Edgar Filing: Clear Channel Outdoor Holdings, Inc.

Form 10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

x	QUARTERLY REPORT PURSUANT TO SECTION 13 AND 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2010

¨	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM TO

Commission File Number

1-32663

CLEAR CHANNEL OUTDOOR HOLDINGS, INC.

(Exact name of registrant as specified in its charter)


Delaware		86-0812139
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

200 East Basse Road

San Antonio, Texas

78209

(Address of principal executive offices)

(Zip Code)

(210) 832-3700

(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 x No ¨

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 during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ¨ No ¨

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 definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer ¨ Accelerated filer x Non-accelerated filer ¨ Smaller reporting company ¨

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

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 October 31, 2010
Class A Common Stock, $.01 par value		40,887,612
Class B Common Stock, $.01 par value		315,000,000

CLEAR CHANNEL OUTDOOR HOLDINGS, INC. AND SUBSIDIARIES

INDEX


	Page No.
PART I — FINANCIAL INFORMATION

Item 1. Unaudited Financial Statements

Condensed Consolidated Balance Sheets at September 30, 2010 and December 31, 2009		3

Consolidated Statements of Operations for the three and nine months ended September 30, 2010 and 2009		4

Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 2010 and 2009		5

Notes to Consolidated Financial Statements		6

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations		23

Item 3. Quantitative and Qualitative Disclosures About Market Risk		33

Item 4. Controls and Procedures		33

PART II — OTHER INFORMATION

Item 1. Legal Proceedings		34

Item 1A. Risk Factors		34

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds		35

Item 3. Defaults Upon Senior Securities		35

Item 4. (Removed and Reserved)		35

Item 5. Other Information		35

Item 6. Exhibits		36

Signatures		37

PART I — FINANCIAL INFORMATION

Item 1. UNAUDITED FINANCIAL STATEMENTS

CLEAR CHANNEL OUTDOOR HOLDINGS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands)


	September 30, 2010 (Unaudited)			December 31, 2009
CURRENT ASSETS
Cash and cash equivalents	$	664,710		$	609,436
Accounts receivable, net		732,445			730,306
Other current assets		209,227			300,803

Total Current Assets		1,606,382			1,640,545

PROPERTY, PLANT AND EQUIPMENT
Structures, net		2,035,286			2,143,972
Other property, plant and equipment, net		293,764			296,666

INTANGIBLE ASSETS
Definite-lived intangibles, net		723,025			799,144
Indefinite-lived intangibles		1,119,912			1,132,218
Goodwill		862,051			861,592

OTHER ASSETS
Due from Clear Channel Communications		254,178			123,308
Other assets		192,052			194,977

Total Assets	$	7,086,650		$	7,192,422


CURRENT LIABILITIES
Accounts payable and accrued expenses	$	602,462		$	614,442
Deferred income		137,447			109,578
Current portion of long-term debt		42,356			47,073

Total Current Liabilities		782,265			771,093

Long-term debt		2,524,980			2,561,805
Deferred tax liability		830,369			841,911
Other long-term liabilities		271,996			256,236
Commitments and contingent liabilities

SHAREHOLDERS’ EQUITY
Noncontrolling interest		201,010			193,730
Class A common stock		409			407
Class B common stock		3,150			3,150
Additional paid-in capital		6,676,478			6,669,247
Retained deficit		(3,978,629	)		(3,886,826	)
Accumulated other comprehensive loss		(225,091	)		(218,177	)
Cost of shares held in treasury		(287	)		(154	)

Total Shareholders’ Equity		2,677,040			2,761,377


Total Liabilities and Shareholders’ Equity	$	7,086,650		$	7,192,422

See notes to consolidated financial statements

CLEAR CHANNEL OUTDOOR HOLDINGS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(UNAUDITED)

(In thousands, except per share data)


	Three Months Ended September 30,						Nine Months Ended September 30,
	2010			2009			2010			2009
Revenue	$	695,086		$	660,622		$	2,005,261		$	1,934,955

Operating expenses:
Direct operating expenses (excludes depreciation and amortization)		380,619			398,766			1,145,389			1,170,683
Selling, general and administrative expenses (excludes depreciation and amortization)		115,224			108,824			357,273			347,930
Corporate expenses (excludes depreciation and amortization)		26,197			15,547			70,726			45,446
Depreciation and amortization		103,833			111,053			310,841			327,769
Impairment charges		—			—			—			812,390
Other operating income (expense) – net		(27,672	)		1,160			(24,934	)		10,125

Operating income (loss)		41,541			27,592			96,098			(759,138	)
Interest expense		60,276			37,908			178,989			114,992
Interest income on Due from Clear Channel Communications		4,800			133			12,019			358
Loss on marketable securities		—			(11,315	)		—			(11,315	)
Equity in loss of nonconsolidated affiliates		(663	)		(2,046	)		(1,462	)		(26,094	)
Other income (expense) – net		1,545			492			(3,447	)		(5,288	)

Loss before income taxes		(13,053	)		(23,052	)		(75,781	)		(916,469	)
Income tax benefit (expense)		(18,829	)		(10,999	)		(7,384	)		101,702

Consolidated net loss		(31,882	)		(34,051	)		(83,165	)		(814,767	)
Amount attributable to noncontrolling interest		3,012			325			8,638			(3,413	)

Net loss attributable to the Company	$	(34,894	)	$	(34,376	)	$	(91,803	)	$	(811,354	)

Other comprehensive income (loss), net of tax:
Foreign currency translation adjustments		106,902			47,637			313			116,553
Foreign currency reclassification adjustment		2,565			11,836			1,424			11,323
Unrealized loss on marketable securities		(394	)		(2,165	)		(5,343	)		(11,315	)

Comprehensive income (loss)		74,179			22,932			(95,409	)		(694,793	)
Amount attributable to noncontrolling interest		7,042			2,981			3,308			7,002

Comprehensive income (loss) attributable to the Company	$	67,137		$	19,951		$	(98,717	)	$	(701,795	)

Net loss per common share:
Basic	$	(0.10	)	$	(0.10	)	$	(0.27	)	$	(2.29	)
Weighted average common shares outstanding		355,585			355,389			355,530			355,364
Diluted	$	(0.10	)	$	(0.10	)	$	(0.27	)	$	(2.29	)
Weighted average common shares outstanding		355,585			355,389			355,530			355,364

See notes to consolidated financial statements

CLEAR CHANNEL OUTDOOR HOLDINGS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

(In thousands)


	Nine Months Ended September 30,
	2010			2009
Cash flows from operating activities:
Consolidated net loss	$	(83,165	)	$	(814,767	)

Reconciling items:
Impairment charges		—			812,390
Depreciation and amortization		310,841			327,769
Deferred taxes		(11,722	)		(127,877	)
Provision for doubtful accounts		4,849			9,059
(Gain) loss on sale of operating and fixed assets		24,934			(10,125	)
Other reconciling items, net		15,659			48,577
Changes in operating assets and liabilities:
(Increase) decrease in accounts receivable		(20,274	)		78,284
Decrease in Federal incomes taxes receivable		50,958			—
Increase in deferred income		30,020			22,409
Increase (decrease) in accounts payable, accrued expenses and other liabilities		22,339			(43,095	)
Changes in other operating assets and liabilities, net of effects of acquisitions and dispositions		24,695			(32,742	)

Net cash provided by operating activities		369,134			269,882

Cash flows from investing activities:
Purchases of property, plant and equipment		(139,274	)		(113,976	)
Acquisition of operating assets, net of cash acquired		(715	)		(5,125	)
Change in other – net		4,762			25,997

Net cash used for investing activities		(135,227	)		(93,104	)

Cash flows from financing activities:
Draws on credit facilities		3,916			6,508
Payments on credit facilities		(42,254	)		(3,784	)
Proceeds from long-term debt		6,844			—
Payments on long-term debt		(12,425	)		(2,191	)
Net transfers to Clear Channel Communications		(130,870	)		(86,309	)
Payments for purchase of noncontrolling interest		—			(25,190	)
Change in other – net		(4,213	)		—

Net cash used for financing activities		(179,002	)		(110,966	)
Effect of exchange rate changes on cash		369			4,768

Net increase in cash and cash equivalents		55,274			70,580
Cash and cash equivalents at beginning of period		609,436			94,812

Cash and cash equivalents at end of period	$	664,710		$	165,392

See notes to consolidated financial statements

CLEAR CHANNEL OUTDOOR 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 accompanying consolidated financial statements were prepared by Clear Channel Outdoor 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 normal and recurring adjustments 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 2009 Annual Report on Form 10-K and Quarterly Reports on Forms 10-Q for the quarterly periods ended March 31, 2010 and June 30, 2010.

The consolidated financial statements include the accounts of the Company and its subsidiaries and give effect to allocations of expenses from the Company’s indirect parent entity, Clear Channel Communications, Inc. (“Clear Channel Communications”). These allocations were made on a specifically identifiable basis or using relative percentages of headcount or other methods management considered to be a reasonable reflection of the utilization of services provided. 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.

Certain prior-period amounts have been reclassified to conform to the 2010 presentation.

New Accounting Pronouncements

In August 2010, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2010-21, Accounting for Technical Amendments to Various SEC Rules and Schedules. This ASU amends various SEC paragraphs pursuant to the issuance of Release No. 33-9026: Technical Amendments to Rules, Forms, Schedules and Codification of Financial Reporting Policies and became effective upon issuance. The adoption of ASU No. 2010-21 will not have a material impact on the Company’s financial position or results of operations.

In August 2010, the FASB issued ASU No. 2010-22, Accounting for Various Topics—Technical Corrections to SEC Paragraphs. This ASU amends various SEC paragraphs and became effective upon issuance. The adoption of ASU No. 2010-22 will not have a material impact on the Company’s financial position or results of operations.

