iHeartMedia, Inc. - Quarter Report: 2008 June (Form 10-Q)

 

 

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q

(Mark One)

þ		QUARTERLY REPORT PURSUANT TO SECTION 13 AND 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2008

o		TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM

Commission file number
000-53354

CC MEDIA HOLDINGS, INC.

(Exact name of registrant as specified in its charter)

Delaware (State of Incorporation)		26-0241222 (I.R.S. Employer Identification No.)

200 East Basse Road San Antonio, Texas (Address of principal executive offices)		78209 (Zip Code)

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

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

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No þ

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

Class		Outstanding at August 8, 2008
Class A common stock, $.001 par value		23,646,625
Class B common stock, $.001 par value		555,556
Class C common stock, $.001 par value		58,967,502

 

 

CC MEDIA HOLDINGS, INC. AND SUBSIDIARIES

INDEX

		Page No.
Part I — Financial Information
Item 1. Unaudited Financial Statements			3
Consolidated Balance Sheets at June 30, 2008 and December 31, 2007			3
Consolidated Statements of Operations for the six and three months ended June 30, 2008 and 2007			5
Condensed Consolidated Statements of Cash Flows for the six months ended June 30, 2008 and 2007			6
Notes to Consolidated Financial Statements			7
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations			17
Item 3. Quantitative and Qualitative Disclosures about Market Risk			34
Item 4. Controls and Procedures			34
Part II — Other Information
Item 1. Legal Proceedings			35
Item 1A. Risk Factors			36
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds			43
Item 3. Defaults Upon Senior Securities			43
Item 4. Submission of Matters to a Vote of Security Holders			43
Item 5. Other Information			43
Item 6. Exhibits			43
Signatures			48
Statement re: Computation of Per Share Earnings
Statement re: Computation of Ratios
Certification of CEO Pursuant to Section 302
Certification of CFO Pursuant to Section 302
Certification of CEO Pursuant to Section 906
Certification of CFO Pursuant to Section 906

PART I

Item 1. UNAUDITED FINANCIAL STATEMENTS

CC MEDIA HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
ASSETS
(In thousands)

		June 30,				December 31,
		2008				2007
		(Unaudited)				(Audited)
CURRENT ASSETS
Cash and cash equivalents		$	668,093			$	145,148
Accounts receivable, net of allowance of $63,049 in 2008 and $59,169 in 2007			1,773,939				1,693,218
Prepaid expenses			138,527				116,902
Other current assets			328,340				243,248
Current assets from discontinued operations			—				96,067
Total Current Assets			2,908,899				2,294,583
PROPERTY, PLANT AND EQUIPMENT
Land, buildings and improvements			847,153				840,832
Structures			4,026,209				3,901,941
Towers, transmitters and studio equipment			587,576				600,315
Furniture and other equipment			526,128				527,714
Construction in progress			145,305				119,260
			6,132,371				5,990,062
Less accumulated depreciation			3,050,884				2,939,698
			3,081,487				3,050,364
Property, plant and equipment from discontinued operations, net			13,280				164,724
INTANGIBLE ASSETS
Definite-lived intangibles, net			523,479				485,870
Indefinite-lived intangibles — licenses			4,214,057				4,201,617
Indefinite-lived intangibles — permits			252,794				251,988
Goodwill			7,256,252				7,210,116
Intangible assets from discontinued operations, net			25,441				219,722
OTHER ASSETS
Notes receivable			12,066				12,388
Investments in, and advances to, nonconsolidated affiliates			300,905				346,387
Other assets			316,125				303,791
Other investments			167,835				237,598
Other assets from discontinued operations			5,752				26,380
Total Assets		$	19,078,372			$	18,805,528

See Notes to Consolidated Financial Statements

CC MEDIA HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
LIABILITIES AND SHAREHOLDERS’ EQUITY
(In thousands)

		June 30,				December 31,
		2008				2007
		(Unaudited)				(Audited)
CURRENT LIABILITIES
Accounts payable		$	141,301			$	165,533
Accrued expenses			836,411				912,665
Accrued interest			83,947				98,601
Accrued income taxes			142,338				79,973
Current portion of long-term debt			1,228,415				1,360,199
Deferred income			224,958				158,893
Current liabilities from discontinued operations			—				37,413
Total Current Liabilities			2,657,370				2,813,277
Long-term debt			4,543,904				5,214,988
Other long-term obligations			191,289				127,384
Deferred income taxes			828,992				793,850
Other long-term liabilities			510,123				567,848
Long-term liabilities from discontinued operations			—				54,330
Minority interest			470,659				436,360
Commitments and contingent liabilities (Note 5)
SHAREHOLDERS’ EQUITY
Common Stock			49,837				49,808
Additional paid-in capital			26,886,854				26,858,079
Retained deficit			(17,407,163	)			(18,489,143	)
Accumulated other comprehensive income			354,670				383,698
Cost of shares held in treasury			(8,163	)			(4,951	)
Total Shareholders’ Equity			9,876,035				8,797,491
Total Liabilities and Shareholders’ Equity		$	19,078,372			$	18,805,528

See Notes to Consolidated Financial Statements

CC MEDIA HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
(In thousands, except per share data)

		Six Months Ended June 30,								Three Months Ended June 30,
		2008				2007				2008				2007
Revenue		$	3,395,285			$	3,307,269			$	1,831,078			$	1,802,192
Operating expenses:
Direct operating expenses (includes share-based payments of $8,187, $8,172, $4,583 and $5,172 for the six and three months ended June 30, 2008 and 2007, respectively, and excludes depreciation and amortization)			1,449,432				1,304,134				743,485				676,255
Selling, general and administrative expenses (includes share-based payments of $6,508, $7,331, $3,373 and $4,499 for the six and three months ended June 30, 2008 and 2007, respectively, and excludes depreciation and amortization)			872,115				863,509				445,734				447,190
Depreciation and amortization			294,466				280,994				142,188				141,309
Corporate expenses (includes share-based payments of $5,687, $6,082, $2,836 and $3,668 for the six and three months ended June 30, 2008 and 2007, respectively, and excludes depreciation and amortization)			94,277				91,194				47,974				43,044
Merger expenses			7,845				4,370				7,456				2,684
Gain on disposition of assets — net			19,451				10,943				17,354				3,996
Operating income			696,601				774,011				461,595				495,706
Interest expense			182,178				234,499				82,175				116,422
Gain (loss) on marketable securities			34,262				(15	)			27,736				(410	)
Equity in earnings of nonconsolidated affiliates			92,035				16,699				8,990				11,435
Other income (expense) — net			5,701				328				(6,086	)			340
Income before income taxes, minority interest and discontinued operations			646,421				556,524				410,060				390,649
Income tax benefit (expense):
Current			(124,880	)			(154,430	)			(101,047	)			(122,071	)
Deferred			(66,838	)			(75,822	)			(24,090	)			(37,715	)
Income tax benefit (expense)			(191,718	)			(230,252	)			(125,137	)			(159,786	)
Minority interest expense, net of tax			16,017				15,246				7,628				14,970
Income before discontinued operations			438,686				311,026				277,295				215,893
Income from discontinued operations, net			643,294				27,186				5,032				20,097
Net income		$	1,081,980			$	338,212			$	282,327			$	235,990
Other comprehensive income (loss), net of tax:
Foreign currency translation adjustments			44,547				45,889				(13,420	)			37,138
Unrealized gain (loss) on securities and derivatives:
Unrealized holding gain (loss) on marketable securities			(47,578	)			(11,177	)			(42,457	)			(4,218	)
Reclassification adjustment for gains included in net income			(25,997	)			—				(25,997	)			—
Comprehensive income		$	1,052,952			$	372,924			$	200,453			$	268,910
Net income per common share:
Income before discontinued operations — Basic		$	.89			$	.63			$	.56			$	.44
Discontinued operations — Basic			1.30				.05				.01				.04
Net income — Basic		$	2.19			$	.68			$	.57			$	.48
Weighted average common shares — basic			494,975				494,105				495,201				494,364
Income before discontinued operations — Diluted		$	.88			$	.63			$	.56			$	.44
Discontinued operations — Diluted			1.30				.05				.01				.04
Net income — Diluted		$	2.18			$	.68			$	.57			$	.48
Weighted average common shares — diluted			496,637				495,280				496,887				495,688
Dividends declared per share		$	—			$	.375			$	—			$	.1875

