UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-

(Mark One)

[X]          QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED September 30, 2012

 

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

 

Commission File Number

1‑32663

 

CLEAR CHANNEL OUTDOOR HOLDINGS, INC.

(Exact name of registrant as specified in its charter)

 

 

                            Delaware                                                                                                                   86-0812139 

           (State or other jurisdiction of                                                                            (I.R.S. Employer Identification No.)

          incorporation or organization)

 

                  200 East Basse Road                                                                                                             78209

                   San Antonio, Texas                                                                                                         (Zip Code)

(Address of principal executive offices)

 

(210) 832-3700

(Registrant’s telephone number, including area code)

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes [X] No [  ]

 

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

 

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

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

 

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

 

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

 

                               Class                                                                                                   Outstanding at October 26, 2012

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

  Class A Common Stock, $.01 par value                                                                                         42,220,486

  Class B Common Stock, $.01 par value                                                                                        315,000,000

 

 


 

 

 

CLEAR CHANNEL OUTDOOR HOLDINGS, INC.

 

INDEX

 

 

  

Page No.

Part I -- Financial Information

 

Item 1.        Financial Statements

1

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

1

Consolidated Statements of Comprehensive Income (Loss) for the three and nine months ended

September 30, 2012 and 2011

2

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

3

                            Notes to Consolidated Financial Statements

4

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

21

Item 3.        Quantitative and Qualitative Disclosures About Market Risk

33

Item 4.        Controls and Procedures

33

Part II -- Other Information

 

Item 1.        Legal Proceedings

34

Item 1A.     Risk Factors

35

Item 2.        Unregistered Sales of Equity Securities and Use of Proceeds

36

Item 3.        Defaults Upon Senior Securities

36

Item 4.        Mine Safety Disclosures

36

Item 5.        Other Information

36

        Item 6.        Exhibits

37

Signatures

38

 


 

PART I -- FINANCIAL INFORMATION

ITEM 1.   FINANCIAL STATEMENTS

CLEAR CHANNEL OUTDOOR HOLDINGS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

                 

(In thousands)

 

September 30,

 

 

 

 

 

 

2012 

 

 

December 31,

 

 

 

(Unaudited)

 

 

2011 

CURRENT ASSETS

 

 

 

 

 

Cash and cash equivalents

$

 534,907 

 

$

 542,655 

Accounts receivable, net

 

 690,201 

 

 

 702,091 

Other current assets

 

 221,612 

 

 

 208,982 

 

Total Current Assets

 

 1,446,720 

 

 

 1,453,728 

 

 

 

 

 

 

 

PROPERTY, PLANT AND EQUIPMENT

 

 

 

 

 

Structures, net

 

 1,887,169 

 

 

 1,950,437 

Other property, plant and equipment, net

 

 309,266 

 

 

 296,273 

 

 

 

 

 

 

 

INTANGIBLE ASSETS AND GOODWILL

 

 

 

 

 

Definite-lived intangibles, net

 

 573,575 

 

 

 618,526 

Indefinite-lived intangibles

 

 1,106,799 

 

 

 1,105,704 

Goodwill

 

 856,623 

 

 

 857,193 

 

 

 

 

 

 

 

OTHER ASSETS

 

 

 

 

 

Due from Clear Channel Communications

 

 723,311 

 

 

 656,040 

Other assets

 

 170,698 

 

 

 150,284 

 

Total Assets

$

 7,074,161 

 

$

 7,088,185 

 

 

 

 

 

 

 

CURRENT LIABILITIES

 

 

 

 

 

Accounts payable and accrued expenses

$

 580,846 

 

$

 607,197 

Deferred income

 

 108,323 

 

 

 89,980 

Current portion of long-term debt

 

 19,710 

 

 

 23,806 

 

Total Current Liabilities

 

 708,879 

 

 

 720,983 

Long-term debt

 

 4,718,792 

 

 

 2,522,103 

Deferred tax liability

 

 793,300 

 

 

 822,932 

Other long-term liabilities

 

 288,689 

 

 

 281,940 

Commitments and contingent liabilities (Note 6)

 

 

 

 

 

 

 

 

 

 

 

 

SHAREHOLDERS’ EQUITY

 

 

 

 

 

Noncontrolling interest

 

 241,121 

 

 

 231,530 

Class A common stock

 

 423 

 

 

 411 

Class B common stock

 

 3,150 

 

 

 3,150 

Additional paid-in capital

 

 4,521,185 

 

 

 6,684,497 

Retained deficit

 

 (3,966,105) 

 

 

 (3,931,403) 

Accumulated other comprehensive loss

 

 (234,300) 

 

 

 (246,988) 

Cost of shares held in treasury

 

 (973) 

 

 

 (970) 

 

Total Shareholders’ Equity

 

 564,501 

 

 

 2,740,227 

 

 

 

 

 

 

 

 

Total Liabilities and Shareholders’ Equity

$

 7,074,161 

 

$

 7,088,185 

See Notes to Consolidated Financial Statements

1 

 


 

CLEAR CHANNEL OUTDOOR HOLDINGS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(UNAUDITED)

                                 

(In thousands, except per share data)

 

Three Months Ended

 

 

Nine Months Ended

 

 

 

 

 

September 30,

 

 

September 30,

 

 

 

 

 

2012 

 

 

2011 

 

 

2012 

 

 

2011 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Revenue

$

 731,141 

 

$

 748,450 

 

$

 2,143,750 

 

$

 2,187,872 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

Direct operating expenses (excludes depreciation and amortization)

 

 393,334 

 

 

 408,132 

 

 

 1,194,282 

 

 

 1,214,984 

 

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

 

 137,488 

 

 

 131,915 

 

 

 422,922 

 

 

 398,032 

 

Corporate expenses (excludes depreciation and amortization)

 

 25,219 

 

 

 22,303 

 

 

 77,367 

 

 

 67,324 

 

Depreciation and amortization

 

 100,352 

 

 

 114,934 

 

 

 292,357 

 

 

 322,864 

 

Other operating income – net

 

 42,397 

 

 

 37 

 

 

 49,146 

 

 

 9,139 

Operating income

 

 117,145 

 

 

 71,203 

 

 

 205,968 

 

 

 193,807 

Interest expense

 

 102,612 

 

 

 61,809 

 

 

 273,396 

 

 

 183,595 

Interest income on Due from Clear Channel Communications

 

 16,913 

 

 

 12,215 

 

 

 48,982 

 

 

 31,786 

Equity in earnings (loss) of nonconsolidated affiliates

 

 (234) 

 

 

 1,038 

 

 

 30 

 

 

 1,640 

Other income (expense) – net

 

