notes is payable semiannually, commencing on June 15, 1998. The 8.125% Notes mature on December 15, 2007 and are redeemable, in whole or in part, at the option of the Company on or after December 15, 2002, at redemption prices ranging from 104.063% at December 15, 2002 and declining to 100% on or after December 15, 2005, plus in each case accrued and unpaid interest. Upon the occurrence of a change in control after December 15, 2000, the holders of the 8.125% Notes have the right to require the Company to repurchase all or any part of the 8.125% Notes at a purchase price equal to 101% plus accrued and unpaid interest. The Clear Channel merger resulted in a change of control with respect to the 8.125% Notes. -9- (d) 8.75% Notes Upon consummation of the merger with Chancellor Broadcasting Company on September 5, 1997, the Company assumed Chancellor Radio Broadcasting Company's $200.0 million aggregate principal amount of 8.75% Senior Subordinated Notes due 2007 (the "8.75% Notes"). Interest on the 8.75% Notes is payable semiannually, commencing on December 15, 1997. The 8.75% Notes mature on June 15, 2007 and are redeemable, in whole or in part, at the option of the Company on or after June 15, 2002, at redemption prices ranging from 104.375% at June 15, 2002 and declining to 100% on or after June 15, 2005, plus in each case accrued and unpaid interest. In addition, prior to June 15, 2000, the Company may redeem up to 25% of the original aggregate principal amount of the 8.75% Notes at a redemption price of 108.75% plus accrued and unpaid interest with the net proceeds of one or more public equity offerings. Upon the occurrence of a change in control after June 15, 2000, the holders of the 8.75% Notes have the right to require the Company to repurchase all or any part of the 8.75% Notes at a purchase price equal to 101% plus accrued and unpaid interest. The Clear Channel merger resulted in a change of control with respect to the 8.75% Notes. (e) 12.625% Notes On November 12, 1999, AMFM Operating completed a consent solicitation to modify certain timing restrictions on its ability to exchange all shares of its 12.625% Series E cumulative exchangeable preferred stock for its 12.625% Senior Subordinated Exchange Debentures due 2006. Consenting holders of 12.625% Series E cumulative exchangeable preferred stock received payments of $0.25 per share of 12.625% Series E cumulative exchangeable preferred stock. On November 23, 1999, the Company exchanged all of the shares of its 12.625% Series E cumulative exchangeable preferred stock for $143.1 million in aggregate principal amount of its 12.625% Senior Subordinated Exchange Debentures due 2006 (the "12.625% Notes"). Interest on the 12.625% Notes is payable semiannually, commencing on January 15, 2000. The 12.625% Notes mature on October 31, 2006 and are redeemable, in whole or in part, at the option of the Company on or after January 15, 2002, at redemption prices ranging from 106.313% at January 15, 2002 and declining to 100% on or after January 15, 2006, plus in each case accrued and unpaid interest. Upon the occurrence of a change in control (as defined in the indenture governing the 12.625% Notes), the holders of the 12.625% Notes have the right to require the Company to repurchase all or any part of the 12.625% Notes at a purchase price equal to 101% plus accrued and unpaid interest. The Clear Channel merger resulted in a change of control with respect to the 12.625% Notes. Other AMFM Operating's 8.75% Notes, 8.125% Notes and 12.625% Notes (collectively, the "Subordinated Notes") are unsecured obligations of AMFM Operating. The Subordinated Notes are subordinated in right of payment to all existing and any future senior indebtedness of AMFM Operating. The Subordinated Notes are fully and unconditionally guaranteed, on a joint and several basis, by all of AMFM Operating's direct and indirect subsidiaries (the "Subsidiary Guarantors"). The 8% Senior Notes are senior unsecured obligations of AMFM Operating and rank equal in right of payment to the obligations of AMFM Operating and all other indebtedness of AMFM Operating not expressly subordinated to the 8% Senior Notes. The 8% Senior Notes are fully and unconditionally guaranteed, on a joint and several basis, by the Subsidiary Guarantors. AMFM Operating's 8% Senior Notes and the Subordinated Notes contain customary restrictive covenants, which, among other things and with certain exceptions, limit