See Notes to Consolidated Financial Statements

CC MEDIA HOLDINGS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(In thousands)

		Six Months Ended June 30,
		2008				2007
Cash flows from operating activities:
Net income		$	1,081,980			$	338,212
(Income) loss from discontinued operations, net			(643,294	)			(27,186	)
			438,686				311,026
Reconciling items:
Depreciation and amortization			294,466				280,994
Deferred taxes			66,838				75,822
(Gain) loss on disposal of assets			(19,451	)			(10,943	)
(Gain) loss forward exchange contract			2,496				9,505
(Gain) loss on trading securities			(849	)			(9,490	)
Provision for doubtful accounts			19,042				16,091
Share-based compensation			20,382				21,585
Equity in earnings of nonconsolidated affiliates			(92,035	)			(16,699	)
Other reconciling items — net			(6,608	)			13,935
Changes in operating assets and liabilities:
Changes in other operating assets and liabilities, net of effects of acquisitions and dispositions			(37,012	)			(20,832	)
Net cash provided by operating activities			685,955				670,994
Cash flows from investing activities:
Decrease (increase) in notes receivable — net			1,859				(242	)
Decrease (increase) in investments in and advances to nonconsolidated affiliates — net			24,664				10,331
Sales (purchases) of investments — net			123,187				(384	)
Purchases of property, plant and equipment			(211,726	)			(152,976	)
Proceeds from disposal of assets			44,311				18,180
Acquisition of operating assets, net of cash acquired			(144,138	)			(51,539	)
Decrease (increase) in other — net			(16,286	)			(25,386	)
Net cash used in investing activities			(178,129	)			(202,016	)
Cash flows from financing activities:
Draws on credit facilities			691,122				368,872
Payments on credit facilities			(873,741	)			(576,527	)
Payments on long-term debt			(625,856	)			(249,392	)
Proceeds from exercise of stock options, stock purchase plan, common stock warrants and other			17,291				75,985
Payments on forward exchange contract			(110,410	)			—
Payments for purchase of common shares			(3,780	)			—
Dividends paid			(93,367	)			(185,641	)
Net cash used in financing activities			(998,741	)			(566,703	)
Cash flows from discontinued operations:
Net cash (used in) provided by operating activities			(85,026	)			21,463
Net cash provided by investing activities			1,098,886				52,046
Net cash provided by (used in) financing activities			—				—
Net cash provided by discontinued operations			1,013,860				73,509
Net (decrease) increase in cash and cash equivalents			522,945				(24,216	)
Cash and cash equivalents at beginning of period			145,148				116,000
Cash and cash equivalents at end of period		$	668,093			$	91,784

See Notes to Consolidated Financial Statements

CC MEDIA HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)

Note 1: BASIS OF PRESENTATION AND NEW ACCOUNTING STANDARDS

     Information Regarding Registrant

CC Media Holdings, Inc. (the “Company”) was formed in May 2007 by private equity funds sponsored by Bain Capital Partners, LLC and Thomas H. Lee Partners, L.P. for the purpose of acquiring the business of Clear Channel Communications, Inc., a Texas company (“Clear Channel”). The acquisition was completed on July 30, 2008 pursuant to the Agreement and Plan of Merger, dated November 16, 2006, as amended on April 18, 2007, May 17, 2007 and May 13, 2008 (the “Merger Agreement”). As a result of the merger, each issued and outstanding share of Clear Channel, other than shares held by certain principals of the Company and that were rolled over and exchanged for shares of Class A common stock of the Company, were either exchanged for (i) $36.00 in cash consideration, without interest, or (ii) one share of Class A common stock of the Company.

In connection with the merger, the Company issued approximately 23.6 million shares of Class A common stock, approximately 0.6 million shares of Class B common stock and approximately 59.0 million shares of Class C common stock.

Immediately following the closing of the merger the Company had aggregate principal amount of debt outstanding of approximately $20.8 billion. The following is a summary of the Company’s new debt incurred in connection with the merger:

	•		a $1.33 billion term loan A facility, with a maturity of six years;
	•		a $10.7 billion term loan B facility with a maturity of seven years and six months;
	•		a $695.9 million term loan C- asset sale facility, with a maturity of seven years and six months;
	•		$1.25 billion delayed draw term loan facilities with maturities of seven years and six months, up to $750 million of which may be drawn on or after the merger closing date to purchase or repay Clear Channel’s outstanding 7.65% senior notes due 2010, and the remainder of which will be available after the merger closing date to purchase or repay Clear Channel’s outstanding 4.25% senior notes due 2009;
	•		a $2.0 billion revolving credit facility with a maturity of six years, including a letter of credit sub-facility and a swingline loan sub-facility;
	•		a $783.5 million receivables based credit facility providing revolving credit commitments in an amount equal to the initial borrowing of $533.5 million on the merger closing date plus $250 million, subject to a borrowing base; and
	•		$980.0 million aggregate principal amount of 10.75% senior cash pay notes due 2016 and $1.33 billion aggregate principal amount of 11.00%/11.75% senior toggle notes due 2016.

The Company will account for its acquisition of Clear Channel as a purchase business combination in conformity with Statement of Financial Accounting Standards No. 141, Business Combinations, and Emerging Issues Task Force Issue 88-16, Basis in Leveraged Buyout Transactions. The Company expects to allocate a portion of the consideration paid to the assets and liabilities acquired at their respective fair values with the remaining portion recorded at the continuing shareholders basis. Any excess consideration after this allocation will be recorded as goodwill. The Company is currently in the process of obtaining third-party valuations of certain of the acquired assets and liabilities in order to allocate the purchase price. The Company will complete its purchase price allocation within one year of the closing of the acquisition.

Prior to the consummation of its acquisition of Clear Channel on July 30, 2008, the Company 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. Certain references to the Company for the periods covered by this quarterly report on Form 10-Q are to Clear Channel and its subsidiaries. Subsequent to the acquisition, Clear Channel became an indirect, wholly-owned subsidiary of the Company and the business of the Company became that of Clear Channel and its subsidiaries.

All of the information in this Quarterly Report on Form 10-Q is presented using the historical results of operations and the historical basis of assets, liabilities and equity of Clear Channel as of June 30, 2008 and December 31, 2007.

     Preparation of Interim Financial Statements

The consolidated financial statements were prepared by the Company pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”) and, in the opinion of management, include all adjustments (consisting of normal recurring accruals and adjustments necessary for adoption of new accounting standards) necessary to present fairly the results of the interim periods shown. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles in the United States have been condensed or omitted pursuant to such SEC rules and regulations.

Management believes that the disclosures made are adequate to make the information presented not misleading. Due to seasonality and other factors, the results for the interim periods are not necessarily indicative of results for the full year. The financial statements contained herein should be read in conjunction with the consolidated financial statements and notes thereto included in Clear Channel’s 2007 Annual Report on Form 10-K and its Current Report on Form 8-K filed May 30, 2008.

