AMFM OPERATING INC - 10-K Annual Report

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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

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Form 10-K

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2002

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 or other jurisdiction of (I.R.S. Employer

incorporation or organization) Identification Number)

200 East Basse Road, San Antonio, Texas 78209
(Address of principal executive offices, including zip code)

(210) 822-2828
(Registrant's telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act: None

Securities Registered Pursuant to Section 12(g) of the Act: None

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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 such 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 by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [X]

Indicate by check mark whether the registrant is an accelerated filer (as
defined in Exchange Act Rule 12b-2). YES [ ] NO [X]

AMFM Operating Inc. is a wholly-owned subsidiary of Clear Channel
Communications, Inc., and there is no market for the Registrant's common stock.
As of March 28, 2003, 1,040 shares of the Registrant's common stock were
outstanding.

The Registrant meets the conditions set forth in, and is filing this form
with the reduced disclosure format prescribed by, General Instruction I(1)(a)
and (b) of Form 10-K.

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TABLE OF CONTENTS

PART I

ITEM 1. Business

(Abbreviated pursuant to General Instruction I(2)(d) of Form 10-K)

General

AMFM Operating Inc., together with its subsidiaries, ("AMFM Operating" or
the "Company") 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. As
of December 31, 2002 we owned or operated 530 radio stations in 127 markets in
the United States. Our operations also include Katz Media Group, Inc. ("Katz"),
a full-service media representation firm that sells national spot advertising
time for its clients in the radio and television industries throughout the
United States and for our portfolio of stations, and a national radio network,
which broadcasts advertising and syndicated programming shows to a national
audience.

Radio Broadcasting

Radio Stations

Our portfolio of radio stations is geographically diversified and employs a
wide variety of programming formats. A station's format can be important in
determining the size and characteristics of its listening audience. Advertisers
often tailor their advertisements to appeal to selected population or
demographic segments.

Most of our radio broadcasting revenue is generated from the sale of
national and local advertising. Additional revenue is generated from network
compensation and event payments, barter and other miscellaneous transactions.
Advertising rates charged by a radio station are based primarily on the
station's ability to attract audiences having certain demographic
characteristics in the market area which advertisers want to reach, as well as
the number of stations and other media competing in the market and the relative
demand for radio in any given market.

Advertising rates generally are the highest during morning and evening
drive-time hours. Depending on the format of a particular station, there are
predetermined numbers of advertisements that are broadcast each hour. We
determine the number of advertisements broadcast hourly to maximize available
revenue dollars without jeopardizing listening levels. Although the number of
advertisements broadcast during a given time period may vary, the total number
of advertisements broadcast on a particular station generally does not vary
significantly from year to year.

Our radio broadcasting results are dependent on a number of factors,
including the general strength of the economy, ability to provide popular
programming, relative efficiency of radio broadcasting compared to other
advertising media, signal strength, technological capabilities and governmental
regulations and policies.

Other Radio Operations

Our radio operations also include a national radio network, which broadcasts
advertising and syndicated programming shows to a national audience. The
national radio network's syndicated programming shows include, among others,
American Top 40 with Casey Kasem, The Bob & Tom Morning Show and special events
such as horse racing's Triple Crown, which includes the Kentucky Derby. The
operations of our national radio networks have been integrated into Premiere
Radio Networks, Clear Channel's radio syndication business.

Other Operations

Katz is a full-service media representation firm that sells national spot
advertising time for clients in the radio and television industries throughout
the United States. Katz represents over 2,500 radio stations and 350 television
stations.

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Katz generates revenues primarily through contractual commissions realized
from the sale of national spot advertising airtime. National spot advertising is
commercial airtime sold to advertisers on behalf of radio and television
stations. Katz represents its media clients pursuant to media representation
contracts, which typically have initial terms of up to ten years in length.

ITEM 2. Properties

(Abbreviated pursuant to General Instruction I(2)(d) of Form 10-K)

In the latter part of 2002, Clear Channel and AMFM Operating moved certain
of the radio corporate operations to the Clear Channel corporate headquarters in
San Antonio, Texas, primarily housed in Clear Channel's company owned 55,000
square foot office building. Previously, our corporate radio operations were
headquartered in 21,201 square feet of leased office space in Covington,
Kentucky. The lease on this premises expires in November 2008. Although the
executives of our radio operations and their support functions are in San
Antonio, we still occupy the leased space in Covington to house other support
functions for our radio operations. The types of properties required to support
each of our radio stations include offices, studios, transmitter sites and
antenna sites. A radio station's studios are generally housed with its offices
in downtown or business districts. A radio station's transmitter sites and
antenna sites are generally located in a manner that provides maximum market
coverage.

Katz operates out of 27 sales offices throughout the United States.

No one property is material to our overall operations. We believe that our
properties are in good condition and suitable for our operations.

ITEM 3. Legal Proceedings

In September 1998, a stockholder class action complaint was filed in the
Delaware Court of Chancery by a stockholder purporting to act individually and
on behalf of all other persons, other than defendants, who own securities of
AMFM Inc. and are similarly situated. The defendants named in the case are AMFM
Inc., Hicks, Muse, Tate & Furst Incorporated, Thomas O. Hicks, Jeffrey A.
Marcus, James E. de Castro, Eric C. Neuman, Lawrence D. Stuart, Jr., Steven
Dinetz, Thomas J. Hodson, Perry Lewis, John H. Massey and Vernon E. Jordan, Jr.
The plaintiff alleges breach of fiduciary duties, gross mismanagement, gross
negligence or recklessness, and other matters relating to the defendants'
actions in connection with the Capstar Broadcasting Corporation merger. The
plaintiff sought to certify the complaint as a class action, enjoin consummation
of the Capstar Broadcasting Corporation merger, order defendants to account to
plaintiff and other alleged class members for damages, and award attorneys' fees
and other costs. The Company believes that the lawsuit is without merit and
intends to vigorously defend the action. This case was dismissed due to lack of
prosecution.

From time to time we become involved in various claims and lawsuits
incidental to our business, including defamation actions. In the opinion of our
management, after consultation with counsel, any ultimate liability arising out
of currently pending claims and lawsuits will not have a material effect on our
financial condition or operations.

ITEM 4. Submission of Matters to a Vote of Security Holders

Omitted under the reduced disclosure format pursuant to General Instruction
I(2)(c) of Form 10-K.

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PART II

ITEM 5. Market for Registrant's Common Equity and Related Stockholder Matters

AMFM Operating is a wholly-owned subsidiary of Clear Channel and there is no
market for the Registrant's common stock.

ITEM 6. Selected Consolidated Financial Data

Omitted under the reduced disclosure format pursuant to General Instruction
I(2)(a) of Form 10-K.

ITEM 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations

(Abbreviated pursuant to General Instruction I(2)(a) of Form 10-K)

Results of Operations

Year Ended December 31, 2002 Compared to Year Ended December 31, 2001

Revenue increased $120.9 million for the year ended December 31, 2002 as
compared to the same period of 2001. We experienced broad based revenue
increases during 2002. Growth occurred across our large and small market
clusters and in national and local sales. This growth was spurred by growth in
our auto, retail, telecom/utility, consumer products and entertainment
advertising categories. As we progressed through the year, we saw more of our
advertising categories contribute to the revenue gains, which fueled the growth
across our markets. Our national and local revenues grew 10% and 5%,
respectively, for the year ended December 31, 2002 as compared to the same
period of 2001.

Divisional operating expenses decreased $13.0 million for the year ended
December 31, 2002 as compared to the same period of 2001. The decrease was
primarily attributable to decreases in bad debt expense and promotional expenses
offset by slight increases in radio commissions and expenses related to
broadcasting rights for various sporting events as well as increases in certain
operating contracts from our syndicated radio business.

Other Income and Expense Information

Non-cash compensation expense relates to unvested stock options granted to
the Company's 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 vary through April 2005. If no
employees forfeit their unvested options by leaving the company, we expect to
recognize non-cash compensation expense of approximately $3.1 million during the
remaining vesting period.

Depreciation and amortization expense decreased $960.2 million for the year
ended December 31, 2002 as compared to the same period of 2001. Upon our
adoption of Financial Accounting Standards No. 142, Goodwill and Other
Intangible Assets, on January 1, 2002, we no longer amortize goodwill and
Federal Communications Commission ("FCC") licenses. For the year ended December
31, 2001, goodwill and FCC license amortization was approximately $966.1
million.

