<PAGE>

                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                   ----------

                                    FORM 10-K

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

                   For the fiscal year ended December 31, 2003

                        Commission File Number 000-22486

                               AMFM OPERATING INC.
                    (an indirect, wholly-owned subsidiary of
                       Clear Channel Communications, Inc.)
             (Exact Name of Registrant as Specified in its Charter)

                 Delaware                               13-3649750

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

      incorporation or organization)              Identification Number)

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

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

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

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

                                   ----------

      Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes |X| No | |

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

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

      AMFM Operating Inc. is a wholly-owned subsidiary of Clear Channel
Communications, Inc., and there is no market for the Registrant's common stock.
As of March 26, 2004, 1,040 shares of the Registrant's common stock were
outstanding.

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

<TABLE>
<CAPTION>
                                                  PART I                                                        Page
<S>                                                                                                             <C>
Item 1.  Business........................................................................................          3
Item 2.  Properties......................................................................................          4
Item 3.  Legal Proceedings...............................................................................          4
Item 4.  Submission of Matters to a Vote of Security Holders.............................................          4
                                                 PART II
Item 5.  Market for Registrant's Common Equity and Related Stockholder Matters...........................          5
Item 6.  Selected Consolidated Financial Data............................................................          5
Item 7.  Management's Discussion and Analysis of Financial Condition and Results of Operations...........          5
Item 7A. Quantitative and Qualitative Disclosures About Market Risk......................................          7
Item 8.  Financial Statements and Supplementary Data.....................................................          8
Item 9.  Changes in and Disagreements with Accountants on Accounting and Financial Disclosure............         26
Item 9A. Controls and Procedures.........................................................................         26
                                                 PART III
Item 10. Directors and Executive Officers of the Registrant..............................................         27
Item 11. Executive Compensation..........................................................................         27
Item 12. Security Ownership of Certain Beneficial Owners and Management..................................         27
Item 13. Certain Relationships and Related Transactions..................................................         27
Item 14. Principal Accountant Fees and Services..........................................................         27
Item 15. Exhibits, Financial Statement Schedules and Reports on Form 8-K.................................         27
</TABLE>
<PAGE>
                                     PART I

ITEM 1. Business
(Abbreviated pursuant to General Instruction I(2)(d) of Form 10-K)

General

      AMFM Operating Inc., together with its subsidiaries, ("AMFM Operating" or
the "Company") is an indirect, wholly-owned subsidiary of Clear Channel
Communications, Inc. ("Clear Channel"), a diversified media company with
operations in radio broadcasting, outdoor advertising and live entertainment. As
of December 31, 2003 we owned or operated 530 radio stations in 127 markets in
the United States. Our operations also include Katz Media Group, Inc. ("Katz"),
a full-service media representation firm that sells national spot advertising
time for its clients in the radio and television industries throughout the
United States and for our portfolio of stations, and a national radio network,
which broadcasts advertising and syndicated programming shows to a national
audience.

Radio Broadcasting

            Radio Stations

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

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

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

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

            Other Radio Operations

      Our radio operations also include a national radio network, which
broadcasts advertising and syndicated programming shows to a national audience.
The operations of our national radio networks have been integrated into Premiere
Radio Networks, Clear Channel's radio syndication business.

Other Operations

      Katz is a full-service media representation firm that sells national spot
advertising time for clients in the radio and television industries throughout
the United States. Katz represents over 2,700 radio stations and 390 television
stations.

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


3
<PAGE>
ITEM 2. Properties
(Abbreviated pursuant to General Instruction I(2)(d) of Form 10-K)

      In the latter part of 2002, Clear Channel and AMFM Operating moved certain
of the radio corporate operations to the Clear Channel corporate headquarters in
San Antonio, Texas, primarily housed in Clear Channel's company-owned 55,000
square foot office building. Previously, our corporate radio operations were
headquartered in 21,201 square feet of leased office space in Covington,
Kentucky. The lease on this site expires in November 2008. Although the
executives of our radio operations and their support functions are in San
Antonio, we still occupy the leased space in Covington to house other support
functions for our radio operations. Additionally, our radio stations are
provided accounting and information technology support services through
employees at Clear Channel's company-owned 120,000 square foot data and
administrative service center in San Antonio. The types of properties required
to support each of our radio stations include offices, studios, transmitter
sites and antenna sites. A radio station's studios are generally housed with its
offices in downtown or business districts. A radio station's transmitter sites
and antenna sites are generally located in a manner that provides maximum market
coverage.

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

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

ITEM 3. Legal Proceedings

      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 our parent
company, Clear Channel. One inquiry is whether Clear Channel has violated
antitrust laws in one of its radio markets. The other is whether Clear Channel
has limited airplay of artists who do not use its concert services in violation
of antitrust laws. Clear Channel 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 Clear Channel. The Subpoena requires Clear Channel 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. Clear Channel is cooperating with such requirements.

      Clear Channel 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 allege that Clear Channel 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 and oral
argument was held in the case in February 2004. A decision has not yet been
issued.

      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 4. Submission of Matters to a Vote of Security Holders

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


4
<PAGE>
                                     PART II

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

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

ITEM 6. Selected Consolidated Financial Data

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

ITEM 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations
(Abbreviated pursuant to General Instruction I(2)(a) of Form 10-K)

Results of Operations

Year Ended December 31, 2003 Compared to Year Ended December 31, 2002

(In thousands)

<TABLE>
<CAPTION>
                                     Years Ended December 31,
                                   ---------------------------      % Change
                                      2003             2002       2003 v. 2002
                                   ----------       ----------    ------------
<S>                                <C>              <C>           <C>
Revenue                            $2,056,512       $2,039,159         1%
Divisional Operating Expenses       1,102,655        1,077,210         2%
</TABLE>

      Revenue increased $17.4 million for the year ended December 31, 2003 as
compared to 2002. Our revenue was impacted by strength in national spot sales,
particularly in the entertainment, finance, telecom/utility, retail and auto
advertising categories. National spot sales had a positive impact in our
national representation business as well.

      Divisional operating expenses increased $25.4 million for the year ended
December 31, 2003 as compared to the same period of 2002. The increase was
driven primarily by increased competition costs to maintain a strong sales staff
in our national representation business, as well as increases in production,
marketing and promotional expenses in our radio business.

Other Income and Expense Information

      Non-cash compensation expense relates to unvested stock options granted to
our employees prior to the merger with Clear Channel that were assumed by Clear
Channel and that are now convertible into Clear Channel stock. To the extent
that these employees' options continue to vest post-merger, we recognize
non-cash compensation expense over the remaining vesting period. Vesting dates
vary through April 2005. If no employees forfeit their unvested options by
leaving the company, we expect to recognize non-cash compensation expense of
approximately $1.3 million during the remaining vesting period.

      Corporate expense was $52.6 million in 2003 and $58.9 million in 2002, a
decrease of $6.3 million. In 2002, corporate expenses included higher
performance-based bonus expenses as compared to 2003.

      Interest expense was $88.3 million and $112.0 million for the years ended
December 31, 2003 and 2002 respectively, a decrease of $23.7 million due to the
decrease in total debt outstanding. In February 2003, we redeemed all of our
outstanding 8.125% notes and 8.75% notes for $379.2 million plus accrued
interest and $193.4 million plus accrued interest, respectively. The redemptions
were financed by borrowings on the Clear Channel promissory note, which we
subsequently repaid through cash flows from continuing operations.

      The loss on sale of marketable securities for the year ended December 31,
2003 of $5.0 million is related to the impairment of our investment in a radio
technology firm that we deemed to be other than temporary. The gain on sale of
marketable securities for the year ended December 31, 2002 of $4.0 million is
related to the sale of 791,000 shares of Entravision Communications Corporation.


5
<PAGE>
      Other income (expense) - net decreased $24.0 million from income of $25.2
million in 2002 to income of $1.2 million in 2003. During 2003, we redeemed our
8.125% and 8.75% notes which resulted in a gain of $1.7 million and recognized a
gain of $1.5 million on the sale of representation contracts, offset by
miscellaneous expenses of $1.8 million. During 2002, the Company recognized a
$14.8 million gain on the sale of representation contracts and a $6.2 million
gain recognized on the early extinguishment of debt.

      The loss recorded as a cumulative effect of a change in accounting
principle during 2002 relates to our adoption of Statement of Financial
Accounting Standards No. 142 on January 1, 2002. Statement 142 requires us to
test goodwill and indefinite-lived intangibles for impairment using a fair value
approach. As a result of the goodwill test, we recorded a non-cash impairment
charge of approximately $3.9 billion upon adoption. Also, as a result of the
indefinite-lived intangible test, we recorded a non-cash, net of tax impairment
charge on our FCC licenses of approximately $5.5 billion.

