Table of Contents

As filed with the Securities and Exchange Commission on April 17, 2009

Registration No. 333-158279

 

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

Amendment No. 1

to

FORM S-4

REGISTRATION STATEMENT

UNDER

THE SECURITIES ACT OF 1933

 

 

CLEAR CHANNEL COMMUNICATIONS, INC.

(Exact name of registrant as specified in its charter)

(see table of additional registrants)

 

 

 

Texas		4832		74-1787539
(State or other jurisdiction of incorporation or organization)		(Primary Standard Industrial Classification Code Number)		(I.R.S. Employer Identification Number)

200 East Basse Road

San Antonio, Texas 78209

(210) 822-2828

(Address, including zip code, and telephone number, including area code, of registrant’s principal executive offices)

See Table of Additional Registrant Guarantors Continued on the Next Page

Andrew W. Levin

Executive Vice President, Chief Legal Officer and Secretary

Clear Channel Communications, Inc.

200 East Basse Road

San Antonio, Texas 78209

(210) 822-2828

(Name, address, including zip code, and telephone number, including area code, of agent for service)

 

 

With a copy to:

David C. Chapin

Alfred O. Rose

Brian C. Erb

Ropes & Gray LLP

One International Place, 36th Floor

Boston, MA 02110

(617) 951-7000

(617) 951-7050 (facsimile)

 

 

Approximate date of commencement of proposed sale to the public:    As soon as practicable after the Registration Statement becomes effective.

If the securities being registered on this Form are being offered in connection with the formation of a holding company and there is compliance with General Instruction G, check the following box.  ¨

If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.  ¨

If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.  ¨

 

The registrants hereby amend this registration statement on such date or dates as may be necessary to delay its effective date until the registrants shall file a further amendment which specifically states that this registration statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until the registration statement shall become effective on such date as the Securities and Exchange Commission, acting pursuant to said Section 8(a), may determine.

 

 

 

---

Table of Contents

TABLE OF ADDITIONAL REGISTRANT GUARANTORS

 

Exact Name of Registrant as Specified in its Charter		State or Other Jurisdiction of Incorporation or Organization		Primary Standard Industrial Classification Code Number		I.R.S. Employer Identification Number		Address, including Zip Code, and Telephone Number, including Area Code, of Registrant’s Principal Executive Offices
Ackerley Broadcasting Operations, LLC		Delaware		4832		20-3731411		200 East Basse Road San Antonio, TX 78209 (210) 822-2828
AMFM Air Services, Inc.		Delaware		4700		75-2771440		200 East Basse Road San Antonio, TX 78209 (210) 822-2828
AMFM Broadcasting Licenses, LLC		Delaware		4832		01-0824545		200 East Basse Road San Antonio, TX 78209 (210) 822-2828
AMFM Broadcasting, Inc.		Delaware		4832		95-4068583		200 East Basse Road San Antonio, TX 78209 (210) 822-2828
AMFM Holdings Inc.		Delaware		4899		75-2728285		200 East Basse Road San Antonio, TX 78209 (210) 822-2828
AMFM Inc.		Delaware		4899		75-2247099		200 East Basse Road San Antonio, TX 78209 (210) 822-2828
AMFM Michigan, LLC		Delaware		4832		75-2775714		200 East Basse Road San Antonio, TX 78209 (210) 822-2828
AMFM Operating Inc.		Delaware		4899		13-3649750		200 East Basse Road San Antonio, TX 78209 (210) 822-2828
AMFM Radio Group, Inc.		Delaware		4899		99-0248292		200 East Basse Road San Antonio, TX 78209 (210) 822-2828
AMFM Radio Licenses, LLC		Delaware		4832		75-2779594		200 East Basse Road San Antonio, TX 78209 (210) 822-2828
AMFM Shamrock Texas, Inc.		Texas		4832		71-0527506		200 East Basse Road San Antonio, TX 78209 (210) 822-2828
AMFM Texas Broadcasting, LP		Delaware		4832		75-2486577		200 East Basse Road San Antonio, TX 78209 (210) 822-2828
AMFM Texas Licenses, LP		Delaware		4832		75-2486580		200 East Basse Road San Antonio, TX 78209 (210) 822-2828
AMFM Texas, LLC		Delaware		4832		74-2939082		200 East Basse Road San Antonio, TX 78209 (210) 822-2828
Broadcast Architecture, Inc.		Massachusetts		4899		04-3096275		200 East Basse Road San Antonio, TX 78209 (210) 822-2828

---

Table of Contents

Exact Name of Registrant as Specified in its Charter		State or Other Jurisdiction of Incorporation or Organization		Primary Standard Industrial Classification Code Number		I.R.S. Employer Identification Number		Address, including Zip Code, and Telephone Number, including Area Code, of Registrant’s Principal Executive Offices
Broadcast Finance, Inc.		Ohio		4899		31-1390698		200 East Basse Road San Antonio, TX 78209 (210) 822-2828
Capstar Broadcasting Partners, Inc.		Delaware		4899		75-2672663		200 East Basse Road San Antonio, TX 78209 (210) 822-2828
Capstar Radio Operating Company		Delaware		4832		13-3922738		200 East Basse Road San Antonio, TX 78209 (210) 822-2828
Capstar TX Limited Partnership		Delaware		4832		13-3933048		200 East Basse Road San Antonio, TX 78209 (210) 822-2828
CC Broadcast Holdings, Inc.		Nevada		4899		20-2302507		200 East Basse Road San Antonio, TX 78209 (210) 822-2828
CC Finco Holdings, LLC		Delaware		4899		26-3757034		200 East Basse Road San Antonio, TX 78209 (210) 822-2828
CC Licenses, LLC		Delaware		4832		20-3498527		200 East Basse Road San Antonio, TX 78209 (210) 822-2828
CCB Texas Licenses, Inc.		Texas		4832		81-0587465		200 East Basse Road San Antonio, TX 78209 (210) 822-2828
Central NY News, Inc.		Washington		4833		91-1801794		200 East Basse Road San Antonio, TX 78209 (210) 822-2828
Christal Radio Sales, Inc.		Delaware		7311		13-2618663		200 East Basse Road San Antonio, TX 78209 (210) 822-2828
Cine Guarantors II, Inc.		California		4899		95-2960196		200 East Basse Road San Antonio, TX 78209 (210) 822-2828
Citicasters Co.		Ohio		4832		31-1081002		200 East Basse Road San Antonio, TX 78209 (210) 822-2828
Citicasters Licenses, Inc.		Texas		4832		74-3005625		200 East Basse Road San Antonio, TX 78209 (210) 822-2828
Clear Channel Aviation, LLC		Delaware		4700		74-2980854		200 East Basse Road San Antonio, TX 78209 (210) 822-2828
Clear Channel Broadcasting Licenses, Inc.		Nevada		4832		88-0309517		200 East Basse Road San Antonio, TX 78209 (210) 822-2828
Clear Channel Broadcasting, Inc.		Nevada		4832		74-2722883		200 East Basse Road San Antonio, TX 78209 (210) 822-2828

---

Table of Contents

Exact Name of Registrant as Specified in its Charter		State or Other Jurisdiction of Incorporation or Organization		Primary Standard Industrial Classification Code Number		I.R.S. Employer Identification Number		Address, including Zip Code, and Telephone Number, including Area Code, of Registrant’s Principal Executive Offices
Clear Channel Capital I, LLC		Delaware		4899		None		200 East Basse Road San Antonio, TX 78209 (210) 822-2828
Clear Channel Collective Marketing, LLC		Delaware		4899		20-4033024		200 East Basse Road San Antonio, TX 78209 (210) 822-2828
Clear Channel Company Store, Inc.		Nevada		5960		74-2975352		200 East Basse Road San Antonio, TX 78209 (210) 822-2828
Clear Channel Holdings, Inc.		Nevada		4899		88-0318078		200 East Basse Road San Antonio, TX 78209 (210) 822-2828
Clear Channel Identity, Inc.		Texas		4899		16-1643710		200 East Basse Road San Antonio, TX 78209 (210) 822-2828
Clear Channel Investments, Inc.		Nevada		6799		91-1883551		200 East Basse Road San Antonio, TX 78209 (210) 822-2828
Clear Channel Management Services, Inc.		Texas		8741		02-0619566		200 East Basse Road San Antonio, TX 78209 (210) 822-2828
Clear Channel Mexico Holdings, Inc.		Nevada		4899		20-2303205		200 East Basse Road San Antonio, TX 78209 (210) 822-2828
Clear Channel Real Estate, LLC		Delaware		4899		74-2745435		200 East Basse Road San Antonio, TX 78209 (210) 822-2828
Clear Channel Satellite Services, Inc.		Delaware		4899		31-1125479		200 East Basse Road San Antonio, TX 78209 (210) 822-2828
Clear Channel Wireless, Inc.		Nevada		4899		74-2975253		200 East Basse Road San Antonio, TX 78209 (210) 822-2828
Clearmart, Inc.		Nevada		5960		55-0858216		200 East Basse Road San Antonio, TX 78209 (210) 822-2828
Critical Mass Media, Inc.		Ohio		4899		31-1228174		200 East Basse Road San Antonio, TX 78209 (210) 822-2828
Jacor Broadcasting Corporation		Ohio		4832		31-1363232		200 East Basse Road San Antonio, TX 78209 (210) 822-2828
Jacor Broadcasting of Colorado, Inc.		Colorado		4832		31-1212116		200 East Basse Road San Antonio, TX 78209 (210) 822-2828
Jacor Broadcasting of Denver, Inc.		California		4832		33-0250362		200 East Basse Road San Antonio, TX 78209 (210) 822-2828

---

Table of Contents

Exact Name of Registrant as Specified in its Charter		State or Other Jurisdiction of Incorporation or Organization		Primary Standard Industrial Classification Code Number		I.R.S. Employer Identification Number		Address, including Zip Code, and Telephone Number, including Area Code, of Registrant’s Principal Executive Offices
Jacor Communications Company		Florida		4899		59-2054850		200 East Basse Road San Antonio, TX 78209 (210) 822-2828
Katz Communications, Inc.		Delaware		7311		13-0904500		200 East Basse Road San Antonio, TX 78209 (210) 822-2828
Katz Media Group, Inc.		Delaware		7311		13-3779266		200 East Basse Road San Antonio, TX 78209 (210) 822-2828
Katz Millennium Sales & Marketing Inc.		Delaware		7311		06-0963166		200 East Basse Road San Antonio, TX 78209 (210) 822-2828
Katz Net Radio Sales, Inc.		Delaware		7311		74-3221051		200 East Basse Road San Antonio, TX 78209 (210) 822-2828
KTZMedia Corporation		Delaware		4899		13-3779269		200 East Basse Road San Antonio, TX 78209 (210) 822-2828
M Street Corporation		Washington		2741		54-1526578		200 East Basse Road San Antonio, TX 78209 (210) 822-2828
Premiere Radio Networks, Inc.		Delaware		4832		95-4083971		200 East Basse Road San Antonio, TX 78209 (210) 822-2828
Radio-Active Media, Inc.		Delaware		4899		31-1511358		200 East Basse Road San Antonio, TX 78209 (210) 822-2828
Terrestrial RF Licensing, Inc.		Nevada		4832		55-0858211		200 East Basse Road San Antonio, TX 78209 (210) 822-2828
The New Research Group, Inc.		Nevada		4899		01-0604020		200 East Basse Road San Antonio, TX 78209 (210) 822-2828

 

The name, address, including zip code, and telephone number, including area code, of agent for service for each of the Additional Registrant Guarantors is:   Andrew W. Levin Executive Vice President, Chief Legal Officer and Secretary Clear Channel Communications, Inc. 200 East Basse Road San Antonio, Texas 78209 (210) 822-2828								With a copy to:   David C. Chapin Alfred O. Rose Brian C. Erb Ropes & Gray LLP One International Place, 36th Floor Boston, MA 02110 (617) 951-7000 (617) 951-7050 (facsimile)

---

Table of Contents

SUBJECT TO COMPLETION, DATED APRIL 17, 2009

The information in this preliminary prospectus is not complete and may be changed. We may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This preliminary prospectus is not an offer to sell these securities and is not soliciting an offer to buy these securities in any jurisdiction where the offer or sale is not permitted.

 

PRELIMINARY PROSPECTUS

CLEAR CHANNEL COMMUNICATIONS, INC.

OFFERS TO EXCHANGE

$980,000,000 aggregate principal amount of its 10.75% Senior Cash Pay Notes due 2016 and $1,330,000,000 aggregate principal amount of its 11.00%/11.75% Senior Toggle Notes due 2016, the issuance of each of which has been registered under the Securities Act of 1933, as amended, for any and all of its outstanding 10.75% Senior Cash Pay Notes due 2016 and any and all of its 11.00%/11.75% Senior Toggle Notes due 2016, respectively.

We are offering to exchange, upon the terms and subject to the conditions set forth in this prospectus and the accompanying letter of transmittal, all of our new 10.75% Senior Cash Pay Notes due 2016 (the “exchange senior cash pay notes”) and all of our new 11.00%/11.75% Senior Toggle Notes due 2016 (the “exchange senior toggle notes” and collectively with the exchange senior cash pay notes, the “exchange notes”), for all of our outstanding 10.75% Senior Cash Pay Notes due 2016 (the “outstanding senior cash pay notes”) and all of our outstanding 11.00%/11.75% Senior Toggle Notes due 2016 (the “outstanding senior toggle notes” and collectively with the outstanding senior cash pay notes, the “outstanding notes” and collectively with the exchange notes, the “notes”), respectively. We are also offering the parent and subsidiary guarantees of the exchange notes, which are described in this prospectus. The terms of the exchange notes are identical to the terms of the outstanding notes except that the exchange notes have been registered under the Securities Act of 1933, as amended (the “Securities Act”), and therefore are freely transferable. We will pay interest on the notes on February 1 and August 1 of each year. The outstanding senior cash pay notes and exchange senior cash pay notes (collectively, the “senior cash pay notes”) will mature on August 1, 2016 and the outstanding senior toggle notes and exchange senior toggle notes (collectively, the “senior toggle notes”) will mature on August 1, 2016.

The principal features of the exchange offers are as follows:

 

•

We will exchange all outstanding notes that are validly tendered and not validly withdrawn prior to the expiration of the exchange offers for an equal principal amount of exchange notes that are freely tradable.

 

•

You may withdraw tendered outstanding notes at any time prior to the expiration of the exchange offers.

 

•

The exchange offers expire at 12:00 a.m. midnight, New York City time, on                     , 2009, unless extended.

 

•

The exchange of outstanding notes for exchange notes pursuant to the exchange offers will not be a taxable event for United States federal income tax purposes.

 

•

We will not receive any proceeds from the exchange offers.

 

•

We do not intend to apply for listing of the exchange notes on any securities exchange or automated quotation system.

All untendered outstanding notes will continue to be subject to the restrictions on transfer set forth in the outstanding notes and in the indenture relating to the outstanding notes. In general, the outstanding notes may not be offered or sold, unless registered under the Securities Act, except pursuant to an exemption from, or in a transaction not subject to, the Securities Act and applicable state securities laws. Other than in connection with the exchange offers, we do not currently anticipate that we will register the outstanding notes under the Securities Act.

You should consider carefully the risk factors beginning on page 17 of this prospectus before participating in the exchange offers.

Each broker-dealer that receives new securities for its own account pursuant to the exchange offers must acknowledge that it will deliver a prospectus in connection with any resale of such new securities. The letter of transmittal states that by so acknowledging and by delivering a prospectus, a broker-dealer will not be deemed to admit that it is an “underwriter” within the meaning of the Securities Act. This prospectus, as it may be amended or supplemented from time to time, may be used by a broker-dealer in connection with resales of new securities received in exchange for securities where such securities were acquired by such broker-dealer as a result of market-making activities or other trading activities. The issuer has agreed that, starting on the expiration date of each exchange offer and ending on the close of business 180 days after the expiration of each exchange offer, it will make this prospectus available to any broker-dealer for use in connection with any such resale. See “Plan of Distribution.”

Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or passed upon the adequacy or accuracy of this prospectus. Any representation to the contrary is a criminal offense.

The date of this prospectus is                     , 2009.

---

Table of Contents

TABLE OF CONTENTS

 

		Page
WHERE YOU CAN FIND MORE INFORMATION		ii
FORWARD-LOOKING STATEMENTS		ii
MARKET AND INDUSTRY DATA		iii
SUMMARY		1
RISK FACTORS		18
THE EXCHANGE OFFERS		34
THE TRANSACTIONS		43
USE OF PROCEEDS		45
CAPITALIZATION		46
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL DATA		47
SELECTED HISTORICAL CONSOLIDATED FINANCIAL AND OTHER DATA		51
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS		55
BUSINESS		87
MANAGEMENT		110
EXECUTIVE COMPENSATION		115
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT		146
CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS		152
DESCRIPTION OF OTHER INDEBTEDNESS		154
DESCRIPTION OF THE EXCHANGE NOTES		161
BOOK ENTRY, DELIVERY AND FORM		226
CERTAIN UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS		228
CERTAIN CONSIDERATIONS FOR PLAN INVESTORS		237
PLAN OF DISTRIBUTION		240
LEGAL MATTERS		240
EXPERTS		240
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS		F-1

This prospectus contains summaries of the terms of several material documents. These material documents contain important business and financial information about Clear Channel Communications, Inc. that is not included in or delivered with the prospectus, apart from the reference to such material documents in such summaries. These summaries include the terms that we believe to be material, but we urge you to review these documents in their entirety. We will provide without charge to each person to whom a copy of this prospectus is delivered, upon written or oral request of that person, a copy of any and all of this information. Requests for copies should be directed to Attn: Investor Relations Department, Clear Channel Communications, Inc., 200 East Basse Road, San Antonio, Texas 78209 (Telephone: (210) 832-3315). You should request this information at least five business days in advance of the date on which you expect to make your decision with respect to the exchange offers. In any event, you must request this information prior to                     , 2009, in order to receive the information prior to the expiration of the exchange offers.

 

i

---

Table of Contents

WHERE YOU CAN FIND MORE INFORMATION

We and the guarantors have filed with the Securities and Exchange Commission (the “SEC”) a registration statement on Form S-4 under the Securities Act with respect to the exchange notes being offered hereby. This prospectus, which forms a part of the registration statement, does not contain all of the information set forth in the registration statement. For further information with respect to us, the guarantors or the exchange notes, we refer you to the registration statement. Statements contained in this prospectus as to the contents of any contract or other document are not necessarily complete. We are not currently subject to the informational requirements of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). As a result of the offering of the exchange notes, we will become subject to the informational requirements of the Exchange Act, and, in accordance therewith, will file reports and other information with the SEC. The registration statement, such reports and other information can be inspected and copied at the Public Reference Room of the SEC located at Room 1580, 100 F Street, N.E., Washington D.C. 20549. Copies of such materials, including copies of all or any portion of the registration statement, can be obtained from the Public Reference Room of the SEC at prescribed rates. You can call the SEC at 1-800-SEC-0330 to obtain information on the operation of the Public Reference Room. Such materials may also be accessed electronically by means of the SEC’s home page on the Internet (http://www.sec.gov).

Under the terms of the indenture relating to the notes, as supplemented by certain supplemental indentures thereto (the “indenture”), we have agreed that, whether or not we are required to do so by the rules and regulations of the SEC, for so long as any of the notes remain outstanding, we will furnish to the trustee and holders of the notes the information specified therein in the manner specified therein. See “Description of the Exchange Notes.”

You may request a copy of Clear Channel Communications, Inc.’s SEC filings, at no cost, by writing or calling Clear Channel Communications, Inc. at the following address or telephone number: Attn: Investor Relations Department, Clear Channel Communications, Inc., 200 East Basse Road, San Antonio, Texas 78209 (Telephone: (210) 832-3315). Exhibits to the filings will not be sent, however, unless those exhibits have specifically been incorporated by reference in this document. Clear Channel Communications, Inc.’s SEC filings will also be available, at no cost, at its website (http://www.clearchannel.com) as soon as reasonably practicable after Clear Channel Communications, Inc. electronically files such material with the SEC.

FORWARD-LOOKING STATEMENTS

This prospectus contains forward-looking statements within the meaning of the United States federal securities laws, which statements involve risks and uncertainties. Statements other than statements of historical facts including, without limitation, statements regarding our future financial position, business strategy, budgets, projected costs and plans, future industry growth and objectives of management for future operations, are forward-looking statements. In addition, forward-looking statements generally can be identified by the use of forward-looking terminology such as “may,” “will,” “expect,” “intend,” “estimate,” “project,” “forecast,” “anticipate,” “believe,” or “continue,” or the negative thereof or variations thereon or similar terminology.

Although we believe that the expectations reflected in these forward-looking statements are reasonable, we can give no assurance that such expectations will prove to have been correct. Certain of the important factors that could cause actual results to differ materially from our expectations, or “cautionary statements,” are disclosed under “Risk Factors” and elsewhere in this prospectus, including, without limitation, in conjunction with the forward-looking statements included in this prospectus.

We caution you not to place undue reliance on any forward-looking statements and we do not undertake any obligation to publicly release any revisions to these forward-looking statements to reflect events or circumstances after the date of this prospectus or to reflect the occurrence of unanticipated events. All subsequent written and oral forward-looking statements attributable to us, or persons acting on our behalf, are expressly qualified in their entirety by the cautionary statements.

 

ii

---

Table of Contents

MARKET AND INDUSTRY DATA

Market and industry data throughout this prospectus was obtained from a combination of our own internal company surveys, the good faith estimates of management, various trade associations and publications, the Arbitron Inc. (“Arbitron”) and Nielsen Media Research, Inc. rankings and CommScore / Media Metrix. Although we believe that these independent sources and our internal data are reliable as of their respective dates, the information contained in them has not been independently verified, and we cannot assure you as to the accuracy or completeness of this information. As a result, you should be aware that the market and industry data contained in this prospectus, and beliefs and estimates based on such data, may not be reliable.

Entities affiliated with Thomas H. Lee Partners, L.P., one of the significant stockholders of CC Media Holdings, Inc. (the indirect parent of Clear Channel Communications, Inc.), beneficially own approximately 20.7% of the outstanding shares of capital stock of The Nielsen Company B.V., an affiliate of Nielsen Media Research, Inc. Officers of Thomas H. Lee Partners, L.P. serve on the Boards of Directors of Clear Channel Communications, Inc. and CC Media Holdings, Inc. Additionally, officers of Thomas H. Lee Partners, L.P. are members of the governing bodies of Nielsen Finance LLC, The Nielsen Company B.V. and Nielsen Finance Co., each of which are affiliates of Nielsen Media Research, Inc. Information in this prospectus that is indicated as having been provided by Nielsen Media Research, Inc. is contained in reports that are available to all clients of Nielsen Media Research, Inc. and was not commissioned by, prepared for, or provided at a discount to Thomas H. Lee Partners, L.P., Bain Capital Partners, LLC, Clear Channel Communications, Inc., or CC Media Holdings, Inc.

Entities affiliated with Abrams Capital, LLC, that are stockholders of CC Media Holdings, Inc. beneficially own approximately 12.2% of the outstanding shares of capital stock of Arbitron. Additionally, Mr. David C. Abrams, the managing member of Abrams Capital, LLC, serves as an independent director on the Boards of Directors of Clear Channel Communications, Inc. and CC Media Holdings, Inc. Information in this prospectus that is indicated as having been provided by Arbitron is contained in reports that are available to all clients of Arbitron and was not commissioned by, prepared for, or provided at a discount to Abrams Capital, LLC, Clear Channel Communications, Inc., or CC Media Holdings, Inc.

 

iii

---

Table of Contents

 

1

---

Table of Contents

 

2

---

Table of Contents

 

3

---

Table of Contents

 

4

---

Table of Contents

 

5

---

Table of Contents

 

6

---

Table of Contents

 

7

---

Table of Contents

 

8

---

Table of Contents

 

9

---

Table of Contents

 

10

---

Table of Contents

 

11

---

Table of Contents

 

12

---

Table of Contents

 

13

---

Table of Contents

 

14

---

Table of Contents

 

15

---

Table of Contents

 

16

---

Table of Contents

 

17

---

Table of Contents

RISK FACTORS

You should carefully consider the risks described below before participating in the exchange offers. The risks described below are not the only ones facing Clear Channel. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial may also materially and adversely affect our business or results of operations in the future. Any of the following risks could materially adversely affect our business, financial condition, or results of operations. In such case, you may lose all or part of your original investment in the notes.

Risks Related to the Exchange Offers

You may have difficulty selling the outstanding notes that you do not exchange.

If you do not exchange your outstanding notes for exchange notes in the exchange offers, you will continue to be subject to the restrictions on transfer of your outstanding notes described in the legend on your outstanding notes. The restrictions on transfer of your outstanding notes arise because we issued the outstanding notes under exemptions from, or in transactions not subject to, the registration requirements of the Securities Act and applicable state securities laws. In general, you may only offer or sell the outstanding notes if they are registered under the Securities Act and applicable state securities laws, or offered and sold under an exemption from these requirements. Except as required by the registration rights agreement, we do not intend to register the outstanding notes under the Securities Act. The tender of outstanding notes under the exchange offers will reduce the principal amount of the currently outstanding notes. Due to the corresponding reduction in liquidity, this may have an adverse effect upon, and increase the volatility of, the market price of any currently outstanding notes that you continue to hold following completion of the exchange offers. See “The Exchange Offers—Consequences of Failure to Exchange.”

There is no public market for the exchange notes, and we do not know if a market will ever develop or, if a market does develop, whether it will be sustained.

The exchange notes are a new issue of securities for which there is no existing trading market. Accordingly, we cannot assure you that a liquid market will develop for the exchange notes, that you will be able to sell your exchange notes at a particular time or that the prices that you receive when you sell the exchange notes will be favorable.

We do not intend to apply for listing or quotation of the notes on any securities exchange or automated quotation system, although our outstanding notes trade on The PORTAL^SM Market. The liquidity of any market for the exchange notes will depend on a number of factors, including:

 

•

the number of holders of exchange notes;

 

•

our operating performance and financial condition;

 

•

our ability to complete the offers to exchange the outstanding notes for the exchange notes;

 

•

the market for similar securities;

 

•

the interest of securities dealers in making a market in the exchange notes; and

 

•

prevailing interest rates.

We understand that one or more of the initial purchasers of the outstanding notes presently intend to make a market in the exchange notes. However, they are not obligated to do so, and any market-making activity with respect to the exchange notes may be discontinued at any time without notice. In addition, any market-making activity will be subject to the limits imposed by the Securities Act and the Exchange Act and may be limited during the exchange offers or the pendency of an applicable shelf registration statement. There can be no assurance that an active trading market will exist for the exchange notes or that any trading market that does develop will be liquid.

 

18

---

Table of Contents

You must comply with the procedures of the exchange offers in order to receive new, freely tradable exchange notes.

Delivery of exchange notes in exchange for outstanding notes tendered and accepted for exchange pursuant to the exchange offers will be made only after timely receipt by the exchange agent of book-entry transfer of outstanding notes into the exchange agent’s account at DTC, as depositary, including an agent’s message. We are not required to notify you of defects or irregularities in tenders of outstanding notes for exchange. Outstanding notes that are not tendered or that are tendered but we do not accept for exchange will, following consummation of the exchange offers, continue to be subject to the existing transfer restrictions under the Securities Act and, upon consummation of the exchange offers, certain registration and other rights under the registration rights agreement will terminate. See “The Exchange Offers—Procedures for Tendering Outstanding Notes” and “The Exchange Offers—Consequences of Failure to Exchange.”