 1,825 

 

 

 (1,859) 

 

 

 (300) 

 

 

 975 

Income (loss) before income taxes

 

 33,037 

 

 

 20,788 

 

 

 (18,716) 

 

 

 44,613 

Income tax expense

 

 (8,212) 

 

 

 (11,002) 

 

 

 (1,000) 

 

 

 (11,007) 

Consolidated net income (loss)

 

 24,825 

 

 

 9,786 

 

 

 (19,716) 

 

 

 33,606 

 

Less amount attributable to noncontrolling interest

 

 7,541 

 

 

 6,573 

 

 

 14,986 

 

 

 13,239 

Net income (loss) attributable to the Company

$

 17,284 

 

$

 3,213 

 

$

 (34,702) 

 

$

 20,367 

Other comprehensive income, net of tax:

 

 

 

 

 

 

 

 

 

 

 

 

Foreign currency translation adjustments

 

 18,580 

 

 

 (88,618) 

 

 

 13,748 

 

 

 (22,233) 

 

Foreign currency reclassification adjustment

 

 (688) 

 

 

 86 

 

 

 (534) 

 

 

 234 

 

Unrealized loss on marketable securities

 

 (1,087) 

 

 

 (4,979) 

 

 

 (1,077) 

 

 

 (4,459) 

Other comprehensive income (loss)

 

 16,805 

 

 

 (93,511) 

 

 

 12,137 

 

 

 (26,458) 

Comprehensive income (loss)

 

 34,089 

 

 

 (90,298) 

 

 

 (22,565) 

 

 

 (6,091) 

 

Less amount attributable to noncontrolling interest

 

 1,184 

 

 

 (1,268) 

 

 

 (551) 

 

 

 4,866 

Comprehensive income (loss) attributable to the Company

$

 32,905 

 

$

 (89,030) 

 

$

 (22,014) 

 

$

 (10,957) 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income (loss) attributable to the Company per common share:

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

$

 0.05 

 

$

 0.01 

 

$

 (0.12) 

 

$

 0.05 

 

 

Weighted average common shares outstanding – Basic

 

 357,108 

 

 

 355,940 

 

 

 356,808 

 

 

 355,873 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Diluted

$

 0.05 

 

$

 0.01 

 

$

 (0.12) 

 

$

 0.05 

 

 

Weighted average common shares outstanding – Diluted

 

 357,547 

 

 

 356,428 

 

 

 356,808 

 

 

 356,556 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Dividends declared per share

$

 - 

 

$

 - 

 

$

 6.08 

 

$

 - 

See Notes to Consolidated Financial Statements

2 

 


 

CLEAR CHANNEL OUTDOOR HOLDINGS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

                                                                                                                                                 

                                                                                                                                                 

(In thousands)

 

Nine Months Ended September 30,

 

 

 

2012 

 

 

2011 

Cash flows from operating activities:

 

 

 

 

 

Consolidated net income (loss)

$

 (19,716) 

 

$

 33,606 

 

 

 

 

 

 

 

Reconciling items:

 

 

 

 

 

 

Depreciation and amortization

 

 292,357 

 

 

 322,864 

 

Deferred taxes

 

 (32,776) 

 

 

 (13,744) 

 

Provision for doubtful accounts

 

 4,507 

 

 

 4,982 

 

Gain on sale of operating assets

 

 (49,146) 

 

 

 (9,139) 

 

Share-based compensation

 

 9,016 

 

 

 8,104 

 

Amortization of deferred financing charges and note discounts, net

 

 8,448 

 

 

 5,740 

 

Other reconciling items – net

 

 (752) 

 

 

 (3,759) 

Changes in operating assets and liabilities:

 

 

 

 

 

 

(Increase) decrease in accounts receivable

 

 (9) 

 

 

 25,763 

 

Increase in deferred income

 

 25,673 

 

 

 27,020 

 

Decrease in accrued expenses

 

 (14,633) 

 

 

 (17,201) 

 

Increase in accounts payable and other liabilities

 

 1,102 

 

 

 11,786 

 

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

 

 1,835 

 

 

 (44,366) 

Net cash provided by operating activities

 

 225,906 

 

 

 351,656 

 

 

 

 

 

 

 

Cash flows from investing activities:

 

 

 

 

 

 

Purchases of property, plant and equipment

 

 (187,369) 

 

 

 (164,400) 

 

Purchases of other operating assets

 

 (9,398) 

 

 

 (13,239) 

 

Proceeds from disposal of assets

 

 54,047 

 

 

 11,008 

 

Change in other – net

 

 (3,775) 

 

 

 947 

Net cash used for investing activities

 

 (146,495) 

 

 

 (165,684) 

 

 

 

 

 

 

 

Cash flows from financing activities:

 

 

 

 

 

 

Draws on credit facilities

 

 2,063 

 

 

 - 

 

Payments on credit facilities

 

 (1,922) 

 

 

 (3,202) 

 

Proceeds from long-term debt

 

 2,200,000 

 

 

 1,560 

 

Payments on long-term debt

 

 (7,301) 

 

 

 (13,243) 

 

Net transfers to Clear Channel Communications

 

 (67,277) 

 

 

 (157,595) 

 

Deferred financing charges

 

 (40,002) 

 

 

 - 

 

Dividends paid

 

 (2,170,396) 

 

 

 - 

 

Change in other – net

 

 (3,817) 

 

 

 (4,350) 

Net cash used for financing activities

 

 (88,652) 

 

 

 (176,830) 

 

 

 

 

 

 

 

Effect of exchange rate changes on cash

 

 1,493 

 

 

 (1,181) 

 

 

 

 

 

 

 

Net increase (decrease) in cash and cash equivalents

 

 (7,748) 

 

 

 7,961 

 

 

 

 

 

 

 

Cash and cash equivalents at beginning of period

 

 542,655 

 

 

 624,018 

 

 

 

 

 

 

 

Cash and cash equivalents at end of period

$

 534,907 

 

$

 631,979 

See Notes to Consolidated Financial Statements

3 

 


 

CLEAR CHANNEL OUTDOOR HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

                                                                                                                                                 

NOTE 1 – BASIS OF PRESENTATION

 

Preparation of Interim Financial Statements

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

 

The consolidated financial statements include the accounts of the Company and its subsidiaries and give effect to allocations of expenses from the Company’s indirect parent entity, Clear Channel Communications, Inc. (“Clear Channel Communications”).  These allocations were made on a specifically identifiable basis or using relative percentages of headcount or other methods management considered to be a reasonable reflection of the utilization of services provided.  Also included in the consolidated financial statements are entities for which the Company has a controlling financial interest or is the primary beneficiary.  Investments in companies in which the Company owns 20 percent to 50 percent of the voting common stock or otherwise exercises significant influence over operating and financial policies of the Company are accounted for under the equity method.  All significant intercompany transactions are eliminated in the consolidation process.  Certain prior-period amounts have been reclassified to conform to the 2012 presentation.