      The non-cash impairments of our goodwill and FCC licenses were primarily
caused by unfavorable economic conditions, which persisted in the radio
broadcast business throughout 2002. This weakness contributed to our customers
reducing the number of advertising dollars spent with us. These conditions
adversely impacted the cash flow projections used to determine the fair value of
our licenses and reporting unit. These factors resulted in the non-cash
impairment charge of a portion of our licenses and goodwill.

Regulatory Matters

      On June 2, 2003, the FCC adopted a decision modifying a number of its
rules governing the ownership of radio stations and other media outlets in local
and national markets. Among other changes, the modified rules establish a new
methodology for defining local radio markets and counting stations within those
markets, treat radio joint sales agreements as ownership interests of the
selling party in certain circumstances, allow for increased ownership of TV
stations at the local and national level, and permit additional local
cross-ownership of daily newspapers, television stations, and radio stations.

      After adoption, a number of parties (including our parent company, Clear
Channel) filed petitions for review of the new FCC regulations with various
federal courts. These petitions have been consolidated in a proceeding before
the United States Court of Appeals for the Third Circuit. That court has issued
a stay preventing the implementation of the new regulations pending the outcome
of judicial review. Oral argument in the court case was conducted in February
2004. In addition, various parties have petitioned the FCC for reconsideration
of its decision, and Congress continues to review the new regulations. Given
these contingencies, it is unclear at this time whether the new FCC regulations
will be fully implemented in their current form.

Caution Concerning Forward Looking Statements

      The Private Securities Litigation Reform Act of 1995 provides a safe
harbor for forward-looking statements made by us or on our behalf. Except for
the historical information, this report contains various forward-looking
statements which represent our expectations or beliefs concerning future events,
including the future levels of cash flow from operations. Management believes
that all statements that express expectations and projections with respect to
future matters, including the strategic fit of radio assets, expansion of market
share, and the availability of capital resources are forward-looking statements
within the meaning of the Private Securities Litigation Reform Act. We caution
that these forward-looking statements involve a number of risks and
uncertainties and are subject to many variables which could impact our financial
performance. These statements are made on the basis of management's views and
assumptions, as of the time the statements are made, regarding future events and
business performance. There can be no assurance, however, that management's
expectations will necessarily come to pass.

      A wide range of factors could materially affect future developments and
performance, including:

            -     the impact of general economic and political conditions in the
                  U.S. 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;


6
<PAGE>
            -     capital expenditure requirements;

            -     the outcome of pending or 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 filings with the
                  Securities and Exchange Commission.

            This list of factors that may affect future performance and the
accuracy of forward-looking statements is illustrative, but by no means
exhaustive. Accordingly, all forward-looking statements should be evaluated with
the understanding of their inherent uncertainty.

ITEM 7A. Quantitative and Qualitative Disclosures about Market Risk

      None.


7
<PAGE>
ITEM 8. Financial Statements and Supplementary Data

                         REPORT OF INDEPENDENT AUDITORS

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

We have audited the accompanying consolidated balance sheets of AMFM Operating
Inc. (an indirect, wholly-owned subsidiary of Clear Channel Communications,
Inc.) and subsidiaries as of December 31, 2003 and 2002, and the related
consolidated statements of operations, equity, and cash flows for the three
years in the period ended December 31, 2003. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.

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

In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of AMFM Operating
Inc. and subsidiaries at December 31, 2003 and 2002, and the consolidated
results of their operations and their cash flows for the three years in the
period ended December 31, 2003, in conformity with accounting principles
generally accepted in the United States.

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



                                        /s/ ERNST & YOUNG LLP

San Antonio, Texas
March 12, 2004


8
<PAGE>
                      AMFM OPERATING INC. AND SUBSIDIARIES
  (an indirect, wholly-owned subsidiary of Clear Channel Communications, Inc.)

                           CONSOLIDATED BALANCE SHEETS
                                     ASSETS
                                 (In thousands)

<TABLE>
<CAPTION>
                                                                              December 31,         December 31,
                                                                                  2003                 2002
                                                                              ------------         ------------
<S>                                                                           <C>                  <C>
Current Assets
   Cash and cash equivalents                                                  $         --         $         --
   Accounts receivable, less allowance of $12,795 at December 31, 2003
      and $14,911 at December 31, 2002                                             425,479              432,473
   Other current assets                                                             21,012               34,316
                                                                              ------------         ------------
        Total Current Assets                                                       446,491              466,789

Property, Plant and Equipment
   Land, buildings and improvements                                                189,393              180,685
   Transmitter and studio equipment                                                283,151              260,314
   Furniture and other equipment                                                   116,439              106,561
   Construction in progress                                                         18,721               33,058
                                                                              ------------         ------------
                                                                                   607,704              580,618
Less accumulated depreciation                                                     (151,821)            (104,590)
                                                                              ------------         ------------
                                                                                   455,883              476,028
Intangible Assets
   Definite-lived intangibles, net                                                 176,309              160,038
   Indefinite-lived intangibles - licenses                                       7,332,941            7,332,132
   Goodwill                                                                      2,794,642            2,794,642

Other Assets
   Other assets                                                                     41,935               49,576
   Other investments                                                                    84                5,084

                                                                              ------------         ------------
Total Assets                                                                  $ 11,248,285         $ 11,284,289
                                                                              ------------         ------------
</TABLE>

                 See Notes to Consolidated Financial Statements


9
<PAGE>
                      AMFM OPERATING INC. AND SUBSIDIARIES
  (an indirect, wholly-owned subsidiary of Clear Channel Communications, Inc.)

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

<TABLE>
<CAPTION>
                                                                              December 31,         December 31,
                                                                                  2003                 2002
                                                                              ------------         ------------
<S>                                                                           <C>                  <C>
Current Liabilities
   Accounts payable                                                           $     29,882         $     26,884
   Accrued interest                                                                  8,802               10,714
   Accrued expenses                                                                 76,141              107,059
                                                                              ------------         ------------
        Total Current Liabilities                                                  114,825              144,657

Long-term debt                                                                     688,064            1,265,535
Clear Channel promissory note                                                      300,000              300,000
Deferred income taxes                                                            1,892,741            1,769,824
Other long-term liabilities                                                        198,523              170,676

Shareholder's Equity
   Common stock, par value $.10 per share, authorized and issued 1,040
      shares in 2003 and 2002                                                            1                    1
   Additional paid-in capital                                                   17,346,238           17,346,238
   Retained deficit                                                             (9,292,107)          (9,712,642)
                                                                              ------------         ------------
        Total Shareholder's Equity                                               8,054,132            7,633,597

                                                                              ------------         ------------
Total Liabilities and Shareholder's Equity                                    $ 11,248,285         $ 11,284,289
                                                                              ------------         ------------
</TABLE>

                 See Notes to Consolidated Financial Statements


10
<PAGE>
                      AMFM OPERATING INC. AND SUBSIDIARIES
  (an indirect, wholly-owned subsidiary of Clear Channel Communications, Inc.)

                      CONSOLIDATED STATEMENTS OF OPERATIONS
                                 (In thousands)

<TABLE>
<CAPTION>
                                                              Year Ended           Year Ended          Year Ended
                                                              December 31,        December 31,        December 31,
                                                                 2003                2002                2001
                                                              ------------        ------------        ------------
<S>                                                           <C>                 <C>                 <C>
Revenue                                                       $ 2,056,512         $ 2,039,159         $ 1,918,271
Operating expenses:
   Divisional operating expense (excludes non-cash
      compensation expense of $1,609, $4,400, and
      $12,372, respectively)                                    1,102,655           1,077,210           1,090,225
   Non-cash compensation expense                                    1,609               4,400              12,372
   Depreciation and amortization                                   78,081              76,239           1,036,428
   Corporate expenses                                              52,623              58,864              45,769
                                                              -----------         -----------         -----------
        Operating income (loss)                                   821,544             822,446            (266,523)

Interest expense                                                   88,328             112,035             176,720
Gain (loss) on marketable securities                               (5,000)              3,991            (242,675)
Other income (expense) - net                                        1,249              25,234              10,019
                                                              -----------         -----------         -----------
Income (loss) before income taxes, extraordinary item
   and cumulative effect of a change in accounting
   principle                                                      729,465             739,636            (675,899)
Income tax benefit (expense)                                     (295,433)           (299,553)            141,722
                                                              -----------         -----------         -----------
Income (loss) before cumulative effect of a change in
   accounting principle                                           434,032             440,083            (534,177)
Cumulative effect of a change in accounting principle,
   net of tax of $3,366,192                                            --          (9,379,265)                 --
                                                              -----------         -----------         -----------
Net income (loss)                                                 434,032          (8,939,182)           (534,177)

Other comprehensive income (loss), net of tax:
   Unrealized gain (loss) on securities:
      Unrealized holding gain (loss) arising during
        period                                                         --               1,470             (23,907)
      Reclassification adjustment for (gains) losses
        included in net income (loss)                                  --              (2,475)            151,493
                                                              -----------         -----------         -----------
Comprehensive income (loss)                                   $   434,032         $(8,940,187)        $  (406,591)
                                                              -----------         -----------         -----------
</TABLE>

                 See Notes to Consolidated Financial Statements


11
<PAGE>
                      AMFM OPERATING INC. AND SUBSIDIARIES
  (an indirect, wholly-owned subsidiary of Clear Channel Communications, Inc.)

