iHeartMedia 2001 Annual Report Download - page 38

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the reduction in selling costs associated with the decline in pro forma revenue in 2001.
Also, as discussed below, the terrorist attacks on September 11, 2001 negatively impacted the
overall operating results for the later part of fiscal year 2001 as compared to the later part of fiscal year
2000.
Corporate expenses increased $44.8 million on a reported basis primarily due to $36.3 million of
additional expense directly related to additional corporate employees obtained in our acquisitions. In
addition, corporate expenses increased due to the additional corporate employees hired subsequent to our
acquisitions to accommodate for the growth of the company. As a result of our acquisitions, we
increased corporate head count throughout 2001 to 700 employees as compared to 350 employees at the
end of fiscal year 2000.
Other Income and Expense Information
Non-cash compensation expense of $17.1 million and $16.0 million was recorded in fiscal year
2001 and 2000, respectively. This expense is primarily due to unvested stock options assumed in
mergers that are now convertible into Clear Channel stock. To the extent that these employees’ options
continue to vest, we recognize non-cash compensation expense over the remaining vesting period.
Vesting dates range from January 2002 to April 2005. If no employees forfeit their unvested options by
leaving the company, we expect to recognize non-cash compensation expense of approximately $9.0
million during the remaining vesting period.
Depreciation and amortization expense increased from $1.4 billion in 2000 to $2.6 billion in
2001, an 83% increase. The increase is due primarily to the inclusion of a full year of depreciation and
amortization associated with the AMFM and SFX acquisitions, which resulted in additional depreciation
and amortization in aggregate of approximately $875.0 million in 2001 as compared to 2000. In addition
to the increase relating to recent acquisitions, depreciation expense includes $170.0 million of
impairment charges related primarily to the identification of duplicative and excess assets no longer
necessary in our ongoing operations. The majority of the impaired assets identified resulted from the
continuing integration of recent acquisitions, as well as analog television equipment, and an impairment
of an operating contract.
Interest expense was $560.1 million and $383.1 million in 2001 and 2000, respectively, an
increase of $177.0 million, or 46% percent. The increase was due to the overall increase in average
amount of debt outstanding, partially offset by the decrease in LIBOR rates. Approximately 36% and
50% of our debt was variable-rate debt that bears interest based upon LIBOR at December 31, 2001 and
2000, respectively. The 1-Month LIBOR rates decreased from 6.57% at December 31, 2000 to 1.87% at
December 31, 2001.
The loss on sale of assets related to mergers in 2001 was $213.7 million as compared to a gain of
$783.7 million in 2000. The loss on sale of assets related to mergers in 2001 is primarily due to a loss of
$235.0 million related to the sale of 24.9 million shares of Lamar Advertising Company acquired in the
AMFM merger, and a net loss of $11.6 million related to write-downs of other investments acquired in
mergers. This loss was partially offset by a gain of $32.9 million realized on the sale of five stations in
connection with governmental directives regarding the AMFM merger. The gain on sale of assets related
to mergers of $783.7 million in 2000 is primarily due to the sale of 39 stations in connection with
governmental directives regarding the AMFM merger, which realized a gain of $805.2 million. This gain
for 2000 was partially offset by a loss of $5.8 million related to the sale of 1.3 million shares of Lamar
Advertising Company that we acquired in the AMFM merger; and a net loss of $15.7 million related to