<PAGE>   1

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                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                   FORM 10-Q

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

               FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 1999

                        COMMISSION FILE NUMBER 001-15145

                                   AMFM INC.
                    (FORMERLY CHANCELLOR MEDIA CORPORATION)
             (Exact Name of Registrant as Specified in its Charter)

                                    DELAWARE
                        (State or other jurisdiction of
                         incorporation or organization)

                                   75-2247099
                    (I.R.S. Employer Identification Number)

         1845 WOODALL RODGERS FREEWAY, SUITE 1300, DALLAS, TEXAS 75201
          (Address of principal executive offices, including zip code)

                                 (214) 922-8700
              (Registrant's telephone number, including area code)

     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 the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date: As of October 31, 1999,
209,779,083 shares of Common Stock, par value $.01 per share, of AMFM Inc. were
outstanding.

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<PAGE>   2

                                     INDEX

<TABLE>
<CAPTION>
                                                                         PAGE
                                                                        NUMBER
                                                                        ------
<S>       <C>                                                           <C>
          PART I. FINANCIAL INFORMATION
Item 1.   Financial Statements........................................     3
          Condensed Consolidated Balance Sheets (unaudited)...........     3
          Condensed Consolidated Statements of Operations
            (unaudited)...............................................     4
          Condensed Consolidated Statement of Stockholders' Equity
            (unaudited)...............................................     5
          Condensed Consolidated Statements of Cash Flows
            (unaudited)...............................................     6
          Notes to Condensed Consolidated Financial Statements
            (unaudited)...............................................     7
Item 2.   Management's Discussion and Analysis of Financial Condition
            and Results of Operations.................................    21
Item 3.   Quantitative and Qualitative Disclosures About Market
            Risk......................................................    32
          PART II. OTHER INFORMATION
Item 1.   Legal Proceedings...........................................    34
Item 2.   Changes in Securities and Use of Proceeds...................    35
Item 4.   Submission of Matters to a Vote of Security Holders.........    35
Item 6.   Exhibits and Reports on Form 8-K............................    36
          Signature...................................................    38
</TABLE>

                                        2
<PAGE>   3

                        PART I -- FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

                           AMFM INC. AND SUBSIDIARIES
            (FORMERLY CHANCELLOR MEDIA CORPORATION AND SUBSIDIARIES)

                     CONDENSED CONSOLIDATED BALANCE SHEETS
                 (DOLLARS IN THOUSANDS, EXCEPT FOR SHARE DATA)

                                     ASSETS

<TABLE>
<CAPTION>
                                                              DECEMBER 31,   SEPTEMBER 30,
                                                                  1998           1999
                                                              ------------   -------------
                                                                              (UNAUDITED)
<S>                                                           <C>            <C>
Current assets:
  Cash and cash equivalents.................................   $   12,256     $    86,512
  Accounts receivable, less allowance for doubtful accounts
    of $15,580 in 1998 and $23,447 in 1999..................      352,646         486,651
  Other current assets......................................       59,909         106,742
                                                               ----------     -----------
         Total current assets...............................      424,811         679,905
Property and equipment, net.................................    1,388,156         467,736
Intangible assets, net......................................    5,056,047      10,527,440
Investments in non-consolidated affiliates..................           --       1,129,389
Other assets, net...........................................      358,893         242,340
                                                               ----------     -----------
                                                               $7,227,907     $13,046,810
                                                               ==========     ===========

                           LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
  Accounts payable and accrued expenses.....................   $  236,618     $   389,252
  Current portion of long-term debt.........................           --          54,625
                                                               ----------     -----------
         Total current liabilities..........................      236,618         443,877
Long-term debt, net of current portion......................    4,096,000       5,645,670
Deferred tax liabilities....................................      453,134       1,740,476
Other liabilities...........................................       50,325          51,176
                                                               ----------     -----------
         Total liabilities..................................    4,836,077       7,881,199
                                                               ----------     -----------
Commitments and contingencies
Minority interest in consolidated subsidiary................           --           3,704
Redeemable preferred stock:
  Redeemable senior exchangeable preferred stock of
    subsidiary, par value $.01 per share; 10,000,000 shares
    authorized, 1,254,618 shares issued and outstanding;
    liquidation preference of $129,226......................           --         148,542
  Redeemable series E cumulative exchangeable preferred
    stock of subsidiary, par value $.01 per share; 4,150,000
    shares authorized, 1,430,989 shares issued and
    outstanding; liquidation preference of $146,863.........           --         169,281
Stockholders' equity:
  Preferred stock, $.01 par value. 2,200,000 shares of 7%
    convertible preferred stock authorized, issued and
    outstanding.............................................      110,000         110,000
  Preferred stock, $.01 par value. 6,000,000 shares
    authorized in 1998; 5,990,000 shares of $3.00
    convertible exchangeable preferred stock issued and
    outstanding in 1998.....................................      299,500              --
  Common stock, $.01 par value. 200,000,000 shares and
    750,000,000 shares authorized in 1998 and 1999,
    respectively; 142,847,674 shares and 209,619,958 shares
    issued and outstanding in 1998 and 1999, respectively...        1,428           2,096
  Paid-in capital...........................................    2,259,583       5,094,432
  Accumulated deficit.......................................     (278,681)       (362,444)
                                                               ----------     -----------
         Total stockholders' equity.........................    2,391,830       4,844,084
                                                               ----------     -----------
                                                               $7,227,907     $13,046,810
                                                               ==========     ===========
</TABLE>

     See accompanying notes to condensed consolidated financial statements.

                                        3
<PAGE>   4

                           AMFM INC. AND SUBSIDIARIES
            (FORMERLY CHANCELLOR MEDIA CORPORATION AND SUBSIDIARIES)

                CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                                  (UNAUDITED)
                     (IN THOUSANDS, EXCEPT PER SHARE DATA)

<TABLE>
<CAPTION>
                                                 THREE MONTHS ENDED               NINE MONTHS ENDED
                                            -----------------------------   -----------------------------
                                            SEPTEMBER 30,   SEPTEMBER 30,   SEPTEMBER 30,   SEPTEMBER 30,
                                                1998            1999            1998            1999
                                            -------------   -------------   -------------   -------------
<S>                                         <C>             <C>             <C>             <C>
Gross revenues............................    $389,551        $ 667,300      $1,015,562      $1,552,143
  Less agency commissions.................      45,722           74,863         116,466         175,295
                                              --------        ---------      ----------      ----------
          Net revenues....................     343,829          592,437         899,096       1,376,848
                                              --------        ---------      ----------      ----------
Operating expenses:
  Operating expenses, excluding
     depreciation and amortization........     175,062          303,492         491,924         731,260
  Depreciation and amortization...........     120,648          236,842         315,772         529,725
  Corporate general and administrative....      10,109           13,491          25,188          44,103
  Non-cash compensation...................          --            6,148              --           6,148
  Merger and non-recurring costs..........          --           30,977          59,475          59,956
                                              --------        ---------      ----------      ----------
     Operating expenses...................     305,819          590,950         892,359       1,371,192
                                              --------        ---------      ----------      ----------
     Operating income.....................      38,010            1,487           6,737           5,656
                                              --------        ---------      ----------      ----------
Other (income) expense:
  Interest expense, net...................      48,624          124,094         135,709         296,205
  Gain on disposition of assets...........          --         (208,950)       (123,845)       (221,356)
  Gain on disposition of representation
     contracts............................     (18,497)          (9,431)        (29,767)        (18,284)
  Other (income) expense..................          --               --          (3,559)             --
                                              --------        ---------      ----------      ----------
     Other (income) expense, net..........      30,127          (94,287)        (21,462)         56,565
                                              --------        ---------      ----------      ----------
     Income (loss) before income taxes....       7,883           95,774          28,199         (50,909)
Income tax expense........................         722           36,167          32,507           8,818
Dividends on preferred stock of
  subsidiaries............................         899            7,940          17,601           7,940
                                              --------        ---------      ----------      ----------
  Income (loss) before equity in net loss
     of affiliates and minority interest
     and extraordinary item...............       6,262           51,667         (21,909)        (67,667)
Equity in net loss of affiliates and
  minority interest.......................          --            1,885              --           2,085
                                              --------        ---------      ----------      ----------
  Income (loss) before extraordinary
     item.................................       6,262           49,782         (21,909)        (69,752)
Extraordinary loss, net of income tax
  benefit.................................      15,224               --          47,089              --
                                              --------        ---------      ----------      ----------
          Net income (loss)...............      (8,962)          49,782         (68,998)        (69,752)
Preferred stock dividends.................       6,417            1,176          19,252          14,011
                                              --------        ---------      ----------      ----------
  Net income (loss) attributable to common
     stockholders.........................    $(15,379)       $  48,606      $  (88,250)     $  (83,763)
                                              ========        =========      ==========      ==========
Basic income (loss) per common share:
  Before extraordinary item...............    $     --        $    0.25      $    (0.31)     $    (0.52)
  Extraordinary item......................       (0.11)              --           (0.34)             --
                                              --------        ---------      ----------      ----------
          Net income (loss)...............    $  (0.11)       $    0.25      $    (0.65)     $    (0.52)
                                              ========        =========      ==========      ==========
Diluted income (loss) per common share:
  Before extraordinary item...............    $     --        $    0.23      $    (0.31)     $    (0.52)
  Extraordinary item......................       (0.11)              --           (0.34)             --
                                              --------        ---------      ----------      ----------
          Net income (loss)...............    $  (0.11)       $    0.23      $    (0.65)     $    (0.52)
                                              ========        =========      ==========      ==========
Weighted average common shares
  outstanding.............................     142,345          194,662         136,427         160,511
                                              ========        =========      ==========      ==========
</TABLE>

     See accompanying notes to condensed consolidated financial statements.

                                        4
<PAGE>   5

                           AMFM INC. AND SUBSIDIARIES
            (FORMERLY CHANCELLOR MEDIA CORPORATION AND SUBSIDIARIES)

            CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
                  FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1999
                                  (UNAUDITED)
                     (IN THOUSANDS, EXCEPT FOR SHARE DATA)

<TABLE>
<CAPTION>
                                           CONVERTIBLE
                                         PREFERRED STOCK           COMMON STOCK                                      TOTAL
                                      ----------------------   --------------------    PAID-IN     ACCUMULATED   STOCKHOLDERS'
                                        SHARES      AMOUNT       SHARES      AMOUNT    CAPITAL       DEFICIT        EQUITY
                                      ----------   ---------   -----------   ------   ----------   -----------   -------------
<S>                                   <C>          <C>         <C>           <C>      <C>          <C>           <C>
Balances at December 31, 1998.......   8,190,000   $ 409,500   142,847,674   $1,428   $2,259,583    $(278,681)    $2,391,830
  Issuance of common
    stock -- Capstar merger.........          --          --    53,553,966     536     2,420,182           --      2,420,718
  Conversion of preferred stock.....  (5,990,000)   (299,500)   11,979,800     120       299,375           --             (5)
  Assumption of stock options and
    warrants -- Capstar merger......          --          --            --      --        81,481           --         81,481
  Exercise of common stock
    options.........................          --          --     1,238,518      12        37,700           --         37,712
  Non-cash compensation expense.....          --          --            --      --         6,148           --          6,148
  Convertible preferred stock
    dividends.......................          --          --            --      --            --      (14,011)       (14,011)
  Net loss..........................          --          --            --      --            --      (69,752)       (69,752)
  Other.............................          --          --            --      --       (10,037)          --        (10,037)
                                      ----------   ---------   -----------   ------   ----------    ---------     ----------
Balances at September 30, 1999......   2,200,000   $ 110,000   209,619,958   $2,096   $5,094,432    $(362,444)    $4,844,084
                                      ==========   =========   ===========   ======   ==========    =========     ==========
</TABLE>

     See accompanying notes to condensed consolidated financial statements.

                                        5
<PAGE>   6

                           AMFM INC. AND SUBSIDIARIES
            (FORMERLY CHANCELLOR MEDIA CORPORATION AND SUBSIDIARIES)

                CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                  (UNAUDITED)
                             (DOLLARS IN THOUSANDS)

<TABLE>
<CAPTION>
                                                                    NINE MONTHS ENDED
                                                              -----------------------------
                                                              SEPTEMBER 30,   SEPTEMBER 30,
                                                                  1998            1999
                                                              -------------   -------------
<S>                                                           <C>             <C>
Net cash provided by operating activities...................   $   146,459      $ 234,442
                                                               -----------      ---------
Cash flows from investing activities:
  Acquisitions, net of cash acquired........................      (905,264)      (495,746)
  Proceeds from sale of assets..............................            --        744,254
  Purchases of property and equipment.......................       (21,684)       (53,290)
  Payments made on purchases of representation contracts....       (25,724)       (27,151)
  Payments received on sales of representation contracts....        20,283         18,193
  Issuance of note receivable from affiliate................      (150,000)            --
  Payments for equity basis investments.....................            --         (6,500)
  Other.....................................................       (39,750)       (16,663)
                                                               -----------      ---------
          Net cash provided by (used by) investing
            activities......................................    (1,122,139)       163,097
                                                               -----------      ---------
Cash flows from financing activities:
  Proceeds of long-term debt................................     1,973,000        643,000
  Payments on long-term debt................................    (1,528,000)      (968,713)
  Net proceeds from issuance of common stock................     1,000,645         22,016
  Repurchase of 12% and 12 1/4% Exchange Debentures.........      (403,213)            --
  Dividends on preferred stock..............................       (50,436)       (14,802)
  Redemption of preferred stock.............................            --         (1,345)
  Payments for debt issuance costs..........................       (19,837)            --
  Other.....................................................            --         (3,439)
                                                               -----------      ---------
          Net cash provided by (used by) financing
            activities......................................       972,159       (323,283)
                                                               -----------      ---------
Increase (decrease) in cash and cash equivalents............        (3,521)        74,256
Cash and cash equivalents at beginning of period............        16,584         12,256
                                                               -----------      ---------
Cash and cash equivalents at end of period..................   $    13,063      $  86,512
                                                               ===========      =========
</TABLE>

     See accompanying notes to condensed consolidated financial statements.

                                        6
<PAGE>   7

                           AMFM INC. AND SUBSIDIARIES
            (FORMERLY CHANCELLOR MEDIA CORPORATION AND SUBSIDIARIES)

              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                  (UNAUDITED)
               (DOLLARS IN THOUSANDS, EXCEPT FOR PER SHARE DATA)

1. BASIS OF PRESENTATION

     The accompanying unaudited interim financial statements include the
accounts of AMFM Inc. (formerly Chancellor Media Corporation) and its
wholly-owned and majority-owned subsidiaries (collectively, the "Company" or
"AMFM"). All significant intercompany balances and transactions have been
eliminated in consolidation and in the opinion of management, all adjustments
(consisting of normal recurring accruals) necessary to present fairly the
financial position, results of operations and cash flows have been recorded.
Investments 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 using the equity method.
Interim period results are not necessarily indicative of results to be expected
for the year.

     These financial statements should be read in conjunction with the
consolidated financial statements and the notes thereto included in the
Company's Annual Report on Form 10-K for the year ended December 31, 1998. The
year-end consolidated balance sheet data was derived from the audited financial
statements, but does not include all disclosures required by generally accepted
accounting principles.

     Income (loss) per common share is based on the weighted average shares of
common stock outstanding during the period. The calculation for diluted income
per common share for the three months ended September 30, 1999 includes the
assumed exercise of stock options and warrants, the effect of which would be to
increase average shares outstanding by 6.5 million shares, and the assumed
conversion of the $3.00 Convertible Exchangeable Preferred Stock and the 7%
Convertible Preferred Stock into common stock at the beginning of the period,
the effect of which would be to decrease preferred stock dividends by $1,176 and
increase average shares outstanding by 13.2 million shares. The $3.00
Convertible Exchangeable Preferred Stock, the 7% Convertible Preferred Stock and
stock options (during loss periods) are not included in the calculation of loss
per common share for the three months ended September 30, 1998 and the nine
months ended September 30, 1998 and 1999 as their effect would be antidilutive.
Weighted average shares excluded from the calculation that related to
potentially dilutive securities amounted to approximately 18.1 million for the
three months ended September 30, 1998 and approximately 23.7 million and 21.9
million for the nine months ended September 30, 1998 and 1999, respectively.

