iHeartMedia, Inc. - Quarter Report: 2009 June (Form 10-Q)

 

 

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

þ		QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

o		TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission File Number
000-53354

CC MEDIA HOLDINGS, INC.

(Exact name of registrant as specified in its charter)

Delaware		26-0241222
(State or other jurisdiction of		(I.R.S. Employer Identification No.)
incorporation or organization)
200 East Basse Road
San Antonio, Texas		78209
(Address of principal executive offices)		(Zip Code)

(210) 822-2828
(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes þ No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes o No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer o		Accelerated filer o		Non-accelerated filer þ (Do not check if a smaller reporting company)		Smaller reporting company o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No þ

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

Class		Outstanding at August 10, 2009
Class A common stock, $.001 par value		23,434,788
Class B common stock, $.001 par value		555,556
Class C common stock, $.001 par value		58,967,502

 

 

CC MEDIA HOLDINGS, INC. AND SUBSIDIARIES

INDEX

		Page No.
Part I — Financial Information
Item 1. Unaudited Financial Statements			3
Consolidated Balance Sheets at June 30, 2009 and December 31, 2008			3
Consolidated Statements of Operations for the three and six months ended June 30, 2009 and 2008			5
Condensed Consolidated Statements of Cash Flows for the six months ended June 30, 2009 and 2008			6
Notes to Consolidated Financial Statements			7
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations			28
Item 3. Quantitative and Qualitative Disclosures about Market Risk			53
Item 4T. Controls and Procedures			53
Part II — Other Information
Item 1. Legal Proceedings			54
Item 1A. Risk Factors			54
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds			54
Item 3. Defaults Upon Senior Securities			55
Item 4. Submission of Matters to a Vote of Security Holders			55
Item 5. Other Information			55
Item 6. Exhibits			56
Signatures			62
EX-11
EX-12
EX-31.1
EX-31.2
EX-32.1
EX-32.2

PART I

Item 1. UNAUDITED FINANCIAL STATEMENTS

CC MEDIA HOLDINGS, INC. AND SUBSIDIARIES

		June 30,				December 31,
		2009				2008
		(Unaudited)				(As adjusted)*
CURRENT ASSETS
Cash and cash equivalents		$	1,497,502			$	239,846
Accounts receivable, net of allowance of $93,510 in 2009 and $97,364 in 2008			1,335,479				1,431,304
Prepaid expenses			104,602				133,217
Income taxes receivable			13,270				—
Other current assets			278,108				262,188
Total Current Assets			3,228,961				2,066,555
PROPERTY, PLANT AND EQUIPMENT
Land, buildings and improvements			630,508				614,811
Structures			2,443,210				2,355,776
Towers, transmitters and studio equipment			373,572				353,108
Furniture and other equipment			230,155				242,287
Construction in progress			85,416				128,739
			3,762,861				3,694,721
Less accumulated depreciation			333,361				146,562
			3,429,500				3,548,159
INTANGIBLE ASSETS
Definite-lived intangibles, net			2,782,523				2,881,720
Indefinite-lived intangibles — licenses			2,430,241				3,019,803
Indefinite-lived intangibles — permits			1,135,826				1,529,068
Goodwill			4,094,910				7,090,621
OTHER ASSETS
Notes receivable			11,467				11,633
Investments in, and advances to, nonconsolidated affiliates			334,748				384,137
Other assets			394,344				560,260
Other investments			55,365				33,507
Total Assets		$	17,897,885			$	21,125,463

See Notes to Consolidated Financial Statements

CC MEDIA HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
LIABILITIES AND SHAREHOLDERS’ EQUITY
(In thousands)

		June 30,				December 31,
		2009				2008
		(Unaudited)				(As adjusted)*
CURRENT LIABILITIES
Accounts payable		$	119,742			$	155,240
Accrued expenses			715,880				793,366
Accrued interest			154,131				181,264
Current portion of long-term debt			298,531				562,923
Deferred income			200,734				153,153
Total Current Liabilities			1,489,018				1,845,946
Long-term debt			20,247,458				18,940,697
Deferred tax liability			2,407,801				2,679,312
Other long-term liabilities			723,821				575,739
Commitments and contingent liabilities (Note 5)
SHAREHOLDERS’ EQUITY
Noncontrolling interest			459,105				426,220
Common Stock			82				82
Additional paid-in capital			2,104,698				2,100,995
Retained deficit			(9,133,619	)			(5,041,998	)
Accumulated other comprehensive loss			(400,391	)			(401,529	)
Cost of shares held in treasury			(88	)			(1	)
Total Shareholders’ Deficit			(6,970,213	)			(2,916,231	)
Total Liabilities and Shareholders’ Deficit		$	17,897,885			$	21,125,463

See Notes to Consolidated Financial Statements

CC MEDIA HOLDINGS, INC. AND SUBSIDIARIES

		Three Months Ended								Six Months Ended
		June 30,								June 30,
		2009				2008				2009				2008
		Post-Merger				Pre-Merger				Post-Merger				Pre-Merger
						(As adjusted)*								(As adjusted)*
Revenue		$	1,437,865			$	1,831,078			$	2,645,852			$	3,395,285
Operating expenses:
Direct operating expenses (excludes depreciation and amortization)			637,076				743,485				1,255,425				1,449,432
Selling, general and administrative expenses (excludes depreciation and amortization)			360,558				445,734				738,094				872,115
Depreciation and amortization			208,246				142,188				383,805				294,466
Corporate expenses (excludes depreciation and amortization)			50,087				47,974				97,722				94,277
Merger expenses			—				7,456				—				7,845
Impairment charges			4,041,252				—				4,041,252				—
Other operating income (expense) — net			(31,516	)			17,354				(34,410	)			19,451
Operating income (loss)			(3,890,870	)			461,595				(3,904,856	)			696,601
Interest expense			384,625				82,175				771,678				182,178
Gain on marketable securities			—				27,736				—				34,262
Equity in earnings (loss) of nonconsolidated affiliates			(17,719	)			8,990				(21,907	)			92,035
Other income (expense) — net			430,629				(6,086	)			427,449				5,701
Income (loss) before income taxes and discontinued operations			(3,862,585	)			410,060				(4,270,992	)			646,421
Income tax benefit (expense):
Current			(18,936	)			(101,047	)			(30,031	)			(124,880	)
Deferred			203,488				(24,090	)			194,991				(66,838	)
Income tax benefit (expense)			184,552				(125,137	)			164,960				(191,718	)
Income (loss) before discontinued operations			(3,678,033	)			284,923				(4,106,032	)			454,703
Income from discontinued operations, net			—				5,032				—				643,294
Consolidated net income (loss)			(3,678,033	)			289,955				(4,106,032	)			1,097,997
Amount attributable to noncontrolling interest			(4,629	)			7,628				(14,411	)			16,017
Net income (loss) attributable to the Company		$	(3,673,404	)		$	282,327			$	(4,091,621	)		$	1,081,980
Other comprehensive income (loss), net of tax:
Foreign currency translation adjustments			133,058				(9,588	)			85,715				59,564
Unrealized gain (loss) on securities and derivatives:
Unrealized holding gain (loss) on marketable securities			8,551				(42,457	)			(1,610	)			(47,578	)
Unrealized holding loss on cash flow derivatives			(47,393	)			—				(75,750	)			—
Reclassification adjustment			(513	)			(25,997	)			3,120				(25,997	)
Comprehensive income (loss)			(3,579,701	)			204,285				(4,080,146	)			1,067,969
Amount attributable to noncontrolling interest			19,509				885				10,337				21,581
Comprehensive income (loss) attributable to the Company			(3,599,210	)		$	203,400				(4,090,483	)		$	1,046,388
Net income (loss) per common share:
Income (loss) attributable to the Company before discontinued operations — Basic		$	(45.23	)		$	.56			$	(50.41	)		$	.88
Discontinued operations — Basic			—				.01				—				1.30
Net income (loss) attributable to the Company — Basic		$	(45.23	)		$	.57			$	(50.41	)		$	2.18
Weighted average common shares — Basic			81,224				495,201				81,163				494,975
Income (loss) attributable to the Company before discontinued operations — Diluted		$	(45.23	)		$	.56			$	(50.41	)		$	.88
Discontinued operations — Diluted			—				.01				—				1.30
Net income (loss) attributable to the Company — Diluted		$	(45.23	)		$	.57			$	(50.41	)		$	2.18
Weighted average common shares — Diluted			81,224				496,887				81,163				496,637
Dividends declared per share		$	—			$	—			$	—			$	—

See Notes to Consolidated Financial Statements

CC MEDIA HOLDINGS, INC. AND SUBSIDIARIES

		Six Months Ended June 30,
		2009				2008
		Post-Merger				Pre-Merger
						(As adjusted)*
Cash flows from operating activities:
Consolidated net income (loss)		$	(4,106,032	)		$	1,097,997
(Income) loss from discontinued operations, net			—				(643,294	)
			(4,106,032	)			454,703
Reconciling items:
Impairment charges			4,041,252				—
Depreciation and amortization			383,805				294,466
Deferred taxes			(194,991	)			66,838
(Gain) loss on sale of operating and fixed assets			34,410				(19,451	)
(Gain) loss on forward exchange contract			—				2,496
(Gain) loss on trading securities			—				(849	)
(Gain) loss on extinguishment of debt			(440,338	)			—
Provision for doubtful accounts			24,206				19,042
Share-based compensation			19,306				20,382
Equity in loss (earnings) of nonconsolidated affiliates			21,907				(92,035	)
Amortization of deferred financing charges, bond premiums and accretion of note discounts, net			120,352				3,653
Other reconciling items — net			(3,444	)			(26,278	)
Changes in other operating assets and liabilities, net of effects of acquisitions and dispositions			15,614				(37,012	)
Net cash (used in) provided by operating activities			(83,953	)			685,955
Cash flows from investing activities:
Change in notes receivable — net			352				1,859
Change in investments in and advances to nonconsolidated affiliates — net			6,970				24,664
Sales of investments — net			23,689				123,187
Purchases of property, plant and equipment			(92,623	)			(211,726	)
Proceeds from disposal of assets			37,332				44,311
Acquisition of operating assets, net of cash acquired			(6,930	)			(144,138	)
Change in other — net			(679	)			(16,286	)
Net cash used in investing activities			(31,889	)			(178,129	)
Cash flows from financing activities:
Draws on credit facilities			1,622,444				691,122
Payments on credit facilities			(149,376	)			(873,741	)
Proceeds from delayed draw term loan facility			500,000				—
Payments on long-term debt			(586,496	)			(625,856	)
Payments on forward exchange contract			—				(110,410	)
Payments for purchase of common shares			(122	)			(3,780	)
Payment for purchase of noncontrolling interest			(12,952	)			—
Proceeds from exercise of stock options and other			—				17,291
Dividends paid			—				(93,367	)
Net cash provided by (used in) financing activities			1,373,498				(998,741	)
Cash flows from discontinued operations:
Net cash used in operating activities			—				(85,026	)
Net cash provided by investing activities			—				1,098,886
Net cash provided by financing activities			—				—
Net cash provided by discontinued operations			—				1,013,860
Net increase in cash and cash equivalents			1,257,656				522,945
Cash and cash equivalents at beginning of period			239,846				145,148
Cash and cash equivalents at end of period		$	1,497,502			$	668,093

