10-Q 1 d238858d10q.htm FORM 10-Q Form 10-Q
Table of Contents

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 SEPTEMBER 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  x    No  ¨

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 October 28, 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 September 30, 2011 and December 31, 2010   2
  Consolidated Statements of Operations for the three and nine months ended September 30, 2011 and 2010   3
  Condensed Consolidated Statements of Cash Flows for the nine months ended September 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   25

Item 3.

  Quantitative and Qualitative Disclosures About Market Risk   40

Item 4.

  Controls and Procedures   41

Part II – Other Information

 

Item 1.

  Legal Proceedings   42

Item 1A.  

  Risk Factors   43

Item 2.

  Unregistered Sales of Equity Securities and Use of Proceeds (intentionally omitted pursuant to General Instruction H(2)(b) of Form 10-Q)   43

Item 3.

  Defaults Upon Senior Securities (intentionally omitted pursuant to General Instruction H(2)(b) of Form 10-Q)   43

Item 4.

  (Removed and Reserved)   43

Item 5.

  Other Information   43

Item 6.

  Exhibits   44

Signatures

  45

 

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)

 

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

Cash and cash equivalents

     $ 1,165,381             $ 1,920,926       

Accounts receivable, net

     1,382,269             1,373,880       

Other current assets

     375,942             308,367       
  

 

 

    

 

 

 

Total Current Assets

     2,923,592             3,603,173       
PROPERTY, PLANT AND EQUIPMENT      

Structures, net

     1,931,695             2,007,399       

Other property, plant and equipment, net

     1,105,520             1,138,155       
INTANGIBLE ASSETS      

Definite-lived intangibles, net

     2,088,062             2,288,149       

Indefinite-lived intangibles

     3,525,164             3,538,241       

Goodwill

     4,184,573             4,119,326       

Other assets

     750,340             765,939       
  

 

 

    

 

 

 

Total Assets

     $     16,508,946             $     17,460,382       
  

 

 

    

 

 

 
CURRENT LIABILITIES      

Accounts payable and accrued expenses

     $ 843,458             $ 956,867       

Accrued interest

     75,765             121,199       

Current portion of long-term debt

     285,078             867,735       

Deferred income

     188,019             152,778       
  

 

 

    

 

 

 

Total Current Liabilities

     1,392,320             2,098,579       

Long-term debt

     19,894,723             19,739,617       

Deferred income taxes

     1,958,025             2,050,196       

Other long-term liabilities

     719,905             776,676       

Commitments and contingent liabilities (Note 6)

     
MEMBER’S DEFICIT      

Noncontrolling interest

     511,363             490,920       

Member’s interest

     2,127,443             2,128,383       

Retained deficit

     (9,814,240)            (9,555,173)      

Accumulated other comprehensive loss

     (280,593)            (268,816)      
  

 

 

    

 

 

 

Total Member’s Deficit

    

 

(7,456,027)   

 

  

 

    

 

(7,204,686)   

 

  

 

  

 

 

    

 

 

 

Total Liabilities and Member’s Deficit

     $ 16,508,946             $ 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
September 30,
     Nine Months Ended
September 30,
 
     2011         2010         2011         2010   
  

 

 

    

 

 

    

 

 

 

Revenue

     $     1,583,352         $     1,477,347         $     4,508,564         $     4,231,134     

Operating expenses:

           

Direct operating expenses (excludes depreciation and amortization)

     636,063           579,098           1,840,585           1,739,228     

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

     420,260           382,997           1,222,968           1,147,063     

Corporate expenses (excludes depreciation and amortization)

     54,247           80,518           163,080           209,123     

Depreciation and amortization

     197,532           184,079           570,884           549,591     

Other operating income (expense) – net

     (6,490)          (29,559)          13,453           (22,523)    
  

 

 

    

 

 

    

 

 

    

 

 

 

Operating income

     268,760           221,096           724,500           563,606     

Interest expense

     369,233           389,197           1,097,849           1,160,571     

Equity in earnings of nonconsolidated affiliates

     5,210           2,994           13,456           8,612     

Other income (expense) – net

     7,307           (5,700)          754           51,548     
  

 

 

    

 

 

    

 

 

    

 

 

 

Loss before income taxes

     (87,956)          (170,807)          (359,139)          (536,805)    

Income tax benefit

     20,665           20,415           122,510           129,579     
  

 

 

    

 

 

    

 

 

    

 

 

 

Consolidated net loss

     (67,291)          (150,392)          (236,629)          (407,226)    

Less amount attributable to noncontrolling interest

     6,765           4,293           22,438           9,197     
  

 

 

    

 

 

    

 

 

    

 

 

 

Net loss attributable to the Company

     $ (74,056)        $ (154,685)        $ (259,067)        $ (416,423)    
  

 

 

    

 

 

    

 

 

    

 

 

 

Other comprehensive income (loss), net of tax:

           

Foreign currency translation adjustments

     (101,951)          126,548           (26,079)          12,876     

Unrealized gain (loss) on securities and derivatives:

           

Unrealized holding gain (loss) on marketable securities

     (21,298)          5,684           (7,289)          9,217     

Unrealized holding gain (loss) on cash flow derivatives

     10,848           529           22,791           (7,617)    

Reclassification adjustment

     86           2,565           234           1,424     
  

 

 

    

 

 

    

 

 

    

 

 

 

Comprehensive loss

     (186,371)          (19,359)          (269,410)          (400,523)    

Less amount attributable to noncontrolling interest

     (11,699)          18,764           1,434           2,524     
  

 

 

    

 

 

    

 

 

    

 

 

 

Comprehensive loss attributable to the Company

     $ (174,672)        $ (38,123)        $ (270,844)        $ (403,047)    
  

 

 

    

 

 

    

 

 

    

 

 

 

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)

 

     Nine Months Ended September 30,  
     2011     2010  

Cash flows from operating activities:

    

Consolidated net loss

    $ (236,629)          $ (407,226)      

Reconciling items:

