UPLOAD: SEC-generated letter
Published on September 9, 2005
Mail Stop 3561
September 9, 2005
Mark P. Mays
Clear Channel Outdoor Holdings, Inc.
200 East Basse Road
San Antonio, Texas 78209
Re: Clear Channel Outdoor Holdings, Inc.
Registration Statement on Form S-1
File No. 333-127375
Filed August 10, 2005
Dear Mr. Mays:
We have reviewed your filing and have the following
comments.
Where indicated, we think you should revise your document in
response
to these comments. If you disagree, we will consider your
explanation as to why our comment is inapplicable or a revision is
unnecessary. Please be as detailed as necessary in your
explanation.
In some of our comments, we may ask you to provide us with
supplemental information so we may better understand your
disclosure.
After reviewing this information, we may or may not raise
additional
comments. The page numbers cited in our comments refer to the
courtesy copies of the registration statement.
Please understand that the purpose of our review process is
to
assist you in your compliance with the applicable disclosure
requirements and to enhance the overall disclosure in your filing.
We look forward to working with you in these respects. We welcome
any questions you may have about our comments or on any other
aspect
of our review. Feel free to call us at the telephone numbers
listed
at the end of this letter.
* * * * *
1. We note that the $2.5 billion intercompany note was issued by
your
subsidiary on August 2, 2005 and subsequently distributed to Clear
Channel Communications as a dividend on its common stock. In your
response letter, please explain the business purpose for the
issuance
of the note and the subsequent distribution to Clear Channel
Communications. In particular, tell us the relationship between
the
note`s issuance and the current offering of Class A common stock.
For example, indicate whether the note was issued and distributed
as
consideration for the "transfer to [you] of certain assets related
to
[your] business not currently owned by [you]," as described on
page
1.
2. Please be advised that, prior to any distribution of
preliminary
prospectuses, you should include the price range, the size of the
offering, and all other required information in your amended
registration statement so that we may complete our review. Refer
to
Items 501(b)(2) and 501(b)(3) of Regulation S-K, Rule 430A of
Regulation C, and Release No. 33-6714.
3. Please provide us with any graphics, pictures, or artwork that
will be used in the prospectus.
Outside Front Cover Page
4. The information on the outside front cover page should be
limited
to that required by Item 501 of Regulation S-K or is otherwise
material. Please revise the third paragraph on the outside front
cover page to discuss only such information. Consider, for
example,
whether the conversion features of the Class B stock, which is not
being offered pursuant to the registration statement, need to be
discussed on the cover page.
5. We note that the managing underwriters are not identified on
the
cover page, as required by Item 501(b)(8) of Regulation S-K. To
the
extent that such underwriters have been retained, please disclose
their identities on the cover page.
6. Please refer to the page following the cover page. Move the
paragraph regarding the company`s trademarks to another section of
the prospectus.
Prospectus Summary, page 1
7. The business description provided on pages 1-6 is too lengthy,
contains information better-suited for the "Business" section, and
is
repetitive of the information in the prospectus` body. For
example,
the "Our Competitive Strengths" and "Our Strategy" sections merely
repeat the information provided in the "Business" section. Item
503(a) of Regulation S-K and part IV.C. of Release No. 33-7497
state
that you should limit the summary to a brief overview of the
offering`s key aspects. Please revise accordingly. Further, as
part
of your revisions, we remind you to ensure your summary disclosure
provides a balanced picture of your operations, financial
condition,
and structure. For example, please disclose your history of net
losses, retained deficit and significant debt obligations.
8. The second italicized paragraph explaining what "the company"
"we," and "us" mean is unnecessary and should be deleted. If you
make your disclosure clear from its context, you do not need to
define these terms.
9. You mention on the page 1 that you provide advertising
opportunities through "other out-of-home displays." Your summary,
however, describes only billboards, street furniture, and transit
displays. Please briefly describe the "other out-of-home
displays"
that the company offers.
10. Please refer to the "Leading positions in key markets"
discussion
on page 2. Please explain briefly what being a "designated market
area region" signifies.
11. Please refer to the "Business model with significant financial
flexibility" discussion on page 2. We note the use of vague
phrases
such as "relatively high levels of cash flows" and "consistent
revenue growth." Provide quantified disclosure that supports such
characterizations. Explain what you mean by "relatively" high
levels
of cash flows. Are you comparing your cash flow to your
competitors?