Some holders who exchange their outstanding notes may be deemed to be underwriters, and these holders will be required to comply with the registration and prospectus delivery requirements in connection with any resale transaction.

If you exchange your outstanding notes in the exchange offers for the purpose of participating in a distribution of the exchange notes, you may be deemed to have received restricted securities and, if so, will be required to comply with the registration and prospectus delivery requirements of the Securities Act in connection with any resale transaction.

Risks Related to Our Indebtedness and the Notes

References under the heading “—Risks Related to Our Indebtedness and the Notes” related to outstanding indebtedness relate to the outstanding indebtedness of Clear Channel and its consolidated subsidiaries and do not relate to Clear Channel Capital, except to the extent Clear Channel Capital is a guarantor of such indebtedness.

Our substantial indebtedness could adversely affect our operations and your investment in the notes.

In connection with the Transactions, Clear Channel incurred a significant amount of indebtedness. As of December 31, 2008, Clear Channel had outstanding total indebtedness of approximately $19,504 million, including the notes and preliminary purchase accounting adjustments of a negative $1,114 million. Clear Channel also had an additional $1,780 million (before taking into account outstanding letters of credit of approximately $304 million) available for borrowing under its revolving credit facility and an additional approximately $338 million (subject to borrowing base limitations described below) of unfunded commitments under its receivables based credit facility as of December 31, 2008. As of December 31, 2008, borrowing base limitations applicable to the receivables based credit facility would have prevented additional borrowings under this facility. On February 6, 2009, Clear Channel borrowed the remaining availability under its revolving credit facility.

Our substantial level of indebtedness and other financial obligations increase the possibility that we may be unable to generate cash sufficient to pay, when due, the principal of, interest on, or other amounts due, in respect of our indebtedness, including the notes. Our substantial indebtedness could also have other significant consequences. For example, it could:

 

•

require us to dedicate a substantial portion of our cash flow from operations to the payment of our indebtedness, thereby reducing the funds available to us for operations and other purposes;

 

•

increase our vulnerability, and limit our ability to adjust, to general adverse economic and changing market conditions;

 

•

limit our ability to obtain additional financing in the future for working capital, capital expenditures, acquisitions, general corporate purposes, or other purposes on satisfactory terms, or at all;

 

19

---

Table of Contents

•

expose us to the risk of increased interest rates as certain of our borrowings, including borrowings under our senior secured credit facilities and our receivables based credit facility, are at variable rates of interest;

 

•

cause us to make non-strategic divestitures or restrict us from making strategic acquisitions;

 

•

limit our planning, flexibility for, or ability to react to, changes in our business and the industries in which we operate; and

 

•

place us at a competitive disadvantage with competitors who may have less indebtedness and other obligations.

If we fail to make any required payment under our senior secured credit facilities or our receivables based credit facility or to comply with any of the financial and operating covenants included in the senior secured credit facilities or the receivables based credit facility, we will be in default. Lenders under such facilities could then vote to accelerate the maturity of the indebtedness and foreclose upon our and our subsidiaries’ assets securing such indebtedness. Other creditors might then accelerate other indebtedness. If any of our creditors accelerates the maturity of their indebtedness, we may not have sufficient assets to satisfy our obligations under the senior secured credit facilities, the receivables based credit facility, or our other indebtedness, including the notes.

We and our subsidiaries may from time to time pursue various alternatives in order to reduce our substantial indebtedness. These alternatives include retiring or purchasing our outstanding debt or equity securities or obligations through cash purchases, prepayments and/or exchanges for newly issued debt or equity securities or obligations, in open market purchases, privately negotiated transactions or otherwise. Such repurchases, prepayments or exchanges, if any, could have a material positive or negative impact on our liquidity available to repay our outstanding debt obligations. These transactions could also result in amendments to the agreements governing our outstanding debt obligations or changes in our leverage or other financial ratios which could have a material positive or negative impact on our ability to comply with the covenants contained in our debt agreements.

Our ability to generate the significant amount of cash needed to pay interest and principal on the notes and service our other indebtedness and financial obligations and our ability to refinance all or a portion of our indebtedness or obtain additional financing depends on many factors beyond our control.

Our ability to make payments on and refinance our indebtedness, including the notes, amounts borrowed under our senior secured credit facilities and our receivables based credit facility and other financial obligations, and to fund our operations will depend on our ability to generate substantial operating cash flow. Our cash flow generation will depend on our future performance, which will be subject to prevailing economic conditions and to financial, business and other factors, many of which are beyond our control.

Our business may not generate sufficient cash flow from operations, and future borrowings may not be available to us under our senior secured credit facilities, our receivables based credit facility, or otherwise in amounts sufficient to enable us to service our indebtedness, including the notes, our retained senior notes and borrowings under our senior secured credit facilities and our receivables based credit facility, or to fund our other liquidity needs. If we cannot service our indebtedness, we will have to take actions such as reducing or delaying capital investments, selling assets, restructuring or refinancing our indebtedness, or seeking additional equity capital. Any of these remedies may not, if necessary, be effected on commercially reasonable terms, or at all. Also, the indenture governing the notes, the indenture governing our retained senior notes and the credit agreements for our senior secured credit facilities and receivables based credit facility restrict us from adopting certain of these alternatives. Because of these and other factors beyond our control, we may be unable to pay the principal, premium, if any, interest, or other amounts on the notes.

 

20

---

Table of Contents

Despite current indebtedness levels, we and our subsidiaries may still be able to incur substantially more indebtedness. This could further exacerbate the risks associated with our substantial leverage.

We and our subsidiaries may be able to incur substantial additional indebtedness in the future. Although the indenture governing the notes and the credit agreements for our senior secured credit facilities and our receivables based credit facility contain restrictions on the incurrence of additional indebtedness, these restrictions are subject to a number of qualifications and exceptions, and the indebtedness incurred in compliance with these restrictions could be substantial. For example, as of December 31, 2008, Clear Channel had an additional $1,780 million (before taking into account outstanding letters of credit of approximately $304 million) available for borrowing under its revolving credit facility, an additional approximately $718 million available for borrowing under its delayed draw term loan facilities and an additional approximately $338 million (subject to borrowing base limitations described below) of unfunded commitments under its receivables based credit facility. As of December 31, 2008, borrowing base limitations applicable to the receivables based credit facility would have prevented additional borrowings under this facility. On February 6, 2009, Clear Channel borrowed the remaining availability under its revolving credit facility.

We may, at our option, subject to certain conditions, raise incremental term loans or incremental commitments under the revolving credit facility of up to (a) $1.5 billion, plus (b) the excess, if any, of (x) 0.65 times pro forma consolidated adjusted EBITDA (as calculated in the manner provided in the senior secured credit facilities documentation), over (y) $1.5 billion, plus (c) the aggregate amount of mandatory prepayments of the term loans under the senior secured credit facilities (other than mandatory prepayments with net cash proceeds of certain asset sales). We may also, at our option, subject to certain conditions, increase the receivables based credit facility in an aggregate amount not to exceed $750 million if certain non-wholly-owned subsidiaries guarantee the receivables based credit facility. Any additional borrowings under our senior secured credit facilities and our receivables based credit facility would be effectively senior to the notes to the extent of the value of the assets securing such indebtedness and the related guarantees of the notes would be subordinated to the guarantees of any additional borrowings under the senior secured credit facilities and receivables based credit facility. Moreover, the indenture governing the notes does not impose any limitation on our incurrence of liabilities that are not considered “indebtedness” under the indenture, and does not impose any limitation on liabilities incurred by our subsidiaries that might be designated as “unrestricted subsidiaries.” If we incur additional indebtedness above current levels, the risks associated with our substantial leverage would increase.

The notes are effectively subordinated to our total secured indebtedness.

The indenture governing the notes permits us to incur certain secured indebtedness, including indebtedness under our senior secured credit facilities and our receivables based credit facility. As of December 31, 2008, indebtedness under Clear Channel’s senior secured credit facilities and its receivables based credit facility of approximately $13,926 million was secured by liens on certain of its assets, including, in the case of the senior secured credit facilities, a pledge of its capital stock. The notes are unsecured and are, therefore, effectively subordinated to Clear Channel’s total secured indebtedness (which includes certain of its retained indebtedness incurred prior to the Transactions) in an amount equal to approximately $13,932 million as of December 31, 2008 (to the extent of the value of the collateral).

Accordingly, if we are involved in a bankruptcy, liquidation, dissolution, reorganization, or similar proceeding, or upon a default in payment on, or the acceleration of, any indebtedness under our senior secured credit facilities, our receivables based credit facility, or our other secured indebtedness, any assets securing such indebtedness will not be available to pay obligations on the notes unless all indebtedness under our senior secured credit facilities, our receivables based credit facility, or other secured indebtedness have been paid in full. In addition, a default under the indenture governing the notes would cause an event of default under the senior secured credit facilities and the receivables based credit facility, and the acceleration of indebtedness under the senior secured credit facilities or the receivables based credit facility or the failure to pay such indebtedness when due would, in certain circumstances, cause an event of default under the indenture governing the notes. See “Description of the Exchange Notes—Events of Default and Remedies.” The lenders under our

 

21

---

Table of Contents

senior secured credit facilities and our receivables based credit facility also have the right upon an event of default thereunder to terminate any commitments they have to provide further borrowings. Further, following an event of default under our senior secured credit facilities and our receivables based credit facility, the lenders under such facilities will have the right to proceed against the collateral granted to them to secure that indebtedness. If the indebtedness under our senior secured credit facilities, our receivables based credit facility, or the notes were to be accelerated, our assets may not be sufficient to repay in full that indebtedness, or any other indebtedness that may become due as a result of that acceleration.

The guarantees of the notes are subordinated to the guarantees of our senior secured credit facilities and our receivables based credit facility.

The guarantees are subordinated to the guarantees of the guarantors of the senior secured credit facilities and receivables based credit facility. As of December 31, 2008, the guarantees were subordinated to guarantees of approximately $13,926 million of indebtedness outstanding under Clear Channel’s senior secured credit facilities and its receivables based credit facility. As of December 31, 2008, Clear Channel had an additional $1,780 million (before taking into account outstanding letters of credit of approximately $304 million) available for borrowing under its revolving credit facility, an additional approximately $718 million available for borrowing under its delayed draw term loan facilities and an additional approximately $338 million (subject to borrowing base limitations described below) of unfunded commitments under its receivables based credit facility. As of December 31, 2008, borrowing base limitations applicable to the receivables based credit facility would have prevented additional borrowings under this facility. On February 6, 2009, Clear Channel borrowed the remaining availability under its revolving credit facility.

We may, at our option, subject to certain conditions, raise incremental term loans or incremental commitments under the revolving credit facility of up to (a) $1.5 billion, plus (b) the excess, if any, of (x) 0.65 times pro forma consolidated adjusted EBITDA (as calculated in the manner provided in the senior secured credit facilities documentation), over (y) $1.5 billion, plus (c) the aggregate amount of mandatory prepayments of the term loans under the senior secured credit facilities (other than mandatory prepayments with net cash proceeds of certain asset sales), and we may increase commitments under our receivables based credit facility in an aggregate amount not to exceed $750 million if certain non-wholly-owned subsidiaries guarantee the receivables based credit facility. The guarantees of such additional borrowings would be senior in right of payment to the guarantees of the notes.

As a result of such subordination, upon any distribution to our creditors or the creditors of any guarantor of the notes in a bankruptcy, liquidation, reorganization, or similar proceeding, the holders of our indebtedness under the senior secured credit facilities and receivables based credit facility will be entitled to be paid in full before any payment will be made on that guarantor’s guarantee.

The notes are structurally subordinated to the liabilities of our subsidiaries that do not guarantee the notes. Your right to receive payments on the notes could be adversely affected if any of our non-guarantor subsidiaries or non-wholly-owned subsidiaries declare bankruptcy, liquidate, or reorganize.

Clear Channel Outdoor Holdings, Inc. (“CCOH”) and our other non-wholly-owned domestic subsidiaries and our foreign subsidiaries do not guarantee the notes. As a result, the notes are also structurally subordinated to all existing and future obligations, including indebtedness, of our subsidiaries that do not guarantee the notes, and the claims of creditors of these subsidiaries, including trade creditors, have priority as to the assets of these subsidiaries. In the event of a bankruptcy, liquidation, or reorganization of any of our non-guarantor subsidiaries, holders of their indebtedness and their trade and other creditors will generally be entitled to payment of their claims from the assets of those subsidiaries before any assets are made available for distribution to us and, in turn, to our creditors.

On a pro forma basis after giving effect to the Transactions, the non-guarantor subsidiaries of Clear Channel would have accounted for approximately $3.3 billion, or 50%, of total net revenue (on a combined basis) for the

 

22

---

Table of Contents

year ended December 31, 2008, and approximately $8.5 billion, or 40%, of total assets as of December 31, 2008. As of December 31, 2008, Clear Channel’s non-guarantor subsidiaries had $2.3 billion of total balance sheet liabilities (including trade payables) to which the notes would have been structurally subordinated.

We may not have access to the cash flow and other assets of our subsidiaries that may be needed to make payment on the notes.

We derive a substantial portion of operating income from our subsidiaries. We are dependent on the earnings and cash flow of our subsidiaries to meet our obligations with respect to the notes. We cannot assure you that our subsidiaries will be able to, or be permitted to, pay to us the amounts necessary to service the notes. Provisions of law, such as those requiring that dividends be paid only out of surplus, will also limit the ability of our subsidiaries to make distributions, loans, or other payments to us. In the event we do not receive distributions from our subsidiaries, we may be unable to make required principal and interest payments on our indebtedness, including the notes.

On November 10, 2005, we entered into a cash management arrangement with CCOH whereby we provide day-to-day cash management services. As part of this arrangement, substantially all of the cash generated from CCOH’s domestic operations is transferred daily into Clear Channel accounts and, in return, we fund certain of CCOH’s operations. This arrangement is evidenced by tandem cash management notes issued by Clear Channel to CCOH and by CCOH to Clear Channel. Each of the cash management notes is a demand obligation; however, we are not under any contractual commitment to advance funds to CCOH beyond the amounts outstanding under the note issued by Clear Channel. The consummation of the Transactions did not permit CCOH to terminate these arrangements and we may continue to use the cash flows of the domestic operations of CCOH for our own general corporate purposes pursuant to the terms of the existing cash management and intercompany arrangements between us and CCOH, which may include making payments on our indebtedness.

On August 2, 2005, CCOH distributed a note issued by Clear Channel Outdoor, Inc. in the original principal amount of $2.5 billion to us as a dividend. This note matures on August 2, 2010, and may be prepaid in whole or in part at any time. The note accrues interest at a variable per annum rate equal to our weighted average cost of indebtedness, calculated on a monthly basis. This note is mandatorily payable upon a change of control of CCOH and, subject to certain exceptions, all proceeds from new indebtedness issued or equity raised by CCOH must be used to prepay such note. At December 31, 2008, the interest rate on the $2.5 billion note was 6.0%.

The $2.5 billion note requires Clear Channel Outdoor, Inc. to comply with various negative covenants, including restrictions on the following activities: incurring consolidated funded indebtedness (as defined in the note), excluding intercompany indebtedness, in a principal amount in excess of $400 million at any one time outstanding; creating liens; making investments; entering into sale and leaseback transactions (as defined in the note), which when aggregated with consolidated funded indebtedness secured by liens, will not exceed an amount equal to 10% of CCOH’s total consolidated stockholders’ equity (as defined in the note) as shown on its most recently reported annual audited consolidated financial statements; disposing of all or substantially all of its assets; entering into mergers and consolidations; declaring or making dividends or other distributions; repurchasing its equity; and entering into transactions with its affiliates. The existence of these restrictions could limit CCOH’s ability to grow and increase its revenue or respond to competitive changes.

Restrictive covenants in the senior secured credit facilities, receivables based credit facility and the indenture governing the notes restrict our ability to pursue our business strategies.

Our senior secured credit facilities, our receivables based credit facility and the indenture governing the notes contain a number of restrictive covenants that impose significant operating and financial restrictions on us and may limit our ability to engage in acts that may be in our long-term best interests. These agreements governing our indebtedness include covenants restricting, among other things, our ability to:

 

•

incur or guarantee additional indebtedness or issue certain preferred stock;

 

23

---

Table of Contents

•

pay dividends or make distributions on our capital stock, or redeem, repurchase, or retire our capital stock and subordinated indebtedness;

 

•

make certain investments;

 

•

create liens on our or our restricted subsidiaries’ assets to secure indebtedness;

 

•

create restrictions on the payment of dividends or other amounts to us from our restricted subsidiaries that are not guarantors of the notes;

 

•

enter into transactions with affiliates;

 

•

merge or consolidate with another person, or sell or otherwise dispose of all or substantially all of our assets;

 

•

sell certain assets, including capital stock of our subsidiaries;

 

•

alter the business that we conduct; and

 

•

designate our subsidiaries as unrestricted subsidiaries.

Notwithstanding the restrictions on our ability to pay dividends, redeem, or purchase capital stock and make certain other restricted payments, the indenture governing the notes allows us to make significant restricted payments in certain circumstances. See “Description of the Exchange Notes—Certain Covenants—Limitation on Restricted Payments.”

We may not be able to fulfill our repurchase obligations in the event of a change of control.

Upon the occurrence of any change of control, we will be required to make a change of control offer to repurchase the notes at a price equal to 101% of the principal amount thereof, plus accrued and unpaid interest, if any, to the date of repurchase. Any change of control also would constitute a default under our senior secured credit facilities and our receivables based credit facility. Therefore, upon the occurrence of a change of control, the lenders under our senior secured credit facilities and our receivables based credit facility would have the right to accelerate their loans, and if so accelerated, we would be required to repay all of our outstanding obligations under our senior secured credit facilities and our receivables based credit facility. Also, our senior secured credit facilities and our receivables based credit facility generally prohibit us from purchasing any notes if we do not repay all borrowings under such facilities first or obtain the consent of the lenders under such facilities. Accordingly, unless we first repay all such borrowings or obtain the consent of such lenders, we are prohibited from purchasing the notes upon a change of control.

In addition, if a change of control occurs, there can be no assurance that we will have available funds sufficient to pay the change of control purchase price for any of the notes that might be delivered by holders of the notes seeking to accept the change of control offer and, accordingly, none of the holders of the notes may receive the change of control purchase price for their notes. Our failure to make the change of control offer or to pay the change of control purchase price with respect to the notes when due would result in a default under the indenture governing the notes. See “Description of the Exchange Notes—Events of Default and Remedies.”

The lenders under our senior secured credit facilities have the discretion to release the guarantors under our senior secured credit facilities, and our senior secured credit facilities documentation provides for the automatic release of one or more guarantors in a variety of circumstances, which will cause those guarantors to be released from their guarantees of the notes.

If the lenders under our senior secured credit facilities release a guarantor from its guarantee of obligations under our senior secured credit facilities, or any guarantor is automatically released from its guarantee of obligations under our senior secured credit facilities pursuant to the terms thereof, then the guarantee of the notes by such guarantor will be released automatically without action by, or consent of, any holder of the notes or the

 

24

---

Table of Contents

trustee under the indenture governing the notes. See “Description of the Exchange Notes.” You will not have a claim as a creditor against any subsidiary that is no longer a guarantor of the notes, and the indebtedness and other liabilities, including trade payables, whether secured or unsecured, of those subsidiaries will effectively be senior to claims of noteholders.

Federal and state statutes allow courts, under specific circumstances, to void guarantees of our subsidiaries and require noteholders to return payments received from subsidiary guarantors.

Under the federal bankruptcy law and comparable provisions of state fraudulent transfer laws, a guarantee could be voided, or claims in respect of a guarantee could be subordinated to all other debts of that subsidiary guarantor if, among other things, the subsidiary guarantor, at the time it incurred the indebtedness evidenced by its guarantee:

 

•

intended to hinder, delay, or defraud creditors; or

 

•

received less than reasonably equivalent value or fair consideration for the incurrence of such guarantee; and

 

•

was insolvent or rendered insolvent by reason of such incurrence; or

 

•

was engaged in a business or transaction for which the subsidiary guarantor’s remaining assets constituted unreasonably small capital; or

 

•

intended to incur, or believed that it would incur, debts beyond its ability to pay such debts as they mature.

In addition, any payment by that subsidiary guarantor pursuant to its guarantee could be voided and required to be returned to the subsidiary guarantor, or to a fund for the benefit of the creditors of the guarantor.

The measures of insolvency for purposes of these fraudulent transfer laws will vary depending upon the law applied in any proceeding to determine whether a fraudulent transfer has occurred. Generally, however, a subsidiary guarantor would be considered insolvent if:

 

•

the sum of its debts, including contingent liabilities, was greater than the then fair saleable value of all of its assets; or

 

•

if the present fair saleable value of its assets was less than the amount that would be required to pay its probable liability on its existing debts, including contingent liabilities, as they become absolute and mature; or

 

•

it could not pay its debts as they become due.

On the basis of historical financial information, recent operating history and other factors, we believe that each subsidiary guarantor, after giving effect to its guarantee of each series of notes, is not insolvent, does not have unreasonably small capital for the business in which it is engaged and has not incurred debts beyond its ability to pay such debts as they mature. There can be no assurance, however, as to what standard a court would apply in making such determinations or that a court would agree with our or any subsidiary guarantor’s conclusions in this regard.

You will be required to pay United States federal income tax on the senior toggle notes even if we do not pay cash interest.

None of the interest payments on the senior toggle notes will be qualified stated interest for United States federal income tax purposes, even if we never exercised the option to pay PIK Interest, because the senior toggle notes provide us with the option to pay cash interest or PIK Interest for any interest payment period through the maturity of the senior toggle notes. Consequently, the senior toggle notes will be treated as issued with original issue discount (“OID”) for United States federal income tax purposes, and United States holders will be required to include the OID in gross income on a constant yield-to-maturity basis, regardless of whether interest is paid

 

25

---

Table of Contents

currently in cash and regardless of their regular method of tax accounting. See “Certain United States Federal Income Tax Considerations.”

We may only be entitled to deduct a portion of any interest or OID on the senior toggle notes for United States federal income tax purposes, and only at such time as such interest or OID is considered paid in cash.

The senior toggle notes may constitute “applicable high yield discount obligations” for United States federal income tax purposes. If so, any interest deductions with respect to any OID relating to the senior toggle notes will be deferred until paid in cash, and will be disallowed to the extent the yield to maturity on the senior toggle notes exceeds six percentage points over the “applicable federal rate” (as determined under the Code) in effect for the calendar month in which the senior toggle notes are issued. The deferral and disallowance of deductions for payments of interest or OID on the senior toggle notes may reduce the amount of cash available to us to meet our obligations under the notes.

United States Holders will be required to pay United States federal income tax on the accrual of original issue discount on the senior cash pay notes.

We expect that the “stated redemption price at maturity” of the senior cash pay notes will exceed their “issue price” by more than the statutory de minimis threshold, in which case, the senior cash pay notes will be treated as being issued with original issue discount for United States federal income tax purposes. A United States Holder (as defined in “Certain United States Federal Income Tax Considerations”) of a senior cash pay note issued with original issue discount will be required to include such original issue discount in gross income for United Sates federal income tax purposes on a constant yield-to-maturity basis, in advance of the receipt of cash attributable to that income and regardless of the United States Holder’s regular method of accounting for United States federal income tax purposes. See “Certain United States Federal Income Tax Considerations” for more detail.

United States Holders will be required to pay United States federal income tax as interest accrues on the senior toggle notes whether or not we pay cash interest.

Because the senior toggle notes provide us with the option to pay PIK Interest in lieu of paying cash interest in any interest payment period, and because the senior toggle notes may be issued at a discount to their stated principal amount, we will treat the senior toggle notes as issued with original issue discount. As a result, United States Holders will be required to include such original issue discount in gross income for United Sates federal income tax purposes on a constant yield-to-maturity basis, in advance of the receipt of cash attributable to that income and regardless of the United States Holder’s regular method of accounting for United States federal income tax purposes. See “Certain United States Federal Income Tax Considerations” for more detail.

An active trading market may not develop for these notes.

The notes are securities for which there is no established public market. Although the notes are eligible for trading in The PORTAL^SM Market, we do not intend to apply to list the notes for trading on any securities exchange or to arrange for quotation on any automated dealer quotation system. As a result of this and the other factors listed below, an active trading market for the notes may not develop, in which case the market price and liquidity of the notes may be adversely affected.

In addition, you may not be able to sell your notes at a particular time or at a price favorable to you. Future trading prices of the notes will depend on many factors, including:

 

•

our operating performance and financial condition;

 

•

our prospects or the prospects for companies in our industry generally;

 

•

the fact that the notes will not be registered under the Securities Act;

 

•

the interest of securities dealers in making a market in the notes;

 

26

---

Table of Contents

•

the market for similar securities;

 

•

prevailing interest rates; and

 

•

the other factors described in this prospectus under “Risk Factors.”

Historically, the market for non-investment grade debt has been subject to disruptions that have caused volatility in prices. It is possible that the market for the notes will be subject to disruptions. A disruption may have a negative effect on you as a holder of the notes, regardless of our prospects or performance.

Although the initial purchasers have advised us that they intend to make a market in the notes, they are not obligated to do so. The initial purchasers may also discontinue any market making activities at any time, in their sole discretion, which could further negatively impact your ability to sell the notes or the prevailing market price at the time you choose to sell.

The trading market for the notes may be adversely affected by future resales of the notes by the initial purchasers or other factors.

Upon the consummation of the Transactions, substantially all of the notes were purchased by the initial purchasers. The initial purchasers expect to continue to hold notes, but are not required to hold such notes for any length of time. As a result, the initial purchasers may resell the notes at any time and at any price, and there can be no assurance that such resales will not adversely affect the market for the notes and the prices at which you may sell your notes. In addition to the foregoing, subsequent to their initial issuance, the notes may trade at a discount from their initial offering price, depending on other factors that include, without limitation, prevailing interest rates, the market for similar notes and our performance.

Risks Related to Our Business

Deterioration in general economic conditions has caused and could cause additional decreases or delays in advertising spending by our advertisers and could harm our ability to generate advertising revenues and negatively affect our results of operations.

The risks associated with our businesses become more acute in periods of a slowing economy or recession, which may be accompanied by a decrease in advertising. Expenditures by advertisers tend to be cyclical, reflecting overall economic conditions and budgeting and buying patterns. The current global economic slowdown has resulted in a decline in advertising and marketing services among our customers, resulting in a decline in advertising revenue across our businesses. This reduction in advertising revenue has had an adverse effect on our revenue, profit margins, cash flow and liquidity, particularly during the second half of 2008. The continuation of the global economic slowdown may continue to adversely impact our revenue, profit margins, cash flow and liquidity.

In this regard, consolidated revenue decreased $232.5 million during 2008 compared to 2007. Revenue growth during the first nine months of 2008 was offset by a decline of $254.0 million in the fourth quarter. Revenue declined $264.7 million during 2008 compared to 2007 from our radio business associated with decreases in both local and national advertising. Our Americas Outdoor Advertising revenue also declined approximately $54.8 million attributable to decreases in poster and bulletin revenues associated with cancellations and non-renewals from major national advertisers.

