10-Q 1 d10q.htm FORM 10-Q FORM 10-Q
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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)

x   QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2011

 

¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM             TO             

Commission File Number

001- 09645

CLEAR CHANNEL COMMUNICATIONS, INC.

(Exact name of registrant as specified in its charter)

 

Texas   74-1787539
(State or other jurisdiction of
incorporation or organization)
  (I.R.S. Employer Identification No.)
200 East Basse Road  
San Antonio, Texas   78209
(Address of principal executive offices)   (Zip Code)

(210) 822-2828

(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  ¨    No  x

Pursuant to the terms of its bond indentures, the registrant is a voluntary filer of reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934, and has filed all such reports as required by its bond indentures during the preceding 12 months.

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes  x    No  ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer  ¨    Accelerated filer  ¨    Non-accelerated filer  x    Smaller reporting company  ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  ¨    No  x

Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date.

 

Class

  

Outstanding at July 29, 2011

Common stock, $.001 par value

   500,000,000

The registrant meets the conditions set forth in General Instructions H(1)(a) and (b) of Form 10-Q and is therefore filing this form in a reduced disclosure format permitted by General Instruction H(2).


Table of Contents

CLEAR CHANNEL COMMUNICATIONS, INC.

INDEX

 

         Page No.  

Part I – Financial Information

  

Item 1.

  Financial Statements of Clear Channel Capital I, LLC (parent company and guarantor of debt of Clear Channel Communications, Inc.)      2   
  Condensed Consolidated Balance Sheets at June 30, 2011 and December 31, 2010      2   
  Consolidated Statements of Operations for the three and six months ended June 30, 2011 and 2010      3   
  Condensed Consolidated Statements of Cash Flows for the six months ended June 30, 2011 and 2010      4   
  Notes to Consolidated Financial Statements      5   

Item 2.

  Management’s Discussion and Analysis of Financial Condition and Results of Operations      24   

Item 3.

  Quantitative and Qualitative Disclosures About Market Risk      38   

Item 4.

  Controls and Procedures      38   

Part II – Other Information

  

Item 1.

  Legal Proceedings      39   

Item 1A.

  Risk Factors      40   

Item 2.

  Unregistered Sales of Equity Securities and Use of Proceeds (intentionally omitted pursuant to General Instruction H(2)(b) of Form 10-Q)      40   

Item 3.

  Defaults Upon Senior Securities (intentionally omitted pursuant to General Instruction H(2)(b) of Form 10-Q)      40   

Item 4.

  (Removed and Reserved)      40   

Item 5.

  Other Information      40   

Item 6.

  Exhibits      41   

Signatures

     42   

 

1


Table of Contents

PART I — FINANCIAL INFORMATION

Item 1. FINANCIAL STATEMENTS OF CLEAR CHANNEL CAPITAL I, LLC

CLEAR CHANNEL CAPITAL I, LLC AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands)

 

     June 30,
2011
(Unaudited)
     December 31,
2010
 
CURRENT ASSETS      

Cash and cash equivalents

     $ 1,219,156            $ 1,920,926      

Accounts receivable, net

     1,453,260            1,373,880      

Other current assets

     352,600            308,367      
  

 

 

    

 

 

 

Total Current Assets

     3,025,016            3,603,173      
PROPERTY, PLANT AND EQUIPMENT      

Structures, net

     1,980,304            2,007,399      

Other property, plant and equipment, net

     1,137,916            1,138,155      
INTANGIBLE ASSETS      

Definite-lived intangibles, net

     2,181,986            2,288,149      

Indefinite-lived intangibles

     3,532,255            3,538,241      

Goodwill

     4,210,765            4,119,326      

Other assets

     813,809            765,939      
  

 

 

    

 

 

 

Total Assets

     $ 16,882,051            $ 17,460,382      
  

 

 

    

 

 

 
CURRENT LIABILITIES      

Accounts payable and accrued expenses

     $ 851,536            $ 956,867      

Accrued interest

     162,279            121,199      

Current portion of long-term debt

     289,943            867,735      

Deferred income

     220,304            152,778      
  

 

 

    

 

 

 

Total Current Liabilities

     1,524,062            2,098,579      

Long-term debt

     19,885,059            19,739,617      

Deferred income taxes

     2,005,472            2,050,196      

Other long-term liabilities

     737,483            776,676      

Commitments and contingent liabilities (Note 6)

     
MEMBER’S DEFICIT      

Noncontrolling interest

     522,409            490,920      

Member’s interest

     2,127,727            2,128,383      

Retained deficit

     (9,740,184)           (9,555,173)     

Accumulated other comprehensive loss

     (179,977)           (268,816)     
  

 

 

    

 

 

 

Total Member’s Deficit

     (7,270,025)           (7,204,686)     
  

 

 

    

 

 

 

Total Liabilities and Member’s Deficit

     $   16,882,051            $   17,460,382      
  

 

 

    

 

 

 

See Notes to Consolidated Financial Statements

 

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Table of Contents

CLEAR CHANNEL CAPITAL I, LLC AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(UNAUDITED)

(In thousands, except per share data)

 

     Three Months Ended
June 30,
     Six Months Ended
June 30,
 
     2011      2010      2011      2010  

Revenue

     $ 1,604,386        $   1,490,009        $ 2,925,212        $ 2,753,787    

Operating expenses:

           

Direct operating expenses (excludes depreciation and amortization)

     642,340          600,916          1,238,595          1,198,263    

Selling, general and administrative expenses (excludes depreciation and amortization)

     408,111          376,637          768,635          725,933    

Corporate expenses (excludes depreciation and amortization)

     56,486          64,109          108,833          128,605    

Depreciation and amortization

     189,641          184,178          373,352          365,512    

Other operating income – net

     3,229          3,264          19,943          7,036    
  

 

 

    

 

 

    

 

 

    

 

 

 

Operating income

     311,037          267,433          455,740          342,510    

Interest expense

     358,950          385,579          728,616          771,374    

Equity in earnings of nonconsolidated affiliates

     5,271          3,747          8,246          5,618    

Other income (expense) – net

     (4,517)         (787)         (6,553)         57,248    
  

 

 

    

 

 

    

 

 

    

 

 

 

Loss before income taxes

     (47,159)         (115,186)         (271,183)         (365,998)   

Income tax benefit

     9,184          37,979          101,845          109,164    
  

 

 

    

 

 

    

 

 

    

 

 

 

Consolidated net loss

     (37,975)         (77,207)         (169,338)         (256,834)   

Less amount attributable to noncontrolling interest

     15,204          9,117          15,673          4,904    
  

 

 

    

 

 

    

 

 

    

 

 

 

Net loss attributable to the Company

     $ (53,179)       $ (86,324)       $ (185,011)       $ (261,738)   
  

 

 

    

 

 

    

 

 

    

 

 

 

Other comprehensive income (loss), net of tax:

           

Foreign currency translation adjustments

     36,565          (74,223)         75,872          (113,672)   

Unrealized gain (loss) on securities and derivatives:

           

Unrealized holding gain (loss) on marketable securities

     11,057          (412)         14,009          3,533    

Unrealized holding gain (loss) on cash flow derivatives

     (1,399)         (4,992)         11,943          (8,146)   

Reclassification adjustment

     59          (1,366)         148          (1,141)   
  

 

 

    

 

 

    

 

 

    

 

 

 

Comprehensive loss

     (6,897)         (167,317)         (83,039)         (381,164)   

Less amount attributable to noncontrolling interest

     6,435          (11,572)         13,133          (16,240)   
  

 

 

    

 

 

    

 

 

    

 

 

 

Comprehensive loss attributable to the Company

     $ (13,332)       $ (155,745)       $ (96,172)       $ (364,924)   
  

 

 

    

 

 

    

 

 

    

 

 

 

See Notes to Consolidated Financial Statements

 

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CLEAR CHANNEL CAPITAL I, LLC AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

(In thousands)

 

         Six Months Ended June 30,      
     2011      2010  

Cash flows from operating activities:

     

Consolidated net loss

     $ (169,338)           $ (256,834)     

Reconciling items:

     

Depreciation and amortization

     373,352            365,512      

Deferred taxes

     (90,895)           (135,808)     

Gain on disposal of operating assets

     (19,943)           (7,036)     

(Gain) loss on extinguishment of debt

     5,721            (60,289)     

Provision for doubtful accounts

     8,300            7,791      

Share-based compensation

     8,029            16,624      

Equity in earnings of nonconsolidated affiliates

     (8,246)           (5,618)     

Amortization of deferred financing charges and note discounts, net

     100,233            105,596      

Other reconciling items – net

     13,998            3,757      

Changes in operating assets and liabilities:

     

Increase in accounts receivable

     (18,262)           (66,994)     

Increase in deferred income

     61,427            42,320      

Increase (decrease) in accrued expenses

     (108,083)           26,003      

Decrease in accounts payable and other liabilities

     (74,089)           (7,837)     

