##### Table of Contents



FORM 10-Q
 SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 QUARTERLY REPORT PURSUANT TO SECTION 13 AND 15(D)  OF THE SECURITIES EXCHANGE ACT OF 1934
 For the quarter ended September 30, 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
 
 þ o
 þ o
 o þ
  Class
    
    Outstanding at November 4, 2005Common Stock, $.10 par value
    
    540,523,925




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CLEAR CHANNEL COMMUNICATIONS, INC. AND SUBSIDIARIES
 INDEX
 Page No.Part I  Financial InformationItem 1. Unaudited Financial StatementsConsolidated Balance Sheets at September 30, 2005 and December 31, 2004
    
    
    3Consolidated Statements of Operations for the nine and three months ended September 30, 2005 and 2004
    
    
    5Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 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
    
    
    28Item 4. Controls and Procedures
    
    
    28Part II  Other InformationItem 1. Legal Proceedings
    
    
    29Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    29Item 6. Exhibits
    
    
    29Signatures
    
    
    30Index to Exhibits
    
    
    31Severance Agreement and General ReleaseSettlement AgreementStatement 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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##### Table of Contents



PART I
 
 Item 1. UNAUDITED FINANCIAL STATEMENTS
 CLEAR CHANNEL COMMUNICATIONS, INC. AND SUBSIDIARIES
 
 CONSOLIDATED BALANCE SHEETS
ASSETS
(In thousands)
 September 30,
    
    
    December 31,2005
    
    
    2004(Unaudited)
    
    
    (Audited)Current AssetsCash and cash equivalents
    
    $
    412,746
    
    
    $
    210,476Accounts receivable, less allowance of $60,082 at
September 30, 2005 and $57,574 at December 31, 2004
    
    
    1,752,210
    
    
    
    1,658,650Prepaid expenses
    
    
    340,816
    
    
    
    213,387Other current assets
    
    
    195,527
    
    
    
    187,409Total Current Assets
    
    
    2,701,299
    
    
    
    2,269,922Property, Plant and EquipmentLand, buildings and improvements
    
    
    1,762,793
    
    
    
    1,740,990Structures
    
    
    3,287,778
    
    
    
    3,110,233Towers, transmitter and studio equipment
    
    
    877,171
    
    
    
    845,295Furniture and other equipment
    
    
    773,268
    
    
    
    779,632Construction in progress
    
    
    145,598
    
    
    
    95,3056,846,608
    
    
    
    6,571,455Less accumulated depreciation
    
    
    2,750,375
    
    
    
    2,447,1814,096,233
    
    
    
    4,124,274Intangible AssetsDefinite-lived intangibles, net
    
    
    531,281
    
    
    
    629,663Indefinite-lived intangibles  licenses
    
    
    4,309,788
    
    
    
    4,323,297Indefinite-lived intangibles  permits
    
    
    212,507
    
    
    
    211,690Goodwill
    
    
    7,321,580
    
    
    
    7,220,444Other AssetsNotes receivable
    
    
    15,800
    
    
    
    16,801Investments in, and advances to, nonconsolidated affiliates
    
    
    325,111
    
    
    
    395,371Other assets
    
    
    405,452
    
    
    
    348,898Other investments
    
    
    390,395
    
    
    
    387,589Total Assets
    
    $
    20,309,446
    
    
    $
    19,927,949
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##### Table of Contents



CLEAR CHANNEL COMMUNICATIONS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
LIABILITIES AND SHAREHOLDERS EQUITY
(In thousands)
 September 30,
    
    
    December 31,2005
    
    
    2004(Unaudited)
    
    
    (Audited)Current LiabilitiesAccounts payable and accrued expenses
    
    $
    1,486,491
    
    
    $
    1,295,106Accrued interest
    
    
    102,315
    
    
    
    95,525Accrued income taxes
    
    
    23,878
    
    
    
    34,683Current portion of long-term debt
    
    
    176,490
    
    
    
    417,275Deferred income
    
    
    381,508
    
    
    
    317,682Other current liabilities
    
    
    21,983
    
    
    
    24,281Total Current Liabilities
    
    
    2,192,665
    
    
    
    2,184,552Long-term debt
    
    
    7,824,554
    
    
    
    6,962,560Other long-term obligations
    
    
    213,912
    
    
    
    283,937Deferred income taxes
    
    
    413,383
    
    
    
    237,827Other long-term liabilities
    
    
    686,873
    
    
    
    703,766Minority interest
    
    
    192,056
    
    
    
    67,229Commitments and contingent liabilities (Note 6)Shareholders EquityCommon stock
    
    
    54,241
    
    
    
    56,757Additional paid-in capital
    
    
    28,360,743
    
    
    
    29,183,595Accumulated deficit
    
    
    (19,732,074
    )
    
    
    (19,933,777
    )Accumulated other comprehensive income
    
    
    110,743
    
    
    