See Notes to Consolidated Financial Statements

CC MEDIA HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)

Note 1: BASIS OF PRESENTATION AND NEW ACCOUNTING STANDARDS

          Preparation of Interim Financial Statements

The consolidated financial statements were prepared by CC Media Holdings, Inc. (the “Company”) pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”) and, in the opinion of management, include all adjustments (consisting of normal recurring accruals and adjustments necessary for adoption of new accounting standards) necessary to present fairly the results of the interim periods shown. Certain information and footnote disclosures normally included in financial statements prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) have been condensed or omitted pursuant to such SEC rules and regulations. Management believes that the disclosures made are adequate to make the information presented not misleading. Due to seasonality and other factors, the results for the interim periods are not necessarily indicative of results for the full year. The financial statements contained herein should be read in conjunction with the consolidated financial statements and notes thereto included in the Company’s 2008 Annual Report on Form 10-K.

The consolidated financial statements include the accounts of the Company and its subsidiaries. Investments in companies in which the Company owns 20 percent to 50 percent of the voting common stock or otherwise exercises significant influence over operating and financial policies of the company are accounted for under the equity method. All significant intercompany transactions are eliminated in the consolidation process.

          Information Regarding the Registrant

The Company was formed in May 2007 by private equity funds sponsored by Bain Capital Partners, LLC and Thomas H. Lee Partners, L.P. (the “Sponsors”) for the purpose of acquiring the business of Clear Channel Communications, Inc., a Texas company (“Clear Channel”). The acquisition (the “acquisition” or the “merger”) was consummated on July 30, 2008 pursuant to the Agreement and Plan of Merger, dated November 16, 2006, as amended on April 18, 2007, May 17, 2007 and May 13, 2008 (the “Merger Agreement”).

The Company accounted for its acquisition of Clear Channel as a purchase business combination in conformity with Statement of Financial Accounting Standards No. 141, Business Combinations, and Emerging Issues Task Force Issue 88-16, Basis in Leveraged Buyout Transactions. The Company allocated a portion of the consideration paid to the assets and liabilities acquired at their initial estimated respective fair values with the remaining portion recorded at the continuing shareholders’ basis. Excess consideration after this preliminary allocation was recorded as goodwill. The purchase price allocation was materially complete as of June 30, 2009.

The accompanying consolidated statements of operations and statements of cash flows are presented for two periods: post-merger and pre-merger. The merger resulted in a new basis of accounting beginning on July 31, 2008 and the financial reporting periods are presented as follows:

•

The three and six month periods ended June 30, 2009 reflect the post-merger period of the Company, including the merger of a wholly-owned subsidiary of the Company with and into Clear Channel. Subsequent to the acquisition, Clear Channel became an indirect, wholly-owned subsidiary of the Company and the business of the Company became that of Clear Channel and its subsidiaries.

•

The three and six month periods ended June 30, 2008 reflect the pre-merger period of Clear Channel. Prior to its acquisition of Clear Channel, the Company had not conducted any activities, other than activities incident to its formation and in connection with the acquisition, and did not have any assets or liabilities, other than as related to the acquisition. The consolidated financial statements for all pre-merger periods were prepared using the historical basis of accounting for Clear Channel. As a result of the merger and the associated purchase accounting, the consolidated financial statements of the post-merger periods are not comparable to periods preceding the merger.

The opening balance sheet reflected the preliminary allocation of purchase price, based on available information and certain assumptions management believed were reasonable. During the first six months of 2009, the Company decreased the initial fair value estimate of its permits, contracts, site leases and other assets primarily in its Americas segment by $137.5 million based on additional information received, which resulted in an increase to goodwill of $93.1 million and a decrease to deferred taxes of $44.4 million.

The following unaudited supplemental pro forma information reflects the consolidated results of operations of the Company as if the merger had occurred on January 1, 2008. The historical financial information was adjusted to give effect to items that are (i) directly attributed to the merger, (ii) factually supportable, and (iii) expected to have a continuing impact on the consolidated results. Such

items include depreciation and amortization expense associated with preliminary valuations of property, plant and equipment and definite-lived intangible assets, corporate expenses associated with new equity-based awards granted to certain members of management, expenses associated with the accelerated vesting of employee equity-based awards upon the closing of the merger, interest expense related to debt issued in conjunction with the merger and the fair value adjustment to Clear Channel’s existing debt and the related tax effects of these items. This unaudited pro forma information should not be relied upon as necessarily being indicative of the historical results that would have been obtained if the merger had actually occurred on that date, nor of the results that may be obtained in the future.

		Three months ended				Six months ended
		June 30, 2008				June 30, 2008
(In thousands, except per share data)		Pre-merger				Pre-merger
Revenue		$	1,831,078			$	3,395,285
Income before discontinued operations		$	52,526			$	(8,696	)
Net income attributable to the Company		$	57,558			$	634,598
Net income per common share — basic		$	0.71			$	7.82
Net income per common share — diluted		$	0.71			$	7.82

          Liquidity

The Company’s primary source of liquidity is cash flow from operations, which has been adversely affected by the global economic downturn. The risks associated with the Company’s businesses become more acute in periods of a slowing economy or recession, which may be accompanied by a decrease in advertising. Expenditures by advertisers tend to be cyclical, reflecting overall economic conditions and budgeting and buying patterns. The current global economic downturn has resulted in a decline in advertising and marketing services among the Company’s customers, resulting in a decline in advertising revenues across its businesses. This reduction in advertising revenues has had an adverse effect on the Company’s revenue, profit margins, cash flow and liquidity. The continuation of the global economic downturn may continue to adversely impact the Company’s revenue, profit margins, cash flow and liquidity.

In January 2009, the Company announced that it commenced a restructuring program targeting a reduction of fixed costs. The Company recognized approximately $56.7 million and $90.3 million of expenses related to its restructuring program during the three and six months ended June 30, 2009, respectively.

Based on the Company’s current and anticipated levels of operations and conditions in its markets, the Company believes that cash flow from operations as well as cash on hand (including amounts drawn or available under the senior secured credit facilities) will enable the Company to meet its working capital, capital expenditure, debt service and other funding requirements for at least the next 12 months.

The Company expects to be in compliance with the covenants under Clear Channel’s senior secured credit facilities in 2009. However, the Company’s anticipated results are subject to significant uncertainty and there can be no assurance that actual results will be in compliance with the covenants. In addition, the Company’s ability to comply with the covenants in Clear Channel’s financing agreements may be affected by events beyond its control, including prevailing economic, financial and industry conditions. The breach of any covenants set forth in the financing agreements would result in a default thereunder. An event of default would permit the lenders under a defaulted financing agreement to declare all indebtedness thereunder to be due and payable prior to maturity. Moreover, the lenders under Clear Channel’s revolving credit facility under the senior secured credit facilities would have the option to terminate their commitments to make further extensions of revolving credit thereunder. If the Company is unable to repay Clear Channel’s obligations under any senior secured credit facilities or the receivables based credit facility, the lenders under such senior secured credit facilities or receivables based credit facility could proceed against any assets that were pledged to secure such senior secured credit facilities or receivables based credit facility. In addition, a default or acceleration under any of Clear Channel’s financing agreements could cause a default under other obligations that are subject to cross-default and cross-acceleration provisions.

The Company’s and Clear Channel’s corporate credit and issue-level ratings were downgraded on June 8, 2009 by Standard & Poor’s Ratings Services. The Company’s and Clear Channel’s corporate credit ratings were lowered to “CCC” from “B-”. These ratings were removed from credit watch, where they were placed with negative implications on May 4, 2009. This recent downgrade had no impact on Clear Channel’s borrowing costs under the credit agreements.

          Impairment Charges

The Company performed an interim impairment test as of June 30, 2009 on its Federal Communications Commission (“FCC”) licenses and billboard permits. The industry cash flow forecasts during the first six months of 2009 were below the forecasts used in the discounted cash flow models used to calculate the impairments at December 31, 2008. The estimated fair value of the Company’s FCC licenses and permits was below their carrying values, which resulted in a non-cash impairment charge of $935.6 million. See Note 2 for further discussion.

The Company also performed an interim goodwill impairment test as of June 30, 2009. The revenue forecasts for 2009 declined 8%, 7% and 9% for Radio, Americas outdoor and International outdoor, respectively, compared to the forecasts used in the 2008 impairment test primarily as a result of the revenues realized during the first six months of 2009. As a result, the estimated fair values of the Company’s reporting units were below their carrying values, which required the Company to compare the implied fair values of each reporting unit’s goodwill with their carrying values. As a result, the Company recognized a non-cash impairment charge of $3.1 billion to reduce goodwill. See Note 2 for further discussion.

Additionally, the Company impaired certain contracts in its Americas outdoor and International outdoor segments by $38.8 million. See Note 2 for further discussion.

          Summarized Operating Results of Discontinued Operations

During 2008, Clear Channel completed the sale of its television business and certain radio stations. Summarized operating results of these businesses reported in discontinued operations are as follows:

		Three Months Ended				Six Months Ended
		June 30,				June 30,
		2008				2008
(In thousands)		Pre-merger				Pre-merger
Revenue		$	3,970			$	73,853
Income before income taxes		$	4,557			$	699,921

Included in income from discontinued operations, net for the three and six months ended June 30, 2008, respectively, is an income tax benefit of approximately $0.5 million and income tax expense of $56.6 million. Also included in income from discontinued operations for the six months ended June 30, 2008 is a gain of $688.2 million related to the sale of Clear Channel’s television business and certain radio stations.

