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 QUARTER ENDED SEPTEMBER 30, 2006

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 1-9645

CLEAR CHANNEL COMMUNICATIONS, INC.

(Exact name of registrant as specified in its charter)

Texas		74-1787539
(State of Incorporation)		(I.R.S. Employer Identification No.)
200 East Basse Road
San Antonio, Texas		78209
(Address of principal executive offices)		(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 þ            No o

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

Large accelerated filer þ            Accelerated filer o            Non-accelerated filer o

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 class of the issuer’s classes of common stock, as of the latest practicable date.

Class		Outstanding at November 6, 2006
Common Stock, $.10 par value		493,795,799

 

 

CLEAR CHANNEL COMMUNICATIONS, INC. AND SUBSIDIARIES

INDEX

		Page No.
Part I — Financial Information
Item 1. Unaudited Financial Statements
Consolidated Balance Sheets at September 30, 2006 and December 31, 2005			3
Consolidated Statements of Operations for the nine and three months ended September 30, 2006 and 2005			5
Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 2006 and 2005			6
Notes to Consolidated Financial Statements			7
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations			20
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			35
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds			35
Item 6. Exhibits			35
Signatures			36
Index to Exhibits			37
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

CLEAR CHANNEL COMMUNICATIONS, INC. AND SUBSIDIARIES

		September 30,				December 31,
		2006				2005
		(Unaudited)				(Audited)
CURRENT ASSETS
Cash and cash equivalents		$	104,632			$	82,786
Accounts receivable, net of allowance of $55,249 in 2006 and $47,061 in 2005			1,593,877				1,505,650
Prepaid expenses			127,027				114,452
Other current assets			292,010				278,294
Income taxes receivable			257,379				417,112
Total Current Assets			2,374,925				2,398,294
PROPERTY, PLANT AND EQUIPMENT
Land, buildings and improvements			895,414				863,133
Structures			3,490,365				3,327,326
Towers, transmitters and studio equipment			890,035				881,070
Furniture and other equipment			575,413				599,296
Construction in progress			91,337				91,789
			5,942,564				5,762,614
Less accumulated depreciation			2,734,286				2,506,965
			3,208,278				3,255,649
INTANGIBLE ASSETS
Definite-lived intangibles, net			518,437				480,790
Indefinite-lived intangibles – licenses			4,331,872				4,312,570
Indefinite-lived intangibles – permits			257,516				207,921
Goodwill			7,417,405				7,111,948
OTHER ASSETS
Notes receivable			10,800				8,745
Investments in, and advances to, nonconsolidated affiliates			313,765				300,223
Other assets			267,527				302,655
Other investments			230,685				324,581
Total Assets		$	18,931,210			$	18,703,376

See Notes to Consolidated Financial Statements

CLEAR CHANNEL COMMUNICATIONS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
LIABILITIES AND SHAREHOLDERS’ EQUITY
(In thousands)

		September 30,				December 31,
		2006				2005
		(Unaudited)				(Audited)
CURRENT LIABILITIES
Accounts payable		$	121,231			$	250,563
Accrued expenses			859,021				731,105
Accrued interest			109,581				97,515
Current portion of long-term debt			1,077,715				891,185
Deferred income			177,951				116,670
Other current liabilities			23,750				20,275
Total Current Liabilities			2,369,249				2,107,313
Long-term debt			7,045,558				6,155,363
Other long-term obligations			44,506				119,655
Deferred income taxes			703,793				528,259
Other long-term liabilities			623,429				675,962
Minority interest			327,715				290,362
Commitment and contingent liabilities (Note 7)
SHAREHOLDERS’ EQUITY
Common Stock			49,264				53,829
Additional paid-in capital			26,705,083				27,945,725
Retained deficit			(19,173,106	)			(19,371,411	)
Accumulated other comprehensive income			239,106				201,928
Cost of shares held in treasury			(3,387	)			(3,609	)
Total Shareholders’ Equity			7,816,960				8,826,462
Total Liabilities and Shareholders’ Equity		$	18,931,210			$	18,703,376

See Notes to Consolidated Financial Statements

CLEAR CHANNEL COMMUNICATIONS, INC. AND SUBSIDIARIES

		Nine Months Ended								Three Months Ended
		September 30,								September 30,
		2006				2005				2006				2005
Revenue		$	5,149,923			$	4,853,830			$	1,794,894			$	1,683,288
Operating expenses:
Direct operating expenses (includes share-based payments of $13,028, $212, $4,330 and $0 for the nine and three months ended September 30, 2006 and 2005, respectively, and excludes depreciation and amortization)			1,940,176				1,813,523				674,620				614,023
Selling, general and administrative expenses (includes share-based payments of $13,382, $0, $4,456 and $0 for the nine and three months ended September 30, 2006 and 2005, respectively, and excludes depreciation and amortization)			1,471,772				1,426,776				486,282				488,820
Depreciation and amortization			466,722				462,138				157,174				154,035
Corporate expenses (includes share-based payments of $7,995 $4,637, $2,260 and $1,931 for the nine and three months ended September 30, 2006 and 2005, respectively, and excludes depreciation and amortization)			140,645				119,412				49,630				41,071
Gain (loss) on disposition of assets – net			56,000				14,303				8,915				8,487
Operating income			1,186,608				1,046,284				436,103				393,826
Interest expense			365,945				324,794				128,271				113,087
Gain (loss) on marketable securities			2,072				(278	)			5,396				(815	)
Equity in earnings of nonconsolidated affiliates			25,054				28,160				8,568				10,565
Other income (expense) – net			(5,752	)			8,585				(536	)			(560	)
Income before income taxes, minority interest, and discontinued operations			842,037				757,957				321,260				289,929
Income tax benefit (expense):
Current			(186,135	)			(150,064	)			(72,032	)			(32,096	)
Deferred			(159,100	)			(149,330	)			(59,684	)			(82,426	)
Income tax benefit (expense)			(345,235	)			(299,394	)			(131,716	)			(114,522	)
Minority interest income (expense), net of tax			(16,629	)			(6,380	)			(3,673	)			(3,577	)
Income before discontinued operations			480,173				452,183				185,871				171,830
Income (loss) from discontinued operations, net			—				21,906				—				33,645
Net income		$	480,173			$	474,089			$	185,871			$	205,475
Other comprehensive income (loss), net of tax:
Foreign currency translation adjustments			30,007				(112,257	)			3,621				2,311
Unrealized gain (loss) on securities and derivatives:
Unrealized holding gain (loss) on marketable securities			(68,961	)			(5,135	)			(6,002	)			13,838
Unrealized holding gain (loss) on cash flow derivatives			76,132				12,513				15,131				(9,644	)
Adjustment for (gain) loss included in net income (loss)			—				—				—				—
Comprehensive income (loss)		$	517,351			$	369,210			$	198,621			$	211,980
Net income per common share:
Income before discontinued operations – Basic		$	.95			$	.82			$	.38			$	.32
Discontinued operations – Basic			—				.04				—				.06
Net income – Basic		$	.95			$	.86			$	.38			$	.38
Income before discontinued operations – Diluted		$	.95			$	.82			$	.38			$	.32
Discontinued operations – Diluted			—				.04				—				.06
Net income – Diluted		$	.95			$	.86			$	.38			$	.38
Dividends declared per share		$	.5625			$	.50			$	.1875			$	.1875

