iHeartMedia 2002 Annual Report Download - page 38

During 2001, we entered into a secured forward exchange contract that monetized part of our investment in American Tower Corporation
(“AMT”). To partially offset the movement in the fair value of the contract, in accordance with Statement of Financial Accounting Standard
No. 133, we reclassified 2.0 million shares of AMT from an available-for-sale classification to a trading classification. As a result of the
reclassification, a $69.7 million pre-tax unrealized holding gain was recorded. The fair value adjustment of the AMT trading shares and the
secured forward exchange contract netted a gain of $11.7 million during 2001. These gains were partially offset by $55.6 million of impairment
charges recorded on investments that had declines in their market values that were considered to be other-than-temporary.
The net loss recorded during 2002 relates to the aggregate $17.6 million gain on the net fair value adjustments of the AMT trading shares
and the secured forward exchange contract, an aggregate $4.6 million gain on the sale of shares in foreign media companies, offset by a
$25.3 million impairment charge recorded on an available-for-sale investment in a domestic media company that had a decline in its market
value that was considered to be other-than-temporary.
E
quity in Earnings of Nonconsolidated Affiliates
Equity in earnings of nonconsolidated affiliates for the year ended December 31, 2002 was $26.9 million as compared to $10.4 million for
the year ended December 31, 2001. The increase is primarily attributable to an increase in our share of net income. Our nonconsolidated
affiliates adopted Statement 142 during the year which resulted in less amortization expense related to indefinite-lived intangibles. The increase
was partially offset by impairment charges related to various international equity investments that had declines in value that were considered to
be other-than-temporary.
Other Income (Expense) — Net
For the years ended December 31, 2002 and 2001, other income (expense) –net was income of $57.4 million and $152.3 million,
respectively. The income recognized in 2002 related primarily to: (1) a $44.5 million aggregate gain recognized on the sale of a television
license, the sale of assets in our live entertainment segment and the sale of our interest in a British radio license; (2) a $12.0 million gain
recognized on the early extinguishment of debt; (3) a $14.8 million gain on the sale of representation contracts; (4) a $8.0 million foreign
exchange loss; (5) a $4.8 million loss on sale of assets in our radio and outdoor segments; and (6) a $1.1 million loss on various other items.
The 2001 income related primarily to a $168.0 million gain on a non-cash, tax-free exchange of the assets of one television station for the
assets of two television stations.
I
ncome Taxes
Income taxes for the years ended December 31, 2002 and 2001 were provided at our federal and state statutory rates adjusted for the effects
of permanent tax items. During 2001, as a result of our large amounts of non-deductible goodwill amortization, our effective tax rate was
adversely impacted. As we no longer amortize goodwill, our effective tax rate for 2002 more closely approximated our statutory tax rates.
I
ncome (Loss) before Cumulative Effect of a Change in Accounting Principle
Income (loss) before cumulative effect of a change in accounting principle for the year ended December 31, 2002 was income of
$724.8 million and was a loss of $1.1 billion for the year ended December 31, 2001. Income (loss) before cumulative effect of a change in
accounting principle for 2001, if we had adopted Statement 142 as of January 1, 2001, would have been income of $248.6 million.
Cumulative Effect of a Change in Accounting Principle
The loss recorded as a cumulative effect of a change in accounting principle during 2002 relates to our adoption of Statement 142 on
January 1, 2002. Statement 142 required that we test goodwill and indefinite-lived intangibles for impairment using a fair value approach. As a
result of the goodwill test, we recorded a non-cash, net of tax, impairment charge of approximately $10.8 billion. Also, as a result of the
indefinite-lived intangible test, we recorded a non-cash, net of tax, impairment charge on our FCC licenses of approximately $6.0 billion. As
required by Statement 142, a subsequent impairment test was performed at October 1, 2002, which resulted in no additional impairment charge.
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