e10vq
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
(Mark One)
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þ |
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QUARTERLY REPORT PURSUANT TO SECTION 13 AND 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2007 |
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o |
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM _________________ |
Commission file number 1-9645
CLEAR CHANNEL COMMUNICATIONS, INC.
(Exact name of registrant as specified in its charter)
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Texas
(State of Incorporation)
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74-1787539
(I.R.S. Employer Identification No.) |
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200 East Basse Road
San Antonio, Texas
(Address of principal executive offices)
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78209
(Zip Code) |
(210) 822-2828
(Registrants 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 þ No o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer,
or a non-accelerated filer. See definition of accelerated filer and large accelerated filer in
Rule 12b-2 of the Exchange Act. (Check One):
Large accelerated filer þ Accelerated filer o Non-accelerated filer o
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the
Exchange Act). Yes o No þ
Indicate the number of shares outstanding of each class of the issuers classes of common stock, as
of the latest practicable date.
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Class
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Outstanding at November 7, 2007 |
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Common Stock, $.10 par value
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497,919,884 |
CLEAR CHANNEL COMMUNICATIONS, INC. AND SUBSIDIARIES
INDEX
PART I
Item 1. UNAUDITED FINANCIAL STATEMENTS
CLEAR CHANNEL COMMUNICATIONS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
ASSETS
(In thousands)
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September 30, |
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December 31, |
|
|
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2007 |
|
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2006 |
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(Unaudited) |
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|
(Audited) |
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CURRENT ASSETS |
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|
|
|
|
|
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Cash and cash equivalents |
|
$ |
124,083 |
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$ |
116,000 |
|
Accounts receivable, net of allowance of $58,209 in 2007 and
$56,068 in 2006 |
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1,707,797 |
|
|
|
1,619,858 |
|
Prepaid expenses |
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|
138,308 |
|
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|
122,000 |
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Other current assets |
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|
268,228 |
|
|
|
244,103 |
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Income taxes receivable |
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|
|
|
|
|
7,392 |
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Current assets from discontinued operations |
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98,625 |
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|
96,377 |
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|
|
|
|
|
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Total Current Assets |
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2,337,041 |
|
|
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2,205,730 |
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PROPERTY, PLANT AND EQUIPMENT |
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Land, buildings and improvements |
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805,431 |
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767,792 |
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Structures |
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3,815,503 |
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3,601,653 |
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Towers, transmitters and studio equipment |
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589,057 |
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585,292 |
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Furniture and other equipment |
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531,719 |
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524,140 |
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Construction in progress |
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112,067 |
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89,823 |
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|
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5,853,777 |
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5,568,700 |
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Less accumulated depreciation |
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2,898,824 |
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2,604,036 |
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|
|
|
|
|
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2,954,953 |
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2,964,664 |
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Property, plant and equipment from discontinued operations, net |
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230,009 |
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271,546 |
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INTANGIBLE ASSETS |
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Definite-lived intangibles, net |
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482,893 |
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522,482 |
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Indefinite-lived intangibles licenses |
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4,187,511 |
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4,197,580 |
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Indefinite-lived intangibles permits |
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|
247,536 |
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260,950 |
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Goodwill |
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7,028,425 |
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7,078,705 |
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|
|
|
|
|
|
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Intangible assets from discontinued operations, net |
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494,009 |
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546,610 |
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|
|
|
|
|
|
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OTHER ASSETS |
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Notes receivable |
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6,517 |
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6,318 |
|
Investments in, and advances to, nonconsolidated affiliates |
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334,333 |
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311,258 |
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Other assets |
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277,212 |
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249,524 |
|
Other investments |
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256,408 |
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245,064 |
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Other assets from discontinued operations |
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28,643 |
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35,890 |
|
|
|
|
|
|
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Total Assets |
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$ |
18,865,490 |
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|
$ |
18,896,321 |
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|
|
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|
See Notes to Consolidated Financial Statements
- 3 -
CLEAR CHANNEL COMMUNICATIONS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
LIABILITIES AND SHAREHOLDERS EQUITY
(In thousands)
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September 30, |
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December 31, |
|
|
|
2007 |
|
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2006 |
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|
(Unaudited) |
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|
(Audited) |
|
CURRENT LIABILITIES |
|
|
|
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|
|
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Accounts payable |
|
$ |
125,089 |
|
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$ |
151,577 |
|
Accrued expenses |
|
|
910,431 |
|
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|
884,479 |
|
Accrued interest |
|
|
88,166 |
|
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|
112,049 |
|
Accrued income taxes |
|
|
61,432 |
|
|
|
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Current portion of long-term debt |
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699,855 |
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336,375 |
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Deferred income |
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174,067 |
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134,287 |
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Current liabilities from discontinued operations |
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43,353 |
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|
45,079 |
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|
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Total Current Liabilities |
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2,102,393 |
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1,663,846 |
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Long-term debt |
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6,320,624 |
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7,326,700 |
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Other long-term obligations |
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|
121,012 |
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|
68,509 |
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Deferred income taxes |
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|
764,594 |
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|
746,960 |
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Other long-term liabilities |
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559,444 |
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|
673,953 |
|
Long-term liabilities from discontinued operations |
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30,872 |
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|
24,621 |
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|
|
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|
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Minority interest |
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406,482 |
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349,391 |
|
Commitments and contingent liabilities (Note 6) |
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SHAREHOLDERS EQUITY |
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Common Stock |
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49,806 |
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|
|
49,399 |
|
Additional paid-in capital |
|
|
26,847,031 |
|
|
|
26,745,687 |
|
Retained deficit |
|
|
(18,716,335 |
) |
|
|
(19,054,365 |
) |
Accumulated other comprehensive income |
|
|
384,081 |
|
|
|
304,975 |
|
Cost of shares held in treasury |
|
|
(4,514 |
) |
|
|
(3,355 |
) |
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|
|
|
|
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|
Total Shareholders Equity |
|
|
8,560,069 |
|
|
|
8,042,341 |
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Liabilities and Shareholders Equity |
|
$ |
18,865,490 |
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|
$ |
18,896,321 |
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|
|
|
|
|
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|
See Notes to Consolidated Financial Statements
- 4 -
CLEAR CHANNEL COMMUNICATIONS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
(In thousands, except per share data)
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Nine Months Ended |
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Three Months Ended |
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September 30, |
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September 30, |
|
|
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2007 |
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2006 |
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|
2007 |
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2006 |
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Revenue |
|
$ |
4,987,754 |
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$ |
4,694,259 |
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$ |
1,726,780 |
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$ |
1,639,824 |
|
Operating expenses: |
|
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|
|
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|
|
|
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|
Direct operating expenses (includes share-based payments
of $12,331, $12,140, $4,159 and $4,034 for the nine and
three months ended September 30, 2007 and 2006,
respectively, and excludes depreciation and amortization) |
|
|
1,976,875 |
|
|
|
1,830,788 |
|
|
|
683,830 |
|
|
|
637,075 |
|
Selling, general and administrative expenses (includes
share-based payments of $11,039, $12,584, $3,708 and
$4,190 for the nine and three months ended September 30,
2007 and 2006, respectively, and excludes depreciation and
amortization) |
|
|
1,265,539 |
|
|
|
1,232,216 |
|
|
|
421,311 |
|
|
|
406,174 |
|
Depreciation and amortization |
|
|
419,356 |
|
|
|
436,158 |
|
|
|
139,894 |
|
|
|
147,076 |
|
Corporate expenses (includes share-based payments of
$9,150, $7,995, $3,068 and $2,260 for the nine and three
months ended September 30, 2007 and 2006, respectively,
and excludes depreciation and amortization) |
|
|
138,234 |
|
|
|
137,232 |
|
|
|
47,040 |
|
|
|
48,486 |
|
Merger expenses |
|
|
6,372 |
|
|
|
|
|
|
|
2,002 |
|
|
|
|
|
Gain (loss) on disposition of assets net |
|
|
10,474 |
|
|
|
58,343 |
|
|
|
(567 |
) |
|
|
9,122 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income |
|
|
1,191,852 |
|
|
|
1,116,208 |
|
|
|
432,136 |
|
|
|
410,135 |
|
Interest expense |
|
|
347,525 |
|
|
|
365,950 |
|
|
|
113,026 |
|
|
|
128,276 |
|
Gain (loss) on marketable securities |
|
|
661 |
|
|
|
2,072 |
|
|
|
676 |
|
|
|
5,396 |
|
Equity in earnings of nonconsolidated affiliates |
|
|
23,832 |
|
|
|
25,305 |
|
|
|
7,133 |
|
|
|
8,681 |
|
Other income (expense) net |
|
|
(1,075 |
) |
|
|
(5,858 |
) |
|
|
(1,403 |
) |
|
|
(601 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before income taxes, minority interest and
discontinued operations |
|
|
867,745 |
|
|
|
771,777 |
|
|
|
325,516 |
|
|
|
295,335 |
|
Income tax benefit (expense): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current |
|
|
(162,464 |
) |
|
|
(163,434 |
) |
|
|
(2,480 |
) |
|
|
(60,717 |
) |
Deferred |
|
|
(128,614 |
) |
|
|
(155,103 |
) |
|
|
(54,760 |
) |
|
|
(61,149 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Income tax benefit (expense) |
|
|
(291,078 |
) |
|
|
(318,537 |
) |
|
|
(57,240 |
) |
|
|
(121,866 |
) |
Minority interest expense, net of tax |
|
|
27,206 |
|
|
|
16,630 |
|
|
|
11,961 |
|
|
|
3,673 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before discontinued operations |
|
|
549,461 |
|
|
|
436,610 |
|
|
|
256,315 |
|
|
|
169,796 |
|
Income from discontinued operations, net |
|
|
68,487 |
|
|
|
43,563 |
|
|
|
23,421 |
|
|
|
16,075 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
|
$ |
617,948 |
|
|
$ |
480,173 |
|
|
$ |
279,736 |
|
|
$ |
185,871 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other comprehensive income (loss), net of tax: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign currency translation adjustments |
|
|
77,018 |
|
|
|
30,007 |
|
|
|
31,129 |
|
|
|
3,621 |
|
Unrealized gain (loss) on securities and derivatives: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrealized holding gain (loss) on marketable securities |
|
|
2,086 |
|
|
|
(68,961 |
) |
|
|
13,263 |
|
|
|
(6,002 |
) |
Unrealized holding gain (loss) on cash flow derivatives |
|
|
|
|
|
|
76,132 |
|
|
|
|
|
|
|
15,131 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive income |
|
$ |
697,052 |
|
|
$ |
517,351 |
|
|
$ |
324,128 |
|
|
$ |
198,621 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income per common share: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before discontinued operations Basic |
|
$ |
1.11 |
|
|
$ |
.87 |
|
|
$ |
.52 |
|
|
$ |
.34 |
|
Discontinued operations Basic |
|
|
.14 |
|
|
|
.08 |
|
|
|
.05 |
|
|
|
.04 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income Basic |
|
$ |
1.25 |
|
|
$ |
.95 |
|
|
$ |
.57 |
|
|
$ |
.38 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted
average common shares basic |
|
|
494,261 |
|
|
|
503,903 |
|
|
|
494,568 |
|
|
|
492,714 |
|
Income before discontinued operations Diluted |
|
$ |
1.11 |
|
|
$ |
.87 |
|
|
$ |
.52 |
|
|
$ |
.34 |
|
Discontinued operations Diluted |
|
|
.14 |
|
|
|
.08 |
|
|
|
.04 |
|
|
|
.04 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income Diluted |
|
$ |
1.25 |
|
|
$ |
.95 |
|
|
$ |
.56 |
|
|
$ |
.38 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted
average common shares diluted |
|
|
495,580 |
|
|
|
504,726 |
|
|
|
496,168 |
|
|
|
493,578 |
|
|
Dividends declared per share |
|
$ |
.5625 |
|
|
$ |
.5625 |
|
|
$ |
.1875 |
|
|
$ |
.1875 |
|
See Notes to Consolidated Financial Statements
- 5 -
CLEAR CHANNEL COMMUNICATIONS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(In thousands)
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended September 30, |
|
|
|
2007 |
|
|
2006 |
|
Cash flows from operating activities: |
|
|
|
|
|
|
|
|
Net income |
|
$ |
617,948 |
|
|
$ |
480,173 |
|
(Income) loss from discontinued operations, net |
|
|
(68,487 |
) |
|
|
(43,563 |
) |
|
|
|
|
|
|
|
|
|
|
549,461 |
|
|
|
436,610 |
|
|
|
|
|
|
|
|
|
|
Reconciling items: |
|
|
|
|
|
|
|
|
Depreciation and amortization |
|
|
419,356 |
|
|
|
436,158 |
|
Deferred taxes |
|
|
128,614 |
|
|
|
155,103 |
|
(Gain) loss on disposal of assets |
|
|
(10,474 |
) |
|
|
(58,343 |
) |
(Gain) loss forward exchange contract |
|
|
11,924 |
|
|
|
(18,899 |
) |
(Gain) loss on trading securities |
|
|
(12,586 |
) |
|
|
16,827 |
|
Provision for doubtful accounts |
|
|
26,405 |
|
|
|
23,390 |
|
Share-based compensation |
|
|
32,520 |
|
|
|
32,719 |
|
Equity in earnings of nonconsolidated affiliates |
|
|
(23,832 |
) |
|
|
(25,305 |
) |
Other reconciling items net |
|
|
29,433 |
|
|
|
26,603 |
|
Changes in operating assets and liabilities: |
|
|
|
|
|
|
|
|
Federal income tax refund |
|
|
|
|
|
|
133,336 |
|
Decrease in income taxes receivable |
|
|
3,234 |
|
|
|
28,421 |
|
Changes in other operating assets and liabilities,
net of effects of acquisitions and dispositions |
|
|
(169,459 |
) |
|
|
(88,421 |
) |
|
|
|
|
|
|
|
Net cash provided by operating activities |
|
|
984,596 |
|
|
|
1,098,199 |
|
Cash flows from investing activities: |
|
|
|
|
|
|
|
|
Decrease (increase) in notes receivable net |
|
|
(198 |
) |
|
|
(1,953 |
) |
Decrease (increase) in investments in and advances
to nonconsolidated affiliates net |
|
|
26,848 |
|
|
|
5,297 |
|
Purchases of investments |
|
|
(422 |
) |
|
|
(461 |
) |
Purchases of property, plant and equipment |
|
|
(223,416 |
) |
|
|
(226,615 |
) |
Proceeds from disposal of assets |
|
|
20,069 |
|
|
|
73,496 |
|
Acquisition of operating assets, net of cash acquired |
|
|
(71,593 |
) |
|
|
(270,614 |
) |
Decrease (increase) in other net |
|
|
(12,547 |
) |
|
|
(53,750 |
) |
|
|
|
|
|
|
|
Net cash used in investing activities |
|
|
(261,259 |
) |
|
|
(474,600 |
) |
Cash flows from financing activities: |
|
|
|
|
|
|
|
|
Draws on credit facilities |
|
|
618,372 |
|
|
|
2,500,198 |
|
Payments on credit facilities |
|
|
(1,026,040 |
) |
|
|
(2,098,358 |
) |
Proceeds from long-term debt |
|
|
14,680 |
|
|
|
778,455 |
|
Payments on long-term debt |
|
|
(277,523 |
) |
|
|
(111,827 |
) |
Payments for purchase of common shares |
|
|
(435 |
) |
|
|
(1,371,462 |
) |
Payment on forward exchange contract |
|
|
|
|
|
|
(83,132 |
) |
Proceeds from exercise of stock options, stock
purchase plan, common stock warrants and other |
|
|
77,295 |
|
|
|
26,488 |
|
Dividends paid |
|
|
(279,008 |
) |
|
|
(290,411 |
) |
|
|
|
|
|
|
|
Net cash used in financing activities |
|
|
(872,659 |
) |
|
|
(650,049 |
) |
Cash flows from discontinued operations: |
|
|
|
|
|
|
|
|
Net cash provided by operating activities |
|
|
50,230 |
|
|
|
84,598 |
|
Net cash provided by (used in) investing activities |
|
|
107,175 |
|
|
|
(35,689 |
) |
Net cash provided by (used in) financing activities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by discontinued operations |
|
|
157,405 |
|
|
|
48,909 |
|
|
|
|
|
|
|
|
|
|
Net (decrease) increase in cash and cash equivalents |
|
|
8,083 |
|
|
|
22,459 |
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents at beginning of period |
|
|
116,000 |
|
|
|
84,337 |
|
|
|
|
|
|
|
|
|
Cash and cash equivalents at end of period |
|
$ |
124,083 |
|
|
$ |
106,796 |
|
|
|
|
|
|
|
|
See Notes to Consolidated Financial Statements
- 6 -
CLEAR CHANNEL COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
Note 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Preparation of Interim Financial Statements
The consolidated financial statements were prepared by Clear Channel Communications, Inc. (the
Company) pursuant to the rules and regulations of the Securities and Exchange Commission (SEC)
and, in the opinion of management, include all adjustments (consisting of normal recurring accruals
and adjustments necessary for adoption of new accounting standards) 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 generally accepted accounting
principles in the United States 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 Companys 2006 Annual Report on Form 10-K.