     Certain reclassifications have been made to prior period condensed
consolidated financial statements to conform to the current period presentation.

2. CLEAR CHANNEL MERGER AGREEMENT

     On October 2, 1999, the Company and Clear Channel Communications, Inc.
("Clear Channel") entered into a definitive merger agreement. Under the terms of
the merger agreement, AMFM stockholders will receive 0.94 shares of Clear
Channel common stock, on a fixed exchange basis, for each share of the Company's
common stock held on the record date of the transaction. Pursuant to the
Telecommunications Act of 1996 and other regulatory guidelines, it is expected
that, collectively, Clear Channel and the Company will need to divest
approximately 100 radio stations to obtain antitrust and Federal Communications
Commission approval for the merger. Consummation of the merger is also subject
to stockholder approval by both companies and other conditions. Although there
can be no assurance, the Company expects that the Clear Channel merger will be
consummated during the second half of 2000.

                                        7
<PAGE>   8
                           AMFM INC. AND SUBSIDIARIES
            (FORMERLY CHANCELLOR MEDIA CORPORATION AND SUBSIDIARIES)

      NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

3. ACQUISITIONS AND DISPOSITIONS

  (a) Capstar Merger

     On July 13, 1999, the Company acquired Capstar Broadcasting Corporation
("Capstar Broadcasting"), a Delaware corporation, through the merger (the
"Capstar Merger") of a wholly-owned subsidiary of the Company into Capstar
Broadcasting, with Capstar Broadcasting surviving as a wholly-owned subsidiary
of the Company. Concurrent with the Capstar Merger, the Company was renamed AMFM
Inc. As a result of the Capstar Merger, all of the then outstanding shares of
Capstar Broadcasting common stock were converted, in a tax-free exchange, into
0.4955 of a share of the Company's common stock, or approximately 53.6 million
shares of the Company's common stock in the aggregate. The Company added 338
radio stations (239 FM and 99 AM) to its portfolio and also assumed the
outstanding options, warrants and other equity rights in Capstar Broadcasting
which represented up to an additional 3.3 million shares of the Company's common
stock. Approximately $2,200,000 of Capstar Broadcasting's debt and preferred
stock remained outstanding after the Capstar Merger, as discussed in Note 4.

  (b) Outdoor Activity and Sale of Outdoor Advertising Business to Lamar

     On September 15, 1999, the Company completed the sale to Lamar Advertising
Company ("Lamar") of all of the outstanding common stock of Chancellor Media
Outdoor Corporation and Chancellor Media Whiteco Outdoor Corporation, indirect
wholly-owned subsidiaries of the Company, which together held all of the
Company's assets used in its outdoor advertising business. The Company received
cash proceeds of $700,000, subject to a net working capital adjustment, and
26,227,273 shares of class A common stock, par value $.01 per share, of Lamar
("Lamar Common Stock"). During the three months ended September 30, 1999, the
Company recognized a pre-tax gain of $209,970 related to the sale.

     The Company owns approximately 30% of the aggregate number of outstanding
shares and approximately 11% of the voting shares of Lamar, based upon the
number of shares of Lamar common stock outstanding as of September 30, 1999.
Lamar, the Company and the controlling stockholder of Lamar entered into a
stockholders agreement under which (1) the Company designated Thomas O. Hicks
and James E. de Castro as its representatives on the Lamar board of directors,
increasing the size of Lamar's board to ten members, (2) the Company agreed not
to sell any of the Lamar Common Stock for a period of 12 months from the closing
date, which ends on September 15, 2000 and (3) Lamar agreed, subject to certain
exceptions, not to take any action without the prior written consent of the
Company that would result in a change of control of Lamar or the acquisition or
disposition of assets worth in excess of $500,000. Due to the Company's ability
to exercise significant influence over the operating and financial policies of
Lamar, the Company is accounting for its investment in Lamar using the equity
method. Lamar and the Company entered into a registration rights agreement which
gives the Company the right to require Lamar to register the sale of the Lamar
Common Stock under applicable securities laws in some circumstances.

     At September 30, 1999, the market value of the Company's common stock of
Lamar, based on the closing sale price of unrestricted class A common stock of
Lamar as reported by The Nasdaq Stock Market, was $1,298,250, and the investment
was carried at $1,109,671. The excess of the Company's carrying value over the
underlying equity in net assets is being amortized over 15 years. The Company's
share of undistributed losses of Lamar totaled $219 at September 30, 1999.

     During 1999, prior to the sale of the Company's outdoor advertising
business, the Company acquired approximately 4,800 billboards and outdoor
displays in various transactions for approximately $51,000 in cash, including
certain working capital and direct acquisition costs. On May 24, 1999, the
Company sold 466 billboards and outdoor displays in various markets to PNE
Media, LLC for approximately $25,600 in cash. These assets were accounted for as
assets held for sale and no gain or loss was recognized by the

                                        8
<PAGE>   9
                           AMFM INC. AND SUBSIDIARIES
            (FORMERLY CHANCELLOR MEDIA CORPORATION AND SUBSIDIARIES)

      NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Company upon consummation of the sale. The excess of the carrying amount over
the proceeds was accounted for as an adjustment to the original purchase price
of the billboards and outdoor displays.

  (c) Other Completed Transactions

     On January 15, 1999, the Company acquired the music production library and
related license agreements of Brown Bag Productions for a purchase price of
$8,483 including direct acquisition costs.

     On January 28, 1999, the Company acquired Wincom Broadcasting Corporation
which owns WQAL-FM in Cleveland. The Company had previously been operating
WQAL-FM under a time brokerage agreement effective October 1, 1998. On February
2, 1999, the Company acquired five additional radio stations in Cleveland
including (i) WDOK-FM and WRMR-AM from Independent Group Limited Partnership,
(ii) WZAK-FM from Zapis Communications and (iii) Zebra Broadcasting Corporation
which owned WZJM-FM and WJMO-AM. The six Cleveland stations were acquired for an
aggregate purchase price of $283,758 in cash, including working capital and
direct acquisition costs.

     On April 16, 1999, the Company sold WMVP-AM in Chicago to ABC, Inc. for
$21,000 in cash and recognized a pre-tax gain of $14,466. The Company had
previously entered into a time brokerage agreement effective September 10, 1998
to sell the broadcast time of WMVP-AM pending completion of the sale.

     On July 1, 1999, the Company acquired KKFR-FM and KFYI-AM in Phoenix from
The Broadcast Group, Inc. for $90,000 in cash. The Company began operating
KKFR-FM and KFYI-AM under a time brokerage agreement effective November 5, 1998.

     On September 1, 1999, the Company acquired WTPA-FM and WNCE-FM in
Harrisburg, Pennsylvania from Quaker State Broadcasting Corporation for
approximately $15,443 in cash. Additionally, the Company acquired KRYL-FM (now
known as KASZ-FM) in Killeen, Texas and KMXJ-FM in Ft. Smith, Arkansas and
disposed of KKTK-AM in Waco, Texas for a net cost of approximately $595 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.

                                        9
<PAGE>   10
                           AMFM INC. AND SUBSIDIARIES
            (FORMERLY CHANCELLOR MEDIA CORPORATION AND SUBSIDIARIES)

      NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

     A summary of the net assets acquired in the nine-month period ended
September 30, 1999 follows:

<TABLE>
<CAPTION>
                                                               NINE MONTHS
                                                                  ENDED
                                                              SEPTEMBER 30,
                                                                  1999
                                                              -------------
<S>                                                           <C>
Cash and cash equivalents...................................   $    20,845
Accounts receivable, net....................................       132,768
Other current assets........................................        13,702
Property and equipment......................................       308,428
Intangible assets...........................................     6,363,754
Other assets................................................        42,426
Accounts payable and accrued expenses.......................       (88,426)
Deferred tax liabilities....................................    (1,386,381)
Other.......................................................         6,575
                                                               -----------
          Total net assets acquired.........................     5,413,691
Less:
  Cash and cash equivalents acquired........................        20,845
  Common stock issued.......................................     2,399,018
  Long-term debt............................................     2,081,091
  Redeemable preferred stock................................       312,836
  Stock options and warrants................................       103,180
  Other liabilities assumed.................................           725
  Notes payable.............................................           250
                                                               -----------
Cash paid for acquisitions..................................   $   495,746
                                                               ===========
</TABLE>

     The unaudited pro forma condensed consolidated results of operations data
for the nine months ended September 30, 1998 and 1999, as if the acquisitions
and dispositions through September 30, 1999 occurred at January 1, 1998, follow:

<TABLE>
<CAPTION>
                                                                   NINE MONTHS ENDED
                                                             -----------------------------
                                                             SEPTEMBER 30,   SEPTEMBER 30,
                                                                 1998            1999
                                                             -------------   -------------
<S>                                                          <C>             <C>
Net revenues...............................................   $1,384,171      $1,546,115
Loss before extraordinary item.............................     (335,425)       (251,600)
Net loss...................................................     (382,514)       (251,600)
Basic and diluted loss per common share -- before
  extraordinary item.......................................        (1.87)          (1.34)
Basic and diluted loss per common share....................        (2.11)          (1.34)
</TABLE>

     The pro forma results are not necessarily indicative of the financial
results which would have occurred if the transactions had been in effect for the
entire periods presented.

     On August 30, 1999, the Company contributed $37,500 and certain rights to
the Company's Internet web sites for an approximate 92% interest in AMFM
Interactive Inc. AMFM Interactive Inc. was organized to develop the Company's
Internet web sites and stream online broadcasts of the Company's on-air
programming and other media.

                                       10
<PAGE>   11
                           AMFM INC. AND SUBSIDIARIES
            (FORMERLY CHANCELLOR MEDIA CORPORATION AND SUBSIDIARIES)

      NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

  (d) Pending Transactions

     On August 6, 1999, the Company entered into an agreement to sell Capstar
Broadcasting's radio stations KIOK-FM, KALE-AM and KEGX-FM in Richland,
Washington and KTCR-AM in Kennewick, Washington to New Northwest Broadcasters
II, Inc. for $4,000 payable in cash. Although there can be no assurance, the
Company expects to complete the sale of these stations in the fourth quarter of
1999.

     On August 30, 1999, the Company entered into an agreement with Cox Radio,
Inc. ("Cox") to acquire KOST-FM and KFI-AM in Los Angeles plus $3,000 in cash
payable by Cox in exchange for 13 of its radio stations including Chancellor
Media Corporation of Los Angeles ("CMCLA", an indirect subsidiary of the
Company) stations WEDR-FM in Miami and WFOX-FM in Atlanta, and Capstar
Broadcasting stations WEFX-FM, WNLK-AM, WKHL-FM and WSTC-AM in Stamford/Norwalk,
WFYV-FM, WAPE-FM, WBWL-AM, WKQL-FM, WMXQ-FM and WOKV-AM in Jacksonville and
WPLR-FM and the local sales rights of a 14th Capstar Broadcasting station,
WYBC-FM in New Haven. The Company began programming KOST-FM and KFI-AM in Los
Angeles and Cox began programming the 13 Company stations under time brokerage
agreements effective October 1, 1999. Although there can be no assurance, the
Company expects that the Cox exchange will be consummated in the first quarter
of 2000.

     On September 14, 1999, the Company entered into an agreement to acquire
radio station KQOD-FM in Stockton, California from Carson Group, Inc. for a
purchase price of $5,150 payable in cash. KQOD-FM will become part of Capstar
Broadcasting's station portfolio. The Company began programming KQOD-FM under a
local marketing agreement on September 20, 1999. Although there can be no
assurance, the Company expects to complete the acquisition in the fourth quarter
of 1999.

     On September 22, 1999, the Company entered into an agreement to sell the
capital stock of its Puerto Rico subsidiaries to Spanish Broadcasting System of
Puerto Rico, Inc. ("Spanish Broadcasting") for $90,000 payable in cash. The
Company owns and operates eight radio stations in Puerto Rico. Pending
completion of the sale, Spanish Broadcasting will program these eight stations
under a time brokerage agreement. Although there can be no assurance, the
Company expects to complete the sale of these subsidiaries in the fourth quarter
of 1999.

4. LONG-TERM DEBT AND REDEEMABLE PREFERRED STOCK

     Long-term debt consists of the following at December 31, 1998 and September
30, 1999:

<TABLE>
<CAPTION>
                                                              DECEMBER 31,   SEPTEMBER 30,
                                                                  1998           1999
                                                              ------------   -------------
<S>                                                           <C>            <C>
CMCLA's Senior Credit Facility..............................   $1,596,000     $1,282,500
8% Senior Notes.............................................      750,000        750,000
9 3/8% Notes................................................      200,000        200,000
8 3/4% Notes................................................      200,000        200,000
10 1/2% Notes...............................................      100,000        100,000
8 1/8% Notes................................................      500,000        500,000
9% Notes....................................................      750,000        750,000
Capstar Broadcasting's Credit Facility......................           --      1,230,250
12 3/4% Capstar Partners Notes..............................           --        239,406
9 1/4% Capstar Radio Notes..................................           --        129,474
10 3/4% Capstar Communications Notes........................           --        318,199
11 3/8% Capstar Communications Notes........................           --            466
                                                               ----------     ----------
                                                                4,096,000      5,700,295
Less current portion........................................           --        (54,625)
                                                               ----------     ----------
                                                               $4,096,000     $5,645,670
                                                               ==========     ==========
</TABLE>

                                       11
<PAGE>   12
                           AMFM INC. AND SUBSIDIARIES
            (FORMERLY CHANCELLOR MEDIA CORPORATION AND SUBSIDIARIES)

      NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

     The Company's long-term debt balance at September 30, 1999 includes Capstar
Broadcasting debt that remained outstanding subsequent to the Capstar Merger. In
addition, the Company's financial statements at September 30, 1999 include the
12% Capstar Broadcasting Partners, Inc. ("Capstar Partners," an indirect
subsidiary of the Company) Senior Exchangeable Preferred Stock and the 12 5/8%
Capstar Communications, Inc. ("Capstar Communications," an indirect subsidiary
of the Company) Series E Cumulative Exchangeable Preferred Stock. A description
of the long-term debt and redeemable preferred stock additions is included
below.

     Capstar Broadcasting's Credit Facility. Capstar Broadcasting is a party to
a credit facility under which Capstar Radio Broadcasting Partners, Inc.
("Capstar Radio"), an indirect subsidiary of the Company, is the borrower.
Capstar Broadcasting's credit facility consists of a $500,000 revolving loan, a
$450,000 A Term Loan and a $400,000 B Term Loan. Pursuant to Capstar
Broadcasting's credit facility and subject to bank availabilities and approvals,
Capstar Broadcasting may request additional term loans and revolving credit
loans in an aggregate amount up to $550,000. The interest rate under Capstar
Broadcasting's credit facility is a floating rate. As of September 30, 1999,
Capstar Broadcasting had borrowings of $1,230,250 outstanding under its credit
facility, of which $54,625 is current. The outstanding balance includes $396,500
in revolving loans, $438,750 under the A Term Loan and $395,000 under the B Term
Loan, with a weighted average effective interest rate of 7.48% per annum. As of
September 30, 1999, the remaining required scheduled annual principal payments
on the A Term Loan, payable quarterly, were $11,250 in 1999, $56,250 in 2000,
$67,500 in 2001, $78,750 in 2002, $90,000 in 2003 and $135,000 in 2004. As of
September 30, 1999, the remaining required scheduled annual principal payments
on the B Term Loan, payable quarterly, were $1,000 in 1999, $4,000 in years 2000
through 2002, $92,000 in 2003, $190,000 in 2004 and $100,000 in 2005. In April
1999, Capstar Broadcasting's credit facility was amended to, among other things,
permit the Capstar Merger; increase the leverage ratio required to be maintained
by Capstar Radio during the period from April 1, 1999 through September 30,
2000; increase the pricing of Capstar Broadcasting's credit facility beginning
January 1, 2000; and permit Capstar Broadcasting's April 30, 1999 acquisition of
Triathlon Broadcasting Company.