Corporate expenses increased $13.1 million for the year ended December 31,
2002 from the same period of 2001. Clear Channel allocates corporate expense to
the Company based on head count. Late in 2001, head count increased related to
additional sales fore

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personnel, thus increasing the corporate allocation to the Company. In addition,
corporate expenses increased in 2002 related to an increase in performance-based
bonus expenses.

Interest expense was $112.0 million and $176.7 million for the years ended
December 31, 2002 and 2001 respectively, a decrease of $64.7 million. The
decrease is due to the January 15, 2002 redemption of all of the outstanding
12.625% exchange debentures as well as a $187.2 million decrease in the balance
of the Clear Channel promissory note, which bears interest at 7% per annum.

The gain on sale of marketable securities for the year ended December 31,
2002 of $4.0 million is related to the sale of 791,000 shares of Entravision
Corporation. The loss on sale of marketable securities for the year ended
December 31, 2001 of $242.7 million is comprised of a $235.0 million loss
related to the sale of 24.9 million shares of Lamar Advertising Company and a
loss of $7.7 million related to a write-down of an investment that had a decline
in its market value that was considered to be other-than-temporary.

Other income (expense) - net was income of $25.2 million for the year ended
December 31, 2002 as compared to income of $10.0 million for the same period of
2001, a $15.2 million increase in 2002. During 2002, the Company recognized a
$14.8 million gain on the sale of representation contracts and a $6.2 million
gain recognized on the early extinguishment of debt.

Income tax expense was $299.6 million for the year ended December 31, 2002,
compared to a benefit of $141.7 million for the year ended December 31, 2001.
Income taxes for years ended December 31, 2002 and 2001 were provided at the
federal and state statutory rates adjusted for the effects of permanent tax
items. During the year ended December 31, 2001, as a result of our large amounts
of non-deductible goodwill amortization, our effective tax rate was adversely
impacted. As we no longer amortize goodwill, our effective rate for the year
ended December 31, 2002, more closely approximates our statutory tax rates.

Income (loss) before cumulative effect of a change in accounting principle
for the year ended December 31, 2002 was income of $440.1 million, as compared
to loss of $534.2 million for the same period of 2001. Income (loss) before
cumulative effect of a change in accounting principle for the year ended
December 31, 2001, if we had adopted Statement 142 as of January 1, 2001, would
have been income of $172.8 million.

The loss recorded as a cumulative effect of a change in accounting principle
during 2002 relates to our adoption of Statement 142 on January 1, 2002.
Statement 142 requires us to test goodwill and indefinite-lived intangibles for
impairment using a fair value approach. As a result of the goodwill test, we
recorded a non-cash impairment charge of approximately $3.9 billion upon
adoption. Also, as a result of the indefinite-lived intangible test, we recorded
a non-cash, net of tax impairment charge on our FCC licenses of approximately
$5.5 billion.

The non-cash impairments of our goodwill and FCC licenses were primarily
caused by unfavorable economic conditions, which persisted in the radio
broadcast business throughout 2001. This weakness contributed to our customers
reducing the number of advertising dollars spent with us. These conditions
adversely impacted the cash flow projections used to determine the fair value of
our licenses and reporting unit. These factors resulted in the non-cash
impairment charge of a portion of our licenses and goodwill.

Caution Concerning Forward Looking Statements

The Private Securities Litigation Reform Act of 1995 provides a safe harbor
for forward-looking statements made by us or on our behalf. Except for the
historical information, this report contains various forward-looking statements
which 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; expansion of market share;
and the availability of capital resources; 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 which could impact 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 in the U.S. and in other
countries in which we currently do business;

o the impact of the geopolitical environment;

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o our ability to integrate the operations of recently acquired
companies;

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 litigation settlements;

o legislative or regulatory requirements;

o interest rates;

o the effect of leverage on our financial position and earnings;

o taxes;

o access to capital markets; and

o certain other factors set forth in our filings with the Securities
and Exchange Commission ("SEC").

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 7A. Quantitative and Qualitative Disclosures About Market Risk

Interest Rate Risk

Our exposure to market risk associated with changes in interest rates
relates primarily to our debt obligations. The following tables present required
principal cash flows by maturity date and the related average interest rate for
outstanding debt at December 31, 2002 and December 31, 2001. Unamortized fair
value purchase accounting adjustment related to the merger with Clear Channel of
$44.6 million and $66.5 million at December 31, 2002 and 2001, respectively, are
not included in the tables below. Our promissory note payable to Clear Channel
bears interest at 7% per annum and matures on August 30, 2010 or upon demand.
The Company has an understanding with Clear Channel that Clear Channel currently
has no intention of demanding payment on this note prior to its maturity. Book
value for the promissory note is assumed to approximate fair market value at
December 31, 2002.

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ITEM 8. Financial Statements and Supplementary Data

REPORT OF INDEPENDENT AUDITORS

The Board of Directors and Shareholder of
AMFM Operating Inc.:

We have audited the accompanying consolidated balance sheets of AMFM Operating
Inc. (an indirect, wholly-owned subsidiary of Clear Channel Communications,
Inc.) and subsidiaries as of December 31, 2002 and 2001, and the related
consolidated statements of operations, equity, and cash flows for the two years
ended December 31, 2002 and for the period from August 31, 2000 through December
31, 2000 (Post-Merger) and the period from January 1, 2000 through August 30,
2000 (Pre-Merger). These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.

We conducted our audits in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.

In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of AMFM Operating
Inc. and subsidiaries at December 31, 2002 and 2001, and the consolidated
results of their operations and their cash flows for the two years ended
December 31, 2002 and for the period from August 31, 2000 through December 31,
2000 (Post-Merger) and the period from January 1, 2000 through August 30, 2000
(Pre-Merger), in conformity with accounting principles generally accepted in the
United States.

As discussed in Note C to the consolidated financial statements, effective
January 1, 2002, the Company adopted Statement of Financial Accounting Standards
No. 142, Goodwill and Other Intangible Assets.

/s/ ERNST & YOUNG LLP
San Antonio, Texas
March 21, 2003

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AMFM OPERATING INC. AND SUBSIDIARIES
(an indirect, wholly-owned subsidiary of Clear Channel Communications, Inc.)

CONSOLIDATED BALANCE SHEETS
ASSETS
(In thousands)

See Notes to Consolidated Financial Statements

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AMFM OPERATING INC. AND SUBSIDIARIES
(an indirect, wholly-owned subsidiary of Clear Channel Communications, Inc.)

CONSOLIDATED BALANCE SHEETS
LIABILITIES AND SHAREHOLDER'S EQUITY
(In thousands)

See Notes to Consolidated Financial Statements

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AMFM OPERATING INC. AND SUBSIDIARIES
(an indirect, wholly-owned subsidiary of Clear Channel Communications, Inc.)

CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands)

See Notes to Consolidated Financial Statements

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AMFM OPERATING INC. AND SUBSIDIARIES
(an indirect, wholly-owned subsidiary of Clear Channel Communications, Inc.)

CONSOLIDATED STATEMENTS OF EQUITY
(In thousands, except for share data)

See Notes to Consolidated Financial Statements

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AMFM OPERATING INC. AND SUBSIDIARIES
(an indirect, wholly-owned subsidiary of Clear Channel Communications, Inc.)

CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)

See Notes to Consolidated Financial Statements

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AMFM OPERATING INC. AND SUBSIDIARIES
(an indirect, wholly-owned subsidiary of Clear Channel Communications, Inc.)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE A - CLEAR CHANNEL MERGER

On August 30, 2000, Clear Channel Communications, Inc. ("Clear Channel")
acquired AMFM Inc. ("AMFM"), indirect parent of AMFM Operating Inc. (the
"Company" or "AMFM Operating"), pursuant to a merger agreement dated October 2,
1999. As a result of the merger, AMFM stockholders received 0.94 shares of Clear
Channel common stock, on a fixed exchange basis, for each share of AMFM common
stock held on the closing date of the transaction and AMFM became a wholly-owned
subsidiary of Clear Channel. In order to obtain governmental approval for the
merger, the Company completed the divestiture of 58 radio stations in 22 markets
for aggregate gross proceeds of approximately $2.8 billion, including the
receipt of 35 radio stations and restricted cash of approximately $440.0
million. Eight other stations with a net asset value of $132.9 million at August
30, 2000 were placed into trust pending their eventual sale. All of these
stations were subsequently sold. On February 21, 2001, the restricted trusts
expired and the $131.6 million not expended on replacement radio assets was
refunded to the Company. The Company also agreed to sell its 26.2 million shares
in Lamar Advertising Company ("Lamar") by December 31, 2002. All 26.2 million
shares of Lamar were sold in a series of transactions during 2000 and 2001. The
Company had previously accounted for its investment in Lamar using the equity
method of accounting. Since the investment was to be passive while the Company
held any interest in Lamar, the Company used the cost method of accounting for
periods subsequent to the merger date.