the ability of the Company to incur additional indebtedness and liens in connection therewith, enter into certain transactions with affiliates, pay dividends, consolidate, merge or effect certain asset sales, issue additional stock, effect an asset swap and make acquisitions. AMFM Operating has guaranteed certain Clear Channel debt obligations, including a $1.9 billion reducing revolving long-term line of credit facility, a $1.5 billion five-year multi-currency revolving credit facility and a $1.5 billion 364-day revolving credit facility with outstanding balances at March 31, 2001 of $1.5 billion, $1.3 billion and $0, respectively. At March 31, 2001, the Company's contingent liability under these guarantees is limited to $1.0 billion. -10- The Company has no scheduled maturities of long-term debt until 2006. Note 5: SEGMENT DATA The Company has one reportable operating segment - radio broadcasting. The Company's media representation firm and corporate expenses are reported in "other". Revenue and expenses earned and charged between segments are recorded at fair value. (In thousands) March 31, ---------------------------------- 2001 2000 ---- ---- Net revenue Radio Broadcasting $ 388,698 $ 480,706 Other 46,839 49,784 Eliminations (4,789) (9,220) ------------ ------------ Consolidated $ 430,748 $ 521,270 Operating expenses Radio Broadcasting $ 214,947 $ 279,662 Other 41,778 37,646 Eliminations (4,789) (9,220) ------------ ------------ Consolidated $ 251,936 $ 308,088 Depreciation and Amortization Radio Broadcasting $ 257,224 $ 192,327 Other 4,853 17,241 ------------ ------------ Consolidated $ 262,077 $ 209,568 Operating loss Radio Broadcasting $ (83,474) $ (2,814) Other (14,053) (54,867) ------------- ------------- Consolidated $ (97,527) $ (57,681) Total identifiable assets Radio Broadcasting $ 24,386,579 $ 10,605,832 Other 1,031,974 1,815,515 ------------ ------------ Consolidated $ 25,418,553 $ 12,421,347

-11- Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Abbreviated pursuant to General Instruction H(2)(a) of Form 10-Q) RESULTS OF OPERATIONS Comparison of Three Months Ended March 31, 2001 to Three Months Ended March 31, 2000 is as follows: Consolidated (In thousands) Reported Basis: Three Months Ended March 31, --------------- ----------------------------------- 2001 2000 % Change ---- ---- -------- Net Revenue $430,748 $521,270 (17%) Operating Expenses 251,936 308,088 (18%) Corporate Expenses 11,868 15,302 (22%) -------- -------- EBITDA $166,944 $197,880 (16%) ======== ========

Net revenue decreased due to the 2000 divestitures required to comply with governmental directives regarding the merger with Clear Channel as well as high inventory demands experienced during the first quarter of 2000 resulting in higher advertising rates than the first quarter of 2001. Operating expenses decreased due to our 2000 divestitures and various cost control measures. Corporate expenses decreased due to savings associated with the merger with Clear Channel. Other Income and Expense Information Non-cash compensation expense of $2.4 million was recorded during the first quarter of 2001 due to unvested stock options granted to AMFM employees that have been assumed by Clear Channel and that are now convertible into Clear Channel stock. To the extent that these employees' options continue to vest post-merger, we recognize non-cash compensation expense over the remaining vesting period. Vesting dates range from January 2001 to April 2005. If no employees forfeit their unvested options by leaving the company, we expect to recognize non-cash compensation expense of approximately $23.0 million during the remaining vesting period. Depreciation and amortization expense increased from $209.6 million in the first quarter of 2000 to $262.1 million in the first quarter of 2001, a 25% increase. The increase is due primarily to the addition of goodwill as well as the revaluation of fixed and intangible assets related to the Clear Channel merger. This increase was partially offset by the divestitures and the change in the amortization period for intangible assets to 25 years as a result of the Clear Channel merger versus 15 years prior to the merger. Interest expense was $47.1 million and $113.9 million in the first quarter of 2001 and 2000, respectively, a decrease of $66.8 million or 59%. The decrease is due to cash proceeds from the divestitures, which were used to pay off the senior credit facility and various Senior