The consolidated financial statements include the accounts of the Company and its subsidiaries.
Investments in companies in which the Company owns 20 percent to 50 percent of the voting common
stock or otherwise exercises significant influence over operating and financial policies of the
company are accounted for under the equity method. All significant intercompany transactions are
eliminated in the consolidation process.
Merger Update
The Companys shareholders approved the adoption of the merger agreement, as amended, with a group
led by T.H. Lee Partners, L.P. and Bain Capital Partners, LLC on September 25, 2007. The
transaction remains subject to requisite regulatory approvals and customary closing conditions.
Under the terms of the merger agreement, as amended, the Companys shareholders will receive $39.20
in cash for each share they own plus additional per share consideration, if any, if the closing of
the merger occurs after December 31, 2007. For a description of the computation of any additional
per share consideration and the circumstances under which it is payable, please refer to the joint
proxy statement/prospectus dated August 21, 2007, filed with the Securities & Exchange Commission
(the Proxy Statement). As an alternative to receiving the $39.20 per share cash consideration,
the Companys unaffiliated shareholders were offered the opportunity on a purely voluntary basis to
exchange some or all of their shares of Clear Channel common stock on a one-for-one basis for
shares of Class A common stock in the new corporation formed by the private equity group to acquire
the Company (subject to aggregate and individual caps), plus the additional per share
consideration, if any.
Holders of shares of the Companys common stock (including shares issuable upon conversion of
outstanding options) in excess of the aggregate cap provided in the merger agreement, as amended,
elected to receive the stock consideration. As a result, unaffiliated shareholders of the Company
will own an aggregate of 30,612,245 shares of CC Media Holdings Class A common stock upon
consummation of the merger.
Certain Reclassifications
The Company has reclassified certain selling, general and administrative expenses to direct
operating expenses in 2006 to conform to current year presentation. The historical financial
statements and footnote disclosures have been revised to exclude amounts related to the Companys
television business and certain radio stations as discussed below.
Discontinued Operations and Assets Held for Sale
On November 16, 2006, the Company announced plans to sell certain radio markets, comprising 448 of
its radio stations, as well as all of its television stations. The radio markets are located
outside the top 100 U.S. media markets. As of September 30, 2007, the Company had sold 55 radio
stations, 5 of which were not part of the announced 448 stations, and had definitive agreements to
sell an additional 360 radio stations, 8 of which were not part of the announced 448 stations. The
closing of the transactions under definitive asset purchase agreements are subject to antitrust
clearances, FCC approval and other customary closing conditions. Further, the sale of these
stations is not a condition to the closing of the merger described above. The Company determined
that each of these markets represents a disposal group. Consistent with the provisions of
Statement of Financial Accounting Standards No. 144, Accounting for the Impairment or Disposal of
Long-lived Assets (Statement 144), the Company classified these markets assets that are subject
to
transfer under the definitive asset purchase agreements as discontinued operations at September 30,
2007 and December 31, 2006. Accordingly, depreciation and amortization associated with these
assets was discontinued. Additionally, the Company determined
- 7 -
that these markets comprise operations and cash flows that can be clearly distinguished,
operationally and for financial reporting purposes, from the rest of the Company. As of September
30, 2007, the Company determined that the estimated fair value less costs to sell attributable to
these markets was in excess of the carrying value of their related net assets held for sale.
On April 20, 2007, the Company entered into a definitive agreement to sell its television business.
The closing of the transaction is subject to regulatory approvals and other customary closing
conditions. Further, the sale of the television business is not a condition to the closing of the
merger described above. Consistent with its radio station divestitures, the Company classified its
television business as discontinued operations at September 30, 2007 and December 31, 2006 and
presented the results of operations as discontinued operations, net of tax, for all periods
presented. As of September 30, 2007, the Company determined that the estimated fair value less
costs to sell attributable to its television business was in excess of the carrying value of their
related net assets held for sale.
Summarized operating results for the nine and three months ended September 30, 2007 and 2006 from
these businesses are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months |
|
|
Three Months |
|
(In thousands) |
|
2007 |
|
|
2006 |
|
|
2007 |
|
|
2006 |
|
Revenue |
|
$ |
416,909 |
|
|
$ |
461,294 |
|
|
$ |
132,470 |
|
|
$ |
156,932 |
|
Income before income taxes |
|
$ |
109,120 |
|
|
$ |
70,258 |
|
|
$ |
46,621 |
|
|
$ |
25,923 |
|
Included in income from discontinued operations, net are income tax expenses of $40.6 million,
$26.7 million, $23.2 million and $9.9 million for the nine and three months ended September 30,
2007 and 2006, respectively. Also included in income from discontinued operations for the nine and
three months ended September 30, 2007 is a gain on the sale of certain radio stations of $40.9
million and $21.3 million, respectively.
The following table summarizes the carrying amount at September 30, 2007 and December 31, 2006 of
the major classes of assets and liabilities of the Companys businesses classified as discontinued
operations:
|
|
|
|
|
|
|
|
|
(In thousands) |
|
September 30, |
|
|
December 31, |
|
|
|
2007 |
|
|
2006 |
|
Assets |
|
|
|
|
|
|
|
|
Accounts receivable, net |
|
$ |
75,437 |
|
|
$ |
75,490 |
|
Other current assets |
|
|
23,188 |
|
|
|
20,887 |
|
|
|
|
|
|
|
|
Total current assets |
|
$ |
98,625 |
|
|
$ |
96,377 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Land, buildings and improvements |
|
$ |
107,120 |
|
|
$ |
133,203 |
|
Transmitter and studio equipment |
|
|
279,013 |
|
|
|
300,810 |
|
Other property, plant and equipment |
|
|
35,181 |
|
|
|
43,197 |
|
Less accumulated depreciation |
|
|
(191,305 |
) |
|
|
(205,664 |
) |
|
|
|
|
|
|
|
|
Property, plant and equipment, net |
|
$ |
230,009 |
|
|
$ |
271,546 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Definite-lived intangibles, net |
|
$ |
300 |
|
|
$ |
335 |
|
Licenses |
|
|
128,963 |
|
|
|
134,082 |
|
Goodwill |
|
|
364,746 |
|
|
|
412,193 |
|
|
|
|
|
|
|
|
Total intangible assets |
|
$ |
494,009 |
|
|
$ |
546,610 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Film rights |
|
$ |
20,308 |
|
|
$ |
20,442 |
|
Other long-term assets |
|
|
8,335 |
|
|
|
15,448 |
|
|
|
|
|
|
|
|
Total non current assets |
|
$ |
28,643 |
|
|
$ |
35,890 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities |
|
|
|
|
|
|
|
|
Accounts payable and accrued expenses |
|
$ |
9,987 |
|
|
$ |
13,911 |
|
Film liability |
|
|
21,243 |
|
|
|
21,765 |
|
Other current liabilities |
|
|
12,123 |
|
|
|
9,403 |
|
|
|
|
|
|
|
|
Total current liabilities |
|
$ |
43,353 |
|
|
$ |
45,079 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Film liability |
|
|
21,896 |
|
|
|
22,158 |
|
Other long-term liabilities |
|
|
8,976 |
|
|
|
2,463 |
|
|
|
|
|
|
|
|
Total long-term liabilities |
|
$ |
30,872 |
|
|
$ |
24,621 |
|
|
|
|
|
|
|
|
Recent Accounting Pronouncements
Statement of Financial Accounting Standards No. 159, The Fair Value Option for Financial Assets and
Financial Liabilities including an amendment of FASB Statement No. 115 (Statement 159), was
issued in February 2007. Statement 159 permits entities to choose to measure many financial
instruments and certain other items at fair value that are not currently required to be measured at
fair value. Statement 159 also establishes presentation and disclosure requirements designed to
facilitate comparisons between entities that choose different measurement attributes for similar
types of assets and liabilities. Statement 159 does not affect any existing accounting literature
that requires certain assets and liabilities to be carried at fair value. Statement 159 does not
eliminate disclosure
- 8 -
requirements included in other accounting standards, including requirements
for disclosures about fair value measurements included in Statements No. 157, Fair Value
Measurements, and No. 107, Disclosures about Fair Value of Financial Instruments. Statement 159 is
effective as of the beginning of an entitys first fiscal year that begins after November 15, 2007.
The Company expects to adopt Statement 159 on January 1, 2008 and does not anticipate adoption to
materially impact its financial position or results of operations.
New Accounting Standard
The Company adopted Financial Accounting Standard Board Interpretation No. 48, Accounting for
Uncertainty in Income Taxes (FIN 48) on January 1, 2007. FIN 48 clarifies the accounting for
uncertainty in income taxes recognized in the financial statements. FIN 48 prescribes a
recognition threshold for the financial statement recognition and measurement of a tax position
taken or expected to be taken within an income tax return. The adoption of FIN 48 resulted in a
decrease of $0.2 million to the January 1, 2007 balance of Retained deficit, an increase of
$101.7 million in Other long term-liabilities for unrecognized tax benefits and a decrease of
$123.0 million in Deferred income taxes. The total amount of unrecognized tax benefits at
January 1, 2007 was $416.1 million, inclusive of $89.6 million for interest. Of this total, $218.4
million represents the amount of unrecognized tax benefits that, if recognized, would favorably
affect the effective income tax rate in future periods.
The Company continues to record interest and penalties related to unrecognized tax benefits in
current income tax expense. The total amount of interest accrued during the nine months ended
September 30, 2007 was $10.2 million. During the three months ended September 30, 2007 the Company
recorded a benefit of $9.3 million for interest and penalties as a result of the settlement of
several federal tax positions through the 2004 tax year. The total amount of unrecognized tax
benefits at September 30, 2007 was $181.8 million. Of this total, $177.5 million represents the
amount of unrecognized tax benefits that, if recognized, would favorably affect the effective
income tax rate in future periods.
The Company and its subsidiaries file income tax returns in the United States federal jurisdiction
and various state and foreign jurisdictions. As stated above, the Company settled several federal
tax positions with the Internal Revenue Service (IRS) during the three months ended September 30,
2007. As a result of the settlement the Company reduced its balance of unrecognized tax benefits
by $246.2 million. The IRS is currently auditing the Companys 2005 and 2006 tax years. The
Company does not expect to resolve any material federal tax positions within the next twelve
months. Substantially all material state, local, and foreign income tax matters have been
concluded for years through 1999.
The Companys effective income tax rates for the nine and three months ended September 30, 2007
were 33.5% and 17.6%, respectively, as compared to 41.3% for the nine and three months ended
September 30, 2006. For the three months ended September 30, 2007, the effective tax rate was
primarily affected by the recording of current tax benefits of approximately $45.7 million related
to the settlement of several tax positions with the IRS for the 1999 through 2004 tax years and
deferred tax benefits of approximately $14.8 million related to the release of valuation allowances
for the use of certain capital loss carryforwards.
Note 2: INTANGIBLE ASSETS AND GOODWILL
The Company has definite-lived intangible assets which consist primarily of transit and street
furniture contracts and other contractual rights in its Americas and International outdoor
segments, talent and program right contracts in its radio segment, and contracts for non-affiliated
radio and television stations in the Companys media representation operations, all of which are
amortized over the respective lives of the agreements. Other definite-lived intangible assets are
amortized over the period of time the assets are expected to contribute directly or indirectly to
the Companys future cash flows.
The following table presents the gross carrying amount and accumulated amortization for each major
class of definite-lived intangible assets at September 30, 2007 and December 31, 2006:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(In thousands) |
|
September 30, 2007 |
|
|
December 31, 2006 |
|
|
|
Gross Carrying |
|
|
Accumulated |
|
|
Gross Carrying |
|
|
Accumulated |
|
|
|
Amount |
|
|
Amortization |
|
|
Amount |
|
|
Amortization |
|
Transit, street
furniture, and other
outdoor contractual
rights |
|
$ |
860,276 |
|
|
$ |
596,450 |
|
|
$ |
821,364 |
|
|
$ |
530,063 |
|
Talent contracts |
|
|
125,270 |
|
|
|
125,270 |
|
|
|
125,270 |
|
|
|
115,537 |
|
Representation contracts |
|
|
376,206 |
|
|
|
202,613 |
|
|
|
349,493 |
|
|
|
175,658 |
|
Other |
|
|
90,884 |
|
|
|
45,410 |
|
|
|
121,179 |
|
|
|
73,566 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
1,452,636 |
|
|
$ |
969,743 |
|
|
$ |
1,417,306 |
|
|
$ |
894,824 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
- 9 -
Total amortization expense from continuing operations related to definite-lived intangible assets
for the nine and three months ended September 30, 2007 and for the year ended December 31, 2006 was
$79.7 million, $25.0 million and $150.7 million, respectively. The following table presents the
Companys estimate of amortization expense for each of the five succeeding fiscal years for
definite-lived intangible assets:
|
|
|
|
|
(In thousands) |
|
|
|
|
2008 |
|
$ |
86,076 |
|
2009 |
|
|
73,294 |
|
2010 |
|
|
52,435 |
|
2011 |
|
|
42,106 |
|
2012 |
|
|
37,319 |
|
As acquisitions and dispositions occur in the future and as purchase price allocations are
finalized, amortization expense may vary.
The Companys indefinite-lived intangible assets consist of FCC broadcast licenses and billboard
permits. FCC broadcast licenses are granted to both radio and television stations for up to eight
years under the Telecommunications Act of 1996. The Act requires the FCC to renew a broadcast
license if: it finds that the station has served the public interest, convenience and necessity;
there have been no serious violations of either the Communications Act of 1934 or the FCCs rules
and regulations by the licensee; and there have been no other serious violations which taken
together constitute a pattern of abuse. The licenses may be renewed indefinitely at little or no
cost. The Company does not believe that the technology of wireless broadcasting will be replaced
in the foreseeable future. The Companys billboard permits are issued in perpetuity by state and
local governments and are transferable or renewable at little or no cost. Permits typically
include the location which allows the Company the right to operate an advertising structure. The
Companys permits are located on either owned or leased land. In cases where the Companys permits
are located on leased land, the leases are typically from 10 to 20 years and renew indefinitely,
with rental payments generally escalating at an inflation based index. If the Company loses its
lease, the Company will typically obtain permission to relocate the permit or bank it with the
municipality for future use.