See Notes to Consolidated Financial Statements

CLEAR CHANNEL COMMUNICATIONS, INC. AND SUBSIDIARIES

		Nine Months Ended September 30,
		2006				2005
Cash flows from operating activities:
Net income		$	480,173			$	474,089
Income from discontinued operations, net			—				(21,906	)
			480,173				452,183
Reconciling Items:
Depreciation and amortization			466,722				462,138
Deferred taxes			159,100				149,330
(Gain) loss on disposal of assets			(56,000	)			(14,303	)
(Gain) loss forward exchange contract			16,827				13,447
(Gain) loss on trading securities			(18,899	)			(13,169	)
Other reconciling items — net			35,070				(12,132	)
Changes in operating assets and liabilities:
Federal income tax refund			133,336				—
Decrease in income taxes receivable			28,421				—
Increase in income taxes payable			—				(53,819	)
Changes in other operating assets and liabilities, net of effects of acquisitions			(62,566	)			(2,220	)
Net cash provided by operating activities			1,182,184				981,455
Cash flows from investing activities:
Decrease (increase) in notes receivable — net			(1,900	)			327
Decrease (increase) in investments in and advances to nonconsolidated affiliates — net			5,387				12,374
Purchases of investments			(652	)			(707	)
Proceeds from sale of investments			—				370
Purchases of property, plant and equipment			(239,948	)			(219,353	)
Proceeds from disposal of assets			73,811				23,585
Acquisition of operating assets, net of cash acquired			(293,416	)			(90,313	)
Decrease (increase) in other — net			(53,571	)			(10,154	)
Net cash used in investing activities			(510,289	)			(283,871	)
Cash flows from financing activities:
Draws on credit facilities			2,500,198				1,591,074
Payments on credit facilities			(2,098,358	)			(752,995	)
Proceeds from long-term debt			778,455				—
Payments on long-term debt			(111,827	)			(233,505	)
Payment on forward exchange contract			(83,132	)			—
Payments for purchase of common shares			(1,371,462	)			(859,140	)
Proceeds from exercise of stock options, stock purchase plan, common stock warrants, and other			26,488				29,052
Dividends paid			(290,411	)			(241,503	)
Net cash used in financing activities			(650,049	)			(467,017	)
Cash flows from discontinued operations:
Net cash provided by operating activities			—				12,511
Net cash used in investing activities			—				(135,143	)
Net cash provided by (used in) financing activities			—				—
Net cash used in discontinued operations			—				(122,632	)
Net increase in cash and cash equivalents			21,846				107,935
Cash and cash equivalents at beginning of period			82,786				31,339
Cash and cash equivalents at end of period		$	104,632			$	139,274

See Notes to Consolidated Financial Statements

CLEAR CHANNEL COMMUNICATIONS, INC. AND SUBSIDIARIES

Note 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

     Preparation of Interim Financial Statements

The consolidated financial statements were prepared by Clear Channel Communications, Inc. (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 the Company’s 2005 Annual Report on Form 10-K.

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 Company has reclassified prior year operating gains and losses to be included as a component of operating income, reclassified share-based compensation to be included in the same operating expense line items as cash compensation, reclassified minority interest expense below its provision for income taxes and reclassified certain other assets to current assets to conform to current year presentation. The Company completed the spin-off of its live entertainment and sports representation businesses (now operating as Live Nation, Inc.) on December 21, 2005. The historical results of these businesses have been reflected as discontinued operations in the underlying financial statements and related disclosures for all periods presented. As a result, the historical footnote disclosures have been revised to exclude amounts related to these businesses. The following table presents summarized financial results for these businesses during the nine and three months ended September 30, 2005:

(In millions)		Nine Months				Three Months
Revenue (including sales to other Company segments of $0.6 million and $0.1 million for the nine and three months ended September 30, respectively)		$	2,178.4			$	998.2
Income (loss) before income taxes		$	36.2			$	55.6
Income tax benefit (expense)		$	(14.3	)		$	(22.0	)

     Recent Accounting Pronouncements

In February 2006, the Financial Accounting Standards Board (“FASB”) issued Statement No. 155, Accounting for Certain Hybrid Financial Instruments (“Statement 155”). Statement 155 is an amendment of FASB Statement No. 133, Accounting for Derivative Instruments and Hedging Activities (“Statement 133”) and FASB Statement 140, Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities (“Statement 140”) and allows companies to elect to measure at fair value entire financial instruments containing embedded derivatives that would otherwise have to be accounted for separately. Statement 155 also requires companies to identify interest in securitized financial assets that are freestanding derivatives or contain embedded derivatives that would have to be accounted for separately, clarifies which interest- and principal-only strips are subject to Statement 133, and amends Statement 140 to revise the conditions of a qualifying special purpose entity due to the new requirement to identify whether interests in securitized financial assets are freestanding derivatives or contain embedded derivatives. Statement 155 is effective for all financial instruments acquired or issued in fiscal years beginning after September 15, 2006. The Company will adopt Statement 155 on January 1, 2007 and anticipates that adoption will not materially impact its financial position or results of operations.