 

During the first quarter of 2012, and in connection with the appointment of the Company’s new chief executive officer, the Company reevaluated its segment reporting and determined that its Latin American operations were more appropriately aligned with the operations of its International segment.  As a result, the operations of Latin America are no longer reflected within the Company’s Americas segment and are currently included in the results of its International segment.  Accordingly, the Company has recast the corresponding segment disclosures for prior periods.

 

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

 

Property, Plant and Equipment

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

 

(In thousands)

 

September 30,

 

 

December 31,

 

 

2012 

 

2011 

Land, buildings and improvements

$

 208,224 

 

$

 204,543 

Structures

 

 2,882,291 

 

 

 2,783,434 

Furniture and other equipment

 

 122,520 

 

 

 111,481 

Construction in progress

 

 76,423 

 

 

 57,504 

 

 

 3,289,458 

 

 

 3,156,962 

Less: accumulated depreciation

 

 1,093,023 

 

 

 910,252 

Property, plant and equipment, net

$

 2,196,435 

 

$

 2,246,710 

 

Definite-lived Intangible Assets

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

4 

 


 

CLEAR CHANNEL OUTDOOR HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(UNAUDITED)

 

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

 

(In thousands)

 

September 30, 2012

 

 

December 31, 2011

 

 

Gross Carrying Amount

 

 

Accumulated Amortization

 

 

Gross Carrying Amount

 

 

Accumulated Amortization

Transit, street furniture and other contractual rights

$

 778,942 

 

$

 (381,466) 

 

$

 773,238 

 

$

 (329,563) 

Other

 

 177,572 

 

 

 (1,473) 

 

 

 176,779 

 

 

 (1,928) 

Total

$

 956,514 

 

$

 (382,939) 

 

$

 950,017 

 

$

 (331,491) 

 

Total amortization expense related to definite-lived intangible assets for the three months ended September 30, 2012 and 2011 was $18.9 million and $30.8 million, respectively.  Total amortization expense related to definite-lived intangible assets for the nine months ended September 30, 2012 and 2011 was $56.0 million and $77.3 million, respectively.

 

The following table presents the Company’s estimate of amortization expense for each of the five succeeding fiscal years for definite-lived intangible assets.

 

(in thousands)

2013 

$

72,652 

2014 

 

67,900 

2015 

 

50,662 

2016 

 

43,256 

2017 

 

32,601 

 

Indefinite-lived Intangible Assets

The Company’s indefinite-lived intangibles consist primarily of billboard permits in its Americas segment.  Due to significant differences in both business practices and regulations, billboards in the International segment are subject to long-term, finite contracts unlike the Company’s permits in the United States and Canada.  Accordingly, there are no indefinite-lived assets in the International segment.

 

Goodwill

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

 

(In thousands)

 

Americas

 

 

International

 

 

Total

Balance as of December 31, 2010

$

 571,932 

 

$

 290,310 

 

$

 862,242 

 

Foreign currency

 

 - 

 

 

 (6,898) 

 

 

 (6,898) 

 

Impairment

 

 - 

 

 

 (1,146) 

 

 

 (1,146) 

 

Acquisitions

 

 - 

 

 

 2,995 

 

 

 2,995 

Balance as of December 31, 2011

 

 571,932 

 

 

 285,261 

 

 

 857,193 

 

Foreign currency

 

 - 

 

 

 2,159 

 

 

 2,159 

 

Dispositions

 

 - 

 

 

 (2,729) 

 

 

 (2,729) 

Balance as of September 30, 2012

$

 571,932 

 

$

 284,691 

 

$

 856,623 

5 

 


 

CLEAR CHANNEL OUTDOOR HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(UNAUDITED)

NOTE 3 – LONG-TERM DEBT

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

 

(In thousands)

 

September 30,

 

 

December 31,

 

 

 

2012 

 

2011 

Clear Channel Worldwide Holdings Senior Notes:

 

 

 

 

 

 

9.25% Series A Senior Notes Due 2017

$

 500,000 

 

$

 500,000 

 

9.25% Series B Senior Notes Due 2017

 

 2,000,000 

 

 

 2,000,000 

Clear Channel Worldwide Holdings Senior Subordinated Notes:

 

 

 

 

 

 

7.625% Series A Senior Subordinated Notes Due 2020

 

 275,000 

 

 

 - 

 

7.625% Series B Senior Subordinated Notes Due 2020

 

 1,925,000 

 

 

 - 

Other debt

 

 38,502 

 

 

 45,909 

Total debt

 

 4,738,502 

 

 

 2,545,909 

Less: current portion

 

 19,710 

 

 

 23,806 

Total long-term debt

$

 4,718,792 

 

$

 2,522,103 

 

The aggregate market value of the Company’s debt based on market prices for which quotes were available was approximately $4.9 billion and $2.7 billion at September 30, 2012 and December 31, 2011, respectively.

 

Clear Channel Worldwide Holdings Senior Subordinated Notes Issuance

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


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

 

The Series A Subordinated Notes were issued pursuant to an indenture, dated as of March 15, 2012 (the “Series A Subordinated Note Indenture”), among CCWH, the Company, CCOI and the other guarantors named therein (collectively with the Company and CCOI, the “Series A Subordinated Note Guarantors”) and U.S. Bank National Association, as trustee (the “Trustee”), and the Series B Subordinated Notes were issued pursuant to an indenture, dated as of March 15, 2012 (the “Series B Subordinated Note Indenture” and together with the Series A Subordinated Note Indenture, the “Subordinated Indentures”), among CCWH, the Company, CCOI and the other guarantors named therein (collectively with the Company and CCOI, the “Series B Subordinated Note Guarantors”) and the Trustee.

