UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington D.C., 20549
Form 8-K
Current Report
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of Earliest Event Reported): 04/29/2005
CLEAR CHANNEL COMMUNICATIONS INC
(Exact Name of Registrant as Specified in its Charter)
Commission File Number: 001-09645
<TABLE>
<S> <C>
TX 74-1787539
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
</TABLE>
200 E. Basse
San Antonio, TX 78209
(Address of Principal Executive Offices, Including Zip Code)
210-822-2828
(Registrant's Telephone Number, Including Area Code)
Check the appropriate box below if the Form 8-K filing is intended to
simultaneously satisfy the filing obligation of the registrant under any of the
following provisions (see General Instruction A.2. below):
[ ] Written communications pursuant to Rule 425 under the Securities Act
(17 CFR 230.425)
[ ] Soliciting material pursuant to Rule 14a-12 under the Exchange Act
(17CFR240.14a-12)
[ ] Pre-commencement communications pursuant to Rule 14d-2(b) under the
Exchange Act(17CFR240.14d-2(b))
[ ] Pre-commencement communications pursuant to Rule 13e-4(c) under the
Exchange Act(17CFR240.13e-4(c))
Items to be Included in this Report
Item 7.01. REGULATION FD DISCLOSURE
The following information, including Exhibits 99.1 and 99.2, is furnished under
Item 7.01, "Regulation FD Disclosure". This information shall not be deemed
"filed" for purposes of Section 18 of the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), or incorporated by reference in any filing under
the Securities Act of 1933, as amended, or the Exchange Act, except as shall be
expressly set forth by specific reference in such filing.
On April 29, 2005, the registrant issued a press release announcing a planned
strategic realignment of its businesses to enhance shareholder value. Also on
April 29, 2005, the registrant issued a press release addressing questions and
answers associated with the planned strategic realignment.
The press releases are attached hereto as Exhibits 99.1 and 99.2.
Item 9.01. FINANCIAL STATEMENTS AND EXHIBITS
(c) Exhibits
99.1 Press Release of Clear Channel Communications issued April 29,
2005 Announcing Planned Strategic Realignment of its Business to
Enhance Shareholder Value
99.2 Press Release of Clear Channel Communications issued April 29,
2005 Addressing Questions and Answers Regarding the Planned Strategic
Realignment
Signature(s)
Pursuant to the Requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this Report to be signed on its behalf by the
Undersigned hereunto duly authorized.
CLEAR CHANNEL COMMUNICATIONS, INC.
Date: April 29, 2005 By: /S/ HERBERT W. HILL, JR.
-------------------------------------------
Herbert W. Hill, Jr.
Sr. Vice President/Chief Accounting Officer
INDEX TO EXHIBITS
99.1 Press Release of Clear Channel Communications issued April 29, 2005
Announcing Planned Strategic Realignment of its Business to Enhance Shareholder
Value
99.2 Press Release of Clear Channel Communications issued April 29, 2005
Addressing Questions and Answers Regarding the Planned Strategic Realignment
Exhibit 99.1
[CLEARCHANNEL LOGO]
CLEAR CHANNEL COMMUNICATIONS ANNOUNCES PLANNED STRATEGIC
REALIGNMENT OF BUSINESSES TO ENHANCE SHAREHOLDER VALUE
Company to Sell Approximately 10% of Clear Channel Outdoor in Initial Public
Offering
Company to Spin Off 100% of Clear Channel Entertainment
Shareholders to Receive Special Dividend of $3.00 per Share and a 50% Increase
in Recurring Quarterly Dividend
SAN ANTONIO, TEXAS - April 29, 2005 - Clear Channel Communications, Inc.
(NYSE:CCU) announced today that its Board of Directors has approved a plan of
strategic initiatives focused on significantly increasing shareholder value. The
plan includes:
- An initial public offering of approximately 10% of Clear Channel
Outdoor;
- The 100% spin-off of Clear Channel Entertainment;
- A $3.00 per share special dividend; and
- A 50% increase in the Company's recurring quarterly dividend.
The Company will hold a conference call today at 9:00 a.m. Eastern / 8:00 a.m.
Central Time in conjunction with its first quarter earnings report also
announced separately today.
UNLOCKING VALUE AND CREATING LONG-TERM OPPORTUNITIES
"We're seeking to unlock the considerable value in our Company, and create a
strong foundation for future growth, by improving the strategic, operational and
financial flexibility in each of our leading business units," said Mark Mays,
President and Chief Executive Officer. "We expect these transactions to
highlight the fundamental value of each of our leading businesses in a tax
efficient manner, so that current and future investors can more clearly evaluate
the Company's overall inherent value. These initiatives are designed to
optimally capitalize each business in a manner that generates enhanced equity
returns while maintaining strong balance sheets and preserving financial
flexibility. Each business will have sharpened management focus and an improved
ability to attract, retain and reward employees in a way that's aligned with
shareholders."