The Company does not amortize its FCC broadcast licenses or billboard permits. The Company tests
these indefinite-lived intangible assets for impairment at least annually using the direct method.
Under the direct method, it is assumed that rather than acquiring indefinite-lived intangible
assets as a part of a going concern business, the buyer hypothetically obtains indefinite-lived
intangible assets and builds a new operation with similar attributes from scratch. Thus, the buyer
incurs start-up costs during the build-up phase which are normally associated with going concern
value. Initial capital costs are deducted from the discounted cash flows model which results in
value that is directly attributable to the indefinite-lived intangible assets.
Under the direct method, the Company aggregates its indefinite-lived intangible assets at the
market level for purposes of impairment testing. The Companys key assumptions using the direct
method are market revenue growth rates, market share, profit margin, duration and profile of the
build-up period, estimated start-up capital costs and losses incurred during the build-up period,
the risk-adjusted discount rate and terminal values. This data is populated using industry
normalized information.
Goodwill
The Company tests goodwill for impairment using a two-step process. The first step, used to screen
for potential impairment, compares the fair value of the reporting unit with its carrying amount,
including goodwill. The second step, used to measure the amount of the impairment loss, compares
the implied fair value of the reporting unit goodwill with the carrying amount of that goodwill.
The following table presents the changes in the carrying amount of goodwill in each of the
Companys reportable segments for the nine month period ended September 30, 2007:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Americas |
|
|
International |
|
|
|
|
|
|
|
(In thousands) |
|
Radio |
|
|
Outdoor |
|
|
Outdoor |
|
|
Other |
|
|
Total |
|
Balance as of December 31, 2006 |
|
$ |
5,984,512 |
|
|
$ |
667,986 |
|
|
$ |
425,630 |
|
|
$ |
577 |
|
|
$ |
7,078,705 |
|
Acquisitions |
|
|
6,565 |
|
|
|
9,094 |
|
|
|
7,410 |
|
|
|
1,994 |
|
|
|
25,063 |
|
Dispositions |
|
|
(4,909 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(4,909 |
) |
Foreign currency |
|
|
|
|
|
|
148 |
|
|
|
27,105 |
|
|
|
|
|
|
|
27,253 |
|
Adjustments |
|
|
(97,597 |
) |
|
|
(90 |
) |
|
|
|
|
|
|
|
|
|
|
(97,687 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance as of September 30, 2007 |
|
$ |
5,888,571 |
|
|
$ |
677,138 |
|
|
$ |
460,145 |
|
|
$ |
2,571 |
|
|
$ |
7,028,425 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The Company recorded a $97.4 million adjustment to its balance of goodwill related to tax positions
established as part of various radio station acquisitions for which the IRS audit periods have now
closed.
- 10 -
Note 3: DERIVATIVE INSTRUMENTS
The Company holds options under two secured forward exchange contracts that limit its exposure to
and benefit from price fluctuations in American Tower Corporation (AMT) over the terms of the
contracts (the AMT contracts). These options are not designated as hedges of the underlying
shares of AMT. The AMT contracts had a value of $22.2 million and $10.3 million recorded in Other
long term liabilities at September 30, 2007 and December 31, 2006, respectively. For the nine
months ended September 30, 2007 and for the year ended December 31, 2006, the Company recognized
losses of $11.9 million and $22.0 million, respectively, in Gain (loss) on marketable securities
related to the change in fair value of the options. To offset the change in the fair value of
these contracts, the Company has recorded AMT shares as trading securities. During the nine months
ended September 30, 2007 and for the year ended December 31, 2006, the Company recognized gains of
$12.6 million and $20.5 million, respectively, in Gain (loss) on marketable securities related to
the change in the fair value of the shares.
The Company is exposed to foreign currency exchange risks related to its investment in net assets
in foreign countries. To manage this risk, the Company entered into two United States dollar
Euro cross currency swaps with an aggregate Euro notional amount of 706.0 million and a
corresponding aggregate U.S. dollar notional amount of $877.7 million. These cross currency swaps
had a value of $121.0 million at September 30, 2007 and $68.5 million at December 31, 2006, which
was recorded in Other long-term obligations. These cross currency swaps require the Company to
make fixed cash payments on the Euro notional amount while it receives fixed cash payments on the
equivalent U.S. dollar notional amount, all on a semiannual basis. The Company has designated
these cross currency swaps as a hedge of its net investment in Euro denominated assets. The
Company selected the forward method under the guidance of the Derivatives Implementation Group
Statement 133 Implementation Issue H8, Foreign Currency Hedges: Measuring the Amount of
Ineffectiveness in a Net Investment Hedge. The forward method requires all changes in the fair
value of the cross currency swaps and the semiannual cash payments to be reported as a cumulative
translation adjustment in other comprehensive income in the same manner as the underlying hedged
net assets. As of September 30, 2007, a $73.7 million loss, net of tax, was recorded as a
cumulative translation adjustment to other comprehensive income related to the cross currency swap.
Note 4: RECENT DEVELOPMENTS
Acquisitions
The Company acquired Americas outdoor display faces and additional equity interests in
international outdoor companies for $42.7 million in cash during the nine months ended September
30, 2007. The Companys national representation business acquired representation contracts for
$28.9 million in cash during the nine months ended September 30, 2007.
Disposition of Assets
The Company received proceeds of $9.7 million primarily related to the sale of representation
contracts and international street furniture assets recorded in cash flows from investing
activities and recorded a gain of $6.3 million in Gain (loss) on disposition of assets net
during the nine months ended September 30, 2007. The Company also received proceeds of $114.2
million related to the sale of radio stations recorded as investing cash flows from discontinued
operations and recorded a gain of $40.9 million as a component of Income from discontinued
operations, net during the nine months ended September 30, 2007.
Debt Maturities
On February 1, 2007, the Company redeemed its 3.125% Senior Notes at their maturity for $250.0
million plus accrued interest with proceeds from its bank credit facility.
Recent Legal Proceedings
The Company is currently involved in certain legal proceedings and, as required, has accrued its
estimate of the probable costs for the resolution of these claims. 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
managements assumptions or the effectiveness of its strategies related to these proceedings.
Note 5: RESTRUCTURING
The Company restructured its outdoor operations in France in the third quarter of 2005. As a
result, the Company recorded $26.6 million in restructuring costs as a component of selling,
general and administrative expenses. Of the $26.6 million, $22.5 million was related to severance
costs and $4.1 million was related to other costs. During 2007, $8.7 million of related costs were
paid and charged to the restructuring accrual. As of September 30, 2007, the balance was $2.5
million.
- 11 -
Note 6: COMMITMENTS AND CONTINGENCIES
Certain agreements relating to acquisitions provide for purchase price adjustments and other future
contingent payments based on the financial performance of the acquired companies. The Company will
continue to accrue additional amounts related to such contingent payments if and when it is
determinable that the applicable financial performance targets will be met. The aggregate of these
contingent payments, if performance targets are met, would not significantly impact the financial
position or results of operations of the Company.
As discussed in Note 4, there are various lawsuits and claims pending against the Company. Based
on current assumptions, the Company has accrued its estimate of the probable costs for the
resolution of these claims. Future results of operations could be materially affected by changes
in these assumptions.
Note 7: GUARANTEES
Within the Companys $1.75 billion credit facility, there exists a $150.0 million sub-limit
available to certain of the Companys international subsidiaries. This $150.0 million sub-limit
allows for borrowings in various foreign currencies, which are used to hedge net assets in those
currencies and provide funds to the Companys international operations for certain working capital
needs. Subsidiary borrowings under this sub-limit are guaranteed by the Company. At September 30,
2007, there was no outstanding balance on this portion of the $1.75 billion credit facility.
Within the Companys bank credit facility agreement is a provision that requires the Company to
reimburse lenders for any increased costs that they may incur in an event of a change in law, rule
or regulation resulting in their reduced returns from any change in capital requirements. In
addition to not being able to estimate the potential amount of any future payment under this
provision, the Company is not able to predict if such event will ever occur.
The Company guarantees $40.2 million of credit lines provided to certain of its international
subsidiaries by a major international bank. Most of these credit lines relate to intraday
overdraft facilities covering participants in the Companys European cash management pool. As of
September 30, 2007, no amounts were outstanding under these agreements.
As of September 30, 2007, the Company has outstanding commercial standby letters of credit and
surety bonds of $83.8 million and $43.5 million, respectively. These letters of credit and surety
bonds relate to various operational matters including insurance, bid, and performance bonds as well
as other items. Letters of credit issued under the Companys $1.75 billion credit facility reduce
the borrowing availability on the credit facility, and are included in the Companys calculation of
its leverage ratio covenant under the bank credit facilities. The surety bonds are not considered
as borrowings under the Companys bank credit facilities.
Note 8: SEGMENT DATA
The Company has three reportable segments, which it believes best reflects how the Company is
currently managed radio broadcasting, Americas outdoor advertising and International outdoor
advertising. The Americas outdoor advertising segment consists primarily of operations in the
United States, Canada and Latin America, and the International outdoor segment includes operations
primarily in Europe, Asia, Africa and Australia. The category other includes media
representation and other general support services and initiatives. Revenue and expenses earned and
charged between segments are recorded at fair value and eliminated in consolidation.
- 12 -
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(In thousands) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Corporate, |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Merger and |
|
|
|
|
|
|
|
|
|
|
|
|
|
Americas |
|
|
International |
|
|
|
|
|
|
Gain on |
|
|
|
|
|
|
|
|
|
Radio |
|
|
Outdoor |
|
|
Outdoor |
|
|
|
|
|
|
disposition of |
|
|
|
|
|
|
|
|
|
Broadcasting |
|
|
Advertising |
|
|
Advertising |
|
|
Other |
|
|
assets - net |
|
|
Eliminations |
|
|
Consolidated |
|
Nine Months Ended September 30, 2007 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue |
|
$ |
2,572,405 |
|
|
$ |
1,080,219 |
|
|
$ |
1,264,891 |
|
|
$ |
165,262 |
|
|
$ |
|
|
|
$ |
(95,023 |
) |
|
$ |
4,987,754 |
|
Direct operating expenses |
|
|
704,728 |
|
|
|
427,138 |
|
|
|
830,682 |
|
|
|
62,883 |
|
|
|
|
|
|
|
(48,556 |
) |
|
|
1,976,875 |
|
Selling, general and
administrative expenses |
|
|
842,559 |
|
|
|
167,004 |
|
|
|
226,314 |
|
|
|
76,129 |
|
|
|
|
|
|
|
(46,467 |
) |
|
|
1,265,539 |
|
Depreciation and amortization |
|
|
81,396 |
|
|
|
140,885 |
|
|
|
152,731 |
|
|
|
32,171 |
|
|
|
12,173 |
|
|
|
|
|
|
|
419,356 |
|
Corporate expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
138,234 |
|
|
|
|
|
|
|
138,234 |
|
Merger expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6,372 |
|
|
|
|
|
|
|
6,372 |
|
Gain on disposition of assets net |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10,474 |
|
|
|
|
|
|
|
10,474 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income (loss) |
|
$ |
943,722 |
|
|
$ |
345,192 |
|
|
$ |
55,164 |
|
|
$ |
(5,921 |
) |
|
$ |
(146,305 |
) |
|
$ |
|
|
|
$ |
1,191,852 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Intersegment revenues |
|
$ |
33,186 |
|
|
$ |
9,489 |
|
|
$ |
|
|
|
$ |
52,348 |
|
|
$ |
|
|
|
$ |
|
|
|
$ |
95,023 |
|
Identifiable assets |
|
$ |
11,581,709 |
|
|
$ |
2,816,825 |
|
|
$ |
2,542,316 |
|
|
$ |
746,236 |
|
|
$ |
327,118 |
|
|
$ |
|
|
|
$ |
18,014,204 |
|
Capital expenditures |
|
$ |
52,135 |
|
|
$ |
76,795 |
|
|
$ |
88,361 |
|
|
$ |
6,125 |
|
|
$ |
|
|
|
$ |
|
|
|
$ |
223,416 |
|
Share-based payments |
|
$ |
16,751 |
|
|
$ |
5,451 |
|
|
$ |
1,168 |
|
|
$ |
|
|
|
$ |
9,150 |
|
|
$ |
|
|
|
$ |
32,520 |
|
Nine Months Ended September 30, 2006 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue |
|
$ |
2,546,052 |
|
|
$ |
965,733 |
|
|
$ |
1,101,293 |
|
|
$ |
170,317 |
|
|
$ |
|
|
|
$ |
(89,136 |
) |
|
$ |
4,694,259 |
|
Direct operating expenses |
|
|
712,860 |
|
|
|
382,401 |
|
|
|
719,987 |
|
|
|
61,992 |
|
|
|
|
|
|
|
(46,452 |
) |
|
|
1,830,788 |
|
Selling, general and
administrative expenses |
|
|
841,861 |
|
|
|
150,846 |
|
|
|
202,212 |
|
|
|
79,981 |
|
|
|
|
|
|
|
(42,684 |
) |
|
|
1,232,216 |
|
Depreciation and amortization |
|
|
89,159 |
|
|
|
129,382 |
|
|
|
169,888 |
|
|
|
33,430 |
|
|
|
14,299 |
|
|
|
|
|
|
|
436,158 |
|
Corporate expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
137,232 |
|
|
|
|
|
|
|
137,232 |
|
Gain on disposition of assets net |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
58,343 |
|
|
|
|
|
|
|
58,343 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income (loss) |
|
$ |
902,172 |
|
|
$ |
303,104 |
|
|
$ |
9,206 |
|
|
$ |
(5,086 |
) |
|
$ |
(93,188 |
) |
|
$ |
|
|
|
$ |
1,116,208 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Intersegment revenues |
|
$ |
30,244 |
|
|
$ |
6,770 |
|
|
$ |
|
|
|
$ |
52,122 |
|
|
$ |
|
|
|
$ |
|
|
|
$ |
89,136 |
|
Identifiable assets |
|
$ |
11,711,339 |
|
|
$ |
2,764,509 |
|
|
$ |
2,265,066 |
|
|
$ |
679,931 |
|
|
$ |
564,442 |
|
|
$ |
|
|
|
$ |
17,985,287 |
|
Capital expenditures |
|
$ |
59,241 |
|
|
$ |
60,367 |
|
|
$ |
103,613 |
|
|
$ |
3,394 |
|
|
$ |
|
|
|
$ |
|
|
|
$ |
226,615 |
|
Share-based payments |
|
$ |
18,928 |
|
|
$ |
3,560 |
|
|
$ |
994 |
|
|
$ |
1,242 |
|
|
$ |
7,995 |
|
|
$ |
|
|
|
$ |
32,719 |
|
Three Months Ended September 30, 2007 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue |
|
$ |
882,152 |
|
|
$ |
386,353 |
|
|
$ |
431,188 |
|
|
$ |
58,458 |
|
|
$ |
|
|
|
$ |
(31,371 |
) |
|
$ |
1,726,780 |
|
Direct operating expenses |
|
|
242,686 |
|
|
|
147,339 |
|
|
|
287,133 |
|
|
|
21,282 |
|
|
|
|
|
|
|
(14,610 |
) |
|
|
683,830 |
|
Selling, general and
administrative expenses |
|
|
281,632 |
|
|
|
56,636 |
|
|
|
74,592 |
|
|
|
25,212 |
|
|
|
|
|
|
|
(16,761 |
) |
|
|
421,311 |
|
Depreciation and amortization |
|
|
24,966 |
|
|
|
47,692 |
|
|
|
52,101 |
|
|
|
11,192 |
|
|
|
3,943 |
|
|
|
|
|
|
|
139,894 |
|
Corporate expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
47,040 |
|
|
|
|
|
|
|
47,040 |
|
Merger expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,002 |
|
|
|
|
|
|
|
2,002 |
|
Gain on disposition of assets net |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(567 |
) |
|
|
|
|
|
|
(567 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income (loss) |
|
$ |
332,868 |
|
|
$ |
134,686 |
|
|
$ |
17,362 |
|
|
$ |
772 |
|
|
$ |
(53,552 |
) |
|
$ |
|
|
|
$ |
432,136 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Intersegment revenues |
|
$ |
10,557 |
|
|
$ |
2,755 |
|
|
$ |
|
|
|
$ |
18,059 |
|
|
$ |
|
|
|
$ |
|
|
|
$ |
31,371 |
|
Share-based payments |
|
$ |
5,610 |
|
|
$ |
1,859 |
|
|
$ |
398 |
|
|
$ |
|
|
|
$ |
3,068 |
|
|
$ |
|
|
|
$ |
10,935 |
|
- 13 -
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(In thousands) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Corporate, |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Merger and |
|
|
|
|
|
|
|
|
|
|
|
|
|
Americas |
|
|
International |
|
|
|
|
|
|
Gain on |
|
|
|
|
|
|
|
|
|
Radio |
|
|
Outdoor |
|
|
Outdoor |
|
|
|
|
|
|
disposition of |
|
|
|
|
|
|
|
|
|
Broadcasting |
|
|
Advertising |
|
|
Advertising |
|
|
Other |
|
|
assets - net |
|
|
Eliminations |
|
|
Consolidated |
|
Three Months Ended September 30, 2006 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue |
|
$ |
890,219 |
|
|
$ |
356,384 |
|
|
$ |
363,870 |
|
|
$ |
58,506 |
|
|
$ |
|
|
|
$ |
(29,155 |
) |
|
$ |
1,639,824 |
|
Direct operating expenses |
|
|
246,599 |
|
|
|
133,468 |
|
|
|
250,365 |
|
|
|
20,266 |
|
|
|
|
|
|
|
(13,623 |
) |
|
|
637,075 |
|
Selling, general and
administrative expenses |
|
|
275,844 |
|
|
|
52,029 |
|
|
|
66,395 |
|
|
|
27,438 |
|
|
|
|
|
|
|
(15,532 |
) |
|
|
406,174 |
|
Depreciation and
amortization |
|
|
29,100 |
|
|
|
45,897 |
|
|
|
56,226 |
|
|
|
10,748 |
|
|
|
5,105 |
|
|
|
|
|
|
|
147,076 |
|
Corporate expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
48,486 |
|
|
|
|
|
|
|
48,486 |
|
Gain on disposition of
assets net |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
9,122 |
|
|
|
|
|
|
|
9,122 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income (loss) |
|
$ |
338,676 |
|
|
$ |
124,990 |
|
|
$ |
(9,116 |
) |
|
$ |
54 |
|
|
$ |
(44,469 |
) |
|
$ |
|
|
|
$ |
410,135 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Intersegment revenues |
|
$ |
10,136 |
|
|
$ |
1,852 |
|
|
$ |
|
|
|
$ |
17,167 |
|
|
$ |
|
|
|
$ |
|
|
|
$ |
29,155 |
|
Share-based payments |
|
$ |
6,309 |
|
|
$ |
1,173 |
|
|
$ |
328 |
|
|
$ |
414 |
|
|
$ |
2,260 |
|
|
$ |
|
|
|
$ |
10,484 |
|
Revenue of $1.4 billion and $1.2 billion derived from foreign operations are included in the data
above for the nine months ended September 30, 2007 and 2006, respectively. Revenue of $462.3
million and $388.0 million derived from foreign operations are included in the data above for the
three months ended September 30, 2007 and 2006, respectively. Identifiable assets of $2.8 billion
and $2.5 billion derived from foreign operations are included in the data above for the nine months
ended September 30, 2007 and 2006, respectively.
