iHeartMedia 2012 Annual Report Download - page 105

CLEAR CHANNEL CAPITAL I, LLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
102
Significant components of the Company's deferred tax liabilities and assets as of December 31, 2012 and 2011 are as follows:
(In thousands)
2012
2011
Deferred tax liabilities:
Intangibles and fixed assets
$
2,418,558
$
2,381,177
Long-term debt
381,712
465,201
Foreign
21,828
43,305
Investments in nonconsolidated affiliates
49,654
46,502
Unrealized loss in marketable securities
13,768
-
Other investments
2,122
7,068
Other
5,480
25,834
Total deferred tax liabilities
2,893,122
2,969,087
Deferred tax assets:
Accrued expenses
82,550
92,038
Unrealized gain in marketable securities
-
6,833
Net operating losses
1,107,594
917,078
Bad debt reserves
8,418
10,767
Deferred Income
553
590
Other
35,693
33,931
Total gross deferred tax assets
1,234,808
1,061,237
Less: Valuation allowance
12,312
14,177
Total deferred tax assets
1,222,496
1,047,060
Net deferred tax liabilities
$
1,670,626
$
1,922,027
Included in the Company’s net deferred tax liabilities are $19.2 million and $16.6 million of current net deferred tax assets for 2012
and 2011, respectively. The Company presents these assets in “Other current assets” on its consolidated balance sheets. The
remaining $1.7 billion and $1.9 billion of net deferred tax liabilities for 2012 and 2011, respectively, are presented in “Deferred tax
liabilities” on the consolidated balance sheets.
At December 31, 2012, the Company had recorded net operating loss carryforwards (tax effected) for federal and state income tax
purposes of $1.1 billion, expiring in various amounts through 2032. The Company expects to realize the benefits of the majority of
net operating losses based on its expectations as to future taxable income from deferred tax liabilities that reverse in the relevant
carryforward period and, therefore, the Company has not recorded a valuation allowance against those losses.
At December 31, 2012, net deferred tax liabilities include a deferred tax asset of $28.7 million relating to stock-based compensation
expense under ASC 718-10, Compensation—Stock Compensation. Full realization of this deferred tax asset requires stock options to
be exercised at a price equaling or exceeding the sum of the grant price plus the fair value of the option at the grant date and restricted
stock to vest at a price equaling or exceeding the fair market value at the grant date. Accordingly, there can be no assurance that the
stock price of the Company’s common stock will rise to levels sufficient to realize the entire deferred tax benefit currently reflected in
its balance sheet.
The deferred tax liability related to intangibles and fixed assets primarily relates to the difference in book and tax basis of acquired
FCC licenses, permits and tax deductible goodwill created from the Company’s various stock acquisitions. In accordance with
ASC 350-10, Intangibles—Goodwill and Other, the Company does not amortize FCC licenses and permits. As a result, this deferred
tax liability will not reverse over time unless the Company recognizes future impairment charges related to its FCC licenses, permits
and tax deductible goodwill or sells its FCC licenses or permits. As the Company continues to amortize its tax basis in its FCC
licenses, permits and tax deductible goodwill, the deferred tax liability will increase over time.