In January 2009, in response to the deterioration in general economic conditions and the resulting negative impact on our business, we commenced a restructuring program targeting a reduction of fixed costs by approximately $350 million on an annualized basis. As part of the program, we eliminated approximately 1,850 full-time positions representing approximately 9% of total workforce. The program is expected to result in restructuring and other non-recurring charges of approximately $200 million, although additional costs may be incurred as the program evolves. The cost savings initiatives are expected to be fully implemented by the end of the first quarter of 2010. No assurance can be given that the restructuring program will be successful or will achieve the anticipated cost savings in the timeframe expected or at all.

 

27

---

Table of Contents

If we need additional cash to fund our working capital, debt service, capital expenditures or other funding requirements, we may not be able to access the credit markets due to continuing adverse securities and credit market conditions.

Our primary source of liquidity is cash flow from operations, which has been adversely impacted by the decline in our advertising revenue resulting from the current global economic slowdown. Based on our current and anticipated levels of operations and conditions in our markets, we believe that cash flow from operations as well as cash on hand (including amounts drawn or available under our senior secured credit facilities) will enable us to meet our working capital, capital expenditure, debt service and other funding requirements for at least the next 12 months. However, our ability to fund our working capital needs, debt service and other obligations, and to comply with the financial covenants under our financing agreements depends on our future operating performance and cash flow, which are in turn subject to prevailing economic conditions and other factors, many of which are beyond our control. If our future operating performance does not meet our expectation or our plans materially change in an adverse manner or prove to be materially inaccurate, we may need additional financing. Continuing adverse securities and credit market conditions could significantly affect the availability of equity or credit financing. Consequently, there can be no assurance that such financing, if permitted under the terms of our financing agreements, will be available on terms acceptable to us or at all. The inability to obtain additional financing in such circumstances could have a material adverse effect on our financial condition and on our ability to meet our obligations.

Downgrades in our credit ratings and macroeconomic conditions may adversely affect our borrowing costs, limit our financing options, reduce our flexibility under future financings and adversely affect our liquidity.

Our corporate credit and issue-level ratings were downgraded on February 20, 2009 by Standard & Poor’s Ratings Services. Our corporate credit rating was lowered to “B-”. These ratings remain on credit watch with negative implications. Additionally, Moody’s Investors Service downgraded our corporate family rating to “Caa3” on March 9, 2009. These ratings are significantly below investment grade. These ratings and any additional reductions in our credit ratings could further increase our borrowing costs and reduce the availability of financing to us. In addition, deteriorating economic conditions, including market disruptions, tightened credit markets and significantly wider corporate borrowing spreads, may make it more difficult or costly for us to obtain financing in the future. A credit rating downgrade does not constitute a default under any of our debt obligations.

Our financial performance may be adversely affected by certain variables which are not in our control.

Certain variables that could adversely affect our financial performance by, among other things, leading to decreases in overall revenue, the numbers of advertising customers, advertising fees, or profit margins include:

 

•

unfavorable economic conditions, both general and relative to the radio broadcasting, outdoor advertising and all related media industries, which may cause companies to reduce their expenditures on advertising;

 

•

unfavorable shifts in population and other demographics which may cause us to lose advertising customers as people migrate to markets where we have a smaller presence, or which may cause advertisers to be willing to pay less in advertising fees if the general population shifts into a less desirable age or geographical demographic from an advertising perspective;

 

•

an increased level of competition for advertising dollars, which may lead to lower advertising rates as we attempt to retain customers or which may cause us to lose customers to our competitors who offer lower rates that we are unable or unwilling to match;

 

•

unfavorable fluctuations in operating costs which we may be unwilling or unable to pass through to our customers;

 

28

---

Table of Contents

•

technological changes and innovations that we are unable to adopt or are late in adopting that offer more attractive advertising or listening alternatives than what we currently offer, which may lead to a loss of advertising customers or to lower advertising rates;

 

•

the impact of potential new royalties charged for terrestrial radio broadcasting which could materially increase our expenses;

 

•

unfavorable changes in labor conditions which may require us to spend more to retain and attract key employees; and

 

•

changes in governmental regulations and policies and actions of federal regulatory bodies which could restrict the advertising media which we employ or restrict some or all of our customers that operate in regulated areas from using certain advertising media, or from advertising at all.

We face intense competition in the broadcasting and outdoor advertising industries.

Our business segments are in highly competitive industries, and we may not be able to maintain or increase our current audience ratings and advertising and sales revenue. Our radio stations and outdoor advertising properties compete for audiences and advertising revenue with other radio stations and outdoor advertising companies, as well as with other media, such as newspapers, magazines, television, direct mail, satellite radio and Internet-based media, within their respective markets. Audience ratings and market shares are subject to change, which could have the effect of reducing our revenue in that market. Our competitors may develop services or advertising media that are equal or superior to those we provide or that achieve greater market acceptance and brand recognition than we achieve. It is possible that new competitors may emerge and rapidly acquire significant market share in any of our business segments. An increased level of competition for advertising dollars may lead to lower advertising rates as we attempt to retain customers or may cause us to lose customers to our competitors who offer lower rates that we are unable or unwilling to match.

Our business is dependent upon the performance of on-air talent and program hosts, as well as our management team and other key employees.

We employ or independently contract with several on-air personalities and hosts of syndicated radio programs with significant loyal audiences in their respective markets. Although we have entered into long-term agreements with some of our key on-air talent and program hosts to protect our interests in those relationships, we can give no assurance that all or any of these persons will remain with us or will retain their audiences. Competition for these individuals is intense and many of these individuals are under no legal obligation to remain with us. Our competitors may choose to extend offers to any of these individuals on terms which we may be unwilling to meet. Furthermore, the popularity and audience loyalty of our key on-air talent and program hosts is highly sensitive to rapidly changing public tastes. A loss of such popularity or audience loyalty is beyond our control and could limit our ability to generate revenue.

Our business is also dependent upon the performance of our management team and other key employees. Although we have entered into long-term agreements with some of these individuals, we can give no assurance that all or any of our executive officers or key employees will remain with us. Competition for these individuals is intense and many of our key employees are at-will employees who are under no legal obligation to remain with us. In addition, any or all of our executive officers or key employees may decide to leave for a variety of personal or other reasons beyond our control. The loss of members of our management team or other key employees could have a negative impact on our business and results of operations.

Extensive government regulation, including laws dealing with indecency, may limit our broadcasting operations or adversely affect our business.

The federal government extensively regulates the domestic broadcasting industry, and any changes in the current regulatory scheme could significantly affect us.

 

29

---

Table of Contents

Provisions of federal law regulate the broadcast of obscene, indecent, or profane material. The FCC has substantially increased its monetary penalties for violations of these regulations. Congressional legislation enacted in 2006 provides the FCC with authority to impose fines of up to $325,000 per violation for the broadcast of such material. We therefore face increased costs in the form of fines for indecency violations, and cannot predict whether Congress will consider or adopt further legislation in this area.

Environmental, health, safety and land use laws and regulations may limit or restrict some of our operations.

As the owner or operator of various real properties and facilities, especially in our outdoor advertising operations, we must comply with various foreign, federal, state and local environmental, health, safety and land use laws and regulations. We and our properties are subject to such laws and regulations relating to the use, storage, disposal, emission and release of hazardous and non-hazardous substances and employee health and safety as well as zoning restrictions. Historically, we have not incurred significant expenditures to comply with these laws. However, additional laws which may be passed in the future, or a finding of a violation of or liability under existing laws, could require us to make significant expenditures and otherwise limit or restrict some of our operations.

Government regulation of outdoor advertising may restrict our outdoor advertising operations.

United States federal, state and local regulations have a significant impact on the outdoor advertising industry and our business. One of the seminal laws was the Highway Beautification Act of 1965 (the “HBA”), which regulates outdoor advertising on the 306,000 miles of Federal-Aid Primary, Interstate and National Highway Systems (“controlled roads”). The HBA regulates the size and location of billboards, mandates a state compliance program, requires the development of state standards, promotes the expeditious removal of illegal signs, and requires just compensation for takings. Construction, repair, lighting, height, size, spacing and the location of billboards and the use of new technologies for changing displays, such as digital displays, are regulated by federal, state and local governments. From time to time, states and municipalities have prohibited or significantly limited the construction of new outdoor advertising structures, and also permitted non-conforming structures to be rebuilt by third parties. Changes in laws and regulations affecting outdoor advertising at any level of government, including laws of the foreign jurisdictions in which we operate, could have a significant financial impact on us by requiring us to make significant expenditures or otherwise limiting or restricting some of our operations.

From time to time, certain state and local governments and third parties have attempted to force the removal of our displays under various state and local laws, including condemnation and amortization. Amortization is the attempted forced removal of legal but non-conforming billboards (billboards which conformed with applicable zoning regulations when built, but which do not conform to current zoning regulations) or the commercial advertising placed on such billboards after a period of years. Pursuant to this concept, the governmental body asserts that just compensation is earned by continued operation of the billboard over time. Amortization is prohibited along all controlled roads and generally prohibited along non-controlled roads. Amortization has, however, been upheld along non-controlled roads in limited instances where provided by state and local law. Other regulations limit our ability to rebuild, replace, repair and upgrade non-conforming displays. In addition, from time to time third parties or local governments assert that we own or operate displays that either are not properly permitted or otherwise are not in strict compliance with applicable law. Although we believe that the number of our billboards that may be subject to removal based on alleged noncompliance is immaterial, from time to time we have been required to remove billboards for alleged noncompliance. Such regulations and allegations have not had a material impact on our results of operations to date, but if we are increasingly unable to resolve such allegations or obtain acceptable arrangements in circumstances in which our displays are subject to removal, modification, or amortization, or if there occurs an increase in such regulations or their enforcement, our operating results could suffer.

A number of state and local governments have implemented or initiated legislative billboard controls, including taxes, fees and registration requirements in an effort to decrease or restrict the number of outdoor signs

 

30

---

Table of Contents

and/or to raise revenue. While these controls have not had a material impact on our business and financial results to date, we expect states and local governments to continue these efforts. The increased imposition of these controls and our inability to pass on the cost of these items to our clients could negatively affect our operating income.

International regulation of the outdoor advertising industry varies by region and country, but generally limits the size, placement, nature and density of out-of-home displays. Other regulations limit the subject matter and language of out-of-home displays. For instance, the United States and most European Union countries, among other nations, have banned outdoor advertisements for tobacco products. Our failure to comply with these or any future international regulations could have an adverse impact on the effectiveness of our displays or their attractiveness to clients as an advertising medium and may require us to make significant expenditures to ensure compliance. As a result, we may experience a significant impact on our operations, revenue, international client base and overall financial condition.

Additional restrictions on outdoor advertising of tobacco, alcohol and other products may further restrict the categories of clients that can advertise using our products.

Out-of-court settlements between the major United States tobacco companies and all 50 states, the District of Columbia, the Commonwealth of Puerto Rico and four other United States territories include a ban on the outdoor advertising of tobacco products. Other products and services may be targeted in the future, including alcohol products. Legislation regulating tobacco and alcohol advertising has also been introduced in a number of European countries in which we conduct business and could have a similar impact. Any significant reduction in alcohol-related advertising due to content-related restrictions could cause a reduction in direct revenue from such advertisements and an increase in the available space on the existing inventory of billboards in the outdoor advertising industry.

Doing business in foreign countries creates certain risks not found in doing business in the United States.

Doing business in foreign countries carries with it certain risks that are not found in doing business in the United States. The risks of doing business in foreign countries that could result in losses against which we are not insured include:

 

•

exposure to local economic conditions;

 

•

potential adverse changes in the diplomatic relations of foreign countries with the United States;

 

•

hostility from local populations;

 

•

the adverse effect of currency exchange controls;

 

•

restrictions on the withdrawal of foreign investment and earnings;

 

•

government policies against businesses owned by foreigners;

 

•

investment restrictions or requirements;

 

•

expropriations of property;

 

•

the potential instability of foreign governments;

 

•

the risk of insurrections;

 

•

risks of renegotiation or modification of existing agreements with governmental authorities;

 

•

foreign exchange restrictions;

 

•

withholding and other taxes on remittances and other payments by subsidiaries; and

 

•

changes in taxation structure.

 

31

---

Table of Contents

In addition, because we own assets in foreign countries and derive revenue from our international operations, we may incur currency translation losses due to changes in the values of foreign currencies and in the value of the United States dollar. We cannot predict the effect of exchange rate fluctuations upon future operating results.

Future acquisitions could pose risks.

We frequently evaluate strategic opportunities both within and outside our existing lines of business. We expect from time to time to pursue additional acquisitions and may decide to dispose of certain businesses. These acquisitions or dispositions could be material. Our acquisition strategy involves numerous risks, including:

 

•

certain of our acquisitions may prove unprofitable and fail to generate anticipated cash flows;

 

•

to successfully manage our large portfolio of broadcasting, outdoor advertising and other properties, we may need to:

 

•

recruit additional senior management as we cannot be assured that senior management of acquired companies will continue to work for us and we cannot be certain that any of our recruiting efforts will succeed, and

 

•

expand corporate infrastructure to facilitate the integration of our operations with those of acquired properties, because the failure to do so may cause us to lose the benefits of any expansion that we decide to undertake by leading to disruptions in our ongoing businesses or by distracting our management;

 

•

entry into markets and geographic areas where we have limited or no experience;

 

•

we may encounter difficulties in the integration of operations and systems;

 

•

our management’s attention may be diverted from other business concerns; and

 

•

we may lose key employees of acquired companies or stations.

Additional acquisitions by us of radio and television stations and outdoor advertising properties may require antitrust review by federal antitrust agencies and may require review by foreign antitrust agencies under the antitrust laws of foreign jurisdictions. We can give no assurances that the United States Department of Justice (“DOJ”) or the Federal Trade Commission (“FTC”) or foreign antitrust agencies will not seek to bar us from acquiring additional radio or television stations or outdoor advertising properties in any market where we already have a significant position. The DOJ also actively reviews proposed acquisitions of outdoor advertising properties. In addition, the antitrust laws of foreign jurisdictions will apply if we acquire international broadcasting properties.

Capital requirements necessary to implement strategic initiatives could pose risks.

The purchase price of possible acquisitions and/or other strategic initiatives could require additional indebtedness or equity financing on our part. Since the terms and availability of this financing depend to a large degree upon general economic conditions and third parties over which we have no control, we can give no assurance that we will obtain the needed financing or that we will obtain such financing on attractive terms. In addition, our ability to obtain financing depends on a number of other factors, many of which are also beyond our control, such as interest rates and national and local business conditions. If the cost of obtaining needed financing is too high or the terms of such financing are otherwise unacceptable in relation to the strategic opportunity we are presented with, we may decide to forego that opportunity. Additional indebtedness could increase our leverage and make us more vulnerable to economic downturns and may limit our ability to withstand competitive pressures.

 

32

---

Table of Contents

New technologies may affect our broadcasting operations.

Our broadcasting businesses face increasing competition from new broadcast technologies, such as broadband wireless and satellite radio, and new consumer products, such as portable digital audio players. These new technologies and alternative media platforms compete with our radio stations for audience share and advertising revenue. The FCC has also approved new technologies for use in the radio broadcasting industry, including the terrestrial delivery of digital audio broadcasting, which significantly enhances the sound quality of radio broadcasts. We have converted approximately 498 of our radio stations to digital broadcasting as of December 31, 2008. We are unable to predict the effect such technologies and related services and products will have on our broadcasting operations, but the capital expenditures necessary to implement such technologies could be substantial and other companies employing such technologies could compete with our businesses.

We may be adversely affected by the occurrence of extraordinary events, such as terrorist attacks.

The occurrence of extraordinary events, such as terrorist attacks, intentional or unintentional mass casualty incidents, or similar events may substantially decrease the use of and demand for advertising, which may decrease revenue or expose us to substantial liability. The September 11, 2001 terrorist attacks, for example, caused a nationwide disruption of commercial activities. As a result of the expanded news coverage following the attacks and subsequent military actions, we experienced a loss in advertising revenue and increased incremental operating expenses. The occurrence of future terrorist attacks, military actions by the United States, contagious disease outbreaks, or similar events cannot be predicted, and their occurrence can be expected to further negatively affect the economies of the United States and other foreign countries where we do business generally, specifically the market for advertising.

Significant equity investors control us and their interests may not be in line with your interests.

Private equity funds sponsored by or co-investors with Bain Capital and THL indirectly own a majority of our outstanding capital stock and will exercise control over matters requiring approval of our shareholder and Board of Directors. Because of this control, transactions may be pursued that could enhance this equity investment while involving risks to your interests. There can be no assurance that the interests of our controlling equity investors will not conflict with your interests.

Additionally, the Sponsors are in the business of making investments in companies and may from time to time acquire and hold interests in businesses that compete directly or indirectly with us. One or more of the Sponsors may also pursue acquisition opportunities that may be complimentary to our business and, as a result, those acquisition opportunities may not be available to us. So long as private equity funds sponsored by or co-investors with the Sponsors continue to indirectly own a significant amount of the outstanding shares of our common stock, even if such amount is less than 50%, the Sponsors will continue to be able to strongly influence or effectively control our decisions.

 

33

---

Table of Contents

THE EXCHANGE OFFERS

Purpose and Effect of the Exchange Offers

Concurrently with the sale of the outstanding notes on July 30, 2008, we entered into a registration rights agreement with the initial purchasers of the outstanding notes that requires us to use our commercially reasonable efforts to prepare and file a registration statement under the Securities Act with respect to the exchange notes and, upon the effectiveness of the registration statement, to offer to the holders of the outstanding notes the opportunity to exchange their outstanding notes for a like principal amount of exchange notes.

The registration rights agreement provides that we must (1)(a) use our commercially reasonable efforts to cause the registration statement of which this prospectus is a part to be declared effective under the Securities Act within 300 days of the original issue date, (b) keep the exchange offers open for at least 20 business days (or longer, if required by applicable law) after the date notice of the exchange offers is mailed to holders of the outstanding notes and (c) on or prior to the 300th day after the original issue date, if required by the registration rights agreement, exchange the outstanding notes for exchange notes or, under certain circumstances, or (2) have one or more shelf registration statements declared effective within the time frames specified in the registration rights agreement. If we fail to meet certain of these targets, which we refer to as a registration default, the annual interest rate on the notes will increase by 0.25%. The annual interest rate on the notes will increase by an additional 0.25% for each subsequent 90-day period during which the registration default continues, up to a maximum additional interest rate of 0.50% per year over the original interest rate of the notes. If the registration default is corrected, the interest rate on such notes will revert to the original level. If we must pay additional interest, we will pay it to holders of the outstanding notes in cash on the same dates that we make other interest payments on the outstanding notes, until the registration default is corrected.

Following the completion of the exchange offers, holders of outstanding notes not tendered will not have any further registration rights other than as set forth in the paragraphs below, and the outstanding notes will continue to be subject to certain restrictions on transfer.

Subject to certain conditions, including the representations set forth below, the exchange notes will be issued without a restrictive legend and generally may be reoffered and resold without registration under the Securities Act. In order to participate in the exchange offers, a holder must represent to us in writing, or be deemed to represent to us in writing, among other things, that:

 

•

the exchange notes acquired pursuant to the exchange offers are being acquired by such holder in the ordinary course of business;

 

•

the holder does not have an arrangement or understanding with any person to participate in the distribution (within the meaning of the Securities Act) of the exchange notes;

 

•

the holder is not an “affiliate,” as defined in Rule 405 under the Securities Act, of ours or of any of the guarantors;

 

•

if the holder is not a broker-dealer, that it is not engaged in, and does not intend to engage in, the distribution of the exchange notes; and

 

•

if the holder is a participating broker-dealer that will acquire exchange notes for its own account in exchange for the outstanding notes that were acquired as a result of market-making activities or other trading activities, that it will deliver a prospectus in connection with any resale of such exchange notes.

Based on an interpretation by the Staff of the SEC set forth in no-action letters issued to third parties unrelated to us, we believe that, with the exceptions set forth below, the exchange notes issued in the exchange offers may be offered for resale, resold and otherwise transferred by the holder of exchange notes without compliance with the registration and prospectus delivery requirements of the Securities Act, unless the holder:

 

•

is an “affiliate,” within the meaning of Rule 405 under the Securities Act, of ours or any guarantor;

 

34

---

Table of Contents

•

is a broker-dealer who purchased outstanding notes directly from us for resale under Rule 144A or Regulation S or any other available exemption under the Securities Act;

 

•

acquired the exchange notes other than in the ordinary course of the holder’s business;

 

•

has an arrangement with any person to engage in the distribution of the exchange notes; or

 

•

is prohibited by any law or policy of the SEC from participating in the exchange offers.

Any holder who tenders in the exchange offers for the purpose of participating in a distribution of the exchange notes cannot rely on this interpretation by the Staff of the SEC and must comply with the registration and prospectus delivery requirements of the Securities Act in connection with a secondary resale transaction. Each broker-dealer that receives exchange notes for its own account in exchange for outstanding notes, where such outstanding notes were acquired by such broker-dealer as a result of market-making activities or other trading activities, must acknowledge that it will deliver a prospectus in connection with any resale of such exchange notes. See “Plan of Distribution.” Broker-dealers who acquired outstanding notes directly from us and not as a result of market-making activities or other trading activities may not rely on the Staff’s interpretations discussed above, and must comply with the prospectus delivery requirements of the Securities Act in order to sell the outstanding notes.

Terms of the Exchange Offers

Upon the terms and subject to the conditions set forth in this prospectus and in the letter of transmittal, we will accept any and all outstanding notes validly tendered and not withdrawn prior to 12:00 a.m. midnight, New York City time, on the expiration date. We will issue $2,000 in principal amount of exchange notes in exchange for each $2,000 principal amount of outstanding notes accepted in the exchange offers and in integral multiples of $1,000 thereafter. Holders may tender some or all of their outstanding notes pursuant to the exchange offers. However, outstanding notes may be tendered only in a denomination equal to $2,000 and in integral multiples of $1,000 in principal amount thereafter.

The exchange notes will evidence the same debt as the outstanding notes and will be issued under the terms of, and entitled to the benefits of, the indenture relating to the outstanding notes.

As of the date of this prospectus: (a) $980,000,000 in aggregate principal amount of senior cash pay notes are outstanding and (b) $1,330,000,000 in aggregate principal amount of senior toggle notes were outstanding. This prospectus, together with the letter of transmittal, is being sent to the registered holders of outstanding notes. We intend to conduct the exchange offers in accordance with the applicable requirements of the Securities Act and Exchange Act and the rules and regulations of the SEC.

We will be deemed to have accepted validly tendered outstanding notes when, as and if we have given oral or written notice thereof to Deutsche Bank Trust Company Americas, which is acting as the exchange agent. The exchange agent will act as agent for the tendering holders for the purpose of receiving the exchange notes from us. If any tendered outstanding notes are not accepted for exchange because of an invalid tender, the occurrence of certain other events set forth under the heading “—Conditions to the Exchange Offers,” any such unaccepted outstanding notes will be returned, without expense, to the tendering holder of those outstanding notes promptly after the expiration date unless the exchange offers are extended.

Holders who tender outstanding notes in the exchange offers will not be required to pay brokerage commissions or fees or, subject to the instructions in the letter of transmittal, transfer taxes with respect to the exchange of outstanding notes in the exchange offers. We will pay all charges and expenses, other than certain applicable taxes described below in connection with the exchange offers.

 

35

---

Table of Contents

Expiration Date; Extensions; Amendments

The expiration date shall be 12:00 a.m. midnight, New York City time, on                      , 2009, unless we, in our sole discretion, extend the exchange offers, in which case the expiration date shall be the latest date and time to which the exchange offers are extended. In order to extend the exchange offers, we will notify the exchange agent and each registered holder of any extension by oral or written notice prior to 9:00 a.m., New York City time, on the next business day after the previously scheduled expiration date and will also disseminate notice of any extension by press release or other public announcement prior to 9:00 a.m., New York City time on such date. We reserve the right, in our sole discretion:

 

•

to delay accepting any outstanding notes, to extend the exchange offers or, if any of the conditions set forth under “—Conditions to the Exchange Offers” shall not have been satisfied, to terminate the exchange offers, by giving oral or written notice of that delay, extension or termination to the exchange agent, or

 

•

to amend the terms of the exchange offers in any manner.

Any delay in acceptance, extension, termination, or amendment will be followed as promptly as practicable by oral or written notice to the registered holders of the outstanding notes. If we amend the exchange offers in a manner that we determine to constitute a material change, we will promptly disclose the amendment in a manner reasonably calculated to inform the holders of the outstanding notes of that amendment.

Conditions to the Exchange Offers

Despite any other term of the exchange offers, we will not be required to accept for exchange, or to issue exchange notes in exchange for, any outstanding notes and we may terminate or amend the exchange offers as provided in this prospectus prior to the expiration date if in our reasonable judgment:

 

•

any exchange offer or the making of any exchange by a holder violates any applicable law or interpretation of the SEC; or

 

•

any action or proceeding has been instituted or threatened in any court or by or before any governmental agency with respect to any exchange offer that, in our judgment, would reasonably be expected to impair our ability to proceed with such exchange offer.

In addition, we will not be obligated to accept for exchange the outstanding notes of any holder that has not made to us:

 

•

the representations described under “—Purpose and Effect of the Exchange Offers,” “—Procedures for Tendering Outstanding Notes” and “Plan of Distribution;” or

 

•

any other representations as may be reasonably necessary under applicable SEC rules, regulations, or interpretations to make available to us an appropriate form for registration of the exchange notes under the Securities Act.

We expressly reserve the right at any time or at various times to extend the period of time during which the exchange offers are open. Consequently, we may delay acceptance of any outstanding notes by giving oral or written notice of such extension to the holders of outstanding notes. We will return any outstanding notes that we do not accept for exchange for any reason without expense to their tendering holder promptly after the expiration or termination of the exchange offers.

We expressly reserve the right to amend or terminate any exchange offer and to reject for exchange any outstanding notes not previously accepted for exchange, upon the occurrence of any of the conditions of the exchange offers specified above. We will give oral or written notice of any extension, amendment, non-acceptance, or termination to the holders of the outstanding notes as promptly as practicable. In the case of any extension, such notice will be issued no later than 9:00 a.m., New York City time, on the next business day after the previously scheduled expiration date.

 

36

---

Table of Contents

These conditions are for our sole benefit and we may assert them regardless of the circumstances that may give rise to them or waive them in whole or in part at any or at various times prior to the expiration date in our sole discretion. If we fail at any time to exercise any of the foregoing rights, this failure will not constitute a waiver of such right. Each such right will be deemed an ongoing right that we may assert at any time or at various times prior to the expiration date.

In addition, we will not accept for exchange any outstanding notes tendered, and will not issue exchange notes in exchange for any such outstanding notes, if at such time any stop order is threatened or in effect with respect to the registration statement of which this prospectus constitutes a part or the qualification of the indenture under the Trust Indenture Act of 1939, as amended (the “TIA”).

Procedures for Tendering Outstanding Notes

To tender your outstanding notes in the exchange offers, you must comply with either of the following:

 

•

complete, sign and date the letter of transmittal, or a facsimile of the letter of transmittal, have the signature(s) on the letter of transmittal guaranteed if required by the letter of transmittal and mail or deliver such letter of transmittal or facsimile thereof to the exchange agent at the address set forth below under “—Exchange Agent” prior to the expiration date; or

 

•

comply with DTC’s ATOP procedures described below.