The combined company restructured the former AMFM operations primarily
during 2001. The Company communicated to all affected employees the last date of
their employment. The AMFM corporate offices in Dallas and Austin, Texas were
closed on March 31, 2001 and other operations of AMFM have either been
discontinued or integrated into existing similar operations of Clear Channel. As
of December 31, 2002, the restructuring has resulted in the actual or pending
termination of 430 employees. The Company has recorded a liability in purchase
accounting primarily related to severance for terminated employees and lease
terminations as follows:

The remaining severance and lease accrual is comprised of $21.6 million of
severance and $7.8 million of lease termination obligations. The severance
accrual will be paid over the next several years. The lease termination accrual
will be paid over the next five years. During 2002, $5.6 million was paid and
charged to the restructuring reserve related to severance. The adjustments to
the restructuring accrual presented above, which are primarily related to
additional severance and compensation accruals, were recorded within goodwill.
During 2001, the Company made adjustments to finalize the purchase price
allocation related to the AMFM merger resulting in an additional adjustment to
goodwill of $27.9 million. Any potential excess reserves will be recorded as an
adjustment to the purchase price.

NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Description of Business

AMFM Operating Inc., together with its subsidiaries, is an indirect,
wholly-owned subsidiary of Clear Channel, a diversified media company with
operations in radio broadcasting, outdoor advertising and live entertainment.
Prior to Clear Channel's acquisition of AMFM, AMFM Operating was an indirect,
wholly-owned subsidiary of AMFM. As of December 31, 2002, the Company owned or

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operated 530 radio stations in 127 markets in the United States. The Company's
operations also include Katz Media Group, Inc. ("Katz"), a full-service media
representation firm that sells national spot advertising time for its clients in
the radio and television industries throughout the United States and for the
Company's portfolio of stations, and a national radio network, which broadcasts
advertising and syndicated programming shows to a national audience.

Clear Channel Push-Down Accounting Adjustments

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 period subsequent to August 30, 2000 and are designated as
"Post-Merger". The financial statements for the Company for the periods ended
prior to August 30, 2000 were prepared using the Company's historical basis of
accounting and are designated "Pre-Merger." The comparability of the operating
results for the Pre-Merger and Post-Merger periods are affected by the purchase
accounting adjustments, including the amortization of intangibles over a period
of 25 years reflected in the Post Merger period prior to adoption of Statement
of Financial Accounting Standards No. 142. Prior to the merger, intangible
assets were generally amortized over a period of 15 years. Subsequent to the
Company adopting Statement of Financial Accounting Standards No. 142, Goodwill
and Other Intangible Assets ("Statement 142"), on January 1, 2002, these
intangibles are no longer amortized. See Note C for further discussion. In
addition, corporate expense is allocated to the financial statements of AMFM
Operating based on Clear Channel's estimate of actual expense.

Principles of Consolidation

The consolidated financial statements include the accounts of AMFM Operating
and its subsidiaries. Significant intercompany accounts have been eliminated in
consolidation. Certain amounts in prior years have been reclassified to conform
to the 2002 presentation.

Cash and Cash Equivalents

Cash and cash equivalents include all highly liquid investments with an
original maturity of three months or less.

Allowance for Doubtful Accounts

The Company evaluates the collectibility of its accounts receivable based on
a combination of factors. In circumstances where it is aware of a specific
customer's inability to meet its financial obligations, it records a specific
reserve to reduce the amounts recorded to what it believes will be collected.
For all other customers, it recognizes reserves for bad debt based on historical
experience of bad debts as a percent of revenues for each business unit,
adjusted for relative improvements or deteriorations in the agings and changes
in current economic conditions.

Property, Plant and Equipment

Property, plant and equipment are stated at cost. Depreciation is computed
using the straight-line method at rates that, in the opinion of management, are
adequate to allocate the cost of such assets over their estimated useful lives,
which are as follows:

Buildings and improvements - 10 to 39 years
Towers, transmitters and studio equipment - 7 to 20 years
Furniture and other equipment - 3 to 20 years
Leasehold improvements - generally life of lease

Expenditures for maintenance and repairs are charged to operations as
incurred, whereas expenditures for renewal and betterments are capitalized.

The Company tests for possible impairment of property, plant, and equipment
whenever events or changes in circumstances, such as a reduction in operating
cash flow or a dramatic change in the manner that the asset is intended to be
used indicate that the carrying amount of the asset is not recoverable. If
indicators exist, the Company compares the undiscounted cash flows related to
the asset to the carrying value of the asset. If the carrying value is greater
than the undiscounted cash flow amount, an impairment charge is recorded in
depreciation expense in the statement of operations for amounts necessary to
reduce the carrying value of the asset to fair value.

Intangible Assets

The Company classifies intangible assets as definite-lived or
indefinite-lived intangible assets, as well as goodwill. Definite-lived
intangibles include primarily talent and representation contracts, both of which
are amortized over the estimated lives of the relationships, typically four to
fifteen years. The Company periodically reviews the appropriateness of the
amortization periods related

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to its definite-lived assets. These assets are stated at cost. Indefinite-lived
intangibles include broadcast FCC licenses. The excess cost over fair value of
net assets acquired is classified as goodwill. The indefinite-lived intangibles
and goodwill are not subject to amortization, but are tested for impairment at
least annually.

The Company tests for possible impairment of definite-lived intangible
assets whenever events or changes in circumstances, such as a reduction in
operating cash flow or a dramatic change in the manner that the asset is
intended to be used indicate that the carrying amount of the asset is not
recoverable. If indicators exist, the Company compares the undiscounted cash
flows related to the asset to the carrying value of the asset. If the carrying
value is greater than the undiscounted cash flow amount, an impairment charge is
recorded in amortization expense in the statement of operations for amounts
necessary to reduce the carrying value of the asset to fair value.

At least annually, the Company performs its impairment test for
indefinite-lived intangibles and goodwill using a discounted cash flow model to
determine the assets' fair value. Certain assumptions are used in determining
the fair value, including assumptions about the cash flow growth rates of the
Company's businesses. Additionally, the fair values are significantly impacted
by macro-economic factors including market cash flow multiples and long-term
interest rates that exists at the time that the discounted cash flows models are
prepared. Impairment charges, other than the charge taken under the transitional
rules of Statement 142, are recorded in amortization expense in the statement of
operations.

Financial Instruments

Due to their short maturity, the carrying amounts of accounts receivable,
accounts payable and accrued liabilities approximated their fair values at
December 31, 2002 and 2001.

Income Taxes

The operations of the Company for periods subsequent to the Clear Channel
merger are included in a consolidated federal income tax return filed by Clear
Channel. The Company's provision for income taxes has been computed on the basis
that the Company files separate consolidated income tax returns with its
subsidiaries. As provided under our tax sharing arrangement, tax payments are
made to Clear Channel on the basis of our separate taxable income. Tax benefits
recognized on employee stock options exercises are retained by Clear Channel.

Subject to the provisions of the tax sharing arrangement with Clear Channel,
the Company computes its deferred income tax provision using the liability
method as if we were a separate taxpayer. Deferred tax assets and liabilities
are determined based on differences between financial reporting bases and tax
bases of assets and liabilities and are measured using the enacted tax rates
expected to apply to taxable income in the periods in which the deferred tax
asset or liability is expected to be realized or settled. Deferred tax assets
are reduced by valuation allowances if the Company believes it is more likely
than not that some portion or all of the asset will not be realized.

Revenue Recognition

Radio broadcasting revenue is recognized as advertisements or programs are
broadcast and is generally billed monthly. Revenue is reported net of agency
commissions. Agency commissions are calculated based on a stated percentage
applied to gross billing revenue. Clients remit the gross billing amount to the
agency and the agency remits gross billings less their commission to the
Company.

Media representation revenue is derived from commissions on sales of
advertising time for radio and television stations under representation
contracts by the Company's media representation firm and is recognized as
advertisements are broadcast. Costs of obtaining media representation contracts
are deferred and amortized over the related period of benefit.

