iHeartMedia 2012 Annual Report Download - page 100

CLEAR CHANNEL CAPITAL I, LLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
97
include: Level 1, defined as observable inputs such as quoted prices in active markets; Level 2, defined as inputs other than quoted
prices in active markets that are either directly or indirectly observable; and Level 3, defined as unobservable inputs in which little or
no market data exists, therefore requiring an entity to develop its own assumptions.
Marketable Equity Securities
The Company’s marketable equity securities and interest rate swap are measured at fair value on each reporting date.
The marketable equity securities are measured at fair value using quoted prices in active markets. Due to the fact that the inputs used
to measure the marketable equity securities at fair value are observable, the Company has categorized the fair value measurements of
the securities as Level 1.
The cost, unrealized holding gains or losses, and fair value of the Company’s investments at December 31, 2012 and 2011 are as
follows:
(In thousands)
Gross
Gross
Unrealized
Unrealized
Fair
Investments
Cost
Losses
Gains
Value
2012
Available-for-sale
$
5,207
$
-
$
106,220
$
111,427
Other cost investments
7,769
-
-
7,769
Total
$
12,976
$
-
$
106,220
$
119,196
2011
Available-for-sale
$
7,786
$
-
$
65,214
$
73,000
Other cost investments
4,766
-
-
4,766
Total
$
12,552
$
-
$
65,214
$
77,766
Other cost investments include various investments in companies for which there is no readily determinable market value. The
Company recognized other-than-temporary impairments of $2.0 million on a cost investment for the year ended December 31, 2012,
which was a non-cash impairment charge recorded in “Loss on marketable securities.”
The Company’s available-for-sale security, Independent News & Media PLC (“INM”), was in an unrealized loss position for an
extended period of time. As a result, the Company considered the guidance in ASC 320-10-S99 and reviewed the length of the time
and the extent to which the market value was less than cost and the financial condition and near-term prospects of the issuer. After
this assessment, the Company concluded that the impairment was other than temporary and recorded a non-cash impairment charge of
$2.6 million, $4.8 million and $6.5 million in “Loss on marketable securities” for the years ended December 31, 2012, 2011 and 2010,
respectively.
Interest Rate Swap
The Company’s $2.5 billion notional amount interest rate swap agreement is designated as a cash flow hedge and the effective portion
of the gain or loss on the swap is reported as a component of other comprehensive income (loss). Ineffective portions of a cash flow
hedging derivative’s change in fair value are recognized currently in earnings. In accordance with ASC 815-20-35-9, as the critical
terms of the swap and the floating-rate debt being hedged were the same at inception and remained the same during the current period,
no ineffectiveness was recorded in earnings.
The Company entered into its swap agreement to effectively convert a portion of its floating-rate debt to a fixed basis, thus reducing
the impact of interest rate changes on future interest expense. The Company assesses at inception, and on an ongoing basis, whether its
interest rate swap agreement is highly effective in offsetting changes in the interest expense of its floating rate debt. A derivative that
is not a highly effective hedge does not qualify for hedge accounting.
The Company continually monitors its positions with, and credit quality of, the financial institution which is counterparty to its
interest rate swap. The Company may be exposed to credit loss in the event of nonperformance by its counterparty to the interest rate
swap. However, the Company considers this risk to be low. If a derivative instrument no longer qualifies as a cash flow hedge, hedge