12. Clarify the way in which your management is "proven" on page
3.
13. Please refer to the "Capitalize on global network..." section
on
page 3. Using clearer language, explain the meaning of the
statement
"these attributes allow us to amortize investment costs over a
broad
asset base."
14. Please refer to "The Offering" section on page 7. Explain
what
the company means by "total economic interest of [your] common
stock"
that would be held by Clear Channel Communications after this
offering.
15. Rather than stating "a portion of the outstanding balance,"
please state the amount of the intercompany notes that will be
paid
with the proceeds of this offering. Revise the "Use of Proceeds"
section accordingly.
Risk Factors, page 14
16. Please revise your subheadings so that they better reflect the
risks discussed. Currently, some of your risk factor subheadings
simply describe facts (e.g., "We face intense competition in the
outdoor advertising industry;" "We are a controlled company..."),
without mentioning the adverse result to you or your investors.
Also
revise those risk factor subheadings that are generic and could
apply
to any issuer in any industry, such as "Future acquisitions could
have adverse consequences on our existing business or assets" and
"We
may be adversely affected by the occurrence of extraordinary
events."
17. Please revise to ensure that all risk factor discussions focus
on
describing risks, not just facts about the company and its
business.
For example, the risk factor "Our results of operations vary from
quarter to quarter" on page 16 describes the variation in
financial
results; revise to better describe the resulting risks.
Similarly,
please revise the risk factor "If Clear Channel Communications
spins
off our high vote Class B common stock..." on page 26.
18. Certain risk factor discussions are overly generic and should
be
revised to be more specific. For example, the risk factor
discussion
"Future acquisitions could have adverse consequences..." on page
16
should explain why the company, in particular, faces these risks.
Similarly, the risk factor "Anti-trust regulations may limit
future
acquisitions" on page 16 is overly generic. If your company faces
particular scrutiny from these regulators due to your dominant
market
position, this fact should be discussed in the risk factor.
Please
revise all other risk factors discussions that are similarly
generic.
We have incurred net losses..., page 14
19. Please explain briefly the known reasons that the company
believes may cause a "reduced demand for [your] advertising
products"
and "underutilization of [your] advertising faces."
Government regulation of outdoor advertising..., page 14
20. Please refer to the third full paragraph ("From time to
time..."). Describe the impact that the amortization ordinances
adopted by municipalities within your existing market had on your
business and financial results, if any. Provide a similar
discussion
for the impact of the taxes passed by certain jurisdictions on
your
outdoor advertising revenues.
21. The last paragraph describes international regulations of
outdoor
advertisers, not risks stemming from such regulations. Please
revise
to focus on describing the risks.
Doing business in foreign countries..., page 15
22. Please expand your explanations of how each of the risks
listed
on pages 15-16 could affect the company. In addition, expand your
discussion of the "substantial tax liabilities" that could result
if
cash is repatriated back to the U.S.
The success of our street furniture..., page 16
23. Please explain in greater detail the reasons why you may not
"successfully negotiate or complete [your] contracts" for
advertisements on street furniture and transit products. For
example, if the bidding for these contracts is highly competitive,
this fact should be disclosed.
After this offering, we will have substantial debt obligations...,
page 17
24. Please quantify the debt service obligations anticipated after
this offering and consummation of the related transactions.
Additional restrictions on outdoor advertising..., page 18
25. Please quantify the revenues derived from the outdoor
advertising
for tobacco products and alcohol products in recent fiscal years.
We may be adversely affected by the occurrence of extraordinary
events, page 19
26. Revise to address the anticipated impact of the damage
associated
with Hurricane Katrina in the Gulf Coast region on your business
and
financial condition, if material. Provide corresponding MD&A
disclosure if necessary.
Because Clear Channel Communications controls..., page 20
27. Please discuss the degree of control that Clear Channel
Communications has on your company, including the ability to deter
any change of control attempts, due to the various agreements
between
Clear Channel Communications and your company, e.g., trademark
license agreement, intercompany note, master agreement, and the
corporate services agreements.