    194,590Other
    
    
    
    
    
    
    (213
    )Cost of shares held in treasury
    
    
    (7,650
    )
    
    
    (12,874
    )Total shareholders equity
    
    
    8,786,003
    
    
    
    9,488,078Total Liabilities and Shareholders Equity
    
    $
    20,309,446
    
    
    $
    19,927,949
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##### Table of Contents



CLEAR CHANNEL COMMUNICATIONS, INC. AND SUBSIDIARIES
 
 CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
(In thousands, except per share data)
 Nine Months Ended
    
    
    Three Months EndedSeptember 30,
    
    
    September 30,2005
    
    
    2004
    
    
    2005
    
    
    2004Revenue
    
    $
    7,020,570
    
    
    $
    7,103,473
    
    
    $
    2,676,879
    
    
    $
    2,648,873Operating expenses:Divisional operating expenses (excludes non-cash
compensation expense of $212, $714, $-0- and $221 for the
nine months ended and three months ended September 30,
2005 and 2004, respectively)
    
    
    5,279,508
    
    
    
    5,197,225
    
    
    
    2,009,274
    
    
    
    1,937,194Non-cash compensation expense
    
    
    6,164
    
    
    
    2,619
    
    
    
    2,725
    
    
    
    786Depreciation and amortization
    
    
    511,050
    
    
    
    511,062
    
    
    
    169,667
    
    
    
    170,150Corporate expenses (excludes non-cash compensation
expense of $5,952, $1,905, $2,725 and $565 for the nine
months ended and three months ended September 30, 2005
and 2004, respectively)
    
    
    149,539
    
    
    
    142,590
    
    
    
    49,966
    
    
    
    46,645Operating income
    
    
    1,074,309
    
    
    
    1,249,977
    
    
    
    445,247
    
    
    
    494,098Interest expense
    
    
    325,936
    
    
    
    266,815
    
    
    
    113,666
    
    
    
    91,607Gain (loss) on marketable securities
    
    
    (278
    )
    
    
    47,705
    
    
    
    (815
    )
    
    
    3,485Equity in earnings of nonconsolidated affiliates
    
    
    28,318
    
    
    
    20,504
    
    
    
    12,341
    
    
    
    3,194Other income (expense)  net
    
    
    7,207
    
    
    
    (20,586
    )
    
    
    (3,477
    )
    
    
    (622
    )Income before income taxes
    
    
    783,620
    
    
    
    1,030,785
    
    
    
    339,630
    
    
    
    408,548Income tax (expense) benefit:Current
    
    
    (157,389
    )
    
    
    (296,945
    )
    
    
    (47,999
    )
    
    
    (44,072
    )Deferred
    
    
    (152,142
    )
    
    
    (102,376
    )
    
    
    (86,156
    )
    
    
    (103,242
    )Net income
    
    
    474,089
    
    
    
    631,464
    
    
    
    205,475
    
    
    
    261,234Other comprehensive income, net of tax:Foreign currency translation adjustments
    
    
    (91,225
    )
    
    
    (10,168
    )
    
    
    3,344
    
    
    
    16,833Unrealized gain (loss) on securities:Unrealized holding gain (loss) on marketable securities
    
    
    (5,135
    )
    
    
    11,995
    
    
    
    13,838
    
    
    
    19,348Unrealized holding gain (loss) on cash flow derivatives
    
    
    12,513
    
    
    
    (33,012
    )
    
    
    (9,644
    )
    
    
    (16,498
    )Reclassification adjustment for (gains) losses
included in net income (loss)
    
    
    
    
    
    
    (32,513
    )
    
    
    
    
    
    
    Comprehensive income
    
    $
    390,242
    
    
    $
    567,766
    
    
    $
    213,013
    
    
    $
    280,917Net income per common share:Basic
    
    $
    .86
    
    
    $
    1.04
    
    
    $
    .38
    
    
    $
    .45Diluted
    
    $
    .86
    
    
    $
    1.04
    
    
    $
    .38
    
    
    $
    .44Dividends declared per share
    
    $
    .50
    
    
    $
    .325
    
    
    $
    .1875
    
    
    $
    .125
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CLEAR CHANNEL COMMUNICATIONS, INC. AND SUBSIDIARIES
 
 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(In thousands)
 Nine Months Ended September 30,2005
    
    
    2004Cash Flows from operating activities:Net income
    
    $
    474,089
    
    
    $
    631,464Reconciling Items:Depreciation and amortization
    
    
    511,050
    
    
    
    511,062Deferred taxes
    
    
    152,142
    
    
    
    102,376(Gain) loss on disposal of assets
    
    
    (10,975
    )
    
    
    (10,773
    )(Gain) loss on available-for-sale securities
    
    
    
    
    
    
    (48,429
    )(Gain) loss forward exchange contract
    
    
    13,447
    
    
    