 

At any time prior to March 15, 2015, CCWH may redeem the Subordinated Notes, in whole or in part, at a price equal to 100% of the principal amount of the Subordinated Notes plus a “make-whole” premium, together with accrued and unpaid interest, if any, to the redemption date. CCWH may redeem the Subordinated Notes, in whole or in part, on or after March 15, 2015, at the redemption prices set forth in the applicable Subordinated Indenture plus accrued and unpaid interest to the redemption date. At any time on or before March 15, 2015, CCWH may elect to redeem up to 40% of the then outstanding aggregate principal amount of the Subordinated Notes at a redemption price equal to 107.625% of the principal amount thereof, plus accrued and unpaid interest to the redemption date, with the net proceeds of one or more equity offerings. Notwithstanding the foregoing, neither the Company nor any of its subsidiaries is permitted to make any purchase of, or otherwise effectively cancel or retire any Series B Subordinated Notes if,

6 

 


 

CLEAR CHANNEL OUTDOOR HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(UNAUDITED)

after giving effect thereto and, if applicable, any concurrent purchase of or other addition with respect to any Series A Subordinated Notes, the ratio of (a) the outstanding aggregate principal amount of the Series A Subordinated Notes to (b) the outstanding aggregate principal amount of the Series B Subordinated Notes shall be greater than 0.25, subject to certain exceptions.

 

The Series A Subordinated Note Indenture contains covenants that limit the Company’s ability and the ability of its restricted subsidiaries to, among other things: (i) incur additional debt or issue certain preferred stock; (ii) engage in certain transactions with affiliates; (iii) create restrictions on dividends or other payments by the restricted subsidiaries; and (iv) merge, consolidate or sell substantially all of the Company’s or CCWH’s assets. The Series A Subordinated Note Indenture does not include limitations on dividends, stock redemptions or other distributions or investments or on asset sales. The Series B Subordinated Note Indenture contains covenants that limit the Company’s ability and the ability of its restricted subsidiaries to, among other things: (i) pay dividends, redeem stock or make other distributions or investments; (ii) incur additional debt or issue certain preferred stock; (iii) transfer or sell assets; (iv) engage in certain transactions with affiliates; (v) create restrictions on dividends or other payments by the restricted subsidiaries; and (vi) merge, consolidate or sell substantially all of the Company’s or CCWH’s assets. The Subordinated Indentures also provide for customary events of default.

 

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


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

 

Clear Channel Communications’ Debt Repayments

On March 15, 2012, using proceeds of the CCOH Dividend distributed to Clear Channel Holdings and CC Finco, together with cash on hand, Clear Channel Communications repaid indebtedness under its senior secured credit facilities in an aggregate amount equal to $1,925.7 million. As a result of the prepayment, the revolving credit commitments under Clear Channel Communications’ revolving credit facility were permanently reduced from $1.9 billion to $10.0 million and the sub-limit under which certain of the Company’s international subsidiaries may borrow (to the extent that Clear Channel Communications’ has not already borrowed against this capacity) was reduced from $145.0 million to $750 thousand.  Clear Channel Communications has borrowed the entire sub-limit capacity as of September 30, 2012.

 

In connection with the Subordinated Notes issuance, Clear Channel Communications used cash on hand to prepay $170.5 million of additional indebtedness under its senior secured credit facilities in order to remain in compliance with its debt covenants.

 

NOTE 4 – SUPPLEMENTAL DISCLOSURES

 

Income tax expense

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

 

(In thousands)

 

Three Months Ended

 

 

Nine Months Ended

 

 

September 30,

 

 

September 30,

 

 

2012 

 

 

2011 

 

 

2012 

 

 

2011 

Current tax expense

$

 (16,804) 

 

$

 (8,321) 

 

$

 (33,776) 

 

$

 (24,751) 

Deferred tax benefit (expense)

 

 8,592 

 

 

 (2,681) 

 

 

 32,776 

 

 

 13,744 

Income tax expense

$

 (8,212) 

 

$

 (11,002) 

 

$

 (1,000) 

 

$

 (11,007) 

 

The effective tax rate is the provision for income taxes as a percent of income before income taxes.  The effective tax rates for the three and nine months ended September 30, 2012 were 24.9% and (5.3)%, respectively. The effective rate for the three months ended September 30, 2012 was primarily impacted by reduced non-U.S. tax rates on financial reporting gains resulting from the disposition of certain foreign subsidiaries.  The effective tax rate for the nine months ended September 30, 2012 was primarily impacted by the

7 

 


 

CLEAR CHANNEL OUTDOOR HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(UNAUDITED)

inability to record tax benefits on tax losses in certain foreign jurisdictions due to the uncertainty of the ability to utilize those losses in future periods.

 

The effective tax rate for the three and nine months ended September 30, 2011 was 52.9% and 24.7%, respectively.  The 2011 effective tax rate was primarily impacted by the Company’s settlement of U.S. federal and state tax examinations.  Pursuant to the settlements, the Company recorded a reduction to income tax expense of approximately $3.5 million to reflect the net tax benefits of the settlements.  In addition, the effective rate for the nine months ended September 30, 2011 was impacted by the Company’s ability to benefit from certain tax loss carry forwards in foreign jurisdictions due to increased taxable income during 2011, where the losses previously did not provide a benefit.

 

During the nine months ended September 30, 2012 and 2011, cash paid for interest and income taxes, net of income tax refunds of $3.7 million and $6.8 million, respectively, was as follows:

 

(In thousands)

 

Nine Months Ended September 30,

 

 

2012 

 

 

2011 

Interest

$

 267,395 

 

$

 176,070 

Income taxes

 

 41,176 

 

 

 27,050 

 

NOTE 5 – FAIR VALUE MEASUREMENTS

 

The Company holds marketable equity securities classified in accordance with the provisions of ASC 320-10  These marketable equity securities are measured at fair value on each reporting date using quoted prices in active markets.  Due to the fact that the inputs used to measure the marketable equity securities at fair value are observable, the Company has categorized the fair value measurements of the securities as Level 1 in accordance with ASC 820-10-35. The Company records its investments in these marketable equity securities on the balance sheet as “Other Assets.” 

 

The cost, unrealized holding gains or losses, and fair value of the Company’s investments at September 30, 2012 and December 31, 2011 are as follows:

 

(In thousands)

 

September 30,

 

 

December 31,

 

 

2012 

 

 

2011 

Cost

$

 3,188 

 

$

 3,188 

Gross unrealized losses

 

 (1,087) 

 

 

 - 

Gross unrealized gains

 

 83 

 

 

 74 

Fair value

$

 2,184 

 

$

 3,262 

 

NOTE 6 – COMMITMENTS AND CONTINGENCIES

 

The Company and its subsidiaries are currently involved in certain legal proceedings arising in the ordinary course of business and, as required, have accrued an estimate of the probable costs for resolution of those claims for which the occurrence of loss is probable and the amount can be reasonably estimated.  These estimates have been developed in consultation with counsel and are based upon an analysis of potential results, assuming a combination of litigation and settlement strategies.  It is possible, however, that future results of operations for any particular period could be materially affected by changes in the Company’s assumptions or the effectiveness of its strategies related to these proceedings.  Additionally, due to the inherent uncertainty of litigation, there can be no assurance that the resolution of any particular claim or proceeding would not have a material adverse effect on the Company’s financial condition or results of operations.