Note 9: SUBSEQUENT EVENTS
Subsequent to September 30, 2007, the Company entered into definitive agreements for the sale of 11
additional radio stations and closed on the sales of 91 radio stations. As of November 7, 2007,
the Company had definitive asset purchase agreements for the sale of 93 radio stations. The
closing of the radio stations under definitive agreements is subject to antitrust clearances, FCC
approval and other customary closing conditions. Further, the closing of these stations is not a
condition to the closing of the merger described above. Agreements to sell 187 stations that were
under definitive agreement at September 30, 2007 were subsequently terminated. However, the
Company continues to actively market these radio stations and they continue to meet the criteria in
Statement 144 for classification as discontinued operations. Therefore, the assets, results of
operations and cash flows from these stations remain classified as discontinued operations in the
Companys consolidated financial statements.
On
April 20, 2007, the Company entered into a definitive agreement
with an affiliate (the Buyer) of Providence Equity
Partners Inc. (Providence) to sell its television
business. A representative of Providence has informed the Company
that the Buyer is considering its options under the definitive
agreement including not closing the acquisition on the terms and conditions in
the definitive agreement. The definitive agreement is in full force
and effect and has not been terminated. There have been no
allegations that the Company has breached any of the terms or
conditions of the definitive agreement or that there is a failure of
a condition to closing the acquisition.
- 14 -
Item 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Approved Merger with a Group led by Thomas H. Lee Partners, L.P. and Bain Capital Partners, LLC
Our shareholders approved the adoption of the merger agreement, as amended, with a group led
by T.H. Lee Partners, L.P. and Bain Capital Partners, LLC on September 25, 2007. The transaction
remains subject to requisite regulatory approvals and customary closing conditions.
Under the terms of the merger agreement, as amended, our shareholders will receive $39.20 in
cash for each share they own plus additional per share consideration, if any, if the closing of the
merger occurs after December 31, 2007. For a description of the computation of any additional per
share consideration and the circumstances under which it is payable, please refer to the joint
proxy statement/prospectus dated August 21, 2007, filed with the Securities & Exchange Commission
(the Proxy Statement). As an alternative to receiving the $39.20 per share cash consideration,
our unaffiliated shareholders were offered the opportunity on a purely voluntary basis to exchange
some or all of their shares of our common stock on a one-for-one basis for shares of Class A common
stock in the new corporation formed by the private equity group to acquire us (subject to aggregate
and individual caps), plus the additional per share consideration, if any.
Holders of shares of our common stock (including shares issuable upon conversion of
outstanding options) in excess of the aggregate cap provided in the merger agreement, as amended,
elected to receive the stock consideration. As a result, unaffiliated shareholders of us will own
an aggregate of 30,612,245 shares of CC Media Holdings Class A common stock upon consummation of
the merger.
Sale of Radio Stations and all of our Television Stations
On November 16, 2006, we announced plans to sell 448 radio stations and all of our television
stations. The sale of these assets is not contingent on the closing of the merger described above.
Definitive asset purchase agreements were signed for 360 radio stations, 8 of which were not part
of the announced 448 stations, as of September 30, 2007. These stations, along with 55 stations
which were sold in the fourth quarter of 2006 and first nine months of 2007, 5 of which were not
part of the announced 448 stations, were classified as assets from discontinued operations in our
consolidated balance sheet and as discontinued operations in our consolidated statements of
operations. Through November 7, 2007, we had definitive asset purchase agreements for the sale of
11 additional radio stations. The closing of these sales is subject to antitrust clearances, FCC
approval and other customary closing conditions. Further, the closing of these sales is not a
condition to the closing of the merger described above. Also through November 7, 2007, we
completed the sales of 91 radio stations that were under definitive agreement at September 30,
2007.
Agreements to sell 187 stations that were under definitive agreement at September 30, 2007
were subsequently terminated. However we continue to actively market these radio stations and they
continue to meet the criteria in Statement 144 for classification as discontinued operations.
Therefore, the assets, results of operations and cash flows from these stations remain classified
as discontinued operations in our consolidated financial statements.
On
April 20, 2007, we entered into a definitive agreement with an
affiliate, or the Buyer, of Providence Equity Partners Inc., or
Providence, to sell our
television business. The closing of the transaction is subject to regulatory approvals and other customary
closing conditions. Further, the sale of the television business is
not a condition to the closing of the merger described above. A
representative of Providence has informed us that the Buyer is
considering its options under the definitive agreement including not
closing the acquisition on the terms and conditions in the definitive
agreement. The definitive agreement is full force and effect and has
not been terminated. There have been no allegations that we have
breached any of the terms or conditions of the definitive agreement
or that there is a failure of a condition to closing the acquisition. Our television business is reported as assets and liabilities of discontinued
operations on our consolidated balance sheet and the results of operations as discontinued
operations on our statements of operations.
Format of Presentation
Managements discussion and analysis of our results of operations and financial condition
should be read in conjunction with the consolidated financial statements and related footnotes.
Our discussion is presented on both a consolidated and segment basis. Our reportable operating
segments are Radio Broadcasting, or radio, which includes our national syndication business,
Americas Outdoor Advertising, or Americas, and International Outdoor Advertising, or International.
Included in the other segment are our media representation business, Katz Media, as well as
other general support services and initiatives.
We manage our operating segments primarily focusing on their operating income, while Corporate
expenses, Merger expenses, Gain (loss) on disposition of assets net, Interest expense, Gain
(loss) on marketable securities, Equity in earnings of
nonconsolidated affiliates, Other income (expense) net, Income tax benefit (expense) and
Minority interest net of tax are managed on a total company basis and are, therefore, included
only in our discussion of consolidated results.
- 15 -
Radio Broadcasting
Our revenues are derived from selling advertising time, or spots, on our radio stations, with
advertising contracts typically less than one year. The formats are designed to reach audiences
with targeted demographic characteristics that appeal to our advertisers. Management monitors
average advertising rates, which are principally based on the length of the spot and how many
people in a targeted audience listen to our stations, as measured by an independent ratings
service. The size of the market influences rates as well, with larger markets typically receiving
higher rates than smaller markets. Also, our advertising rates are influenced by the time of day
the advertisement airs, with morning and evening drive-time hours typically the highest.
Management monitors yield in addition to average rates because yield allows management to track
revenue performance across our inventory. Yield is defined by management as revenue earned divided
by commercial capacity available.
Management monitors macro level indicators to assess our radio operations performance. Due
to the geographic diversity and autonomy of our markets, we have a multitude of market specific
advertising rates and audience demographics. Therefore, management reviews average unit rates
across all of our stations.
Management looks at our radio operations overall revenues as well as local advertising, which
is sold predominately in a stations local market, and national advertising, which is sold across
multiple markets. Local advertising is sold by each radio stations sales staffs while national
advertising is sold, for the most part, through our national representation firm. Local
advertising, which is our largest source of advertising revenue, and national advertising revenues
are tracked separately, because these revenue streams have different sales forces and respond
differently to changes in the economic environment.
Management also looks at radio revenue by market size, as defined by Arbitron. Typically,
larger markets can reach larger audiences with wider demographics than smaller markets.
Additionally, management reviews our share of target demographics listening to the radio in an
average quarter hour. This metric gauges how well our formats are attracting and retaining
listeners.
A portion of our radio segments expenses vary in connection with changes in revenue. These
variable expenses primarily relate to costs in our sales department, such as salaries, commissions
and bad debt. Our programming and general and administrative departments incur most of our fixed
costs, such as talent costs, rights fees, utilities and office salaries. Lastly, our highly
discretionary costs are in our marketing and promotions department, which we primarily incur to
maintain and/or increase our audience share.
Americas and International Outdoor Advertising
Our revenues are derived from selling advertising space on the displays that we own or operate
in key markets worldwide consisting primarily of billboards, street furniture and transit displays.
We own the majority of our advertising displays, which typically are located on sites that we
either lease or own or for which we have acquired permanent easements. Our advertising contracts
typically outline the number of displays reserved, the duration of the advertising campaign and the
unit price per display.
Our advertising rates are based on the gross rating points, or total number of impressions
delivered by a display or group of displays, expressed as a percentage of a market population. The
number of impressions delivered by a display is measured by the number of people passing the site
during a defined period of time and, in some international markets, is weighted to account for such
factors as illumination, proximity to other displays and the speed and viewing angle of approaching
traffic. Management typically monitors our business by reviewing the average rates, average
revenues per display, or yield, occupancy, and inventory levels of each of our display types by
market. In addition, because a significant portion of our advertising operations are conducted in
foreign markets, principally France and the United Kingdom, management reviews the operating
results from our foreign operations on a constant dollar basis. A constant dollar basis allows for
comparison of operations independent of foreign exchange movements. Because revenue-sharing and
minimum guaranteed payment arrangements are more prevalent in our International operations, the
margins in our International operations typically are less than the margins in our Americas
operations.
The significant expenses associated with our operations include (i) direct production,
maintenance and installation expenses, (ii) site lease expenses for land under our displays and
(iii) revenue-sharing or minimum guaranteed amounts payable under our street furniture and transit
display contracts. Our direct production, maintenance and installation expenses include costs for
printing, transporting and changing the advertising copy on our displays, the related labor costs,
the vinyl and paper costs and the costs for cleaning and maintaining our displays. Vinyl and paper
costs vary according to the complexity of the advertising copy and the quantity of displays. Our
site lease expenses include lease payments for use of the land under our displays, as well as any
revenue-sharing arrangements or minimum guaranteed amounts payable that we may have with the
landlords. The terms of our site leases and revenue-sharing or minimum guaranteed contracts
generally range from 1 to 20 years.
Our street furniture and transit display contracts, the terms of which range from 3 to 20
years, generally require us to make upfront investments in property, plant and equipment. These
contracts may also include upfront lease payments and/or minimum
- 16 -
annual guaranteed lease payments. We can give no assurance that our cash flows from
operations over the terms of these contracts will exceed the upfront and minimum required payments.
The results in 2007 include our acquisition of Interspace Airport Advertising, or Interspace,
which we acquired in July 2006.