The consolidated financial statements include the accounts of the Company and its subsidiaries. Investments in companies in which the Company owns 20 percent to 50 percent of the voting common stock or otherwise exercises significant influence over operating and financial policies of the company are accounted for under the equity method. All significant intercompany transactions are eliminated in the consolidation process.

     Certain Reclassifications

The historical financial statements and footnote disclosures have been revised to exclude amounts related to the Company’s television business and certain radio stations as discussed below.

     Discontinued Operations and Assets Held for Sale

Sale of non-core radio stations

During the first quarter of 2008, the Company revised its plans to sell 173 of its previously announced 448 non-core radio station sales because it determined that market conditions were not advantageous to complete the sales. The Company intends to hold and operate these 173 stations. 145 of these non-core stations were classified as discontinued operations and no longer met the requirements of Statement of Financial Accounting Standards No. 144, Accounting for the Impairment or Disposal of Long-lived Assets (“Statement 144”) for classification as discontinued operations. Therefore, the assets, results of operations and cash flows from these 145 stations were reclassified to continuing operations in the Company’s consolidated financial statements for the six and three months ended June 30, 2007 and as of December 31, 2007.

The following table presents the activity related to the Company’s planned divestitures of radio stations:

Total radio stations announced as being marketed for sale on November 16, 2006			448
Total radio stations no longer being marketed for sale			(173	)
Adjusted number of radio stations being marketed for sale (“Non-core” radio stations)			275
Non-core radio stations sold through June 30, 2008			(238	)
Remaining non-core radio stations at June 30, 2008 classified as discontinued operations			37
Non-core radio stations under definitive asset purchase agreements			(34	)
Non-core radio stations being marketed for sale			3

Sale of other radio stations

In addition to its non-core stations, the Company had definitive asset purchase agreements for 8 stations at June 30, 2008.

The Company determined that each of the radio station markets represent a disposal group. Consistent with the provisions of Statement 144, the Company classified these assets that are subject to transfer under the definitive asset purchase agreements as discontinued operations for all periods presented. Accordingly, depreciation and amortization associated with these assets was discontinued. Additionally, the Company determined that these assets comprise operations and cash flows that can be clearly distinguished, operationally and for financial reporting purposes, from the rest of the Company. As of June 30, 2008, the Company 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.

Sale of the television business

On March 14, 2008, the Company announced it had 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, the Company recorded a gain of $666.7 million as a component of “Income from discontinued operations, net” in its consolidated statement of operations during the six months ended June 30, 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 the six and three months ended June 30, 2007. The net assets related to the television business were classified as discontinued operations as of December 31, 2007.

Summarized Financial Information of Discontinued Operations

Summarized operating results of discontinued operations for the six and three months ended June 30, 2008 and 2007 are as follows:

		Six Months								Three Months
(In thousands)		2008				2007				2008				2007
Revenue		$	73,853			$	237,729			$	3,970			$	120,724
Income before income taxes		$	699,921			$	48,207			$	4,557			$	38,842

Included in income from discontinued operations, net are income tax expenses of $56.6 million for the six months ended June 30, 2008. For the three months ended June 30, 2008, a tax benefit of approximately $0.5 million was recorded in discontinued operations due to the utilization of capital loss carryforwards during the period. Also included in income from discontinued operations for the six months ended June 30, 2008 is a gain of $688.2 million related to the sale of the Company’s television business and certain radio stations. The Company estimates utilization of approximately $588.7 million of capital loss carryforwards to offset a portion of the taxes associated with these gains. The Company recorded approximately $706.2 million in capital loss carryforwards remaining as of June 30, 2008.

Included in income from discontinued operations, net are income tax expenses of $21.0 million and $18.7 million for the six and three months ended June 30, 2007, respectively. Included in income from discontinued operations for the six and three months ended June 30, 2007 is a gain of $19.6 million and $16.8 million related to the sale of certain radio stations.

The following table summarizes the carrying amount at June 30, 2008 and December 31, 2007 of the major classes of assets and liabilities of the Company’s businesses classified as discontinued operations:

		June 30,				December 31,
(In thousands)		2008				2007
Assets
Accounts receivable, net		$	—			$	76,426
Other current assets			—				19,641
Total current assets		$	—			$	96,067
Land, buildings and improvements		$	7,785			$	73,138
Transmitter and studio equipment			12,696				207,230
Other property, plant and equipment			2,211				22,781
Less accumulated depreciation			9,412				138,425
Property, plant and equipment, net		$	13,280			$	164,724
Definite-lived intangibles, net		$	—			$	283
Licenses			3,436				107,910
Goodwill			22,005				111,529
Total intangible assets		$	25,441			$	219,722
Film rights		$	—			$	18,042
Other long-term assets			5,752				8,338
Total other assets		$	5,752			$	26,380
Liabilities
Accounts payable and accrued expenses		$	—			$	10,565
Film liability			—				18,027
Other current liabilities			—				8,821
Total current liabilities		$	—			$	37,413
Film liability		$	—			$	19,902
Other long-term liabilities			—				34,428
Total long-term liabilities		$	—			$	54,330

     Recent Accounting Pronouncements

On March 19, 2008, the Financial Accounting Standards Board issued Statement 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. The Company will adopt the disclosure requirements beginning January 1, 2009.

In April 2008, the Financial Accounting Standards Board (“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 FASB Statement 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. The Company will adopt FSP FAS 142-3 on January 1, 2009. FSP FAS 142-3’s impact is dependent upon acquisitions at that time.

     New Accounting Standards

The Company adopted Financial Accounting Standards Board Statement No. 159, The Fair Value Option for Financial Assets and Financial Liabilities (“Statement 159”), which permits entities to measure many financial instruments and certain other items at fair value at specified election dates that are not currently required to be measured at fair value. Unrealized gains and losses on items for which the fair value option has been elected should be reported in earnings at each subsequent reporting date. The provisions of Statement 159 were effective as of January 1, 2008. The Company did not elect the fair value option under this standard upon adoption.

The Company adopted Financial Accounting Standards Board Statement No. 157, Fair Value Measurements (“Statement 157”) on January 1, 2008 and began to apply its recognition and disclosure provisions to its financial assets and financial liabilities that are remeasured at fair value at least annually. Statement 157 establishes a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value. These tiers include: Level 1, defined as observable inputs such as quoted prices in active markets; Level 2, defined as inputs other than quoted prices in active markets that are either directly or indirectly observable; and Level 3, defined as unobservable inputs in which little or no market data exists, therefore requiring an entity to develop its own assumptions.

The Company holds marketable equity securities classified in accordance with Statement of Financial Accounting Standards No. 115, Accounting for Certain Investments in Debt and Equity Securities (“Statement 115”). These equity securities are measured at fair value on each reporting date using quoted prices in active markets. Due to the fact that the inputs used to measure the equity securities at fair value are observable, the Company has categorized the securities as Level 1.

The Company was party to two U.S. dollar — Euro cross currency swap contracts as discussed in Note 3. The Company was also a party to $1.1 billion of interest rate swap contracts that were designated as fair value hedges of the underlying fixed-rate debt obligations. The fair values of the cross-currency swap contracts and interest rate swap contracts are determined based on inputs that are readily available in public markets or can be derived from information available in publicly quoted markets. Due to the fact that the inputs are either directly or indirectly observable, the Company classified these contracts as Level 2. The cross currency and interest rate swap contracts were terminated on July 30, 2008 and July 10, 2008, respectively.

The Company held options under two secured forward exchange contracts as discussed in Note 3. The fair value of these contracts is determined using option pricing models that include both observable and unobservable inputs (principally volatility). As a result of the impact that volatility has on the calculation of fair value, the Company classified these contracts as Level 3. These contracts were terminated effective June 13, 2008.