    9,832(Gain) loss on trading securities
    
    
    (13,169
    )
    
    
    (9,108
    )Increase (decrease) other  net
    
    
    (15,185
    )
    
    
    4,452Changes in operating assets and liabilities:Increase (decrease) in accrued income and other taxes
    
    
    (46,875
    )
    
    
    116,306Changes in other operating assets and liabilities, net of effects of acquisitions
    
    
    5,604
    
    
    
    (8,245
    )Net cash provided by operating activities
    
    
    1,070,128
    
    
    
    1,298,937Cash flows from investing activities:(Investment in) liquidation of restricted cash, net
    
    
    
    
    
    
    (7,809
    )Decrease (increase) in notes receivable  net
    
    
    1,001
    
    
    
    2,088Decrease (increase) in investments in and advances to nonconsolidated affiliates  net
    
    
    12,374
    
    
    
    2,015Purchases of investments
    
    
    (707
    )
    
    
    (1,287
    )Proceeds from sale of investments
    
    
    370
    
    
    
    627,505Purchases of property, plant and equipment
    
    
    (291,350
    )
    
    
    (242,659
    )Proceeds from disposal of assets
    
    
    24,176
    
    
    
    25,968Proceeds from divestitures placed in restricted cash
    
    
    
    
    
    
    47,838Acquisition of operating assets, net of cash acquired
    
    
    (158,187
    )
    
    
    (137,919
    )Acquisition of operating assets with restricted cash
    
    
    
    
    
    
    (39,857
    )Decrease (increase) in othernet
    
    
    (6,691
    )
    
    
    (25,192
    )Net cash (used in) provided by investing activities
    
    
    (419,014
    )
    
    
    250,691Cash flows from financing activities:Draws on credit facilities
    
    
    1,591,074
    
    
    
    3,691,149Payments on credit facilities
    
    
    (752,995
    )
    
    
    (3,681,265
    )Proceeds from long-term debt
    
    
    21,257
    
    
    
    753,545Payments on long-term debt
    
    
    (236,589
    )
    
    
    (617,101
    )Payments for purchase of treasury shares
    
    
    (859,140
    )
    
    
    (1,428,103
    )Proceeds from exercise of stock options, stock purchase plan and common stock warrants
    
    
    29,052
    
    
    
    22,889Dividends paid
    
    
    (241,503
    )
    
    
    (183,452
    )Net cash used in financing activities
    
    
    (448,844
    )
    
    
    (1,442,338
    )Net increase in cash and cash equivalents
    
    
    202,270
    
    
    
    107,290Cash and cash equivalents at beginning of period
    
    
    210,476
    
    
    
    123,334Cash and cash equivalents at end of period
    
    $
    412,746
    
    
    $
    230,624
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CLEAR CHANNEL COMMUNICATIONS, INC. AND SUBSIDIARIES
 
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
  Preparation of Interim Financial Statements
   Stock-Based Compensation
 Accounting for Stock Issued to Employees Accounting for Stock-Based Compensation
 Nine Months Ended September 30,
    
    
    Three Months Ended September 30,(In thousands, except per share data)
    
    2005
    
    
    2004
    
    
    2005
    
    
    2004Net incomeReported
    
    $
    474,089
    
    
    $
    631,464
    
    
    $
    205,475
    
    
    $
    261,234Pro forma stock compensation
expense, net of tax
    
    
    (18,878
    )
    
    
    (58,213
    )
    
    
    (2,902
    )
    
    
    (20,628
    )Pro Forma
    
    $
    455,211
    
    
    $
    573,251
    
    
    $
    202,573
    
    
    $
    240,606Net income per common shareBasic:Reported
    
    $
    .86
    
    
    $
    1.04
    
    
    $
    .38
    
    
    $
    .45Pro Forma
    
    $
    .83
    
    
    $
    .95
    
    
    $
    .37
    
    
    $
    .41Diluted:Reported
    
    $
    .86
    
    
    $
    1.04
    
    
    $
    .38
    
    
    $
    .44Pro Forma
    
    $
    .83
    
    
    $
    .94
    
    
    $
    .37
    
    
    $
    .41
  2005
    
    
    2004Risk-free interest rate
    
    
    4.06%  4.20
    %
    
    
    2.21%  4.30
    %Dividend yield
    
    
    2.30
    %
    
    
    .90%  1.46
    %Volatility factors
    
    
    25
    %
    
    
    42%  50
    %Expected life in years
    
    
    5.0 - 7.5
    
    
    
    3.0  7.5
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Recent Accounting Pronouncements
 Accounting for Conditional Asset Retirement Obligations Accounting for Asset Retirement Obligations,
 Share-Based Payment Share-Based Payment
  Determining the
Amortization Period of Leasehold Improvements
   Definite-lived Intangibles
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September 30, 2005
    
    
    December 31, 2004Gross
    
    
    
    
    
