##### 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 June 30, 2004
    
    Commission file number 1-9645
 CLEAR CHANNEL COMMUNICATIONS, INC.  Texas
(State of Incorporation)
    
    74-1787539
(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 August 4, 2004Common Stock, $.10 par value
    
    590,027,036




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CLEAR CHANNEL COMMUNICATIONS, INC. AND SUBSIDIARIES INDEX Page No.Part I  Financial InformationItem 1. Unaudited Financial StatementsConsolidated Balance Sheets at June 30, 2004 and December 31, 2003
    
    
    3Consolidated Statements of Operations for the six and three months ended June 30, 2004 and 2003
    
    
    5Consolidated Statements of Cash Flows for the six months ended June 30, 2004 and 2003
    
    
    6Notes to Consolidated Financial Statements
    
    
    7Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    14Item 3. Quantitative and Qualitative Disclosures About Market Risk
    
    
    26Item 4. Controls and Procedures
    
    
    26Part II  Other InformationItem 1. Legal Proceedings
    
    
    27Item 2. Changes in Securities, and Use of Proceeds and Issuer Purchases of Equity Securities
    
    
    27Item 4. Submission of Matters to a Vote of Security Holders
    
    
    28Item 6. Exhibits and reports on Form 8-K
    
    
    28(a) Exhibits(b) Reports on Form 8-KSignatures
    
    
    29Index to Exhibits
    
    
    30Statement Re: Computation of Per Share EarningsStatement Re: Computation of RatiosCertification Pursuant to Section 302Certification Pursuant to Section 302Certification Pursuant to Section 906Certification 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)
 June 30,
    
    December 31,2004
    
    2003(Unaudited)
    
    (Audited)Current AssetsCash and cash equivalents
    
    $
    232,759
    
    
    $
    123,334Restricted cash
    
    
    4,002
    
    
    
    Accounts receivable, less allowance of $53,977 at June 30,
2004 and $56,586 December 31, 2003
    
    
    1,777,878
    
    
    
    1,703,393Prepaid expenses
    
    
    314,593
    
    
    
    196,494Other current assets
    
    
    131,611
    
    
    
    162,461Total Current Assets
    
    
    2,460,843
    
    
    
    2,185,682Property, Plant and EquipmentLand, buildings and improvements
    
    
    1,639,292
    
    
    
    1,635,611Structures
    
    
    2,884,493
    
    
    
    2,888,834Towers, transmitter and studio equipment
    
    
    846,124
    
    
    
    829,488Furniture and other equipment
    
    
    717,227
    
    
    
    694,163Construction in progress
    
    
    173,180
    
    
    
    161,9736,260,316
    
    
    
    6,210,069Less accumulated depreciation
    
    
    2,156,489
    
    
    
    1,949,1544,103,827
    
    
    
    4,260,915Intangible AssetsDefinite-lived intangibles, net
    
    
    654,749
    
    
    
    717,181Indefinite-lived intangibles  licenses
    
    
    11,882,534
    
    
    
    11,797,742Indefinite-lived intangibles  permits
    
    
    453,396
    
    
    
    424,640Goodwill
    
    
    7,301,728
    
    
    
    7,306,338Other AssetsNotes receivable
    
    
    17,391
    
    
    
    19,389Investments in, and advances to, nonconsolidated affiliates
    
    
    368,172
    
    
    
    353,132Other assets
    
    
    365,417
    
    
    
    361,306Other investments
    
    
    313,468
    
    
    
    926,368Total Assets
    
    $
    27,921,525
    
    
    $
    28,352,693
 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) June 30,
    
    December 31,2004
    
    2003(Unaudited)
    
    (Audited)Current LiabilitiesAccounts payable
    
    $
    340,461
    
    
    $
    368,434Accrued interest
    
    
    87,882
    
    
    
    93,848Accrued expenses
    
    
    985,955
    
    
    
    941,263Accrued income taxes
    
    
    77,101
    
    
    
    1,079Current portion of long-term debt
    
    
    167,000
    
    
    
    143,664Deferred income
    
    
    626,563
    
    
    
    318,759Other current liabilities
    
    
    19,418
    
    
    
    25,672Total Current Liabilities
    
    
    2,304,380
    
    
    
    1,892,719Long-term debt
    
    
    6,509,634
    
    
    
    6,921,348Other long-term obligations
    
    
    156,863
    
    
    
    153,311Deferred income taxes
    
    
    3,013,449
    
    
    
    3,049,337Other long-term liabilities
    
    
    754,841
    
    
    
    723,676Minority interest
    
    
    59,513
    
    
    
    58,363Shareholders EquityCommon stock
    
    
    61,742
    
    
    
    61,632Additional paid-in capital
    
    
    30,973,300
    
    
    
    30,950,820Accumulated deficit
    
    
    (15,381,984
    )
    
    
    (15,630,387
    )Accumulated other comprehensive income
    
    
    111,025
    
    
    
    194,406Other
    
    
    (664
    )
    
    
    (1,293
    )Cost of shares held in treasury
    
    
    (640,574
    )
    
    
    (21,239
    )Total shareholders equity
    
    
    15,122,845
    
    
    
    15,553,939Total Liabilities and Shareholders Equity
    
    $
    27,921,525
    
    
    $
    28,352,693
 See Notes to Consolidated Financial Statements - 4 -




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CLEAR CHANNEL COMMUNICATIONS, INC. AND SUBSIDIARIES 
 CONSOLIDATED STATEMENTS OF OPERATIONS
 (UNAUDITED)
(In thousands of dollars, except per share data)
 Six Months Ended June 30,
    
    Three Months Ended June 30,2004
    
    2003
    
    2004
    
    2003Revenue
    
    $
    4,454,600
    
    
    $
    4,096,692
    
    
    $
    2,485,034
    
    
    $
    2,317,249Operating expenses:Divisional operating expenses (excludes non-cash
compensation expenses of $493, $1,016, $232 and $500 for
the six and three months ended June 30, 2004 and 2003,
respectively)
    
    
    3,260,031
    
    
    
    3,002,980
    
    
    
    1,760,313
    
    
    
    1,641,905Non-cash compensation expense
    
    
    1,833
    
    
    
    2,578
    
    
    
    915
    
    
    
    1,779Depreciation and amortization
    
    
    340,912
    
    
    
    321,442
    
    
    
    167,754
    
    
    
    161,880Corporate expenses (excludes non-cash compensation
expenses of $1,340, $1,562, $683 and $1,279 for the six
and three months ended June 30, 2004 and 2003,
respectively)
    
    
    95,945
    
    
    
    85,238
    
    
    
    46,581
    
    
    
    42,459Operating income
    
    
    755,879
    
    
    
    684,454
    
    
    
    509,471
    
    
    
    469,226Interest expense
    
    
    175,208
    
    
    
    196,263
    
    
    
    85,403
    
    
    
    95,311Gain (loss) on marketable securities
    
    
    44,220
    
    
    
    5,373
    
    
    
    (5,503
    )
    
    
    2,581Equity in earnings of nonconsolidated affiliates
    
    
    17,310
    
    
    
    9,048
    
    
    
    10,635
    
    
    
    6,713Other income (expense)  net
    
    
    (19,964
    )
    
    
    39,144
    
    
    
    (2,694
    )
    
    
    39,142Income before income taxes
    
    
    622,237
    
    
    
    541,756
    
    
    
    426,506
    
    
    
    422,351Income tax (expense) benefit:Current
    
    
    (252,873
    )
    
    
    (40,326
    )
    
    
    (106,888
    )
    
    
    (58,321
    )Deferred
    
    
    866
    
    
    
    (179,084
    )
    
    
    (65,848
    )
    
    
    (112,730
    )Net income
    
    
    370,230
    
    
    
    322,346
    
    
    
    253,770
    
    
    
    251,300Other comprehensive income, net of tax:Foreign currency translation adjustments
    
    
    (27,001
    )
    
    
    33,981
    
    
    
    (29,915
    )
    
    
    26,774Unrealized gain (loss) on securities:Unrealized holding gain (loss)
    
    
    (7,353
    )
    
    
    65,349
    
    
    
    (1,176
    )
    
    
    40,312Unrealized holding gain (loss) on cash flow derivatives
    
    
    (16,514
    )
    
    
    
    
    
    
    51
    
    
    
    Reclassification adjustment for (gains) losses
included in net income
    
    
    (32,513
    )
    
    
    (1,869
    )
    
    
    (938
    )
    
    
    (146
    )Comprehensive income
    
    $
    286,849
    
    
    $
    419,807
    
    
    $
    221,792
    
    
    $
    318,240Net income per common share:Basic
    
    $
    .60
    
    
    $
    .53
    
    
    $
    .42
    
    
    $
    .41Diluted
    
    $
    .60
    
    
    $
    .52
    
    
    $
    .41
    
    
    $
    .41Dividends declared per share
    
    $
    .20
    
    
    $
    
    
    
    $
    .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)
 Six Months Ended June 30,2004
    
    2003Cash Flows from operating activities:Net income
    
    $
    370,230
    
    
    $
    322,346Reconciling Items:Depreciation and amortization
    
    
    340,912
    
    
    
    321,442Deferred taxes
    
    
    (866
    )
    
    
    179,084(Gain) loss on disposal of assets
    
    
    (11,698
    )
    
    
    (5,317
    )(Gain) loss on sale of other investments
    
    
    (48,429
    )
    
    
    (3,840
    )(Gain) loss on forward exchange contract
    
    
    (8,806
    )
    
    
    9,163(Gain) loss on trading securities
    
    
    13,015
    
    
    
    (10,696
    )Increase (decrease) accrued income and other taxes
    
    
    79,809
    
    
    