The Company’s assets and liabilities measured at fair value on a recurring basis subject to the disclosure requirements of Statement 157 at June 30, 2008 were as follows:

		Quoted Prices in Active
		markets for Identical				Significant Other				Significant
		Assets				Observable Inputs				Unobservable Inputs
(In thousands)		(Level 1)				(Level 2)				(Level 3)
Asset / (Liability)
Available-for-sale securities		$	161,162			$	—			$	—
Derivatives			—				(177,509	)			—
Total		$	161,162			$	(177,509	)		$	—

For assets and liabilities measured at fair value on a recurring basis using Level 3 inputs, Statement 157 requires a reconciliation of the beginning and ending balances as follows:

(In thousands)		2008
Beginning balance at January 1		$	(16,978	)
Loss included in “Gain (loss) on marketable securities”			(802	)
Settlement			17,780
Ending balance at June 30		$	—

Note 2: INTANGIBLE ASSETS AND GOODWILL

Definite-lived Intangibles

The Company has definite-lived intangible assets which consist primarily of transit and street furniture contracts and other contractual rights in its Americas and International outdoor segments, talent and program right contracts in its radio segment, and contracts for non-affiliated radio and television stations in the Company’s media representation operations. Definite-lived intangible assets are amortized over the shorter of either the respective lives of the agreements or over the period of time the assets are expected to contribute directly or indirectly to the Company’s future cash flows.

The following table presents the gross carrying amount and accumulated amortization for each major class of definite-lived intangible assets at June 30, 2008 and December 31, 2007:

		June 30, 2008								December 31, 2007
		Gross Carrying				Accumulated				Gross Carrying				Accumulated
(In thousands)		Amount				Amortization				Amount				Amortization
Transit, street furniture, and other outdoor contractual rights		$	931,941			$	666,231			$	867,283			$	613,897
Representation contracts			447,010				232,188				400,316				212,403
Other			85,128				42,181				84,004				39,433
Total		$	1,464,079			$	940,600			$	1,351,603			$	865,733

Total amortization expense from continuing operations related to definite-lived intangible assets for the six and three months ended June 30, 2008 and for the year ended December 31, 2007 was $49.4 million, $25.4 million and $105.0 million, respectively. The following table presents the Company’s estimate of amortization expense for each of the five succeeding fiscal years for definite-lived intangible assets:

(In thousands)
2009		$	92,839
2010			74,854
2011			59,686
2012			48,351
2013			43,350

As acquisitions and dispositions occur in the future and as purchase price allocations are finalized, amortization expense may vary.

Indefinite-lived Intangibles

The Company’s indefinite-lived intangible assets consist of Federal Communications Commission (“FCC”) broadcast licenses and billboard permits. FCC broadcast licenses are granted to both radio and television stations for up to eight years under the Telecommunications Act of 1996. The Act requires the FCC to renew a broadcast license if: it finds that the station has served the public interest, convenience and necessity; there have been no serious violations of either the Communications Act of 1934 or the FCC’s rules and regulations by the licensee; and there have been no other serious violations which taken together constitute a pattern of abuse. The licenses may be renewed indefinitely at little or no cost. The Company does not believe that the technology of wireless broadcasting will be replaced in the foreseeable future. The Company’s billboard permits are issued in perpetuity by state and local governments and are transferable or renewable at little or no cost. Permits typically include the location which allows the Company the right to operate an advertising structure. The Company’s permits are located on either owned or leased land. In cases where the Company’s permits are located on leased land, the leases are typically from 10 to 20 years and renew indefinitely, with rental payments generally escalating at an inflation based index. If the Company loses its lease, the Company will typically obtain permission to relocate the permit or bank it with the municipality for future use.

The Company does not amortize its FCC broadcast licenses or billboard permits. The Company tests these indefinite-lived intangible assets for impairment at least annually using a direct method. This direct method assumes that rather than acquiring indefinite-lived intangible assets as a part of a going concern business, the buyer hypothetically obtains indefinite-lived intangible assets and builds a new operation with similar attributes from scratch. Thus, the buyer incurs start-up costs during the build-up phase which are normally associated with going concern value. Initial capital costs are deducted from the discounted cash flows model which results in value that is directly attributable to the indefinite-lived intangible assets.

Under the direct method, the Company aggregates its indefinite-lived intangible assets at the market level for purposes of impairment testing. The Company’s key assumptions using the direct method are market revenue growth rates, market share, profit margin, duration and profile of the build-up period, estimated start-up capital costs and losses incurred during the build-up period, the risk-adjusted discount rate and terminal values. This data is populated using industry normalized information.

Goodwill

The Company tests goodwill for impairment using a two-step process. The first step, used to screen for potential impairment, compares the fair value of the reporting unit with its carrying amount, including goodwill. The second step, used to measure the amount of the impairment loss, compares the implied fair value of the reporting unit goodwill with the carrying amount of that goodwill. The Company’s reporting units for radio broadcasting and Americas outdoor advertising are the reportable segments. The Company determined that each country in its International outdoor segment constitutes a reporting unit. The following table presents the changes in the carrying amount of goodwill the Company recorded in each of its reportable segments for the six month period ended June 30, 2008:

										International
(In thousands)		Radio				Americas Outdoor				Outdoor				Other				Total
Balance as of December 31, 2007		$	6,045,527			$	688,336			$	474,253			$	2,000			$	7,210,116
Acquisitions			—				—				12,686				—				12,686
Dispositions			(371	)			—				—				—				(371	)
Foreign currency			—				(62	)			35,121				—				35,059
Adjustments			(163	)			(1,075	)			—				—				(1,238	)
Balance as of June 30, 2008		$	6,044,993			$	687,199			$	522,060			$	2,000			$	7,256,252

Note 3: DERIVATIVE INSTRUMENTS

The Company held options under two secured forward exchange contracts that limited its exposure to and benefit from price fluctuations in American Tower Corporation (“AMT”) over the terms of the contracts. These options were not designated as hedges of the underlying shares of AMT. Under the terms of the contracts, the Company received proceeds at inception, which it accreted using the effective interest method over the life of the contracts. The accreted value of the debt obligation was $89.1 million and the fair value of the options was a liability of $17.8 million at June 13, 2008.

To offset the change in the fair value of these contracts, the Company had recorded AMT shares as trading securities. The Company also held AMT shares classified as available for sale. The fair value of the Company’s AMT securities on June 13, 2008 was $125.7 million.

The Company terminated the contracts effective June 13, 2008. The Company received net proceeds of $15.2 million and recorded a net gain of $27.0 million in “Gain on marketable securities” related to terminating the contracts and selling its AMT shares.

The Company is exposed to foreign currency exchange risks related to its investment in net assets in foreign countries. The Company entered into two U.S. dollar — Euro cross currency swaps with an aggregate Euro notional amount of €706.0 million and a corresponding aggregate U.S. dollar notional amount of $877.7 million. These cross currency swaps had a value of $191.3 million at June 30, 2008 and $127.4 million at December 31, 2007, which was recorded in “Other long-term obligations”. These cross currency swaps require the Company to make fixed cash payments on the Euro notional amount while it receives fixed cash payments on the equivalent U.S. dollar notional amount, all on a semiannual basis. The Company has designated these cross currency swaps as a hedge of its net investment in Euro denominated assets. The Company selected the forward method under the guidance of the Derivatives Implementation Group Statement 133 Implementation Issue H8, Foreign Currency Hedges: Measuring the Amount of Ineffectiveness in a Net Investment Hedge. The forward method requires all changes in the fair value of the cross currency swaps and the semiannual cash payments to be reported as a cumulative translation adjustment in other comprehensive income in the same manner as the underlying hedged net assets. As of June 30, 2008, a $119.9 million loss, net of tax, was recorded as a cumulative translation adjustment to accumulated other comprehensive income related to the cross currency swap. The cross currency swap contracts were terminated on July 30, 2008.