    
    GrossCarrying
    
    
    Accumulated
    
    
    Carrying
    
    
    Accumulated(In thousands)
    
    Amount
    
    
    Amortization
    
    
    Amount
    
    
    AmortizationTransit, street furniture, and other outdoor contractual rights
    
    $
    641,316
    
    
    $
    396,720
    
    
    $
    688,373
    
    
    $
    364,939Talent contracts
    
    
    202,161
    
    
    
    170,818
    
    
    
    202,161
    
    
    
    155,647Representation contracts
    
    
    300,170
    
    
    
    123,836
    
    
    
    268,283
    
    
    
    94,078Other
    
    
    193,962
    
    
    
    114,954
    
    
    
    197,462
    
    
    
    111,952Total
    
    $
    1,337,609
    
    
    $
    806,328
    
    
    $
    1,356,279
    
    
    $
    726,616
  (In thousands)2006
    
    $
    121,2722007
    
    
    72,9212008
    
    
    38,1212009
    
    
    30,9862010
    
    
    21,667
  Indefinite-lived Intangibles
    Goodwill
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(In thousands)
    
    Radio
    
    
    Outdoor
    
    
    Entertainment
    
    
    Other
    
    
    TotalBalance as of December 31, 2004
    
    $
    6,369,182
    
    
    $
    787,694
    
    
    $
    34,429
    
    
    $
    29,139
    
    
    $
    7,220,444Acquisitions
    
    
    16,683
    
    
    
    17,287
    
    
    
    99,834
    
    
    
    13,784
    
    
    
    147,588Dispositions
    
    
    (1,253
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,253
    )Foreign currency
    
    
    
    
    
    
    (42,049
    )
    
    
    (852
    )
    
    
    
    
    
    
    (42,901
    )Adjustments
    
    
    (117
    )
    
    
    (1,733
    )
    
    
    (448
    )
    
    
    
    
    
    
    (2,298
    )Balance as of September 30, 2005
    
    $
    6,384,495
    
    
    $
    761,199
    
    
    $
    132,963
    
    
    $
    42,923
    
    
    $
    7,321,580
     Foreign Currency Hedges: Measuring the Amount of Ineffectiveness in a Net Investment Hedge
  Company Share Repurchase Program
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Clear Media Limited (Clear Media)
  Recent Legal Proceedings
        Nine Months Ended
    
    
    Year Ended(In thousands)
    
    September 30, 2005
    
    
    December 31, 2004Severance and lease termination costs:Accrual at January 1
    
    $
    11,015
    
    
    $
    57,140Estimated restructuring accruals
    
    
    5,390
    
    
    
    Adjustments to restructuring accrual
    
    
    
    
    
    
    (43,623
    )Payments charged against restructuring accrual
    
    
    (2,215
    )
    
    
    (2,502
    )Ending balance of severance and lease termination accrual
    
    $
    14,190
    
    
    $
    11,015
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Radio
    
    
    Outdoor
    
    
    Live(In thousands)
    
    Broadcasting
    
    
    Advertising
    
    
    Entertainment
    
    
    Other
    
    
    Corporate
    
    
    Eliminations
    
    
    ConsolidatedNine Months Ended
September 30, 2005Revenue
    
    $
    2,624,736
    
    
    $
    1,931,470
    
    
    $
    2,137,441
    
    
    $
    429,577
    
    
    $
    3⁄4
    
    
    $
    (102,654
    )
    
    $
    7,020,570Divisional operating
expenses
    
    
    1,612,039
    
    
    
    1,400,603
    
    
    
    2,012,670
    
    
    
    356,850
    
    
    
    3⁄4
    
    
    
    (102,654
    )
    
    
    5,279,508Non-cash compensation
    
    
    212
    
    
    
    3⁄4
    
    
    
    3⁄4
    
    
    
    3⁄4
    
    
    
    5,952
    
    
    
    3⁄4
    
    
    
    6,164Depreciation and
amortization
    
    
    106,309
    
    
    
    290,233
    
    
    
    47,703
    
    
    
    52,652
    
    
    
    14,153
    
    
    
    3⁄4
    
    
    
    511,050Corporate expenses
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    149,539
    
    
    
    
    
    
    
    149,539Operating income (loss)
    
    $
    906,176
    
    
    $
    240,634
    
    
    $
    77,068
    
    
    $
    20,075
    
    
    $
    (169,644
    )
    
    $
    3⁄4
    
    
    $
    1,074,309Intersegment revenues
    
    $
    36,102
    
    
    $
    7,049
    
    
    $
    550
    
    
    $
    58,953
    
    
    $
    3⁄4
    
    
    $
    3⁄4
    
    
    $
    102,654Identifiable assets
    
    $
    12,246,440
    
    
    $
    4,833,310
    
    
    $
    1,707,462
    
    
    $
    1,205,938
    
    
    $
    316,296
    
    
    $
    3⁄4
    
    
    $
    20,309,446Capital expenditures
    
    $
    65,806
    
    
    $
    137,222
    
    
    $
    71,997
    
    
    $
    11,064
    
    
    $
    5,261
    
    
    $
    3⁄4
    
    
    $
    291,350Three Months Ended
September 30, 2005Revenue
    
    $
    919,245
    
    
    $
    668,003
    
    
    $
    983,454
    
    
    $
    145,120
    
    
    $
    3⁄4
    
    
    $
    (38,943
    )
    