    

Depreciation and amortization

     570,884            549,591       

Deferred taxes

     (122,886)           (170,886)      

(Gain) loss on disposal of operating assets

     (13,453)           22,523       

(Gain) loss on extinguishment of debt

     1,447            (60,289)      

Provision for doubtful accounts

     13,300            14,880       

Share-based compensation

     14,281            24,967       

Equity in earnings of nonconsolidated affiliates

     (13,456)           (8,612)      

Amortization of deferred financing charges and note discounts, net

     143,519            160,040       

Other reconciling items – net

     7,449            9,722       

Changes in operating assets and liabilities:

    

(Increase) decrease in accounts receivable

     16,591            (74,710)      

Decrease in Federal income taxes receivable

     —            132,309       

Increase in deferred income

     34,178            47,244       

Increase (decrease) in accrued expenses

     (106,910)           52,127       

Increase (decrease) in accounts payable and other liabilities

     (47,549)           4,695       

Increase (decrease) in accrued interest

     (66,242)           34,501       

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

    acquisitions and dispositions

     (73,142)           (14,334)      
  

 

 

   

 

 

 

Net cash provided by operating activities

     121,382            316,542       

Cash flows from investing activities:

    

Purchases of property, plant and equipment

     (218,136)           (169,405)      

Purchases of businesses

     (33,882)           —       

Acquisition of operating assets

     (14,352)           (11,743)      

Proceeds from disposal of assets

     52,389            20,550       

Change in other – net

     1,716            (4,741)      
  

 

 

   

 

 

 

Net cash used for investing activities

     (212,265)           (165,339)      

Cash flows from financing activities:

    

Draws on credit facilities

     55,000            160,416       

Payments on credit facilities

     (959,383)           (140,254)      

Proceeds from delayed draw term loan facility

     —            138,795       

Proceeds from long-term debt

     1,727,813            6,844       

Payments on long-term debt

     (1,370,265)           (368,585)      

Deferred financing charges

     (46,597)           —       

Repurchases of long-term debt

     (55,250)           (125,000)      

Change in other – net

     (15,980)           (6,579)      
  

 

 

   

 

 

 

Net cash used for financing activities

     (664,662)           (334,363)      

Net decrease in cash and cash equivalents

     (755,545)           (183,160)      

Cash and cash equivalents at beginning of period

     1,920,926            1,883,994       
  

 

 

   

 

 

 

Cash and cash equivalents at end of period

    $     1,165,381           $     1,700,834       
  

 

 

   

 

 

 

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 Clear Channel’s 2010 Annual Report on Form 10-K and Quarterly Reports on Form 10-Q for the periods ended March 31, 2011 and June 30, 2011.

The consolidated financial statements include the accounts of the Company and its subsidiaries. Also included in the consolidated financial statements are entities for which the Company has a controlling financial interest or is the primary beneficiary. 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 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.

 

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Table of Contents

CLEAR CHANNEL CAPITAL I, LLC AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(UNAUDITED)

 

In September 2011, the FASB issued ASU No. 2011-08, Intangibles-Goodwill and Other (Topic 350): Testing Goodwill for Impairment. Under the revised guidance, entities testing goodwill for impairment have the option of performing a qualitative assessment before calculating the fair value of the reporting unit (i.e., step 1 of the goodwill impairment test). If entities determine, on the basis of qualitative factors, that the fair value of the reporting unit is more likely than not less than the carrying amount, the two-step impairment test would be required. The ASU does not change how goodwill is calculated or assigned to reporting units, nor does it revise the requirement to test goodwill annually for impairment. The amendments are effective for annual and interim goodwill impairment tests performed for fiscal years beginning after December 15, 2011. Early adoption is permitted. The Company adopted the provisions of this ASU as of October 1, 2011 and is currently evaluating the impact of adoption.

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

Acquisitions

On April 29, 2011, a wholly owned subsidiary of the Company 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 September 30, 2011 and December 31, 2010, respectively:

 

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

Land, buildings and improvements

       $ 654,304              $ 652,575       

Structures

     2,726,585            2,623,561       

Towers, transmitters and studio equipment

     393,775            397,434       

Furniture and other equipment

     341,192            282,385       

Construction in progress

     70,239            65,173       
  

 

 

   

 

 

 
     4,186,095            4,021,128       

Less: accumulated depreciation

     1,148,880            875,574       
  

 

 

   

 

 

 

Property, plant and equipment, net

       $     3,037,215              $     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.

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

 

(In thousands)   September 30, 2011       December 31, 2010
      Gross Carrying  
Amount
   

  Accumulated  
  Amortization  

        Gross Carrying  
Amount
   

  Accumulated  
  Amortization  

Transit, street furniture and other outdoor contractual rights

   $ 777,362          $   296,016           $ 789,867          $    241,461    

Customer / advertiser relationships

    1,210,269         374,799           1,210,205        289,824    

Talent contracts

    350,246         129,878           317,352        99,050    

Representation contracts

    232,578         129,619           231,623        101,650    

Other

    559,013         106,094           551,197        80,110    
 

 

 

   

 

   

 

 

   

 

Total

   $ 3,129,468          $1,041,406           $ 3,100,244          $    812,095    
 

 

 

   

 

   

 

 

   

 

 

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Table of Contents

CLEAR CHANNEL CAPITAL I, LLC AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(UNAUDITED)

 

Total amortization expense related to definite-lived intangible assets was $87.8 million and $82.8 million for the three months ended September 30, 2011 and 2010, respectively, and $247.3 million and $251.0 million for the nine months ended September 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

   $       301,450   
 

   2013

     281,995   
 

   2014

     260,841   
 

   2015

     234,215   
 

   2016

     215,362   

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)    September 30,
2011
     December 31,
2010
 

FCC broadcast licenses

     $ 2,411,602             $ 2,423,828       

Billboard permits

     1,113,562             1,114,413       
  

 

 

    

 

 

 

Total indefinite-lived intangible assets

     $       3,525,164             $       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