Revenue from barter transactions is recognized when advertisements are
broadcast. Merchandise or services received are charged to expense when received
or used.

The Company believes that the credit risk, with respect to trade receivables
is limited due to the large number and the geographic diversification of its
customers.

Clear Channel Stock Option Plans

The Company does not have any compensation plans under which it grants stock
awards to employees. Prior to the merger with Clear Channel, AMFM granted stock
options to the Company's officers and other key employees on behalf of the
Company.

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\
Subsequent to the merger, Clear Channel grants stock options to the Company's
officers and other key employees on behalf of the Company. Approximately 27.1
million options to purchase AMFM common stock were outstanding as of the merger
date and were converted into options to purchase Clear Channel common stock
using the conversion ratio of 0.94. Clear Channel assumed the outstanding
options to purchase AMFM common stock on the same terms and conditions as were
applicable prior to the merger.

The Company accounts for the stock-based award plans in accordance with
Accounting Principles Board Opinion No. 25, Accounting for Stock Issued to
Employees, and related interpretations, under which compensation expense is
recorded to the extent that the current market price of the underlying stock
exceeds the exercise price. The Company recognized non-cash compensation expense
of $36.1 million for the period from January 1 to August 30, 2000, primarily
related to amendments made to the stock option agreements of certain operating
personnel terminated upon implementation of the Company's consolidation
strategy; and $16.0 million, $12.4 million and $4.4 million for the period from
August 31 to December 31, 2000, and for the years ended December 31, 2001 and
2002, respectively, primarily related to the vesting of executive stock options.
In addition, the merger and non-recurring costs for the period from January 1 to
August 30, 2000 include a non-cash compensation charge of $67.8 million,
primarily related to executive stock options which became exercisable upon the
merger date.

Had the Company determined compensation cost based on the fair value at the
grant date for its stock options under Statement of Financial Accounting
Standards ("SFAS") No. 123, Accounting for Stock-Based Compensation, the
Company's pro forma net income (loss) would have been $639.0 million for the
period from January 1 to August 30, 2000. For periods prior to the merger with
Clear Channel, the fair value for the stock options was estimated at the date of
grant using a Black-Scholes option pricing model with the following
weighted-average assumptions: expected volatility ranging from 39.9% to 45.8%;
risk-free interest rates ranging from 4.7% to 6.7%; dividend yields of 0%; and
expected lives ranging from three to seven years. Subsequent to the merger, the
Company's employees are granted stock options under Clear Channel's stock option
plans. Stock option grants for the post-merger period from August 31 to December
31, 2000 are not significant. The Company's pro forma net loss would have been
$546.9 million for the year ended December 31, 2001. For 2001, the fair value of
the stock options was estimated at the date of grant using a Black-Scholes
option pricing model with the following weighted-average assumptions: expected
volatility ranging from 35.8% to 36.9%; risk-free interest rates ranging from
4.9% to 5.2%; dividend yields of 0%; and expected lives ranging from six to
eight years. The Company's pro forma net income before the cumulative effect of
a change in accounting principle would have been $437.9 million for the year
ended December 31, 2002. For 2002, the fair value of the stock options was
estimated at the date of grant using a Black-Scholes option pricing model with
the following weighted-average assumptions: expected volatility ranging from
39.3% to 45.1%; risk-free interest rates ranging from 3.7% to 4.4%; dividend
yields of 0%; and expected lives ranging from three to eight years.

Use of Estimates

The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates, judgments
and assumptions that affect the amounts reported in the financial statements and
accompanying notes. The Company basis its estimates on historical experience and
on various other assumptions that are believed to be reasonable under the
circumstances. Actual results could differ from those estimates.

Representation Contracts

Representation contracts typically may be terminated by either party upon
written notice. Upon termination, a buyout agreement is typically entered into
for the purchase of the remaining term of such contracts by the successor
representation firm. The purchase price paid by the successor representation
firm is typically based upon the historical commission income projected over the
remaining contract period, including the evergreen or notice period, plus two
months.

Amortization costs from obtaining representation contracts is included in
depreciation and amortization and was $14.3 million for the period from January
1 to August 30, 2000, $.5 million for the period from August 31 to December 31,
2000, $7.5 million for the year ended December 31, 2001 and $12.4 million for
the year ended December 31, 2002. Gains on the disposition of representation
contracts are recognized on the effective date of the buyout agreement as a
component of other income (expense) - net.

Dividend Policy

Pursuant to the Company's by-laws, the Board of Directors may declare a
dividend payable to the Shareholder of the Company at any time and for any
amount. The dividend is payable in cash, property, or shares of the Company.

On December 31, 2002, the Board authorized a dividend in the amount of
$150.0 million payable to Clear Channel. Payments of dividends by the Company to
Clear Channel are considered restricted payments under the Company's bond
indentures. Under the

17

most restrictive of these indentures, the Company had approximately $7.7 billion
available for restricted payments at December 31, 2002.

The amount and frequency of future dividends will be determined by the
Company's Board of Directors in light of the earnings and financial condition of
the Company at such time, and no assurance can be given that dividends will be
declared in the future.

Omission of Per Share Information

Net income (loss) per share information is not presented as such information
is not meaningful. During the three-year period ended December 31, 2002, all of
the issued and outstanding shares of the Company's common stock have been owned,
directly or indirectly, by Clear Channel for periods subsequent to the merger
and by AMFM for periods prior to the merger.

New Accounting Pronouncements

In June 2001, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 143, Accounting for Asset Retirement
Obligations ("Statement 143"). Statement 143 applies to legal obligations
associated with the retirement of long-lived assets that result from
acquisition, construction, development and/or the normal operation of a
long-lived asset. Statement 143 is effective for financial statements for fiscal
years beginning June 15, 2002. The Company is required to adopt this statement
in the first quarter of 2003. Management does not believe adoption of this
statement will materially impact the Company's financial position or results of
operations.

On January 1, 2002, the Company adopted Financial Accounting Standards No.
144, Accounting for the Impairment or Disposal of Long-Lived Assets ("Statement
144"). Statement 144 supersedes Financial Accounting Standards No. 121,
Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to
be Disposed of, and the accounting and reporting provisions of APB Opinion No.
30, Reporting the Results of Operations-Reporting the Effects of Disposal of a
Segment of a Business, and Extraordinary, Unusual and Infrequently Occurring
Events and Transactions, for the disposal of a segment of a business. Statement
144 also amends ARB No. 51, Consolidated Financial Statements, to eliminate the
exception to consolidation for a subsidiary for which control is likely to be
temporary. Adoption of Statement 144 had no impact on the financial position of
the Company or its results of operations.

In April 2002, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 145, Rescission of FASB Statements No. 4, 44,
and 64, Amendment of FASB Statement No. 13, and Technical Corrections
("Statement 145"). Statement 145 rescinds FASB Statement No. 4, Reporting Gains
and Losses from Extinguishment of Debt, and an amendment of that Statement, and
FASB Statement No. 64, Extinguishments of Debt Made to Satisfy Sinking-Fund
Requirements. The Company has elected to early adopt this statement effective
January 1, 2002. Management does not believe adoption of this statement
materially impacted the Company's financial position or results of operations.

In July 2002, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 146, Accounting for Costs Associated with
Exit or Disposal Activities ("Statement 146"). Statement 146 address the
accounting and reporting for costs associated with exit or disposal activities
and nullifies Emerging Issues Task Force ("EITF") Issue No. 94-3, "Liability
Recognition for Certain Employee Terminations Benefits and Other Costs to Exit
an Activity." It also substantially nullifies EITF Issue No. 88-10, "Costs
Associated with Lease Modification or Termination." Statement 146 is effective
for exit or disposal activities initiated after December 31, 2002. Management
does not believe that adoption of this statement will materially impact the
Company's financial position or results of operations.

In November 2002, the Financial Accounting Standards Board issued
Interpretation No. 45, Guarantor's Accounting and Disclosure Requirements for
Guarantees, Including Indirect Guarantees of Indebtedness of Others ("the
Interpretation"). The Interpretation applies to contracts or indemnification
agreements that contingently require the guarantor to make payments to the
guaranteed party based on changes in an underlying that is related to an asset,
liability, or an equity security of the guaranteed party. The Interpretation's
disclosure requirements are effective for financial statements of interim or
annual periods ending after December 15, 2002. The Interpretation's initial
recognition and initial measurement provisions are applicable on a prospective
basis to guarantees issued or modified after December 31, 2002, irrespective of
the guarantor's fiscal year-end. The Company adopted the disclosure requirements
of this Interpretation for its 2002 annual report. Management does not believe
that adoption of the initial recognition and initial measurement requirements of
the Interpretation will materially impact the Company's financial position or
results of operations.