    39,288Increase (decrease) other, net
    
    
    19,764
    
    
    
    (45,431
    )Changes in other operating assets and liabilities,
net of effects of acquisitions
    
    
    149,883
    
    
    
    137,700Net cash provided by (used in) operating activities
    
    
    903,814
    
    
    
    943,738Cash flows from investing activities:(Investment in) liquidation of restricted cash
    
    
    (4,002
    )
    
    
    Decrease (increase) in notes receivable  net
    
    
    1,448
    
    
    
    2,442Decrease (increase) in investments in and advances
to nonconsolidated affiliates  net
    
    
    (3,216
    )
    
    
    7,249Purchases of investments
    
    
    (1,023
    )
    
    
    (4,734
    )Proceeds from sale of investments
    
    
    607,186
    
    
    
    10,940Purchases of property, plant and equipment
    
    
    (156,645
    )
    
    
    (140,279
    )Proceeds from disposal of assets
    
    
    9,013
    
    
    
    8,164Proceeds from divestitures placed in restricted cash
    
    
    44,038
    
    
    
    Acquisition of operating assets
    
    
    (130,161
    )
    
    
    (44,843
    )Acquisition of operating assets with restricted cash
    
    
    (39,857
    )
    
    
    Decrease (increase) in other-net
    
    
    (6,516
    )
    
    
    (36,839
    )Net cash (used in) provided by investing activities
    
    
    320,265
    
    
    
    (197,900
    )Cash flows from financing activities:Draws on credit facilities
    
    
    2,146,207
    
    
    
    1,567,734Payments on credit facilities
    
    
    (1,918,342
    )
    
    
    (3,088,814
    )Proceeds from long-term debt
    
    
    
    
    
    
    1,997,817Payments on long-term debt
    
    
    (609,443
    )
    
    
    (1,310,753
    )Payments for purchase of treasury shares
    
    
    (626,008
    )
    
    
    Proceeds from forward exchange contract
    
    
    
    
    
    
    83,519Proceeds from exercise of stock options, stock
purchase plan and common stock warrants
    
    
    16,261
    
    
    
    30,201Dividends paid
    
    
    (123,329
    )
    
    
    Net cash used in financing activities
    
    
    (1,114,654
    )
    
    
    (720,296
    )Net increase in cash and cash equivalents
    
    
    109,425
    
    
    
    25,542Cash and cash equivalents at beginning of period
    
    
    123,334
    
    
    
    170,086Cash and cash equivalents at end of period
    
    $
    232,759
    
    
    $
    195,628
 See Notes to Consolidated Financial Statements - 6 -




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##### Table of Contents



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 generally accepted
accounting principles in the United States for interim financial information
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 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 2003 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 2003 consolidated
financial statements to conform to the 2004 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: Six Months Ended June 30,
    
    Three Months Ended June 30,(In thousands, except per share
data)
    
    2004
    
    2003
    
    2004
    
    2003Net incomeReported
    
    $
    370,230
    
    
    $
    322,346
    
    
    $
    253,770
    
    
    $
    251,300Pro forma stock compensation expense, net of tax
    
    
    (37,584
    )
    
    
    (23,966
    )
    
    
    (21,799
    )
    
    
    (11,729
    )Pro Forma
    
    $
    332,646
    
    
    $
    298,380
    
    
    $
    231,971
    
    
    $
    239,571Net income per common shareBasic:Reported
    
    $
    .60
    
    
    $
    .53
    
    
    $
    .42
    
    
    $
    .41Pro Forma
    
    $
    .54
    
    
    $
    .49
    
    
    $
    .38
    
    
    $
    .39Diluted:Reported
    
    $
    .60
    
    
    $
    .52
    
    
    $
    .41
    
    
    $
    .41Pro Forma
    
    $
    .54
    
    
    $
    .48
    
    
    $
    .38
    
    
    $
    .39
 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 2004 and 2003: 2004
    
    2003Risk-free interest rate
    
    2.21% - 4.30%
    
    2.91% - 3.76%Dividend yield
    
    .90% - .93%
    
    0%Volatility factors
    
    42% - 50%
    
    43% - 47%Expected life in years
    
    3.0 - 7.5
    
    5.0 - 7.5
 - 7 -




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Recent
Accounting Pronouncements On January 1, 2004, the Company adopted Financial Accounting Standards Board
Interpretation No. 46, Consolidation of Variable Interest Entities(FIN 46).
The Interpretation addresses consolidation of business enterprises of variable
interest. The adoption of FIN 46 did not have a material impact on the
Companys financial position or results of operations. Note 2: INTANGIBLE ASSETS AND GOODWILL Definite-lived
Intangibles The Company has definite-lived intangible assets recorded that continue to be
amortized in accordance with Statement of Financial Accounting Standards No.
142, Goodwill and Other Intangible Assets(Statement 142). These assets
consist primarily of transit and street furniture contracts and other
contractual rights in the outdoor segment, talent and program rights contracts
in the radio segment, and, in the Companys other segment, representation
contracts for non-affiliated television and radio stations, 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 asset at June 30, 2004 and
December 31, 2003: June 30, 2004
    
    December 31, 2003Gross
    
    
    
    
    
    GrossCarrying
    
    Accumulated
    
    Carrying
    
    Accumulated(In thousands)
    
    Amount
    
    Amortization
    
    Amount
    
    AmortizationTransit, street
furniture, and other
outdoor contractual
rights
    
    $
    646,269
    
    
    $
    314,886
    
    
    $
    655,775
    
    
    $
    289,821Talent contracts
    
    
    202,161
    
    
    
    144,249
    
    
    
    202,161
    
    
    
    132,421Representation contracts
    
    
    248,700
    
    
    
    78,172
    
    
    
    238,951
    
    
    
    62,678Other
    
    
    214,001
    
    
    
    119,075
    
    
    
    213,506
    
    
    
    108,292Total
    
    $
    1,311,131
    
    
    $
    656,382
    
    
    $
    1,310,393
    
    
    $
    593,212
 Total amortization expense from definite-lived intangible assets for the three
and six months ended June 30, 2004 and for the year ended December 31, 2003 was
$35.4 million, $67.7 million and $138.2 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)2005
    
    $
    115,8742006
    
    
    95,8602007
    
    
    65,5672008
    
    
    52,5592009
    
    
    44,167
 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 typically have been renewed
indefinitely, with rental payments generally escalating at an inflation based
index. Should the Company lose its lease, the Company will typically obtain
permission to relocate the permit or bank it with the municipality for future
use. - 8 -




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##### Table of Contents



In accordance with Statement 142, 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. The
Company generally uses an income approach to value FCC licenses and billboard
permits, which involves estimating future cash flows expected to be generated
from the licenses or billboard permits, discounted to their present value using
a risk-adjusted discount rate. Terminal values are also estimated and
discounted to their present value. The Company performed impairment tests at
October 1, 2003 and 2002, which resulted in no impairment charge. Goodwill Statement 142 requires the Company to test 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 Company completed the two-step
impairment test at October 1, 2003 and 2002, which resulted in no impairment
charge. Consistent with the Companys approach to fair valuing FCC licenses
and billboard permits, an income approach was used to determine the fair value
of each of the Companys reporting units. The following table presents the
changes in the carrying amount of goodwill in each of the Companys reportable
segments for the six-month period ended June 30, 2004: Radio
    
    Outdoor
    
    Live(In thousands)
    
    Broadcasting
    
    Advertising
    
    Entertainment
    
    Other
    
    TotalBalance as of December 31, 2003
    
    $
    6,419,191
    
    
    $
    710,815
    
    
    $
    147,590
    
    
    $
    28,742
    
    
    $
    7,306,338Acquisitions
    
    
    6,951
    
    
    
    4,787
    
    
    
    4,800
    
    
    
    160
    
    
    
    16,698Foreign currency
    
    
    
    
    
    
    (7,712
    )
    
    
    (5,251
    )
    
    
    
    
    
    
    (12,963
    )Adjustments
    
    
    (3,049
    )
    
    
    2,076
    
    
    
    (7,310
    )
    
    
    (62
    )
    
    
    (8,345
    )Balance as of June 30, 2004
    
    $
    6,423,093
    
    
    $
    709,966
    
    
    $
    139,829
    
    
    $
    28,840
    
    
    $
    7,301,728
 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 June 30, 2004 and December 31, 2003, the fair value of
the collar was a liability of $128.6 million and $101.7 million, respectively.
The amount recorded in other comprehensive income, net of tax, related to the
collar was $79.7 million and $63.5 million as of June 30, 2004 and December 31,
2003, 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 $34.3 million and $47.3 million at June 30, 2004 and December
31, 2003, respectively. For the six months ended June 30, 2004 and the year
ended December 31, 2003, the Company recognized a gain of $13.0 million and a
loss of $17.1 million, respectively, in Gain (loss) on marketable securities
related to the change in fair value of the options. 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. The 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 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 in the same manner as the underlying hedged net assets.
As of June 30, 2004, a $.7 million gain was recorded as a cumulative
translation adjustment to other comprehensive income related to the cross
currency swap. Note 4: RECENT DEVELOPMENTS Company
Share Repurchase Program On March 30, 2004, the Companys Board of Directors authorized a share
repurchase program of up to $1.0 billion effective immediately. The share
repurchase program will be conducted over the next 12 months. As of June 30,
2004, 16.0 million shares had - 9 -