     (10,422                           (10,422

Foreign currency

            (655     (2,097             (2,752

Other adjustments

     (36                           (36
  

 

 

   

 

 

   

 

 

   

 

 

    

 

 

 

Balance as of September 30, 2011

   $ 3,207,986      $ 584,879      $ 274,611      $ 117,097       $     4,184,573   
  

 

 

   

 

 

   

 

 

   

 

 

    

 

 

 

 

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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 September 30, 2011 and December 31, 2010 consisted of the following:

 

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

Senior Secured Credit Facilities:

    

Term Loan Facilities (1)

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

Revolving Credit Facility Due 2014

     1,325,550            1,842,500       

Delayed Draw Term Loan 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 Subsidiary Debt

     7,320            4,692       
  

 

 

   

 

 

 

Total Consolidated Secured Debt

     14,553,493            14,130,098       
  

 

 

   

 

 

 

Senior Cash Pay Notes

     796,250            796,250       

Senior Toggle Notes

     829,831            829,831       

Clear Channel Senior Notes

     1,998,415            2,911,393       

Subsidiary Senior Notes

     2,500,000            2,500,000       

Other Clear Channel Subsidiary Debt

     46,809            63,115       

Purchase accounting adjustments and original issue discount

     (544,997)           (623,335)      
  

 

 

   

 

 

 
     20,179,801            20,607,352       

Less: current portion

     285,078            867,735       
  

 

 

   

 

 

 

Total long-term debt

     $   19,894,723            $   19,739,617       
  

 

 

   

 

 

 

 

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

Clear Channel’s weighted average interest rate at September 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 $15.1 billion and $18.7 billion at September 30, 2011 and December 31, 2010, respectively.

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 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.

 

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CLEAR CHANNEL CAPITAL I, LLC AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(UNAUDITED)

 

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 used $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) and intends to use the remaining $203.8 million to repay at maturity a portion of Clear Channel’s 5% senior notes which mature in March 2012.

Clear Channel capitalized an additional $7.1 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.

During the third quarter of 2011, CC Finco, LLC (“CC Finco”), an indirect wholly-owned subsidiary of the Company, repurchased $80.0 million aggregate principal amount of Clear Channel’s outstanding 5.5% senior notes due 2014 for $57.1 million, including accrued interest, through open market purchases. Notes repurchased by CC Finco are eliminated in consolidation.

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 nine 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.

On July 16, 2010, Clear Channel made the election to pay interest on the senior toggle notes entirely in cash, effective for the interest period commencing August 1, 2010. Unless otherwise elected, the cash interest election will remain in effect throughout the remaining term of the notes.

During the first nine months of 2010, Clear Channel repaid its remaining 7.65% senior notes upon maturity for $138.8 million, including $5.1 million of accrued interest, with proceeds from its delayed draw term loan facility that was specifically designated for this purpose. Also during the first nine months of 2010, Clear Channel repaid its remaining 4.50% senior notes upon maturity for $240.0 million with available cash on hand.

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 nine months ended September 30, 2011, the Company’s Radio segment sold stations from the trust and recorded a gain of $4.9 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 nine months ended September 30, 2011 and 2010, respectively, consisted of the following components:

 

(In thousands)    Three Months Ended
September 30,
     Nine Months Ended
September 30,
 
     2011      2010      2011      2010  

Current tax expense

    $             (11,326)         $           (14,663)         $ (376)         $       (41,307)      

Deferred tax benefit

     31,991           35,078           122,886           170,886       
  

 

 

    

 

 

    

 

 

    

 

 

 

Income tax benefit

    $ 20,665          $ 20,415          $       122,510          $ 129,579       
  

 

 

    

 

 

    

 

 

    

 

 

 

The effective tax rate for the three and nine months ended September 30, 2011 was 23.5% and 34.1%, respectively. The effective tax rate for the three months ended September 30, 2011 was primarily impacted by increases in tax expense attributable to the write-off of deferred tax assets in excess of the tax benefits realized upon the vesting of certain equity awards, an increase in unrecognized tax benefits and the Company’s inability to record the benefit of losses in certain foreign jurisdictions.

The effective tax rate for the nine months ended September 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 $10.6 million to reflect the net tax benefits of the settlements. In addition, the effective rate for the nine months ended September 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 effects of these items were partially offset by the items mentioned above related to the three months ended September 30, 2011.

The Company’s effective tax rate for the three and nine months ended September 30, 2010 was 11.9% and 24.1%, 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. In addition, during the three months ended September 30, 2010, the Company recorded a valuation allowance of $13.4 million against deferred tax assets in foreign jurisdictions due to the uncertainty of the ability to realize those assets in future periods.

During the nine months ended September 30, 2011 and 2010, cash paid for interest and income taxes, net of U.S. Federal income tax refunds of $132.3 million in 2010, was as follows:

 

(In thousands)    Nine Months Ended September 30,  
     2011      2010  

Interest

       $   1,028,973                 $    969,525          

Income taxes

     77,548               (113,840)         

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 September 30, 2011 and December 31, 2010 are as follows:

 

(In thousands)    September 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    $  (4,455)    $ 53,339    $  61,498    $  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 loss. 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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CLEAR CHANNEL CAPITAL I, LLC AND SUBSIDIARIES

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 $176.7 million and $213.1 million at September 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

    (22,791)         
 

 

 

 

Balance at September 30, 2011

      $ 111,276          
 

 

 

 

Other Comprehensive Income (Loss)

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

 

     Three Months Ended
September  30,
     Nine Months Ended
September 30,
 
(In thousands)    2011      2010      2011      2010  

Unrealized holding gain (loss) on marketable securities

       $   18,341               $   (11,713)           $ 4,569            $     (12,627)      

Unrealized holding gain (loss) on cash flow derivatives

     (6,474)            (318)            (13,602)            4,570       
  

 

 

    

 

 

    

 

 

    

 

 

 

Income tax benefit (expense)

       $ 11,867               $ (12,031)           $ (9,033)           $ (8,057)      
  

 

 

    

 

 

    

 

 

    

 

 

 

 

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CLEAR CHANNEL CAPITAL I, LLC AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(UNAUDITED)

 

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.