    $
    2,676,879Divisional operating
expenses
    
    
    546,615
    
    
    
    483,379
    
    
    
    897,959
    
    
    
    120,264
    
    
    
    3⁄4
    
    
    
    (38,943
    )
    
    
    2,009,274Non-cash compensation
    
    
    3⁄4
    
    
    
    3⁄4
    
    
    
    3⁄4
    
    
    
    3⁄4
    
    
    
    2,725
    
    
    
    3⁄4
    
    
    
    2,725Depreciation and
amortization
    
    
    36,185
    
    
    
    95,405
    
    
    
    15,341
    
    
    
    18,054
    
    
    
    4,682
    
    
    
    3⁄4
    
    
    
    169,667Corporate expenses
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    49,966
    
    
    
    
    
    
    
    49,966Operating income (loss)
    
    $
    336,445
    
    
    $
    89,219
    
    
    $
    70,154
    
    
    $
    6,802
    
    
    $
    (57,373
    )
    
    $
    3⁄4
    
    
    $
    445,247Intersegment revenues
    
    $
    13,089
    
    
    $
    1,670
    
    
    $
    78
    
    
    $
    24,106
    
    
    $
    3⁄4
    
    
    $
    3⁄4
    
    
    $
    38,943Nine Months Ended
September 30, 2004Revenue
    
    $
    2,789,834
    
    
    $
    1,761,308
    
    
    $
    2,223,114
    
    
    $
    429,591
    
    
    $
    3⁄4
    
    
    $
    (100,374
    )
    
    $
    7,103,473Divisional operating
expenses
    
    
    1,603,276
    
    
    
    1,277,110
    
    
    
    2,069,432
    
    
    
    347,781
    
    
    
    3⁄4
    
    
    
    (100,374
    )
    
    
    5,197,225Non-cash compensation
    
    
    714
    
    
    
    3⁄4
    
    
    
    3⁄4
    
    
    
    3⁄4
    
    
    
    1,905
    
    
    
    3⁄4
    
    
    
    2,619Depreciation and
amortization
    
    
    113,653
    
    
    
    288,810
    
    
    
    45,577
    
    
    
    47,358
    
    
    
    15,664
    
    
    
    3⁄4
    
    
    
    511,062Corporate expenses
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    142,590
    
    
    
    
    
    
    
    142,590Operating income (loss)
    
    $
    1,072,191
    
    
    $
    195,388
    
    
    $
    108,105
    
    
    $
    34,452
    
    
    $
    (160,159
    )
    
    $
    3⁄4
    
    
    $
    1,249,977Intersegment revenues
    
    $
    43,221
    
    
    $
    9,701
    
    
    $
    497
    
    
    $
    46,955
    
    
    $
    3⁄4
    
    
    $
    3⁄4
    
    
    $
    100,374Identifiable assets
    
    $
    19,740,902
    
    
    $
    4,804,175
    
    
    $
    1,506,654
    
    
    $
    1,425,597
    
    
    $
    299,398
    
    
    $
    3⁄4
    
    
    $
    27,776,726Capital expenditures
    
    $
    44,976
    
    
    $
    116,507
    
    
    $
    62,008
    
    
    $
    10,565
    
    
    $
    8,603
    
    
    $
    3⁄4
    
    
    $
    242,659
 - 13 -




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##### Table of Contents



Radio
    
    
    Outdoor
    
    
    Live(In thousands)
    
    Broadcasting
    
    
    Advertising
    
    
    Entertainment
    
    
    Other
    
    
    Corporate
    
    
    Eliminations
    
    
    ConsolidatedThree Months Ended
September 30, 2004Revenue
    
    $
    960,066
    
    
    $
    600,166
    
    
    $
    974,675
    
    
    $
    147,313
    
    
    $
    3⁄4
    
    
    $
    (33,347
    )
    
    $
    2,648,873Divisional operating
expenses
    
    
    538,179
    
    
    
    431,383
    
    
    
    883,645
    
    
    
    117,334
    
    
    
    3⁄4
    
    
    
    (33,347
    )
    
    
    1,937,194Non-cash compensation
    
    
    221
    
    
    
    3⁄4
    
    
    
    3⁄4
    
    
    
    3⁄4
    
    
    
    565
    
    
    
    3⁄4
    
    
    
    786Depreciation and
amortization
    
    
    37,887
    
    
    
    96,254
    
    
    
