iHeartMedia 2010 Annual Report Download - page 101

CLEAR CHANNEL CAPITAL I, LLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
The Company accounts for annual rent escalation clauses included in the lease term on a straight-line basis under the guidance in
ASC 840-10. The Company considers renewal periods in determining its lease terms if at inception of the lease there is reasonable
assurance the lease will be renewed. Expenditures for maintenance are charged to operations as incurred, whereas expenditures for
renewal and betterments are capitalized.
The Company leases office space, certain broadcasting facilities, equipment and the majority of the land occupied by its outdoor
advertising structures under long-term operating leases. The Company accounts for these leases in accordance with the policies
described above.
The Company’s contracts with municipal bodies or private companies relating to street furniture, billboards, transit and malls
generally require the Company to build bus stops, kiosks and other public amenities or advertising structures during the term of the
contract. The Company owns these structures and is generally allowed to advertise on them for the remaining term of the
contract. Once the Company has built the structure, the cost is capitalized and expensed over the shorter of the economic life of the
asset or the remaining life of the contract.
Certain of the Company’s contracts contain penalties for not fulfilling its commitments related to its obligations to build bus stops,
kiosks and other public amenities or advertising structures. Historically, any such penalties have not materially impacted the
Company’s financial position or results of operations.
As of December 31, 2010, the Company’s future minimum rental commitments under non-cancelable operating lease agreements
with terms in excess of one year, minimum payments under non-cancelable contracts in excess of one year, and capital expenditure
commitments consist of the following:
Rent expense charged to continuing operations for the years ended December 31, 2010 and 2009 was $1.10 billion and $1.13 billion,
respectively. Rent expense charged to continuing operations for the post-merger period from July 31, 2008 to December 31, 2008 and
the pre-merger period from January 1, 2008 to July 30, 2008 was $526.6 million and $755.4 million, respectively.
The Company and its subsidiaries are currently involved in certain legal proceedings arising in the ordinary course of business and, as
required, the Company has accrued its estimate of the probable costs for resolution of those claims for which the occurrence of loss is
probable and the amount can be reasonably estimated. These estimates have been developed in consultation with counsel and are
based upon an analysis of potential results, assuming a combination of litigation and settlement strategies. It is possible, however, that
future results of operations for any particular period could be materially affected by changes in the Company’s assumptions or the
effectiveness of its strategies related to these proceedings.
In 2006, two of the Company’s operating businesses (L&C Outdoor Ltda. (“L&C”) and Publicidad Klimes Sao Paulo Ltda.
(“Klimes”), respectively) in the Sao Paulo, Brazil market received notices of infraction from the state taxing authority, seeking to
impose a value added tax (“VAT”) on such businesses, retroactively for the period from December 31, 2001 through January 31,
2006. The taxing authority contends that the Company’s businesses fall within the definition of “communication services” and as
such are subject to the VAT.
92
(In thousands)
Non-Cancelable
O
p
eratin
g
Leases
Non-Cancelable
Contracts
Capital
Expenditure
Commitments
2011 $ 369,012 $ 541,186 $ 48,059
2012
316,789 419,836 28,501
2013 291,769 351,403 15,486
2014
257,064 307,978 7,395
2015 249,459 281,004 4,344
Thereafter
1,325,325 624,004 3,322
Total $ 2,809,418 $ 2,525,411 $ 107,107