If Clear Channel Communications engages in the same type of
business..., page 21
28. Please briefly elaborate on the nature of the "corporate
opportunity policy" and explain why such policy poses a risk. For
example, you should state here that, under the policy, Clear
Channel
Communications, rather than your company, will have the right to
any
corporate opportunity arising from a potential transaction in
which
both companies have an interest.
Any deterioration in the financial condition..., page 24
29. Please explain in greater detail how deterioration in Clear
Channel Communications` financial condition would increase your
company`s borrowing costs or impair your company`s ability to
access
the capital markets. Similarly, explain how Clear Channel
Communications can "enter into agreements or adopt policies" that
may
limit your ability to issue equity, incur debt, or meet your
liquidity needs.
Use of Proceeds, page 29
30. Please state the current outstanding balances of the $1.4
billion
and $73.0 million intercompany notes. We note from page 52 that,
as
of June 30, 2005, the company had approximately $1.7 billion of
debt.
31. Please state the amount of the balance of the "Due from Clear
Channel Communications" intercompany account that will be used to
reduce the outstanding amounts of the $1.4 billion and $73.0
million
intercompany notes. Quantify the expected amount of the notes
that
will be considered as a contribution of capital by Clear Channel
Communications.
32. Based on your disclosure, it appears that the proceeds will be
used to repay only the amounts due under the $1.4 billion and
$73.0
million intercompany notes. The relevance of the $2.5 billion
intercompany note in the Use of Proceeds section is unclear.
Please
either move the discussion of this third note to another part of
the
prospectus or explain its relevance to us.
Unaudited Pro Forma Combined Statements of Operations, page 34
33. Please separately present a line item for the weighted average
common shares outstanding used to calculate historical and pro
forma
basic and diluted income (loss) before cumulative effect of a
change
in accounting principle per common share.
Notes to Unaudited Pro Forma Combined Balance Sheet, page 37
34. Please present these transactions gross on the pro forma
combined
balance sheet.
Management`s Discussion and Analysis..., page 43
Overview, page 43
35. Please discuss the most significant business challenges that
management expects to encounter over the next year and beyond as
well
as the known trends, demands, or uncertainties that may affect the
company`s financial condition. Challenges that should be
discussed
include the transition from being a wholly-owned subsidiary to a
publicly-traded company (including paying for the increased costs
associated with being a public company), the company`s ability to
generate similar rates of growth, and any plans for expansion.
Consider identifying the metrics used to gauge the company`s
financial condition or performance (e.g., revenues per display,
which
is mentioned on page 50).
36. Discuss the financial impact of the increased costs you expect
to
incur as a result of operating as an independent public subsidiary
of
Clear Channel Communications. For example, you indicate in a risk
factor on page 19 that you may incur increased costs associated
with
reduced economies of scale, costs for services and personnel, etc.
What additional expenses will you incur since Clear Channel
Communications will no longer cover these costs?
37. Discuss whether Clear Channel Communications is planning to
dispose of its interest in your company, if known. If it has any
such plans, disclose the details of your plans to establish
functions
independently of Clear Channel Communications, including an
estimate
of the costs that you expect to incur in preparing the company to
operate as a stand-alone entity.
Results of Operations, page 45
38. Please refer to the "Revenues" section on page 45. Quantify
the
"decline in revenues from [your] media products in France" and how
much this decline "offset" the growth. Provide similar quantified
disclosure with respect to any factors that significantly affected
your financial results for a particular period.
In addition, where multiple factors contributed to a particular
financial result, please state, with quantified disclosure, how
much
each factor contributed to that result. For example, we note from
page 46 that your domestic operations contributed approximately
$94.9
million to the revenues during 2003 and that this contribution was
due to both "increased rates and occupancy on [your] bulletin
inventory" and your acquisition of The Ackerley Group. Please
state
how much of this increase was due to the increased rates and
occupancy and how much was due to the Ackerley Group acquisition.
Finally, describe any known trends or uncertainties that had, or
you
expect may reasonably have, a material impact on your operations
and
if you believe that these trends are indicative of future
performance. For example, it appears that rate increases
contributed
significantly to your growth in revenues; you should indicate
whether
management expects similar rate increases in the future.
Similarly,
indicate whether management expects significant growth in the
number
of displays in the future.