Randall Mays, Chief Financial Officer, said: "Clear Channel Communications is
fortunate to own businesses which generate substantial amounts of free cash flow
and under present circumstances we believe we can best demonstrate that ability
by returning a considerable amount of excess capital directly to shareholders.
Today's announcement of a special dividend and a 50% increase in our regular
quarterly dividend enhances shareholder returns both at the outset and on a
recurring basis. Furthermore, by accretively reinvesting cash flow in these
businesses and returning excess capital to shareholders through dividends and
share buybacks, we will continue to pursue opportunities to provide the best
shareholder returns. We remain committed to maintaining strong balance sheets,
with a continued focus on financial discipline."
"Clear Channel's long history of creating shareholder value has taken another
leap forward today," said Lowry Mays, Chairman. "This bold strategic initiative
that the Board approved is a transforming event for the Company and one that
will unleash numerous benefits focused on
- More -
Page 2
allowing us to continue to provide shareholders with superior long-term returns.
Our radio and television, outdoor and entertainment businesses are leaders in
their respective industries. Each has respected management teams and unique
opportunities for growth. We couldn't be more excited about our Company's
future."
INITIAL PUBLIC OFFERING OF CLEAR CHANNEL OUTDOOR
The Company announced its intention to sell approximately 10% of the common
stock of Clear Channel Outdoor in an initial public offering (IPO). After
consummation of the IPO, Clear Channel Communications will continue to hold a
controlling stake in Clear Channel Outdoor. Clear Channel Outdoor will consist
of the Company's current domestic and international outdoor operations, and is
the world's largest outdoor media company with annual 2004 sales of
approximately $2.5 billion.
The Company believes an IPO of Clear Channel Outdoor will provide several
important benefits to the Company's shareholders. A partially-separated Clear
Channel Outdoor will enjoy greater strategic focus and flexibility.
Additionally, Clear Channel Outdoor will be able to supplement its attractive
organic profile by pursuing selective acquisitions using a currency based on its
inherent valuation rather than the blended valuation represented by the
Company's current common stock. This public currency will also enable Clear
Channel Outdoor to better attract, retain and reward management in alignment
with its performance. Moreover, the Company believes an IPO will help Clear
Channel Communications shareholders more clearly evaluate the inherent value of
Clear Channel Outdoor by highlighting its strong leadership position and growth
profile.
Mark Mays will continue as Chief Executive Officer and Randall Mays will
continue as Chief Financial Officer of Clear Channel's combined Outdoor
operations, similar to the respective positions each has held in the Outdoor
operations since the Company's entry into the business in 1997. The Company also
today named Paul Meyer as Global President and Chief Operating Officer of Clear
Channel Outdoor's worldwide operations. Meyer will also continue to oversee
Clear Channel Outdoor's operations in North and South America. Roger Parry will
continue to oversee Clear Channel Outdoor's operations in Europe, Asia,
Australia, New Zealand and Africa, including Clear Channel Outdoor's joint
venture in China known as Clear Media.
Given the Company's retention of approximately 90% of the outstanding shares of
Clear Channel Outdoor after the IPO, Clear Channel Outdoor's Board of Directors
will be comprised substantially of the same members as Clear Channel
Communications' Board plus a number of new independent, non-overlapping Board
members. The corporate headquarters for Clear Channel Outdoor will continue to
be in San Antonio, Texas.
100% SPIN-OFF OF CLEAR CHANNEL ENTERTAINMENT
The Company also announced today its intention to spin-off the operations of
Clear Channel Entertainment from Clear Channel Communications. After separation,
Clear Channel Entertainment will be a separate, publicly-traded company in which
Clear Channel Communications will not retain any ownership interest. Clear
Channel Entertainment will consist of entertainment operations throughout North
America, Europe, South America, Asia and Australia, with annual 2004 sales of
approximately $2.75 billion.
As a separate and largely unregulated public company, Clear Channel
Entertainment will enjoy enhanced flexibility to pursue initiatives that can
maximize its strategic and operating potential and will be poised to more
effectively enhance shareholder value than under the current structure. Clear
Channel Entertainment will also be able to pursue selective acquisitions using
its own stock
Page 3
as currency. This public currency will also enable Clear Channel Entertainment
to better attract, retain and reward management and employees in alignment with
its performance. Moreover, the Company believes the spin-off will help investors
more clearly evaluate the inherent value of Clear Channel Entertainment by
highlighting its strong leadership position and growth profile.
The Chief Executive Officer of Clear Channel Entertainment will report to a
separate Board of Directors to be comprised of a majority of independent
Directors not overlapping with Clear Channel Communications' Directors. It is
anticipated that Clear Channel Entertainment's corporate headquarters will
remain in Houston, Texas.
