PINX:CCMO CC Media Holdings Inc Quarterly Report 10-Q/A Filing - 6/30/2012

Effective Date 6/30/2012

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

FORM 10-Q/A

(Amendment No. 1)

 

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

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

or

[   ]          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

000-53354

 

CC MEDIA HOLDINGS, INC.

(Exact name of registrant as specified in its charter)

 

                                        Delaware                                                                                                                             26-0241222 

   (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 [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 [X]   Non-accelerated filer [  ]  Smaller reporting company [   ]

 

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

                    Yes [  ] No [X]

 

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

 

                                      Class                                                                                                                           Outstanding at July 31, 2012

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

                    Class A common stock, $.001 par value                                                                                              23,579,852 (1) 

                    Class B common stock, $.001 par value                                                                                                   555,556

                    Class C common stock, $.001 par value                                                                                                 58,967,502

 

                         (1) Outstanding Class A common stock includes 111,291 shares owned by a subsidiary

 


 

 

 

 

 

Explanatory Note

 

This Amendment No. 1(“the Amendment”) to the CC Media Holdings, Inc. Form 10-Q for the quarter ended June 30, 2012 (the “Form 10-Q”) filed with the Securities and Exchange Commission on August 1, 2012 (the “Filing Date”) is filed solely to correct the net loss attributable to the Company per common share amounts included in the financial statements in Part I, Item 1 and included in Exhibit 11 thereto and to make corresponding changes to Exhibit 101 to the Form 10-Q, which contains the XBRL (Extensible Business Reporting Language) Interactive Data File for the financial statements and notes included in Part I, Item 1 of the Form 10-Q.  Due to an administrative error, the adjustment for participating securities dividends was incorrect, resulting in net loss attributable to the Company per common share being overstated by $0.09 per share and $0.09 per share for the three months and six months ended June 30, 2012, respectively.  This error had no impact on any other items presented on the Company’s Consolidated Statements of Comprehensive Income (Loss) including Revenue, Operating Income, Net income (loss) and Net income (loss) attributable to the Company.  The calculation error had no impact on the Company’s Condensed Consolidated Balance Sheets, Condensed Consolidated Statements of Cash Flows or any disclosures included in the Notes to the Consolidated Financial Statements and Management’s Discussion and Analysis.  No other changes to our Form 10-Q are made in this Amendment.  This Amendment speaks as of the Filing Date, does not reflect events that may have occurred subsequent to the Filing Date, and, other than as set forth below, does not modify or update the disclosures made in the Form 10-Q.  Accordingly, this Amendment should be read in conjunction with the Form 10-Q.

 

2 

 


 

 

CC MEDIA HOLDINGS, INC.

INDEX

 

 

 

Page No.

Part I – Financial Information

 

Item 1.    Financial Statements

1

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

1

Consolidated Statements of Comprehensive Loss for the three and six months ended June 30, 2012 and 2011

2

Condensed Consolidated Statements of Cash Flows for the six months ended June 30, 2012 and 2011

3

                Notes to Consolidated Financial Statements

4

Part II – Other Information

 

Item 6.  Exhibits

15

Signatures                                                                             

16

 


 

PART I FINANCIAL INFORMATION

ITEM 1.   FINANCIAL STATEMENTS

CC MEDIA HOLDINGS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS 

  

  

  

  

  

  

  

(In thousands)

  

June 30,

  

  

  

  

  

2012 

  

  

December 31,

  

  

(Unaudited)

  

  

2011 

CURRENT ASSETS

  

  

  

  

  

Cash and cash equivalents

$

 1,316,516 

  

$

 1,228,682 

Accounts receivable, net

  

 1,371,276 

  

  

 1,399,135 

Other current assets

  

 368,079 

  

  

 357,468 

  

Total Current Assets

  

 3,055,871 

  

  

 2,985,285 

  

  

  

  

  

  

  

PROPERTY, PLANT AND EQUIPMENT

  

  

  

  

  

Structures, net

  

 1,920,953 

  

  

 1,950,437 

Other property, plant and equipment, net

  

 1,100,595 

  

  

 1,112,890 

  

  

  

  

  

  

  

INTANGIBLE ASSETS AND GOODWILL

  

  

  

  

  

Definite-lived intangibles, net

  

 1,882,905 

  

  

 2,017,760 

Indefinite-lived intangibles

  

 3,515,666 

  

  