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

<TABLE>
<CAPTION>
                                                                                                      Accumulated
                                                                                        Retained          Other            Total
                                              Common Stock              Paid-in         Earnings      Comprehensive    Shareholder's
                                          Shares         Amount         Capital        (Deficit)      Income (Loss)        Equity
                                      ------------    ------------   ------------    ------------     -------------    -------------
<S>                                   <C>             <C>            <C>             <C>              <C>              <C>
Balances at December 31, 2000                1,040    $          1   $ 17,346,238    $    (89,246)    $   (126,581)    $ 17,130,412
Unrealized loss on investments, net
    of tax                                      --              --             --              --          (23,907)         (23,907)
Reclassification adjustment for loss
  included in net loss                          --              --             --              --          151,493          151,493
Net loss                                        --              --             --        (534,177)              --         (534,177)
                                      ------------    ------------   ------------    ------------     ------------     ------------
Balances at December 31, 2001                1,040               1     17,346,238        (623,423)           1,005       16,723,821
Unrealized gain on investments, net
    of tax                                      --              --             --              --            1,470            1,470
Reclassification adjustment for gain
  Included in net loss                          --              --             --              --           (2,475)          (2,475)
Dividends paid to Clear Channel                 --              --             --        (150,037)              --         (150,037)
Net loss                                        --              --             --      (8,939,182)              --       (8,939,182)
                                      ------------    ------------   ------------    ------------     ------------     ------------
Balances at December 31, 2002                1,040               1     17,346,238      (9,712,642)              --        7,633,597
Dividends paid to Clear Channel                 --              --             --         (13,497)              --          (13,497)
Net earnings                                    --              --             --         434,032               --          434,032
                                      ------------    ------------   ------------    ------------     ------------     ------------
Balances at December 31, 2003                1,040    $          1   $ 17,346,238    $ (9,292,107)    $         --     $  8,054,132
                                      ------------    ------------   ------------    ------------     ------------     ------------
</TABLE>

                 See Notes to Consolidated Financial Statements


12
<PAGE>
                      AMFM OPERATING INC. AND SUBSIDIARIES
  (an indirect, wholly-owned subsidiary of Clear Channel Communications, Inc.)

                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (In thousands)

<TABLE>
<CAPTION>
                                                                    Year Ended December 31,
                                                              2003            2002            2001
                                                          -----------     -----------     -----------
<S>                                                       <C>             <C>             <C>
Net income (loss)                                         $   434,032     $(8,939,182)    $  (534,177)
Reconciling items:
   Cumulative effect of a change in accounting
      principle, net of tax                                        --       9,379,265              --
   Depreciation                                                53,037          52,524          54,779
   Amortization                                                25,044          23,715         981,649
   Non-cash compensation                                        1,609           4,400          12,372
   Deferred income tax expense (benefit)                      122,917         181,653        (254,224)
   Loss (gain) on disposition of marketable securities          5,000          (3,991)        242,675
   Other                                                          607          (6,223)        (10,949)

Changes in certain assets and liabilities:
    Decrease (increase) in accounts receivable                  6,994         (27,695)         89,255
    Decrease (increase) in other current assets                13,304           8,740          24,803
    Increase (decrease) in income taxes payable to
       Clear Channel                                               --              --        (398,975)
    Increase (decrease) in accounts payable and
       accrued expenses                                       (29,119)        (23,114)       (135,903)
    Increase (decrease) in other, net                           3,166          (9,688)         70,867
                                                          -----------     -----------     -----------
Net cash provided by operating activities                     636,591         640,404         142,172

CASH FLOWS FROM INVESTING ACTIVITIES:
(Investment in), liquidation of, restricted cash                   --              --         320,485
Proceeds from divestitures placed in restricted cash               --              --           3,000
Proceeds from sale of available-for-sale securities                --          11,827         919,999
Purchases of property, plant and equipment                    (39,842)        (53,311)        (88,182)
Proceeds from disposal of assets                                2,665              --          23,301
Acquisitions of operating assets                              (13,383)        (16,681)        (59,892)
Acquisition of radio stations with restricted cash                 --              --        (191,929)
Other                                                              --            (135)          4,515
                                                          -----------     -----------     -----------
Net cash provided by (used by) investing activities           (50,560)        (58,300)        931,297

CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from Clear Channel promissory note                   572,534         151,258              --
Payments on Clear Channel promissory note                    (572,534)       (443,419)     (1,080,444)
Payments on long-term debt                                   (572,534)       (151,258)           (175)
Dividends to Clear Channel                                    (13,497)       (150,037)             --
                                                          -----------     -----------     -----------
Net cash used by financing activities                        (586,031)       (593,456)     (1,080,619)

Increase (decrease) in cash and cash equivalents                   --         (11,352)         (7,150)
Cash and cash equivalents at beginning of period                   --          11,352          18,502
                                                          -----------     -----------     -----------
Cash and cash equivalents at end of period                $        --     $        --     $    11,352
                                                          -----------     -----------     -----------
</TABLE>

                 See Notes to Consolidated Financial Statements


13
<PAGE>
                      AMFM OPERATING INC. AND SUBSIDIARIES
  (an indirect, wholly-owned subsidiary of Clear Channel Communications, Inc.)

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Description of Business

      AMFM Operating Inc., together with its subsidiaries, is an indirect,
wholly-owned subsidiary of Clear Channel, a diversified media company with
operations in radio broadcasting, outdoor advertising and live entertainment. As
of December 31, 2003, the Company owned or operated 530 radio stations in 127
markets in the United States. The Company's operations also include Katz Media
Group, Inc. ("Katz"), a full-service media representation firm that sells
national spot advertising time for its clients in the radio and television
industries throughout the United States and for the Company's portfolio of
stations, and a national radio network, which broadcasts advertising and
syndicated programming shows to a national audience.

Clear Channel Push-Down Accounting Adjustments

      Clear Channel accounted for its acquisition of AMFM in 2000 as a purchase
and purchase accounting adjustments, including goodwill, have been pushed down
and are reflected in the financial statements of the Company and its
subsidiaries. In addition, corporate expense is allocated to the financial
statements of AMFM Operating based on Clear Channel's estimate of actual
expense.

Principles of Consolidation

      The consolidated financial statements include the accounts of AMFM
Operating and its subsidiaries. Significant intercompany accounts have been
eliminated in consolidation. Certain amounts in prior years have been
reclassified to conform to the 2003 presentation.

Cash and Cash Equivalents

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

Allowance for Doubtful Accounts

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

Property, Plant and Equipment

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

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

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

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


14
<PAGE>
Intangible Assets

      The Company classifies intangible assets as definite-lived or
indefinite-lived intangible assets, as well as goodwill. Definite-lived
intangibles include primarily talent and representation contracts, both of which
are amortized over the estimated lives of the relationships, typically four to
fifteen years. The Company periodically reviews the appropriateness of the
amortization periods related to its definite-lived assets. These assets are
stated at cost. Indefinite-lived intangibles consist of FCC broadcast licenses.
The excess cost over fair value of net assets acquired is classified as
goodwill. The indefinite-lived intangibles and goodwill are not subject to
amortization, but are tested for impairment at least annually.

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

      At least annually, the Company performs its impairment test for
indefinite-lived intangibles and goodwill using a discounted cash flow model to
determine the assets' fair value. Certain assumptions are used in determining
the fair value, including assumptions about the cash flow growth rates of the
Company's businesses. Additionally, the fair values are significantly impacted
by macro-economic factors including market cash flow multiples and long-term
interest rates that exists at the time that the discounted cash flows models are
prepared. Impairment charges, other than the charge taken under the transitional
rules of Statement of Financial Accounting Standard No. 142, "Goodwill and Other
Intangible Assets" ("Statement 142"), are recorded in amortization expense in
the statement of operations.