Subordinated Notes. This decrease was partially offset by the interest incurred on the Clear Channel Promissory Note. The loss on sale of marketable securities of $35.3 million is comprised of a $27.7 million loss related to the sale of 6.5 million shares of Lamar Advertising Company and a loss of $7.6 million related to a write-down of an investment. Equity in earnings (loss) of nonconsolidated affiliates represents our pre-merger investment in Lamar Advertising Company. As a result of a Consent Decree requiring us to relinquish all shareholder rights with regard to our Lamar shares, this investment has been accounted for under the cost method post-merger. -12- Risks Regarding Forward Looking Statements Except for the historical information, this report contains various forward-looking statements that represent our expectations or beliefs concerning future events, including the future levels of cash flow from operations. Management believes that all statements that express expectations and projections with respect to future matters, including the strategic fit of radio assets; are forward-looking statements within the meaning of the Private Securities Litigation Reform Act. We caution that these forward-looking statements involve a number of risks and uncertainties and are subject to many variables that could have an adverse effect upon our financial performance. These statements are made on the basis of management's views and assumptions, as of the time the statements are made, regarding future events and business performance. There can be no assurance, however, that management's expectations will necessarily come to pass. A wide range of factors could materially affect future developments and performance, including: o the impact of general economic conditions; o shifts in population and other demographics; o industry conditions, including competition; o fluctuations in operating costs; o technological changes and innovations; o changes in labor conditions; o capital expenditure requirements; o legislative or regulatory requirements; o interest rates; o taxes; and o certain other factors set forth in our SEC filings. This list of factors that may affect future performance and the accuracy of forward-looking statements is illustrative, but by no means exhaustive. Accordingly, all forward-looking statements should be evaluated with the understanding of their inherent uncertainty. Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK. Omitted pursuant to General Instruction H(2)(c) of Form 10-Q. -13- Part II -- OTHER INFORMATION Item 6. EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits. See Exhibit Index on Page 15 (b) Reports on Form 8-K NONE Signatures Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. AMFM OPERATING INC. Date May 14, 2001 /s/ Herbert W. Hill, Jr. Herbert W. Hill, Jr. Senior Vice President and Chief Accounting Officer -14- INDEX TO EXHIBITS EXHIBIT NO. DESCRIPTION OF EXHIBIT -------------- ---------------------- 2.1(1) -- Agreement and Plan of Merger, dated as of August 26, 1998, among Chancellor Media Corporation, Capstar Broadcasting Corporation and CBC Acquisition Company, Inc., (see table of contents for list of omitted schedules and exhibits). 2.2(2) -- Amended and Restated Agreement and Plan of Merger, dated as of April 29, 1999, among Chancellor Media Corporation, Capstar Broadcasting Corporation, CBC Acquisition Company, Inc. and CMC Merger Sub, Inc. (see table of contents for list of omitted schedules and exhibits). 2.3(3) -- First Amendment to Amended and Restated Agreement and Plan of Merger, dated as of June 30, 1999, among Chancellor Media Corporation, Capstar Broadcasting Corporation and CMC Merger Sub, Inc. 2.4(5) -- Stock Purchase Agreement, dated as of June 1, 1999, by and between Lamar Advertising Company and CMCLA (see table of contents for list of omitted schedules and exhibits). 2.5(5) -- Subscription Agreement, dated as of June 1, 1999, by and between Lamar Advertising Company and CMCLA. 2.6(5) -- Voting Agreement, dated as of June 1, 1999, by and among Lamar Advertising Company, CMCLA and Reilly Family Limited Partnership. 2.7(3) -- Second Amended and Restated Stock Purchase Agreement dated as of August 11, 1999 by and among Lamar Advertising Company, Lamar Media Corp., Chancellor Mezzanine Holdings Corporation and CMCLA (see table of contents for list of omitted schedules and exhibits). 