 3,517,071 

Goodwill

  

 4,183,156 

  

  

 4,186,718 

  

  

  

  

  

  

  

OTHER ASSETS

  

  

  

  

  

Other assets

  

 792,676 

  

  

 771,878 

Total Assets

$

 16,451,822 

  

$

 16,542,039 

  

  

  

  

  

  

  

CURRENT LIABILITIES

  

  

  

  

  

Accounts payable and accrued expenses

$

 793,430 

  

$

 856,727 

Accrued interest

  

 155,567 

  

  

 160,361 

Current portion of long-term debt

  

 323,528 

  

  

 268,638 

Deferred income

  

 212,412 

  

  

 143,236 

  

Total Current Liabilities

  

1,484,937 

  

  

1,428,962 

  

  

  

  

  

  

  

Long-term debt

  

20,391,288 

  

  

19,938,531 

Deferred income taxes

  

1,823,695 

  

  

1,938,599 

Other long-term liabilities

  

613,845 

  

  

707,888 

  

  

  

  

  

  

  

Commitments and contingent liabilities (Note 6)

  

  

  

  

  

  

  

  

  

  

  

  

SHAREHOLDERS' DEFICIT

  

  

  

  

  

Noncontrolling interest

  

 291,449 

  

  

 521,794 

Common stock

  

 84 

  

  

 83 

Additional paid-in capital

  

 2,131,867 

  

  

 2,132,368 

Retained deficit

  

 (10,039,921) 

  

  

 (9,857,267) 

Accumulated other comprehensive loss

  

 (241,852) 

  

  

 (266,043) 

Cost of shares held in treasury

  

 (3,570) 

  

  

 (2,876) 

  

Total Shareholders' Deficit

  

(7,861,943)

  

  

 (7,471,941) 

  

  

  

  

  

  

  

Total Liabilities and Shareholders' Deficit

$

 16,451,822 

  

$

 16,542,039 

 

See Notes to Consolidated Financial Statements

 

1

 


 

 

 

CC MEDIA HOLDINGS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

(UNAUDITED)

 

(In thousands, except per share data)

  

Three Months Ended

  

  

Six Months Ended

  

  

  

  

June 30,

  

  

June 30,

  

  

2012 

  

  

2011 

  

  

2012 

  

  

2011 

  

  

  

  

  

  

  

  

  

  

  

  

  

  

Revenue

$

 1,602,494 

  

$

 1,604,386 

  

$

 2,963,217 

  

$

 2,925,212 

Operating expenses:

  

  

  

  

  

  

  

  

  

  

  

  

  

Direct operating expenses (excludes depreciation and amortization)

  

 607,095 

  

  

 630,015 

  

  

 1,221,529 

  

  

 1,214,084 

  

  

Selling, general and administrative expenses (excludes depreciation and

  

  

  

  

  

  

  

  

  

  

  

  

  

  amortization)

  

 398,123 

  

  

 420,436 

  

  

 821,751 

  

  

 793,146 

  

  

Corporate expenses (excludes depreciation and amortization)

  

 71,158 

  

  

 56,486 

  

  

 140,356 

  

  

 108,833 

  

  

Depreciation and amortization

  

 181,839 

  

  

 189,641 

  

  

 357,205 

  

  

 373,352 

  

  

Other operating income - net

 1,917 

  

  

 3,229 

  

  

 5,041 

  

  

 19,943 

Operating income

  

 346,196 

  

  

 311,037 

  

  

 427,417 

  

  

 455,740 

Interest expense

  

 385,867 

  

  

 358,950 

  

  

 759,883 

  

  

 728,616 

Equity in earnings of nonconsolidated affiliates

  

 4,696 

  

  

 5,271 

  

  

 8,251 

  

  

 8,246 

Other expense - net

  

 (1,397) 

  

  

 (4,517) 

  

  

 (17,670) 

  

  

 (6,553) 

Loss before income taxes

  

 (36,372) 

  

  

 (47,159) 

  

  

 (341,885) 

  

  

 (271,183) 

Income tax benefit

  

 8,663 

  

  

 9,184 

  

  

 166,061 

  

  

 101,845 

Consolidated net loss

  

 (27,709) 

  

  

 (37,975) 

  

  

 (175,824) 

  

  

 (169,338) 

  

Less amount attributable to noncontrolling interest

  

 11,316 

  

  

 15,204 

  

  

 6,830 

  

  