In June 2006, the FASB issued Interpretation No. 48, Accounting for Uncertainty in Income Taxes – an interpretation of FASB Statement 109 (“FIN 48”). FIN 48 clarifies the accounting for uncertainty in income taxes by prescribing a recognition threshold for tax positions taken or expected to be taken in a tax return. FIN 48 requires that entities recognize in their financial statements the impact of a tax position if that position is more likely than not of being sustained on audit, based on the technical merits of the position. The cumulative effect of applying the provisions of FIN 48 will be reported as an adjustment to the opening balance of

retained earnings upon adoption. FIN 48 is effective for fiscal years beginning after December 15, 2006. The Company will adopt FIN 48 on January 1, 2007 and is currently evaluating the impact FIN 48 will have on its financial position and results of operations.

In September 2006, the FASB issued Statement No. 157, Fair Value Measurements (“Statement 157”). Statement 157 defines fair value, establishes a framework for measuring fair value and expands disclosure requirements for fair value measurements. Statement 157 applies whenever other standards require (or permit) assets or liabilities to be measured at fair value. Statement 157 does not expand the use of fair value in any new circumstances. Statement 157 is effective for financial statements issued for fiscal years beginning after November 15, 2007. The Company will adopt Statement 157 on January 1, 2008 and anticipates that adoption will not materially impact its financial position or results of operations.

In September 2006, the FASB issued Statement No. 158, Employers’ Accounting for Defined Benefit Pension and Other Postretirement Plans, an amendment of FASB Statements No. 87, 88, 106, and 132(R) (“Statement 158”). Statement 158 requires an employer to recognize the overfunded or underfunded status of a defined benefit postretirement plan as an asset or liability in its statement of financial position and to recognize changes in that funded status in the year in which the changes occur through comprehensive income. The portions of Statement 158 that apply to the Company are effective as of the end of the fiscal year ending after December 15, 2006. The Company will adopt Statement 158 as of December 31, 2006 and anticipates that adoption will not materially impact its financial position or results of operations.

Note 2: SHARE-BASED PAYMENTS

The Company has granted options to purchase its common stock to employees and directors of the Company and its affiliates under various stock option plans typically at no less than the fair value of the underlying stock on the date of grant. These options are granted for a term not exceeding ten years and are forfeited, except in certain circumstances, in the event the employee or director terminates his or her employment or relationship with the Company or one of its affiliates. These options generally vest over five years. All option plans contain anti-dilutive provisions that permit an adjustment of the number of shares of the Company’s common stock represented by each option for any change in capitalization.

The Company adopted the fair value recognition provisions of Statement of Financial Accounting Standards No. 123(R), Share-Based Payment (“Statement 123(R)”), on January 1, 2006, using the modified-prospective-transition method. The fair value of the options is estimated using a Black-Scholes option-pricing model and amortized straight-line to expense over five years. Prior to January 1, 2006, the Company accounted for its share-based payments under the recognition and measurement provisions of APB Opinion No. 25, Accounting for Stock Issued to Employees (“APB 25”) and related Interpretations, as permitted by Statement of Financial Accounting Standards No. 123, Accounting for Stock-Based Compensation (“Statement 123”). Under that method, when options are granted with a strike price equal to or greater than the market price on the date of issuance, there is no impact on earnings either on the date of grant or thereafter, absent certain modifications to the options. The amounts recorded as share-based payments prior to adopting Statement 123(R) primarily related to the expense associated with restricted stock awards. Under the modified-prospective-transition method, compensation cost recognized beginning in 2006 includes: (a) compensation cost for all share-based payments granted prior to, but not yet vested as of January 1, 2006, based on the grant date fair value estimated in accordance with the original provisions of Statement 123, and (b) compensation cost for all share-based payments granted subsequent to January 1, 2006, based on the grant-date fair value estimated in accordance with the provisions of Statement 123(R). Results for prior periods have not been restated.

As a result of adopting Statement 123(R) on January 1, 2006, the Company’s income before income taxes, minority interest and discontinued operations for the nine and three months ended September 30, 2006, was $23.4 million and $7.4 million lower, respectively, and net income for the nine and three months ended September 30, 2006, was $13.8 million and $4.4 million lower, respectively, than if it had continued to account for share-based compensation under APB 25. Basic and diluted earnings per share for the nine months ended September 30, 2006 were $0.03 and $0.03 lower, respectively, than if the Company had continued to account for share-based compensation under APB 25. Basic and diluted earnings per share for the three months ended September 30, 2006 were $0.01 and $0.01 lower than if the Company had continued to account for share-based compensation under APB 25.

Prior to the adoption of Statement 123(R), the Company presented all tax benefits of deductions resulting from the exercise of stock options as operating cash flows in the Statement of Cash Flows. Statement 123(R) requires the cash flows resulting from the tax benefits resulting from tax deductions in excess of the compensation cost recognized for those options (excess tax benefits) to be classified as financing cash flows. The excess tax benefit that is required to be classified as a financing cash inflow after adoption of Statement 123(R) is not material.

The following table illustrates the effect on net income and earnings per share for the nine and three months ended September 30, 2005 as if the Company had applied the fair value recognition provisions of Statement 123 to options granted under the Company’s stock option plans in all periods presented. For purposes of this pro forma disclosure, the value of the options, excluding restricted stock awards, is estimated using a Black-Scholes option-pricing model and amortized to expense over the options’ vesting periods.

		Nine Months Ended				Three Months Ended
(In thousands, except per share data)		September 30, 2005				September 30, 2005
Income before discontinued operations:
Reported		$	452,183			$	171,830
Add: Stock-based employee compensation expense included in reported net income, net of related tax effects			2,934				1,168
Deduct: Total stock-based employee compensation expense determined under fair value based method for all awards, net of related tax effects			(18,252	)			(3,153	)
Pro Forma		$	436,865			$	169,845
Income (loss) from discontinued operations, net:
Reported		$	21,906			$	33,645
Add: Stock-based employee compensation expense included in reported net income, net of related tax effects			796				480
Deduct: Total stock-based employee compensation expense determined under fair value based method for all awards, net of related tax effects			(3,465	)			(826	)
Pro Forma		$	19,237			$	33,299
Income before discontinued operations per common share:
Basic:
Reported		$	.82			$	.32
Pro Forma		$	.80			$	.31
Diluted:
Reported		$	.82			$	.32
Pro Forma		$	.80			$	.31
Discontinued operations, net per common share:
Basic:
Reported		$	.04			$	.06
Pro Forma		$	.04			$	.06
Diluted:
Reported		$	.04			$	.06
Pro Forma		$	.04			$	.06