39. Please explain the company`s definition of "divisional"
operating
expenses.
Income Taxes, page 47
40. Please revise your disclosure to more specifically discuss the
factors that resulted in your effective tax rate of 89% for the
year
ended December 31, 2004. Also disclose in more detail the nature
of
the reversal of certain deferred tax liabilities, adjustments to
your
deferred tax asset and additional taxes due to certain tax
contingencies.
Domestic Results of Operations, page 49
41. Please disclose in more detail what you mean by fewer display
takedowns and their effect on accelerated depreciation.
Use of OIBDAN and OIBN, page 51
42. We note that you use "OIBDAN" and "OIBN" to evaluate your
segment. Please tell us how you use consolidated non-GAAP
measures
to evaluate your segment. Based on your MD&A and Note M of your
financial statements, it appears to us that your measure of
segment
profit/loss is operating income and not these measures.
43. We note your disclosure concerning the material limitations
associated with the use of "OIBDAN" and "OIBN" as compared to the
most directly comparable GAAP measure, operating income. Please
discuss the manner in which you compensate for these limitations
when
using these non-GAAP measures.
44. You disclose that you use "OIBDAN" and "OIBN" to assess the
ability of your assets to generate cash sufficient to pay interest
on
your indebtedness. It appears to us that you are using these
measures to evaluate liquidity. If you are using these non-GAAP
measures to evaluate liquidity, please reconcile them to the most
closely comparable GAAP measure of liquidity, cash flows from
operating activities. Also expand to disclose the substantive
reasons why you believe the presentation of these measures
provides
useful information to investors regarding liquidity. We note the
following disclosure on page 3: "Our fundamental goal is to
increase
stockholder value by maximizing our cash flow from operations
worldwide."
45. Provide an expanded discussion of management`s analysis of the
company`s performance based on an evaluation of "OIBDAN" and
"OIBN."
Describe the assessments or conclusions that management made.
Cash Flows, page 52
46. Please refer to page 53. Explain more clearly the nature of
the
"changes" in the "Due from Clear Channel Communications" balance
that
resulted in the $43.9 million increase in cash provided by
operations.
47. Please refer to the "Investing Activities" section on page 53.
Explain the reasons for the increase in cash used in investing
activities for the six months ended June 30, 2005. Describe in
greater detail the nature of the "acquisition activity" that
occurred
during 2004.
Liquidity, page 54
48. For the most part, the "Liquidity" section appears to repeat
merely information already disclosed in other sections. The
current
discussion does not provide a clear picture of your ability to
generate cash and meet existing and known short- and long-term
cash
requirements. Please revise to identify, in a clear and useful
manner, all significant sources of liquidity available to your
business after the offering. For example, clarify the nature of
the
"additional intercompany and third-party indebtedness" that
provide
"alternative sources of liquidity." Explain the basis of the
company`s belief that these sources will be available.
49. Please discuss in more detail and quantify your short-term and
long-term cash requirements. Your discussion should include the
funds necessary to maintain current operations and any commitments
for capital expenditures and other expenditures. Refer to Section
IV
of the Commission`s Interpretive Release on Managements Discussion
and Analysis of Financial Condition and Results of Operations
which
is located on our website at: http://www.sec.gov/rules/interp/33-
8350.htm.
50. Your liquidity section should discuss the cash requirements
for
implementing your business strategy, as described in the
prospectus
(e.g., on pages 3-4). For example, provide detailed (and
quantified,
if possible) disclosure regarding how the company`s plans to
"pursue
new cost-effective technologies," such as electronic displays,
will
affect the company`s cash needs (e.g., the effect of any increased
research and development expenses). The liquidity section should
indicate the source of funds for each anticipated cash need.
Please
refer to Release No. 33-8350 for additional guidance regarding the
disclosure expected in the liquidity section.
51. Provide a clearer description of the relationship between your
company and Clear Channel Communications with respect to the
management of cash generated by your company after the offering.
In
this regard, provide detailed and useful discussion of the terms
of
the "cash management arrangement" between the two companies,
including the definition of "excess operating cash" (including how
this "excess" cash differs from the cash generated by your
domestic
and international operations), the terms of the "revolving demand
promissory note" issued by Clear Channel Communications, the terms
of
the "uncommitted revolving demand promissory notes" issued by your
company to Clear Channel Communications, and any limitations on
your
access to the commingled funds. Tell us whether the agreements
governing the "cash management arrangement" will be filed as
exhibits
to the registration statement.