 15,673 

Net loss attributable to the Company

$

 (39,025) 

  

$

 (53,179) 

  

$

 (182,654) 

  

$

 (185,011) 

Other comprehensive income, net of tax:

  

  

  

  

  

  

  

  

  

  

  

  

Foreign currency translation adjustments

  

 (40,380) 

  

  

 36,565 

  

  

 (3,291) 

  

  

 75,872 

  

Unrealized gain on securities and derivatives:

  

  

  

  

  

  

  

  

  

  

  

  

  

Unrealized holding gain (loss) on marketable securities

  

 (11,317) 

  

  

 11,057 

  

  

 731 

  

  

 14,009 

  

  

Unrealized holding gain (loss) on cash flow derivatives

  

 15,935 

  

  

 (1,399) 

  

  

 24,514 

  

  

 11,943 

  

Reclassification adjustment

  

 91 

  

  

 59 

  

  

 154 

  

  

 148 

Other comprehensive income (loss)

  

 (35,671) 

  

  

 46,282 

  

  

 22,108 

  

  

 101,972 

Comprehensive loss

  

 (74,696) 

  

  

 (6,897) 

  

  

 (160,546) 

  

  

 (83,039) 

  

 Less amount attributable to noncontrolling interest

  

 (5,738) 

  

  

 6,435 

  

  

 (2,083) 

  

  

 13,133 

Comprehensive loss attributable to the Company

$

 (68,958) 

  

$

 (13,332) 

  

$

 (158,463) 

  

$

 (96,172) 

  

  

  

  

  

  

  

  

  

  

  

  

  

  

Net loss attributable to the Company per common share:

  

  

  

  

  

  

  

  

  

  

  

  

Basic

$

(0.48)

  

$

(0.65)

  

$

(2.31)

  

$

(2.27)

  

Weighted average common shares outstanding – Basic

  

82,543 

  

  

82,375 

  

  

82,598 

  

  

82,317 

  

Diluted

$

(0.48)

  

$

(0.65)

  

$

(2.31)

  

$

(2.27)

  

Weighted average common shares outstanding – Diluted

  

82,543 

  

  

82,375 

  

  

82,598 

  

  

82,317 

 

See Notes to Consolidated Financial Statements

 

2

 


 

CC MEDIA HOLDINGS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

 

(In thousands)

  

Six Months Ended June 30,

  

  

2012 

  

2011 

Cash flows from operating activities:

  

  

  

  

  

Consolidated net loss

$

(175,824)

$

 (169,338) 

  

  

  

  

  

  

  

Reconciling items:

  

  

  

  

  

Depreciation and amortization

  

357,205 

  

373,352 

  

Deferred taxes

  

(123,582)

  

(90,895)

  

Gain on disposal of operating assets

  

(5,041)

  

(19,943)

  

Loss on extinguishment of debt

  

15,167 

  

5,721 

  

Provision for doubtful accounts

  

8,271 

  

8,300 

  

Share-based compensation

  

12,712 

  

8,029 

  

Equity in earnings of nonconsolidated affiliates

  

(8,251)

  

(8,246)

  

Amortization of deferred financing charges and note discounts, net

  

84,132 

  

100,233 

  

Other reconciling items – net

  

10,119 

  

13,998 

  

Changes in operating assets and liabilities:

  

  

  

  

  

  

(Increase) decrease in accounts receivable

  

15,608 

  

(18,262)

  

  

Increase in deferred income

  

67,345 

  

61,427 

  

  

Decrease in accrued expenses

  

(33,690)

  

(108,083)

  

  

Decrease in accounts payable and other liabilities

  

(76,648)

  

(74,089)

  

  

Increase (decrease) in accrued interest

  

(4,791)

  

20,240 

  

  

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

  

  

  

  

  

  

  acquisitions and dispositions

  

(26,126)

  

(38,944)

Net cash provided by operating activities

  

 116,606 

  

 63,500 

  

  

  

  

  

  

  

Cash flows from investing activities:

  

  

  

  

  

Purchases of property, plant and equipment

  

(174,292)

  

(140,452)

  

Purchases of other operating assets

  

(18,636)

  

(37,962)

  

Proceeds from disposal of assets

  

11,284 

  

48,116 

  

Change in other – net

  

 (9,488) 

  

 856 

Net cash used for investing activities

  

 (191,132) 

  

 (129,442) 

  

  

  

  

  

  

