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Property, Plant And Equipment, Intangible Assets And Goodwill | 12 Months Ended
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Dec. 31, 2011
Property, Plant And Equipment, Intangible Assets And Goodwill [Abstract] |
Property, Plant And Equipment, Intangible Assets And Goodwill | NOTE 2 – PROPERTY, PLANT AND EQUIPMENT, INTANGIBLE ASSETS AND GOODWILL Acquisitions On April 29, 2011, a wholly owned subsidiary of the Company purchased the traffic business of Westwood One, Inc. for $24.3 million. Immediately after closing, the acquired subsidiaries repaid pre-existing, intercompany debt owed by the subsidiaries to Westwood One, Inc. in the amount of $95.0 million. The acquisition resulted in an increase of $17.2 million to property, plant and equipment, $35.0 million to intangible assets and $70.6 million to goodwill. During 2011, a subsidiary of the Company acquired Brouwer & Partners, a street furniture business in Holland, for $12.5 million. Property, Plant and Equipment The Company's property, plant and equipment consisted of the following classes of assets at December 31, 2011 and 2010, respectively:
|  |  | $0,000,000,00 |  |  |  | $0,000,000,00 |
(In thousands) |  | December 31, |  |  | December 31, |
|  | 2011 |  |  | 2010 |
Land, buildings and improvements |  | $ | 657,346 |  |  | $ | 652,575 |
Structures |  |  | 2,783,434 |  |  |  | 2,623,561 |
Towers, transmitters and studio equipment |  |  | 400,832 |  |  |  | 397,434 |
Furniture and other equipment |  |  | 365,137 |  |  |  | 282,385 |
Construction in progress |  |  | 68,658 |  |  |  | 65,173 |
|  |  | 4,275,407 |  |  |  | 4,021,128 |
Less: accumulated depreciation |  |  | 1,212,080 |  |  |  | 875,574 |
Property, plant and equipment, net |  | $ | 3,063,327 |  |  | $ | 3,145,554 |
Definite-lived Intangible Assets The following table presents the gross carrying amount and accumulated amortization for each major class of definite-lived intangible assets at December 31, 2011 and 2010, respectively:
|  |  | $0,000,000,00 |  |  |  | $0,000,000,00 |  |  |  | $0,000,000,00 |  |  |  | $0,000,000,00 |
(In thousands) |  | December 31, 2011 |  |  | December 31, 2010 |
|  | Gross Carrying Amount |  |  | Accumulated Amortization |  |  | Gross Carrying Amount |  |  | Accumulated Amortization |
Transit, street furniture, and other outdoor contractual rights |  | $ | 773,238 |  |  | $ | 329,563 |  |  | $ | 789,867 |  |  | $ | 256,685 |
Customer / advertiser relationships |  |  | 1,210,269 |  |  |  | 409,794 |  |  |  | 1,210,205 |  |  |  | 289,824 |
Talent contracts |  |  | 347,489 |  |  |  | 139,154 |  |  |  | 317,352 |  |  |  | 99,050 |
Representation contracts |  |  | 237,451 |  |  |  | 137,058 |  |  |  | 231,623 |  |  |  | 101,650 |
Other |  |  | 560,978 |  |  |  | 96,096 |  |  |  | 551,197 |  |  |  | 64,886 |
Total |  | $ | 3,129,425 |  |  | $ | 1,111,665 |  |  | $ | 3,100,244 |  |  | $ | 812,095 |
Total amortization expense related to definite-lived intangible assets was $328.3 million, $332.3 million, and $341.6 million for the years ended December 31, 2011, 2010 and 2009, 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:
|  |  | $000000000 |
(In thousands) |  |  |
2012 |  | $ | 302,374 |
2013 |  |  | 282,921 |
2014 |  |  | 259,860 |
2015 |  |  | 232,293 |
2016 |  |  | 217,248 |
Indefinite-lived Intangible Assets and Goodwill The Company's indefinite-lived intangible assets consist of FCC broadcast licenses and billboard permits. FCC broadcast licenses are granted to radio 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 granted for the right to operate an advertising structure at the specified location as long as the structure is in compliance with the laws and regulations of each jurisdiction. The Company's permits are located on owned land, leased land or land for which we have acquired permanent easements. In cases where the Company's permits are located on leased land, the leases typically have initial terms of between 10 and 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. Due to significant differences in both business practices and regulations, billboards in the International outdoor segment are subject to long-term, finite contracts unlike the Company's permits in the United States and Canada. Accordingly, there are no indefinite-lived intangible assets in the International outdoor segment. The impairment tests for indefinite-lived intangible assets consist of a comparison between the fair value of the indefinite-lived intangible asset at the market