 

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

8 

 


 

CLEAR CHANNEL OUTDOOR HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(UNAUDITED)

 

Brazil Litigation

 

On or about July 12, 2006 and April 12, 2007, two of the Company’s operating businesses (L&C Outdoor Ltda. (“L&C”) and Publicidad Klimes São Paulo Ltda. (“Klimes”), respectively) in the São Paulo, Brazil market received notices of infraction from the state taxing authority, seeking to impose a value added tax (“VAT”) on such businesses, retroactively for the period from December 31, 2001 through January 31, 2006. The taxing authority contends that these businesses fall within the definition of “communication services” and as such are subject to the VAT. L&C and Klimes filed separate petitions to challenge the imposition of this tax.

 

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

 

Guarantees

 

As of September 30, 2012, the Company had $71.5 million in letters of credit outstanding, of which $69.0 million of letters of credit were cash secured. Additionally, as of September 30, 2012, Clear Channel Communications had outstanding commercial standby letters of credit and surety bonds of $18.2 million and $42.4 million, respectively, held on behalf of the Company. 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 in the amount of $5.0 million are collateral in support of surety bonds and these amounts would only be drawn under the letter of credit in the event the associated surety bonds were funded and the Company did not honor its reimbursement obligation to the issuers.

 

In addition, as of September 30, 2012, the Company had outstanding bank guarantees of $51.4 million related to international subsidiaries, of which $4.6 million were backed by cash collateral.

 

NOTE 7 – RELATED PARTY TRANSACTIONS

 

The Company records net amounts due to or from Clear Channel Communications as “Due from/to Clear Channel Communications” on the condensed consolidated balance sheets.  The accounts represent the revolving promissory note issued by the Company to Clear Channel Communications and the revolving promissory note issued by Clear Channel Communications to the Company, in the face amount of $1.0 billion, or if more or less than such amount, the aggregate unpaid principal amount of all advances.  The accounts accrue interest pursuant to the terms of the promissory notes and are generally payable on demand or when they mature on December 15, 2017.

 

Included in the accounts are the net activities resulting from day-to-day cash management services provided by Clear Channel Communications.  As a part of these services, the Company maintains collection bank accounts swept daily into accounts of Clear Channel Communications (after satisfying the funding requirements of the Trustee Accounts under the CCWH senior notes and the CCWH Subordinated Notes).  In return, Clear Channel Communications funds the Company’s controlled disbursement accounts as checks or electronic payments are presented for payment.  The Company’s claim in relation to cash transferred from its concentration account is on an unsecured basis and is limited to the balance of the “Due from Clear Channel Communications” account.  At September 30, 2012 and December 31, 2011, the asset recorded in “Due from Clear Channel Communications” on the condensed consolidated balance sheets was $723.3 million and $656.0 million, respectively.  At September 30, 2012, we had no borrowings under the revolving promissory note to Clear Channel Communications.

 

The net interest income for the three months ended September 30, 2012 and 2011 was $16.9 million and $12.2 million, respectively. The net interest income for the nine months ended September 30, 2012 and 2011 was $49.0 million and $31.8 million, respectively. At September 30, 2012 and December 31, 2011, the interest rate on the “Due from Clear Channel Communications” account was 9.25%, which is equal to the fixed interest rate on the CCWH senior notes.

 

Clear Channel Communications has a multi-currency revolving credit facility with a maturity in July 2014 which includes a sub-limit that certain of the Company’s International subsidiaries may borrow against to the extent Clear Channel Communications has not already borrowed against this capacity and is compliant with its covenants under the revolving credit facility.  In connection with the

9 

 


 

CLEAR CHANNEL OUTDOOR HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(UNAUDITED)

Subordinated Notes issuance during the first quarter of 2012, Clear Channel Communications made mandatory prepayments under its senior secured credit facilities in an aggregate amount equal to $1,925.7 million. As a result of the prepayment, the revolving credit commitments under Clear Channel Communications’ revolving credit facility were permanently reduced from $1.9 billion to $10.0 million and the sub-limit under which certain of the Company’s international subsidiaries may borrow (to the extent that Clear Channel Communications’ has not already borrowed against this capacity) was reduced from $145.0 million to $750 thousand.  As of September 30, 2012, the Company had no outstanding borrowings under the $750 thousand sub-limit facility.  Clear Channel Communications had borrowed the entire sub-limit capacity as of September 30, 2012.

 

The Company provides advertising space on its billboards for radio stations owned by Clear Channel Communications.  For the three months ended September 30, 2012 and 2011, the Company recorded $0.5 million and $1.1 million, respectively, in revenue for these advertisements. For the nine months ended September 30, 2012 and 2011, the Company recorded $1.1 million and $2.8 million, respectively, in revenue for these advertisements.

 

Under the Corporate Services Agreement between Clear Channel Communications and the Company, Clear Channel Communications provides management services to the Company, which include, among other things: (i) treasury, payroll and other financial related services; (ii) certain executive officer services; (iii) human resources and employee benefits services; (iv) legal and related services; (v) information systems, network and related services; (vi) investment services; (vii) procurement and sourcing support services; and (viii) other general corporate services.  These services are charged to the Company based on actual direct costs incurred or allocated by Clear Channel Communications based on headcount, revenue or other factors on a pro rata basis.  For the three months ended September 30, 2012 and 2011, the Company recorded $9.5 million and $7.2 million, respectively, as a component of corporate expenses for these services. For the nine months ended September 30, 2012 and 2011, the Company recorded $24.6 million and $19.7 million, respectively, as a component of corporate expenses for these services.

 

Pursuant to the Tax Matters Agreement between Clear Channel Communications and the Company, the operations of the Company are included in a consolidated federal income tax return filed by Clear Channel Communications.  The Company’s provision for income taxes has been computed on the basis that the Company files separate consolidated federal income tax returns with its subsidiaries.  Tax payments are made to Clear Channel Communications on the basis of the Company’s separate taxable income.  Tax benefits recognized on the Company’s employee stock option exercises are retained by the Company.

 

The Company computes its deferred income tax provision using the liability method in accordance with the provisions of ASC 740-10, as if the Company was a separate taxpayer.  Deferred tax assets and liabilities are determined based on differences between financial reporting bases and tax bases of assets and liabilities and are measured using the enacted tax rates expected to apply to taxable income in the periods in which the deferred tax asset or liability is expected to be realized or settled.  Deferred tax assets are reduced by valuation allowances if the Company believes it is more likely than not some portion or all of the asset will not be realized.