     Capstar Broadcasting's credit facility is collateralized by granting a
first priority perfected pledge of Capstar Radio's assets, including the capital
stock of its subsidiaries, excluding the assets of Capstar Communications.
Capstar Partners, Capstar Broadcasting and all of the direct and indirect
subsidiaries of Capstar Partners (other than Capstar Communications) have
guaranteed Capstar Broadcasting's credit facility and have collateralized their
guarantees by granting a first priority perfected pledge of substantially all of
their assets.

     12 3/4% Capstar Partners Notes. In February 1997, Capstar Partners issued
its 12 3/4% Senior Discount Notes due 2009 which are carried at a discount from
their aggregate principal amount at maturity of $273,350. The carrying value of
the 12 3/4% Capstar Partners Senior Discount Notes due 2009 will increase
through accretion until February 1, 2002. As of September 30, 1999, the carrying
value was $239,406. Beginning on August 1, 2002, Capstar Partners will pay
interest of approximately $17,426 semi-annually on February 1 and August 1 of
each year until maturity.

     The 12 3/4% Capstar Partners Senior Discount Notes due 2009 may be redeemed
at any time on or after February 1, 2002, in whole or in part, at the option of
Capstar Partners at prices ranging from 106.375% at February 1, 2002 and
declining to 100% on February 1, 2007 (expressed as a percentage of the accreted
value on the redemption date), plus in each case accrued and unpaid interest. In
addition, prior to February 1, 2001, Capstar Partners may, at its option, redeem
up to 25% of the principal amount at maturity of its 12 3/4% Senior Discount
Notes due 2009 at a redemption price of 112.75% of the accreted value, out of
the proceeds of one or more public equity offering or major asset sales. Upon
the occurrence of a change in control (as defined in the indenture of the
12 3/4% Capstar Partners Senior Discount Notes due 2009), the holders of the
12 3/4% Capstar Partners Senior Discount Notes due 2009 have the right to
require Capstar Partners to purchase all or a
                                       12
<PAGE>   13
                           AMFM INC. AND SUBSIDIARIES
            (FORMERLY CHANCELLOR MEDIA CORPORATION AND SUBSIDIARIES)

      NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

portion of the 12 3/4% Capstar Partners Senior Discount Notes due 2009 at a
purchase price equal to (i) 101% of the accreted value if the change in control
occurs before February 1, 2002 or (ii) 101% of the principal amount at maturity,
plus accrued and unpaid interest, if the change in control occurs after February
1, 2002. The indenture of the 12 3/4% Capstar Partners Senior Discount Notes due
2009 contains limitations on incurrence of additional indebtedness, issuance of
preferred stock of subsidiaries and restricted payments, as well as other
restrictive covenants.

     9 1/4% Capstar Radio Notes. In June 1997, Capstar Radio issued its 9 1/4%
Senior Subordinated Notes due 2007 with a principal amount outstanding at
September 30, 1999 of $125,775. Capstar Radio pays interest of approximately
$5,817 on its 9 1/4% Senior Subordinated Notes due 2007 semi-annually on January
1 and July 1 of each year.

     Capstar Radio's 9 1/4% Senior Subordinated Notes due 2007 may be redeemed
at any time on or after July 1, 2002, in whole or in part, at the option of
Capstar Radio at prices ranging from 104.625% at July 1, 2002 and declining to
100% on or after July 1, 2005, plus in each case accrued and unpaid interest. In
addition, prior to July 1, 2001, Capstar Radio may redeem up to 25% of the
original aggregate principal amount of its 9 1/4% Senior Subordinated Notes due
2007 at a redemption price of 109.25% plus accrued and unpaid interest with net
proceeds of one or more public equity offerings or major asset sales. Upon the
occurrence of a change of control (as defined in the indenture of the 9 1/4%
Capstar Radio Senior Subordinated Notes due 2007), the holders of the 9 1/4%
Capstar Radio Senior Subordinated Notes due 2007 have the right to require
Capstar Radio to purchase all or a portion of its 9 1/4% Senior Subordinated
Notes due 2007 at a price equal to 101% plus accrued and unpaid interest. The
indenture of the 9 1/4% Capstar Radio Senior Subordinated Notes due 2007
contains limitations on incurrence of additional indebtedness, issuance of
preferred stock of subsidiaries and restricted payments, as well as other
restrictive covenants.

     10 3/4% Capstar Communications Notes and 11 3/8% Capstar Communications
Notes. Capstar Communications has outstanding its 10 3/4% Senior Subordinated
Notes due 2006 and its 11 3/8% Senior Subordinated Notes due 2000. Capstar
Communications pays interest of approximately $15,792 on its 10 3/4% Senior
Subordinated Notes due 2006 semi-annually on May 15 and November 15 of each year
and pays interest of approximately $27 on its 11 3/8% Senior Subordinated Notes
due 2000 semi-annually on April 1 and October 1 of each year. As of September
30, 1999, the outstanding principal balances were $293,816 and $466 on the
10 3/4% Capstar Communications Senior Subordinated Notes due 2006 and the
11 3/8% Capstar Communications Senior Subordinated Notes due 2000, respectively.
On November 12, 1999, Capstar Communications completed a cash tender offer to
acquire all of its outstanding 10 3/4% Senior Subordinated Notes due 2006.
Approximately $293,641 in aggregate principal amount of the notes, representing
99.9% of the outstanding notes, was accepted for payment for an aggregate
repurchase cost of $327,750 plus accrued interest of $15,169. The repurchase was
funded with borrowings under the senior credit facility of CMCLA.

     Capstar Communications' 10 3/4% Senior Subordinated Notes due 2006 and its
11 3/8% Senior Subordinated Notes due 2000 are fully, unconditionally, jointly
and severally guaranteed by every direct and indirect wholly-owned subsidiary of
Capstar Communications. Capstar Communications is a holding company with no
assets, liabilities or operations other than its investment in its subsidiaries.

     12% Capstar Partners Preferred Stock. In June 1997, Capstar Partners issued
1,000,000 shares of its 12% Senior Exchangeable Preferred Stock. Capstar
Partners is required to pay dividends on its 12% Senior Exchangeable Preferred
Stock semi-annually on January 1 and July 1 of each year at a rate of $12.00 per
share. Until July 1, 2002, dividends may be paid, at Capstar Partners' option,
either in cash or in additional shares of 12% Capstar Partners Senior
Exchangeable Preferred Stock. Since issuance, Capstar Partners has paid the
required dividend in additional shares. However, Capstar Partners intends to pay
all future dividends in cash beginning January 1, 2000. As of September 30,
1999, 1,254,618 shares of the 12% Capstar Partners

                                       13
<PAGE>   14
                           AMFM INC. AND SUBSIDIARIES
            (FORMERLY CHANCELLOR MEDIA CORPORATION AND SUBSIDIARIES)

      NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Senior Exchangeable Preferred Stock were issued and outstanding with a
liquidation preference equal to $100.00 per share plus accrued and unpaid
dividends.

     The 12% Capstar Partners Senior Exchangeable Preferred Stock is redeemable
at Capstar Partners' option, in whole or in part at any time on or after July 1,
2002, at prices ranging from 106% at July 1, 2002 and declining to 100% after
July 1, 2007, plus, without duplication, accumulated and unpaid dividends to the
date of redemption. In addition, subject to certain exceptions, prior to July 1,
2001, Capstar Partners may, at its option, redeem up to 25% of its 12% Senior
Exchangeable Preferred Stock with the net cash proceeds from one or more Public
Equity or Major Asset Sales (both as defined in the certificate of designation
governing the 12% Capstar Partners Senior Exchangeable Preferred Stock), at the
redemption prices set forth in the certificate of designation, plus, without
duplication, accumulated and unpaid dividends to the redemption date. The 12%
Capstar Partners Senior Exchangeable Preferred Stock is subject to mandatory
redemption in whole on July 1, 2009 at a price equal to 100% of the liquidation
preference thereof, plus all accrued and unpaid dividends.

     Capstar Partners may, at its option, subject to certain conditions, on any
scheduled dividend payment date, exchange its 12% Senior Exchangeable Preferred
Stock, in whole but not in part, for 12% Capstar Partners Exchange Debentures.
Holders of the 12% Capstar Partners Senior Exchangeable Preferred Stock will be
entitled to receive $1.00 principal amount of 12% Capstar Partners Exchange
Debentures for each $1.00 in liquidation preference of 12% Capstar Partners
Senior Exchangeable Preferred Stock.

     12 5/8% Capstar Communications Series E Preferred Stock. Capstar
Communications has outstanding its 12 5/8% Series E Cumulative Exchangeable
Preferred Stock. Capstar Communications is required to pay dividends on its
12 5/8% Series E Cumulative Exchangeable Preferred Stock semi-annually on
January 15 and July 15 of each year at the rate per share of $12.625 per year.
Until January 15, 2002, Capstar Communications may pay dividends either in cash
or in additional shares of its 12 5/8% Series E Cumulative Exchangeable
Preferred Stock. Since July 15, 1998, Capstar Communications has paid the
required dividend in additional shares. However, Capstar Communications intends
to pay all future dividends in cash. As of September 30, 1999, 1,430,989 shares
of the 12 5/8% Capstar Communications Series E Cumulative Exchangeable Preferred
Stock were issued and outstanding with a liquidation preference equal to $100.00
per share plus accrued and unpaid dividends. On October 12, 1999, Capstar
Communications commenced a consent solicitation to modify certain timing
restrictions on its ability to exchange all shares of its 12 5/8% Series E
Cumulative Exchangeable Preferred Stock for its 12 5/8% Senior Subordinated
Exchange Debentures due 2006. If at least a majority of the holders consent to
the proposed modifications, then consenting holders of 12 5/8% Capstar
Communications Series E Cumulative Exchangeable Preferred Stock will be entitled
to receive consent payments of $0.25 per share of 12 5/8% Capstar Communications
Series E Cumulative Exchangeable Preferred Stock. If the requisite consents are
obtained and certain other conditions are satisfied, Capstar Communications
intends to exchange the outstanding shares of 12 5/8% Series E Cumulative
Exchangeable Preferred Stock for its 12 5/8% Senior Subordinated Exchange
Debentures in November 1999.

  Change in Legal Structure and Refinancing

     Through a series of related transactions, including capital contributions
of stock and mergers of subsidiaries, the Company intends to combine the
outstanding bonds, bank indebtedness and preferred stock of its direct and
indirect subsidiaries into fewer entities (the "Reorganization"). After
completion of the Reorganization, Capstar Communications will assume and/or be
liable for all of its remaining outstanding bonds, as well as the bonds and bank
indebtedness of Capstar Radio and CMCLA, which will be combined with Capstar
Communications in the fourth quarter of 1999. The Reorganization also includes
the tender offer for the 10 3/4% Capstar Communications Senior Subordinated
Notes due 2006 and the possible exchange of the 12 5/8% Capstar Communications
Series E Cumulative Exchangeable Preferred Stock for 12 5/8% Capstar

                                       14
<PAGE>   15
                           AMFM INC. AND SUBSIDIARIES
            (FORMERLY CHANCELLOR MEDIA CORPORATION AND SUBSIDIARIES)

      NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Communications Senior Subordinated Debentures due 2006 described above. The
Reorganization is expected to be completed during the fourth quarter of 1999.

     Also as part of the Reorganization, the Company intends to refinance
CMCLA's senior credit facility and Capstar Broadcasting's credit facility with a
new credit facility. Several banks entered into a commitment letter with CMCLA
on November 3, 1999 and agreed to provide Capstar Communications with a senior
credit facility. The Company expects that Capstar Communications' senior credit
facility will be entered into in November 1999. Capstar Communications' senior
credit facility will include commitments for a revolving loan facility of
$600,000 and a term loan facility of $2,600,000. The proceeds of such facilities
may be used to repay the existing credit facilities of CMCLA and Capstar
Broadcasting, to repay, repurchase or redeem other debt and equity securities of
the Company and its subsidiaries and for other general corporate purposes. Both
the revolving loan facility and the term loan facility of Capstar Communications
will mature two years after the date of Capstar Communications' senior credit
facility. No scheduled amortization of principal will be required prior to
maturity. Both the revolving loan facility and the term loan facility of Capstar
Communications will bear interest at fluctuating rates based upon the prime rate
or the eurodollar rate. The margin above the applicable prime rate or the
eurodollar rate will be determined by reference to Capstar Communications' ratio
of consolidated debt to consolidated earnings before interest, taxes,
depreciation and amortization, provided that such margins will be fixed at .50%
and 1.50%, respectively, until delivery of Capstar Communications' financial
statements for the fiscal quarter ending March 31, 2000, and capped at .50% and
1.50%, respectively, thereafter so long as the Clear Channel merger agreement
has not been terminated. Capstar Communications' senior credit facility will be
guaranteed by most of the direct and indirect subsidiaries, other than Capstar
Communications, of Chancellor Mezzanine Holdings Corporation ("Chancellor
Mezzanine"), a direct subsidiary of the Company, and will be secured by (a) a
non-recourse pledge of the stock of Chancellor Mezzanine, (b) a recourse pledge
of the stock of Capstar Partners, (c) a recourse pledge of the stock of Capstar
Communications and most of the subsidiaries of Capstar Communications, and (d) a
pledge of the common stock of Lamar to be held by Capstar Communications after
the Reorganization. Capstar Communications' senior credit facility will be
subject to affirmative and negative covenants, including (i) limitations on
indebtedness, mergers, acquisitions and dispositions of assets, dividends, stock
repurchases, other restricted payments, investments and liens, and (ii)
financial maintenance covenants. The merger of the Company and Clear Channel
will be an event of default under Capstar Communications' senior credit facility
and will require refinancing at the effective time of the merger.

5. PREFERRED STOCK CONVERSION

     On August 6, 1999, the Company gave notice to the holders of its $3.00
Convertible Exchangeable Preferred Stock of the Company's election to redeem all
of the outstanding shares of its $3.00 Convertible Exchangeable Preferred Stock
at a per share redemption price of $52.40, plus accrued and unpaid dividends.
Each holder had the right to convert each share of $3.00 Convertible
Exchangeable Preferred Stock held by it into two shares of common stock of the
Company in lieu of being redeemed. On August 24, 1999, preferred holders
converted 5,989,900 shares of $3.00 Convertible Exchangeable Preferred Stock
into 11,979,800 shares of the Company's common stock, and the Company redeemed
the remaining 100 shares of $3.00 Convertible Exchangeable Preferred Stock for
$5 in the aggregate.

                                       15
<PAGE>   16
                           AMFM INC. AND SUBSIDIARIES
            (FORMERLY CHANCELLOR MEDIA CORPORATION AND SUBSIDIARIES)

      NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

6. MERGER AND NON-RECURRING COSTS

     During the first quarter of 1999, the Company recorded a charge of $28,979
for merger and non-recurring costs, of which approximately $1,493 is accrued as
of September 30, 1999, which consisted of the following:

<TABLE>
<S>                                                            <C>
Write-off of LIN Merger and Petry transaction costs(a)......   $16,783
Executive severance costs(b)................................    12,196
                                                               -------
          Total.............................................   $28,979
                                                               =======
</TABLE>

---------------

(a)  On July 7, 1998, the Company entered into a merger agreement with the
     indirect parent of LIN Television Corporation, a Delaware corporation
     ("LIN"), to acquire LIN by merger. On April 8, 1998, the Company entered
     into an agreement to acquire Petry Media Corporation ("Petry"), a leading
     independent television representation firm, for approximately $127,000.
     Effective March 15, 1999, the Company and LIN agreed to terminate the LIN
     merger agreement. The Company subsequently assigned to LIN its contract to
     acquire Petry. The Company recorded a charge of $16,783 to write off
     transaction costs incurred in connection with the LIN merger agreement and
     Petry transaction.

