UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

FORM 10-Q

 

[X]          QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE

                ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2012

 

[   ]          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                                                                   (I.R.S. Employer Identification No.)

                              incorporation or organization)

 

                                      200 East Basse Road

                                       San Antonio, Texas                                                                                                     78209

                     (Address of principal executive offices)                                                                               (Zip Code)

 

(210) 822-2828

(Registrant’s telephone number, including area code)

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of

the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant

was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes [  ] No [X]

 

Pursuant to the terms of its bond indentures, the registrant is a voluntary filer of reports required to be filed by Section 13

or 15(d) of the Securities Exchange Act of 1934, and has filed all such reports as required by its bond indentures during

the preceding 12 months.

 

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any,

every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the

preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

Yes [X] No [  ]

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a

smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting

company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer [  ]   Accelerated filer [  ]   Non-accelerated filer [X]  Smaller reporting company [   ]

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes [  ] No [X]

 

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

 

                                                   Class                                                                                           Outstanding at October 26, 2012

                           - - - - - - - - - - - - - - - - - - - - - - - - --                                                                     - - - - - - - - - - - -  - - - - - - - - - -

                             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).

 

 


 

 

 

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.)

 

1

                    Condensed Consolidated Balance Sheets as of September 30, 2012 and December 31, 2011

1

                    Consolidated Statements of Comprehensive Loss for the three and nine months ended September 30, 2012 and 2011

2

                    Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 2012 and 2011

3

                    Notes to Consolidated Financial Statements

4

Item 2.        Management’s Discussion and Analysis of Financial Condition and Results of Operations

25

Item 3.        Quantitative and Qualitative Disclosures About Market Risk

41

Item 4.        Controls and Procedures

41

Part II – Other Information

 

Item 1.        Legal Proceedings

42

Item 1A.     Risk Factors

42

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

 

42

Item 3.        Defaults Upon Senior Securities (intentionally omitted pursuant to General Instruction H(2)(b) of

                    Form 10-Q)

 

43

Item 4.        Mine Safety Disclosures

43

Item 5.        Other Information

43

Item 6.        Exhibits

44

Signatures

45

 

 


 

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,

 

 

 

 

 

2012 

 

 

December 31,

 

 

(Unaudited)

 

 

2011 

CURRENT ASSETS

 

 

 

 

 

Cash and cash equivalents

$

 1,296,643 

 

$

 1,228,682 

Accounts receivable, net

 

 1,405,259 

 

 

 1,399,135 

Other current assets

 

 365,508 

 

 

 357,468 

 

Total Current Assets

 

 3,067,410 

 

 

 2,985,285 

 

 

 

 

 

 

 

PROPERTY, PLANT AND EQUIPMENT

 

 

 

 

 

Structures, net

 

 1,887,169 

 

 

 1,950,437 

Other property, plant and equipment, net

 

 1,119,282 

 

 

 1,112,890 

 

 

 

 

 

 

 

INTANGIBLE ASSETS AND GOODWILL

 

 

 

 

 

Definite-lived intangibles, net

 

 1,811,676 

 

 

 2,017,760 

Indefinite-lived intangibles

 

 3,519,970 

 

 

 3,517,071 

Goodwill

 

 4,195,856 

 

 

 4,186,718 

 

 

 

 

 

 

 

OTHER ASSETS

 

 

 

 

 

Other assets

 

 800,956 

 

 

 771,878 

Total Assets

$

 16,402,319 

 

$

 16,542,039 

 

 

 

 

 

 

 

CURRENT LIABILITIES

 

 

 

 

 

Accounts payable and accrued expenses

$

 841,907 

 

$

 856,727 

Accrued interest

 

 77,186 

 

 

 160,361 

Current portion of long-term debt

 

 419,880 

 

 

 268,638 

Deferred income

 

 176,979 

 

 

 143,236 

Other current liabilities

 

 102,154 

 

 

 - 

 

Total Current Liabilities

 

1,618,106 

 

 

1,428,962 

 

 

 

 

 

 

 

Long-term debt

 

20,317,926 

 

 

19,938,531 

Deferred income taxes

 

1,815,032 

 

 

1,938,599 

Other long-term liabilities

 

498,592 

 

 

707,888 

 

 

 

 

 

 

 

Commitments and contingent liabilities (Note 6)

 

 

 

 

 

 

 

 

 

 

 

 

MEMBER'S DEFICIT

 

 

 

 

 

Noncontrolling interest

 

 307,171 

 

 

 521,794 

Member's interest

 

 2,131,779 

 

 

 2,129,575 

Retained deficit

 

 (10,090,482) 

 

 

 (9,857,267) 

Accumulated other comprehensive loss

 

 (195,805) 

 

 

 (266,043) 

 

Total Member's Deficit

 

(7,847,337)

 

 

 (7,471,941) 

 

 

 

 

 

 

 

Total Liabilities and Member's Deficit

$

 16,402,319 

 

$

 16,542,039 

 

See Notes to Consolidated Financial Statements

1

 


 

 

 

CLEAR CHANNEL CAPITAL I, LLC AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

(UNAUDITED)

 

(In thousands)

 

Three Months Ended

 

 

Nine Months Ended

 

 

 

 

September 30,

 

 

September 30,

 

 

2012 

 

 

2011 

 

 

2012 

 

 

2011 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Revenue

$

 1,587,331 

 

$

 1,583,352 

 

$

 4,550,548 

 

$

 4,508,564 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

Direct operating expenses (excludes depreciation and amortization)

 

 624,526 

 

 

 654,163 

 

 

 1,846,055 

 

 

 1,868,247 

 

 

Selling, general and administrative expenses (excludes depreciation and

 

 

 

 

 

 

 

 

 

 

 

 

 

  amortization)

 

 419,855 

 

 

 402,160 

 

 

 1,241,606 

 

 

 1,195,306 

 

 

Corporate expenses (excludes depreciation and amortization)

 

 70,811 

 

 

 54,247 

 

 

 211,167 

 

 

 163,080 

 

 

Depreciation and amortization

 

 182,350 

 

 

 197,532 

 

 

 539,555 

 

 

 570,884 

 

 

Other operating income (expense) - net

 42,118 

 

 

 (6,490) 

 

 

 47,159 

 

 

 13,453 

Operating income

 

 331,907 

 

 

 268,760 

 

 

 759,324 

 

 

 724,500 

Interest expense

 

 388,210 

 

 

 369,233 

 

 