FAS 123(R), Share-Based Payment
As of September 30, 2007, there was $102.1 million of total unrecognized compensation cost
related to nonvested share-based compensation arrangements. This cost is expected to be recognized
over a weighted average period of approximately three years. The following table details
compensation costs related to share-based payments for the three and nine months ended September
30, 2007 and 2006:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months ended September 30, |
|
|
Nine Months ended September 30, |
|
(In millions) |
|
2007 |
|
|
2006 |
|
|
2007 |
|
|
2006 |
|
Radio Broadcasting |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Direct Operating Expenses |
|
$ |
2.5 |
|
|
$ |
2.7 |
|
|
$ |
7.5 |
|
|
$ |
8.3 |
|
SG&A |
|
|
3.1 |
|
|
|
3.6 |
|
|
|
9.2 |
|
|
|
10.6 |
|
Americas Outdoor Advertising |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Direct Operating Expenses |
|
$ |
1.3 |
|
|
$ |
0.9 |
|
|
$ |
3.9 |
|
|
$ |
2.6 |
|
SG&A |
|
|
0.5 |
|
|
|
0.3 |
|
|
|
1.5 |
|
|
|
0.9 |
|
International Outdoor Advertising |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Direct Operating Expenses |
|
$ |
0.3 |
|
|
$ |
0.2 |
|
|
$ |
0.9 |
|
|
$ |
0.6 |
|
SG&A |
|
|
0.1 |
|
|
|
0.1 |
|
|
|
0.3 |
|
|
|
0.3 |
|
Other |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Direct Operating Expenses |
|
$ |
|
|
|
$ |
0.2 |
|
|
$ |
|
|
|
$ |
0.6 |
|
SG&A |
|
|
|
|
|
|
0.2 |
|
|
|
|
|
|
|
0.8 |
|
Corporate |
|
$ |
3.1 |
|
|
$ |
2.3 |
|
|
$ |
9.2 |
|
|
$ |
8.0 |
|
- 17 -
The comparison of Three and Nine Months Ended September 30, 2007 to Three and Nine Months Ended
September 30, 2006 is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(In thousands) |
|
Three Months Ended |
|
|
|
|
|
|
Nine Months Ended |
|
|
|
|
|
|
September 30, |
|
|
% |
|
|
September 30, |
|
|
% |
|
|
|
2007 |
|
|
2006 |
|
|
Change |
|
|
2007 |
|
|
2006 |
|
|
Change |
|
Revenue |
|
$ |
1,726,780 |
|
|
$ |
1,639,824 |
|
|
|
5 |
% |
|
$ |
4,987,754 |
|
|
$ |
4,694,259 |
|
|
|
6 |
% |
Operating expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Direct operating expenses |
|
|
683,830 |
|
|
|
637,075 |
|
|
|
7 |
% |
|
|
1,976,875 |
|
|
|
1,830,788 |
|
|
|
8 |
% |
Selling, general and administrative expenses |
|
|
421,311 |
|
|
|
406,174 |
|
|
|
4 |
% |
|
|
1,265,539 |
|
|
|
1,232,216 |
|
|
|
3 |
% |
Depreciation and amortization |
|
|
139,894 |
|
|
|
147,076 |
|
|
|
(5 |
%) |
|
|
419,356 |
|
|
|
436,158 |
|
|
|
(4 |
%) |
Corporate expenses |
|
|
47,040 |
|
|
|
48,486 |
|
|
|
(3 |
%) |
|
|
138,234 |
|
|
|
137,232 |
|
|
|
1 |
% |
Merger expenses |
|
|
2,002 |
|
|
|
|
|
|
|
|
|
|
|
6,372 |
|
|
|
|
|
|
|
|
|
Gain (loss) on disposition of assets net |
|
|
(567 |
) |
|
|
9,122 |
|
|
|
|
|
|
|
10,474 |
|
|
|
58,343 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income |
|
|
432,136 |
|
|
|
410,135 |
|
|
|
5 |
% |
|
|
1,191,852 |
|
|
|
1,116,208 |
|
|
|
7 |
% |
Interest expense |
|
|
113,026 |
|
|
|
128,276 |
|
|
|
|
|
|
|
347,525 |
|
|
|
365,950 |
|
|
|
|
|
Gain (loss) on marketable securities |
|
|
676 |
|
|
|
5,396 |
|
|
|
|
|
|
|
661 |
|
|
|
2,072 |
|
|
|
|
|
Equity in earnings of nonconsolidated
affiliates |
|
|
7,133 |
|
|
|
8,681 |
|
|
|
|
|
|
|
23,832 |
|
|
|
25,305 |
|
|
|
|
|
Other income (expense) net |
|
|
(1,403 |
) |
|
|
(601 |
) |
|
|
|
|
|
|
(1,075 |
) |
|
|
(5,858 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before income taxes, minority interest
and discontinued operations |
|
|
325,516 |
|
|
|
295,335 |
|
|
|
|
|
|
|
867,745 |
|
|
|
771,777 |
|
|
|
|
|
Income tax benefit (expense): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current |
|
|
(2,480 |
) |
|
|
(60,717 |
) |
|
|
|
|
|
|
(162,464 |
) |
|
|
(163,434 |
) |
|
|
|
|
Deferred |
|
|
(54,760 |
) |
|
|
(61,149 |
) |
|
|
|
|
|
|
(128,614 |
) |
|
|
(155,103 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income tax benefit (expense) |
|
|
(57,240 |
) |
|
|
(121,866 |
) |
|
|
|
|
|
|
(291,078 |
) |
|
|
(318,537 |
) |
|
|
|
|
Minority interest expense, net of tax |
|
|
11,961 |
|
|
|
3,673 |
|
|
|
|
|
|
|
27,206 |
|
|
|
16,630 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before discontinued operations |
|
|
256,315 |
|
|
|
169,796 |
|
|
|
|
|
|
|
549,461 |
|
|
|
436,610 |
|
|
|
|
|
Income from discontinued operations, net |
|
|
23,421 |
|
|
|
16,075 |
|
|
|
|
|
|
|
68,487 |
|
|
|
43,563 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
|
$ |
279,736 |
|
|
$ |
185,871 |
|
|
|
|
|
|
$ |
617,948 |
|
|
$ |
480,173 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated Revenue
Three Months
Our consolidated revenues increased $87.0 million during the third quarter of 2007 compared to
the same period of 2006. Our International revenue increased $67.3 million, including
approximately $30.7 million related to movements in foreign exchange. In addition to foreign
exchange, International revenue growth was primarily led by increased billboards and street
furniture revenues. Our Americas revenue increased $30.0 million from increases across our display
inventory including bulletins, posters, street furniture, airports and taxi displays. Our radio
revenue declined $8.1 million primarily from declines in both local and national advertising
partially offset by increases in our syndicated radio programming, traffic and on-line businesses.
Nine Months
Our consolidated revenues increased $293.5 million during the nine months of 2007 compared to
the same period of 2006. Our International revenue increased $163.6 million, including
approximately $90.0 million related to movements in foreign exchange. In addition to foreign
exchange, International revenue growth was led by billboards and street furniture revenues. Our
Americas revenue increased $114.5 million with Interspace, which we acquired in July 2006,
contributing approximately $31.7 million of the increase. In addition to Interspace, our Americas
revenue growth was driven by increases across our display inventory. Our radio revenue increased
$26.4 million primarily from an increase in our syndicated radio programming, traffic and on-line
businesses. These increases were partially offset by declines from operations classified in our
other segment.
Consolidated Direct Operating Expenses
Three Months
Our consolidated direct operating expenses increased approximately $46.8 million during the
third quarter of 2007 compared to the same period of 2006. International direct operating expenses
increased $36.8 million primarily from $20.4 million related to movements in foreign exchange.
Americas direct operating expenses increased $13.8 million principally related to increased
site-
- 18 -
lease expenses. Partially offsetting these increases was a decline in our radio direct
operating expenses of approximately $3.9 million primarily from a decline in programming expenses.
Nine Months
Our consolidated direct operating expenses increased approximately $146.1 million during the
first nine months of 2007 compared to the same period of 2006. International direct operating
expenses increased $110.7 million principally from $61.4 million related to movements in foreign
exchange. Americas direct operating expenses increased $44.7 million with Interspace contributing
approximately $14.7 million and the remainder primarily attributable to increased site-lease
expenses. Partially offsetting these increases was a decline in our radio direct operating
expenses of approximately $8.1 million primarily from a decline in programming expenses.
Consolidated Selling, General and Administrative Expenses, or SG&A
Three Months
Our consolidated SG&A expenses increased approximately $15.1 million during the third quarter
of 2007 compared to the same period of 2006. International SG&A expenses increased $8.2 million
primarily related to movements in foreign exchange. Americas SG&A expenses increased $4.6 million
attributable to selling expenses primarily associated with the increase in revenue. Our radio SG&A
expenses increased $5.8 million for the same period primarily driven by an increase in selling
expenses in our syndicated radio and on-line businesses associated with the increase in revenue for
these businesses. We also experienced expense declines from operations classified in our other
segment.
Nine Months
Our consolidated SG&A expenses increased approximately $33.3 million during the first nine
months of 2007 compared to the same period of 2006. International SG&A expenses increased $24.1
million primarily related to movements in foreign exchange. Americas SG&A expenses increased $16.2
million attributable to $7.3 million from Interspace and the rest primarily attributable to sales
expenses associated with the increase in revenue. Our radio SG&A expenses were essentially
unchanged during the first nine months of 2007 compared to the same period of 2006. We also
experienced declines in our SG&A expenses from operations classified in our other segment.
Gain (loss) on Disposition of Assets Net
The loss of $0.6 million in the third quarter 2007 primarily relates to the sale of two radio
stations in a certain market where we continue to own radio stations. The gain of $9.1 million in
2006 relates to a $6.7 gain from an LMA termination fee, $1.4 million gain on the sale of sports
rights and $1.0 million gain on various other items.
The gain for the nine months ended September 30, 2007 related primarily to a $5.5 million gain
from the sale of street furniture assets. The gain for the nine months ended September 30, 2006
primarily relates to the items discussed above as well as gains recognized in the first quarter of
2006 including a $13.2 million gain in our Americas outdoor segment from the exchange of assets in
one of our markets for the assets of a third party located in a different market and $22.5 million
in our radio segment primarily from the sale of programming rights in one of our markets.
Interest Expense
Interest expense declined $15.3 million and $18.4 million in the third quarter of 2007 and
nine months ended September 30, 2007, respectively, compared to the same periods of 2006. The
declines were primarily from a reduction in our outstanding debt.
Gain (loss) on marketable securities
The $0.7 million gain on marketable securities for the third quarter of 2007 related to
changes in fair value of the AMT shares and the related forward exchange contracts. The gain on
marketable securities of $5.4 million in the third quarter of 2006 related to a $1.6 million gain
associated with the changes in fair value of our AMT securities and the related secured forward
exchange contracts, plus $3.8 million from terminating our secured forward exchange contract
associated with our investment in XM Satellite Radio Holdings, Inc.
The $0.7 million and $2.1 million gains for the nine months ended September 30, 2007 and 2006,
respectively, relates to the items discussed above.
- 19 -
Income Tax Benefit (Expense)
Three Months
Current tax expense for the three months ended September 30, 2007 decreased $58.2 million
compared to the three months ended September 30, 2006 primarily due to current tax benefits of
approximately $45.7 million recorded in 2007 related to the settlement of several tax positions
with the IRS for the 1999 through 2004 tax years.
Deferred tax expense decreased $6.4 million for the three months ended September 30, 2007
primarily due to additional deferred tax expense of $8.3 million
recorded during the third quarter of 2006 related to the uncertainty
of our ability to utilize certain tax losses in the future for
international operations. In addition, we recorded a deferred tax benefit of $14.8 million in 2007 related to the release of
valuation allowances for the use of certain capital loss
carryforwards. This deferred tax
benefit was offset by additional deferred tax expense recorded in 2007 related to the
true up of the 2006 federal tax return filed in 2007.
Nine Months
Current tax expense for the nine months ended September 30, 2007 decreased $1.0 million
compared to the nine months ended September 30, 2006 primarily due to current tax benefits of
approximately $45.7 million recorded in 2007 related to the IRS settlement, partially offset by
additional current tax expense recorded in 2007 due to an increase in Income before income taxes,
minority interest and discontinued operations of $96.0 million.
Deferred tax expense for the nine months ended September 30, 2007 decreased $26.5 million
compared to the nine months ended September 30, 2006 primarily
due to additional deferred tax expense of approximately
$16.7 million recorded during 2006 related to the uncertainty of
our ability to utilize certain tax losses in the future for
international operations. In addition, we recorded a deferred tax benefit of
$14.8 million during 2007 related to the release of valuation allowances for the use
of certain capital loss carryforwards. This deferred tax benefit was
offset by additional deferred tax expense recorded in 2007 related to
the true up of the 2006 federal tax return filed in 2007.
Segment Revenue and Divisional Operating Expenses
Radio Broadcasting
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(In thousands) |
|
Three Months Ended |
|
|
|
|
|
|
Nine Months Ended |
|
|
|
|
|
|
September 30, |
|
|
% |
|
|
September 30, |
|
|
% |
|
|
|
2007 |
|
|
2006 |
|
|
Change |
|
|
2007 |
|
|
2006 |
|
|
Change |
|
Revenue |
|
$ |
882,152 |
|
|
$ |
890,219 |
|
|
|
(1)% |
|
|
$ |
2,572,405 |
|
|
$ |
2,546,052 |
|
|
|
1% |
|
Direct operating expenses |
|
|
242,686 |
|
|
|
246,599 |
|
|
|
(2)% |
|
|
|
704,728 |
|
|
|
712,860 |
|
|
|
(1)% |
|
Selling, general and
administrative expenses |
|
|
281,632 |
|
|
|
275,844 |
|
|
|
2% |
|
|
|
842,559 |
|
|
|
841,861 |
|
|
|
0% |
|
Depreciation and amortization |
|
|
24,966 |
|
|
|
29,100 |
|
|
|
(14)% |
|
|
|
81,396 |
|
|
|
89,159 |
|
|
|
(9)% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income |
|
$ |
332,868 |
|
|
$ |
338,676 |
|
|
|
(2)% |
|
|
$ |
943,722 |
|
|
$ |
902,172 |
|
|
|
5% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months
Our radio revenue decreased 1% during the third quarter of 2007 as compared to the same period
of 2006 primarily from a decline in both local and national revenues. Local and national revenues
were down partially as a result of declines in automotive, retail and political advertising
categories. The decline in revenues was partially offset by increases in network, traffic,
syndicated radio and on-line revenues. During the quarter, we increased our average unit rates
compared to the third quarter of 2006, however, total minutes sold declined during this same
period.
Our direct operating expenses decreased approximately $3.9 million during the third quarter of
2007 as compared to the same period of 2006 primarily from a decline of $3.6 million in programming
expenses and a $2.0 million decline in research and other ancillary expenses. Partially offsetting
these declines were increases of $1.5 million in traffic expenses and $1.4 million in programming
expenses in our syndicated radio business associated with the increased revenues in these
businesses. SG&A expenses increased $5.8 million during the third quarter of 2007 as compared to
the same period of 2006 primarily from an increase in commission expenses in our syndicated radio
business and salaries and commission expenses in our on-line business, both associated with the
increase in revenue from these businesses.
Nine Months
Our radio revenue increased 1% during the first nine months of 2007 as compared to the same
period of 2006 primarily from an increase in our syndicated radio programming, traffic and on-line
businesses. Our radio direct operating expenses decreased approximately $8.1 million primarily
from an $11.4 million decline in programming expenses and a $4.6 million decline in research and
other ancillary expenses. Partially offsetting these declines were increases of $5.1 million in
traffic expenses and $1.4 million in
- 20 -
engineering expenses. SG&A expenses were essentially unchanged during the nine months ended September 30, 2007 as compared to the same period of 2006.
Increases in commission expenses in our syndicated radio business and salaries and commission
expenses in our on-line business were partially offset by declines in expenses associated with
non-traditional revenues and commission expenses for our radio sales personnel.
