iHeartMedia 2003 Annual Report Download - page 40

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.
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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.
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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.
The non-cash impairments of our goodwill and FCC licenses were generally caused by unfavorable economic conditions, which persisted in
the industries we served throughout 2001. This weakness contributed to our customers reducing the number of advertising dollars spent on our
media inventory and live entertainment events. These conditions adversely impacted the cash flow projections used to determine the fair value
of our licenses and each reporting unit at January 1, 2002. These factors resulted in the non-cash impairment charge of a portion of our licenses
and goodwill.
Radio Broadcasting
Revenue increased $261.7 million for the year ended December 31, 2002 as compared to 2001. We experienced broad based revenue
increases during 2002. Growth occurred across our large and small market clusters, in national and local sales, in our syndicated radio
programs and across our advertising categories. Consistent with the widespread growth across our markets, our national and local revenue
increased 11% and 5%,
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(In thousands)
Years Ended December 31,
% Change
2002 2001 2002 v. 2001
Revenue $3,717,243 $3,455,553 8%
Divisional operating expenses 2,126,139 2,104,719 1%
Non-cash compensation 4,400 12,373 (64%)
Depreciation and amortization 153,941 1,619,986 (90%)
Operating income (loss) $1,432,763 $(281,525)