Increase in accrued interest

     20,240            45,188      

Changes in other operating assets and liabilities, net of effects of acquisitions and dispositions

     (38,944)           (19,583)     
  

 

 

    

 

 

 

Net cash provided by operating activities

     63,500            52,792      

Cash flows from investing activities:

     

Purchases of property, plant and equipment

     (140,452)           (103,409)     

Purchases of businesses

     (33,181)           —      

Acquisition of operating assets

     (4,781)           (10,814)     

Proceeds from disposal of assets

     48,116            11,107      

Change in other – net

     856            (2,437)     
  

 

 

    

 

 

 

Net cash used for investing activities

     (129,442)           (105,553)     

Cash flows from financing activities:

     

Draws on credit facilities

     10,000            148,304      

Payments on credit facilities

     (958,074)           (104,541)     

Proceeds from long-term debt

     1,726,254            6,844      

Payments on long-term debt

     (1,362,496)           (247,807)     

Deferred financing charges

     (46,597)           —      

Repurchases of long-term debt

     —            (125,000)     

Change in other – net

     (4,915)           (4,303)     
  

 

 

    

 

 

 

Net cash used for financing activities

     (635,828)           (326,503)     

Net decrease in cash and cash equivalents

     (701,770)           (379,264)     

Cash and cash equivalents at beginning of period

     1,920,926            1,883,994      
  

 

 

    

 

 

 

Cash and cash equivalents at end of period

     $   1,219,156            $   1,504,730      
  

 

 

    

 

 

 

See Notes to Consolidated Financial Statements

 

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CLEAR CHANNEL CAPITAL I, LLC AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

NOTE 1 — BASIS OF PRESENTATION AND NEW ACCOUNTING STANDARDS

Preparation of Interim Financial Statements

As permitted by the rules and regulations of the Securities and Exchange Commission (the “SEC”), the unaudited financial statements and related footnotes included in Item 1 of Part I of this Quarterly Report on Form 10-Q are those of Clear Channel Capital I, LLC (the “Company” or the “Parent Company”), the direct parent of Clear Channel Communications, Inc., a Texas corporation (“Clear Channel” or the “Subsidiary Issuer”), and contain certain footnote disclosures regarding the financial information of Clear Channel and Clear Channel’s domestic wholly-owned subsidiaries that guarantee certain of Clear Channel’s outstanding indebtedness.

The accompanying consolidated financial statements were prepared by the Company pursuant to the rules and regulations of the SEC and, in the opinion of management, include all normal and recurring adjustments necessary to present fairly the results of the interim periods shown. Certain information and footnote disclosures normally included in financial statements prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) have been condensed or omitted pursuant to such SEC rules and regulations. Management believes that the disclosures made are adequate to make the information presented not misleading. Due to seasonality and other factors, the results for the interim periods are not necessarily indicative of results for the full year. The financial statements contained herein should be read in conjunction with the consolidated financial statements and notes thereto included in the Company’s 2010 Annual Report on Form 10-K and Quarterly Report on Form 10-Q for the period ended March 31, 2011.

The consolidated financial statements include the accounts of the Company and its subsidiaries. Investments in companies in which the Company owns 20 percent to 50 percent of the voting common stock or otherwise exercises significant influence over operating and financial policies of the company are accounted for under the equity method. All significant intercompany transactions are eliminated in the consolidation process.

Certain prior-period amounts have been reclassified to conform to the 2011 presentation.

Information Regarding the Company

The Company is a limited liability company organized under Delaware law, with all of its interests being held by Clear Channel Capital II, LLC, a direct, wholly-owned subsidiary of CC Media Holdings, Inc. (“CCMH”). CCMH was formed in May 2007 by private equity funds sponsored by Bain Capital Partners, LLC and Thomas H. Lee Partners, L.P. (together, the “Sponsors”) for the purpose of acquiring the business of Clear Channel. The acquisition (the “acquisition” or the “merger”) was consummated on July 30, 2008 pursuant to the Agreement and Plan of Merger, dated November 16, 2006, as amended on April 18, 2007, May 17, 2007 and May 13, 2008 (the “Merger Agreement”).

Omission of Per Share Information

Net loss per share information is not presented as Clear Channel Capital II, LLC is the sole member of the Company and owns 100% of the limited liability company interests. The Company does not have any publicly traded common stock or potential common stock.

New Accounting Pronouncements

In December 2010, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2010-29, Business Combinations (Topic 805): Disclosure of Supplementary Pro Forma Information for Business Combinations. This ASU updates Topic 805 to specify that if a public entity presents comparative financial statements, the entity should disclose revenue and earnings of the combined entity as though the business combination that occurred during the current year had occurred as of the beginning of the comparable prior annual reporting period only. The amendments of this ASU are effective prospectively for business combinations for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after December 15, 2010. The Company adopted the provisions of ASU 2010-29 on January 1, 2011 without material impact to the Company’s disclosures.

In April 2011, the FASB issued ASU No. 2011-04, Fair Value Measurement (Topic 820): Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRSs. The amendments in this ASU change the wording used to describe many of the requirements in U.S. GAAP for measuring fair value and for disclosing information about fair value measurements. For many of the requirements, the FASB does not intend for the amendments in this ASU to result in a change in the application of the requirements in Topic 820. Some of the amendments clarify the FASB’s intent about the application of existing fair value measurement requirements. Other amendments change a particular principle or requirement for measuring fair value or for

 

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Table of Contents

CLEAR CHANNEL CAPITAL I, LLC AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(UNAUDITED)

 

disclosing information about fair value measurements. The amendments in this ASU are to be applied prospectively for interim and annual periods beginning after December 15, 2011. The Company does not expect the provisions of ASU 2011-04 to have a material effect on its financial position or results of operations.

In June 2011, the FASB issued ASU No. 2011-05, Comprehensive Income (Topic 220): Presentation of Comprehensive Income. This ASU improves the comparability, consistency, and transparency of financial reporting and increases the prominence of items reported in other comprehensive income by eliminating the option to present components of other comprehensive income as part of the statement of changes in stockholders’ equity. The amendments require that all nonowner changes in stockholders’ equity be presented either in a single continuous statement of comprehensive income or in two separate but consecutive statements. The changes apply for interim and annual financial statements and should be applied retrospectively, effective for fiscal years, and interim periods within those years, beginning after December 15, 2011. Early adoption is permitted. The Company currently complies with the provisions of this ASU by presenting the components of comprehensive income in a single continuous financial statement within its consolidated statement of operations for both interim and annual periods.

NOTE 2 — PROPERTY, PLANT AND EQUIPMENT, INTANGIBLE ASSETS AND GOODWILL

Acquisitions

On April 29, 2011, Clear Channel Acquisition, LLC, the Company’s wholly-owned subsidiary, purchased the traffic business of Westwood One, Inc. (“Westwood One”) for $24.3 million. Immediately after closing, the acquired subsidiaries repaid pre-existing, intercompany debt owed by the subsidiaries to Westwood One in the amount of $95.0 million. The acquisition resulted in an increase of $17.2 million to property, plant and equipment, $36.3 million to intangible assets and $66.0 million to goodwill.

Property, Plant and Equipment

The Company’s property, plant and equipment consisted of the following classes of assets at June 30, 2011 and December 31, 2010, respectively:

 

(In thousands)    June 30,      December 31,  
     2011      2010  

Land, buildings and improvements

     $ 656,619           $ 652,575     

Structures

     2,740,631           2,623,561     

Towers, transmitters and studio equipment

     390,091           397,434     

Furniture and other equipment

     330,153           282,385     

Construction in progress

     83,337           65,173     
                 
     4,200,831           4,021,128     

Less: accumulated depreciation

     1,082,611           875,574     
                 

Property, plant and equipment, net

     $   3,118,220           $   3,145,554     
                 

Definite-lived Intangible Assets

The Company has definite-lived intangible assets which consist primarily of transit and street furniture contracts, talent and representation contracts, customer and advertiser relationships, and site-leases, all of which are amortized over the respective lives of the agreements, or over the period of time the assets are expected to contribute directly or indirectly to the Company’s future cash flows. The Company periodically reviews the appropriateness of the amortization periods related to its definite-lived assets. These assets are recorded at cost.

 

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CLEAR CHANNEL CAPITAL I, LLC AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(UNAUDITED)

 

The following table presents the gross carrying amount and accumulated amortization for each major class of definite-lived intangible assets at June 30, 2011 and December 31, 2010, respectively:

 

(In thousands)    June 30, 2011      December 31, 2010  
     Gross Carrying
Amount
     Accumulated
Amortization
     Gross Carrying
Amount
     Accumulated
Amortization
 

Transit, street furniture and other outdoor contractual rights

     $ 810,930           $ 293,416           $ 789,867           $ 241,461     

Customer / advertiser relationships

     1,210,289           349,805           1,210,205           289,824     

Talent contracts

     350,612           119,344           317,352           99,050     

Representation contracts

     232,412           119,447           231,623           101,650     

Other

     558,287           98,532           551,197           80,110     
                                   

Total

     $ 3,162,530           $ 980,544           $ 3,100,244           $ 812,095     
                                   

Total amortization expense related to definite-lived intangible assets was $80.4 million and $87.1 million for the three months ended June 30, 2011 and 2010, respectively, and $159.5 million and $168.2 million for the six months ended June 30, 2011 and 2010, respectively.