 

Pursuant to the Employee Matters Agreement, the Company’s employees participate in Clear Channel Communications’ employee benefit plans, including employee medical insurance and a 401(k) retirement benefit plan.  These costs are recorded as a component of selling, general and administrative expenses and were approximately $2.8 million and $3.1 million for the three months ended September 30, 2012 and 2011, respectively. For the nine months ended September 30, 2012 and 2011, the Company recorded approximately $8.6 million and $9.1 million, respectively, as a component of selling, general and administrative expenses for these services.

10 

 


 

CLEAR CHANNEL OUTDOOR HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(UNAUDITED)

NOTE 8 – EQUITY AND COMPREHENSIVE INCOME

 

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

 

(In thousands)

 

The Company

 

 

Noncontrolling Interests

 

 

Consolidated

Balances at January 1, 2012

$

 2,508,697 

 

$

 231,530 

 

$

 2,740,227 

Net income (loss)

 

 (34,702) 

 

 

 14,986 

 

 

 (19,716) 

Dividend

 

 (2,170,396) 

 

 

 - 

 

 

 (2,170,396) 

Foreign currency translation adjustments

 

 14,299 

 

 

 (551) 

 

 

 13,748 

Unrealized holding loss on marketable securities

 

 (1,077) 

 

 

 - 

 

 

 (1,077) 

Reclassification adjustment

 

 (534) 

 

 

 - 

 

 

 (534) 

Other - net

 

 7,093 

 

 

 (4,844) 

 

 

 2,249 

Balances at September 30, 2012

$

 323,380 

 

$

 241,121 

 

$

 564,501 

 

 

 

 

 

 

 

 

 

Balances at January 1, 2011

$

 2,498,261 

 

$

 209,794 

 

 

 2,708,055 

Net income

 

 20,367 

 

 

 13,239 

 

 

 33,606 

Foreign currency translation adjustments

 

 (27,099) 

 

 

 4,866 

 

 

 (22,233) 

Unrealized holding loss on marketable securities

 

 (4,459) 

 

 

 - 

 

 

 (4,459) 

Reclassification adjustment

 

 234 

 

 

 - 

 

 

 234 

Other - net

 

 4,794 

 

 

 (3,708) 

 

 

 1,086 

Balances at September 30, 2011

$

 2,492,098 

 

$

 224,191 

 

$

 2,716,289 

 

During March 2012, the Company paid the CCOH Dividend, totaling $2,170.4 million, using proceeds from the Subordinated Notes issuance in addition to cash on hand.  The CCOH Dividend was determined to represent a return of capital, or liquidating dividend, to the Company’s shareholders, which resulted in a reduction to “Additional paid-in capital.”

 

Also, in connection with the CCOH Dividend, all outstanding stock options and restricted stock units as of both March 16, 2012 and March 26, 2012 were modified pursuant to antidilutive provisions contained in the Company’s 2005 Stock Incentive Plan. The modification ensured that the intrinsic value of existing stock options and restricted stock units prior to the dividend payment did not decline due to the reduction the Company’s stock price that resulted from the dividend. The CCOH Dividend was determined to be an equity restructuring in accordance with ASC 718.  No incremental compensation cost was or will be recognized as a result of this modification.

 

NOTE 9 – SEGMENT DATA

 

The Company has two reportable segments, which it believes best reflect how the Company is currently managed – Americas and International.  The Americas segment consists of operations primarily in the United States and Canada, and the International segment primarily includes operations in Europe, Asia and Latin America.  The Americas and International display inventory consists primarily of billboards, street furniture displays and transit displays.  Corporate includes infrastructure and support including information technology, human resources, legal, finance and administrative functions of each of the Company’s operating segments, as well as overall executive, administrative and support functions.  Share-based payments are recorded by each segment in direct operating and selling, general and administrative expenses.

 

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

11 

 


 

CLEAR CHANNEL OUTDOOR HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(UNAUDITED)

 

(In thousands)

 

 

 

 

 

 

 

Corporate and other

 

 

 

 

 

Americas

 

 

International

 

 

reconciling items

 

 

Consolidated

Three months ended September 30, 2012

 

 

 

 

 

 

 

 

 

 

 

Revenue

$

 335,021 

 

$

 396,120 

 

$

 - 

 

$

 731,141 

Direct operating expenses

 

 146,121 

 

 

 247,213 

 

 

 - 

 

 

 393,334 

Selling, general and administrative expenses

 

 54,718 

 

 

 82,770 

 

 

 - 

 

 

 137,488 

Depreciation and amortization

 

 50,177 

 

 

 49,740 

 

 

 435 

 

 

 100,352 

Corporate expenses

 

 - 

 

 

 - 

 

 

 25,219 

 

 

 25,219 

Other operating income - net

 

 - 

 

 

 - 

 

 

 42,397 

 

 

 42,397 

Operating income

$

 84,005 

 

$

 16,397 

 

$

 16,743 

 

$

 117,145 

 

 

 

 

 

 

 

 

 

 

 

 

Capital expenditures

$

 25,633 

 

$

 30,238 

 

$

 702 

 

$

 56,573 

Share-based compensation expense

$

 1,893 

 

$

 1,708 

 

$

 59 

 

$

 3,660 

 

 

 

 

 

 

 

 

 

 

 

 

Three months ended September 30, 2011

 

 

 

 

 

 

 

 

 

 

 

Revenue

$

 326,882 

 

$

 421,568 

 

$

 - 

 

$

 748,450 

Direct operating expenses

 

 143,345 

 

 

 264,787 

 

 

 - 

 

 

 408,132 

Selling, general and administrative expenses

 

 50,639 

 

 

 81,276 

 

 

 - 

 

 

 131,915 

Depreciation and amortization

 

 60,117 

 

 

 54,817 

 

 

 - 

 

 

 114,934 

Corporate expenses

 

 - 

 

 

 - 

 

 

 22,303 

 

 

 22,303 

Other operating income - net

 

 - 

 

 

 - 

 

 

 37 

 

 

 37 

Operating income (loss)

$

 72,781 

 

$

 20,688 

 

$

 (22,266) 

 

$

 71,203 

 

 

 

 

 

 

 

 

 

 

 

 

Capital expenditures

$

 17,073 

 

$

 42,049 

 

$

 1,248 

 

$

 60,370 

Share-based compensation expense

$

 1,903 

 

$

 792 

 

$

 36 

 

$

 2,731 

 

 

 

 

 

 

 

 

 

 

 

 

Nine months ended September 30, 2012

 

 

 

 

 

 

 

 

 

 

 

Revenue

$

 935,850 

 

$

 1,207,900 

 