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been repurchased for an aggregate purchase price of $626.0 million, including
commission and fees, under the Companys share repurchase program. 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 (the DOJ),
is pursuing two separate antitrust inquiries concerning the Company. One
inquiry is whether the Company has violated antitrust laws in one of its radio
markets. The other is whether the Company has limited airplay of artists who
do not use its 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 by it on behalf of offshore
and/or online (Internet) gambling businesses, including sports bookmaking and
casino-style gambling. The Company is cooperating with such requirements. The Company is among the defendants in a lawsuit filed on June 12, 2002 in the
United States District Court for the Southern District of Florida by Spanish
Broadcasting System. The plaintiffs alleged that the Company is in violation
of Section One and Section Two of the Sherman Antitrust Act as well as various
other claims, such as unfair trade practices and defamation, among other
counts. This case was dismissed with prejudice on January 31, 2003. The
plaintiffs filed an appeal with the 11th Circuit Court of Appeals. On June 30,
2004, the 11th Circuit Court of Appeals upheld the dismissal. The Company is currently involved in certain legal proceedings and, as
required, has accrued its 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 the Companys assumptions or the effectiveness of its strategies
related to these proceedings. Note 5: RESTRUCTURING As a result of the Companys merger with The Ackerley Group, Inc. (Ackerley)
in June 2002, the Company recorded a $40.0 million accrual related to the
restructuring of Ackerleys operations. Of the $40.0 million, $19.0 million is
related to severance and $21.0 million is related to lease terminations. The
Ackerley corporate office closed in July 2002. At June 30, 2004, the accrual
balance for the Ackerley restructuring was $22.8 million. Also, in connection
with the Companys mergers in 2000 with SFX Entertainment, Inc. (SFX) and
AMFM Inc. (AMFM), the Company restructured the SFX and AMFM operations. The
AMFM corporate offices in Dallas and Austin, Texas were closed on March 31,
2001 and a portion of the SFX corporate office in New York was closed on June
30, 2001. Other operations of AMFM have either been discontinued or integrated
into existing similar operations. As of June 30, 2004, the accrual balance for
the AMFM and SFX restructuring was $32.9 million. All 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: Six Months Ended
    
    Year Ended(In thousands)
    
    June 30, 2004
    
    December 31, 2003Severance and lease termination costs:Accrual at January 1
    
    $
    57,140
    
    
    $
    73,573Adjustments to restructuring accrual
    
    
    
    
    
    
    Payments charged against restructuring accrual
    
    
    (1,486
    )
    
    
    (16,433
    )Ending balance of severance and lease termination accrual
    
    $
    55,654
    
    
    $
    57,140
 The remaining severance and lease accrual is comprised of $38.7 million of
severance and $16.9 million of lease termination. 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 five years. During the first
half of 2004, $.5 million was paid and charged to the restructuring reserve
related to severance. 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. All
adjustments have been made, and 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 France during the second quarter of 2003. As
a result, the Company has recorded a $13.8 - 10 -




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##### Table of Contents



million accrual in divisional
operating expenses. Of the $13.8 million, $12.5 million was related to
severance and $1.3 million was related to lease terminations and consulting
costs. As of June 30, 2004, this accrual balance was $2.7 million. It is
expected that this accrual will be paid over the next year. This restructuring
resulted in the termination of 134 employees. 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 contingent payments, if performance targets are met,
would not significantly impact the financial position or results of operations
of the Company. In addition to the legal proceedings discussed in Note 4, there are various
lawsuits and claims pending against the Company. The Company believes that any
ultimate liability resulting from those actions or claims will not have a
material adverse effect on the results of operations, financial position or
liquidity of the Company. Note 7: GUARANTEES As of June 30, 2004, the Company guaranteed third party debt of approximately
$13.2 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 June 30, 2004, it is not probable that the Company will be
required to make a payment under these guarantees. Thus, as of June 30, 2004,
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
facilities. As of June 30, 2004, the Company has provided a guarantee under a certain
performance contract of up to $19.3 million, which will expire during the
second half of 2004. Under this guarantee, if the amount collected from the
third parties that receive the benefit under the performance contract does not
meet the guarantee amount, the Company must make payment for the shortfall.
The Company made no payments under this guarantee during the first half of
2004. As of June 30, 2004, the Company cannot reasonably estimate whether it
will have to make any future payments under this guarantee for the 2004
contract period. As such, possible losses on this executory performance
contract will be appropriately recorded in the period that they are incurred. The Company guarantees a $150.0 million five-year revolving credit facility
between its international subsidiary and a group of international banks. The
credit facility expires in 2005. The facility 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. At June 30, 2004, the outstanding balance on the credit
facility was $45.8 million. The outstanding balance on the credit facility is
recorded in Long-term debt on the Companys financial statements. AMFM Operating Inc., an indirect wholly-owned subsidiary of the Company has
guaranteed a portion of the Companys bank credit facilities including the
reducing revolving credit facility and the $1.5 billion five-year
multi-currency revolving credit facility with outstanding balances at June 30,
2004 of $730.0 million and $145.0 million, respectively. At June 30, 2004, the
contingent liability under these guarantees was $1.0 billion. At June 30,
2004, these outstanding balances are recorded in Long-term debt on the
Companys financial statements. Within the Companys bank credit facilities agreements 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 subsidiarys banking institutions related to overdraft lines and
credit card charge-back transactions up to approximately $66.3 million. As of
June 30, 2004, no amounts were outstanding under these agreements. As of June 30, 2004, the Company has outstanding commercial standby letters of
credit and surety bonds of $144.8 million and $59.1 million, respectively, that
primarily expire during 2004. 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 reduce the borrowing
availability on the - 11 -




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##### Table of Contents



Companys bank credit facilities, and are included in the
Companys calculation of its leverage ratio covenant under the bank credit
facilities. The surety bonds are not considered borrowings under the Companys
bank credit facilities. Note 8: OTHER Capital Market Transaction On February 25, 2004, the Company redeemed 454.4 million of its 6.5% senior
notes due July 7, 2005, for 477.7 million plus accrued interest. As a result
of this redemption, the Company recorded a pre-tax loss of $31.6 million on the
early extinguishment of debt. After this redemption, 195.6 million of the
6.5% senior notes remain outstanding. Marketable Security Transaction During the first half of 2004, the Company received $607.2 million of proceeds
primarily related to the sale of its remaining investment in Univision
Communications, Inc. As a result, the Company recorded a gain of $48.4 million
in Gain (loss) on marketable securities. Sale of Operating Assets During the first half of 2004, the Company recorded a gain of $23.3 million on
the sale of radio assets and a loss of $12.0 million on the sale of
entertainment assets. Note 9: 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
    
    ConsolidatedSix Months Ended
June 30, 2004Revenue
    
    $
    1,829,768
    
    
    $
    1,161,142
    
    
    $
    1,248,439
    
    
    $
    282,278
    
    
    $
    
    
    
    $
    (67,027
    )
    
    $
    4,454,600Divisional operating
expenses
    
    
    1,065,097
    
    
    
    845,727
    
    
    
    1,185,787
    
    
    
    230,447
    
    
    
    
    
    
    
    (67,027
    )
    
    
    3,260,031Non-cash compensation
    
    
    493
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,340
    
    
    
    
    
    
    
    1,833Depreciation and
amortization
    
    
    75,766
    
    
    
    192,556
    
    
    
    30,443
    
    
    
    31,584
    
    
    
    10,563
    
    
    
    
    
    
    
    340,912Corporate expenses
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    95,945
    
    
    
    
    
    
    
    95,945Operating income (loss)
    
    $
    688,412
    
    
    $
    122,859
    
    
    $
    32,209
    
    
    $
    20,247
    
    
    $
    (107,848
    )
    
    $
    
    
    
    $
    755,879Intersegment revenues
    
    $
    29,040
    
    
    $
    7,255
    
    
    $
    467
    
    
    $
    30,265
    
    
    $
    
    
    
    $
    
    
    
    $
    67,027Identifiable assets
    
    $
    19,815,048
    
    
    $
    4,823,849
    
    
    $
    1,631,712
    
    
    $
    1,391,900
    
    
    $
    259,016
    
    
    $
    
    
    
    $
    27,921,525Capital expenditures
    
    $
    26,703
    
    
    $
    74,913
    
    
    $
    44,170
    
    
    $
    10,726
    
    
    $
    133
    
    
    $
    
    
    
    $
    156,645Three Months Ended
June 30, 2004Revenue
    
    $
    996,824
    
    
    $
    639,549
    
    
    $
    734,481
    
    
    $
    149,917
    
    
    $
    
    
    
    $
    (35,737
    )
    
    $
    2,485,034Divisional operating
expenses
    
    
    552,769
    
    
    
    432,989
    
    
    
    693,939
    
    
    
    116,353
    
    
    
    
    
    
    
    (35,737
    )
    
    
    1,760,313Non-cash compensation
    
    
    232
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    683
    
    
    
    
    
    
    
    915Depreciation and
amortization
    
    
    37,975
    
    
    
    92,806
    
    
    
    14,895
    
    
    
    16,858
    
    
    
    5,220
    
    
    
    
    
    
    
    167,754Corporate expenses
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    46,581
    
    
    
    
    
    
    
    46,581Operating income (loss)
    
    $
    405,848
    
    
    $
    113,754
    
    
    $
    25,647
    
    
    $
    16,706
    
    
    $
    (52,484
    )
    
    $
    
    
    
    $
    509,471Intersegment revenues
    
    $
    13,862
    
    
    $
    4,246
    
    
    $
    457
    
    
    $
    17,172
    
    
    $
    
    
    
    $
    
    
    
    $
    35,737
 - 12 -




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##### Table of Contents



Radio
    
    Outdoor
    
    Live(In thousands)
    