Prior to the spin-off, the Company expects to submit a request to the Internal
Revenue Service (IRS) seeking a letter ruling regarding the tax-free nature of
the spin-off.
In a parallel development, Brian Becker, who has served as Chief Executive
Officer of Clear Channel Entertainment, has decided to pursue alternative
entrepreneurial opportunities outside of the Company. As part of this, Clear
Channel Entertainment and Brian Becker have agreed to form a joint venture
company to pursue entertainment content opportunities through acquisition and
development. Randall Mays is serving as interim Chief Executive Officer during
Clear Channel Entertainment's transition to an independent company.
$3.00 PER SHARE SPECIAL DIVIDEND
The Company also announced its intention to pay a special dividend of $3.00 per
share upon, and subject to, completion of the IPO of Clear Channel Outdoor and
the spin-off of Clear Channel Entertainment. Management believes that the strong
free cash flow nature of its businesses enables it to return substantial funds
to shareholders while maintaining significant operational, strategic and
financial flexibility. Since March 30, 2004, the Company used approximately $2.5
billion to repurchase approximately 12% of its common stock in the open market
with relatively little additional leverage. In the future, the Company intends
to maintain a strong balance sheet and will continue to assess the best way to
utilize available capital, which may include future acquisitions, dividend
increases, special dividends or additional share repurchases.
The Company will fund this special dividend with a combination of current cash
balances, cash flow from operations, proceeds from the repayment of intercompany
debt, and the proceeds of any new debt offerings. Each of Clear Channel Outdoor
and Clear Channel Entertainment will be appropriately capitalized to seek to
provide enhanced returns to equity holders while maintaining financial
flexibility at each entity. Clear Channel Communications' outstanding notes will
remain obligations of the Company. It is the Company's present intention to
maintain a strong balance sheet with leverage levels that are consistent with
current investment grade corporate credit rating guidelines. (Please refer to
risks and uncertainties section at the end of this release.)
50% INCREASE IN QUARTERLY DIVIDEND
The Board of Directors of the Company today also announced an increase in the
Company's quarterly dividend from $0.125 per share ($0.50 per share annually) to
$0.1875 per share ($0.75 per share annually). The next quarterly dividend will
be payable on July 15, 2005 to shareholders of record on June 30, 2005. After
giving effect to all of the transactions described above, the Company believes
that it will continue to generate substantial free cash flow. Accordingly, the
Board of Directors of the Company believes that it is appropriate to return a
larger portion of this cash flow directly to investors. While the increase in
the Company's regular dividend is substantial, the absolute amount will still
fall well within the financial capabilities of the Company, and is not expected
to impact operating, financial or strategic flexibility.
Page 4
CONDITIONS PRECEDENT TO COMPLETION
With the exception of the increase in the Company's recurring quarterly
dividend, this plan is conditioned on, among other things, the successful
completion of each of the above transactions which are expected to occur during
the second half of 2005. These transactions are subject to final approval by
Clear Channel Communications' Board of Directors, receipt of a tax opinion of
counsel and letter ruling from the IRS relating to the Clear Channel
Entertainment spin-off, favorable market conditions, the filing and
effectiveness of registration statements with the Securities and Exchange
Commission (SEC), and other customary conditions. Approval of the Company's
shareholders will not be required.
CLEAR CHANNEL COMMUNICATIONS
The Company believes that Clear Channel Communications' collection of
broadcasting and outdoor assets will be able to provide investors with
attractive overall returns in the forms of current yield and capital
appreciation associated with future growth of the broadcasting and outdoor
businesses. The remaining businesses of Clear Channel Communications will
continue to represent the world's largest broadcasting portfolio, including the
Company's 1,189 owned and operated domestic radio stations, equity interests in
various international broadcasting companies, a leading national radio network
and 40 owned or programmed TV stations. In addition, following the IPO, Clear
Channel Communications will continue to own approximately 90% of Clear Channel
Outdoor.
Mark Mays said: "We are highly confident in the future growth prospects of the
broadcasting business. Our creative efforts to innovate the industry by giving
listeners more of what they come to radio for and delivering a better
environment for advertisers have already paid dividends with our listeners and
advertisers. By reducing clutter, implementing unique advertising units with
exceptional creative execution, and developing new, highly compelling
programming through strong local, regional and national brands, we will continue
to deliver outstanding entertainment and information to our listeners and
superior results to our advertisers. We are the best equipped radio broadcaster
to benefit from a rebound in advertising while leveraging the sustainability of
local content."
CONFERENCE CALL INFORMATION
The Company will host a teleconference to discuss this strategic realignment and
its first quarter earnings results today at 9:00 a.m. Eastern / 8:00 a.m.
Central Time. The conference call number is 888-578-6632 and the pass code is
6664378. Please call ten minutes in advance to ensure that you are connected
prior to the presentation. The teleconference will also be available via a live
audio cast on the Company's website, located at www.clearchannel.com. A replay
of the conference call will be available for 72 hours after the live conference
call. The replay number is 888-203-1112 and the pass code is 6664378. The audio
cast will also be archived on the Company's website and will be available
beginning 24 hours after the call for a period of one week.
