SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 11-K
[x] Annual report pursuant to Section 15(d) of the Securities Exchange Act of
1934 [No Fee Required]
For the fiscal year ended December 31, 2004,
or
[ ] Transition report pursuant to Section 15(d) of the Securities Exchange
Act of 1934
For the transition period from ________ to _________.
COMMISSION FILE NUMBER
1-9645
CLEAR CHANNEL ENTERTAINMENT, INC. 401(k) SAVINGS PLAN
(Full title of the plan)
CLEAR CHANNEL COMMUNICATIONS, INC.
200 EAST BASSE ROAD
SAN ANTONIO, TEXAS 78209
TELEPHONE (210) 822-2828
(Name of Issuer of the securities held pursuant to the plan
and address of its principal executive office)
CLEAR CHANNEL ENTERTAINMENT, INC. 401(k) SAVINGS PLAN
INDEX TO FORM 11-K
REQUIRED INFORMATION
Report of Independent Registered Public Accounting Firm......................... 3
Financial Statements:
Statements of Net Assets Available for Plan Benefits as of December 31, 2004
and 2003...................................................................... 4
Statement of Changes in Net Assets Available for Plan Benefits Year
Ended December 31, 2004....................................................... 5
Notes to Financial Statements................................................... 6
Supplemental Schedules:
Schedule of Assets (Held at End of Year) as of December 31, 2004................ 11
Schedule of Delinquent Participant Contributions Year Ended December 31, 2004... 12
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
trustees (or other person who administer the employee benefit plan) have duly
caused this annual report to be signed on its behalf by the undersigned,
thereunto duly authorized.
CLEAR CHANNEL ENTERTAINMENT, INC. 401(k) SAVINGS PLAN
Date: June 27, 2005
By: /s/ Randall T. Mays
-------------------------------------------------
Name: Randall T. Mays
Title: Executive Vice President/Chief Financial
Officer
2
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Clear Channel Entertainment, Inc. 401(k) Savings Plan
San Antonio, Texas
We have audited the financial statements of the Clear Channel Entertainment,
Inc. 401(k) Savings Plan as of December 31, 2004 and 2003, and for the year
ended December 31, 2004, as listed in the accompanying contents page. These
financial statements are the responsibility of the Plan's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audits to obtain reasonable assurance about whether the
financial statements are free of material misstatement. The Plan is not required
to have, nor were we engaged to perform, an audit of its internal control over
financial reporting. Our audits included consideration of internal control over
financial reporting as a basis for designing audit procedures that are
appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the Plan's internal control over financial
reporting. Accordingly, we express no such opinion. An audit includes examining
on a test basis, evidence supporting the amounts and disclosures in the
financial statements. An audit also includes assessing the accounting principles
used and significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the net assets available for plan benefits of Clear
Channel Entertainment, Inc. 401(k) Savings Plan as of December 31, 2004 and
2003, and the changes in its net assets available for plan benefits for the year
ended December 31, 2004, in conformity with accounting principles generally
accepted in the United States of America.
Our audits were conducted for the purpose of forming an opinion on the basic
financial statements taken as a whole. The supplemental schedule of assets (held
at end of year) as of December 31, 2004, and schedule of delinquent participant
contributions for the year ended December 31, 2004, are presented for the
purpose of additional analysis and is not a part of the basic financial
statements but is supplemental information required by the Department of Labor's
Rules and Regulations for Reporting and Disclosure under the Employee Retirement
Income Security Act of 1974. The supplemental information is the responsibility
of the Plan's management. The supplemental information has been subjected to the
auditing procedures applied in the audit of the basic financial statements as of
and for the year ended December 31, 2004, and in our opinion, is fairly stated
in all material respects in relation to the basic financial statements taken as
a whole.