 1,148,093 

 

 

 1,097,849 

Equity in earnings of nonconsolidated affiliates

 

 3,663 

 

 

 5,210 

 

 

 11,914 

 

 

 13,456 

Other income (expense) - net

 

 824 

 

 

 7,307 

 

 

 (16,846) 

 

 

 754 

Loss before income taxes

 

 (51,816) 

 

 

 (87,956) 

 

 

 (393,701) 

 

 

 (359,139) 

Income tax benefit

 

 13,232 

 

 

 20,665 

 

 

 179,293 

 

 

 122,510 

Consolidated net loss

 

 (38,584) 

 

 

 (67,291) 

 

 

 (214,408) 

 

 

 (236,629) 

 

Less amount attributable to noncontrolling interest

 

 11,977 

 

 

 6,765 

 

 

 18,807 

 

 

 22,438 

Net loss attributable to the Company

$

 (50,561) 

 

$

 (74,056) 

 

$

 (233,215) 

 

$

 (259,067) 

Other comprehensive income, net of tax:

 

 

 

 

 

 

 

 

 

 

 

 

Foreign currency translation adjustments

 

 21,219 

 

 

 (101,951) 

 

 

 17,928 

 

 

 (26,079) 

 

Unrealized gain on securities and derivatives:

 

 

 

 

 

 

 

 

 

 

 

 

 

Unrealized holding gain (loss) on marketable securities

 

 16,668 

 

 

 (21,298) 

 

 

 17,399 

 

 

 (7,289) 

 

 

Unrealized holding gain on cash flow derivatives

 

 11,808 

 

 

 10,848 

 

 

 36,322 

 

 

 22,791 

 

Reclassification adjustment

 

 (688) 

 

 

 86 

 

 

 (534) 

 

 

 234 

Other comprehensive income (loss)

 

 49,007 

 

 

 (112,315) 

 

 

 71,115 

 

 

 (10,343) 

Comprehensive loss

 

 (1,554) 

 

 

 (186,371) 

 

 

 (162,100) 

 

 

 (269,410) 

 

 Less amount attributable to noncontrolling interest

 

 2,960 

 

 

 (11,699) 

 

 

 877 

 

 

 1,434 

Comprehensive loss attributable to the Company

$

 (4,514) 

 

$

 (174,672) 

 

$

 (162,977) 

 

$

 (270,844) 

 

See Notes to Consolidated Financial Statements

2

 


 

CLEAR CHANNEL CAPITAL I, LLC AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

 

(In thousands)

 

Nine Months Ended September 30,

 

 

2012 

 

2011 

Cash flows from operating activities:

 

 

 

 

 

Consolidated net loss

$

(214,408)

$

 (236,629) 

 

 

 

 

 

 

 

Reconciling items:

 

 

 

 

 

Depreciation and amortization

 

539,555 

 

570,884 

 

Deferred taxes

 

 (157,962) 

 

(122,886)

 

Gain on disposal of operating assets

 

 (47,159) 

 

(13,453)

 

Loss on extinguishment of debt

 

 15,167 

 

1,447 

 

Provision for doubtful accounts

 

 11,009 

 

13,300 

 

Share-based compensation

 

 20,090 

 

14,281 

 

Equity in earnings of nonconsolidated affiliates

 

(11,914)

 

(13,456)

 

Amortization of deferred financing charges and note discounts, net

 

 124,262 

 

143,519 

 

Other reconciling items – net

 

 19,913 

 

7,449 

 

Changes in operating assets and liabilities:

 

 

 

 

 

 

(Increase) decrease in accounts receivable

 

 (24,803) 

 

16,591 

 

 

Increase in deferred income

 

 37,945 

 

34,178 

 

 

Decrease in accrued expenses

 

 (14,954) 

 

(106,910)

 

 

Decrease in accounts payable and other liabilities

 

 (45,609) 

 

(47,549)

 

 

Decrease in accrued interest

 

 (83,180) 

 

(66,242)

 

 

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

 

 

 

 

 

 

  acquisitions and dispositions

 

 (11,781) 

 

(73,142)

Net cash provided by operating activities

 

 156,171 

 

 121,382 

 

 

 

 

 

 

 

Cash flows from investing activities:

 

 

 

 

 

Purchases of property, plant and equipment

 

 (260,481) 

 

(218,136)

 

Purchases of other operating assets

 

 (33,738) 

 

(48,234)

 

Proceeds from disposal of assets

 

 58,915 

 

52,389 

 

Change in other – net

 

 (9,832) 

 

 1,716 

Net cash used for investing activities

 

 (245,136) 

 

 (212,265) 

 

 

 

 

 

 

 

Cash flows from financing activities:

 

 

 

 

 

Draws on credit facilities

 

 604,563 

 

 55,000 

 

Payments on credit facilities

 

 (1,919,973) 

 

 (959,383) 

 

Proceeds from long-term debt

 

 2,200,000 

 

 1,727,813 

 

Payments on long-term debt

 

 (438,422) 

 

 (1,370,265) 

 

Dividends paid

 

 (244,734) 

 

 - 

 

Deferred financing charges

 

 (40,002) 

 

 (46,597) 

 

Repurchases of long-term debt

 

 - 

 

 (55,250) 

 

Change in other – net

 

 (4,506) 

 

 (15,980) 

Net cash provided by (used for) financing activities

 

 156,926 

 

 (664,662) 

 

 

 

 

 

 

 

Net increase (decrease) in cash and cash equivalents

 

 67,961 

 

 (755,545) 

 

 

 

 

 

 

 

Cash and cash equivalents at beginning of period

 

 1,228,682 

 

 1,920,926 

 

 

 

 

 

 

 

Cash and cash equivalents at end of period

$

 1,296,643 

$

 1,165,381 

 

See Notes to Consolidated Financial Statements

3

 


 

CLEAR CHANNEL CAPITAL I, LLC AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

             

NOTE 1 – BASIS OF PRESENTATION

Preparation of Interim Financial Statements

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

The accompanying consolidated financial statements were prepared by the Company pursuant to the rules and regulations of the SEC and, in the opinion of management, include all normal and recurring adjustments necessary to present fairly the results of the interim periods shown. Certain information and footnote disclosures normally included in financial statements prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) have been condensed or omitted pursuant to such SEC rules and regulations. Management believes that the disclosures made are adequate to make the information presented not misleading. Due to seasonality and other factors, the results for the interim periods are not necessarily indicative of results for the full year.  The financial statements contained herein should be read in conjunction with the consolidated financial statements and notes thereto included in the Company’s 2011 Annual Report on Form 10-K and Quarterly Reports on Form 10-Q for the periods ended March 31, 2012 and June 30, 2012.