The fair value of each option awarded is estimated on the date of grant using a Black-Scholes option-pricing model. Expected volatilities are based on implied volatilities from traded options on the Company’s stock, historical volatility on the Company’s stock, and other factors. The expected life of options granted represents the period of time that options granted are expected to be outstanding. The Company uses historical data to estimate option exercises and employee terminations within the valuation model. The risk free interest rate is based on the U.S. Treasury yield curve in effect at the time of grant for periods equal to the expected life of the option. The following assumptions were used to calculate the fair value of the Company’s options on the date of grant during the nine months ended September 30, 2006 and 2005:

			2006				2005
Expected volatility			25%				25%
Expected life in years			5.0 – 7.5				5.0 – 7.5
Risk-free interest rate			4.61% – 5.10	%			4.06% – 4.20	%
Dividend yield			2.61% – 2.65	%			1.46% – 2.30	%

The following table presents a summary of the Company’s stock options outstanding at and stock option activity during the nine months ended September 30, 2006 (“Price” reflects the weighted average exercise price per share):

										Weighted Average				Aggregate
										Remaining				Intrinsic
(In thousands, except per share data)		Options				Price				Contractual Term				Value
Outstanding, beginning of year			42,696			$	41.34
Granted			16				28.68
Exercised (a)			(1,180	)			19.60
Forfeited			(1,148	)			35.58
Expired			(2,386	)			51.69
Outstanding, September 30			37,998				41.54			3.4 years				$	27,555
Exercisable, September 30			28,133							2.5 years				$	27,311
Weighted average fair value per option granted		$	7.18

The weighted average grant date fair value of options granted during the nine months ended September 30, 2006 and 2005 was $7.18 and $8.59, respectively. The total intrinsic value of options exercised during the nine months ended September 30, 2006 and 2005 was $11.6 million and $10.4 million, respectively.

A summary of the Company’s nonvested options at December 31, 2005, and changes during the nine months ended September 30, 2006, is presented below:

						Weighted Average
						Grant Date
(In thousands, except per share data)		Options				Fair Value
Nonvested, beginning of year			13,086			$	15.03
Granted			16				7.18
Vested			(2,089	)			25.78
Forfeited			(1,148	)			13.49
Nonvested, September 30			9,865				12.91

There were 36.4 million shares available for future grants under the various option plans at September 30, 2006. Vesting dates range from February 1997 to April 2011, and expiration dates range from October 2006 to April 2016 at exercise prices and average contractual lives as follows:

(In thousands of shares)

													Weighted
													Average				Weighted								Weighted
									Outstanding				Remaining				Average				Exercisable				Average
										as of				Contractual				Exercise				as of			Exercise
Range of Exercise Prices										9/30/06				Life				Price				9/30/06				Price
$	.01	—	$	10.00						635				3.1			$	5.90				635			$	5.90
	10.01	—		20.00						280				0.4				16.41				280				16.41
	20.01	—		30.00						2,912				1.6				25.74				2,784				25.68
	30.01	—		40.00						10,157				5.8				32.55				2,369				33.14
	40.01	—		50.00						18,332				2.5				44.97				16,383				45.06
	50.01	—		60.00						3,614				3.2				55.35				3,614				55.35
	60.01	—		70.00						1,491				2.0				64.09				1,491				64.09
	70.01	—		80.00						529				3.6				76.57				529				76.57
	80.01	—		91.35						48				0.4				86.18				48				86.18
										37,998				3.4				41.54				28,133				43.96

Restricted Stock Awards

The Company began granting restricted stock awards to employees and directors of the Company and its affiliates in 2003. These common shares hold a legend which restricts their transferability for a term of up to five years and are forfeited, except in certain circumstances, in the event the employee or director terminates his or her employment or relationship with the Company prior to the lapse of the restriction. The restricted stock awards were granted out of the Company’s stock option plans. Recipients of the restricted stock awards are entitled to all cash dividends as of the date the award was granted.

The following table presents a summary of the Company’s restricted stock outstanding at and restricted stock activity during the nine months ended September 30, 2006 (“Price” reflects the weighted average share price at the date of grant):

		2006
(In thousands, except per share data)		Awards				Price
Outstanding, beginning of year			2,452			$	32.62
Granted			7				28.50
Vested (restriction lapsed)			(2	)			28.37
Forfeited			(141	)			32.25
Outstanding, September 30			2,316				32.64

Subsidiary Share-Based Awards

Clear Channel Outdoor Holdings, Inc. (“CCO”), a subsidiary of the Company, grants options to purchase shares of its Class A common stock to its employees and directors and its affiliates under its incentive stock plan typically at no less than the fair market value of the underlying stock on the date of grant. These options are granted for a term not exceeding ten years and are forfeited, except in certain circumstances, in the event the employee or director terminates his or her employment or relationship with CCO or one of its affiliates. These options generally vest over five years. The incentive stock plan contains anti-dilutive provisions that permit an adjustment of the number of shares of CCO’s common stock represented by each option for any change in capitalization.

Prior to CCO’s Initial Public Offering (“IPO”), CCO did not have any compensation plans under which it granted stock awards to employees. However, the Company had granted certain of CCO’s officers and other key employees stock options to purchase shares of the Company’s common stock. All outstanding options to purchase shares of the Company’s common stock held by CCO employees were converted using an intrinsic value method into options to purchase shares of CCO Class A common shares concurrent with the closing of CCO’s IPO.