$

 - 

 

$

 2,143,750 

Direct operating expenses

 

 433,716 

 

 

 760,566 

 

 

 - 

 

 

 1,194,282 

Selling, general and administrative expenses

 

 151,996 

 

 

 270,926 

 

 

 - 

 

 

 422,922 

Depreciation and amortization

 

 141,702 

 

 

 149,485 

 

 

 1,170 

 

 

 292,357 

Corporate expenses

 

 - 

 

 

 - 

 

 

 77,367 

 

 

 77,367 

Other operating income - net

 

 - 

 

 

 - 

 

 

 49,146 

 

 

 49,146 

Operating income (loss)

$

 208,436 

 

$

 26,923 

 

$

 (29,391) 

 

$

 205,968 

 

 

 

 

 

 

 

 

 

 

 

 

Capital expenditures

$

 84,749 

 

$

 97,147 

 

$

 5,473 

 

$

 187,369 

Share-based compensation expense

$

 5,065 

 

$

 3,791 

 

$

 160 

 

$

 9,016 

 

 

 

 

 

 

 

 

 

 

 

 

Nine months ended September 30, 2011

 

 

 

 

 

 

 

 

 

 

 

Revenue

$

 914,800 

 

$

 1,273,072 

 

$

 - 

 

$

 2,187,872 

Direct operating expenses

 

 420,305 

 

 

 794,679 

 

 

 - 

 

 

 1,214,984 

Selling, general and administrative expenses

 

 149,232 

 

 

 248,800 

 

 

 - 

 

 

 398,032 

Depreciation and amortization

 

 159,061 

 

 

 163,803 

 

 

 - 

 

 

 322,864 

Corporate expenses

 

 - 

 

 

 - 

 

 

 67,324 

 

 

 67,324 

Other operating income - net

 

 - 

 

 

 - 

 

 

 9,139 

 

 

 9,139 

Operating income (loss)

$

 186,202 

 

$

 65,790 

 

$

 (58,185) 

 

$

 193,807 

 

 

 

 

 

 

 

 

 

 

 

 

Capital expenditures

$

 82,550 

 

$

 81,150 

 

$

 2,444 

 

$

 166,144 

Share-based compensation expense

$

 5,745 

 

$

 2,396 

 

$

 111 

 

$

 8,252 

12 

 


 

CLEAR CHANNEL OUTDOOR HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(UNAUDITED)

NOTE 10 – GUARANTOR SUBSIDIARIES

 

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

 

(In thousands)

 

As of September 30, 2012

 

 

Parent

 

Subsidiary

 

Guarantor

 

Non-Guarantor

 

 

 

 

 

 

 

 

Company

 

Issuer

 

Subsidiaries

 

Subsidiaries

 

Eliminations

 

Consolidated

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash and cash equivalents

$

 214,665 

 

$

 - 

 

$

 - 

 

$

 324,676 

 

$

 (4,434) 

 

$

 534,907 

Accounts receivable, net of allowance

 

 - 

 

 

 - 

 

 

 232,580 

 

 

 457,621 

 

 

 - 

 

 

 690,201 

Intercompany receivables

 

 - 

 

 

 183,685 

 

 

 1,393,405 

 

 

 - 

 

 

 (1,577,090) 

 

 

 - 

Other current assets

 

 3,953 

 

 

 4,125 

 

 

 78,195 

 

 

 135,339 

 

 

 - 

 

 

 221,612 

 

Total Current Assets

 

 218,618 

 

 

 187,810 

 

 

 1,704,180 

 

 

 917,636 

 

 

 (1,581,524) 

 

 

 1,446,720 

Property, plant and equipment, net

 

 - 

 

 

 - 

 

 

 1,414,311 

 

 

 782,124 

 

 

 - 

 

 

 2,196,435 

Definite-lived intangibles, net

 

 - 

 

 

 - 

 

 

 364,536 

 

 

 209,039 

 

 

 - 

 

 

 573,575 

Indefinite-lived intangibles

 

 - 

 

 

 - 

 

 

 1,091,114 

 

 

 15,685 

 

 

 - 

 

 

 1,106,799 

Goodwill

 

 - 

 

 

 - 

 

 

 571,932 

 

 

 284,691 

 

 

 - 

 

 

 856,623 

Due from Clear Channel Communications

 

 723,311 

 

 

 - 

 

 

 - 

 

 

 - 

 

 

 - 

 

 

 723,311 

Intercompany notes receivable

 

 182,026 

 

 

 4,939,430 

 

 

 - 

 

 

 12,384 

 

 

 (5,133,840) 

 

 

 - 

Other assets

 

 586,247 

 

 

 834,813 

 

 

 1,489,740 

 

 

 56,601 

 

 

 (2,796,703) 

 

 

 170,698 

 

Total Assets

$

 1,710,202 

 

$

 5,962,053 

 

$

 6,635,813 

 

$

 2,278,160 

 

$

 (9,512,067) 

 

$

 7,074,161 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accounts payable and accrued expenses

$

 (601) 

 

$

 5,883 

 

$

 90,620 

 

$

 489,378 

 

$

 (4,434) 

 

$

 580,846 

Intercompany payable

 

 1,381,158 

 

 

 - 

 

 

 183,685 

 

 

 12,247 

 

 

 (1,577,090) 

 

 

 - 

Deferred income

 

 - 

 

 

 - 

 

 

 38,979 

 

 

 69,344 

 

 

 - 

 

 

 108,323 

Current portion of long-term debt

 

 - 

 

 

 - 

 

 

 39 

 

 

 19,671 

 

 

 - 

 

 

 19,710 

 

Total Current Liabilities

 

 1,380,557 

 

 

 5,883 

 

 

 313,323 

 

 

 590,640 

 

 

 (1,581,524) 

 

 

 708,879 

Long-term debt

 

 - 

 

 

 4,700,000 

 

 

 1,193 

 

 

 17,599 

 

 

 - 

 

 

 4,718,792 

Intercompany notes payable

 

 6,040 

 

 

 - 

 

 

 4,845,963 

 

 

 281,837 

 

 

 (5,133,840) 

 

 

 - 

Deferred tax liability

 

 225 

 

 

 85 

 

 

 752,144 

 

 

 40,846 

 

 

 - 

 

 

 793,300 

Other long-term liabilities

 

 - 

 

 

 - 

 

 

 136,943 

 

 

 151,746 

 

 

 - 

 

 

 288,689 

Total shareholders' equity

 

 323,380 

 

 

 1,256,085 

 

 

 586,247 

 

 

 1,195,492 

 

 

 (2,796,703) 

 

 

 564,501 

 