ABOUT CLEAR CHANNEL COMMUNICATIONS
Clear Channel Communications, Inc. (NYSE:CCU) is a global media and
entertainment company specializing in "gone from home" entertainment and
information services for local communities and premiere opportunities for
advertisers. Based in San Antonio, Texas, the Company's
Page 5
businesses include radio, outdoor displays, live entertainment events and
venues, and television stations. See us on the web at www.clearchannel.com.
--------------------------------------------------------------------------------
CERTAIN STATEMENTS IN THIS RELEASE CONSTITUTE "FORWARD-LOOKING STATEMENTS"
WITHIN THE MEANING OF THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995. SUCH
FORWARD-LOOKING STATEMENTS INVOLVE KNOWN AND UNKNOWN RISKS, UNCERTAINTIES AND
OTHER FACTORS WHICH MAY CAUSE THE ACTUAL RESULTS, PERFORMANCE OR ACHIEVEMENTS OF
THE COMPANY TO BE MATERIALLY DIFFERENT FROM ANY FUTURE RESULTS, PERFORMANCE OR
ACHIEVEMENTS EXPRESSED OR IMPLIED BY SUCH FORWARD-LOOKING STATEMENTS. THE WORDS
OR PHRASES "GUIDANCE," "BELIEVE," "EXPECT," "ANTICIPATE," "ESTIMATES" AND
"FORECAST" AND SIMILAR WORDS OR EXPRESSIONS ARE INTENDED TO IDENTIFY SUCH
FORWARD-LOOKING STATEMENTS. IN ADDITION, ANY STATEMENTS THAT REFER TO
EXPECTATIONS OR OTHER CHARACTERIZATIONS OF FUTURE EVENTS OR CIRCUMSTANCES ARE
FORWARD-LOOKING STATEMENTS. THE COMPANY CANNOT PROVIDE ANY ASSURANCE THAT THE
IPO OF CLEAR CHANNEL OUTDOOR, THE SPIN-OFF OF CLEAR CHANNEL ENTERTAINMENT OR THE
PAYMENT OF THE SPECIAL DIVIDEND WILL BE COMPLETED, OR THE TERMS OF WHICH ALL OF
THE TRANSACTIONS WILL BE CONSUMMATED.
VARIOUS RISKS THAT COULD CAUSE FUTURE RESULTS TO DIFFER FROM THOSE EXPRESSED BY
THE FORWARD-LOOKING STATEMENTS INCLUDED IN THIS PRESS RELEASE INCLUDE, BUT ARE
NOT LIMITED TO: RISKS INHERENT IN THE CONTEMPLATED IPO, SPIN-OFF, CASH DIVIDENDS
OR BORROWINGS; COSTS RELATED TO THE PROPOSED TRANSACTIONS; DISTRACTION OF THE
COMPANY AND ITS MANAGEMENT TEAM AS A RESULT OF THE PROPOSED TRANSACTIONS;
CHANGES IN BUSINESS, POLITICAL AND ECONOMIC CONDITIONS IN THE U.S. AND IN OTHER
COUNTRIES IN WHICH THE COMPANY CURRENTLY DOES BUSINESS (BOTH GENERAL AND
RELATIVE TO THE ADVERTISING AND ENTERTAINMENT INDUSTRIES); FLUCTUATIONS IN
INTEREST RATES; CHANGES IN OPERATING PERFORMANCE; SHIFTS IN POPULATION AND OTHER
DEMOGRAPHICS; CHANGES IN THE LEVEL OF COMPETITION FOR ADVERTISING DOLLARS;
FLUCTUATIONS IN OPERATING COSTS; TECHNOLOGICAL CHANGES AND INNOVATIONS; CHANGES
IN LABOR CONDITIONS; CHANGES IN GOVERNMENTAL REGULATIONS AND POLICIES AND
ACTIONS OF REGULATORY BODIES; FLUCTUATIONS IN EXCHANGE RATES AND CURRENCY
VALUES; CHANGES IN TAX RATES; CHANGES IN CAPITAL EXPENDITURE REQUIREMENTS;
ACCESS TO CAPITAL MARKETS AND CHANGES IN CREDIT RATINGS, INCLUDING THOSE THAT
MAY RESULT FROM THE PROPOSED STRATEGIC REALIGNMENT. OTHER UNKNOWN OR
UNPREDICTABLE FACTORS ALSO COULD HAVE MATERIAL ADVERSE EFFECTS ON THE COMPANY'S,
CLEAR CHANNEL OUTDOOR'S AND CLEAR CHANNEL ENTERTAINMENT'S FUTURE RESULTS,
PERFORMANCE OR ACHIEVEMENTS. IN LIGHT OF THESE RISKS, UNCERTAINTIES, ASSUMPTIONS
AND FACTORS, THE FORWARD-LOOKING EVENTS DISCUSSED IN THIS PRESS RELEASE MAY NOT
OCCUR. YOU ARE CAUTIONED NOT TO PLACE UNDUE RELIANCE ON THESE FORWARD-LOOKING
STATEMENTS, WHICH SPEAK ONLY AS OF THE DATE STATED, OR IF NO DATE IS STATED, AS
OF THE DATE OF THIS PRESS RELEASE. OTHER KEY RISKS ARE DESCRIBED IN CLEAR
CHANNEL COMMUNICATIONS' REPORTS FILED WITH THE U.S. SECURITIES AND EXCHANGE
COMMISSION, INCLUDING IN THE SECTION ENTITLED "ITEM 1. BUSINESS - RISK FACTORS"
OF THE COMPANY'S ANNUAL REPORT ON FORM 10-K FOR THE YEAR ENDED DECEMBER 31,