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 2012 presentation.

During the first quarter of 2012, and in connection with the appointment of the new chief executive officer of the Company’s indirect subsidiary, Clear Channel Outdoor Holdings, Inc. (“CCOH”), the Company reevaluated its segment reporting and determined that its Latin American operations were more appropriately aligned with the operations of its International outdoor advertising segment.  As a result, the operations of Latin America are no longer reflected within the Company’s Americas outdoor advertising segment and are currently included in the results of its International outdoor advertising segment.  Accordingly, the Company has recast the corresponding segment disclosures for prior periods.

 

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.

 

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.

4

 


 

CLEAR CHANNEL CAPITAL I, LLC AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(UNAUDITED)

 

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

Property, Plant and Equipment

The Company’s property, plant and equipment consisted of the following classes of assets at September 30, 2012 and December 31, 2011, respectively.

 

(In thousands)

 

September 30,

 

 

December 31,

 

 

2012 

 

 

2011 

Land, buildings and improvements

$

 673,524 

 

$

 657,346 

Structures

 

 2,882,291 

 

 

 2,783,434 

Towers, transmitters and studio equipment

 

 419,157 

 

 

 400,832 

Furniture and other equipment

 

 398,522 

 

 

 365,137 

Construction in progress

 

 101,800 

 

 

 68,658 

 

 

 4,475,294 

 

 

 4,275,407 

Less: accumulated depreciation

 

 1,468,843 

 

 

 1,212,080 

Property, plant and equipment, net

$

 3,006,451 

 

$

 3,063,327 

 

Definite-lived Intangible Assets

The Company has definite-lived intangible assets which consist primarily of transit and street furniture contracts, talent and representation contracts, and customer and advertiser relationships, 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 intangible 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, 2012 and December 31, 2011, respectively:

 

(In thousands)

 

September 30, 2012

 

December 31, 2011

 

 

 

Gross Carrying Amount

 

Accumulated Amortization

 

Gross Carrying Amount

 

Accumulated Amortization

Transit, street furniture and other outdoor contractual rights

$

778,942 

$

(381,466)

$

 773,238 

$

 (329,563) 

Customer / advertiser relationships

 

1,210,245 

 

(496,416)

 

 1,210,269 

 

 (409,794) 

Talent contracts

 

344,255 

 

(167,362)

 

 347,489 

 

 (139,154) 

Representation contracts

 

243,993 

 

(162,805)

 

 237,451 

 

 (137,058) 

Other

 

561,217 

 

(118,927)

 

 560,978 

 

 (96,096) 

 

Total

$

 3,138,652 

$

 (1,326,976) 

$

 3,129,425 

$

 (1,111,665) 

 

Total amortization expense related to definite-lived intangible assets was $74.3 million and $87.8 million for the three months ended September 30, 2012 and 2011, respectively, and $225.8 million and $247.3 million for the nine months ended September 30, 2012 and 2011, respectively.

5

 


 

CLEAR CHANNEL CAPITAL I, LLC AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(UNAUDITED)

 

 

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)

 

 

2013 

$

 283,385 

2014 

 

 263,561 

2015 

 

 237,200 

2016 

 

 222,531 

2017 

 

 196,689 

 

Indefinite-lived Intangible Assets

The Company’s indefinite-lived intangible assets consist of Federal Communications Commission (“FCC”) broadcast licenses in its Media and Entertainment (“CCME”) segment and billboard permits in its Americas outdoor advertising segment. Due to significant differences in both business practices and regulations, billboards in the International outdoor advertising segment are subject to long-term, finite contracts unlike the Company’s permits in the United States and Canada. Accordingly, there are no indefinite-lived assets in the International outdoor advertising segment. The Company’s indefinite-lived intangible assets are as follows:

 

(In thousands)

 

September 30,

 

 

December 31,

 

 

2012 

 

 

2011 

FCC broadcast licenses

$

 2,413,171 

 

$

 2,411,367 

Billboard permits

 

 1,106,799 

 

 

 1,105,704 

Total indefinite-lived intangible assets

$

 3,519,970 

 

$

 3,517,071 

 

Goodwill

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

 

(In thousands)

 

CCME

 

Americas Outdoor Advertising

 

International Outdoor Advertising

 

Other

 

Consolidated

Balance as of December 31, 2010

$

 3,140,198 

$

 571,932 

$

 290,310 

$

 116,886 

$

 4,119,326 

 

Impairment

 

 - 

 

 - 

 

 (1,146) 

 

 - 

 

 (1,146) 

 

Acquisitions

 

 82,844 

 

 - 

 

 2,995 

 

 212 

 

 86,051 

 

Dispositions

 

 (10,542) 

 

 - 

 

 - 

 

 - 

 

 (10,542) 

 

Foreign currency

 

 - 

 

 - 

 

 (6,898) 

 

 - 

 

 (6,898) 

 

Other

 

 (73) 

 

 - 

 

 - 

 

 - 

 

 (73) 

Balance as of December 31, 2011

$

 3,212,427 

$

 571,932 

$

 285,261 

$

 117,098 

$

 4,186,718 

 

Acquisitions

 

 10,226 

 

 - 

 

 - 

 

 51 

 

 10,277 

 

Dispositions

 

 (489) 

 

 - 

 

 (2,729) 

 

 - 

 

 (3,218) 

 

Foreign currency

 

 - 

 

 - 

 

 2,159 

 

 - 

 

 2,159 

 

Other

 

 (80) 

 

 - 

 

 - 

 

 - 

 

 (80) 

Balance as of September 30, 2012

$

 3,222,084 

$

 571,932 

$

 284,691 

$

 117,149 

$

 4,195,856 

6

 


 

CLEAR CHANNEL CAPITAL I, LLC AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(UNAUDITED)

 

 

NOTE 3 – LONG-TERM DEBT

Long-term debt at September 30, 2012 and December 31, 2011, respectively, consisted of the following:

 

(In thousands)

 

September 30,

 

 

December 31,

 

 

 

2012 

 

2011 

Senior Secured Credit Facilities:

 

 

 

 

 

 

Term Loan Facilities (1)

$

 10,328,873 

 

$

 10,493,847 

 

Revolving Credit Facility Due 2014

 

