iHeartMedia 2003 Annual Report Download - page 41

respectively, for 2002 as compared to 2001. This growth was spurred by growth in our auto, retail, telecom/utility, consumer products and
entertainment advertising categories.
Audience reach is an important part of our ability to set rates because it is an indication of how many listeners will hear our customers’
advertisements. Reach is measured in individual markets by audience surveys. While ratings across all of our markets are the ultimate
determinate of the health of our radio business, we generate approximately half of our radio revenues from our top 20 markets. Therefore, we
took a snapshot of our ratings from these markets based on the percentage of people in the market over twelve years old who listened to our
stations in an average quarter hour for the six months ending in the fall of 2002. Based on this demographic, our ratings improved in twelve of
the twenty markets, were down in six of the twenty markets and were flat in the other markets as compared to the summer of 2001.
Divisional operating expenses increased $21.4 million in 2002 as compared to 2001. The increase is attributable to acquisitions as well as
the addition of new programs and an increase in talent fees in our national syndication business. Also, commission expense and the accrual for
our incentive bonus plan increased associated with the increase in revenues. These increases were partially offset by a decrease in our bad debt
expense in 2002 and other discretionary expenditure cuts.
The decrease in depreciation and amortization for the year ended December 31, 2002 as compared to 2001 relates primarily to our adoption
of Statement 142. In accordance with Statement 142, we no longer amortize goodwill and FCC license. In addition, depreciation and
amortization expense for the year ended December 31, 2001 includes amounts related to asset impairments as well as write-offs related to
duplicative assets.
Outdoor Advertising
Revenue increased $111.6 million for the year ended December 31, 2002 as compared to year ended December 31, 2001. The increase is
partially attributable to $45.1 million from the strengthening of our international functional currencies against the dollar as well as
$37.5 million from our acquisition of the outdoor assets of Ackerley in June 2002.
Occupancy on our domestic poster, bulletin and mall/shelter inventory increased during 2002, but our average rate for this inventory is still
below that of last year. However, we saw bulletin revenue and rates increase in the fourth quarter of 2002 compared to the third quarter of
2002. With the exception of posters, we experienced revenue growth in the fourth quarter of 2002 as compared to the third quarter of 2002.
Yields per panel on our international billboard, street furniture and transit inventory were below the levels seen in 2001 for the first nine
months of 2002; however, we saw a slow recovery throughout the year and, in the fourth quarter, yields exceeded 2001 levels.
In July, we completed our acquisition of Score Outdoor in the United Kingdom. This acquisition gives us national coverage in billboards in
the United Kingdom, which has helped us gain sales we would not have received prior to the acquisition. We also renewed our Madrid and
Valencia bus contracts.
Divisional operating expenses increased $133.4 million for the year ended December 31, 2002 as compared to 2001. Ackerley contributed
approximately $19.4 million in expense for the year ended December 31, 2002. The remaining increase is primarily the result of additional
fixed expenses such as real estate and site lease expenses, which includes minimum guarantees on our municipal contracts.
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(In thousands)
Years Ended December 31,
% Change
2002 2001 2002 v. 2001
Revenue $1,859,643 $1,748,031 6%
Divisional operating expenses 1,354,092 1,220,681 11%
Depreciation and amortization 336,895 559,498 (40%)
Operating income (loss) $ 168,656 $ (32,148)