Note 4: OTHER DEVELOPMENTS

     Acquisitions

The Company acquired two FCC licenses in its radio segment for $11.4 million in cash during 2008. The Company acquired outdoor display faces and additional equity interests in international outdoor companies for $83.6 million in cash during 2008. The Company’s national representation business acquired representation contracts for $49.1 million in cash during 2008.

During 2008, the Company exchanged assets in one of its Americas markets for assets located in a different market and recognized a gain of $2.6 million in “Gain on disposition of assets — net.”

     Disposition of Assets

The Company received proceeds of $88.9 million related to the sale of radio stations recorded as investing cash flows from discontinued operations and recorded a gain of $25.7 million as a component of “income from discontinued operations, net” during the six months ended June 30, 2008. The Company 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 $666.7 million as a component of “income from discontinued operations, net” during the six months ended June 30, 2008.

The Company’s effective tax rate for the three months ended June 30, 2008 was 30.5% as compared to 40.9% for the same period of the prior year. The decline was primarily due to the release of the valuation allowance on the capital loss carryforwards that were used to offset the taxable gain from the disposition of our AMT shares.

In addition, the Company sold its 50% interest in Clear Channel Independent, a South African outdoor advertising company, 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. The sale of Clear Channel Independent was a tax free disposition thereby resulting in no current tax expense recognized on the sale. Due to the release of the valuation allowance on the capital loss carryforwards that were used to offset the taxable gain from the disposition of the AMT shares and the tax free disposition of Clear Channel Independent, the Company’s effective tax rate for the six months ended June 30, 2008 was 29.7%.

     Debt Maturities

On January 15, 2008, the Company 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, the Company redeemed its 6.625% Senior Notes at their maturity for $125.0 million with available cash on hand.

     Legal Proceedings

Plaintiff Grantley Patent Holdings, Ltd. (“Grantley”) sued the Company and nine of its subsidiaries for patent infringement in the United States District Court for the Eastern District of Texas in November 2006. The four patents at issue claim methods and systems for electronically combining a traffic and billing system and a software yield management system to create an inventory management system for the broadcast media industry. The Company contended that the patents are invalid and alternatively, that its systems did not infringe the patents. The case was tried before a jury beginning April 14, 2008. On April 22, 2008 the jury found that the patents at issue were valid and that the Company infringed the patents and awarded damages to Grantley. A final judgment of $89.8 million was entered by the court on June 10, 2008, which includes damages, plus pre-judgment and post-judgment interest and a post-judgment royalty. The Company plans to vigorously contest the judgment through an appeal to the U.S. Court of Appeals for the Federal Circuit. The Company’s potential loss for this proceeding is within a range of outcomes. The Company has accrued the minimum amount within the range because no amount within the range represents a better estimate of the potential loss. Ultimate resolution of the case could result in material additional expense.

The Company is currently involved in certain legal proceedings and, as required, has accrued its estimate of the probable costs for the resolution of these claims. These estimates have been developed in consultation with counsel and are based upon an analysis of potential results, assuming a combination of litigation and settlement strategies. It is possible, however, that future results of operations for any particular period could be materially affected by changes in management’s assumptions or the effectiveness of its strategies related to these proceedings.

Note 5: COMMITMENTS AND CONTINGENCIES

Certain agreements relating to acquisitions provide for purchase price adjustments and other future contingent payments based on the financial performance of the acquired companies. The Company will continue to accrue additional amounts related to such contingent payments if and when it is determinable that the applicable financial performance targets will be met. The aggregate of these

contingent payments, if performance targets are met, would not significantly impact the financial position or results of operations of the Company.

As discussed in Note 4, there are various lawsuits and claims pending against the Company. Based on current assumptions, the Company has accrued its estimate of the probable costs for the resolution of these claims. Future results of operations could be materially affected by changes in these assumptions.

In July 2008, the Company announced that Rush Limbaugh renewed his contract, continuing multi-year syndication of The Rush Limbaugh Show and syndication of The Rush Limbaugh Morning Update. Furthermore, the Company, in partnership with Mr. Limbaugh, will continue to oversee The Limbaugh Letter and RushLimbaugh.com.

Note 6: GUARANTEES

At June 30, 2008, the Company guaranteed $40.0 million of credit lines provided to certain of its international subsidiaries by a major international bank. Most of these credit lines related to intraday overdraft facilities covering participants in the Company’s European cash management pool. As of June 30, 2008, no amounts were outstanding under these agreements.

As of June 30, 2008, the Company had outstanding commercial standby letters of credit and surety bonds of $225.0 million and $159.7 million, respectively. A letter of credit in the amount of $107.7 million is collateral in support of a surety bond and this amount would only be drawn under the letter of credit in the event the associated surety bond was funded and the Company did not honor its reimbursement obligation to the issuer.

These letters of credit and surety bonds relate to various operational matters including insurance, bid, and performance bonds as well as other items.

Note 7: SEGMENT DATA

The Company has three reportable segments, which it believes best reflects how the Company is currently managed — radio broadcasting, Americas outdoor advertising and International outdoor advertising. The Americas outdoor advertising segment consists primarily of operations in the United States, Canada and Latin America, and the International outdoor segment includes operations primarily in Europe, Asia and Australia. The category “other” includes media representation and other general support services and initiatives. Revenue and expenses earned and charged between segments are recorded at fair value and eliminated in consolidation.

																		Corporate,
																		Merger and
						Americas				International								Gain on
		Radio				Outdoor				Outdoor								disposition of
(In thousands)		Broadcasting				Advertising				Advertising				Other				assets — net				Eliminations				Consolidated
Six Months Ended June 30, 2008
Revenue		$	1,661,094			$	718,340			$	972,047			$	96,834			$	—			$	(53,030	)		$	3,395,285
Direct operating expenses			476,826				317,265				643,813				37,919				—				(26,391	)			1,449,432
Selling, general and administrative expenses			555,243				118,432				177,212				47,867				—				(26,639	)			872,115
Depreciation and amortization			52,502				99,372				110,482				24,305				7,805				—				294,466
Corporate expenses			—				—				—				—				94,277				—				94,277
Merger expenses			—				—				—				—				7,845				—				7,845
Gain on disposition of assets — net			—				—				—				—				19,451				—				19,451
Operating income (loss)		$	576,523			$	183,271			$	40,540			$	(13,257	)		$	(90,476	)		$	—			$	696,601
Intersegment revenues		$	20,860			$	4,239			$	—			$	27,931			$	—			$	—			$	53,030
Identifiable assets		$	11,749,790			$	2,920,321			$	2,784,482			$	614,317			$	964,989			$	—			$	19,033,899
Capital expenditures		$	35,008			$	71,818			$	101,471			$	1,554			$	1,875			$	—			$	211,726
Share-based payments		$	9,315			$	4,301			$	1,079			$	—			$	5,687			$	—			$	20,382