(b)  On March 15, 1999, the Company announced an executive realignment which
     included (i) the resignation of Jeffrey A. Marcus as the Company's
     President and Chief Executive Officer; (ii) the resignation of Thomas P.
     McMillin as the Company's Chief Financial Officer; (iii) the departure of
     Richard A. B. Gleiner as the Company's General Counsel; and (iv) the
     resignation of Eric C. Neuman as the Company's Senior Vice
     President -- Strategic Development, each effective March 15, 1999. In
     connection with the executive realignment, the Company recorded a charge of
     $12,196 for executive severance and other costs.

     During the third quarter of 1999, the Company recorded a charge of $30,977
for merger and non-recurring costs which consisted of the following:

<TABLE>
<S>                                                            <C>
Personnel changes, format changes and other non-recurring
costs incurred in connection with the implementation of the
Company's clustering strategy(a)............................   $ 6,027
Personnel changes and contractual obligations in exiting
  certain non-core business ventures(b).....................    23,555
Other(c)....................................................     1,395
                                                               -------
          Total.............................................   $30,977
                                                               =======
</TABLE>

---------------

(a)  The Company has announced its new clustering strategy whereby each cluster
     of stations in a market will be managed as a single business unit. In
     connection with this strategy, certain personnel have been terminated and
     other personnel-related costs have been incurred to align formats within a
     market to target certain demographics. Of the total costs incurred, $5,694
     related to personnel costs. At September 30, 1999, $2,269 of those costs
     were accrued and are expected to be paid during the fourth quarter of 1999.

(b)  Previously, the Company has announced that it would sharpen its focus on
     domestic radio and new media operations. As a result, management decided to
     discontinue Katz Media's international operations and streamline its
     television representation business, sell its outdoor advertising business,
     terminate its contracts to acquire Grupo Radio and assign to LIN its
     contract to acquire Petry. Of the $23,555 incurred, $3,814 related to
     personnel costs and the remainder related to the termination of contractual
     obligations, such as leases, and legal and advisory fees. At September 30,
     1999, $3,312 of the total costs are accrued and are expected to be paid
     during the fourth quarter of 1999.

(c)  During the third quarter of 1999, developmental costs of $1,395 were
     incurred related to Galaxy and Star Performance, the Company's proprietary
     traffic system and sales training program.

                                       16
<PAGE>   17
                           AMFM INC. AND SUBSIDIARIES
            (FORMERLY CHANCELLOR MEDIA CORPORATION AND SUBSIDIARIES)

      NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

7. CONTINGENCIES

     On August 29, 1997, two lawsuits were commenced against Capstar
Communications (formerly SFX Broadcasting, Inc.) and its directors in the Court
of Chancery of the State of Delaware (New Castle County). The plaintiffs in the
lawsuits are Harbor Finance Partners (C.A. No. 15891) and Steven Lieberman (C.A.
No. 15901). The complaints are identical and allege that the consideration to be
paid as a result of the acquisition of Capstar Communications to the holders of
the class A common stock of Capstar Communications was unfair and that the
individual defendants breached their fiduciary duties. Both complaints sought to
have the actions certified as class actions and sought to enjoin the acquisition
of Capstar Communications by Capstar Broadcasting or, in the alternative,
monetary damages. The parties agreed that the lawsuits could be consolidated in
one action entitled In Re SFX Broadcasting, Inc. Shareholders Litigation (C.A.
No. 15891). On March 17, 1998, the parties entered into a Memorandum of
Understanding, pursuant to which the parties reached an agreement providing for
a settlement of the lawsuit. Pursuant to the settlement, Capstar Communications
agreed not to seek an amendment to the Capstar Communications merger agreement
with Capstar Broadcasting to reduce the consideration to be received by the
stockholders of Capstar Communications in the Capstar Communications acquisition
in order to offset the indemnity obligations of SFX Entertainment, Inc., a
former subsidiary of Capstar Communications. The settlement also provides for
Capstar Communications to pay plaintiff's counsel an aggregate of $950,
including all fees and expenses as approved by the court. The settlement is
conditioned on court approval. Pursuant to the settlement, the defendants have
denied, and continue to deny, that they have acted in bad faith or breached any
fiduciary duty. The parties expect to submit the settlement document soon to the
court for its approval. There can be no assurance that the court will approve
the settlement.

     On July 13, 1998, Noddings Investment Group, Inc. and Noddings Warrant
Limited Partnership filed Civil Action No. 16538 in the Court of Chancery of the
State of Delaware in and for New Castle County against Capstar Communications.
Noddings, which allegedly holds 415,900 warrants, alleges that Capstar
Communications breached a warrant agreement that Noddings contends requires
Capstar Communications to permit Noddings, after payment of an $11.50 purchase
price, to exercise warrants in exchange for cash and shares of stock of SFX
Entertainment, Inc., a former subsidiary of Capstar Communications.
Specifically, Noddings alleges that Capstar Communications has violated the
warrant agreement by permitting Noddings to receive cash in exchange for its
warrants, but refusing to convey shares of stock of SFX Entertainment. In March
1999, the Chancery Court held that Noddings is entitled to 0.2983 shares of SFX
Entertainment, Inc. stock per warrant in addition to the $22.3725 in cash, after
Noddings' payment of the $11.50 purchase price. Capstar Communications appealed
to the Supreme Court of the State of Delaware. In September 1999, the Supreme
Court affirmed the Chancery Court's decision.

     On July 24, 1998, in connection with Capstar Broadcasting's then pending
acquisition of Triathlon Broadcasting Company, Capstar Broadcasting was notified
of an action filed on behalf of all holders of depository shares of Triathlon
against Triathlon, Triathlon's directors, and Capstar Broadcasting. The action
was filed in the Court of Chancery of the State of Delaware (Civil Action No.
16560) in and for New Castle County, Delaware by Herbert Behrens. The complaint
alleges that Triathlon and its directors breached their fiduciary duties to the
class of depository shareholders by agreeing to a transaction with Capstar
Broadcasting that allegedly favored the class A common stockholders at the
expense of the depository stockholders. Capstar Broadcasting is accused of
knowingly aiding and abetting the breaches of fiduciary duties allegedly
committed by the other defendants. The complaint sought to have the action
certified as a class action and sought to enjoin the Triathlon acquisition, or
in the alternative, sought monetary damages in an unspecified amount. On
February 12, 1999, the parties signed a memorandum of understanding that
provided for the settlement of the lawsuit. The amount of the settlement will
equal $0.11 in additional consideration for each depositary share owned by any
class member at the effective time of the Triathlon acquisition. Capstar
Broadcasting also agreed not to oppose plaintiff's counsel's application for
attorney fees and expenses in the aggregate amount of

                                       17
<PAGE>   18
                           AMFM INC. AND SUBSIDIARIES
            (FORMERLY CHANCELLOR MEDIA CORPORATION AND SUBSIDIARIES)

      NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

$150. The proposed settlement is contingent upon confirmatory discovery by the
plaintiff, execution of a definitive settlement agreement, and court approval.

     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 the
Company and are similarly situated. The defendants named in the case are the
Company, 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 Merger. The plaintiff sought to certify
the complaint as a class action, enjoin consummation of the Capstar 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.

     The Company is also involved in various other claims and lawsuits which are
generally incidental to its business. The Company is also vigorously contesting
all of these matters and believes that the ultimate resolution of these matters
and those mentioned above will not have a material adverse effect on its
consolidated financial position or results of operations.

8. SEGMENT DATA

     During the nine months ended September 30, 1999, the Company conducted
business in three distinct operating segments consisting of radio broadcasting,
new media and outdoor advertising. Following the sale of the Company's outdoor
advertising business to Lamar on September 15, 1999, the Company operates in
only the radio broadcasting and new media segments. Information about each of
the operating segments follows:

  (a) AMFM Radio Group -- radio broadcasting

     The AMFM Radio Group portfolio consisted of 455 radio stations (328 FM and
127 AM) at September 30, 1999, including eleven stations operated under time
brokerage or joint sales agreements. The AMFM Radio Group also operates a
national radio network, The AMFM Radio Networks, which broadcasts advertising
and syndicated programming shows to a national audience of approximately 68
million listeners in the United States, and the Chancellor Marketing Group, a
full-service sales promotion firm developing integrated marketing programs for
Fortune 1000 companies.

  (b) AMFM New Media Group -- media representation and Internet

     The AMFM New Media Group includes Katz Media, a full-service media
representation firm that sells national spot advertising time for its clients in
the radio and television industries primarily throughout the United States and
for the Company's portfolio of stations. The Company's Internet initiative
focuses on developing the Company's Internet web sites, streaming online
broadcasts of the Company's on-air programming and other media, and promoting
emerging Internet and new media concerns.

  (c) Chancellor Outdoor Group -- outdoor advertising

     The Company's outdoor advertising business was formed on July 31, 1998 with
the acquisition of Martin Media and Martin & MacFarlane, Inc., and also included
the assets of the outdoor advertising division of Whiteco Industries, Inc.,
acquired on December 1, 1998. On September 15, 1999, the Company completed the
sale of its outdoor advertising business to Lamar, as discussed in Note 3(b).
The Chancellor Outdoor Group segment data includes the results of operations of
the outdoor advertising business through September 15, 1999.
                                       18
<PAGE>   19
                           AMFM INC. AND SUBSIDIARIES
            (FORMERLY CHANCELLOR MEDIA CORPORATION AND SUBSIDIARIES)

      NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

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

<TABLE>
<CAPTION>
                                                     THREE MONTHS ENDED               NINE MONTHS ENDED
                                                -----------------------------   -----------------------------
                                                SEPTEMBER 30,   SEPTEMBER 30,   SEPTEMBER 30,   SEPTEMBER 30,
                                                    1998            1999            1998            1999
                                                -------------   -------------   -------------   -------------
<S>                                             <C>             <C>             <C>             <C>
AMFM Radio Group -- radio broadcasting:
  Net revenues................................    $287,704        $516,232        $778,901       $1,115,880
  Operating expenses, excluding depreciation
     and amortization.........................     140,682         252,822         420,745          573,241
  Depreciation and amortization...............      98,476         185,167         271,265          391,269
  Operating income............................      46,799          70,455          81,651          136,209
  Capital expenditures........................          NA              NA          10,754           19,104
AMFM New Media Group -- media representation
  and Internet:
  Net revenues................................      46,764          52,999         122,127          141,535
  Operating expenses, excluding depreciation
     and amortization.........................      32,994          36,750          81,086          100,001
  Depreciation and amortization...............       7,155          15,914          22,727           31,382
  Operating income (loss).....................       5,076          (5,469)         13,427            1,322
  Capital expenditures........................          NA              NA           8,616            5,262
Chancellor Outdoor Group -- outdoor
  advertising:
  Net revenues................................      15,086          45,737          15,086          156,627
  Operating expenses, excluding depreciation
     and amortization.........................       7,111          25,822           7,111           84,583
  Depreciation and amortization...............      11,022          30,536          11,022           94,062
  Operating loss..............................      (3,504)        (13,731)         (3,504)         (31,007)
  Capital expenditures........................          NA              NA              --           22,716
</TABLE>

     The segment financial data includes intersegment revenues and expenses
which must be excluded to reconcile to the Company's consolidated financial
statements. In addition, certain depreciation and amortization expenses,
corporate general and administrative expenses, non-cash compensation, merger and
non-recurring costs, and corporate capital expenditures were not allocated to
operating segments and must be included to reconcile to the Company's
consolidated financial statements. Reconciling financial data is provided below:

<TABLE>
<CAPTION>
                                              THREE MONTHS ENDED               NINE MONTHS ENDED
                                         -----------------------------   -----------------------------
                                         SEPTEMBER 30,   SEPTEMBER 30,   SEPTEMBER 30,   SEPTEMBER 30,
                                             1998            1999            1998            1999
                                         -------------   -------------   -------------   -------------
<S>                                      <C>             <C>             <C>             <C>
Intersegment net revenues...............    $5,725          $22,531         $17,018         $37,194
Intersegment operating expenses,
  excluding depreciation and
  amortization..........................     5,725           11,902          17,018          26,565
Unallocated depreciation and
  amortization..........................     3,995            5,225          10,758          13,012
Unallocated corporate general and
  administrative expenses...............     6,366            7,589          14,604          21,923
Unallocated non-cash compensation.......        --            6,148              --           6,148
Unallocated merger and non-recurring
  costs.................................        --           20,177          59,475          49,156
Unallocated corporate capital
  expenditures..........................        NA               NA           2,314           6,208
</TABLE>

                                       19
<PAGE>   20
                           AMFM INC. AND SUBSIDIARIES
            (FORMERLY CHANCELLOR MEDIA CORPORATION AND SUBSIDIARIES)

      NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

     Total identifiable assets of the Company's operating segments at September
30, 1999 were $11,081,480 and $638,772 for the AMFM Radio Group and the AMFM New
Media Group, respectively. Unallocated corporate identifiable assets at
September 30, 1999 were $1,326,558.

9. RECENTLY ISSUED ACCOUNTING PRONOUNCEMENT

     In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133, Accounting for Derivative Instruments
and Hedging Activities. This statement establishes accounting and reporting
standards for derivative instruments and hedging activities. SFAS No. 133, as
amended by SFAS No. 137, is effective for all fiscal quarters of all fiscal
years beginning after June 15, 2000. Management does not anticipate that this
statement will have a material impact on the Company's consolidated financial
statements.

                                       20
<PAGE>   21

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS

GENERAL

     AMFM Inc. together with its subsidiaries, ("AMFM") is a large national
pure-play radio broadcasting and related media company with operations in radio
broadcasting and media representation and growing Internet operations, which
focus on developing AMFM's Internet web sites, streaming online broadcasts of
AMFM's on-air programming and other media, and promoting emerging Internet and
new media concerns. In addition, AMFM owns an approximate 30% equity interest in
Lamar Advertising Company ("Lamar"), one of the largest owners and operators of
outdoor advertising structures in the United States. As of November 1, 1999, the
AMFM Radio Group owned and operated, programmed or sold air time for 456 radio
stations (328 FM and 128 AM) in 102 markets in the continental United States and
in Puerto Rico, including 12 radio stations programmed under time brokerage
("LMA") or joint sales agreements. The AMFM Radio Group also includes a national
radio network, The AMFM Radio Networks, which broadcasts advertising and
syndicated programming shows to a national audience of approximately 68 million
listeners in the United States (including approximately 59 million listeners
from AMFM's portfolio of stations) and the Chancellor Marketing Group, a
full-service sales promotion firm developing integrated marketing programs for
Fortune 1000 companies. The media representation business consists of 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 primarily throughout the United States and for AMFM's portfolio of
stations.

     See Note 8 to the Condensed Consolidated Financial Statements included
elsewhere in this Form 10-Q for additional information on AMFM's operating
segments as of September 30, 1999.

     AMFM's results of operations for the three months and nine months ended
September 30, 1999 are not comparable to the results of operations for the three
months and nine months ended September 30, 1998 due to the impact of AMFM's
various acquisitions and dispositions. AMFM completed the following transactions
from October 1, 1998 through September 30, 1999:

     - the July 13, 1999 merger with Capstar Broadcasting Corporation ("Capstar
       Broadcasting") described below, which at consummation of the merger
       operated 338 radio stations (239 FM and 99 AM);

     - the net acquisition of approximately 28,000 outdoor advertising
       billboards and display faces for approximately $1.1 billion in cash and
       the subsequent sale of AMFM's entire outdoor advertising business to
       Lamar on September 15, 1999;

     - the acquisition of 20 radio stations (17 FM and three AM) for
       approximately $465.3 million in cash;

     - the disposition of two AM radio stations for approximately $21.5 million
       in cash; and

     - the acquisition of music production libraries for approximately $8.5
       million in cash.