18

On December 31, 2002, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 148, Accounting for Stock-Based
Compensation - Transition and Disclosure ("Statement 148"). Statement 148 amends
Financial Accounting Standards No. 123, Accounting for Stock-Based Compensation
("Statement 123"), to provide alternative methods of transition to Statement
123's fair value method of account for stock-based employee compensation.
Statement 148 also amends the disclosure provisions of Statement 123 and
Accounting Principals Board Opinion No. 28, Interim Financial Reporting, to
require disclosures in the summary of significant accounting policies of the
effects of an entity's accounting policy with respect to stock-based employee
compensation on reported net income and earnings per share in annual and interim
financial statements. Statement 148 does not amend Statement 123 to require
companies to account for employee stock options using the fair value method. The
Company adopted the disclosure provisions required in Statement 148 and has
provided the necessary disclosures within Note B.

NOTE C - INTANGIBLE ASSETS AND GOODWILL

On January 1, 2002, the Company adopted Statement of Financial Accounting
Standards No. 142, Goodwill and Other Intangible Assets ("Statement 142").
Statement 142 addresses financial accounting and reporting for acquired goodwill
and other intangible assets and supersedes APB Opinion No. 17, Intangible
Assets. Under the new rules, goodwill and intangible assets deemed to have
indefinite lives are no longer amortized but are subject to annual impairment
tests in accordance with the statement. Other intangible assets will continue to
be amortized over their useful lives.

The following table presents the impact of Statement 142 on net income
(loss) as if the standard had been in effect for the two years ended December
31, 2001 and 2000:

Definite-lived Intangibles

The Company has representation contracts for non-affiliated television and
radio stations, which continue to be amortized in accordance with Statement 142
over their estimated lives. In accordance with the transitional requirements of
Statement 142, the Company reassessed the useful lives of these intangibles and
made no material changes to their useful lives.

Total amortization expense from definite-lived intangibles for the years
ended December 31, 2002 and 2001 was $19.9 million and $15.4 million,
respectively. For the pre merger period ending August 30, 2000 and the post
merger period ending December 31, 2000, amortization expense from representation
contracts was $18.4 million and $3.3 million, respectively. The gross carrying
value of the contracts at December 31, 2002 was $198.5 million and accumulated
amortization was $38.5 million. The gross carrying value of the contracts at
December 31, 2001 was $185.7 million and accumulated amortization was $19.0
million. The following table presents the Company's estimate of amortization
expense for each of the five succeeding fiscal years for definite-lived
intangible assets:

As acquisitions and dispositions occur in the future, amortization expense
may vary.

19

Indefinite-lived Intangibles

Under the guidance in Statement 142, the Company's FCC licenses are
considered indefinite-lived intangibles. These assets are not subject to
amortization, but will be tested for impairment at least annually.

In accordance with Statement 142, the Company tested these indefinite-lived
intangible assets for impairment as of January 1, 2002 by comparing their fair
value to their carrying value at that date. The Company recognized impairment on
FCC licenses of approximately $5.5 billion, net of deferred tax of $3.4 billion,
recorded as a component of the cumulative effect of a change in accounting
principle during the first quarter of 2002. The Company used the income approach
to value FCC licenses, which involved estimating expected future cash flows from
the licenses, discounted to their present value using a risk-adjusted discount
rate. Terminal values were also estimated and discounted to their present value.
In estimating future cash flows, the Company took into account the economic slow
down in the radio industry at the end of 2001, coupled with the economic impact
of the events of September 11th.

Goodwill

Statement 142 requires the Company to test goodwill for impairment using a
two-step process. The first step is a screen for potential impairment, while the
second step measures the amount, if any, of impairment. The Company completed
the two-step impairment test during the first quarter of 2002. As a result of
this test, the Company recognized an impairment of approximately $3.9 billion as
a component of the cumulative effect of a change in accounting principle during
the first quarter of 2002. Consistent with the Company's approach to fair
valuing FCC licenses, the income approach was used to determine the fair value
of the Company's radio broadcasting reporting unit. Throughout 2001, unfavorable
economic conditions persisted in the radio broadcast business, which caused its
customers to reduce the number of advertising dollars spent with the Company as
compared to prior periods. These conditions adversely impacted the cash flow
projections used to determine the fair value of the Company's radio broadcasting
reporting unit, resulting in a write-off of a portion of goodwill. The following
table presents the changes in the carrying amount of goodwill for the year ended
December 31, 2002:

Other

Statement 142 does not change the requirements of Statement of Financial
Accounting Standards No. 109, Accounting for Income Taxes, for recognition of
deferred taxes related to FCC licenses and tax-deductible goodwill. As a result
of adopting Statement 142, a deferred tax benefit for the difference between
book and tax amortization on the Company's FCC licenses and tax-deductible
goodwill will no longer be recognized as these assets are no longer amortized
for book purposes. As the majority of the Company's deferred tax liability
recorded on the balance sheet relates to the difference between book and tax
basis on FCC licenses, the deferred tax liability will not reverse over time
unless future impairment charges are recognized on FCC licenses or the FCC
licenses are sold.

Prior to adopting Statement 142, the Company recorded large amounts of
non-deductible goodwill amortization, which resulted in a corresponding large
permanent tax item, which adversely impacted the Company's effective tax rate.
However, as a result of the Company's adoption of Statement 142, it no longer
amortizes goodwill for book purposes, thus its effective tax rate more closely
approximates statutory tax rates.

NOTE D - ACQUISITIONS AND DISPOSITIONS

In 2002, the Company had no significant acquisition activity.

In 2001, the Company disposed of one radio station held in trust for
approximately $3.0 million in restricted cash; and acquired 104 radio stations
for $5.6 million in cash, $191.9 million in restricted cash plus the exchange of
six radio stations valued at $103.0 million. In addition, in 2001, the Company
acquired national representation contracts for $54.3 million in cash.

In 2000, the Company acquired substantially all the assets of 25 radio
stations for approximately $5.3 million in cash and $173.8 million in restricted
cash. Also, in 2000, the Company acquired national representation contracts for
$30.9 million in cash. The

20

Company disposed of 12 radio stations in 2000 for approximately $94.6 million
and three radio stations held in trust in 2000 for approximately $47.3 million
in restricted cash. In addition, in 2000, the Company exchanged 14 radio
stations and the local sales rights of one radio station for three radio
stations and approximately $9.2 million in cash.

The foregoing acquisitions were accounted for as purchases. Accordingly, the
accompanying consolidated financial statements include the results of operations
of the acquired entities from their respective dates of acquisition.

There were no significant differences between pro forma and actual condensed
consolidated results of operations for the years ended December 31, 2002 and
2001, respectively.

NOTE E - INVESTMENTS

Other investments include marketable equity securities as follows:

(a) Investment in Entravision Communications Corporation

On August 10, 2000, the Company received cash proceeds of $38.4 million in
return for approximately 77% of its cost basis investment in Z-Spanish Media and
recognized a pre-tax gain of approximately $19.3 million. Z-Spanish Media was
acquired by Entravision Communications Corporation on August 16, 2000. The
Company's investment in Z-Spanish Media was carried at historical value as of
December 31, 1999. Due to the availability of a quoted market price for
Entravision Communications Corporation, the Company's investment is carried at
fair value as of December 31, 2001. An unrealized gain of $1.6 million (net of
$.6 million of tax) is recorded as a separate component of shareholder's equity
at December 31, 2001. In addition, during 2001, an unrealized loss of $7.7
million was recorded as gain (loss) on marketable securities related to an
impairment of Entravision due to a decline in market value that was considered
to be other-than-temporary.

In a series of transactions concluding on March 21, 2002, the Company sold
all of its shares of Entravision. As a result of these sales, the Company
received proceeds of $11.8 million, and recognized a gain of approximately $4.0
million.