level with its carrying amount. If the carrying amount of the indefinite-lived intangible asset exceeds its fair value, an impairment loss is recognized equal to that excess. After an impairment loss is recognized, the adjusted carrying amount of the indefinite-lived asset is its new accounting basis. The fair value of the indefinite-lived asset is determined using the direct valuation method as prescribed in ASC 805-20-S99. Under the direct valuation method, the fair value of the indefinite-lived assets is calculated at the market level as prescribed by ASC 350-30-35. The Company engaged Mesirow Financial, a third-party valuation firm, to assist it in the development of the assumptions and the Company's determination of the fair value of its indefinite-lived intangible assets. The application of the direct valuation method attempts to isolate the income that is properly attributable to the indefinite-lived intangible asset 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 forecasts revenue, expenses, and cash flows over a ten-year period for each of its markets in its application of the direct valuation method. The Company also calculates 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 flow 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 or billboard permit within a market. Annual Impairment Test to FCC Licenses and Billboard Permits The Company performs its annual impairment test on October 1 of each year. The aggregate fair value of the Company's FCC licenses on October 1, 2011 and 2010 increased approximately 10% and 14% from the fair value at October 1, 2010 and 2009, respectively. The increase in fair value for both years resulted primarily from improvements to general market conditions leading to increased advertising spending, which results in higher revenues for the industry. The aggregate fair value of the Company's permits on October 1, 2011 and 2010 increased approximately 12% and 58% from the fair value at October 1, 2010 and 2009, respectively. The increase in fair value resulted primarily from improvements to general market conditions leading to increased advertising spending and results in higher revenues for the industry. During 2011, the Company recognized a $6.5 million impairment charge related to billboard permits in one market due to significant declines in permit value resulting from flat revenues, a slight decline in margin and increased capital expenditures within the market. During 2010, although the aggregate fair values of FCC licenses and billboard permits increased, certain markets experienced continuing declines. As a result, impairment charges were recorded in 2010 for FCC licenses and billboard permits of $0.5 million and $4.8 million, respectively. Interim Impairment to FCC Licenses The Company performed an interim impairment test on its FCC licenses as of June 30, 2009 as a result of the poor economic environment during the period. In determining the fair value of the Company's FCC licenses, the following key assumptions were used:
| § | Industry revenue forecast by BIA Financial Network, Inc. ("BIA") of 1.8% were used during the three year build-up period;
| § | Operating margin of 12.5% in the first year gradually climbs to the industry average margin in year three of 29%;
| § | 2% revenue growth was assumed beyond the discrete build-up projection; and
| § | Assumed discount rates of 10% for the 13 largest markets and 10.5% for all other markets.
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 at June 30, 2009 in approximately one-quarter of its markets, which totaled $590.3 million. 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. Approximately 23% of the fair value of the Company's FCC licenses at June 30, 2009 was determined using the stick method. Interim Impairment to Billboard Permits The Company performed an interim impairment test on its billboard permits as June 30, 2009 as a result of the poor economic environment during the period. In determining the fair value of the Company's billboard permits, the following key assumptions were used:
| § | Industry revenue growth of negative 16% during the one year build-up period;
| § | Cost structure reached a normalized level over a three year period and the operating margins gradually grew over that period to the industry average margins of 45%. The margin in year three was the lower of the industry average margin or the actual margin for the market;
| § | Industry average revenue growth of 3% beyond the discrete build-up projection; and
| § | A discount rate of 10%.
