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SECURITIES AND EXCHANGE COMMISSION Washington, D.C.
20549
 FORM 10-Q QUARTERLY REPORT PURSUANT TO SECTION 13 AND 15(D)OF THE SECURITIES EXCHANGE ACT OF 1934  For the quarter ended March 31, 2005
    
    Commission file number 1-9645 CLEAR CHANNEL COMMUNICATIONS, INC.  Texas
    
    74-1787539(State of Incorporation)
    
    (I.R.S. Employer Identification No.)
 200 East Basse Road
San Antonio, Texas 78209
(210) 822-2828 (Address and telephone number
of principal executive offices) Indicate by check mark whether the registrant (1) has filed all reports required to be filed
by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or
for such shorter period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. Yes [x] No [  ] Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule
12b-2 of the Exchange Act). Yes [x] No [  ] Indicate the number of shares outstanding of each class of the issuers classes of common
stock, as of the latest practicable date. Class
    
    Outstanding at May 6, 2005Common Stock, $.10 par value
    
    548,155,260




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CLEAR CHANNEL COMMUNICATIONS, INC. AND SUBSIDIARIES INDEX  
 Page No.Part I  Financial InformationItem 1. Unaudited Financial StatementsConsolidated Balance Sheets at March 31, 2005 and December 31, 2004
    
    
    3Consolidated Statements of Operations for the three months ended March 31, 2005 and 2004
    
    
    5Consolidated Statements of Cash Flows for the three months ended March 31, 2005 and 2004
    
    
    6Notes to Consolidated Financial Statements
    
    
    7Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    15Item 3. Quantitative and Qualitative Disclosures About Market Risk
    
    
    26Item 4. Controls and Procedures
    
    
    26Part II  Other InformationItem 1. Legal Proceedings
    
    
    27Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    27Item 6. Exhibits
    
    
    27Signatures
    
    
    28Index to Exhibits
    
    
    29Statement re: Computation of Per Share EarningsStatement re: Computation of RatiosCertification of CEO Pursuant to Section 302Certification of CFO Pursuant to Section 302Certification of CEO Pursuant to Section 906Certification of CFO Pursuant to Section 906




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PART I 
 Item 1. UNAUDITED FINANCIAL STATEMENTS 
 CLEAR CHANNEL COMMUNICATIONS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
ASSETS
(In thousands) March 31,
    
    December 31,2005
    
    2004(Unaudited)
    
    (Audited)Current AssetsCash and cash equivalents
    
    $
    271,294
    
    
    $
    210,476Accounts receivable, less allowance of $58,476 at March
31, 2005 and $57,574 December 31, 2004
    
    
    1,490,782
    
    
    
    1,658,650Prepaid expenses
    
    
    343,003
    
    
    
    213,387Other current assets
    
    
    211,501
    
    
    
    187,409Total Current Assets
    
    
    2,316,580
    
    
    
    2,269,922Property, Plant and EquipmentLand, buildings and improvements
    
    
    1,738,659
    
    
    
    1,740,990Structures
    
    
    3,085,377
    
    
    
    3,110,233Towers, transmitter and studio equipment
    
    
    851,348
    
    
    
    845,295Furniture and other equipment
    
    
    745,893
    
    
    
    779,632Construction in progress
    
    
    121,343
    
    
    
    95,3056,542,620
    
    
    
    6,571,455Less accumulated depreciation
    
    
    2,502,150
    
    
    
    2,447,1814,040,470
    
    
    
    4,124,274Intangible AssetsDefinite-lived intangibles, net
    
    
    590,963
    
    
    
    629,663Indefinite-lived intangibles  licenses
    
    
    4,329,329
    
    
    
    4,323,297Indefinite-lived intangibles  permits
    
    
    210,512
    
    
    
    211,690Goodwill
    
    
    7,205,575
    
    
    
    7,220,444Other AssetsNotes receivable
    
    
    15,882
    
    
    
    16,801Investments in, and advances to, nonconsolidated affiliates
    
    
    390,370
    
    
    
    395,371Other assets
    
    
    335,220
    
    
    
    348,898Other investments
    
    
    334,774
    
    
    
    387,589Total Assets
    
    $
    19,769,675
    
    
    $
    19,927,949
 See Notes to Consolidated Financial Statements - 3 -




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CLEAR CHANNEL COMMUNICATIONS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
LIABILITIES AND SHAREHOLDERS EQUITY
(In thousands) March 31,
    
    December 31,2005
    
    2004(Unaudited)
    
    (Audited)Current LiabilitiesAccounts payable and accrued expenses
    
    $
    1,199,325
    
    
    $
    1,295,106Accrued interest
    
    
    111,176
    
    
    
    95,525Accrued income taxes
    
    
    24,284
    
    
    
    34,683Current portion of long-term debt
    
    
    384,585
    
    
    
    417,275Deferred income
    
    
    543,740
    
    
    
    317,682Other current liabilities
    
    
    18,466
    
    
    
    24,281Total Current Liabilities
    
    
    2,281,576
    
    
    
    2,184,552Long-term debt
    
    
    7,348,234
    
    
    
    6,962,560Other long-term obligations
    
    
    244,820
    
    
    
    283,937Deferred income taxes
    
    
    282,878
    
    
    
    237,827Other long-term liabilities
    
    
    697,048
    
    
    
    703,766Minority interest
    
    
    65,049
    
    
    
    67,229Shareholders EquityCommon stock
    
    
    56,047
    
    
    
    56,757Additional paid-in capital
    
    
    28,955,885
    
    
    
    29,183,595Accumulated deficit
    
    
    (19,954,721
    )
    
    
    (19,933,777
    )Accumulated other comprehensive income
    
    
    149,764
    
    
    
    194,590Other
    
    
    
    
    
    
    (213
    )Cost of shares held in treasury
    
    
    (356,905
    )
    
    
    (12,874
    )Total shareholders equity
    
    
    8,850,070
    
    
    
    9,488,078Total Liabilities and Shareholders Equity
    
    $
    19,769,675
    
    
    $
    19,927,949
 See Notes to Consolidated Financial Statements - 4 -




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CLEAR CHANNEL COMMUNICATIONS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
(In thousands, except per share data) Three Months Ended March 31,2005
    
    2004Revenue
    
    $
    1,884,940
    
    
    $
    1,969,566Operating expenses:Divisional operating expenses (excludes non-cash compensation expenses
of $212 and $261 in 2005 and 2004, respectively)
    
    
    1,479,742
    
    
    
    1,499,718Non-cash compensation expense
    
    
    1,764
    
    
    
    918Depreciation and amortization
    
    
    173,392
    
    
    
    173,158Corporate expenses (excludes non-cash compensation expenses of $1,552
and $657 in 2005 and 2004, respectively)
    
    
    51,417
    
    
    
    49,364Operating income
    
    
    178,625
    
    
    
    246,408Interest expense
    
    
    106,783
    
    
    
    89,805Gain (loss) on marketable securities
    
    
    (1,073
    )
    
    
    49,723Equity in earnings of nonconsolidated affiliates
    
    
    6,143
    
    
    
    6,675Other income (expense)  net
    
    
    2,231
    
    
    
    (17,270
    )Income before income taxes
    
    
    79,143
    
    
    
    195,731Income tax (expense) benefit:Current
    
    
    (1,339
    )
    
    
    (145,985
    )Deferred
    
    
    (29,922
    )
    
    
    66,714Net income
    
    
    47,882
    
    
    
    116,460Other comprehensive income, net of tax:Foreign currency translation adjustments
    
    
    (43,543
    )
    
    
    2,914Unrealized gain (loss) on securities:Unrealized holding gain (loss) on marketable securities
    
    
    (31,031
    )
    
    
    (6,177
    )Unrealized holding gain (loss) on cash flow derivatives
    
    
    29,748
    
    
    
    (16,565
    )Reclassification adjustment for (gains) losses included in net income
    
    
    
    
    
    
    (31,575
    )Comprehensive income
    
    $
    3,056
    
    
    $
    65,057Net income per common share:Basic
    
    $
    .09
    
    
    $
    .19Diluted
    
    $
    .09
    
    
    $
    .19Dividends declared per share
    
    $
    .125
    
    
    $
    .10
 See Notes to Consolidated Financial Statements - 5 -




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CLEAR CHANNEL COMMUNICATIONS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(In thousands) Three Months Ended March 31,2005
    
    2004Cash Flows from operating activities:Net income
    
    $
    47,882
    
    
    $
    116,460Reconciling Items:Depreciation and amortization
    
    
    173,392
    
    
    
    173,158Deferred taxes
    
    
    29,922
    
    
    
    (66,714
    )(Gain) loss on disposal of assets
    
    
    (924
    )
    
    
    (10,731
    )(Gain) loss on sale of other investments
    
    
    
    
    
    
    (46,973
    )(Gain) loss on forward exchange contract
    
    
    731
    
    
    
    (1,684
    )(Gain) loss on trading securities
    
    
    342
    
    
    
    (1,066
    )Increase (decrease) accrued income and other taxes
    
    
    (10,228
    )
    
    
    134,249Increase (decrease) other, net
    
    
    (3,376
    )
    
    
    23,302Changes in other operating assets and liabilities, net of
effects of acquisitions
    
    
    142,224
    
    
    
    210,761Net cash provided by (used in) operating activities
    
    
    379,965
    
    
    
    530,762Cash flows from investing activities:(Investment) in liquidation of restricted cash
    
    
    
    
    
    
    (4,900
    )Decrease
(increase) in notes receivable  net
    
    
    919
    
    
    
    376Decrease (increase) in investments in and advances to
nonconsolidated affiliates  net
    
    
    3,039
    
    
    
    (2,794
    )Purchases of investments
    
    
    (125
    )
    
    
    (615
    )Proceeds from sale of investments
    
    
    370
    
    
    
    599,426Purchases of property, plant and equipment
    
    
    (81,543
    )
    
    
    (70,784
    )Proceeds from disposal of assets
    
    
    4,407
    
    
    
    2,499Proceeds from divestitures placed in restricted cash
    
    
    
    
    
    
    13,138Acquisition of operating assets
    
    
    (17,792
    )
    
    
    (82,146
    )Acquisition of operating assets with restricted cash
    
    
    
    
    
    
    (12,951
    )Decrease (increase) in other  net
    
    
    25,225
    
    
    
    (5,527
    )Net cash (used in) provided by investing activities
    
    
    (65,500
    )
    
    
    435,722Cash flows from financing activities:Draws on credit facilities
    
    
    469,165
    
    
    
    1,349,018Payments on credit facilities
    
    
    (72,650
    )
    
    
    (1,635
    )Payments on long-term debt
    
    
    (843
    )
    
    
    (2,193,716
    )Proceeds from exercise of stock options and stock purchase plan
    
    
    15,471
    
    
    
    12,185Dividends paid
    
    
    (70,934
    )
    
    
    (61,624
    )Payments for purchase of common shares
    
    
    (593,856
    )
    
    
    Net cash used in financing activities
    
    
    (253,647
    )
    
    
    (895,772
    )Net increase in cash and cash equivalents
    
    
    60,818
    
    
    
    70,712Cash and cash equivalents at beginning of period
    
    
    210,476
    
    
    