Americas Outdoor Advertising
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(In thousands) |
|
Three Months Ended |
|
|
|
|
|
|
Nine Months Ended |
|
|
|
|
|
|
September 30, |
|
|
% |
|
|
September 30, |
|
|
% |
|
|
|
2007 |
|
|
2006 |
|
|
Change |
|
|
2007 |
|
|
2006 |
|
|
Change |
|
Revenue |
|
$ |
386,353 |
|
|
$ |
356,384 |
|
|
|
8% |
|
|
$ |
1,080,219 |
|
|
$ |
965,733 |
|
|
|
12% |
|
Direct operating expenses |
|
|
147,339 |
|
|
|
133,468 |
|
|
|
10% |
|
|
|
427,138 |
|
|
|
382,401 |
|
|
|
12% |
|
Selling, general and
administrative expenses |
|
|
56,636 |
|
|
|
52,029 |
|
|
|
9% |
|
|
|
167,004 |
|
|
|
150,846 |
|
|
|
11% |
|
Depreciation and amortization |
|
|
47,692 |
|
|
|
45,897 |
|
|
|
4% |
|
|
|
140,885 |
|
|
|
129,382 |
|
|
|
9% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income |
|
$ |
134,686 |
|
|
$ |
124,990 |
|
|
|
8% |
|
|
$ |
345,192 |
|
|
$ |
303,104 |
|
|
|
14% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months
Americas revenue increased $30.0 million, or 8%, during the third quarter of 2007 as compared
to the same period of 2006. The growth occurred across our inventory, including bulletins,
posters, street furniture, airports and taxi displays. The revenue growth was led by bulletin
revenue which was driven by increased rates and by increased airport display revenue which had both
increased rates and occupancy. Leading advertising categories during the quarter were
telecommunications, beverages, retail, financial services, amusements and real estate. Revenue
growth occurred across our markets, led by Los Angeles, New York, Washington/Baltimore, Atlanta and
Albuquerque.
Direct operating expenses increased $13.8 million in the third quarter of 2007 as compared to
the same period of 2006 primarily from an $11.6 million increase in site lease expenses related to
new contracts and the increase in airport, street furniture and taxi revenues. SG&A expenses
increased $4.6 million primarily from an increase in selling expenses associated with the increase
in revenue.
Nine Months
Our Americas revenue increased 12%, or $114.5 million, during the nine months ended September
30, 2007 as compared to the same period of 2006. Interspace contributed approximately $31.7
million to the increase. Bulletin, posters, street furniture, airports and taxi displays all
contributed to the increase in revenues. Direct operating expenses increased $44.7 million in the
nine months ended September 30, 2007 over the same period of 2006 primarily from an increase of
$14.7 million related to Interspace and a $24.6 million increase in site lease expenses associated
with new contracts and the increase in airport, street furniture and taxi revenues. Our SG&A
expenses increased $16.2 million in the first nine months of 2007 over the same period of 2006.
Interspace contributed approximately $7.3 million to the increase and the rest of the increase was
primarily attributable to bonus, commission and bad debt expenses associated with the increase in
revenues.
Depreciation and amortization increased $11.5 million for the nine months ended September 30,
2007 compared to the same period of the prior year primarily associated with $6.3 million from
Interspace.
International Outdoor Advertising
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(In thousands) |
|
Three Months Ended |
|
|
|
|
|
|
Nine Months Ended |
|
|
|
|
|
|
September 30, |
|
|
% |
|
|
September 30, |
|
|
% |
|
|
|
2007 |
|
|
2006 |
|
|
Change |
|
|
2007 |
|
|
2006 |
|
|
Change |
|
Revenue |
|
$ |
431,188 |
|
|
$ |
363,870 |
|
|
|
19% |
|
|
$ |
1,264,891 |
|
|
$ |
1,101,293 |
|
|
|
15% |
|
Direct operating expenses |
|
|
287,133 |
|
|
|
250,365 |
|
|
|
15% |
|
|
|
830,682 |
|
|
|
719,987 |
|
|
|
15% |
|
Selling, general and
administrative expenses |
|
|
74,592 |
|
|
|
66,395 |
|
|
|
12% |
|
|
|
226,314 |
|
|
|
202,212 |
|
|
|
12% |
|
Depreciation and amortization |
|
|
52,101 |
|
|
|
56,226 |
|
|
|
(7)% |
|
|
|
152,731 |
|
|
|
169,888 |
|
|
|
(10)% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income |
|
$ |
17,362 |
|
|
$ |
(9,116 |
) |
|
NA |
|
$ |
55,164 |
|
|
$ |
9,206 |
|
|
|
499% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months
International revenue increased $67.3 million, or 19%, in the third quarter of 2007 as
compared to the same period of 2006. Included in the increase was approximately $30.7 million
related to movements in foreign exchange. Revenue growth occurred across
- 21 -
inventory categories including billboards, street furniture and transit, primarily driven by both increased rates and
occupancy. Growth was led by increased revenues in France, Italy, Australia, Ireland and China.
Direct operating expenses increased $36.8 million during the third quarter of 2007 as compared
to the same period of 2006. Included in the increase was approximately $20.4 million related to
movements in foreign exchange. The remaining increase in direct operating expenses was primarily
attributable to an increase in site-lease expense associated with the increase in revenue. SG&A
expenses increased $8.2 million from approximately $5.3 million related to movements in foreign
exchange with the remaining increase primarily attributable to selling expenses associated with the
increase in revenue.
Nine Months
Revenue in our international outdoor segment increased $163.6 million, or 15%, in the first
nine months of 2007 compared to the same period of 2006. Included in the increase was
approximately $90.0 million related to movements in foreign exchange. Also contributing to the
increase was growth in billboard and street furniture revenues during the nine months ended
September 30, 2007 compared to the same period of 2006. Direct operating expenses increased $110.7
million during the nine months ended September 30, 2007 as compared to the same period of 2006
primarily from approximately $61.4 million related to movements in foreign exchange as well as an
increase in site-lease expenses associated with new contracts and the increase in revenue. Our
SG&A expenses increased $24.1 million primarily attributable to $16.7 million related to movements
in foreign exchange and the remaining increase primarily attributable with selling expenses
associated with the increase in revenue.
Depreciation and amortization declined $17.1 million during the first nine months of 2007
compared to the same period of the prior year primarily from contracts which were fully
amortized at December 31, 2006.
Reconciliation of Segment Operating Income (Loss) to Consolidated Operating Income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(In thousands) |
|
Three Months ended September 30, |
|
|
Nine Months ended September 30, |
|
|
|
2007 |
|
|
2006 |
|
|
2007 |
|
|
2006 |
|
Radio Broadcasting |
|
$ |
332,868 |
|
|
$ |
338,676 |
|
|
$ |
943,722 |
|
|
$ |
902,172 |
|
Americas Outdoor Advertising |
|
|
134,686 |
|
|
|
124,990 |
|
|
|
345,192 |
|
|
|
303,104 |
|
International Outdoor Advertising |
|
|
17,362 |
|
|
|
(9,116 |
) |
|
|
55,164 |
|
|
|
9,206 |
|
Other |
|
|
772 |
|
|
|
54 |
|
|
|
(5,921 |
) |
|
|
(5,086 |
) |
Gain on disposition of assets net |
|
|
(567 |
) |
|
|
9,122 |
|
|
|
10,474 |
|
|
|
58,343 |
|
Corporate |
|
|
(52,985 |
) |
|
|
(53,591 |
) |
|
|
(156,779 |
) |
|
|
(151,531 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated operating income |
|
$ |
432,136 |
|
|
$ |
410,135 |
|
|
$ |
1,191,852 |
|
|
$ |
1,116,208 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIQUIDITY AND CAPITAL RESOURCES
Cash Flows
|
|
|
|
|
|
|
|
|
(In thousands) |
|
Nine Months Ended September 30, |
|
|
|
2007 |
|
|
2006 |
|
Cash provided by (used in): |
|
|
|
|
|
|
|
|
Operating activities |
|
$ |
984,596 |
|
|
$ |
1,098,199 |
|
Investing activities |
|
$ |
(261,259 |
) |
|
$ |
(474,600 |
) |
Financing activities |
|
$ |
(872,659 |
) |
|
$ |
(650,049 |
) |
Discontinued operations |
|
$ |
157,405 |
|
|
$ |
48,909 |
|
Operating Activities
Cash flow from operating activities during the nine months of 2007 primarily reflected income
before discontinued operations of $549.5 million plus depreciation and amortization of $419.4
million and deferred taxes of $128.6 million. Cash flow from operating activities for the nine
months ended September 30, 2006 principally reflected income before discontinued operations of
$436.6 million plus depreciation and amortization of $436.2 million plus deferred taxes of $155.1
million. Also contributing to cash flow from operating activities was an income tax refund of
$133.3 million from the overpayment of 2005 taxes due to a foreign exchange loss from the
restructuring of our international business in anticipation of our strategic realignment, as well
as the application of a portion of the capital loss generated from our spin-off of Live Nation.
- 22 -
Investing Activities
Cash used in investing activities during the first nine months of 2007 principally reflects
the purchase of property, plant and equipment of $223.4 million. Cash used in investing activities
for the nine months ended September 30, 2006 principally reflected cash used for the acquisition of
operating assets of $270.6 million which primarily related to the acquisition of radio stations and
a music scheduling company in our radio segment, the acquisition of Interspace and the acquisition
of an outdoor advertising business in the United Kingdom. Cash used in investing activities for
the nine months ended September 30, 2006 also reflected $226.6 million used for the purchase of
property, plant and equipment.
Financing Activities
Cash used in financing activities for the nine months ended September 30, 2007 principally
reflected net payments on our credit facility of $407.7 million, $250.0 million related to the
February 2007 maturity of our 3.125% Senior Notes and $279.0 million in dividends paid. Cash used
in financing activities for the nine months ended September 30, 2006 primarily reflected $1.4
billion used for the purchase of our common stock, $290.4 million used for the payment of
dividends, partially offset by net draws on our credit facility of $401.8 million and $778.5
million from the issuance of long term debt.
Discontinued Operations
We had definitive asset purchase agreements signed for the sale of 360 of our radio stations
and all of our television stations as of September 30, 2007. The cash flows from these businesses,
along with 55 radio stations which were sold in the fourth quarter of 2006 and first nine months of
2007, are reported for both years as cash flows from discontinued operations.
Disposition of Assets
We received proceeds of $9.7 million primarily related to the sale of representation contracts
and international street furniture assets recorded in cash flows from investing activities during
the nine months ended September 30, 2007. We also received proceeds of $114.2 million related to
the sale of radio stations recorded as investing cash flows from discontinued operations during the
nine months ended September 30, 2007.
Anticipated Cash Requirements
We expect to fund anticipated cash requirements (including payments of principal and interest
on outstanding indebtedness and commitments, acquisitions, anticipated capital expenditures,
quarterly dividends and share repurchases) for the foreseeable future with cash flows from
operations and various externally generated funds.
SOURCES OF CAPITAL
As of September 30, 2007 and December 31, 2006, we had the following debt outstanding:
|
|
|
|
|
|
|
|
|
(In millions) |
|
September 30, |
|
|
December 31, |
|
|
|
2007 |
|
|
2006 |
|
Credit facilities |
|
$ |
593.0 |
|
|
$ |
966.5 |
|
Long-term bonds (a) |
|
|
6,297.7 |
|
|
|
6,531.6 |
|
Other borrowings |
|
|
129.7 |
|
|
|
164.9 |
|
|
|
|
|
|
|
|
Total Debt |
|
|
7,020.4 |
|
|
|
7,663.0 |
|
Less: Cash and cash equivalents |
|
|
124.1 |
|
|
|
116.0 |
|
|
|
|
|
|
|
|
|
|
$ |
6,896.3 |
|
|
$ |
7,547.0 |
|
|
|
|
|
|
|
|
|
|
|
(a) |
|
Includes $4.3 million and $7.1 million at September 30, 2007 and December 31, 2006,
respectively, in unamortized fair value purchase accounting adjustment premiums related to
the merger with AMFM. Also includes negative $12.3 million and $29.8 million related to
fair value adjustments for interest rate swap agreements at September 30, 2007 and
December 31, 2006, respectively. |
Credit Facility
We have a multi-currency revolving credit facility in the amount of $1.75 billion, which can
be used for general working capital purposes including commercial paper support as well as to fund
capital expenditures, share repurchases, acquisitions and the refinancing of public debt
securities. At September 30, 2007, the outstanding balance on this facility was $593.0 million
and, taking
- 23 -
into account letters of credit of $75.7 million, $1.1 billion was available for future
borrowings, with the entire balance to be repaid on July 12, 2009.
During the nine months ended September 30, 2007, we made principal payments totaling $1.0
billion and drew down $618.4 million on the credit facility. As of November 7, 2007, the credit
facilitys outstanding balance was $359.7 million and, taking into account outstanding letters of
credit, $1.3 billion was available for future borrowings.
Shelf Registration
On August 30, 2006, we filed a Registration Statement on Form S-3 covering the issuance of
debt securities, junior subordinated debt securities, preferred stock, common stock, warrants,
stock purchase contracts and stock purchase units. The shelf registration statement also covers
preferred securities that may be issued from time to time by our three Delaware statutory business
trusts and guarantees of such preferred securities by us. This shelf registration statement was
automatically effective on August 31, 2006 for a period of three years.
Debt Covenants
The significant covenants on our $1.75 billion five-year, multi-currency revolving credit
facility relate to leverage and interest coverage contained and defined in the credit agreement.
The leverage ratio covenant requires us to maintain a ratio of consolidated funded indebtedness to
operating cash flow (each as defined by the credit agreement) of less than 5.25x. The interest
coverage covenant requires us to maintain a minimum ratio of operating cash flow (each as defined
by the credit agreement) to interest expense of 2.50x. In the event that we do not meet these
covenants, we are considered to be in default on the credit facility at which time the credit
facility may become immediately due. At September 30, 2007, our leverage and interest coverage
ratios were 3.2x and 4.9x, respectively. This credit facility contains a cross default provision
that would be triggered if we were to default on any other indebtedness greater than $200.0
million, and also contains a provision whereby the credit facility becomes immediately due upon any
change of control.
Our other indebtedness does not contain provisions that would cause a default if we were to
default on our credit facility.
The fees we pay on our $1.75 billion, five-year multi-currency revolving credit facility
depend on the highest of our long-term debt ratings, unless there is a split rating of more than
one level in which case the fees depend on the long-term debt rating that is one level lower than
the highest rating. Based on our current ratings level of B+/Baa3, our fees on borrowings are a
52.5 basis point spread to LIBOR and are 22.5 basis points on the total $1.75 billion facility. In
the event our ratings improve, the fee on borrowings and facility fee decline gradually to 20.0
basis points and 9.0 basis points, respectively, at ratings of A/A3 or better. In the event that
our ratings decline, the fee on borrowings and facility fee increase gradually to 120.0 basis
points and 30.0 basis points, respectively, at ratings of BB/Ba2 or lower.
We believe there are no other agreements that contain provisions that trigger an event of
default upon a change in long-term debt ratings that would have a material impact to our financial
statements.
Additionally, our 8% senior notes due 2008, which were originally issued by AMFM Operating
Inc., a wholly-owned subsidiary of Clear Channel, contain certain restrictive covenants that limit
the ability of AMFM Operating Inc. to incur additional indebtedness, enter into certain
transactions with affiliates, pay dividends, consolidate, or effect certain asset sales.
At September 30, 2007 we were in compliance with all debt covenants.