Financial Instruments

      Due to their short maturity, the carrying amounts of accounts receivable,
accounts payable and accrued liabilities approximated their fair values at
December 31, 2003 and 2002.

Income Taxes

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

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

Revenue Recognition

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

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

      Revenue from barter transactions is recognized when advertisements are
broadcast. Merchandise or services received are charged to expense when received
or used. Barter and trade revenues for the years ended December 31, 2003, 2002
and 2001, were approximately $59.2 million, $54.4 million and $54.2 million,
respectively, and are included in total revenues. Barter and trade


15
<PAGE>
expenses for the years ended December 31, 2003, 2002 and 2001, were
approximately $60.4 million, $53.4 million and $52.0 million, respectively, and
are included in divisional operating expenses.

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

Advertising Expense

      The Company records advertising expense as it is incurred. Advertising
expenses of $45.9 million, $38.5 million and $50.4 million were recorded during
the years ended December 31, 2003, 2002 and 2001, respectively.

Clear Channel Stock Option Plans

      The Company does not have any compensation plans under which it grants
stock awards to employees. Prior to the merger with Clear Channel, AMFM granted
stock options to the Company's officers and other key employees on behalf of the
Company. Subsequent to the merger, Clear Channel grants stock options to the
Company's officers and other key employees on behalf of the Company.
Approximately 27.1 million options to purchase AMFM common stock were
outstanding as of the merger date and were converted into options to purchase
Clear Channel common stock using the conversion ratio of 0.94. Clear Channel
assumed the outstanding options to purchase AMFM common stock on the same terms
and conditions as were applicable prior to the merger. Non-cash compensation
expense relates to unvested stock options that Clear Channel assumed in the
merger and that are now convertible into Clear Channel stock. To the extent that
these options continue to vest post-merger, we recognize non-cash compensation
expense over the remaining vesting period. The Company recognized non-cash
compensation expense of $1.6 million, $4.4 million and $12.4 million for the
years ended December 31, 2003, 2002 and 2001, respectively, primarily related to
the vesting of executive stock options assumed in the merger with Clear Channel.

      The Company accounts for the stock-based award plans in accordance with
Accounting Principles Board Opinion No. 25, Accounting for Stock Issued to
Employees, and related interpretations, under which compensation expense is
recorded to the extent that the current market price of the underlying stock
exceeds the exercise price.

      The required pro forma net income 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, is as follows:

<TABLE>
<CAPTION>
(In thousands)                                               2003          2002          2001
                                                          ---------     ---------     ---------
<S>                                                       <C>           <C>           <C>
Net income before cumulative effect of a change in
   accounting principle:
      Reported                                            $ 434,032     $ 440,083     $(534,177)
      Pro forma stock compensation expense, net of tax       (3,640)       (2,225)       (2,203)
                                                          ---------     ---------     ---------
      Pro Forma                                           $ 430,392     $ 437,858     $(536,380)
</TABLE>

      The fair value for these options was estimated at the date of grant using
a Black-Scholes option-pricing model with the following assumptions for 2003 and
2002:

<TABLE>
<CAPTION>
                                      2003             2002             2001
                                   -----------      -----------      -----------
<S>                                <C>              <C>              <C>
Risk-free interest rate            2.9% - 3.8%      3.7% - 4.4%      4.9% - 5.2%
Dividend yield                          0%               0%               0%
Volatility factors                  43% - 47%        39% - 45%        36% - 37%
Expected life in years                5 - 8            3 - 8            6 - 8
</TABLE>

Use of Estimates

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


16
<PAGE>
Dividend Policy

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

      On December 31, 2003, the Board authorized a dividend in the amount of
$13.5 million payable to Clear Channel. Payments of dividends by the Company to
Clear Channel are considered restricted payments under the Company's bond
indenture. The Company had approximately $7.9 billion available for restricted
payments at December 31, 2003. The amount and frequency of future dividends will
be determined by the Company's Board of Directors in light of the earnings and
financial condition of the Company at such time, and no assurance can be given
that dividends will be declared in the future.

Omission of Per Share Information

      Net income (loss) per share information is not presented as such
information is not meaningful. During the three-year period ended December 31,
2003, all of the issued and outstanding shares of the Company's common stock
were owned, directly or indirectly, by Clear Channel.

New Accounting Pronouncements

      On January 1, 2003, the Company adopted Statement of Financial Accounting
Standards No. 143, Accounting for Asset Retirement Obligations ("Statement
143"). Statement 143 applies to legal obligations associated with the retirement
of long-lived assets that result from acquisition, construction, development
and/or the normal operation of a long-lived asset. Adoption of this statement
did not materially impact the Company's financial position or results of
operations.

      On January 1, 2003, the Company adopted Statement of Financial Accounting
Standards No. 146, Accounting for Costs Associated with Exit or Disposal
Activities ("Statement 146"). Statement 146 addresses the accounting and
reporting for costs associated with exit or disposal activities and nullifies
Emerging Issues Task Force ("EITF") Issue No. 94-3, "Liability Recognition for
Certain Employee Terminations Benefits and Other Costs to Exit an Activity." It
also substantially nullifies EITF Issue No. 88-10, "Costs Associated with Lease
Modification or Termination." Adoption of this statement did not materially
impact the Company's financial position or results of operations.

      On January 1, 2003, the Company adopted Financial Accounting Standards
Board Interpretation No. 45, Guarantor's Accounting and Disclosure Requirements
for Guarantees, Including Indirect Guarantees of Indebtedness of Others ("FIN
45"). FIN 45 applies to contracts or indemnification agreements that
contingently require the guarantor to make payments to the guaranteed party
based on changes in an underlying that is related to an asset, liability, or an
equity security of the guaranteed party. FIN 45's disclosure requirements were
effective for financial statements of interim or annual periods ending after
December 15, 2002. FIN 45's initial recognition and initial measurement
provisions were applicable on a prospective basis to guarantees issued or
modified after December 31, 2002, irrespective of the guarantor's fiscal
year-end. The Company adopted the disclosure requirements of this Interpretation
for its 2002 annual report. Adoption of the initial recognition and initial
measurement requirements of FIN 45 did not materially impact the Company's
financial position or results of operations.

      On January 1, 2003, the Financial Accounting Standards Board issued
Financial Accounting Standards Board Interpretation No. 46, Consolidation of
Variable Interest Entities ("FIN 46"). In addition, on December 24, 2003, the
Financial Accounting Standards Board issued a revision of FIN 46 (the "Revised
Interpretation"). The Revised Interpretation addresses consolidation of business
enterprises of variable interest entities and is effective for variable interest
entities for the first fiscal year or interim period ending after March 15,
2004. The Company does not believe the adoption of FIN 46 will have a material
impact on the Company's financial position or results of operations.

NOTE B - INTANGIBLE ASSETS AND GOODWILL

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


17
<PAGE>
      The following table presents the impact of Statement 142 on net income
(loss) as if the standard had been in effect for the year ended December 31,
2001:

<TABLE>
<CAPTION>
     (In thousands)
<S>                                                             <C>
      Adjusted net income (loss):
         Reported net income (loss)                             $(534,177)
         Add back: goodwill amortization                          284,173
         Add back: license amortization                           681,897
         Tax impact                                              (259,121)
                                                                ---------
      Adjusted net income                                       $ 172,772
                                                                ---------
</TABLE>

Definite-lived Intangibles

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

      Total amortization expense from definite-lived intangibles for the years
ended December 31, 2003 and 2002 was $25.0 million and $19.9 million,
respectively. The gross carrying value of the contracts at December 31, 2003 was
$239.8 million and accumulated amortization was $63.5 million. The gross
carrying value of the contracts at December 31, 2002 was $198.5 million and
accumulated amortization was $38.5 million. The following table presents the
Company's estimate of amortization expense for each of the five succeeding
fiscal years for definite-lived intangible assets in existence at December 31,
2003:

<TABLE>
<CAPTION>
      (In thousands)
<S>                            <C>
        2004                   $ 28,106
        2005                     26,594
        2006                     21,627
        2007                     14,858
        2008                     13,590
</TABLE>

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

Indefinite-lived Intangibles

      The Company's indefinite-lived intangible assets consist of FCC broadcast
licenses. 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.