 10,000 

 

 

 1,325,550 

 

Delayed Draw Term Loan Facilities Due 2016

 

 961,407 

 

 

 976,776 

Receivables Based Facility Due 2014

 

 - 

 

 

 - 

Priority Guarantee Notes Due 2021

 

 1,750,000 

 

 

 1,750,000 

Other Secured Subsidiary Long-term Debt

 

 26,643 

 

 

 30,976 

Total Consolidated Secured Debt

 

 13,076,923 

 

 

 14,577,149 

 

 

 

 

 

 

 

Senior Cash Pay Notes Due 2016

 

 796,250 

 

 

 796,250 

Senior Toggle Notes Due 2016

 

 829,831 

 

 

 829,831 

Clear Channel Senior Notes (2)

 

 1,748,564 

 

 

 1,998,415 

Subsidiary Senior Notes Due 2017

 

 2,500,000 

 

 

 2,500,000 

Subsidiary Senior Subordinated Notes Due 2020

 

 2,200,000 

 

 

 - 

Other Subsidiary Debt

 

 15,858 

 

 

 19,860 

Purchase accounting adjustments and original issue discount

 

 (429,620) 

 

 

 (514,336) 

 

 

 

 20,737,806 

 

 

 20,207,169 

Less: current portion

 

 419,880 

 

 

 268,638 

Total long-term debt

$

 20,317,926 

 

$

 19,938,531 

 

 

 

 

 

 

 

 

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

 

(2)     Clear Channel’s Senior Notes mature at various dates from 2013 through 2027.

 

The Company’s weighted average interest rates at September 30, 2012 and December 31, 2011 were 6.5% and 6.2%, respectively.  The aggregate market value of the Company’s debt based on market prices for which quotes were available was approximately $18.1 billion and $16.2 billion at September 30, 2012 and December 31, 2011, respectively.

 

Subsidiary Senior Subordinated Notes Issuance

During the first quarter of 2012, the Company’s indirect subsidiary, Clear Channel Worldwide Holdings, Inc. (“CCWH”) issued $275.0 million aggregate principal amount of 7.625% Series A Senior Subordinated Notes due 2020 and $1,925.0 million aggregate principal amount of 7.625% Series B Senior Subordinated Notes due 2020 (collectively, the “Subordinated Notes”).  Interest on the Subordinated Notes is payable to the trustee weekly in arrears and to the noteholders on March 15 and September 15 of each year, beginning on September 15, 2012.

  

The Subordinated Notes are CCWH’s senior subordinated obligations and are fully and unconditionally guaranteed, jointly and severally, on a senior subordinated basis by CCOH, its wholly-owned subsidiary Clear Channel Outdoor, Inc. (“CCOI”), and certain of CCOH’s other domestic subsidiaries (collectively, the “Guarantors”). The Subordinated Notes are unsecured senior subordinated obligations that rank junior to all of CCWH’s existing and future senior debt, including CCWH’s outstanding senior notes, equally with any of CCWH’s existing and future senior subordinated debt and ahead of all of CCWH’s existing and future debt that expressly provides that it is subordinated to the Subordinated Notes. The guarantees of the Subordinated Notes rank junior to each Guarantor’s existing and future senior debt, including CCWH’s outstanding senior notes, equally with each Guarantor’s existing and future senior subordinated debt and ahead of each Guarantor’s existing and future debt that expressly provides that it is subordinated to the guarantees of the Subordinated Notes.

7

 


 

CLEAR CHANNEL CAPITAL I, LLC AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(UNAUDITED)

 


The Company capitalized $40.0 million in fees and expenses associated with the Subordinated Notes offering and is amortizing them through interest expense over the life of the Subordinated Notes. 

 

With the proceeds of the Subordinated Notes (net of the initial purchasers’ discount of $33.0 million), CCWH loaned an aggregate amount equal to $2,167.0 million to CCOI. CCOI paid all other fees and expenses of the offering using cash on hand and, with the proceeds of the loans, made a special cash dividend to CCOH, which in turn made a special cash dividend on March 15, 2012 in an amount equal to $6.0832 per share to its Class A and Class B stockholders of record at the close of business on March 12, 2012, including Clear Channel Holdings, Inc. (“CC Holdings”) and CC Finco, LLC (“CC Finco”), both wholly-owned subsidiaries of the Company.   Of the $2,170.4 million special cash dividend paid by CCOH, an aggregate of $1,925.7 million was distributed to CC Holdings and CC Finco, with the remaining $244.7 million distributed to other stockholders.  As a result, the Company recorded a reduction of $244.7 million in “Noncontrolling interest” on the consolidated balance sheet.

 

2011 Refinancing Transactions

In February 2011, Clear Channel amended its senior secured credit facilities and its receivables based facility and issued $1,000 million aggregate principal amount of 9.0% Priority Guarantee Notes due 2021 (the “Initial Notes”).  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”) at an issue price of 93.845% of the principal amount.  The Initial Notes and the Additional Notes have identical terms and are treated as a single class.

 

The Company capitalized $39.5 million in fees and expenses associated with the Initial Notes offering and is amortizing them through interest expense over the life of the Initial Notes.  The Company 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.

 

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.

 

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 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 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.

 

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 used the remaining $203.8 million to repay at maturity a portion of Clear Channel’s 5% senior notes that matured in March 2012.

 

Debt Repayments, Maturities and Other

In connection with the issuance of the Subordinated Notes, CCOH paid a special cash dividend equal to $2,170.4 million to its Class A and Class B stockholders, consisting of $1,925.7 million distributed to CC Holdings and CC Finco and $244.7 million distributed to other stockholders. In connection with the Subordinated Notes issuance and the dividend paid by CCOH during the first quarter of 2012, Clear Channel repaid indebtedness under its senior secured credit facilities in an amount equal to the aggregate amount of dividend proceeds distributed to CC Holdings and CC Finco, or $1,925.7 million.  Of this amount, a prepayment of $1,918.1 million was applied to indebtedness outstanding under Clear Channel’s revolving credit facility, thus permanently reducing the revolving credit commitments under Clear Channel’s revolving credit facility to $10.0 million.  The remaining $7.6 million prepayment was allocated on a pro rata basis to Clear Channel’s term loan facilities.