As acquisitions and dispositions occur in the future, amortization expense may vary. The following table presents the Company’s estimate of amortization expense for each of the five succeeding fiscal years for definite-lived intangible assets:

(In thousands)

2012

   $   302,913   

2013

     283,773   

2014

     262,101   

2015

     239,430   

2016

     218,479   

Indefinite-lived Intangible Assets

The Company’s indefinite-lived intangible assets consist of Federal Communications Commission (“FCC”) broadcast licenses and billboard permits as follows:

 

(In thousands)    June 30,      December 31,  
     2011      2010  

FCC broadcast licenses

     $     2,418,366           $     2,423,828     

Billboard permits

     1,113,889           1,114,413     
                 

Total indefinite-lived intangible assets

     $ 3,532,255           $ 3,538,241     
                 

Goodwill

The following table presents the changes in the carrying amount of goodwill in each of the Company’s reportable segments.

 

(In thousands)    Radio     Americas
Outdoor
     International
Outdoor
    Other      Total  

Balance as of December 31, 2009

   $   3,146,869      $ 585,249       $ 276,343      $   116,544       $   4,125,005   

Impairment

                    (2,142             (2,142

Acquisitions

                           342         342   

Dispositions

     (5,325                            (5,325

Foreign currency

            285         3,299                3,584   

Other

     (1,346             (792             (2,138
                                          

Balance as of December 31, 2010

   $ 3,140,198      $ 585,534       $ 276,708      $ 116,886       $ 4,119,326   
                                          

Acquisitions

     78,246                       211         78,457   

Dispositions

     (9,400                            (9,400

Foreign currency

            327         22,083                22,410   

Other adjustments

     (28                            (28
                                          

Balance as of June 30, 2011

   $ 3,209,016      $ 585,861       $ 298,791      $ 117,097       $ 4,210,765   
                                          

 

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CLEAR CHANNEL CAPITAL I, LLC AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(UNAUDITED)

 

NOTE 3 — DEBT

Long-term debt at June 30, 2011 and December 31, 2010 consisted of the following:

 

(In thousands)    June 30,
2011
     December 31,
2010
 

Senior Secured Credit Facilities:

     

Term Loan Facilities (1)

     $ 10,493,847            $ 10,885,447      

Revolving Credit Facility Due 2014

     1,280,550            1,842,500      

Delayed Draw Facilities Due 2016

     976,776            1,013,227      

Receivables Based Facility Due 2014

     —            384,232      

Priority Guarantee Notes Due 2021

     1,750,000            —      

Other Secured Long-term Debt

     6,232            4,692      
                 

Total Consolidated Secured Debt

     14,507,405            14,130,098      
                 

Senior Cash Pay Notes

     796,250            796,250      

Senior Toggle Notes

     829,831            829,831      

Clear Channel Senior Notes

     2,078,415            2,911,393      

Subsidiary Senior Notes

     2,500,000            2,500,000      

Other long-term debt

     58,476            63,115      

Purchase accounting adjustments and original issue discount

     (595,375)           (623,335)     
                 
     20,175,002            20,607,352      

Less: current portion

     289,943            867,735      
                 

Total long-term debt

     $     19,885,059            $     19,739,617      
                 

 

  (1) Term Loan Facilities mature at various dates from 2014 through 2016.

Clear Channel’s weighted average interest rate at June 30, 2011 was 6.2%. The aggregate market value of Clear Channel’s debt based on market prices for which quotes were available was approximately $18.4 billion and $18.7 billion at June 30, 2011 and December 31, 2010, respectively.

Refinancing Transactions

During the first quarter of 2011, Clear Channel amended its senior secured credit facilities and its receivables based credit facility and issued $1.0 billion aggregate principal amount of 9.0% Priority Guarantee Notes due 2021 (the “Initial Notes”). Clear Channel capitalized $39.5 million in fees and expenses associated with the offering of the Initial Notes and is amortizing them through interest expense over the life of the Initial Notes.

Clear Channel used the proceeds of the Initial Notes offering to prepay $500.0 million of the indebtedness outstanding under its senior secured credit facilities. The $500.0 million prepayment was allocated on a ratable basis between outstanding term loans and revolving credit commitments under Clear Channel’s revolving credit facility, thus permanently reducing the revolving credit commitments under Clear Channel’s revolving credit facility to $1.9 billion. The prepayment resulted in the accelerated expensing of $5.7 million of loan fees recorded in “Other income (expense) – net”.

The proceeds from the offering of the Initial Notes, along with available cash on hand, were also used to repay at maturity $692.7 million in aggregate principal amount of Clear Channel’s 6.25% senior notes, which matured during the first quarter of 2011.

Clear Channel obtained, concurrent with the offering of the Initial Notes, amendments to its credit agreements with respect to its senior secured credit facilities and its receivables based credit facility (revolving credit commitments under the receivables based facility were reduced from $783.5 million to $625.0 million), which were required as a condition to complete the offering. The amendments, among other things, permit Clear Channel to request future extensions of the maturities of its senior secured credit facilities, provide Clear Channel with greater flexibility in the use of its accordion capacity, provide Clear Channel with greater flexibility to incur new debt, provided that the proceeds from such new debt are used to pay down senior secured credit facility

 

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CLEAR CHANNEL CAPITAL I, LLC AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(UNAUDITED)

 

indebtedness, and provide greater flexibility for Clear Channel’s indirect subsidiary, Clear Channel Outdoor Holdings, Inc. (“CCOH”), and its subsidiaries to incur new debt, provided that the net proceeds distributed to Clear Channel from the issuance of such new debt are used to pay down senior secured credit facility indebtedness.

In June 2011, Clear Channel issued an additional $750.0 million in aggregate principal amount of its 9.0% Priority Guarantee Notes due 2021 (the “Additional Notes” or, together with the Initial Notes, the “9.0% Priority Guarantee Notes”) at an issue price of 93.845% of the principal amount of the Additional Notes. Interest on the Additional Notes accrued from February 23, 2011, and accrued interest was paid by the purchaser at the time of delivery of the Additional Notes on June 14, 2011. The Initial Notes and the Additional Notes have identical terms and are treated as a single class.

Of the $703.8 million of proceeds from the issuance of the Additional Notes ($750.0 million aggregate principal amount net of $46.2 million of discount), Clear Channel intends to use (i) $203.8 million to repay at maturity a portion of Clear Channel’s 5% senior notes which mature in March 2012 and (ii) the remaining $500 million for general corporate purposes (to replenish cash on hand that Clear Channel previously used to pay senior notes at maturity on March 15, 2011 and May 15, 2011). In addition, such proceeds may be used in connection with one or more future transactions involving a permanent repayment of a portion of Clear Channel’s senior secured credit facilities as part of Clear Channel’s long-term efforts to optimize its capital structure.

Clear Channel capitalized an additional $6.9 million in fees and expenses associated with the offering of the Additional Notes and is amortizing them through interest expense over the life of the Additional Notes.

Debt Repurchases, Maturities and Other

During the second quarter of 2011, Clear Channel repaid its 4.4% senior notes at maturity for $140.2 million (net of $109.8 million principal amount held by and repaid to a subsidiary of Clear Channel), plus accrued interest, with available cash on hand. Prior to, and in connection with the Additional Notes offering, Clear Channel repaid all amounts outstanding under its receivables based credit facility on June 8, 2011, using cash on hand. This voluntary repayment did not reduce the commitments under this facility and Clear Channel may reborrow amounts under this facility at any time. In addition, on June 27, 2011, Clear Channel made a voluntary payment of $500.0 million on its revolving credit facility, which did not reduce the commitments under this facility and Clear Channel may reborrow amounts under this facility at any time.

During the first six months of 2010, Clear Channel Investments, Inc. (“CC Investments”), an indirect wholly-owned subsidiary of the Company, repurchased $185.2 million aggregate principal amount of certain of Clear Channel’s outstanding senior toggle notes for $125.0 million through an open market purchase. Notes repurchased by CC Investments are eliminated in consolidation.