San Antonio, Texas
June 22, 2005
Page 3
CLEAR CHANNEL ENTERTAINMENT, INC. 401(k) SAVINGS PLAN
STATEMENTS OF NET ASSETS AVAILABLE FOR PLAN BENEFITS
DECEMBER 31, 2004 AND 2003
2004 2003
ASSETS
INVESTMENT:
Plan interest in Clear Channel Communications, Inc. -
Master Trust $47,132,906 $39,576,313
----------- -----------
RECEIVABLES:
Employer's contribution 45,312 -
Participants' contributions 142,880 127,538
----------- -----------
Total receivables 188,192 127,538
----------- -----------
TOTAL ASSETS 47,321,098 39,703,851
----------- -----------
LIABILITIES
Expenses payable 964 1,167
----------- -----------
TOTAL LIABILITIES 964 1,167
----------- -----------
NET ASSETS AVAILABLE FOR PLAN BENEFITS $47,320,134 $39,702,684
=========== ===========
See notes to financial statements.
Page 4
CLEAR CHANNEL ENTERTAINMENT, INC. 401(k) SAVINGS PLAN
STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR PLAN BENEFITS
YEAR ENDED DECEMBER 31, 2004
ADDITIONS TO NET ASSETS ATTRIBUTED TO:
Investment income:
Net appreciation in fair value of investments $ 2,966,240
Dividends and interest 991,217
------------
Total investment income 3,957,457
------------
Contributions:
Employer 1,902,631
Participants 5,696,930
Rollovers 187,844
------------
Total contributions 7,787,405
------------
TOTAL ADDITIONS 11,744,862
------------
DEDUCTIONS FROM NET ASSETS ATTRIBUTED TO:
Benefits paid to participants 4,122,101
Administrative expenses 5,311
------------
TOTAL DEDUCTIONS 4,127,412
------------
Net increase 7,617,450
NET ASSETS AVAILABLE FOR PLAN BENEFITS:
Beginning of year 39,702,684
------------
End of year $ 47,320,134
============
See notes to financial statements.
Page 5
CLEAR CHANNEL ENTERTAINMENT, INC. 401(K) SAVINGS PLAN
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2004 AND 2003
1. DESCRIPTION OF PLAN
The following description of the Clear Channel Entertainment, Inc. 401(k)
Savings Plan (the Plan) provides only general information. Participants should
refer to the Plan document for a more complete description of the Plan's
provisions.
GENERAL -- The Plan is a defined contribution plan covering all eligible
employees, as defined, of the plan sponsor. It is subject to the provisions of
the Employee Retirement Income Security Act of 1974 (ERISA).
CONTRIBUTIONS -- Employer contributions to the Plan include matching
contributions. Additionally, elective contributions may be made annually at the
discretion of the plan sponsor's Board of Directors. The employer contributions
were $1,902,631 for the year ended December 31, 2004.
Participants may elect to defer a portion of their compensation by an amount
that does not exceed the maximum allowed under IRS rules and regulations.
Participants are always 100% vested in their voluntary contributions. Each year,
participants may contribute up to 25% of their eligible pay on a pre-tax basis,
up to the annual IRS maximum 401(k) deferral limit of $13,000 in 2004. The IRS
also limits the amount of compensation that can be taken into account for Plan
purposes; for 2004, the qualified plan compensation limit was $205,000.
Employees participating in the Plan who will attain age 50 by December 31, 2004,
are eligible to contribute an additional $3,000 in pre-tax "Catch-Up"
contributions. Participants may also contribute amounts representing
distributions from other qualified defined benefit or defined contribution
plans. Participants direct the investment of their contributions into various
investment options offered by the Plan. The Plan currently offers one unitized
common stock fund and nineteen registered investment funds of which two are
closed to new investors.
PARTICIPANT ACCOUNTS -- Each participant's account is credited with the
participant's contribution and allocations of the plan sponsor's contribution
and Plan earnings and charged with certain stock fund expenses and transaction
fees. Allocations are based on participant account balances and participant
directed transactions, as defined. The benefit to which a participant is
entitled is the benefit that can be provided from the participant's vested
account.
