iHeartMedia 2010 Annual Report Download - page 86

Download and view the complete annual report

Please find page 86 of the 2010 iHeartMedia annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 191

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62
  • 63
  • 64
  • 65
  • 66
  • 67
  • 68
  • 69
  • 70
  • 71
  • 72
  • 73
  • 74
  • 75
  • 76
  • 77
  • 78
  • 79
  • 80
  • 81
  • 82
  • 83
  • 84
  • 85
  • 86
  • 87
  • 88
  • 89
  • 90
  • 91
  • 92
  • 93
  • 94
  • 95
  • 96
  • 97
  • 98
  • 99
  • 100
  • 101
  • 102
  • 103
  • 104
  • 105
  • 106
  • 107
  • 108
  • 109
  • 110
  • 111
  • 112
  • 113
  • 114
  • 115
  • 116
  • 117
  • 118
  • 119
  • 120
  • 121
  • 122
  • 123
  • 124
  • 125
  • 126
  • 127
  • 128
  • 129
  • 130
  • 131
  • 132
  • 133
  • 134
  • 135
  • 136
  • 137
  • 138
  • 139
  • 140
  • 141
  • 142
  • 143
  • 144
  • 145
  • 146
  • 147
  • 148
  • 149
  • 150
  • 151
  • 152
  • 153
  • 154
  • 155
  • 156
  • 157
  • 158
  • 159
  • 160
  • 161
  • 162
  • 163
  • 164
  • 165
  • 166
  • 167
  • 168
  • 169
  • 170
  • 171
  • 172
  • 173
  • 174
  • 175
  • 176
  • 177
  • 178
  • 179
  • 180
  • 181
  • 182
  • 183
  • 184
  • 185
  • 186
  • 187
  • 188
  • 189
  • 190
  • 191

CLEAR CHANNEL CAPITAL I, LLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
The balance at December 31, 2008 is net of cumulative impairments of $1.1 billion, $2.3 billion, and $173.4 million in the Radio
broadcasting, Americas outdoor and International outdoor segments, respectively.
The fair value of the Company’s reporting units on October 1, 2010 increased from the fair value at October 1, 2009. The increase in
the fair value of the Company’s radio reporting unit was primarily the result of a 50 basis point decline in the discount rate and a
$210.0 million increase related to industry projections. The increase in the fair value of the Company’s Americas outdoor reporting
unit was primarily the result of a $638.6 million increase related to forecast revenues and operating margins. As a result of increase in
fair value across the radio and Americas outdoor reporting units, no goodwill impairments were recognized in these segments. Within
the Company’s International outdoor segment, one country experienced a decline in fair value which resulted in a $2.1 million non-
cash impairment to goodwill.
I
nterim Impairment Tests to Goodwill
The discounted cash flow model indicated that the Company failed the first step of the impairment test for certain of its reporting
units as of December 31, 2008 and June 30, 2009, which required it to compare the implied fair value of each reporting unit’s
goodwill with its carrying value.
The Company forecasted revenue, expenses, and cash flows over a ten-year period for each of its reporting units. Historically,
revenues in its industries have been highly correlated to economic cycles. Based on this consideration, among others, the assumed
2008 and 2009 revenue growth rates used in the December 31, 2008 and June 30, 2009 impairment models were negative followed by
assumed revenue growth with an anticipated economic recovery in 2009 and 2010, respectively. The Company also calculated a
“normalized” residual year which represents the perpetual cash flows of each reporting unit. The residual year cash flow was
capitalized to arrive at the terminal value of the reporting unit.
The Company calculated the weighted average cost of capital (“WACC”) as of December 31, 2008 resulting in WACCs of 11%,
12.5% and 12.5% for each of the reporting units in the Radio, Americas outdoor and International outdoor segments, respectively. As
of June 30, 2009, the Company calculated WACCs of 11%, 12.5% and 13.5% for each of the reporting units in the Radio, Americas
outdoor and International outdoor segments, respectively.
The Company also utilized the market approach to provide a test of reasonableness to the results of the discounted cash flow model.
The market approach indicates the fair value of the invested capital of a business based on a company’s market capitalization (if
publicly traded) and a comparison of the business to comparable publicly traded companies and transactions in its industry. This
approach can be estimated through the quoted market price method, the market comparable method, and the market transaction
method. The three variations of the market approach indicated that the fair value determined by the Company’s discounted cash flow
model was within a reasonable range of outcomes as of December 31, 2008 and June 30, 2009.
77
(In thousands)
Radio
Broadcastin
g
Americas
Outdoor
Advertisin
g
International
Outdoor
Advertisin
g
Other
Consolidated
Post-Mer
g
er
Balance as of December 31, 2008
$ 5,579,19
0
$ 892,598
$ 287,543
$ 331,290
$ 7,090,621
Im
p
airment
(2,420,897)
(390,374)
(73,764)
(211,988)
(3,097,023)
Ac
q
uisitions
4,518
2,250
11
0
—
6,878
Dis
p
ositions
(62,410)
—
—
(2,276)
(64,686)
Forei
g
n currenc
y
—
16,293 17,412
—
33,705
Purchase
p
rice ad
j
ustments - net
47,086
68,896
45,042
(482)
160,542
Other
(618)
(4,414)
—
—
(5,032)
Balance as of December 31, 2009
$3,146,869 $ 585,249 $ 276,343
$116,544
$4,125,005
Im
p
airment
—
—
(2,142)
—
(2,142)
Ac
q
uisitions
—
—
—
342
342
Dis
p
ositions
(5,325)
—
—
—
(5,325)
Forei
g
n currenc
y
—
285
3,299
—
3,584
Other
(1,346)
—
(792)
—
(2,138)
Balance as of December 31, 2010
$3,140,198
$585,534
$276,708
$116,886
$4,119,326