The fair value of each option awarded is estimated on the date of grant using a Black-Scholes option-pricing model. Expected volatilities are based on implied volatilities from traded options on CCO’s stock, historical volatility on CCO’s stock, and other factors. The expected life is based on historical data of options granted and represents the period of time that options granted are

expected to be outstanding. CCO uses historical data to estimate option exercises and employee terminations within the valuation model. Prior to the adoption of Statement 123(R), the Company recognized forfeitures as they occurred in its Statement 123 pro forma disclosures. Beginning January 1, 2006, the Company includes estimated forfeitures in its compensation cost and updates the estimated forfeiture rate through the final vesting date of awards. The risk free interest rate is based on the U.S. Treasury yield curve in effect at the time of grant for periods equal to the expected life of the option. The following assumptions were used to calculate the fair value of the CCO’s options on the date of grant during the nine months ended September 30, 2006:

Expected volatility			27	%
Expected life in years			5.0 – 7.5
Risk-free interest rate			4.58% – 5.08	%
Dividend yield			0	%

The following table presents a summary of CCO’s stock options outstanding at and stock option activity during the nine months ended September 30, 2006 (“Price” reflects the weighted average exercise price per share):

										Weighted Average				Aggregate
										Remaining				Intrinsic
(In thousands, except per share data)		Options				Price				Contractual Term				Value
Outstanding, beginning of year			8,509			$	24.05
Granted			177				19.85
Exercised			(6	)			20.42
Forfeited			(276	)			22.59
Expired			(510	)			32.37
Outstanding, September 30			7,894				23.43			4.5 years				$	8,262
Exercisable, September 30			3,064							2.3 years				$	174
Weighted average fair value per option granted		$	6.55

A summary of CCO’s nonvested options at December 31, 2005, and changes during the nine months ended September 30, 2006, is presented below:

						Weighted Average
						Grant Date
(In thousands, except per share data)		Options				Fair Value
Nonvested, beginning of year			5,634			$	4.56
Granted			177				6.55
Vested			(705	)			.91
Forfeited			(276	)			4.01
Nonvested, September 30			4,830				5.21

There were 33.9 million shares available for future grants under CCO’s option plan at September 30, 2006. Vesting dates range from April 2004 to April 2011, and expiration dates range from November 2006 to April 2016 at exercise prices and average contractual lives as follows:

(In thousands of shares)

														Weighted
														Average				Weighted								Weighted
										Outstanding				Remaining				Average				Exercisable				Average
										as of				Contractual				Exercise				as of				Exercise
Range of Exercise Prices										9/30/06				Life				Price				9/30/06				Price
$   15.01	—	$	20.00								3,408				6.5			$	17.98				57			$	17.35
20.01	—		25.00								1,097				4.2				21.08				229				21.57
25.01	—		30.00								2,143				2.9				26.12				1,532				26.04
30.01	—		35.00								692				2.4				32.78				692				32.78
35.01	—		40.00								417				0.6				37.86				417				37.86
40.01	—		45.00								98				3.8				42.80				98				42.80
45.01	—		50.00								39				0.2				49.52				39				49.52
											7,894				4.5				23.43				3,064				29.50

CCO also grants restricted stock awards to employees and directors of CCO and its affiliates. These common shares hold a legend which restricts their transferability for a term of up to five years and are forfeited, except in certain circumstances, in the event the employee terminates his or her employment or relationship with CCO prior to the lapse of the restriction. The restricted stock awards were granted out of the CCO’s stock option plan.

The following table presents a summary of CCO’s restricted stock outstanding at and restricted stock activity during the nine months ended September 30, 2006 (“Price” reflects the weighted average share price at the date of grant):

		2006
(In thousands, except per share data)		Awards				Price
Outstanding, beginning of year			236			$	18.00
Granted			6				19.87
Vested (restriction lapsed)			—				—
Forfeited			(19	)			18.01
Outstanding, September 30			223				18.04

Unrecognized share-based compensation cost

As of September 30, 2006, there was $49.5 million of unrecognized compensation cost related to nonvested share-based compensation arrangements. The cost is expected to be recognized over a weighted average period of approximately three years.

Note 3: INTANGIBLE ASSETS AND GOODWILL

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, all of which are amortized over the respective lives of the agreements. Other definite-lived intangible assets are amortized over the period of time the assets are expected to contribute directly or indirectly to the Company’s future cash flows.

The following table presents the gross carrying amount and accumulated amortization for each major class of definite-lived intangible assets at September 30, 2006 and December 31, 2005:

		September 30, 2006								December 31, 2005
		Gross								Gross
		Carrying				Accumulated				Carrying				Accumulated
(In thousands)		Amount				Amortization				Amount				Amortization
Transit, street furniture, and other outdoor contractual rights		$	777,850			$	488,893			$	651,455			$	408,018
Talent contracts			125,270				111,365				202,161				175,553
Representation contracts			323,436				162,605				313,004				133,987
Other			130,180				75,436				135,782				104,054
Total		$	1,356,736			$	838,299			$	1,302,402			$	821,612

CCO completed the acquisition of Interspace Airport Advertising (“Interspace”) on July 1, 2006. As a result of the acquisition, the company recorded $39.5 million in definite-lived intangible assets which consists primarily of airport contracts with a remaining weighted average life of 5 years.

Total amortization expense from definite-lived intangible assets for the nine and three months ended September 30, 2006 and for the year ended December 31, 2005 was $107.8 million, $34.3 million and $154.2 million, respectively. The following table presents the Company’s estimate of amortization expense for each of the five succeeding fiscal years for definite-lived intangible assets:

(In thousands)
2007		$	104,999
2008			66,728
2009			52,492
2010			46,485
2011			35,080

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

The Company’s indefinite-lived intangible assets consist of FCC broadcast licenses and billboard permits. FCC broadcast licenses are granted to both radio and television stations for up to eight years under the Telecommunications Act of 1996. The Act requires the FCC to renew a broadcast license if: it finds that the station has served the public interest, convenience and necessity; there have been no serious violations of either the Communications Act of 1934 or the FCC’s rules and regulations by the licensee; and there have been no other serious violations which taken together constitute a pattern of abuse. The licenses may be renewed indefinitely at little or no cost. The Company does not believe that the technology of wireless broadcasting will be replaced in the foreseeable future. The Company’s billboard permits are issued in perpetuity by state and local governments and are transferable or renewable at little or no cost. Permits typically include the location for which the permit allows the Company the right to operate an advertising structure. The Company’s permits are located on either owned or leased land. In cases where the Company’s permits are located on leased land, the leases are typically from 1 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 the direct method. Under the direct 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.

Under the direct method, the Company continues to aggregate 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 following table presents the changes in the carrying amount of goodwill in each of the Company’s reportable segments for the nine month period ended September 30, 2006:

						Americas				International
(In thousands)		Radio				Outdoor				Outdoor				Other				Total
Balance as of December 31, 2005		$	6,321,394			$	405,964			$	343,611			$	40,979			$	7,111,948
Acquisitions			42,499				211,649				33,917				6,564				294,629
Dispositions			(10,591	)			(1,913	)			—				—				(12,504	)
Foreign currency			—				401				24,119				—				24,520
Adjustments			(879	)			—				(315	)			6				(1,188	)
Balance as of September 30, 2006		$	6,352,423			$	616,101			$	401,332			$	47,549			$	7,417,405

Included in the Americas’ acquisitions amount above is $127.6 million related to the acquisition of Interspace, all of which is expected to be deductible for tax purposes.