  

Cash flows from financing activities:

  

  

  

  

  

Draws on credit facilities

  

 606,861 

  

 10,000 

  

Payments on credit facilities

  

 (1,920,013) 

  

 (958,074) 

  

Proceeds from long-term debt

  

 2,200,000 

  

 1,726,254 

  

Payments on long-term debt

  

 (437,182) 

  

 (1,362,496) 

  

Dividends paid

  

 (244,734) 

  

 - 

  

Deferred financing charges

  

 (40,002) 

  

 (46,597) 

  

Change in other – net

  

 (2,570) 

  

 (4,915) 

Net cash provided by (used for) financing activities

  

 162,360 

  

 (635,828) 

  

  

  

  

  

  

  

Net increase (decrease) in cash and cash equivalents

  

 87,834 

  

 (701,770) 

  

  

  

  

  

  

  

Cash and cash equivalents at beginning of period

  

 1,228,682 

  

 1,920,926 

  

  

  

  

  

  

  

Cash and cash equivalents at end of period

$

 1,316,516 

$

 1,219,156 

 

See Notes to Consolidated Financial Statements

 

3

 


 

CC MEDIA HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

             

NOTE 1 – BASIS OF PRESENTATION

Preparation of Interim Financial Statements

The accompanying consolidated financial statements were prepared by CC Media Holdings, Inc. (the “Company”) pursuant to the rules and regulations of the Securities and Exchange Commission (“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 Report on Form 10-Q for the period ended March 31, 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 restated the corresponding segment disclosures for prior periods.

 

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 June 30, 2012 and December 31, 2011, respectively.

 

(In thousands)

  

June 30,

  

  

December 31,

  

  

2012 

  

  

2011 

Land, buildings and improvements

$

 670,122 

  

$

 657,346 

Structures

  

 2,858,625 

  

  

 2,783,434 

Towers, transmitters and studio equipment

  

 411,577 

  

  

 400,832 

Furniture and other equipment

  

 387,204 

  

  

 365,137 

Construction in progress

  

 75,128 

  

  

 68,658 

  

  

 4,402,656 

  

  

 4,275,407 

Less: accumulated depreciation

  

 1,381,108 

  

  

 1,212,080 

Property, plant and equipment, net

$

 3,021,548 

  

$

 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.

 

4

 


 

CC MEDIA HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(UNAUDITED)   

                 

The following table presents the gross carrying amount and accumulated amortization for each major class of definite-lived intangible assets at June 30, 2012 and December 31, 2011, respectively:

 

(In thousands)

  

June 30, 2012

  

December 31, 2011

  

  

  

Gross Carrying Amount

  

Accumulated Amortization

  

Gross Carrying Amount

  

Accumulated Amortization

Transit, street furniture and other outdoor contractual rights

$

779,418 

$

(365,941)

$

 773,238 

$

 (329,563) 

Customer / advertiser relationships

  

1,210,245 

  

(466,635)

  

 1,210,269 

  

 (409,794) 

Talent contracts

  

349,046 

  

(161,833)

  

 347,489 

  

 (139,154) 

Representation contracts

  

243,936 

  

(154,478)

  

 237,451 

  

 (137,058) 

Other

  

561,619 

  

(112,472)

  

 560,978 

  

 (96,096) 

  

Total

$

 3,144,264 

$

 (1,261,359) 

$

 3,129,425 

$

 (1,111,665) 

 

Total amortization expense related to definite-lived intangible assets was $76.2 million and $80.4 million for the three months ended June 30, 2012 and 2011, respectively, and $151.5 million and $159.5 million for the six months ended June 30, 2012 and 2011, respectively.

 

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 

$

 283,193 

2014 

  

 263,354 

2015 

  

 237,112 

2016 

  

 222,565 

2017 

  

 194,814 

 

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 (“Americas outdoor”) segment. Due to significant differences in both business practices and regulations, billboards in the International outdoor 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 segment. The Company’s indefinite-lived intangible assets are as follows: 

 

(In thousands)

  

June 30,

  

  

December 31,

  

  

2012 

  

  

2011 

FCC broadcast licenses

$

 2,409,401 

  

$

 2,411,367 

Billboard permits

  

 1,106,265 

  

  

 1,105,704 

Total indefinite-lived intangible assets

$

 3,515,666 

  

$

 3,517,071 

5

 


 

CC MEDIA HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(UNAUDITED)   