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

Goodwill

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


18
<PAGE>
reporting unit and the implied fair value of its goodwill, resulting in a
write-off of a portion of goodwill. The following table presents the changes in
the carrying amount of goodwill for the year ended December 31, 2002:

<TABLE>
<CAPTION>
(In thousands)
<S>                                                                 <C>
Balance as of January 1, 2002                                       $ 6,744,779
Adjustments                                                             (63,216)
Impairment loss related to the
   adoption of Statement 142                                         (3,886,921)
                                                                    -----------
Balance as of December 31, 2002                                     $ 2,794,642
                                                                    -----------
</TABLE>

There was no change to the Company's goodwill balance during the year ended
December 31, 2003.

Other

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

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

NOTE C - RESTRUCTURING

      The Company has recorded a liability in purchase accounting from its
merger with Clear Channel in 2000 ("AMFM merger") primarily related to severance
for terminated employees and lease terminations as follows:

<TABLE>
<CAPTION>
      (In thousands)
                                                                Years Ended December 31,
                                                           ----------------------------------
                                                             2003         2002         2001
                                                           --------     --------     --------
<S>                                                        <C>          <C>          <C>
      Severance and lease termination costs:
         Accrual at January 1                              $ 29,450     $ 36,310     $ 56,855
         Adjustments to restructuring accrual                    --           --       11,300
         Payments charged against restructuring accrual      (2,934)      (6,860)     (31,845)
                                                           --------     --------     --------
      Remaining severance and lease termination accrual    $ 26,516     $ 29,450     $ 36,310
                                                           --------     --------     --------
</TABLE>

      The remaining severance and lease accrual is comprised of $19.8 million of
severance and $6.7 million of lease termination obligations. The severance
accrual will be paid over the next several years. The lease termination accrual
will be paid over the next four years. During 2003, $1.8 million was paid and
charged to the restructuring reserve related to severance. The adjustments to
the restructuring accrual presented above, which are primarily related to
additional severance and compensation accruals, were recorded within goodwill.
As the Company made adjustments to finalize the purchase price allocation
related to the AMFM merger in 2001, any potential excess reserves will be
recorded as an adjustment to the purchase price.


19
<PAGE>
NOTE D - ACQUISITIONS AND DISPOSITIONS

      In 2003 and 2002, the Company had no significant acquisition or
divestiture activity.

      In 2001, the Company disposed of one radio station held in trust for
approximately $3.0 million in restricted cash; and acquired 104 radio stations
for $5.6 million in cash, $191.9 million in restricted cash plus the exchange of
six radio stations valued at $103.0 million. In addition, the Company acquired
national representation contracts for $54.3 million in cash. The foregoing
acquisitions were accounted for as purchases. Accordingly, the accompanying
consolidated financial statements include the results of operations of the
acquired entities from their respective dates of acquisition.

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

      The Clear Channel promissory note and long-term debt consists of the
following:

<TABLE>
<CAPTION>
            (In millions)
                                                      December 31,    December 31,
                                                          2003            2002
                                                      ------------    ------------
<S>                                                   <C>             <C>
            Clear Channel Promissory Note               $  300.0        $  300.0
                                                        --------        --------

            Long-Term Debt:
              8% Senior Notes                              688.1           690.8
              8.125% Notes                                    --           380.2
              8.75% Notes                                     --           194.5
                                                        --------        --------
            Total long-term debt (a)                    $  688.1        $1,265.5
                                                        --------        --------
</TABLE>

(a) Includes $16.8 million and $44.6 million at December 31, 2003 and 2002,
respectively, in unamortized fair value purchase accounting adjustments related
to the merger with Clear Channel. The fair value of the Company's debt was
$780.9 million and $1.3 billion at December 31, 2003 and 2002, respectively.
Fair value was determined based on quoted market prices.

Clear Channel Promissory Note

      The promissory note bears interest at 7% per annum. Accrued interest plus
the note balance is payable on August 30, 2010 or upon demand. The Company is
entitled to borrow additional funds and to repay outstanding borrowings, subject
to the terms of the promissory note. The Company has an understanding with Clear
Channel that Clear Channel currently has no intention of demanding payment on
this note prior to its maturity.

      On February 10, 2003, Clear Channel called all of the Company's
outstanding 8.125% senior subordinated notes due 2007 for $379.2 million plus
accrued interest. On February 18, 2003, Clear Channel called all of the
Company's outstanding 8.75% senior subordinated notes due 2007 for $193.4
million plus accrued interest. The Company financed the redemption of the notes
through borrowings on the Clear Channel promissory note, which were subsequently
repaid through cash flows from operations. As a result of the redemptions, a
gain on the early extinguishment of debt of $1.7 million was recorded in "Other
income (expense) - net".

8% Senior Notes

      On November 17, 1998, the Company issued $750.0 million aggregate
principal amount of 8% senior notes due 2008 (the "8% senior notes"). Interest
on the 8% senior notes is payable semiannually, commencing on May 1, 1999. The
8% senior notes mature on November 1, 2008 and are redeemable, in whole or in
part, at the option of the Company at a redemption price equal to 100% plus the
applicable premium (as defined in the indenture governing the 8% senior notes)
plus accrued and unpaid interest. Upon the occurrence of a change in control (as
defined in the indenture governing the 8% senior notes), the holders of the
notes have the right to require the Company to repurchase all or any part of the
notes at a purchase price equal to 101% plus accrued and unpaid interest.

      The 8% senior notes are senior unsecured obligations of the Company and
rank equal in right of payment to the obligations of the Company and all other
indebtedness of the Company not expressly subordinated to the 8% senior notes.
The 8% senior notes are fully and unconditionally guaranteed, on a joint and
several basis, by all of the Company's direct and indirect subsidiaries.


20
<PAGE>
      The 8% senior notes contain customary restrictive covenants, which, among
other things and with certain exceptions, limit the ability of the Company to
incur additional indebtedness and liens in connection therewith, enter into
certain transactions with affiliates, pay dividends, consolidate, merge or
effect certain asset sales, issue additional stock, effect an asset swap and
make acquisitions. Under the 8% senior notes, the Company had approximately $7.9
billion available for restricted payments at December 31, 2003. The redemptions
of the 8.125% notes and 8.75% notes in February 2003 were restricted payments
under the 8% senior notes.

Other

      At December 31, 2003, the Company was in compliance with all debt
covenants. The Company expects to be in compliance throughout 2004.

      The Company has no scheduled maturities of long-term debt until 2008.

NOTE F - COMMITMENTS, CONTINGENCIES AND GUARANTEES

      The Company has guaranteed a portion of Clear Channel's bank credit
facilities, including a reducing revolving line of credit facility and a $1.5
billion five-year multi-currency revolving credit facility with outstanding
balances at December 31, 2003 of $610.5 million and $50.0 million, respectively.
At December 31, 2003, the Company's contingent liability under these guarantees
was $1.0 billion.

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

      As of December 31, 2003, the Company's future minimum rental commitments
under non-cancelable operating lease agreements and minimum payments under
non-cancelable contracts, both with terms in excess of one year, consist of the
following:

<TABLE>
<CAPTION>
                 (In thousands)
                                                  Non-
                                               Cancelable         Non-
                                               Operating       Cancelable
                                                 Leases         Contracts
                                               ----------      ----------
                 Year ending December 31:
<S>                                             <C>             <C>
                  2004                          $ 52,803        $ 36,225
                  2005                            48,930          31,458
                  2006                            46,348          18,448
                  2007                            43,660           7,318
                  2008                            40,101           4,416
                  Thereafter                     164,547           5,138
                                                --------        --------
                                                $396,389        $103,003
                                                --------        --------
</TABLE>

      Rental expense for operating leases was approximately $53.7 million, $50.0
million and $47.6 million for the years ended December 31, 2003, 2002 and 2001,
respectively.

      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.