 

In addition, on March 15, 2012, using cash on hand, Clear Channel made voluntary prepayments under its senior secured credit facilities in an aggregate amount equal to $170.5  million, as follows: (i) $16.2 million under its term loan A due 2014, (ii) $129.8 million under its term loan B due 2016, (iii) $10.0 million under its term loan C due 2016 and (iv) $14.5 million under its

8

 


 

CLEAR CHANNEL CAPITAL I, LLC AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(UNAUDITED)

 

delayed draw term loans due 2016.  In connection with the prepayments on Clear Channel’s senior secured credit facilities discussed above, the Company recorded a loss of $15.2 million in “Other expense” related to the accelerated expensing of loan fees.

 

During the first quarter of 2012, Clear Channel repaid its 5.0% senior notes at maturity for $249.9 million (net of $50.1 million principal amount repaid to a subsidiary of Clear Channel with respect to notes repurchased and held by such entity), plus accrued interest, using a portion of the proceeds from the 2011 offering of the Additional Notes, along with cash on hand.

 

During the nine months ended September 30, 2011, Clear Channel repaid its 6.25% senior notes at maturity for $692.7 million (net of $57.3 million principal amount repaid to a subsidiary of Clear Channel with respect to notes repurchased and held by such entity), plus accrued interest, using a portion of the proceeds from the 2011 offering of the Initial Notes, along with available cash on hand. Clear Channel also repaid its 4.4% senior notes at maturity for $140.2 million (net of $109.8 million principal amount repaid to a subsidiary of Clear Channel with respect to notes repurchased and held by such entity), 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.

 

During the third quarter of 2011, CC Finco 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.

 

NOTE 4 – SUPPLEMENTAL DISCLOSURES

Divestiture Trusts

The Company owns certain radio stations which, under current FCC rules, are not permitted to be owned or transferred to another Clear Channel entity. 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.

 

Income Tax Benefit

The Company’s income tax benefit for the three and nine months ended September 30, 2012 and 2011, respectively, consisted of the following components:

 

(In thousands)

 

Three Months Ended

 

Nine Months Ended

 

 

September 30,

 

September 30,

 

 

2012 

 

 

2011 

 

2012 

 

 

2011 

Current tax benefit (expense)

$

 (21,148) 

 

$

 (11,326) 

$

 21,331 

 

$

 (376) 

Deferred tax benefit

 

 34,380 

 

 

 31,991 

 

 157,962 

 

 

 122,886 

Income tax benefit

$

 13,232 

 

$

 20,665 

$

 179,293 

 

$

 122,510 

 

The effective tax rate for the three and nine months ended September 30, 2012 was 25.5% and 45.5%, respectively.  The effective tax rate for the three months ended September 30, 2012 was primarily impacted by additional tax expense recorded related to uncertain tax positions, the effects of which were partially offset by reduced non-U.S. tax rates of financial reporting gains resulting from the disposition of certain foreign subsidiaries.  The effective tax rate for the nine months ended September 30, 2012 was primarily

9

 


 

CLEAR CHANNEL CAPITAL I, LLC AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(UNAUDITED)

 

impacted by the completion of income tax examinations in various jurisdictions during the period which resulted in a reduction to income tax expense of approximately $61.0 million.

 

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.

 

During the nine months ended September 30, 2012 and 2011, cash paid for interest and income taxes, net of income tax refunds of $4.1 million and $7.3 million, respectively, was as follows:

 

(In thousands)

 

Nine Months Ended September 30,

 

 

2012 

 

 

2011 

Interest

$

 1,110,139 

 

$

 1,028,973 

Income taxes

 

 44,989 

 

 

 77,548 

 

NOTE 5 – FAIR VALUE MEASUREMENTS

The Company’s marketable equity securities and interest rate swap are measured at fair value on each reporting date.

 

Marketable Equity Securities

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, 2012 and December 31, 2011 are as follows:

 

(In thousands)

 

September 30,

 

 

December 31,

 

 

2012 

 

 

2011 

Cost

$

 7,786 

 

$

 7,786 

Gross unrealized losses

 

 (1,087) 

 

 

 - 

Gross unrealized gains

 

 94,727 

 

 

 65,214 

Fair value

$

 101,426 

 

$

 73,000 

 

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 portion of the gain or loss on the swap is reported as a component of other comprehensive income (loss).  Ineffective portions of a cash flow hedging derivative’s change in fair value are recognized currently in earnings.  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 for the three and nine months ended September 30, 2012.

 

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 September 2013.

 

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

10

 


 

CLEAR CHANNEL CAPITAL I, LLC AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(UNAUDITED)

 

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 in earnings.

 

The fair value of the Company’s $2.5 billion notional amount interest rate swap designated as a hedging instrument and recorded in “Other current liabilities” was $102.2 million at September 30, 2012.  The fair value of the notional amount interest rate swap was $159.1 million at December 31, 2011 and recorded in “Other long-term liabilities”.

 

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

 

(In thousands)

Accumulated other comprehensive loss

Balance at December 31, 2011

$

 100,292 

Other comprehensive income

 

 (36,322) 

Balance at September 30, 2012

$

 63,970 

 

Other Comprehensive Income (Loss)

The following table discloses the amount of income tax (asset) liability allocated to each component of other comprehensive income (loss) for the three and nine months ended September 30, 2012 and 2011, respectively:

 

(In thousands)

 

Three Months Ended

September 30,

 

 

Nine Months Ended

 September 30,

 

 

2012 

 

 

2011 

 

 

2012 

 

 

2011 

Foreign currency translation adjustments

$

 (1,659) 

 

$

 8,603 

 

$

 (3,009) 

 

$

 2,796 

Unrealized holding gain (loss) on marketable securities

 

 (10,599) 

 

 

 9,738 

 

 

 (11,028) 

 

 

 1,773 

Unrealized holding loss on cash flow derivatives

 

 (7,048) 

 

 

 (6,474) 

 

 

 (20,648) 

 

 

 (13,602) 

 

Total income tax benefit (expense)

$

 (19,306) 

 

$

 11,867 

 

$

 (34,685) 

 

$

 (9,033) 

                         

 

NOTE 6 – COMMITMENTS, CONTINGENCIES AND GUARANTEES

The Company and its subsidiaries are involved in certain legal proceedings arising in the ordinary course of business and, as required, have accrued an estimate of the probable costs for the 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 the Company’s strategies related to these proceedings.  Additionally, due to the inherent uncertainty of litigation, there can be no assurance that the resolution of any particular claim or proceeding would not have a material adverse effect on the Company’s financial condition or results of operations.

