iHeartMedia 2000 Annual Report Download - page 47

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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, the 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.
We have entered into interest rate swap agreements that effectively float interest at rates based
upon LIBOR on $1.5 billion of our current fixed rate borrowings. These agreements expire from
September 2003 to June 2005. The fair value of these agreements at December 31, 2000 was $49.0
million.
Equity Price Risk
The carrying value of our available -for-sale 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, 2000 by $307.2 million and would change comprehensive
income by $199.7 million.
In connection with the completion of the AMFM merger, Clear Channel and AMFM entered into
a Consent Decree with the Department of Justice regarding our investment in Lamar Advertising
Company. The Consent Decree, among other things, required us to sell all of our shares of Lamar by
December 31, 2002. In accordance with ABP 16, Business Combinations, our 26.2 million shares of
Lamar were recorded at their quoted market price on the closing date of the merger, which was
significantly higher than AMFM’ s historical purchase price. We will be exposed to changes in Lamar’ s
market price, which may result in large gains and losses related to this disposition in future periods.
Foreign Currency
We have operations in 43 countries throughout Europe, Asia, Australia and North and South
America. Foreign operations are measured in their local currencies except in our 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 currency fluctuations throughout
Europe and Asia, we have a natural hedge through borrowings in Euros, Sterling and other currencies.
This hedge position is reviewed monthly. We 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 loss of $9.3 million for the year ended
December 31, 2000. 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, 2000 by $.9 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, 2000 would change net income for the year ended December 31,
2000 by approximately $.1 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
In June 1998, the Financial Accounting Standards Board issued Statement of Financial
Accounting Standards No. 133 Accounting for Derivative Instruments and Hedging Activities (“Statement