																		Corporate,
																		Merger and
						Americas				International								Gain on
		Radio				Outdoor				Outdoor								disposition of
(In thousands)		Broadcasting				Advertising				Advertising				Other				assets — net				Eliminations				Consolidated
Six Months Ended June 30, 2007
Revenue		$	1,745,164			$	693,866			$	833,703			$	98,188			$	—			$	(63,652	)		$	3,307,269
Direct operating expenses			477,199				279,799				543,549				37,533				—				(33,946	)			1,304,134
Selling, general and administrative expenses			582,651				110,368				151,722				48,474				—				(29,706	)			863,509
Depreciation and amortization			58,150				93,193				100,630				20,783				8,238				—				280,994
Corporate expenses			—				—				—				—				91,194				—				91,194
Merger expenses			—				—				—				—				4,370				—				4,370
Gain on disposition of assets — net			—				—				—				—				10,943				—				10,943
Operating income (loss)		$	627,164			$	210,506			$	37,802			$	(8,602	)		$	(92,859	)		$	—			$	774,011
Intersegment revenues		$	27,651			$	6,734			$	—			$	29,267			$	—			$	—			$	63,652
Identifiable assets		$	11,926,921			$	2,798,497			$	2,451,724			$	696,325			$	321,637			$	—			$	18,195,104
Capital expenditures		$	36,967			$	50,464			$	61,654			$	3,891			$	—			$	—			$	152,976
Share-based payments		$	11,140			$	3,592			$	770			$	—			$	6,083			$	—			$	21,585
Three Months Ended June 30, 2008
Revenue		$	891,483			$	384,978			$	529,830			$	52,381			$	—			$	(27,594	)		$	1,831,078
Direct operating expenses			245,330				161,020				329,224				20,595				—				(12,684	)			743,485
Selling, general and administrative expenses			285,961				60,057				90,977				23,649				—				(14,910	)			445,734
Depreciation and amortization			21,015				49,273				55,491				12,750				3,659				—				142,188
Corporate expenses			—				—				—				—				47,974				—				47,974
Merger expenses			—				—				—				—				7,456				—				7,456
Gain on disposition of assets — net			—				—				—				—				17,354				—				17,354
Operating income (loss)		$	339,177			$	114,628			$	54,138			$	(4,613	)		$	(41,735	)		$	—			$	461,595
Intersegment revenues		$	9,896			$	2,562			$	—			$	15,136			$	—			$	—			$	27,594
Share-based payments		$	4,506			$	2,763			$	687			$	—			$	2,836			$	—			$	10,792
Three Months Ended June 30, 2007
Revenue		$	945,963			$	376,843			$	459,870			$	52,514			$	—			$	(32,998	)		$	1,802,192
Direct operating expenses			242,681				144,885				284,258				19,828				—				(15,397	)			676,255
Selling, general and administrative expenses			305,958				56,125				78,432				24,276				—				(17,601	)			447,190
Depreciation and amortization			28,249				46,632				51,521				10,817				4,090				—				141,309
Corporate expenses			—				—				—				—				43,044				—				43,044
Merger expenses			—				—				—				—				2,684				—				2,684
Gain on disposition of assets — net			—				—				—				—				3,996				—				3,996
Operating income (loss)		$	369,075			$	129,201			$	45,659			$	(2,407	)		$	(45,822	)		$	—			$	495,706
Intersegment revenues		$	12,369			$	4,851			$	—			$	15,778			$	—			$	—			$	32,998
Share-based payments		$	6,676			$	2,466			$	529			$	—			$	3,668			$	—			$	13,339

Revenue of $1.0 billion and $888.0 million derived from foreign operations are included in the data above for the six months ended June 30, 2008 and 2007, respectively. Revenue of $564.6 million and $489.5 million derived from foreign operations are included in the data above for the three months ended June 30, 2008 and 2007, respectively. Identifiable assets of $3.0 billion and $2.7 billion derived from foreign operations are included in the data above for the six months ended June 30, 2008 and 2007, respectively.

Note 8: SUBSEQUENT EVENTS

On July 1, 2008, the Company terminated its previously announced tender offer and consent solicitation for its outstanding 7.65% Senior Notes due 2010. None of the Senior Notes were purchased in the offer.

The Company sold a portion of its investment in Grupo ACIR Comunicaciones for approximately $47.0 million on July 1, 2008. The Company’s book basis in the portion of the investment sold was approximately $38.3 million.

The Company terminated its interest rate swaps effective July 10, 2008 and received proceeds of approximately $15.4 million. The interest rate swaps were recorded on the Company’s balance sheet at fair value, which was equivalent to the proceeds received.

The Company’s $1.75 billion multi-currency revolving credit facility was terminated in connection with the closing of the merger. There was no outstanding balance on the facility on the date it was terminated.

The Company repurchased $639.2 million aggregate principal amount, or 99%, of the 8% senior notes due 2008, which were originally issued by AMFM Operating Inc., a wholly-owned subsidiary, pursuant to a tender offer and consent solicitation in connection with the merger. As a result of the receipt of the requisite consents, AMFM Operating Inc. entered into a supplemental indenture which eliminates substantially all of the restrictive covenants and the covenants regarding mergers and consolidations contained in the 8% senior notes and in the indenture related thereto, eliminates certain events of default, and modifies or eliminates certain other provisions, including certain provisions relating to defeasance and providing for guarantees, contained in the 8% senior notes and indenture.

The Company terminated its cross currency swap contracts on July 30, 2008 by paying the counterparty $196.2 million from available cash on hand. The contracts were recorded on the Company’s balance sheet at fair value, which was equivalent to the cash paid to terminate them.

On August 7, 2008, the Company announced that it commenced a cash tender offer and consent solicitation for its outstanding $750.0 million principal amount of 7.65% senior notes due 2010 on the terms and conditions set forth in the Offer to Purchase and Consent Solicitation Statement dated August 7, 2008.

Through August 8, 2008, the Company closed on 24 of its non-core radio station divestitures that were under definitive asset purchase agreements at June 30, 2008.

Item 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Consummation of Merger with a Group Led by Thomas H. Lee Partners, L.P. and Bain Capital Partners, LLC

     CC Media Holdings, Inc. was formed in May 2007 by private equity funds sponsored by Bain Capital Partners, LLC and Thomas H. Lee Partners, L.P. for the purpose of acquiring the business of Clear Channel Communications, Inc., or Clear Channel. The acquisition was completed pursuant to the Agreement and Plan of Merger, dated November 16, 2006, as amended on April 18, 2007, May 17, 2007 and May 13, 2008. As a result of the merger, each issued and outstanding share of Clear Channel Communications, Inc., other than shares held by certain principals of CC Media Holdings, Inc. and that were rolled over and exchanged for shares of Class A common stock of the Company, were either exchanged for (i) $36.00 in cash consideration, without interest, or (ii) one share of Class A common stock of CC Media Holdings, Inc.

     CC Media Holdings, Inc. will account for its acquisition of Clear Channel as a purchase business combination in conformity with Statement of Financial Accounting Standards No. 141, Business Combinations, and Emerging Issues Task Force Issue 88-16, Basis in Leveraged Buyout Transactions. CC Media Holdings, Inc. expects to allocate a portion of the consideration paid to the assets and liabilities acquired at their respective fair values with the remaining portion recorded at the continuing shareholders basis. Any excess consideration after this allocation will be recorded as goodwill. CC Media Holdings, Inc. is currently in the process of obtaining third-party valuations of certain of the acquired assets and liabilities in order to allocate the purchase price. CC Media Holdings, Inc. will complete its purchase price allocation within one year of the closing of the acquisition.

     Prior to the consummation of its acquisition of Clear Channel on July 30, 2008, CC Media Holdings, Inc. 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 of Clear Channel. Subsequent to the acquisition, Clear Channel became an indirect, wholly-owned subsidiary of CC Media Holdings, Inc. and the business of the CC Media Holdings, Inc. became that of Clear Channel and its subsidiaries.

     All of the information in this Quarterly Report on Form 10-Q is presented using the historical results of operations and the historical basis of assets, liabilities and equity of Clear Channel as of June 30, 2008 and December 31, 2007.