NOTE 4 — SUPPLEMENTAL DISCLOSURES

Divestiture Trusts

The Company owns certain radio stations which, under current FCC rules, are not permitted or transferable. These radio stations were placed in a trust in order to comply with FCC rules at the time of the closing of the merger that resulted in the Company’s acquisition of Clear Channel. The Company is the beneficial owner of the trust, but the radio stations are managed by an independent trustee. The Company will have to divest all of these radio stations unless any stations may be owned by the Company under then-current FCC rules, in which case the trust will be terminated with respect to such stations. The trust agreement stipulates that the Company must fund any operating shortfalls of the trust activities, and any excess cash flow generated by the trust is distributed to the Company. The Company is also the beneficiary of proceeds from the sale of stations held in the trust. The Company consolidates the trust in accordance with ASC 810-10, which requires an enterprise involved with variable interest entities to perform an analysis to determine whether the enterprise’s variable interest or interests give it a controlling financial interest in the variable interest entity, as the trust was determined to be a variable interest entity and the Company is its primary beneficiary. During the six months ended June 30, 2011, the Company’s Radio segment sold stations from the trust and recorded a gain of $6.7 million included in “Other operating income – net.”

 

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CLEAR CHANNEL CAPITAL I, LLC AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(UNAUDITED)

 

Income Tax Benefit

The Company’s income tax benefit for the three and six months ended June 30, 2011 and 2010, respectively, consisted of the following components:

 

(In thousands)    Three Months Ended
June  30,
     Six Months Ended
June 30,
 
     2011      2010      2011      2010  

Current tax benefit (expense)

     $         (21,045)         $         (13,987)         $         10,950          $         (26,644)   

Deferred tax benefit

     30,229          51,966          90,895          135,808    
  

 

 

    

 

 

    

 

 

    

 

 

 

Income tax benefit

     $ 9,184          $ 37,979          $ 101,845          $ 109,164    
  

 

 

    

 

 

    

 

 

    

 

 

 

The effective tax rate for the three and six months ended June 30, 2011 was 19.5% and 37.6%, respectively. The effective tax rate for the three months ended June 30, 2011 was primarily impacted by the deferred tax expense recorded as a result of changes to tax rates and laws in certain domestic jurisdictions and the vesting of equity awards. The effective tax rate for the six months ended June 30, 2011 was primarily impacted by the Company’s settlement of U.S. federal and state tax examinations during the period. Pursuant to the settlements, the Company recorded a reduction to income tax expense of approximately $12.3 million to reflect the net tax benefits of the settlements. In addition, the effective rate for the six months ended June 30, 2011 was impacted by the Company’s ability to benefit from certain tax loss carryforwards in foreign jurisdictions due to increased taxable income during 2011, where the losses previously did not provide a benefit.

The Company’s effective tax rate for the three and six months ended June 30, 2010 was 33.0% and 29.8%, respectively. The 2010 effective rates were impacted primarily as a result of the Company’s inability to benefit from tax losses in certain foreign jurisdictions due to the uncertainty of the ability to utilize those losses in future years.

During the six months ended June 30, 2011 and 2010, cash paid for interest and income taxes, net of income tax refunds of $1.2 million and $5.5 million, respectively, was as follows:

 

(In thousands)    Six Months Ended June 30,  
     2011      2010  

Interest

     $     610,549             $     626,813       

Income taxes

     62,080             14,457       

NOTE 5 — FAIR VALUE MEASUREMENTS

Marketable Equity Securities

The Company holds marketable equity securities and interest rate swaps that are measured at fair value on each reporting date.

The marketable equity securities are measured at fair value using quoted prices in active markets. Due to the fact that the inputs used to measure the marketable equity securities at fair value are observable, the Company has categorized the fair value measurements of the securities as Level 1 in accordance with ASC 820-10-35. The cost, unrealized holding gains or losses, and fair value of the Company’s investments at June 30, 2011 and December 31, 2010 are as follows:

 

(In thousands)    June 30, 2011      December 31, 2010  

Investments

   Cost      Gross
Unrealized
Losses
     Gross
Unrealized
Gains
     Fair
Value
     Cost      Gross
Unrealized
Losses
     Gross
Unrealized
Gains
     Fair
Value
 

Available-for-sale

   $     12,614       $       $   79,928       $   92,542       $   12,614       $       $ 57,945       $ 70,559   

Interest Rate Swap Agreement

The Company’s $2.5 billion notional amount interest rate swap agreement is designated as a cash flow hedge and the effective portions of the gain or loss on the swap are reported as a component of other comprehensive income. The Company entered into the swap to effectively convert a portion of its floating-rate debt to a fixed basis, thus reducing the impact of interest-rate changes on future interest expense. The interest rate swap agreement matures in 2013.

 

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(UNAUDITED)

 

The swap agreement is valued using a discounted cash flow model that takes into account the present value of the future cash flows under the terms of the agreement by using market information available as of the reporting date, including prevailing interest rates and credit spread. Due to the fact that the inputs are either directly or indirectly observable, the Company classified the fair value measurements of its swap agreement as Level 2 in accordance with ASC 820-10-35.

The Company continually monitors its positions with, and credit quality of, the financial institution which is counterparty to its interest rate swap. The Company may be exposed to credit loss in the event of nonperformance by the counterparty to the interest rate swap. However, the Company considers this risk to be low. If a derivative instrument no longer qualifies as a cash flow hedge, hedge accounting is discontinued and the gain or loss that was recorded in other comprehensive income is recognized currently in income.

In accordance with ASC 815-20-35-9, as the critical terms of the swap and the floating-rate debt being hedged were the same at inception and remained the same during the current period, no ineffectiveness was recorded in earnings related to the interest rate swap.

The fair value of the Company’s interest rate swap designated as a hedging instrument and recorded in “Other long-term liabilities” was $194.0 million and $213.1 million at June 30, 2011 and December 31, 2010, respectively.

The following table details the beginning and ending accumulated other comprehensive loss and the current period activity, net of tax, related to the interest rate swap agreement:

 

(In thousands)    Accumulated other
comprehensive loss
 

Balance at January 1, 2011

       $         134,067        

Other comprehensive income

     (11,943)       
        

Balance at June 30, 2011

       $ 122,124        
        

Other Comprehensive Income (Loss)

The following table discloses the amount of income tax benefit (expense) allocated to each component of other comprehensive income for the three and six months ended June 30, 2011 and 2010, respectively:

 

(In thousands)    Three Months Ended
June 30,
     Six Months Ended
June 30,
 
     2011      2010      2011      2010  

Unrealized holding gain (loss) on marketable securities

       $   (12,643)           $   3,470          $ (13,772)         $     (914)   

Unrealized holding gain (loss) on cash flow derivatives

     835          2,999          (7,129)         4,887    
                                   

Income tax benefit (expense)

       $ (11,808)           $ 6,469          $ (20,901)         $ 3,973    
                                   

NOTE 6 — COMMITMENTS, CONTINGENCIES AND GUARANTEES

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

In 2006, two of the Company’s operating businesses (L&C Outdoor Ltda. (“L&C”) and Publicidad Klimes Sao Paulo Ltda. (“Klimes”), respectively) in the Sao Paulo, Brazil market received notices of infraction from the state taxing authority, seeking to impose a value added tax (“VAT”) on such businesses, retroactively for the period from December 31, 2001 through January 31, 2006. The taxing authority contends that the Company’s businesses fall within the definition of “communication services” and as such are subject to the VAT.

 

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(UNAUDITED)

 

L&C and Klimes have filed separate petitions to challenge the imposition of this tax. L&C’s challenge was unsuccessful at the first administrative level, but successful at the second administrative level. The state taxing authority filed an appeal to the third and final administrative level, which required consideration by a full panel of 16 administrative law judges. On September 27, 2010, L&C received an unfavorable ruling at this final administrative level, which concluded that the VAT applied. L&C intends to appeal this ruling to the judicial level. In addition, L&C has filed a petition to have the case remanded to the second administrative level for consideration of the reasonableness of the amount of the penalty assessed against it. The amounts allegedly owed by L&C are approximately $10.3 million in taxes, approximately $20.5 million in penalties and approximately $34.3 million in interest (as of June 30, 2011 at an exchange rate of 0.64). At June 30, 2011, the range of reasonably possible loss is from zero to approximately $65.1 million. The maximum loss that could ultimately be paid depends on the timing of the final resolution at the judicial level and applicable future interest rates. Based on management’s review of the law, the outcome of similar cases at the judicial level and the advice of counsel, the Company has not accrued any costs related to these claims and believes the occurrence of loss is not probable.

Klimes’ challenge was unsuccessful at the first administrative level, and denied at the second administrative level on or about September 24, 2009. On January 5, 2011, the administrative law judges at the third administrative level published a ruling that the VAT applies but significantly reduced the penalty assessed by the taxing authority. With the penalty reduction, the amounts allegedly owed by Klimes are approximately $11.6 million in taxes, approximately $5.8 million in penalties and approximately $21 million in interest (as of June 30, 2011 at an exchange rate of 0.64). In late February 2011, Klimes filed a writ of mandamus in the 13th lower public treasury court in São Paulo, State of São Paulo, appealing the administrative court’s decision that the VAT applies. On that same day, Klimes filed a motion for an injunction barring the taxing authority from collecting the tax, penalty and interest while the appeal is pending. The court denied the motion in early April 2011. Klimes filed a motion for reconsideration with the court and also appealed that ruling to the São Paulo State Higher Court, which affirmed in late April 2011. On June 20, 2011, the 13th lower public treasury court in São Paulo reconsidered its prior ruling and granted Klimes an injunction suspending any collection effort by the taxing authority until a decision on the merits is obtained at the first judicial level. At June 30, 2011, the range of reasonably possible loss is from zero to approximately $38.4 million. The maximum loss that could ultimately be paid depends on the timing of the final resolution at the judicial level and applicable future interest rates. Based on management’s review of the law, the outcome of similar cases at the judicial level and the advice of counsel, the Company has not accrued any costs related to these claims and believes the occurrence of loss is not probable.

