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, 2002,
or
[ ] Transition report pursuant to Section 15(d) of the Securities Exchange
Act of 1934
For the transition period from to
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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
Independent Auditor's Report.....................................................................................3
Financial Statements:
Statements of Net Assets Available for Plan Benefits
as of December 31, 2002 and 2001...............................................................................4
Statement of Changes in Net Assets Available for Plan Benefits
for the Year Ended December 31, 2002...........................................................................5
Notes to Financial Statements....................................................................................6
Supplemental Schedule:
Schedule of Assets Held for Investment Purposes at End of Year..................................................11
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, 2003
By: /s/ Randall T. Mays
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Name: Randall T. Mays
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Title: Executive Vice President/Chief Financial Officer
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2
INDEPENDENT AUDITOR'S REPORT
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, 2002 and 2001, and for the year
ended December 31, 2002, 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 auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audits to obtain reasonable assurance about whether the financial
statements are free of material misstatement. 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 the Clear
Channel Entertainment, Inc. 401(k) Savings Plan as of December 31, 2002 and
2001, and the changes in its net assets available for plan benefits for the year
ended December 31, 2002, in conformity with accounting principles generally
accepted in the United States of America.
Our audit of the Plan's financial statements as of and for the year ended
December 31, 2002, was made for the purpose of forming an opinion on the basic
financial statements taken as a whole. The supplemental schedule of assets held
for investment purposes as of December 31, 2002, is presented for purposes of
additional analysis and is not a required part of the basic financial statements
but is supplementary 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 schedule is the responsibility of the
Plan's management. The supplemental schedule has been subjected to the auditing
procedures applied in the audit of the basic financial statements and, in our
opinion, is fairly stated in all material respects in relation to the basic
financial statements taken as a whole.
/s/ THE HANKE GROUP, P.C.
San Antonio, Texas
June 11, 2003
Page 3
CLEAR CHANNEL ENTERTAINMENT, INC. 401(K) SAVINGS PLAN
STATEMENTS OF NET ASSETS AVAILABLE FOR PLAN BENEFITS
DECEMBER 31, 2002 AND 2001
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ASSETS 2002 2001
INVESTMENTS $27,917,520 $23,254,002
RECEIVABLES:
Employer's contribution 20,847 59,125
Participants' contributions 125,764 265,320
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Total receivables 146,611 324,445
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TOTAL ASSETS 28,064,131 23,578,447
LIABILITIES
Expenses payable 12,289 17,455
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TOTAL LIABILITIES 12,289 17,455
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NET ASSETS AVAILABLE FOR PLAN BENEFITS $28,051,842 $23,560,992
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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, 2002
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ADDITIONS TO NET ASSETS ATTRIBUTED TO:
Investment income:
Net depreciation in fair value of investments $ (4,555,619)
Dividends and interest 414,920
------------
(4,140,699)
Contributions:
Employer 1,252,274
Participants 5,218,053
Rollovers 935,006
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7,405,333
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TOTAL ADDITIONS 3,264,634
DEDUCTIONS FROM NET ASSETS ATTRIBUTED TO:
Benefits paid to participants 2,337,874
Administrative expenses 34,364
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TOTAL DEDUCTIONS 2,372,238
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Net increase before transfer of plan assets 892,396
Transfer of plan assets 3,598,454
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Net increase 4,490,850
NET ASSETS AVAILABLE FOR PLAN BENEFITS:
Beginning of year 23,560,992
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End of year $ 28,051,842
============
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See notes to financial statements. Page 5
CLEAR CHANNEL ENTERTAINMENT, INC. 401(K) SAVINGS PLAN
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2002 AND 2001
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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).
Effective January 1, 2002, SFX Entertainment Profit Sharing and 401(k) Plan
changed its name to Clear Channel Entertainment, Inc. 401(k) Savings Plan.
CONTRIBUTIONS -- Employer contributions to the Plan consist of matching
contributions and elective contributions made annually at the discretion of the
Plan Sponsor's Board of Directors. Employer contributions were $1,252,274 for
the year ended December 31, 2002.
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 from 1 up to 25 percent of pretax
compensation, as defined in the Plan. 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 common stock fund and twelve registered investment funds.
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 an allocation of certain administrative
expenses. Allocations are based on participant earnings or account balances, 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 are used to
reduce employer contributions to the Plan. For the Plan year ended December 31,
2002, approximately $48,000 of forfeitures was used to reduce employer
contributions. There were no unallocated forfeitures at December 31, 2002.
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 $1,000 up to a maximum of $50,000
or 50% of their vested account balance, whichever is less. 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, a participant may elect to
receive either a lump sum amount equal to the value of the participant's vested
interest in his or her account, pay out in a deferred annuity or roll over into
another qualified plan or IRA. Hardship withdrawals are available to Plan
participants upon approval.
Effective June 1, 2001, terminated participants can only receive lump sum
distributions.
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Page 6
CLEAR CHANNEL ENTERTAINMENT, INC. 401(K) SAVINGS PLAN
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 2002 AND 2001
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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 investments are stated
at fair value. The Plan's investments in common stock are reported at fair value
based on quoted market prices. Shares of mutual funds are valued at the net
asset value of shares held by the Plan at December 31. Participant loans are
valued at cost, which approximates fair value.
PAYMENTS OF BENEFITS -- Benefits are recorded when paid.
USE OF ESTIMATES -- The preparation of financial statements in conformity with
generally accepted accounting principles requires management 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
Effective January 1, 2002, the Plan transferred all investments to the Clear
Channel Communications, Inc. - Master Trust (Master Trust) which is held by
Fidelity Management Trust Company (Trustee). 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 primarily of registered investment companies and sponsored
Company stock.