 

Although the Company is involved in a variety of legal proceedings in the ordinary course of business, a large portion of the Company’s litigation arises in the following contexts: commercial disputes; defamation matters; employment and benefits related claims; governmental fines; intellectual property claims; and tax disputes.

 

11

 


 

CLEAR CHANNEL CAPITAL I, LLC AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(UNAUDITED)

 

 

Brazil Litigation

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 filed separate petitions to challenge the imposition of this tax.

 

On August 8, 2011, Brazil’s National Council of Fiscal Policy (CONFAZ) published a convenio authorizing sixteen states, including the State of São Paulo, to issue an amnesty that would reduce the principal amount of VAT allegedly owed and reduce or waive related interest and penalties.  The State of São Paulo ratified the amnesty in late August 2011.  On May 10, 2012, the State of São Paulo published an amnesty decree that mirrors the convenio.  Klimes and L&C accepted the amnesty on May 24, 2012 by making the aggregate required payment of $10.9 million.  On that same day, Klimes and L&C filed petitions to discontinue the tax litigation based on the amnesty payments.

 

Guarantees

As of September 30, 2012, Clear Channel had outstanding surety bonds and commercial standby letters of credit of $47.6 million and $141.3 million, respectively, of which $69.0 million of letters of credit were cash secured.  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, 2012, Clear Channel had outstanding bank guarantees of $51.4 million related to international subsidiaries, of which $4.6 million were backed by cash collateral.

 

NOTE 7 – CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS

Clear Channel is a party to a management agreement with certain affiliates of the Sponsors and certain other parties pursuant to which such affiliates of the Sponsors will provide management and financial advisory services until 2018.  These agreements require management fees to be paid to such affiliates of the Sponsors for such services at a rate not greater than $15.0 million per year, plus reimbursable expenses.  For the three months ended September 30, 2012 and 2011, the Company recognized management fees and reimbursable expenses of $3.9 million and $3.8 million, respectively. For the nine months ended September 30, 2012 and 2011, the Company recognized management fees and reimbursable expenses of $11.9 million and $11.8 million, respectively.

12

 


 

CLEAR CHANNEL CAPITAL I, LLC AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(UNAUDITED)

 

NOTE 8 – EQUITY AND COMPREHENSIVE INCOME (LOSS)

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

 

(In thousands)

 

The Company

 

 

Noncontrolling Interests

 

 

Consolidated

Balances at January 1, 2012

$

(7,993,735)

 

$

 521,794 

 

$

(7,471,941)

 

Net income (loss)

 

(233,215)

 

 

18,807 

 

 

 (214,408) 

 

Dividend

 

 - 

 

 

 (244,734) 

 

 

 (244,734) 

 

Foreign currency translation adjustments

 

16,867 

 

 

1,061 

 

 

 17,928 

 

Unrealized holding gain (loss) on marketable securities

 

17,522 

 

 

(123)

 

 

 17,399 

 

Unrealized holding gain on cash flow derivatives

 

36,322 

 

 

 - 

 

 

 36,322 

 

Reclassification adjustment

 

(473)

 

 

(61)

 

 

 (534) 

 

Other - net

 

 2,204 

 

 

 10,427 

 

 

 12,631 

Balances at September 30, 2012

$

(8,154,508)

 

$

 307,171 

 

$

(7,847,337)

 

 

 

 

 

 

 

 

 

 

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)

 

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, as well as restricted stock and restricted stock units.  CCMH completed a voluntary stock option exchange program on March 21, 2011 and exchanged 2.5 million stock options granted under the Clear Channel 2008 Executive Incentive Plan for 1.3 million replacement stock options with a lower exercise price and different service and performance vesting conditions.  The Company accounted for the exchange program as a modification of the existing awards under ASC 718 and will recognize incremental compensation expense of approximately $1.0 million over the service period of the new awards.

 

NOTE 9 – SEGMENT DATA

The Company’s reportable segments, which it believes best reflect how the Company is currently managed, are CCME, Americas outdoor advertising and International outdoor advertising.  Revenue and expenses earned and charged between segments are recorded at estimated fair value and eliminated in consolidation.  The CCME segment provides media and entertainment services via broadcast and digital delivery and also includes the Company’s national syndication business.  The Americas outdoor advertising segment consists of operations primarily in the United States and Canada.  The International outdoor advertising segment primarily includes operations in Europe, Asia and Latin America.  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 business 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 payments are recorded by each segment in direct operating and selling, general and administrative expenses. 

 

During the first quarter of 2012, the Company recast its segment reporting, as discussed in Note 1.  The following table presents the Company’s reportable segment results for the three and nine months ended September 30, 2012 and 2011.

 

13

 


 

CLEAR CHANNEL CAPITAL I, LLC AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(UNAUDITED)

 

(In thousands)

 

CCME

 

Americas Outdoor Advertising

 

International Outdoor Advertising

 

Other

 

Corporate and other reconciling items

 

Eliminations

 

Consolidated

 

Three Months Ended September 30, 2012

 

Revenue

$

 798,759 

$

 335,021 

$

 396,120 

$

 76,067 

$

 - 

$

 (18,636) 

$

 1,587,331 

 

Direct operating expenses

 

 229,843 

 

 146,121 

 

 247,213 

 

 6,529 

 

 - 

 

 (5,180) 

 

 624,526 

 

Selling, general and administrative expenses

 

 259,861 

 

 54,718 

 

 82,770 

 

 35,962 

 

 - 

 

 (13,456) 

 

 419,855 

 

Depreciation and amortization

 

 67,956 

 

 50,177 

 

 49,740 

 

 10,663 

 

 3,814 

 

 - 

 

 182,350 

 

Corporate expenses

 

 - 

 

 - 

 

 - 

 

 - 

 

 70,811 

 

 - 

 

 70,811 

 

Other operating income - net

 

 - 

 

 - 

 

 - 

 

 - 

 

 42,118 

 

 - 

 

 42,118 

 

Operating income (loss)

$

 241,099 

$

 84,005 

$

 16,397 

$

 22,913 

$

 (32,507) 

$

 - 

$

 331,907 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Intersegment revenues

$

 - 

$

 314 

$

 - 

$

 18,322 

$

 - 

$

 - 

$

 18,636 

 

Capital expenditures

$

 16,885 

$

 25,633 

$

 30,238 

$

 2,812 

$

 10,621 

$

 - 

$

 86,189 

 

Share-based compensation expense

$

 1,418 

$

 1,893 

$

 1,708 

$

 - 

$

 2,359 

$

 - 

$

 7,378 

 