Note 2: PROPERTY, PLANT AND EQUIPMENT, INTANGIBLE ASSETS AND GOODWILL

Property, Plant and Equipment

The Company’s property, plant and equipment consisted of the following classes of assets at September 30, 2010 and December 31, 2009, respectively:


(In thousands)	September 30, 2010		December 31, 2009
Land, buildings and improvements	$	206,770	$	207,939
Structures		2,589,169		2,514,602
Furniture and other equipment		78,631		71,567
Construction in progress		59,234		51,598

		2,933,804		2,845,706
Less accumulated depreciation		604,754		405,068

Property, plant and equipment, net	$	2,329,050	$	2,440,638

CLEAR CHANNEL OUTDOOR HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(UNAUDITED)

Definite-lived Intangible Assets

The Company has definite-lived intangible assets which 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. Definite-lived 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 September 30, 2010 and December 31, 2009, respectively:


(In thousands)	September 30, 2010				December 31, 2009
	Gross Carrying Amount		Accumulated Amortization		Gross Carrying Amount		Accumulated Amortization
Transit, street furniture and other contractual rights	$	791,746	$	226,163	$	803,297	$	166,803
Other		172,114		14,672		172,394		9,744

Total	$	963,860	$	240,835	$	975,691	$	176,547

Total amortization expense related to definite-lived intangible assets was $26.2 million and $27.5 million for the three months ended September 30, 2010 and 2009, respectively, and $80.0 million and $75.0 million for the nine months ended September 30, 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:

(In thousands)


2011	$	86,993
2012		77,282
2013		72,977
2014		65,878
2015		53,193

Indefinite-lived Intangible Assets

The Company’s indefinite-lived intangible assets consist of billboard permits. The Company’s billboard permits are effectively issued in perpetuity by state and local governments and are transferable at little or no cost.

Goodwill

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


(In thousands)	Americas			International			Total
Balance as of December 31, 2008	$	892,598		$	287,543		$	1,180,141
Acquisitions		2,250			110			2,360
Foreign currency translation		16,293			17,412			33,705
Purchase accounting adjustments – net		68,896			45,042			113,938
Impairment		(390,374	)		(73,764	)		(464,138	)
Other		(4,414	)		—			(4,414	)

Balance as of December 31, 2009	$	585,249		$	276,343		$	861,592

Foreign currency		176			283			459

Balance as of September 30, 2010	$	585,425		$	276,626		$	862,051

The balance at December 31, 2008 is net of cumulative impairments of $2.3 billion and $173.4 million in the Americas and International segments, respectively.

CLEAR CHANNEL OUTDOOR HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(UNAUDITED)

Note 3: DEBT

Long-term debt at September 30, 2010 and December 31, 2009 consisted of the following:


(In thousands)	September 30, 2010		December 31, 2009
Clear Channel Worldwide Holdings Senior Notes:
9.25% Series A Senior Notes Due 2017	$	500,000	$	500,000
9.25% Series B Senior Notes Due 2017		2,000,000		2,000,000
Credit facility ($150.0 million sub-limit within Clear Channel Communications’ $2.0 billion revolving credit facility)		—		30,000
Other debt		67,336		78,878

Total debt		2,567,336		2,608,878
Less: Current portion		42,356		47,073

Total long-term debt	$	2,524,980	$	2,561,805

The aggregate market value of the Company’s debt based on market prices for which quotes were available was approximately $2.7 billion at September 30, 2010 and December 31, 2009.

Note 4: OTHER DEVELOPMENTS

Disposition of Assets

On October 15, 2010, the Company transferred its interest in its Branded Cities operations to its joint venture partner, The Ellman Companies. The long-lived tangible and intangible assets of the Branded Cities operations were transferred for less than their carrying values in connection with this transaction. In connection with this subsequent event, the Company recorded a non-cash charge in the third quarter of 2010 of approximately $23.6 million in “Other operating income (expense) – net” to present these assets at their estimated fair values as of September 30, 2010.

During the three months ended September 30, 2010, the Company’s International segment sold its outdoor advertising business in India, resulting in a loss of $3.7 million included in “Other operating income (expense) – net.”

Share-based Compensation Expense

Share-based compensation expense 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 expense recorded during the three and nine months ended September 30, 2010 and 2009, respectively:


(In thousands)	Three Months Ended September 30,				Nine Months Ended September 30,
	2010		2009		2010		2009
Direct operating expenses	$	2,099	$	1,694	$	6,231	$	5,698
Selling, general and administrative expenses		766		618		2,275		2,079
Corporate expenses		92		182		273		611

Total share-based compensation expense	$	2,957	$	2,494	$	8,779	$	8,388

As of September 30, 2010, there was $18.4 million of unrecognized compensation cost, net of estimated forfeitures, related to unvested share-based compensation arrangements. This cost is expected to be recognized over a weighted average period of approximately two years.

CLEAR CHANNEL OUTDOOR HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(UNAUDITED)

Supplemental Disclosures

Cash paid (received) for interest and income taxes for the nine months ended September 30, 2010 and 2009, net of Federal income tax refunds of $51.0 million for the nine months ended September 30, 2010, was as follows:


(In thousands)	Nine Months Ended September 30,
	2010			2009
Interest	$	175,919		$	114,089
Income taxes	$	(29,656	)	$	18,649

Income tax benefit (expense)

The Company’s income tax benefit (expense) for the three and nine months ended September 30, 2010 and 2009, respectively, consisted of the following components:


(In thousands)	Three Months Ended September 30,						Nine Months Ended September 30,
	2010			2009			2010			2009
Current tax expense	$	(1,418	)	$	(13,025	)	$	(19,106	)	$	(26,175	)
Deferred tax benefit (expense)		(17,411	)		2,026			11,722			127,877

Income tax benefit (expense)	$	(18,829	)	$	(10,999	)	$	(7,384	)	$	101,702

The effective tax rate is the provision for income taxes as a percent of income from continuing operations before income taxes. The Company’s effective tax rate for the three and nine months ended September 30, 2010 was (144.3%) and (9.7%), respectively, compared to an effective rate of (47.7%) and 11.1% for the three and nine months ended September 30, 2009, respectively. The 2010 effective rate was impacted primarily as a result of the Company’s inability to benefit from tax losses in certain foreign jurisdictions due to the uncertainty of the ability to utilize those losses in future years. In addition, during the three months ended September 30, 2010, the Company recorded a valuation allowance of $13.4 million against deferred tax assets in foreign jurisdictions due to the uncertainty of the ability to realize those assets in future periods. The change in the effective rate compared to the same period of the prior year was impacted primarily by the impairment charge on goodwill recorded in 2009 and as a result of a deferred tax valuation allowance recorded in 2009 due to the uncertainty of the Company’s ability to utilize Federal and foreign tax losses at that time.

Note 5: FAIR VALUE MEASUREMENTS

The Company holds marketable equity securities classified in accordance with the provisions of ASC 320-10. These marketable equity securities are measured at fair value on each reporting date using quoted prices in active markets. Due to the fact that the inputs used to measure the marketable equity securities at fair value are observable, the Company has categorized the fair value measurements of the securities as Level 1. The Company records its investments in these marketable equity securities on the balance sheet as “Other Assets.”

The cost, unrealized holding gains or losses, and fair value of the Company’s marketable equity securities at September 30, 2010 and December 31, 2009, respectively, are as follows:


(In thousands)	September 30, 2010									December 31, 2009
Investments	Cost		Gross Unrealized Losses			Gross Unrealized Gains		Fair Value		Cost		Gross Unrealized Losses		Gross Unrealized Gains		Fair Value
Available-for-sale	$	14,506	$	(4,025	)	$	87	$	10,568	$	14,506	$	—	$	1,405	$	15,911

CLEAR CHANNEL OUTDOOR HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(UNAUDITED)

Note 6: COMMITMENTS AND CONTINGENCIES

The Company and its subsidiaries are currently involved in certain legal proceedings arising in the ordinary course of business and, as required, the Company has accrued its estimate of the probable costs for resolution of those claims for which the occurrence of loss is probable and the amount can be reasonably estimated. These estimates have been developed in consultation with counsel and are based upon an analysis of potential results, assuming a combination of litigation and settlement strategies. It is possible, however, that future results of operations for any particular period could be materially affected by changes in the Company’s assumptions or the effectiveness of its strategies related to these proceedings.

In 2006, two of the Company’s operating businesses (L&C Outdoor Ltda. and Publicidad Klimes Sao Paulo Ltda.) in the Sao Paulo, Brazil market received notices of infraction from the state taxing authority, seeking to impose a value added tax (“VAT”) on such businesses, retroactively for the period from December 31, 2001 through January 31, 2006. The taxing authority contends that our businesses fall within the definition of “communication services” and as such are subject to the VAT. The aggregate amount of tax initially claimed to be owed by both businesses equals approximately $69.4 million, comprised of approximately $20.2 million in taxes, approximately $40.2 million in penalty and approximately $9.0 million in interest. In addition, the taxing authorities are seeking to impose an additional aggregate amount of interest on the tax and penalty amounts of approximately $39.3 million until the initial tax, penalty and interest are paid. The aggregate amount of additional interest accrues daily at an interest rate promulgated by the Brazilian government, which at September 30, 2010 is equal to approximately $1.85 million per month.

The Company has filed petitions to challenge the imposition of this tax against each of its businesses, which are proceeding separately. The Company’s challenge for L&C Outdoor Ltda. was unsuccessful at the first administrative level, but successful at the second administrative level. The state taxing authority filed an appeal to the next administrative level, which required consideration by a full panel of 16 administrative law judges. On September 27, 2010, the Company received an unfavorable ruling from this final administrative level and intends to appeal this ruling to the judicial level. The Company has filed a petition to have the case remanded to the second administrative level for consideration of the amount of the penalty assessed against it. The Company’s challenge for Publicidad Klimes Sao Paulo Ltda. was unsuccessful at the first administrative level, and denied at the second administrative level on or about September 24, 2009. The case is now pending before the third administrative level. Based on the Company’s review of the law in similar cases in other Brazilian states, the Company has not accrued any costs related to these claims and believes the occurrence of loss is not probable.

As of September 30, 2010, Clear Channel Communications had outstanding commercial standby letters of credit and surety bonds of $47.9 million and $43.2 million, respectively, held on behalf of the Company. These letters of credit and surety bonds relate to various operational matters, including insurance, bid and performance bonds, as well as other items.

Note 7: RELATED PARTY TRANSACTIONS

The Company records net amounts due to or from Clear Channel Communications as “Due from/to Clear Channel Communications” on the condensed consolidated balance sheets. The accounts represent the revolving promissory note issued by the Company to Clear Channel Communications and the revolving promissory note issued by Clear Channel Communications to the Company, in the face amounts of $1.0 billion, or if more or less than such amounts, the aggregate unpaid principal amount of all advances. The accounts accrue interest pursuant to the terms of the promissory notes and are generally payable on demand.