(b) Other investments

Other investments primarily include a 16.67% investment in National Cable
Communications (NCC). Prior to May, 2002, NCC and Katz were party to a
management agreement pursuant to which Katz acted as the managing partner of
NCC, provided certain management services and was entitled to a fee. The
management agreement contained a provision granting NCC the ability to terminate
the agreement. In May 2002, NCC elected to terminate the management agreement.
As a condition of the termination, NCC redeemed Katz 16.67% interest in NCC. As
a result, other investments were reduced by $34.8 million and a gain of $2.8
million was recorded in other income (expense) - net.

During 2001, proceeds of $920.0 million were received on the sale of 24.9
million shares of Lamar. A loss of $235.0 million was realized on the sale of
Lamar common stock in 2001, which was recorded in "Gain on sale of assets
related to mergers". At December 31, 2001, the Company no longer held shares of
Lamar common stock.

21

NOTE F - CLEAR CHANNEL PROMISSORY NOTE AND LONG-TERM DEBT

Long-term debt consists of the following:

(a) Includes $44.6 million and $66.5 million at December 31, 2002 and 2001,
respectively, in unamortized fair value purchase accounting adjustments related
to the merger with Clear Channel.

Clear Channel Promissory Note

The promissory note bears interest at 7% per annum. Accrued interest plus
the note balance is payable 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. The Company has an understanding with Clear
Channel that Clear Channel currently has no intention of demanding payment on
this note prior to its maturity.

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.

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. 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. On February 10, 2003 the
Company redeemed all of the outstanding 8.125% notes at a redemption price of
104.063% plus accrued and unpaid interest.

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

22

and unpaid interest. On February 18, 2003 the Company redeemed all of the
outstanding 8.75% notes at a redemption price of 104.375% plus accrued and
unpaid interest.

12.625% Exchange Debentures

On January 15, 2002, the Company redeemed all of the outstanding 12.625%
exchange debentures due 2006. At December 31, 2001 the face value of these notes
was $141.8 million and the unamortized fair value purchase accounting adjustment
premium was $15.3 million. The debentures were redeemed for $150.8 million plus
accrued interest. The redemption resulted in a gain of $6.3 million, recorded in
other income (expense) - net.

Other

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 8.75% notes and 8.125% 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"). In
addition, at December 31, 2002, AMFM Operating's independent assets and
operations are insignificant, as the majority of the assets and all of the
operations are at the level of the Subsidiary Guarantors. Additionally, all of
the Subsidiary Guarantors are 100% owned by the Company.

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. Under the 8%
senior notes, the Company had approximately $7.7 billion available for
restricted payments at December 31, 2002. The redemption of the 8.125% notes and
8.75% notes in February 2003 was a restricted payment under the 8% senior notes.

At December 31, 2002, the Company was in compliance with all debt covenants.
The Company expects to be in compliance in 2003.

Upon the occurrence of a change in control (as defined in the indenture
governing the 8.0%, 8.125% and 8.75% notes (the "notes"), the holders of the
notes have the right to require the Company to repurchase all or any part of the
notes at a purchase price equal to 101% plus accrued and unpaid interest.
Although the Clear Channel merger resulted in a change of control with respect
to the notes, as of September 30, 2001 the repurchase option had expired.

Although not scheduled to mature, on January 15, 2002 the Company redeemed
all of the outstanding 12.625% exchange debentures due 2006 and in February 2003
redeemed all of the outstanding 8.75% notes due 2007 and 8.125% notes due 2007.
The remaining $690.8 million in long-term debt is scheduled to mature in 2008.

Cash paid for interest was $107.7 million and $117.5 million for the years
ended December 31, 2002 and 2001 respectively. Cash paid for interest for the
post merger period from August 31, 2000 to December 31, 2000 was $93.3 million.
Cash paid for interest for the pre merger period from January 1, 2000 to August
30, 2000 was $287.8 million.

NOTE G - FINANCIAL INSTRUMENTS AND RISK MANAGEMENT

Fair Value of Financial Instruments

The following table presents the carrying amounts and estimated fair values
of the Company's financial instruments at December 31, 2002 and 2001.

23

The following methods and assumptions were used to estimate the fair value
of each class of financial instrument:

The Company's promissory note payable to Clear Channel represents
intercompany borrowings and there is no market for this debt. The promissory
note bears interest at 7% per annum and matures on August 30, 2010 or upon
demand. Book value is assumed to approximate fair market value.

The fair values of the Company's other long-term debt are based on quoted
market prices at December 31, 2002 and 2001.

NOTE H - COMMITMENTS, CONTINGENCIES AND GUARANTEES

The Company has guaranteed a portion of Clear Channel's bank credit
facilities, including a reducing revolving line of credit facility, a $1.5
billion five-year multi-currency revolving credit facility and a $1.5 billion
three-year term loan with outstanding balances at December 31, 2002 of $555.0
million, $1.5 million and $1.5 billion, respectively. At December 31, 2002, the
Company's contingent liability under these guarantees was $1.0 billion.

The Company has long-term operating leases for office space, certain
broadcasting facilities and equipment which expire at various dates, generally
during the next ten years, and have varying options to renew and cancel. Some of
the lease agreements contain renewal options and annual rental escalation
clauses (generally tied to the consumer price index or a maximum of 5%), as well
as provisions for the payment of utilities and maintenance by the Company.

In addition, the Company has commitments relating to non-cancelable
programming rights.

As of December 31, 2002, the Company's future minimum rental commitments
under non-cancelable operating lease agreements and minimum programming rights
payments under non-cancelable programming contracts, both with terms in excess
of one year, consist of the following:

Rental expense for operating leases was approximately $50.0 million for the
year ended December 31, 2002, $47.6 million for the year ended December 31,
2001, $33.0 million for the period from January 1 to August 30, 2000 and $15.2
million for the period from August 31 to December 31, 2000.

24

From time to time, claims are made and lawsuits are filed against the
Company, arising out of the ordinary business of the Company. In the opinion of
the Company's management, liabilities, if any, arising from these actions are
either covered by insurance or accrued reserves, or would not have a material
adverse effect on the financial condition of the Company.

NOTE I - INCOME TAXES

The operations of the Company for periods subsequent to the Clear Channel
merger are included in a consolidated federal income tax return filed by Clear
Channel. However, for financial reporting purposes, the Company's provision for
income taxes has been computed on the basis that the Company files separate
consolidated income tax returns with its subsidiaries.

Significant components of the provision for income tax expense (benefit) are
as follows:

During the year ended December 31, 2001 and the period from August 31 to
December 31, 2000, the tax benefit related to the unrealized holding losses on
cost investments was $78.2 and $68.2 million, respectively. The unrealized
holding losses are presented net of tax within other comprehensive loss on the
statement of operations.

During 2000, the Company incurred an extraordinary loss in connection with
various refinancings. The tax benefit related to the extraordinary loss was
approximately $11.6 million for the period from January 1 to August 30, 2000.
This tax benefit is separately allocated to the extraordinary item.

Total income tax expense differed from the amount computed by applying the
U.S. federal statutory income tax rate of 35% to income or loss from continuing
operations as a result of the following:

25

Significant components of the Company's deferred tax assets and liabilities
as of December 31, 2002 and 2001 are as follows:

The deferred tax liability relating to intangibles and fixed assets
primarily relates to the difference in book and tax basis recorded as a result
of the Clear Channel merger.

Deferred tax assets and liabilities are computed by applying the U.S.
federal and state income tax rate in effect to the gross amounts of temporary
differences and other tax attributes, such as net operating loss carryforwards.

During 2002, the Company utilized approximately $104.3 million of net
operating loss carryforwards which were generated by the Company prior to the
merger with Clear Channel. The utilization of the net operating loss
carryforwards reduced current taxes payable and current tax expense as of and
for the year ended December 31, 2002, and resulted in a reduction of the
deferred tax asset valuation allowance. The reduction in the valuation allowance
was recorded as an adjustment to the original purchase price allocation and did
not impact total income tax expense.

For the periods subsequent to the merger, the Company did not make any
federal or state tax payments. Rather, all tax liabilities owed by the Company
are paid by Clear Channel through the Clear Channel promissory note. The Company
made cash payments for taxes for the pre merger period from January 1, 2000 to
August 30, 2000 of $6.5 million.