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, 2002
and 2001, was approximately 8.0% and 0%, respectively.
4. PLAN MERGERS
Effective December 30, 2002, all of the net assets of Pace Entertainment
Corporation Employees' 401(k) Profit Sharing Plan merged into the Clear Channel
Entertainment, Inc. 401(k) Savings Plan. The net assets transferred from this
plan were recorded by Clear Channel Entertainment, Inc. 401(k) Savings Plan at
their fair market value at the date of merger. The changes in net assets of the
combined plans are included in the accompanying statement of changes in net
assets available for benefits from the effective date of the merger through
December 31, 2002. A summary of the transferred net assets follows:
Investments at fair value:
Pace Entertainment Corporation Employees'
401(k) Profit Sharing Plan $3,598,454
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Page 7
CLEAR CHANNEL ENTERTAINMENT, INC. 401(K) SAVINGS PLAN
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 2002 AND 2001
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5. INVESTMENTS
Investments that represent 5% or more of the Plan's net assets as of December
31, 2002 and 2001, are:
2002 2001
Invesco Dynamics Fund $ -- $3,516,786
American Century Equity Growth Fund -- 4,747,077
Schwab S&P 500 Investor Shares -- 4,465,235
Clear Channel Communications, Inc. (unitized*) 1,589,022 2,120,594
Schwab Institutional Advantage Money Fund -- 3,058,702
Dodge & Cox Balanced Fund -- 2,010,254
American Aadvantage International Equity Institutional -- 1,158,296
PIMCO Total Return Institutional Fund 3,010,501 1,272,047
MSIFT Midcap Growth Advisor Fund 3,374,461 --
Fidelity Puritan Fund 3,041,136 --
Fidelity Dividend Growth Fund 4,640,256 --
Fidelity Retirement Money Market Fund 3,791,585 --
Fidelity US Equity Index Pool 5,196,349 --
During 2002, the Plan's investments (including gains and losses on investments
bought and sold, as well as held during the year) depreciated in value as
follows:
Registered investment funds $(4,023,423)
Clear Channel Communications, Inc. stock (unitized*) (532,196)
-----------
$(4,555,619)
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*A non-registered fund comprised of the underlying Company stock and a
short-term cash component.
6. RELATED PARTY TRANSACTIONS
Certain Plan investments are shares of mutual funds 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 $162,000 in professional fees related to the
Plan for the year ended December 31, 2002.
7. 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 percent vested in their employer's
contributions.
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Page 8
CLEAR CHANNEL ENTERTAINMENT, INC. 401(K) SAVINGS PLAN
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 2002 AND 2001
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8. 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). Although
the Plan has been amended and restated since receiving the determination letter,
the Plan Administrator and the Plan's tax counsel believe that the Plan is
designed and is currently being operated in compliance with the applicable
requirements of the IRC.
9. SUBSEQUENT EVENT
Effective January 1, 2003, the Clear Channel Entertainment, Inc. 401(k) Savings
Plan was amended and restated to comply with the Economic Growth and Tax Relief
Reconciliation Act of 2001, among other matters.
Effective January 1, 2003, the Company began matching 50% of the employees'
contributions up to 5% of pay.
Effective January 1, 2003, the Fidelity Freedom Funds were added as investment
options. The Fidelity Puritan Fund was frozen to any new contributions or
incoming transfers effective January 1, 2003. Any contribution elections to the
Fidelity Puritan Fund as of December 31, 2002, were mapped to the Fidelity
Freedom 2010 Fund. The default fund was changed to the Fidelity Freedom 2010
Fund effective January 1, 2003.
Effective May 1, 2003, Fidelity Small Cap Stock Mutual Fund was added as an
investment option.
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Page 9
SUPPLEMENTAL SCHEDULE
CLEAR CHANNEL ENTERTAINMENT, INC. 401(K) SAVINGS PLAN
EMPLOYER IDENTIFICATION NUMBER: 13-3977880
PLAN NUMBER: 001
DECEMBER 31, 2002
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Schedule H, Line 4(I): Schedule of Assets Held for Investment Purposes at End of
Year
DESCRIPTION OF INVESTMENT
IDENTITY OF ISSUER, INCLUDING MATURITY DATE,
BORROWER, LESSOR OR RATE OF INTEREST, CURRENT
SIMILAR PARTY COLLATERAL, PAR OR MATURITY VALUE VALUE
------------------------------------------ ------------------------------------------------- -----------------
Janus Twenty Fund $ 309,831
MSIFT Midcap Growth Advisor Fund 3,374,461
PIMCO Total Return Institutional Fund 3,010,501
Lord Abbett Midcap Value - Class A 72,805
* Clear Channel
Communications, Inc. Common Stock (unitized) 1,589,022
* Fidelity Management
Trust Company Puritan Fund 3,041,136
* Fidelity Management
Trust Company Equity Income Fund 192,898
* Fidelity Management
Trust Company Low Priced Stock Fund 952,929
* Fidelity Management
Trust Company Diversified International Fund 1,369,248
* Fidelity Management
Trust Company Dividend Growth Fund 4,640,256
* Fidelity Management
Trust Company Freedom 2040
361
* Fidelity Management
Trust Company Retirement Money Market Fund 3,791,585
* Fidelity Management U.S. Equity Index Pool 5,196,349
Trust Company
Loans to Participants Various due dates with interest
rates of prime plus 1% 376,138
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$ 27,917,520
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* denotes party-in-interest
See accompanying independent auditor's report. Page 11
EXHIBIT INDEX
23.1 Consent of The Hanke Group, P.C.
99.1 Certification of Chief Executive Officer
99.2 Certification of Chief Financial Officer