    123,334Cash and cash equivalents at end of period
    
    $
    271,294
    
    
    $
    194,046
 See Notes to Consolidated Financial Statements - 6 -




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CLEAR CHANNEL COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED) Note 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Preparation of Interim Financial Statements The consolidated financial statements have been prepared by Clear Channel Communications, Inc. (the
Company) pursuant to the rules and regulations of the Securities and Exchange Commission (SEC)
and, in the opinion of management, include all adjustments (consisting of normal recurring accruals
and adjustments necessary for adoption of new accounting standards) necessary to present fairly the
results of the interim periods shown. Certain information and footnote disclosures normally
included in financial statements prepared in accordance with generally accepted accounting
principles in the United States have been condensed or omitted pursuant to such SEC rules and
regulations. Management believes that the disclosures made are adequate to make the information
presented not misleading. Due to seasonality and other factors, the results for the interim
periods are not necessarily indicative of results for the full year. The financial statements
contained herein should be read in conjunction with the consolidated financial statements and notes
thereto included in the Companys 2004 Annual Report on Form 10-K. The consolidated financial statements include the accounts of the Company and its subsidiaries, the
majority of which are wholly-owned. Investments in companies in which the Company owns 20 percent
to 50 percent of the voting common stock or otherwise exercises significant influence over
operating and financial policies of the company are accounted for under the equity method. All
significant intercompany transactions are eliminated in the consolidation process. Certain
reclassifications have been made to the 2004 consolidated financial statements to conform to the
2005 presentation. Stock-Based Compensation The Company accounts for its stock-based award plans in accordance with Accounting Principles Board
(APB) Opinion No. 25, Accounting for Stock Issued to Employees, and related interpretations,
under which compensation expense is recorded to the extent that the market price on the grant date
of the underlying stock exceeds the exercise price. The required pro forma net income and pro
forma earnings per share as if the stock-based awards had been accounted for using the provisions
of Statement of Financial Accounting Standards No. 123, Accounting for Stock-Based Compensation,
are as follows: The Three Months Ended March 31,(In thousands, except per share
data)
    
    2005
    
    2004Net incomeReported
    
    $
    47,882
    
    
    $
    116,460Pro forma stock compensation expense, net of tax
    
    
    9,182
    
    
    
    15,785Pro Forma
    
    $
    38,700
    
    
    $
    100,675Net incomeBasic:Reported
    
    $
    .09
    
    
    $
    .19Pro Forma
    
    $
    .07
    
    
    $
    .16Net incomeDiluted:Reported
    
    $
    .09
    
    
    $
    .19Pro Forma
    
    $
    .07
    
    
    $
    .16
 The fair value for these options was estimated at the date of grant using a Black-Scholes
option-pricing model with the following weighted average assumptions for 2005 and 2004: 2005
    
    2004Risk-free interest rate
    
    3.76% - 4.09%
    
    2.21% - 3.06%Dividend yield
    
    1.46% - 1.59%
    
    .9%Volatility factors
    
    25%
    
    46% - 50%Expected life in years
    
    5.0 - 7.5
    
    3.0 - 5.0
 - 7 -




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Recent Accounting Pronouncements In March 2005, the Financial Accounting Standards Board (FASB) issued Interpretation No. 47,
Accounting for Conditional Asset Retirement Obligations(FIN 47). FIN 47 is an interpretation of
FASB Statement 143, Asset Retirement Obligations,which was issued in June 2001. According to FIN
47, uncertainty about the timing and (or) method of settlement because they are conditional on a
future event that may or may not be within the control of the entity should be factored into the
measurement of the asset retirement obligation when sufficient information exists. FIN 47 also
clarifies when an entity would have sufficient information to reasonably estimate the fair value of
an asset retirement obligation. FIN 47 is effective no later than the end of fiscal years ending
after December 15, 2005. Retrospective application of interim financial information is permitted,
but is not required. The Company adopted FIN 47 on January 1, 2005, which did not materially
impact the Companys financial position or results of operations. In March 2005, the Securities and Exchange Commission (SEC) issued Staff Accounting Bulletin No.
107 Share-Based Payment(SAB 107). SAB 107 expresses the SEC staffs views regarding the
interaction between Statement of Financial Accounting Standards No. 123(R) Share-Based Payment
(Statement 123(R)) and certain SEC rules and regulations and provides the staffs views regarding
the valuation of share-based payment arrangements for public companies. In particular, SAB 107
provides guidance related to share-based payment transactions with nonemployees, the transition
from nonpublic to public entity status, valuation methods (including assumptions such as expected
volatility and expected term), the accounting for certain redeemable financial instruments issued
under share-based payment arrangements, the classification of compensation expense, non-GAAP
financial measures, first time adoption of Statement 123(R) in an interim period, capitalization of
compensation cost related to share-based payment arrangements, the accounting for income tax
effects of share-based payment arrangements upon adoption of Statement 123(R) and the modification
of employee share options prior to adoption of Statement 123(R). The Company is unable to quantify
the impact of adopting SAB 107 and Statement 123(R) at this time because it will depend on levels
of share-based payments granted in the future. Additionally, the Company is still evaluating the
assumptions it will use upon adoption. In April 2005, the SEC issued a press release announcing that it would provide for phased-in
implementation guidance for Statement 123(R). The SEC would require that registrants that are not
small business issuers adopt Statement 123(R)s fair value method of accounting for share-based
payments to employees no later than the beginning of the first fiscal year beginning after June 15,
2005. The Company intends to adopt Statement 123(R) on January 1, 2006. Note 2: INTANGIBLE ASSETS AND GOODWILL Definite-lived Intangibles The Company has definite-lived intangible assets which consist primarily of transit and street
furniture contracts and other contractual rights in the outdoor segment, talent and program right
contracts in the radio segment, and contracts for non-affiliated television stations in the
Companys media representation operations, all of which are amortized over the respective lives of
the agreements. Other definite-lived intangible assets are amortized over the period of time the
assets are expected to contribute directly or indirectly to the Companys future cash flows. The
following table presents the gross carrying amount and accumulated amortization for each major
class of definite-lived intangible assets at March 31, 2005 and December 31, 2004: March 31, 2005
    
    December 31, 2004Gross
    
    
    
    
    
    GrossCarrying
    
    Accumulated
    
    Carrying
    
    Accumulated(In thousands)
    
    Amount
    
    Amortization
    
    Amount
    
    AmortizationTransit, street
furniture, and other
outdoor contractual
rights
    
    $
    672,559
    
    
    $
    377,115
    
    
    $
    688,373
    
    
    $
    364,939Talent contracts
    
    
    202,161
    
    
    
    161,346
    
    
    
    202,161
    
    
    
    155,647Representation contracts
    
    
    275,066
    
    
    
    103,694
    
    
    
    268,283
    
    
    
    94,078Other
    
    
    197,162
    
    
    
    113,830
    
    
    
    197,462
    
    
    
    111,952Total
    
    $
    1,346,948
    
    
    $
    755,985
    
    
    $
    1,356,279
    
    
    $
    726,616
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Total amortization expense from definite-lived intangible assets for the three months ended
March 31, 2005 and for the year ended December 31, 2004 was $40.8 million and $136.6 million,
respectively. The following table presents the Companys estimate of amortization expense for each
of the five succeeding fiscal years for definite-lived intangible assets: (In thousands)2006
    
    $
    126,8462007
    
    
    78,7612008
    
    
    41,7082009
    
    
    35,1752010
    
    
    26,959
 As acquisitions and dispositions occur in the future and as purchase price allocations are
finalized, amortization expense may vary. Indefinite-lived Intangibles The Companys indefinite-lived intangible assets consist of FCC broadcast licenses and billboard
permits. FCC broadcast licenses are granted to both radio and television stations for up to eight
years under the Telecommunications Act of 1996. The Act requires the FCC to renew a broadcast
license if: it finds that the station has served the public interest, convenience and necessity;
there have been no serious violations of either the Communications Act of 1934 or the FCCs rules
and regulations by the licensee; and there have been no other serious violations which taken
together constitute a pattern of abuse. The licenses may be renewed indefinitely at little or no
cost. The Company does not believe that the technology of wireless broadcasting will be replaced
in the foreseeable future. The Companys billboard permits are issued in perpetuity by state and
local governments and are transferable or renewable at little or no cost. Permits typically
include the location for which the permit allows the Company the right to operate an advertising
structure. The Companys permits are located on either owned or leased land. In cases where the
Companys permits are located on leased land, the leases are typically from 10 to 30 years and
renew indefinitely, with rental payments generally escalating at an inflation based index. If the
Company loses its lease, the Company will typically obtain permission to relocate the permit or
bank it with the municipality for future use. The Company does not amortize its FCC broadcast licenses or billboard permits. The Company tests
these indefinite-lived intangible assets for impairment at least annually using the direct method.
Under the direct method, it is assumed that rather than acquiring indefinite-lived intangible
assets as a part of a going concern business, the buyer hypothetically obtains indefinite-lived
intangible assets and builds a new operation with similar attributes from scratch. Thus, the buyer
incurs start-up costs during the build-up phase which are normally associated with going concern
value. Initial capital costs are deducted from the discounted cash flows model which results in
value that is directly attributable to the indefinite-lived intangible assets. Under the direct method, the Company continues to aggregate its indefinite-lived intangible assets
at the market level for purposes of impairment testing. The Companys key assumptions using the
direct method are market revenue growth rates, market share, profit margin, duration and profile of
the build-up period, estimated start-up capital costs and losses incurred during the build-up
period, the risk-adjusted discount rate and terminal values. This data is populated using industry
normalized information representing an average station within a market. Goodwill The Company tests goodwill for impairment using a two-step process. The first step, used to screen
for potential impairment, compares the fair value of the reporting unit with its carrying amount,
including goodwill. The second step, used to measure the amount of the impairment loss, compares
the implied fair value of the reporting unit goodwill with the carrying amount of that goodwill.
The following table presents the changes in the carrying amount of goodwill in each of the
Companys reportable segments for the three-month period ended March 31, 2005: (In thousands)
    
    Radio
    
    Outdoor
    
    Entertainment
    
    Other
    
    TotalBalance as of December 31, 2004
    
    
    $6,369,182
    
    
    
    $787,694
    
    
    
    $34,429
    
    
    
    $29,139
    
    
    
    $7,220,444Acquisitions
    
    
    93
    
    
    
    1,403
    
    
    
    1,309
    
    
    
    
    
    
    
    2,805Foreign currency
    
    
    
    
    
    
    (15,555
    )
    
    
    (2,107
    )
    
    
    
    
    
    
    (17,662
    )Adjustments
    
    
    42
    
    
    
    (42
    )
    
    
    27
    
    
    
    (39
    )
    
    
    (12
    )Balance as of March 31, 2005
    
    
    $6,369,317
    
    
    
    $773,500
    
    
    
    $33,658
    
    
    
    $29,100
    
    
    
