iHeartMedia 2003 Annual Report Download - page 35

Deferred tax expense increased $188.9 million in 2003 primarily due to $158.0 million in the current year related to the conversion of our
Hispanic shares to our Univision investment. Although a book gain was recorded in “Gain (loss) in marketable securities” during the third
quarter of 2003 related to the conversion of our Hispanic investment, which was accounted for as an equity investment, to Univision, which is
carried on our balance sheet at fair value, the gain is not taxable. As a result, deferred tax expense increased.
For both the years ended December 31, 2003 and 2002, our effective tax rates is 40.5%.
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 of Financial
Accounting Standards No. 142 on January 1, 2002. FAS 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.
RadioBroadcastingResultsofOperations
Our radio broadcasting operating results were as follows:
Revenue decreased $22.2 million during 2003 as compared to 2002, with weak local advertising being the key reason for the decline.
Discontinued sports broadcasting rights such as the L.A. Dodgers, cessation of business with independent promoters and a revenue decline in
our nationally syndicated radio business due to the elimination of certain shows also contributed to the decline. However, we were able to
generate a 1% revenue increase from our top 50 markets, primarily behind the relative strength of national advertising compared to local
advertising. Some of our strongest top 50 markets during 2003 were New York, Los Angeles, Cleveland, Sacramento and Austin. Leading
national advertising categories in 2003 were entertainment, finance, telecom/utility, retail and auto.
In total, radio’s divisional operating expenses were flat year over year. We saw declines in variable sales-related expenses primarily from
commissions and bonuses, declines in expenses related to sports broadcasting rights that we did not renew in 2003, and a decline in bad debt
expense. However, marketing and promotions-related expenses increased 13% in 2003 as compared to 2002 which were discretionary
expenditures aimed at competitively positioning some of our markets for the future. In addition, program-related expenses increased 3% in
2003 as compared to 2002.
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(In thousands)
Years Ended December 31,
% Change
2003 2002 2003 v. 2002
Revenue $3,695,020 $3,717,243 (1%)
Divisional operating expenses 2,130,054 2,126,139 0%
Non-cash compensation 1,609 4,400 (63%)
Depreciation and amortization 154,121 153,941 0%
Operating income $1,409,236 $1,432,763