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CLEAR CHANNEL CAPITAL I, LLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
99
involving the completion of a development or obtaining appropriate permits that enable the Company to construct additional
advertising displays. At December 31, 2012, the Company believes its maximum aggregate contingency, which is subject to
performance requirements by the seller, is approximately $30.0 million. As the contingencies have not been met or resolved as of
December 31, 2012, these amounts are not recorded.
As of December 31, 2012, 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, capital expenditure
commitments and employment/talent contracts consist of the following:
(In thousands)
Capital
Non-Cancelable
Non-Cancelable
Expenditure
Employment/Talent
Operating Lease
Contracts
Commitments
Contracts
2013
$
380,288
$
561,837
$
80,143
$
85,762
2014
330,397
473,937
25,426
66,304
2015
316,951
418,056
21,273
60,383
2016
255,262
311,899
7,688
58,320
2017
210,444
154,668
11,112
17,536
Thereafter
1,283,847
450,526
932
-
Total
$
2,777,189
$
2,370,923
$
146,574
$
288,305
Rent expense charged to operations for the years ended December 31, 2012, 2011 and 2010 was $1.14 billion, $1.16 billion and
$1.10 billion, respectively.
In various areas in which the Company operates, outdoor advertising is the object of restrictive and, in some cases, prohibitive zoning
and other regulatory provisions, either enacted or proposed. The impact to the Company of loss of displays due to governmental
action has been somewhat mitigated by Federal and state laws mandating compensation for such loss and constitutional restraints.
The Company and its subsidiaries are involved in certain legal proceedings arising in the ordinary course of business and, as required,
have accrued an estimate of the probable costs for the 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. Additionally, due to the inherent uncertainty of litigation, there can be no assurance that the
resolution of any particular claim or proceeding would not have a material adverse effect on the Company’s financial condition or
results of operations.
Although the Company is involved in a variety of legal proceedings in the ordinary course of business, a large portion of its litigation
arises in the following contexts: commercial disputes; defamation matters; employment and benefits related claims; governmental
fines; intellectual property claims; and tax disputes.
Brazil Litigation
On or about July 12, 2006 and April 12, 2007, two of the Company’s operating businesses (L&C Outdoor Ltda. (“L&C”) and
Publicidad Klimes São Paulo Ltda. (“Klimes”), respectively) in the São 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 these businesses fall within the definition of
“communication services” and as such are subject to the VAT. L&C and Klimes filed separate petitions to challenge the imposition of
this tax.
On August 8, 2011, Brazil’s National Council of Fiscal Policy (CONFAZ) published a convenio authorizing sixteen states, including
the State of São Paulo, to issue an amnesty that would reduce the principal amount of VAT allegedly owed and reduce or waive
related interest and penalties. The State of São Paulo ratified the amnesty in late August 2011. On May 10, 2012, the State of São
Paulo published an amnesty decree that mirrors the convenio. Klimes and L&C accepted the amnesty on May 24, 2012 by making the
aggregate required payment of $10.9 million. On that same day, Klimes and L&C filed petitions to discontinue the tax litigation based