          Share-based Compensation Cost

The share-based compensation cost is measured at the grant date based on the fair value of the award and is recognized as expense on a straight-line basis over the vesting period. The following table presents the amount of share-based compensation recorded during the three and six months ended June 30, 2009 and 2008:

		Three Months Ended June 30,								Six Months Ended June 30,
		2009				2008				2009				2008
(In thousands)		Post-merger				Pre-merger				Post-merger				Pre-merger
Direct Expense		$	2,871			$	4,583			$	5,878			$	8,187
Selling, General & Administrative Expense			1,837				3,373				3,725				6,508
Corporate Expense			4,827				2,836				9,703				5,687
Total Share-Based Compensation Expense		$	9,535			$	10,792			$	19,306			$	20,382

As of June 30, 2009, there was $116.0 million of unrecognized compensation cost, net of estimated forfeitures, related to unvested share-based compensation arrangements that will vest based on service conditions. This cost is expected to be recognized over four years. In addition, as of June 30, 2009, there was $80.2 million of unrecognized compensation cost, net of estimated forfeitures, related to unvested share-based compensation arrangements that will vest based on market, performance and service conditions. This cost will be recognized when it becomes probable that the performance condition will be satisfied.

          New Accounting Pronouncements

Statement of Financial Accounting Standards No. 168, The FASB Accounting Standards Codification^TM and the Hierarchy of Generally Accepted Accounting Principles (“Statement No. 168”), was issued in June 2009. Statement No. 168 identifies the sources of accounting principles and the framework for selecting the principles used in the preparation of financial statements of nongovernmental entities that are presented in conformity with GAAP in the United States. Statement No. 168 establishes the

codification as the source of authoritative GAAP recognized by the FASB to be applied by nongovernmental entities. Statement No. 168 shall be effective for financial statements issued for interim and annual periods ending after September 15, 2009. The Company adopted the provisions of Statement No. 168 on July 1, 2009 and has updated its references to specific GAAP literature parenthetically to reflect the codification.

Statement of Financial Accounting Standards No. 167, Amendments to FASB Interpretation No. 46(R) (“Statement No. 167”), was issued in June 2009. Statement No. 167 shall be effective as of the beginning of each reporting entity’s first annual reporting period that begins after November 15, 2009, for interim periods within that first annual reporting period, and for interim and annual reporting periods thereafter. Earlier application is prohibited. Statement No. 167 amends Financial Accounting Standards Board Interpretation No. 46(R), Consolidation of Variable Interest Entities (“Interpretation No. 46(R)” or ASC 810-10-25), to replace the quantitative-based risks and rewards calculation for determining which enterprise, if any, has a controlling financial interest in a variable interest entity with an approach focused on identifying which enterprise has the power to direct the activities of a variable interest entity that most significantly impact the entity’s economic performance and (1) the obligation to absorb losses of the entity or (2) the right to receive benefits from the entity. An approach that is expected to be primarily qualitative will be more effective for identifying which enterprise has a controlling financial interest in a variable interest entity. Statement No. 167 requires an additional reconsideration event when determining whether an entity is a variable interest entity when any changes in facts and circumstances occur such that the holders of the equity investment at risk, as a group, lose the power from voting rights or similar rights of those investments to direct the activities of the entity that most significantly impact the entity’s economic performance. It also requires ongoing assessments of whether an enterprise is the primary beneficiary of a variable interest entity. These requirements will provide more relevant and timely information to users of financial statements. Statement No. 167 amends Interpretation No. 46(R) to require additional disclosures about an enterprise’s involvement in variable interest entities, which will enhance the information provided to users of financial statements. The Company will adopt Statement No. 167 on January 1, 2010 and is currently evaluating the impact of adoption.

Statement of Financial Accounting Standards No. 165, Subsequent Events (“Statement No. 165” or ASC Topic 855), was issued in May 2009. Statement No. 165 is effective for interim and annual periods ending after June 15, 2009 and is intended to establish general standards of accounting for and disclosure of events that occur after the balance sheet date but before financial statements are issued or are available to be issued. It requires the disclosure of the date through which an entity has evaluated subsequent events and the basis for that date—that is, whether that date represents the date the financial statements were issued or were available to be issued. This disclosure should alert all users of financial statements that an entity has not evaluated subsequent events after that date in the set of financial statements being presented. In accordance with the provisions of Statement No. 165, the Company currently evaluates subsequent events through the date the financial statements are issued.

The Company retrospectively adopted the provisions of Financial Accounting Standards Board Staff Position Emerging Issues Task Force 03-6-1, Determining Whether Instruments Granted in Share-Based Payment Transactions Are Participating Securities (“FSP EITF 03-6-1” or ASC 260-10-45), on January 1, 2009. FSP EITF 03-6-1 clarifies that unvested share-based payment awards with a right to receive nonforfeitable dividends are participating securities. Guidance is also provided on how to allocate earnings to participating securities and compute basic earnings per share using the two-class method. All prior-period earnings per share data presented shall be adjusted retrospectively (including interim financial statements, summaries of earnings, and selected financial data) to conform with the provisions of FSP EITF 03-6-1. The impact of adopting FSP EITF 03-6-1 decreased previously reported basic earnings per share by $.01 for the six months ended June 30, 2008.

Statement of Financial Accounting Standards No. 160, Noncontrolling Interests in Consolidated Financial Statements — an amendment of ARB No. 51 (“Statement No. 160” or ASC 810-10-45), was issued in December 2007. Statement No. 160 clarifies the classification of noncontrolling interests in consolidated statements of financial position and the accounting for and reporting of transactions between the reporting entity and holders of such noncontrolling interests. Under this guidance, noncontrolling interests are considered equity and should be reported as an element of consolidated equity, net income will encompass the total income of all consolidated subsidiaries and there will be separate disclosure on the face of the income statement of the attribution of that income between the controlling and noncontrolling interests, and increases and decreases in the noncontrolling ownership interest amount will be accounted for as equity transactions. The provisions of Statement No. 160 are effective for the first annual reporting period beginning on or after December 15, 2008, and earlier application is prohibited. Guidance is required to be adopted prospectively, except for reclassifying noncontrolling interests to equity, separate from the parent’s shareholders’ equity, in the consolidated statement of financial position and recasting consolidated net income (loss) to include net income (loss) attributable to both the controlling and noncontrolling interests, both of which are required to be adopted retrospectively. The Company adopted the provisions of Statement No. 160 on January 1, 2009, which resulted in a reclassification of approximately $426.2 million of noncontrolling interests to shareholders’ equity.

Statement No. 160 requires a reconciliation at the beginning and the end of the period of the carrying amount of total equity, equity attributable to the Company and equity attributable to the noncontrolling interests. The following table presents the changes in equity attributable to the Company and equity attributable to the noncontrolling interests for the six months ended June 30, 2009 and 2008.

						Noncontrolling
(In thousands)		The Company				Interests				Consolidated
Balances at January 1, 2009		$	(3,342,451	)		$	426,220			$	(2,916,231	)
Net loss			(4,091,621	)			(14,411	)			(4,106,032	)
Foreign currency translation adjustments			74,332				11,383				85,715
Unrealized holding loss on marketable securities			(564	)			(1,046	)			(1,610	)
Unrealized holding loss on cash flow derivatives			(75,750	)			—				(75,750	)
Reclassification adjustment			3,120				33,382				36,502
Other — net			3,616				3,577				7,193
Balances at June 30, 2009		$	(7,429,318	)		$	459,105			$	(6,970,213	)

						Noncontrolling
(In thousands)		The Company				Interests				Consolidated
Balances at January 1, 2008		$	8,769,299			$	464,552			$	9,233,851
Net income			1,081,980				16,017				1,097,997
Foreign currency translation adjustments			35,119				24,445				59,564
Unrealized holding loss on marketable securities			(44,714	)			(2,864	)			(47,578	)
Reclassification adjustment			(25,997	)			—				(25,997	)
Other — net			25,593				3,264				28,857
Balances at June 30, 2008		$	9,841,280			$	505,414			$	10,346,694

The Company adopted the provisions of Statement of Financial Accounting Standards No. 161, Disclosures about Derivative Instruments and Hedging Activities (“Statement No. 161” or ASC 815-10), on January 1, 2009. Statement No. 161 requires additional disclosures about how and why an entity uses derivative instruments, how derivative instruments and related hedged items are accounted for and how derivative instruments and related hedged items effect an entity’s financial position, results of operations and cash flows. Please refer to Note 4 for disclosure required by Statement No. 161.

Financial Accounting Standards Board Staff Position No. FAS 157-4, Determining Fair Value When the Volume and Level of Activity for the Asset or Liability Have Significantly Decreased and Identifying Transactions That Are Not Orderly (“FSP No. FAS 157-4” or ASC 820-10), was issued in April 2009. FSP No. FAS 157-4 provides additional guidance for estimating fair value when the volume and level of activity for the asset or liability have significantly decreased. FSP No. FAS 157-4 also includes guidance on identifying circumstances that indicate a transaction is not orderly. This guidance shall be effective for interim and annual reporting periods ending after June 15, 2009, and shall be applied prospectively. Early adoption is permitted for periods ending after March 15, 2009. Earlier adoption for periods ending before March 15, 2009 is not permitted. The Company adopted the provisions of FSP No. FAS 157-4 on April 1, 2009 with no material impact to its financial position or results of operations.

Financial Accounting Standards Board Staff Position No. FAS 115-2 and FAS 124-2, Recognition and Presentation of Other-Than-Temporary Impairments (“FSP FAS 115-2 and FAS 124-2” or ASC 320-10-35), was issued in April 2009. It amends the other-than-temporary impairment guidance in U.S. GAAP for debt securities to make the guidance more operational and to improve the presentation and disclosure of other-than-temporary impairments on debt and equity securities in the financial statements. FSP FAS 115-2 and FAS 124-2 does not amend existing recognition and measurement guidance related to other-than-temporary impairments of equity securities. This guidance shall be effective for interim and annual reporting periods ending after June 15, 2009, with early adoption permitted for periods ending after March 15, 2009. Earlier adoption for periods ending before March 15, 2009 is not permitted. The Company adopted the provisions of FSP FAS 115-2 and FAS 124-2 on April 1, 2009 with no material impact to its financial position or results of operations.

Financial Accounting Standards Board Staff Position No. FAS 141(R)-1, Accounting for Assets Acquired and Liabilities Assumed in a Business Combination That Arise from Contingencies (“FSP No. FAS 141(R)-1” or ASC 805-20), was issued in April 2009. FSP No. FAS 141(R)-1 addresses application issues raised by preparers, auditors, and members of the legal profession on initial recognition and measurement, subsequent measurement and accounting, and disclosure of assets and liabilities arising from contingencies in a business combination. This guidance shall be effective for assets or liabilities arising from contingencies in business combinations for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after December 15, 2008. The impact of FSP No. FAS 141(R)-1 on accounting for contingencies in a business combination is dependent upon the nature of future acquisitions.