USES OF CAPITAL
Dividends
Our Board of Directors declared quarterly cash dividends as follows:
(In millions, except per share data)
|
|
|
|
|
|
|
|
|
Declaration |
|
Amount per |
|
|
|
|
|
Total |
Date |
|
Common Share |
|
Record Date |
|
Payment Date |
|
Payment |
October 25, 2006 |
|
0.1875 |
|
December 31, 2006 |
|
January 15, 2007 |
|
$92.6 |
February 21, 2007 |
|
0.1875 |
|
March 31, 2007 |
|
April 15, 2007 |
|
93.0 |
April 19, 2007 |
|
0.1875 |
|
June 30, 2007 |
|
July 15, 2007 |
|
93.4 |
July 27, 2007 |
|
0.1875 |
|
September 30, 2007 |
|
October 15, 2007 |
|
93.4 |
- 24 -
Acquisitions
We acquired Americas outdoor display faces and additional equity interests in international
outdoor companies for $42.7 million in cash during the nine months ended September 30, 2007. Our
national representation business acquired representation contracts for $28.9 million in cash during
the nine months ended September 30, 2007.
Capital Expenditures
Capital expenditures were $223.4 million and $226.6 million in the nine months ended September
30, 2007 and 2006, respectively.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(In millions) |
|
Nine Months Ended September 30, 2007 Capital Expenditures |
|
|
|
|
|
|
|
Americas |
|
|
International |
|
|
|
|
|
|
|
|
|
|
|
|
|
Outdoor |
|
|
Outdoor |
|
|
Corporate and |
|
|
|
|
|
|
Radio |
|
|
Advertising |
|
|
Advertising |
|
|
Other |
|
|
Total |
|
Non-revenue producing |
|
$ |
52.1 |
|
|
$ |
23.3 |
|
|
$ |
30.4 |
|
|
$ |
6.1 |
|
|
$ |
111.9 |
|
Revenue producing |
|
|
|
|
|
|
53.5 |
|
|
|
58.0 |
|
|
|
|
|
|
|
111.5 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
52.1 |
|
|
$ |
76.8 |
|
|
$ |
88.4 |
|
|
$ |
6.1 |
|
|
$ |
223.4 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commitments, Contingencies and Guarantees
There are various lawsuits and claims pending against us. Based on current assumptions, we
have accrued an estimate of the probable costs for the resolution of these claims. Future results
of operations could be materially affected by changes in these assumptions.
Certain agreements relating to acquisitions provide for purchase price adjustments and other
future contingent payments based on the financial performance of the acquired companies generally
over a one to five year period. We will continue to accrue additional amounts related to such
contingent payments if and when it is determinable that the applicable financial performance
targets will be met. The aggregate of these contingent payments, if performance targets are met,
would not significantly impact our financial position or results of operations.
Debt Maturities
On February 1, 2007, we redeemed our 3.125% Senior Notes at their maturity for $250.0 million
plus accrued interest with proceeds from our bank credit facility.
MARKET RISK
Interest Rate Risk
At September 30, 2007, approximately 25% of our long-term debt, including fixed-rate debt on
which we have entered into interest rate swap agreements, bears interest at variable rates.
Accordingly, our earnings are affected by changes in interest rates. Assuming the current level of
borrowings at variable rates and assuming a two percentage point change in the average interest
rate under these borrowings, it is estimated that our interest expense for the nine months ended
September 30, 2007 would have changed by $26.1 million and that our net income for the nine months
ended September 30, 2007 would have changed
by $15.4 million. In the event of an adverse change in interest rates, management may take
actions to further mitigate its exposure. However, due to the uncertainty of the actions that
would be taken and their possible effects, this interest rate analysis assumes no such actions.
Further, the analysis does not consider the effects of the change in the level of overall economic
activity that could exist in such an environment.
At September 30, 2007, we had interest rate swap agreements with a $1.1 billion aggregate
notional amount that effectively float interest at rates based upon LIBOR. These agreements
expire from May 2009 to March 2012. The fair value of these agreements at September 30, 2007
was a liability of $12.3 million.
Equity Price Risk
The carrying value of our available-for-sale and trading equity securities is affected by
changes in their quoted market prices. It is estimated that a 20% change in the market prices of
these securities would change their carrying value at September 30, 2007 by $49.0 million and would
change comprehensive income and net income by $18.6 million and $10.3 million, respectively. At
- 25 -
September 30, 2007, we also held $11.2 million of investments that do not have a quoted market
price, but are subject to fluctuations in their value.
We maintain derivative instruments on certain of our trading equity securities to limit our
exposure to and benefit from price fluctuations on those securities.
Foreign Currency
We have operations in countries throughout the world. As a result, our financial results
could be affected by factors such as changes in foreign currency exchange rates or weak economic
conditions in the foreign markets in which we have operations. To mitigate a portion of the
exposure of international currency fluctuations, we maintain a natural hedge through borrowings in
currencies other than the U.S. dollar. In addition, we have U.S. dollar Euro cross currency
swaps which are also designated as a hedge of our net investment in foreign denominated assets.
These hedge positions are reviewed monthly. Our foreign operations reported net income of $34.4
million for the nine months ended September 30, 2007. It is estimated that a 10% change in the
value of the U.S. dollar to foreign currencies would change net income for the nine months ended
September 30, 2007 by $3.4 million.
Our earnings are also affected by fluctuations in the value of the U.S. dollar as compared to
foreign currencies as a result of our investments in various countries, all of which are accounted
for under the equity method. It is estimated that the result of a 10% fluctuation in the value of
the dollar relative to these foreign currencies at September 30, 2007 would change our equity in
earnings of nonconsolidated affiliates by $2.4 million and would change our net income by
approximately $1.4 million for the nine months ended September 30, 2007.
This analysis does not consider the implications that such fluctuations could have on the
overall economic activity that could exist in such an environment in the U.S. or the foreign
countries or on the results of operations of these foreign entities.
Recent Accounting Pronouncements
Statement of Financial Accounting Standards No. 159, The Fair Value Option for Financial
Assets and Financial Liabilities including an amendment of FASB Statement No. 115 (Statement
159), was issued in February 2007. Statement 159 permits entities to choose to measure many
financial instruments and certain other items at fair value that are not currently required to be
measured at fair value. Statement 159 also establishes presentation and disclosure requirements
designed to facilitate comparisons between entities that choose different measurement attributes
for similar types of assets and liabilities. Statement 159 does not affect any existing accounting
literature that requires certain assets and liabilities to be carried at fair value. Statement 159
does not eliminate disclosure requirements included in other accounting standards, including
requirements for disclosures about fair value measurements included in Statements
No. 157, Fair Value Measurements, and No. 107, Disclosures about Fair Value of Financial
Instruments. Statement 159 is effective as of the beginning of an entitys first fiscal year that
begins after November 15, 2007. We expect to adopt Statement 159 on January 1, 2008 and do not
anticipate adoption to materially impact our financial position or results of operations.
Inflation
Inflation has affected our performance in terms of higher costs for wages, salaries and
equipment. Although the exact impact of inflation is indeterminable, we believe we have offset
these higher costs in various manners.
Ratio of Earnings to Fixed Charges
The ratio of earnings to fixed charges is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended |
|
|
September 30, |
|
Year Ended December 31, |
2007 |
|
2006 |
|
2006 |
|
2005 |
|
2004 |
|
2003 |
|
2002 |
2.32 |
|
|
2.15 |
|
|
|
2.22 |
|
|
|
2.20 |
|
|
|
2.69 |
|
|
|
3.49 |
|
|
|
2.38 |
|
The ratio of earnings to fixed charges was computed on a total enterprise basis. Earnings
represent income from continuing operations before income taxes less equity in undistributed
net income (loss) of unconsolidated affiliates plus fixed charges. Fixed charges represent
interest, amortization of debt discount and expense, and the estimated interest portion of
rental charges. We had no preferred stock outstanding for any period presented.
- 26 -
Risks Regarding Forward Looking Statements
The Private Securities Litigation Reform Act of 1995 provides a safe harbor for
forward-looking statements made by us or on our behalf. Except for the historical information,
this report contains various forward-looking statements which represent our expectations or beliefs
concerning future events, including our future levels of cash flow from operations. Management
believes that all statements that express expectations and projections with respect to future
matters, including the success of our Merger Agreement and the planned sale of radio and television
assets; our ability to negotiate contracts having more favorable terms; and the availability of
capital resources; are forward-looking statements within the meaning of the Private Securities
Litigation Reform Act. We caution that these forward-looking statements involve a number of risks
and uncertainties and are subject to many variables which could impact our financial performance.
These statements are made on the basis of managements views and assumptions, as of the time the
statements are made, regarding future events and business performance. There can be no assurance,
however, that managements expectations will necessarily come to pass. We do not intend to update
any forward looking statements.
A wide range of factors could materially affect future developments and performance,
including:
|
|
|
the occurrence of any event, change or other circumstance that could give rise to
the termination of the Merger Agreement; |
|
|
|
|
the outcome of any legal proceedings that have been or may be instituted against us
relating to the Merger Agreement; |
|
|
|
|
our inability to complete the merger due to the failure to obtain shareholder
approval or to satisfy any other conditions to completion of the merger; |
|
|
|
|
the impact of the substantial indebtedness incurred to finance the consummation of
the merger; |
|
|
|
|
the occurrence of any event, change or other circumstance that could give rise to
the termination of agreements to sell our radio and television assets; |
|
|
|
|
the impact of general economic and political conditions in the U.S. and in other
countries in which we currently do business, including those resulting from
recessions, political events and acts or threats of terrorism or military conflicts; |
|
|
|
|
the impact of the geopolitical environment; |
|
|
|
|
our ability to integrate the operations of recently acquired companies; |
|
|
|
|
shifts in population and other demographics; |
|
|
|
|
industry conditions, including competition; |
|
|
|
|
fluctuations in operating costs; |
|
|
|
|
technological changes and innovations; |
|
|
|
|
changes in labor conditions; |
|
|
|
|
fluctuations in exchange rates and currency values; |
|
|
|
|
capital expenditure requirements; |
|
|
|
|
the outcome of pending and future litigation settlements; |
|
|
|
|
legislative or regulatory requirements; |
|
|
|
|
interest rates; |
|
|
|
|
the effect of leverage on our financial position and earnings; |
|
|
|
|
taxes; |
|
|
|
|
access to capital markets; and |
|
|
|
|
certain other factors set forth in our filings with the Securities and Exchange
Commission. |
This list of factors that may affect future performance and the accuracy of forward-looking
statements are illustrative, but by no means exhaustive. Accordingly, all forward-looking
statements should be evaluated with the understanding of their inherent uncertainty.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Required information is within Item 2 of this Part I.
ITEM 4. CONTROLS AND PROCEDURES
Our principal executive and financial officers have concluded, based on their evaluation as of
the end of the period covered by this Form 10-Q, that our disclosure controls and procedures, as
defined under Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934, are effective
to ensure that information we are required to disclose in the reports we file or submit under the
Exchange Act is recorded, processed, summarized and reported within the time periods specified in
the SECs rules and forms, and include controls and procedures designed to ensure that information
we are required to disclose in such reports is accumulated and
- 27 -
communicated to management, including our principal executive and financial officers, as appropriate to allow timely decisions
regarding required disclosure.
There were no changes in our internal control over financial reporting that occurred during
the most recent fiscal quarter that have materially affected, or are reasonably likely to
materially affect, our internal control over financial reporting.
- 28 -
Part II OTHER INFORMATION
Item 1. Legal Proceedings
We are currently involved in certain legal proceedings and, as required, have accrued our
estimate of the probable costs for the resolution of these claims. 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
our assumptions or the effectiveness of our strategies related to these proceedings.
On September 9, 2003, the Assistant United States Attorney for the Eastern District of
Missouri caused a Subpoena to Testify before Grand Jury to be issued to us. The Subpoena requires
us to produce certain information regarding commercial advertising run by us on behalf of offshore
and / or online (Internet) gambling businesses, including sports bookmaking and casino-style
gambling. On October 5, 2006, we received a subpoena from the Assistant United States Attorney for
the Southern District of New York requiring us to produce certain information regarding
substantially the same matters as covered in the subpoena from the Eastern District of Missouri. We
are cooperating with such requirements.
On February 7, 2005, we received a subpoena from the State of New York Attorney Generals
office, requesting information on policies and practices regarding record promotion on radio
stations in the state of New York. We are cooperating with this subpoena.
We are a co-defendant with Live Nation, Inc. (which was spun off as an independent company in
December, 2005) in twenty-two putative class actions filed by different named plaintiffs in various
district courts throughout the country. These actions generally allege that the defendants
monopolized or attempted to monopolize the market for live rock concerts in violation of
Section 2 of the Sherman Act. Plaintiffs claim that they paid higher ticket prices for defendants
rock concerts as a result of defendants conduct. They seek damages in an undetermined amount.
On April 17, 2006, the Judicial Panel for Multidistrict Litigation centralized these class action
proceedings in the Central District of California. On March 2, 2007, plaintiffs filed motions for
class certification in five template cases involving five regional markets, Los Angeles, Boston,
New York, Chicago and Denver. Defendants opposed that motion and on October 22, 2007 the district
court issued its decision certifying the class for each regional market. On November 4, 2007,
defendants filed a petition for permission to appeal the class certification ruling with the Ninth
Circuit Court of Appeals. That petition is pending. Unless the petition is granted and the
district court proceedings are stayed, trial on one or more of the regional classes should take
place in 2008. In the Master Separation and Distribution Agreement between us and Live Nation,
Inc. that was entered into in connection with our spin-off of Live Nation in December 2005, Live
Nation agreed, among other things, to assume responsibility for legal actions existing at the time
of, or initiated after, the spin-off in which we are a defendant if such actions relate in any
material respect to the business of Live Nation. Pursuant to the agreement, Live Nation also
agreed to indemnify us with respect to all liabilities assumed by Live Nation, including those
pertaining to the claims discussed above.
Merger related litigation
Eight putative class action lawsuits were filed in the District Court of Bexar County, Texas,
in 2006 in connection with the merger. Of the eight, three have been voluntarily dismissed and
five are still pending. The remaining putative class actions, Teitelbaum v. Clear Channel
Communications, Inc., et al., No. 2006CI17492 (filed November 14, 2006), City of St. Clair Shores
Police and Fire Retirement System v. Clear Channel Communications, Inc., et al., No. 2006CI17660
(filed November 16, 2006), Levy Investments, Ltd. v. Clear Channel Communications, Inc., et al.,
No. 2006CI17669 (filed November 16, 2006), DD Equity Partners LLC v. Clear Channel Communications,
Inc., et al., No. 2006CI7914 (filed November 22, 2006), and Pioneer Investments
Kapitalanlagegesellschaft MBH v. L. Lowry Mays, et al. (filed December 7, 2006), are consolidated
into one proceeding and all raise substantially similar allegations on behalf of a purported class
of our shareholders against the defendants for breaches of fiduciary duty in connection with the
approval of the merger.
Three other lawsuits filed in connection with the merger are also still pending, Rauch v.
Clear Channel Communications, Inc., et al., Case No. 2006-CI17436 (filed November 14, 2006),
Pioneer Investments Kapitalanlagegesellschaft mbH v. Clear Channel Communications, Inc., et al.,
(filed January 30, 2007 in the United States District Court for the Western District of Texas) and
Alaska Laborers Employees Retirement Fund v. Clear Channel Communications, Inc., et. al., Case
No. SA-07-CA-0042 (filed January 11, 2007). These lawsuits raise substantially similar allegations
to those found in the pleadings of the consolidated class actions.