    15,134
    
    
    
    15,774
    
    
    
    5,101
    
    
    
    3⁄4
    
    
    
    170,150Corporate expenses
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    46,645
    
    
    
    
    
    
    
    46,645Operating income (loss)
    
    $
    383,779
    
    
    $
    72,529
    
    
    $
    75,896
    
    
    $
    14,205
    
    
    $
    (52,311
    )
    
    $
    3⁄4
    
    
    $
    494,098Intersegment revenues
    
    $
    14,181
    
    
    $
    2,446
    
    
    $
    30
    
    
    $
    16,690
    
    
    $
    3⁄4
    
    
    $
    3⁄4
    
    
    $
    33,347
        - 14 -




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##### Table of Contents



Item 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
 Executive Summary
  Less is More
  Strategic Realignment of Businesses
   Format of Presentation
   Radio Broadcasting
  - 15 -




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##### Table of Contents



Less is More Less is More
       Outdoor Advertising
    Live Entertainment
  - 16 -




---



##### Table of Contents



Consolidated
 Three Months Ended
    
    
    
    
    
    
    Nine Months EndedSeptember 30,
    
    
    %
    
    
    September 30,
    
    
    %(In thousands)
    
    2005
    
    
    2004
    
    
    Change
    
    
    2005
    
    
    2004
    
    
    ChangeRevenue
    
    $
    2,676,879
    
    
    $
    2,648,873
    
    
    
    1
    %
    
    $
    7,020,570
    
    
    $
    7,103,473
    
    
    
    (1
    %)Operating expenses:Divisional operating expenses (excludes
non-cash compensation expense of $212, $714,
$-0- and $221 for the nine months ended and
three months ended September 30, 2005 and
2004, respectively)
    
    
    2,009,274
    
    
    
    1,937,194
    
    
    
    4
    %
    
    
    5,279,508
    
    
    
    5,197,225
    
    
    
    2
    %Non-cash compensation expense
    
    
    2,725
    
    
    
    786
    
    
    
    247
    %
    
    
    6,164
    
    
    
    2,619
    
    
    
    135
    %Depreciation and amortization
    
    
    169,667
    
    
    
    170,150
    
    
    
    0
    %
    
    
    511,050
    
    
    
    511,062
    
    
    
    0
    %Corporate expenses (excludes non-cash
compensation expense of $5,952, $1,905,
$2,725 and $565 for the nine months ended
and three months ended September 30, 2005
and 2004, respectively)
    
    
    49,966
    
    
    
    46,645
    
    
    
    7
    %
    
    
    149,539
    
    
    
    142,590
    
    
    
    5
    %Operating income
    
    
    445,247
    
    
    
    494,098
    
    
    
    (10
    %)
    
    
    1,074,309
    
    
    
    1,249,977
    
    
    
    (14
    %)Interest expense
    
    
    113,666
    
    
    
    91,607
    
    
    
    
    
    
    
    325,936
    
    
    
    266,815Gain (loss) on marketable securities
    
    
    (815
    )
    
    
    3,485
    
    
    
    
    
    
    
    (278
    )
    
    
    47,705Equity in earnings of nonconsolidated affiliates
    
    
    12,341
    
    
    
    3,194
    
    
    
    
    
    
    
    28,318
    
    
    
    20,504Other income (expense)  net
    
    
    (3,477
    )
    
    
    (622
    )
    
    
    
    
    
    
    7,207
    
    
    
    (20,586
    )Income before income taxes
    
    
    339,630
    
    
    
    408,548
    
    
    
    
    
    
    
    783,620
    
    
    
    1,030,785Income tax (expense) benefit:Current
    
    
    (47,999
    )
    
    
    (44,072
    )
    
    
    
    
    
    
    (157,389
    )
    
    
    (296,945
    )Deferred
    
    
    (86,156
    )
    
    
    (103,242
    )
    
    
    
    
    
    
    (152,142
    )
    
    
    (102,376
    )Net income
    
    $
    205,475
    
    
    $
    261,234
    
    
    
    
    
    
    $
    474,089
    
    
    $
    631,464
 Consolidated Revenue
 Less is More
 - 17 -




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##### Table of Contents



Less
is More
 Consolidated Divisional Operating Expenses
   Non-cash Compensation Expense
 Accounting for Stock Issued to Employees
 Corporate Expenses
  Interest Expense
  Gain (Loss) on Marketable Securities
   - 18 -




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##### Table of Contents



Other Income (Expense)  Net
  Income Tax Benefit (Expense)
   Segment Revenue and Divisional Operating Expenses
 Radio Broadcasting
 Three Months Ended
    
    
    
    
    
    
    Nine Months EndedSeptember 30,
    
    
    
    
    
    
    September 30,(In thousands)
    
    2005
    
    
    2004
    
    
    % Change
    
    
    2005
    
    
    2004
    
    
    % ChangeRevenue
    
    $
    919,245
    
    
    $
    960,066
    
    
    