Note 4: DERIVATIVE INSTRUMENTS

The Company’s wholly owned subsidiary, Clear Channel Investments, Inc., terminated its secured forward exchange contract with respect to 8.3 million shares of its investment in XM Satellite Radio Holdings, Inc. on August 2, 2006 by paying the counterparty approximately $83.1 million. The accreted value of the debt was $92.9 million and the fair value of the collar was an asset of $6.0 million resulting in a net gain of approximately $3.8 million recorded in “Gain (loss) on marketable securities” on the Company’s consolidated statement of operations.

The Company holds options under two secured forward exchange contracts that limit its exposure to and benefit from price fluctuations in American Tower Corporation (“AMT”) over the terms of the contracts (the “AMT contracts”). These options are not

designated as hedges of the underlying shares of AMT. The fair values of the AMT contracts were a liability of $9.0 million recorded in “Other long term liabilities” and an asset of $11.7 million recorded in “Other assets” at September 30, 2006 and December 31, 2005, respectively. For the nine months ended September 30, 2006 and year ended December 31, 2005, the Company recognized losses of $20.7 million and $18.2 million, respectively, in “Gain (loss) on marketable securities” related to the change in fair value of the options. To offset the change in the fair value of these contracts, the Company has recorded AMT shares as trading securities. During the nine months ended September 30, 2006 and year ended December 31, 2005, the Company recognized gains of $18.9 million and $17.5 million, respectively, in “Gain (loss) on marketable securities” related to the change in the fair value of the shares.

The Company is exposed to foreign currency exchange risks related to its investment in net assets in foreign countries. To manage this risk, the Company entered into two United States 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 $44.5 million at September 30, 2006 and $2.9 million at December 31, 2005, 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 (loss) in the same manner as the underlying hedged net assets. As of September 30, 2006, a $20.7 million loss, net of tax, was recorded as a cumulative translation adjustment to other comprehensive income (loss) related to the cross currency swap.

Note 5: RECENT DEVELOPMENTS

     Company Share Repurchase Program

On March 9, 2006, the Company’s Board of Directors authorized a share repurchase program, permitting it to repurchase $600.0 million of its common stock. On September 6, 2006, the Board of Directors authorized an additional share repurchase program, permitting the Company to repurchase an additional $1.0 billion of its common stock. This increase expires on September 6, 2007, although the program may be discontinued or suspended at anytime prior to its expiration. The Company had repurchased an aggregate 130.9 million shares for $4.3 billion, including commission and fees, under all previously announced share repurchase programs as of September 30, 2006, with $1.0 billion remaining available.

     Debt Offerings

On March 21, 2006 the Company completed a debt offering of $500.0 million 6.25% Senior Notes due 2011. Interest is payable on March 15 and September 15 of each year. The net proceeds of approximately $497.5 million were used to repay borrowings under the Company’s bank credit facility.

On August 15, 2006 the Company completed an additional $250.0 million issuance of its 6.25% Senior Notes due 2011 originally issued March 21, 2006. The net proceeds of approximately $253.4 million, including accrued interest, were used to repay borrowings under the Company’s bank credit facility.

     Acquisitions

CCO completed the acquisition of Interspace on July 1, 2006, by issuing 4,250,000 shares of CCO’s Class A common stock and the payment of approximately $81.3 million. The acquisition was valued at approximately $170.4 million based on CCO’s common shares issued at the closing share price on the date of acquisition and the cash consideration paid. Interspace’s 2005 revenues and operating expenses (excluding depreciation and amortization) were approximately $45.8 million and $32.5 million, respectively.

The Company acquired radio stations for $16.6 million and a music scheduling company for $44.3 million in cash plus $10.0 million of deferred purchase consideration during the nine months ended September 30, 2006. The Company also acquired Americas and international outdoor display faces and additional equity interests in international outdoor companies for $200.7 million in cash, which includes cash paid for Interspace. The Company exchanged assets in one of its Americas outdoor markets for assets located in a different market. In addition, the Company’s national representation firm acquired representation contracts for $11.8 million in cash and its television business acquired a station for $20.0 million in cash.

     Disposition of Assets

The Company disposed of programming rights in its radio broadcasting segment and recognized a gain of $31.4 million and exchanged assets in one of its Americas outdoor markets for assets located in a different market and recognized a gain of $13.2 million. Both of these gains were recorded in “Gain on disposition of assets — net” during the first quarter of 2006.

     Recent Legal Proceedings

On September 9, 2003, the Assistant United States Attorney for the Eastern District of Missouri caused a Subpoena to Testify before Grand Jury to be issued to the Company. The Subpoena requires the Company to produce certain information regarding commercial advertising run by it on behalf of offshore and/or online (Internet) gambling businesses, including sports bookmaking and casino-style gambling. On October 5, 2006, the Company received a subpoena from the Assistant United States Attorney for the Southern District of New York requiring it to produce certain information regarding substantially the same matters as covered in the subpoena from the Eastern District of Missouri. The Company is cooperating with the requirements of both subpoenas.

On February 7, 2005, the Company received a subpoena from the State of New York Attorney General’s office, requesting information on policies and practices regarding record promotion on radio stations in the state of New York. The Company is cooperating with this subpoena.

On April 19, 2006, the Company received a letter of inquiry from the Federal Communications Commission (the “FCC”) requesting information about whether consideration was provided by record labels to the Company in exchange for the broadcast of music without disclosure of such consideration to the public. The Company is cooperating with the FCC in responding to this request for information.

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

Note 6: RESTRUCTURING

The Company has restructuring liabilities related to its 2000 acquisition of AMFM Inc. (“AMFM”), and the 2002 acquisition of The Ackerley Group, Inc. (“Ackerley”). The balance at September 30, 2006 of $5.3 million was comprised of $0.4 million of severance costs and $4.9 million of lease termination costs. During the nine months ended September 30, 2006, $0.4 million was paid and charged to severance.