Included in the accounts are the net activities resulting from day-to-day cash management services provided by Clear Channel Communications. As a part of these services, the Company maintains collection bank accounts swept daily into accounts of Clear Channel Communications. In return, Clear Channel Communications funds the Company’s controlled disbursement accounts as checks or electronic payments are presented for payment. The Company’s claim in relation to cash transferred from its concentration account is on an unsecured basis and is limited to the balance of the “Due from Clear Channel Communications” account. At September 30, 2010 and December 31, 2009, the asset recorded in “Due from Clear Channel Communications” on the condensed consolidated balance sheets was $254.2 million and $123.3 million, respectively. As of September 30, 2010, the Company had no borrowings under the cash management note to Clear Channel Communications.

The net interest income for the three and nine months ended September 30, 2010 was $4.8 million and $12.0 million, respectively. The net interest income for the three and nine months ended September 30, 2009 was $0.1 million and $0.4 million, respectively. At September 30, 2009, the interest rate on the “Due from Clear Channel Communications” account was 0.056%, which represented the average one-month generic treasury bill rate. At September 30, 2010, the interest rate on the “Due from Clear Channel Communications” account was 9.25%, which represented the rate as amended in connection with the CCWH Senior Notes issuance in December of 2009.

CLEAR CHANNEL OUTDOOR HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(UNAUDITED)

Clear Channel Communications has a $2.0 billion multi-currency revolving credit facility with a maturity in July 2014 which includes a $150.0 million sub-limit that certain of the Company’s International subsidiaries may borrow against to the extent Clear Channel Communications has not already borrowed against this capacity and is compliant with its covenants under the revolving credit facility. As of September 30, 2010, the Company had no borrowings outstanding under this $150.0 million sub-limit facility.

The Company provides advertising space on its billboards for radio stations owned by Clear Channel Communications. For the three months ended September 30, 2010 and 2009, the Company recorded $0.7 million and $0.8 million, respectively, in revenue for these advertisements. For the nine months ended September 30, 2010 and 2009, the Company recorded $2.4 million and $2.0 million, respectively, in revenue for these advertisements.

Under the Corporate Services Agreement between Clear Channel Communications and the Company, Clear Channel Communications provides management services to the Company, which include, among other things: (i) treasury, payroll and other financial related services; (ii) executive officer services; (iii) human resources and employee benefits services; (iv) legal and related services; (v) information systems, network and related services; (vi) investment services; (vii) procurement and sourcing support services; and (viii) other general corporate services. These services are charged to the Company based on actual direct costs incurred or allocated by Clear Channel Communications based on headcount, revenue or other factors on a pro rata basis. For the three months ended September 30, 2010 and 2009, the Company recorded $9.1 million and $7.8 million, respectively, as a component of corporate expenses for these services. For the nine months ended September 30, 2010 and 2009, the Company recorded $27.7 million and $22.0 million, respectively, as a component of corporate expenses for these services.

Pursuant to the Tax Matters Agreement between Clear Channel Communications and the Company, the operations of the Company are included in a consolidated federal income tax return filed by Clear Channel Communications. The Company’s provision for income taxes has been computed on the basis that the Company files separate consolidated federal income tax returns with its subsidiaries. Tax payments are made to Clear Channel Communications on the basis of the Company’s separate taxable income. Tax benefits recognized on the Company’s employee stock option exercises are retained by the Company.

The Company computes its deferred income tax provision using the liability method in accordance with the provisions of ASC 740-10, as if the Company was a separate taxpayer. Deferred tax assets and liabilities are determined based on differences between financial reporting bases and tax bases of assets and liabilities and are measured using the enacted tax rates expected to apply to taxable income in the periods in which the deferred tax asset or liability is expected to be realized or settled. Deferred tax assets are reduced by valuation allowances if the Company believes it is more likely than not some portion or all of the asset will not be realized.

Pursuant to the Employee Matters Agreement, the Company’s employees participate in Clear Channel Communications’ employee benefit plans, including employee medical insurance and a 401(k) retirement benefit plan. These costs are recorded as a component of selling, general and administrative expenses and were approximately $2.6 million and $2.2 million for the three months ended September 30, 2010 and 2009, respectively. For the nine months ended September 30, 2010 and 2009, the Company recorded approximately $7.7 million and $7.2 million, respectively, as a component of selling, general and administrative expenses for these services.

CLEAR CHANNEL OUTDOOR HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(UNAUDITED)

Note 8: EQUITY AND COMPREHENSIVE INCOME (LOSS)

The Company reports its noncontrolling interests in consolidated subsidiaries as a component of equity separate from the Company’s equity. The following table shows the changes in equity attributable to the Company and the noncontrolling interests of subsidiaries in which the Company has a majority, but not total ownership interest:


(In thousands)	The Company			Noncontrolling Interests			Consolidated
Balances at December 31, 2009	$	2,567,647		$	193,730		$	2,761,377
Net income (loss)		(91,803	)		8,638			(83,165	)
Foreign currency translation adjustments		(3,169	)		3,482			313
Unrealized holding loss on marketable securities		(5,343	)		—			(5,343	)
Reclassification adjustment		1,598			(174	)		1,424
Other – net		7,100			(4,666	)		2,434

Balances at September 30, 2010	$	2,476,030		$	201,010		$	2,677,040


(In thousands)	The Company			Noncontrolling Interests			Consolidated
Balances at December 31, 2008	$	3,332,010		$	211,813		$	3,543,823
Net loss		(811,354	)		(3,413	)		(814,767	)
Foreign currency translation adjustments		109,551			7,002			116,553
Other – net		(2,583	)		(22,900	)		(25,483	)

Balances at September 30, 2009	$	2,627,624		$	192,502		$	2,820,126

CLEAR CHANNEL OUTDOOR HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(UNAUDITED)

Note 9: SEGMENT DATA

The Company has two reportable segments, which it believes best reflect how the Company is currently managed – Americas and International. The Americas segment primarily includes operations in the United States, Canada and Latin America, and the International segment includes operations primarily in Europe, Asia and Australia. Share-based compensation expense is recorded by each segment in direct operating expenses and selling, general and administrative expenses. The following table presents the Company’s operating segment results for the three and nine months ended September 30, 2010 and 2009, respectively:


(In thousands)	Americas		International			Corporate, and other reconciling items			Consolidated

Three months ended September 30, 2010
Revenue	$	333,269	$	361,817		$	—		$	695,086
Direct operating expenses		143,940		236,679			—			380,619
Selling, general and administrative expenses		51,750		63,474			—			115,224
Depreciation and amortization		53,139		50,694			—			103,833
Corporate expenses		—		—			26,197			26,197
Other operating expense – net		—		—			(27,672	)		(27,672	)

Operating income (loss)	$	84,440	$	10,970		$	(53,869	)	$	41,541


Share-based compensation expense	$	2,207	$	658		$	92		$	2,957
Capital expenditures	$	30,689	$	21,869		$	—		$	52,558

Three months ended September 30, 2009
Revenue	$	312,537	$	348,085		$	—		$	660,622
Direct operating expenses		147,250		251,516			—			398,766
Selling, general and administrative expenses		47,602		61,222			—			108,824
Depreciation and amortization		54,102		56,951			—			111,053
Corporate expenses		—		—			15,547			15,547
Other operating income – net		—		—			1,160			1,160

Operating income (loss)	$	63,583	$	(21,604	)	$	(14,387	)	$	27,592


Share-based compensation expense	$	1,775	$	537		$	182		$	2,494
Capital expenditures	$	23,819	$	23,335		$	—		$	47,154

CLEAR CHANNEL OUTDOOR HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(UNAUDITED)


(In thousands)	Americas		International			Corporate, and other reconciling items			Consolidated

Nine months ended September 30, 2010
Revenue	$	928,015	$	1,077,246		$	—		$	2,005,261
Direct operating expenses		427,546		717,843			—			1,145,389
Selling, general and administrative expenses		160,302		196,971			—			357,273
Depreciation and amortization		158,319		152,522			—			310,841
Corporate expenses		—		—			70,726			70,726
Other operating expense – net		—		—			(24,934	)		(24,934	)

Operating income (loss)	$	181,848	$	9,910		$	(95,660	)	$	96,098


Share-based compensation expense	$	6,553	$	1,953		$	273		$	8,779
Capital expenditures	$	70,615	$	68,659		$	—		$	139,274

Nine months ended September 30, 2009
Revenue	$	898,277	$	1,036,678		$	—		$	1,934,955
Direct operating expenses		440,885		729,798			—			1,170,683
Selling, general and administrative expenses		147,839		200,091			—			347,930
Depreciation and amortization		158,612		169,157			—			327,769
Corporate expenses		—		—			45,446			45,446
Impairment charge		—		—			812,390			812,390
Other operating income – net		—		—			10,125			10,125

Operating income (loss)	$	150,941	$	(62,368	)	$	(847,711	)	$	(759,138	)


Share-based compensation expense	$	5,971	$	1,806		$	611		$	8,388
Capital expenditures	$	58,116	$	55,860		$	—		$	113,976

CLEAR CHANNEL OUTDOOR HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(UNAUDITED)

Note 10: GUARANTOR SUBSIDIARIES

The Company and certain of the Company’s direct and indirect wholly-owned domestic subsidiaries (the “Guarantor Subsidiaries”) fully and unconditionally guarantee on a joint and several basis certain of the outstanding indebtedness of Clear Channel Worldwide Holdings, Inc. (the “Subsidiary Issuer”). The following consolidating schedules present financial information on a combined basis in conformity with the SEC’s Regulation S-X Rule 3-10(d):


	September 30, 2010
(In thousands)	Parent Company		Subsidiary Issuer		Guarantor Subsidiaries		Non-Guarantor Subsidiaries		Eliminations			Consolidated
Cash and cash equivalents	$	—	$	—	$	437,049	$	227,661	$	—		$	664,710
Accounts receivable, net		—		—		258,609		473,836		—			732,445
Intercompany receivables		—		28,131		688,036		—		(716,167	)		—
Other current assets		3,079		—		66,441		139,707		—			209,227

Total Current Assets		3,079		28,131		1,450,135		841,204		(716,167	)		1,606,382
Property, plant and equipment, net		—		—		1,514,110		814,940		—			2,329,050
Definite-lived intangibles, net		—		—		405,842		317,183		—			723,025
Indefinite-lived intangibles		—		—		1,104,922		14,990		—			1,119,912
Goodwill		—		—		571,932		290,119		—			862,051
Due from Clear Channel Communications		254,178		—		—		—		—			254,178
Intercompany notes receivable		182,026		2,680,458		9,243		18,105		(2,889,832	)		—
Other assets		2,751,330		1,000,038		1,447,445		88,498		(5,095,259	)		192,052