2004. EXCEPT AS OTHERWISE STATED IN THIS NEWS ANNOUNCEMENT, CLEAR CHANNEL
COMMUNICATIONS DOES NOT UNDERTAKE ANY OBLIGATION TO PUBLICLY UPDATE OR REVISE
ANY FORWARD-LOOKING STATEMENTS BECAUSE OF NEW INFORMATION, FUTURE EVENTS OR
OTHERWISE.
A REGISTRATION STATEMENT RELATING TO THE IPO OF CLEAR CHANNEL OUTDOOR COMMON
STOCK AND AN INFORMATION STATEMENT RELATING TO THE SPIN-OFF OF CLEAR CHANNEL
ENTERTAINMENT WILL BE FILED WITH THE SECURITIES AND EXCHANGE COMMISSION.
THIS PRESS RELEASE SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF
AN OFFER TO BUY ANY SECURITIES, NOR SHALL THERE BE ANY SALE OF CLEAR CHANNEL
OUTDOOR COMMON STOCK IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE
WOULD BE UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES
LAWS OF ANY SUCH STATE. ANY SUCH OFFERING OF SECURITIES WILL BE MADE ONLY BY
MEANS OF A PROSPECTUS INCLUDED IN THE REGISTRATIONS STATEMENT FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION.
================================================================================
FOR FURTHER INFORMATION CONTACT:
INVESTORS - RANDY PALMER, SENIOR VICE PRESIDENT OF INVESTOR RELATIONS, (210)
832-3315 OR MEDIA - LISA DOLLINGER, CHIEF COMMUNICATIONS OFFICER, (210) 832-3474
OR VISIT OUR WEBSITE AT HTTP://WWW.CLEARCHANNEL.COM.
# # #
Exhibit 99.2
QUESTIONS AND ANSWERS REGARDING STRATEGIC REALIGNMENT
ANNOUNCEMENT (APRIL 29, 2005)
This list of questions and answers regarding the proposed strategic plan
contains forward-looking statements. Please see a list of risks and
uncertainties associated with such statements at the end of this document.
TRANSACTION STRUCTURE
Q: Can you clarify the mechanics of the transactions?
-- The plan announced in an April 29, 2005 press release (available on the
Clear Channel Communications website at www.clearchannel.com)
encompasses four primary components:
1) A spin-off to our shareholders of 100% of the Clear Channel
Entertainment business as a new separately-traded public
company.
2) An Initial Public Offering (IPO) carve-out of approximately
10% of Clear Channel Outdoor.
3) A special dividend to Clear Channel Communications, Inc.
(NYSE: CCU) shareholders representing $3.00 per Clear
Channel Communications share.
4) We will also be raising our recurring annual dividend by 50%
to $0.75 per share ($0.1875 quarterly), with the next
quarterly dividend payable on July 15, 2005 to shareholders
of record on June 30, 2005.
TRANSACTION RATIONALE / VALUATION
Q: Why are you doing these transactions?
-- Most importantly, we believe that these transactions will increase
shareholder value by maximizing the strategic potential of all three
businesses.
- They will allow each company to more effectively pursue
strategic initiatives that will lead to long-term growth and
value creation.
- They are designed to optimally capitalize each business in a
manner that generates enhanced equity returns.
- We believe this set of initiatives is the best course of
action to provide long-term value for our shareholders. By
allowing each business to actively pursue its strategic
path, we believe shareholders will benefit and that these
transactions will highlight the substantial value that is
not currently reflected in our stock price.
- They will also highlight the strong operating performance,
growth profile, ability to return capital, and stability of
each of the businesses.
- They will provide each business with a pure-play currency to
use for strategic initiatives that they may undertake in the
future.
1
- These separate currencies will be available to help create
stronger alignment between management / employee incentives
and individual business performance.