In addition to the AMFM and Ackerley restructurings, the Company restructured its outdoor operations in France in the third quarter of 2005. As a result, the Company recorded $26.6 million in restructuring costs as a component of selling, general and administrative expenses. Of the $26.6 million, $22.5 million was related to severance costs and $4.1 million was related to other costs. During 2006, $7.4 million of related costs were paid and charged to the restructuring accrual. As of September 30, 2006, the accrual balance was $14.7 million.

Note 7: 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 5, 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.

Note 8: GUARANTEES

Within the Company’s $1.75 billion credit facility, there exists a $150.0 million sub-limit available to certain of the Company’s international subsidiaries. This $150.0 million sub-limit allows for borrowings in various foreign currencies, which are used to hedge net assets in those currencies and provides funds to the Company’s international operations for certain working capital needs. Subsidiary borrowings under this sub-limit are guaranteed by the Company. At September 30, 2006, this portion of the $1.75 billion credit facility’s outstanding balance was $30.7 million, which is recorded in “Long-term debt” on the Company’s financial statements.

Within the Company’s bank credit facility agreement is a provision that requires the Company to reimburse lenders for any increased costs that they may incur in an event of a change in law, rule or regulation resulting in their reduced returns from any change in capital requirements. In addition to not being able to estimate the potential amount of any future payment under this provision, the Company is not able to predict if such event will ever occur.

The Company currently has guarantees that provide protection to its international subsidiary’s banking institutions related to overdraft lines up to approximately $39.9 million. As of September 30, 2006, no amounts were outstanding under these agreements.

As of September 30, 2006, the Company has outstanding commercial standby letters of credit and surety bonds of $130.2 million and $35.6 million, respectively. These letters of credit and surety bonds relate to various operational matters including insurance, bid, and performance bonds as well as other items. These letters of credit reduce the borrowing availability on the Company’s bank credit facilities, and are included in the Company’s calculation of its leverage ratio covenant under the bank credit facilities. The surety bonds are not considered as borrowings under the Company’s bank credit facilities.

Note 9: 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 of our operations in the United States, Canada and Latin America, and the international outdoor segment includes operations in Europe, Asia, Africa and Australia. The category “other” includes television broadcasting, 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
																		expenses and
						Americas				International								gain (loss) on
		Radio				Outdoor				Outdoor								disposition of
(In thousands)		Broadcasting				Advertising				Advertising				Other				assets - net				Eliminations				Consolidated
Nine Months Ended September 30, 2006
Revenue		$	2,754,566			$	965,733			$	1,101,293			$	423,098			$	—			$	(94,767	)		$	5,149,923
Direct operating expenses			768,215				382,401				671,442				164,716				—				(46,598	)			1,940,176
Selling, general and administrative expenses			940,413				150,846				250,757				177,925				—				(48,169	)			1,471,772
Depreciation and amortization			102,998				129,382				169,888				49,881				14,573				—				466,722
Corporate expenses			—				—				—				—				140,645				—				140,645
Gain (loss) on disposition of assets — net			—				—				—				—				56,000				—				56,000
Operating income (loss)		$	942,940			$	303,104			$	9,206			$	30,576			$	(99,218	)		$	—			$	1,186,608
Intersegment revenues		$	30,764			$	6,864			$	—			$	57,139			$	—			$	—			$	94,767
Identifiable assets		$	12,262,329			$	2,764,509			$	2,265,066			$	1,071,857			$	567,449			$	—			$	18,931,210
Capital expenditures		$	64,769			$	60,367			$	103,613			$	7,805			$	3,394			$	—			$	239,948

																		Corporate
																		expenses and
						Americas				International								gain (loss) on
		Radio				Outdoor				Outdoor								disposition of
(In thousands)		Broadcasting				Advertising				Advertising				Other				assets - net				Eliminations				Consolidated
Three Months Ended September 30, 2006
Revenue		$	962,147			$	356,384			$	363,870			$	143,510			$	—			$	(31,017	)		$	1,794,894
Direct operating expenses			265,319				133,468				234,152				55,345				—				(13,664	)			674,620
Selling, general and administrative expenses			308,787				52,029				82,608				60,211				—				(17,353	)			486,282
Depreciation and amortization			33,582				45,897				56,226				16,277				5,192				—				157,174
Corporate expenses			—				—				—				—				49,630				—				49,630
Gain (loss) on disposition of assets — net			—				—				—				—				8,915				—				8,915
Operating income (loss)		$	354,459			$	124,990			$	(9,116	)		$	11,677			$	(45,907	)		$	—			$	436,103
Intersegment revenues		$	10,175			$	1,882			$	—			$	18,960			$	—			$	—			$	31,017
Nine Months Ended September 30, 2005
Revenue		$	2,624,736			$	886,649			$	1,044,822			$	388,585			$	—			$	(90,962	)		$	4,853,830
Direct operating expenses			711,604				358,862				629,185				160,339				—				(46,467	)			1,813,523
Selling, general and administrative expenses			900,647				136,919				273,044				160,661				—				(44,495	)			1,426,776
Depreciation and amortization			106,309				127,019				163,214				51,443				14,153				—				462,138
Corporate expenses			—				—				—				—				119,412				—				119,412
Gain (loss) on disposition of assets — net			—				—				—				—				14,303				—				14,303
Operating income (loss)		$	906,176			$	263,849			$	(20,621	)		$	16,142			$	(119,262	)		$	—			$	1,046,284
Intersegment revenues		$	27,396			$	5,633			$	—			$	57,933			$	—			$	—			$	90,962
Identifiable assets		$	12,246,440			$	2,515,518			$	2,166,667			$	1,269,086			$	316,296			$	—			$	18,514,007
Capital expenditures		$	65,806			$	50,012			$	87,210			$	11,064			$	5,261			$	—			$	219,353
Three Months Ended September 30, 2005
Revenue		$	919,245			$	317,705			$	350,298			$	130,352			$	—			$	(34,312	)		$	1,683,288
Direct operating expenses			248,716				121,817				207,648				55,858				—				(20,016	)			614,023
Selling, general and administrative expenses			297,899				45,768				107,282				52,167				—				(14,296	)			488,820
Depreciation and amortization			36,185				40,928				54,477				17,763				4,682				—				154,035
Corporate expenses			—				—				—				—				41,071				—				41,071
Gain (loss) on disposition of assets — net			—				—				—				—				8,487				—				8,487
Operating income (loss)		$	336,445			$	109,192			$	(19,109	)		$	4,564			$	(37,266	)		$	—			$	393,826
Intersegment revenues		$	9,240			$	1,162			$	—			$	23,910			$	—			$	—			$	34,312

Revenue of $1.2 billion and $1.1 billion derived from foreign operations are included above for the nine months ended September 30, 2006 and 2005, respectively. Revenue of $389.0 million and $368.9 million derived from foreign operations are included above for the three months ended September 30, 2006 and 2005, respectively. Identifiable assets of $2.5 billion derived from foreign operations are included above at September 30, 2006 and 2005.