     Seasonal revenue fluctuations are common in the radio broadcasting and
outdoor advertising industries and are due primarily to fluctuations in
advertising expenditures by local and national advertisers. Advertising
expenditures are typically lower in the first and third calendar quarters and
higher in the second and fourth calendar quarters of each year. AMFM's operating
results in any period may be affected by the occurrence of advertising and
promotion expenses that do not produce commensurate revenues in the period in
which the expenditures are made.

RECENT EVENTS

     On October 2, 1999, AMFM and Clear Channel Communications, Inc. ("Clear
Channel") entered into a definitive merger agreement. Under the terms of the
merger agreement, AMFM stockholders will receive 0.94 shares of Clear Channel
common stock, on a fixed exchange basis, for each share of AMFM common stock
held on the record date of the transaction. Pursuant to the Telecommunications
Act of 1996 and other regulatory guidelines, it is expected that, collectively,
Clear Channel and AMFM will need to divest approximately 100 radio stations to
obtain antitrust and Federal Communications Commission approval for the merger.
Consummation of the merger is also subject to stockholder approval by both
companies and other

                                       21
<PAGE>   22

conditions. Although there can be no assurance, AMFM expects that the Clear
Channel merger will be consummated during the second half of 2000.

     On September 15, 1999, AMFM completed the sale to Lamar of all of the
outstanding common stock of Chancellor Media Outdoor Corporation and Chancellor
Media Whiteco Outdoor Corporation, indirect wholly-owned subsidiaries of AMFM,
which together held all of AMFM's assets used in its outdoor advertising
business. AMFM received cash proceeds of $700.0 million, subject to a net
working capital adjustment, and 26,227,273 shares of class A common stock, par
value $.01 per share, of Lamar. AMFM recognized a pre-tax gain of approximately
$210.0 million related to the sale. AMFM owns approximately 30% of the aggregate
number of outstanding shares and approximately 11% of the voting shares of
Lamar, based upon the number of shares of Lamar common stock outstanding as of
September 30, 1999.

     On July 13, 1999, AMFM acquired Capstar Broadcasting through the merger
(the "Capstar Merger") of a wholly-owned subsidiary of AMFM into Capstar
Broadcasting, with Capstar Broadcasting surviving as a wholly-owned subsidiary
of AMFM. As a result of the Capstar Merger, all of the then outstanding shares
of Capstar Broadcasting common stock were converted, in a tax-free exchange,
into 0.4955 of a share of AMFM's common stock, or approximately 53.6 million
shares of AMFM's common stock in the aggregate. AMFM added 338 radio stations
(239 FM and 99 AM) to its portfolio and also assumed the outstanding options,
warrants and other equity rights in Capstar Broadcasting which represented up to
an additional 3.3 million shares of AMFM's common stock. Approximately $2.2
billion of Capstar Broadcasting's debt and preferred stock remained outstanding
after the Capstar Merger.

     Capstar Broadcasting recorded net revenues of $161.9 million and $22.8
million and operating income (loss) of $44.8 million and $(50.5) million for the
three months ended September 30, 1998 and the period July 1 through July 13,
1999, respectively, and net revenues of $337.9 million and $347.3 million and
operating income (loss) of $41.3 million and $(24.0) million for the nine months
ended September 30, 1998 and the period January 1 through July 13, 1999,
respectively.

RESULTS OF OPERATIONS

  Three Months Ended September 30, 1999 Compared To Three Months Ended September
  30, 1998

     Net revenues for the three months ended September 30, 1999 increased 72.3%
to $592.4 million compared to $343.8 million for the third quarter of 1998.
Operating expenses excluding depreciation and amortization for the three months
ended September 30, 1999 increased 73.4% to $303.5 million compared to $175.1
million for the three months ended September 30, 1998. The increase in net
revenues and operating expenses was primarily attributable to the net impact of
the various acquisitions and dispositions discussed elsewhere in this Form 10-Q
and overall net operational improvements.

     Depreciation and amortization for the three months ended September 30, 1999
increased 96.3% to $236.8 million compared to $120.6 million for the third
quarter of 1998. The increase is due to the impact of the acquisitions completed
during 1998 and through September 30, 1999.

     Corporate general and administrative expenses for the three months ended
September 30, 1999 increased 33.5% to $13.5 million compared to $10.1 million
for the third quarter of 1998. The increase is due to the growth of AMFM, and
the related increase in properties and staff, primarily due to recent
acquisitions.

     The non-cash compensation expense of $6.1 million for the three months
ended September 30, 1999 related to stock options granted to employees.

     The merger and non-recurring costs of $31.0 million for the third quarter
of 1999 consist of (i) the costs to terminate employees and close certain
facilities in connection with the Capstar Merger and the implementation of
AMFM's clustering strategy and (ii) the costs associated with AMFM's decision to
focus primarily on domestic radio and new media operations including: costs to
discontinue Katz's international division and integrate its Seltel TV Division
into its operations, personnel costs related to the sale of AMFM's outdoor
advertising business, legal and advisory fees associated with the termination of
contracts and exit of certain non-core business ventures, and developmental
costs associated with Galaxy and Star Performance,

                                       22
<PAGE>   23

AMFM's proprietary traffic system and sales training program. The majority of
these costs have been paid as of September 30, 1999. Remaining amounts will be
paid in the fourth quarter of 1999 and early in 2000.

     As a result of the above factors, AMFM realized operating income of $1.5
million for the three months ended September 30, 1999 compared to operating
income of $38.0 million for the third quarter of 1998.

     Net interest expense for the three months ended September 30, 1999
increased 155.2% to $124.1 million compared to $48.6 million for the same period
in 1998. The net increase in interest expense was primarily due to (i)
additional bank borrowings under the senior credit facility of Chancellor Media
Corporation of Los Angeles ("CMCLA"), an indirect subsidiary of AMFM, required
to finance the various acquisitions discussed elsewhere in this Form 10-Q; (ii)
the issuance of the 9% Senior Subordinated Notes due 2008 by CMCLA on September
30, 1998; (iii) the issuance of the 8% Senior Notes due 2008 by CMCLA on
November 17, 1998; and (iv) additional debt recorded in connection with the
Capstar Merger on July 13, 1999.

     The gain on disposition of assets of $209.0 million for the three months
ended September 30, 1999 related primarily to the gain of $210.0 million
recognized upon the sale of AMFM's outdoor advertising business to Lamar on
September 15, 1999.

     AMFM recorded a gain on disposition of representation contracts of $9.4
million for the three months ended September 30, 1999 and $18.5 million for the
third quarter of 1998 related to its media representation operations. The gain
represents the sales proceeds received from successor representation firms for
the buyout of existing media representation contracts, net of any remaining
deferred costs associated with obtaining the original representation contract.
While the consolidation of the radio broadcasting industry has resulted in an
increase in buyout activity, the impact on future periods cannot be predicted.

     Income tax expense for the three months ended September 30, 1999 increased
to $36.2 million compared with $0.7 million for the three months ended September
30, 1998. The increase was primarily due to higher pretax income for the three
months ended September 30, 1999.

     Dividends on preferred stock of subsidiaries were $7.9 million for the
three months ended September 30, 1999 and related to the 12% Senior Exchangeable
Preferred Stock of Capstar Broadcasting Partners, Inc. ("Capstar Partners"), an
indirect subsidiary of AMFM, and the 12 5/8% Series E Cumulative Exchangeable
Preferred Stock of Capstar Communications, Inc. ("Capstar Communications"), an
indirect subsidiary of AMFM. Dividends on preferred stock of subsidiaries of
$0.9 million for the three months ended September 30, 1998 related to preferred
stock of CMCLA which was exchanged for CMCLA's 12 1/4% Subordinated Exchange
Debentures due 2008 in July 1998.

     During the third quarter of 1999, AMFM recorded equity in net loss of
affiliates and minority interest of $1.9 million, which consisted of $2.4
million related to AMFM's investments accounted for using the equity method
offset by $0.5 million related to the approximate 8% interest in AMFM
Interactive Inc. owned by third parties.

     During the third quarter of 1998, AMFM recorded an extraordinary charge of
$15.2 million, net of a tax benefit of $8.2 million, consisting of the premiums,
estimated transaction costs and the write-off of the unamortized balance of
deferred debt issuance costs in connection with the tender offer for CMCLA's
12 1/4% Subordinated Exchange Debentures due 2008.

     Dividends on AMFM's preferred stock were $1.2 million for the three months
ended September 30, 1999 and $6.4 million for the third quarter of 1998.
Preferred stock consisted of (i) AMFM's $3.00 Convertible Exchangeable Preferred
Stock issued in June 1997 and (ii) AMFM's 7% Convertible Preferred Stock issued
in September 1997. On August 24, 1999, preferred holders converted 5,989,900
shares of $3.00 Convertible Exchangeable Preferred Stock into 11,979,800 shares
of AMFM common stock, and AMFM redeemed the remaining 100 shares of $3.00
Convertible Exchangeable Preferred Stock for $5,298 in the aggregate.

     As a result of the above factors, AMFM recorded net income attributable to
common stockholders of $48.6 million for the three months ended September 30,
1999 compared to a $15.4 million net loss attributable to common stockholders
for the third quarter of 1998.
                                       23
<PAGE>   24

  Nine Months Ended September 30, 1999 Compared To Nine Months Ended September
  30, 1998

     Net revenues for the nine months ended September 30, 1999 increased 53.1%
to $1.4 billion compared to $899.1 million for the nine months ended September
30, 1998. Operating expenses excluding depreciation and amortization for the
nine months ended September 30, 1999 increased 48.7% to $731.3 million compared
to $491.9 million for the nine months ended September 30, 1998. The increase in
net revenues and operating expenses was primarily attributable to the net impact
of the various acquisitions and dispositions discussed elsewhere in this Form
10-Q and overall net operational improvements, as evidenced by the increase in
AMFM's direct operating margin from 45.3% for the nine months ended September
30, 1998 to 46.9% for the nine months ended September 30, 1999.

     Depreciation and amortization for the nine months ended September 30, 1999
increased 67.8% to $529.7 million compared to $315.8 million for the nine months
ended September 30, 1998. The increase is due to the impact of the acquisitions
completed during 1998 and through September 30, 1999.

     Corporate general and administrative expenses for the nine months ended
September 30, 1999 increased 75.1% to $44.1 million compared to $25.2 million
for the nine months ended September 30, 1998. The increase is due to the growth
of AMFM, and the related increase in properties and staff, primarily due to
recent acquisitions.

     The non-cash compensation expense of $6.1 million for the nine months ended
September 30, 1999 related to stock options granted to employees.

     In the first quarter of 1999, AMFM recorded merger and non-recurring costs
of $29.0 million related to the write-off of LIN Television Corporation and
Petry Media Corporation transaction costs and executive severance and other
costs related to the executive management realignment. Additional merger and
non-recurring costs of $31.0 million were recorded in the third quarter of 1999
which consist of (i) the costs to terminate employees and close certain
facilities in connection with the Capstar Merger and the implementation of
AMFM's clustering strategy and (ii) the costs associated with AMFM's decision to
focus primarily on domestic radio and new media operations including: costs to
discontinue Katz's international division and integrate its Seltel TV Division
into its operations, personnel costs related to the sale of AMFM's outdoor
advertising business, legal and advisory fees associated with the termination of
contracts and exit of certain non-core business ventures, and developmental
costs associated with Galaxy and Star Performance, AMFM's proprietary traffic
system and sales training program. The majority of the costs incurred through
September 30, 1999 have been paid. Remaining amounts will be paid in the fourth
quarter of 1999 and early in 2000. The merger and non-recurring costs of $59.5
million for the nine months ended September 30, 1998 represent a one-time charge
incurred in connection with the resignation of Scott K. Ginsburg as President
and Chief Executive Officer in April 1998.

     As a result of the above factors, AMFM realized operating income of $5.7
million for the nine months ended September 30, 1999 compared to operating
income of $6.7 million for the nine months ended September 30, 1998.

     Net interest expense for the nine months ended September 30, 1999 increased
118.3% to $296.2 million compared to $135.7 million for the same period in 1998.
The net increase in interest expense was primarily due to (i) additional bank
borrowings under CMCLA's senior credit facility required to finance the various
acquisitions discussed elsewhere in this Form 10-Q; (ii) the issuance of the 9%
Senior Subordinated Notes due 2008 by CMCLA on September 30, 1998; (iii) the
issuance of the 8% Senior Notes due 2008 by CMCLA on November 17, 1998; and (iv)
additional debt recorded in connection with the Capstar Merger on July 13, 1999.

     The gain on disposition of assets of $221.4 million for the nine months
ended September 30, 1999 related primarily to a gain of $210.0 million
recognized upon the sale of AMFM's outdoor advertising business to Lamar on
September 15, 1999 and a gain of $14.5 million upon the sale of WMVP-AM in
Chicago to ABC, Inc. on April 16, 1999. AMFM recorded a gain on disposition of
assets of $123.8 million for the nine months ended September 30, 1998 related to
the exchange of WTOP-AM and WGMS-FM in Washington, D.C. and

                                       24
<PAGE>   25

KZLA-FM in Los Angeles plus $63.0 million in cash for WTJM-FM in New York,
KLDE-FM in Houston and KBIG-FM in Los Angeles.

     AMFM recorded a gain on disposition of representation contracts of $18.3
million for the nine months ended September 30, 1999 and $29.8 million for the
nine months ended September 30, 1998 related to its media representation
operations. The gain represents the sales proceeds received from successor
representation firms for the buyout of existing media representation contracts,
net of any remaining deferred costs associated with obtaining the original
representation contract. While the consolidation of the radio broadcasting
industry has resulted in an increase in buyout activity, the impact on future
periods cannot be predicted.

     Income tax expense for the nine months ended September 30, 1999 decreased
to $8.8 million compared with $32.5 million for the nine months ended September
30, 1998. The decrease in expense was primarily due to an increase in the pretax
loss for the nine months ended September 30, 1999.

     Dividends on preferred stock of subsidiaries were $7.9 million for the nine
months ended September 30, 1999 and related to the Capstar Partners 12% Senior
Exchangeable Preferred Stock and the Capstar Communications 12 5/8% Series E
Cumulative Exchangeable Preferred Stock. Dividends on preferred stock of
subsidiaries of $17.6 million for the nine months ended September 30, 1998
related to preferred stock of CMCLA which was exchanged for CMCLA's 12%
Subordinated Exchange Debentures due 2009 and CMCLA's 12 1/4% Subordinated
Exchange Debentures due 2008 in May and July 1998.

     During the nine months ended September 30, 1999, AMFM recorded equity in
net loss of affiliates and minority interest of $2.1 million, which consisted of
$2.6 million related to AMFM's investments accounted for using the equity method
offset by $0.5 million related to the approximate 8% interest in AMFM
Interactive Inc. owned by third parties.

     During the nine months ended September 30, 1998, AMFM recorded an
extraordinary charge of $47.1 million, net of a tax benefit of $25.4 million,
consisting of the premiums, estimated transaction costs and the write-off of the
unamortized balance of deferred debt issuance costs in connection with the
tender offers for CMCLA's 12% Subordinated Exchange Debentures due 2009 and
12 1/4% Subordinated Exchange Debentures due 2008.

     Dividends on AMFM's preferred stock were $14.0 million for the nine months
ended September 30, 1999 and $19.3 million for the nine months ended September
30, 1998. Preferred stock consisted of (i) AMFM's $3.00 Convertible Exchangeable
Preferred Stock issued in June 1997 and (ii) AMFM's 7% Convertible Preferred
Stock issued in September 1997. On August 24, 1999, preferred holders converted
5,989,900 shares of $3.00 Convertible Exchangeable Preferred Stock into
11,979,800 shares of AMFM common stock, and AMFM redeemed the remaining 100
shares of $3.00 Convertible Exchangeable Preferred Stock for $5,298 in the
aggregate.