21
<PAGE>
NOTE G - INCOME TAXES

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

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

<TABLE>
<CAPTION>
                  (In thousands)
                                                           Year Ended        Year Ended       Year Ended
                                                          December 31,      December 31,     December 31,
                                                              2003              2002             2001
                                                          ------------      ------------     ------------
<S>                                                       <C>               <C>              <C>
                  Current - federal                         $ 156,698        $ 108,143        $ 100,191
                  Current - state                              15,818            9,757           12,311
                                                            ---------        ---------        ---------
                        Total current                         172,516          117,900          112,502
                                                            ---------        ---------        ---------

                  Deferred - federal                          113,213          167,312         (234,154)
                  Deferred - state                              9,704           14,341          (20,070)
                                                            ---------        ---------        ---------
                        Total deferred                        122,917          181,653         (254,224)
                                                            ---------        ---------        ---------
                  Total income tax expense (benefit)        $ 295,433        $ 299,553        $(141,722)
                                                            ---------        ---------        ---------
</TABLE>

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

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

<TABLE>
<CAPTION>
            (In thousands)
                                                              Year Ended       Year Ended        Year Ended
                                                             December 31,     December 31,      December 31,
                                                                 2003             2002              2001
                                                             ------------     ------------      ------------
<S>                                                          <C>              <C>               <C>
            Computed "expected" tax expense (benefit)         $ 255,313        $ 258,873         $(236,565)
            Amortization of goodwill                                 --               --            99,460
            State income taxes, net of federal benefit           25,522           24,098            (7,759)
            Non-deductible meals and entertainment                2,631            2,367             2,636
            Other, net                                           11,967           14,215               506
                                                              ---------        ---------         ---------
                                                              $ 295,433        $ 299,553         $(141,722)
                                                              ---------        ---------         ---------
</TABLE>


22
<PAGE>
      Significant components of the Company's deferred tax assets and
liabilities as of December 31, 2003 and 2002 are as follows:

<TABLE>
<CAPTION>
            (In thousands)
                                                   December 31,      December 31,
                                                       2003              2002
                                                   ------------      ------------
<S>                                                <C>               <C>
            Deferred tax assets:
               Restructuring reserves               $   10,702        $   36,404
               Accrued non-cash compensation            39,786            39,174
               Long-term debt                           12,229            25,469
               Other                                     5,339             7,748
                                                    ----------        ----------
            Total deferred tax assets                   68,056           108,795
                                                    ----------        ----------

            Deferred tax liabilities:
               Intangibles and fixed assets          1,958,894         1,848,608
               Investments                               1,410             4,735
               Other                                       493            25,276
                                                    ----------        ----------
            Total deferred tax liabilities           1,960,797         1,878,619
                                                    ----------        ----------
            Net deferred tax liabilities            $1,892,741        $1,769,824
                                                    ----------        ----------
</TABLE>

The deferred tax liability relating to intangibles and fixed assets primarily
relates to the difference in book and tax basis recorded as a result of the
Clear Channel merger. In accordance with Statement No. 142, the Company no
longer amortizes FCC licenses. Thus, a deferred tax benefit for the difference
between book and tax amortization for the Company's FCC licenses is no longer
recognized, as these assets are no longer amortized for book purposes. As a
result, this deferred tax liability will not reverse over time unless the
Company recognizes future impairment charges on its FCC licenses or sells its
FCC licenses. As the Company continues to amortize its tax basis in its FCC
licenses, the deferred tax liability will increase over time.

      Deferred tax assets and liabilities are computed by applying the U.S.
federal and state income tax rate in effect to the gross amounts of temporary
differences.

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

      All tax liabilities owed by the Company are paid by Clear Channel through
the Clear Channel promissory note.

NOTE H - RELATED PARTY AND OTHER TRANSACTIONS

      The Company has outstanding a promissory note payable to Clear Channel of
$300.0 million as of December 31, 2003 and 2002. This promissory note represents
net borrowings from Clear Channel to redeem the Company's senior credit facility
and certain other notes, as well as operating liabilities such as trade payables
and accrued payroll. These borrowings are being offset by payments made to Clear
Channel generated by the Company's operations. Borrowings under the promissory
note bear interest at 7% per annum. Interest expense on borrowings under the
promissory note was $26.8 million, $18.6 million and $70.6 million for years
ended December 31, 2003, 2002 and 2001, respectively.

      The Company provides media representation and inventory tracking services
to Clear Channel. Revenue for these services are recorded at fair value and were
$26.9 million, $23.6 million and $20.3 million for the years ended December 31,
2003, 2002 and 2001, respectively.

      Additionally, the Company receives syndicated programming services from
Clear Channel's Premiere Radio Networks, marketing services from Clear Channel's
Critical Mass Media, outdoor advertising services from Clear Channel Outdoor and
promotional services from Clear Channel Entertainment. Divisional operating
exepnses for these services are recorded at fair value and are not material.


23
<PAGE>
NOTE I - OTHER INFORMATION

<TABLE>
<CAPTION>
      (In thousands)                                                       December 31,    December 31,
                                                                               2003            2002
                                                                           ------------    ------------
<S>                                                                        <C>             <C>
      The following details the components of "Other current assets":
          Prepaid expenses                                                   $ 10,828        $ 14,187
          Representation contracts receivable                                      --          12,019
          Other                                                                10,184           8,110
                                                                             --------        --------
      Total other current assets                                             $ 21,012        $ 34,316
                                                                             --------        --------

      The following details the components of "Accrued expenses":
          Acquisition accruals                                               $ 31,601        $ 37,704
          Representation contracts payable                                      4,231          11,320
          Accrued commissions                                                  12,812          20,995
          Other accrued expenses                                               27,497          37,040
                                                                             --------        --------
      Total accrued expenses                                                 $ 76,141        $107,059
                                                                             --------        --------
</TABLE>

<TABLE>
<CAPTION>
      (In thousands)
                                                                                    Year Ended       Year Ended      Year Ended
                                                                                     December         December      December 31,
                                                                                     31, 2003         31, 2002          2001
                                                                                    ----------       ----------     ------------
<S>                                                                                  <C>              <C>             <C>
      The following details the components of "Other income (expense) - net":
          Gain on disposition of representation contracts                            $  1,450         $ 14,836        $ 13,463
          Gain on early extinguishment of debt                                          1,647            6,232              --
          Other, net                                                                   (1,848)           4,166          (3,444)
                                                                                     --------         --------        --------
      Total other income                                                             $  1,249         $ 25,234        $ 10,019
                                                                                     --------         --------        --------
</TABLE>

Gain (loss) on marketable securities

      During 2003, the Company recorded a loss of $5.0 million related to the
impairment of an investment in a radio technology firm that was deemed to be
other than temporary. During 2002, the Company recognized a gain of
approximately $4.0 million on the sale of its shares of Entravision
Communications Corporation. During 2001, the Company recognized a loss of $235.0
million on the sale of its shares of Lamar Advertising Company.

NOTE J - SEGMENT DATA

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

Radio Broadcasting

      As of December 31, 2003 we owned or operated 530 radio stations in 127
markets in the United States. The Company's radio broadcasting operations also
include a national radio network, which broadcasts advertising and syndicated
programming shows to a national audience.

Other

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


                                       24
<PAGE>
      Separate financial data for each of the Company's operating segments is
provided below:

<TABLE>
<CAPTION>
      (In thousands)                        Radio
                                         Broadcasting          Other            Corporate         Eliminations       Consolidated
                                         ------------       ------------       ------------       ------------       ------------
<S>                                      <C>                <C>                <C>                <C>                <C>
      Year ended December 31, 2003
      Revenue                            $  1,883,336       $    202,456       $         --       $    (29,280)      $  2,056,512
      Divisional operating expenses           960,783            171,152                 --            (29,280)         1,102,655
      Non-cash compensation                     1,609                 --                 --                 --              1,609
      Depreciation and amortization            44,586             30,683              2,812                 --             78,081
      Corporate expenses                           --                 --             52,623                 --             52,623
                                         ------------       ------------       ------------       ------------       ------------
      Operating income (loss)            $    876,358       $        621       $    (55,435)      $         --       $    821,544
                                         ------------       ------------       ------------       ------------       ------------

      Intersegment Revenues              $         --       $     29,280       $         --       $         --       $     29,280
      Identifiable assets                $ 10,928,515       $    249,384       $     70,386       $         --       $ 11,248,285
      Capital expenditures               $     36,742       $      2,321       $        779       $         --       $     39,842

      Year ended December 31, 2002
      Revenue                            $  1,868,412       $    201,532       $         --       $    (30,785)      $  2,039,159
      Divisional operating expenses           935,593            172,402                 --            (30,785)         1,077,210
      Non-cash compensation                     4,400                 --                 --                 --              4,400
      Depreciation and amortization            48,248             25,288              2,703                 --             76,239
      Corporate expenses                           --                 --             58,864                 --             58,864
                                         ------------       ------------       ------------       ------------       ------------
      Operating income (loss)            $    880,171       $      3,842       $    (61,567)      $         --       $    822,446
                                         ------------       ------------       ------------       ------------       ------------

      Intersegment Revenues              $         --       $     30,785       $         --       $         --       $     30,785
      Identifiable assets                $ 10,960,084       $    244,263       $     79,942       $         --       $ 11,284,289
      Capital expenditures               $     50,087       $      1,826       $      1,398       $         --       $     53,311

