iHeartMedia 2001 Annual Report Download - page 58

Download and view the complete annual report

Please find page 58 of the 2001 iHeartMedia annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 111

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62
  • 63
  • 64
  • 65
  • 66
  • 67
  • 68
  • 69
  • 70
  • 71
  • 72
  • 73
  • 74
  • 75
  • 76
  • 77
  • 78
  • 79
  • 80
  • 81
  • 82
  • 83
  • 84
  • 85
  • 86
  • 87
  • 88
  • 89
  • 90
  • 91
  • 92
  • 93
  • 94
  • 95
  • 96
  • 97
  • 98
  • 99
  • 100
  • 101
  • 102
  • 103
  • 104
  • 105
  • 106
  • 107
  • 108
  • 109
  • 110
  • 111

58
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 December 31, 2001 by $58.0 million and would change
accumulated comprehensive income (loss) and net income (loss) by $33.6 million and $2.4 million,
respectively. At December 31, 2001, we also hold $64.4 million of investments that do not have a quoted
market price, but are subject to fluctuations in their value.
Foreign Currency
We have operations in countries throughout the world. Foreign operations are measured in their
local currencies except in hyper-inflationary countries in which we operate. 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 to
risk of international currency fluctuations, we maintain a natural hedge through borrowings in currencies
other than the U.S. dollar. This hedge position is reviewed monthly. We currently maintain no
derivative instruments to mitigate the exposure to translation and/or transaction risk. However, this does
not preclude the adoption of specific hedging strategies in the future. Our foreign operations reported a
net loss of $28.1 million for the year ended December 31, 2001. It is estimated that a 10% change in the
value of the U.S. dollar to foreign currencies would change net loss for the year ended December 31,
2001 by $2.8 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 December 31, 2001 would change our 2001 equity in earnings of
nonconsolidated affiliates by $.3 million and would change our net income for the year ended December
31, 2001 by approximately $.2 million. 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
On July 1, 2001, we adopted Statement of Financial Accounting Standards No. 141, Business
Combinations. Statement 141 addresses financial accounting and reporting for business combinations
and supersedes APB Opinion No. 16, Business Combinations, and FASB Statement 38, Accounting for
Preacquisition Contingencies of Purchased Enterprises. Statement 141 is effective for all business
combinations initiated after June 30, 2001. Statement 141 eliminates the pooling-of-interest method of
accounting for business combinations except for qualifying business combinations that were initiated
prior to July 1, 2001. Statement 141 also changes the criteria to recognize intangible assets apart from
goodwill. As we have historically used the purchase method to account for all business combinations,
adoption of this statement did not have a material impact on our financial position or results of
operations.