Note 10: SUBSEQUENT EVENTS

On October 25, 2006, the Company’s Board of Directors declared a quarterly cash dividend of $0.1875 per share on the Company’s Common Stock. The dividend is payable on January 15, 2007 to shareholders of record at the close of business on December 31, 2006.

On October 12, 2006, the Company received a $257.0 million tax refund related to the utilization of a portion of the capital loss generated on the spin-off of Live Nation, Inc. The Company also utilized 2005 net operating losses to reduce its September 15, 2006 tax payment by $21.3 million. These two events resulted in a total cash benefit to the Company of $278.3 million.

On November 1, 2006, the Company redeemed its 6% Senior Notes at their maturity for $750.0 million plus accrued interest with proceeds from its bank credit facility.

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

Executive Summary

     Consolidated revenue increased 7% during the third quarter of 2006 compared to the same period of 2005. Revenue growth of $42.9 million from our radio broadcasting segment was driven by increased national advertising revenues. Our Americas outdoor advertising segment’s revenues increased $38.7 million primarily from growth in bulletin and airport revenues as well as from the acquisition of Interspace. Our international outdoor segment contributed $13.6 million in revenue growth which was primarily attributable to movements in foreign exchange over the third quarter of 2005.

     Consolidated direct operating and SG&A expenses increased 5% during the third quarter of 2006, compared to the same period of 2005, primarily from our radio and Americas segments, which increased principally due to growth in commission expenses associated with the increase in revenue and the adoption of FAS 123(R). Radio also experienced increased programming and distribution expenses while Americas incurred increased site lease expenses. Direct operating and SG&A expenses declined in our international outdoor segment primarily from a $26.6 million restructuring charge related to our businesses in France recorded during the third quarter of 2005.

     Our subsidiary, Clear Channel Outdoor Holdings, Inc., or CCO, completed its acquisition of Interspace Airport Advertising on July 1, 2006, by issuing 4,250,000 shares of CCO’s Class A Common Stock and approximately $81.3 million in cash. Interspace contributed approximately $14.6 million to revenue and $9.0 million to direct operating and SG&A expenses during the third quarter of 2006.

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 which includes our national syndication business, Americas Outdoor Advertising and International Outdoor Advertising. Included in the “other” segment are television broadcasting; 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, gain (loss) on disposition of assets — net, interest expense, gain (loss) on marketable securities, equity in earnings of nonconsolidated affiliates, other income (expense) – net, income tax benefit (expense), minority interest — net of tax, and discontinued operations are managed on a total company basis and are, therefore, included only in our discussion of consolidated results.

Radio Broadcasting

     Our revenues are derived from selling advertising time, or spots, on our radio stations. Our radio markets are run predominantly by local management teams who control the formats selected for their programming. The formats are designed to reach audiences with targeted demographic characteristics that appeal to our advertisers. 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. Our advertising rates are also influenced by the time of day the advertisement airs, with morning and evening drive-time hours typically the highest. Management monitors yield 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. Radio advertising contracts are typically less than one year.

     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 revenues including 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 stations’ 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 targeted demographics listening to the radio in an average quarter hour. This metric gauges how well our formats are attracting and keeping listeners.

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

Americas and International Outdoor Advertising

     Our revenues are derived from selling advertising space on displays that we own or operate in key markets worldwide. The displays consist primarily of billboards, street furniture displays 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 with clients typically outline the number of displays reserved, the duration of the advertising campaign and the unit price per display. The margins on our billboard contracts tend to be higher than on contracts for our other displays.

     Our advertising rates are generally based on the gross rating points, or total number of impressions delivered, expressed as a percentage of a market population, by 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 revenues per display, 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, principally 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. Because revenue-sharing and minimum guaranteed payment arrangements are more prevalent in our international operations, the margins in our international operations are typically less than the margins in our Americas operations.

     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 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 we may have with the landlords. The terms of our Americas site leases generally range from 1 to 20 years. The terms of our international site leases generally range from 3 to 15 years, but vary across our networks.

FAS 123(R), Share-Based Payment

     We adopted FAS 123(R), Share-Based Payment, on January 1, 2006 under the modified-prospective approach which requires us to recognize employee compensation cost related to our stock option grants in the same line items as cash compensation in the 2006 financial statements for all options granted after the date of adoption as well as for any options that were unvested at adoption. Under the modified-prospective approach, no stock option expense attributable to these options is reflected in the financial statements for 2005. The amounts recorded as share-based payments in the financial statements during 2005 relate to the expense associated with restricted stock awards. As of September 30, 2006, there was $49.5 million of total unrecognized compensation cost related to nonvested share-based compensation arrangements. This cost is expected to be recognized over a weighted average period of approximately three years.

     The fair value of each option awarded is estimated on the date of grant using a Black-Scholes option-pricing model. Expected volatilities are based on implied volatilities from traded options on the Company’s stock, historical volatility on the Company’s stock, and other factors. The expected life of options granted represents the period of time that options granted are expected to be outstanding. The Company uses historical data to estimate option exercises and employee terminations within the valuation model. The risk free interest rate is based on the U.S. Treasury yield curve in effect at the time of grant for periods equal to

the expected life of the option. The following table details compensation costs related to share-based payments for the three and nine months ended September 30, 2006:

(In millions)		Three Months				Nine Months
Radio Broadcasting
Direct Operating Expenses		$	2.7			$	8.3
SG&A			3.6				10.6
Americas Outdoor Advertising
Direct Operating Expenses		$	0.9			$	2.6
SG&A			0.3				0.9
International Outdoor Advertising
Direct Operating Expenses		$	0.2			$	0.6
SG&A			0.1				0.3
Other
Direct Operating Expenses		$	0.5			$	1.5
SG&A			0.5				1.6
Corporate		$	2.3			$	8.0