Financial Accounting Standards Board Staff Position No. FAS 107-1 and APB 28-1, Interim Disclosures about Fair Value of Financial Instruments (“FSP No. FAS 107-1 and APB 28-1” or ASC 825-10-50), was issued in April 2009. FSP No. FAS 107-1 and APB 28-1 amends prior authoritative guidance to require disclosures about fair value of financial instruments for interim reporting periods of publicly traded companies as well as in annual financial statements. The provisions of FSP No. FAS 107-1 and APB 28-1 shall be effective for interim reporting periods ending after June 15, 2009, with early adoption permitted for periods ending after March 15, 2009. The Company adopted the disclosure requirements of FSP No. FAS 107-1 and APB 28-1 on April 1, 2009.

Financial Accounting Standards Board Staff Position Emerging Issues Task Force 08-6, Equity Method Investment Accounting Considerations (“FSP EITF 08-6” or ASC 323-10-35), was issued in November 2008. FSP EITF 08-6 clarifies the accounting for certain transactions and impairment considerations involving equity method investments. This guidance is effective for fiscal years beginning on or after December 15, 2008, and interim periods within those fiscal years and shall be applied prospectively. The Company adopted the provisions of FSP EITF 08-6 on January 1, 2009 with no material impact to its financial position or results of operations.

Note 2: INTANGIBLE ASSETS AND GOODWILL

          Definite-lived Intangible Assets

The Company has intangible assets that consist primarily of transit and street furniture contracts, permanent easements that provide the Company access to certain of its outdoor displays and other contractual rights in its Americas and International outdoor segments. The Company has talent and program right contracts and advertiser relationships in its radio segment and contracts for non-affiliated radio and television stations in its media representation operations. These intangible assets are amortized over the shorter of either the respective lives of the agreements or over the period of time the assets are expected to contribute directly or indirectly to the Company’s future cash flows.

The following table presents the gross carrying amount and accumulated amortization for each major class of definite-lived intangible assets at June 30, 2009 and December 31, 2008:

		June 30, 2009								December 31, 2008
		Gross Carrying				Accumulated				Gross Carrying				Accumulated
(In thousands)		Amount				Amortization				Amount				Amortization
Transit, street furniture, and other outdoor contractual rights		$	796,755			$	98,671			$	883,130			$	49,818
Customer / advertiser relationships			1,210,847				109,933				1,210,205				49,970
Talent contracts			320,854				36,843				161,644				7,479
Representation contracts			217,153				41,725				216,955				21,537
Other			547,489				23,403				548,180				9,590
Total		$	3,093,098			$	310,575			$	3,020,114			$	138,394

For the six months ended June 30, 2009, total amortization expense from continuing operations related to definite-lived intangible assets was $172.3 million. Included in amortization expense is $19.8 million related to a purchase accounting adjustment of $155.8 million to increase the balance of the Company’s talent contracts.

During the first six months of 2009, the Company decreased the initial fair value estimate of its permits, contracts, site leases, and other assets primarily in its Americas segment by $137.5 million based on additional information received which resulted in a credit to amortization expense of approximately $6.9 million.

The Company reviews its definite-lived tangibles for impairment when events and circumstances indicate that amortizable long-lived assets might be impaired and the undiscounted cash flows estimated to be generated from those assets are less than the carrying amount of those assets. When specific assets are determined to be unrecoverable, the cost basis of the asset is reduced to reflect the current fair market value.

The Company uses various assumptions in determining the current fair market value of these assets, including future expected cash flows, industry growth rates and discount rates. Impairment loss calculations require management to apply judgment in estimating future cash flows, including forecasting useful lives of the assets and selecting the discount rate that reflects the risk inherent in future cash flows.

During the second quarter of 2009, the Company recorded a $21.3 million impairment to taxi contracts in its Americas segment and a $17.5 million impairment primarily related to street furniture and billboard contracts in its International segment. The Company determined fair values using a discounted cash flow model. The decline in fair value of the contracts was primarily driven by a decline in the revenue projections. The decline in revenue related to taxi contracts and street furniture and billboard contracts was in the range of 10% to 15%. The balance of these taxi contracts and street furniture and billboard contracts after the impairment charges, for the contracts that were impaired, was $3.3 million and $16.0 million, respectively.

As acquisitions and dispositions occur in the future, amortization expense may vary. The following table presents the Company’s estimate of amortization expense for each of the five succeeding fiscal years for definite-lived intangible assets:

(In thousands)
2010		$	318,577
2011			311,162
2012			293,840
2013			277,503
2014			257,670

          Indefinite-lived Intangible Assets

The Company’s indefinite-lived intangible assets consist of FCC broadcast licenses and billboard permits. FCC broadcast licenses are granted to both radio and television stations for up to eight years under the Telecommunications Act of 1996 (the “Act”). The Act requires the FCC to renew a broadcast license if the FCC finds that the station has served the public interest, convenience and necessity, there have been no serious violations of either the Communications Act of 1934 or the FCC’s rules and regulations by the licensee, and there have been no other serious violations which taken together constitute a pattern of abuse. The licenses may be renewed indefinitely at little or no cost. The Company does not believe that the technology of wireless broadcasting will be replaced in the foreseeable future.

The Company’s billboard permits are issued in perpetuity by state and local governments and are transferable or renewable at little or no cost. Permits typically include the location which permits the Company to operate an advertising structure. The Company’s permits are located on either owned or leased land. In cases where the Company’s permits are located on leased land, the leases are typically from 10 to 20 years and renew indefinitely, with rental payments generally escalating at an inflation-based index. If the Company loses its lease, the Company will typically obtain permission to relocate the permit or bank it with the municipality for future use.

The indefinite-lived intangibles and goodwill are not subject to amortization, but are tested for impairment at least annually. The Company tests for possible impairment of indefinite-lived intangible assets whenever events or changes in circumstances, such as a reduction in operating cash flow or a dramatic change in the manner for which the asset is intended to be used indicate that the carrying amount of the asset may not be recoverable. If indicators exist, the Company compares the undiscounted cash flows related to the asset to the carrying value of the asset. If the carrying value is greater than the undiscounted cash flow amount, an impairment charge is recorded in amortization expense in the statement of operations for amounts necessary to reduce the carrying value of the asset to fair value.

          FCC Licenses

The Company performed an interim impairment test on its FCC licenses as of December 31, 2008, which resulted in a non-cash impairment charge of $936.2 million. The industry cash flows forecast by BIA Financial Network, Inc. (“BIA”) during the first six months of 2009 were below the BIA forecast used in the discounted cash flow model used to calculate the impairment at December 31, 2008. As a result, the Company performed an interim impairment test as of June 30, 2009 on its FCC licenses.

The fair value of the FCC licenses was determined using the direct valuation method as prescribed in Emerging Issues Task Force Topic No. D-108, Use of the Residual Method to Value Acquired Assets Other Than Goodwill (“Topic No. D-108” or ASC 805-20-S99). Under the direct valuation method, the fair value of the FCC licenses was calculated at the market level as prescribed by Emerging Issues Task Force 02-07, Unit of Accounting for Testing Impairment of Indefinite-Lived Intangible Assets (“EITF 02-07” or ASC 350-30-35). The Company utilized Mesirow Financial Consulting, LLC (“Mesirow Financial”), a third-party valuation firm, to assist it in the development of the assumptions and the determination of the fair value of its FCC licenses. The impairment test consisted of a comparison of the fair value of the FCC licenses at the market level with their carrying amount. If the carrying amount of the FCC license exceeded its fair value, an impairment loss was recognized equal to that excess. After an impairment loss is recognized, the adjusted carrying amount of the FCC license is its new accounting basis.

The application of the direct valuation method attempts to isolate the income that is properly attributable to the license alone (that is, apart from tangible and identified intangible assets and goodwill). It is based upon modeling a hypothetical “greenfield” build up to a “normalized” enterprise that, by design, lacks inherent goodwill and whose only other assets have essentially been paid for (or added) as part of the build-up process. The Company forecasted revenue, expenses, and cash flows over a ten-year period for each of our markets in its application of the direct valuation method. The Company also calculated a “normalized” residual year which represents the perpetual cash flows of each market. The residual year cash flow was capitalized to arrive at the terminal value of the licenses in each market.

Under the direct valuation method, it is assumed that rather than acquiring indefinite-lived intangible assets as part of a going concern business, the buyer hypothetically develops indefinite-lived intangible assets and builds a new operation with similar attributes from scratch. Thus, the buyer incurs start-up costs during the build-up phase which are normally associated with going concern value. Initial capital costs are deducted from the discounted cash flows model which results in value that is directly attributable to the indefinite-lived intangible assets.

The key assumptions using the direct valuation method are market revenue growth rates, market share, profit margin, duration and profile of the build-up period, estimated start-up capital costs and losses incurred during the build-up period, the risk-adjusted discount rate and terminal values. This data is populated using industry normalized information representing an average FCC license within a market.

Management uses publicly available information from BIA regarding the future revenue expectations for the radio broadcasting industry.

The build-up period represents the time it takes for the hypothetical start-up operation to reach normalized operations in terms of achieving a mature market share and profit margin. Management believes that a three-year build-up period is required for a start-up operation to obtain the necessary infrastructure and obtain advertisers. It is estimated that a start-up operation would gradually obtain a mature market revenue share in three years. BIA forecasted industry revenue growth of negative 1.8% during the build-up period. The cost structure is expected to reach the normalized level over three years due to the time required to establish operations and recognize the synergies and cost savings associated with the ownership of the FCC licenses within the market.

The estimated operating margin in the first year of operations was assumed to be 12.5% based on observable market data for an independent start-up radio station. The estimated operating margin in the second year of operations was assumed to be the mid-point of the first-year operating margin and the normalized operating margin. The normalized operating margin in the third year was assumed to be the industry average margin of 29% based on an analysis of comparable companies. The first and second-year expenses include the non-operating start-up costs necessary to build the operation (i.e. development of customers, workforce, etc.).

In addition to cash flows during the projection period, a “normalized” residual cash flow was calculated based upon industry-average growth of 2% beyond the discrete build-up projection period. The residual cash flow was then capitalized to arrive at the terminal value.

The present value of the cash flows is calculated using an estimated required rate of return based upon industry-average market conditions. In determining the estimated required rate of return, management calculated a discount rate using both current and historical trends in the industry.

The Company calculated the discount rate as of the valuation date and also one-year, two-year, and three-year historical quarterly averages. The discount rate was calculated by weighting the required returns on interest-bearing debt and common equity capital in proportion to their estimated percentages in an expected capital structure. The capital structure was estimated based on the quarterly average data for publicly traded companies in the radio broadcasting industry.