    Broadcasting
    
    Advertising
    
    Entertainment
    
    Other
    
    Corporate
    
    Eliminations
    
    ConsolidatedSix Months Ended
June 30, 2003Revenue
    
    $
    1,765,599
    
    
    $
    1,019,702
    
    
    $
    1,113,802
    
    
    $
    264,723
    
    
    $
    
    
    
    $
    (67,134
    )
    
    $
    4,096,692Divisional operating
expenses
    
    
    1,031,992
    
    
    
    779,043
    
    
    
    1,040,416
    
    
    
    218,663
    
    
    
    
    
    
    
    (67,134
    )
    
    
    3,002,980Non-cash compensation
    
    
    1,016
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,562
    
    
    
    
    
    
    
    2,578Depreciation and
amortization
    
    
    76,076
    
    
    
    178,437
    
    
    
    29,745
    
    
    
    25,076
    
    
    
    12,108
    
    
    
    
    
    
    
    321,442Corporate expenses
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    85,238
    
    
    
    
    
    
    
    85,238Operating income (loss)
    
    $
    656,515
    
    
    $
    62,222
    
    
    $
    43,641
    
    
    $
    20,984
    
    
    $
    (98,908
    )
    
    $
    
    
    
    $
    684,454Intersegment revenues
    
    $
    27,033
    
    
    $
    9,577
    
    
    $
    1,195
    
    
    $
    29,329
    
    
    $
    
    
    
    $
    
    
    
    $
    67,134Identifiable assets
    
    $
    19,792,427
    
    
    $
    4,817,252
    
    
    $
    1,435,799
    
    
    $
    1,450,026
    
    
    $
    483,078
    
    
    $
    
    
    
    $
    27,978,582Capital expenditures
    
    $
    20,881
    
    
    $
    80,290
    
    
    $
    28,596
    
    
    $
    9,656
    
    
    $
    856
    
    
    $
    
    
    
    $
    140,279Three Months Ended
June 30, 2003Revenue
    
    $
    970,565
    
    
    $
    569,174
    
    
    $
    675,920
    
    
    $
    139,305
    
    
    $
    
    
    
    $
    (37,715
    )
    
    $
    2,317,249Divisional operating
expenses
    
    
    536,888
    
    
    
    414,334
    
    
    
    619,280
    
    
    
    109,118
    
    
    
    
    
    
    
    (37,715
    )
    
    
    1,641,905Non-cash compensation
    
    
    500
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,279
    
    
    
    
    
    
    
    1,779Depreciation and
amortization
    
    
    38,776
    
    
    
    89,471
    
    
    
    14,926
    
    
    
    12,579
    
    
    
    6,128
    
    
    
    
    
    
    
    161,880Corporate expenses
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    42,459
    
    
    
    
    
    
    
    42,459Operating income (loss)
    
    $
    394,401
    
    
    $
    65,369
    
    
    $
    41,714
    
    
    $
    17,608
    
    
    $
    (49,866
    )
    
    $
    
    
    
    $
    469,226Intersegment revenues
    
    $
    14,285
    
    
    $
    6,058
    
    
    $
    1,170
    
    
    $
    16,202
    
    
    $
    
    
    
    $
    
    
    
    $
    37,715
 Net revenue of $1.0 billion and $411.9 million for the six and three months
ended June 30, 2004, respectively, and $850.8 million and $333.4 million for
the six and three months ended June 30, 2003, respectively, and identifiable
assets of $2.6 billion and $2.4 billion as of June 30, 2004 and 2003,
respectively, are included in the data above and are derived from the Companys
foreign operations. Note 10: SUBSEQUENT EVENTS On July 13, 2004, the Company entered into a new five-year, multi-currency
revolving credit facility in the amount of $1.75 billion. The facility 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. The Companys existing $1.5 billion
five-year multi-currency revolving credit facility was repaid in its entirety
and terminated at the same time the new facility was entered into. On July 21, 2004, the Companys Board of Directors declared a quarterly cash
dividend of $0.125 per share on the Companys Common Stock. The dividend is
payable on October 15, 2004 to shareholders of record at the close of business
on September 30, 2004. From July 1, 2004 through August 4, 2004, 11.1 million shares had been
repurchased for an aggregate purchase price of $395.8 million, including
commission and fees. On July 21, 2004, the Companys Board of Directors
authorized a second share repurchase program of up to $1.0 billion effective
immediately. This second share repurchase program will be conducted over the
next 12 months. At August 4, 2004, the Company had completed the first $1.0
billion share repurchase program authorized by the Board of Directors on March
30, 2004 and there was $978.2 million remaining available for repurchase
through this second repurchase program. - 13 -




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##### Table of Contents



Item 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS Overview 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.
Therefore, our discussion of the results of operations of our operating
segments focuses on their operating income. Corporate expenses, Interest
expense, Gain (loss) on sale of marketable securities, Equity in earnings of
nonconsolidated affiliates, Other income (expense)  net, and Income tax
benefit (expense) are managed on a total company basis and are, therefore,
reflected 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. 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 staff 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. During the second quarter of 2004,
growth in our local advertising revenue outpaced the growth in our national
advertising revenue. 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 doing attracting and keeping listeners. Our
overall share of listeners 12 years and older and age 25 to 54 was up in the
second quarter of 2004 over the second quarter of 2003. 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
and market share. - 14 -




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##### Table of Contents



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
revenues 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 revenue and divisional operating
expenses increased in the second quarter of 2004 as compared to the second
quarter of 2003 by approximately $28.8 million and $22.1 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 theater 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 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 music 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 revenues 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 second quarter of 2004 as compared to the
second quarter of 2003 by approximately $15.9 million and $14.8 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 to 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. - 15 -




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The comparison of Three and Six Months Ended June 30, 2004 to Three and Six
Months Ended June 30, 2003 is as follows: Consolidated Three Months Ended June 30,
    
    
    
    
    
    Six Months Ended June 30,(In thousands)
    
    2004
    
    2003
    
    % Change
    
    2004
    
    2003
    
    % ChangeRevenue
    
    $
    2,485,034
    
    
    $
    2,317,249
    
    
    
    7
    %
    
    $
    4,454,600
    
    
    $
    4,096,692
    
    
    
    9
    %Operating expenses:Divisional operating expenses
(excludes non-cash compensation
expenses of $232, $500, $493 and
$1,016, for the three and six
months ended June 30, 2004 and
2003, respectively)
    
    
    1,760,313
    
    
    
    1,641,905
    
    
    
    7
    %
    
    
    3,260,031
    
    
    
    3,002,980
    
    
    
    9
    %Non-cash compensation expense
    
    
    915
    
    
    
    1,779
    
    
    
    (49
    %)
    
    
    1,833
    
    
    
    2,578
    
    
    
    (29
    %)Depreciation and amortization
    
    
    167,754
    
    
    
    161,880
    
    
    
    4
    %
    
    
    340,912
    
    
    
    321,442
    
    
    
    6
    %Corporate expenses (excludes
non-cash compensation expenses
of $683, $1,279, $1,340 and
$1,562 for the six and three
months ended June 30, 2004 and
2003, respectively)
    
    
    46,581
    
    
    
    42,459
    
    
    
    10
    %
    
    
    95,945
    
    
    
    85,238
    
    
    
    13
    %Operating income
    
    
    509,471
    
    
    
    469,226
    
    
    
    9
    %
    
    
    755,879
    
    
    
    684,454
    
    
    
    10
    %Interest expense
    
    
    85,403
    
    
    
    95,311
    
    
    
    
    
    
    
    175,208
    
    
    
    196,263Gain (loss) on marketable securities
    
    
    (5,503
    )
    
    
    2,581
    
    
    
    
    
    
    
    44,220
    
    
    
    5,373Equity in earnings of
nonconsolidated affiliates
    
    
    10,635
    
    
    
    6,713
    
    
    
    
    
    
    
    17,310
    
    
    
    9,048Other income (expense)  net
    
    
    (2,694
    )
    
    
    39,142
    
    
    
    
    
    
    
    (19,964
    )
    
    
    39,144Income before income taxes
    
    
    426,506
    
    
    
    422,351
    
    
    
    
    
    
    
    622,237
    
    
    
    541,756Income tax (expense) benefit:Current
    
    
    (106,888
    )
    
    
    (58,321
    )
    
    
    
    
    
    
    (252,873
    )
    
    
    (40,326
    )Deferred
    
    
    (65,848
    )
    
    
    (112,730
    )
    
    
    
    
    
    
    866
    
    
    
    (179,084
    )Net income
    
    $
    253,770
    
    
    $
    251,300
    
    
    
    
    
    
    $
    370,230
    
    
    $
    322,346
 Consolidated Revenue Three Months Revenue increased $167.8 million for the three months ended June 30, 2004
as compared to the same period of 2003. Outdoor, live entertainment and radio
contributed $70.4 million, $58.6 million and $26.3 million to the increase,
respectively. The outdoor increase was driven by domestic bulletin and poster
revenues along with revenues from our international street furniture and
bulletin displays. The live entertainment increase was driven by higher
concert ticket revenues. The radio revenue increase was largely attributable
to higher local revenues, syndicated radio programming and traffic revenues.
Also increasing revenue was approximately $44.7 million resulting from
fluctuations in foreign exchange rates. Six Months Revenue increased $357.9 million for the six months ended June 30, 2004 as
compared to the same period of 2003. Outdoor, live entertainment and radios
contribution to the increase was $141.4 million, $134.6 million and $64.2
million, respectively. Outdoor revenue was driven by improvements in bulletin
and poster revenues, as well as international billboards and street furniture
revenues. Live entertainment revenue was driven by an increase in ticket
revenues from concerts such as Madonna and Bette Midler, while the increase in
radios revenue was driven primarily by local advertising. Also increasing
revenue was approximately $98.9 million resulting from fluctuations in foreign
exchange rates. Consolidated Divisional Operating Expenses Three Months Divisional operating expenses increased $118.4 million for the three
months ended June 30, 2004 as compared to the same period of 2003. Live
entertainment contributed $74.7 million to the increase largely from guaranteed
artist payments and production
costs, outdoor advertising contributed $18.7 million to the increase
primarily from increased site lease expenses, and radio contributed - 16 -