      Year ended December 31, 2001
      Revenue                            $  1,760,242       $    192,884       $         --       $    (34,855)      $  1,918,271
      Divisional operating expenses           952,133            172,947                 --            (34,855)         1,090,225
      Non-cash compensation                    12,372                 --                 --                 --             12,372
      Depreciation and amortization         1,013,714             20,380              2,334                 --          1,036,428
      Corporate expenses                           --                 --             45,769                 --             45,769
                                         ------------       ------------       ------------       ------------       ------------
      Operating income (loss)            $   (217,977)      $       (443)      $    (48,103)      $         --       $   (266,523)
                                         ------------       ------------       ------------       ------------       ------------

      Intersegment Revenues              $         --       $     34,855       $         --       $         --       $     34,855
      Identifiable assets                $ 23,710,698       $    303,066       $     81,439       $         --       $ 24,095,203
      Capital expenditures               $     57,047       $      4,912       $     26,223       $         --       $     88,182
</TABLE>


25
<PAGE>
NOTE K - QUARTERLY FINANCIAL DATA (UNAUDITED)

<TABLE>
<CAPTION>
                                                              ---------------------------------------------------------------
(In thousands)                                                Quarter Ended   Quarter Ended    Quarter Ended    Quarter Ended
                                                                March 31,        June 30,      September 30,     December 31,
                                                                   2003            2003             2003             2003
                                                              -------------   -------------    -------------    -------------
<S>                                                           <C>             <C>              <C>              <C>
Revenues                                                       $   438,458     $   542,002      $   533,250      $   542,802
Operating income                                                   153,124         228,433          225,466          214,521
Net income                                                          77,146         121,273          119,704          115,909
</TABLE>

<TABLE>
<CAPTION>
                                                              ---------------------------------------------------------------
(In thousands)                                                Quarter Ended   Quarter Ended    Quarter Ended    Quarter Ended
                                                                March 31,        June 30,      September 30,     December 31,
                                                                   2002            2002             2002             2002
                                                              -------------   -------------    -------------    -------------
<S>                                                           <C>             <C>              <C>              <C>
Revenues                                                       $   429,182     $   540,254      $   520,795      $   548,928
Operating income                                                   146,029         237,264          219,488          219,665
Income before cumulative effect of a change in accounting
  principle
                                                                    73,956         130,975          115,910          119,242
Net income (loss)                                               (9,305,309)        130,975          115,910          119,242
</TABLE>

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

      None.

ITEM 9A. 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-K, 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
<PAGE>
      PART III

ITEM 10. Directors and Executive Officers of the Registrant

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

ITEM 11. Executive Compensation

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

ITEM 12. Security Ownership of Certain Beneficial Owners and Management

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

ITEM 13. Certain Relationships and Related Transactions

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

ITEM 14. Principal Accountant Fees and Services

      Audit Fees. Ernst & Young LLP billed Clear Channel $180,500 and $163,000
for audit services rendered for the audit of AMFM Operating's annual financial
statements for the years ended December 31, 2003 and 2002, respectively. These
fees include the reviews of quarterly financial statements, assistance with
review of documents filed with the SEC, attest services, work done by tax
professionals in connection with the audit or quarterly reviews, and accounting
consultations and research work necessary to comply with generally accepted
auditing standards.

      Audit-Related Fees. AMFM Operating had no audit-related fees billed during
2003 or 2002 for services provided by Ernst & Young LLP.

      Tax Fees. AMFM Operating had no tax fees billed during 2003 or 2002 for
services provided by Ernst & Young LLP.

      All Other Fees. AMFM Operating had no other fees billed during 2003 or
2002 for services provided by Ernst & Young LLP.

      All fees are pre-approved by Clear Channel's audit committee. Clear
Channel's Audit Committee pre-approves all audit and permitted non-audit
services (including the fees and terms thereof) to be performed for AMFM
Operating by its independent auditor. The chairperson of Clear Channel's Audit
Committee may represent the entire committee for the purposes of pre-approving
permissible non-audit services, provided that the decision to pre-approve any
service is disclosed to the Audit Committee no later than its next scheduled
meeting.

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

      (a) 1. Financial Statements.

      The following consolidated financial statements are included in Item 8.

      Consolidated Balance Sheets as of December 31, 2003 and 2002

      Consolidated Statements of Operations for the Years Ended December 31,
      2003, 2002 and 2001.

      Consolidated Statements of Changes in Equity for the Years Ended December
      31, 2003, 2002 and 2001.

      Consolidated Statements of Cash Flows for the Years Ended December 31,
      2003, 2002 and 2001.

      Notes to Consolidated Financial Statements

      (a) 2. Financial Statement Schedule.


27
<PAGE>
The following financial statement schedule for the years ended December 31,
2003, 2002 and 2001 and related report of independent auditors is filed as part
of this report and should be read in conjunction with the consolidated financial
statements.

Schedule II Valuation and Qualifying Accounts

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


28
<PAGE>
         REPORT OF INDEPENDENT AUDITORS ON FINANCIAL STATEMENT SCHEDULE

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

We have audited the consolidated financial statements of AMFM Operating Inc. (an
indirect, wholly-owned subsidiary of Clear Channel Communications, Inc.) and
subsidiaries as of December 31, 2003 and 2002, and for each of the three years
in the period ended December 31, 2003 and have issued our report thereon dated
March 12, 2004. Our audits also included the financial statement schedule listed
in the Index at Item 15(a)(2). This schedule is the responsibility of the
Company's management. Our responsibility is to express an opinion based on our
audits.

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


                                        /s/ ERNST & YOUNG LLP

San Antonio, Texas
March 12, 2004


29
<PAGE>
                                                                     SCHEDULE II

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

                        VALUATION AND QUALIFYING ACCOUNTS
                                 (In thousands)

<TABLE>
<CAPTION>
                                                          Additions       Additions
                                           Balance at     charged to      charged                        Balance
                                           beginning      costs and       to other                        at end
            Description                    of period       expenses       accounts      Write-offs      of period
                                           ---------      ----------      ---------     ----------      ---------
<S>                                        <C>            <C>             <C>           <C>             <C>
Allowance for doubtful accounts:
  Year ended December 31, 2003 .....        $14,911        $15,245        $     --        $17,361        $12,795
                                            =======        =======        ========        =======        =======
  Year ended December 31, 2002 .....        $12,883        $21,818        $     --        $19,790        $14,911
                                            =======        =======        ========        =======        =======
  Year ended December 31, 2001 .....        $19,714        $30,257        $     --        $37,088        $12,883
                                            =======        =======        ========        =======        =======
</TABLE>


30
<PAGE>
                                                                     SCHEDULE II

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

                        VALUATION AND QUALIFYING ACCOUNTS
                                 (In thousands)

<TABLE>
<CAPTION>
                                                                  Charges to
                                                  Balance at        Costs,                                      Balance at
                                                 beginning of    Expenses and                                     end of
              Description                           period          Other         Deletions        Other          period
                                                 ------------    ------------     ---------       --------      ----------
<S>                                                 <C>            <C>             <C>            <C>             <C>
Deferred tax asset valuation allowance:
  Year ended December 31, 2003 .............        $    --        $     --        $    --        $     --        $    --
                                                    =======        ========        =======        ========        =======
  Year ended December 31, 2002 .............        $39,616        $     --        $39,616        $     --        $    --
                                                    =======        ========        =======        ========        =======
  Year ended December 21, 2001 .............        $39,616        $     --        $    --        $     --        $39,616
                                                    =======        ========        =======        ========        =======
</TABLE>


31
<PAGE>
      (a) 3. Exhibits

<TABLE>
<CAPTION>
EXHIBIT
  NO.                                 DESCRIPTION OF EXHIBIT
                  --------------------------------------------------------------
<S>       <C>     <C>
3.1(1)    --      Amended and Restated Certificate of Incorporation of AMFM
                  Operating Inc.

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

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

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

4.3(5)    --      Indenture, dated as of June 24, 1997, governing the 8 3/4%
                  Senior Subordinated Notes due 2007 of AMFM Operating Inc. (the
                  "8 3/4% Notes Indenture").

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

4.5(7)    --      Second Supplemental Indenture, dated as of October 28,
                  1997, to the 8 3/4% Notes Indenture.

4.6(7)    --      Third Supplemental Indenture, dated as of August 23, 1999,
                  to the 8 3/4% Notes Indenture.

4.7(7)    --      Fourth Supplemental Indenture, dated as of November 19,
                  1999, to the 8 3/4% Notes Indenture.

4.8(7)    --      Fifth Supplemental Indenture, dated as of January 18, 2000,
                  to the 8 3/4% Notes Indenture.