FORFEITURES -- Participant forfeitures of non-vested contributions and unclaimed
benefits are used to reduce employer contributions to the Plan. For the Plan
year ended December 31, 2004, approximately $76,000 of forfeitures was used to
reduce employer contributions. There are no unallocated forfeitures at December
31, 2004.
VESTING -- Participants are immediately vested in their contributions plus
actual earnings thereon. Vesting in the plan sponsor's contributions is based on
years of continuous service. A participant is 100% vested after five years of
credited service (or upon the death, disability, or retirement of the
participant).
PARTICIPANT LOANS -- Participants may borrow from $1,000 up to a maximum of the
lesser of i) $50,000 reduced by the excess, if any, of (A) the highest
outstanding balance of loans to the participant from the plan during the one
year period ending on the day before the day the loan is made, over (B) the
outstanding balance of loans to the participant from the plan on the date on
which the loan is made, or ii) 50% of their vested account balance. The loans
are secured by the balance in the participant's account and bear a fixed
interest rate at one percent above prime.
PAYMENT OF BENEFITS -- On termination of service, the Plan provides that
benefits less than $5,000 will be paid by lump sum distribution or rollover. For
benefits over $5,000, benefits may be paid in a lump sum distribution, remain in
the Plan until the earlier of age 65 or death of the participant, or rolled over
into another qualified plan or individual retirement account. Hardship
withdrawals are available to Plan participants upon approval.
Page 6
CLEAR CHANNEL ENTERTAINMENT, INC. 401(K) SAVINGS PLAN
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 2004 AND 2003
2. SUMMARY OF ACCOUNTING POLICIES
BASIS OF ACCOUNTING -- The financial statements of the Plan are prepared using
the accrual method of accounting.
INVESTMENT VALUATION AND INCOME RECOGNITION -- The Plan's interest in the Clear
Channel Communications, Inc. Master Trust is stated at fair value (see Note 3).
PAYMENTS OF BENEFITS -- Benefits are recorded when paid.
USE OF ESTIMATES -- The preparation of financial statements in conformity with
accounting principles generally accepted in the United States of America
requires the plan administrator to make estimates and assumptions that affect
certain reported amounts and disclosures. Accordingly, actual results could
differ from those estimates.
3. PLAN INTEREST IN CLEAR CHANNEL COMMUNICATIONS, INC. MASTER TRUST
The Master Trust was established for the investment of assets of the Plan and
three other Clear Channel Communications, Inc., sponsored retirement plans.
These investments in the Master Trust consist of and are valued as follows:
- Sponsored Company stock - quoted market price
- Registered investment funds - net asset value of shares held at
December 31
- Participant loans - valued at cost which approximates fair value
The purpose of the Master Trust is the collective investment of the assets of
participating employee benefit plans of the Company. The Master Trust's assets
are allocated among participating plans by assigning to each plan those
transactions (primarily contributions and benefit payments) which can be
specifically identified and allocating among all plans (in proportion to the
fair value of the assets assigned to each plan) the income and expenses
resulting from the collective investment of the assets.
The proportionate interest of the Plan in the Master Trust at December 31, 2004
and 2003, was approximately 8.0% and 7.6%, respectively.
The following table presents the fair values of investments and investment
income for the Master Trust:
2004 2003
Investments at fair value:
Clear Channel Communications, Inc.
common stock (unitized) $ 57,868,991 $ 80,224,035
Registered investment funds 516,792,816 383,304,496
Common commingled pool - 48,623,212
Participant loans 11,593,297 9,359,973
------------ ------------
$586,255,104 $521,511,716
============ ============
Investment income:
Net appreciation (depreciation) in
fair value of investments:
Clear Channel Communications, Inc.
common stock (unitized) $(22,795,711)
Registered investment funds 38,032,500
Common commingled pool 3,167,841
------------
18,404,630
Interest and dividends 14,276,857
------------
$ 32,681,487
============
Page 7
CLEAR CHANNEL ENTERTAINMENT, INC. 401(K) SAVINGS PLAN
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 2004 AND 2003
4. INVESTMENTS
Investments that represent 5% or more of the Plan's net assets as of December
31, 2004 and 2003, are:
2004 2003
Clear Channel Communications, Inc.