                 

 

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

  

 188 

  

 - 

  

 - 

  

 51 

  

 239 

  

Dispositions

  

 (445) 

  

 - 

  

 - 

  

 - 

  

 (445) 

  

Foreign currency

  

 - 

  

 - 

  

 (3,325) 

  

 - 

  

 (3,325) 

  

Other

  

 (31) 

  

 - 

  

 - 

  

 - 

  

 (31) 

Balance as of June 30, 2012

$

 3,212,139 

$

 571,932 

$

 281,936 

$

 117,149 

$

 4,183,156 

 

NOTE 3 – LONG-TERM DEBT

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

 

(In thousands)

  

June 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

  

 27,187 

  

  

 30,976 

Total Consolidated Secured Debt

  

 13,077,467 

  

  

 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

  

 19,250 

  

  

 19,860 

Purchase accounting adjustments and original issue discount

  

 (456,546) 

  

  

 (514,336) 

  

  

  

 20,714,816 

  

  

 20,207,169 

Less: current portion

  

 323,528 

  

  

 268,638 

Total long-term debt

$

 20,391,288 

  

$

 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.

 

6

 


 

CC MEDIA HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(UNAUDITED)   

                 

The Company’s weighted average interest rate at June 30, 2012 was 6.5%.  The aggregate market value of the Company’s debt based on market prices for which quotes were available was approximately $17.6 billion and $16.2 billion at June 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.


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 Clear Channel Refinancing Transactions

In February 2011, Clear Channel Communications, Inc. (“Clear Channel”), an indirect subsidiary of the Company, 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

7

 


 

CC MEDIA HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(UNAUDITED)   

                 

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 delayed draw term loans due 2016.  As a result of the prepayment of term loan indebtedness under Clear Channel’s senior secured credit facilities, the scheduled repayment of term loans is revised as set forth below:

 

(In millions)

  

Tranche A Term

  

Tranche B Term

  

Tranche C Term

  

Delayed Draw 2

  

Delayed Draw 3

Year

  

 Loan* 

  

Loan**

  

Loan**

  

 Term Loan**

  

 Term Loan**

2013 

$

 71.4 

  

 - 

$

 2.8 

  

 - 

  

 - 

2014 

$

 998.6 

  

 - 

$

 7.0 

  

 - 

  

 - 

2015 

  

 - 

  

 - 

$

 3.4 

  

 - 

  

 - 

2016 

  

 - 

$

 8,598.5 

$

 647.2 

$

 559.6 

$

 401.8 

  

Total

$

 1,070.0 

$

 8,598.5 

$

 660.4 

$

 559.6 

$

 401.8 

                       

*Balance of Tranche A Term Loan is due July 30, 2014

**Balance of Tranche B Term Loan, Tranche C Term Loan, Delayed Draw 1 Term Loan and Delayed Draw 2 Term Loan are due January 29, 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 first six months of 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.      

8

 


 

CC MEDIA HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(UNAUDITED)   

                 

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. 

 

Income Tax Benefit

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

 

(In thousands)

  

Three Months Ended

  

Six Months Ended

  

  

June 30,

  

June 30,

  

  

2012 

  

  

2011 

  

2012 

  

  

2011 

Current tax benefit (expense)

$

 (16,481) 

  

$

 (21,045) 

$

 42,479 

  

$

 10,950 

Deferred tax benefit

  

 25,144 

  

  

 30,229 

  

 123,582 

  

  

 90,895 

Income tax benefit

$

 8,663 

  

$

 9,184 

$

 166,061 

  

$

 101,845 

 

The effective tax rate for the three and six months ended June 30, 2012 was 23.8% and 48.6%, respectively.  The effective tax rate for the three months ended June 30, 2012 was primarily impacted by the Company’s inability to record tax benefits for tax losses in certain foreign jurisdictions due to the uncertainty of the ability to utilize those losses in future periods. The effective tax rate for the six months ended June 30, 2012 was primarily 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 six months ended June 30, 2011 was 19.5% and 37.6%, respectively.  The effective tax rate for the three months ended June 30, 2011 was primarily impacted by the deferred tax expense recorded as a result of changes to tax rates and laws in certain domestic jurisdictions and the vesting of equity awards.  The effective tax rate for the six months ended June 30, 2011 was primarily impacted by the Company’s settlement of U.S. federal and state tax examinations during the period.  Pursuant to the settlements, the Company recorded a reduction to income tax expense of approximately $12.3 million to reflect the net tax benefits of the settlements.  In addition, the effective rate for the six months ended June 30, 2011 was impacted by the Company’s ability to benefit from certain tax loss carryforwards in foreign jurisdictions due to increased taxable income during 2011, where the losses previously did not provide a benefit.