    $7,205,575
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Note 3: DERIVATIVE INSTRUMENTS The Company holds a net purchased option (the collar) under a secured forward exchange contract
that limits its exposure to and benefit from price fluctuations in XM Satellite Radio Holding, Inc.
(XMSR) over the term of the contract. The collar is accounted for as a hedge of the forecasted
sale of the underlying shares. At March 31, 2005 and December 31, 2004, the fair value of the
collar was a liability recorded in Other long-term obligations of $160.2 million and $208.1
million, respectively, and the amount recorded in other comprehensive income (loss), net of tax,
related to the change in fair value of the collar for the three months ended March 31, 2005 and
2004 was $29.7 million and $(16.6) million, respectively. The Company also holds options under two secured forward exchange contracts that limit its exposure
to and benefit from price fluctuations in American Tower Corporation (AMT) over the terms of the
contracts. These options are not designated as hedges of the underlying shares of AMT. The AMT
contracts had a value of $29.1 million and $29.9 million at March 31, 2005 and December 31, 2004,
respectively. For the three months ended March 31, 2005 and 2004, the Company recognized a loss of
$.8 million and a gain of $1.7 million, respectively, in Gain (loss) on marketable securities
related to the change in fair value of the options. To offset the change in the fair value of
these contracts, the Company has recorded AMT shares as trading securities. During the three
months ended March 31, 2005 and 2004, the Company recognized a loss of $.3 million and gain of $1.1
million, respectively, in Gain (loss) on marketable securities related to the change in the fair
value of the shares. As a result of the Companys foreign operations, the Company is exposed to foreign currency
exchange risks related to its investment in net assets in foreign countries. To manage this risk,
on February 25, 2004, the Company entered into a United States dollar  Euro cross currency swap
with a Euro notional amount of 497.0 million and a corresponding U.S. dollar notional amount of
$629.0 million. This cross currency swap had a value of $61.2 million and $75.8 million at March
31, 2005 and December 31, 2004, respectively, which was recorded in Other long-term obligations.
The cross currency swap requires the Company to make fixed cash payments on the Euro notional
amount while it receives fixed cash payments on the equivalent U.S. dollar notional amount, all on
a semiannual basis. The Company has designated the cross currency swap as a hedge of its net
investment in Euro denominated assets. The Company selected the forward method under the guidance
of the Derivatives Implementation Group Statement 133 Implementation Issue H8, Foreign Currency
Hedges: Measuring the Amount of Ineffectiveness in a Net Investment Hedge. The forward method
requires all changes in the fair value of the cross currency swap and the semiannual cash payments
to be reported as a cumulative translation adjustment in other comprehensive income (loss) in the
same manner as the underlying hedged net assets. As of March 31, 2005 and December 31, 2004, a
loss, net of tax of $38.5 million and $47.5 million, respectively, was recorded as a cumulative
translation adjustment to other comprehensive income (loss) related to the cross currency swap. Note 4: RECENT DEVELOPMENTS Company Share Repurchase Program On February 1, 2005, the Companys Board of Directors authorized its third share repurchase program
of up to $1.0 billion effective immediately. The first two share repurchase programs, each for
$1.0 billion, were authorized during 2004 and have each been completed. This third $1.0 billion
share repurchase program is authorized for a period consisting of the next 12 months, although the
program may be discontinued or suspended at anytime prior to its expiration. As of March 31, 2005,
69.2 million shares had been repurchased for an aggregate purchase price of $2.4 billion, including
commission and fees, under all three share repurchase programs. Recent Legal Proceedings At the Senate Judiciary Committee hearing on July 24, 2003, an Assistant United States Attorney
General announced that the Department of Justice (DOJ), is pursuing two separate antitrust
inquiries concerning the Company. One inquiry is whether the Company has violated antitrust laws
in one of our radio markets. The other is whether the Company has limited airplay of artists who do not use the Companys
concert services, in violation of antitrust laws. The Company is cooperating fully with all DOJ
requests. On September 9, 2003, the Assistant United States Attorney for the Eastern District of Missouri
caused a Subpoena to Testify before Grand Jury to be issued to the Company. The Subpoena requires
the Company to produce certain information regarding commercial advertising run on behalf of
offshore and/or online (Internet) gambling businesses, including sports bookmaking and casino-style
gambling. The Company is fully cooperating with such requirements. On February 7, 2005, the Company received a subpoena from the State of New York Attorney Generals
office, requesting information on policies and practices regarding record promotion on radio
stations in the state of New York. The Company is fully cooperating with this subpoena. - 10 -




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The Company is among the defendants in a lawsuit filed September 3, 2002 by JamSports and
Clear Channel Entertainment in the United States Federal District Court for the Northern District
of Illinois. The plaintiff alleged that the Company violated Section One and Section Two of the
Sherman Antitrust Act and wrongfully interfered in the plaintiffs contractual rights. On March
21, 2005, the jury rendered its verdict finding that the Company had not violated the antitrust
laws, but had tortiously interfered with the contract which the plaintiff had entered into with AMA
Pro Racing and with the plaintiffs prospective economic advantage. In connection with the
findings regarding tortious interference, the jury awarded to the plaintiffs approximately $17.0
million in lost profits and $73.0 million in punitive damages. The Company is vigorously seeking
to overturn or nullify the adverse verdict and damage award regarding tortious interference
including, if necessary, pursuing appropriate appeals. The Company is also currently involved in certain other legal proceedings and, as required, has
accrued an estimate of the probable costs for the resolution of these claims, inclusive of those
discussed above. These estimates have been developed in consultation with counsel and are based
upon an analysis of potential results, assuming a combination of litigation and settlement
strategies. It is possible, however, that future results of operations for any particular period
could be materially affected by changes in the Companys assumptions or the effectiveness of its
strategies related to these proceedings. Note 5: RESTRUCTURING As a result of the Companys mergers with The Ackerley Group, Inc. (Ackerley) in 2002, and SFX
Entertainment, Inc. (SFX) and AMFM Inc. (AMFM) in 2000, the Company restructured the Ackerley,
SFX and AMFM operations. The Ackerley corporate office in Seattle was closed in July 2002, the
AMFM corporate offices in Dallas and Austin, Texas were closed in March 2001 and a portion of the
SFX corporate office in New York was closed in June 2001. Other operations of Ackerley and AMFM
have either been discontinued or integrated into existing similar operations. As of March 31,
2005, the restructuring has resulted in the actual termination of approximately 800 employees. The
Company has recorded a liability in purchase accounting for Ackerley, SFX and AMFM, primarily
related to severance for terminated employees and lease terminations as follows: Three Months Ended
    
    Year Ended(In thousands)
    
    March 31, 2005
    
    December 31, 2004Severance and lease termination costs:Accrual at January 1
    
    $
    11,015
    
    
    $
    57,140Adjustments to restructuring accrual
    
    
    3⁄4
    
    
    
    (43,623
    )Payments charged against restructuring accrual
    
    
    (500
    )
    
    
    (2,502
    )Ending balance of severance and lease termination accrual
    
    $
    10,515
    
    
    $
    11,015
  The remaining severance and lease termination accrual at March 31, 2005 is comprised of $2.4
million of severance and $8.1 million of lease termination costs. The severance accrual includes
amounts that will be paid over the next several years related to deferred payments to former
employees as well as other compensation. The lease termination accrual will be paid over the next
four years. There were no payments or charges made relating to severance during the first quarter
of 2005. The Company made adjustments to finalize the purchase price allocation for both the AMFM
and SFX mergers during 2001 and the purchase price allocation related to the Ackerley merger was
finalized in 2003. During 2004, the Company reduced its restructuring reserve by approximately
$43.6 million, as amounts previously recorded were no longer expected to be paid. This reversal
was recorded as an adjustment to the purchase price. Any future potential excess reserves will be
recorded as an adjustment to the purchase price.In addition to the restructuring described above, the Company restructured its outdoor advertising
operations in Spain and France during 2004 and 2003, respectively. As a result of the Spain
restructuring, the Company recorded a $4.1 million accrual in divisional operating expenses; $2.2
million was related to severance and $1.9 million was related to consulting and other costs. As a
result of the France restructuring, the Company recorded a $13.8 million accrual in divisional
operating expenses; $12.5 million was related to severance and $1.3 million was related to lease
terminations and consulting costs. As of March 31, 2005, the aggregate accrual balance relating to the Spain and France restructuring
was $3.3 million. It is expected that these accruals will be paid in the current year. It has
been announced that these restructurings will result in the termination of 178 employees. As of
March 31, 2005, 173 employees have been terminated. Note 6: COMMITMENTS AND CONTINGENCIES Certain agreements relating to acquisitions provide for purchase price adjustments and other future
contingent payments based on the financial performance of the acquired companies. The Company will
continue to accrue additional amounts related to such contingent payments if and when it is
determinable that the applicable financial performance targets will be met. The aggregate of these - 11 -




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contingent payments, if performance targets are met, would not significantly impact the financial
position or results of operations of the Company. As discussed in Note 4, there are various lawsuits and claims pending against the Company. Based
on current assumptions, the Company has accrued its estimate of the probable costs for the
resolution of these claims. Future results of operations could be materially affected by changes
in these assumptions. Note 7: GUARANTEES As of March 31, 2005, the Company guaranteed third party debt of approximately $13.5 million. The
guarantees arose primarily in 2000 in conjunction with the Company entering into long-term
contracts with third parties. The operating assets associated with these contracts secure the debt
that the Company has guaranteed. Only to the extent that the assets are either sold by the
third-party for less than the guaranteed amount or the third party is unable to service the debt
will the Company be required to make a cash payment under the guarantee. As of March 31, 2005, it
is not probable that the Company will be required to make a payment under these guarantees. Thus,
as of March 31, 2005, the guarantees associated with long-term operating contracts are not recorded
on the Companys financial statements. These guarantees are included in the Companys calculation
of its leverage ratio covenant under the bank credit facility. Within the Companys $1.75 billion credit facility, there exists a $150.0 million sub-limit
available to certain of the Companys international subsidiaries. This $150.0 million sub-limit
allows for borrowings in various foreign currencies, which are used to hedge net assets in those
currencies and provides funds to the Companys international operations for certain working capital
needs. Subsidiary borrowings under this sub-limit are guaranteed by the Company. At March 31,
2005, this portion of the $1.75 billion credit facilitys outstanding balance was $23.7 million.
At March 31, 2005, this outstanding balance is recorded in Long-term debt on the Companys
financial statements. Within the Companys bank credit facility agreement is a provision that requires the Company to
reimburse lenders for any increased costs that they may incur in an event of a change in law, rule
or regulation resulting in their reduced returns from any change in capital requirements. In
addition to not being able to estimate the potential amount of any future payment under this
provision, the Company is not able to predict if such event will ever occur. The Company currently has guarantees that provide protection to its international subsidiaries
banking institutions related to overdraft lines and credit card charge-back transactions up to
approximately $67.4 million. As of March 31, 2005, no amounts were outstanding under these
agreements. As of March 31, 2005, the Company has outstanding commercial standby letters of credit and surety
bonds of $164.9 million and $41.3 million, respectively, that primarily expire during the next
twelve months. These letters of credit and surety bonds relate to various operational matters
including insurance, bid and performance bonds as well as other items. These letters of credit are
included in the Companys calculation of its leverage ratio covenant under the bank credit
facility. The surety bonds are not considered borrowings under the Companys bank credit facility. - 12 -




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Note 8: SEGMENT DATA The Company has three reportable segments, which it believes best reflects how the Company is
currently managed  radio broadcasting, outdoor advertising and live entertainment. The category
other includes television broadcasting, sports representation and media representation. Revenue
and expenses earned and charged between segments are recorded at fair value and eliminated in
consolidation. Radio
    
    Outdoor
    
    Live(In thousands)
    
    Broadcasting
    
    Advertising
    
    Entertainment
    
    Other
    
    Corporate
    
    Eliminations
    
    ConsolidatedThree Months Ended March 31, 2005Revenue
    
    $
    773,562
    
    
    $
    578,959
    
    
    $
    424,514
    
    
    $
    138,706
    
    
    $
    
    
    
    $
    (30,801
    )
    
    $
    1,884,940Divisional operating expenses
    
    
    511,207
    
    
    
    456,359
    
    
    
    423,497
    
    
    
    119,480
    
    
    
    
    
    
    
    (30,801
    )
    
    
    1,479,742Non-cash compensation
    
    
    212
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,552
    
    
    
    
    
    
    
    1,764Depreciation and amortization
    
    
    35,694
    
    
    
    98,266
    
    
    
    17,537
    
    
    
    17,210
    
    
    
    4,685
    
    
    
    
    
    
    
    173,392Corporate expenses
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    51,417
    
    
    
    
    
    
    
    51,417Operating income (loss)
    
    $
    226,449
    
    
    $
    24,334
    
    
    $
    (16,520
    )
    
    $
    2,016
    
    
    $
    (57,654
    )
    
    $
    
    
    
    $
    178,625Intersegment revenues
    
    $
    11,059
    
    
    $
    2,190
    
    
    $
    46
    
    
    $
    17,506
    
    
    $
    
    
    
    $
    
    
    