Total Assets	$	3,190,613	$	3,708,627	$	6,503,629	$	2,385,039	$	(8,701,258	)	$	7,086,650

Accounts payable and accrued expenses	$	35	$	274	$	135,319	$	466,834	$	—		$	602,462
Intercompany notes payable		706,832		—		—		9,335		(716,167	)		—
Deferred income		—		—		47,116		90,331		—			137,447
Current portion of long-term debt		—		—		75		42,281		—			42,356

Total Current Liabilities		706,867		274		182,510		608,781		(716,167	)		782,265
Long-term debt		—		2,500,000		—		24,980		—			2,524,980
Intercompany notes payable		7,491		—		2,692,640		189,701		(2,889,832	)		—
Deferred income taxes		225		—		772,757		57,387		—			830,369
Other long-term liabilities		—		2,041		104,392		165,563		—			271,996
Total shareholders’ equity		2,476,030		1,206,312		2,751,330		1,338,627		(5,095,259	)		2,677,040

Total Liabilities and Shareholders’ Equity	$	3,190,613	$	3,708,627	$	6,503,629	$	2,385,039	$	(8,701,258	)	$	7,086,650

CLEAR CHANNEL OUTDOOR HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(UNAUDITED)


	December 31, 2009
(In thousands)	Parent Company		Subsidiary Issuer			Guarantor Subsidiaries		Non-Guarantor Subsidiaries		Eliminations			Consolidated
Cash and cash equivalents	$	—	$	—		$	431,105	$	178,331	$	—		$	609,436
Accounts receivable, net		—		—			249,325		480,981		—			730,306
Intercompany receivables		—		4,689			582,554		20,606		(607,849	)		—
Other current assets		2,796		(1,935	)		122,636		177,306		—			300,803

Total Current Assets		2,796		2,754			1,385,620		857,224		(607,849	)		1,640,545
Property, plant and equipment, net		—		—			1,562,256		878,382		—			2,440,638
Definite-lived intangibles, net		—		—			423,935		375,209		—			799,144
Indefinite-lived intangibles		—		—			1,117,568		14,650		—			1,132,218
Goodwill		—		—			571,932		289,660		—			861,592
Intercompany notes receivable		182,026		2,700,000			9,243		18,235		(2,909,504	)		—
Due from Clear Channel Communications		123,308		—			—		—		—			123,308
Other assets		2,849,918		1,075,719			1,517,111		80,019		(5,327,790	)		194,977

Total Assets	$	3,158,048	$	3,778,473		$	6,587,665	$	2,513,379	$	(8,845,143	)	$	7,192,422

Accounts payable and accrued expenses	$	—	$	—		$	112,492	$	501,950	$	—		$	614,442
Intercompany notes payable		582,554		—			25,295		—		(607,849	)		—
Deferred income		—		—			38,579		70,999		—			109,578
Current portion of long-term debt		—		—			77		46,996		—			47,073

Total Current Liabilities		582,554		—			176,443		619,945		(607,849	)		771,093
Long-term debt		—		2,500,000			—		61,805		—			2,561,805
Intercompany notes payable		7,622		—			2,692,639		209,243		(2,909,504	)		—
Deferred tax liability		225		—			780,846		60,840		—			841,911
Other long-term liabilities		—		1,225			87,819		167,192		—			256,236
Total shareholders’ equity		2,567,647		1,277,248			2,849,918		1,394,354		(5,327,790	)		2,761,377

Total Liabilities and Shareholders’ Equity	$	3,158,048	$	3,778,473		$	6,587,665	$	2,513,379	$	(8,845,143	)	$	7,192,422

CLEAR CHANNEL OUTDOOR HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(UNAUDITED)


	Three Months Ended September 30, 2010
(In thousands)	Parent Company			Subsidiary Issuer			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminations			Consolidated
Revenue	$	—		$	—		$	294,703		$	400,383		$	—		$	695,086
Operating expenses:
Direct operating expenses		—			—			123,118			257,501			—			380,619
Selling, general and administrative expenses		—			—			43,176			72,048			—			115,224
Corporate expenses		3,244			(83	)		15,249			7,787			—			26,197
Depreciation and amortization		—			—			49,546			54,287			—			103,833
Other operating expense – net		—			—			(5,592	)		(22,080	)		—			(27,672	)

Operating income (loss)		(3,244	)		83			58,022			(13,320	)		—			41,541
Interest expense		79			57,812			1,367			1,018			—			60,276
Interest income on debt with Clear Channel Communications		—			—			4,800			—			—			4,800
Intercompany interest income		3,535			58,004			—			245			(61,784	)		—
Intercompany interest expense		119			—			61,193			472			(61,784	)		—
Equity in earnings (loss) of nonconsolidated affiliates		(34,952	)		(23,518	)		(30,186	)		(663	)		88,656			(663	)
Other income (expense) – net		—			—			(48	)		1,593			—			1,545

Income (loss) before income taxes		(34,859	)		(23,243	)		(29,972	)		(13,635	)		88,656			(13,053	)
Income tax benefit (expense)		(35	)		225			(4,981	)		(14,038	)		—			(18,829	)

Consolidated net income (loss)		(34,894	)		(23,018	)		(34,953	)		(27,673	)		88,656			(31,882	)
Amount attributable to noncontrolling interest		—			—			(1	)		3,013			—			3,012

Net income (loss) attributable to the Company	$	(34,894	)	$	(23,018	)	$	(34,952	)	$	(30,686	)	$	88,656		$	(34,894	)
Other comprehensive income (loss), net of tax:
Foreign currency translation adjustments		—			—			—			106,902			—			106,902
Foreign currency reclassification adjustment		—			—			—			2,565			—			2,565
Unrealized loss on marketable securities		—			—			—			(394	)		—			(394	)
Equity in subsidiary comprehensive income		102,031			94,506			102,031			—			(298,568	)		—

Comprehensive income (loss)	$	67,137		$	71,488		$	67,079		$	78,387		$	(209,912	)	$	74,179
Amount attributable to noncontrolling interest		—			—			—			7,042			—			7,042

Comprehensive income (loss) attributable to the Company	$	67,137		$	71,488		$	67,079		$	71,345		$	(209,912	)	$	67,137

CLEAR CHANNEL OUTDOOR HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(UNAUDITED)


	Three Months Ended September 30, 2009
(In thousands)	Parent Company			Subsidiary Issuer			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminations			Consolidated
Revenue	$	—		$	—		$	279,818		$	380,804		$	—		$	660,622
Operating expenses:
Direct operating expenses		—			—			129,076			269,690			—			398,766
Selling, general and administrative expenses		—			—			40,770			68,054			—			108,824
Corporate expenses		4,242			—			7,971			3,334			—			15,547
Depreciation and amortization		—			—			49,988			61,065			—			111,053
Other operating income (expense) – net		—			—			1,776			(616	)		—			1,160

Operating income (loss)		(4,242	)		—			53,789			(21,955	)		—			27,592
Interest expense		86			—			36,705			1,117			—			37,908
Interest income on debt with Clear Channel Communications		—			—			133			—			—			133
Intercompany interest income		2,634			422			280			357			(3,693	)		—
Intercompany interest expense		257			—			2,734			702			(3,693	)		—
Loss on marketable securities		—			—			—			(11,315	)		—			(11,315	)
Equity in earnings (loss) of nonconsolidated affiliates		(33,095	)		(34,428	)		(29,153	)		(2,046	)		96,676			(2,046	)
Other income (expense) – net		—			—			(32	)		524			—			492

Income (loss) before income taxes		(35,046	)		(34,006	)		(14,422	)		(36,254	)		96,676			(23,052	)
Income tax benefit (expense)		670			(278	)		(18,673	)		7,282			—			(10,999	)

Consolidated net income (loss)		(34,376	)		(34,284	)		(33,095	)		(28,972	)		96,676			(34,051	)
Amount attributable to noncontrolling interest		—			—			—			325			—			325

Net income (loss) attributable to the Company	$	(34,376	)	$	(34,284	)	$	(33,095	)	$	(29,297	)	$	96,676		$	(34,376	)
Other comprehensive income (loss), net of tax:
Foreign currency translation adjustments		—			—			—			47,637			—			47,637
Foreign currency reclassification adjustment		—			—			—			521			—			521
Unrealized loss on marketable securities		—			—			—			(2,165	)		—			(2,165	)
Reclassification adjustments		—			—			—			11,315			—			11,315
Equity in subsidiary comprehensive income		54,327			53,436			54,327			—			(162,090	)		—

Comprehensive income (loss)	$	19,951		$	19,152		$	21,232		$	28,011		$	(65,414	)	$	22,932
Amount attributable to noncontrolling interest		—			—			—			2,981			—			2,981

Comprehensive income (loss) attributable to the Company	$	19,951		$	19,152		$	21,232		$	25,030		$	(65,414	)	$	19,951

CLEAR CHANNEL OUTDOOR HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(UNAUDITED)


	Nine Months Ended September 30, 2010
(In thousands)	Parent Company			Subsidiary Issuer			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminations			Consolidated
Revenue	$	—		$	—		$	814,146		$	1,191,115		$	—		$	2,005,261
Operating expenses:
Direct operating expenses		—			—			365,214			780,175			—			1,145,389
Selling, general and administrative expenses		—			—			135,876			221,397			—			357,273
Corporate expenses		10,144			452			41,968			18,162			—			70,726
Depreciation and amortization		—			—			147,559			163,282			—			310,841
Other operating expense – net		—			—			(3,625	)		(21,309	)		—			(24,934	)

Operating income (loss)		(10,144	)		(452	)		119,904			(13,210	)		—			96,098
Interest expense		328			172,874			2,653			3,134			—			178,989
Interest income on debt with Clear Channel Communications		—			—			12,019			—			—			12,019
Intercompany interest income		10,626			173,749			—			738			(185,113	)		—
Intercompany interest expense		361			—			183,047			1,705			(185,113	)		—
Equity in earnings (loss) of nonconsolidated affiliates		(91,674	)		(49,446	)		(49,751	)		(1,279	)		190,688			(1,462	)
Other expense – net		—			—			(139	)		(3,308	)		—			(3,447	)