Covenant Compliance, page 55
52. Briefly describe the definition of "change of control" as
provided in the $2.5 billion intercompany note. Also describe the
terms governing the repayment of the note in case the company
conducts an equity or debt offering. Note that Release No. 33-
8350
recommends expanded disclosure of material covenants when they
limit,
or are reasonably likely to limit, a company`s ability to
undertake
financing to a material extent.
53. Please describe briefly the events that constitute events of
default under the intercompany note, the $1.8 billion revolving
credit facility, and the revolving promissory notes issued by your
company and Clear Channel Communications.
Industry Overview, page 61
54. In your response letter, please tell us if any of the "third-
party industry publications and surveys and forecasts" were
prepared
in connection with this registration statement. Confirm, if true,
that these materials are publicly-available.
Industry Metrics, page 61
55. Identify the "leading market research firm" mentioned in the
first sentence of this section. Provide us with copies of the
relevant excerpts that support the assertions made in the first
paragraph of this section.
Business, page 64
Our History, page 65
56. Please provide a brief discussion of the concurrent spin-off
of
CCE Spinco, Inc.
Legal Proceedings, page 76
57. With respect to your discussion of the Cabrera litigation,
quantify the "portion" of damages that is covered by your
insurance.
Management, page 77
58. Once you select them, identify the additional directors and
provide the biographical information for them as required by Item
401
of Regulation S-K. Also, we remind you to file consents for any
persons about to be named as directors who have not signed the
registration statement. See Securities Act Rule 438.
Director Compensation, page 81
59. Please quantify, if known, the "additional annual cash
retainer"
that will be paid to the chairpersons of the various committees.
Stock Ownership of Directors and Executive Officers, page 81
60. We note that the table on page 81 is as of March 11, 2005.
Please update this table to the most recent practicable date.
Employment Agreements, page 88
61. Currently, your exhibit list does not indicate the filing of
any
of the employment agreements discussed in this section. Advise us
whether or not you intend to file the employment agreements
pursuant
to Item 601(b)(10) of Regulation S-K, and if not, why you believe
you
are not required to do so.
Arrangements Between Clear Channel Communications and Us, page 92
62. Please provide us with copies of the agreements discussed in
this
section. We may have further comments after reviewing these
agreements.
Master Agreement, page 92
63. Please refer to the "Other Provisions" section on page 95.
Please briefly describe the "restrictions" on your ability to
repurchase Class A stock, or securities convertible into or
exercisable for Class A stock, as mentioned in the first bullet-
point
sentence.
Corporate Services Agreement, page 96
64. Disclose the amounts you are required to pay to Clear Channel
Communications for the various corporate services or how those
amounts will be determined. For example, explain how you will
determine what is an "allocable portion" of the compensation and
benefits costs in the last paragraph of this section. Similarly
revise the disclosure about the royalty fee on page 101 to
quantify
the percentage of annual revenues that will comprise the basis for
the fee.
Clear Channel Communications Agreements with Third Parties, page
101
65. Please briefly describe the nature of the "services" provided
by
the third-parties. Indicate, to the extent currently known, which
of
these services your company will continue to receive through the
arrangement with Clear Channel Communications.
Description of Capital Stock, page 103
66. Please provide us with copies of the amended and restated
certificate of incorporation. We may have further comments after
reviewing the material.
Material U.S. Federal Tax Considerations..., page 112
67. Avoid using all-capital letters for the last paragraph on page
112. Use alternative means to highlight this text.
Underwriting, page 115
68. Please disclose the factors that will be used by the
underwriters
in determining whether to release the shares subject to the lock-
up
agreements. Indicate whether there is any current intention to
release those shares prior to the expiration of the lock-up
periods.
Available Information, page 117
69. The new address for the Public Reference room is 100 F Street,
N.E., Washington, D.C. Please revise accordingly.
Report of Independent Registered Public Accounting Firm, page F-2
70. Please remove the preamble by amending the registration
statement
before its effectiveness.