NOTE J - RELATED PARTY AND OTHER TRANSACTIONS

As discussed in Note F, the Company has outstanding a promissory note
payable to Clear Channel of $300.0 million and $487.2 million as of December 31,
2002 and 2001, respectively. This promissory note represents net borrowings from
Clear Channel during 2000 to pay off the Company's senior credit facility, 9%
Notes, 9.25% Notes, certain other notes pursuant to change in control offers, as
well as operating liabilities such as trade payables and accrued payroll. These
borrowings are being offset by payments made to Clear Channel generated by the
Company's operations. Borrowings under the promissory note bear interest at 7%
per annum. Interest expense on borrowings under the promissory note was $30.5
million for the period from August 30 to December 31, 2000, $70.6 million for
the year ended December 31, 2001 and $18.6 million for the year ended December
31, 2002.

The Company provides media representation and inventory tracking services to
Clear Channel. Additionally, the Company receives syndicated programming
services from Clear Channel's Premiere Radio Networks, marketing services from
Clear Channel's Critical Mass Media, outdoor advertising services from Clear
Channel Outdoor and promotional services from Clear Channel Entertainment.
Revenues and divisional operating expenses are recorded at fair value and are
not material.

26

NOTE K - MERGER AND NON-RECURRING COSTS

Merger and non-recurring costs consist of the following:

(a) 2000

On February 16, 2000, the Company announced the retirement of James
E. de Castro as Vice-Chairman of AMFM Inc., President and Chief
Executive Officer of AMFM Radio Group and Chairman and Chief
Executive Officer of AMFM Interactive, Inc., effective February 18,
2000. In connection with Mr. de Castro's retirement, the Company
recorded a charge of $5.3 million for severance costs.

The Company incurred costs related to the continued implementation of
its market strategy of $5.1 million for the period from January 1 to
August 30, 2000, of which $4.1 million related to personnel costs.
Subsequent to the Clear Channel merger, restructuring costs directly
attributable to the Company's operations are included in the
restructuring liability (see Note A). At December 31, 2000,
approximately $3.6 million of the total costs incurred to date were
accrued and are expected to be paid during 2001.

(b) 2000

The Company incurred costs related to the Clear Channel merger of
$96.3 million for the period from January 1 to August 30, 2000. The
Clear Channel merger costs include a non-cash compensation charge of
$67.8 million, primarily related to executive stock options, which
became exercisable upon the merger date. Subsequent to the merger,
restructuring costs directly attributable to the Company's operations
are included in the restructuring liability (see Note A).
Additionally, the Company incurred developmental costs of $2.8
million for the period from January 1 to August 30, 2000 and other
non-recurring charges of $1.9 million for the period from January 1
to August 30, 2000.

NOTE L - OTHER INFORMATION

NOTE M - SEGMENT DATA

Separate financial data for the radio broadcasting and other operating
segments is provided below. Revenue and divisional operating expenses earned and
charged between segments are recorded at fair value and eliminated in
consolidation. The accounting policies of the segments are the same as those
described in Note B. Information about each of the operating segments follows:

Radio Broadcasting

As of December 31, 2002 we owned or operated 530 radio stations in 127
markets in the United States. The Company's radio broadcasting operations also
include a national radio network, which broadcasts advertising and syndicated
programming shows to a national audience.

Other

The other operating segment includes Katz, a full-service media
representation firm that sells national spot advertising time for its clients in
the radio and television industries throughout the United States. Katz is
retained on an exclusive basis by radio and television stations.

Separate financial data for each of the Company's operating segments is
provided below:

NOTE N - QUARTERLY FINANCIAL DATA (UNAUDITED)

ITEM 9. Changes in and Disagreements With Accountants on Accounting and
Financial Disclosure

None

29

PART III

ITEM 10. Directors and Executive Officers of the Registrant

Omitted under the reduced disclosure format pursuant to General Instruction
I(2)(c) of Form 10-K.

ITEM 11. Executive Compensation

Omitted under the reduced disclosure format pursuant to General Instruction
I(2)(c) of Form 10-K.

ITEM 12. Security Ownership of Certain Beneficial Owners and Management

Omitted under the reduced disclosure format pursuant to General Instruction
I(2)(c) of Form 10-K.

ITEM 13. Certain Relationships and Related Transactions

Omitted under the reduced disclosure format pursuant to General Instruction
I(2)(c) of Form 10-K.

ITEM 14. Controls and Procedures

Our principal executive and financial officers have concluded, based on
their evaluation as of a date within 90 days before the filing of this Form
10-K, that our disclosure controls and procedures under Rule 13a-14 of the
Securities Exchange Act of 1934 are effective to ensure that information we are
required to disclose in the reports we file or submit under the Exchange Act is
recorded, processed, summarized and reported within the time periods specified
in the SEC's rules and forms, and include controls and procedures designed to
ensure that information we are required to disclose in such reports is
accumulated and communicated to management, including our principal executive
and financial officers, as appropriate to allow timely decisions regarding
required disclosure.

Subsequent to our evaluation, there were no significant changes in internal
controls or other factors that could significantly affect these internal
controls.

ITEM 15. Exhibits, Financial Statement Schedules and Reports on Form 8-K

(a) 1. Financial Statements.

The following consolidated financial statements are included in Item 8.

Consolidated Balance Sheets as of December 31, 2002 and 2001

Consolidated Statements of Operations for the Years Ended December 31, 2002,
2001 and 2000.

Consolidated Statements of Changes in Equity for the Years Ended December
31, 2002, 2001 and 2000.

Consolidated Statements of Cash Flows for the Years Ended December 31, 2002,
2001 and 2000.

Notes to Consolidated Financial Statements

(a) 2. Financial Statement Schedule.

The following financial statement schedule for the years ended December 31,
2002, 2001 and 2000 and related report of independent auditors is filed as
part of this report and should be read in conjunction with the consolidated
financial statements.

Schedule II Valuation and Qualifying Accounts

All other schedules for which provision is made in the applicable accounting
regulation of the Securities and Exchange Commission are not required under
the related instructions or are inapplicable, and therefore have been
omitted.

30

REPORT OF INDEPENDENT AUDITORS ON FINANCIAL STATEMENT SCHEDULE

The Board of Directors and Shareholder of
AMFM Operating Inc.:

We have audited the consolidated financial statements of AMFM Operating Inc. (an
indirect, wholly-owned subsidiary of Clear Channel Communications, Inc.) and
subsidiaries as of December 31, 2002 and 2001, and for the two years ended
December 31, 2002, the period from August 31, 2000 through December 31, 2000
(Post-Merger) and the period from January 1, 2000 through August 30, 2000
(Pre-Merger), and have issued our report thereon dated March 21, 2003. Our
audits also included the financial statement schedule listed in the Index at
Item 15(a)(2). This schedule is the responsibility of the Company's management.
Our responsibility is to express an opinion based on our audits.

In our opinion, the financial statement schedule referred to above, when
considered in relation to the basic financial statements taken as a whole,
presents fairly in all material respects the information set forth therein.

/s/ ERNST & YOUNG LLP

San Antonio, Texas
March 21, 2003

31

SCHEDULE II

AMFM OPERATING INC. AND SUBSIDIARIES
(an indirect, wholly-owned subsidiary of Clear Channel Communications, Inc.)

VALUATION AND QUALIFYING ACCOUNTS
(In thousands)

32

SCHEDULE II

AMFM OPERATING INC. AND SUBSIDIARIES
(an indirect, wholly-owned subsidiary of Clear Channel Communications, Inc.)

VALUATION AND QUALIFYING ACCOUNTS
(In thousands)

- ----------

(1) Related to the allowance for net operating loss carryforwards and other
deferred tax assets assumed in acquisitions.

(2) In 2002, the Company utilized net operating loss carryforwards, which
resulted in the reduction of the allowance for net operating loss
carryforwards.

33

(a) 3. Exhibits.

EXHIBIT
NO. DESCRIPTION OF EXHIBIT

3.1(1) -- Amended and Restated Certificate of Incorporation
of AMFM Operating Inc.

3.2(2) -- Bylaws of AMFM Operating Inc.

4.1(3) -- Certificate of Designation for 12 5/8% Series E
Cumulative Exchangeable Preferred Stock of AMFM
Operating Inc.

4.2(4) -- Certificate of Amendment to Certificate of
Designation for 12 5/8% Series E Cumulative
Exchangeable Preferred Stock of AMFM Operating Inc.

4.3(5) -- Indenture, dated as of November 19, 1999, governing
the 12 5/8% Senior Subordinated Exchange Debentures
due 2006, of AMFM Operating Inc.

4.4(6) -- 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(7) -- First Supplemental Indenture, dated as of September
5, 1997, to the 8 3/4% Notes Indenture.