    $
    30,801Identifiable assets
    
    $
    12,192,128
    
    
    $
    4,673,413
    
    
    $
    1,476,140
    
    
    $
    1,114,933
    
    
    $
    313,061
    
    
    $
    
    
    
    $
    19,769,675Capital expenditures
    
    $
    22,282
    
    
    $
    34,694
    
    
    $
    22,606
    
    
    $
    527
    
    
    $
    1,434
    
    
    $
    
    
    
    $
    81,543Three Months Ended March 31, 2004Revenue
    
    $
    832,944
    
    
    $
    521,593
    
    
    $
    513,958
    
    
    $
    132,361
    
    
    $
    
    
    
    $
    (31,290
    )
    
    $
    1,969,566Divisional operating expenses
    
    
    512,328
    
    
    
    412,738
    
    
    
    491,848
    
    
    
    114,094
    
    
    
    
    
    
    
    (31,290
    )
    
    
    1,499,718Non-cash compensation
    
    
    261
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    657
    
    
    
    
    
    
    
    918Depreciation and amortization
    
    
    37,791
    
    
    
    99,750
    
    
    
    15,548
    
    
    
    14,726
    
    
    
    5,343
    
    
    
    
    
    
    
    173,158Corporate expenses
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    49,364
    
    
    
    
    
    
    
    49,364Operating income (loss)
    
    $
    282,564
    
    
    $
    9,105
    
    
    $
    6,562
    
    
    $
    3,541
    
    
    $
    (55,364
    )
    
    $
    
    
    
    $
    246,408Intersegment revenues
    
    $
    10,736
    
    
    $
    2,450
    
    
    $
    5,300
    
    
    $
    12,804
    
    
    $
    
    
    
    $
    
    
    
    $
    31,290Identifiable assets
    
    $
    19,742,233
    
    
    $
    4,791,966
    
    
    $
    1,524,851
    
    
    $
    1,366,396
    
    
    $
    374,035
    
    
    $
    
    
    
    $
    27,799,481Capital expenditures
    
    $
    7,655
    
    
    $
    36,644
    
    
    $
    23,218
    
    
    $
    3,048
    
    
    $
    219
    
    
    $
    
    
    
    $
    70,784
 Net revenue of $475.6 million and $411.9 million and identifiable assets of $2.7 billion and
$2.5 billion were derived from the Companys foreign operations and are included in the March 31,
2005 and 2004 data above, respectively. Note 9: SUBSEQUENT EVENTS On April 26, 2005, the Companys Board of Directors approved a plan to strategically realign the
Companys businesses. This plan includes an initial public offering (IPO) of approximately 10%
of the common stock of the Companys outdoor business (Clear Channel Outdoor) and a 100% spin-off
of its entertainment business (Clear Channel Entertainment). After consummation of the IPO, the
Company will continue to hold a controlling stake in Clear Channel Outdoor. Clear Channel Outdoor
will consist of our current domestic and international outdoor operations. Following the spin-off,
Clear Channel Entertainment will be a separate, publicly-traded company in which the Company will
not retain any ownership interest. Prior to the spin-off, the Company expects to submit a request
to the Internal Revenue Service (IRS) seeking a letter ruling regarding the tax-free nature of the
spin-off. This realignment, which the Company expects to complete in the second half of 2005, is
subject to receipt of a tax opinion of counsel and letter ruling from the IRS relating to the Clear
Channel Entertainment spin-off, favorable market conditions, the filing and effectiveness of
registration statements with the Securities and Exchange Commission and other customary conditions.
The transactions do not require approval by the Companys shareholders. Furthermore, the Company intends to pay a special dividend of $3.00 per share upon, and subject to,
completion of the IPO of Clear Channel Outdoor and the spin-off of Clear Channel Entertainment.
The Company will fund this special dividend with a combination of current cash balances, cash flow
from operations, proceeds from the repayment of intercompany debt, and the proceeds of any new debt
offerings. The Companys outstanding debt will remain obligations of the Company. Also on April 26, 2005, the Companys Board of Directors declared a quarterly cash dividend of
$.1875 per share on the Companys common stock. The dividend is payable on July 15, 2005 to
shareholders of record at the close of business on June 30, 2005. - 13 -




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From April 1, 2005 through April 30, 2005, 2.5 million shares had been repurchased for an aggregate
purchase price of $85.3 million, including commission and fees, under the Companys share
repurchase program. At April 30, 2005, there was $487.4 million remaining available for repurchase
through the Companys repurchase program authorized on February 1, 2005. On April 15, 2005, the Company retired 12.2 million of its shares held in treasury, which were
valued at $410.2 million. At April 30, 2005, the Company
held 925,265 shares in treasury, which
were valued at $31.9 million. On May 5, 2005, the Company initiated the purchase of approximately 5.7 million shares of its
common stock in a private transaction for an aggregate of $180.0 million. This transaction is
scheduled to settle and close on May 9, 2005 - 14 -




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Item 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Executive Summary Our operating performance during the first quarter of 2005 was led by our outdoor advertising
business, primarily resulting from that divisions strong revenue growth. Domestic revenue growth
was fueled by our bulletin and poster inventory. Our international outdoor advertising business
revenue growth was lead by increased revenue per display on our street furniture and transit
advertising inventory. Our radio broadcasting revenues declined 7% during the first quarter of 2005 compared to the
same quarter of 2004. The first three months of 2005 comprised the first full quarter in which all
of our radio stations operated under our Less is Moreinitiative, by which we reduced our overall
commercial minutes approximately 20% from 2004 levels. We also began to build a market for shorter
length advertisements rather than the traditional 60-second commercials. Adoption by advertisers
of the shorter length commercials has varied by market with the overall adoption rate slower than
originally anticipated. As a result, revenues from both our local and national advertisements were
down. In addition, non-cash trade revenues were down. Our live entertainment revenue declined 17% due to lower ticket revenues and merchandising and
concession revenues. The lower ticket revenues were primarily attributable to the mix of events in
the current quarter, which resulted in significantly less arena shows than the first quarter of
2004. Merchandising and concession revenues were down as a result of the different mix of events. Strategic Realignment of Businesses On April 26, 2005, our Board of Directors approved a plan to sell approximately 10% of the
common stock of Clear Channel Outdoor in an initial public offering. After consummation of the
IPO, we will continue to hold a controlling stake in Clear Channel Outdoor. Clear Channel Outdoor
will consist of our current domestic and international outdoor operations. We believe an IPO of
Clear Channel Outdoor will provide several important benefits. A partially-separated Clear Channel
Outdoor will enjoy greater strategic focus and flexibility. Additionally, Clear Channel Outdoor
will be able to supplement its attractive organic growth profile by pursuing selective acquisitions
using a currency based on its inherent valuation, rather than the blended valuation represented by
our current common stock. This public currency will also enable Clear Channel Outdoor to better
attract, retain and reward management in alignment with its performance. Our Board also approved a plan to spin-off the operations of Clear Channel Entertainment.
After separation, Clear Channel Entertainment will be a separate, publicly-traded company in which
we will not retain any ownership interest. We believe a spin-off of Clear Channel Entertainment
will provide several important benefits. As a separate and largely unregulated public company,
Clear Channel Entertainment will enjoy enhanced flexibility to pursue initiatives that can maximize
its strategic and operating potential and will be poised to more effectively enhance shareholder
value than under the current structure. Furthermore, we intend to pay a special dividend of $3.00 per share upon, and subject to,
completion of the IPO of Clear Channel Outdoor and the spin-off of Clear Channel Entertainment. We
will fund this special dividend with a combination of current cash balances, cash flow from
operations, proceeds from the repayment of intercompany debt, and the proceeds of any new debt
offerings. Our outstanding debt will remain our obligation. Each of the IPO of Clear Channel Outdoor, the spin-off of Clear Channel Entertainment and the
special dividend are subject to receipt of a tax opinion of counsel and letter ruling from the IRS
relating to the Clear Channel Entertainment spin-off, favorable market conditions, the filing and
effectiveness of registration statements with the Securities and Exchange Commission and other
customary conditions. Format of Presentation Managements discussion and analysis of our results of operations and financial condition
should be read in conjunction with the consolidated financial statements and related footnotes.
Our discussion is presented on both a consolidated and segment basis. Our reportable operating
segments are Radio Broadcasting, which includes our national syndication business, Outdoor
Advertising and Live Entertainment. Included in the other segment are television broadcasting,
sports representation and our media representation business, Katz Media. We manage our operating segments primarily on their operating income, which is the focus of
our discussion of the results of operations of our operating segments. Corporate expenses,
Interest expense, Gain (loss) on sale of marketable securities, Equity in - 15 -




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earnings of
nonconsolidated affiliates, Other income (expense)  net, and Income tax benefit (expense) are
managed on a total company basis and are, therefore, included only in our discussion of
consolidated results. Radio Broadcasting Our local radio markets are run predominantly by local management teams who control the
formats selected for their programming. The formats are designed to reach audiences with targeted
demographic characteristics that appeal to our advertisers. Our advertising rates are principally
based on how many people in a targeted audience are listening to our stations, as measured by an
independent ratings service. The size of the market influences rates as well, with larger markets
typically receiving higher rates than smaller markets. Also, our advertising rates are influenced
by the time of day the advertisement airs, with morning and evening drive-time hours typically the
highest. We sell a certain number of radio advertising spots per hour to our advertisers. Radio
advertising contracts are typically less than one year. During the first quarter of 2005, we completed the rollout of our Less is Moreinitiative,
which lowered the amount of commercial minutes played per hour by approximately 15% - 20% across
our stations. A key component of Less is Moreis encouraging advertisers to invest in shorter
advertisements rather than the traditional 60-second spot. Based on our research, we believe that
the effectiveness of a commercial is not related to its length. Because effectiveness is not tied
to the length of the advertisement, on a cost per thousand listeners reached basis, we can provide
our advertisers a more efficient investment with our new shorter commercials than with the
traditional 60-second commercials. Adoption by advertisers of shorter length commercials has
varied by market, with the overall adoption rate slower than we had anticipated. However, we
believe that this trend will improve as the year progresses. Management monitors macro level indicators to assess our radio operations performance. Due
to the geographic diversity and autonomy of our markets, we have a multitude of market specific
advertising rates and audience demographics. Therefore, our discussion of the results of
operations of our radio broadcasting segment focuses on the macro level indicators that management
monitors to assess our radio segments financial condition and results of operations. Management looks at our radio operations overall revenues as one of its main performance
metrics. Management also looks at local advertising, which is sold predominately in a stations
local market, and national advertising, which is sold across multiple markets. Local advertising
is sold by our local radio stations sales staffs while national advertising is sold, for the most
part, through our national representation firm. Local and national advertising revenues are tracked separately, because these revenue streams
have different sales forces, respond differently to changes in the economic environment, and
because local advertising is the primary driver of our radio revenues. Management also looks at radio revenue by market size, as defined by Arbitron. Typically,
larger markets can reach bigger audiences with wider demographics than smaller markets. Over half
of our radio revenue and divisional operating expenses comes from our 50 largest markets. Additionally, management reviews our share of listeners in target demographics listening to
the radio in an average quarter hour. This metric gauges how well our formats are attracting and
keeping listeners. A significant portion of our radio segments expenses vary in connection with changes in
revenue. These variable expenses primarily relate to costs in our sales department, such as
salaries, commissions and bad debt. Our programming and general and administrative departments
incur most of our fixed costs, such as talent costs, rights fees, utilities and office salaries.
Lastly, our highly discretionary costs are in our marketing and promotions department, which we
primarily incur to maintain and/or increase our audience share. Outdoor Advertising Our outdoor advertising revenues are generated from selling advertisements on our display
faces, which include bulletins, posters and transit displays, as well as street furniture panels.
Our advertising rates are based on a particular displays impressions in relation to the
demographics of a particular market and its location within a market. Our outdoor advertising
contracts are typically based on the number of months or weeks the advertisement is displayed. To monitor the health of our outdoor business, management reviews average rates, average
occupancy and inventory levels of each of our display faces by market. In addition, because a
significant portion of our outdoor advertising is conducted in foreign markets, principally Europe,
management looks at the operating results from our foreign operations on a constant dollar basis.
A constant dollar basis allows for comparison of operations independent of foreign exchange
movements. Our outdoor advertising - 16 -