common stock (unitized*) $ n/a $1,996,389
Fidelity Low-Priced Stock Fund $3,260,408 $2,052,856
Fidelity Diversified International Fund $3,110,915 $2,297,439
PIMCO Total Return Fund - Institutional Class $4,161,630 $3,874,457
MSIFT Mid Cap Growth Portfolio - Adviser Class $6,510,855 $5,224,349
Fidelity Puritan Fund $2,902,401 $2,975,533
Fidelity Dividend Growth Fund $7,461,694 $6,774,825
Fidelity Retirement Money Market Portfolio $3,276,303 $3,511,706
Fidelity U.S. Equity Index Commingled Pool $ - $7,287,769
Spartan U.S. Equity Index Fund $8,198,688 $ -
During 2004, the Plan's investments (including gains and losses on investments
bought and sold, as well as held during the year) appreciated (depreciated) in
value as follows:
Registered investment funds $ 3,064,998
Common commingled pool 461,343
Clear Channel Communications, Inc.
common stock (unitized*) (560,101)
------------
$ 2,966,240
============
* A non-registered fund comprised of the underlying Company stock and a
short-term cash component.
5. RELATED PARTY TRANSACTIONS
Certain Plan investments are managed by Fidelity Management Trust Company
(Fidelity). Fidelity is the trustee as defined by the Plan and, therefore, these
transactions qualify as party-in-interest transactions.
The plan sponsor paid approximately $60,000 in professional fees related to the
Plan for the year ended December 31, 2004.
6. PLAN TERMINATION
Although it has not expressed any intent to do so, the plan sponsor has the
right under the Plan to discontinue its contributions at any time and to
terminate the Plan subject to the provisions of ERISA. In the event of Plan
termination, participants would become 100% vested in the employer's
contributions allocated to their accounts.
Page 8
CLEAR CHANNEL ENTERTAINMENT, INC. 401(K) SAVINGS PLAN
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 2004 AND 2003
7. TAX STATUS
The Internal Revenue Service has determined and informed the plan sponsor by a
letter dated August 5, 2002, that the Plan and related trust are designed in
accordance with applicable sections of the Internal Revenue Code (IRC).
Effective January 1, 2003, the Clear Channel Entertainment, Inc. 401(k) Savings
Plan was amended and restated to reflect recent amendments to the Plan and
clarify certain provisions under the Plan, among other matters. Although the
Plan has been amended and restated since receiving the determination letter, the
Plan Administrator believes that the Plan is designed and is currently being
operated in compliance with the applicable requirements of the IRC.
8. SUBSEQUENT EVENTS
Effective January 1, 2005, Clear Channel began limiting the 401(k) deferral
percentage elections of all highly compensated employees in the Plan to a
maximum of 5% of pay.
The Plan is to be amended, effective January 1, 2005, to allow Hardship
withdrawals for a) the payment of burial or funeral expenses for the
participant's deceased parent, spouse, children or dependents, and b) expenses
for the repair of damages to the participant's principal residence that would
qualify for the casualty deduction under section 165 of the IRC. The Plan is
currently operating in accordance with this policy.
Effective with respect to distributions made on or after March 28, 2005, in the
event of a mandatory distribution greater than $1,000, if a participant does not
elect: a) to have such distribution paid directly to an eligible retirement plan
in the form of a direct rollover, or b) to receive the distribution directly,
then the distribution will be paid in a direct rollover to an individual
retirement plan designated by the Committee.
On April 29, 2005, Clear Channel Communications, Inc. announced that its Board
of Directors had approved a plan of strategic initiatives focused on
significantly increasing shareholder value. The plan includes: a) an initial
public offering of approximately 10% of Clear Channel Outdoor; b) the 100%
spin-off of Clear Channel Entertainment; c) a $3.00 per share special dividend;
and d) a 50% increase in the Company's recurring quarterly dividend.