At June 30, 2011, Clear Channel guaranteed $39.9 million of credit lines provided to certain of its international subsidiaries by a major international bank. Most of these credit lines related to intraday overdraft facilities covering participants in Clear Channel’s European cash management pool. As of June 30, 2011, no amounts were outstanding under these agreements.

As of June 30, 2011, Clear Channel had outstanding commercial standby letters of credit and surety bonds of $133.2 million and $48.7 million, respectively. Letters of credit in the amount of $9.1 million are collateral in support of surety bonds and these amounts would only be drawn under the letter of credit in the event the associated surety bonds were funded and Clear Channel did not honor its reimbursement obligation to the issuers.

These letters of credit and surety bonds relate to various operational matters including insurance, bid, and performance bonds as well as other items.

NOTE 7 — CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS

CCMH is a party to a management agreement with certain affiliates of the Sponsors and certain other parties pursuant to which such affiliates of the Sponsors will provide management and financial advisory services until 2018. These agreements require management fees to be paid to such affiliates of the Sponsors for such services at a rate not greater than $15.0 million per year, plus reimbursable expenses. For the three months ended June 30, 2011 and 2010, the Company recognized management fees of $3.8 million in each period and reimbursable expenses of $0.4 million and $0.6 million, respectively. For the six months ended June 30, 2011 and 2010, the Company recognized management fees of $7.5 million in each period and reimbursable expenses of $0.5 million and $1.0 million, respectively.

 

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(UNAUDITED)

 

NOTE 8 — EQUITY AND COMPREHENSIVE INCOME (LOSS)

The Company reports its noncontrolling interests in consolidated subsidiaries as a component of equity separate from the Company’s equity. The following table shows the changes in equity attributable to the Company and the noncontrolling interests of subsidiaries in which the Company has a majority, but not total ownership interest:

 

(In thousands)    The Company      Noncontrolling
Interests
     Consolidated  

Balances at January 1, 2011

   $   (7,695,606)         $     490,920         $     (7,204,686)   

Net income (loss)

     (185,011)         15,673         (169,338)   

Foreign currency translation adjustments

     62,817         13,055         75,872   

Unrealized holding gain on marketable securities

     13,949         60         14,009   

Unrealized holding gain on cash flow derivatives

     11,943         —           11,943   

Reclassification adjustment

     131         17         148   

Other - net

     (657)         2,684         2,027   
  

 

 

    

 

 

    

 

 

 

Balances at June 30, 2011

   $ (7,792,434)         $ 522,409         $ (7,270,025)   
  

 

 

    

 

 

    

 

 

 
(In thousands)    The Company      Noncontrolling
Interests
     Consolidated  

Balances at January 1, 2010

   $ (7,300,386)         $ 455,648         $ (6,844,738)   

Net income (loss)

     (261,738)         4,904         (256,834)   

Foreign currency translation adjustments

     (98,131)         (15,541)         (113,672)   

Unrealized holding gain (loss) on marketable securities

     4,101         (568)         3,533   

Unrealized holding loss on cash flow derivatives

     (8,146)         —           (8,146)   

Reclassification adjustment

     (1,010)         (131)         (1,141)   

Other - net

     9,296         2,404         11,700   
  

 

 

    

 

 

    

 

 

 

Balances at June 30, 2010

   $ (7,656,014)         $ 446,716         $ (7,209,298)   
  

 

 

    

 

 

    

 

 

 

The Company does not have any compensation plans under which it grants stock awards to employees. CCMH and CCOH have granted options to purchase their Class A common stock to certain key individuals. CCMH completed a voluntary stock option exchange program on March 21, 2011 and exchanged 2.5 million stock options granted under the Clear Channel 2008 Executive Incentive Plan for 1.3 million replacement stock options with a lower exercise price and different service and performance vesting conditions. The Company accounted for the exchange program as a modification of the existing awards under ASC 718 and will recognize incremental compensation expense of approximately $1.0 million over the service period of the new awards.

NOTE 9 — SEGMENT DATA

The Company’s reportable operating segments, which it believes best reflect how the Company is currently managed, are Radio broadcasting, Americas outdoor advertising and International outdoor advertising. Revenue and expenses earned and charged between segments are recorded at fair value and eliminated in consolidation. The Radio broadcasting segment also operates various radio networks. The Americas outdoor advertising segment consists of operations primarily in the United States, Canada and Latin America. The International outdoor segment primarily includes operations in Europe, Asia and Australia. The Americas outdoor and International outdoor display inventory consists primarily of billboards, street furniture displays and transit displays. The Other category includes the Company’s media representation firm as well as other general support services and initiatives which are ancillary to the Company’s other businesses. Corporate includes infrastructure and support including information technology, human resources, legal, finance and administrative functions of each of the Company’s operating segments, as well as overall executive, administrative and support functions. Share-based compensation expense is recorded by each segment in direct operating and selling, general and administrative expenses.

 

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CLEAR CHANNEL CAPITAL I, LLC AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(UNAUDITED)

 

The following table presents the Company’s operating segment results for the three and six months ended June 30, 2011 and 2010.

 

(In thousands)    Radio
Broadcasting
     Americas
Outdoor
Advertising
     International
Outdoor
Advertising
     Other      Corporate
and other
reconciling
items
     Eliminations      Consolidated  

Three Months Ended June 30, 2011

  

              

Revenue

   $ 780,876        $ 340,775        $ 448,433        $ 59,172        $ —         $ (24,870)       $ 1,604,386    

Direct operating expenses

     215,454          149,493          265,979          24,355          —           (12,941)         642,340    

Selling, general and administrative expenses

     257,627          55,232          87,705          19,476          —           (11,929)         408,111    

Depreciation and amortization

     69,033          52,964          52,636          12,809          2,199          —           189,641    

Corporate expenses

     —          —          —          —           56,486          —           56,486    

Other operating income-net

     —          —          —          —           3,229          —           3,229    
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Operating income (loss)

   $ 238,762       $ 83,086        $ 42,113        $ 2,532        $ (55,456)       $ —         $ 311,037    
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Intersegment revenues

   $ 9,131        $ 745        $ —        $ 14,994        $ —         $ —         $ 24,870    

Capital expenditures

   $ 13,851        $ 36,297        $ 23,116        $ —         $ 3,219        $ —         $ 76,483    

Share-based compensation expense

   $ 882        $ 1,674        $ 701        $ —         $ 2,481        $ —         $ 5,738    

Three Months Ended June 30, 2010

  

              

Revenue

   $ 748,738        $ 323,769        $ 377,638        $ 62,773        $ —         $ (22,909)       $ 1,490,009    

Direct operating expenses

     198,894          144,298          241,586          27,213          —           (11,075)         600,916    

Selling, general and administrative expenses

     238,713          64,075          66,617          19,066          —           (11,834)         376,637    

Depreciation and amortization

     63,812          55,729          49,570          12,925          2,142          —           184,178    

Corporate expenses

     —          —          —          —           64,109          —           64,109    

Other operating income-net

     —          —          —          —           3,264          —           3,264    
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Operating income (loss)

   $ 247,319        $ 59,667        $ 19,865        $ 3,569        $ (62,987)       $ —         $ 267,433    
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Intersegment revenues

   $ 7,143        $ 790        $ —        $ 14,976        $ —         $ —         $ 22,909    

Capital expenditures

   $ 6,513        $ 15,221        $ 22,172        $ —         $ 4,179        $ —         $ 48,085    

Share-based compensation expense

   $ 1,757        $ 2,316        $ 692        $ —         $ 3,744        $ —         $ 8,509    

Six Months Ended June 30, 2011

  

              

Revenue

   $ 1,421,221        $ 630,089        $ 809,333        $ 110,435        $ —         $ (45,866)       $ 2,925,212    

Direct operating expenses

     407,562          292,984          513,868          48,243          —           (24,062)         1,238,595    

Selling, general and administrative expenses

     484,276          109,599          156,518          40,046          —           (21,804)         768,635    

Depreciation and amortization

     133,489          104,050          103,880          26,094          5,839          —           373,352    

Corporate expenses

     —          —          —          —           108,833          —           108,833    

Other operating income-net

     —          —          —          —           19,943          —           19,943    
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Operating income (loss)

   $ 395,894        $ 123,456        $ 35,067        $ (3,948)       $ (94,729)       $ —         $ 455,740    
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Intersegment revenues