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$15.9
million to the increase primarily from increased programming and promotional
expenditures. Also increasing divisional operating expenses was approximately
$36.9 million resulting from fluctuations in foreign exchange rates. Six Months Divisional operating expenses increased $257.1 million for the six months
ended June 30, 2004 as compared to the same period of 2003. Live entertainment
contributed $145.4 million to the increase mainly from artist costs associated
with guaranteed artist payments and due to higher production costs, outdoor
contributed $66.7 million to the increase from higher site lease expenses and
the consolidation of an investment that had previously been accounted for under
the equity method and radio contributed $33.1 million to the increase
principally from increased programming and promotional expenses. Also
increasing divisional operating expenses was approximately $86.4 million from
fluctuations in foreign exchange rates. Depreciation and Amortization Depreciation and amortization expense increased $5.9 million and $19.5
million for the three and six months ended June 30, 2004 as compared to the
same periods of 2003. The increases were primarily attributable to
fluctuations in foreign exchange rates in our outdoor advertising segment of
$3.5 million and $8.0 million for the second quarter and year to date of 2004,
respectively, compared to the same periods of 2003. Also contributing to the
increase was additional amortization as a result of the purchase of certain
national representation contracts during the latter part of 2003 and
accelerated depreciation on display takedowns and abandonments in our outdoor
advertising segment. Corporate Expenses Corporate expenses increased $4.1 million and $10.7 million for the three
and six months ended June 30, 2004, respectively, as compared to the same
periods of 2003. The increase was the result of additional outside
professional services. Interest Expense Interest expense decreased $9.9 million and $21.1 million for the three
and six months ended June 30, 2004, respectively, as compared to the same
periods of 2003. The decrease was primarily attributable to a decrease in our
total debt outstanding. At June 30, 2004 and 2003, outstanding debt was $6.7
billion and $8.0 billion, respectively. Gain (loss) on Marketable Securities Gain (loss) on marketable securities decreased $8.1 million for the three
months ended June 30, 2004 as compared to the same period of 2003. The
decrease was the result of changes in the fair value of certain investment
securities that are classified as trading and a related secured forward
exchange contract associated with those securities. Gain (loss) on marketable securities increased $38.8 million for the six
months ended June 30, 2004 compared to the same period of 2003. The increase
was primarily the result of a $47.0 million gain recorded during the first
quarter of 2004 on the sale of our remaining investment in the common stock of
Univision Communications Inc. Equity in Earnings of Nonconsolidated Affiliates Equity in earnings of nonconsolidated affiliates increased $3.9 million
for the three months ended June 30, 2004 as compared to the same period of
2003. The increase was primarily the result of a $6.3 million increase in our
international outdoor equity investments and a $2.0 million increase in our
Australian and New Zealand radio investments. The increase was partially
offset by a decline of $4.4 million from our Mexico radio equity investment,
principally from political advertising dollars spent during the 2003 Mexican
elections. Equity in earnings of nonconsolidated affiliates increased $8.3 million
for the six months ended June 30, 2004 compared to the same period of 2003.
The increase was primarily the result of a $6.7 million increase in our
international outdoor equity investments, a $3.6 million increase in our
Australian and New Zealand radio investments, and a $2.7 million increase in
our live entertainment equity investments. The increase was partially offset
by a decline of $4.7 million from our Mexico radio equity investment. - 17 -




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Other Income (Expense)  Net Other income (expense)  net decreased $41.8 million during the second
quarter of 2004 as compared to the same period of 2003. The decline was
principally the result of a $41.3 million gain on the early extinguishment of
debt during the second quarter of 2003. During the second quarter of 2004, we
recorded a $12.2 million gain related to the sale of radio operating assets
partially offset by a $12.0 million loss on the sale of entertainment operating
assets. Other income (expense)  net decreased $59.1 million during the six months
ended June 30, 2004 as compared to the same period of 2003. The principal
components of other income (expense) that drove the change were: Six Months Ended June 30,(In millions)
    
    2004
    
    2003Gain (loss) on early extinguishment of debt
    
    $
    (31.4
    )
    
    $
    41.3Sale of radio operating assets
    
    
    23.3
    
    
    
    Sale of entertainment operating assets
    
    
    (12.0
    )
    
    
    Other
    
    
    .1
    
    
    
    (2.2
    )Other income (expense)  net
    
    $
    (20.0
    )
    
    $
    39.1
 Income Tax Benefit (Expense) For the three months ended June 30, 2004 current tax expense increased
$48.6 million as compared to the three months ended June 30, 2003. The
increase related to deductions taken on amended tax returns and the utilization
of acquired net operating losses both taken in the three months ended June 30,
2003. For the six months ended June 30, 2004, current tax expense increased
$212.5 million as compared to the six months ended June 30, 2003 primarily due
to the sale of our remaining investment in Univision, partially offset by a tax
loss on our early extinguishment of debt, both in the first quarter of 2004. Deferred tax expense for the three months ended June 30, 2004 decreased
$46.9 million as compared to the same period of 2003 primarily due to the
reversal of deferred tax assets in the three months ended June 30, 2003 that
were recorded in prior periods associated with deductions taken on amended
returns and a book gain on the early extinguishment of debt, which was reversed
for tax purposes. Deferred tax expense decreased from $179.1 million for the
six months ended June 30, 2003 to a deferred tax benefit of $.9 million for the
six months ended June 30, 2004 primarily due to the sale of our remaining
investment in Univision. Segment Revenue and Divisional Operating Expenses Radio Broadcasting Three Months Ended June 30,
    
    
    
    
    
    Six Months Ended June 30,(In thousands)
    
    2004
    
    2003
    
    % Change
    
    2004
    
    2003
    
    % ChangeRevenue
    
    $
    996,824
    
    
    $
    970,565
    
    
    
    3
    %
    
    $
    1,829,768
    
    
    $
    1,765,599
    
    
    
    4
    %Divisional operating expenses
    
    
    552,769
    
    
    
    536,888
    
    
    
    3
    %
    
    
    1,065,097
    
    
    
    1,031,992
    
    
    
    3
    %Non-cash compensation
    
    
    232
    
    
    
    500
    
    
    
    (54
    %)
    
    
    493
    
    
    
    1,016
    
    
    
    (51
    %)Depreciation and amortization
    
    
    37,975
    
    
    
    38,776
    
    
    
    (2
    %)
    
    
    75,766
    
    
    
    76,076
    
    
    
    (0
    %)Operating income
    
    $
    405,848
    
    
    $
    394,401
    
    
    
    3
    %
    
    $
    688,412
    
    
    $
    656,515
    
    
    
    5
    %
 Three Months Our radio broadcasting revenue increased 3% to $996.8 million in the
second quarter of 2004 compared to the same period of 2003. The increase was
driven by local revenues, our syndicated radio programs and traffic revenues.
The increase was partially offset by a decline in national advertising revenue,
which contributed to a deceleration in our revenue growth as the quarter
progressed. The primary driver of revenue growth was in our small and
mid-sized markets, which we define as markets outside the top 25. Strong
advertising categories included services, media and consumer products, with
automotive down for the quarter. Our radio divisional operating expenses increased 3% in the second quarter
of 2004 compared to the same period of 2003. The primary drivers of the
increase were approximately $5.9 million from increased compensation costs
related to program talent salaries and sales commissions and approximately $1.1
million from increased advertising and promotion expenditures. - 18 -




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Six Months Our radio broadcasting revenue increased $64.2 million to $1.8 billion
during the six months ended June 30, 2004 as compared to the same period of
2003. Growth was lead by local revenues, with traffic revenues and revenues
from our syndicated radio programming contributing to a lesser extent.
National revenue was down year to date compared to the same period of the prior
year. Growth in our small to mid-size markets, which we define as markets
outside our top 25, grew at a faster rate than our large markets. We attribute
this difference to the impact that national advertising has on our larger
markets. After showing sequential improvement in growth during the first
quarter of 2004, our revenue growth during the second quarter decelerated.
Again, the primary reason for the slowdown in growth was due to weakness in
national advertising revenues. Divisional operating expenses increased $33.1 million to $1.1 billion
during the six months ended June 30, 2004 as compared to the same period of
2003. The primary drivers of the increase were an increase in compensation
costs related to program talent salaries and sales commissions, an increase
related to advertising and promoting our radio stations, and an increase in
general and administrative expenses associated with an increase in the cost of
employee healthcare benefits. Outdoor Advertising Three Months Ended June 30,
    
    
    
    
    
    Six Months Ended June 30,(In thousands)
    
    2004
    
    2003
    
    % Change
    
    2004
    
    2003
    
    % ChangeRevenue
    
    $
    639,549
    
    
    $
    569,174
    
    
    
    12
    %
    
    $
    1,161,142
    
    
    $
    1,019,702
    
    
    
    14
    %Divisional operating expenses
    
    
    432,989
    
    
    
    414,334
    
    
    
    5
    %
    
    
    845,727
    
    
    
    779,043
    
    
    
    9
    %Depreciation and amortization
    
    
    92,806
    
    
    
    89,471
    
    
    
    4
    %
    
    
    192,556
    
    
    
    178,437
    
    
    
    8
    %Operating income
    
    $
    113,754
    
    
    $
    65,369
    
    
    