-- Additionally, this set of transactions provides a very meaningful cash
distribution to our shareholders through the special dividend and
increased recurring dividend, which reflects the yield inherent in our
businesses.
Q: Is each transaction contingent on each other transaction?
-- We have composed this series of transactions as one, integrated
initiative to create value and achieve our strategic objectives. We
are fully committed to successfully executing each transaction and
have no reason to believe that any one would not occur. However, the
increase in the Clear Channel Communications' recurring quarterly
dividend is not conditioned on the completion of the other
transactions.
DEBT / CREDIT
Q: How much debt will each company carry?
-- We expect that all the existing debt will remain at Clear Channel
Communications (the remaining company) and that Clear Channel
Communications will continue to manage its balance sheet, including
overall debt, in a disciplined manner. We will appropriately capitalize
each of Clear Channel Outdoor and Clear Channel Entertainment so as to
provide the optimal capital structure and to enhance levered equity
returns.
Q: Have you determined what the capital structure will be for each of the
companies going forward?
-- We will appropriately capitalize each of Clear Channel Communications,
Clear Channel Outdoor and Clear Channel Entertainment. As we determine
what additional financing will be necessary for this capitalization, we
are highly confident that we will be able to tap the capital markets
for new debt issuances, if necessary.
-- We have had great success financing Clear Channel Communications in the
past, and we have no reason to believe that we will not continue to
have that success in the future.
Q: What will be the ratings profiles of Clear Channel Communications, Clear
Channel Outdoor and Clear Channel Entertainment?
-- We have strong working relationships with the ratings agencies and have
notified them of these initiatives. Over the upcoming weeks and months,
we plan to meet with the rating agencies to provide them further
guidance for each of these businesses.
-- We anticipate that Clear Channel Communications will maintain a strong
balance sheet with leverage levels that are consistent with current
investment grade corporate credit ratings.
2
CLEAR CHANNEL ENTERTAINMENT SPIN-OFF
Q: Why are you spinning off Clear Channel Entertainment?
-- We strongly believe that, as a separate company, Clear Channel
Entertainment will be able to pursue initiatives and strategic
opportunities which will allow it to maximize its shareholder value
more effectively than under Clear Channel Communications, Inc.
-- It will allow Clear Channel Communications to focus on its core
out-of-home advertising business in Broadcasting and Outdoor.
-- It will tap into investor demand for a pure-play entertainment company.
-- It will help provide further clarity to the strong growth potential and
profile of the Clear Channel Entertainment business.
-- It will provide Clear Channel Entertainment with an efficient capital
structure.
-- It will provide Clear Channel Entertainment with a separate currency
which will be available to more strongly align management incentives to
Clear Channel Entertainment's performance, as well as to be used
opportunistically for strategic initiatives.
Q: Will the spin-off be tax-free to shareholders?
-- The spin-off is conditioned on receipt of a tax opinion of counsel and
letter ruling from the Internal Revenue Service (IRS) regarding the
spin-off of Clear Channel Entertainment confirming the tax-free nature
of the spin-off.
CLEAR CHANNEL OUTDOOR IPO
Q: Why is it necessary / valuable to do this IPO of Clear Channel Outdoor?
-- By separately highlighting our outdoor assets, investors in Clear
Channel Communications will be able to more clearly evaluate the
overall valuation of Clear Outdoor.
-- With its own common stock, Clear Channel Outdoor will have the
opportunity to pursue acquisitions using its inherent valuation and
asset mix as opposed to the blended mix reflected in shares of Clear
Channel Communications. Additionally, this currency will be available
to help create stronger alignment between management / employee
incentives and individual business performance.
-- We believe that our outdoor assets have substantial value that is not
currently reflected in the Clear Channel Communications' stock price.
-- Clear Channel Outdoor will be more efficiently capitalized with its own
common stock and an appropriate amount of leverage.
Q: What percentage of Clear Channel Outdoor do you plan to IPO and how big an
IPO does that represent?
-- We anticipate that we will IPO approximately 10% of Clear Channel
Outdoor. The market will dictate the value of that carve-out.
Q: How will Clear Channel International be affected?
3
-- Clear Channel International is and will continue to be a part of Clear
Channel Outdoor. It will be part of the new Clear Channel Outdoor
company, a portion of which will be sold to the public in the IPO.
Q: What do you plan to do with the proceeds from the IPO?
-- The primary use of IPO proceeds will be to repay inter-company debt
owed to Clear Channel Communications.
DIVIDENDS/RETURN OF CAPITAL
Q: What is the size of the special dividend? When will it be paid?
-- The special dividend will be $3.00 per share. This dividend will be
paid at a later date and after completion of the IPO of Clear Channel
Outdoor and the spin-off of Clear Channel Entertainment.
Q: How did you determine the amount ($3.00) of the special dividend?