Three Months Ended September 30, 2011

 

Revenue

$

 791,365 

$

 326,882 

$

 421,568 

$

 60,195 

$

 - 

$

 (16,658) 

$

 1,583,352 

 

Direct operating expenses

 

 242,704 

 

 143,345 

 

 264,787 

 

 7,171 

 

 - 

 

 (3,844) 

 

 654,163 

 

Selling, general and administrative expenses

 

 247,037 

 

 50,639 

 

 81,276 

 

 36,022 

 

 - 

 

 (12,814) 

 

 402,160 

 

Depreciation and amortization

 

 68,176 

 

 60,117 

 

 54,817 

 

 12,052 

 

 2,370 

 

 - 

 

 197,532 

 

Corporate expenses

 

 - 

 

 - 

 

 - 

 

 - 

 

 54,247 

 

 - 

 

 54,247 

 

Other operating income - net

 

 - 

 

 - 

 

 - 

 

 - 

 

 (6,490) 

 

 - 

 

 (6,490) 

 

Operating income (loss)

$

 233,448 

$

 72,781 

$

 20,688 

$

 4,950 

$

 (63,107) 

$

 - 

$

 268,760 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Intersegment revenues

$

 - 

$

 1,084 

$

 - 

$

 15,574 

$

 - 

$

 - 

$

 16,658 

 

Capital expenditures

$

 14,313 

$

 17,073 

$

 42,049 

$

 816 

$

 5,178 

$

 - 

$

 79,429 

 

Share-based compensation expense

$

 1,034 

$

 1,903 

$

 792 

$

 - 

$

 2,523 

$

 - 

$

 6,252 

 

Nine Months Ended September 30, 2012

 

Revenue

$

 2,263,308 

$

 935,850 

$

 1,207,900 

$

 191,909 

$

 - 

$

 (48,419) 

$

 4,550,548 

 

Direct operating expenses

 

 642,570 

 

 433,716 

 

 760,566 

 

 18,855 

 

 - 

 

 (9,652) 

 

 1,846,055 

 

Selling, general and administrative expenses

 

 743,991 

 

 151,996 

 

 270,926 

 

 113,460 

 

 - 

 

 (38,767) 

 

 1,241,606 

 

Depreciation and amortization

 

 202,935 

 

 141,702 

 

 149,485 

 

 34,871 

 

 10,562 

 

 - 

 

 539,555 

 

Corporate expenses

 

 - 

 

 - 

 

 - 

 

 - 

 

 211,167 

 

 - 

 

 211,167 

 

Other operating income - net

 

 - 

 

 - 

 

 - 

 

 - 

 

 47,159 

 

 - 

 

 47,159 

 

Operating income (loss)

$

 673,812 

$

 208,436 

$

 26,923 

$

 24,723 

$

 (174,570) 

$

 - 

$

 759,324 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Intersegment revenues

$

 - 

$

 1,084 

$

 - 

$

 47,335 

$

 - 

$

 - 

$

 48,419 

 

Capital expenditures

$

 43,711 

$

 84,749 

$

 97,147 

$

 11,817 

$

 23,057 

$

 - 

$

 260,481 

 

Share-based compensation expense

$

 3,834 

$

 5,065 

$

 3,791 

$

 - 

$

 7,400 

$

 - 

$

 20,090 

 
                               

 

14

 


 

CLEAR CHANNEL CAPITAL I, LLC AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(UNAUDITED)

 

 

(In thousands)

 

CCME

 

Americas Outdoor Advertising

 

International Outdoor Advertising

 

Other

 

Corporate and other reconciling items

 

Eliminations

 

Consolidated

 

Nine Months Ended September 30, 2011

 

Revenue

$

 2,196,075 

$

 914,800 

$

 1,273,072 

$

 170,630 

$

 - 

$

 (46,013) 

$

 4,508,564 

 

Direct operating expenses

 

 643,317 

 

 420,305 

 

 794,679 

 

 21,341 

 

 - 

 

 (11,395) 

 

 1,868,247 

 

Selling, general and administrative expenses

 

 721,751 

 

 149,232 

 

 248,800 

 

 110,141 

 

 - 

 

 (34,618) 

 

 1,195,306 

 

Depreciation and amortization

 

 201,665 

 

 159,061 

 

 163,803 

 

 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 

$

 186,202 

$

 65,790 

$

 1,002 

$

 (157,836) 

$

 - 

$

 724,500 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Intersegment revenues

$

 - 

$

 2,772 

$

 - 

$

 43,241 

$

 - 

$

 - 

$

 46,013 

 

Capital expenditures

$

 37,977 

$

 82,550 

$

 81,150 

$

 3,942 

$

 14,261 

$

 - 

$

 219,880 

 

Share-based compensation expense

$

 3,470 

$

 5,745 

$

 2,396 

$

 - 

$

 2,670 

$

 - 

$

 14,281 

 

15

 


 

CLEAR CHANNEL CAPITAL I, LLC AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(UNAUDITED)

 

NOTE 10 – GUARANTOR SUBSIDIARIES

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

 

(In thousands)

 

As of September 30, 2012

 

 

Parent

 

Subsidiary

 

Guarantor

 

Non-Guarantor

 

 

 

 

 

 

 

 

Company

 

Issuer

 

Subsidiaries

 

Subsidiaries

 

Eliminations

 

Consolidated

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash and cash equivalents

$

 - 

 

$

 1 

 

$

 431,228 

 

$

 865,414 

 

$

 - 

 

$

 1,296,643 

Accounts receivable, net of allowance

 

 - 

 

 

 - 

 

 

 712,900 

 

 

 692,359 

 

 

 - 

 

 

 1,405,259 

Intercompany receivables

 

 32,686 

 

 

 4,283,900 

 

 

 247,556 

 

 

 - 

 

 

 (4,564,142) 

 

 

 - 

Other current assets

 

 4,808 

 

 

 40,162 

 

 

 100,459 

 

 

 397,368 

 

 

 (177,289) 

 

 

 365,508 

 

Total Current Assets

 

 37,494 

 

 

 4,324,063 

 

 

 1,492,143 

 

 

 1,955,141 

 

 

 (4,741,431) 

 

 

 3,067,410 

Property, plant and equipment, net

 

 - 

 

 

 - 

 

 

 808,450 

 

 

 2,198,001 

 

 

 - 

 

 

 3,006,451 

Definite-lived intangibles, net

 

 - 

 

 