   

During the six months ended June 30, 2012 and 2011, cash paid for interest and income taxes, net of income tax refunds of $0.9 million and $1.2 million, respectively, was as follows:

 

(In thousands)

  

Six Months Ended June 30,

  

  

2012 

  

  

2011 

Interest

$

 682,608 

  

$

 610,549 

Income taxes

  

 37,764 

  

  

 62,080 

9

 


 

CC MEDIA HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(UNAUDITED)   

                 

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 June 30, 2012 and December 31, 2011 are as follows:

 

(In thousands)

  

June 30,

  

  

December 31,

  

  

2012 

  

  

2011 

Cost

$

 7,786 

  

$

 7,786 

Gross unrealized losses

  

 - 

  

  

 - 

Gross unrealized gains

  

 66,373 

  

  

 65,214 

Fair value

$

 74,159 

  

$

 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.

 

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 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 income.

 

The fair value of the Company’s $2.5 billion notional amount interest rate swap designated as a hedging instrument and recorded in “Other long-term liabilities” was $121.0 million and $159.1 million at June 30, 2012 and December 31, 2011, respectively.

 

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

  

 (24,514) 

Balance at June 30, 2012

$

 75,778 

10

 


 

CC MEDIA HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(UNAUDITED)   

                 

 

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 six months ended June 30, 2012 and 2011, respectively:

 

(In thousands)

  

Three Months Ended June 30,

  

  

Six Months Ended June 30,

  

  

2012 

  

  

2011 

  

  

2012 

  

  

2011 

Foreign currency translation adjustments

$

 884 

  

$

 - 

  

$

 (1,350) 

  

$

 - 

Unrealized holding gain (loss) on marketable securities

  

 6,588 

  

  

 (12,643) 

  

  

 (429) 

  

  

 (13,772) 

Unrealized holding gain (loss) on cash flow derivatives

  

 (8,480) 

  

  

 835 

  

  

 (13,600) 

  

  

 (7,129) 

  

Total income tax benefit

$

 (1,008) 

  

$

 (11,808) 

  

$

 (15,379) 

  

$

 (20,901) 

                         

 

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.

 

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.

 

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 June 30, 2012, Clear Channel had outstanding surety bonds and commercial standby letters of credit of $50.1 million and $140.2 million, respectively, of which $67.5 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 June 30, 2012, Clear Channel had outstanding bank guarantees of $51.7 million related to international subsidiaries, of which $4.4 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 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

11

 


 

CC MEDIA HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(UNAUDITED)   

                 

management and financial advisory services until 2018.  These agreements require management fees to be paid to such affiliates of the Sponsors for such services at a rate not greater than $15.0 million per year, plus reimbursable expenses.  For the three months ended June 30, 2012 and 2011, the Company recognized management fees and reimbursable expenses of $4.0 million and $4.2 million, respectively. For the six months ended June 30, 2012 and 2011, the Company recognized management fees and reimbursable expenses of $8.0  million and $8.0  million, respectively.

 

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)

  

(182,654)

  

  

6,830 

  

  

 (175,824) 

  

Dividend

  

 - 

  

  

 (244,734) 

  

  

 (244,734) 

  

Foreign currency translation adjustments

  

(1,190)

  

  

(2,101)

  

  

 (3,291) 

  

Unrealized holding gain on marketable securities

  

730 

  

  

  

  

 731 

  

Unrealized holding gain on cash flow derivatives

  

24,514 

  

  

 - 

  

  

 24,514 

  

Reclassification adjustment

  

137 

  

  

17 

  

  

 154 

  

Other - net

  

 (1,194) 

  

  

 9,642 

  

  

 8,448 

Balances at June 30, 2012

$

(8,153,392)

  

$

 291,449 

  

$

(7,861,943)

  

  

  

  

  

  

  

  

  

  

Balances at January 1, 2011

$

(7,695,606)

  

$

 490,920 

  

$

(7,204,686)

  

Net income (loss)

  

 (185,011) 

  

  

 15,673 

  

  

 (169,338) 

  

Foreign currency translation adjustments

  

 62,817 

  

  

 13,055 

  

  

 75,872 

  

Unrealized holding gain on marketable securities

  

 13,949 

  

  

 60 

  

  

 14,009 

  

Unrealized holding gain on cash flow derivatives

  

 11,943 

  

  

 - 

  

  

 11,943 

  

Reclassification adjustment

  

 131 

  

  

 17 

  

  

 148 

  

Other - net

  

 (657) 

  

  

 2,684 

  

  

2,027 

Balances at June 30, 2011

$

(7,792,434)

  

$

522,409 

  

$

(7,270,025)

 

The Company 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 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. 