     As a result of the above factors, AMFM incurred a net loss attributable to
common stockholders of $83.8 million for the nine months ended September 30,
1999 compared to a net loss attributable to common stockholders of $88.3 million
for the nine months ended September 30, 1998.

LIQUIDITY AND CAPITAL RESOURCES

  Overview

     AMFM historically has generated sufficient cash flow from operations to
finance its existing operational requirements and debt service requirements, and
AMFM anticipates that this will continue to be the case. Operating activities
provided net cash of $146.5 million and $234.4 million for the nine months ended
September 30, 1998 and 1999, respectively. AMFM has used the proceeds of bank
debt and private and public debt and equity offerings, supplemented by cash flow
from operations not required to fund operational requirements and debt service,
to fund implementation of AMFM's acquisition strategy.

     AMFM is a holding company with no significant assets other than the capital
stock of its direct and indirect subsidiaries. Consequently, its sole source of
cash from which to service indebtedness and pay

                                       25
<PAGE>   26

preferred stock dividends is through dividends distributed or other payments
made to it by its operating subsidiaries. The instruments governing AMFM's
indebtedness contain certain covenants that restrict or, in some cases, prohibit
the ability of subsidiaries to pay dividends and make other distributions. These
restrictions are not anticipated to have an impact on AMFM's ability to meet its
cash obligations.

  Outstanding Debt and Preferred Stock in Connection with the July 13, 1999
  Capstar Merger

     The Capstar Merger resulted in a change of control with respect to the
outstanding indebtedness (other than Capstar Broadcasting's credit facility) and
preferred stock of Capstar Broadcasting and its subsidiaries, and each of
Capstar Partners, Capstar Radio Broadcasting Partners, Inc. ("Capstar Radio," an
indirect subsidiary of AMFM) and Capstar Communications (collectively, the
"Capstar Subsidiaries"), as applicable, offered to purchase the notes and the
preferred stock from the holders thereof at an offer price in cash equal to 101%
of the aggregate principal amount, accreted value or liquidation preference, as
applicable, plus accrued and unpaid interest or dividends, as applicable. The
Capstar Subsidiaries made offers to purchase the outstanding notes and preferred
stock and closed the acquisition of accepted tenders in August and September
1999. The Capstar Subsidiaries paid for the change of control offers out of cash
from operating activities and Capstar Broadcasting's credit facility. The
Capstar Subsidiaries repurchased the following notes and preferred stock upon
completion of the change of control offers:

     - $3.7 million, or 1.3%, of the aggregate outstanding principal amount of
       the 12 3/4% Capstar Partners Senior Discount Notes due 2009;

     - $66.0 million, or 33.0%, of the aggregate outstanding principal amount of
       the 9 1/4% Capstar Radio Senior Subordinated Notes due 2007;

     - $0.3 million, or 0.1%, of the aggregate outstanding principal amount of
       the 10 3/4% Capstar Communications Senior Subordinated Notes due 2006;

     - $0.1 million, or 17.6%, of the aggregate outstanding principal amount of
       the 11 3/8% Capstar Communications Senior Subordinated Notes due 2000;

     - 13,381 shares, or 1.1%, of the outstanding shares of 12% Capstar Partners
       Senior Exchangeable Preferred Stock; and

     - 73 shares, or 0.005%, of the outstanding shares of 12 5/8% Capstar
       Communications Series E Cumulative Exchangeable Preferred Stock.

     Remaining amounts outstanding of debt and preferred stock recorded in
connection with the Capstar Merger are detailed below. Additional information
regarding the significant terms of each issue is included in Note 4 to the
condensed consolidated financial statements included elsewhere in this Form
10-Q.

     12 3/4% Capstar Partners Notes. In February 1997, Capstar Partners issued
its 12 3/4% Senior Discount Notes due 2009 which are carried at a discount from
their aggregate principal amount at maturity of $273.4 million. The carrying
value of the 12 3/4% Capstar Partners Senior Discount Notes due 2009 will
increase through accretion until February 1, 2002. As of October 31, 1999, the
carrying value was approximately $241.5 million. Beginning on August 1, 2002,
Capstar Partners will pay interest of approximately $17.4 million semi-annually
on February 1 and August 1 of each year until maturity.

     9 1/4% Capstar Radio Notes. In June 1997, Capstar Radio issued its 9 1/4%
Senior Subordinated Notes due 2007. In addition to the change of control
repurchase noted above, Capstar Radio redeemed $5.0 million and $3.2 million on
September 17, 1999 and September 24, 1999, resulting in a principal amount
outstanding as of October 31, 1999 of $125.8 million. Capstar Radio pays
interest of approximately $5.8 million on its 9 1/4% Senior Subordinated Notes
due 2007 semi-annually on January 1 and July 1 of each year.

     10 3/4% Capstar Communications Notes and 11 3/8% Capstar Communications
Notes. Capstar Communications has outstanding its 10 3/4% Senior Subordinated
Notes due 2006 and its 11 3/8% Senior Subordinated Notes due 2000. Capstar
Communications pays interest of approximately $15.8 million on its 10 3/4%
Senior Subordinated Notes due 2006 semi-annually on May 15 and November 15 of
each year and pays
                                       26
<PAGE>   27

interest of approximately $27,000 on its 11 3/8% Senior Subordinated Notes due
2000 semi-annually on April 1 and October 1 of each year. As of October 31,
1999, the outstanding principal balances were approximately $293.8 million and
$0.5 million on the 10 3/4% Capstar Communications Senior Subordinated Notes due
2006 and the 11 3/8% Capstar Communications Senior Subordinated Notes due 2000,
respectively. On November 12, 1999, Capstar Communications completed a cash
tender offer to acquire all of its outstanding 10 3/4% Senior Subordinated Notes
due 2006. Approximately $293.6 million in aggregate principal amount of the
notes, representing 99.9% of the outstanding notes, was accepted for payment for
an aggregate repurchase cost of $327.8 million plus accrued interest of $15.2
million. The repurchase was funded with borrowings under CMCLA's senior credit
facility.

     12% Capstar Partners Preferred Stock. In June 1997, Capstar Partners issued
1,000,000 shares of its 12% Senior Exchangeable Preferred Stock. Capstar
Partners is required to pay dividends on its 12% Senior Exchangeable Preferred
Stock semi-annually on January 1 and July 1 of each year at a rate of $12.00 per
share. Until July 1, 2002, dividends may be paid, at Capstar Partners' option,
either in cash or in additional shares of 12% Capstar Partners Senior
Exchangeable Preferred Stock. Since issuance, Capstar Partners has paid the
required dividend in additional shares. However, Capstar Partners intends to pay
all future dividends in cash beginning January 1, 2000. As of October 31, 1999,
1,254,618 shares of the 12% Capstar Partners Senior Exchangeable Preferred Stock
were issued and outstanding with a liquidation preference equal to $100.00 per
share plus accrued and unpaid dividends.

     12 5/8% Capstar Communications Series E Preferred Stock. Capstar
Communications has outstanding its 12 5/8% Series E Cumulative Exchangeable
Preferred Stock. Capstar Communications is required to pay dividends on its
12 5/8% Series E Cumulative Exchangeable Preferred Stock semi-annually on
January 15 and July 15 of each year at the rate per share of $12.625 per year.
Until January 15, 2002, Capstar Communications may pay dividends either in cash
or in additional shares of its 12 5/8% Series E Cumulative Exchangeable
Preferred Stock. Since July 15, 1998, Capstar Communications has paid the
required dividend in additional shares. However, Capstar Communications intends
to pay all future dividends in cash. As of October 31, 1999, 1,430,989 shares of
the 12 5/8% Capstar Communications Series E Cumulative Exchangeable Preferred
Stock were issued and outstanding with a liquidation preference equal to $100.00
per share plus accrued and unpaid dividends. On October 12, 1999, Capstar
Communications commenced a consent solicitation to modify certain timing
restrictions on its ability to exchange all shares of its 12 5/8% Series E
Cumulative Exchangeable Preferred Stock for its 12 5/8% Senior Subordinated
Exchange Debentures due 2006. If at least a majority of the holders consent to
the proposed modifications, then consenting holders of the 12 5/8% Capstar
Communications Series E Cumulative Exchangeable Preferred Stock will be entitled
to receive consent payments of $0.25 per share of 12 5/8% Capstar Communications
Series E Cumulative Exchangeable Preferred Stock. If the requisite consents are
obtained and certain other conditions are satisfied, Capstar Communications
intends to exchange the outstanding shares of its 12 5/8% Series E Cumulative
Exchangeable Preferred Stock for its 12 5/8% Senior Subordinated Exchange
Debentures due 2006 in November 1999.

     Capstar Broadcasting's Credit Facility. Capstar Broadcasting is a party to
a credit facility under which Capstar Radio is the borrower. Capstar
Broadcasting's credit facility consists of a $500.0 million revolving loan, a
$450.0 million A Term Loan and a $400.0 million B Term Loan. Pursuant to Capstar
Broadcasting's credit facility and subject to bank availabilities and approvals,
Capstar Broadcasting may request additional term loans and revolving credit
loans in an aggregate amount up to $550.0 million. The interest rate under
Capstar Broadcasting's credit facility is a floating rate. As of October 31,
1999, Capstar Broadcasting had borrowings of approximately $1.2 billion
outstanding under its credit facility, of which $54.6 million is current. The
outstanding balance includes $389.5 million in revolving loans, $438.8 million
under the A Term Loan and $395.0 million under the B Term Loan, with a weighted
average effective interest rate of 7.55% per annum. As of October 31, 1999,
$109.8 million was available for borrowing, subject to financial covenants
contained in Capstar Broadcasting's credit facility and the indentures that
govern the indebtedness of its subsidiaries. As of September 30, 1999, the
remaining required scheduled annual principal payments on the A Term Loan,
payable quarterly, were $11.3 million in 1999, $56.3 million in 2000, $67.5
million in 2001, $78.8 million in 2002, $90.0 million in 2003 and $135.0 million
in 2004. As of September 30, 1999, the remaining required scheduled annual
principal payments on the B Term Loan, payable quarterly, were

                                       27
<PAGE>   28

$1.0 million in 1999, $4.0 million in years 2000 through 2002, $92.0 million in
2003, $190.0 million in 2004 and $100.0 million in 2005. In April 1999, Capstar
Broadcasting's credit facility was amended to, among other things, permit the
Capstar Merger; increase the leverage ratio required to be maintained by Capstar
Radio during the period from April 1, 1999 through September 30, 2000; increase
the pricing of Capstar Broadcasting's credit facility beginning January 1, 2000;
and permit Capstar Broadcasting's April 30, 1999 acquisition of Triathlon
Broadcasting Company.

  Other Outstanding Debt and Preferred Stock

     CMCLA's Senior Credit Facility. CMCLA's senior credit facility provides for
aggregate commitments under a revolving loan facility and a term loan facility
of $1.6 billion and $900.0 million, respectively. The term loan facility is
payable in quarterly installments commencing on September 30, 2000 and ending
June 30, 2005. The revolving loan facility requires scheduled annual reductions
of the commitment amount, payable in quarterly installments commencing on
September 30, 2000 and ending on June 30, 2005. As of October 31, 1999, AMFM had
drawn approximately $402.5 million of the revolving loan facility and $900.0
million of the term loan facility.

     8% CMCLA Senior Notes. The 8% CMCLA Senior Notes due 2008 are senior
unsecured obligations of CMCLA and rank equal in right of payment to the
obligations of CMCLA under CMCLA's senior credit facility and existing and all
other indebtedness of CMCLA not expressly subordinated to the 8% CMCLA Senior
Notes due 2008. However, because the 8% CMCLA Senior Notes due 2008 are
unsecured, the 8% CMCLA Senior Notes due 2008 are effectively subordinated in
right of payment to CMCLA's secured debt, including CMCLA's senior credit
facility. The 8% CMCLA Senior Notes due 2008 are fully and unconditionally
guaranteed, on a joint and several basis, by all of CMCLA's direct and indirect
wholly owned subsidiaries other than certain inconsequential subsidiaries (the
"Subsidiary Guarantors"). As of October 31, 1999, the outstanding principal
balance was $750.0 million. Interest payment requirements on the 8% CMCLA Senior
Notes due 2008 are approximately $60.0 million per year.

     CMCLA Senior Subordinated Notes. The 9 3/8% CMCLA Senior Subordinated Notes
due 2004, the 8 3/4% CMCLA Senior Subordinated Notes due 2007, the 10 1/2% CMCLA
Senior Subordinated Notes due 2007, the 8 1/8% CMCLA Senior Subordinated Notes
due 2007 and the 9% CMCLA Senior Subordinated Notes due 2008 (collectively, the
"Subordinated Notes") are unsecured obligations of CMCLA. The Subordinated Notes
are subordinated in right of payment to all existing and any future senior
indebtedness of CMCLA. The Subordinated Notes are fully and unconditionally
guaranteed, on a joint and several basis, by the Subsidiary Guarantors. As of
October 31, 1999, the total outstanding principal balance on the Subordinated
Notes was approximately $1.8 billion. Interest payment requirements on the
Subordinated Notes are approximately $154.9 million per year.

     CMCLA's senior credit facility and the indentures governing the 8% CMCLA
Senior Notes due 2008 and the Subordinated Notes contain customary restrictive
covenants, which, among other things and with certain exceptions, limit the
ability of CMCLA and its subsidiaries 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. CMCLA is required under its
senior credit facility to maintain specified financial ratios, including
leverage, cash flow and debt service coverage ratios. As of October 31, 1999,
AMFM remains in compliance with these covenants.

     7% Convertible Preferred Stock. As of October 31, 1999, AMFM had
outstanding 2,200,000 shares of its 7% Convertible Preferred Stock with a
liquidation preference of $50.00 per share plus accrued and unpaid dividends.
Cash dividend requirements of AMFM on its 7% Convertible Preferred Stock are
approximately $7.7 million per year. AMFM is obligated under the Clear Channel
merger agreement to redeem or convert all of its outstanding 7% Convertible
Preferred Stock prior to the consummation of the Clear Channel merger. During
November 1999, AMFM plans to deliver notice to the holders of record on that
date of its 7% Convertible Preferred Stock that AMFM will redeem the outstanding
shares of its 7% Convertible Preferred Stock on January 19, 2000 for cash equal
to $52.45 per share, plus accrued and unpaid dividends. Each holder has the
right to convert each share of 7% Convertible Preferred Stock held by it into

                                       28
<PAGE>   29

approximately 2.76 shares of AMFM common stock in lieu of being redeemed. AMFM
expects the preferred stockholders to convert their shares into shares of AMFM
common stock in lieu of being redeemed.

     $3.00 Convertible Exchangeable Preferred Stock. On August 6, 1999, AMFM
gave notice to the holders of its $3.00 Convertible Exchangeable Preferred Stock
of AMFM's election to redeem all of the outstanding shares of its $3.00
Convertible Exchangeable Preferred Stock at a per share redemption price of
$52.40, plus accrued and unpaid dividends. Each holder had the right to convert
each share of $3.00 Convertible Exchangeable Preferred Stock held by it into two
shares of common stock of AMFM in lieu of being redeemed. On August 24, 1999,
preferred holders converted 5,989,900 shares of $3.00 Convertible Exchangeable
Preferred Stock into 11,979,800 shares of AMFM common stock, and AMFM redeemed
the remaining 100 shares of $3.00 Convertible Exchangeable Preferred Stock for
$5,298 in the aggregate.