    (4
    %)
    
    $
    2,624,736
    
    
    $
    2,789,834
    
    
    
    (6
    %)Divisional operating expenses
    
    
    546,615
    
    
    
    538,179
    
    
    
    2
    %
    
    
    1,612,039
    
    
    
    1,603,276
    
    
    
    1
    %Non-cash compensation
    
    
    
    
    
    
    221
    
    
    
    (100
    %)
    
    
    212
    
    
    
    714
    
    
    
    (70
    %)Depreciation and amortization
    
    
    36,185
    
    
    
    37,887
    
    
    
    (4
    %)
    
    
    106,309
    
    
    
    113,653
    
    
    
    (6
    %)Operating income
    
    $
    336,445
    
    
    $
    383,779
    
    
    
    (12
    %)
    
    $
    906,176
    
    
    $
    1,072,191
    
    
    
    (15
    %)
 Three Months
   Nine Months
 Less is More
  - 19 -




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##### Table of Contents



Outdoor Advertising
 Three Months Ended
    
    
    
    
    
    
    Nine Months EndedSeptember 30,
    
    
    
    
    
    
    September 30,(In thousands)
    
    2005
    
    
    2004
    
    
    % Change
    
    
    2005
    
    
    2004
    
    
    % ChangeRevenue
    
    $
    668,003
    
    
    $
    600,166
    
    
    
    11
    %
    
    $
    1,931,470
    
    
    $
    1,761,308
    
    
    
    10
    %Divisional operating expenses
    
    
    483,379
    
    
    
    431,383
    
    
    
    12
    %
    
    
    1,400,603
    
    
    
    1,277,110
    
    
    
    10
    %Depreciation and amortization
    
    
    95,405
    
    
    
    96,254
    
    
    
    (1
    %)
    
    
    290,233
    
    
    
    288,810
    
    
    
    0
    %Operating income
    
    $
    89,219
    
    
    $
    72,529
    
    
    
    23
    %
    
    $
    240,634
    
    
    $
    195,388
    
    
    
    23
    %
 Three Months
      Nine Months
  - 20 -




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##### Table of Contents



Live Entertainment
 Three Months Ended
    
    
    
    
    
    
    Nine Months EndedSeptember 30,
    
    
    
    
    
    
    September 30,(In thousands)
    
    2005
    
    
    2004
    
    
    % Change
    
    
    2005
    
    
    2004
    
    
    % ChangeRevenue
    
    $
    983,454
    
    
    $
    974,675
    
    
    
    1
    %
    
    $
    2,137,441
    
    
    $
    2,223,114
    
    
    
    (4
    %)Divisional operating expenses
    
    
    897,959
    
    
    
    883,645
    
    
    
    2
    %
    
    
    2,012,670
    
    
    
    2,069,432
    
    
    
    (3
    %)Depreciation and amortization
    
    
    15,341
    
    
    
    15,134
    
    
    
    1
    %
    
    
    47,703
    
    
    
    45,577
    
    
    
    5
    %Operating income
    
    $
    70,154
    
    
    $
    75,896
    
    
    
    (8
    %)
    
    $
    77,068
    
    
    $
    108,105
    
    
    
    (29
    %)
 Three Months
   Nine Months
   - 21 -




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##### Table of Contents



Reconciliation of Segment Operating Income (Loss) to Consolidated Operating Income
 Three Months Ended
    
    
    Nine Months EndedSeptember 30,
    
    
    September 30,(In thousands)
    
    2005
    
    
    2004
    
    
    2005
    
    
    2004Radio Broadcasting
    
    $
    336,445
    
    
    $
    383,779
    
    
    $
    906,176
    
    
    $
    1,072,191Outdoor Advertising
    
    
    89,219
    
    
    
    72,529
    
    
    
    240,634
    
    
    
    195,388Live Entertainment
    
    
    70,154
    
    
    
    75,896
    
    
    
    77,068
    
    
    
    108,105Other
    
    
    6,802
    
    
    
    14,205
    
    
    
    20,075
    
    
    
    34,452Corporate
    
    
    (57,373
    )
    
    
    (52,311
    )
    
    
    (169,644
    )
    
    
    (160,159
    )Consolidated Operating Income
    
    $
    445,247
    
    
    $
    494,098
    
    
    $
    1,074,309
    
    
    $
    1,249,977
 LIQUIDITY AND CAPITAL RESOURCES
 Cash Flow
 Operating Activities:
  Investing Activities:
  Financing Activities:
     September 30,
    
    
    December 31,(In millions)
    
    2005
    
    
    2004Credit facility
    
    $
    1,201.5
    
    
    $
    350.5Long-term bonds (a)
    
    
    6,551.9
    
    
    
    6,846.1Other borrowings
    
    
    247.6
    
    
    