On or about July 12, 2006 and April 12, 2007, two of the Company’s operating businesses (L&C Outdoor Ltda. (“L&C”) and Publicidad Klimes São Paulo Ltda. (“Klimes”), respectively) in the São 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 these businesses fall within the definition of “communication services” and as such are subject to the VAT.

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 $8.8 million in taxes, approximately $17.5 million in penalties and approximately $31.6 million in interest (as of September 30, 2011 at an exchange rate of 0.547). On August 8, 2011, Brazil’s National Council of Fiscal Policy (CONFAZ) published a rule authorizing sixteen states, including the State of São Paulo, to reduce the principal amount of VAT allegedly owed for communications services; the rule also authorizes the states to reduce or waive related interest and penalties. The State of São Paulo ratified the amnesty in late August 2011. However, it is not required to reduce the principal amount of VAT or waive the payment of penalties and interest. In late 2011 or early 2012, the Company expects the São Paulo state legislature to pass legislation setting forth the precise terms of the amnesty. Based on the uncertainty of any amnesty terms that may be offered, the Company does not know whether the offered terms will be acceptable. Accordingly, the Company continues to vigorously pursue its case in the administrative courts and, if necessary, in the relevant appellate courts. At September 30, 2011, the range of reasonably possible loss is from zero to approximately $58 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 the Company’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 $9.9 million in taxes, approximately $4.9 million in penalties and approximately $19.3 million in interest (as of September 30, 2011 at an exchange rate of 0.547). 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. On August 8, 2011, Brazil’s National Council of Fiscal Policy (CONFAZ) published a rule authorizing sixteen states, including the State of São Paulo, to reduce the principal amount of VAT allegedly owed for communications services; the rule also authorizes the states to reduce or waive related interest and penalties. The State of São Paulo ratified the amnesty in late August 2011. However, it is not required to reduce the principal amount of VAT or waive the payment of penalties and interest. In late 2011 or early 2012, the Company expects the São Paulo state legislature to pass legislation setting forth the precise terms of the amnesty. Based on the uncertainty of any amnesty terms that may be offered, the Company does not know whether the offered terms will be acceptable. Accordingly, the Company continues to vigorously pursue its appeal in the 13th lower public treasury court. At September 30, 2011, the range of reasonably possible loss is from zero to approximately $34 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 the Company’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.

 

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CLEAR CHANNEL CAPITAL I, LLC AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(UNAUDITED)

 

At September 30, 2011, Clear Channel guaranteed $39.7 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 September 30, 2011, no amounts were outstanding under these agreements.

As of September 30, 2011, Clear Channel had outstanding commercial standby letters of credit and surety bonds of $136.9 million and $49.3 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.

As of September 30, 2011, Clear Channel had outstanding bank guarantees of $58.3 million. Bank guarantees in the amount of $4.3 million are backed by cash collateral.

NOTE 7 — CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS

CCMH is a party to a management agreement with certain affiliates of Bain Capital Partners, LLC and Thomas H. Lee Partners, L.P. (together, 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 September 30, 2011 and 2010, the Company recognized management fees of $3.8 million in each period and reimbursable expenses of $0.7 million for the three months ended September 30, 2010. For the nine months ended September 30, 2011 and 2010, the Company recognized management fees of $11.3 million in each period and reimbursable expenses of $0.6 million and $1.7 million, respectively.

On August 9, 2010, Clear Channel announced that its board of directors approved a stock purchase program under which Clear Channel or its subsidiaries may purchase up to an aggregate of $100 million of the Class A common stock of CCMH and/or the Class A common stock of CCOH. The stock purchase program does not have a fixed expiration date and may be modified, suspended or terminated at any time at Clear Channel’s discretion. During the third quarter of 2011, CC Finco purchased 998,250 shares of CCOH’s Class A common stock through open market purchases for approximately $10.7 million.

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)

    (259,067)         22,438          (236,629)    

Foreign currency translation adjustments

    (27,810)         1,731          (26,079)    

Unrealized holding loss on marketable securities

    (6,776)         (513)         (7,289)    

Unrealized holding gain on cash flow derivatives

    22,791          —          22,791     

Reclassification adjustment

    18          216          234     

Other - net

    (940)         (3,429)         (4,369)    
 

 

 

   

 

 

   

 

 

 

Balances at September 30, 2011

   $ (7,967,390)         $ 511,363         $ (7,456,027)    
 

 

 

   

 

 

   

 

 

 

 

(In thousands)   The Company     Noncontrolling
Interests
    Consolidated  

Balances at January 1, 2010

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

Net income (loss)

    (416,423)         9,197          (407,226)    

Foreign currency translation adjustments

    9,748          3,128          12,876     

Unrealized holding gain (loss) on marketable securities

    9,830          (613)         9,217     

Unrealized holding loss on cash flow derivatives

    (7,617)         —          (7,617)    

Reclassification adjustment

    1,414          10          1,424     

Other - net

    11,924          4,544          16,468     
 

 

 

   

 

 

   

 

 

 

Balances at September 30, 2010

   $ (7,691,510)         $ 471,914         $ (7,219,596)    
 

 

 

   

 

 

   

 

 

 

The Company does not have any compensation plans under which it grants awards to employees. CCMH and CCOH have granted options to purchase shares of 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.

 

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CLEAR CHANNEL CAPITAL I, LLC AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(UNAUDITED)

 

NOTE 9 — SEGMENT DATA

The Company’s reportable operating segments, which it believes best reflect how the Company is currently managed, are Radio, 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 segment provides media and entertainment services through broadcast and digital delivery, digital media and the operation of 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.