Income (loss) before income taxes		(91,881	)		(49,023	)		(103,667	)		(21,898	)		190,688			(75,781	)
Income tax benefit (expense)		78			526			11,992			(19,980	)					(7,384	)

Consolidated net income (loss)		(91,803	)		(48,497	)		(91,675	)		(41,878	)		190,688			(83,165	)
Amount attributable to noncontrolling interest		—			—			(1	)		8,639			—			8,638

Net income (loss) attributable to the Company	$	(91,803	)	$	(48,497	)	$	(91,674	)	$	(50,517	)	$	190,688		$	(91,803	)
Other comprehensive income (loss), net of tax:
Foreign currency translation adjustments		—			3,796			—			(3,483	)		—			313
Foreign currency reclassification adjustment		—			—			—			1,424			—			1,424
Unrealized loss on marketable securities		—			—			—			(5,343	)		—			(5,343	)
Equity in subsidiary comprehensive income		(6,914	)		(15,076	)		(6,914	)		—			28,904			—

Comprehensive income (loss)	$	(98,717	)	$	(59,777	)	$	(98,588	)	$	(57,919	)	$	219,592		$	(95,409	)
Amount attributable to noncontrolling interest		—			—			—			3,308			—			3,308

Comprehensive income (loss) attributable to the Company	$	(98,717	)	$	(59,777	)	$	(98,588	)	$	(61,227	)	$	219,592		$	(98,717	)

CLEAR CHANNEL OUTDOOR HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(UNAUDITED)


	Nine Months Ended September 30, 2009
(In thousands)	Parent Company			Subsidiary Issuer			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminations			Consolidated
Revenue	$	—		$	—		$	806,512		$	1,128,443		$	—		$	1,934,955
Operating expenses:
Direct operating expenses		—			—			389,734			780,949			—			1,170,683
Selling, general and administrative expenses		—			—			127,896			220,034			—			347,930
Corporate expenses		10,876			—			24,746			9,824			—			45,446
Depreciation and amortization		—			—			147,279			180,490			—			327,769
Impairment charges		—			—			691,500			120,890			—			812,390
Other operating income – net		—			—			7,045			3,080			—			10,125

Operating loss		(10,876	)		—			(567,598	)		(180,664	)		—			(759,138	)
Interest expense		323			—			110,732			3,937			—			114,992
Interest income on debt with Clear Channel Communications		—			—			358			—			—			358
Intercompany interest income		7,993			1,149			807			906			(10,855	)		—
Intercompany interest expense		649			—			8,250			1,956			(10,855	)		—
Loss on marketable securities		—			—			—			(11,315	)		—			(11,315	)
Equity in earnings (loss) of nonconsolidated affiliates		(808,882	)		(163,381	)		(221,534	)		(25,697	)		1,193,400			(26,094	)
Other expense – net		—			—			(305	)		(4,983	)		—			(5,288	)

Income (loss) before income taxes		(812,737	)		(162,232	)		(907,254	)		(227,646	)		1,193,400			(916,469	)
Income tax benefit (expense)		1,383			(807	)		98,755			2,371			—			101,702

Consolidated net income (loss)		(811,354	)		(163,039	)		(808,499	)		(225,275	)		1,193,400			(814,767	)
Amount attributable to noncontrolling interest		—			—			—			(3,413	)		—			(3,413	)

Net income (loss) attributable to the Company	$	(811,354	)	$	(163,039	)	$	(808,499	)	$	(221,862	)	$	1,193,400		$	(811,354	)
Other comprehensive income (loss), net of tax:
Foreign currency translation adjustments		—			—			—			116,553			—			116,553
Foreign currency reclassification adjustment		—			—			—			8			—			8
Unrealized loss on marketable securities		—			—			—			(11,315	)		—			(11,315	)
Reclassification adjustments		—			—			—			11,315			—			11,315
Equity in subsidiary comprehensive income		109,559			79,593			109,559			—			(298,711	)		—

Comprehensive income (loss)	$	(701,795	)	$	(83,446	)	$	(698,940	)	$	(105,301	)	$	894,689		$	(694,793	)
Amount attributable to noncontrolling interest		—			—			—			7,002			—			7,002

Comprehensive income (loss) attributable to the Company	$	(701,795	)	$	(83,446	)	$	(698,940	)	$	(112,303	)	$	894,689		$	(701,795	)

CLEAR CHANNEL OUTDOOR HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(UNAUDITED)


	Nine Months Ended September 30, 2010
(In thousands)	Parent Company			Subsidiary Issuer			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminations			Consolidated
Cash flows from operating activities:
Consolidated net income (loss)	$	(91,803	)	$	(48,497	)	$	(91,675	)	$	(41,878	)	$	190,688		$	(83,165	)
Reconciling items:
Depreciation and amortization		—			—			147,559			163,282			—			310,841
Deferred taxes		—			—			(7,970	)		(3,752	)		—			(11,722	)
Provision for doubtful accounts		—			—			481			4,368			—			4,849
Loss on sale of operating assets		—			—			3,625			21,309			—			24,934
Other reconciling items – net		91,674			53,242			56,381			5,050			(190,688	)		15,659
Changes in operating assets and liabilities:
Increase in accounts receivable		—			—			(9,791	)		(10,483	)		—			(20,274	)
(Increase) decrease in Federal income taxes receivable		774			(1,502	)		50,136			1,550			—			50,958
Increase in deferred income		—			—			9,172			20,848			—			30,020
Increase (decrease) in accounts payable, accrued expenses and other liabilities		—			816			39,649			(18,126	)		—			22,339
Changes in other operating assets and liabilities, net of effects of acquisitions and dispositions		(1,022	)		(159	)		6,960			18,916			—			24,695

Net cash provided by (used for) operating activities		(377	)		3,900			204,527			161,084			—			369,134
Cash flows from investing activities:
Purchases of property, plant and equipment		—			—			(65,908	)		(73,366	)		—			(139,274	)
Acquisition of operating assets, net of cash acquired		—			—			(715	)		—			—			(715	)
Equity contributions to subsidiaries		—			—			(331	)		—			331			—
Decrease (increase) in intercompany notes receivable – net		—			19,542			—			130			(19,672	)		—
Dividends from subsidiaries		—			—			107			—			(107	)		—
Change in other – net		—			—			3,050			1,712			—			4,762

Net cash provided by (used for) investing activities		—			19,542			(63,797	)		(71,524	)		(19,448	)		(135,227	)
Cash flows from financing activities:
Draws on credit facilities		—			—			—			3,916			—			3,916
Payments on credit facilities		—			—			(3	)		(42,251	)		—			(42,254	)
Proceeds from long-term debt		—			—			—			6,844			—			6,844
Payments on long-term debt		—			—			—			(12,425	)		—			(12,425	)
Net transfers to Clear Channel Communications		(130,870	)		—			—			—			—			(130,870	)
Intercompany funding		130,255			(23,442	)		(134,782	)		27,969			—			—
Increase (decrease) in intercompany notes payable – net		(130	)		—			—			(19,542	)		19,672			—
Dividends declared and paid		—			—			—			(107	)		107			—
Equity contributions from parent		—			—			—			331			(331	)		—
Change in other – net		1,122			—			(1	)		(5,334	)		—			(4,213	)

Net cash provided by (used for) financing activities		377			(23,442	)		(134,786	)		(40,599	)		19,448			(179,002	)
Effect of exchange rate changes on cash		—			—			—			369			—			369

Net increase in cash and cash equivalents		—			—			5,944			49,330			—			55,274
Cash and cash equivalents at beginning of period		—			—			431,105			178,331			—			609,436

Cash and cash equivalents at end of period	$	—		$	—		$	437,049		$	227,661		$	—		$	664,710

CLEAR CHANNEL OUTDOOR HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(UNAUDITED)


	Nine Months Ended September 30, 2009
(In thousands)	Parent Company			Subsidiary Issuer			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminations			Consolidated
Cash flows from operating activities:
Consolidated net income (loss)	$	(811,354	)	$	(163,039	)	$	(808,499	)	$	(225,275	)	$	1,193,400		$	(814,767	)
Reconciling items:
Depreciation and amortization		—			—			147,279			180,490			—			327,769
Impairment charges		—			—			691,500			120,890			—			812,390
Deferred tax expense (benefit)		60			—			(111,429	)		(16,508	)		—			(127,877	)
Provision for doubtful accounts		—			—			2,600			6,459			—			9,059
Gain on sale of operating assets		—			—			(7,045	)		(3,080	)					(10,125	)
Other reconciling items – net		808,882			163,381			225,959			43,755			(1,193,400	)		48,577
Changes in operating assets and liabilities:
Decrease in accounts receivable		—			—			9,944			68,340			—			78,284
Increase in deferred income		—			—			7,487			14,922			—			22,409
Increase (decrease) in accounts payable, accrued expenses and other liabilities		186			48			(3,941	)		(39,388	)		—			(43,095	)
Changes in operating assets and liabilities, net of effects of acquisitions and dispositions		(3,059	)		(665	)		11,389			(40,407	)		—			(32,742	)

Net cash provided by (used for) operating activities		(5,285	)		(275	)		165,244			110,198			—			269,882
Cash flows from investing activities:
Purchases of property, plant and equipment		—			—			(55,006	)		(58,970	)		—			(113,976	)
Acquisition of operating assets, net of cash acquired		—			—			(5,015	)		(110	)		—			(5,125	)
Equity contributions to subsidiaries		—			—			(58	)		—			58			—
Change in other – net		(81	)		—			7,539			20,775			(2,236	)		25,997

Net cash used for investing activities		(81	)		—			(52,540	)		(38,305	)		(2,178	)		(93,104	)
Cash flows from financing activities:
Draws on credit facilities		—			—			—			6,508			—			6,508
Payments on credit facilities		—			—			(976	)		(2,808	)		—			(3,784	)
Payments on long-term debt		—			—			—			(2,191	)		—			(2,191	)
Net transfers from Clear Channel Communications		(86,309	)		—			—			—			—			(86,309	)
Intercompany funding		91,711			275			(101,085	)		9,099			—			—
Dividends declared and paid		—			—			—			(2,236	)		2,236			—
Payments for purchase of noncontrolling interest		—			—			—			(25,154	)		—			(25,154	)
Change in other – net		(36	)		—			—			58			(58	)		(36	)

Net cash provided by (used for) financing activities		5,366			275			(102,061	)		(16,724	)		2,178			(110,966	)
Effect of exchange rate changes on cash		—			—			—			4,768			—			4,768

Net increase in cash and cash equivalents		—			—			10,643			59,937			—			70,580
Cash and cash equivalents at beginning of period		—			—			(14,800	)		109,612			—			94,812

Cash and cash equivalents at end of period	$	—		$	—		$	(4,157	)	$	169,549		$	—		$	165,392

Item 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Format of Presentation

Management’s discussion and analysis of our results of operations and financial condition should be read in conjunction with the consolidated financial statements and related footnotes. Our discussion is presented on both a consolidated and segmented basis. Our reportable operating segments are Americas outdoor advertising (“Americas”) and International outdoor advertising (“International”).