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revenue and divisional operating expenses increased in the
first quarter of 2005 as compared to the first quarter of 2004 by approximately $18.8 million and
$17.4 million, respectively, as a result of fluctuations in foreign currency exchange rates. Our significant outdoor expenses include production expenses, revenue sharing or minimum
guarantees on our transit and street furniture contracts and site lease expenses, primarily for
land under our advertising displays. Our site lease terms vary from monthly to yearly, can be for
terms of 20 years or longer and typically provide for renewal options. Our street furniture
contracts are usually won in a competitive bid and generally have terms of between 10 and 20 years. Live Entertainment We derive live entertainment revenues primarily from promoting or producing music and
theatrical events. Revenues from these events are mainly from ticket sales, rental income,
corporate sponsorships, concessions and merchandise. We typically receive either all the ticket
sales or just a fixed fee for each event we host. We also generally receive fees representing a
percentage of total concession sales from vendors and total merchandise sales from the performer or
tour producer. We generally receive higher music profits when an event is at a venue we own rather than a
venue we rent. The higher music profits are due to our ability to share in a percentage of the
revenues received from concession and merchandise sales as well as the opportunity to sell
sponsorships for venue naming rights and signage. To judge the health of our live entertainment business, management monitors the number of
shows, average paid attendance, talent cost as a percent of revenue, sponsorship dollars and ticket
revenues. In addition, because a significant portion of our live entertainment business is
conducted in foreign markets, management looks at the operating results from our foreign operations
on a constant dollar basis. A constant dollar basis allows for comparison of operations
independent of foreign exchange movements. Our live entertainment revenue and divisional operating
expenses increased in the first quarter of 2005 as compared to the first quarter of 2004 by
approximately $6.3 million and $5.9 million, respectively, as a result of fluctuations in foreign
currency exchange rates. The primary expense driver for live entertainment is talent cost. Talent cost is the amount
we pay a musical artist or theatrical production to perform at an event. This is a negotiated
amount primarily driven by what the artist or production requires to cover their direct costs and
the value of their time. These fees are typically agreed to at a set minimum amount with the
potential for additional profit sharing if the event exceeds set revenue targets. The comparison of Three Months Ended March 31, 2005 to Three Months Ended March 31, 2004 is as
follows: Consolidated (In thousands)
    
    Three Months Ended March 31,2005
    
    2004
    
    % ChangeRevenue
    
    $
    1,884,940
    
    
    $
    1,969,566
    
    
    
    (4
    %)Operating expenses:Divisional operating expenses (excludes
non-cash compensation expenses of $212 and
$261 in 2005 and 2004, respectively)
    
    
    1,479,742
    
    
    
    1,499,718
    
    
    
    (1
    %)Non-cash compensation expense
    
    
    1,764
    
    
    
    918
    
    
    
    92
    %Depreciation and amortization
    
    
    173,392
    
    
    
    173,158
    
    
    
    0
    %Corporate
expenses (excludes non-cash compensation expenses of $1,552 and $657 in
2005 and 2004, respectively)
    
    
    51,417
    
    
    
    49,364
    
    
    
    4
    %Operating income
    
    
    178,625
    
    
    
    246,408
    
    
    
    (28
    %)Interest expense
    
    
    106,783
    
    
    
    89,805Gain (loss) on marketable securities
    
    
    (1,073
    )
    
    
    49,723Equity in earnings of nonconsolidated affiliates
    
    
    6,143
    
    
    
    6,675Other income (expense)  net
    
    
    2,231
    
    
    
    (17,270
    )Income before income taxes
    
    
    79,143
    
    
    
    195,731Income tax benefit (expense):Current
    
    
    (1,339
    )
    
    
    (145,985
    )Deferred
    
    
    (29,922
    )
    
    
    66,714Net income
    
    $
    47,882
    
    
    $
    116,460
 - 17 -




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Consolidated Revenue Consolidated revenue declined $84.6 million during the first quarter of 2005 as compared to
the first quarter of 2004, consisting of declines of $89.4 million and $59.4 million in our live
entertainment and radio segments, respectively, partially offset by an increase of $57.4 million in
our outdoor advertising segment. The decline in our live entertainment revenue was driven by lower
ticket sales as well as lower concessions and merchandising revenue due to a different mix of
events. Our radio segment experienced declines in both local and national revenue due to an
overall reduction in commercial minutes, partially offset by average rate increases. Our outdoor
segment saw revenue growth from a wide range of our advertising products both domestically and
internationally. Consolidated Divisional Operating Expenses Consolidated divisional operating expenses declined $20.0 million during the first quarter of
2005 as compared to the first quarter of 2004, led by a $68.4 million decline from our live
entertainment segment, partially offset by a $43.6 million increase from our outdoor advertising
segment. Divisional operating expenses in our radio segment were essentially flat for the first
quarter of 2005 as compared to the first quarter of 2004. The decline in live entertainment
operating expenses was associated with the decline in revenue. The increase in outdoor divisional
operating expenses related to increased production and site-lease expense associated with the
increase in revenue. Non-cash Compensation Expense Non-cash compensation expense increased 92% during the first quarter of 2005 as compared to
the first quarter of the prior year primarily from the granting of more restricted stock awards in
the current quarter. Corporate Expenses Corporate expenses increased $2.1 million during the first quarter of 2005 as compared to the
first quarter of 2004 primarily related to an increase in corporate legal expenses. This increase
was partially offset by a decrease in bonus expense. Interest Expense Interest expense increased $17.0 million during the first quarter of 2005 as compared to the
first quarter of 2004 primarily as a result of an increase in our average debt outstanding as well
as an increase in our average cost of debt. Our debt balances and weighted average cost of debt at
March 31, 2005 and 2004 were $7.7 billion, 5.6%, $6.3 billion and 5.0%, respectively. Gain (loss) on Marketable Securities The loss on marketable securities for the first quarter of 2005 consisted entirely of changes
in fair value of certain investment securities that are classified as trading and a related secured
forward exchange contract associated with those securities. The gain on marketable securities during the first quarter of 2004 of $49.7 million consisted
of a $47.0 million gain on the sale of our remaining investment in Univision Communications and a
$2.7 million gain related to the change in fair value of certain investment securities that are
classified as trading and a related secured forward exchange contract associated with those
securities. Other Income (Expense)  Net There were no individually significant items of other income (expense)  net during the first
quarter of 2005. During the first quarter of 2004, other income (expense)  net consisted of a
$31.4 million loss on the early extinguishment of debt, partially offset by an $11.6 million gain
on the disposal of radio operating assets and a $2.5 million net gain on various other items. Income Tax Benefit (Expense) Current tax expense decreased $144.6 million for the three months ended March 31, 2005.
Current tax expense for the three months ended March 31, 2004 included $199.4 million related to
the sale of our remaining investment in Univision Communications and certain radio operating
assets. This expense was partially offset by a tax benefit of approximately $67.5 million related
to the tax loss on our early extinguishment of debt recorded during the three months ended March
31, 2004. The remaining decrease during the current quarter is due to lower taxable income. Deferred tax expense for the three months ended March 31, 2005 was $29.9 million compared to a
deferred tax benefit of $66.7 million for the three months ended March 31, 2004. There were no
unusual deferred tax items recorded during the three months ended March 31, 2005. However, during
the same period of the previous year, a $176.0 million deferred tax benefit was recorded - 18 -




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related to
the sale of our remaining investment in Univision. This benefit was partially offset by an
approximate $54.3 million expense related to our early extinguishment of debt. Segment Revenue and Divisional Operating Expenses Radio Broadcasting Three Months Ended March 31,(In thousands)
    
    2005
    
    2004
    
    % ChangeRevenue
    
    $
    773,562
    
    
    $
    832,944
    
    
    
    (7%
    )Divisional operating expenses
    
    
    511,207
    
    
    
    512,328
    
    
    
    (0%
    )Non-cash compensation
    
    
    212
    
    
    
    261
    
    
    
    (19%
    )Depreciation and amortization
    
    
    35,694
    
    
    
    37,791
    
    
    
    (6%
    )Operating income
    
    $
    226,449
    
    
    $
    282,564
    
    
    
    (20%
    )
 Our radio broadcasting revenues declined 7% during the first quarter of 2005 as compared to
the first quarter of 2004. The decline is primarily due to a reduction in overall commercial
minutes, partially offset by average rate increases. We experienced an equivalent decline on a
percentage basis in both local and national advertising. Most of our advertising categories were
down for the first quarter, with the largest dollar declines coming from automotive,
telecommunications and entertainment. In addition, non-cash trade revenues declined during the
first quarter of 2005, as compared to the first quarter of 2004. We continued the implementation
of our Less is Moreinitiative in the first quarter of 2005. As part of the Less is More
initiative, we are attempting to reshape the radio business model with a shift from the traditional
60-second commercial to shorter length commercials. Adoption by advertisers of the shorter length
commercials has varied by market, with the overall adoption rate slower than originally
anticipated. We believe that this trend will improve as the year continues. Our radio broadcasting divisional operating expenses were essentially flat for the first
quarter of 2005 as compared to the first quarter of last year. We saw declines in both trade and
bonus expenses, associated with our decline in revenue, partially offset by an increase in
programming expenses. Programming expenses were up primarily as a result of an increase in music
license fees. Outdoor Advertising Three Months Ended March 31,(In thousands)
    
    2005
    
    2004
    
    % ChangeRevenue
    
    $
    578,959
    
    
    $
    521,593
    
    
    
    11%Divisional operating expenses
    
    
    456,359
    
    
    
    412,738
    
    
    
    11%Depreciation and amortization
    
    
    98,266
    
    
    
    99,750
    
    
    
    (1%
    )Operating income
    
    $
    24,334
    
    
    $
    9,105
    
    
    
    167%
 Our outdoor advertising revenue increased $57.4 million during the first quarter of 2005 as
compared to the same quarter of 2004. The growth includes approximately $18.8 million from foreign
exchange increases. Both our domestic and international operations contributed to the revenue
growth. Our domestic revenue growth was led by bulletins as well as gains from mall, airport, and
taxi advertisements. Driving the growth in bulletin revenue was an increase in average rate, while
occupancy was slightly down. Both rate and occupancy for posters were up for the first quarter as
compared to the same quarter of 2004. Strong domestic advertising categories for the first quarter
of 2005 included automotive, entertainment, financial services, retail and telecommunications. Our first quarter international revenue growth was led by street furniture and transit
revenues, with billboard revenues essentially flat as compared to the first quarter of 2004. Our
street furniture business was particularly strong in Italy, Australia, the United Kingdom and
Belgium. Driving the first quarter increase in street furniture and transit revenues were
increases in average revenue per display, as well as an increase in the number of street furniture
and transit displays as compared to the same quarter of 2004. Billboards saw a slight increase in
the average revenue per display during the first quarter of 2005 as compared to the same quarter of
the prior year. Divisional operating expenses increased $43.6 million during the first quarter of 2005 as
compared to the same quarter of 2004. The growth includes approximately $17.4 million from foreign
exchange increases. The remainder of the increase is associated principally with an increase in
production and site lease expenses. - 19 -




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Live Entertainment Three Months Ended March 31,(In thousands)
    
    2005
    
    2004
    
    % ChangeRevenue
    
    $
    424,514
    
    
    $
    513,958
    
    
    