    74
    %
    
    $
    122,859
    
    
    $
    62,222
    
    
    
    97
    %
 Three Months Our outdoor advertising revenue increased 12% to $639.5 million during the
second quarter of 2004 compared to the same period of 2003. Growth was led by
strong domestic bulletin and poster revenues as well as international street
furniture and billboard revenues. Excluding foreign exchange of approximately
$28.8 million from the second quarter of 2004, revenues increased 7%. The growth in our domestic bulletin and poster revenue came from growth in
average rates, while occupancy levels were down for the second quarter of 2004
compared to 2003. Growth occurred across the majority of our domestic markets,
lead by Washington/Baltimore, Seattle, Tampa and Portland. Strong advertising
categories included automotive, retail, soft drinks, telecommunications,
entertainment, real estate and insurance. The growth in our international revenues was fueled by growth in average
revenue per billboard and street furniture display. The number of billboard
displays was down slightly while the number of street furniture displays was up
for the second quarter of 2004 compared to the same period of 2003. Strong
international markets included the United Kingdom, Australia and Sweden. Our outdoor divisional operating expenses increased 5% to $433.0 million
during the second quarter of 2004 compared to the same period of 2003. The
increase includes approximately $22.1 million from foreign exchange increases.
Also, we recorded a restructuring charge of approximately $11.0 million related
to our operations in France in the second quarter of 2003. Excluding foreign
exchange and the restructuring charge, operating expenses were up 2% driven by
increased site lease expenses. Six Months Our outdoor advertising revenue increased $141.4 million to $1.2 billion
during the six months ended June 30, 2004 as compared to the same period of
2003. The increase was lead by domestic bulletins and posters and
international billboards and street furniture revenues. Also contributing to
the increase was $10.4 million from the purchase and consolidation of our
outdoor advertising joint venture in Australia during the second quarter of
2003, which we had previously accounted for as an equity method investment.
For the six months ended June 30, 2004, revenue included increases of
approximately $66.6 million resulting from movements in foreign exchange rates. The growth in domestic bulletin and poster revenues was driven by
increased rates, with occupancy slightly down. Growth occurred across our
markets, with the top 25 leading the way. Strong markets included Portland,
Seattle, Tampa and Washington/Baltimore. Growth in our international outdoor
revenues was lead by increased revenue per display, with the number of
billboards down and street furniture displays up during the six months ended
June 30, 2004 as compared to the same period of 2003. Divisional operating expenses increased $66.7 million to $845.7 million
during the six months ended June 30, 2004 as compared to the same period of
2003. The increase includes approximately $56.2 million from fluctuations in
foreign exchange rates. - 19 -




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Also contributing to the increase was $8.8 million
from the purchase and consolidation of our outdoor advertising joint venture in
Australia during the second quarter of 2003, which we had previously accounted
for as an equity method investment. Additionally, we recorded a restructuring
charge of approximately $11.0 million related to our operations in France in
the second quarter of 2003. The remaining increase is primarily from an
increase in site lease expenses. Depreciation and amortization increased $3.3 million and $14.1 million for
the three and six months ended June 30, 2004 as compared to the same periods of
2003, respectively. The increase was primarily attributable to $3.5 million
and $8.0 million resulting from fluctuations in foreign exchange rates,
respectively, for the second quarter and year to date 2004 compared to the same
periods of 2003. Live Entertainment Three Months Ended June 30,
    
    
    
    
    
    Six Months Ended June 30,(In thousands)
    
    2004
    
    2003
    
    % Change
    
    2004
    
    2003
    
    % ChangeRevenue
    
    $
    734,481
    
    
    $
    675,920
    
    
    
    9
    %
    
    $
    1,248,439
    
    
    $
    1,113,802
    
    
    
    12
    %Divisional operating expenses
    
    
    693,939
    
    
    
    619,280
    
    
    
    12
    %
    
    
    1,185,787
    
    
    
    1,040,416
    
    
    
    14
    %Depreciation and amortization
    
    
    14,895
    
    
    
    14,926
    
    
    
    (0
    %)
    
    
    30,443
    
    
    
    29,745
    
    
    
    2
    %Operating income
    
    $
    25,647
    
    
    $
    41,714
    
    
    
    (39
    %)
    
    $
    32,209
    
    
    $
    43,641
    
    
    
    (26
    %)
 Three Months Our live entertainment revenue increased 9% to $734.5 million during the
second quarter of 2004 compared to the same period of 2003. The increase was
driven by an increase in ticket revenues, partially offset by a loss in ticket
revenue due to event cancellations and a decline in ancillary revenues from
concessions, merchandising and parking. The decline in ancillary revenues was
a result of fewer events held at our amphitheaters in the second quarter of
2004 compared to the same period of 2003. The increase in ticket revenues was
driven by large music tours during the quarter, such as Madonna. Also included
in the revenue increase was approximately $15.9 million from foreign exchange
increases. Our live entertainment divisional operating expenses increased 12% to
$693.9 million during the second quarter of 2004 compared to the same period of
2003. Included in the increase is approximately $14.8 million from foreign
exchange increases. Live entertainments operating expenses grew at a higher
rate than its revenue growth primarily from an increase in production costs and
higher guaranteed artist payments, as well as the impact of event cancellations
during the second quarter of 2004 compared to the same period of 2003. Six Months Our live entertainment revenue increased $134.6 million for the six months
ended June 30, 2004 as compared to the same period of 2003. An increase in
ticket and sponsorships revenues drove the growth. We had large music tours in
the current year, such as Madonna, Bette Midler and Aerosmith, that helped
drive revenues higher despite the fact that the overall number of music events
declined in the current year partially attributable to a higher number of event
cancellations. For the six months ended June 30, 2004, revenue included
increases of approximately $32.3 million resulting from movements in foreign
exchange rates. Divisional operating expenses increased $145.4 million during the six
months ended June 30, 2004 compared to the same period of 2003. Driving the
increase was talent costs, primarily from higher artist guarantees and
production costs in the current six month period compared to the prior six
month period. The increase includes approximately $30.2 million from
fluctuations in foreign exchange rates. Reconciliation of Segment Operating Income to Consolidated Operating Income Three Months Ended June 30,
    
    Six Months Ended June 30,(In thousands)
    
    2004
    
    2003
    
    2004
    
    2003Radio Broadcasting
    
    $
    405,848
    
    
    $
    394,401
    
    
    $
    688,412
    
    
    $
    656,515Outdoor Advertising
    
    
    113,754
    
    
    
    65,369
    
    
    
    122,859
    
    
    
    62,222Live Entertainment
    
    
    25,647
    
    
    
    41,714
    
    
    
    32,209
    
    
    
    43,641Other
    
    
    16,706
    
    
    
    17,608
    
    
    
    20,247
    
    
    
    20,984Corporate
    
    
    (52,484
    )
    
    
    (49,866
    )
    
    
    (107,848
    )
    
    
    (98,908
    )Consolidated Operating Income
    
    $
    509,471
    
    
    $
    469,226
    
    
    $
    755,879
    
    
    $
    684,454
 - 20 -




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LIQUIDITY AND CAPITAL RESOURCES Cash Flow Operating Activities Net cash flow from operating activities of $903.8 million for the six
months ended June 30, 2004 principally reflects a net income of $370.2 million
plus depreciation and amortization of $340.9 million. Cash flow from operating
activities was negatively impacted during the six months ended June 30, 2004 by
$150.0 million primarily related to the taxes paid related to the gain from the
sale of our remaining shares of Univision, partially offset by the tax loss
related to the partial redemption of our Euro denominated debt. Cash flow from
operations also reflects a positive change in working capital of approximately
$149.9 million primarily due to an increase in deferred income, partially
offset by increases in accounts receivable and prepaid expenses. Net cash flow from operating activities of $943.7 million for the six
months ended June 30, 2003 principally reflects a net income of $322.3 million
plus depreciation and amortization of $321.4 million. Cash flow from operations
also reflects a positive change in working capital of approximately $137.7
million primarily due to an increase in deferred income, partially offset by
increases in accounts receivable and prepaid expenses. Investing Activities Net cash provided by investing activities of $320.3 million for the six
months ended June 30, 2004 principally reflect proceeds of $607.2 million
related to the sale of investments, primarily the sale of our Univision shares,
which is partially offset by capital expenditures of $156.6 million related to
purchases of property, plant and equipment and $170.0 million related to
acquisitions of operating assets. Net cash expenditures used in investing
activities of $197.9 million for the six months ended June 30, 2003 principally
reflect capital expenditures of $140.3 million related to purchases of
property, plant and equipment and $44.8 million related to acquisitions of
operating assets. Financing Activities Financing activities for the six months ended June 30, 2004 principally
reflect the net decrease in debt of $381.6 million, repurchases of our stock
totaling $626.0 million and dividends paid of $123.3 million. Financing
activities for the six months ended June 30, 2003 principally reflect the net
reduction in debt of $834.0 million, proceeds from a secured forward exchange
contract of $83.5 million and proceeds of $30.2 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, dividends and share
repurchases) for the foreseeable future with cash flows from operations and
various externally generated funds. SOURCES OF CAPITAL As of June 30, 2004 and December 31, 2003 we had the following debt
outstanding: June 30,
    
    December 31,(In millions)
    
    2004
    
    2003Credit facilities  domestic
    
    $
    875.0
    
    
    $
    660.5Credit facility  international
    
    
    45.8
    
    
    
    50.1Long-term bonds (a)
    
    
    5,551.4
    
    
    
    6,159.4Other borrowings
    
    
    204.4
    
    
    
    195.0Total Debt
    
    
    6,676.6
    
    
    