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

 

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

Three Months Ended September 30, 2011

  

       

Revenue

   $     798,474         $     347,344         $     401,106         $         60,195         $ —         $ (23,767)        $     1,583,352     

Direct operating expenses

    231,713          152,631          255,501          7,171          —          (10,953)         636,063     

Selling, general and administrative expenses

    265,137          57,780          74,135          36,022          —          (12,814)         420,260     

Depreciation and amortization

    68,176          62,809          52,125          12,052          2,370          —          197,532     

Corporate expenses

    —          —          —          —          54,247          —          54,247     

Other operating expense - net

    —          —          —          —          (6,490)         —          (6,490)    
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Operating income (loss)

   $ 233,448        $ 74,124         $ 19,345         $ 4,950         $ (63,107)        $ —         $ 268,760     
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Intersegment revenues

   $ 7,109         $ 1,084         $ —         $ 15,574         $ —         $ —         $ 23,767     

Capital expenditures

   $ 15,595         $ 19,177         $ 41,193         $ —         $ 3,464         $ —         $ 79,429     

Share-based compensation expense

   $ 1,034         $ 1,903         $ 792         $ —         $ 2,523         $ —         $ 6,252     

Three Months Ended September 30, 2010

  

Revenue

   $ 743,034         $ 333,269         $ 361,817         $ 61,849         $ —         $ (22,622)        $ 1,477,347     

Direct operating expenses

    202,771          143,940          236,679          6,670          —          (10,962)         579,098     

Selling, general and administrative expenses

    240,668          51,750          63,474          38,765          —          (11,660)         382,997     

Depreciation and amortization

    64,657          53,139          50,694          13,139          2,450          —          184,079     

Corporate expenses

    —          —          —          —          80,518          —          80,518     

Other operating expense - net

    —          —          —          —          (29,559)         —          (29,559)    
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Operating income (loss)

   $ 234,938         $ 84,440         $ 10,970         $ 3,275         $   (112,527)        $ —         $ 221,096     
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Intersegment revenues

  $ 7,259         $ 865         $ —         $ 14,498         $ —         $ —         $ 22,622     

Capital expenditures

   $ 10,515         $ 30,689         $ 21,869         $ —         $ 2,923         $ —         $ 65,996     

Share-based compensation expense

   $ 1,746         $ 2,207         $ 658         $ —         $ 3,732         $ —         $ 8,343     

 

14


Table of Contents

CLEAR CHANNEL CAPITAL I, LLC AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(UNAUDITED)

 

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

Nine Months Ended September 30, 2011

  

       

Revenue

   $     2,219,695        $     977,433         $     1,210,439         $     170,630        $ —         $ (69,633)         $     4,508,564     

Direct operating expenses

    639,275          445,615          769,369          21,341          —          (35,015)          1,840,585     

Selling, general and administrative expenses

    749,413          167,379          230,653          110,141          —          (34,618)          1,222,968     

Depreciation and amortization

    201,665          166,859          156,005          38,146          8,209          —           570,884     

Corporate expenses

    —          —          —          —          163,080          —           163,080     

Other operating income - net

    —          —          —          —          13,453          —          13,453     
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Operating income (loss)

   $ 629,342         $ 197,580         $ 54,412         $ 1,002         $ (157,836)        $ —          $ 724,500     
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Intersegment revenues

   $ 23,620         $ 2,772         $ —         $ 43,241         $ —         $ —          $ 69,633     

Capital expenditures

   $ 45,453         $ 87,875         $ 78,269         $ —         $ 8,283         $ —          $ 219,880     

Share-based compensation expense

   $ 3,470         $ 5,745         $ 2,396         $ —         $ 2,670         $ —          $ 14,281     

Nine Months Ended September 30, 2010

  

       

Revenue

   $ 2,114,971         $ 928,015         $ 1,077,246        $ 176,668         $ —         $ (65,766)        $ 4,231,134     

Direct operating expenses

    605,425          427,546          717,843          20,578          —          (32,164)          1,739,228     

Selling, general and administrative expenses

    706,478          160,302          196,971          116,914          —          (33,602)          1,147,063     

Depreciation and amortization

    192,401          158,319          152,522          39,660          6,689          —          549,591     

Corporate expenses

    —          —          —          —          209,123          —          209,123     

Other operating expense - net

    —          —          —          —          (22,523)         —          (22,523)    
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Operating income (loss)

   $ 610,667         $ 181,848         $ 9,910         $ (484)        $   (238,335)        $ —         $ 563,606     
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Intersegment revenues

   $ 21,056         $ 2,712         $ —         $ 41,998         $ —          —         $ 65,766     

Capital expenditures

   $ 21,617         $ 70,615         $ 68,659         $ —         $ 8,514        $ —         $ 169,405     

Share-based compensation expense

   $ 5,252         $ 6,553         $ 1,953         $ —         $ 11,209        $ —         $ 24,967     

 

15


Table of Contents

NOTE 10 – SUBSEQUENT EVENTS

On October 14, 2011, Clear Channel Hillenaar BV, a subsidiary of the Company, acquired Brouwer & Partners, a street furniture business in Holland, for $12.5 million.

 

16


Table of Contents

CLEAR CHANNEL CAPITAL I, LLC AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(UNAUDITED)

 

NOTE 11 – 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)    September 30, 2011  
     Parent
Company
     Subsidiary
Issuer
     Guarantor
Subsidiaries
     Non-Guarantor
Subsidiaries
     Eliminations      Consolidated  

Cash and cash equivalents

    $ —          $ 1          $ 305,135          $ 860,245          $ —          $ 1,165,381     

Accounts receivable, net

     —           —           679,306           702,963           —           1,382,269     

Intercompany receivables (1)

     25,863           5,574,239           94,987           —           (5,695,089)          —     

Other current assets

     4,770           45,885           106,190           270,034           (50,937)          375,942     
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total Current Assets

     30,633           5,620,125           1,185,618           1,833,242           (5,746,026)          2,923,592     

Property, plant and equipment, net

     —           —           824,920           2,212,295           —           3,037,215     