  Change in Legal Structure and Refinancing

     Through a series of related transactions, including capital contributions
of stock and mergers of subsidiaries, AMFM intends to combine the outstanding
bonds, bank indebtedness and preferred stock of its direct and indirect
subsidiaries into fewer entities (the "Reorganization"). After completion of the
Reorganization, Capstar Communications will assume and/or be liable for all of
its remaining outstanding bonds, as well as the bonds and bank indebtedness of
Capstar Radio and CMCLA, which will be combined with Capstar Communications in
the fourth quarter of 1999. The Reorganization also includes the tender offer
for the 10 3/4% Capstar Communications Senior Subordinated Notes due 2006 and
the possible exchange of the 12 5/8% Capstar Communications Series E Cumulative
Exchangeable Preferred Stock for 12 5/8% Capstar Communications Senior
Subordinated Debentures due 2006 described above. The Reorganization is expected
to be completed during the fourth quarter of 1999.

     Also as part of the Reorganization, AMFM intends to refinance CMCLA's
senior credit facility and Capstar Broadcasting's credit facility with a new
credit facility. Several banks entered into a commitment letter with CMCLA on
November 3, 1999 and agreed to provide Capstar Communications with a senior
credit facility. AMFM expects that Capstar Communications' senior credit
facility will be entered into in November 1999. Capstar Communications' senior
credit facility will include commitments for a revolving loan facility of $600.0
million and a term loan facility of $2.6 billion. The proceeds of such
facilities may be used to repay the existing credit facilities of CMCLA and
Capstar Broadcasting, to repay, repurchase or redeem other debt and equity
securities of AMFM and its subsidiaries and for other general corporate
purposes. Both the revolving loan facility and the term loan facility of Capstar
Communications will mature two years after the date of Capstar Communications'
senior credit facility. No scheduled amortization of principal will be required
prior to maturity. Both the revolving loan facility and the term loan facility
of Capstar Communications will bear interest at fluctuating rates based upon the
prime rate and the eurodollar rate. The margin above the applicable prime rate
or the eurodollar rate will be determined by reference to Capstar
Communications' ratio of consolidated debt to consolidated earnings before
interest, taxes, depreciation and amortization, provided that such margins will
be fixed at .50% and 1.50%, respectively, until delivery of Capstar
Communications' financial statements for the fiscal quarter ending March 31,
2000, and capped at .50% and 1.50%, respectively, thereafter so long as the
Clear Channel merger agreement has not been terminated. Capstar Communications'
senior credit facility will be guaranteed by most of the direct and indirect
subsidiaries, other than Capstar Communications, of Chancellor Mezzanine
Holdings Corporation ("Chancellor Mezzanine"), a direct subsidiary of AMFM, and
will be secured by (a) a non-recourse pledge of the stock of Chancellor
Mezzanine, (b) a recourse pledge of the stock of Capstar Partners, (c) a
recourse pledge of the stock of Capstar Communications and most of the
subsidiaries of Capstar Communications, and (d) a pledge of the common stock of
Lamar to be held by Capstar Communications after the Reorganization. Capstar
Communications' senior credit facility will be subject to affirmative and
negative covenants, including (i) limitations on indebtedness, mergers,
acquisitions and dispositions of assets, dividends, stock repurchases, other
restricted payments, investments and liens, and (ii) financial maintenance
covenants. The merger of AMFM and Clear Channel will be an event of default
under Capstar Communications' senior credit facility and will require
refinancing at the effective time of the merger.

                                       29
<PAGE>   30

  Pending Transactions

     On August 6, 1999, AMFM entered into an agreement to sell Capstar
Broadcasting's radio stations KIOK-FM, KALE-AM and KEGX-FM in Richland,
Washington and KTCR-AM in Kennewick, Washington to New Northwest Broadcasters
II, Inc. for $4.0 million payable in cash. Although there can be no assurance,
AMFM expects to complete the sale of these stations in the fourth quarter of
1999.

     On August 30, 1999, AMFM entered into an agreement with Cox Radio, Inc. to
acquire KOST-FM and KFI-AM in Los Angeles plus $3.0 million in cash payable by
Cox Radio, Inc. in exchange for 13 of its radio stations including CMCLA
stations WEDR-FM in Miami and WFOX-FM in Atlanta, and Capstar Broadcasting
stations WEFX-FM, WNLK-AM, WKHL-FM and WSTC-AM in Stamford/Norwalk, WFYV-FM,
WAPE-FM, WBWL-AM, WKQL-FM, WMXQ-FM and WOKV-AM in Jacksonville and WPLR-FM and
the local sales rights of a 14th Capstar Broadcasting station, WYBC-FM in New
Haven. AMFM began programming KOST-FM and KFI-AM in Los Angeles and Cox Radio,
Inc. began programming the 13 AMFM stations under time brokerage agreements
effective October 1, 1999. Although there can be no assurance, AMFM expects that
the exchange will be consummated in the first quarter of 2000.

     On September 14, 1999, AMFM entered into an agreement to acquire radio
station KQOD-FM in Stockton, California from Carson Group, Inc. for a purchase
price of $5.2 million payable in cash. KQOD-FM will become part of Capstar
Broadcasting's station portfolio. AMFM began programming KQOD-FM under a local
marketing agreement on September 20, 1999. Although there can be no assurance,
AMFM expects to complete the acquisition in the fourth quarter of 1999.

     On September 22, 1999, AMFM entered into an agreement to sell the capital
stock of its Puerto Rico subsidiaries to Spanish Broadcasting System of Puerto
Rico, Inc. for $90.0 million payable in cash. AMFM owns and operates eight radio
stations in Puerto Rico. Pending completion of the sale, Spanish Broadcasting
will program these eight stations under a time brokerage agreement. Although
there can be no assurance, AMFM expects to complete the sale of these
subsidiaries in the fourth quarter of 1999.

     Consummation of each of the transactions discussed above is subject to
various conditions, including approval from the Federal Communications
Commission, in the case of radio broadcast station transactions, and the
expiration or early termination of any waiting period required under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976. AMFM believes that such
conditions will be satisfied in the ordinary course, but there can be no
assurance that this will be the case.

     The principal liquidity requirements of AMFM and its subsidiaries (in
addition to debt service and tax liabilities) will be for working capital,
general corporate purposes, capital expenditures and pending acquisitions, and
as opportunities arise, to acquire additional radio stations or complementary
broadcast-related businesses. AMFM believes that disposition of certain assets
and cash from operating activities, together with available revolving credit
borrowings under its credit facilities, should be sufficient to permit AMFM to
meet its obligations. As of October 31, 1999, AMFM had available borrowings of
$1.3 billion under its credit facilities, subject to financial covenants
contained in its credit facilities and the indentures that govern the
indebtedness of its subsidiaries.

     In the future, AMFM may require additional financing, either in the form of
additional debt or equity securities. AMFM evaluates potential acquisition
opportunities on an ongoing basis and has had, and continues to have,
preliminary discussions concerning the purchase of additional stations and other
assets. AMFM expects that in connection with the financing of future
acquisitions, it may consider disposing of stations in its current markets.

FORWARD-LOOKING STATEMENTS

     Certain statements used in the preceding and following discussion and
elsewhere in this Quarterly Report on Form 10-Q are forward-looking statements
within the meaning of Section 27A of the Securities Act of 1933, as amended, and
Section 21E of the Securities Exchange Act of 1934, as amended. These forward-
looking statements about the financial condition, prospects, operations and
business of AMFM are generally accompanied by words such as "believes,"
"expects," "plans," "anticipates," "intends," "likely," "estimates,"
                                       30
<PAGE>   31

or similar expressions. These forward-looking statements are subject to risks,
uncertainties and other factors, some of which are beyond the control of AMFM,
that could cause actual results to differ materially from those forecast or
anticipated in such forward-looking statements.

     These risks, uncertainties and other factors include, but are not limited
to: the potential negative consequences of the substantial indebtedness of AMFM;
the restrictions imposed on AMFM and its subsidiaries by the agreements
governing its debt instruments; the competitive nature of the radio broadcasting
and new media businesses; the potential adverse effects on licenses and
ownership of regulation of the radio broadcasting industry; the difficulty of
integrating substantial acquisitions and entering new lines of business;
potential adverse effects of the Year 2000 issue; and the control of AMFM by
affiliates of Hicks, Muse, Tate & Furst Incorporated and potential conflicts of
interest relating thereto.

     Because such forward-looking statements are subject to risks and
uncertainties, readers are cautioned not to place undue reliance on these
forward-looking statements, which reflect management's view only as of the date
of this Quarterly Report on Form 10-Q. AMFM undertakes no obligation to update
such statements or publicly release the result of any revisions to these
forward-looking statements which it may make to reflect events or circumstances
after the date of this report or to reflect the occurrence of unanticipated or
unforeseen events.

RECENTLY ISSUED ACCOUNTING PRONOUNCEMENT

     In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133, Accounting for Derivative Instruments
and Hedging Activities. This statement establishes accounting and reporting
standards for derivative instruments and hedging activities. SFAS No. 133, as
amended by SFAS No. 137, is effective for all fiscal quarters of all fiscal
years beginning after June 15, 2000. Management does not anticipate that this
statement will have a material impact on AMFM's consolidated financial
statements.

YEAR 2000 ISSUE

     Background. The Year 2000 issue is whether AMFM's computer systems will
properly recognize date sensitive information when the year changes to 2000, or
"00." Systems that do not properly recognize such information could generate
erroneous data or cause a system to fail.

     State of Readiness. AMFM has substantially completed an inventory and
assessment of its systems and operations to identify any software or hardware
systems, equipment with embedded chips or processors, and non-information
technology systems, such as telephone, voicemail and HVAC systems, which do not
properly recognize dates after December 31, 1999. Concurrent with its
company-wide assessment, AMFM has developed and is in the process of
implementing its Year 2000 compliance program. AMFM is utilizing both internal
and external resources to identify its mission critical systems and, upon
identification, to remediate or replace and test systems for Year 2000
compliance.

     AMFM has identified its corporate financial reporting, radio broadcasting
operations (including advertising scheduling and billing systems) and media
representation systems as its mission critical systems to evaluate for Year 2000
compliance. AMFM has received Year 2000 compliance certificates from these
application vendors indicating that they are Year 2000 compliant. AMFM is in the
process of testing these systems to ensure their Year 2000 compliance. In
addition, prior to the Capstar Merger, Capstar Broadcasting had identified
StarSystem(TM), its digital automation systems, as one of its critical systems.
The management of Capstar Broadcasting had determined that the software
underlying StarSystem(TM) is Year 2000 compliant, but is dependent on the
systems of the its telecommunications service providers, over which it has no
control. AMFM has been assured by its vendors that its other digital automation
systems are Year 2000 compliant. AMFM has tested substantially all of these
systems to ensure their Year 2000 compliance.

     The list of AMFM's mission critical systems may be expanded upon completion
of AMFM's inventory and assessment. As part of its acquisition and consolidation
strategy, AMFM also assesses and, as necessary, remediates or replaces the
systems of acquired companies and stations with Year 2000 compliant systems.

                                       31
<PAGE>   32

     Third Party Relationships. In addition to identifying, assessing and
remediating or replacing its mission critical systems, AMFM continues to assess
its exposure from external sources to Year 2000. AMFM relies on third party
providers for key services such as telecommunications and utilities.
Interruption of these services could, in management's view, have a material
adverse impact on the operations of AMFM. The ability of third parties with
which AMFM does business to adequately address their Year 2000 issues is outside
of AMFM's control. Therefore, there can be no assurance that the failure of such
third parties to adequately address their Year 2000 issues will not have a
material adverse effect on AMFM's business, financial condition, cash flows and
results of operations. AMFM has sent questionnaires to many of its third party
providers, and continues to do so, asking them to update AMFM on the status of
their Year 2000 compliance. Until all questionnaires are returned and reviewed,
AMFM will be unable to fully assess the potential for disruption in its
programming and operations arising from this third party risk. If AMFM does not
receive reasonable assurance regarding Year 2000 compliance from any provider of
these services, AMFM will then develop contingency plans, to the extent
possible, to address its exposure.

     Costs. Costs specifically associated with AMFM's Year 2000 efforts are
currently expected to be approximately $4.3 million, of which approximately $3.0
million has been incurred to date. Additionally, through September 15, 1999,
AMFM incurred costs of $0.6 million related to its outdoor advertising business,
which was sold on September 15, 1999. These cost estimates are subject to change
once AMFM has fully assessed its systems, including those acquired in the
Capstar Merger, and as responses are obtained from third party vendors and
service providers. Any change in cost may be material. Funding of these costs is
anticipated to come from cash flows generated by business operations and/or
borrowings under AMFM's credit facilities.

     Risks. AMFM is in the process of identifying the most reasonably likely
worst case scenarios that may affect its operations due to Year 2000
noncompliance of AMFM's systems or the systems of third parties. Initially, AMFM
believes that the failure of its radio broadcast systems and the temporary loss
of power at some of its stations due to Year 2000 noncompliance are the most
reasonably likely worst case scenarios. Most of AMFM's stations and transmitter
sites currently have on-site generators in the event of power outages. As part
of AMFM's capital improvement program, management has begun installation of
generators at many of its remaining stations and transmitter sites. AMFM
believes that the upgrade of the hardware on its existing radio broadcast
systems and the installation of generators at most of its stations will resolve
possible material disruptions in the business operations of AMFM that would
result from such risks. AMFM may identify additional worst case scenarios once
it has fully assessed its mission critical systems and obtained responses from
the remaining third party vendors and service providers.

     Based on the nature of AMFM's business and dispersed geographical
locations, AMFM believes that it may experience some disruption in its business
due to the impact of the Year 2000 issue. Management presently believes,
however, that AMFM is taking appropriate steps to assess and control its Year
2000 issues. AMFM cannot guarantee that there will be no Year 2000 issues in
spite of these efforts. If AMFM does not complete all phases of its Year 2000
compliance program and remediations or replacements are not made, are not
completed on time, or are insufficient to prevent systems failures or other
disruptions, the Year 2000 issue could have a material adverse impact on AMFM's
results of operations and financial condition.

     Contingency Plans. AMFM has developed contingency plans to mitigate the
possible disruption in business operations that may result from AMFM's systems
or the systems of third parties that are not Year 2000 compliant. AMFM is
continually assessing the status of completion of its Year 2000 compliance
program and, as necessary, will update the level of contingency plans necessary.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

     Interest Rate Risk Management. AMFM's exposure to market risk associated
with changes in interest rates relates primarily to its debt obligations. AMFM
manages its interest rate risk through a combination of fixed and floating rate
debt and swap agreements.