The calculation of the discount rate required the rate of return on debt, which was based on a review of the credit ratings for comparable companies (i.e. market participants). The Company calculated the average yield on an S&P B and CCC rated corporate bond which was used for the pre-tax rate of return on debt and tax-effected such yield based on applicable tax rates.

The rate of return on equity capital was estimated using a modified Capital Asset Pricing Model (“CAPM”). Inputs to this model included the yield on long-term U.S. Treasury bonds, forecast betas for comparable companies, calculation of a market risk premium based on research and empirical evidence and calculation of a size premium derived from historical differences in returns between small companies and large companies using data published by Ibbotson Associates.

The concluded discount rate used in the discounted cash flow models to determine the fair value of the licenses was 10% for the 13 largest markets and 10.5% for all other markets. Applying the discount rate, the present value of cash flows during the discrete

projection period and terminal value were added to estimate the fair value of the hypothetical start-up operation. The initial capital investment was subtracted to arrive at the value of the licenses. The initial capital investment represents the fixed assets needed to operate the radio station.

The BIA forecast for 2009 declined 8.7% and declined between 13.8% and 15.7% through 2013 compared to the BIA forecasts used in the 2008 impairment test. Additionally, the industry profit margin declined 100 basis points from the 2008 impairment test. These market driven changes were primarily responsible for the decline in fair value of the FCC licenses below their carrying value. As a result, the Company recognized a non-cash impairment charge in approximately one-quarter of its markets, which totaled $590.3 million. The fair value of the Company’s FCC licenses was $2.4 billion at June 30, 2009.

In calculating the fair value of its FCC licenses, the Company primarily relied on the discounted cash flow models. However, the Company relied on the stick method for those markets where the discounted cash flow model resulted in a value less than the stick method indicated.

To estimate the stick values for its markets, the Company obtained historical radio station transaction data from BIA which involved sales of individual radio stations whereby the station format was immediately abandoned after acquisition. These transactions are highly indicative of stick transactions in which the buyer does not assign value to any of the other acquired assets (i.e. tangible or intangible assets) and is only purchasing the FCC license.

In addition, the Company analyzed publicly available FCC license auction data involving radio broadcast licenses. Periodically, the FCC will hold an auction for certain FCC licenses in various markets and these auction prices reflect the purchase of only the FCC radio license.

Based on this analysis, the stick values were estimated to be the minimum value of a radio license within each market. This value was considered to be the fair value of the license for those markets where the present value of the cash flows and terminal value did not exceed the estimated stick value. Approximately 23% of the fair value of the Company’s FCC licenses at June 30, 2009 was determined using the stick method.

          Billboard Permits

The Company has approximately 36,000 billboard permits in its Americas segment. The billboard permits are effectively issued in perpetuity by state and local governments as they are transferable or renewable at little or no cost. Permits typically include the location which permits the Company to operate an advertising structure. Due to significant differences in both business practices and regulations, billboards in the International segment are subject to long-term, finite contracts versus permits in the United States and Canada. Accordingly, there are no indefinite-lived assets in the International segment.

The Company performed an interim impairment test on its billboard permits as of December 31, 2008, which resulted in a non-cash impairment charge of $722.6 million. The Company’s cash flows during the first six months of 2009 were below those in the discounted cash flow model used to calculate the impairment at December 31, 2008. As a result, the Company performed an interim impairment test as of June 30, 2009 on its billboard permits.

The fair value of the billboard permits was determined using the direct valuation method as prescribed in Topic No. D-108. Under the direct valuation method, the fair value of the billboard permits was calculated at the market level as prescribed by EITF 02-07. The Company utilized Mesirow Financial to assist it in the development of the assumptions and the determination of the fair value of the billboard permits. The impairment test consisted of a comparison of the fair value of the billboard permits at the market level with their carrying amount. If the carrying amount of the billboard permits exceeded their fair value, an impairment loss was recognized equal to that excess. After an impairment loss is recognized, the adjusted carrying amount of the billboard permit is its new accounting basis.

The Company’s application of the direct valuation method utilized the “greenfield” approach as discussed above. The key assumptions using the direct valuation method are market revenue growth rates, market share, profit margin, duration and profile of the build-up period, estimated start-up capital costs and losses incurred during the build-up period, the risk-adjusted discount rate and terminal values. This data is populated using industry normalized information representing an average billboard permit within a market.

Management uses its internal forecasts to estimate industry normalized information as it believes these forecasts are similar to what a market participant would expect to generate. This is due to the pricing structure and demand for outdoor signage in a market being relatively constant regardless of the owner of the operation. Management also relied on its internal forecasts because there is nominal public data available for each of its markets.

The build-up period represents the time it takes for the hypothetical start-up operation to reach normalized operations in terms of achieving a mature market revenue share and profit margin. Management believes that a one-year build-up period is required for a start-up operation to erect the necessary structures and obtain advertisers in order achieve mature market revenue share. It is estimated that a start-up operation would be able to obtain 10% of the potential revenues in the first year of operations and 100% in the second year. Management assumed industry revenue growth of negative 16% during the build-up period. However, the cost structure is expected to reach the normalized level over three years due to the time required to recognize the synergies and cost savings associated with the ownership of the permits within the market.

For the normalized operating margin in the third year, management assumed a hypothetical business would operate at the lower of the operating margin for the specific market or the industry average margin of 45% based on an analysis of comparable companies. For the first and second-year of operations, the operating margin was assumed to be 50% of the “normalized” operating margin. The first and second-year expenses include the non-recurring start-up costs necessary to build the operation (i.e. development of customers, workforce, etc.).

In addition to cash flows during the projection period, a “normalized” residual cash flow was calculated based upon industry-average growth of 3% beyond the discrete build-up projection period. The residual cash flow was then capitalized to arrive at the terminal value.

The present value of the cash flows is calculated using an estimated required rate of return based upon industry-average market conditions. In determining the estimated required rate of return, management calculated a discount rate using both current and historical trends in the industry.

The Company calculated the discount rate as of the valuation date and also one-year, two-year, and three-year historical quarterly averages. The discount rate was calculated by weighting the required returns on interest-bearing debt and common equity capital in proportion to their estimated percentages in an expected capital structure. The capital structure was estimated based on the quarterly average data for publicly traded companies in the outdoor advertising industry.

The calculation of the discount rate required the rate of return on debt, which was based on a review of the credit ratings for comparable companies (i.e. market participants). Management used the yield on an S&P B rated corporate bond for the pre-tax rate of return on debt and tax-effected such yield based on applicable tax rates.

The rate of return on equity capital was estimated using a modified CAPM. Inputs to this model included the yield on long-term U.S. Treasury bonds, forecast betas for comparable companies, calculation of a market risk premium based on research and empirical evidence and calculation of a size premium derived from historical differences in returns between small companies and large companies using data published by Ibbotson Associates.

The concluded discount rate used in the discounted cash flow models to determine the fair value of the permits was 10%. Applying the discount rate, the present value of cash flows during the discrete projection period and terminal value were added to estimate the fair value of the hypothetical start-up operation. The initial capital investment was subtracted to arrive at the value of the permits. The initial capital investment represents the fixed assets needed to erect the necessary advertising structures.

The discount rate used in the impairment model increased approximately 50 basis points over the discount rate used to value the permits at December 31, 2008. Industry revenue forecasts declined 8% through 2013 compared to the forecasts used in the 2008 impairment test. These market driven changes were primarily responsible for the decline in fair value of the billboard permits below their carrying value. As a result, the Company recognized a non-cash impairment charge in all but five of its markets in the United States and Canada, which totaled $345.4 million. The fair value of the permits was $1.1 billion at June 30, 2009.

          Goodwill

Each of the Company’s reporting units is valued using a discounted cash flow model which requires estimating future cash flows expected to be generated from the reporting unit, discounted to their present value using a risk-adjusted discount rate. Terminal values were also estimated and discounted to their present value. Assessing the recoverability of goodwill requires the Company to make estimates and assumptions about sales, operating margins, growth rates and discount rates based on its budgets, business plans, economic projections, anticipated future cash flows and marketplace data. There are inherent uncertainties related to these factors and management’s judgment in applying these factors. The Company utilizes Mesirow Financial to assist the Company in the development of these assumptions and the Company’s determination of the fair value of its reporting units.

The following table presents the changes in the carrying amount of goodwill in each of the Company’s reportable segments:

						Americas				International
(In thousands)		Radio				Outdoor				Outdoor				Other				Total
Pre-Merger
Balance as of December 31, 2007		$	6,045,527			$	688,336			$	474,253			$	2,000			$	7,210,116
Acquisitions			7,051				—				12,341				—				19,392
Dispositions			(20,931	)			—				—				—				(20,931	)
Foreign currency			—				(293	)			28,596				—				28,303
Adjustments			(423	)			(970	)			—				—				(1,393	)
Balance as of July 30, 2008		$	6,031,224			$	687,073			$	515,190			$	2,000			$	7,235,487

						Americas				International
(In thousands)		Radio				Outdoor				Outdoor				Other				Total
Post-Merger
Balance as of July 31, 2008			—				—				—				—				—
Preliminary purchase price allocation			6,335,220				2,805,780				603,712				60,115				9,804,827
Purchase price adjustments — net			356,040				438,025				(76,116	)			271,175				989,124
Impairment			(1,115,033	)			(2,321,602	)			(173,435	)			—				(3,610,070	)
Acquisitions			3,486				—				—				—				3,486
Foreign exchange			—				(29,605	)			(63,519	)			—				(93,124	)
Other			(523	)			—				(3,099	)			—				(3,622	)
Balance as of December 31, 2008			5,579,190				892,598				287,543				331,290				7,090,621
Impairment			(2,426,597	)			(389,828	)			(29,722	)			(211,988	)			(3,058,135	)
Acquisitions			9,884				2,250				110				—				12,244
Dispositions			(62,233	)			—				—				(2,276	)			(64,509	)
Foreign currency			—				15,809				7,016				—				22,825
Purchase price adjustments — net			39,801				53,304				—				—				93,105
Other			(529	)			(712	)			—				—				(1,241	)
Balance as of June 30, 2009		$	3,139,516			$	573,421			$	264,947			$	117,026			$	4,094,910

The Company performed an interim impairment test as of December 31, 2008 which resulted in a non-cash impairment charge of $3.6 billion to reduce its goodwill. The goodwill impairment test is a two-step process. The first step, used to screen for potential impairment, compares the fair value of the reporting unit with its carrying amount, including goodwill. The second step, if applicable and used to measure the amount of the impairment loss, compares the implied fair value of the reporting unit goodwill with the carrying amount of that goodwill.

