iHeartMedia 2011 Annual Report Download - page 37

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E
quity in Earnings of Nonconsolidated Affiliates
Equity in earnings of nonconsolidated affiliates of $5.7 million for 2010 included an $8.3 million impairment related to an
equity investment in our International outdoor segment.
Other Income (Expense) - Net
Other expense of $4.6 million for 2011 primarily related to the accelerated expensing of $5.7 million of loan fees upon the
prepayment of $500.0 million of our senior secured credit facilities in connection with the February 2011 Offering described
elsewhere in this MD&A, partially offset by an aggregate gain of $4.3 million on the repurchase of our 5.5% senior notes due 2014.
Other income of $46.5 million in 2010 primarily related to an aggregate gain of $60.3 million on the repurchase of our
senior toggle notes partially offset by $12.8 million in foreign exchange transaction losses on short-term intercompany accounts.
Please refer to the “Debt Repurchases, Maturities and Other” section within this MD&A for additional discussion of the 2011 and
2010 repurchases.
I
ncome Tax Benefit
The effective tax rate for the year ended December 31, 2011 was 32.0% as compared to 25.7% for the year ended
December 31, 2011. The effective tax rate for 2011 was favorably impacted by our settlement of U.S. Federal and state tax
examinations during the year. Pursuant to the settlements, we recorded a reduction to income tax expense of approximately $16.3
million to reflect the net tax benefits of the settlements. This benefit was partially offset by additional tax recorded during 2011
related to the write-off of deferred tax assets associated with the vesting of certain equity awards and our inability to benefit from
certain tax loss carryforwards in foreign jurisdictions.
The effective tax rate for the year ended December 31, 2010 was 25.7% as compared to 10.9% for the year ended
December 31, 2009. The effective tax rate for 2010 was impacted by our inability to benefit from tax losses in certain foreign
j
urisdictions due to the uncertainty of the ability to utilize those losses in future years. In addition, we recorded a valuation allowance
of $13.6 million in 2010 against deferred tax assets related to capital allowances in foreign jurisdictions due to the uncertainty of the
ability to realize those assets in future periods.
CCME Results of Operations
Our CCME operating results were as follows:
CCME revenue increased $117.6 million during 2011 compared to 2010, primarily driven by a $107.1 million increase due
to our Traffic acquisition. We experienced increases in our digital radio services revenue as a result of improved rates, increased
volume and revenues related to our iHeartRadio Music Festival. Offsetting the increases were slight declines in local and national
advertising across various markets and advertising categories including telecommunication, travel and tourism and, most notably,
political.
Direct operating expenses increased $40.7 million during 2011 compared to 2010, primarily due to an increase of $56.6
million from our Traffic acquisition and an increase in expenses related to our digital initiatives, including our iHeartRadio Player and
iHeartRadio Music Festival. These increases were partially offset by a $19.0 million decline in music license fees related to a
settlement of 2011 and 2010 license fees. In addition, included in our 2011 results are restructuring expenses of $8.9 million, which
represents a decline of $4.8 million compared to 2010. SG&A expenses increased $17.1 million, primarily due to an increase of $41.0
million related to our Traffic acquisition, which was partially offset by a decline of $21.9 million in compensation expense primarily
related to reduced salaries and commission.
Depreciation and amortization increased $11.6 million, primarily due to our Traffic acquisition.
34
(In thousands)
Years Ended December 31,
2011
2010
% Chan
g
e
Revenue
$2,986,828
$2,869,224
4%
Direct o
p
eratin
g
ex
p
enses
849,265
808,592
5%
SG&A ex
p
enses
980,960
963,853
2%
De
p
reciation and amortization
268,245
256,673
5%
O
p
eratin
g
income
$888,358
$840,106
6%