In addition, either:

 

•

the exchange agent must receive certificates for outstanding notes along with the letter of transmittal prior to the expiration date;

 

•

the exchange agent must receive a timely confirmation of book-entry transfer of outstanding notes into the exchange agent’s account at DTC according to the procedures for book-entry transfer described below or a properly transmitted agent’s message prior to the expiration date; or

 

•

you must comply with the guaranteed delivery procedures described below.

Your tender, if not withdrawn prior to the expiration date, constitutes an agreement between us and you upon the terms and subject to the conditions described in this prospectus and in the letter of transmittal.

The method of delivery of outstanding notes, letters of transmittal, and all other required documents to the exchange agent is at your election and risk. We recommend that instead of delivery by mail, you use an overnight or hand delivery service, properly insured. In all cases, you should allow sufficient time to assure timely delivery to the exchange agent before the expiration date. You should not send letters of transmittal or certificates representing outstanding notes to us. You may request that your broker, dealer, commercial bank, trust company, or nominee effect the above transactions for you.

If you are a beneficial owner whose outstanding notes are registered in the name of a broker, dealer, commercial bank, trust company, or other nominee and you wish to tender your outstanding notes, you should promptly contact the registered holder and instruct the registered holder to tender on your behalf. If you wish to tender the outstanding notes yourself, you must, prior to completing and executing the letter of transmittal and delivering your outstanding notes, either:

 

•

make appropriate arrangements to register ownership of the outstanding notes in your name; or

 

•

obtain a properly completed bond power from the registered holder of outstanding notes.

The transfer of registered ownership may take considerable time and may not be able to be completed prior to the expiration date.

 

37

---

Table of Contents

Signatures on the applicable letter of transmittal or a notice of withdrawal, as the case may be, must be guaranteed by a member firm of a registered national securities exchange or of the National Association of Securities Dealers, Inc., a commercial bank or trust company having an office or correspondent in the United States or another “eligible guarantor institution” within the meaning of Rule 17A(d)-15 under the Exchange Act unless the outstanding notes surrendered for exchange are tendered:

 

•

by a registered holder of the outstanding notes who has not completed the box entitled “Special Delivery Instructions” on the letter of transmittal; or

 

•

for the account of an eligible guarantor institution.

If the letter of transmittal is signed by a person other than the registered holder of any outstanding notes listed on the outstanding notes, such outstanding notes must be endorsed or accompanied by a properly completed bond power. The bond power must be signed by the registered holder as the registered holder’s name appears on the outstanding notes and an eligible guarantor institution must guarantee the signature on the bond power.

If the letter of transmittal or any certificates representing outstanding notes, or bond powers are signed by trustees, executors, administrators, guardians, attorneys-in-fact, officers of corporations, or others acting in a fiduciary or representative capacity, those persons should also indicate when signing and, unless waived by us, they should also submit evidence satisfactory to us of their authority to so act.

The exchange agent and DTC have confirmed that any financial institution that is a participant in DTC’s system may use DTC’s ATOP system to tender. Participants in the program may, instead of physically completing and signing the applicable letter of transmittal and delivering it to the exchange agent, electronically transmit their acceptance of the exchange by causing DTC to transfer the outstanding notes to the exchange agent in accordance with DTC’s ATOP procedures for transfer. DTC will then send an agent’s message to the exchange agent. The term “agent’s message” means a message transmitted by DTC, received by the exchange agent and forming part of the book-entry confirmation, which states that:

 

•

DTC has received an express acknowledgment from a participant in its ATOP that is tendering outstanding notes that are the subject of the book-entry confirmation;

 

•

the participant has received and agrees to be bound by the terms of the letter of transmittal, or in the case of an agent’s message relating to guaranteed delivery, that such participant has received and agrees to be bound by the notice of guaranteed delivery; and

 

•

we may enforce that agreement against such participant.

DTC is referred to herein as a “book-entry transfer facility.”

Acceptance of Exchange Notes

In all cases, we will promptly issue exchange notes for outstanding notes that we have accepted for exchange under the exchange offers only after the exchange agent timely receives:

 

•

outstanding notes or a timely book-entry confirmation of such outstanding notes into the exchange agent’s account at the book-entry transfer facility; and

 

•

a properly completed and duly executed letter of transmittal and all other required documents or a properly transmitted agent’s message.

 

•

By tendering outstanding notes pursuant to the exchange offers, you will represent to us that, among other things:

 

•

you are not our affiliate or an affiliate of any guarantor within the meaning of Rule 405 under the Securities Act;

 

38

---

Table of Contents

•

you do not have an arrangement or understanding with any person or entity to participate in a distribution of the exchange notes; and

 

•

you are acquiring the exchange notes in the ordinary course of your business.

In addition, each broker-dealer that is to receive exchange notes for its own account in exchange for outstanding notes must represent that such outstanding notes were acquired by that broker-dealer as a result of market-making activities or other trading activities and must acknowledge that it will deliver a prospectus that meets the requirements of the Securities Act in connection with any resale of the exchange notes. The letter of transmittal states that by so acknowledging and by delivering a prospectus, a broker-dealer will not be deemed to admit that it is an “underwriter” within the meaning of the Securities Act. See “Plan of Distribution.”

We will interpret the terms and conditions of the exchange offers, including the letters of transmittal and the instructions to the letters of transmittal, and will resolve all questions as to the validity, form, eligibility, including time of receipt, and acceptance of outstanding notes tendered for exchange. Our determinations in this regard will be final and binding on all parties. We reserve the absolute right to reject any and all tenders of any particular outstanding notes not properly tendered or to not accept any particular outstanding notes if the acceptance might, in our or our counsel’s judgment, be unlawful. We also reserve the absolute right to waive any defects or irregularities as to any particular outstanding notes prior to the expiration date.

Unless waived, any defects or irregularities in connection with tenders of outstanding notes for exchange must be cured within such reasonable period of time as we determine. Neither we, the exchange agent, nor any other person will be under any duty to give notification of any defect or irregularity with respect to any tender of outstanding notes for exchange, nor will any of us or them incur any liability for any failure to give notification. Any outstanding notes received by the exchange agent that are not properly tendered and as to which the irregularities have not been cured or waived will be returned by the exchange agent to the tendering holder, unless otherwise provided in the letter of transmittal, promptly after the expiration date.

Book-Entry Delivery Procedures

Promptly after the date of this prospectus, the exchange agent will establish an account with respect to the outstanding notes at DTC and, as the book-entry transfer facility, for purposes of the exchange offers. Any financial institution that is a participant in the book-entry transfer facility’s system may make book-entry delivery of the outstanding notes by causing the book-entry transfer facility to transfer those outstanding notes into the exchange agent’s account at the facility in accordance with the facility’s procedures for such transfer. To be timely, book-entry delivery of outstanding notes requires receipt of a confirmation of a book-entry transfer, a “book-entry confirmation,” prior to the expiration date. In addition, although delivery of outstanding notes may be effected through book-entry transfer into the exchange agent’s account at the book-entry transfer facility, the applicable letter of transmittal or a manually signed facsimile thereof, together with any required signature guarantees and any other required documents, or an agent’s message, in connection with a book-entry transfer, must, in any case, be delivered or transmitted to and received by the exchange agent at its address set forth on the cover page of the applicable letter of transmittal prior to the expiration date to receive exchange notes for tendered outstanding notes, or the guaranteed delivery procedure described below must be complied with. Tender will not be deemed made until such documents are received by the exchange agent. Delivery of documents to the book-entry transfer facility does not constitute delivery to the exchange agent.

Holders of outstanding notes who are unable to deliver confirmation of the book-entry tender of their outstanding notes into the exchange agent’s account at the book-entry transfer facility or all other documents required by the applicable letter of transmittal to the exchange agent on or prior to the expiration date must tender their outstanding notes according to the guaranteed delivery procedures described below.

 

39

---

Table of Contents

Guaranteed Delivery Procedures

If you wish to tender your outstanding notes but your outstanding notes are not immediately available or you cannot deliver your outstanding notes, the applicable letter of transmittal or any other required documents to the exchange agent, or comply with the procedures under DTC’s ATOP system in the case of outstanding notes, prior to the expiration date, you may still tender if:

 

•

the tender is made through an eligible guarantor institution;

 

•

prior to the expiration date, the exchange agent receives from such eligible guarantor institution either a properly completed and duly executed notice of guaranteed delivery, by facsimile transmission, mail, or hand delivery or a properly transmitted agent’s message and notice of guaranteed delivery, that (1) sets forth your name and address, the names in which the outstanding notes are registered, the certificate number(s) of such outstanding notes and the principal amount of outstanding notes tendered; (2) states that the tender is being made thereby; and (3) guarantees that, within three New York Stock Exchange trading days after the expiration date, the letter of transmittal, or facsimile thereof, together with the outstanding notes or a book-entry confirmation, and any other documents required by the letter of transmittal, will be deposited by the eligible guarantor institution with the exchange agent; and

 

•

the exchange agent receives the properly completed and executed letter of transmittal or facsimile thereof, as well as certificate(s) representing all tendered outstanding notes in proper form for transfer or a book-entry confirmation of transfer of the outstanding notes into the exchange agent’s account at DTC and all other documents required by the letter of transmittal within three New York Stock Exchange trading days after the expiration date.

Upon request, the exchange agent will send to you a notice of guaranteed delivery if you wish to tender your outstanding notes according to the guaranteed delivery procedures.

Withdrawal Rights

Except as otherwise provided in this prospectus, you may withdraw your tender of outstanding notes at any time prior to 12:00 a.m. midnight, New York City time, on the expiration date.

For a withdrawal to be effective:

 

•

the exchange agent must receive a written notice, which may be by facsimile or letter, of withdrawal at its address set forth below under “—Exchange Agent”; or

 

•

you must comply with the appropriate procedures of DTC’s ATOP system.

 

•

Any notice of withdrawal must:

 

•

specify the name of the person who tendered the outstanding notes to be withdrawn;

 

•

identify the outstanding notes to be withdrawn, including the certificate numbers and principal amount of the outstanding notes;

 

•

include a statement that the holder is withdrawing its election to have such outstanding notes exchanged; and

 

•

where certificates for outstanding notes have been transmitted, specify the name in which such outstanding notes were registered, if different from that of the withdrawing holder.

If certificates for outstanding notes have been delivered or otherwise identified to the exchange agent, then, prior to the release of such certificates, you must also submit:

 

•

the serial numbers of the particular certificates to be withdrawn; and

 

•

a signed notice of withdrawal with signatures guaranteed by an eligible institution unless you are an eligible guarantor institution.

 

40

---

Table of Contents

If outstanding notes have been tendered pursuant to the procedures for book-entry transfer described above, any notice of withdrawal must specify the name and number of the account at the book-entry transfer facility to be credited with the withdrawn outstanding notes and otherwise comply with the procedures of the facility. We will determine all questions as to the validity, form, and eligibility, including time of receipt of notices of withdrawal, and our determination will be final and binding on all parties. Any outstanding notes so withdrawn will be deemed not to have been validly tendered for exchange for purposes of the exchange offers. Any outstanding notes that have been tendered for exchange but that are not exchanged for any reason will be returned to their holder, without cost to the holder, or, in the case of book-entry transfer, the outstanding notes will be credited to an account at the book-entry transfer facility, promptly after withdrawal, rejection of tender or termination of the exchange offers. Properly withdrawn outstanding notes may be retendered by following the procedures described under “—Procedures for Tendering Outstanding Notes” above at any time on or prior to the expiration date.

Exchange Agent

Deutsche Bank Trust Company Americas has been appointed as the exchange agent for the exchange offers. Deutsche Bank Trust Company Americas also acts as the paying agent, registrar and transfer agent under the indenture governing the notes.

You should direct all executed letters of transmittal and all questions and requests for assistance, requests for additional copies of this prospectus or of the letters of transmittal, and requests for notices of guaranteed delivery to the exchange agent addressed as follows:

 

By Mail:		By Overnight Mail or Courier:		Email: SPU-Reorg.Operations@db.com
DB Services Tennessee, Inc. Reorganization Unit P.O. Box 305050 Nashville, Tennessee 37230 Fax: (615) 835-3701		DB Services Tennessee, Inc. Trust and Securities Services Reorganization Unit 648 Grassmere Park Road Nashville, Tennessee 37211		For Information: (800) 735-7777

If you deliver the letter of transmittal to an address other than the one set forth above or transmit instructions via facsimile other than the one set forth above, that delivery or those instructions will not be effective.

Fees and Expenses

The registration rights agreement provides that we will bear all expenses in connection with the performance of our obligations relating to the registration of the exchange notes and the conduct of the exchange offers. These expenses include registration and filing fees, accounting and legal fees and printing costs, among others. We will pay the exchange agent reasonable and customary fees for its services and reasonable out-of-pocket expenses. We will also reimburse brokerage houses and other custodians, nominees and fiduciaries for customary mailing and handling expenses incurred by them in forwarding this prospectus and related documents to their clients that are holders of outstanding notes and for handling or tendering for such clients.

We have not retained any dealer-manager in connection with the exchange offers and will not pay any fee or commission to any broker, dealer, nominee or other person, other than the exchange agent, for soliciting tenders of outstanding notes pursuant to the exchange offers.

Accounting Treatment

We will record the exchange notes in our accounting records at the same carrying value as the outstanding notes, which is the aggregate principal amount as reflected in our accounting records on the date of exchange. Accordingly, we will not recognize any gain or loss for accounting purposes upon the consummation of the exchange offers. We will record the expenses of the exchange offers as incurred.

 

41

---

Table of Contents

Transfer Taxes

We will pay all transfer taxes, if any, applicable to the transfer and exchange of outstanding notes under the exchange offers, provided that such transfer taxes will not be considered to include income, franchise or other taxes that are not occasioned solely by such transfer and exchange. The tendering holder, however, will be required to pay any transfer taxes, whether imposed on the registered holder or any other person, if:

 

•

certificates representing outstanding notes for principal amounts not tendered or accepted for exchange are to be delivered to, or are to be registered or issued in the name of, any person other than the registered holder of outstanding notes tendered;

 

•

tendered outstanding notes are registered in the name of any person other than the person signing the letter of transmittal; or

 

•

a transfer tax is imposed for any reason other than the transfer and exchange of outstanding notes under the exchange offers.

If satisfactory evidence of payment of such taxes or exception therefrom is not submitted with the letter of transmittal, the amount of such transfer taxes will be billed directly to the tendering holder.

Holders who tender their outstanding notes for exchange will not be required to pay any transfer taxes. However, holders who instruct us to register exchange notes in the name of, or request that outstanding notes not tendered or not accepted in the exchange offers be returned to, a person other than the registered tendering holder will be required to pay any applicable transfer tax.

Consequences of Failure to Exchange

If you do not exchange your outstanding notes for exchange notes under the exchange offers, your outstanding notes will remain subject to the restrictions on transfer of such outstanding notes:

 

•

as set forth in the legend printed on the outstanding notes as a consequence of the issuance of the outstanding notes pursuant to the exemptions from, or in transactions not subject to, the registration requirements of the Securities Act and applicable state securities laws; and

 

•

as otherwise set forth in the offering memorandum distributed in connection with the private offering of the outstanding notes.

In general, you may not offer or sell your outstanding notes unless they are registered under the Securities Act or if the offer or sale is exempt from registration under the Securities Act and applicable state securities laws. Except as required by the registration rights agreement, we do not intend to register resales of the outstanding notes under the Securities Act.

Other

Participating in the exchange offers is voluntary, and you should carefully consider whether to accept. You are urged to consult your financial and tax advisors in making your own decision on what action to take.

We may in the future seek to acquire untendered outstanding notes in open market or privately negotiated transactions, through subsequent exchange offers or otherwise. We have no present plans to acquire any outstanding notes that are not tendered in the exchange offers or to file a registration statement to permit resales of any untendered outstanding notes.

 

42

---

Table of Contents

THE TRANSACTIONS

The Transactions

On November 16, 2006, Clear Channel entered into an Agreement and Plan of Merger, as amended by Amendment No. 1, dated April 18, 2007, Amendment No. 2, dated May 17, 2007, and Amendment No. 3, dated May 13, 2008, to effect the acquisition of Clear Channel by Holdings. Clear Channel held a special meeting of its shareholders on July 24, 2008, at which time the proposed merger was approved. On July 30, 2008, upon the satisfaction of the conditions set forth in the merger agreement, Holdings acquired Clear Channel. The acquisition was effected by the merger of Merger Sub, then an indirect subsidiary of Holdings, with and into Clear Channel. As a result of the merger, Clear Channel became a wholly-owned subsidiary of Holdings, held indirectly through intermediate holding companies including Clear Channel Capital. Upon the consummation of the merger, Holdings became a public company and Clear Channel ceased to be a public company.

At the effective time of the merger, Clear Channel’s shareholders who elected to receive cash consideration in connection with the merger received $36.00 in cash for each pre-merger share of Clear Channel’s outstanding common stock they owned. Pursuant to the merger agreement, as an alternative to receiving the $36.00 per share cash consideration, Clear Channel’s shareholders were offered the opportunity to exchange some or all of their pre-merger shares on a one-for-one basis for shares of common stock in Holdings. Immediately following the Transactions, those shares represented, in the aggregate, approximately 25% (whether measured by voting power or economic interest) of the equity of Holdings.

Several new entities controlled by the Sponsors and their co-investors acquired through newly formed companies (each of which is ultimately controlled jointly by the Sponsors) shares of stock in Holdings. Immediately following the Transactions, those shares represented, in the aggregate, approximately 72% (whether measured by voting power or economic interest) of the equity of Holdings. In connection with the Transactions, Messrs. Mark P. Mays, Randall T. Mays and L. Lowry Mays rolled over unrestricted common stock, restricted equity securities and “in the money” stock options exercisable for common stock of Clear Channel, with an aggregate value of approximately $45 million, in exchange for equity securities of Holdings, and Messrs. Mark P. Mays and Randall T. Mays received restricted stock of Holdings with an aggregate value of approximately $40 million (in each case based upon the per share price paid by the Sponsors for shares of Holdings in connection with the merger). Certain other members of Clear Channel’s management also rolled over restricted equity securities and “in the money” stock options exercisable for common stock of Clear Channel in exchange for equity securities of Holdings. Accordingly, the remaining approximately 3% of the equity of Holdings was held by Messrs. Mark P. Mays, Randall T. Mays, L. Lowry Mays and certain members of Clear Channel’s management.

In connection with the Transactions, Clear Channel entered into senior secured credit facilities providing for a $2,000 million revolving credit facility with a maturity in July 2014, a $1,332 million term loan A facility with a maturity in July 2014, a $10,700 million term loan B facility with a maturity in January 2016, a $696 million term loan C—asset sale facility with a maturity in January 2016 and $1,250 million delayed draw term loan facilities with maturities in January 2016. Furthermore, Clear Channel entered into a $784 million receivables based credit facility with a maturity in July 2014, subject to a borrowing base.

The Transactions were financed by:

 

•

an equity investment in Clear Channel of $3,000 million comprised of rollover equity of Clear Channel’s existing shareholders who elected to receive shares of Holdings as merger consideration, rollover equity from the Mays family, restricted stock and cash equity contributed to Clear Channel indirectly by Holdings from cash equity investments in Holdings by entities associated with the Sponsors and their co-investors and Clear Channel cash on hand;

 

•

borrowings of approximately $12,808 million and $534 million drawn under Clear Channel’s senior secured credit facilities and receivables based credit facility, respectively, in connection with the Transactions; and

 

•

the issuance of $980 million aggregate principal amount of the outstanding senior cash pay notes and $1,330 million aggregate principal amount of the outstanding senior toggle notes.

 

43

---

Table of Contents

For a more complete description of the Transactions, see the sections entitled “Use of Proceeds,” “Capitalization,” “Unaudited Pro Forma Condensed Consolidated Financial Data,” “Description of Other Indebtedness,” and “Description of the Exchange Notes.”

Ownership and Corporate Structure

The following chart illustrates our ownership and corporate structure following the Transactions.

 

(1)	For more information regarding ownership of the outstanding capital stock of Holdings upon the consummation of the Transactions, see “The Transactions.”

 

(2)	The senior secured credit facilities and the receivables based credit facility are guaranteed on a senior basis by Clear Channel Capital and Clear Channel’s material wholly-owned domestic restricted subsidiaries.

 

(3)

The exchange notes are guaranteed on a senior basis by Clear Channel Capital and all of Clear Channel’s wholly-owned domestic restricted subsidiaries that guarantee Clear Channel’s senior secured credit facilities and receivables based credit facility, except that such guarantees are subordinated to each such guarantor’s guarantee of such facilities.

 

(4)	The retained senior notes are obligations solely of Clear Channel and are not guaranteed by Clear Channel Capital or any of Clear Channel’s subsidiaries.

 

44

---

Table of Contents

USE OF PROCEEDS

These exchange offers are intended to satisfy certain of Clear Channel’s obligations under the registration rights agreement. Clear Channel will not receive any proceeds from the issuance of the exchange notes in the exchange offers. In exchange for each of the exchange notes, Clear Channel will receive outstanding notes in like principal amount. Clear Channel will retire or cancel all of the outstanding notes tendered in the exchange offers. Accordingly, the issuance of the exchange notes will not result in any change in capitalization.

 

45

---

Table of Contents

CAPITALIZATION

The following table sets forth Clear Channel Capital’s consolidated cash, cash equivalents and capitalization as of December 31, 2008. You should read this table in conjunction with “Use of Proceeds,” “The Transactions,” “Selected Historical Consolidated Financial and Other Data,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” “Description of Other Indebtedness” and the consolidated financial statements and the related notes included herein. The amounts in the tables may not add due to rounding.

 

		As of December 31, 2008
		(in millions)
Cash and Cash Equivalents		$	239.8
Debt:
Senior secured credit facilities:
Revolving credit facility
Domestic based borrowings		$	190.0
Foreign subsidiary borrowings			30.0
Term loan A facility			1,331.5
Term loan B facility			10,700.0
Term loan C—asset sale facility			695.9
Delayed draw term loan facilities			532.5
Receivables based credit facility			445.6
Senior cash pay notes			980.0
Senior toggle notes			1,330 .0
Retained subsidiary debt			75.9
Total guaranteed/subsidiary debt (1)(2)		$	16,311.4
Retained structurally subordinated Clear Channel notes (2)			3,192.3
Total Debt			19,503.7
Total Shareholder’s Equity (Deficit) (3)			(3,380.1	)
Total Capitalization		$	16,123.6

 

(1)	Represents the sum of the indebtedness which is guaranteed by Clear Channel Capital and Clear Channel’s material wholly-owned domestic restricted subsidiaries, and retained indebtedness of Clear Channel’s restricted subsidiaries which remains outstanding as of December 31, 2008.

 

(2)	Represents total debt, less the amount of Clear Channel’s retained senior notes which are not guaranteed by, or direct obligations of, its subsidiaries.

 

(3)

The amount represents total capital increases of $2,925 million, excluding $75 million of restricted stock and options of Holdings, less an accounting adjustment of $835 million mainly related to continuing shareholders’ basis in accordance with EITF 88-16 and less post-merger activity of $5,470 million.

 

46

---

Table of Contents

UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL DATA

The following unaudited pro forma condensed consolidated financial data has been derived by the application of pro forma adjustments to Clear Channel Capital’s audited historical consolidated financial statements for the year ended December 31, 2008.

Clear Channel Capital’s audited historical consolidated financial statements for the year ended December 31, 2008 are comprised of two periods: post-merger and pre-merger, which relate to the period succeeding the merger (reflecting the consolidated financial data of Clear Channel Capital) and the period preceding the merger (reflecting the consolidated financial data of Clear Channel), respectively. For purposes of this discussion, pro forma adjustments have been applied to the audited historical consolidated financial statements of Clear Channel Capital for the year ended December 31, 2008 presented on a combined basis. For a discussion of the post-merger and pre-merger period financial data, see “Management’s Discussion and Analysis of the Financial Condition and Results of Operations” and the audited historical consolidated financial statements and related notes included in this prospectus.

The unaudited pro forma condensed consolidated financial data gives effect to the merger which is accounted for as a purchase in conformity with Statement of Financial Accounting Standards No. 141, Business Combinations (“Statement 141”), and EITF 88-16. As a result of the continuing ownership in Holdings by certain members of Clear Channel’s management and large shareholders, Holdings allocated a portion of the consideration to the assets and liabilities at their respective fair values with the remaining portion recorded at the continuing shareholders’ historical basis. The pro forma adjustments are based on the preliminary assessments of allocation of the consideration paid using information available to date and certain assumptions believed to be reasonable. As of the date of this prospectus, Holdings has not completed the valuation studies necessary to determine the fair values of its assets and liabilities and the related allocation of purchase price. Differences between the preliminary and final allocation may have a material impact on amounts recorded for total assets, total liabilities, shareholders’ equity and income (loss).

Holdings’ preliminary purchase accounting adjustments, including goodwill, are reflected in Clear Channel Capital’s financial statements.

The unaudited pro forma condensed consolidated statement of operations of Clear Channel Capital for the year ended December 31, 2008 was prepared based upon the historical consolidated statement of operations of Clear Channel Capital on a combined basis as discussed above, adjusted to reflect the merger as if it had occurred on January 1, 2008.

The unaudited pro forma condensed consolidated statement of operations was adjusted to give effect to items that are directly attributed to the merger, factually supportable, and expected to have a continuing impact on the consolidated results. Such items include: (i) depreciation and amortization expense associated with preliminary valuations of property, plant and equipment and definite-lived intangible assets, (ii) corporate expenses associated with new equity based awards granted to certain members of management, (iii) corporate expenses associated with the accelerated vesting of employee share-based awards upon closing of the merger, (iv) interest expense related to debt issued in conjunction with the merger, issue costs on this indebtedness and the fair value adjustment to Clear Channel’s existing indebtedness and (v) the related tax effects of these items.

The unaudited pro forma condensed consolidated financial data of Clear Channel Capital should be read in conjunction with the historical audited financial statements and the notes thereto included in this prospectus and the other financial information contained in “Summary Historical and Unaudited Pro Forma Consolidated Financial and Other Data,” “Selected Historical Consolidated Financial and Other Data” and “Management’s Discussion and Analysis of the Financial Condition and Results of Operations” included herein.

The unaudited pro forma condensed consolidated financial data of Clear Channel Capital is not necessarily indicative of the actual results of operations or financial position had the above described transactions occurred on the date indicated, nor are they necessarily indicative of future operating results or financial position.