 - 

 

 

 1,229,404 

 

 

 582,272 

 

 

 - 

 

 

 1,811,676 

Indefinite-lived intangibles - licenses

 

 - 

 

 

 - 

 

 

 2,413,171 

 

 

 - 

 

 

 - 

 

 

 2,413,171 

Indefinite-lived intangibles - permits

 

 - 

 

 

 - 

 

 

 - 

 

 

 1,106,799 

 

 

 - 

 

 

 1,106,799 

Goodwill

 

 - 

 

 

 - 

 

 

 3,335,479 

 

 

 860,377 

 

 

 - 

 

 

 4,195,856 

Intercompany notes receivable

 

 - 

 

 

 962,000 

 

 

 - 

 

 

 

 

 

 (962,000) 

 

 

 - 

Long-term intercompany receivable

 

 - 

 

 

 - 

 

 

 - 

 

 

 723,311 

 

 

 (723,311) 

 

 

 - 

Investment in subsidiaries

 

 (8,450,651) 

 

 

 3,768,444 

 

 

 671,929 

 

 

 - 

 

 

 4,010,278 

 

 

 - 

Other assets

 

 - 

 

 

 126,282 

 

 

 307,422 

 

 

 831,068 

 

 

 (463,816) 

 

 

 800,956 

 

Total Assets

$

 (8,413,157) 

 

$

 9,180,789 

 

$

 10,257,998 

 

$

 8,256,969 

 

$

 (2,880,280) 

 

$

 16,402,319 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accounts payable and accrued expenses

$

 (1,144) 

 

$

 (103,198) 

 

$

 345,442 

 

$

 600,807 

 

$

 - 

 

$

 841,907 

Accrued interest

 

 - 

 

 

 86,027 

 

 

 - 

 

 

 2,370 

 

 

 (11,211) 

 

 

 77,186 

Intercompany payable

 

 - 

 

 

 

 

 

 4,412,200 

 

 

 151,942 

 

 

 (4,564,142) 

 

 

 - 

Current portion of long-term debt

 

 - 

 

 

 400,170 

 

 

 - 

 

 

 19,710 

 

 

 - 

 

 

 419,880 

Deferred income

 

 - 

 

 

 - 

 

 

 65,746 

 

 

 111,233 

 

 

 - 

 

 

 176,979 

Other current liabilities

 

 - 

 

 

 102,154 

 

 

 - 

 

 

 - 

 

 

 - 

 

 

 102,154 

 

Total Current Liabilities

 

 (1,144) 

 

 

 485,153 

 

 

 4,823,388 

 

 

 886,062 

 

 

 (4,575,353) 

 

 

 1,618,106 

Long-term debt

 

 - 

 

 

 16,469,044 

 

 

 4,000 

 

 

 4,718,792 

 

 

 (873,910) 

 

 

 20,317,926 

Long-term intercompany payable

 

 - 

 

 

 723,311 

 

 

 - 

 

 

 - 

 

 

 (723,311) 

 

 

 - 

Intercompany long-term debt

 

 - 

 

 

 - 

 

 

 962,000 

 

 

 - 

 

 

 (962,000) 

 

 

 - 

Deferred income taxes

 

 (14,290) 

 

 

 (74,662) 

 

 

 1,075,945 

 

 

 825,230 

 

 

 2,809 

 

 

 1,815,032 

Other long-term liabilities

 

 - 

 

 

 28,594 

 

 

 181,241 

 

 

 288,757 

 

 

 - 

 

 

 498,592 

Total member's interest (deficit)

 

 (8,397,723) 

 

 

 (8,450,651) 

 

 

 3,211,424 

 

 

 1,538,128 

 

 

 4,251,485 

 

 

 (7,847,337) 

 

Total Liabilities and Member's Equity (Deficit)

$

 (8,413,157) 

 

$

 9,180,789 

 

$

 10,257,998 

 

$

 8,256,969 

 

$

 (2,880,280) 

 

$

 16,402,319 

16

 


 

CLEAR CHANNEL CAPITAL I, LLC AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(UNAUDITED)

 

 

(In thousands)

 

As of December 31, 2011

 

 

Parent

 

Subsidiary

 

Guarantor

 

Non-Guarantor

 

 

 

 

 

 

 

 

Company

 

Issuer

 

Subsidiaries

 

Subsidiaries

 

Eliminations

 

Consolidated

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash and cash equivalents

$

 - 

 

$

 1 

 

$

 461,572 

 

$

 767,109 

 

$

 - 

 

$

 1,228,682 

Accounts receivable, net of allowance

 

 - 

 

 

 - 

 

 

 694,548 

 

 

 704,587 

 

 

 - 

 

 

 1,399,135 

Intercompany receivables

 

 30,270 

 

 

 4,824,634 

 

 

 - 

 

 

 - 

 

 

 (4,854,904) 

 

 

 - 

Other current assets

 

 2,251 

 

 

 46,018 

 

 

 107,564 

 

 

 277,695 

 

 

 (76,060) 

 

 

 357,468 

 

Total Current Assets

 

 32,521 

 

 

 4,870,653 

 

 

 1,263,684 

 

 

 1,749,391 

 

 

 (4,930,964) 

 

 

 2,985,285 

Property, plant and equipment, net

 

 - 

 

 

 - 

 

 

 815,245 

 

 

 2,248,082 

 

 

 - 

 

 

 3,063,327 

Definite-lived intangibles, net

 

 - 

 

 

 - 

 

 

 1,389,935 

 

 

 627,825 

 

 

 - 

 

 

 2,017,760 

Indefinite-lived intangibles - licenses

 

 - 

 

 

 - 

 

 

 2,411,367 

 

 

 - 

 

 

 - 

 

 

 2,411,367 

Indefinite-lived intangibles - permits

 

 - 

 

 

 - 

 

 

 - 

 

 

 1,105,704 

 

 

 - 

 

 

 1,105,704 

Goodwill

 

 - 

 

 

 - 

 

 

 3,325,771 

 

 

 860,947 

 

 

 - 

 

 

 4,186,718 

Intercompany notes receivable

 

 - 

 

 

 962,000 

 

 

 - 

 

 

 - 

 

 

 (962,000) 

 

 

 - 

Long-term intercompany receivable

 

 - 

 

 

 - 

 

 

 - 

 

 

 656,040 

 

 

 (656,040) 

 

 

 - 

Investment in subsidiaries

 

 (8,342,987) 

 

 

 5,234,229