Combined Balance Sheets, page F-3
71. Please comply with Rule 5-02(19) and (20) of Regulation S-X.
Combined Statements of Cash Flows, page F-6
72. Please disclose cash paid for income taxes on your behalf by
your
parent.
Combined Statement of Operations, page F-4
73. Please comply with Rule 5-03 of Regulation S-X.
74. Please comply with SAB 11B.
Note B - Definite-lived Intangibles, page F-13
75. Please disclose the weighted average amortization period in
total
and by major asset class under paragraph 44(c) of FAS142.
Note B - Indefinite-lived Intangible, page F-14
76. Please refer to Clear Channel Communication, Inc.`s letter
dated
January 12, 2004 addressed to the staff concerning the billboard
permits. In this letter, Clear Channel stated "...we do not use
the
residual method to value any intangible assets other than
goodwill..." and "(w)e obtained the fair value of our permits from
a
third-party independent appraiser." It appears to us that Clear
Channel tested impairment of their billboard permits under the
direct
method since the adoption of FAS 142. Please tell us why your
disclosures are inconsistent with Clear Channel`s letter.
Note E - Asset Retirement Obligation, page F-18
77. Please tell us the nature of the 2004 changes in your
estimates
of the remediation costs.
Note M - Segment Data, page F-27
78. Please tell us and disclose why you have revenue and assets
derived from the company`s foreign operations in the Domestic
data.
Financial Statement Schedules, page II-3
79. Please provide Schedule II under Rule 5-04 of Regulation S-X.
Exhibits
80. Please file the legality opinion as soon as possible. We may
have comments after we have had an opportunity to it.
* * * * *
As appropriate, please amend your registration statement in
response to these comments. You may wish to provide us with
marked
copies of the amendment to expedite our review. Please furnish a
cover letter with your amendment that keys your responses to our
comments and provides any requested supplemental information.
Detailed cover letters greatly facilitate our review. Please
understand that we may have additional comments after reviewing
your
amendment and responses to our comments.
We urge all persons who are responsible for the accuracy and
adequacy of the disclosure in the filings reviewed by the staff to
be
certain that they have provided all information investors require
for
an informed decision. Since the company and its management are in
possession of all facts relating to a company`s disclosure, they
are
responsible for the accuracy and adequacy of the disclosures they
have made.
Notwithstanding our comments, in the event the company
requests
acceleration of the effective date of the pending registration
statement, it should furnish a letter, at the time of such
request,
acknowledging that:
? should the Commission or the staff, acting pursuant to
delegated
authority, declare the filing effective, it does not foreclose the
Commission from taking any action with respect to the filing;
? the action of the Commission or the staff, acting pursuant to
delegated authority, in declaring the filing effective, does not
relieve the company from its full responsibility for the adequacy
and
accuracy of the disclosure in the filing; and
? the company may not assert staff comments and the declaration
of
effectiveness as a defense in any proceeding initiated by the
Commission or any person under the federal securities laws of the
United States.
In addition, please be advised that the Division of
Enforcement
has access to all information you provide to the staff of the
Division of Corporation Finance in connection with our review of
your
filing or in response to our comments on your filing.
We will consider a written request for acceleration of the
effective date of the registration statement as a confirmation of
the
fact that those requesting acceleration are aware of their
respective
responsibilities under the Securities Act of 1933 and the
Securities
Exchange Act of 1934 as they relate to the proposed public
offering
of the securities specified in the above registration statement.
We
will act on the request and, pursuant to delegated authority,
grant
acceleration of the effective date.
We direct your attention to Rules 460 and 461 regarding
requesting acceleration of a registration statement. Please allow
adequate time after the filing of any amendment for further review
before submitting a request for acceleration. Please provide this
request at least two business days in advance of the requested
effective date.
You may contact Robert Carroll at (202) 551-3362 or Dean
Suehiro at (202) 551-3384 if you have questions regarding comments
on
the financial statements and related matters. Please contact Ted
Yu
at (202) 551-3372, Michele M. Anderson, Legal Branch Chief, at
(202)
551-3833, or me at (202) 551-3810 with any other questions.
Sincerely,
Larry Spirgel
Assistant Director
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Mark P. Mays
Clear Channel Outdoor Holdings, Inc.
September 9, 2005
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