 

47

---

Table of Contents

UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS

YEAR ENDED DECEMBER 31, 2008

(In thousands)

 

		Combined Historical				Transaction Adjustments						Pro Forma
Revenue		$	6,688,683			$	—					$	6,688,683
Operating expenses:
Direct operating expenses (excludes depreciation and amortization)			2,904,444				(13,113	)		(F)			2,891,331
Selling, general and administrative expenses (excludes depreciation and amortization)			1,829,246				(12,524	)		(F)			1,816,722
Depreciation and amortization			696,830				50,160			(A)			746,990
Corporate expenses (excludes depreciation and amortization)			227,945				(6,281	)		(D),(F)			221,664
Merger expenses			155,769				(155,769	)		(C)			—
Impairment charge			5,268,858				—						5,268,858
Other operating income—net			28,032				—						28,032
Operating income (loss)			(4,366,377	)			137,527						(4,228,850	)
Interest expense			928,978				744,721			(B)			1,673,699
Gain (loss) on marketable securities			(82,290	)			—						(82,290	)
Equity in earnings of nonconsolidated affiliates			100,019				—						100,019
Other income (expense)—net			126,393				—						126,393
Income (loss) before income taxes and minority interest			(5,151,233	)			(607,194	)					(5,758,427	)
Income tax benefit (expense)			524,040				230,535			(E)			754,575
Minority interest expense, net of tax			16,671				—						16,671
Loss from continuing operations		$	(4,643,864	)		$	(376,659	)				$	(5,020,523	)

Net loss per share information is not presented as such information is not required by Statement of Financial Accounting Standards No. 128, Earnings per Share. Subsequent to the merger, Clear Channel Capital II, LLC is the sole member of Clear Channel Capital and owns 100% of its limited liability company interests. Clear Channel Capital does not have any publicly traded common stock or potential common stock.

 

48

---

Table of Contents

NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL DATA

The unaudited pro forma condensed consolidated financial data includes the following pro forma adjustments.

(A) This pro forma adjustment is for the additional depreciation and amortization related to the fair value adjustments on property, plant and equipment and definite-lived intangible assets based on the estimated remaining useful lives ranging from two to twenty years for such assets.

(B) This pro forma adjustment is for the incremental interest expense resulting from the new capital structure resulting from the merger and the fair value adjustments to existing Clear Channel long-term indebtedness. On February 6, 2009, Clear Channel borrowed the approximately $1.6 billion of remaining availability under its $2.0 billion revolving credit facility. Assuming the balance on the facility after the draw on February 6, 2009 and weighted average interest rate are held constant over the remaining term, interest payments would have increased by approximately $60.2 million per year.

 

		Year Ended December 31, 2008
		Combined
		(In thousands)
Interest expense on revolving credit facility (1)		$	8,336
Interest expense on receivables based credit facility (2)			15,683
Interest expense on term loan facilities (3)			465,233
Interest expense on outstanding notes (4)			146,796
Amortization of deferred financing fees and fair value adjustments on retained senior notes (5)			146,745
Reduction in interest expense on debt redeemed			(38,072	)
Total pro forma interest adjustment		$	744,721

 

(1)

Pro forma interest expense reflects an $80 million outstanding balance on the $2,000 million revolving credit facility at a rate equal to an applicable margin of 3.4% over LIBOR of 2.5%, plus a commitment fee of 0.5% on the undrawn balance of the revolving credit facility. For each 0.125% per annum change in LIBOR, annual interest expense on the revolving credit facility would change by $0.1 million.

 

(2)

Reflects pro forma interest expense on the receivables based credit facility at a rate equal to an applicable margin of 2.4% over LIBOR of 2.5%, and a commitment fee of 0.375% on the unutilized portion of the receivables based credit facility. For each 0.125% per annum change in LIBOR, annual interest expense on the receivables based credit facility would change by $0.7 million.

 

(3)

Reflects pro forma interest expense on the term loan facilities at a rate equal to an applicable margin over LIBOR. The pro forma adjustment includes margins of 3.4% to 3.65%, LIBOR of 2.5%, and a commitment fee of 1.82% on the unutilized portion of the delayed draw term loan facilities. For each 0.125% per annum change in LIBOR, annual interest expense on the term loan facilities would change by $15.9 million. As of March 4, 2009, Clear Channel had executed $6.0 billion aggregate notional amount of pay-fixed rate receive-floating rate interest rate swaps to effectively fix the interest rate on a portion of the term loan facilities. This analysis does not include the effects of these interest rate swap agreements.

 

(4)	Reflects a fixed rate of 10.75% on the outstanding senior cash pay notes and a fixed rate of 11.00% on the outstanding senior toggle notes.

 

(i)

On January 15, 2009, Clear Channel made a permitted election under the indenture governing the senior toggle notes to pay PIK Interest with respect to 100% of the outstanding senior toggle notes. As a result, Clear Channel is deemed to have made the PIK Interest election for future interest periods unless and until we elect otherwise. These pro forma financial statements include the assumption that the PIK Election has not been made in the pre-merger period ended July 30, 2008 to the fullest extent possible.

 

49

---

Table of Contents

The table below quantifies the effects for the period presented of two possible alternate scenarios available to Clear Channel with regard to the payment of required interest, a) making a 100% PIK Election for all periods presented and b) electing to pay 50% in cash and 50% through use of the PIK Election for all periods presented:

 

		100% PIK Election							50% Cash/50% PIK Election
		Increase in interest expense			Increase in net loss				Increase in interest expense			Increase in net loss
Year ended December 31, 2008		$	9,975		$	(6,185	)		$	4,988		$	(3,092	)

The use of the 100% PIK Election will increase cash balances by approximately $146 million in the first year that the debt is outstanding. The use of the 50% cash pay/50% PIK Election will increase cash balances by approximately $73 million in the first year that the debt is outstanding.

 

(5)	Represents debt issuance costs associated with our credit facilities amortized over six years for the receivables based credit facility and the revolving credit facility, six to seven and one half years for the term loan facilities and eight years for the outstanding notes.

(C) This pro forma adjustment reverses merger expenses as they are non-recurring charges incurred in connection with the merger.

(D) This pro forma adjustment records non-cash compensation expense of $7.3 million for the pre-merger period ended July 30, 2008 associated with common stock options and restricted stock of Holdings that were granted to certain key executives upon completion of the merger under its new equity incentive plan described elsewhere in this prospectus. The assumptions used to calculate the fair value of these awards were consistent with the assumptions used by Holdings disclosed in its Form 10-K for the year ended December 31, 2008.

(E) The pro forma adjustment for income tax benefit was determined using statutory rates for the year ended December 31, 2008.

(F) This pro forma adjustment reverses expenses associated with the accelerated vesting of certain employee share-based awards upon the closing of the merger.

 

50

---

Table of Contents

SELECTED HISTORICAL CONSOLIDATED FINANCIAL AND OTHER DATA

The following table sets forth Clear Channel’s and Clear Channel Capital’s selected historical consolidated financial and other data as of and for the five years ended December 31, 2008. The summary historical consolidated financial data as of December 31, 2008 and 2007, and for the three years ended December 31, 2008, are derived from the audited consolidated financial statements and related notes included elsewhere in this prospectus. The summary historical consolidated financial data as of December 31, 2006, 2005 and 2004, and for the two years ended December 31, 2005 are derived from Clear Channel’s audited consolidated financial statements and related notes not included herein. The financial data as of December 31, 2005 and 2004, and for the year ended December 31, 2004 has been revised to reflect the reclassification of the assets, liabilities, revenues and expenses of Clear Channel’s television business and certain radio stations as discontinued operations in accordance with Statement of Financial Accounting Standards No. 144, Accounting for the Impairment or Disposal of Long-lived Assets (“Statement 144”).

The selected historical consolidated financial and other data for the year ended December 31, 2008 is comprised of two periods: post-merger and pre-merger, which relate to the period succeeding the merger (reflecting the consolidated financial data of Clear Channel Capital) and the period preceding the merger (reflecting the consolidated financial data of Clear Channel), respectively. For purposes of this discussion, the selected historical consolidated financial and other data of Clear Channel Capital for the year ended December 31, 2008 is presented on a combined basis. Clear Channel Capital believes that presentation on a combined basis is more meaningful as it allows the financial data to be analyzed to comparable prior periods. The post-merger and pre-merger financial data of Clear Channel Capital for the year ended December 31, 2008 is presented in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and in the consolidated financial statements and related notes herein.

 

51

---

Table of Contents

Acquisitions and dispositions significantly impact the comparability of the historical consolidated financial data. This information is only a summary and you should read the information presented below in conjunction with Clear Channel’s and Clear Channel Capital’s historical consolidated financial statements and related notes included elsewhere in this prospectus, as well as the section entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”

 

		Year Ended December 31,
		2008 (1)				2007 (2)				2006 (3)				2005				2004
		Combined				Pre-merger				Pre-merger				Pre-merger				Pre-merger
		(In thousands)
Statement of Operations:
Revenue		$	6,688,683			$	6,921,202			$	6,567,790			$	6,126,553			$	6,132,880
Operating expenses:
Direct operating expenses (excludes depreciation and amortization)			2,904,444				2,733,004				2,532,444				2,351,614				2,216,789
Selling, general and administrative expenses (excludes depreciation and amortization)			1,829,246				1,761,939				1,708,957				1,651,195				1,644,251
Depreciation and amortization			696,830				566,627				600,294				593,477				591,670
Corporate expenses (excludes depreciation and amortization)			227,945				181,504				196,319				167,088				163,263
Merger expenses			155,769				6,762				7,633				—				—
Impairment charge (4)			5,268,858				—				—				—				—
Other operating income—net			28,032				14,113				71,571				49,656				43,040
Operating income (loss)			(4,366,377	)			1,685,479				1,593,714				1,412,835				1,559,947
Interest expense			928,978				451,870				484,063				443,442				367,511
Gain (loss) on marketable securities			(82,290	)			6,742				2,306				(702	)			46,271
Equity in earnings of nonconsolidated affiliates			100,019				35,176				37,845				38,338				22,285
Other income (expense)—net			126,393				5,326				(8,593	)			11,016				(30,554	)
Income (loss) before income taxes, minority interest, discontinued operations and cumulative effect of a change in accounting principle			(5,151,233	)			1,280,853				1,141,209				1,018,045				1,230,438
Income tax benefit (expense)			524,040				(441,148	)			(470,443	)			(403,047	)			(471,504	)
Minority interest expense, net of tax			16,671				47,031				31,927				17,847				7,602
Income (loss) before discontinued operations and cumulative effect of a change in accounting principle			(4,643,864	)			792,674				638,839				597,151				751,332
Income from discontinued operations, net (5)			638,391				145,833				52,678				338,511				94,467
Income (loss) before cumulative effect of a change in accounting principle			(4,005,473	)			938,507				691,517				935,662				845,799
Cumulative effect of a change in accounting principle, net of tax of, $2,959,003 in 2004 (6)			—				—				—				—				(4,883,968	)
Net income (loss)		$	(4,005,473	)		$	938,507			$	691,517			$	935,662			$	(4,038,169	)

 

52

---

Table of Contents

		Year Ended, or as of, December 31,
		2008 (1)				2007 (2)				2006 (3)				2005				2004
		Post-merger				Pre-merger				Pre-merger				Pre-merger				Pre-merger
		(In thousands)
Balance Sheet Data:
Current assets		$	2,066,554			$	2,294,583			$	2,205,730			$	2,398,294			$	2,269,922
Property, plant and equipment—net, including discontinued operations (7)			3,548,159				3,215,088				3,236,210				3,255,649				3,328,165
Total assets			21,125,463				18,805,528				18,886,455				18,718,571				19,959,618
Current liabilities			1,845,946				2,813,277				1,663,846				2,107,313				2,184,552
Long-term debt, net of current maturities			18,940,697				5,214,988				7,326,700				6,155,363				6,941,996
Shareholders’ equity (deficit)			(3,380,147	)			8,797,491				8,042,341				8,826,462				9,488,078
Other Financial Data:
Capital expenditures		$	430,455			$	363,309			$	336,739			$	302,655
Ratio of earnings to fixed charges (8)			—				2.38	x			2.27	x			2.24	x			2.76	x

 

		Period from July 31 through December 31, 2008 (9)		Period from January 1 through July 30, 2008			Year Ended December 31,
							2007 (2)			2006 (3)			2005			2004
		Post-merger		Pre-merger			Pre-merger			Pre-merger			Pre-merger			Pre-merger
		(In thousands)
Net income (loss) per common share:
Basic:
Income (loss) before discontinued operations and cumulative effect of a change in accounting principle				$	.80		$	1.60		$	1.27		$	1.09		$	1.26
Discontinued operations					1.29			.30			.11			.62			.16
Income (loss) before cumulative effect of a change in accounting principle					2.09			1.90			1.38			1.71			1.42
Cumulative effect of a change in accounting principle					—			—			—			—			(8.19	)
Net income (loss)				$	2.09		$	1.90		$	1.38		$	1.71		$	(6.77	)
Diluted:
Income (loss) before discontinued operations and cumulative effect of a change in accounting principle				$	.80		$	1.60		$	1.27		$	1.09		$	1.26
Discontinued operations					1.29			.29			.11			.62			.15
Income (loss) before cumulative effect of a change in accounting principle					2.09			1.89			1.38			1.71			1.41
Cumulative effect of a change in accounting principle					—			—			—			—			(8.16	)
Net income (loss)				$	2.09		$	1.89		$	1.38		$	1.71		$	(6.75	)
Dividends declared per share				$	—		$	.75		$	.75		$	.69		$	.45

 

53

---

Table of Contents

 

(1)

The statement of operations for the year ended December 31, 2008 is comprised of two periods: post-merger and pre-merger. Holdings applied preliminary purchase accounting adjustments, and these adjustments are reflected in Clear Channel Capital’s opening balance sheet on July 31, 2008 as the merger occurred at the close of business on July 30, 2008. The merger resulted in a new basis of accounting beginning on July 31, 2008. Please refer to the historical consolidated financial statements and related notes included elsewhere in this prospectus for details on the post-merger and pre-merger periods.

 

(2)

Effective January 1, 2007, Clear Channel adopted FIN 48. In accordance with the provisions of FIN 48, the effects of adoption were accounted for as a cumulative-effect adjustment recorded to the balance of retained earnings on the date of adoption. The adoption of FIN 48 resulted in a decrease of $0.2 million to the January 1, 2007 balance of “Retained deficit,” an increase of $101.7 million in “Other long-term liabilities” for unrecognized tax benefits and a decrease of $123.0 million in “Deferred income taxes.”

 

(3)	Effective January 1, 2006, Clear Channel adopted Statement 123(R). In accordance with the provisions of Statement 123(R), Clear Channel elected to adopt the standard using the modified prospective method.

 

(4)	A non-cash impairment charge of $5.3 billion was recorded in 2008 as a result of the global economic slowdown which adversely affected advertising revenues across Clear Channel’s businesses in recent months.

 

(5)	Includes the results of operations of Clear Channel’s live entertainment and sports representation businesses, which it spun-off on December 21, 2005, Clear Channel’s television business sold on March 14, 2008 and certain of its non-core radio stations.

 

(6)

Clear Channel recorded a non-cash charge of $4.9 billion, net of deferred taxes of $3.0 billion, in 2004 as a cumulative effect of a change in accounting principle during the fourth quarter of 2004 as a result of the adoption of EITF Topic D-108, Use of the Residual Method to Value Acquired Assets other than Goodwill (“Topic D-108”).

 

(7)	Excludes the property, plant and equipment—net of Clear Channel’s live entertainment and sports representation businesses, which it spun-off on December 21, 2005.

 

(8)	The ratio of earnings to fixed charges for the pre-merger period from January 1 through July 30, 2008 was 2.06x. Earnings, as adjusted, were not sufficient to cover fixed charges by approximately $5.7 billion for the post-merger period from July 31 through December 31, 2008.

 

(9)

Net loss per share information is not presented for the post-merger period as such information is not required by Statement of Financial Accounting Standards No. 128, Earnings per Share. During the post-merger period ended December 31, 2008, Clear Channel Capital II, LLC is the sole member of Clear Channel Capital and owns 100% of its limited liability company interests. Clear Channel Capital does not have any publicly traded common stock or potential common stock.

 

54

---

Table of Contents

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS

You should read the following discussion of Clear Channel’s and Clear Channel Capital’s financial condition and results of operations with “Selected Historical Consolidated Financial and Other Data,” “Unaudited Pro Forma Condensed Consolidated Financial Data” and the historical consolidated financial statements and related notes included elsewhere in this prospectus. In this section, the terms “we,” “our,” “ours “ and “us” refer to Clear Channel and its consolidated subsidiaries for pre-merger results and refer to Clear Channel Capital and its consolidated subsidiaries for post-merger results and results presented on a combined basis, as discussed further below. The term “Clear Channel Capital” refers collectively to Clear Channel Capital and its consolidated subsidiaries. This discussion contains forward-looking statements about Clear Channel’s markets, the demand for Clear Channel’s products and services and Clear Channel Capital’s future results. We based these statements on assumptions that we consider reasonable. Actual results may differ materially from those suggested by our forward-looking statements for various reasons including those discussed in the “Risk Factors” and “Forward-Looking Statements” sections of this prospectus. Those sections expressly qualify all subsequent oral and written forward-looking statements attributable to us or persons acting on our behalf. We do not have any intention or obligation to update forward-looking statements included in this prospectus.

Format of Presentation

Clear Channel Capital’s consolidated balance sheets, statements of operations, statements of cash flows and shareholders’ equity and related notes included elsewhere in this prospectus are presented for two periods: post-merger and pre-merger, which relate to the period succeeding the merger and the periods preceding the merger, respectively. Prior to the merger, Clear Channel Capital had not conducted any activities, other than activities incident to its formation and in connection with the acquisition, and did not have any assets or liabilities, other than as related to the acquisition. Holdings applied preliminary purchase accounting, and these adjustments are reflected in Clear Channel Capital’s opening balance sheet on July 31, 2008 as the merger occurred at the close of business on July 30, 2008. The results of operations subsequent to the closing of the merger reflect the impact of the new basis of accounting. The financial reporting periods are presented as follows:

 

•

The period from July 31 through December 31, 2008 includes the post-merger period, reflecting the merger of Clear Channel with and into Merger Sub. Subsequent to the acquisition, Clear Channel became an indirect, wholly-owned subsidiary of Holdings and Clear Channel Capital’s business became that of Clear Channel and its subsidiaries.

 

•

The period from January 1 through July 30, 2008 includes the pre-merger period of Clear Channel. Prior to the consummation of Holdings’ acquisition of Clear Channel, Clear Channel Capital had not conducted any activities, other than activities incident to its formation and in connection with the acquisition, and did not have any assets or liabilities, other than as related to the acquisition.

 

•

The 2007 and 2006 periods presented are pre-merger. The consolidated financial statements for all pre-merger periods were prepared using the historical basis of accounting for Clear Channel. As a result of the merger and the associated preliminary purchase accounting, the consolidated financial statements of the post-merger periods are not comparable to periods preceding the merger.

The discussion in this “Management’s Discussion and Analysis of Financial Condition and Results of Operations” is presented on a combined basis for the pre-merger and post-merger periods for 2008. The 2008 post-merger and pre-merger results are presented, but are not discussed, separately. We believe that the discussion on a combined basis is more meaningful as it allows the results of operations to be analyzed to comparable periods in 2007 and 2006.

 

55

---

Table of Contents

Management’s discussion and analysis of our results of operations and financial condition should be read in conjunction with the historical consolidated financial statements and related footnotes. Our discussion is presented on both a consolidated and segment basis. Our reportable operating segments are Americas Outdoor Advertising, International Outdoor Advertising and Radio Broadcasting, which includes our national syndication business. Included in the Other segment are our media representation business, Katz Media, and other general support services and initiatives.

We manage our operating segments primarily focusing on their operating income, while corporate expenses, merger expenses, impairment charge, other operating income—net, interest expense, gain (loss) on marketable securities, equity in earnings of nonconsolidated affiliates, other income (expense)—net, income tax benefit (expense) and minority interest benefit (expense)—net of tax are managed on a total company basis and are, therefore, included only in our discussion of consolidated results.

Recent Events

Consummation of the Merger

Holdings was formed in May 2007 by private equity funds sponsored by Bain Capital and THL for the purpose of acquiring the business of Clear Channel. At the effective time of the merger, each issued and outstanding share of Clear Channel, other than shares held by certain members of Clear Channel management that were rolled over and exchanged for shares of Holdings’ Class A common stock, was either exchanged for (i) $36.00 in cash consideration, without interest, or (ii) one share of Holdings’ Class A common stock.

Holdings accounted for its acquisition of Clear Channel as a purchase business combination in conformity with Statement 141 and EITF 88-16 and has preliminarily allocated a portion of the consideration paid to the assets and liabilities acquired at their initial estimated respective fair values with the remaining portion recorded at the continuing shareholders’ basis. Excess consideration after this preliminary allocation was recorded as goodwill.

Holdings estimated the preliminary fair value of the acquired assets and liabilities as of the merger date utilizing information available at the time the financial statements were prepared. These estimates are subject to refinement until all pertinent information is obtained. Holdings is currently in the process of obtaining third-party valuations of certain of the acquired assets and liabilities and will complete its purchase price allocation in 2009. The final allocation of the purchase price may be different than the initial allocation.

The preliminary purchase accounting adjustments, including goodwill, are reflected in the financial statements of Clear Channel Capital.

Impairment Charge

The global economic slowdown has adversely affected advertising revenues across our businesses in recent months. As a result, we performed an impairment test in the fourth quarter of 2008 on our indefinite-lived FCC licenses, indefinite-lived permits and goodwill.

Our FCC licenses and permits are valued using the direct valuation approach, with the key assumptions being market revenue growth rates, market share, profit margin, duration and profile of the build-up period, estimated start-up capital costs and losses incurred during the build-up period, the risk-adjusted discount rate and terminal values. This data is populated using industry normalized information representing an average asset within a market.

The estimated fair value of FCC licenses and permits was below their carrying values. As a result, we recognized a non-cash impairment charge of $1.7 billion on our FCC licenses and permits. The United States and global economies are undergoing a period of economic uncertainty, which has caused, among other things, a general tightening in the credit markets, limited access to the credit market, lower levels of liquidity and lower consumer and business spending. These disruptions in the credit and financial markets and the continuing impact of adverse economic, financial and industry conditions on the demand for advertising negatively impacted the key assumptions in the discounted cash flow models used to value our FCC licenses and permits.

 

56

---

Table of Contents

The goodwill impairment test requires us to measure the fair value of our reporting units and compare the estimated fair value to the carrying value, including goodwill. Each of our reporting units is valued using a discounted cash flow model which requires estimating future cash flows expected to be generated from the reporting unit, discounted to their present value using a risk-adjusted discount rate. Terminal values were also estimated and discounted to their present value. Assessing the recoverability of goodwill requires us to make estimates and assumptions about sales, operating margins, growth rates and discount rates based on our budgets, business plans, economic projections, anticipated future cash flows and marketplace data. There are inherent uncertainties related to these factors and management’s judgment in applying these factors.

The estimated fair value of our reporting units was below their carrying values, which required us to compare the implied fair value of each reporting units’ goodwill with its carrying value. As a result, we recognized a non-cash impairment charge of $3.6 billion to reduce our goodwill. The macroeconomic factors discussed above had an adverse effect on our estimated cash flows and discount rates used in the discounted cash flow model.

While we believe we had made reasonable estimates and utilized reasonable assumptions to calculate the fair value of our FCC licenses, permits and reporting units, it is possible a material change could occur to the estimated fair value of these assets. If our actual results are not consistent with our estimates, we could be exposed to future impairment losses that could be material to our results of operations.

Restructuring Program

On January 20, 2009, we announced that we commenced a restructuring program targeting a reduction of fixed costs by approximately $350 million on an annualized basis. As part of the program, we eliminated approximately 1,850 full-time positions representing approximately 9% of total workforce. The restructuring program will also include other actions, including elimination of overlapping functions and other cost savings initiatives. The program is expected to result in restructuring and other non-recurring charges of approximately $200 million, although additional costs may be incurred as the program evolves. The cost savings initiatives are expected to be fully implemented by the end of the first quarter of 2010. No assurance can be given that the restructuring program will be successful or will achieve the anticipated cost savings in the timeframe expected or at all. In addition, we may modify or terminate the restructuring program in response to economic conditions or otherwise.

As of December 31, 2008, we had recognized approximately $95.9 million of expenses related to our restructuring program. These expenses primarily related to severance of approximately $83.3 million and $12.6 million related to professional fees.

Sale of Non-core Radio Stations and the Television Business

Sale of Non-core Radio Stations

We determined that each radio station market in Clear Channel’s previously announced non-core radio station sales represents a disposal group consistent with the provisions of Statement 144. Consistent with the provisions of Statement 144, we classified these assets that are subject to transfer under definitive asset purchase agreements as discontinued operations for all periods presented. Accordingly, depreciation and amortization associated with these assets was discontinued. Additionally, we determined that these assets comprise operations and cash flows that can be clearly distinguished, operationally and for financial reporting purposes, from the rest of Clear Channel Capital. We determined that the estimated fair value less costs to sell attributable to these assets was in excess of the carrying value of their related net assets held for sale.

 

57

---

Table of Contents

Sale of the Television Business

On March 14, 2008, Clear Channel completed the sale of its television business to Newport Television, LLC for $1.0 billion, adjusted for certain items including proration of expenses and adjustments for working capital. As a result, Clear Channel recorded a gain of $662.9 million as a component of “Income from discontinued operations, net” in its consolidated statement of operations during the quarter ended March 31, 2008. Additionally, net income and cash flows from the television business were classified as discontinued operations in the consolidated statements of operations and the consolidated statements of cash flows, respectively, in 2008 through the date of sale and for all of 2007 and 2006. The net assets related to the television business were classified as discontinued operations as of December 31, 2007.

Radio Broadcasting

Our radio business has been adversely impacted and may continue to be adversely impacted by the difficult economic conditions currently present in the United States. The weakening economy in the United States has, among other things, adversely affected our clients’ need for advertising and marketing services thereby reducing demand for our advertising spots. Continuing weakening demand for these services could materially affect our business, financial condition and results of operations.

Our revenue is derived from selling advertising time (“spots”) on our radio stations, with advertising contracts typically less than one year in duration. The programming formats of our radio stations are designed to reach audiences with targeted demographic characteristics that appeal to our advertisers. Management monitors average advertising rates, which are principally based on the length of the spot and how many people in a targeted audience listen to our stations, as measured by an independent ratings service. The size of the market influences rates as well, with larger markets typically receiving higher rates than smaller markets. Also, our advertising rates are influenced by the time of day the advertisement airs, with morning and evening drive-time hours typically the highest. Management monitors yield per available minute in addition to average rates because yield allows management to track revenue performance across our inventory. Yield is defined by management as revenue earned divided by commercial capacity available.

Management monitors macro level indicators to assess our radio broadcasting operations’ performance. Due to the geographic diversity and autonomy of our markets, we have a multitude of market-specific advertising rates and audience demographics. Therefore, management reviews average unit rates across all of our stations.

Management looks at our radio broadcasting operations’ overall revenue as well as local advertising, which is sold predominately in a station’s local market, and national advertising, which is sold across multiple markets. Local advertising is sold by each radio station’s sales staffs while national advertising is sold, for the most part, through our national representation firm. Local advertising, which is our largest source of advertising revenue, and national advertising revenues are tracked separately because these revenue streams have different sales forces and respond differently to changes in the economic environment.

Management also looks at radio revenue by market size, as defined by Arbitron. Typically, larger markets can reach larger audiences with wider demographics than smaller markets. Additionally, management reviews our share of target demographics listening to the radio in an average quarter hour. This metric gauges how well our formats are attracting and retaining listeners.

A portion of our Radio Broadcasting segment’s expenses vary in connection with changes in revenue. These variable expenses primarily relate to costs in our sales department, such as salaries, commissions and bad debt. Our programming and general and administrative departments incur most of our fixed costs, such as talent costs, rights fees, utilities and office salaries. Lastly, our highly discretionary costs are in our marketing and promotions department, which we primarily incur to maintain and/or increase our audience share.