Each of the Company’s U.S. radio markets and outdoor advertising markets are components. The U.S. radio markets are aggregated into a single reporting unit and the U.S. outdoor advertising markets are aggregated into a single reporting unit for purposes of the goodwill impairment test using the guidance in Emerging Issues Task Force Topic No. D-101, Clarification of Reporting Unit Guidance in Paragraph 30 of FASB Statement No. 142. The Company also determined that within its Americas outdoor segment, Canada, Mexico, Peru, and Brazil constitute separate reporting units and each country in its International outdoor segment constitutes a separate reporting unit.

The Company tests goodwill at interim dates if events or changes in circumstances indicate that goodwill might be impaired. The Company’s cash flows during the first six months of 2009 were below those used in the discounted cash flow model used to calculate the impairment at December 31, 2008. Additionally, the fair value of the Company’s debt and equity at June 30, 2009 declined from the values at December 31, 2008. As a result of these indicators, the Company performed an interim goodwill impairment test as of June 30, 2009.

The discounted cash flow model indicated that the Company failed the first step of the impairment test for certain of its reporting units, which required it to compare the implied fair value of each reporting unit’s goodwill with its carrying value.

The discounted cash flow approach the Company uses for valuing goodwill involves estimating future cash flows expected to be generated from the related assets, discounted to their present value using a risk-adjusted discount rate. Terminal values are also estimated and discounted to their present value.

The Company forecasted revenue, expenses, and cash flows over a ten-year period for each of its reporting units. In projecting future cash flows, the Company considers a variety of factors including its historical growth rates, macroeconomic conditions, advertising

sector and industry trends as well as company-specific information. Historically, revenues in its industries have been highly correlated to economic cycles. Based on these considerations, the assumed 2009 revenue growth rates were negative followed by assumed revenue growth with an anticipated economic recovery in 2010. To arrive at the projected cash flows and resulting growth rates, the Company evaluated its historical operating results, current management initiatives and both historical and anticipated industry results to assess the reasonableness of the operating margin assumptions. The Company also calculated a “normalized” residual year which represents the perpetual cash flows of each reporting unit. The residual year cash flow was capitalized to arrive at the terminal value of the reporting unit.

The Company calculated the weighted average cost of capital (“WACC”) as of June 30, 2009 and also one-year, two-year, and three-year historical quarterly averages for each of its reporting units. WACC is an overall rate based upon the individual rates of return for invested capital (equity and interest bearing debt). The WACC is calculated by weighting the required returns on interest-bearing debt and common equity capital in proportion to their estimated percentages in an expected capital structure. The capital structure was estimated based on the quarterly average data for publicly traded companies in the radio and outdoor advertising industry. The calculation of the WACCs considered both current industry WACCs and historical trends in the industry.

The calculation of the WACC requires the rate of return on debt, which was based on a review of the credit ratings for comparable companies (i.e. market participants) and the indicated yield on similarly rated bonds.

The rate of return on equity capital was estimated using a modified CAPM. Inputs to this model included the yield on long-term U.S. Treasury bonds, forecast betas for comparable companies, calculation of a market risk premium based on research and empirical evidence and calculation of a size premium derived from historical differences in returns between small companies and large companies using data published by Ibbotson Associates.

In line with advertising industry trends, the Company’s operations and expected cash flow are subject to significant uncertainties about future developments, including timing and severity of the recessionary trends and customers’ behaviors. To address these risks, the Company included company-specific risk premiums for each of the reporting units in the estimated WACC. Based on this analysis, company-specific risk premiums of 100 basis points, 250 basis points and 350 basis points were included for Radio, Americas outdoor and International outdoor segments, respectively, resulting in WACCs of 11%, 12.5% and 13.5% for each of the reporting units in the Radio, Americas outdoor and International outdoor segments, respectively. Applying these WACCs, the present value of cash flows during the discrete projection period and terminal value were added to estimate the fair value of the reporting units.

The discount rate utilized in the valuation of the FCC licenses and outdoor permits as of June 30, 2009 excludes the company specific-risk premiums that were added to the industry WACCs used in the valuation of the reporting units. Management believes the exclusion of this premium is appropriate given the difference between the nature of the licenses and billboard permits and reporting unit cash flow projections. The cash flow projections utilized under the direct valuation method for the licenses and permits are derived from utilizing industry “normalized” information for the existing portfolio of licenses and permits. Given that the underlying cash flow projections are based on industry normalized information, application of an industry average discount rate is appropriate. Conversely, the cash flow projections for the overall reporting unit are based on internal forecasts for each business and incorporate future growth and initiatives unrelated to the existing license and permit portfolio. Additionally, the projections for the reporting unit include cash flows related to non-FCC license and non-permit based assets. In the valuation of the reporting unit, the company-specific risk premiums were added to the industry WACCs due to the risks inherent in achieving the projected cash flows of the reporting unit.

The Company also utilized the market approach to provide a test of reasonableness to the results of the discounted cash flow model. The market approach indicates the fair value of the invested capital of a business based on a company’s market capitalization (if publicly traded) and a comparison of the business to comparable publicly traded companies and transactions in its industry. This approach can be estimated through the quoted market price method, the market comparable method, and the market transaction method.

One indication of the fair value of a business is the quoted market price in active markets for the debt and equity of the business. The quoted market price of equity multiplied by the number of shares outstanding yields the fair value of the equity of a business on a marketable, noncontrolling basis. A premium for control is then applied and added to the estimated fair value of interest-bearing debt to indicate the fair value of the invested capital of the business on a marketable, controlling basis.

The market comparable method provides an indication of the fair value of the invested capital of a business by comparing it to publicly traded companies in similar lines of business. The conditions and prospects of companies in similar lines of business depend on common factors such as overall demand for their products and services. An analysis of the market multiples of companies engaged in similar lines of business yields insight into investor perceptions and, therefore, the value of the subject business. These multiples

are then applied to the operating results of the subject business to estimate the fair value of the invested capital on a marketable, noncontrolling basis. We then apply a premium for control to indicate the fair value of the business on a marketable, controlling basis.

The market transaction method estimates the fair value of the invested capital of a business based on exchange prices in actual transactions and on asking prices for controlling interests in similar companies recently offered for sale. This process involves comparison and correlation of the subject business with other similar companies that have recently been purchased. Considerations such as location, time of sale, physical characteristics, and conditions of sale are analyzed for comparable businesses.

The three variations of the market approach indicated that the fair value determined by the Company’s discounted cash flow model was within a reasonable range of outcomes.

The revenue forecasts for 2009 declined 8%, 7% and 9% for Radio, Americas outdoor and International outdoor, respectively, compared to the forecasts used in the 2008 impairment test primarily as a result of the revenues realized during the first six months of 2009. These market driven changes were primarily responsible for the decline in fair value of the reporting units below their carrying value. As a result, the Company recognized a non-cash impairment charge to reduce its goodwill of $3.1 billion.

NOTE 3: DEBT

Long-term debt at June 30, 2009 and December 31, 2008 consisted of the following:

		June 30,				December 31,
(In thousands)		2009				2008
Senior Secured Credit Facilities:
Term Loan A Facility		$	1,331,500			$	1,331,500
Term Loan B Facility			10,700,000				10,700,000
Term Loan C — Asset Sale Facility			695,879				695,879
Revolving Credit Facility			1,802,500				220,000
Delayed Draw Term Loan Facilities			1,032,500				532,500
Receivables Based Credit Facility			341,732				445,609
Other Secured Long-term Debt			5,491				6,604
Total Consolidated Secured Debt			15,909,602				13,932,092
Senior Cash Pay Notes			796,250				980,000
Senior Toggle Notes			1,080,625				1,330,000
Clear Channel Senior Notes:
4.25% Senior Notes Due 2009			—				500,000
7.65% Senior Notes Due 2010			116,181				133,681
4.5% Senior Notes Due 2010			239,975				250,000
6.25% Senior Notes Due 2011			712,941				722,941
4.4% Senior Notes Due 2011			196,279				223,279
5.0% Senior Notes Due 2012			269,800				275,800
5.75% Senior Notes Due 2013			428,504				475,739
5.5% Senior Notes Due 2014			750,000				750,000
4.9% Senior Notes Due 2015			250,000				250,000
5.5% Senior Notes Due 2016			250,000				250,000
6.875% Senior Debentures Due 2018			175,000				175,000
7.25% Senior Debentures Due 2027			300,000				300,000
Other long-term debt			66,869				69,260
Purchase accounting adjustments and original issue (discount) premium			(996,037	)			(1,114,172	)
			20,545,989				19,503,620
Less: current portion			298,531				562,923
Total long-term debt		$	20,247,458			$	18,940,697

The Company’s weighted average interest rate at June 30, 2009 was 5.7%. The aggregate market value of the Company’s debt based on quoted market prices for which quotes were available was approximately $12.4 billion and $17.2 billion at June 30, 2009 and December 31, 2008, respectively.

The Company and its subsidiaries may from time to time pursue various financing alternatives, including retiring or purchasing its outstanding indebtedness through cash purchases, prepayments and / or exchanges for newly issued debt or equity securities or obligations, in open market purchases, privately negotiated transactions or otherwise. The Company may also sell certain assets or properties and use the proceeds to reduce its indebtedness or the indebtedness of its subsidiaries. Such repurchases, prepayments, exchanges or sales, if any, could have a material positive or negative impact on the Company’s liquidity available to repay outstanding debt obligations or on the Company’s consolidated results of operations. These transactions could also require or result in amendments to the agreements governing outstanding debt obligations or changes in the Company’s leverage or other financial ratios which could have a material positive or negative impact on the Company’s ability to comply with the covenants contained in Clear Channel’s debt agreements. Such purchases, prepayments, exchanges or sales, if any, will depend on prevailing market conditions, the Company’s liquidity requirements, contractual restrictions and other factors. The amounts involved may be material.

          Senior Secured Credit Facilities

Borrowings under the senior secured credit facilities bear interest at a rate equal to an applicable margin plus, at Clear Channel’s option, either (i) a base rate determined by reference to the higher of (A) the prime lending rate publicly announced by the administrative agent and (B) the federal funds effective rate from time to time plus 0.50%, or (ii) a Eurocurrency rate determined by reference to the costs of funds for deposits for the interest period relevant to such borrowing adjusted for certain additional costs.

The margin percentages applicable to the term loan facilities and revolving credit facility are the following percentages per annum:

•

with respect to loans under the term loan A facility and the revolving credit facility, (i) 2.40% in the case of base rate loans and (ii) 3.40% in the case of Eurocurrency rate loans, subject to downward adjustments if Clear Channel’s leverage ratio of total debt to EBITDA decreases below 7 to 1; and

•

with respect to loans under the term loan B facility, term loan C — asset sale facility and delayed draw term loan facilities, (i) 2.65% in the case of base rate loans and (ii) 3.65% in the case of Eurocurrency rate loans, subject to downward adjustments if Clear Channel’s leverage ratio of total debt to EBITDA decreases below 7 to 1.