We manage our operating segments primarily focusing on their operating income, while Corporate expenses, Other operating income (expense) – net, Interest expense, Equity in earnings (loss) of nonconsolidated affiliates, Other income (expense) – net and Income tax benefit (expense) are managed on a total company basis and are, therefore, included only in our discussion of consolidated results.

Executive Summary

The key highlights of our business for the three and nine months ended September 30, 2010 are summarized below:

•

Consolidated revenue increased $34.5 million and $70.3 million for the three and nine months ended September 30, 2010, respectively, compared to the same periods of 2009, primarily as a result of improved economic conditions throughout the first nine months of 2010.

•

Americas revenue increased $20.7 million and $29.7 million for the three and nine months ended September 30, 2010, respectively, compared to the same periods of 2009, driven by increases in revenue across our advertising inventory, particularly digital.

•

International revenue increased $13.7 million for the three months ended September 30, 2010, compared to the same period of 2009, primarily as a result of revenue growth from all of our advertising inventory categories, particularly street furniture, and across most countries, partially offset by a decrease from movements in foreign exchange of $12.5 million. Revenue increased $40.6 million for the nine months ended September 30, 2010 compared to the same period of 2009, primarily as a result of revenue growth from street furniture across most countries and included a $3.4 million increase from movements in foreign exchange.

•

We received Federal income tax refunds of $51.0 million during the third quarter of 2010.

•

On October 15, 2010, we transferred our interest in our Branded Cities operations to our joint venture partner, The Ellman Companies. The long-lived tangible and intangible assets of the Branded Cities operations were transferred for less than their carrying values in connection with this transaction and, as a result, we recorded a non-cash charge in the third quarter of 2010 of approximately $23.6 million in “Other operating income (expense) – net” to present these assets at their estimated fair values as of September 30, 2010.

Certain Indenture EBITDA Adjustments

The indenture governing the Series B Senior Notes issued by our subsidiary, Clear Channel Worldwide Holdings, Inc., allows us to adjust the calculation of our adjusted EBITDA (as calculated in accordance with the indenture) for certain charges. These charges include restructuring costs of $2.5 million and $18.3 million for the three and nine months ended September 30, 2010. In addition, certain other charges, including costs related to the closure and/or consolidation of facilities, retention charges, systems establishment costs and consulting fees incurred in connection with any of the foregoing, among other items, are also adjustments to the calculation of our adjusted EBITDA. For the three and nine months ended September 30, 2010, our adjusted EBITDA calculation included adjustments for an additional $2.1 million and $4.1 million, respectively. See “SOURCES OF CAPITAL” below for a description of the calculation of our adjusted EBITDA pursuant to the indenture.

RESULTS OF OPERATIONS

Consolidated Results of Operations

The comparison of the three and nine months ended September 30, 2010 to the three and nine months ended September 30, 2009, respectively, is as follows:


(In thousands)	Three Months Ended September 30,						% Change			Nine Months Ended September 30,						% Change
	2010			2009			% Change			2010			2009			% Change
Revenue	$	695,086		$	660,622			5	%	$	2,005,261		$	1,934,955			4	%
Operating expenses:
Direct operating expenses		380,619			398,766			(5	%)		1,145,389			1,170,683			(2	%)
Selling, general and administrative expenses		115,224			108,824			6	%		357,273			347,930			3	%
Corporate expenses		26,197			15,547			69	%		70,726			45,446			56	%
Depreciation and amortization		103,833			111,053			(7	%)		310,841			327,769			(5	%)
Impairment charges		—			—						—			812,390
Other operating income (expense) - net		(27,672	)		1,160						(24,934	)		10,125

Operating income (loss)		41,541			27,592						96,098			(759,138	)
Interest expense		60,276			37,908						178,989			114,992
Interest income on debt with Clear Channel Communications		4,800			133						12,019			358
Loss on marketable securities		—			(11,315	)					—			(11,315	)
Equity in loss of nonconsolidated affiliates		(663	)		(2,046	)					(1,462	)		(26,094	)
Other income (expense) - net		1,545			492						(3,447	)		(5,288	)

Loss before income taxes		(13,053	)		(23,052	)					(75,781	)		(916,469	)
Income tax benefit (expense)		(18,829	)		(10,999	)					(7,384	)		101,702

Consolidated net loss		(31,882	)		(34,051	)					(83,165	)	$	(814,767	)
Amount attributable to noncontrolling interest		3,012			325						8,638			(3,413	)

Net loss attributable to the Company	$	(34,894	)	$	(34,376	)				$	(91,803	)	$	(811,354	)

Consolidated Revenue

Our consolidated revenue increased $34.5 million during the third quarter of 2010 as compared to the third quarter of 2009. Americas revenue increased $20.7 million, driven by revenue increases across our advertising inventory, particularly digital. Our International revenue increased $13.7 million, primarily due to revenue growth from all of our advertising inventory categories, particularly street furniture, and across most countries, partially offset by decreases of $12.5 million from movements in foreign exchange.

Our consolidated revenue increased $70.3 million during the first nine months of 2010 as compared to the same period of 2009. Americas revenue increased $29.7 million, driven by revenue increases across our advertising inventory, particularly digital. Our International revenue increased $40.6 million, primarily due to revenue growth from street furniture across most countries, and included a $3.4 million increase from movements in foreign exchange.

Consolidated Direct Operating Expenses

Our direct operating expenses decreased $18.1 million during the third quarter of 2010 as compared to the third quarter of 2009. Americas direct operating expenses decreased $3.3 million, primarily as a result of the disposition of our taxi advertising business, partially offset by an increase in site lease expenses associated with the increase in revenue. Direct operating expenses in our International segment decreased $14.8 million, primarily as a result of a $9.4 million decrease from movements in foreign exchange in addition to decreased site lease expenses associated with cost savings from our restructuring program.

Our direct operating expenses decreased $25.3 million during the first nine months of 2010 as compared to the same period of 2009. Americas direct operating expenses decreased $13.3 million, primarily as a result of the disposition of our taxi advertising business, partially offset by an increase in site lease expenses associated with the increase in revenue. Direct operating expenses in our International segment decreased $12.0 million, primarily as a result of decreased site lease expenses associated with cost savings from our restructuring program, partially offset by a $1.2 million increase from movements in foreign exchange.

Selling, General and Administrative (“SG&A”) Expenses

Our SG&A expenses increased $6.4 million during the third quarter of 2010 as compared to the same period of 2009. SG&A expenses increased $4.1 million in our Americas segment, primarily as a result of increased bonus and commission expenses associated with the increase in revenue. SG&A expenses increased $2.3 million in International, primarily from increased selling costs associated with the increase in revenue, partially offset by a $2.5 million decrease from movements in foreign exchange.

Our SG&A expenses increased $9.3 million during the first nine months of 2010 as compared to the same period of 2009. SG&A expenses increased $12.5 million in our Americas segment, primarily as a result of the unfavorable impact of litigation in addition to an increase in selling and marketing costs associated with the increase in revenue. Our International SG&A expenses decreased $3.1 million, primarily as a result of cost savings from our restructuring program as well as a decrease in business tax related to a change in French tax law.

Corporate Expenses

Corporate expenses increased $10.7 million and $25.3 million during the three and nine months ended September 30, 2010, respectively, as compared to the same periods of 2009, primarily due to increases in bonus expense from improved operating performance compared to the prior year and increases related to headcount from centralization efforts and the expansion of corporate capabilities.

Depreciation and Amortization

Depreciation and amortization decreased $7.2 million and $16.9 million during the third quarter and first nine months of 2010, respectively, compared to the same periods of 2009, primarily as a result of decreased amortization in our International segment in 2010 related to assets that became fully amortized during 2009.

Other Operating Income (Expense) - Net

Other operating expenses were $27.7 million and $24.9 million for the three and nine months ended September 30, 2010, respectively, primarily due to a $23.6 million non-cash charge recorded as of September 30, 2010 as a result of the transfer of our interest in our Branded Cities business, and a $3.7 million loss on the sale of our outdoor advertising business in India.

Other operating income for the nine months ended September 30, 2009 was $10.1 million and primarily related to a gain of $4.4 million on the sale of International assets and a gain of $3.7 million on the sale of Americas assets.

Interest Expense

Interest expense increased $22.4 million and $64.0 million during the three and nine months ended September 30, 2010, respectively, as compared to the same periods of 2009. The increase was primarily attributable to the issuance by our subsidiary, Clear Channel Worldwide Holdings, Inc., of $2.5 billion aggregate principal amount of senior notes in December 2009, which bear interest at a fixed rate of 9.25% per annum. The senior notes were issued at a higher interest rate than the $2.5 billion note to Clear Channel Communications, which was prepaid and retired in December 2009.

Loss on Marketable Securities

The loss on marketable securities of $11.3 million during the three and nine months ended September 30, 2009 relates to an impairment of certain available-for-sale securities.

Income Tax Benefit (Expense)

Our operations are included in a consolidated income tax return filed by CC Media Holdings, Inc. (“CC Media Holdings”). However, for our financial statements, our provision for income taxes was computed on the basis that we file separate consolidated Federal income tax returns with our subsidiaries.

Income tax expense of $18.8 million and $7.4 million was recorded for the three months and nine months ended September 30, 2010, respectively, resulting in effective tax rates of (144.3%) and (9.7%) for those periods, respectively. The 2010 effective rates were impacted primarily as a result of our inability to benefit from tax losses in certain foreign jurisdictions due to the uncertainty of the ability to utilize those losses in future years. In addition, during the three months ended September 30, 2010, we recorded a valuation allowance of $13.4 million against deferred tax assets in foreign jurisdictions due to the uncertainty of the ability to realize those assets in future periods.

