iHeartMedia 2005 Annual Report Download - page 40

40
loss on our early extinguishment of debt and $34.1 million related to the reversal of accruals associated with tax
contingencies. Current tax expense for the year ended December 31, 2003 includes $119.7 million primarily related to
the sale of a portion of our Univision investment.
Deferred tax expense decreased $324.7 million in 2004 as compared to 2003. Deferred tax expense for the year
ended December 31, 2004 includes a $176.0 million deferred tax benefit related to our sale of our remaining investment
in Univision. This benefit was partially offset by an approximate $54.3 million expense related to our early
extinguishment of debt. Deferred tax expense for the year ended December 31, 2003 includes $158.0 million related to
our conversion of our investment in Hispanic to Univision.
Income from Discontinued Operations - Net
We completed the spin-off of our live entertainment and sports representation businesses on December 21,
2005. In accordance with Statement of Financial Accounting Standards No. 144, Accounting for the Impairment or
Disposal of Long-Lived Assets, we reported the results of operations of these businesses during 2004 and 2003 in
discontinued operations.
Cumulative Effect of a Change in Accounting Principle
The SEC staff issued Staff Announcement No. D-108, Use of the Residual Method to Value Acquired Assets
Other Than Goodwill, at the September 2004 meeting of the Emerging Issues Task Force. The Staff Announcement
states that the residual method should no longer be used to value intangible assets other than goodwill. Rather, a direct
method should be used to determine the fair value of all intangible assets other than goodwill required to be recognized
under Statement of Financial Accounting Standards No. 141, Business Combinations. Registrants who had applied a
method other than a direct method to the valuation of intangible assets other than goodwill for purposes of impairment
testing under Statement of Financial Accounting Standards No 142, Goodwill and Other Intangible Assets, shall perform
an impairment test using a direct value method on all intangible assets other than goodwill that were previously valued
using another method by no later than the beginning of their first fiscal year beginning after December 15, 2004.
Our adoption of the Staff Announcement in the fourth quarter of 2004 resulted in an aggregate carrying value
of our FCC licenses and outdoor permits that was in excess of their fair value. The Staff Announcement required us to
report the excess value of $4.9 billion, net of tax, as a cumulative effect of a change in accounting principle.
Radio Broadcasting Results of Operations
Our radio broadcasting operating results were as follows:
(In thousands) Years Ended December 31, % Change
2004 2003 2004 v. 2003
Revenue $ 3,754,381 $ 3,695,020 2%
Direct operating expenses 900,633 852,195 6%
Selling, general and administrative expenses 1,261,855 1,277,859 (1%)
Non-cash compensation 930 1,609 (42%)
Depreciation and amortization 159,082 154,121 3%
Operating income $ 1,431,881 $ 1,409,236 2%
Our radio broadcasting revenues increased 2% during 2004 as compared to 2003, led by our small to mid-size
markets (those outside the top 25), which outpaced our overall radio growth. These markets rely more heavily on local
advertising, which was up for the year. Our national syndication business also outpaced our overall radio growth
through demand for advertising on existing programs and the addition of two new shows, Delilah and Trumped. Growth
in revenues from local and national advertisements broadcast during our traffic updates as well as non-spot advertising
revenues was positive for the year. Consistent with the radio industry, our national advertising revenues struggled
throughout the year and finished below amounts recognized in 2003. Some national advertising categories such as
finance, professional services and political increased spending during 2004, but declines in our three largest national
advertising categories of retail, automotive and telecom/utility weighed on the overall results. Although national
advertising declined in 2004 as compared to 2003, we began to see growth in national advertising during the fourth
quarter of 2004, buoyed by political advertising, as well as strength in consumer products, professional services and
automotive advertisements.
Our direct operating expenses grew $48.4 million during 2004 as compared to 2003, principally from
programming expenses related to higher on-air talent salaries. Our SG&A decreased $16.0 million during 2004 as
compared to 2003, due to a decline in variable sales-related expenses, partially offset by an increase in general and
administrative expenses.