2.8(6) -- Registration Rights Agreement dated as of September 15, 1999 among Lamar Advertising Company, CMCLA and Chancellor Mezzanine Holdings Corporation. 2.9(6) -- Stockholders Agreement dated as of September 15, 1999 among Lamar Advertising Company and certain of its stockholders. 2.10(3) -- Second Amended and Restated Voting Agreement, dated as of August 11, 1999, among Lamar Advertising Company, CMCLA, Chancellor Mezzanine Holdings Corporation and Reilly Family Limited Partnership. 2.11(7) -- Agreement and Plan of Merger, dated October 2, 1999, by and between Clear Channel Communications, Inc., CCU Merger Sub, Inc. and AMFM Inc. (see table of contents for list of omitted schedules and exhibits). 3.1(8) -- Amended and Restated Certificate of Incorporation of AMFM Operating Inc. 3.2(9) -- Bylaws of AMFM Operating Inc. 4.1(10) -- Certificate of Designation for 12 5/8% Series E Cumulative Exchangeable Preferred Stock of AMFM Operating Inc. 4.2(11) -- Certificate of Amendment to Certificate of Designation for 12 5/8% Series E Cumulative Exchangeable Preferred Stock of AMFM Operating Inc. 4.3(12) -- Indenture, dated as of November 19, 1999, governing the 12 5/8% Senior Subordinated Exchange Debentures due 2006, of AMFM Operating Inc. 4.4(13) -- Indenture, dated as of June 24, 1997, governing the 8 3/4% Senior Subordinated Notes due 2007 of AMFM Operating Inc. (the "8 3/4% Notes Indenture"). 4.5(14) -- First Supplemental Indenture, dated as of September 5, 1997, to the 8 3/4% Notes Indenture. -15- 4.6(15) -- Second Supplemental Indenture, dated as of October 28, 1997, to the 8 3/4% Notes Indenture. 4.7(15) -- Third Supplemental Indenture, dated as of August 23, 1999, to the 8 3/4% Notes Indenture. 4.8(15) -- Fourth Supplemental Indenture, dated as of November 19, 1999, to the 8 3/4% Notes Indenture. 4.9(15) -- Fifth Supplemental Indenture, dated as of January 18, 2000, to the 8 3/4% Notes Indenture. 4.10(16) -- Amended and Restated Indenture, dated as of October 28, 1997, governing the 10 1/2% Senior Subordinated Notes due 2007 of AMFM Operating Inc. (the "10 1/2% Notes Indenture"). 4.11(16) -- Second Supplement Indenture, dated as of October 28, 1997, to the 10 1/2% Notes Indenture. 4.12(15) -- Third Supplemental Indenture, dated as of August 23, 1999, to the 10 1/2% Notes Indenture. 4.13(15) -- Fourth Supplemental Indenture, dated as of November 19, 1999, to the 10 1/2% Notes Indenture. 4.14(15) -- Fifth Supplemental Indenture, dated as of January 18, 2000, to the 10 1/2% Notes Indenture. 4.15(17) -- Indenture, dated as of December 22, 1997, governing the 8 1/8% Senior Subordinated Notes due 2007 of AMFM Operating Inc. (the "8 1/8% Notes Indenture"). 4.16(15) -- First Supplemental Indenture, dated as of August 23, 1999, to the 8 1/8% Notes Indenture. 4.17(15) -- Second Supplemental Indenture, dated as of November 19, 1999, to the 8 1/8% Notes Indenture. 4.18(15) -- Third Supplemental Indenture, dated as of January 18, 2000, to the 8 1/8% Notes Indenture. 4.19(4) -- Indenture, dated as of November 17, 1998, governing the 8% Senior Notes due 2008 of AMFM Operating Inc. (the "8% Notes Indenture"). 4.20(15) -- First Supplemental Indenture, dated as of August 23, 1999, to the 8% Notes Indenture. 4.21(15) -- Second Supplemental Indenture, dated as of November 19, 1999, to the 8% Notes Indenture. 4.22(15) -- Third Supplemental Indenture, dated as of January 18, 2000, to the 8% Notes Indenture. 4.23(18) -- Indenture, dated as of May 31, 1996, governing the 10 3/4% Senior Subordinated Notes due 2006 of AMFM Operating Inc. (the "10 3/4% Notes Indenture"). 4.24(19) -- First Supplemental Indenture, dated as of November 25, 1996, to the 10 3/4% Notes Indenture. 4.25(19) -- Second Supplemental Indenture, dated as of January 10, 1997, to the 10 3/4% Notes Indenture. 4.26(19) -- Third Supplemental Indenture, dated as of January 13, 1997, to the 10 3/4% Notes Indenture. 4.27(20) -- Fourth Supplemental Indenture, dated as of January 29, 1997, to the 10 3/4% Notes Indenture. 4.28(20) -- Fifth Supplemental Indenture, dated as of May 15, 1997, to the 10 3/4% Notes Indenture. 4.29(20) -- Sixth Supplemental Indenture, dated as of July 8, 1997, to the 10 3/4% Notes Indenture. 4.30(20) -- Seventh Supplemental Indenture, dated as of October 9, 1997 to the 10 3/4% Notes Indenture. 4.31(20) -- Eighth Supplemental Indenture, dated as of October 10, 1997, to the 10 3/4% Notes Indenture. 4.32(20) -- Ninth Supplemental Indenture, dated as of January 23, 1998, to the 10 3/4% Notes Indenture. 