    7,065.0Less: Cash and cash equivalents
    
    
    232.8
    
    
    
    123.3$
    6,443.8
    
    
    $
    6,941.7
  (a)
    
    Includes $15.3 million and $16.8 million in unamortized fair value
purchase accounting adjustment premiums related to the merger with AMFM
Inc. at June 30, 2004 and December 31, 2003, respectively. Also includes
a reduction of $19.0 million at June 30, 2004 and includes $7.0 million at
December 31, 2003 related to fair value adjustments for interest rate swap
agreements. - 21 -




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Domestic Credit Facilities As of June 30, 2004, we had two separate domestic credit facilities. The first credit facility is a reducing revolving credit facility,
originally in the amount of $2.0 billion. At June 30, 2004, $730.0 million was
outstanding and $1.3 million was available for future borrowings. The amount
available for future borrowings under this credit facility began reducing on
September 30, 2000, with quarterly reductions to continue through the last
business day of June 2005. The reductions in amounts available for future
borrowings total $109.4 million per quarter in 2004, $131.3 million in the
first quarter of 2005 and $381.3 million in the second quarter of 2005. The second facility is a $1.5 billion five-year multi-currency revolving
credit facility. At June 30, 2004, $145.0 million was outstanding and, taking
into account letters of credit of $135.1 million, $1.2 billion was available
for future borrowings, with the entire balance to be repaid on August 30, 2005. During the six months ended June 30, 2004, we made principal payments
totaling $1.9 billion and drew down $2.1 billion on the credit facilities. On July 13, 2004, we entered into a new five-year, multi-currency
revolving credit facility in the amount of $1.75 billion. The facility 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. Our existing $1.5 billion five-year
multi-currency revolving credit facility was repaid in its entirety and
terminated at the same time we entered into the new facility. As of August 4, 2004, the credit facilities aggregate outstanding balance
was $1.3 billion and, taking into account outstanding letters of credit, $999.0
million was available for future borrowings. International Credit Facility We have a $150.0 million five-year revolving credit facility with a group
of international banks. This facility allows for borrowings in various foreign
currencies, which are used to hedge net assets in those currencies and provides
funds to our international operations for certain working capital needs. At
June 30, 2004, $45.8 million was outstanding. This credit facility expires on
December 8, 2005. On July 30, 2004, this facility was paid in full through borrowings under
our new $1.75 billion five-year, multi-currency revolving credit facility. Sale of Investments During the first half of 2004, we received $607.2 million of proceeds
related to the sale of our remaining investment in Univision as well as other
various investments. Shelf Registration On April 22, 2004, we filed a Registration Statement on Form S-3/A
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). 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. Debt Covenants Our only significant covenants on our reducing revolving credit facility
relate to leverage and interest coverage contained and defined in the credit
facilities. The leverage ratio covenant requires us to maintain a ratio of
total debt to EBITDA (as defined by the credit facilities) of less than 5.00x.
The interest coverage covenant requires us to maintain a minimum ratio of
EBITDA (as defined by the credit facilities) to interest expense of 2.00x. In
the event that we do not meet these covenants, we are considered to be in
default on the credit facilities at which time the credit facilities may become
immediately due. At June 30 2004, our leverage and interest coverage ratios
were 2.89x and 6.41x, respectively. Including our cash and cash equivalents
recorded at June 30, 2004, our leverage on a net debt basis was 2.80x. These
credit facilities contain cross default provisions that would be triggered if
we were to default on any other indebtedness greater than $25.0 million. Our
other indebtedness does not contain such provisions that would make it a
default if we were to default on one of our credit facilities. - 22 -




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Additionally, the AMFM long-term bonds contain certain restrictive
covenants that limit the ability of AMFM Operating Inc., a wholly-owned
subsidiary of Clear Channel, to incur additional indebtedness, enter into
certain transactions with affiliates, pay dividends, consolidate, or effect
certain asset sales. The significant covenants on our new $1.75 billion five-year,
multi-currency revolving credit facility also relate to leverage and interest
coverage contained and defined in the credit facilities. The leverage ratio
covenant requires us to maintain a ratio of total debt to EBITDA (as defined by
the credit facilities) of less than 5.25x. The interest coverage covenant
requires us to maintain a minimum ratio of EBITDA (as defined by the credit
facilities) 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 facilities at
which time the credit facilities may become immediately due. 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. Our other
indebtedness does not contain such provisions that would make it a default if
we were to default on one of our credit facilities. The fees we pay on our new $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 are 17.5 basis points on the total
$1.75 billion facility and a 45.0 basis point spread to LIBOR on borrowings.
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. At June 30 2004, we were in compliance with all debt covenants. We expect
to remain in compliance throughout 2004. USES OF CAPITAL Long-Term Bonds On February 25, 2004, we redeemed 454.4 million of our 6.5% senior notes
due July 7, 2005, for 477.7 million plus accrued interest. As a result of
this redemption we recorded a pre-tax loss of $31.4 million on the early
extinguishment of debt. After this redemption, 195.6 million of the 6.5%
senior notes remain outstanding. Dividends On October 23, 2003, February 19, 2004 and April 28, 2004, our Board of
Directors declared a quarterly cash dividend of $0.10 per share on our Common
Stock. Dividend payments of $61.6 million, $61.7 million and $60.1 million
were disbursed on January 15, 2004, April 15, 2004 and July 15, 2004,
respectively, to shareholders of record at the close of business on December
31, 2003, March 31, 2004 and June 30, 2004, respectively. Additionally, on
July 21, 2004 our Board of Directors declared a quarterly cash dividend of
$.125 per share of our Common Stock to be paid on October 15, 2004 to
shareholders of record on September 30, 2004. Acquisitions During the six months ended June 30, 2004 we acquired radio stations for
$59.3 million in cash and $35.7 million in restricted cash. We also acquired
outdoor display faces for $52.2 million in cash and acquired
equity interests
in international outdoor companies for $1.9 million in cash. Our live
entertainment segment made cash payments of $4.8 million during the six months
ended June 30, 2004, primarily related to various earn-outs and deferred
purchase price consideration on prior year acquisitions. Also, we acquired a
television station for $4.2 million in restricted cash and our national representation business
acquired new contracts for a total of $12.0 million in cash during the six
months ended June 30, 2004. - 23 -




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Capital Expenditures Capital expenditures were $156.6 million and $140.3 million in the six
months ended June 30, 2004 and 2003, respectively. Six Months Ended June 30, 2004 Capital ExpendituresCorporate and(In millions)
    
    Radio
    
    Outdoor
    
    Entertainment
    
    Other
    
    TotalNon-revenue producing
    
    $
    26.7
    
    
    $
    28.1
    
    
    $
    12.4
    
    
    $
    10.8
    
    
    $
    78.0Revenue producing
    
    
    
    
    
    
    46.8
    
    
    
    31.8
    
    
    
    
    
    
    
    78.6$
    26.7
    
    
    $
    74.9
    
    
    $
    44.2
    
    
    $
    10.8
    
    
    $
    156.6
 Company Share
Repurchase Program As of August 4, 2004, 27.1 million shares had been repurchased for an
aggregate purchase price of $1.0 billion, including commission and fees, under
our share repurchase programs. Commitments,
Contingencies and Guarantees In accordance with generally accepted accounting principles in the United
States, we do not record the following transactions on our balance sheet: Commitments and Contingencies We were among the defendants in a lawsuit filed on June 12, 2002 in the
United States District Court for the Southern District of Florida by Spanish
Broadcasting System. The plaintiffs alleged that we were in violation of
Section One and Section Two of the Sherman Antitrust Act as well as various
other claims, such as unfair trade practices and defamation, among other
counts. This case was dismissed with prejudice on January 31, 2003. The
plaintiffs filed an appeal with the 11th Circuit Court of Appeals. On June 30,
2004, the 11th Circuit Court of Appeals upheld the dismissal. There are various other lawsuits and claims pending against us. We believe
that any ultimate liability resulting from those actions or claims will not
have a material adverse effect on our results of operations, financial position
or liquidity. 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 June 30, 2004, we guaranteed the debt of third parties of
approximately $13.2 million primarily related to long-term operating contracts.
The third parties associated operating assets secure a substantial portion of
these obligations. At June 30, 2004, we guaranteed the third-party performance under a
certain contract for up to approximately $19.3 million that expires in 2004. Market Risk Interest Rate Risk At June 30, 2004, approximately 36% 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 years average interest rate
under these borrowings, it is estimated that our interest expense would have
changed by $23.8 million and that our net income would have changed by $14.7
million during the first six months of 2004. In the event of an adverse change
in interest rates, management may take actions to further mitigate our
exposure. However, due to the uncertainty of the actions that would be taken
and their possible effects, the 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. - 24 -




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At June 30, 2004, 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 June 30, 2004 was a liability of $19.0
million. Equity Price Risk At June 30, 2004, the carrying value of our available-for-sale and trading
equity securities was $241.2 million and $43.7 million, respectively. These
investments are 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 June 30, 2004 by $57.0 million and would change
accumulated comprehensive income (loss) and net income (loss) by $29.9 million
and $5.4 million, respectively. At June 30, 2004, we also held $28.6 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. 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 to risk 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 $2.8 million for the six months ended June 30, 2004. It is
estimated that a 10% change in the value of the U.S. dollar to foreign
currencies would change net loss for the six months ended June 30, 2004 by $.3
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 June 30, 2004 would change our equity
in earnings of nonconsolidated affiliates by $1.7 million and would change our
net income for the six months ended June 30, 2004 by approximately $1.1
million. 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 On January 1, 2004, we adopted Financial Accounting Standards Board
Interpretation No. 46, Consolidation of Variable Interest Entities. The
Interpretation addresses consolidation of business enterprises of variable
interest. The adoption of FIN 46 did not have a material impact on our
financial position or results of operations. 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. Ratio of Earnings to
Fixed Charges The ratio of earnings to fixed charges is as follows: Six Months endedJune 30,
    
