iHeartMedia 2011 Annual Report Download - page 59

Download and view the complete annual report

Please find page 59 of the 2011 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 144

  • 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

Interest payments related to the revolving credit facility assume the balance and interest rate as of December 31, 2011 is held
constant over the remaining term.
Interest payments on $2.5 billion of the Term Loan B facility are effectively fixed at an interest rate of 4.4%, plus applicable
margins, per annum, as a result of an aggregate $2.5 billion interest rate swap agreement maturing in September 2013. Interest
expense assumes the rate is fixed through maturity of the remaining swap, at which point the rate reverts back to the floating rate
in effect at December 31, 2011.
SEASONALITY
Typically, our CCME, Americas outdoor and International outdoor segments experience their lowest financial performance
in the first quarter of the calendar year, with International outdoor historically experiencing a loss from operations in that period. Our
International outdoor segment typically experiences its strongest performance in the second and fourth quarters of the calendar year.
We expect this trend to continue in the future.
MARKET RISK
We are exposed to market risk arising from changes in market rates and prices, including movements in interest rates,
equity security prices and foreign currency exchange rates.
Equity Price Risk
The carrying value of our available-for-sale equity securities is affected by changes in their quoted market prices. It is
estimated that a 20% change in the market prices of these securities would change their carrying value and our comprehensive loss at
December 31, 2011 by approximately $14.6 million.
Interest Rate Risk
A significant amount of our long-term debt bears interest at variable rates. Accordingly, our earnings will be affected by
changes in interest rates. At December 31, 2011 we had an interest rate swap agreement with a $2.5 billion notional amount that
effectively fixes interest rates on a portion of our floating rate debt at a rate of 4.4%, plus applicable margins, per annum. The fair
value of this agreement at December 31, 2011 was a liability of $159.1 million. At December 31, 2011, approximately 50% of our
aggregate principal amount of long-term debt, including taking into consideration debt on which we have entered into a pay-fixed-
rate-receive-floating-rate swap agreement, bears interest at floating rates.
Assuming the current level of borrowings and interest rate swap contracts and assuming a 30% change in LIBOR, it is
estimated that our interest expense for the year ended December 31, 2011 would have changed by approximately $9.1 million.
In the event of an adverse change in interest rates, management may take actions to further mitigate its exposure. However,
due to the uncertainty of the actions that would be taken and their possible effects, the preceding interest rate sensitivity analysis
assumes no such actions. Further, the analysis does not consider the effects of the change in the level of overall economic activity that
could exist in such an environment.
56
(2) Interest payments on the senior secured credit facilities, other than the revolving credit facility, assume the obligations are repaid
in accordance with the amortization schedule (after giving effect to the December 2009 prepayment of $2.0 billion of term loans
with proceeds from the issuance of subsidiary senior notes and the $500.0 million repayment of revolving credit facility and
term loans associated with the priority guarantee notes, both discussed elsewhere in this MD&A) and the interest rate is held
constant over the remainin
g
term.
(3) The non-current portion of the unrecognized tax benefits is included in the “Thereafter” column as we cannot reasonably
estimate the timing or amounts of additional cash payments, if any, at this time. For additional information, see Note 10 included
in Item 8 of Part II of this Annual Re
p
ort on Form 10-K.
(4) Other long-term obligations consist of $51.0 million related to asset retirement obligations recorded pursuant to ASC 410-20,
which assumes the underlying assets will be removed at some period over the next 50 years. Also included are $31.8 million of
contract payments in our syndicated radio and media representation businesses and $65.0 million of various other long-term
obli
g
ations.
(5) Excluded from the table is $347.4 million related to various obligations with no specific contractual commitment or maturity,
$159.1 million of which relates to the fair value of our interest rate swa
p
a
g
reement.