9. RISK AND UNCERTAINTIES
The Plan may invest in various types of investment securities. Investment
securities are exposed to various risks, such as interest rate, market, and
credit risks. Due to the level of risk associated with certain investment
securities, it is at least reasonably possible that changes in the values of
investment securities will occur in the near term and that such changes could
materially affect the amounts reported in the statement of net assets available
for Plan benefits.
Page 9
SUPPLEMENTAL SCHEDULES
CLEAR CHANNEL ENTERTAINMENT, INC. 401(k) SAVINGS PLAN
SCHEDULE H, LINE 4(i): SCHEDULE OF ASSETS (HELD AT END OF YEAR)
EMPLOYER IDENTIFICATION NUMBER: 13-3977880
PLAN NUMBER: 001
DECEMBER 31, 2004
DESCRIPTION OF INVESTMENT
INCLUDING MATURITY DATE,
IDENTITY OF ISSUER, BORROWER, RATE OF INTEREST, COLLATERAL,
LESSOR OR SIMILAR PARTY PAR OR MATURITY VALUE CURRENT VALUE
---------------------------------------- ------------------------------------ -------------
Harbor Small Cap Value Fund -
Institutional Class $ 91,863
MSIFT Mid Cap Growth Portfolio -
Adviser Class 6,510,885
PIMCO Total Return Fund -
Institutional Class 4,161,630
Lord Abbett Mid-Cap Value Fund - Class Y 960,007
Spartan U.S. Equity Index Fund 8,198,688
* Clear Channel Communications, Inc. Common Stock (unitized) 1,482,753
* Fidelity Management Trust Company Puritan Fund 2,902,401
* Fidelity Management Trust Company Equity-Income Fund 989,123
* Fidelity Management Trust Company Low-Priced Stock Fund 3,260,408
* Fidelity Management Trust Company Diversified International Fund 3,110,915
* Fidelity Management Trust Company Dividend Growth Fund 7,461,694
* Fidelity Management Trust Company Small Cap Stock Fund 405,197
* Fidelity Management Trust Company Freedom Income Fund 42,610
* Fidelity Management Trust Company Freedom 2000 Fund 34,937
* Fidelity Management Trust Company Freedom 2010 Fund 2,199,404
* Fidelity Management Trust Company Freedom 2020 Fund 285,090
* Fidelity Management Trust Company Freedom 2030 Fund 261,368
* Fidelity Management Trust Company Freedom 2040 Fund 155,616
* Fidelity Management Trust Company Retirement Money Market Portfolio 3,276,303
* Fidelity Management Trust Company Growth Company Fund 638,987
Participant Loans Various due dates with interest
rates between 5% - 10.5% 703,027
-------------
$ 47,132,906
=============
* Denotes party-in-interest
See accompanying report of independent registered public accounting firm.
Page 11
CLEAR CHANNEL ENTERTAINMENT, INC. 401(k) SAVINGS PLAN
SCHEDULE H, LINE 4(a): SCHEDULE OF DELINQUENT PARTICIPANT CONTRIBUTIONS
EMPLOYER IDENTIFICATION NUMBER: 13-3977880
PLAN NUMBER: 001
YEAR ENDED DECEMBER 31, 2004
TOTAL THAT CONSTITUTE NONEXEMPT PROHIBITED TRANSACTIONS
TOTAL
PARTICIPANT CONTRIBUTIONS FULLY CORRECTED
CONTRIBUTION CONTRIBUTIONS PENDING UNDER VFCP
TRANSFERRED CONTRIBUTIONS CORRECTED CORRECTION IN AND PTE
LATE TO PLAN NOT CORRECTED OUTSIDE VFCP VFCP 2002-51
$ 569* $ - $ - $ - $ 569*
* Form 5330 was filed on April 15, 2005, excise tax paid, and correction made
under EPCRS and in accordance with VFCP.
See accompanying report of independent registered public accounting firm.
Page 12
EXHIBIT INDEX
23.1 Consent of The Hanke Group, P.C.