4.33(21) -- Tenth Supplemental Indenture, dated as of February 2, 1998, to the 10 3/4% Notes Indenture. -16- 4.34(15) -- Eleventh Supplemental Indenture, dated as of May 18, 1998, to the 10 3/4% Notes Indenture. 4.35(15) -- Twelfth Supplemental Indenture, dated as of May 29, 1998, to the 10 3/4% Notes Indenture. 4.36(15) -- Thirteenth Supplemental Indenture, dated as of November 12, 1999, to the 10 3/4% Notes Indenture. 4.41(22) -- Sixth Supplemental Indenture, dated June 2, 2000, to the Indenture, dated as of October 28, 1997, governing the 10 1/2% Senior Subordinated Notes due 2007 of AMFM Operating Inc. 4.42(23) -- Intercompany Promissory Note between AMFM Operating Inc. and Clear Channel Communications, Inc. dated August 30, 2000. ------------ (1) Incorporated by reference to Exhibits to the Quarterly Report on Form 10-Q of Chancellor Media Corporation and CMCLA for the quarterly period ending September 30, 1998. (2) Incorporated by reference to Exhibits to the Quarterly Report on Form 10-Q of Chancellor Media Corporation and CMCLA for the quarterly period ending March 31, 1999. (3) Incorporated by reference to Exhibits to the Quarterly Report on Form 10-Q of AMFM Inc. for the quarterly period ending June 30, 1999. (4) Incorporated by reference to Exhibits to CMCLA's Registration Statement on Form S-4, initially filed on November 9, 1998, as amended (Registration Number 333-66971). (5) Incorporated by reference to Exhibits to the Current Report on Form 8-K of Chancellor Media Corporation filed on June 8, 1999. (6) Incorporated by reference to Exhibits to AMFM Inc.'s Amendment No. 1 to Schedule 13D filed on March 10, 2000 regarding AMFM Inc.'s ownership interest in Lamar Advertising Company. (7) Incorporated by reference to Exhibit 2.1 to the Current Report on Form 8-K of AMFM Inc., filed on October 5, 1999. (8) Incorporated by reference to Exhibit 3.1 to the Quarterly Report on Form 10-Q of Capstar Communications, Inc. for the quarterly period ending June 30, 1999. (9) Incorporated by reference to Exhibit 3.2 to the Annual Report on Form 10-K of Capstar Communications, Inc. for the year ended December 31, 1998. (10) Incorporated by reference to Exhibits to the Current Report on Form 8-K of SFX Broadcasting, Inc., filed on January 27, 1997. (11) Incorporated by reference to Exhibits to SFX Broadcasting, Inc.'s Annual Report on Form 10-K for the year ended December 31, 1997. (12) Incorporated by reference to Exhibit 4.1 to the Current Report on Form 8-K of AMFM Operating Inc. filed on November 19, 1999. (13) Incorporated by reference to Exhibit 4.1 to the Current Report on Form 8-K of Chancellor Broadcasting Company and Chancellor Radio Broadcasting Company filed on July 17, 1997. (14) Incorporated by reference to Exhibits to CMCLA's Registration Statement on Form S-4, initially filed on September 26, 1997, as amended (Registration Number 333-36451). -17- (15) Incorporated by reference to Exhibits to the Annual Report on Form 10-K of AMFM Inc. for the year ended December 31, 1999. (16) Incorporated by reference to U.C. Exhibits to the Annual Report on Form 10-K of Chancellor Media Corporation and CMCLA for the year ended December 31, 1997. (17) Incorporated by reference to Exhibits to CMCLA's Registration Statement on Form S-4, initially filed on April 22, 1998, as amended (Registration Number 333-50739). (18) Incorporated by reference to Exhibits to SFX Broadcasting, Inc.'s Registration Statement on Form S-4, initially filed on June 21, 1996, as amended (Registration Number 333-06553). (19) Incorporated by reference to Exhibits to the Current Report on Form 8-K of SFX Broadcasting, Inc., filed on January 17, 1997. (20) Incorporated by reference to Exhibits to Capstar Broadcasting Corporation's Amendment No. 2 to Registration Statement on Form S-1, filed on May 11, 1998 (Registration Number 333-48819). (21) Incorporated by reference to Exhibits to SFX Broadcasting, Inc.'s Annual Report on Form 10-K for the year ended December 31, 1996. (22) Incorporated by reference to Exhibits to AMFM Inc.'s Quarterly Report on Form 10-Q for the quarter ended June 30, 2000. (23) The Company has not filed long-term debt instruments where the total amount under such instruments is less than ten percent of the total assets of the Company and its subsidiaries on a consolidated basis. However, the Company will furnish a copy of such instruments to the Commission upon request. -18-

AMFM OPERATING INC 10-Q