   $ 16,511        $ 1,688        $ —        $ 27,667        $ —         $ —         $ 45,866    

Capital expenditures

   $ 29,858        $ 68,698        $ 37,076        $ —         $ 4,820        $ —         $ 140,452    

Share-based compensation expense

   $ 2,436        $ 3,842        $ 1,604        $ —         $ 147        $ —         $ 8,029    

 

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CLEAR CHANNEL CAPITAL I, LLC AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(UNAUDITED)

 

(In thousands)    Radio
Broadcasting
     Americas
Outdoor
Advertising
     International
Outdoor
Advertising
     Other      Corporate
and other
reconciling
items
     Eliminations      Consolidated  

Six Months Ended June 30, 2010

  

              

Revenue

   $ 1,371,937        $ 594,746        $ 715,429        $ 114,819        $ —        $ (43,144)       $ 2,753,787    

Direct operating expenses

     402,654          283,606          481,164          52,041          —          (21,202)         1,198,263    

Selling, general and administrative expenses

     465,810          108,552          133,497          40,016          —          (21,942)         725,933    

Depreciation and amortization

     127,744          105,180          101,828          26,521          4,239          —          365,512    

Corporate expenses

     —          —          —           —          128,605          —          128,605    

Other operating income-net

     —          —          —           —          7,036          —          7,036    
                                                              

Operating income (loss)

   $ 375,729        $ 97,408        $ (1,060)       $ (3,759)       $ (125,808)       $ —        $ 342,510    
                                                              

Intersegment revenues

   $ 13,797        $ 1,847        $ —         $ 27,500        $ —        $ —        $ 43,144    

Capital expenditures

   $ 11,102        $ 39,926        $ 46,790        $ —        $ 5,591        $ —        $ 103,409    

Share-based compensation expense

   $ 3,506        $ 4,346        $ 1,295        $ —        $ 7,477        $ —        $ 16,624    

 

15


Table of Contents

CLEAR CHANNEL CAPITAL I, LLC AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(UNAUDITED)

 

NOTE 10 — GUARANTOR SUBSIDIARIES

The Company and certain of Clear Channel’s direct and indirect wholly-owned domestic subsidiaries (the “Guarantor Subsidiaries”) fully and unconditionally guaranteed on a joint and several basis certain of Clear Channel's outstanding indebtedness. The following consolidating schedules present financial information on a combined basis in conformity with the SEC’s Regulation S-X Rule 3-10(d):

 

(In thousands)    June 30, 2011  
      Parent
Company
     Subsidiary
Issuer
     Guarantor
Subsidiaries
     Non-Guarantor
Subsidiaries
     Eliminations      Consolidated  

Cash and cash equivalents

   $ —        $       $ 443,467        $ 775,688        $ —        $ 1,219,156    

Accounts receivable, net

     —          —          688,444          764,816          —          1,453,260    

Intercompany receivables (1)

     27,218          5,791,312          —          27,246          (5,845,776)         —    

Other current assets

     1,577          45,885          86,105          283,790          (64,757)         352,600    
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total Current Assets

     28,795          5,837,198          1,218,016          1,851,540          (5,910,533)         3,025,016    

Property, plant and equipment, net

     —          —          833,596          2,284,624          —          3,118,220    

Definite-lived intangibles, net

     —          —          1,499,281          682,705          —          2,181,986    

Indefinite-lived intangibles

     —          —          2,418,366          1,113,889          —          3,532,255    

Goodwill

     —          —          3,322,359          888,406          —          4,210,765    

Intercompany notes receivable

     —          212,000          —          —          (212,000)         —    

Long-term intercompany receivable

     —          —          —          483,917          (483,917)         —    

Investment in subsidiaries

     (8,171,209)         4,998,322          2,915,924          —          256,963          —    

Other assets

     —          192,405          249,146          814,554          (442,296)         813,809    
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total Assets

   $ (8,142,414)       $ 11,239,925        $ 12,456,688        $ 8,119,635        $ (6,791,783)       $ 16,882,051    
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Accounts payable and accrued expenses

   $ (866)       $ (75,124)       $ 303,415        $ 624,111        $ —        $ 851,536    

Accrued interest

     —          190,194          —          1,860          (29,775)         162,279    

Intercompany payable (1)

     —          —          5,845,776          —          (5,845,776)         —    

Current portion of long-term debt

     —          229,723          1,420          58,800          —          289,943    

Deferred income

     —          —          63,903          156,401          —          220,304    
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total Current Liabilities

     (866)         344,793          6,214,514          841,172          (5,875,551)         1,524,062    

Long-term debt

     —          18,193,635          4,276          2,500,211          (813,063)         19,885,059    

Long-term intercompany payable

     —          483,917          —          —          (483,917)         —    

Intercompany long-term debt

     —          —          212,000          —          (212,000)         —    

Deferred income taxes

     (13,329)         149,724          1,014,874          854,203          —          2,005,472    

Other long-term liabilities

     —          239,065          221,472          276,946          —          737,483    

Total member’s interest (deficit)

     (8,128,219)         (8,171,209)         4,789,552          3,647,103          592,748          (7,270,025)   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total Liabilities and Member’s Interest (Deficit)

   $   (8,142,414)       $   11,239,925        $   12,456,688        $   8,119,635        $   (6,791,783)       $   16,882,051    
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

  (1) The intercompany payable balance includes approximately $7.3 billion of designated amounts of borrowings under the senior secured credit facilities by certain Guarantor Subsidiaries that are Co-Borrowers and primary obligors thereunder with respect to these amounts. These amounts were incurred by the Co-Borrowers at the time of the closing of the merger, but were funded and will be repaid through accounts of the Subsidiary Issuer. The intercompany receivables balance includes the amount of such borrowings, which are required to be repaid to the lenders under the senior secured credit facilities by the Guarantor Subsidiaries as Co-Borrowers and primary obligors thereunder.

 

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CLEAR CHANNEL CAPITAL I, LLC AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(UNAUDITED)

 

(In thousands)   December 31, 2010  
    Parent
Company
    Subsidiary
Issuer
    Guarantor
Subsidiaries
    Non-Guarantor
Subsidiaries
    Eliminations     Consolidated  

Cash and cash equivalents

   $ —        $       $ 1,220,362        $ 700,563        $ —       $ 1,920,926   

Accounts receivable, net

    —         —         636,970         736,910         —         1,373,880   

Intercompany receivables (1)

    28,826         6,910,565         53,162         —         (6,992,553)        —     

Other current assets

    1,827         42,480         77,598         358,082         (171,620)        308,367   
                                               

Total Current Assets

    30,653         6,953,046         1,988,092         1,795,555         (7,164,173)        3,603,173   

Property, plant and equipment, net

    —         —         846,459         2,299,095         —         3,145,554   

Definite-lived intangibles, net

    —         —         1,572,829         715,320         —         2,288,149   

Indefinite-lived intangibles

    —         —         2,423,828         1,114,413         —         3,538,241   

Goodwill

    —         —         3,253,330         865,996         —         4,119,326   

Intercompany notes receivable

    —         212,000         —         —         (212,000)        —     

Long-term intercompany receivable

    —         —         —         383,778         (383,778)        —     

Investment in subsidiaries

    (8,120,253)        4,515,224         2,821,678         —         783,351         —     

Other assets

    —         178,550         225,064         800,818         (438,493)        765,939   
                                               

Total Assets

   $ (8,089,600)       $ 11,858,820        $ 13,131,280        $ 7,974,975        $ (7,415,093)      $ 17,460,382   
                                               

Accounts payable and accrued expenses

   $ (941)       $ 63,888        $ 400,449        $ 646,093        $ (31,423)      $ 1,078,066   

Intercompany payable (1)

    —         —         6,939,391         53,162         (6,992,553)        —     

Current portion of long-term debt

    —         826,059         —         41,676         —         867,735   

Deferred income

    —         —         49,423         103,355         —         152,778   
                                               

Total Current Liabilities

    (941)        889,947         7,389,263         844,286         (7,023,976)        2,098,579   

Long-term debt

    —         18,172,562         4,000         2,522,133         (959,078)        19,739,617   

Long-term intercompany payable

    —         383,778         —         —         (383,778)        —     

Intercompany long-term debt

    —         —         212,000         —         (212,000)        —     

Deferred income taxes

    (12,665)        269,578         927,685         865,598         —         2,050,196   

Other long-term liabilities

    —         263,208         261,434         252,034         —         776,676   

Total member’s interest (deficit)

    (8,075,994)        (8,120,253)        4,336,898         3,490,924         1,163,739         (7,204,686)   
                                               

Total Liabilities and Member’s Interest (Deficit)

   $     (8,089,600)       $   11,858,820        $   13,131,280        $   7,974,975        $   (7,415,093)       $   17,460,382   
                                               

 

  (1) The intercompany payable balance includes approximately $7.3 billion of designated amounts of borrowings under the senior secured credit facilities by certain Guarantor Subsidiaries that are Co-Borrowers and primary obligors thereunder with respect to these amounts. These amounts were incurred by the Co-Borrowers at the time of the closing of the merger, but were funded and will be repaid through accounts of the Subsidiary Issuer. The intercompany receivables balance includes the amount of such borrowings, which are required to be repaid to the lenders under the senior secured credit facilities by the Guarantor Subsidiaries as Co-Borrowers and primary obligors thereunder.