Definite-lived intangibles, net

     —           —           1,442,642           645,420           —           2,088,062     

Indefinite-lived intangibles

     —           —           2,411,602           1,113,562           —           3,525,164     

Goodwill

     —           —           3,321,329           863,244           —           4,184,573     

Intercompany notes receivable

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

Long-term intercompany receivable

     —           —           —           541,356           (541,356)          —     

Investment in subsidiaries

     (8,336,138)          5,038,383           2,820,667           —           477,088           —     

Other assets

     —           179,247           224,138           873,699           (526,744)          750,340     
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total Assets

    $ (8,305,505)         $ 11,049,755          $ 12,230,916          $     8,082,818          $ (6,549,038)         $ 16,508,946     
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Accounts payable and accrued expenses

    $ (773)         $ (70,410)         $ 308,444          $ 606,197          $ —          $ 843,458     

Accrued interest

     —           85,224           —           1,856           (11,315)          75,765     

Intercompany payable (1)

     —           —           5,600,102           94,987           (5,695,089)          —     

Current portion of long-term debt

     —           236,159           1,313           47,606           —           285,078     

Deferred income

     —           —           57,901           130,118           —           188,019     
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total Current Liabilities

     (773)          250,973           5,967,760           880,764           (5,706,404)          1,392,320     

Long-term debt

     —           18,271,771           3,981           2,501,229           (882,258)          19,894,723     

Long-term intercompany payable

     —           541,356           —           —           (541,356)          —     

Intercompany long-term debt

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

Deferred income taxes

     (13,509)          99,879           1,026,973           844,209           473           1,958,025     

Other long-term liabilities

     —           221,914           220,325           277,666           —           719,905     

Total member’s interest (deficit)

     (8,291,223)          (8,336,138)          4,799,877           3,578,950           792,507           (7,456,027)    
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total Liabilities and Member’s Interest (Deficit)

    $     (8,305,505)         $     11,049,755          $     12,230,916          $     8,082,818          $     (6,549,038)         $     16,508,946     
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

  (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)

   December 31, 2010  
     Parent
Company
     Subsidiary
Issuer
     Guarantor
Subsidiaries
     Non-Guarantor
Subsidiaries
     Eliminations      Consolidated  

Cash and cash equivalents

    $ —          $ 1          $ 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)         $ (87,577)         $ 400,449          $ 644,936          $ —          $ 956,867     

Accrued interest

     —           151,465           —           1,157           (31,423)          121,199     

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.

 

18


Table of Contents

CLEAR CHANNEL CAPITAL I, LLC AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(UNAUDITED)

 

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

Revenue

    $ —          $ —          $ 832,949          $ 755,472          $ (5,069)         $ 1,583,352     

Operating expenses:

                 

Direct operating expenses

     —           —           227,360           412,677           (3,974)          636,063     

Selling, general and administrative expenses

     —           —           288,116           133,239           (1,095)          420,260     

Corporate expenses

     2,599           —           29,313           22,335           —           54,247     

Depreciation and amortization

     —           —           82,266           115,266           —           197,532     

Other operating income (expense) – net

     —           —           (6,527)          37           —           (6,490)    
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Operating income (loss)

     (2,599)          —           199,367           71,992           —           268,760     

Interest expense – net

     2           343,039           (1,024)          13,109           14,107           369,233     

Equity in earnings (loss) of nonconsolidated affiliates

     (62,574)          153,264           9,327           5,242           (100,049)          5,210     

Other income (expense) – net

     —           (1)          (252)          3,286           4,274           7,307     
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Income (loss) before income taxes

     (65,175)          (189,776)          209,466           67,411           (109,882)          (87,956)    

Income tax benefit (expense)

     952           127,202           (78,831)          (28,658)          —           20,665     
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Consolidated net income (loss)

     (64,223)          (62,574)          130,635           38,753           (109,882)          (67,291)    

Less amount attributable to noncontrolling interest

     —           —           192           6,573           —           6,765     
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Net income (loss) attributable to the Company

    $ (64,223)         $ (62,574)         $ 130,443          $ 32,180          $ (109,882)         $ (74,056)    

Other comprehensive income (loss), net of tax:

                 

Foreign currency translation adjustments

     —           —           625           (102,576)          —           (101,951)    

Unrealized gain (loss) on securities and derivatives:

                 

Unrealized holding gain (loss) on marketable securities

     —           —           (16,319)          (5,771)          792           (21,298)    

Unrealized holding gain on cash flow derivatives

     —           10,848           —           —           —           10,848     

Reclassification adjustment

     —           —           —           86           —           86     

Equity in subsidiary comprehensive income (loss)

     (101,219)          (112,067)          (106,201)          —           319,487           —     
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Comprehensive income (loss)

     (165,442)          (163,793)          8,548           (76,081)          210,397           (186,371)    

Less amount attributable to noncontrolling interest

     —           —           (10,620)          (1,268)          189           (11,699)    
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Comprehensive income (loss) attributable to the Company

    $     (165,442)         $     (163,793)         $     19,168          $     (74,813)         $     210,208          $     (174,672)    
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

19


Table of Contents

CLEAR CHANNEL CAPITAL I, LLC AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(UNAUDITED)

 

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

Revenue

   $ —         $ —         $ 776,705         $ 701,815         $ (1,173)        $ 1,477,347     

Operating expenses:

           

Direct operating expenses

    —          —          197,340          382,066          (308)         579,098     

Selling, general and administrative expenses

    —          —          264,364          119,498          (865)         382,997     

Corporate expenses

    2,984          9          51,328          26,197          —          80,518     

Depreciation and amortization

    —          —          79,865          104,214          —          184,079     

Other operating expense – net

    —          —          (1,887)        (27,672)         —          (29,559)    
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Operating income (loss)

    (2,984)         (9)         181,921          42,168          —          221,096     

Interest expense – net

    4          361,665          (2,205)         8,103          21,630          389,197     

Equity in earnings (loss) of nonconsolidated affiliates

    (131,162)         95,200          (35,633)         3,021          71,568          2,994     