Clear Channel is required to pay each revolving credit lender a commitment fee in respect of any unused commitments under the revolving credit facility, which is 0.50% per annum, subject to downward adjustments if Clear Channel’s leverage ratio of total debt to EBITDA decreases below 4 to 1. Clear Channel is required to pay each delayed draw term loan facility lender a commitment fee in respect of any undrawn commitments under the delayed draw term loan facilities, which initially is 1.825% per annum until the delayed draw term loan facilities are fully drawn or commitments thereunder are terminated.

The senior secured credit facilities contain a financial covenant that requires Clear Channel to comply on a quarterly basis with a maximum consolidated senior secured net debt to adjusted EBITDA (as calculated in accordance with the senior secured credit facilities) ratio (maximum of 9.5:1). This financial covenant becomes more restrictive over time beginning in the second quarter of 2013. Clear Channel’s senior secured debt consists of the senior secured credit facilities, the receivables based credit facility and certain other secured subsidiary debt. The Company was in compliance with this covenant as of June 30, 2009.

          Receivables Based Credit Facility

The receivables based credit facility of $783.5 million provides revolving credit commitments in an amount equal to the initial borrowing of $533.5 million on the closing date, subject to a borrowing base. The borrowing base at any time equals 85% of the eligible accounts receivable for certain subsidiaries of the Company.

Borrowings, excluding the initial borrowing, under the receivables based credit facility are subject to compliance with a minimum fixed charge coverage ratio of 1.0:1.0 if at any time excess availability under the receivables based credit facility is less than $50 million, or if aggregate excess availability under the receivables based credit facility and revolving credit facility is less than 10% of the borrowing base.

Borrowings under the receivables based credit facility bear interest at a rate equal to an applicable margin plus, at Clear Channel’s option, either (i) a base rate determined by reference to the higher of (A) the prime lending rate publicly announced by the administrative agent and (B) the federal funds effective rate from time to time plus 0.50%, or (ii) a Eurocurrency rate determined by reference to the costs of funds for deposits for the interest period relevant to such borrowing adjusted for certain additional costs.

The margin percentage applicable to the receivables based credit facility is (i) 1.40% in the case of base rate loans and (ii) 2.40% in the case of Eurocurrency rate loans, subject to downward adjustments if Clear Channel’s leverage ratio of total debt to EBITDA decreases below 7 to 1.

Clear Channel is required to pay each lender a commitment fee in respect of any unused commitments under the receivables based credit facility, which is 0.375% per annum, subject to downward adjustments if Clear Channel’s leverage ratio of total debt to EBITDA decreases below 6 to 1.

          Senior Cash Pay Notes and Senior Toggle Notes

Clear Channel has outstanding $796.3 million aggregate principal amount of 10.75% senior cash pay notes due 2016 (the “senior cash pay notes”) and $1.08 billion aggregate principal amount of 11.00%/11.75% senior toggle notes due 2016 (the “senior toggle notes”).

Clear Channel may elect on each interest election date to pay all or 50% of such interest on the senior toggle notes in cash or by increasing the principal amount of the senior toggle notes or by issuing new senior toggle notes (such increase or issuance, “PIK Interest”). Interest on the senior toggle notes payable in cash accrues at a rate of 11.00% per annum and PIK Interest accrues at a rate of 11.75% per annum. Interest on the senior cash pay notes accrues at a rate of 10.75% per annum.

On January 15, 2009, the Company made a permitted election under the indenture governing the senior toggle notes to pay PIK Interest with respect to 100% of the senior toggle notes for the semi-annual interest period commencing February 1, 2009. For subsequent interest periods, the Company must make an election regarding whether the applicable interest payment on the senior toggle notes will be made entirely in cash, entirely through PIK Interest or 50% in cash and 50% in PIK Interest. In the absence of such an election for any interest period, interest on the senior toggle notes will be payable according to the election for the immediately preceding interest period. As a result, the Company is deemed to have made the PIK Interest election for future interest periods unless and until it elects otherwise.

          Debt Maturities and Other

During the second quarter of 2009, the Company redeemed Clear Channel’s $500.0 million aggregate principal amount of its 4.25% senior notes due May 15, 2009 with a draw under the $500.0 million delayed draw term loan facility that is specifically designated for this purpose.

CC Finco II, LLC, an indirect wholly-owned subsidiary of the Company, repurchased $183.8 million and $249.4 million aggregate principal amount of senior cash pay notes and senior toggle notes during the second quarter of 2009, respectively. A gain on the extinguishment of debt in the amount of $373.7 million was recorded in “Other income (expense) — net” during the post-merger period ended June 30, 2009.

In addition, during the second quarter of 2009, CC Finco, LLC, an indirect wholly-owned subsidiary of the Company, repurchased certain of Clear Channel’s outstanding 7.65% senior notes due 2010 (“7.65% Notes”), Clear Channel’s outstanding 4.5% senior notes due 2010 (“4.5% Notes”), Clear Channel’s outstanding 6.25% senior notes due 2011 (“6.25% Notes”), Clear Channel’s outstanding 4.4% senior notes due 2011 (“4.4% Notes”), Clear Channel’s outstanding 5.0% senior notes due 2012 (“5.0% Notes”) and Clear Channel’s outstanding 5.75% senior notes due 2013 (“5.75% Notes”). The aggregate principal amounts of the 7.65% Notes, 4.5% Notes, 6.25% Notes, 4.4% Notes, 5.0% Notes and 5.75% Notes repurchased were $17.5 million, $10.0 million, $10.0 million, $27.0 million, $6.0 million and $47.2 million, respectively. The Company recorded an aggregate gain of $66.6 million in “Other income (expense) — net” during the post-merger period ended June 30, 2009 as a result of such repurchased notes.

Note 4: OTHER DEVELOPMENTS

          Acquisitions

During the six months ended June 30, 2009, the Company’s Americas outdoor segment paid $5.0 million primarily for the acquisition of land and buildings. Additionally, the Company’s Americas outdoor segment purchased the remaining 15% interest in its fully consolidated subsidiary, Paneles Napsa S.A., for $13.0 million.

During the first six months of 2008, Clear Channel acquired two FCC licenses in its radio segment for $11.4 million in cash. Clear Channel acquired outdoor display faces and additional equity interests in international outdoor companies for $83.6 million in cash during the same period. Clear Channel’s national representation business acquired representation contracts for $49.1 million in cash during the first six months of 2008.

Also during the first six months of 2008, Clear Channel exchanged assets in one of its Americas markets for assets located in a different market and recognized a gain of $2.6 million in “Other income (expense) — net.”

          Disposition of Assets

During the six months ended June 30, 2009, the Company sold five radio stations for approximately $11.6 million and recorded a loss of $12.3 million in “Other operating income — net”. In addition, the Company exchanged radio stations in its radio markets for assets located in a different market and recognized a loss of $27.6 million in “Other operating income — net.”

During the first six months of 2009, the Company sold international assets for $4.9 million resulting in a gain of $5.0 million. In addition, the Company sold assets for $3.6 million in its Americas outdoor segment and recorded a gain of $2.9 million in “Other operating income — net.” The Company also received proceeds of $18.3 million from the sale of an airplane in the first six months of 2009 and recorded a loss of $2.2 million in “Other operating income — net.”

The Company sold 57% of its remaining interest in Grupo ACIR Comunicaciones for approximately $23.5 million and recorded a loss of approximately $4.0 million during the six months ended June 30, 2009. As a result of the sale, the Company will no longer account for the investment under the provisions of Accounting Principles Board No. 18, The Equity Method of Accounting for Investments in Common Stock (ASC Topic 323).

Clear Channel received proceeds of $88.9 million related to the sale of radio stations recorded as investing cash flows from discontinued operations and recorded a gain of $25.7 million as a component of “Income from discontinued operations, net” during the six months ended June 30, 2008. Clear Channel received proceeds of $1.0 billion related to the sale of its television business recorded as investing cash flows from discontinued operations and recorded a gain of $666.7 million as a component of “Income from discontinued operations, net” during the six months ended June 30, 2008.

In addition, in the first six months of 2008, Clear Channel sold its 50% interest in Clear Channel Independent, a South African outdoor advertising company, and recognized a gain of $75.6 million in “Equity in earnings of nonconsolidated affiliates” based on the fair value of the equity securities received. Clear Channel classified these equity securities as available-for-sale on its consolidated balance sheet in accordance with Statement of Financial Accounting Standards No. 115, Accounting for Certain Investments in Debt and Equity Securities (ASC Topic 320). The sale of Clear Channel Independent was structured as a tax-free disposition, thereby resulting in no current tax expense recognized on the sale. As a result, Clear Channel’s effective tax rate for the six months ended June 30, 2008 was 29.7%.

          Divestiture Trusts

The Company holds nontransferable, noncompliant station combinations pursuant to certain FCC rules or, in a few cases, pursuant to temporary waivers. These noncompliant station combinations were placed in a trust in order to bring the merger into compliance with the FCC’s media ownership rules. The Company will have to divest of certain stations in these noncompliant station combinations. The trust will be terminated, with respect to each noncompliant station combination, if at any time the stations may be owned by the Company under the then-current FCC media ownership rules. The trust agreement stipulates that the Company must fund any operating shortfalls of the trust activities, and any excess cash flow generated by the trust is distributed to the Company. The Company is also the beneficiary of proceeds from the sale of stations held in the trust. The Company consolidates the trust in accordance with Interpretation No. 46(R), as the trust was determined to be a variable interest entity and the Company is its primary beneficiary.

          Legal Proceedings

The Company and its subsidiaries are currently involved in certain legal proceedings arising in the ordinary course of business and, as required, has accrued its estimate of the probable costs for the resolution of these claims. 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.

          Effective Tax Rate

The effective tax rate is the provision for income taxes as a percent of income from continuing operations before income taxes. The effective tax rate for the three and six months ended June 30, 2009 was 4.78% and 3.86%, respectively. The effective rate was impacted as a result of the impairment of permanent goodwill. In addition, the Company recorded a valuation allowance on current period net losses. Due to the lack of earnings history as a merged company and limitations on net operating loss carryback claims allowed, the Company cannot rely on future earnings and carryback claims as a means to realize deferred tax assets which may arise as a result of future net operating losses. Pursuant to the provisions of Statement of Financial Accounting Standards No. 109, Accounting for Income Taxes (ASC 740-10-30), deferred tax valuation allowances would be required on those deferred tax assets. For the three and six months ended June 30, 2008, the effective tax rate was 30.5% and 29.7%, respectively, driven by the tax-free disposition of Clear Channel Independent, a South African outdoor advertising company.