 

17


Table of Contents

CLEAR CHANNEL CAPITAL I, LLC AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(UNAUDITED)

 

(In thousands)    Three Months Ended June 30, 2011  
      Parent
Company
     Subsidiary
Issuer
     Guarantor
Subsidiaries
     Non-Guarantor
Subsidiaries
     Eliminations      Consolidated  

Revenue

   $ —        $ —        $ 784,493        $ 824,499        $ (4,606)       $ 1,604,386    

Operating expenses:

                 

Direct operating expenses

     —          —          208,824          430,604          2,912          642,340    

Selling, general and administrative expenses

     —          —          258,898          156,731          (7,518)         408,111    

Corporate expenses

     2,951          —          30,497          23,038          —          56,486    

Depreciation and amortization

     —          —          81,306          108,335          —          189,641    

Other operating income (expense)– net

     —          —          (1,071)         4,300          —          3,229    
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Operating income (loss)

     (2,951)         —          203,897          110,091          —          311,037    

Interest expense – net

             332,242          (1,396)         9,544          18,556          358,950    

Equity in earnings (loss) of nonconsolidated affiliates

     (32,749)         175,700          27,639          5,276          (170,595)         5,271    

Other income (expense) – net

     —                  (156)         (4,362)         —          (4,517)   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Income (loss) before income taxes

     (35,704)         (156,541)         232,776          101,461          (189,151)         (47,159)   

Income tax benefit (expense)

     1,081          123,792          (76,523)         (39,166)         —          9,184    
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Consolidated net income (loss)

     (34,623)         (32,749)         156,253          62,295          (189,151)         (37,975)   

Less amount attributable to noncontrolling interest

     —          —          7,687          7,517          —          15,204    
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Net income (loss) attributable to the Company

   $ (34,623)       $ (32,749)       $ 148,566        $ 54,778        $ (189,151)       $ (53,179)   

Other comprehensive income (loss), net of tax:

                 

Foreign currency translation adjustments

     —          —          331          36,234          —          36,565    

Unrealized gain (loss) on securities and derivatives:

                 

Unrealized holding gain (loss) on marketable securities

     —          —          13,006          (1,949)         —          11,057    

Unrealized holding loss on cash flow derivatives

     —          (1,399)         —          —          —          (1,399)   

Reclassification adjustment

     —          —          —          59          —          59    

Equity in subsidiary comprehensive income (loss)

     39,847          41,246          30,512          —          (111,605)         —    
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Comprehensive income (loss)

     5,224          7,098          192,415          89,122          (300,756)         (6,897)   

Less amount attributable to noncontrolling interest

     —          —          2,603          3,832          —          6,435    
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Comprehensive income (loss) attributable to the Company

   $     5,224        $     7,098        $     189,812        $     85,290        $     (300,756)       $     (13,332)   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

18


Table of Contents

CLEAR CHANNEL CAPITAL I, LLC AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(UNAUDITED)

 

(In thousands)   Three Months Ended June 30, 2010  
    Parent
Company
    Subsidiary
Issuer
    Guarantor
Subsidiaries
    Non-Guarantor
Subsidiaries
    Eliminations     Consolidated  

Revenue

  $ —       $ —       $ 783,377       $ 707,723       $ (1,091)      $ 1,490,009    

Operating expenses:

           

Direct operating expenses

    —         —         214,094         387,123         (301)        600,916    

Selling, general and administrative expenses

    —         —         242,507         134,920         (790)        376,637    

Corporate expenses

    3,425                36,922         23,757         —         64,109    

Depreciation and amortization

    —         —         78,501         105,677         —         184,178    

Other operating income – net

    —         —         1,544         1,720         —         3,264    
                                               

Operating income (loss)

    (3,425)        (5)        212,897         57,966         —         267,433    

Interest expense – net

           355,544         (1,073)        12,946         18,157         385,579    

Equity in earnings (loss) of nonconsolidated affiliates

    (65,995)        156,539        (4,463)        3,750         (86,084)        3,747    

Other income (expense) – net

    —         —         37         (824)        —         (787)   
                                               

Income (loss) before income taxes

    (69,425)        (199,010)        209,544         47,946         (104,241)        (115,186)   

Income tax benefit (expense)

    1,258         133,015         (77,778)        (18,516)        —         37,979    
                                               

Consolidated net income (loss)

    (68,167)        (65,995)        131,766         29,430         (104,241)        (77,207)   

Less amount attributable to noncontrolling interest

    —         —         2,494         6,623         —         9,117    
                                               

Net income (loss) attributable to the Company

  $ (68,167)      $ (65,995)      $ 129,272       $ 22,807       $ (104,241)      $ (86,324)   
                                               

Other comprehensive income (loss), net of tax:

           

Foreign currency translation adjustments

    —         —         280         (74,503)        —         (74,223)   

Unrealized gain (loss) on securities and derivatives:

           

Unrealized holding gain (loss) on marketable securities

    —         —         1,916         (2,328)        —         (412)   

Unrealized holding loss on cash flow derivatives

    —         (4,992)        —         —         —         (4,992)   

Reclassification adjustment

    —         —         —         (1,366)        —         (1,366)   

Equity in subsidiary comprehensive income (loss)

    (69,421)        (64,430)        (74,306)        —         208,157         —    
                                               

Comprehensive income (loss)

    (137,588)        (135,417)        57,162         (55,390)        103,916         (167,317)   

Less amount attributable to noncontrolling interest

    —         —         (7,681)        (3,891)        —         (11,572)   
                                               

Comprehensive income (loss) attributable to the Company

  $     (137,588)      $     (135,417)      $     64,843       $     (51,499)      $     103,916       $     (155,745)   
                                               

 

19


Table of Contents

CLEAR CHANNEL CAPITAL I, LLC AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(UNAUDITED)

 

(In thousands)    Six Months Ended June 30, 2011  
      Parent
Company
     Subsidiary
Issuer
     Guarantor
Subsidiaries
     Non-Guarantor
Subsidiaries
     Eliminations      Consolidated  

Revenue

   $ —        $ —        $ 1,453,021        $ 1,481,574        $ (9,383)       $ 2,925,212    

Operating expenses:

                 

Direct operating expenses

     —          —          416,469          823,048          (922)         1,238,595    

Selling, general and administrative expenses

     —          —          490,159          286,937          (8,461)         768,635    

Corporate expenses

     5,610          —          58,202          45,021          —          108,833    

Depreciation and amortization

     —          —          162,114          211,238          —          373,352    

Other operating income – net

     —          —          10,841          9,102          —          19,943    
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Operating income (loss)

     (5,610)         —          336,918          124,432          —          455,740    

Interest expense – net

     11          677,181          (2,673)         9,494          44,603          728,616    

Equity in earnings (loss) of nonconsolidated affiliates

     (136,843)         287,470          20,693          8,236          (171,310)         8,246    

Other income (expense) – net

     —          (5,720)         (362)         (471)         —          (6,553)   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Income (loss) before income taxes

     (142,464)         (395,431)         359,922          122,703          (215,913)         (271,183)   

Income tax benefit (expense)

     2,056          258,588          (121,676)         (37,123)         —          101,845    
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Consolidated net income (loss)

     (140,408)         (136,843)         238,246          85,580          (215,913)         (169,338)   

Less amount attributable to noncontrolling interest

     —          —          9,007          6,666          —          15,673    
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Net income (loss) attributable to the Company

   $ (140,408)       $ (136,843)       $ 229,239        $ 78,914        $ (215,913)       $ (185,011)   

Other comprehensive income (loss), net of tax:

                 

Foreign currency translation adjustments

     —          —          52          75,820          —          75,872    

Unrealized gain on securities and derivatives:

                 

Unrealized holding gain on marketable securities

     —          —          13,489          520          —          14,009    

Unrealized holding gain on cash flow derivatives

     —          11,943          —          —          —          11,943    

Reclassification adjustment

     —          —          —          148          —          148    

Equity in subsidiary comprehensive income (loss)

     88,839          76,896          70,354          —          (236,089)         —    
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Comprehensive income (loss)

     (51,569)         (48,004)         313,134          155,402          (452,002)         (83,039)   

Less amount attributable to noncontrolling interest

     —          —          6,999          6,134          —          13,133    
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Comprehensive income (loss) attributable to the Company

   $     (51,569)       $     (48,004)       $     306,135        $     149,268        $     (452,002)       $     (96,172)   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

20


Table of Contents

CLEAR CHANNEL CAPITAL I, LLC AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(UNAUDITED)

 