We continue to believe that the allegations contained in each of the pleadings in the
above-referenced actions are without merit and we intend to contest the actions vigorously. We
cannot assure you that we will successfully defend the allegations included in the complaints or
that pending motions to enjoin the transactions contemplated by the merger agreement will not be
granted. If we are unable to resolve the claims that are the basis for the lawsuits or to prevail
in any related litigation we may be required to pay
- 29 -
substantial monetary damages for which we may
not be adequately insured, which could have a material adverse effect on our business, financial
position and results of operations. Regardless of whether the merger is consummated or the outcome
of the lawsuits, we may incur significant related expenses and costs that could have an adverse
effect on our business and operations. Furthermore, the cases could involve a substantial diversion
of the time of some members of management. Accordingly, we are unable to estimate the impact of any
potential liabilities associated with the complaints.
Item 1A. Risk Factors
For information regarding risk factors, please refer to Item 1A in our Annual Report on
Form 10-K for the year ended December 31, 2006. There have not been any material changes in
the risk factors disclosed in this Annual Report on Form 10-K.
Additional information relating to risk factors is described in Managements Discussion
and Analysis of Financial Condition and Results of Operations under Risks Regarding
Forward-Looking Statements.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
(c) Purchases of Equity Securities by the Issuer and Affiliated Purchases.
On September 6, 2006, our Board of Directors authorized a share repurchase program, permitting
us to repurchase $1.0 billion of our common stock. This program expired on September 6, 2007.
During the three months ended September 30, 2007, we did not repurchase any shares through this
program; however, we accepted shares in payment of income taxes due upon the vesting of restricted
stock awards as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Number of |
|
|
|
|
|
|
|
|
|
|
|
|
Shares Purchased as |
|
Maximum Dollar Value |
|
|
Total Number |
|
Average |
|
Part of Publicly |
|
of Shares that May Yet |
|
|
of Shares |
|
Price Paid per |
|
Announced |
|
Be Purchased Under the |
Period |
|
Purchased |
|
Share |
|
Programs |
|
Programs |
July 1 through
July 31 |
|
|
340 |
|
|
$ |
36.90 |
|
|
|
-0- |
|
|
$ |
1,000,000,000 |
|
August 1 through
August 31 |
|
|
431 |
|
|
$ |
36.55 |
|
|
|
-0- |
|
|
$ |
1,000,000,000 |
|
September 1 through
September 30 |
|
|
168 |
|
|
$ |
37.51 |
|
|
|
-0- |
|
|
$ |
-0- |
|
Total |
|
|
939 |
|
|
|
|
|
|
|
-0- |
|
|
$ |
-0- |
|
Item 4. Submission of Matters to a Vote of Security Holders
A special meeting of the shareholders of Clear Channel Communications, Inc., was held on
September 25, 2007 to vote on the following three proposals:
|
1. |
|
To consider and vote upon a proposal to approve and adopt the Agreement and Plan of
Merger, dated as of November 16, 2006, by and among Clear Channel, BT Triple Crown Merger
Co., Inc. (Merger Sub), B Triple Crown Finco, LLC and T Triple Crown Finco, LLC
(together with B Triple Crown Finco, LLC, the Fincos), as amended by Amendment No. 1
thereto, dated April 18, 2007, by and among Clear Channel, Merger Sub and the Fincos, and
as further amended by Amendment No. 2 thereto, dated May 17, 2007, by and among Clear
Channel, Merger Sub, the Fincos and CC Media Holdings, Inc. (as amended, the merger
agreement); |
|
|
|
2. |
|
To consider and vote upon a proposal to adjourn or postpone the special meeting, if
necessary or appropriate, to solicit additional proxies if there are insufficient votes
at the time of the special meeting to approve and adopt the merger agreement, as
amended; and |
|
|
3. |
|
To transact such other business that may properly come before the special meeting
or any adjournment or postponement thereof. |
- 30 -
The results of voting at the special meeting of the shareholders were as follows:
Proposal No. 1
|
|
|
|
|
|
|
|
|
|
|
|
|
For |
|
Against |
|
Abstain |
|
Not Voted |
364,084,022 |
|
|
5,814,983 |
|
|
|
3,277,672 |
|
|
124,769,494 |
Proposal No. 2
|
|
|
|
|
|
|
|
|
|
|
|
|
For |
|
Against |
|
Abstain |
|
Not Voted |
342,230,682 |
|
|
27,673,532 |
|
|
|
3,272,463 |
|
|
124,769,494 |
Proposal No. 3
|
|
|
|
|
|
|
|
|
|
|
|
|
For |
|
Against |
|
Abstain |
|
Not Voted |
199,440,775 |
|
|
132,533,707 |
|
|
|
41,202,195 |
|
|
124,769,494 |
Item 6. Exhibits
See the Index to Exhibits, which is incorporated into and made a part of this Quarterly
Report on Form 10-Q.
- 31 -
Signatures
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has
duly caused this report to be signed on its behalf by the undersigned thereunto duly
authorized.
|
|
|
|
|
|
CLEAR CHANNEL COMMUNICATIONS, INC.
|
|
November 9, 2007 |
/s/ Randall T. Mays
|
|
|
Randall T. Mays |
|
|
President and
Chief Financial Officer |
|
|
|
|
|
November 9, 2007 |
/s/ Herbert W. Hill, Jr.
|
|
|
Herbert W. Hill, Jr. |
|
|
Senior Vice President and
Chief Accounting Officer |
|
- 32 -
INDEX TO EXHIBITS
|
|
|
Exhibit |
|
|
Number |
|
Description |
2.1
|
|
Agreement and Plan of Merger among BT Triple Crown Merger
Co., Inc., B Triple Crown Finco, LLC, T Triple Crown Finco,
LLC and Clear Channel Communications, Inc., dated as of
November 16, 2006 (incorporated by reference to the
exhibits to Clear Channels Current Report on Form 8-K
dated November 16, 2006). |
|
|
|
2.2
|
|
Amendment No. 1, dated April 18, 2007, to the Agreement and
Plan of Merger, dated as of November 16, 2006, by and among
BT Triple Crown Merger Co., Inc., B Triple Crown Finco,
LLC, T Triple Crown Finco, LLC and Clear Channel
Communications, Inc. (incorporated by reference to the
exhibits to Clear Channels Current Report on Form 8-K
dated April 18, 2007). |
|
|
|
2.3
|
|
Amendment No. 2, dated May 17, 2007, to the Agreement and
Plan of Merger, dated as of November 16, 2006, by and among
BT Triple Crown Merger Co., Inc., B Triple Crown Finco,
LLC, T Triple Crown Finco, LLC, BT Triple Crown Holdings
III, Inc. and Clear Channel Communications, Inc., as
amended (incorporated by reference to the exhibits to Clear
Channels Current Report on Form 8-K dated May 18, 2007). |
|
|
|
2.4
|
|
Asset Purchase Agreement dated April 20, 2007, between
Clear Channel Broadcasting, Inc., ABO Broadcasting
Operations, LLC, Ackerley Broadcasting Fresno, LLC, AK
Mobile Television, Inc., Bel Meade Broadcasting, Inc.,
Capstar Radio Operating Company, Capstar TX Limited
Partnership, CCB Texas Licenses, L.P., Central NY News,
Inc., Citicasters Co., Clear Channel Broadcasting Licenses,
Inc., Clear Channel Investments, Inc. and TV Acquisition
LLC (incorporated by reference to the exhibits to Clear
Channels Current Report on Form 8-K dated April 26, 2007). |
|
|
|
3.1
|
|
Current Articles of Incorporation of the Company
(incorporated by reference to the exhibits of the Companys
Registration Statement on Form S-3 (Reg. No. 333-33371)
dated September 9, 1997). |
|
|
|
3.2
|
|
Current Bylaws of the Company (incorporated by reference to
the exhibits to Clear Channels Quarterly Report on Form
10-Q dated May 9, 2007). |
|
|
|
3.3
|
|
Amendment to the Companys Articles of Incorporation
(incorporated by reference to the exhibits to the Companys
Quarterly Report on Form 10-Q for the quarter ended
September 30, 1998). |
|
|
|
3.4
|
|
Second Amendment to Clear Channels Articles of
Incorporation (incorporated by reference to the exhibits to
Clear Channels Quarterly Report on Form 10-Q for the
quarter ended March 31, 1999). |
|
|
|
3.5
|
|
Third Amendment to Clear Channels Articles of
Incorporation (incorporated by reference to the exhibits to
Clear Channels Quarterly Report on Form 10-Q for the
quarter ended May 31, 2000). |
|
|
|
4.1
|
|
Agreement Concerning Buy-Sell Agreement by and between
Clear Channel Communications, Inc., L. Lowry Mays, B.J.
McCombs, John M. Schaefer and John W. Barger, dated August
3, 1998 (incorporated by reference to the exhibits to Clear
Channels Schedule 13-D/A, dated October 10, 2002). |
|
|
|
4.2
|
|
Waiver and Second Agreement Concerning Buy-Sell Agreement
by and between Clear Channel Communications, Inc., L. Lowry
Mays and B.J. McCombs, dated August 17, 1998 (incorporated
by reference to the exhibits to Clear Channels Schedule
13-D/A, dated October 10, 2002). |
|
|
|
4.3
|
|
Waiver and Third Agreement Concerning Buy-Sell Agreement by
and between Clear Channel Communications, Inc., L. Lowry
Mays and B.J. McCombs, dated July 26, 2002 (incorporated by
reference to the exhibits to Clear Channels Schedule
13-D/A, dated October 10, 2002). |
|
|
|
4.4
|
|
Waiver and Fourth Agreement Concerning Buy-Sell Agreement
by and between Clear Channel Communications, Inc., L. Lowry
Mays and B.J. McCombs, dated September 27, 2002
(incorporated by reference to the exhibits to Clear
Channels Schedule 13-D/A, dated October 10, 2002). |
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|
|
|
Exhibit |
|
|
Number |
|
Description |
4.5
|
|
Buy-Sell Agreement by and between Clear Channel
Communications, Inc., L. Lowry Mays, B. J. McCombs, John M.
Schaefer and John W. Barger, dated May 31, 1977
(incorporated by reference to the exhibits of the Companys
Registration Statement on Form S-1 (Reg. No. 33-289161)
dated April 19, 1984). |
|
|
|
4.6
|
|
Senior Indenture dated October 1, 1997, by and between
Clear Channel Communications, Inc. and The Bank of New York
as Trustee (incorporated by reference to the exhibits to
the Companys Quarterly Report on Form 10-Q for the quarter
ended September 30, 1997). |
|
|
|
4.7
|
|
Second Supplemental Indenture dated June 16, 1998 to Senior
Indenture dated October 1, 1997, by and between Clear
Channel Communications, Inc. and the Bank of New York, as
Trustee (incorporated by reference to the exhibits to the
Companys Current Report on Form 8-K dated August 27,
1998). |
|
|
|
4.8
|
|
Third Supplemental Indenture dated June 16, 1998 to Senior
Indenture dated October 1, 1997, by and between Clear
Channel Communications, Inc. and the Bank of New York, as
Trustee (incorporated by reference to the exhibits to the
Companys Current Report on Form 8-K dated August 27,
1998). |
|
|
|
4.9
|
|
Ninth Supplemental Indenture dated September 12, 2000, to
Senior Indenture dated October 1, 1997, by and between
Clear Channel Communications, Inc. and The Bank of New
York, as Trustee (incorporated by reference to the exhibits
to Clear Channels Quarterly Report on Form 10-Q for the
quarter ended September 30, 2000). |
|
|
|
4.10
|
|
Eleventh Supplemental Indenture dated January 9, 2003, to
Senior Indenture dated October 1, 1997, by and between
Clear Channel Communications, Inc. and The Bank of New York
as Trustee (incorporated by reference to the exhibits to
Clear Channels Annual Report on Form 10-K for the year
ended December 31, 2002). |
|
|
|
4.11
|
|
Twelfth Supplemental Indenture dated March 17, 2003, to
Senior Indenture dated October 1, 1997, by and between
Clear Channel Communications, Inc. and The Bank of New
York, as Trustee (incorporated by reference to the exhibits
to Clear Channels Current Report on Form 8-K dated March
18, 2003). |
|
|
|
4.12
|
|
Thirteenth Supplemental Indenture dated May 1, 2003, to
Senior Indenture dated October 1, 1997, by and between
Clear Channel Communications, Inc. and The Bank of New
York, as Trustee (incorporated by reference to the exhibits
to Clear Channels Current Report on Form 8-K dated May 2,
2003). |
|
|
|
4.13
|
|
Fourteenth Supplemental Indenture dated May 21, 2003, to
Senior Indenture dated October 1, 1997, by and between
Clear Channel Communications, Inc. and The Bank of New
York, as Trustee (incorporated by reference to the exhibits
to Clear Channels Current Report on Form 8-K dated May 22,
2003). |
|
|
|
4.14
|
|
Sixteenth Supplemental Indenture dated December 9, 2003, to
Senior Indenture dated October 1, 1997, by and between
Clear Channel Communications, Inc. and The Bank of New
York, as Trustee (incorporated by reference to the exhibits
to Clear Channels Current Report on Form 8-K dated
December 10, 2003). |
|
|
|
4.15
|
|
Seventeenth Supplemental Indenture dated September 15,
2004, to Senior Indenture dated October 1, 1997, by and
between Clear Channel Communications, Inc. and The Bank of
New York, as Trustee (incorporated by reference to the
exhibits to Clear Channels Current Report on Form 8-K
dated September 15, 2004). |
|
|
|
4.16
|
|
Eighteenth Supplemental Indenture dated November 22, 2004,
to Senior Indenture dated October 1, 1997, by and between
Clear Channel Communications, Inc. and The Bank of New
York, as Trustee (incorporated by reference to the exhibits
to Clear Channels Current Report on Form 8-K dated
November 17, 2004). |
- 34 -
|
|
|
Exhibit |
|
|
Number |
|
Description |
4.17
|
|
Nineteenth Supplemental Indenture dated December 13, 2004,
to Senior Indenture dated October 1, 1997, by and between
Clear Channel Communications, Inc. and The Bank of New
York, as Trustee (incorporated by reference to the exhibits
to Clear Channels Current Report on Form 8-K dated
December 13, 2004). |
|
|
|
4.18
|
|
Twentieth Supplemental Indenture dated March 21, 2006, to
Senior Indenture dated October 1, 1997, by and between
Clear Channel Communications, Inc. and The Bank of New
York, as Trustee (incorporated by reference to the exhibits
to Clear Channels Current Report on Form 8-K dated March
21, 2006). |
|
|
|
4.19
|
|
Twenty-first Supplemental Indenture dated August 15, 2006,
to Senior Indenture dated October 1, 1997, by and between
Clear Channel Communications, Inc. and The Bank of New
York, as Trustee (incorporated by reference to the exhibits
to Clear Channels Current Report on Form 8-K dated August
16, 2006). |
|
|
|
11
|
|
Statement re: Computation of Per Share Earnings. |
|
|
|
12
|
|
Statement re: Computation of Ratios. |
|
|
|
31.1
|
|
Certification of Chief Executive Officer 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 of Chief Financial Officer 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 of Chief Executive Officer Pursuant to 18
U.S.C. Section 1350, as Adopted Pursuant to Section 906 of
the Sarbanes-Oxley Act of 2002. |
|
|
|
32.2
|
|
Certification of Chief Financial Officer Pursuant to 18
U.S.C. Section 1350, as Adopted Pursuant to Section 906 of
the Sarbanes-Oxley Act of 2002. |
- 35 -