          Marketable Equity Securities and Interest Rate Swap Agreements

The Company holds marketable equity securities and interest rate swaps that are measured at fair value on each reporting date.

Statement of Financial Accounting Standards No. 157, Fair Value Measurements (ASC 820-10-35-37), establishes a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value. These tiers 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.

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. Other cost investments include various investments in companies for which there is no readily determinable market value. The unamortized cost, unrealized holding gains or losses, and fair value of the Company’s investments at June 30, 2009 and December 31, 2008 are as follows:

		June 30, 2009																December 31, 2008
(In thousands)		Fair				Unrealized				Unrealized								Fair				Unrealized				Unrealized
Investments		Value				Losses				Gains				Cost				Value				Losses				Gains				Cost
Available-for sale		$	29,839			$	—			$	2,729			$	27,110			$	27,110			$	—			$	—			$	27,110
Other cost investments			25,526				—				—				25,526				6,397				—				—				6,397
Total		$	55,365			$	—			$	2,729			$	52,636			$	33,507			$	—			$	—			$	33,507

The Company’s aggregate $6.0 billion notional amount interest rate swap agreements are designated as a cash flow hedge and the effective portions of the gain or loss on the swaps are reported as a component of other comprehensive income. The Company entered into the swaps 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. These interest rate swap agreements mature at various times from 2010 through 2013. No ineffectiveness was recorded in earnings related to these interest rate swaps.

Due to the fact that the inputs are either directly or indirectly observable, the Company classified the fair value measurements of these agreements as Level 2.

The table below shows the balance sheet classification and fair value of the Company’s interest rate swaps designated as hedging instruments:

(In thousands)
Classification as of June 30, 2009		Fair Value				Classification as of December 31, 2008		Fair Value
Other long-term liabilities		$	238,830			Other long-term liabilities		$	118,785

The following table details the beginning and ending accumulated other comprehensive loss and the current period activity related to the interest rate swap agreements:

		Accumulated other
(In thousands)		comprehensive loss
Balance at January 1, 2009		$	75,079
Other comprehensive loss			75,750
Balance at June 30, 2009		$	150,829

          Other Comprehensive Income

The following table discloses the amount of income tax (expense) or benefit allocated to each component of other comprehensive income for six months ended June 30, 2009 and 2008, respectively:

		Six Months Ended June 30,
		2009				2008
(In thousands)		Post-Merger				Pre-Merger
Unrealized holding (gain) loss on investments		$	(12,928	)		$	21,729
Unrealized holding loss on cash flow derivatives			44,295				11,595
Income tax benefit		$	31,367			$	33,324

Note 5: COMMITMENTS, CONTINGENCIES AND GUARANTEES

Certain agreements relating to acquisitions provide for purchase price adjustments and other future contingent payments based on the financial performance of the acquired companies. For acquisitions completed prior to the adoption of Statement of Financial Accounting Standards No. 141 (revised 2007), Business Combinations (“Statement No. 141R” or ASC 805-10), the Company will continue to accrue additional amounts related to such contingent payments if and when it is determinable that the applicable financial performance targets will be met. The aggregate of these contingent payments, if performance targets are met, would not significantly impact the financial position or results of operations of the Company. For acquisitions completed following the adoption of Statement No. 141R, the Company accounts for these payments based on the guidance in FSP No. FAS 141(R)-1.

As discussed in Note 4, there are various lawsuits and claims pending against the Company. Based on current assumptions, the Company has accrued its estimate of the probable costs for the resolution of these claims. Future results of operations could be materially affected by changes in these assumptions or the effectiveness of the strategies related to these proceedings.

At June 30, 2009, Clear Channel guaranteed $39.7 million of credit lines provided to certain of its international subsidiaries by a major international bank. Most of these credit lines related to intraday overdraft facilities covering participants in Clear Channel’s European cash management pool. As of June 30, 2009, no amounts were outstanding under these agreements.

As of June 30, 2009, Clear Channel had outstanding commercial standby letters of credit and surety bonds of $159.9 million and $94.3 million, respectively. Letters of credit in the amount of $61.0 million are collateral in support of surety bonds and these amounts would only be drawn under the letter of credit in the event the associated surety bonds were funded and Clear Channel did not honor its reimbursement obligations to the issuers.

These letters of credit and surety bonds relate to various operational matters including insurance, bid, and performance bonds as well as other items.

Note 6: CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS

The Company is a party to a management agreement with certain affiliates of the Sponsors and certain other parties pursuant to which such affiliates of the Sponsors will provide management and financial advisory services until 2018. This agreement requires management fees to be paid to such affiliates of the Sponsors for such services at a rate not greater than $15.0 million per year. For the three and six months ended June 30, 2009, the Company recognized management fees of $3.8 million and $7.5 million, respectively.

In addition, the Company reimbursed the Sponsors for additional expenses in the amount of $2.0 million for the three and six months ended June 30, 2009.

Note 7: SEGMENT DATA

The Company has three reportable segments, which it believes best reflects how the Company is currently managed — radio broadcasting, Americas outdoor advertising and International outdoor advertising. The Americas outdoor advertising segment consists primarily of operations in the United States, Canada and Latin America, and the International outdoor advertising segment includes operations primarily in Europe, Asia and Australia. The category “other” includes media representation and other general support services and initiatives. Revenue and expenses earned and charged between segments are recorded at fair value and eliminated in consolidation.

The following table presents the Company’s post-merger and Clear Channel’s pre-merger operating segment results for the three and six months ended June 30, 2009 and 2008, respectively.

						Americas				International								Corporate and
		Radio				Outdoor				Outdoor								other reconciling
(In thousands)		Broadcasting				Advertising				Advertising				Other				items				Eliminations				Consolidated
Three Months Ended June 30, 2009 (Post-merger)
Revenue		$	717,567			$	315,553			$	376,564			$	49,335			$	—			$	(21,154	)		$	1,437,865
Direct operating expenses			233,585				148,755				243,554				21,755				—				(10,573	)			637,076
Selling, general and administrative expenses			226,227				51,398				69,944				23,570				—				(10,581	)			360,558
Depreciation and amortization			77,990				57,860				56,948				13,485				1,963				—				208,246
Corporate expenses			—				—				—				—				50,087				—				50,087
Impairment charge			—				—				—				—				4,041,252				—				4,041,252
Other operating expense — net			—				—				—				—				(31,516	)			—				(31,516	)
Operating income (loss)		$	179,765			$	57,540			$	6,118			$	(9,475	)		$	(4,124,818	)		$	—			$	(3,890,870	)
Intersegment revenues		$	8,002			$	1,145			$	—			$	12,007			$	—			$	—			$	21,154
Share-based payments		$	2,139			$	2,028			$	613			$	(72	)		$	4,827			$	—			$	9,535
Six Months Ended June 30, 2009 (Post-merger)
Revenue		$	1,321,189			$	585,740			$	688,593			$	91,133			$	—			$	(40,803	)		$	2,645,852
Direct operating expenses			461,767				293,635				478,282				44,281				—				(22,540	)			1,255,425
Selling, general and administrative expenses			465,566				100,237				138,869				51,685				—				(18,263	)			738,094
Depreciation and amortization			134,822				104,510				112,206				28,332				3,935				—				383,805
Corporate expenses			—				—				—				—				97,722				—				97,722
Impairment charge			—				—				—				—				4,041,252				—				4,041,252
Other operating expense — net			—				—				—				—				(34,410	)			—				(34,410	)
Operating income (loss)		$	259,034			$	87,358			$	(40,764	)		$	(33,165	)		$	(4,177,319	)		$	—			$	(3,904,856	)
Intersegment revenues		$	17,416			$	1,270			$	—			$	22,117			$	—			$	—			$	40,803
Identifiable assets		$	8,732,178			$	4,353,936			$	2,272,665			$	778,835			$	1,760,271			$	—			$	17,897,885
Capital expenditures		$	23,609			$	34,297			$	32,525			$	20			$	2,172			$	—			$	92,623
Share-based payments		$	4,138			$	4,196			$	1,269			$	—			$	9,703			$	—			$	19,306
Three Months Ended June 30, 2008 (Pre-merger)
Revenue		$	891,483			$	384,978			$	529,830			$	52,381			$	—			$	(27,594	)		$	1,831,078
Direct operating expenses			245,330				161,020				329,224				20,595				—				(12,684	)			743,485
Selling, general and administrative expenses			285,961				60,057				90,977				23,649				—				(14,910	)			445,734
Depreciation and amortization			21,015				49,273				55,491				12,750				3,659				—				142,188
Corporate expenses			—				—				—				—				47,974				—				47,974
Merger expenses			—				—				—				—				7,456				—				7,456
Other operating income — net			—				—				—				—				17,354				—				17,354
Operating income (loss)		$	339,177			$	114,628			$	54,138			$	(4,613	)		$	(41,735	)		$	—			$	461,595
Intersegment revenues		$	9,896			$	2,562			$	—			$	15,136			$	—			$	—			$	27,594
Share-based payments		$	4,506			$	2,763			$	687			$	—			$	2,836			$	—			$	10,792
Six Months Ended June 30, 2008 (Pre-merger)
Revenue		$	1,661,094			$	718,340			$	972,047			$	96,834			$	—			$	(53,030	)		$	3,395,285
Direct operating expenses			476,826				317,265				643,813				37,919				—				(26,391	)			1,449,432
Selling, general and administrative expenses			555,243				118,432				177,212				47,867				—				(26,639	)			872,115
Depreciation and amortization			52,502				99,372				110,482				24,305				7,805				—				294,466
Corporate expenses			—				—				—				—				94,277				—				94,277
Merger expenses			—				—				—				—				7,845				—				7,845
Other operating income — net			—				—				—				—				19,451				—				19,451
Operating income (loss)		$	576,523			$	183,271			$	40,540			$	(13,257	)		$	(90,476	)		$	—			$	696,601
Intersegment revenues		$	20,860			$	4,239			$	—			$	27,931			$	—			$	—			$	53,030
Identifiable assets		$	11,749,790			$	2,920,321			$	2,784,482			$	614,317			$	964,989			$	—			$	19,033,899
Capital expenditures		$	35,008			$	71,818			$	101,471			$	1,554			$	1,875			$	—			$	211,726
Share-based payments		$	9,315			$	4,301			$	1,079			$	—			$	5,687			$	—			$	20,382