Income tax expense of $11.0 million and income tax benefits of $101.7 million were recorded for the three months and nine months ended September 30, 2009, respectively, resulting in effective tax rates of (47.7%) and 11.1% for those periods, respectively. The 2009 effective tax rates were primarily impacted by the impairment charge on goodwill. In addition, we recorded deferred tax valuation allowances due the uncertainty of our ability to utilize Federal and foreign tax losses at that time.

Americas Results of Operations

Disposition of Taxi Business

On December 31, 2009, our subsidiary Clear Channel Outdoor, Inc. disposed of Clear Channel Taxi Media, LLC (“Taxis”), our taxi advertising business. For the three months ended September 30, 2009, Taxis contributed $9.8 million in revenue, $9.6 million in direct operating expenses and $2.4 million in SG&A expenses. For the nine months ended September 30, 2009, Taxis contributed $29.5 million in revenue, $29.5 million in direct operating expenses and $7.7 million in SG&A expenses.

Our Americas operating results were as follows:


(In thousands)	Three Months Ended September 30,				% Change			Nine Months Ended September 30,				% Change
	2010		2009		% Change			2010		2009		% Change
Revenue	$	333,269	$	312,537		7	%	$	928,015	$	898,277		3	%
Direct operating expenses		143,940		147,250		(2	%)		427,546		440,885		(3	%)
SG&A expenses		51,750		47,602		9	%		160,302		147,839		8	%
Depreciation and amortization		53,139		54,102		(2	%)		158,319		158,612		(0	%)

Operating income	$	84,440	$	63,583		33	%	$	181,848	$	150,941		20	%

Three Months

Americas revenue increased $20.7 million during the third quarter of 2010 compared to the same period of 2009 as a result of increased revenue across our advertising inventory, particularly digital. The increase was driven by increases in both occupancy and rate. Partially offsetting the revenue increase was the decrease in revenue related to the sale of Taxis.

Direct operating expenses decreased $3.3 million during the third quarter of 2010 compared to the same period of 2009, due to the disposition of Taxis. Offsetting the decrease was a $5.6 million increase in site-lease expenses associated with the increase in revenue. SG&A expenses increased $4.1 million during the third quarter of 2010 compared to the same period of 2009 primarily as a result of increased bonus and commission expenses associated with the increase in revenue, partially offset by the disposition of Taxis.

Nine Months

Americas revenue increased $29.7 million during the first nine months of 2010 compared to the same period of 2009 as a result of increased revenue across our advertising inventory, particularly digital. The increase was driven by increases in both occupancy and rate. Partially offsetting the revenue increase was the decrease in revenue related to the sale of Taxis.

Direct operating expenses decreased $13.3 million during the first nine months of 2010 compared to the same period of 2009. The decline in direct operating expenses was due to the disposition of Taxis, partially offset by a $16.9 million increase in site-lease expenses associated with the increase in revenue. SG&A expenses increased $12.5 million during the first nine months of 2010 compared to the same period of 2009 as a result of a $5.3 million increase primarily related to the unfavorable impact of litigation, a $4.4 million increase in consulting costs and a $6.0 million increase primarily due to bonus and commission expenses associated with the increase in revenue, partially offset by the disposition of Taxis.

International Results of Operations

Our International operating results were as follows:


(In thousands)	Three Months Ended September 30,					% Change			Nine Months Ended September 30,					% Change
	2010		2009			% Change			2010		2009			% Change
Revenue	$	361,817	$	348,085			4	%	$	1,077,246	$	1,036,678			4	%
Direct operating expenses		236,679		251,516			(6	%)		717,843		729,798			(2	%)
SG&A expenses		63,474		61,222			4	%		196,971		200,091			(2	%)
Depreciation and amortization		50,694		56,951			(11	%)		152,522		169,157			(10	%)

Operating income (loss)	$	10,970	$	(21,604	)		151	%	$	9,910	$	(62,368	)		116	%

Three Months

International revenue increased $13.7 million during the third quarter of 2010 compared to the same period of 2009. Revenue growth from all of our advertising inventory categories, particularly street furniture, and across most countries was partially offset by the exit from the business in Greece. Foreign exchange movements negatively impacted revenues by $12.5 million.

Direct operating expenses decreased $14.8 million during the third quarter of 2010 compared to the same period of 2009, primarily from a $9.4 million decrease from movements in foreign exchange and a $4.7 million decline in site-lease expenses as a result of cost savings from our restructuring program and the exit from the business in Greece. SG&A expenses increased $2.3 million during the third quarter of 2010 compared to the same period of 2009 primarily from increased selling costs associated with the increase in revenue, partially offset by a $2.5 million decrease from movements in foreign exchange.

Depreciation and amortization decreased $6.3 million during the third quarter of 2010 compared to the same period of 2009 primarily as a result of assets that became fully amortized during 2009.

Nine Months

International revenue increased $40.6 million during the first nine months of 2010 compared to the same period of 2009, primarily as a result of revenue growth from street furniture across most countries and included a $3.4 million increase from movements in foreign exchange. Partially offsetting the increase was the exit from businesses in Greece and India.

Direct operating expenses decreased $12.0 million during the first nine months of 2010 compared to the same period of 2009, primarily as a result of a $16.6 million decline in site-lease expenses associated with cost savings from our restructuring program and the exit from the business in Greece, partially offset by a $1.2 million increase from movements in foreign exchange. SG&A expenses decreased $3.1 million during the first nine months of 2010 compared to the same period of 2009, primarily as a result of a $4.5 million decrease in business tax related to a change in French tax law, partially offset by higher compensation expense associated with the increase in revenue.

Depreciation and amortization decreased $16.6 million during the first nine months of 2010 compared to the same period of 2009 primarily as a result of assets that became fully amortized during 2009.

Reconciliation of Segment Operating Income (Loss) to Consolidated Operating Income (Loss)


(In thousands)	Three Months Ended September 30,						Nine Months Ended September 30,
	2010			2009			2010			2009
Americas	$	84,440		$	63,583		$	181,848		$	150,941
International		10,970			(21,604	)		9,910			(62,368	)
Corporate expenses		(26,197	)		(15,547	)		(70,726	)		(45,446	)
Impairment charges		—			—			—			(812,390	)
Other operating income (expense) - net		(27,672	)		1,160			(24,934	)		10,125

Consolidated operating income (loss)	$	41,541		$	27,592		$	96,098		$	(759,138	)

Share-Based Compensation Expense

The following table details amounts related to share-based compensation expense for the three and nine months ended September 30, 2010 and 2009, respectively:


(In thousands)	Three Months Ended September 30,				Nine Months Ended September 30,
	2010		2009		2010		2009
Americas	$	2,207	$	1,775	$	6,553	$	5,971
International		658		537		1,953		1,806
Corporate		92		182		273		611

Total share-based compensation expense	$	2,957	$	2,494	$	8,779	$	8,388

LIQUIDITY AND CAPITAL RESOURCES

Clear Channel Communications’ Merger

Clear Channel Communications’ capitalization, liquidity and capital resources substantially changed due to the consummation of its merger on July 30, 2008 with entities formed by private equity funds sponsored by Bain Capital Partners, LLC and Thomas H. Lee Partners, L.P. Upon the closing of the merger, Clear Channel Communications incurred additional debt and became highly leveraged.

Also, so long as Clear Channel Communications maintains a significant interest in us, pursuant to the Master Agreement between Clear Channel Communications and us, Clear Channel Communications will have the option to limit our ability to incur debt or issue equity securities, among other limitations, which could adversely affect our ability to meet our liquidity needs.

The following discussion highlights our cash flow activities during the nine months ended September 30, 2010 and 2009 respectively.

Cash Flows


(In thousands)	Nine Months Ended September 30,
	2010			2009
Cash provided by (used for):
Operating activities	$	369,134		$	269,882
Investing activities	$	(135,227	)	$	(93,104	)
Financing activities	$	(179,002	)	$	(110,966	)

Operating Activities

The increase in cash flow from operations for the nine months ended September 30, 2010 compared to the same period of the prior year was primarily driven by improved profitability, including a 4% increase in revenues and a 1% decrease in direct operating and SG&A expenses. Our cash paid for interest increased $61.8 million primarily due to the December 2009 issuance of $2.5 billion aggregate principal amount of senior notes at a higher rate than the $2.5 billion note to Clear Channel Communications, which was prepaid and retired in December 2009. Partially offsetting the increased interest was the receipt of $51.0 million of Federal income tax refunds during the third quarter of 2010.

Investing Activities

Net cash used for investing activities of $135.2 million for the nine months ended September 30, 2010 primarily reflects capital expenditures of $139.3 million, partially offset by proceeds of $6.5 million from the sale of International and Americas assets. We spent $70.6 million in our Americas segment primarily related to the construction of new billboards and $68.7 million in our International segment primarily related to new billboard and street furniture contracts and renewals of existing contracts.

Net cash used for investing activities of $93.1 million for the nine months ended September 30, 2009 primarily reflects capital expenditures of $55.9 million in our International segment primarily related to new billboard and street furniture contracts and renewals of existing contracts. We also received proceeds of $5.5 million from the sale of International assets and $5.2 million from the sale of Americas assets.

Financing Activities

Net cash used for financing activities of $179.0 million for the nine months ended September 30, 2010 primarily reflects payments on credit facilities and long-term debt of $42.3 million and $12.4 million, respectively, and net transfers to Clear Channel Communications of $130.9 million.

Net cash used for financing activities of $111.0 million for the nine months ended September 30, 2009 include net transfers of cash to Clear Channel Communications of $86.3 million. The net transfers of cash to Clear Channel Communications represent the activity in the “Due from/to Clear Channel Communications” account. This activity primarily relates to working capital and settlement of interest on the cash management notes and the $2.5 billion note payable to Clear Channel Communications. In addition, we purchased the remaining 15% interest in our fully consolidated subsidiary, Paneles Napsa S.A., for $13.0 million.

Anticipated Cash Requirements

Our primary source of liquidity is cash flow from operations. Based on our current and anticipated levels of operations and conditions in our markets, we believe that cash on hand, cash flows from operations and borrowings under the revolving promissory note with Clear Channel Communications will enable us to meet our working capital, capital expenditure, debt service and other funding requirements for at least the next 12 months.