Sale of Radio Stations and All of Our Television Stations

Sale of non-core radio stations

     During the first quarter of 2008, we revised our plans to sell 173 of the previously announced 448 non-core radio station sales because we determined that market conditions were not advantageous to complete the sales. We intend to hold and operate these 173 stations. 145 of these non-core stations were classified as discontinued operations but no longer met the requirements of Statement of Financial Accounting Standards No. 144, Accounting for the Impairment or Disposal of Long-lived Assets (“Statement 144”) for classification as discontinued operations. Therefore, the assets, results of operations and cash flows from these 145 stations were reclassified to continuing operations in our consolidated financial statements for all periods presented.

     The following table presents the activity related to our planned divestitures of radio stations:

Total radio stations announced as being marketed for sale on November 16, 2006			448
Total radio stations no longer being marketed for sale			(173	)
Adjusted number of radio stations being marketed for sale (“Non-core” radio stations)			275
Non-core radio stations sold through June 30, 2008			(238	)
Remaining non-core radio stations at June 30, 2008 classified as discontinued operations			37
Non-core radio stations under definitive asset purchase agreements			(34	)
Non-core radio stations being marketed for sale			3

     Through August 8, 2008, we closed on 24 of our non-core radio station divestitures that were under definitive asset purchase agreements at June 30, 2008.

Sale of the television business

     On March 14, 2008, we announced we had completed the sale of our 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, we recorded a gain of $666.7 million as a component of “Income from discontinued operations, net” in our 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 the three and six months ended June 30, 2007. The net assets related to the television business were classified as discontinued operations as of December 31, 2007.

Format of Presentation

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

     We manage our operating segments primarily focusing on their operating income, while Corporate expenses, Merger expenses, Gain on disposition of assets — net, Interest expense, Gain (loss) on marketable securities, Equity in earnings of nonconsolidated affiliates, Other income (expense) - net, Income tax expense and Minority interest expense — net of tax are managed on a total company basis and are, therefore, included only in our discussion of consolidated results.

Radio Broadcasting

     Our revenue is derived from selling advertising time, or spots, on our radio stations, with advertising contracts typically less than one year. The formats 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 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 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 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.

Americas and International Outdoor Advertising

     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 is 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 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 U.S. In addition, competitive bidding for street furniture and transit contracts, which constitute a larger portion of our International business, and a different regulatory environment for billboards, result in higher site lease cost in our International business compared to our Americas business. As a result, our margins are typically less in our International business than in the Americas.

     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.

FAS 123(R), Share-Based Payment

     As of June 30, 2008, there was $79.5 million of total unrecognized compensation cost, net of estimated forfeitures, related to nonvested share-based compensation arrangements. This cost is expected to be recognized over a weighted average period of approximately three years. The following table details compensation costs related to share-based payments for the three and six months ended June 30, 2008 and 2007:

		Three Months ended June 30,								Six Months ended June 30,
(In millions)		2008				2007				2008				2007
Radio Broadcasting
Direct Operating Expenses		$	2.0			$	3.0			$	4.2			$	5.0
SG&A			2.5				3.7				5.1				6.1
Americas Outdoor Advertising
Direct Operating Expenses		$	2.0			$	1.8			$	3.1			$	2.6
SG&A			0.8				0.7				1.2				1.0
International Outdoor Advertising
Direct Operating Expenses		$	0.5			$	0.4			$	0.8			$	0.6
SG&A			0.2				0.1				0.3				0.2
Corporate		$	2.8			$	3.7			$	5.7			$	6.1

     Clear Channel expects to record approximately $39.2 million of share-based payment expenses for the acceleration of vesting of stock options and restricted shares related to the closing of the merger with CC Media Holdings, Inc.

The comparison of Three and Six Months Ended June 30, 2008 to Three and Six Months Ended June 30, 2007 is as follows:

		Three Months Ended												Six Months Ended
		June 30,								%				June 30,								%
(In thousands)		2008				2007				Change				2008				2007				Change
Revenue		$	1,831,078			$	1,802,192				2	%		$	3,395,285			$	3,307,269				3	%
Operating expenses:
Direct operating expenses			743,485				676,255				10	%			1,449,432				1,304,134				11	%
Selling, general and administrative expenses			445,734				447,190				0	%			872,115				863,509				1	%
Depreciation and amortization			142,188				141,309				1	%			294,466				280,994				5	%
Corporate expenses			47,974				43,044				11	%			94,277				91,194				3	%
Merger expenses			7,456				2,684								7,845				4,370
Gain on disposition of assets — net			17,354				3,996								19,451				10,943
Operating income			461,595				495,706				(7	%)			696,601				774,011				(10	%)
Interest expense			82,175				116,422								182,178				234,499
Gain (loss) on marketable securities			27,736				(410	)							34,262				(15	)
Equity in earnings of nonconsolidated affiliates			8,990				11,435								92,035				16,699
Other income (expense) — net			(6,086	)			340								5,701				328
Income before income taxes, minority interest and discontinued operations			410,060				390,649								646,421				556,524
Income tax benefit (expense):
Current			(101,047	)			(122,071	)							(124,880	)			(154,430	)
Deferred			(24,090	)			(37,715	)							(66,838	)			(75,822	)
Income tax benefit (expense)			(125,137	)			(159,786	)							(191,718	)			(230,252	)
Minority interest expense, net of tax			7,628				14,970								16,017				15,246
Income before discontinued operations			277,295				215,893								438,686				311,026
Income from discontinued operations, net			5,032				20,097								643,294				27,186
Net income		$	282,327			$	235,990							$	1,081,980			$	338,212

Consolidated Revenue

     Our consolidated revenue increased $28.9 million during the second quarter of 2008 compared to the same period of 2007. Our international revenue increased $70.0 million, with roughly $50.1 million from movements in foreign exchange. The remainder of our international revenue growth was mostly associated with increases in China, Turkey and Australia. Our Americas revenue grew $8.1 million primarily from increases in airport, street furniture and digital display revenue. These increases were partially offset by a revenue decline of $54.5 million from our radio business associated with decreases in both local and national advertising.

     Our consolidated revenue increased $88.0 million during the first six months of 2008 compared to the same period of 2007. Our international revenue increased $138.3 million, with roughly $93.8 million from movements in foreign exchange. Our Americas revenue grew $24.5 million primarily from increases in airport, street furniture and digital display revenue. These increases were partially offset by a revenue decline of $84.1 million from our radio business associated with decreases in both local and national advertising.

Consolidated Direct Operating Expenses

     Direct operating expenses increased $67.2 million during the second quarter of 2008 compared to the same period of 2007. Our international outdoor segment contributed $45.0 million of the increase, of which $30.8 million related to movements in foreign exchange and the remainder of the increase was driven by an increase in site lease expenses. Americas outdoor direct operating expenses increased $16.1 million driven by increased site lease expenses associated with new contracts and the increase in airport, street furniture and digital display revenues.

     Direct operating expenses increased $145.3 million during the first six months of 2008 compared to the same period of 2007. Our international outdoor segment contributed $100.3 million of the increase, of which $61.3 million related to movements in foreign exchange and the remainder of the increase was driven by an increase in site lease expenses. Americas outdoor direct operating

expenses increased $37.5 million driven by increased site lease expenses associated with new contracts. Direct operating expenses in our radio broadcasting segment decreased $0.4 million.

Consolidated Selling, General and Administrative Expenses, or SG&A

     SG&A decreased $1.5 million during the second quarter of 2008 compared to the same period of 2007. Our radio broadcasting SG&A declined $20.0 million from fewer marketing and promotional expenses and decreases in commission expenses associated with the revenue decline. Our international outdoor SG&A expenses increased $12.5 million primarily attributable to $8.7 million from movements in foreign exchange. SG&A increased $3.9 million in our Americas outdoor segment principally related to an increase in administrative expenses.