Other expense – net

    —          —          (1,574)         (4,126)         —          (5,700)    
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Income (loss) before income taxes

    (134,150)         (266,474)         146,919          32,960          49,938          (170,807)    

Income tax benefit (expense)

    1,095          135,312          (80,043)        (35,949)         —          20,415     
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Consolidated net income (loss)

    (133,055)         (131,162)         66,876          (2,989)         49,938          (150,392)    

Less amount attributable to noncontrolling interest

    —          —          1,281          3,012          —          4,293     
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net income (loss) attributable to the Company

   $ (133,055)        $ (131,162)        $ 65,595         $ (6,001)        $ 49,938         $ (154,685)    
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Other comprehensive income (loss), net of tax:

           

Foreign currency translation adjustments

    —          —          (232)         126,780          —          126,548     

Unrealized gain (loss) on securities and derivatives:

           

Unrealized holding gain (loss) on marketable securities

    —          —          6,079          (395)         —          5,684     

Unrealized holding gain on cash flow derivatives

    —          529          —          —          —          529     

Reclassification adjustment

    —          —          —          2,565          —          2,565     

Equity in subsidiary comprehensive income (loss)

    116,562          116,033          121,908          —          (354,503)         —     
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Comprehensive income (loss)

    (16,493)         (14,600)         193,350          122,949          (304,565)         (19,359)    

Less amount attributable to noncontrolling interest

    —          —          11,723          7,041          —          18,764     
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Comprehensive income (loss) attributable to the Company

   $     (16,493)        $     (14,600)        $     181,627         $     115,908         $     (304,565)        $     (38,123)    
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

20


Table of Contents

CLEAR CHANNEL CAPITAL I, LLC AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(UNAUDITED)

 

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

Revenue

   $ —         $ —         $ 2,285,970         $ 2,237,046         $ (14,452)        $ 4,508,564     

Operating expenses:

           

Direct operating expenses

    —          —          609,756          1,235,725          (4,896)         1,840,585     

Selling, general and administrative expenses

    —          —          812,348          420,176          (9,556)         1,222,968     

Corporate expenses

    8,209          —          87,515          67,356          —          163,080     

Depreciation and amortization

    —          —          244,380          326,504          —          570,884     

Other operating income – net

    —          —          4,314          9,139          —          13,453     
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Operating income (loss)

    (8,209)         —          536,285          196,424          —          724,500     

Interest expense – net

    13          1,020,220          (3,697)         22,603          58,710          1,097,849     

Equity in earnings (loss) of nonconsolidated affiliates

    (199,417)         440,734          30,020          13,478          (271,359)         13,456     

Other income (expense) – net

    —          (5,721)         (614)         2,815          4,274          754     
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Income (loss) before income taxes

    (207,639)         (585,207)         569,388          190,114          (325,795)         (359,139)    

Income tax benefit (expense)

    3,008          385,790          (200,507)         (65,781)         —          122,510     
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Consolidated net income (loss)

    (204,631)         (199,417)         368,881          124,333          (325,795)         (236,629)    

Less amount attributable to noncontrolling interest

    —          —          9,199          13,239          —          22,438     
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net income (loss) attributable to the Company

   $ (204,631)        $ (199,417)        $ 359,682         $ 111,094         $ (325,795)       $ (259,067)    

Other comprehensive income (loss), net of tax:

           

Foreign currency translation adjustments

    —          —          677          (26,756)         —          (26,079)    

Unrealized gain (loss) on securities and derivatives:

           

Unrealized holding gain (loss) on marketable securities

    —          —          (2,830)         (5,251)         792          (7,289)    

Unrealized holding gain on cash flow derivatives

    —          22,791          —          —          —          22,791     

Reclassification adjustment

    —          —          —          234          —          234     

Equity in subsidiary comprehensive income (loss)

    (12,380)         (35,171)         (35,847)         —          83,398          —     
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Comprehensive income (loss)

    (217,011)         (211,797)         321,682          79,321          (241,605)         (269,410)    

Less amount attributable to noncontrolling interest

    —          —          (3,621)         4,866          189          1,434     
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Comprehensive income (loss) attributable to the Company

   $     (217,011)        $     (211,797)        $     325,303         $     74,455         $     (241,794)        $     (270,844)    
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

21


Table of Contents

CLEAR CHANNEL CAPITAL I, LLC AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(UNAUDITED)

 

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

Revenue

   $ —         $ —         $     2,209,893         $     2,024,822         $ (3,581)        $     4,231,134     

Operating expenses:

           

Direct operating expenses

    —          —          590,822          1,149,275          (869)         1,739,228     

Selling, general and administrative expenses

    —          —          779,652          370,123          (2,712)         1,147,063     

Corporate expenses

    9,417          17          128,963          70,726          —          209,123     

Depreciation and amortization

    —          —          237,614          311,977          —          549,591     

Other operating income (expense) –net

    —          —          2,411          (24,934)         —          (22,523)    
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Operating income (loss)

    (9,417)         (17)         475,253          97,787          —          563,606     

Interest expense – net

    13          1,068,827          2,046          35,702          53,983          1,160,571     

Equity in earnings (loss) of nonconsolidated affiliates

    (416,757)         252,220          (86,381)         8,651          250,879          8,612     

Other income (expense) – net

    —          —          (2,135)         (6,606)         60,289          51,548     
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Income (loss) before income taxes

    (426,187)         (816,624)         384,691          64,130          257,185          (536,805)    

Income tax benefit (expense)

    3,458          399,867          (213,927)         (59,819)         —          129,579     
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Consolidated net income (loss)

    (422,729)         (416,757)         170,764          4,311          257,185          (407,226)    

Less amount attributable to noncontrolling interest

    —          —          559          8,638          —          9,197     
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net income (loss) attributable to the Company

   $ (422,729)        $ (416,757)        $ 170,205         $ (4,327)        $ 257,185         $ (416,423)    