Total Liabilities and Shareholders' Equity

$

 1,710,202 

 

$

 5,962,053 

 

$

 6,635,813 

 

$

 2,278,160 

 

$

 (9,512,067) 

 

$

 7,074,161 

13 

 


 

CLEAR CHANNEL OUTDOOR HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(UNAUDITED)

 

(In thousands)

 

As of December 31, 2011

 

 

Parent

 

Subsidiary

 

Guarantor

 

Non-Guarantor

 

 

 

 

 

 

 

 

Company

 

Issuer

 

Subsidiaries

 

Subsidiaries

 

Eliminations

 

Consolidated

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash and cash equivalents

$

 325,696 

 

$

 - 

 

$

 - 

 

$

 249,448 

 

$

 (32,489) 

 

$

 542,655 

Accounts receivable, net of allowance

 

 - 

 

 

 - 

 

 

 232,834 

 

 

 469,257 

 

 

 - 

 

 

 702,091 

Intercompany receivables

 

 - 

 

 

 183,310 

 

 

 1,435,881 

 

 

 - 

 

 

 (1,619,191) 

 

 

 - 

Other current assets

 

 2,012 

 

 

 - 

 

 

 79,626 

 

 

 127,344 

 

 

 - 

 

 

 208,982 

 

Total Current Assets

 

 327,708 

 

 

 183,310 

 

 

 1,748,341 

 

 

 846,049 

 

 

 (1,651,680) 

 

 

 1,453,728 

Property, plant and equipment, net

 

 - 

 

 

 - 

 

 

 1,448,078 

 

 

 798,632 

 

 

 - 

 

 

 2,246,710 

Definite-lived intangibles, net

 

 - 

 

 

 - 

 

 

 378,515 

 

 

 240,011 

 

 

 - 

 

 

 618,526 

Indefinite-lived intangibles

 

 - 

 

 

 - 

 

 

 1,090,597 

 

 

 15,107 

 

 

 - 

 

 

 1,105,704 

Goodwill

 

 - 

 

 

 - 

 

 

 571,932 

 

 

 285,261 

 

 

 - 

 

 

 857,193 

Due from Clear Channel Communications

 

 656,040 

 

 

 - 

 

 

 - 

 

 

 - 

 

 

 - 

 

 

 656,040 

Intercompany notes receivable

 

 182,026 

 

 

 2,774,175 

 

 

 - 

 

 

 17,832 

 

 

 (2,974,033) 

 

 

 - 

Other assets

 

 2,775,720 

 

 

 786,783 

 

 

 1,475,709 

 

 

 61,309 

 

 

 (4,949,237) 

 

 

 150,284 

 

Total Assets

$

 3,941,494 

 

$

 3,744,268 

 

$

 6,713,172 

 

$

 2,264,201 

 

$

 (9,574,950) 

 

$

 7,088,185 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accounts payable and accrued expenses

$

 144 

 

$

 1,134 

 

$

 136,226 

 

$

 502,182 

 

$

 (32,489) 

 

$

 607,197 

Intercompany payable

 

 1,424,937 

 

 

 - 

 

 

 183,310 

 

 

 10,944 

 

 

 (1,619,191) 

 

 

 - 

Deferred income

 

 - 

 

 

 - 

 

 

 34,217 

 

 

 55,763 

 

 

 - 

 

 

 89,980 

Current portion of long-term debt

 

 - 

 

 

 - 

 

 

 31 

 

 

 23,775 

 

 

 - 

 

 

 23,806 

 

Total Current Liabilities

 

 1,425,081 

 

 

 1,134 

 

 

 353,784 

 

 

 592,664 

 

 

 (1,651,680) 

 

 

 720,983 

Long-term debt

 

 - 

 

 

 2,500,000 

 

 

 1,265 

 

 

 20,838 

 

 

 - 

 

 

 2,522,103 

Intercompany notes payable

 

 7,491 

 

 

 - 

 

 

 2,692,644 

 

 

 273,898 

 

 

 (2,974,033) 

 

 

 - 

Deferred tax liability

 

 225 

 

 

 (137) 

 

 

 771,105 

 

 

 51,739 

 

 

 - 

 

 

 822,932 

Other long-term liabilities

 

 - 

 

 

 1,204 

 

 

 118,650 

 

 

 162,086 

 

 

 - 

 

 

 281,940 

Total shareholders' equity

 

 2,508,697 

 

 

 1,242,067 

 

 

 2,775,724 

 

 

 1,162,976 

 

 

 (4,949,237) 

 

 

 2,740,227 

 

Total Liabilities and Shareholders' Equity

$

 3,941,494 

 

$

 3,744,268 

 

$

 6,713,172 

 

$

 2,264,201 

 

$

 (9,574,950) 

 

$

 7,088,185 

14 

 


 

CLEAR CHANNEL OUTDOOR HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(UNAUDITED)

 

(In thousands)

Three Months Ended September 30, 2012

 

 

Parent

 

Subsidiary

 

Guarantor

 

Non-Guarantor

 

 

 

 

 

 

 

 

Company

 

Issuer

 

Subsidiaries

 

Subsidiaries

 

Eliminations

 

Consolidated

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Revenue

$

 - 

 

$

 - 

 

$

 312,395 

 

$

 418,746 

 

$

 - 

 

$

 731,141 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Direct operating expenses

 

 - 

 

 

 - 

 

 

 131,615 

 

 

 261,719 

 

 

 - 

 

 

 393,334 

 

Selling, general and administrative expenses

 

 - 

 

 

 - 

 

 

 51,335 

 

 

 86,153 

 

 

 - 

 

 

 137,488 

 

Corporate expenses

 

 4,598 

 

 

 - 

 

 

 12,631 

 

 

 7,990 

 

 

 - 

 

 

 25,219 

 

Depreciation and amortization

 

 - 

 

 

 - 

 

 

 49,633 

 

 

 50,719 

 

 

 - 

 

 

 100,352 

 

Other operating income (expense) – net

 

 (126) 

 

 

 - 

 

 

 2,784 

 

 

 39,739 

 

 

 - 

 

 

 42,397 

Operating income (loss)

 

 (4,724) 

 

 

 - 

 

 

 69,965 

 

 

 51,904 

 

 

 - 

 

 

 117,145 

Interest (income) expense – net

 

 (81) 

 

 

 100,782 

 

 

 2,129 

 

 

 (218) 

 

 

 - 

 

 

 102,612 

Interest income on Due from Clear Channel Communications

 

 - 

 

 

 - 

 

 

 16,913 

 

 

 - 

 

 

 - 

 

 

 16,913 

Intercompany interest income

 

 3,602