iHeartMedia 2009 Annual Report Download - page 50

E
quity in Earnings (Loss) of Non-consolidated Affiliates
Equity in loss of nonconsolidated affiliates of $20.7 million in 2009 is primarily related to a $22.9 million impairment of
equity investments in our International outdoor segment in addition to a $4.0 million loss on the sale of a portion of our investment in
Grupo ACIR. Subsequent to the January 2009 sale of 57% of our remaining 20% interest in Grupo ACIR, we no longer accounted for
our investment as an equity method investment and began accounting for it at cost in accordance with ASC 323.
Included in equity in earnings of nonconsolidated affiliates in 2008 is a $75.6 million gain on the sale of our 50% interest
in Clear Channel Independent, a South African outdoor advertising company.
Other Income (Expense) – Net
Other income of $679.7 million in 2009 relates to an aggregate gain of $368.6 million on the repurchases of certain of our
senior notes and an aggregate gain of $373.7 million on the repurchases of certain of our senior toggle notes and senior cash pay
notes. The gains on extinguishment of debt were partially offset by a $29.3 million loss related to loan costs associated with the $2.0
billion retirement of certain of our outstanding senior secured debt. Please refer to the Sources and Uses section within this MD&A
for additional discussion of the repurchases and debt retirement.
Other income of $126.4 million in 2008 relates to an aggregate net gain of $94.7 million on the tender of certain of our
outstanding notes, a $29.3 million foreign exchange gain on translating short-term intercompany notes and an $8.0 million dividend
received from a cost investment, partially offset by a $4.7 million impairment of our investment in a radio partnership.
I
ncome Taxes
Current tax benefits for 2009 increased $26.7 million compared to the full year for 2008 primarily due to our ability to
carry back certain net operating losses to prior years. On November 6, 2009, the Worker, Homeownership, and Business Assistance
Act of 2009 (the “Act”) was enacted into law. The Act amended Section 172 of the Internal Revenue Code to allow net operating
losses realized in a tax year ended after December 31, 2007 and beginning before January 1, 2010 to be carried back for up to five
years (such losses were previously limited to a two-year carryback). This change will allow us to carryback fiscal 2009 taxable losses
of approximately $361 million, based on our projections of projected taxable losses eligible for carryback, to prior years and receive
refunds of previously paid Federal income taxes of approximately $126.4 million. The ultimate amount of such refunds realized from
net operating loss carryback is dependent on our actual taxable losses for fiscal 2009, which may vary from our current expectations.
The effective tax rate for the year ended December 31, 2009 was 10.9% as compared to 10.2% for the year ended
December 31, 2008. The effective tax rate for 2009 was impacted by the goodwill impairment charges which are not deductible for
tax purposes. In addition, as noted above, due to the law change on November 6, 2009 that allows us to carryback a portion of our
2009 net operating losses back five years and based on our expectations as to future taxable income from deferred tax liabilities that
reverse in the relevant carryforward period for those net operating losses that cannot be carried back, we believe that the realization of
the deferred tax assets associated with the remaining net operating loss carryforwards and other deferred tax assets is more likely than
not and therefore no valuation allowance is needed for the majority of our deferred tax assets.
The 2008 effective tax rate was impacted by the impairment charge that resulted in a $5.3 billion decrease in “Income
(loss) before income taxes and discontinued operations” and tax benefits of approximately $648.2 million. Partially offsetting this
decrease to the effective rate were tax benefits recorded as a result of the release of valuation allowances on the capital loss
carryforwards that were used to offset the taxable gain from the disposition of our investment in AMT and Grupo ACIR.
Additionally, we sold our 50% interest in Clear Channel Independent in 2008, which was structured as a tax free disposition. The sale
resulted in a gain of $75.6 million with no current tax expense. Further, in 2008 valuation allowances were recorded on certain net
operating losses generated during the period that were not able to be carried back to prior years.
For the year ended December 31, 2009, deferred tax benefits decreased $57.4 million as compared to 2008 primarily due to
larger impairment charges recorded in 2008 related to the tax deductible intangibles. This decrease was partially offset by increases in
deferred tax expense in 2009 as a result of the deferral of certain discharge of indebtedness income, for income tax purposes, resulting
from the reacquisition of business indebtedness, as provided by the American Recovery and Reinvestment Act of 2009 signed into
law on February 17, 2009.
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