The discount rate used in the June 30, 2009 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 at June 30, 2009 in all but five of its markets in the United States and Canada, which totaled $345.4 million. Annual Impairment Test to Goodwill The Company performs its annual impairment test on October 1 of each year. 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 ASC 350-20-55. 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. Beginning with its annual impairment testing in the fourth quarter of 2011, the Company utilized the option to assess qualitative factors under ASC 350-20-35 to determine whether it was more likely than not that the fair value of its reporting units was less than their carrying amounts, including goodwill. Based on a qualitative assessment, the Company concluded that no further testing of goodwill for impairment was required for its CCME reporting unit and for all of the reporting units within its Americas outdoor segment, with the exception of one country, for which further testing was required. Further testing was also required for three of the countries within its International outdoor segment. If further testing of goodwill for impairment is required after assessing qualitative factors, the Company follows the two-step impairment testing approach in accordance with ASC 350-20-35. The first step, used to screen for potential impairment, compares the fair value of the reporting unit with its carrying amount, including goodwill. If applicable, the second step, 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 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. For the year ended December 31, 2011, the Company recognized a non-cash impairment charge to goodwill of $1.1 million due to a decline in the fair value of one country within the Company's International outdoor segment. The fair value of the Company's reporting units on October 1, 2010 increased from the fair value at October 1, 2009. The increase in the fair value of the Company's CCME reporting unit was primarily the result of a 50 basis point decline in the discount rate and a $210.0 million increase related to industry projections. The increase in the fair value of the Company's Americas outdoor reporting unit was primarily the result of a $638.6 million increase related to forecast revenues and operating margins. As a result of increase in fair value across the CCME and Americas outdoor reporting units, no goodwill impairments were recognized in these segments. Within the Company's International outdoor segment, one country experienced a decline in fair value which resulted in a $2.1 million non-cash impairment to goodwill recorded for the year ended December 31, 2010. The following table presents the changes in the carrying amount of goodwill in each of the Company's reportable segments. The provisions of ASC 350-20-50-1 require the disclosure of cumulative impairment. As a result of the merger, a new basis in goodwill was recorded in accordance with ASC 805-10. All impairments shown in the table below have been recorded subsequent to the merger and, therefore, do not include any pre-merger impairment.
|  |  | $0,000,000 |  |  |  | $0,000,000 |  |  |  | $0,000,000 |  |  |  | $0,000,000 |  |  |  | $0,000,000 |
(In thousands) |  | CCME |  |  | Americas Outdoor Advertising |  |  | International Outdoor Advertising |  |  | Other |  |  | Consolidated |
Balance as of December 31, 2009 |  | $ | 3,146,869 |  |  | $ | 585,249 |  |  | $ | 276,343 |  |  | $ | 116,544 |  |  | $ | 4,125,005 |
Impairment |  |  | — |  |  |  | — |  |  |  | (2,142 | ) |  |  | — |  |  |  | (2,142 | )
Acquisitions |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 342 |  |  |  | 342 |
Dispositions |  |  | (5,325 | ) |  |  | — |  |  |  | — |  |  |  | — |  |  |  | (5,325 | )
Foreign currency |  |  | — |  |  |  | 285 |  |  |  | 3,299 |  |  |  | — |  |  |  | 3,584 |
Other |  |  | (1,346 | ) |  |  | — |  |  |  | (792 | ) |  |  | — |  |  |  | (2,138 | )
Balance as of December 31, 2010 |  | $ | 3,140,198 |  |  | $ | 585,534 |  |  | $ | 276,708 |  |  | $ | 116,886 |  |  | $ | 4,119,326 |
Impairment |  |  | — |  |  |  | — |  |  |  | (1,146 | ) |  |  | — |  |  |  | (1,146 | )
Acquisitions |  |  | 82,844 |  |  |  | — |  |  |  | 2,995 |  |  |  | 212 |  |  |  | 86,051 |
Dispositions |  |  | (10,542 | ) |  |  | — |  |  |  | — |  |  |  | — |  |  |  | (10,542 | )
Foreign currency |  |  | — |  |  |  | (670 | ) |  |  | (6,228 | ) |  |  | — |  |  |  | (6,898 | )
Other |  |  | (73 | ) |  |  | — |  |  |  | — |  |  |  | — |  |  |  | (73 | )
Balance as of December 31, 2011 |  | $ | 3,212,427 |  |  | $ | 584,864 |  |  | $ | 272,329 |  |  | $ | 117,098 |  |  | $ | 4,186,718 |
The balance at December 31, 2009 is net of cumulative impairments of $3.5 billion, $2.7 billion, $247.2 million and $212.0 million in the Company's CCME, Americas outdoor, International outdoor and Other segments, respectively. Interim Impairment Test to Goodwill The discounted cash flow model indicated that the Company failed the first step of the impairment test for certain of its reporting units as of June 30, 2009, which required it to compare the implied fair value of each reporting unit's goodwill with its carrying value. As of June 30, 2009, the Company calculated the weighted average cost of capital ("WACC") of 11%, 12.5% and 13.5% for each of the reporting units in the CCME, Americas outdoor and International outdoor segments, respectively. 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 can be estimated through the quoted market price method, the market comparable method, and the market transaction method. 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 Company forecasted revenue, expenses, and cash flows over a ten-year period for each of its reporting units. The revenue forecasts for 2009 declined 8%, 7% and 9% for CCME, 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 at June 30, 2009.

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