 

58

---

Table of Contents

Americas Outdoor Advertising and International Outdoor Advertising

Our outdoor advertising business has been, and may continue to be, adversely impacted by the difficult economic conditions currently present in the United States and other countries in which we operate. The continuing weakening economy has, among other things, adversely affected our clients’ need for advertising and marketing services, resulted in increased cancellations and non-renewals by our clients, thereby reducing our occupancy levels and could require us to lower our rates in order to remain competitive, thereby reducing our yield, or affect our client’s solvency. Any one or more of these effects could materially affect our business, financial condition and results of operations.

Our revenue is derived from selling advertising space on the displays we own or operate in key markets worldwide consisting primarily of billboards, street furniture and transit displays. We own the majority of our advertising displays, which typically are located on sites that we either lease or own or for which we have acquired permanent easements. Our advertising contracts typically outline the number of displays reserved, the duration of the advertising campaign and the unit price per display.

Our advertising rates are based on a number of different factors including location, competition, size of display, illumination, market and gross ratings points. Gross ratings points are the total number of impressions delivered, expressed as a percentage of a market population, of a display or group of displays. The number of impressions delivered by a display is measured by the number of people passing the site during a defined period of time and, in some international markets, is weighted to account for such factors as illumination, proximity to other displays and the speed and viewing angle of approaching traffic. Management typically monitors our business by reviewing the average rates, average revenue per display, or yield, occupancy and inventory levels of each of our display types by market. In addition, because a significant portion of our advertising operations are conducted in foreign markets, the largest being France and the United Kingdom, management reviews the operating results from our foreign operations on a constant dollar basis. A constant dollar basis allows for comparison of operations independent of foreign exchange movements.

The significant expenses associated with our operations include (i) direct production, maintenance and installation expenses, (ii) site lease expenses for land under our displays and (iii) revenue-sharing or minimum guaranteed amounts payable under our billboard, street furniture and transit display contracts. Our direct production, maintenance and installation expenses include costs for printing, transporting and changing the advertising copy on our displays, the related labor costs, the vinyl and paper costs and the costs for cleaning and maintaining our displays. Vinyl and paper costs vary according to the complexity of the advertising copy and the quantity of displays. Our site lease expenses include lease payments for use of the land under our displays, as well as any revenue-sharing arrangements or minimum guaranteed amounts payable that we may have with the landlords. The terms of our site leases and revenue-sharing or minimum guaranteed contracts generally range from one to 20 years.

In our International Outdoor Advertising business, normal market practice is to sell billboards and street furniture as network packages with contract terms typically ranging from one to two weeks, compared to contract terms typically ranging from four weeks to one year in the United States. In addition, competitive bidding for street furniture and transit contracts, which constitute a larger portion of our International Outdoor Advertising business, and a different regulatory environment for billboards, result in higher site lease cost in our International Outdoor Advertising business compared to our Americas Outdoor Advertising business. As a result, our margins are typically less in our International Outdoor Advertising business than in the Americas Outdoor Advertising.

Our street furniture and transit display contracts, the terms of which range from three to 20 years, generally require us to make upfront investments in property, plant and equipment. These contracts may also include upfront lease payments and/or minimum annual guaranteed lease payments. We can give no assurance that our cash flows from operations over the terms of these contracts will exceed the upfront and minimum required payments.

 

59

---

Table of Contents

Our 2008 and 2007 results of operations include the full year results of operations of Interspace Airport Advertising (“Interspace”) and our results of operations for 2006 include a partial year of the results of operations of Interspace, which Clear Channel acquired in July 2006.

Statement 123(R)

Clear Channel Capital does not have any equity incentive plans. Clear Channel’s employees receive equity awards from Holdings’ equity incentive plans. Prior to the merger, Clear Channel granted equity awards to its employees under its own equity incentive plans.

As of December 31, 2008, there was $130.3 million of unrecognized compensation cost, net of estimated forfeitures, related to unvested share-based compensation arrangements that will vest based on service conditions. This cost is expected to be recognized over four years. In addition, as of December 31, 2008, there was $80.2 million of unrecognized compensation cost, net of estimated forfeitures, related to unvested share-based compensation arrangements that will vest based on market, performance and service conditions. This cost will be recognized when it becomes probable that the performance condition will be satisfied.

Vesting of certain Clear Channel stock options and restricted stock awards was accelerated upon the closing of the merger. As a result, except for certain executive officers and holders of certain options that could not, by their terms, be cancelled prior to their stated expiration date, holders of stock options received cash or, if elected, an amount of Holdings stock, in each case equal to the intrinsic value of the awards based on a market price of $36.00 per share while holders of restricted stock awards received, with respect to each share of restricted stock, $36.00 per share in cash, without interest or, if elected, a share of Holdings stock. Approximately $39.2 million of share-based compensation was recognized in the 2008 pre-merger period as a result of the accelerated vesting of stock options and restricted stock awards and is included in the table below.

The following table details compensation costs related to share-based payments for the years ended December 31, 2008, 2007 and 2006:

 

		Year Ended December 31,
		2008			2007			2006
		Combined			Pre-merger			Pre-merger
		(In millions)
Radio Broadcasting
Direct Operating Expenses		$	17.2		$	10.0		$	11.1
SG&A			20.6			12.2			14.1
Americas Outdoor Advertising
Direct Operating Expenses		$	6.3		$	5.7		$	3.4
SG&A			2.1			2.2			1.3
International Outdoor Advertising
Direct Operating Expenses		$	1.7		$	1.2		$	0.9
SG&A			0.4			0.5			0.4
Other
Direct Operating Expenses		$	0.5		$	—		$	0.7
SG&A			0.8			—			1.0
Corporate		$	28.9		$	12.2		$	9.1

 

60

---

Table of Contents

The Comparison of Year Ended December 31, 2008 to Year Ended December 31, 2007 is as Follows:

 

		Post-merger				Pre-merger				Combined
		Period from July 31 through December 31, 2008				Period from January 1 through July 30, 2008				Year Ended December 31, 2008
		(In thousands)
Revenue		$	2,736,941			$	3,951,742			$	6,688,683
Operating expenses:
Direct operating expenses (excludes depreciation and amortization)			1,198,345				1,706,099				2,904,444
Selling, general and administrative expenses (excludes depreciation and amortization)			806,787				1,022,459				1,829,246
Depreciation and amortization			348,041				348,789				696,830
Corporate expenses (excludes depreciation and amortization)			102,276				125,669				227,945
Merger expenses			68,085				87,684				155,769
Impairment charge			5,268,858				—				5,268,858
Other operating income—net			13,205				14,827				28,032
Operating income (loss)			(5,042,246	)			675,869				(4,366,377	)
Interest expense			715,768				213,210				928,978
Gain (loss) on marketable securities			(116,552	)			34,262				(82,290	)
Equity in earnings of nonconsolidated affiliates			5,804				94,215				100,019
Other income (expense)—net			131,505				(5,112	)			126,393
Income (loss) before income taxes, minority interest and discontinued operations			(5,737,257	)			586,024				(5,151,233	)
Income tax benefit (expense):
Current			76,729				(27,280	)			49,449
Deferred			619,894				(145,303	)			474,591
Income tax benefit (expense)			696,623				(172,583	)			524,040
Minority interest income (expense), net of tax			481				(17,152	)			(16,671	)
Income (loss) before discontinued operations			(5,040,153	)			396,289				(4,643,864	)
Income (loss) from discontinued operations, net			(1,845	)			640,236				638,391
Net income (loss)		$	(5,041,998	)		$	1,036,525			$	(4,005,473	)

 

61

---

Table of Contents

		Year Ended December 31,								% Change
		2008				2007
		Combined				Pre-merger
		(In thousands)
Revenue		$	6,688,683			$	6,921,202			(3	)%
Operating expenses:
Direct operating expenses (excludes depreciation and amortization)			2,904,444				2,733,004			6	%
Selling, general and administrative expenses (excludes depreciation and amortization)			1,829,246				1,761,939			4	%
Depreciation and amortization			696,830				566,627			23	%
Corporate expenses (excludes depreciation and amortization)			227,945				181,504			26	%
Merger expenses			155,769				6,762
Impairment charge			5,268,858				—
Other operating income—net			28,032				14,113
Operating income (loss)			(4,366,377	)			1,685,479
Interest expense			928,978				451,870
Gain (loss) on marketable securities			(82,290	)			6,742
Equity in earnings of nonconsolidated affiliates			100,019				35,176
Other income (expense)—net			126,393				5,326
Income (loss) before income taxes, minority interest and discontinued operations			(5,151,233	)			1,280,853
Income tax benefit (expense):
Current			49,449				(252,910	)
Deferred			474,591				(188,238	)
Income tax benefit (expense)			524,040				(441,148	)
Minority interest income (expense), net of tax			(16,671	)			(47,031	)
Income (loss) before discontinued operations			(4,643,864	)			792,674
Income (loss) from discontinued operations, net			638,391				145,833
Net income (loss)		$	(4,005,473	)		$	938,507

Consolidated Results of Operations

Revenue

Our consolidated revenue decreased $232.5 million during 2008 compared to 2007. Revenue growth during the first nine months of 2008 was offset by a decline of $254.0 million in the fourth quarter. Revenue declined $264.7 million during 2008 compared to 2007 from our radio business associated with decreases in both local and national advertising. Our Americas Outdoor Advertising revenue also declined approximately $54.8 million attributable to decreases in poster and bulletin revenues associated with cancellations and non-renewals from major national advertisers. The declines were partially offset by an increase from our International Outdoor Advertising revenue of approximately $62.3 million, with roughly $60.4 million from movements in foreign exchange.

Direct Operating Expenses

Our consolidated direct operating expenses increased approximately $171.4 million during 2008 compared to 2007. Our International Outdoor Advertising business contributed $90.3 million to the increase primarily from an increase in site lease expenses and $39.5 million related to movements in foreign exchange. Our Americas Outdoor Advertising business contributed $57.0 million to the increase primarily from new contracts. These increases were partially offset by a decline in direct operating expenses in our Radio Broadcasting segment of approximately $3.6 million related to a decline in programming expenses.

 

62

---

Table of Contents

Selling, General and Administrative Expenses (“SG&A”)

Our SG&A increased approximately $67.3 million during 2008 compared to 2007. Approximately $48.3 million of this increase occurred during the fourth quarter primarily as a result of an increase in severance. Our International Outdoor Advertising business contributed approximately $41.9 million to the increase primarily from movements in foreign exchange of $11.2 million and an increase in severance in 2008 associated with our restructuring plan of approximately $20.1 million. Our Americas Outdoor Advertising business’ SG&A increased approximately $26.4 million largely from increased bad debt expense of $15.5 million and an increase in severance in 2008 associated with our restructuring plan of $4.5 million. SG&A expenses in our radio business decreased approximately $7.5 million primarily from reduced marketing and promotional expenses and a decline in commissions associated with the decline in revenues, partially offset by an increase in severance in 2008 associated with our restructuring plan of approximately $32.6 million.

Depreciation and Amortization

Depreciation and amortization expense increased $130.2 million in 2008 compared to 2007 primarily due to $86.0 million in additional depreciation and amortization associated with the preliminary purchase accounting adjustments to the acquired assets, $29.3 million of accelerated depreciation in our Americas Outdoor Advertising and International Outdoor Advertising segments from billboards that were removed and approximately $11.3 million related to impaired advertising display contracts in our International Outdoor Advertising segment.

Corporate Expenses

The increase in corporate expenses of $46.4 million in 2008 compared to 2007 primarily relates to a $16.7 million increase in non-cash compensation related to awards that vested at the closing of the merger, a $6.3 million management fee to the Sponsors on connection with the management and advisory services provided following the merger, and $6.2 million related to outside professional services.

Merger Expenses

Merger expenses for 2008 were $155.8 million and include accounting, investment banking, legal and other expenses.

Impairment charge

The global economic slowdown has adversely affected advertising revenues across our businesses in recent months. As discussed above, we performed an impairment test in the fourth quarter of 2008 and recognized a non-cash impairment charge to our indefinite-lived intangible assets and goodwill of $5.3 billion.

Other Operating Income—Net

The $28.0 million income for 2008 consists of $9.6 million from the favorable settlement of a lawsuit, a $7.0 million gain on the disposition of a representation contract, a $4.0 million gain on the sale of property, plant and equipment, $3.3 million from the sale of sports broadcasting rights and a $1.7 million gain on the sale of international street furniture. The $14.1 million income in 2007 related primarily to $8.9 million gain from the sale of street furniture assets and land in our International Outdoor Advertising segment as well as $3.4 million from the disposition of assets in our Radio Broadcasting segment.

Interest Expense

The increase in interest expense for 2008 over 2007 is the result of the increase in our average debt outstanding after the merger. Our outstanding debt was $19.5 billion and $6.6 billion at December 31, 2008 and 2007, respectively.

 

63

---

Table of Contents

Gain (Loss) on Marketable Securities

During the fourth quarter of 2008, we recorded a non-cash impairment charge to certain available-for-sale securities. The fair value of these available-for-sale securities was below their cost each month subsequent to the closing of the merger. As a result, we considered the guidance in SAB Topic 5M and reviewed the length of the time and the extent to which the market value was less than cost and the financial condition and near-term prospects of the issuer. After this assessment, we concluded that the impairment was other than temporary and recorded a $116.6 million impairment charge. This loss was partially offset by a net gain of $27.0 million recorded in the second quarter of 2008 on the unwinding of our secured forward exchange contracts and the sale of our American Tower Corporation (“AMT”) shares.

The $6.7 million gain on marketable securities for 2007 primarily related to changes in fair value of the shares of AMT held by us and the related forward exchange contracts.

Other Income (Expense)—Net

Other income of $126.4 million in 2008 relates to an aggregate gain of $124.5 million on the fourth quarter 2008 tender of certain of Clear Channel’s outstanding notes, a $29.3 million foreign exchange gain on translating short-term intercompany notes, an $8.0 million dividend received, partially offset by a $29.8 million loss on the third quarter 2008 tender of certain of Clear Channel’s outstanding notes and a $4.7 million impairment of our investment in a radio partnership and $0.9 million of various other items.

Other income of $5.3 million in 2007 primarily relates to a foreign exchange gain on translating short-term intercompany notes.

Equity in Earnings of Nonconsolidated Affiliates

Equity in earnings of nonconsolidated affiliates increased $64.8 million in 2008 compared to 2007 primarily from a $75.6 million gain recognized in the first quarter 2008 on the sale of Clear Channel’s 50% interest in Clear Channel Independent, a South African outdoor advertising company. We also recognized a gain of $9.2 million on the disposition of 20% of Grupo ACIR Comunicaciones. These gains were partially offset by a $9.0 million impairment charge to one of our International Outdoor Advertising equity method investments and declines in equity in income from our investments in certain international radio broadcasting companies as well as the loss of equity in earnings from the disposition of Clear Channel Independent.

Income Taxes

Current tax expense for 2008 decreased $302.4 million compared to 2007 primarily due to a decrease in income (loss) before income taxes, minority interest and discontinued operations of $1.2 billion which excludes the non-tax deductible impairment charge of $5.3 billion recorded in 2008. In addition, current tax benefits of approximately $74.6 million were recorded during 2008 related to the termination of Clear Channel’s cross currency swap. Also, we recognized additional tax depreciation deductions as a result of the bonus depreciation provisions enacted as part of the Economic Stimulus Act of 2008. These current tax benefits were partially offset by additional current tax expense recorded in 2008 related to currently non deductible transaction costs as a result of the merger.

The effective tax rate for the year ended December 31, 2008 decreased to 10.2% as compared to 34.4% for the year ended December 31, 2007, primarily due to the impairment charge that resulted in a $5.3 billion decrease in “income (loss) before income taxes, minority interest and discontinued operations” and “tax benefits” of approximately $648.2 million. Partially offsetting this decrease to the effective rate were tax benefits recorded as a result of the release of valuation allowances on the capital loss carryforwards that were used to offset the taxable gain from the disposition of Clear Channel’s investment in AMT and Grupo ACIR Comunicaciones.

 

64

---

Table of Contents

Additionally, Clear Channel sold its 50% interest in Clear Channel Independent in 2008, which was structured as a tax free disposition. The sale resulted in a gain of $75.6 million with no current tax expense. Further, in 2008 valuation allowances were recorded on certain net operating losses generated during the period that were not able to be carried back to prior years. Due to the lack of earnings history as a merged company and limitations on net operating loss carryback claims allowed, Clear Channel Capital cannot rely on future earnings and carryback claims as a means to realize deferred tax assets which may arise as a result of future period net operating losses. Pursuant to the provision of Statement of Financial Accounting Standards No. 109, Accounting for Income Taxes, deferred tax valuation allowances would be required on those deferred tax assets.

For the year ended December 31, 2008, deferred tax expense decreased $662.8 million as compared to 2007 primarily due to the impairment charge recorded in 2008 related to the tax deductible intangibles. This decrease was partially offset by increases in deferred tax expense in 2008 related to recording of valuation allowances on certain net operating losses as well as the termination of the cross currency swap and the additional tax depreciation deductions as a result of the bonus depreciation provisions enacted as part of the Economic Stimulus Act of 2008 mentioned above.

Minority Interest, Net of Tax

The decline in minority interest expense of $30.4 million in 2008 compared to 2007 relates to the decline for the same period in net income of our subsidiary, CCOH.

Discontinued Operations

Income from discontinued operations of $638.4 million recorded during 2008 primarily relates to a gain of $631.9 million, net of tax, related to the sale of our television business and radio stations.

Radio Broadcasting Results of Operations

Our Radio Broadcasting operating results were as follows:

 

		Year Ended December 31,						% Change
		2008			2007
		Combined			Pre-merger
		(In thousands)
Revenue		$	3,293,874		$	3,558,534		(7	)%
Direct operating expenses			979,324			982,966		(0	)%
Selling, general and administrative expenses			1,182,607			1,190,083		(1	)%
Depreciation and amortization			152,822			107,466		42	%
Operating income		$	979,121		$	1,278,019		(23	)%

Our Radio Broadcasting revenue declined approximately $264.7 million during 2008 compared to 2007, with approximately 43% of the decline occurring during the fourth quarter. Our local revenues were down $205.6 million in 2008 compared to 2007. National revenues declined as well. Both local and national revenues were down as a result of overall weakness in advertising. Our Radio Broadcasting revenue experienced declines across advertising categories including automotive, retail and entertainment advertising categories. For the year ended December 31, 2008, our total minutes sold and average minute rate declined compared to 2007.

Direct operating expenses declined approximately $3.6 million. Decreases in programming expenses of approximately $21.2 million from our radio markets were partially offset by an increase in programming expenses of approximately $16.3 million in our national syndication business. The increase in programming expenses in our national syndication business was mostly related to contract talent payments. SG&A expenses

 

65

---

Table of Contents

decreased approximately $7.5 million primarily from reduced marketing and promotional expenses and a decline in commission expenses associated with the revenue decline. Partially offsetting the decline in SG&A was an increase in severance in 2008 associated with our restructuring plan of approximately $32.6 million and an increase in bad debt expense of approximately $17.3 million.

Depreciation and amortization increased approximately $45.4 million mostly as a result of additional amortization associated with the preliminary purchase accounting adjustments to the acquired intangible assets.

Americas Outdoor Advertising Results of Operations

Our Americas Outdoor Advertising operating results were as follows:

 

		Year Ended December 31,						% Change
		2008			2007
		Combined			Pre-merger
		(In thousands)
Revenue		$	1,430,258		$	1,485,058		(4	)%
Direct operating expenses			647,526			590,563		10	%
Selling, general and administrative expenses			252,889			226,448		12	%
Depreciation and amortization			207,633			189,853		9	%
Operating income		$	322,210		$	478,194		(33	)%

Revenue decreased approximately $54.8 million during 2008 compared to 2007, with the entire decline occurring in the fourth quarter. Driving the decline was approximately $87.4 million attributable to poster and bulletin revenues associated with cancellations and non-renewals from major national advertisers, partially offset by an increase of $46.2 million in airport revenues, digital display revenues and street furniture revenues. Also impacting the decline in bulletin revenue was decreased occupancy while the decline in poster revenue was affected by a decrease in both occupancy and rate. The increase in airport and street furniture revenues was primarily driven by new contracts while digital display revenue growth was primarily the result of an increase in the number of digital displays. Other miscellaneous revenues also declined approximately $13.6 million.

Our Americas Outdoor Advertising direct operating expenses increased $57.0 million primarily from higher site lease expenses of $45.2 million primarily attributable to new taxi, airport and street furniture contracts and an increase of $2.4 million in severance. Our SG&A expenses increased $26.4 million largely from increased bad debt expense of $15.5 million and an increase of $4.5 million in severance in 2008 associated with our restructuring plan.

Depreciation and amortization increased approximately $17.8 million mostly as a result of $6.6 million related to additional depreciation and amortization associated with preliminary purchase accounting adjustments to the acquired assets and $11.3 million of accelerated depreciation from billboards that were removed.

International Outdoor Advertising Results of Operations

Our International Outdoor Advertising operating results were as follows:

 

		Year Ended December 31,						% Change
		2008			2007
		Combined			Pre-merger
		(In thousands)
Revenue		$	1,859,029		$	1,796,778		3	%
Direct operating expenses			1,234,610			1,144,282		8	%
Selling, general and administrative expenses			353,481			311,546		13	%
Depreciation and amortization			264,717			209,630		26	%
Operating income		$	6,221		$	131,320		(95	)%

 

66

---

Table of Contents

Revenue increased approximately $62.3 million, with roughly $60.4 million from movements in foreign exchange. The remaining revenue growth was primarily attributable to growth in China, Turkey and Romania, partially offset by revenue declines in France and the United Kingdom. China and Turkey benefited from strong advertising environments. Clear Channel acquired operations in Romania at the end of the second quarter of 2007, which also contributed to revenue growth in 2008. The decline in France was primarily driven by the loss of a contract to advertise on railways and the decline in the United Kingdom was primarily driven by weak advertising demand.

During the fourth quarter of 2008, revenue declined approximately $88.6 million compared to the fourth quarter of 2007, of which approximately $51.8 million was attributable to movements in foreign exchange and the remainder of which was primarily the result of a decline in advertising demand.

Direct operating expenses increased $90.3 million. Included in the increase is approximately $39.5 million related to movements in foreign exchange. The remaining increase in direct operating expenses was driven by an increase in site lease expenses. SG&A expenses increased $41.9 million in 2008 over 2007 with $20.1 million related to severance in 2008 associated with our restructuring plan and approximately $11.2 million related to movements in foreign exchange.

Depreciation and amortization expenses increased $55.1 million with $18.8 million related to additional depreciation and amortization associated with the preliminary purchase accounting adjustments to the acquired assets, approximately $18.0 million related to an increase in accelerated depreciation from billboards to be removed, approximately $11.3 million related to impaired advertising display contracts and $4.9 million related to an increase from movements in foreign exchange.

Reconciliation of Segment Operating Income (Loss)

 

		Year Ended December 31,
		2008				2007
		Combined				Pre-merger
		(In thousands)
Radio Broadcasting		$	979,121			$	1,278,019
Americas Outdoor Advertising			322,210				478,194
International Outdoor Advertising			6,221				131,320
Other			(31,419	)			(11,659	)
Impairment Charge			(5,268,858	)			—
Other operating income—net			28,032				14,113
Merger expenses			(155,769	)			(6,762	)
Corporate			(245,915	)			(197,746	)
Consolidated operating income		$	(4,366,377	)		$	1,685,479

 

67

---

Table of Contents

The Comparison of Year Ended December 31, 2007 to Year Ended December 31, 2006 is as Follows:

 

		Year Ended December 31,							% Change
		2007			2006
		Pre-merger			Pre-merger
		(In thousands)
Revenue		$	6,921,202		$	6,567,790			5	%
Operating expenses:
Direct operating expenses (excludes depreciation and amortization)			2,733,004			2,532,444			8	%
Selling, general and administrative expenses (excludes depreciation and amortization)			1,761,939			1,708,957			3	%
Depreciation and amortization			566,627			600,294			(6	)%
Corporate expenses (excludes depreciation and amortization)			181,504			196,319			(8	)%
Merger expenses			6,762			7,633
Other operating income—net			14,113			71,571
Operating income			1,685,479			1,593,714			6	%
Interest expense			451,870			484,063
Gain on marketable securities			6,742			2,306
Equity in earnings of nonconsolidated affiliates			35,176			37,845
Other income (expense)—net			5,326			(8,593	)
Income before income taxes, minority interest expense and discontinued operations			1,280,853			1,141,209
Income tax expense:
Current			252,910			278,663
Deferred			188,238			191,780
Income tax expense			441,148			470,443
Minority interest expense, net of tax			47,031			31,927
Income before discontinued operations			792,674			638,839
Income from discontinued operations, net			145,833			52,678
Net income		$	938,507		$	691,517

Consolidated Results of Operations

Revenue

Our consolidated revenue increased $353.4 million during 2007 compared to 2006. Our International Outdoor Advertising revenue increased $240.4 million, including approximately $133.3 million related to movements in foreign exchange and the remainder associated with growth across inventory categories. Our Americas Outdoor Advertising revenue increased $143.7 million driven by increases in bulletin, street furniture, airports and taxi display revenues as well as $32.1 million from Interspace. Our Radio Broadcasting revenue was essentially flat. Declines in local and national advertising revenue were partially offset by an increase in our syndicated radio programming, traffic and on-line businesses. These increases were also partially offset by declines from operations classified in our Other segment.

Direct Operating Expenses

Our direct operating expenses increased $200.6 million in 2007 compared to 2006. International Outdoor Advertising direct operating expenses increased $163.8 million principally from $88.0 million related to movements in foreign exchange. Americas Outdoor Advertising direct operating expenses increased $56.2 million primarily attributable to increased site lease expenses associated with new contracts and the increase in transit revenue as well as approximately $14.9 million from Interspace. Partially offsetting these increases was a decline in our Radio Broadcasting direct operating expenses of approximately $11.7 million primarily from a decline in programming and expenses associated with non-traditional revenue.

 

68

---

Table of Contents

Selling, General and Administrative Expenses

Our SG&A increased $53.0 million in 2007 compared to 2006. International Outdoor Advertising SG&A expenses increased $31.9 million primarily related to movements in foreign exchange. Americas Outdoor Advertising SG&A expenses increased $19.1 million mostly attributable to sales expenses associated with the increase in revenue and $6.7 million from Interspace. Our Radio Broadcasting SG&A expenses increased $4.3 million for the comparative periods primarily from an increase in our marketing and promotions department which was partially offset by a decline in bonus and commission expenses.

Depreciation and Amortization

Depreciation and amortization expense decreased approximately $33.7 million primarily from a decrease in the radio segments fixed assets and a reduction in amortization from international outdoor contracts.

Corporate Expenses

Corporate expenses decreased $14.8 million during 2007 compared to 2006 primarily related to a decline in radio bonus expenses.

Merger Expenses

We entered into the merger agreement in the fourth quarter of 2006. Expenses associated with the merger were $6.8 million and $7.6 million for the years ended December 31, 2007 and 2006, respectively, and include accounting, investment banking, legal and other expenses.

Other Operating Income—Net

Other operating income—net of $14.1 million for the year ended December 31, 2007 related primarily to a $8.9 million gain from the sale of street furniture assets and land in our International Outdoor Advertising segment, as well as $3.4 million from the disposition of assets in our Radio Broadcasting segment.