    (17
    %)Divisional operating expenses
    
    
    423,497
    
    
    
    491,848
    
    
    
    (14
    %)Depreciation and amortization
    
    
    17,537
    
    
    
    15,548
    
    
    
    13
    %Operating income (loss)
    
    $
    (16,520
    )
    
    $
    6,562
    
    
    
    (352
    %)
 Live entertainment revenue decreased 17% during the first quarter of 2005 as compared to the
first quarter of 2004, primarily as a result of a decline in ticket revenue. Ticket revenues were
down as a result of significantly fewer arena shows and due to the mix of events in the current
quarter compared to the first quarter of the prior year. During the first quarter of 2004, we had
large arena shows like Bette Midler and Britney Spears, with no comparable events in the first
quarter of 2005. Ancillary revenues from concessions and merchandising were also down as a result
of a lower number of shows. The declines were partially offset by an increase of $6.3 million
related to foreign exchange. Divisional operating expenses declined 14% for the quarter ended March 31, 2005 as
compared to the same quarter of 2004. The decline was associated with the decline in revenues.
The decrease was partially offset by an increase of $5.9 million related to foreign exchange
and an increase in litigation reserves. Reconciliation of Segment Operating Income (Loss) to Consolidated Operating Income (In thousands)
    
    Three Months Ended March 31,2005
    
    2004Radio Broadcasting
    
    $
    226,449
    
    
    $
    282,564Outdoor Advertising
    
    
    24,334
    
    
    
    9,105Live Entertainment
    
    
    (16,520
    )
    
    
    6,562Other
    
    
    2,016
    
    
    
    3,541Corporate
    
    
    (57,654
    )
    
    
    (55,364
    )Consolidated Operating Income
    
    $
    178,625
    
    
    $
    246,408
 LIQUIDITY AND CAPITAL RESOURCES Cash Flow Operating Activities: Net cash flow from operating activities of $380.0 million for the three months ended March
31, 2005 principally reflects a net income of $47.9 million plus depreciation and amortization
of $173.4 million. Cash flow from operations also reflects a positive change in working
capital of approximately $142.2 million primarily due to an increase in deferred income and a
decrease in accounts receivable, partially offset by an increase in prepaid assets and a
decrease in accounts payable and accrued expenses. Net cash flow from operating activities of
$530.8 million for the three months ended March 31, 2004 principally reflects a net income of
$116.5 million plus depreciation and amortization of $173.2 million. Cash flow from operations
also reflects a positive change in working capital of approximately $210.8 million primarily
due to an increase in deferred income and a decrease in accounts receivable. Investing Activities: Net cash used in investing activities of $65.5 million for the three months ended March 31,
2005 principally reflects the purchases of property, plant and equipment and the acquisition of
operating assets of $99.3 million. Net cash provided by investing activities of $435.7 million for the three
months ended March 31, 2004 principally reflects proceeds from the sale of our remaining investment
in Univision of $599.4 million, partially offset by capital expenditures of $70.8 million related
to purchases of property, plant and equipment and $95.1 million primarily related to acquisitions
of radio and outdoor assets. - 20 -




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Financing Activities: Net cash used in financing activities for the three months ended March 31, 2005 principally
reflect $593.9 million used to purchase our common stock and $70.9 million in dividend payments,
partially offset by $395.7 million of net proceeds primarily from our credit facility. Net cash
used in financing activities for the three months ended March 31, 2004 principally reflect the net
reduction in debt of $846.3 million and $61.6 million in dividend payments, partially offset by
proceeds of $12.2 million related to the exercise of stock options. We expect to fund anticipated cash requirements (including payments of principal and interest
on outstanding indebtedness and commitments, acquisitions, anticipated capital expenditures,
quarterly dividends and share repurchases) for the foreseeable future with cash flows from
operations and various externally generated funds. SOURCES OF CAPITAL As of March 31, 2005 and December 31, 2004 we had the following debt outstanding: (In millions)
    
    March 31,
    
    December 31,2005
    
    2004Credit facility
    
    $
    764.6
    
    
    $
    350.5Long-term bonds (a)
    
    
    6,804.4
    
    
    
    6,846.1Other borrowings
    
    
    163.8
    
    
    
    183.2Total Debt
    
    
    7,732.8
    
    
    
    7,379.8Less: Cash and cash equivalents
    
    
    271.3
    
    
    
    210.5$
    7,461.5
    
    
    $
    7,169.3
  (a)
    Includes $13.0 million and $13.8 million in unamortized fair value purchase accounting
adjustment premiums related to the merger with AMFM at March 31, 2005 and December 31,
2004, respectively. Also includes ($23.5) million and $6.5 million related to fair value
adjustments for interest rate swap agreements at March 31, 2005 and December 31, 2004,
respectively. Credit Facility We have a multi-currency revolving credit facility in the amount of $1.75 billion, which can
be used for general working capital purposes including commercial paper support as well as to fund
capital expenditures, share repurchases, acquisitions and the refinancing of public debt
securities. At March 31, 2005, the outstanding balance on this facility was $764.6 million and,
taking into account letters of credit of $162.4 million, $822.4 million was available for future
borrowings, with the entire balance to be repaid on July 12, 2009. During the three months ended March 31, 2005, we made principal payments totaling $72.7
million and drew down $469.2 million on the credit facility. As of April 30, 2005, the credit
facilitys outstanding balance was $901.8 million and, taking into account outstanding letters of
credit, $600.7 million was available for future borrowings. Shelf Registration On April 22, 2004, we filed a Registration Statement on Form S-3 covering a combined $3.0
billion of debt securities, junior subordinated debt securities, preferred stock, common stock,
warrants, stock purchase contracts and stock purchase units. The shelf registration statement also
covers preferred securities that may be issued from time to time by our three Delaware statutory
business trusts and guarantees of such preferred securities by us. The SEC declared this shelf
registration statement effective on April 26, 2004. After debt offerings on September 15, 2004,
November 17, 2004, and December 16, 2004, $1.75 billion remains available from this shelf
registration statement. Debt Covenants The significant covenants on our $1.75 billion five-year, multi-currency revolving credit
facility relate to leverage and interest coverage contained and defined in the credit agreement.
The leverage ratio covenant requires us to maintain a ratio of consolidated funded indebtedness to
operating cash flow (as defined by the credit agreement) of less than 5.25x. The interest coverage
covenant requires us to maintain a minimum ratio of operating cash flow (as defined by the credit
agreement) to interest expense of 2.50x. In the event that we do not meet these covenants, we are
considered to be in default on the credit facility at which time the credit facility may become
immediately due. At March 31, 2005, our leverage and interest coverage ratios were 3.35x and
6.01x, respectively. This credit facility contains a cross default provision that would be
triggered if we were to default on any other indebtedness greater than $200.0 million. - 21 -




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Our other indebtedness does not contain provisions that would make it a default if we
were to default on our credit facility. The fees we pay on our $1.75 billion, five-year multi-currency revolving credit facility
depend on our long-term debt ratings. Based on our current ratings level of BBB-/Baa3, our fees on
borrowings are a 45.0 basis point spread to LIBOR and are 17.5 basis points on the total $1.75
billion facility. In the event our ratings improve, the fee on borrowings and facility fee decline
gradually to 20.0 basis points and 9.0 basis points, respectively, at ratings of A/A3 or better.
In the event that our ratings decline, the fee on borrowings and facility fee increase gradually to
120.0 basis points and 30.0 basis points, respectively, at ratings of BB/Ba2 or lower. We believe there are no other agreements that contain provisions that trigger an event of
default upon a change in long-term debt ratings that would have a material impact to our financial
statements. Additionally, our 8% senior notes due 2008, which were originally issued by AMFM Operating
Inc., a wholly-owned subsidiary of Clear Channel, contain certain restrictive covenants that limit
the ability of AMFM Operating Inc. to incur additional indebtedness, enter into certain
transactions with affiliates, pay dividends, consolidate, or effect certain asset sales. At March 31, 2005, we were in compliance with all debt covenants. We expect to remain in
compliance throughout 2005. USES OF CAPITAL Dividends On October 20, 2004 and February 16, 2005, our Board of Directors declared a quarterly cash
dividend of $0.125 per share on our common stock. Dividend payments of $70.9 million and $68.8
million were disbursed on January 15, 2005 and April 15, 2005, respectively, to shareholders of
record at the close of business on December 31, 2004 and March 31, 2005, respectively.
Additionally, on April 26, 2005 our Board of Directors declared a quarterly cash dividend of
$0.1875 per share of our common stock to be paid on July 15, 2005 to shareholders of record on June
30, 2005. In conjunction with our strategic realignment plan approved by our Board on April 26, 2005, we
intend to pay a special dividend of $3.00 per share upon, and subject to, completion of the IPO of
Clear Channel Outdoor and the spin-off of Clear Channel Entertainment. We will fund this special
dividend with a combination of current cash balances, cash flow from operations, proceeds from the
repayment of intercompany debt, and the proceeds of any new debt offerings. Acquisitions During the three months ended March 31, 2005, we acquired radio stations for $3.9 million in
cash. We also acquired outdoor display faces for $5.3 million in cash. Our live entertainment
segment made cash payments of $1.5 million primarily related to the acquisition of a theater venue
operator in Spain. In addition, our national representation firm acquired contracts for $7.1
million in cash. Capital Expenditures Capital expenditures were $81.5 million and $70.8 million in the quarters ended March 31, 2005
and 2004, respectively. Three Months Ended March 31, 2005 Capital Expenditures(In
millions)
    
    Radio
    
    Outdoor
    
    Entertainment
    
    Corporate and
Other
    
    TotalNon-revenue producing
    
    

$
    22.3
    
    
    $
    14.6
    
    
    $
    7.2
    
    
    $
    1.9
    
    
    $
    46.0Revenue producing
    
    
    

    
    
    
    20.1
    
    
    
    15.4
    
    
    
    
    
    
    
    35.5$
    22.3
    
    
    $
    34.7
    
    
    $
    22.6
    
    
    $
    1.9
    
    
    $
    81.5
 Treasury Stock Transactions Our Board of Directors approved two separate share repurchase programs during 2004, each for
$1.0 billion. On February 1, 2005, our Board of Directors approved a third $1.0 billion share
repurchase program. As of April 30, 2005, 71.7 million shares had been repurchased for an
aggregate purchase price of $2.5 billion, including commission and fees, under all three share
repurchase programs. From January 1, 2005 through April 30, 2005, we repurchased 20.2 million
shares of our common stock for an aggregate purchase price of $671.1 million, including commission
and fees. - 22 -