4.9(8)    --      Indenture, dated as of December 22, 1997, governing the
                  8 1/8% Senior Subordinated Notes due 2007 of AMFM Operating
                  Inc. (the "8 1/8% Notes Indenture").

4.10(7)   --      First Supplemental Indenture, dated as of August 23, 1999,
                  to the 8 1/8% Notes Indenture.

4.11(7)   --      Second Supplemental Indenture, dated as of November 19,
                  1999, to the 8 1/8% Notes Indenture.

4.12(7)   --      Third Supplemental Indenture, dated as of January 18, 2000,
                  to the 8 1/8% Notes Indenture.

4.13(9)   --      Indenture, dated as of November 17, 1998, governing the 8%
                  Senior Notes due 2008 of AMFM Operating Inc. (the "8% Notes
                  Indenture").

4.14(7)   --      First Supplemental Indenture, dated as of August 23, 1999,
                  to the 8% Notes Indenture.

4.15(7)   --      Second Supplemental Indenture, dated as of November 19,
                  1999, to the 8% Notes Indenture.

4.16(7)   --      Third Supplemental Indenture, dated as of January 18, 2000,
                  to the 8% Notes Indenture.

4.17(10)  --      Intercompany Promissory Note between AMFM Operating Inc.
                  and Clear Channel Communications, Inc. dated August 30, 2000.

10.1(11)  --      Stock Option Grant Agreement, dated July 13, 1999, by and
                  between AMFM Inc. and HMCo for 335,099 shares.
</TABLE>


32
<PAGE>
<TABLE>
<S>       <C>     <C>
10.2(11)  --      Stock Option Grant Agreement, dated July 13, 1999, by and
                  between AMFM Inc. and HMCo for 634,517 shares.

31.1      --      Certification of Chief Executive Officer Pursuant to Rules
                  13a-14(a) and 15d-14(a) under the Securities Exchange Act of
                  1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley
                  Act of 2002.

31.2      --      Certification of Chief Financial Officer Pursuant to Rules
                  13a-14(a) and 15d-14(a) under the Securities Exchange Act of
                  1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley
                  Act of 2002.

32.1      --      Certification of Chief Executive Officer Pursuant to 18
                  U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the
                  Sarbanes-Oxley Act of 2002.

32.2      --      Certification of Chief Financial Officer Pursuant to 18
                  U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the
                  Sarbanes-Oxley Act of 2002.
</TABLE>

----------

      (1)   Incorporated by reference to Exhibit 3.1 to the Quarterly Report on
            Form 10-Q of Capstar Communications, Inc. for the quarterly period
            ending June 30, 1999.

      (2)   Incorporated by reference to Exhibits to SFX Broadcasting, Inc.'s
            Registration Statement on Form S-3, initially filed November 4,
            1996, as amended (Registration Number 333-15469).

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

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

      (5)   Incorporated by reference to Exhibit 4.1 to the Current Report on
            Form 8-K of Chancellor Broadcasting Company and Chancellor Radio
            Broadcasting Company filed on July 17, 1997.

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

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

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

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

      (10)  The Company has not filed long-term debt instruments where the total
            amount under such instruments is less than ten percent of the total
            assets of the Company and its subsidiaries on a consolidated basis.
            However, the Company will furnish a copy of such instruments to the
            Commission upon request.

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

      (b) Reports on Form 8-K.

            None.


33
<PAGE>
                                   SIGNATURES

      Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized, on the 26th day of
March, 2004.

                                        AMFM OPERATING INC.


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

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

<TABLE>
<CAPTION>
              Signature                                  Title                               Date
              ---------                                  -----                               ----
<S>                                     <C>                                             <C>

          /s/ L. LOWRY MAYS             Chairman, Chief Executive Officer and           March 26, 2004
      -----------------------------      Director
            L. Lowry Mays                (Principal Executive Officer)


          /s/ MARK P. MAYS              President, Chief Operating Officer and          March 26, 2004
      -----------------------------      Director
            Mark P. Mays


         /s/ RANDALL T. MAYS            Executive Vice President, Chief Financial       March 26, 2004
      -----------------------------      Officer and Director
           Randall T. Mays               (Principal Financial Officer)


      /s/ HERBERT W. HILL, JR.          Senior Vice President and Chief                 March 26, 2004
      -----------------------------      Accounting Officer
        Herbert W. Hill, Jr.             (Principal Accounting Officer)
</TABLE>


34
<PAGE>
                                INDEX TO EXHIBITS

<TABLE>
<CAPTION>
EXHIBIT
  NO.                                 DESCRIPTION OF EXHIBIT
                                      ----------------------
<S>       <C>     <C>

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

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

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

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

4.3(5)    --      Indenture, dated as of June 24, 1997, governing the 8 3/4%
                  Senior Subordinated Notes due 2007 of AMFM Operating Inc. (the
                  "8 3/4% Notes Indenture").

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

4.5(7)    --      Second Supplemental Indenture, dated as of October 28,
                  1997, to the 8 3/4% Notes Indenture.

4.6(7)    --      Third Supplemental Indenture, dated as of August 23, 1999,
                  to the 8 3/4% Notes Indenture.

4.7(7)    --      Fourth Supplemental Indenture, dated as of November 19,
                  1999, to the 8 3/4% Notes Indenture.

4.8(7)    --      Fifth Supplemental Indenture, dated as of January 18, 2000,
                  to the 8 3/4% Notes Indenture.

4.9(8)    --      Indenture, dated as of December 22, 1997, governing the
                  8 1/8% Senior Subordinated Notes due 2007 of AMFM Operating
                  Inc. (the "8 1/8% Notes Indenture").

4.10(7)   --      First Supplemental Indenture, dated as of August 23, 1999,
                  to the 8 1/8% Notes Indenture.

4.11(7)   --      Second Supplemental Indenture, dated as of November 19,
                  1999, to the 8 1/8% Notes Indenture.

4.12(7)   --      Third Supplemental Indenture, dated as of January 18, 2000,
                  to the 8 1/8% Notes Indenture.

4.13(9)   --      Indenture, dated as of November 17, 1998, governing the 8%
                  Senior Notes due 2008 of AMFM Operating Inc. (the "8% Notes
                  Indenture").

4.14(7)   --      First Supplemental Indenture, dated as of August 23, 1999,
                  to the 8% Notes Indenture.

4.15(7)   --      Second Supplemental Indenture, dated as of November 19,
                  1999, to the 8% Notes Indenture.

4.16(7)   --      Third Supplemental Indenture, dated as of January 18, 2000,
                  to the 8% Notes Indenture.

4.17(10)  --      Intercompany Promissory Note between AMFM Operating Inc.
                  and Clear Channel Communications, Inc. dated August 30, 2000.

10.1(11)  --      Stock Option Grant Agreement, dated July 13, 1999, by and
                  between AMFM Inc. and HMCo for 335,099 shares.
</TABLE>
<PAGE>
<TABLE>
<S>       <C>     <C>
10.2(11)  --      Stock Option Grant Agreement, dated July 13, 1999, by and
                  between AMFM Inc. and HMCo for 634,517 shares.

31.1      --      Certification of Chief Executive Officer Pursuant to Rules
                  13a-14(a) and 15d-14(a) under the Securities Exchange Act of
                  1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley
                  Act of 2002.

31.2      --      Certification of Chief Financial Officer Pursuant to Rules
                  13a-14(a) and 15d-14(a) under the Securities Exchange Act of
                  1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley
                  Act of 2002.

32.1      --      Certification of Chief Executive Officer Pursuant to 18
                  U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the
                  Sarbanes-Oxley Act of 2002.

32.2      --      Certification of Chief Financial Officer Pursuant to 18
                  U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the
                  Sarbanes-Oxley Act of 2002.
</TABLE>

----------

      (1)   Incorporated by reference to Exhibit 3.1 to the Quarterly Report on
            Form 10-Q of Capstar Communications, Inc. for the quarterly period
            ending June 30, 1999.

      (2)   Incorporated by reference to Exhibits to SFX Broadcasting, Inc.'s
            Registration Statement on Form S-3, initially filed November 4,
            1996, as amended (Registration Number 333-15469).

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

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

      (5)   Incorporated by reference to Exhibit 4.1 to the Current Report on
            Form 8-K of Chancellor Broadcasting Company and Chancellor Radio
            Broadcasting Company filed on July 17, 1997.

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

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

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

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

      (10)  The Company has not filed long-term debt instruments where the total
            amount under such instruments is less than ten percent of the total
            assets of the Company and its subsidiaries on a consolidated basis.
            However, the Company will furnish a copy of such instruments to the
            Commission upon request.

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