4.6(8) -- Second Supplemental Indenture, dated as of October
28, 1997, to the 8 3/4% Notes Indenture.

4.7(8) -- Third Supplemental Indenture, dated as of August
23, 1999, to the 8 3/4% Notes Indenture.

4.8(8) -- Fourth Supplemental Indenture, dated as of November
19, 1999, to the 8 3/4% Notes Indenture.

4.9(8) -- Fifth Supplemental Indenture, dated as of January
18, 2000, to the 8 3/4% Notes Indenture.

4.10(9) -- 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").

4.11(8) -- First Supplemental Indenture, dated as of August
23, 1999, to the 8 1/8% Notes Indenture.

4.12(8) -- Second Supplemental Indenture, dated as of November
19, 1999, to the 8 1/8% Notes Indenture.

4.13(8) -- Third Supplemental Indenture, dated as of January
18, 2000, to the 8 1/8% Notes Indenture.

4.14(10) -- Indenture, dated as of November 17, 1998, governing
the 8% Senior Notes due 2008 of AMFM Operating Inc.
(the "8% Notes Indenture").

4.15(8) -- First Supplemental Indenture, dated as of August
23, 1999, to the 8% Notes Indenture.

4.16(8) -- Second Supplemental Indenture, dated as of November
19, 1999, to the 8% Notes Indenture.

4.17(8) -- Third Supplemental Indenture, dated as of January
18, 2000, to the 8% Notes Indenture.

4.18(11) -- Intercompany Promissory Note between AMFM Operating
Inc. and Clear Channel Communications, Inc. dated
August 30, 2000.

10.1(12) -- Stock Option Grant Agreement, dated July 13, 1999,
by and between AMFM Inc. and HMCo for 335,099
shares.

10.2(12) -- Stock Option Grant Agreement, dated July 13, 1999,
by and between AMFM Inc. and HMCo for 634,517
shares.

34

99.1 -- Certification of Chief Executive Officer

99.2 -- Certification of Chief Financial Officer

- ----------

(1) 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.

(2) Incorporated by reference to Exhibits to SFX Broadcasting, Inc.'s
Registration Statement on Form S-3, initially filed November 22,
1996, as amended (Registration Number 333-15469).

(3) Incorporated by reference to Exhibits to the Current Report on Form
8-K of SFX Broadcasting, Inc., filed on January 27, 1997.

(4) Incorporated by reference to Exhibits to SFX Broadcasting, Inc.'s
Annual Report on Form 10-K for the year ended December 31, 1997.

(5) Incorporated by reference to Exhibit 4.1 to the Current Report on
Form 8-K of AMFM Operating Inc. filed on November 19, 1999.

(6) 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.

(7) Incorporated by reference to Exhibits to Chancellor Media
Corporation of Los Angeles's Registration Statement on Form S-4,
initially filed on September 26, 1997, as amended (Registration
Number 333-36451).

(8) Incorporated by reference to Exhibits to the Annual Report on Form
10-K of AMFM Inc. for the year ended December 31, 1999.

(9) Incorporated by reference to Exhibits to Chancellor Media
Corporation of Los Angeles's Registration Statement on Form S-4,
initially filed on April 22, 1998, as amended (Registration Number
333-50739).

(10) Incorporated by reference to Exhibits to Chancellor Media
Corporation of Los Angeles's Registration Statement on Form S-4,
initially filed on November 9, 1998, as amended (Registration Number
333-66971).

(11) 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.

(12) Incorporated by reference to Exhibits to Amendment No. 6 to Schedule
13D of Thomas O. Hicks, et. al., filed on October 14, 1999.

(b) Reports on Form 8-K.

None.

35

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) 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, on the 28th day of
March, 2003.

AMFM OPERATING INC.

By: /s/ L. LOWRY MAYS
-----------------
L. Lowry Mays
Chairman and Chief Executive Officer

Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.

36

CERTIFICATION

I, L. Lowry Mays, Chairman and Chief Executive Officer of AMFM Operating Inc.,
certify that:

1. I have reviewed this annual report on Form 10-K of AMFM Operating Inc.;

2. Based on my knowledge, this annual report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this annual report;

3. Based on my knowledge, the financial statements, and other financial
information included in this annual report, fairly present in all material
respects the financial condition, results of operations and cash flows of
the registrant as of, and for, the periods presented in this annual report;

4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined
in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:

a) designed such disclosure controls and procedures to ensure that material
information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities,
particularly during the period in which this annual report is being
prepared;

b) evaluated the effectiveness of the registrant's disclosure controls and
procedures as of a date within 90 days prior to the filing date of this
annual report (the "Evaluation Date"); and

c) presented in this annual report our conclusions about the effectiveness
of the disclosure controls and procedures based on our evaluation as of
the Evaluation Date;

5. The registrant's other certifying officers and I have disclosed, based on
our most recent evaluation, to the registrant's auditors and the audit
committee of registrant's board of directors (or persons performing the
equivalent function):

a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to
record, process, summarize and report financial data and have identified
for the registrant's auditors any material weaknesses in internal
controls; and

b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal
controls; and

6. The registrant's other certifying officers and I have indicated in this
annual report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation, including any
corrective actions with regard to significant deficiencies and material
weaknesses.

Date: March 28, 2003

/s/ L. LOWRY MAYS
- ------------------------------------
L. Lowry Mays
Chairman and Chief Executive Officer

37

CERTIFICATION

I, Randall T. Mays, Executive Vice President and Chief Financial Officer of AMFM
Operating Inc., certify that:

1. I have reviewed this annual report on Form 10-K of AMFM Operating Inc.;

2. Based on my knowledge, this annual report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this annual report;

3. Based on my knowledge, the financial statements, and other financial
information included in this annual report, fairly present in all material
respects the financial condition, results of operations and cash flows of
the registrant as of, and for, the periods presented in this annual report;

4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined
in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:

a) designed such disclosure controls and procedures to ensure that material
information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities,
particularly during the period in which this annual report is being
prepared;

b) evaluated the effectiveness of the registrant's disclosure controls and
procedures as of a date within 90 days prior to the filing date of this
annual report (the "Evaluation Date"); and

c) presented in this annual report our conclusions about the effectiveness
of the disclosure controls and procedures based on our evaluation as of
the Evaluation Date;

5. The registrant's other certifying officers and I have disclosed, based on
our most recent evaluation, to the registrant's auditors and the audit
committee of registrant's board of directors (or persons performing the
equivalent function):

a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to
record, process, summarize and report financial data and have identified
for the registrant's auditors any material weaknesses in internal
controls; and

b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal
controls; and

6. The registrant's other certifying officers and I have indicated in this
annual report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation, including any
corrective actions with regard to significant deficiencies and material
weaknesses.

Date: March 28, 2003

/s/ RANDALL T. MAYS
- ----------------------------
Randall T. Mays
Executive Vice President and
Chief Financial Officer

38

- ----------

(1) 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.

(2) Incorporated by reference to Exhibits to SFX Broadcasting, Inc.'s
Registration Statement on Form S-3, initially filed November 22,
1996, as amended (Registration Number 333-15469).

(3) Incorporated by reference to Exhibits to the Current Report on Form
8-K of SFX Broadcasting, Inc., filed on January 27, 1997.

(4) Incorporated by reference to Exhibits to SFX Broadcasting, Inc.'s
Annual Report on Form 10-K for the year ended December 31, 1997.

(5) Incorporated by reference to Exhibit 4.1 to the Current Report on
Form 8-K of AMFM Operating Inc. filed on November 19, 1999.

(6) 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.

(7) Incorporated by reference to Exhibits to Chancellor Media
Corporation of Los Angeles's Registration Statement on Form S-4,
initially filed on September 26, 1997, as amended (Registration
Number 333-36451).

(8) Incorporated by reference to Exhibits to the Annual Report on Form
10-K of AMFM Inc. for the year ended December 31, 1999.

(9) Incorporated by reference to Exhibits to Chancellor Media
Corporation of Los Angeles's Registration Statement on Form S-4,
initially filed on April 22, 1998, as amended (Registration Number
333-50739).

(10) Incorporated by reference to Exhibits to Chancellor Media
Corporation of Los Angeles's Registration Statement on Form S-4,
initially filed on November 9, 1998, as amended (Registration Number
333-66971).

(11) 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.

(12) Incorporated by reference to Exhibits to Amendment No. 6 to Schedule
13D of Thomas O. Hicks, et. al., filed on October 14, 1999.