     The following table presents descriptions of the financial instruments and
derivative instruments that were held by AMFM at September 30, 1999 which are
sensitive to interest rate fluctuation. For the outstanding debt, the table
presents required principal cash flows by maturity date and the related average
interest rate.
                                       32
<PAGE>   33

For the interest rate swaps, the table presents the notional amounts and
expected interest rates that exist by contractual dates, and the notional amount
is used to calculate the contractual payments to be exchanged under the
contract. The variable rates are estimated based on implied forward rates in the
yield curve at the reporting date.
<TABLE>
<CAPTION>
                            THREE
                            MONTHS
                            ENDED        YEAR ENDED     YEAR ENDED     YEAR ENDED     YEAR ENDED
                         DECEMBER 31,   DECEMBER 31,   DECEMBER 31,   DECEMBER 31,   DECEMBER 31,
                             1999           2000           2001           2002           2003       THEREAFTER
                         ------------   ------------   ------------   ------------   ------------   ----------
                                                        (DOLLARS IN THOUSANDS)
<S>                      <C>            <C>            <C>            <C>            <C>            <C>
Fixed rate debt
(U.S. $)...............    $     --       $    466       $     --       $     --       $     --     $3,187,079
 Average interest
   rate................          --          11.38%            --             --             --           9.14%
Variable rate debt
 (U.S. $)..............    $ 12,250       $127,750       $229,000       $262,750       $498,000     $1,383,000
 Average interest
   rate................        8.21%          8.22%          8.38%          8.52%          8.64%          8.72%
Interest rate swaps
 (variable to fixed)
 Notional amount.......    $250,000       $426,000       $400,000       $     --       $     --     $       --
 Unrecorded gain --
   fair value..........          --             --             --             --             --             --
 Average pay rate......        6.00%          5.98%          5.28%            --             --             --
 Average receive
   rate................        5.38%          6.03%          6.50%            --             --             --

<CAPTION>

                           TOTAL      FAIR VALUE
                         ----------   ----------
                         (DOLLARS IN THOUSANDS)
<S>                      <C>          <C>
Fixed rate debt
(U.S. $)...............  $3,187,545   $3,171,549
 Average interest
   rate................        9.14%
Variable rate debt
 (U.S. $)..............  $2,512,750   $2,512,750
 Average interest
   rate................        8.62%
Interest rate swaps
 (variable to fixed)
 Notional amount.......  $1,076,000
 Unrecorded gain --
   fair value..........          --   $    5,685
 Average pay rate......        5.72%
 Average receive
   rate................        6.05%
</TABLE>

                                       33
<PAGE>   34

                          PART II -- OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

     On August 29, 1997, two lawsuits were commenced against Capstar
Communications (formerly SFX Broadcasting, Inc.) and its directors in the Court
of Chancery of the State of Delaware (New Castle County). The plaintiffs in the
lawsuits are Harbor Finance Partners (C.A. No. 15891) and Steven Lieberman (C.A.
No. 15901). The complaints are identical and allege that the consideration to be
paid as a result of the acquisition of Capstar Communications to the holders of
the class A common stock of Capstar Communications was unfair and that the
individual defendants breached their fiduciary duties. Both complaints sought to
have the actions certified as class actions and sought to enjoin the acquisition
of Capstar Communications by Capstar Broadcasting or, in the alternative,
monetary damages. The parties agreed that the lawsuits could be consolidated in
one action entitled In Re SFX Broadcasting, Inc. Shareholders Litigation (C.A.
No. 15891). On March 17, 1998, the parties entered into a Memorandum of
Understanding, pursuant to which the parties reached an agreement providing for
a settlement of the lawsuit. Pursuant to the settlement, Capstar Communications
agreed not to seek an amendment to the Capstar Communications merger agreement
with Capstar Broadcasting to reduce the consideration to be received by the
stockholders of Capstar Communications in the Capstar Communications acquisition
in order to offset the indemnity obligations of SFX Entertainment, Inc., a
former subsidiary of Capstar Communications. The settlement also provides for
Capstar Communications to pay plaintiff's counsel an aggregate of approximately
$1.0 million, including all fees and expenses as approved by the court. The
settlement is conditioned on court approval. Pursuant to the settlement, the
defendants have denied, and continue to deny, that they have acted in bad faith
or breached any fiduciary duty. The parties expect to submit the settlement
document soon to the court for its approval. There can be no assurance that the
court will approve the settlement.

     On July 13, 1998, Noddings Investment Group, Inc. and Noddings Warrant
Limited Partnership filed Civil Action No. 16538 in the Court of Chancery of the
State of Delaware in and for New Castle County against Capstar Communications.
Noddings, which allegedly holds 415,900 warrants, alleges that Capstar
Communications breached a warrant agreement that Noddings contends requires
Capstar Communications to permit Noddings, after payment of an $11.50 purchase
price, to exercise warrants in exchange for cash and shares of stock of SFX
Entertainment, Inc., a former subsidiary of Capstar Communications.
Specifically, Noddings alleges that Capstar Communications has violated the
warrant agreement by permitting Noddings to receive cash in exchange for its
warrants, but refusing to convey shares of stock of SFX Entertainment. In March
1999, the Chancery Court held that Noddings is entitled to 0.2983 shares of SFX
Entertainment, Inc. stock per warrant in addition to the $22.3725 in cash, after
Noddings' payment of the $11.50 purchase price. Capstar Communications appealed
to the Supreme Court of the State of Delaware. In September 1999, the Supreme
Court affirmed the Chancery Court's decision.

     On July 24, 1998, in connection with Capstar Broadcasting's then pending
acquisition of Triathlon Broadcasting Company, Capstar Broadcasting was notified
of an action filed on behalf of all holders of depository shares of Triathlon
against Triathlon, Triathlon's directors, and Capstar Broadcasting. The action
was filed in the Court of Chancery of the State of Delaware (Civil Action No.
16560) in and for New Castle County, Delaware by Herbert Behrens. The complaint
alleges that Triathlon and its directors breached their fiduciary duties to the
class of depository shareholders by agreeing to a transaction with Capstar
Broadcasting that allegedly favored the class A common stockholders at the
expense of the depository stockholders. Capstar Broadcasting is accused of
knowingly aiding and abetting the breaches of fiduciary duties allegedly
committed by the other defendants. The complaint sought to have the action
certified as a class action and sought to enjoin the Triathlon acquisition, or
in the alternative, sought monetary damages in an unspecified amount. On
February 12, 1999, the parties signed a memorandum of understanding that
provided for the settlement of the lawsuit. The amount of the settlement will
equal $0.11 in additional consideration for each depositary share owned by any
class member at the effective time of the Triathlon acquisition. Capstar
Broadcasting also agreed not to oppose plaintiff's counsel's application for
attorney fees and expenses in the aggregate amount of approximately $0.2
million. The proposed settlement is contingent upon confirmatory discovery by
the plaintiff, execution of a definitive settlement agreement, and court
approval.

                                       34
<PAGE>   35

     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 and are similarly situated. The defendants named in the case are AMFM,
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 Merger. The plaintiff sought to certify
the complaint as a class action, enjoin consummation of the Capstar Merger,
order defendants to account to plaintiff and other alleged class members for
damages, and award attorneys' fees and other costs. AMFM believes that the
lawsuit is without merit and intends to vigorously defend the action.

     AMFM is also involved in various other claims and lawsuits which are
generally incidental to its business. AMFM is vigorously contesting all of these
matters and believes that the ultimate resolution of these matters and those
mentioned above will not have a material adverse effect on its consolidated
financial position or results of operation.

ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS

     On August 10, 1999, Capstar Partners effected a reverse stock split by
amendment to Capstar Partners' certificate of incorporation pursuant to which
all of its outstanding shares of common stock were converted into 1,000 shares.

     On November 12, 1999, Capstar Communications completed an offer to purchase
all of its outstanding 10 3/4% Senior Subordinated Notes due 2006. In connection
with the tender offer, holders of not less than 75 percent in aggregate
principal amount of the 10 3/4% Senior Subordinated Notes due 2006 consented to
certain amendments to the indenture governing the notes, and the material
restrictive covenants in the indenture were deleted.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

     (a) AMFM held its annual meeting of stockholders on July 13, 1999 in
Dallas, Texas. At the annual meeting, the following actions of the stockholders
of AMFM were taken:

          (i) The stockholders of AMFM voted to approve the issuance of shares
     of AMFM common stock in the merger contemplated by the Agreements and Plan
     of Merger, dated as of August 26, 1998 and amended and restated as of April
     29, 1999, by and among Chancellor Media Corporation, Capstar Broadcasting
     Corporation, a Delaware corporation, CBC Acquisition Company, Inc., a
     Delaware corporation, and CMC Merger Sub, Inc., a Delaware corporation and
     wholly-owned subsidiary of Chancellor Media Corporation as follows:

<TABLE>
<CAPTION>
FOR            AGAINST    ABSTENTIONS   BROKER NON-VOTES
---           ---------   -----------   ----------------
<S>           <C>         <C>           <C>
101,353,077   2,584,832     50,889         22,303,107
</TABLE>

          (ii) The stockholders of AMFM voted to approve the amendment and
     restatement of AMFM's amended and restated certificate of incorporation as
     follows:

<TABLE>
<CAPTION>
FOR            AGAINST    ABSTENTIONS   BROKER NON-VOTES
---           ---------   -----------   ----------------
<S>           <C>         <C>           <C>
103,092,626     827,891     68,281         22,303,107
</TABLE>

          (iii) The stockholders of AMFM voted to elect three (3) Class II
     directors for terms expiring in 2002 as follows:

<TABLE>
<CAPTION>
                                                                VOTES
                                                        ----------------------
DIRECTORS                                                   FOR       WITHHELD
---------                                               -----------   --------
<S>                                                     <C>           <C>
James E. de Castro....................................  126,197,693    94,212
Robert L. Cranda1l....................................  125,628,560   663,345
Lawrence D. Stuart, Jr. ..............................  126,196,548    95,357
</TABLE>

                                       35
<PAGE>   36

          Following the Annual Meeting of Stockholders, (a) the following
     individuals continued as Class I directors of AMFM, with a term expiring at
     the 2001 annual meeting of stockholders of AMFM: Vernon E. Jordan, Jr.,
     Michael J. Levitt, Perry J. Lewis, and R. Steven Hicks, and (b) the
     following individuals continued as Class III directors of AMFM, with a term
     expiring at the 2000 annual meeting of stockholders of AMFM: Thomas O.
     Hicks, Thomas J. Hodson, John H. Massey and J. Otis Winters. In addition,
     pursuant to the terms of the Capstar Broadcasting merger agreement, R.
     Gerald Turner, formerly a director of Capstar Broadcasting, was appointed
     to the Board of Directors of AMFM as a Class II director with a term
     expiring at the 2002 annual meeting of AMFM's stockholders.

          (iv) The stockholders of AMFM voted to adopt the AMFM Inc. 1999 Stock
     Option Plan as follows:

<TABLE>
<CAPTION>
FOR           AGAINST     ABSTENTIONS   BROKER NON-VOTES
---          ----------   -----------   ----------------
<S>          <C>          <C>           <C>
93,533,416   10,396,708     58,674         22,303,107
</TABLE>

     (b) By written consent dated August 2, 1999, the sole stockholder of
Capstar Partners approved an amendment to the Certificate of Incorporation of
Capstar Partners, which when filed on August 10, 1999, effected a reverse stock
split in which the outstanding shares of Capstar Partners common stock were
converted into 1,000 shares of Capstar Partners common stock.

     (c) On November 12, 1999, Capstar Communications completed an offer to
purchase all of its outstanding 10 3/4% Senior Subordinated Notes due 2006. In
connection with the tender offer, holders of not less than 75 percent in
aggregate principal amount of the 10 3/4% Senior Subordinated Notes due 2006
consented to certain amendments to the indenture governing the notes, and the
material restrictive covenants in the indenture were deleted.

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

     (a) Exhibits

<TABLE>
<CAPTION>
        EXHIBIT
          NO.                               DESCRIPTION OF EXHIBIT
        -------                             ----------------------
<C>                      <S>
          2.61(a)        -- 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 Chancellor Media
                            Corporation of Los Angeles.
          2.62(a)        -- Registration Rights Agreement dated as of August 11, 1999
                            among Lamar Advertising Company, Chancellor Media
                            Corporation of Los Angeles and Chancellor Mezzanine
                            Holdings Corporation.
          2.63(a)        -- Stockholders Agreement dated as of August 11, 1999 among
                            Lamar Advertising Company and certain of its
                            stockholders.
          2.64(a)        -- Second Amended and Restated Voting Agreement, dated as of
                            August 11, 1999, among Lamar Advertising Company,
                            Chancellor Media Corporation of Los Angeles, Chancellor
                            Mezzanine Holdings Corporation and Reilly Family Limited
                            Partnership.
          2.65(b)        -- Agreement and Plan of Merger, dated October 2, 1999, by
                            and between Clear Channel Communications, Inc., CCU
                            Merger Sub, Inc. and AMFM Inc.
          3.1(a)         -- Amended and Restated Certificate of Incorporation of AMFM
                            Inc. (formerly known as Chancellor Media Corporation)
          3.2(a)         -- Certificate of Correction of Amended and Restated
                            Certificate of Incorporation of AMFM Inc.
         10.73(a)        -- Termination and Release Agreement, dated July 13, 1999,
                            by and among Capstar Broadcasting, Capstar Partners,
                            Hicks, Muse & Co. Partners, L.P. and Chancellor Media
                            Corporation.
         27.1*           -- Financial Data Schedule of AMFM Inc.
</TABLE>

                                       36
<PAGE>   37

---------------

 *  Filed herewith.

(a)  Incorporated by reference to the identically numbered exhibit to the
     Quarterly Report on Form 10-Q of AMFM Inc. for the quarterly period ending
     June 30, 1999.

(b)  Incorporated by reference to Exhibit 2.1 to the Current Report on Form 8-K
     of AMFM Inc., dated October 2, 1999 and filed on October 5, 1999.

     (b) Reports on Form 8-K

     1. Current Report on Form 8-K (Items 2, 5 and 7), dated July 1, 1999 and
filed July 15, 1999, as amended on August 3, 1999 announcing (i) stockholder
approval of the merger between Chancellor Media Corporation (now AMFM Inc.) and
Capstar Broadcasting Corporation, (ii) the acquisition of KKFR-FM and KFYI-AM in
Phoenix from The Broadcast Group, Inc. and (iii) the appointment of R. Gerald
Turner to AMFM's Board of Directors.

     2. Current Report on Form 8-K (Items 2 and 7), dated September 15, 1999 and
filed September 29, 1999, to announce the consummation of the sale of AMFM's
outdoor advertising business to Lamar Advertising Company.

                                       37
<PAGE>   38

                                   SIGNATURE

     Pursuant to the requirements of the Securities Exchange Act of 1934, AMFM
Inc. has duly caused this report to be signed on its behalf by the undersigned
hereunto duly authorized.

                                            AMFM INC.

                                            By:   /s/ W. SCHUYLER HANSEN

                                              ----------------------------------
                                                      W. Schuyler Hansen
                                                  Senior Vice President and
                                                   Chief Accounting Officer

Date: November 12, 1999

                                       38
<PAGE>   39

                                 EXHIBIT INDEX

<TABLE>
<CAPTION>
        EXHIBIT
          NO.                               DESCRIPTION OF EXHIBIT
        -------                             ----------------------
<C>                      <S>
          2.61(a)        -- 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 Chancellor Media
                            Corporation of Los Angeles.
          2.62(a)        -- Registration Rights Agreement dated as of August 11, 1999
                            among Lamar Advertising Company, Chancellor Media
                            Corporation of Los Angeles and Chancellor Mezzanine
                            Holdings Corporation.
          2.63(a)        -- Stockholders Agreement dated as of August 11, 1999 among
                            Lamar Advertising Company and certain of its
                            stockholders.
          2.64(a)        -- Second Amended and Restated Voting Agreement, dated as of
                            August 11, 1999, among Lamar Advertising Company,
                            Chancellor Media Corporation of Los Angeles, Chancellor
                            Mezzanine Holdings Corporation and Reilly Family Limited
                            Partnership.
          2.65(b)        -- Agreement and Plan of Merger, dated October 2, 1999, by
                            and between Clear Channel Communications, Inc., CCU
                            Merger Sub, Inc. and AMFM Inc.
          3.1(a)         -- Amended and Restated Certificate of Incorporation of AMFM
                            Inc. (formerly known as Chancellor Media Corporation)
          3.2(a)         -- Certificate of Correction of Amended and Restated
                            Certificate of Incorporation of AMFM Inc.
         10.73(a)        -- Termination and Release Agreement, dated July 13, 1999,
                            by and among Capstar Broadcasting, Capstar Partners,
                            Hicks, Muse & Co. Partners, L.P. and Chancellor Media
                            Corporation.
         27.1*           -- Financial Data Schedule of AMFM Inc.
</TABLE>

---------------

 *  Filed herewith.

(a)  Incorporated by reference to the identically numbered exhibit to the
     Quarterly Report on Form 10-Q of AMFM Inc. for the quarterly period ending
     June 30, 1999.

(b)  Incorporated by reference to Exhibit 2.1 to the Current Report on Form 8-K
     of AMFM Inc., dated October 2, 1999 and filed on October 5, 1999.