(In thousands)   Six Months Ended June 30, 2010  
    Parent
Company
    Subsidiary
Issuer
    Guarantor
Subsidiaries
    Non-Guarantor
Subsidiaries
    Eliminations     Consolidated  

Revenue

  $ —       $ —       $ 1,433,188       $ 1,323,007       $ (2,408)      $ 2,753,787    

Operating expenses:

           

Direct operating expenses

    —         —         431,615         767,209         (561)        1,198,263    

Selling, general and administrative expenses

    —         —         477,155         250,625         (1,847)        725,933    

Corporate expenses

    6,433                77,635         44,529         —         128,605    

Depreciation and amortization

    —         —         157,749         207,763         —         365,512    

Other operating income – net

    —         —         4,298         2,738         —         7,036    
                                               

Operating income (loss)

    (6,433)        (8)        293,332         55,619         —         342,510    

Interest expense – net

           707,162         4,251         27,599         32,353         771,374    

Equity in earnings (loss) of nonconsolidated affiliates

    (285,595)        157,020         (50,748)        5,630         179,311         5,618    

Other income (expense) – net

    —         —         (561)        (2,480)        60,289         57,248    
                                               

Income (loss) before income taxes

    (292,037)        (550,150)        237,772         31,170         207,247         (365,998)   

Income tax benefit (expense)

    2,363         264,555        (133,884)        (23,870)        —         109,164    
                                               

Consolidated net income (loss)

    (289,674)        (285,595)        103,888         7,300         207,247         (256,834)   

Less amount attributable to noncontrolling interest

    —         —         (722)        5,626         —         4,904    
                                               

Net income (loss) attributable to the Company

  $ (289,674)      $ (285,595)      $ 104,610       $ 1,674       $ 207,247       $ (261,738)   

Other comprehensive income (loss), net of tax:

           

Foreign currency translation adjustments

    —         —         (243)        (113,429)        —         (113,672)   

Unrealized gain (loss) on securities and derivatives:

           

Unrealized holding gain (loss) on marketable securities

    —         —         8,481         (4,948)        —         3,533    

Unrealized holding loss on cash flow derivatives

    —         (8,146)        —         —         —         (8,146)   

Reclassification adjustment

    —         —         —         (1,141)        —         (1,141)   

Equity in subsidiary comprehensive income (loss)

    (103,186)        (95,040)        (115,784)        —         314,010         —    
                                               

Comprehensive income (loss)

    (392,860)        (388,781)        (2,936)        (117,844)        521,257         (381,164)   

Less amount attributable to noncontrolling interest

    —         —         (12,507)        (3,733)        —         (16,240)   
                                               

Comprehensive income (loss) attributable to the Company

  $     (392,860)      $     (388,781)      $     9,571       $     (114,111)      $     521,257       $     (364,924)   
                                               

 

21


Table of Contents

CLEAR CHANNEL CAPITAL I, LLC AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(UNAUDITED)

 

     Six Months Ended June 30, 2011  
(In thousands)    Parent
Company
     Subsidiary
Issuer
     Guarantor
Subsidiaries
     Non-Guarantor
Subsidiaries
     Eliminations      Consolidated  

Cash flows from operating activities:

                 

Consolidated net income (loss)

   $ (140,408)        $ (136,843)        $ 238,246         $ 85,580         $ (215,913)        $ (169,338)    
                 

Reconciling items:

                 

Depreciation and amortization

     —           —           162,114           211,238           —           373,352     

Deferred taxes

     (664)          (126,983)          56,461           (19,709)          —           (90,895)    

Gain on disposal of operating assets

     —           —           (10,841)          (9,102)          —           (19,943)    

Loss on extinguishment of debt

     —           5,721           —           —           —           5,721     

Provision for doubtful accounts

     —           —           4,898           3,402           —           8,300     

Share-based compensation

     —           —           2,603           5,426           —           8,029     

Equity in (earnings) loss of nonconsolidated affiliates

     136,843           (287,470)          (20,693)          (8,236)          171,310           (8,246)    

Amortization of deferred financing charges and note discounts, net

     —           118,079           (2,915)          (59,534)          44,603           100,233     

Other reconciling items net

     —           —           449           13,549           —           13,998     

Changes in operating assets and liabilities:

                 

Decrease in accounts receivable

     —           —           (3,965)          (14,297)          —           (18,262)    

Increase in deferred income

     —           —           12,937           48,490           —           61,427     

Decrease in accrued expenses

     —           —           (81,509)          (26,574)          —           (108,083)    

Decrease in accounts payable and other liabilities

     —           (5,214)          (61,264)          (7,611)          —           (74,089)    

Increase in accrued interest

     —           17,916           —           677           1,647           20,240     

Changes in other operating assets and liabilities, net of effects of acquisitions and dispositions

     325           13,262           (22,759)          (28,125)          (1,647)          (38,944)    
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Net cash provided by (used for) operating activities

     (3,904)          (401,532)          273,762           195,174           —           63,500     

Cash flows from investing activities:

                 

Proceeds from maturity of Clear Channel notes

     —           —           —           167,022           (167,022)          —     

Purchases of property, plant and equipment

     —           —           (33,496)          (106,956)          —           (140,452)    

Purchases of businesses

     —           —           (211)          (32,970)          —           (33,181)    

Acquisition of operating assets

     —           —           (947)          (3,834)          —           (4,781)    

Proceeds from disposal of assets

     —           —           37,938           10,178           —           48,116     

Change in other net

     —           —           62           794           —           856     
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Net cash provided by (used for) investing activities

     —           —           3,346           34,234           (167,022)          (129,442)    

Cash flows from financing activities:

                 

Draws on credit facilities

     —           10,000           —           —           —           10,000     

Payments on credit facilities

     —           (956,181)          —           (1,893)          —           (958,074)    

Intercompany funding

     4,211           1,097,711           (1,055,284)          (46,638)          —           —     

Proceeds from long-term debt

     —           1,724,650           1,604           —           —           1,726,254     

Payments on long-term debt

     —           (1,428,051)          (573)          (100,894)          167,022           (1,362,496)    

Deferred financing charges

     —           (46,597)          —           —           —           (46,597)    

Change in other net

     (307)          —           250           (4,858)          —           (4,915)    
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Net cash provided by (used for) financing activities

     3,904           401,532           (1,054,003)          (154,283)          167,022           (635,828)    

Net increase (decrease) in cash and cash equivalents

     —           —           (776,895)          75,125           —           (701,770)    

Cash and cash equivalents at beginning of period

     —           1           1,220,362           700,563           —           1,920,926     
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Cash and cash equivalents at end of period

   $     —         $     1         $     443,467         $     775,688         $     —         $     1,219,156     
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

22


Table of Contents

CLEAR CHANNEL CAPITAL I, LLC AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(UNAUDITED)

 

(In thousands)   Six Months Ended June 30, 2010  
    Parent
Company
    Subsidiary
Issuer
    Guarantor
Subsidiaries
    Non-Guarantor
Subsidiaries
    Eliminations     Consolidated  

Cash flows from operating activities:

           

Consolidated net income (loss)

  $ (289,674)       $ (285,595)        $ 103,888        $ 7,300        $ 207,247        $ (256,834)    

Reconciling items:

           

Depreciation and amortization

    —          —          157,749          207,763          —          365,512     

Deferred taxes

    504          (6,095)         (101,698)         (28,519)         —          (135,808)    

Gain on disposal of operating assets

    —          —          (4,298)         (2,738)         —          (7,036)    

Gain on extinguishment of debt

    —          —          —          —          (60,289)         (60,289)    

Provision for doubtful accounts

    —          —          5,696          2,095          —          7,791     

Share-based compensation

    —          —          10,943          5,681          —          16,624     

Equity in (earnings) loss of nonconsolidated affiliates

    285,595          (157,020)         50,748          (5,630)         (179,311)         (5,618)    

Amortization of deferred financing charges and note discounts, net

    —          123,156          2,527          (52,440)         32,353          105,596     

Other reconciling items net

    —          —          (447)         4,204           —          3,757     

Changes in operating assets and liabilities:

           

Increase in accounts receivable

    —          —          (41,427)         (25,567)         —          (66,994)    

Increase in deferred income

    —          —          7,438          34,882          —          42,320     

Increase (decrease) in accrued expenses

    —          (25)         16,229          9,799          —          26,003     

Increase (decrease) in accounts payable and other liabilities

      1,366          (4,368)         (4,835)         —          (7,837)    

Increase (decrease) in accrued interest

    —          64,254          (19,703)         637          —          45,188     

Changes in other operating assets and liabilities, net of effects of acquisitions and dispositions

    3,279          275,454          (303,801)         5,485          —          (19,583)    
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net cash provided by (used for) operating activities

    (296)         15,495          (120,524)         158,117          —          52,792     

Cash flows from investing activities:

           

Proceeds from maturity of Clear Channel notes

    —          —          —          10,025          (10,025)         —     

Investment in Clear Channel notes

    —