 

12

 


 

CC MEDIA HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(UNAUDITED)   

                 

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

 

(In thousands)

  

CCME

  

Americas Outdoor Advertising

  

International Outdoor Advertising

  

Other

  

Corporate and other reconciling items

  

Eliminations

  

Consolidated

Three Months Ended June 30, 2012

Revenue

$

 793,039 

$

 320,678 

$

 440,648 

$

 64,144 

$

 - 

$

 (16,015) 

$

 1,602,494 

Direct operating expenses

  

 196,348 

  

 143,185 

  

 263,710 

  

 5,787 

  

 - 

  

 (1,935) 

  

 607,095 

Selling, general and administrative expenses

  

 243,157 

  

 44,699 

  

 87,586 

  

 36,761 

  

 - 

  

 (14,080) 

  

 398,123 

Depreciation and amortization

  

 67,923 

  

 48,567 

  

 50,710 

  

 11,355 

  

 3,284 

  

 - 

  

 181,839 

Corporate expenses

  

 - 

  

 - 

  

 - 

  

 - 

  

 71,158 

  

 - 

  

 71,158 

Other operating income - net

  

 - 

  

 - 

  

 - 

  

 - 

  

 1,917 

  

 - 

  

 1,917 

Operating income (loss)

$

 285,611 

$

 84,227 

$

 38,642 

$

 10,241 

$

 (72,525) 

$

 - 

$

 346,196 

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

Intersegment revenues

$

 - 

$

 - 

$

 - 

$

 16,015 

$

 - 

$

 - 

$

 16,015 

Capital expenditures

$

 16,674 

$

 33,780 

$

 39,247 

$

 6,617 

$

 5,327 

$

 - 

$

 101,645 

Share-based compensation expense

$

 1,202 

$

 1,240 

$

 874 

$

 - 

$

 2,499 

$

 - 

$

 5,815 

Three Months Ended June 30, 2011

Revenue

$

 771,744 

$

 318,217 

$

 470,991 

$

 59,172 

$

 - 

$

 (15,738) 

$

 1,604,386 

Direct operating expenses

  

 211,368 

  

 141,010 

  

 274,462 

  

 6,984 

  

 - 

  

 (3,809) 

  

 630,015 

Selling, general and administrative expenses

  

 252,581 

  

 49,035 

  

 93,902 

  

 36,847 

  

 - 

  

 (11,929) 

  

 420,436 

Depreciation and amortization

  

 69,033 

  

 50,322 

  

 55,278 

  

 12,809 

  

 2,199 

  

 - 

  

 189,641 

Corporate expenses

  

 - 

  

 - 

  

 - 

  

 - 

  

 56,486 

  

 - 

  

 56,486 

Other operating income - net

  

 - 

  

 - 

  

 - 

  

 - 

  

 3,229 

  

 - 

  

 3,229 

Operating income (loss)

$

 238,762 

$

 77,850 

$

 47,349 

$

 2,532 

$

 (55,456) 

$

 - 

$

 311,037 

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

Intersegment revenues

$

 - 

$

 745 

$

 - 

$

 14,993 

$

 - 

$

 - 

$

 15,738 

Capital expenditures

$

 10,424 

$

 34,562 

$

 23,979 

$

 1,004 

$

 6,514 

$

 - 

$

 76,483 

Share-based compensation expense

$

 882 

$

 1,674 

$

 701 

$

 - 

$

 2,481 

$

 - 

$

 5,738 

Six Months Ended June 30, 2012

Revenue

$

 1,464,549 

$

 600,829 

$

 811,780 

$

 115,842 

$

 - 

$

 (29,783) 

$

 2,963,217 

Direct operating expenses

  

 412,727 

  

 287,595 

  

 513,353 

  

 12,326 

  

 - 

  