-- We determined that this was an amount that would be a meaningful return
of capital to our shareholders, while continuing to provide us with a
strong and flexible balance sheet.
Q: How will the special dividend be funded?
-- The special dividend will be funded through a combination of current
cash balances, cash flow from operations, proceeds from the repayment
of inter-company debt and proceeds from any new debt offerings.
Q: Has Clear Channel Communications ever paid a special dividend? If so, when
was the dividend paid and how much was it?
-- Clear Channel Communications paid a special dividend of $3.00 per share
in July 1989.
Q: When will the increase in recurring dividend take effect?
-- The increase in the quarterly dividend from $0.125 per share to $0.1875
per share will commence with the dividend payable on July 15, 2005 to
shareholders of record on June 30, 2005.
Q: Clear Channel Communications has repurchased approximately $2.5 billion in
Clear Channel shares over the past twelve months. Why have you now decided
to pay this special dividend?
-- We believe the special dividend is the most straight-forward way to
return meaningful excess capital to our shareholders. Combined with our
repurchase programs of approximately $2.5 billion over the past 12
months, these initiatives reflect our intent to deploy excess cash for
the benefit of our shareholders in the form of buybacks and dividends,
while not creating undue strain on our assets. Clear Channel
Communications currently has a share repurchase program in place with
approximately $488.5 million remaining under the authorization.
4
CORPORATE GOVERNANCE
Q: Who will comprise the Board of Directors of each new company?
-- The Board for Clear Channel Communications (the remaining company) will
be composed of the same members as the existing Board.
-- Given that we are only selling a minority interest in Clear Channel
Outdoor, Clear Channel Outdoor will be considered a "controlled
company" as defined by applicable stock exchanges. Its board will be
composed of the members of the existing Clear Channel Communications
board plus additional non-overlapping, independent directors
-- We are still determining the appropriate board structure for Clear
Channel Entertainment, but it will comply with all Sarbanes-Oxley,
securities law and stock exchange requirements.
TRANSACTION PROCESS
Q: What is the expected timing for each step of the transactions?
-- We anticipate that the spin-off, the IPO, any new debt issuances, and
the special dividend will all occur at approximately the same time.
-- Based on our best estimate on timing, we expect the transactions to
close by the end of this year.
Q: Have you received approval from the Board of Directors?
-- Yes. Our Board has approved the plan to pursue these initiatives.
However, with the exception of the increase in the recurring dividend,
these transactions are subject to final approval from our Board of
Directors which would occur at a later date.
Q: What are the other key conditions to the transactions?
-- As mentioned, these transactions are subject to final approval from our
Board of Directors.
-- The transactions do not require a shareholder vote.
-- We will be seeking tax opinion of counsel and a letter ruling from the
Internal Revenue Service (IRS) related to the Clear Channel
Entertainment spin-off.
-- The IPO and spin-off are also subject to the filing and effectiveness
of registration statements with the Securities and Exchange Commission
(SEC).
-- We do not foresee these initiatives requiring approval from the FCC.
-- Favorable market conditions.
Q: Do you anticipate that the Clear Channel Entertainment spin-off or the
Clear Channel Outdoor IPO will trigger any material change of control
provisions in any of the companies' contracts?
-- At the current time, we do not expect that these transactions will
trigger any material change of control provisions.
5
CERTAIN STATEMENTS IN THIS DOCUMENT CONSTITUTE "FORWARD-LOOKING STATEMENTS"
WITHIN THE MEANING OF THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995. SUCH
FORWARD-LOOKING STATEMENTS INVOLVE KNOWN AND UNKNOWN RISKS, UNCERTAINTIES AND
OTHER FACTORS WHICH MAY CAUSE THE ACTUAL RESULTS, PERFORMANCE OR ACHIEVEMENTS OF
CLEAR CHANNEL COMMUNICATIONS TO BE MATERIALLY DIFFERENT FROM ANY FUTURE RESULTS,
PERFORMANCE OR ACHIEVEMENTS EXPRESSED OR IMPLIED BY SUCH FORWARD-LOOKING
STATEMENTS. THE WORDS OR PHRASES "GUIDANCE," "BELIEVE," "EXPECT," "ANTICIPATE,"
"ESTIMATES" AND "FORECAST" AND SIMILAR WORDS OR EXPRESSIONS ARE INTENDED TO
IDENTIFY SUCH FORWARD-LOOKING STATEMENTS. IN ADDITION, ANY STATEMENTS THAT REFER
TO EXPECTATIONS OR OTHER CHARACTERIZATIONS OF FUTURE EVENTS OR CIRCUMSTANCES ARE
FORWARD-LOOKING STATEMENTS. THE COMPANY CANNOT PROVIDE ANY ASSURANCE THAT THE
IPO OF CLEAR CHANNEL OUTDOOR, THE SPIN-OFF OF CLEAR CHANNEL ENTERTAINMENT OR THE
PAYMENT OF THE ONE-TIME/SPECIAL DIVIDEND WILL BE COMPLETED, OR THE TERMS OF
WHICH ALL OF THE TRANSACTIONS WILL BE CONSUMMATED.