Other operating income —net of $71.6 million for the year ended December 31, 2006 mostly related to $34.6 million in our Radio Broadcasting segment primarily from the sale of stations and programming rights and $13.2 million in our Americas Outdoor Advertising segment from the exchange of assets in one of our markets for the assets of a third party located in a different market.

Interest Expense

Interest expense declined $32.2 million for the year ended December 31, 2007 compared to the same period of 2006. The decline was primarily associated with the reduction in our average outstanding debt during 2007.

Gain (Loss) on Marketable Securities

The $6.7 million gain on marketable securities for 2007 primarily related to changes in fair value of the AMT shares and the related forward exchange contracts. The gain of $2.3 million for the year ended December 31, 2006 related to a $3.8 million gain from terminating our secured forward exchange contract associated with our investment in XM Satellite Radio Holdings Inc. partially offset by a loss of $1.5 million from the change in fair value of AMT securities that are classified as trading and the related secured forward exchange contracts associated with those securities.

Other Income (Expense)—Net

Other income of $5.3 million recorded in 2007 primarily relates to foreign exchange gains while other expense of $8.6 million recorded in 2006 primarily relates to foreign exchange losses.

 

69

---

Table of Contents

Income Taxes

Current tax expense decreased $25.8 million for the year ended December 31, 2007 as compared to the year ended December 31, 2006 primarily due to current tax benefits of approximately $45.7 million recorded in 2007 related to the settlement of several tax positions with the Internal Revenue Service (“IRS”) for the 1999 through 2004 tax years. In addition, we recorded current tax benefits of approximately $14.6 million in 2007 related to the utilization of capital loss carryforwards. The 2007 current tax benefits were partially offset by additional current tax expense due to an increase in income before income taxes of $139.6 million.

Deferred tax expense decreased $3.5 million for the year ended December 31, 2007 as compared to the year ended December 31, 2006 primarily due to additional deferred tax benefits of approximately $8.3 million recorded in 2007 related to accrued interest and state tax expense on uncertain tax positions. In addition, we recorded deferred tax expense of approximately $16.7 million in 2006 related to the uncertainty of our ability to utilize certain tax losses in the future for certain international operations. The changes noted above were partially offset by additional deferred tax expense recorded in 2007 as a result of tax depreciation expense related to capital expenditures in certain foreign jurisdictions.

Minority Interest, Net of Tax

Minority interest expense increased $15.1 million in 2007 compared to 2006 primarily from an increase in net income attributable to our subsidiary, CCOH.

Discontinued Operations

Clear Channel closed on the sale of 160 stations in 2007 and five stations in 2006. The gain on sale of assets recorded in discontinued operations for these sales was $144.6 million and $0.3 million in 2007 and 2006, respectively. The remaining $1.2 million and $52.4 million are associated with the net income from radio stations and our television business that are recorded as income from discontinued operations for 2007 and 2006, respectively.

Radio Broadcasting Results of Operations

Our Radio Broadcasting operating results were as follows:

 

		Year Ended December 31,						% Change
		2007			2006
		Pre-merger			Pre-merger
		(In thousands)
Revenue		$	3,558,534		$	3,567,413		0	%
Direct operating expenses			982,966			994,686		(1	)%
Selling, general and administrative expenses			1,190,083			1,185,770		0	%
Depreciation and amortization			107,466			125,631		(14	)%
Operating income		$	1,278,019		$	1,261,326		1	%

Our Radio Broadcasting revenue was essentially flat. Declines in local and national revenues were partially offset by increases in network, traffic, syndicated radio and on-line revenues. Local and national revenues were down partially as a result of overall weakness in advertising as well as declines in automotive, retail and political advertising categories. During 2007, our average minute rate declined compared to 2006.

Our Radio Broadcasting direct operating expenses declined approximately $11.7 million in 2007 compared to 2006. The decline was primarily from a $14.8 million decline in programming expenses partially related to salaries, a $16.5 million decline in non-traditional expenses primarily related to fewer concert events sponsored

 

70

---

Table of Contents

by us in the current year and $5.1 million in other direct operating expenses. Partially offsetting these declines were increases of $5.7 million in traffic expenses and $19.1 million in internet expenses associated with the increased revenue in these businesses. SG&A expenses increased $4.3 million during 2007 as compared to 2006 primarily from an increase of $16.2 million in our marketing and promotions department partially offset by a decline of $9.5 million in bonus and commission expenses.

Americas Outdoor Advertising Results of Operations

Our Americas Outdoor Advertising operating results were as follows:

 

		Year Ended December 31,						% Change
		2007			2006
		Pre-merger			Pre-merger
		(In thousands)
Revenue		$	1,485,058		$	1,341,356		11	%
Direct operating expenses			590,563			534,365		11	%
Selling, general and administrative expenses			226,448			207,326		9	%
Depreciation and amortization			189,853			178,970		6	%
Operating income		$	478,194		$	420,695		14	%

Americas Outdoor Advertising revenue increased $143.7 million, or 11%, during 2007 as compared to 2006 with Interspace contributing approximately $32.1 million to the increase. The growth occurred across our inventory, including bulletins, street furniture, airports and taxi displays. The revenue growth was primarily driven by bulletin revenue attributable to increased rates and airport revenue which had both increased rates and occupancy. Leading advertising categories during the year were telecommunications, retail, automotive, financial services and amusements. Revenue growth occurred across our markets, led by Los Angeles, New York, Washington/Baltimore, Atlanta, Boston, Seattle and Minneapolis.

Our Americas Outdoor Advertising direct operating expenses increased $56.2 million primarily from an increase of $46.6 million in site lease expenses associated with new contracts and the increase in airport, street furniture and taxi revenues. Interspace contributed $14.9 million to the increase. Our SG&A expenses increased $19.1 million primarily from bonus and commission expenses associated with the increase in revenue and from Interspace, which contributed approximately $6.7 million to the increase.

Depreciation and amortization increased $10.9 million during 2007 compared to 2006 primarily associated with $5.9 million from Interspace.

International Outdoor Advertising Results of Operations

Our International Outdoor Advertising operating results were as follows:

 

		Year Ended December 31,						% Change
		2007			2006
		Pre-merger			Pre-merger
		(In thousands)
Revenue		$	1,796,778		$	1,556,365		15	%
Direct operating expenses			1,144,282			980,477		17	%
Selling, general and administrative expenses			311,546			279,668		11	%
Depreciation and amortization			209,630			228,760		(8	)%
Operating income		$	131,320		$	67,460		95	%

 

71

---

Table of Contents

International Outdoor Advertising revenue increased $240.4 million, or 15%, in 2007 as compared to 2006. Included in the increase was approximately $133.3 million related to movements in foreign exchange. Revenue growth occurred across inventory categories including billboards, street furniture and transit, driven by both increased rates and occupancy. Growth was led by increased revenues in France, Italy, Australia, Spain and China.

Our International Outdoor Advertising direct operating expenses increased approximately $163.8 million in 2007 compared to 2006. Included in the increase was approximately $88.0 million related to movements in foreign exchange. The remaining increase in direct operating expenses was primarily attributable to an increase in site lease expenses associated with the increase in revenue. SG&A expenses increased $31.9 million in 2007 over 2006 from approximately $23.4 million related to movements in foreign exchange and an increase in selling expenses associated with the increase in revenue. Additionally, we recorded a $9.8 million reduction to SG&A in 2006 as a result of the favorable settlement of a legal proceeding.

Depreciation and amortization declined $19.1 million during 2007 compared to 2006 primarily from contracts which were recorded at fair value in purchase accounting in prior years and became fully amortized at December 31, 2006.

Reconciliation of Segment Operating Income (Loss)

 

		Year Ended December 31,
		2007				2006
		Pre-merger				Pre-merger
		(In thousands)
Radio Broadcasting		$	1,278,019			$	1,261,326
Americas Outdoor Advertising			478,194				420,695
International Outdoor Advertising			131,320				67,460
Other			(11,659	)			(4,225	)
Other operating income—net			14,113				71,571
Merger expenses			(6,762	)			(7,633	)
Corporate			(197,746	)			(215,480	)
Consolidated operating income		$	1,685,479			$	1,593,714

Liquidity and Capital Resources

Cash Flows

 

						Period from July 31 through December 31, 2008				Period from January 1 through July 30, 2008				Year Ended December 31,
		2008												2007				2006
		Combined				Post-merger				Pre-merger				Pre-merger				Pre-merger
		(In thousands)
Cash provided by (used in):
Operating activities		$	1,281,284			$	246,026			$	1,035,258			$	1,576,428			$	1,748,057
Investing activities		$	(18,127,954	)		$	(17,711,703	)		$	(416,251	)		$	(482,677	)		$	(607,011	)
Financing activities		$	15,907,798			$	17,554,739			$	(1,646,941	)		$	(1,431,014	)		$	(1,178,610	)
Discontinued operations		$	1,033,570			$	2,429			$	1,031,141			$	366,411			$	69,227

 

72

---

Table of Contents

Operating Activities

Fiscal Year 2008

Net cash flow from operating activities for 2008 primarily reflects a loss before discontinued operations of $4.6 billion plus a non-cash impairment charge of $5.3 billion, depreciation and amortization of $696.8 million, the amortization of deferred financing charges of approximately $106.4 million, and share-based compensation of $78.6 million, partially offset by a deferred tax benefit of $474.6 million.

Fiscal Year 2007

Net cash flow from operating activities during 2007 primarily reflected income before discontinued operations of $792.7 million plus depreciation and amortization of $566.6 million and deferred taxes of $188.2 million.

Fiscal Year 2006

Net cash flow from operating activities of $1.7 billion for the year ended December 31, 2006 principally reflected net income from continuing operations of $638.8 million and depreciation and amortization of $600.3 million. Net cash flows from operating activities also reflect an increase of $190.2 million in accounts receivable as a result of the increase in revenue and a $390.4 million federal income tax refund related to restructuring our international businesses consistent with our strategic realignment and the utilization of a portion of the capital loss generated on the spin-off of Live Nation, Inc.

Investing Activities

Fiscal Year 2008

Net cash used in investing activities during 2008 principally reflected cash used in the acquisition of Clear Channel by Holdings of $17.5 billion and the purchase of property, plant and equipment of $430.5 million.

Fiscal Year 2007

Net cash used in investing activities of $482.7 million for the year ended December 31, 2007 principally reflected the purchase of property, plant and equipment of $363.3 million.

Fiscal Year 2006

Net cash used in investing activities of $607.0 million for the year ended December 31, 2006 principally reflected capital expenditures of $336.7 million related to purchases of property, plant and equipment and $341.2 million primarily related to acquisitions of operating assets, partially offset by proceeds from the sale of other assets of $99.7 million.

Financing Activities

Fiscal Year 2008

Net cash used in financing activities for 2008 principally reflected $15.4 billion in debt proceeds used to finance the acquisition of Clear Channel by Holdings, an equity contribution of $2.1 billion used to finance the acquisition of Clear Channel by Holdings, $1.9 billion primarily for the redemptions of certain of Clear Channel’s subsidiaries’ notes and $93.4 million in dividends paid.

Fiscal Year 2007

Net cash used in financing activities for the year ended December 31, 2007 principally reflects $372.4 million in dividend payments, decrease in debt of $1.1 billion, partially offset by the proceeds from the exercise of stock options of $80.0 million.

 

73

---

Table of Contents

Fiscal Year 2006

Net cash used in financing activities for the year ended December 31, 2006 principally reflects $1.4 billion for shares repurchased, $382.8 million in dividend payments, partially offset by the net increase in debt of $601.3 million and proceeds from the exercise of stock options of $57.4 million.

Discontinued Operations

During 2008, Clear Channel completed the sale of our television business to Newport Television, LLC for $1.0 billion and completed the sales of certain radio stations for $110.5 million. The cash received from these sales was recorded as a component of cash flows from discontinued operations during the first quarter of 2008.

The proceeds from the sale of five stations in 2006 and 160 stations in 2007 are classified as cash flows from discontinued operations in 2006 and 2007, respectively. Additionally, the cash flows from these stations are classified as discontinued operations for all periods presented.

Anticipated Cash Requirements

Our primary source of liquidity is cash flow from operations, which has been adversely affected by the global economic slowdown. The risks associated with our businesses become more acute in periods of a slowing economy or recession, which may be accompanied by a decrease in advertising. Expenditures by advertisers tend to be cyclical, reflecting overall economic conditions and budgeting and buying patterns. The current global economic slowdown has resulted in a decline in advertising and marketing services among our customers, resulting in a decline in advertising revenues across our businesses. This reduction in advertising revenues has had an adverse effect on our revenue, profit margins, cash flow and liquidity, particularly during the second half of 2008. The continuation of the global economic slowdown may continue to adversely impact our revenue, profit margins, cash flow and liquidity.

In January 2009, in response to the deterioration in general economic conditions and the resulting negative impact on our business, we commenced a restructuring program targeting a reduction of fixed costs by approximately $350 million on an annualized basis. As part of the program, we eliminated approximately 1,850 full-time positions representing approximately 9% of total workforce. The program is expected to result in restructuring and other non-recurring charges of approximately $200 million, although additional costs may be incurred as the program evolves. The cost savings initiatives are expected to be fully implemented by the end of the first quarter of 2010. No assurance can be given that the restructuring program will be successful or will achieve the anticipated cost savings in the timeframe expected or at all.

Based on our current and anticipated levels of operations and conditions in our markets, we believe that cash flow from operations as well as cash on hand (including amounts drawn or available under Clear Channel’s senior secured credit facilities) will enable us to meet our working capital, capital expenditure, debt service and other funding requirements for at least the next 12 months.

Continuing adverse securities and credit market conditions could significantly affect the availability of equity or credit financing. While there is no assurance in the current economic environment, we believe the lenders participating in Clear Channel’s credit agreements will be willing and able to provide financing in accordance with the terms of their agreements. In this regard, on February 6, 2009 Clear Channel borrowed the approximately $1.6 billion of remaining availability under its $2.0 billion revolving credit facility to improve our liquidity position in light of continuing uncertainty in credit market and economic conditions. We expect to refinance Clear Channel’s $500.0 million 4.25% notes due May 15, 2009 with a draw under the $500.0 million delayed draw term loan facility that is specifically designated for this purpose. The remaining $69.5 million of indebtedness maturing in 2009 will either be refinanced or repaid with cash flow from operations or on hand.

 

74

---

Table of Contents

We expect to be in compliance with the covenants under Clear Channel’s senior secured credit facilities in 2009. However, our anticipated results are subject to significant uncertainty and there can be no assurance that actual results will be in compliance with the covenants. In addition, our ability to comply with the covenants in Clear Channel’s financing agreements may be affected by events beyond our control, including prevailing economic, financial and industry conditions. The breach of any covenants set forth in Clear Channel’s financing agreements would result in a default thereunder. An event of default would permit the lenders under a defaulted financing agreement to declare all indebtedness thereunder to be due and payable prior to maturity. Moreover, the lenders under the revolving credit facility under Clear Channel’s senior secured credit facilities would have the option to terminate their commitments to make further extensions of revolving credit thereunder. If we are unable to repay Clear Channel’s obligations under any senior secured credit facilities or the receivables based credit facility, the lenders under such senior secured credit facilities or receivables based credit facility could proceed against any assets that were pledged to secure such senior secured credit facilities or receivables based credit facility. In addition, a default or acceleration under any of Clear Channel’s financing agreements could cause a default under other of our obligations that are subject to cross-default and cross-acceleration provisions.

Clear Channel’s corporate credit and issue-level ratings were downgraded on February 20, 2009 by Standard & Poor’s Ratings Services. Clear Channel’s corporate credit rating was lowered to “B-”. These ratings remain on credit watch with negative implications. Additionally, Moody’s Investors Service downgraded our corporate family rating to “Caa3” on March 9, 2009. These ratings are significantly below investment grade. These ratings and any additional reductions in Clear Channel’s credit ratings could further increase our borrowing costs and reduce the availability of financing to us. In addition, deteriorating economic conditions, including market disruptions, tightened credit markets and significantly wider corporate borrowing spreads, may make it more difficult or costly for us to obtain financing in the future. A credit rating downgrade does not constitute a default under any of Clear Channel’s debt obligations.

Our ability to fund our working capital needs, debt service and other obligations, and to comply with the financial covenants under Clear Channel’s financing agreements depends on our future operating performance and cash flow, which are in turn subject to prevailing economic conditions and other factors, many of which are beyond our control. If our future operating performance does not meet our expectation or our plans materially change in an adverse manner or prove to be materially inaccurate, we may need additional financing. Continuing adverse securities and credit market conditions could significantly affect the availability of equity or credit financing. Consequently, there can be no assurance that such financing, if permitted under the terms of Clear Channel’s financing agreements, will be available on terms acceptable to us or at all. The inability to obtain additional financing in such circumstances could have a material adverse effect on our financial condition and on our ability to meet Clear Channel’s obligations.

 

75

---

Table of Contents

Sources of Capital

As of December 31, 2008 and 2007, we had the following indebtedness outstanding:

 

		December 31,
		2008			2007
		Post-merger			Pre-merger
		(In millions)
Revolving credit facility (a)		$	220.0			—
Term loan A facility			1,331.5			—
Term loan B facility			10,700.0			—
Term loan C—asset sale facility			695.9			—
Delayed draw term loan facilities			532.5			—
Receivables based credit facility			445.6			—
Secured subsidiary debt			6.6			8.3
Total Secured Debt			13,932.1			8.3
Senior cash pay notes			980.0			—
Senior toggle notes			1,330.0			—
Clear Channel $1.75 billion credit facility			—			174.6
Clear Channel retained senior notes (b)			3,192.3			5,646.4
Clear Channel subsidiary debt (c)			69.3			745.9
Total Debt			19,503.7			6,575.2
Less: Cash and cash equivalents			239.8			145.1
		$	19,263.9		$	6,430.1

 

(a)	Subsequent to December 31, 2008, Clear Channel borrowed the approximately $1.6 billion of remaining availability under this facility.

 

(b)

Includes $1.1 billion at December 31, 2008 in unamortized fair value purchase accounting discounts related to the acquisition of Clear Channel by Holdings. Includes an $11.4 million increase related to fair value adjustments for interest rate swap agreements and a $15.0 million decrease related to original issue discounts at December 31, 2007.

 

(c)	Includes $3.2 million at December 31, 2007 in unamortized fair value purchase accounting adjustment premiums related to Clear Channel’s merger with AMFM Inc.

We may utilize available funds for general working capital purposes including funding capital expenditures and acquisitions. We may also from time to time seek to retire or purchase Clear Channel’s outstanding debt or equity securities or obligations through cash purchases, prepayments and/or exchanges for debt or equity securities or obligations, in open market purchases, privately negotiated transactions or otherwise. Such uses, repurchases, prepayments or exchanges, if any, will depend on prevailing market conditions, our liquidity requirements, contractual restrictions and other factors. The amounts involved may be material.

Credit Facility

Clear Channel had a multi-currency revolving credit facility in the amount of $1.75 billion. This facility was terminated in connection with the closing of the Transactions.

Dispositions and Other

Clear Channel received proceeds of $110.5 million related to the sale of radio stations recorded as investing cash flows from discontinued operations and recorded a gain of $28.8 million as a component of “income from

 

76

---

Table of Contents

discontinued operations, net” during 2008. Clear Channel received proceeds of $1.0 billion related to the sale of its television business recorded as investing cash flows from discontinued operations and recorded a gain of $662.9 million as a component of “income from discontinued operations, net” during 2008.

In addition, Clear Channel sold its 50% interest in Clear Channel Independent and recognized a gain of $75.6 million in “equity in earnings of nonconsolidated affiliates” based on the fair value of the equity securities received in the pre-merger period.

Clear Channel sold a portion of its investment in Grupo ACIR Comunicaciones for approximately $47.0 million on July 1, 2008 and recorded a gain of $9.2 million in equity in earnings of nonconsolidated affiliates. Effective January 30, 2009, Clear Channel sold 57% of its remaining 20% interest in Grupo ACIR Comunicaciones for approximately $23.5 million and recorded a loss of approximately $2.2 million.

Uses of Capital

Dividends

Clear Channel declared a $93.4 million dividend on December 3, 2007 payable to shareholders of record on December 31, 2007 and paid on January 15, 2008.

Clear Channel Capital currently does not intend to pay regular quarterly cash dividends on the shares of its common stock.

Tender Offers

On August 7, 2008, Clear Channel launched a cash tender offer and consent solicitation for its outstanding $750 million principal amount of its 7.65% senior notes due 2010 on the terms and conditions set forth in the Offer to Purchase and Consent Solicitation Statement. Clear Channel’s tender offer and consent solicitation expired on September 9, 2008. Clear Channel received validly tendered notes with respect to $364 million aggregate principal amount of its 7.65% senior notes due 2010, constituting approximately 49% of the total outstanding amount of such senior notes. Clear Channel borrowed amounts available under its delayed draw 1 term loan facility in order to purchase such senior notes. The total debt outstanding following the expiration of the cash tender offer and consent solicitation remained unchanged. On November 24, 2008, Clear Channel announced that it commenced a cash tender offer for a portion of its outstanding $386 million principal amount of 7.65% senior notes due 2010, on the terms and conditions set forth in the Offer to Purchase dated November 24, 2008. Clear Channel’s cash tender offer expired on December 23, 2008. Clear Channel received validly tendered notes with respect to $252 million principal amount of its 7.65% senior notes due 2010, constituting approximately 65% of the total outstanding amount of such senior notes. Clear Channel purchased such senior notes with the second of three borrowings permitted to be drawn under its delayed draw 1 term loan facility. After settlement of the cash tender offer, $134 million principal amount of Clear Channel’s 7.65% senior notes due 2010 remains outstanding.

On December 17, 2007, AMFM Operating Inc. commenced a cash tender offer and consent solicitation for the outstanding $644.9 million principal amount of its 8% senior notes due 2008 on the terms and conditions set forth in the Offer to Purchase and Consent Solicitation Statement dated December 17, 2007. On July 30, 2008, AMFM Operating Inc. completed its tender offer. AMFM Operating Inc. received validly tendered notes with respect to $639 million aggregate principal amount of its 8% senior notes due 2008, constituting approximately 99% of the total outstanding principal amount of such senior notes, and a loss of $8.0 million was recorded in other expense in the pre-merger consolidated income statement. The remaining AMFM Operating Inc. 8% senior notes were redeemed at maturity on November 1, 2008.

On November 24, 2008, CC Finco, LLC, an indirect wholly-owned subsidiary of Clear Channel (“CC Finco”), commenced a cash tender offer for Clear Channel’s outstanding 6.25% senior notes due 2011 and

 

77

---

Table of Contents

outstanding 4.40% senior notes due 2011, on the terms and conditions set forth in the governing Offer to Purchase. On the same date, CC Finco commenced a cash tender offer for Clear Channel’s outstanding 5.00% senior notes due 2012 and outstanding 5.75% senior notes due 2013, on the terms and conditions set forth in the governing Offer to Purchase. CC Finco’s cash tender offers expired on December 23, 2008. CC Finco received validly tendered notes with respect to $27 million principal amount of each of Clear Channel’s 6.25% senior notes due 2011 and 4.40% senior notes due 2011, constituting approximately 4% and 11% of the total outstanding amounts of such senior notes, respectively. Furthermore, CC Finco received validly tendered notes with respect to $24 million principal amount of each of Clear Channel’s 5.00% senior notes due 2012 and 5.75% senior notes due 2013, constituting approximately 8% and 5% of the total outstanding amounts of such senior notes, respectively. CC Finco purchased and currently holds such tendered notes.

Debt Maturities and Other

On January 15, 2008, Clear Channel redeemed its 4.625% senior notes at their maturity for $500.0 million plus accrued interest with proceeds from its bank credit facility.

On June 15, 2008, Clear Channel redeemed its 6.625% senior notes at their maturity for $125.0 million with available cash on hand.

Clear Channel terminated its cross currency swaps on July 30, 2008 by paying the counterparty $196.2 million from available cash on hand.

Capital Expenditures

Capital expenditures, on a combined basis for the year ended December 31, 2008, were $430.5 million. Capital expenditures were $363.3 million in the year ended December 31, 2007.

 

		Combined Year Ended December 31, 2008
		Radio Broadcasting			Americas Outdoor Advertising			International Outdoor Advertising			Corporate and Other			Total
		(In millions)
Non-revenue producing		$	61.5		$	40.5		$	44.9		$	10.7		$	157.6
Revenue producing			—			135.3			137.6			—			272.9
		$	61.5		$	175.8		$	182.5		$	10.7		$	430.5

Acquisitions

We acquired FCC licenses in our Radio Broadcasting segment for $11.7 million in cash during 2008. We acquired outdoor display faces and additional equity interests in international outdoor companies for $96.5 million in cash during 2008. Our national representation business acquired representation contracts for $68.9 million in cash during 2008.

Certain Relationships with the Sponsors

In connection with the Transactions, Holdings paid certain affiliates of the Sponsors $87.5 million in fees and expenses for financial and structural advice and analysis, assistance with due diligence investigations and debt financing negotiations and $15.9 million for reimbursement of certain escrow and other out-of-pocket expenses. This amount was preliminarily allocated between merger expense, debt issuance costs or included in the overall purchase price of the merger.

 

78

---

Table of Contents

Holdings has agreements with certain affiliates of the Sponsors pursuant to which such affiliates of the Sponsors will provide management and financial advisory services to Holdings until 2018. The agreements require Holdings to pay management fees to such affiliates of the Sponsors for such services at a rate not greater than $15.0 million per year, with any additional fees subject to approval by Holdings’ Board of Directors. For the post-merger period ended December 31, 2008, Holdings recognized Sponsors’ management fees of $6.3 million.

Commitments, Contingencies and Guarantees

There are various lawsuits and claims pending against Clear Channel. Based on current assumptions, we have accrued an estimate of the probable costs for the resolution of these claims. Future results of operations could be materially affected by changes in these assumptions.

Certain agreements relating to acquisitions provide for purchase price adjustments and other future contingent payments based on the financial performance of the acquired companies generally over a one to five year period. We will continue to accrue additional amounts related to such contingent payments if and when it is determinable that the applicable financial performance targets will be met. The aggregate of these contingent payments, if performance targets are met, would not significantly impact our financial position or results of operations.

In addition to our scheduled maturities on our debt, we have future cash obligations under various types of contracts. We lease office space, certain broadcast facilities, equipment and the majority of the land occupied by our outdoor advertising structures under long-term operating leases. Some of our lease agreements contain renewal options and annual rental escalation clauses (generally tied to the consumer price index), as well as provisions for our payment of utilities and maintenance.

We have minimum franchise payments associated with non-cancelable contracts that enable us to display advertising on such media as buses, taxis, trains, bus shelters and terminals. The majority of these contracts contain rent provisions that are calculated as the greater of a percentage of the relevant advertising revenue or a specified guaranteed minimum annual payment. Also, we have non-cancelable contracts in our Radio Broadcasting operations related to program rights and music license fees.

In the normal course of business, our broadcasting operations have minimum future payments associated with employee and talent contracts. These contracts typically contain cancellation provisions that allow us to cancel the contract with good cause.