     SG&A increased $8.6 million during the first six months of 2008 compared to the same period of 2007. Our international outdoor SG&A expenses increased $25.5 million primarily attributable to $17.3 million from movements in foreign exchange. SG&A increased $8.1 million in our Americas outdoor segment principally related to taxes and various legal expenses. Partially offsetting these increases was a decline in our radio broadcasting SG&A of $27.4 million from fewer marketing and promotional expenses and decreases in commission expenses associated with the revenue decline.

Depreciation and Amortization

     Depreciation and amortization increased $0.9 million during the second quarter of 2008 compared to the same period of 2007. Increased depreciation and amortization of $5.0 million resulting from movements in foreign exchange were partially offset by a decline in depreciation and amortization in our radio broadcasting segment as a result of contracts that became fully amortized in the third quarter of 2007.

     Depreciation and amortization increased $13.5 million during the six months ended June 30, 2008 compared to the same period of 2007 primarily as a result of movements in foreign exchange of $9.9 million.

Corporate Expenses

     Corporate expenses increased $4.9 million during the second quarter of 2008 compared to the second quarter of 2007 related to an increase in our legal reserve, primarily related to a patent lawsuit which is discussed in the footnotes to the consolidated financial statements, partially offset by a decline in non-cash compensation and a decline in the bonus accrual in radio.

     Corporate expenses increased $3.1 million for the first six months of 2008 compared to the same period of the prior year as a result of the increase in our legal reserve, partially offset by a decline in radio bonus expenses.

Gain on Disposition of Assets — Net

     The $17.4 million gain in the second quarter of 2008 consists of a gain of $3.3 million on the sale of sports broadcasting rights, $7.0 million gain on the disposition of a representation contract, a $4.0 million gain on sale of property, and $3.1 million of miscellaneous other items. The gain of $4.0 million in the second quarter of 2007 is due primarily to a gain on the exchange of radio stations.

     The $19.5 million gain in the first six months of 2008 primarily relates to the items discussed above and a gain on disposition of Americas assets of $2.6 million, partially offset by a loss on the disposal of land of $1.4 million both recognized in the first quarter of 2008. The gain for the first six months of 2007 of $10.9 million related primarily to a $5.5 million gain on the disposition of street furniture assets recognized in the first quarter of 2007 plus the items discussed above.

Interest Expense

     The decline in interest expense of $34.2 million and $52.3 million for the three and six months ended June 30, 2008, respectively, compared to the same periods of the prior year primarily relates to the decline in our average debt outstanding.

Gain on Marketable Securities

     The $27.7 million gain for the second quarter of 2008 primarily relates to a net gain of $27.0 million on the unwinding of our secured forward exchange contracts and the sale of our American Tower Corporation, or AMT, shares. The $0.4 million loss in the second quarter of 2007 relates solely to the change in value of the AMT shares and the related secured forward exchange contracts.

     The gain on marketable securities during the first six months of 2008 of $34.3 million relates to the items discussed above and the change in value of the secured forward exchange contracts and the underlying AMT shares recognized during the first quarter of 2008. The loss in 2007 relates solely to the change in value of the AMT shares and the related secured forward exchange contracts.

Equity in Earnings of Nonconsolidated Affiliates

     Equity in earnings of nonconsolidated affiliates declined $2.4 million during the second quarter of 2008 compared to the second quarter of 2007 mostly related to the sale of our joint venture in South Africa. Equity in earnings of nonconsolidated affiliates increased $75.3 million during the first six months of 2008 compared to the same period of 2007 primarily from a $75.6 million gain recognized in the first quarter 2008 on the sale of our 50% interest in Clear Channel Independent, a South African outdoor advertising company.

Other Income (Expense) — Net

     Other expense of $6.1 million in the second quarter of 2008 consists primarily of a $4.7 million impairment of our investment in a radio partnership. Other income of $5.7 million in the first six months of 2008 primarily related to foreign exchange gains partially offset by the impairment recognized in the second quarter.

Income Tax Benefit (Expense)

     Three Months

     Current tax expense for the three months ended June 30, 2008 decreased $21.0 million compared to the same period of the prior year due primarily to current tax benefits related to tax deductions taken pursuant to the bonus depreciation provisions enacted as part of the Economic Stimulus Act of 2008. In addition, we recorded current tax benefits in 2008 from the vesting of certain equity awards.

     Deferred tax expense for the three months ended June 30, 2008 decreased $13.6 million compared to the same period of 2007 due primarily to the deferred tax benefit that was recorded in 2008 related to the release of a valuation allowance upon the disposition of our American Tower Corporation shares. The deferred tax benefit was partially offset by additional deferred tax expense recorded during 2008 as a result of the additional tax depreciation and equity tax deductions mentioned above.

     Our effective tax rate for the three months ended June 30, 2008 was 30.5% as compared to 40.9% for the same period of the prior year. The decline was primarily due to the release of the valuation allowance on the capital loss carryforwards that were used to offset the taxable gain from the disposition of our America Tower Corporation shares.

     Six Months

     Current tax expense for the six months ended June 30, 2008 decreased $29.6 million compared to the same period of 2007 primarily due to the bonus depreciation provisions enacted as part of the Economic Stimulus Act of 2008 and the vesting of certain equity awards.

     Deferred tax expense for the six months ended June 30, 2008 decreased $9.0 million compared to 2007 primarily due to the deferred tax benefit that was recorded in 2008 related to the release of the valuation allowance as a result of the disposition of our American Tower Corporation shares. The deferred tax benefit was partially offset by additional deferred tax expense recorded during 2008 as a result of the additional tax depreciation and equity tax deductions mentioned above.

     The effective tax rate for the six months ended June 30, 2008 decreased to 29.7% as compared to 41.4% for the sixth months ended June 30, 2007, primarily due to the release of the valuation allowance on the capital loss carryforwards that were used to offset the taxable gain from the disposition of the America Tower Corporation shares. Additionally, we sold our 50% interest in Clear Channel Independent, which was structured as a tax free disposition. The sale resulted in a gain of $75.6 million with no current tax expense.

Minority Interest Expense, Net of Tax

     Minority interest expense declined $7.3 million during the second quarter of 2008 compared to the second quarter of 2007 primarily related to a $9.7 million gain on the purchase of the remaining minority interest in one of our subsidiaries.

Income from Discontinued Operations, Net

     The decline in income from discontinued operations of $15.1 million in the second quarter of 2008 compared to the second quarter of 2007 is the result of the sale of our television business in the first quarter of 2008 and fewer radio stations classified as discontinued operations in 2008 compared to 2007. The increase in income from discontinued operations of $616.1 million in the first six months of 2008 compared to the same period of 2007 was primarily the result of a gain of $633.2 million, net of tax, related to the sale of our television business and the sale of radio stations.

Segment Revenue and Divisional Operating Expenses

Radio Broadcasting

		Three Months Ended												Six Months Ended
		June 30,								%				June 30,								%
(In thousands)		2008				2007				Change				2008				2007				Change
Revenue		$	891,483			$	945,963				(6	%)		$	1,661,094			$	1,745,164				(5	%)
Direct operating expenses			245,330				242,681				1	%			476,826				477,199				(0	%)
Selling, general and administrative expenses			285,961				305,958				(7	%)			555,243				582,651				(5	%)
Depreciation and amortization			21,015				28,249				(26	%)			52,502				58,150				(10	%)
Operating income		$	339,177			$	369,075				(8	%)		$	576,523			$	627,164				(8	%)