VARIOUS RISKS THAT COULD CAUSE FUTURE RESULTS TO DIFFER FROM THOSE EXPRESSED BY
THE FORWARD-LOOKING STATEMENTS INCLUDED IN THIS DOCUMENT INCLUDE, BUT ARE NOT
LIMITED TO: RISKS INHERENT IN THE CONTEMPLATED IPO, SPIN-OFF, CASH DIVIDENDS OR
BORROWINGS; COSTS RELATED TO THE PROPOSED TRANSACTIONS; DISTRACTION OF THE
COMPANY AND ITS MANAGEMENT TEAM AS A RESULT OF THE PROPOSED TRANSACTIONS;
CHANGES IN BUSINESS, POLITICAL AND ECONOMIC CONDITIONS IN THE U.S. AND IN OTHER
COUNTRIES IN WHICH CLEAR CHANNEL COMMUNICATIONS CURRENTLY DOES BUSINESS (BOTH
GENERAL AND RELATIVE TO THE ADVERTISING AND ENTERTAINMENT INDUSTRIES);
FLUCTUATIONS IN INTEREST RATES; CHANGES IN OPERATING PERFORMANCE; SHIFTS IN
POPULATION AND OTHER DEMOGRAPHICS; CHANGES IN THE LEVEL OF COMPETITION FOR
ADVERTISING DOLLARS; FLUCTUATIONS IN OPERATING COSTS; TECHNOLOGICAL CHANGES AND
INNOVATIONS; CHANGES IN LABOR CONDITIONS; CHANGES IN GOVERNMENTAL REGULATIONS
AND POLICIES AND ACTIONS OF REGULATORY BODIES; FLUCTUATIONS IN EXCHANGE RATES
AND CURRENCY VALUES; CHANGES IN TAX RATES; AND CHANGES IN CAPITAL EXPENDITURE
REQUIREMENTS; ACCESS TO CAPITAL MARKETS AND CHANGES IN CREDIT RATINGS. OTHER
UNKNOWN OR UNPREDICTABLE FACTORS ALSO COULD HAVE MATERIAL ADVERSE EFFECTS ON
CLEAR CHANNEL COMMUNICATIONS', CLEAR CHANNEL OUTDOOR'S AND CLEAR CHANNEL
ENTERTAINMENT'S FUTURE RESULTS, PERFORMANCE OR ACHIEVEMENTS. IN LIGHT OF THESE
RISKS, UNCERTAINTIES, ASSUMPTIONS AND FACTORS, THE FORWARD-LOOKING EVENTS
DISCUSSED IN THIS DOCUMENT MAY NOT OCCUR. YOU ARE CAUTIONED NOT TO PLACE UNDUE
RELIANCE ON THESE FORWARD-LOOKING STATEMENTS, WHICH SPEAK ONLY AS OF THE DATE
STATED, OR IF NO DATE IS STATED, AS OF THE DATE OF THIS DOCUMENT. OTHER KEY
RISKS ARE DESCRIBED IN CLEAR CHANNEL COMMUNICATIONS' REPORTS FILED WITH THE U.S.
SECURITIES AND EXCHANGE COMMISSION, INCLUDING IN THE SECTION ENTITLED "ITEM 1.
BUSINESS - RISK FACTORS" OF THE COMPANY'S ANNUAL REPORT ON FORM 10-K FOR THE
YEAR ENDED DECEMBER 31, 2004. EXCEPT AS OTHERWISE STATED IN THIS DOCUMENT, CLEAR
CHANNEL COMMUNICATIONS DOES NOT UNDERTAKE ANY OBLIGATION TO PUBLICLY UPDATE OR
REVISE ANY FORWARD-LOOKING STATEMENTS BECAUSE OF NEW INFORMATION, FUTURE EVENTS
OR OTHERWISE.
A REGISTRATION STATEMENT RELATING TO THE IPO OF CLEAR CHANNEL OUTDOOR COMMON
STOCK AND AN INFORMATION STATEMENT RELATING TO THE SPIN-OFF OF CLEAR CHANNEL
ENTERTAINMENT WILL BE FILED WITH THE SECURITIES AND EXCHANGE COMMISSION.
THIS DOCUMENT SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN
OFFER TO BUY ANY SECURITIES, NOR SHALL THERE BE ANY SALE OF CLEAR CHANNEL
OUTDOOR COMMON STOCK IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE
WOULD BE UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES
LAWS OF ANY SUCH STATE. ANY SUCH OFFERING OF SECURITIES WILL BE MADE ONLY BY
MEANS OF A PROSPECTUS INCLUDED IN THE REGISTRATIONS STATEMENT FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION.
6