The scheduled maturities of the senior secured credit facilities, the receivables based credit facility, the notes, other long-term debt outstanding, future minimum rental commitments under non-cancelable lease agreements, minimum payments under other non-cancelable contracts, payments under employment/talent contracts, capital expenditure commitments and other long-term obligations as of December 31, 2008 are as follows:

 

		Payments due by Period
Contractual Obligations		Total			2009			2010-2011			2012-2013			Thereafter
		(In thousands)
Long-term debt
Senior secured debt		$	13,932,092			677			249,748			745,115			12,936,552
Senior cash pay notes and senior toggle notes (1)			2,310,000			—			—			—			2,310,000
Clear Channel retained senior notes			4,306,440			500,000			1,329,901			751,539			1,725,000
Other long-term debt			69,260			68,850			410			—			—
Interest payments on long-term debt (2)			9,136,049			1,151,824			2,077,657			1,899,257			4,007,311
Non-cancelable operating leases			2,745,110			383,568			627,884			468,084			1,265,574
Non-cancelable contracts			2,648,262			673,900			859,061			471,766			643,535
Employment/Talent contracts			599,363			196,391			220,040			112,214			70,718
Capital expenditures			151,663			76,760			62,426			9,336			3,141
Other long-term obligations (3)			159,805			—			26,489			9,233			124,083
Total (4)		$	36,058,044		$	3,051,970		$	5,453,616		$	4,466,544		$	23,085,914

 

79

---

Table of Contents

 

(1)

On January 15, 2009, we made a permitted election under the indenture to pay PIK Interest with respect to 100% of the outstanding senior toggle notes. For subsequent interest periods, we must make an election regarding whether the applicable interest payment on the senior toggle notes will be made entirely in cash, entirely through PIK Interest, or 50% in cash and 50% in PIK Interest. In the absence of such an election for any interest period, interest on the senior toggle notes will be payable according to the election for the immediately preceding interest period. As a result, we are deemed to have made the PIK Interest election for future interest periods unless and until we elect otherwise. Therefore, the interest payments on the senior toggle notes assume that the PIK Interest election will apply over the term of the notes.

 

(2)

Interest payments on the senior secured credit facilities, other than the revolving credit facility, assume the obligations are repaid in accordance with the amortization schedule included in the credit agreements and the interest rate is held constant over the remaining term based on the weighted average interest rate at December 31, 2008 on the credit facilities.

Interest payments related to the revolving credit facility assume the balance and interest rate as of December 31, 2008 is held constant over the remaining term. On February 6, 2009, Clear Channel borrowed the approximately $1.6 billion of remaining availability under its $2.0 billion revolving credit facility. Assuming the balance on the facility after the draw on February 6, 2009 and weighted average interest rate are held constant over the remaining term, interest payments would have increased by approximately $60.2 million per year.

Interest payments on $6.0 billion of the term loan B facility are effectively fixed at interest rates between 2.6% and 4.4%, plus applicable margins, per annum, as a result of an aggregate of $6.0 billion notional amount of interest rate swap agreements.

 

(3)

Other long-term obligations consist of $55.6 million related to asset retirement obligations recorded pursuant to Statement of Financial Accounting Standards No. 143, Accounting for Asset Retirement Obligations, which assumes the underlying assets will be removed at some period over the next 50 years. Also included are $50.8 million of contract payments in our syndicated radio and media representation businesses and $53.4 million of various other long-term obligations.

 

(4)	Excluded from the table is $423.1 million related to various obligations with no specific contractual commitment or maturity, $267.8 million of which relates to unrecognized tax benefits recorded pursuant to FIN 48. Approximately $1.0 million of the benefits are recorded as current liabilities.

Market Risk

Interest Rate Risk

After the Transactions, a significant amount of Clear Channel’s long-term debt bears interest at variable rates. Accordingly, earnings will be affected by changes in interest rates. At December 31, 2008, we had interest rate swap agreements with a $6.0 billion notional amount that effectively fixes interest at rates between 2.6% and 4.4%, plus applicable margins, per annum. The fair value of these agreements at December 31, 2008 was a liability of $118.8 million. At December 31, 2008, approximately 39% of our aggregate principal amount of long-term debt, including taking into consideration debt on which we have entered into pay-fixed rate receive-floating interest rate swap agreements, bears interest at floating rates.

Assuming the current level of borrowings and interest rate swap contracts and assuming a 200 basis point change in LIBOR, it is estimated that interest expense for the post-merger period ended December 31, 2008 would have changed by approximately $66.0 million.

In the event of an adverse change in interest rates, management may take actions to further mitigate its exposure. However, due to the uncertainty of the actions that would be taken and their possible effects, this interest rate analysis assumes no such actions. Further, the analysis does not consider the effects of the change in the level of overall economic activity that could exist in such an environment.

Equity Price Risk

The carrying value of our available-for-sale equity securities is affected by changes in their quoted market prices. It is estimated that a 20% change in the market prices of these securities would change their carrying

 

80

---

Table of Contents

value at December 31, 2008 by $5.4 million and would change comprehensive income by $3.2 million. At December 31, 2008, we also held $6.4 million of investments that do not have a quoted market price, but are subject to fluctuations in their value.

Foreign Currency

We have operations in countries throughout the world. Foreign operations are measured in their local currencies except in hyper-inflationary countries in which we operate. As a result, our financial results could be affected by factors such as changes in foreign currency exchange rates or weak economic conditions in the foreign markets in which we have operations. We believe we mitigate a small portion of our exposure to foreign currency fluctuations with a natural hedge through borrowings in currencies other than the United States dollar. Our foreign operations reported a net loss of approximately $135.2 million for the year ended December 31, 2008. We estimate a 10% change in the value of the United States dollar relative to foreign currencies would have changed our net income for the year ended December 31, 2008 by approximately $13.5 million.

Our earnings are also affected by fluctuations in the value of the United States dollar as compared to foreign currencies as a result of our equity method investments in various countries. It is estimated that the result of a 10% fluctuation in the value of the dollar relative to these foreign currencies at December 31, 2008 would change our equity in earnings of nonconsolidated affiliates by $10.0 million and would change our net income by approximately $5.9 million for the year ended December 31, 2008.

This analysis does not consider the implications that such fluctuations could have on the overall economic activity that could exist in such an environment in the United States or the foreign countries or on the results of operations of these foreign entities.

Recent Accounting Pronouncements

Statement of Financial Accounting Standards No. 141(R), Business Combinations (“Statement 141(R)”), was issued in December 2007. Statement 141(R) requires that upon initially obtaining control, an acquirer will recognize 100% of the fair values of acquired assets, including goodwill, and assumed liabilities, with only limited exceptions, even if the acquirer has not acquired 100% of its target. Additionally, contingent consideration arrangements will be fair valued at the acquisition date and included on that basis in the purchase price consideration and transaction costs will be expensed as incurred. Statement 141(R) also modifies the recognition for preacquisition contingencies, such as environmental or legal issues, restructuring plans and acquired research and development value in purchase accounting. Statement 141(R) amends Statement of Financial Accounting Standards No. 109, Accounting for Income Taxes, to require the acquirer to recognize changes in the amount of its deferred tax benefits that are recognizable because of a business combination either in income from continuing operations in the period of the combination or directly in contributed capital, depending on the circumstances. Statement 141(R) is effective for fiscal years beginning after December 15, 2008. Adoption is prospective and early adoption is not permitted. We adopted Statement 141(R) on January 1, 2009. Statement 141(R)’s impact on accounting for business combinations is dependent upon the nature of future acquisitions.

Statement of Financial Accounting Standards No. 160, Noncontrolling Interests in Consolidated Financial Statements—an amendment of ARB No. 51 (“Statement 160”), was issued in December 2007. Statement 160 clarifies the classification of noncontrolling interests in consolidated statements of financial position and the accounting for and reporting of transactions between the reporting entity and holders of such noncontrolling interests. Under Statement 160, noncontrolling interests are considered equity and should be reported as an element of consolidated equity, net income will encompass the total income of all consolidated subsidiaries and there will be separate disclosure on the face of the income statement of the attribution of that income between the controlling and noncontrolling interests, and increases and decreases in the noncontrolling ownership interest amount will be accounted for as equity transactions. Statement 160 is effective for the first annual reporting

 

81

---

Table of Contents

period beginning on or after December 15, 2008, and earlier application is prohibited. Statement 160 is required to be adopted prospectively, except for reclassifying noncontrolling interests to equity, separate from the parent’s shareholders’ equity, in the consolidated statement of financial position and recasting consolidated net income (loss) to include net income (loss) attributable to both the controlling and noncontrolling interests, both of which are required to be adopted retrospectively. We adopted Statement 160 on January 1, 2009, which resulted in a reclassification of approximately $463.9 million of noncontrolling interests to shareholders’ equity.

On March 19, 2008, the Financial Accounting Standards Board (“FASB”) issued Statement of Financial Accounting Standards No. 161, Disclosures about Derivative Instruments and Hedging Activities (“Statement 161”). Statement 161 requires additional disclosures about how and why an entity uses derivative instruments, how derivative instruments and related hedged items are accounted for and how derivative instruments and related hedged items effect an entity’s financial position, results of operations and cash flows. It is effective for financial statements issued for fiscal years and interim periods beginning after November 15, 2008, with early application encouraged. We will adopt the disclosure requirements beginning January 1, 2009.

In April 2008, the FASB issued FASB Staff Position No. FAS 142-3, Determination of the Useful Life of Intangible Assets (“FSP FAS 142-3”). FSP FAS 142-3 amends the factors an entity should consider in developing renewal or extension assumptions used in determining the useful life of recognized intangible assets under Statement of Financial Accounting Standards No. 142, Goodwill and Other Intangible Assets (“Statement 142”). FSP FAS 142-3 removes an entity’s requirement under paragraph 11 of Statement 142 to consider whether an intangible asset can be renewed without substantial cost or material modifications to the existing terms and conditions. It is effective for financial statements issued for fiscal years and interim periods beginning after December 15, 2008, and early adoption is prohibited. We adopted FSP FAS 142-3 on January 1, 2009. FSP FAS 142-3’s impact is dependent upon future acquisitions.

In June 2008, the FASB issued FASB Staff Position Emerging Issues Task Force 03-6-1, Determining Whether Instruments Granted in Share-Based Payment Transactions Are Participating Securities (“FSP EITF 03-6-1”). FSP EITF 03-6-1 clarifies that unvested share-based payment awards with a right to receive nonforfeitable dividends are participating securities. Guidance is also provided on how to allocate earnings to participating securities and compute basic earnings per share using the two-class method. This FSP is effective for financial statements issued for fiscal years and interim periods beginning after December 15, 2008, and early adoption is prohibited. We adopted FSP EITF 03-6-1 on January 1, 2009. We are evaluating the impact FSP EITF 03-6-1 will have on our earnings per share.

Critical Accounting Estimates

The preparation of our financial statements in conformity with GAAP requires management to make estimates, judgments and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements and the reported amount of expenses during the reporting period. On an ongoing basis, we evaluate our estimates that are based on historical experience and on various other assumptions that are believed to be reasonable under the circumstances. The result of these evaluations forms the basis for making judgments about the carrying values of assets and liabilities and the reported amount of expenses that are not readily apparent from other sources. Because future events and their effects cannot be determined with certainty, actual results could differ from our assumptions and estimates, and such difference could be material. Our significant accounting policies are discussed in the notes to our consolidated financial statements in this prospectus. Management believes that the following accounting estimates are the most critical to aid in fully understanding and evaluating our reported financial results, and they require management’s most difficult, subjective, or complex judgments, resulting from the need to make estimates about the effect of matters that are inherently uncertain. The following narrative describes these critical accounting estimates, the judgments and assumptions and the effect if actual results differ from these assumptions.

 

82

---

Table of Contents

Allowance for Doubtful Accounts

We evaluate the collectibility of our accounts receivable based on a combination of factors. In circumstances where we are aware of a specific customer’s inability to meet its financial obligations, we record a specific reserve to reduce the amounts recorded to what we believe will be collected. For all other customers, we recognize reserves for bad debt based on historical experience of bad debts as a percent of revenue for each business unit, adjusted for relative improvements or deteriorations in the agings and changes in current economic conditions.

If our allowance were to change 10%, it is estimated that our 2008 bad debt expense would have changed by $9.7 million and our 2008 net income would have changed by $6.0 million.

Long-Lived Assets

Long-lived assets, such as property, plant and equipment and definite-lived intangibles are reviewed for impairment when events and circumstances indicate that depreciable and amortizable long-lived assets might be impaired and the undiscounted cash flows estimated to be generated by those assets are less than the carrying amount of those assets. When specific assets are determined to be unrecoverable, the cost basis of the asset is reduced to reflect the current fair market value.

We use various assumptions in determining the current fair market value of these assets, including future expected cash flows, industry growth rates and discount rates, as well as future salvage values. Our impairment loss calculations require management to apply judgment in estimating future cash flows, including forecasting useful lives of the assets and selecting the discount rate that reflects the risk inherent in future cash flows.

Using the impairment review described, we recorded an impairment charge of approximately $33.4 million for the year ended December 31, 2008. If actual results are not consistent with our assumptions and judgments used in estimating future cash flows and asset fair values, we may be exposed to future impairment losses that could be material to our results of operations.

Indefinite-lived Assets

Indefinite-lived assets are reviewed annually for possible impairment using the direct valuation method as prescribed in Topic D-108. Under the direct valuation method, it is assumed that rather than acquiring indefinite-lived intangible assets as a part of a going concern business, the buyer hypothetically obtains indefinite-lived intangible assets and builds a new operation with similar attributes from scratch. Thus, the buyer incurs start-up costs during the build-up phase, which are normally associated with going concern value. Initial capital costs are deducted from the discounted cash flows model which results in value that is directly attributable to the indefinite-lived intangible assets.

Our key assumptions using the direct valuation method are market revenue growth rates, market share, profit margin, duration and profile of the build-up period, estimated start-up capital costs and losses incurred during the build-up period, the risk-adjusted discount rate and terminal values. This data is populated using industry normalized information representing an average asset within a market.

In accordance with Statement 142, we performed an interim impairment test as of December 31, 2008. The estimated fair value of our FCC licenses and permits was below their carrying values. As a result, we recognized a non-cash impairment charge of $1.7 billion in 2008 on our indefinite-lived FCC licenses and permits as a result of the impairment test. The United States and global economies are undergoing a period of economic uncertainty, which has caused, among other things, a general tightening in the credit markets, limited access to the credit markets, lower levels of liquidity and lower consumer and business spending. These disruptions in the credit and

 

83

---

Table of Contents

financial markets and the continuing impact of adverse economic, financial and industry conditions on the demand for advertising negatively impacted the key assumptions in the discounted cash flow models used to value our FCC licenses and permits.

While we believe we had made reasonable estimates and utilized reasonable assumptions to calculate the fair value of our FCC license and permits, it is possible a material change could occur. If our future results are not consistent with our estimates, we could be exposed to future impairment losses that could be material to our results of operations. The following table shows the impact on the fair value of our FCC licenses and billboard permits of a 100 basis point decline in our long-term revenue growth rate, profit margin, and discount rate assumptions, respectively:

 

(In thousands)
Indefinite-lived intangible		Revenue growth rate				Profit margin				Discount rates
FCC licenses		$	(285,900	)		$	(121,670	)		$	524,900
Billboard permits			(508,300	)			(84,000	)			770,200

Goodwill

Goodwill represents the excess of the purchase price over the fair value of identifiable net assets acquired in business combinations. We review goodwill for potential impairment annually using a discounted cash flow approach to determine the fair value of our reporting units. The fair value of our reporting units is used to apply value to the net assets of each reporting unit. To the extent that the carrying amount of net assets would exceed the fair value, an impairment charge may be required to be recorded.

The discounted cash flow approach we use for valuing goodwill involves estimating future cash flows expected to be generated from the related assets, discounted to their present value using a risk-adjusted discount rate. Terminal values were also estimated and discounted to their present value. In accordance with Statement 142, we performed an interim impairment test as of December 31, 2008 on goodwill.

The estimated fair value of our reporting units was below their carrying values, which required us to compare the implied fair value of each reporting units’ goodwill with its carrying value. As a result, we recognized a non-cash impairment charge of $3.6 billion to reduce our goodwill. The macroeconomic factors discussed above had an adverse effect on our estimated cash flows and discount rates used in the discounted cash flow approach.

While we believe we had made reasonable estimates and utilized reasonable assumptions to calculate the fair value of our reporting units, it is possible a material change could occur. If future results are not consistent with our assumptions and estimates, we may be exposed to impairment charges in the future. The following table shows the impact on the fair value of each of our reportable segments of a 100 basis point decline in our long-term revenue growth rate, profit margin, and discount rate assumptions, respectively:

 

(In thousands)
Reportable segment		Revenue growth rate				Profit margin				Discount rates
Radio Broadcasting		$	(960,000	)		$	(240,000	)		$	1,090,000
Americas Outdoor Advertising			(380,000	)			(90,000	)			420,000
International Outdoor Advertising			(190,000	)			(160,000	)			90,000

Tax Accruals

The IRS and other taxing authorities routinely examine our tax returns. From time to time, the IRS challenges certain of our tax positions. We believe our tax positions comply with applicable tax law and we would vigorously defend these positions if challenged. The final disposition of any positions challenged by the

 

84

---

Table of Contents

IRS could require us to make additional tax payments. We believe that we have adequately accrued for any foreseeable payments resulting from tax examinations and consequently do not anticipate any material impact upon their ultimate resolution.

Our estimates of income taxes and the significant items giving rise to the deferred assets and liabilities are shown in the notes to our audited consolidated financial statements included in this prospectus and reflect our assessment of actual future taxes to be paid on items reflected in the financial statements, giving consideration to both timing and probability of these estimates. Actual income taxes could vary from these estimates due to future changes in income tax law or results from the final review of our tax returns by federal, state, or foreign tax authorities.

We have considered these potential changes in accordance with Statement of Financial Accounting Standards No. 109, Accounting for Income Taxes, and FIN 48, which requires us to record reserves for estimates of probable settlements of federal and state tax audits.

Litigation Accruals

Clear Channel is currently involved in certain legal proceedings and, as required, has accrued an estimate of the probable costs for the resolution of these claims.

Management’s estimates used 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.

Insurance Accruals

We are currently self-insured beyond certain retention amounts for various insurance coverages, including general liability, property and casualty. Accruals are recorded based on estimates of actual claims filed, historical payouts, existing insurance coverage and projections of future development of costs related to existing claims.

Our self-insured liabilities contain uncertainties because management must make assumptions and apply judgment to estimate the ultimate cost to settle reported claims and claims incurred but not reported as of December 31, 2008.

If actual results are not consistent with our assumptions and judgments, we may be exposed to gains or losses that could be material. A 10% change in our self-insurance liabilities at December 31, 2008 would have affected net income by approximately $3.2 million for the year ended December 31, 2008.

Share-based Payments

Under the fair value recognition provisions of Statement 123(R), stock based compensation cost is measured at the grant date based on the value of the award. For awards that vest based on service conditions, this cost is recognized as expense on a straight-line basis over the vesting period. For awards that will vest based on market, performance and service conditions, this cost will be recognized when it becomes probable that the performance condition will be satisfied. Determining the fair value of share-based awards at the grant date requires assumptions and judgments about expected volatility and forfeiture rates, among other factors. If actual results differ significantly from these estimates, our results of operations could be materially impacted.

 

85

---

Table of Contents

Inflation

Inflation has affected our performance in terms of higher costs for wages, salaries and equipment. Although the exact impact of inflation is indeterminable, we believe we have offset these higher costs by increasing the effective advertising rates of most of our broadcasting stations and outdoor display faces.

Ratio of Earnings to Fixed Charges

The ratio of earnings to fixed charges is as follows:

 

Period from July 31 through December 31, 2008		Period from January 1 through July 30, 2008		Year Ended December 31,
				2007		2006		2005		2004
Post-merger		Pre-merger		Pre-merger		Pre-merger		Pre-merger		Pre-merger
N/A		2.06		2.38		2.27		2.24		2.76

The ratio of earnings to fixed charges was computed on a total enterprise basis. Earnings represent income from continuing operations before income taxes less equity in undistributed net income (loss) of unconsolidated affiliates plus fixed charges. Fixed charges represent interest, amortization of debt discount and expense and the estimated interest portion of rental charges. We had no preferred stock outstanding for any period presented. Earnings, as adjusted, were not sufficient to cover fixed charges by approximately $5.7 billion for the post-merger period from July 31 through December 31, 2008.

 

86

---

Table of Contents

BUSINESS

Clear Channel

On November 16, 2006, Clear Channel entered into the merger agreement with Merger Sub, an entity formed by the Sponsors to effect the acquisition of Clear Channel by Holdings. Clear Channel held a special meeting of its shareholders on July 24, 2008, at which time the proposed merger was approved. On July 30, 2008, upon the satisfaction of the conditions set forth in the merger agreement, Holdings acquired Clear Channel. The acquisition was effected by the merger of Merger Sub, then an indirect subsidiary of Holdings, with and into Clear Channel. As a result of the merger, Clear Channel became a wholly-owned subsidiary of Holdings, held indirectly through intermediate holding companies including Clear Channel Capital. Upon the consummation of the merger, Holdings became a public company and Clear Channel was no longer a public company.

Recent Developments

The global economic slowdown has adversely affected advertising revenue across our businesses in recent months. In this regard, we performed an interim impairment test in the fourth quarter of 2008 and recorded a non-cash impairment of approximately $5.3 billion.

On January 20, 2009, we announced that we commenced a restructuring program targeting a reduction of fixed costs by approximately $350 million on an annualized basis. As part of the program, we eliminated approximately 1,850 full-time positions representing approximately 9% of total workforce. The restructuring program will also include other actions, including elimination of overlapping functions and other cost savings initiatives. The program is expected to result in restructuring and other non-recurring charges of approximately $200 million, although additional costs may be incurred as the program evolves. The cost savings initiatives are expected to be fully implemented by the end of the first quarter of 2010. No assurance can be given that the restructuring program will be successful or will achieve the anticipated cost savings in the timeframe expected or at all. In addition, we may modify or terminate the restructuring program in response to economic conditions or otherwise. As of December 31, 2008, we had recognized approximately $95.9 million of expenses related to our restructuring program. These expenses primarily related to severance of approximately $83.3 million and $12.6 million related to professional fees.

Our Business Segments

We are a diversified media company incorporated in 1974 with three reportable business segments: Radio Broadcasting, Americas Outdoor Advertising (consisting primarily of operations in the United States, Canada and Latin America) and International Outdoor Advertising. As of December 31, 2008, we owned 894 radio stations and a leading national radio network operating in the United States. In addition, we had equity interests in various international radio broadcasting companies. For the year ended December 31, 2008, the Radio Broadcasting segment represented 49% of net revenue on a combined basis. As of December 31, 2008, we also owned or operated approximately 237,000 Americas Outdoor Advertising display faces and approximately 670,000 International Outdoor Advertising display faces. For the year ended December 31, 2008, the Americas Outdoor Advertising and International Outdoor Advertising segments represented 21% and 27% of net revenue on a combined basis, respectively. As of December 31, 2008 we also owned a media representation firm, as well as other general support services and initiatives, all of which are within the category “Other.” This segment represented 3% of net revenue on a combined basis for the year ended December 31, 2008.

We believe we offer advertisers a diverse platform of media assets across geographies, radio programming formats and outdoor products. We intend to continue to execute upon our long-standing radio broadcasting and outdoor advertising strategies, while closely managing expense growth and focusing on achieving operating efficiencies throughout our businesses. Within each of our operating segments, we share best practices across our markets in an attempt to replicate our successes throughout the markets in which we operate.

 

87

---

Table of Contents

Radio Broadcasting

As of December 31, 2008, we owned 894 domestic radio stations, with 272 stations operating in the 50 largest markets. For the year ended December 31, 2008, Radio Broadcasting represented 49% of our net revenue on a combined basis. Our portfolio of stations offers a broad assortment of programming formats, including adult contemporary, country, contemporary hit radio, rock, urban and oldies, among others, to a total weekly listening base of more than 90 million individuals based on Arbitron National Regional Database figures for the Spring 2008 ratings period. Our radio broadcasting business includes radio stations for which we are the licensee and for which we program and/or sell air time under local marketing agreements (“LMAs”) or joint sales agreements (“JSAs”).

In addition to our radio broadcasting business, we operate our Premiere Radio Network, a national radio network that produces, distributes or represents approximately 90 syndicated radio programs and services for approximately 5,000 radio station affiliates. Some of our more popular syndicated radio personalities include Rush Limbaugh, Sean Hannity, Steve Harvey, Ryan Seacrest and Jeff Foxworthy. We also own various sports, news and agriculture networks.

Strategy

Our radio broadcasting strategy centers on providing programming and services to the local communities in which we operate and being a contributing member of those communities. We believe that by serving the needs of local communities, we will be able to grow listenership and deliver target audiences to advertisers.

Our radio broadcasting strategy also entails improving the ongoing operations of our stations through effective programming, promotion, marketing and sales and careful management of costs. In late 2004, we implemented price and yield optimization systems and invested in new information systems, which provide station level inventory yield and pricing information previously unavailable. We shifted our sales force compensation plan from a straight “volume-based” commission percentage system to a “value-based” system to reward success in optimizing price and inventory.

We will continue to focus on enhancing the radio listener experience by offering a wide variety of compelling content. We believe our investments in radio programming over time have created a collection of leading on-air talent. The distribution platform provided by our Premiere Radio Network allows us to attract talent and more effectively utilize quality content across many stations.

We are also continually expanding content choices for our listeners, including utilization of HD radio, Internet and other distribution channels with complementary formats. HD radio enables crystal clear reception, interactive features, data services and new applications. Further, HD radio allows for many more stations, providing greater variety of content which we believe will enable advertisers to target consumers more effectively. The interactive capabilities of HD radio will potentially permit us to participate in commercial download services. In addition, we provide streaming audio via the Internet, and accordingly, have increased listener reach and developed new listener applications as well as new advertising capabilities. Our websites hosted approximately 11.7 million unique visitors in December 2008 as measured by CommScore / Media Metrix, making the collection of these websites one of the top five trafficked music websites. Finally, we have pioneered mobile applications which allow subscribers to use their cell phones to interact directly with the station, including finding titles/artists, requesting songs and downloading station wallpapers.

Sources of Revenue

Our Radio Broadcasting segment generated 49%, 50% and 53% of our consolidated revenue in 2008 (on a combined basis), 2007 and 2006, respectively. The primary source of revenue in our Radio Broadcasting segment is the sale of spots on our radio stations for local, regional and national advertising. Our local advertisers cover a

 

88

---

Table of Contents

wide range of categories, including consumer services, retailers, entertainment, health and beauty products, telecommunications, automotive and media. Our contracts with our advertisers generally provide for a term which extends for less than a one-year period. We also generate additional revenue from network compensation, the Internet, air traffic, events, barter and other miscellaneous transactions. These other sources of revenue supplement traditional advertising revenue without increasing on-air-commercial time.

Each radio station’s local sales staff solicits advertising directly from local advertisers or indirectly through advertising agencies. Our strategy of producing commercials that respond to the specific needs of our advertisers helps to build local direct advertising relationships. Regional advertising sales are also generally realized by our local sales staff. To generate national advertising sales, we engage firms specializing in soliciting radio advertising sales on a national level. National sales representatives obtain advertising principally from advertising agencies located outside the station’s market and receive commissions based on advertising sold.

Advertising rates are principally based on the length of the spot and how many people in a targeted audience listen to our stations, as measu