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On May 5, 2005, we initiated the purchase of approximately 5.7 million shares of our common
stock in a private transaction for an aggregate of $180.0 million. This transaction is scheduled to
settle and close on May 9, 2005 Commitments, Contingencies and Guarantees Commitments and Contingencies We are among the defendants in a lawsuit filed September 3, 2002 by JamSports and Clear
Channel Entertainment in the United States Federal District Court for the Northern District of
Illinois. The plaintiff alleged that we violated Section One and Section Two of the Sherman
Antitrust Act and wrongfully interfered in the plaintiffs contractual rights. On March 21, 2005,
the jury rendered its verdict finding that we had not violated the antitrust laws, but had
tortiously interfered with the contract which the plaintiff had entered into with AMA Pro Racing
and with the plaintiffs prospective economic advantage. In connection with the findings regarding
tortious interference, the jury awarded to the plaintiffs approximately $17.0 million in lost
profits and $73.0 million in punitive damages. We are vigorously seeking to overturn or nullify
the adverse verdict and damage award regarding tortious interference including, if necessary,
pursuing appropriate appeals. There are various other lawsuits and claims pending against us. Based on current assumptions,
we have accrued an estimate of the probable costs for the resolution of these claims. Future
results of operations could be materially affected by changes in these assumptions. Certain agreements relating to acquisitions provide for purchase price adjustments and other
future contingent payments based on the financial performance of the acquired companies generally
over a one to five year period. We will continue to accrue additional amounts related to such
contingent payments if and when it is determinable that the applicable financial performance
targets will be met. The aggregate of these contingent payments, if performance targets are met,
would not significantly impact our financial position or results of operations. Guarantees As of March 31, 2005, we guaranteed the debt of third parties of approximately $13.5 million
primarily related to long-term operating contracts. The third parties associated operating assets
secure a substantial portion of these obligations. Market Risk Interest Rate Risk At March 31, 2005, approximately 28% of our long-term debt, including fixed-rate debt on which
we have entered into interest rate swap agreements, bears interest at variable rates. Accordingly,
our earnings are affected by changes in interest rates. Assuming the current level of borrowings
at variable rates and assuming a two percentage point change in the quarters average interest rate
under these borrowings, it is estimated that our interest expense for the three months ended March
31, 2005 would have changed by $10.9 million and that our net income for the three months ended
March 31, 2005 would have changed by $6.8 million. In the event of an adverse change in interest
rates, management may take actions to further mitigate its exposure. However, due to the
uncertainty of the actions that would be taken and their possible effects, this interest rate analysis assumes no such actions. Further, the
analysis does not consider the effects of the change in the level of overall economic activity that
could exist in such an environment. At March 31, 2005, we had entered into interest rate swap agreements with a $1.3 billion
aggregate notional amount that effectively float interest at rates based upon LIBOR. These
agreements expire from February 2007 to March 2012. The fair value of these agreements at
March 31, 2005 was a liability of $23.5 million. Equity Price Risk The carrying value of our available-for-sale and trading equity securities is affected by
changes in their quoted market prices. It is estimated that a 20% change in the market prices of
these securities would change their carrying value at March 31, 2005 by $63.3 million and would
change accumulated comprehensive income (loss) and net income by $34.7 million and $4.5 million,
respectively. At March 31, 2005, we also held $18.1 million of investments that do not have a
quoted market price, but are subject to fluctuations in their value. We maintain derivative instruments on certain of our available-for-sale and trading equity
securities to limit our exposure to and benefit from price fluctuations on those securities. - 23 -




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Foreign Currency We have operations in countries throughout the world. Foreign operations are measured in
their local currencies except in hyper-inflationary countries in which we operate. As a result,
our financial results could be affected by factors such as changes in foreign currency exchange
rates or weak economic conditions in the foreign markets in which we have operations. To mitigate
a portion of the exposure of international currency fluctuations, we maintain a natural hedge
through borrowings in currencies other than the U.S. dollar. In
addition, we have a U.S. dollar 
Euro cross currency swap which is also designated as a hedge of our net investment in foreign
denominated assets. These hedge positions are reviewed monthly. Our foreign operations reported a
net loss of $24.4 million for the quarter ended March 31, 2005. It is estimated that a 10% change
in the value of the U.S. dollar to foreign currencies would change net income for the quarter ended
March 31, 2005 by $2.4 million. Our earnings are also affected by fluctuations in the value of the U.S. dollar as compared to
foreign currencies as a result of our investments in various countries, all of which are accounted
for under the equity method. It is estimated that the result of a 10% fluctuation in the value of
the dollar relative to these foreign currencies at March 31, 2005 would change our equity in
earnings of nonconsolidated affiliates by $.6 million and would change our net income by
approximately $.4 million for the quarter ended March 31, 2005. This analysis does not consider the implications that such fluctuations could have on the
overall economic activity that could exist in such an environment in the U.S. or the foreign
countries or on the results of operations of these foreign entities. Recent Accounting Pronouncements In March 2005, the Financial Accounting Standards Board (FASB) issued Interpretation No. 47,
Accounting for Conditional Asset Retirement Obligations(FIN 47). FIN 47 is an interpretation of
FASB Statement 143, Asset Retirement Obligations,which was issued in June 2001. According to FIN
47, uncertainty about the timing and (or) method of settlement because they are conditional on a
future event that may or may not be within the control of the entity should be factored into the
measurement of the asset retirement obligation when sufficient information exists. FIN 47 also
clarifies when an entity would have sufficient information to reasonably estimate the fair value of
an asset retirement obligation. FIN 47 is effective no later than the end of fiscal years ending
after December 15, 2005. Retrospective application of interim financial information is permitted,
but is not required. We adopted FIN 47 on January 1, 2005, which did not materially impact our
financial position or results of operations. In March 2005, the Securities and Exchange Commission (SEC) issued Staff Accounting Bulletin
No. 107 Share-Based Payment(SAB 107). SAB 107 expresses the SEC staffs views regarding the
interaction between Statement of Financial Accounting Standards No. 123(R) Share-Based Payment
(Statement 123(R)) and certain SEC rules and regulations and provides the staffs views regarding
the valuation of share-based payment arrangements for public companies. In particular, SAB 107
provides guidance related to share-based payment transactions with nonemployees, the transition
from nonpublic to public entity status, valuation methods (including assumptions such as expected
volatility and expected term), the accounting for certain redeemable financial instruments issued
under share-based payment arrangements, the classification of compensation expense, non-GAAP
financial measures, first time adoption of Statement 123(R) in an interim period, capitalization of
compensation cost related to share-based payment arrangements, the accounting for income tax
effects of share-based payment arrangements upon adoption of Statement 123(R) and the modification
of employee share options prior to adoption of Statement 123(R). We are unable to quantify the
impact of adopting SAB 107 and Statement 123(R) at this time because it will depend on levels of
share-based payments granted in the future. Additionally, we are still evaluating the assumptions
we will use upon adoption. In April 2005, the SEC issued a press release announcing that it would provide for phased-in
implementation guidance for Statement 123(R). The SEC would require that registrants that are not
small business issuers adopt Statement 123(R)s fair value method of accounting for share-based
payments to employees no later than the beginning of the first fiscal year beginning after June 15, 2005.
We intend to adopt Statement 123(R) on January 1, 2006. Inflation Inflation has affected our performance in terms of higher costs for wages, salaries and
equipment. Although the exact impact of inflation is indeterminable, we believe we have offset
these higher costs in various manners. - 24 -




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Ratio of Earnings to Fixed Charges The ratio of earnings to fixed charges is as follows: Three Months endedMarch 31,
    
    Year Ended December 31,2005
    
    2004
    
    2004
    
    2003
    
    2002
    
    2001
    
    20001.37
    
    
    2.05
    
    
    
    2.80
    
    
    
    3.62
    
    
    
    2.62
    
    
    
    *
    
    
    
    2.20
 * For the year ended December 31, 2001, fixed charges exceeded earnings before income taxes and
fixed charges by $1.3 billion. The ratio of earnings to fixed charges was computed on a total enterprise basis. Earnings
represent income from continuing operations before income taxes less equity in undistributed
net income (loss) of unconsolidated affiliates plus fixed charges. Fixed charges represent
interest, amortization of debt discount and expense, and the estimated interest portion of
rental charges. We had no preferred stock outstanding for any period presented. Risks Regarding Forward Looking Statements The Private Securities Litigation Reform Act of 1995 provides a safe harbor for
forward-looking statements made by us or on our behalf. Except for the historical information, this
report contains various forward-looking statements which represent our expectations or beliefs
concerning future events, including the future levels of cash flow from operations. Management
believes that all statements that express expectations and projections with respect to future
matters, including the success of our strategic realignment plan, our Less is Moreinitiative; the
strategic fit of radio assets; expansion of market share; our ability to negotiate contracts having
more favorable terms; and the availability of capital resources; are forward-looking statements
within the meaning of the Private Securities Litigation Reform Act. We caution that these
forward-looking statements involve a number of risks and uncertainties and are subject to many
variables which could impact our financial performance. These statements are made on the basis of
managements views and assumptions, as of the time the statements are made, regarding future events
and business performance. There can be no assurance, however, that managements expectations will
necessarily come to pass. Various risks that could cause future results to differ from those expressed by the
forward-looking statements included in this Quarterly Report on Form 10-Q include, but are not
limited to:  
    the impact of general economic conditions in the U.S. and in other countries
in which we currently do business, including those resulting from recessions, political
events and acts or threats of terrorism or military conflicts;
    the impact of the geopolitical environment;
    our ability to integrate the operations of recently acquired companies;
    shifts in population and other demographics;
    industry conditions, including competition;
    fluctuations in operating costs;
    technological changes and innovations;
    changes in labor conditions;
    fluctuations in exchange rates and currency values;
    changes in capital expenditure requirements;
    the outcome of pending and future litigation;
    changes in governmental regulations and policies and actions of regulatory bodies;
    fluctuations in interest rates;
    the effect of leverage on our financial position and earnings;
    changes in tax rates;
    risks and costs inherent in the contemplated IPO, spin-off, cash dividends or borrowings;
    access to capital markets and changes in credit ratings, including those that
may result from the proposed strategic realignment; and
    certain other factors set forth in our SEC filings, including our Annual
Report on Form 10-K for the year ended December 31, 2004. This list of factors that may affect future performance and the accuracy of
forward-looking statements is illustrative, but by no means exhaustive. Accordingly, all
forward-looking statements should be evaluated with the understanding of their inherent
uncertainty. - 25 -




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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK Required information is within Item 2 
 ITEM 4. CONTROLS AND PROCEDURES Our principal executive and financial officers have concluded, based on their evaluation as of
the end of the period covered by this Form 10-Q, that our disclosure controls and procedures, as
defined under Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934, are effective
to ensure that information we are required to disclose in the reports we file or submit under the
Exchange Act is recorded, processed, summarized and reported within the time periods specified in
the SECs rules and forms, and include controls and procedures designed to ensure that information
we are required to disclose in such reports is accumulated and communicated to management,
including our principal executive and financial officers, as appropriate to allow timely decisions
regarding required disclosure. Subsequent to our evaluation, there were no significant changes in internal controls or other
factors that could significantly affect these internal controls. - 26 -




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Part II  OTHER INFORMATION 
 Item 1. Legal Proceedings We are among the defendants in a lawsuit filed September 3, 2002 by JamSports and Clear
Channel Entertainment in the United States Federal District Court for the Northern District of
Illinois. The plaintiff alleged that we violated Section One and Section Two of the Sherman
Antitrust Act and wrongfully interfered in the plaintiffs contractual rights. On March 21, 2005,
the jury rendered its verdict finding that we had not violated the antitrust laws, but had
tortiously interfered with the contract which the plaintiff had entered into with AMA Pro Racing
and with the plaintiffs prospective economic advantage. In connection with the findings regarding
tortious interference, the jury awarded to the plaintiffs approximately $17.0 million in lost
profits and $73.0 million in punitive damages. We are vigorously seeking to overturn or nullify
the adverse verdict and damage award regarding tortious interference including, if necessary,
pursuing appropriate appeals. We are currently involved in certain legal proceedings and, as required, have accrued our
estimate of the probable costs for the resolution of these claims. These estimates have been
developed in consultation with counsel and are based upon an analysis of potential results,
assuming a combination of litigation and settlement strategies. It is possible, however, that
future results of operations for any particular period could be materially affected by changes in
our assumptions or the effectiveness of our strategies related to these proceedings. 
 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds  (c)
    
    Purchases of Equity Securities by the Issuer and Affiliated Purchases. On March 30, 2004, July 21, 2004, and then again on February 1, 2005, we publicly announced
that our Board of Directors authorized share repurchase programs each up to $1.0 billion effective
immediately. The March 30, 2004 program was completed at August 2, 2004 and the July 21, 2004
program was completed at February 4, 2005 upon the repurchase of $1.0 billion each in our shares.
The February 1, 2005 share repurchase program will expire on January 31, 2006, although prior to
such time the program may be discontinued or suspended at any time. During the three months ended
March 31, 2005, we repurchased the following shares: Total