Other comprehensive income (loss), net of tax:

           

Foreign currency translation adjustments

    —          —          (475)         13,351          —          12,876     

Unrealized gain (loss) on securities and derivatives:

           

Unrealized holding gain (loss) on marketable securities

    —          —          14,560          (5,343)         —          9,217     

Unrealized holding loss on cash flow derivatives

    —          (7,617)         —          —          —          (7,617)    

Reclassification adjustment

    —          —          —          1,424          —          1,424     

Equity in subsidiary comprehensive income (loss)

    13,376          20,993          6,124          —          (40,493)         —     
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Comprehensive income (loss)

    (409,353)         (403,381)         190,414          5,105          216,692          (400,523)    

Less amount attributable to noncontrolling interest

    —          —          (784)         3,308          —          2,524     
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Comprehensive income (loss) attributable to the Company

   $     (409,353)        $     (403,381)        $     191,198         $ 1,797         $     216,692         $ (403,047)    
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

22


Table of Contents

CLEAR CHANNEL CAPITAL I, LLC AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(UNAUDITED)

 

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

Cash flows from operating activities:

  

Consolidated net income (loss)

    $     (204,631)         $ (199,417)         $ 368,881          $     124,333          $     (325,795)         $ (236,629)    

Reconciling items:

                 

Depreciation and amortization

     —           —           244,380           326,504           —           570,884     

Deferred taxes

     (843)          (183,775)          76,627           (14,895)          —           (122,886)    

Gain on disposal of operating assets

     —           —           (4,314)          (9,139)          —           (13,453)    

(Gain) loss on extinguishment of debt

     —           5,721           —           —           (4,274)          1,447     

Provision for doubtful accounts

     —           —           8,195           5,105           —           13,300     

Share-based compensation

     —           —           6,177           8,104           —           14,281     

Equity in (earnings) loss of nonconsolidated affiliates

     199,417           (440,734)          (30,020)          (13,478)          271,359           (13,456)    

Amortization of deferred financing charges, bond premiums and accretion of note discounts, net

     —           169,455           (4,487)          (80,158)          58,709           143,519     

Other reconciling items net

     —           —           200           7,248           1           7,449     

Changes in operating assets and liabilities:

                 

Decrease in accounts receivable

     —           —           1,863           14,728           —           16,591     

Increase in deferred income

     —           —           7,130           27,048           —           34,178     

Decrease in accrued expenses

     —           (3,216)          (92,647)          (11,047)          —           (106,910)    

Increase (decrease) in accounts payable and other liabilities

     —           —           (48,288)          739           —           (47,549)    

Increase (decrease) in accrued interest

     —           (87,054)          5,391           705           14,716           (66,242)    

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

     (2,775)          17,976           (43,492)          (30,135)          (14,716)          (73,142)    
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Net cash provided by (used for) operating activities

     (8,832)          (721,044)          495,596           355,662           —           121,382     

Cash flows from investing activities:

                 

Proceeds from maturity of Clear Channel notes

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

Purchases of property, plant and equipment

     —           —           (52,295)          (165,841)          —           (218,136)    

Purchases of businesses

     —           —           (211)          (33,671)          —           (33,882)    

Acquisition of operating assets

     —           —           (1,113)          (13,239)          —           (14,352)    

Proceeds from disposal of assets

     —           —           41,381           11,008           —           52,389     

Investment in Clear Channel notes

     —           —           —           (55,250)          55,250           —     

Change in other net

     —           —           67           (9,676)          11,325           1,716     
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Net cash provided by (used for) investing activities

     —           —           (12,171)          (99,647)          (100,447)          (212,265)    

Cash flows from financing activities:

                 

Draws on credit facilities

     —           55,000           —           —           —           55,000     

Payments on credit facilities

     —           (956,181)          —           (3,202)          —           (959,383)    

Intercompany funding

     9,139           1,372,223           (1,399,528)          18,166           —           —     

Proceeds from long-term debt

     —           1,724,650           1,603           1,560           —           1,727,813     

Payments on long-term debt

     —           (1,428,051)          (977)          (108,259)          167,022           (1,370,265)    

Deferred financing charges

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

Repurchases of long-term debt

     —           —           —           —           (55,250)          (55,250)    

Change in other net

     (307)          —           250           (4,598)          (11,325)          (15,980)    
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Net cash provided by (used for) financing activities

     8,832           721,044           (1,398,652)          (96,333)           100,447           (664,662)    

Net increase (decrease) in cash and cash equivalents

     —           —           (915,227)          159,682           —           (755,545)    

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          $ 305,135          $ 860,245          $ —          $     1,165,381     
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

23


Table of Contents

CLEAR CHANNEL CAPITAL I, LLC AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(UNAUDITED)

 

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

Cash flows from operating activities:

 

Consolidated net income (loss)

   $     (422,729)        $     (416,757)        $     170,764         $     4,311         $     257,185         $     (407,226)    

Reconciling items:

           

Depreciation and amortization

    —          —          237,614          311,977          —          549,591     

Deferred taxes

    (1,336)         (205,868)         49,103          (12,785)         —          (170,886)    

(Gain) loss on disposal of operating assets

    —          —          (2,411)         24,934          —          22,523     

Gain on extinguishment of debt

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

Provision for doubtful accounts

    —          —          10,066          4,814          —          14,880     

Share-based compensation

    —          —          16,400          8,567          —          24,967     

Equity in (earnings) loss of nonconsolidated affiliates

    416,757          (252,220)         86,381          (8,651)         (250,879)         (8,612)    

Amortization of deferred financing charges, bond premiums and accretion of note discounts, net

    —          187,008          3,162          (84,113)         53,983          160,040     

Other reconciling items net

    —          —          (9,005)         18,727          —          9,722     

Changes in operating assets and liabilities:

           

Increase in accounts receivable

    —          —          (54,589)         (20,121)         —          (74,710)    

Increase (decrease) in deferred income

    4,187          382,024          (304,098)         50,196          —          132,309