    183.2Total Debt
    
    
    8,001.0
    
    
    
    7,379.8Less: Cash and cash equivalents
    
    
    412.7
    
    
    
    210.5$
    7,588.3
    
    
    $
    7,169.3
 
 (a)
    
    Includes $11.4 million and $13.8 million in unamortized fair value purchase accounting
adjustment premiums related to the merger with AMFM at September 30, 2005 and December 31,
2004, respectively. Also includes $(20.9) million and $6.5 million related to fair value
adjustments for interest rate swap agreements at September 30, 2005 and December 31, 2004,
respectively. - 22 -




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##### Table of Contents



Credit Facility
   Shelf Registration
  Debt Covenants
       - 23 -




---



##### Table of Contents



Dividends
  (In millions, except per share data)
 AmountperDeclaration
    
    CommonDate
    
    Share
    
    
    Record Date
    
    
    Payment Date
    
    
    Total PaymentOctober 20, 2004
    
    $
    0.125
    
    
    December 31, 2004
    
    January 15, 2005
    
    $
    70.9February 16, 2005
    
    
    0.125
    
    
    March 31, 2005
    
    April 15, 2005
    
    
    68.9April 26, 2005
    
    
    0.1875
    
    
    June 30, 2005
    
    July 15, 2005
    
    
    101.7July 27, 2005
    
    
    0.1875
    
    
    September 30, 2005
    
    October 15, 2005
    
    
    101.8
  Acquisitions
  Capital Expenditures
  Nine Months Ended September 30, 2005 Capital ExpendituresCorporate and(In millions)
    
    Radio
    
    
    Outdoor
    
    
    Entertainment
    
    
    Other
    
    
    TotalNon-revenue producing
    
    $
    65.8
    
    
    $
    53.0
    
    
    $
    40.0
    
    
    $
    16.4
    
    
    $
    175.2Revenue producing
    
    
    
    
    
    
    84.2
    
    
    
    32.0
    
    
    
    
    
    
    
    116.2$
    65.8
    
    
    $
    137.2
    
    
    $
    72.0
    
    
    $
    16.4
    
    
    $
    291.4
 Treasury Stock Transactions
  Commitments, Contingencies and Guarantees
 Commitments and Contingencies
  - 24 -




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##### Table of Contents



Guarantees
  Market Risk
 Interest Rate Risk
   Equity Price Risk
   Foreign Currency
  - 25 -




---



##### Table of Contents



Recent Accounting Pronouncements
 Accounting for Conditional Asset Retirement Obligations Asset Retirement Obligations,
 Share-Based Payment Share-Based Payment
  Determining the
Amortization Period of Leasehold Improvements
  Inflation
  - 26 -




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##### Table of Contents



Ratio of Earnings to Fixed Charges
  Nine Months ended September 30,
    
    
    Year Ended December 31,2005
    
    2004
    
    
    2004
    
    
    2003
    
    
    2002
    
    
    2001
    
    
    20002.23
    
    
    2.85
    
    
    
    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.  Risks Regarding Forward Looking Statements
 Less is More
  
    
    the impact of general economic conditions in the United States 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.
  - 27 -




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##### Table of Contents



ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
  
 ITEM 4. CONTROLS AND PROCEDURES
   - 28 -




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##### Table of Contents



Part II  OTHER INFORMATION
 
 Item 1. Legal Proceedings
   
 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
   Item 6. Exhibits
  - 29 -




---



##### Table of Contents



Signatures
  CLEAR CHANNEL COMMUNICATIONS, INC.November 8, 2005
    /s/ Randall T. MaysRandall T. MaysExecutive Vice President and
Chief Financial OfficerNovember 8, 2005
    /s/ Herbert W. Hill, Jr.Herbert W. Hill, Jr.Senior Vice President and
Chief Accounting Officer - 30 -




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##### Table of Contents



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).
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##### Table of Contents



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).
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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
    
    Employment Agreement dated August 5, 2005 between Clear Channel Outdoor Holdings, Inc.
and Paul Meyer (incorporated by reference to the exhibits of Clear Channels Current
Report on Form 8-K filed August 10, 2005).10.2*
    
    Severance Agreement and General Release effective September 30, 2005 among Brian E.
Becker, SFX Entertainment, Inc. d/b/a Clear Channel Entertainment, and Clear Channel
Communications, Inc.10.3
    
    Employment Agreement dated August 17, 2005 between SFX Entertainment, Inc. d/b/a Clear
Channel Entertainment and Michael Rapino (incorporated by reference to the exhibits of
Clear Channels Current Report on Form 8-K filed August 23, 2005).10.4
    
    Settlement Agreement dated May 27, 2005 among Roger Parry and Clear Channel Outdoor, Inc.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.
 
 *
    
    Confidential treatment has been requested with respect to certain portions of this
exhibit. Omitted portions have been filed separately with the Securities and Exchange
Commission. - 33 -