    
        
    
        Total Number of
Shares
    
    Maximum Dollar Value ofNumber of

    
        Average
    
        Purchased as Part of
    
    Shares that May Yet BeShares

    
        Price Paid
    
        Publicly Announced
    
    Purchased Under thePeriod
    
        Purchased

    
        per Share
    
        Programs
    
    ProgramsJanuary 1 through
January 31
    

    
    2,759,446
    
    
    $
    33.10
    
    
    
    2,606,200
    
    
    $
    75,168,084February 1 through
February 28
    

    
    4,633,925
    
    
    $
    33.12
    
    
    
    4,633,925
    
    
    $
    921,712,028March 1 through
March 31

    
    
    10,410,200
    
    
    $
    33.53
    
    
    
    10,410,200
    
    
    $
    572,662,157Total
    

    
    17,803,571
    
    
    
    
    
    
    
    17,650,325
 
 Item 6. Exhibits See Exhibit Index on Page 29 - 27 -




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Signatures Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has
duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. CLEAR CHANNEL COMMUNICATIONS, INC.May 6, 2005
    /s/ Randall T. MaysRandall T. MaysExecutive Vice President and
Chief Financial OfficerMay 6, 2005
    /s/ Herbert W. Hill, Jr.Herbert W. Hill, Jr.Senior Vice President and
Chief Accounting Officer - 28 -




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INDEX TO EXHIBITS ExhibitNumber
    
    Description2.1
    
    Agreement and Plan of Merger dated as of October 5, 2001,
by and among Clear Channel, CCMM Sub, Inc. and The Ackerley
Group, Inc. (incorporated by reference to the exhibits of
Clear Channels Current Report on Form 8-K filed October 9,
2001).3.1
    
    Current Articles of Incorporation of the Company
(incorporated by reference to the exhibits of the Companys
Registration Statement on Form S-3 (Reg. No. 333-33371)
dated September 9, 1997).3.2
    
    Fourth Amended and Restated Bylaws of the Company
(incorporated by reference to the exhibits of the Companys
Current Report on Form 8-K dated April 26, 2005).3.3
    
    Amendment to the Companys Articles of Incorporation
(incorporated by reference to the exhibits to the Companys
Quarterly Report on Form 10-Q for the quarter ended
September 30, 1998).3.4
    
    Second Amendment to Clear Channels Articles of
Incorporation (incorporated by reference to the exhibits to
Clear Channels Quarterly Report on Form 10-Q for the
quarter ended March 31, 1999).3.5
    
    Third Amendment to Clear Channels Articles of
Incorporation (incorporated by reference to the exhibits to
Clear Channels Quarterly Report on Form 10-Q for the
quarter ended May 31, 2000).4.1
    
    Agreement Concerning Buy-Sell Agreement by and between
Clear Channel Communications, Inc., L. Lowry Mays, B.J.
McCombs, John M. Schaefer and John W. Barger, dated August
3, 1998 (incorporated by reference to the exhibits to Clear
Channels Schedule 13-D/A, dated October 10, 2002).4.2
    
    Waiver and Second Agreement Concerning Buy-Sell Agreement
by and between Clear Channel Communications, Inc., L. Lowry
Mays and B.J. McCombs, dated August 17, 1998 (incorporated
by reference to the exhibits to Clear Channels Schedule
13-D/A, dated October 10, 2002).4.3
    
    Waiver and Third Agreement Concerning Buy-Sell Agreement by
and between Clear Channel Communications, Inc., L. Lowry
Mays and B.J. McCombs, dated July 26, 2002 (incorporated by
reference to the exhibits to Clear Channels Schedule
13-D/A, dated October 10, 2002).4.4
    
    Waiver and Fourth Agreement Concerning Buy-Sell Agreement
by and between Clear Channel Communications, Inc., L. Lowry
Mays and B.J. McCombs, dated September 27, 2002
(incorporated by reference to the exhibits to Clear
Channels Schedule 13-D/A, dated October 10, 2002).4.5
    
    Buy-Sell Agreement by and between Clear Channel
Communications, Inc., L. Lowry Mays, B. J. McCombs, John M.
Schaefer and John W. Barger, dated May 31, 1977
(incorporated by reference to the exhibits of the Companys
Registration Statement on Form S-1 (Reg. No. 33-289161)
dated April 19, 1984).4.6
    
    Senior Indenture dated October 1, 1997, by and between
Clear Channel Communications, Inc. and The Bank of New York
as Trustee (incorporated by reference to the exhibits to
the Companys Quarterly Report on Form 10-Q for the quarter
ended September 30, 1997).4.7
    
    Second Supplemental Indenture dated June 16, 1998 to Senior
Indenture dated October 1, 1997, by and between Clear
Channel Communications, Inc. and the Bank of New York, as
Trustee (incorporated by reference to the exhibits to the
Companys Current Report on Form 8-K dated August 27,
1998).4.8
    
    Third Supplemental Indenture dated June 16, 1998 to Senior
Indenture dated October 1, 1997, by and between Clear
Channel Communications, Inc. and the Bank of New York, as
Trustee (incorporated by reference to the exhibits to the
Companys Current Report on Form 8-K dated August 27,
1998).
 - 29 -




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ExhibitNumber
    
    Description4.9
    
    Sixth Supplemental Indenture dated June 21, 2000, to Senior
Indenture dated October 1, 1997, by and between Clear
Channel Communications, Inc. and The Bank of New York, as
Trustee (incorporated by reference to the exhibits of Clear
Channels registration statement on Form S-3 (Reg. No.
333-42028) dated July 21, 2000).4.10
    
    Seventh Supplemental Indenture dated July 7, 2000, to
Senior Indenture dated October 1, 1997, by and between
Clear Channel Communications, Inc. and The Bank of New
York, as Trustee (incorporated by reference to the exhibits
of Clear Channels registration statement on Form S-3 (Reg.
No. 333-42028) dated July 21, 2000).4.11
    
    Ninth Supplemental Indenture dated September 12, 2000, to
Senior Indenture dated October 1, 1997, by and between
Clear Channel Communications, Inc. and The Bank of New
York, as Trustee (incorporated by reference to the exhibits
to Clear Channels Quarterly Report on Form 10-Q for the
quarter ended September 30, 2000).4.12
    
    Tenth Supplemental Indenture dated October 26, 2001, to
Senior Indenture dated October 1, 1997, by and between
Clear Channel Communications, Inc. and The Bank of New
York, as Trustee (incorporated by reference to the exhibits
to Clear Channels Quarterly Report on Form 10-Q for the
quarter ended September 30, 2001).4.13
    
    Eleventh Supplemental Indenture dated January 9, 2003, to
Senior Indenture dated October 1, 1997, by and between
Clear Channel Communications, Inc. and The Bank of New York
as Trustee (incorporated by reference to the exhibits to
Clear Channels Annual Report on Form 10-K for the year
ended December 31, 2002).4.14
    
    Twelfth Supplemental Indenture dated March 17, 2003, to
Senior Indenture dated October 1, 1997, by and between
Clear Channel Communications, Inc. and The Bank of New
York, as Trustee (incorporated by reference to the exhibits
to Clear Channels Current Report on Form 8-K dated March
18, 2003).4.15
    
    Thirteenth Supplemental Indenture dated May 1, 2003, to
Senior Indenture dated October 1, 1997, by and between
Clear Channel Communications, Inc. and The Bank of New
York, as Trustee (incorporated by reference to the exhibits
to Clear Channels Current Report on Form 8-K dated May 2,
2003).4.16
    
    Fourteenth Supplemental Indenture dated May 21, 2003, to
Senior Indenture dated October 1, 1997, by and between
Clear Channel Communications, Inc. and The Bank of New
York, as Trustee (incorporated by reference to the exhibits
to Clear Channels Current Report on Form 8-K dated May 22,
2003).4.17
    
    Fifteenth Supplemental Indenture dated November 5, 2003, to
Senior Indenture dated October 1, 1997, by and between
Clear Channel Communications, Inc. and The Bank of New
York, as Trustee (incorporated by reference to the exhibits
to Clear Channels Current Report on Form 8-K dated
November 14, 2003).4.18
    
    Sixteenth Supplemental Indenture dated December 9, 2003, to
Senior Indenture dated October 1, 1997, by and between
Clear Channel Communications, Inc. and The Bank of New
York, as Trustee (incorporated by reference to the exhibits
to Clear Channels Current Report on Form 8-K dated
December 10, 2003).4.19
    
    Seventeenth Supplemental Indenture dated September 15,
2004, to Senior Indenture dated October 1, 1997, by and
between Clear Channel Communications, Inc. and The Bank of
New York, as Trustee (incorporated by reference to the
exhibits to Clear Channels Current Report on Form 8-K
dated September 15, 2004).
 - 30 -




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##### Table of Contents



ExhibitNumber
    
    Description4.20
    
    Eighteenth Supplemental Indenture dated November 22, 2004,
to Senior Indenture dated October 1, 1997, by and between
Clear Channel Communications, Inc. and The Bank of New
York, as Trustee (incorporated by reference to the exhibits
to Clear Channels Current Report on Form 8-K dated
November 17, 2004).4.21
    
    Nineteenth Supplemental Indenture dated December 13, 2004,
to Senior Indenture dated October 1, 1997, by and between
Clear Channel Communications, Inc. and The Bank of New
York, as Trustee (incorporated by reference to the exhibits
to Clear Channels Current Report on Form 8-K dated
December 13, 2004).10.1
    
    Form of 2001 Stock Incentive Plan Stock Option Agreement
for a Stock Option with a Ten Year Term (incorporated by
reference to the exhibits to Clear Channels Current Report
on Form 8-K dated January 12, 2005).10.2
    
    Form of 2001 Stock Incentive Plan Stock Option Agreement
for a Stock Option with a Seven Year Term (incorporated by
reference to the exhibits to Clear Channels Current Report
on Form 8-K dated January 12, 2005).10.3
    
    Form of 2001 Stock Incentive Plan Restricted Stock Award
Agreement (incorporated by reference to the exhibits to
Clear Channels Current Report on Form 8-K dated January
12, 2005).10.4
    
    Amended and Restated Employment Agreement by and between
Clear Channel Communications, Inc. and L. Lowry Mays dated
March 10 2005 (incorporated by reference to the exhibits to
Clear Channels Annual Report on Form 10-K filed March 13,
2005).10.5
    
    Amended and Restated Employment Agreement by and between
Clear Channel Communications, Inc. and Mark P. Mays dated
March 10, 2005 (incorporated by reference to the exhibits
to Clear Channels Annual Report on Form 10-K filed March
13, 2005).10.6
    
    Amended and Restated Employment Agreement by and between
Clear Channel Communications, Inc. and Randall T. Mays
dated March 10, 2005 (incorporated by reference to the
exhibits to Clear Channels Annual Report on Form 10-K
filed March 13, 2005).11
    
    Statement re: Computation of Per Share Earnings.12
    
    Statement re: Computation of Ratios.31.1
    
    Certification of Chief Executive Officer Pursuant to Rules
13a-14(a) and 15d-14(a) under the Securities Exchange Act
of 1934, as Adopted Pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002.31.2
    
    Certification of Chief Financial Officer Pursuant to Rules
13a-14(a) and 15d-14(a) under the Securities Exchange Act
of 1934, as Adopted Pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002.32.1
    
    Certification of Chief Executive Officer Pursuant to 18
U.S.C. Section 1350, as Adopted Pursuant to Section 906 of
the Sarbanes-Oxley Act of 2002.32.2
    
    Certification of Chief Financial Officer Pursuant to 18
U.S.C. Section 1350, as Adopted Pursuant to Section 906 of
the Sarbanes-Oxley Act of 2002.
 - 31 -