    Year Ended December 31,2004
    
    2003
    
    2003
    
    2002
    
    2001
    
    2000
    
    19992.68
    
    
    
    2.49
    
    
    
    3.62
    
    
    
    2.62
    
    
    
    *
    
    
    
    2.20
    
    
    
    2.04
 * 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. - 25 -




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Risks Regarding Forward
Looking Statements Except for the historical information, this report contains various
forward-looking statements that represent our expectations or beliefs
concerning future events, including the future levels of cash flow from
operations. Management believes that all statements that express expectations
and projections with respect to future matters, including the strategic fit of
radio assets, expansion of market share, our ability to capitalize on synergies
between the live entertainment and radio broadcasting businesses, the
availability of capital resources, and expected changes in advertising
revenues, are forward-looking statements within the meaning of the Private
Securities Litigation Reform Act. We caution that these forward-looking
statements involve a number of risks and uncertainties and are subject to many
variables that could have an adverse effect upon our financial performance.
These statements are made on the basis of managements views and assumptions,
as of the time the statements are made, regarding future events and business
performance. There can be no assurance, however, that managements expectations
will necessarily come to pass. A wide range of factors could materially affect future developments and
performance, including:  
    
    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;
    
    capital expenditure requirements;
    
    the outcome of pending and future litigation;
    
    legislative or regulatory requirements;
    
    interest rates;
    
    the effect of leverage on our financial position and earnings;
    
    taxes;
    
    access to capital markets; and
    
    certain other factors set forth in our SEC filings, including our
Annual Report on Form 10-K for the year ended December 31, 2003. This list of factors that may affect future performance and the accuracy
of forward-looking statements is illustrative, but by no means exhaustive.
Accordingly, all forward-looking statements should be evaluated with the
understanding of their inherent uncertainty. 
 ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK 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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##### Table of Contents



Part II  OTHER INFORMATION 
 Item 1. Legal Proceedings We are among the defendants in a lawsuit filed on June 12, 2002 in the
United States District Court for the Southern District of Florida by Spanish
Broadcasting System. The plaintiffs allege that we are in violation of Section
One and Section Two of the Sherman Antitrust Act as well as various other
claims, such as unfair trade practices and defamation, among other counts.
This case was dismissed with prejudice on January 31, 2003. The plaintiffs
filed an appeal with the 11th Circuit Court of Appeals. On June 30, 2004, the
11th Circuit Court of Appeals upheld the dismissal. There are various other lawsuits and claims pending against us. We believe
that any ultimate liability resulting from those actions or claims will not
have a material adverse effect on our results of operations, financial position
or liquidity. 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. Changes in Securities, Use of Proceeds and Issuer Purchases of
Equity Securities On March 30, 2004, we publicly announced that our Board of Directors
authorized a share repurchase program of up to $1.0 billion effective
immediately. This share repurchase program will expire on March 30, 2005,
although prior to such time the program may be discontinued or suspended at any
time. During the three months ended June 30, 2004, the Company has 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
    
    Program
    
    ProgramApril 1 through
April 30
    
    
    -0-
    
    
    $
    0.00
    
    
    
    -0-
    
    
    $
    1,000,000,000May 1 through May 31
    
    
    7,133,350
    
    
    $
    40.56
    
    
    
    7,133,350
    
    
    $
    710,637,524June 1 through June
30
    
    
    8,902,215
    
    
    $
    37.82
    
    
    
    8,902,215
    
    
    $
    373,991,791Total
    
    
    16,035,565
    
    
    $
    39.02
    
    
    
    16,035,565
 - 27 -




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Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS Our annual meeting of shareholders was held on April 27, 2004. L. Lowry
Mays, Alan D. Feld, Perry J. Lewis, Mark P. Mays, Randall T. Mays, B. J.
McCombs, Phyllis B. Riggins, Theodore H. Strauss J. C. Watts and John H.
Williams were elected as our directors, each to hold office until the next
annual meeting of shareholders or until his or her successor has been elected
and qualified, subject to earlier resignation and removal. The shareholders
also approved the selection of Ernst & Young LLP as our independent auditors
for the year ending December 31, 2004. The results of voting at the annual meeting of the shareholders were as
follows: Proposal No. 1
(Election of Directors) Nominee
    
    For
    
    WithheldL. Lowry Mays
    
    
    526,450,081
    
    
    
    15,676,792Alan D. Feld
    
    
    364,514,638
    
    
    
    177,612,235Perry J. Lewis
    
    
    523,095,522
    
    
    
    19,031,351Mark P. Mays
    
    
    527,258,060
    
    
    
    14,868,813Randall T. Mays
    
    
    523,235,432
    
    
    
    18,891,441B.J. McCombs
    
    
    502,886,299
    
    
    
    39,240,574Phyllis B. Riggins
    
    
    527,532,688
    
    
    
    14,594,185Theodore H. Strauss
    
    
    527,533,879
    
    
    
    14,592,994J.C. Watts
    
    
    527,672,390
    
    
    
    14,454,483John H. Williams
    
    
    524,457,904
    
    
    
    17,668,969
 Thomas Hicks, one of the nominees for election to the board of directors
listed in our proxy statement, resigned from the board of directors as of April
23, 2004 and, accordingly, did not stand for re-election at the annual meeting. Proposal No. 2
(Selection of Ernst & Young LLP as Independent Auditors for the year ending December 31, 2004) For
    
    Withhold/Against
    
    Exceptions/Abstain527,517,823
    
    
    10,839,016
    
    
    
    3,770,034
 
 Item 6. Exhibits and Reports on Form 8-K 
 (a) Exhibits. See Exhibit Index on Page 30 
 (b) Reports on Form 8-K Filing
    
    Date
    
    Items Reported
    
    Financial Statements Reported8-K
    
    4/27/04
    
    Item 5
    
    None8-K
    
    5/4/04
    
    Item 12 & 7
    
    Earnings Release8-K
    
    5/10/04
    
    Item 5 & 7
    
    None
 - 28 -




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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.August 4, 2004
    
    /s/ Randall T. MaysRandall T. MaysExecutive Vice President andChief Financial OfficerAugust 4, 2004
    
    /s/ Herbert W. Hill, Jr.Herbert W. Hill, Jr.Senior Vice President andChief Accounting Officer
 - 29 -




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INDEX TO EXHIBITS ExhibitNumber
    
    Description2.1
    
    Agreement and Plan of Merger dated as of October 2, 1999,
among Clear Channel, CCU Merger Sub, Inc. and AMFM Inc.
(incorporated by reference to the exhibits of Clear
Channels Current Report on Form 8-K filed October 5,
1999).2.2
    
    Agreement and Plan of Merger dated as of February 28, 2000,
among Clear Channel, CCU II Merger Sub, Inc. and SFX
Entertainment, Inc. (incorporated by reference to the
exhibits of Clear Channels Current Report on Form 8-K
filed February 29, 2000).2.3
    
    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
    
    Third Amended and Restated Bylaws of the Company
(incorporated by reference to the exhibits of the Companys
Registration Statement on Form S-4 (Reg. No. 333-74196)
dated November 29, 2001).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
    
    First Supplemental Indenture dated March 30, 1998 to Senior
Indenture dated October 1, 1997, by and between the Company
and The Bank of New York, as Trustee (incorporated by
reference to the
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ExhibitNumber
    
    Descriptionexhibits to the Companys Quarterly Report
on Form 10-Q for the quarter ended March 31, 1998).4.8
    
    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).4.9
    
    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).4.10
    
    Fourth Supplement Indenture dated November 24, 1999 to
Senior Indenture dated October 1, 1997, by and between
Clear Channel and The Bank of New York as Trustee
(incorporated by reference to the exhibits of the Companys
Annual Report on Form 10-K for the year ended December 31,
1999).4.11
    
    Fifth 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).4.12
    
    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).4.13
    
    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).4.14
    
    Eighth 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).4.15
    
    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).4.16
    
    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).4.17
    
    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).4.18
    
    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).4.19
    
    Thirteenth Supplemental Indenture dated May 1, 2003, to
Senior Indenture dated October 1, 1997, by
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##### Table of Contents



ExhibitNumber
    
    Descriptionand 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).4.20
    
    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).4.21
    
    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).4.22
    
    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).4.23
    
    Termination Agreement by and among Clear Channel
Communications, Inc., L. Lowry Mays, Thomas O. Hicks and
certain other shareholders affiliated with Mr. Hicks dated
March 10, 2004, terminating that certain Shareholders
Agreement dated October 2, 1999 (incorporated by reference
to the exhibits of Clear Channels Annual Report on Form
10-K for the year ended December 31, 2003).4.24
    
    Shareholders Agreement by and between Clear Channel
Communications, Inc. and L. Lowry Mays dated March 10, 2004
(incorporated by reference to the exhibits of Clear
Channels Annual Report on Form 10-K for the year ended
December 31, 2003).4.25
    
    Shareholders Agreement by and among Clear Channel
Communications, Inc., Thomas O. Hicks and certain other
shareholders affiliated with Mr. Hicks dated March 10, 2004
(incorporated by reference to the exhibits of Clear
Channels Annual Report on Form 10-K for the year ended
December 31, 2003).11
    
    Statement re: Computation of Per Share Earnings.12
    
    Statement re: Computation of Ratios.31.1
    
    Certification of Principal 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 Principal 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.
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