 (4,472) 

  

 1,221,529 

Selling, general and administrative expenses

  

 484,130 

  

 97,278 

  

 188,156 

  

 77,498 

  

 - 

  

 (25,311) 

  

 821,751 

Depreciation and amortization

  

 134,979 

  

 91,525 

  

 99,745 

  

 24,208 

  

 6,748 

  

 - 

  

 357,205 

Corporate expenses

  

 - 

  

 - 

  

 - 

  

 - 

  

 140,356 

  

 - 

  

 140,356 

Other operating income - net

  

 - 

  

 - 

  

 - 

  

 - 

  

 5,041 

  

 - 

  

 5,041 

Operating income (loss)

$

 432,713 

$

 124,431 

$

 10,526 

$

 1,810 

$

 (142,063) 

$

 - 

$

 427,417 

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

Intersegment revenues

$

 - 

$

 770 

$

 - 

$

 29,013 

$

 - 

$

 - 

$

 29,783 

Capital expenditures

$

 26,826 

$

 59,116 

$

 66,909 

$

 9,005 

$

 12,436 

$

 - 

$

 174,292 

Share-based compensation expense

$

 2,416 

$

 3,172 

$

 2,083 

$

 - 

$

 5,041 

$

 - 

$

 12,712 

                               

13

 


 

CC MEDIA HOLDINGS, INC. 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

Six Months Ended June 30, 2011

Revenue

$

 1,404,709 

$

 587,918 

$

 851,504 

$

 110,435 

$

 - 

$

 (29,354) 

$

 2,925,212 

Direct operating expenses

  

 400,613 

  

 276,960 

  

 529,892 

  

 14,169 

  

 - 

  

 (7,550) 

  

 1,214,084 

Selling, general and administrative expenses

  

 474,713 

  

 98,593 

  

 167,524 

  

 74,120 

  

 - 

  

 (21,804) 

  

 793,146 

Depreciation and amortization

  

 133,489 

  

 98,944 

  

 108,986 

  

 26,094 

  

 5,839 

  

 - 

  

 373,352 

Corporate expenses

  

 - 

  

 - 

  

 - 

  

 - 

  

 108,833 

  

 - 

  

 108,833 

Other operating income - net

  

 - 

  

 - 

  

 - 

  

 - 

  

 19,943 

  

 - 

  

 19,943 

Operating income (loss)

$

 395,894 

$

 113,421 

$

 45,102 

$

 (3,948) 

$

 (94,729) 

$

 - 

$

 455,740 

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

Intersegment revenues

$

 - 

$

 1,688 

$

 - 

$

 27,666 

$

 - 

$

 - 

$

 29,354 

Capital expenditures

$

 23,663 

$

 65,477 

$

 39,102 

$

 3,126 

$

 9,084 

$

 - 

$

 140,452 

Share-based compensation expense

$

 2,436 

$

 3,842 

$

 1,604 

$

 - 

$

 147 

$

 - 

$

 8,029 

14

 


 

CC MEDIA HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(UNAUDITED)   

                 

ITEM 6.  EXHIBITS  

  

  

  

Exhibit Number

  

Description

10.1 

  

Clear Channel Outdoor Holdings, Inc. 2012 Stock Incentive Plan (Incorporated by reference to Exhibit 99.1 to the Clear Channel Outdoor Holdings, Inc. Registration Statement on Form S-8 (File No. 333-181514) filed on May 18, 2012).

10.2 

  

Clear Channel Outdoor Holdings, Inc. Amended and Restated 2006 Annual Incentive Plan (Incorporated by reference to Appendix B to the Clear Channel Outdoor Holdings, Inc. Definitive Proxy Statement on Schedule 14A for its 2012 Annual Meeting of Stockholders filed on April 9, 2012).

10.3 

  

Form of Restricted Stock Unit Agreement under the Clear Channel Outdoor Holdings, Inc. 2005 Stock Incentive Plan, dated May 10, 2012, between Thomas W. Casey and Clear Channel Outdoor Holdings, Inc. (Incorporated by reference to Exhibit 10.49 to the Clear Channel Worldwide Holdings, Inc. Registration Statement on Form S-4 (File No. 333-182265) filed on June 21, 2012).

11*

  

Statement re: Computation of Loss Per Share.

31.1*

  

Certification Pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2*

  

Certification Pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32.1**

  

Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

32.2**

  

Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

101***

  

Interactive Data Files.