We expect to be in compliance with the covenants governing our indebtedness in 2010. However, our anticipated results are subject to significant uncertainty and there can be no assurance that we will be able to maintain compliance with these covenants. In addition, our ability to comply with these covenants may be affected by events beyond our control, including prevailing economic, financial and industry conditions.

Furthermore, in its Quarterly Report on Form 10-Q filed with the SEC on November 8, 2010, CC Media Holdings, our indirect parent, stated that it expects to be in compliance with the covenants under Clear Channel Communications’ material financing agreements in 2010, including the financial covenant contained in its senior credit facilities that limits the ratio of its consolidated senior secured debt, net of cash and cash equivalents, to its consolidated adjusted EBITDA for the preceding four quarters. CC Media Holdings similarly stated in its Quarterly Report that its anticipated results are also subject to significant uncertainty and there can be no assurance that actual results will be in compliance with the covenants. Moreover, CC Media Holdings stated in its Quarterly Report that its ability to comply with the covenants in Clear Channel Communications’ material financing agreements may be affected by events beyond CC Media Holdings’ control, including prevailing economic, financial and industry conditions. As discussed therein, the breach of any covenants set forth in Clear Channel Communications’ financing agreements would result in a default thereunder, and 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, as discussed therein, the lenders under the revolving credit facility under Clear Channel Communications’ senior secured credit facilities would have the option to terminate their commitments to make further extensions of revolving credit thereunder. In addition, CC Media Holdings stated in its Quarterly Report that if CC Media Holdings is unable to repay Clear Channel Communications’ obligations under any secured credit facility, the lenders under such secured credit facility could proceed against any assets that were pledged to secure such facility. Finally, CC Media Holdings stated in its Quarterly Report that a default or acceleration under any of Clear Channel Communications’ material financing agreements, including the Notes, could cause a default under other obligations that are subject to cross-default and cross-acceleration provisions.

For so long as Clear Channel Communications maintains significant control over us, a deterioration in the financial condition of Clear Channel Communications could have the effect of increasing our borrowing costs or impairing our access to capital markets. As of September 30, 2010, Clear Channel Communications had $1.7 billion recorded as “Cash and cash equivalents” on its condensed consolidated balance sheets.

We frequently evaluate strategic opportunities both within and outside our existing lines of business. We expect from time to time to pursue additional acquisitions and may decide to dispose of certain businesses. These acquisitions or dispositions could be material.

Our ability to fund our working capital needs, debt service and other obligations depends on our future operating performance and cash flow. If our future operating performance does not meet our expectations or our plans materially change in an adverse manner or prove to be materially inaccurate, we may need additional financing. We may not be able to secure any such additional financing on terms favorable to us or at all.

SOURCES OF CAPITAL

As of September 30, 2010 and December 31, 2009, we had the following debt outstanding, net of cash and cash equivalents and amounts due from Clear Channel Communications:


(In thousands)	September 30, 2010		December 31, 2009
CCWH Senior Notes	$	2,500,000	$	2,500,000
Credit facility ($150.0 million sub-limit within Clear Channel Communications’ $2.0 billion revolving credit facility)		—		30,000
Other debt		67,336		78,878

Total debt		2,567,336		2,608,878
Less: Cash and cash equivalents		664,710		609,436
Less: Due from Clear Channel Communications		254,178		123,308

	$	1,648,448	$	1,876,134

We may from time to time repay our outstanding debt or seek to purchase our outstanding equity securities. Such transactions, if any, will depend on prevailing market conditions, our liquidity requirements, contractual restrictions and other factors.

Promissory Notes with Clear Channel Communications

We maintain accounts that represent net amounts due to or from Clear Channel Communications, which is recorded as “Due from/to Clear Channel Communications” on our condensed consolidated balance sheets. The accounts represent our revolving promissory note issued by us to Clear Channel Communications and the revolving promissory note issued by Clear Channel Communications to us in the face amount of $1.0 billion, or if more or less than such amount, the aggregate unpaid principal amount of all advances. Included in the accounts are the net activities resulting from day-to-day cash management services provided by Clear Channel Communications. At September 30, 2010 and December 31, 2009, the asset recorded in “Due from Clear Channel Communications” on our condensed consolidated balance sheet was $254.2 million and $123.3 million, respectively. At September 30, 2010, we had no borrowings under the cash management note to Clear Channel Communications.

The net interest income for the three and nine months ended September 30, 2010 was $4.8 million and $12.0 million, respectively. The net interest income for the three and nine months ended September 30, 2009 was $0.1 million and $0.4 million, respectively. At September 30, 2010 and 2009, the interest rate on the “Due from Clear Channel Communications” account was 9.25% and 0.056%, respectively, the first of which represented the interest rate on the CCWH Senior Notes and the second of which represented the average one-month generic treasury bill rate.

Unlike the management of cash from our U.S. based operations, the amount of cash, if any, which is transferred from our foreign operations to Clear Channel Communications is determined on a basis mutually agreeable to us and Clear Channel Communications, and not on a pre-determined basis. In arriving at such mutual agreement, the reasonably foreseeable cash needs of our foreign operations are evaluated before a cash amount is considered as an excess or surplus amount for transfer to Clear Channel Communications.

Our working capital requirements and capital for general corporate purposes, including acquisitions and capital expenditures, may be provided to us by Clear Channel Communications, in its sole discretion, pursuant to a revolving promissory note issued by us to Clear Channel Communications. Without the opportunity to obtain financing from Clear Channel Communications, we may need to obtain additional financing from banks or other lenders, or through public offerings or private placements of debt or equity, strategic relationships or other arrangements at some future date. As stated above, we may be unable to successfully obtain additional debt or equity financing on satisfactory terms or at all.

As long as Clear Channel Communications maintains a significant interest in us, pursuant to the Master Agreement between Clear Channel Communications and us, Clear Channel Communications will have the option to limit our ability to incur debt or issue equity securities, among other limitations, which could adversely affect our ability to meet our liquidity needs. Under the Master Agreement with Clear Channel Communications, we are limited in our borrowing from third parties to no more than $400.0 million (including borrowings under the $150.0 million sub-limit of Clear Channel Communications’ $2.0 billion revolving credit facility).

Clear Channel Worldwide Holdings Senior Notes

The Series B Notes indenture restricts, among other things, our ability to incur additional indebtedness and to pay dividends and make other restricted payments. In order to incur additional indebtedness, our consolidated leverage ratio (as defined by the indenture) must generally be no greater than 6.5:1 and, in order to incur additional senior indebtedness, our senior leverage ratio (as defined by the indenture) must be no greater than 3.25:1, in each case after giving pro forma effect to such incurrence. The Company’s adjusted EBITDA of $715.5 million is calculated as the trailing twelve months operating income before depreciation and amortization and other operating income – net, plus impairment charges and non-cash compensation, and is further adjusted for certain items, including: (i) an increase for expected cost savings (limited to $58.8 million in any twelve month period) of $16.9 million; (ii) an increase of $40.9 million for non-cash items; (iii) an increase of $52.0 million related to restructuring charges and other costs/expenses; and (iv) an increase of $8.5 million for various other items. Our consolidated leverage ratio was 3.6:1 at September 30, 2010, and our senior leverage ratio was also 3.6:1 at September 30, 2010. If these ratios are not met, we have various exceptions that allow us to incur additional indebtedness, such as a $150 million basket for credit facilities indebtedness and a $65 million general indebtedness basket. The restrictions on our ability to pay dividends and make other restricted payments are subject to various exceptions, including a $500 million exception for the payment of dividends and a $25 million general exception for the making of other restricted payments.

Other Debt

Other debt consists primarily of loans with international banks. At September 30, 2010, approximately $67.3 million was outstanding as other debt.

Clear Channel Communications’ Debt Covenants

Clear Channel Communications’ senior credit facilities require Clear Channel Communications to comply on a quarterly basis with a financial covenant limiting the ratio of its consolidated senior secured debt, net of cash and cash equivalents, to its consolidated adjusted EBITDA for the preceding four quarters. The maximum ratio under this financial covenant is currently set at 9.5:1 and becomes more restrictive over time beginning in the second quarter of 2013. In its Quarterly Report on Form 10-Q filed with the SEC on November 8, 2010, CC Media Holdings stated that it was in compliance with this covenant as of September 30, 2010.

Disposition of Assets

On October 15, 2010, we transferred our interest in our Branded Cities operations to our joint venture partner, The Ellman Companies. The long-lived tangible and intangible assets of the Branded Cities operations were transferred for less than their carrying values in connection with this transaction. In connection with this subsequent event, we recorded a non-cash charge in the third quarter of 2010 of approximately $23.6 million in “Other operating income (expense) – net” to present these assets at their estimated fair values as of September 30, 2010.

During the three months ended September 30, 2010, our International segment sold its outdoor advertising business in India, resulting in a loss of $3.7 million included in “Other operating income (expense) – net.”

USES OF CAPITAL

Commitments, Contingencies and Guarantees

We are currently involved in certain legal proceedings. Based on current assumptions, we have accrued an estimate of the probable costs for the resolution of those claims for which the occurrence of loss is probable and the amount can be reasonably estimated. Future results of operations could be materially affected by changes in our assumptions or the effectiveness of our strategies related to these proceedings.

SEASONALITY

Typically, both our Americas and International segments experience their lowest financial performance in the first quarter of the calendar year, with International historically experiencing a loss from operations in that period. Our Americas segment historically experiences consistent performance for the remainder of our calendar year. Our International segment typically experiences its strongest performance in the second and fourth quarters of our calendar year. We expect this trend to continue in the future.

MARKET RISK

Equity Price Risk

The carrying value of our available-for-sale equity securities is affected by changes in their quoted market prices. It is estimated that a 20% change in the market prices of these securities would change their carrying value and comprehensive loss at September 30, 2010 by $2.1 million.

Foreign Currency Exchange Rate Risk

We have operations in countries throughout the world. The financial results of our foreign operations are measured in their local currencies. As a result, our financial results could be affected by factors such as changes in foreign currency exchange rates or weak economic conditions in the foreign markets in which we operate. We believe we mitigate a small portion of our exposure to foreign currency fluctuations with a natural hedge through borrowings in currencies other than the U.S. dollar. We estimate a 10% increase in the value of the U.S. dollar relative to foreign currencies would have increased our net loss for the three and nine months ended September 30, 2010 by approximately $1.8 million and $2.9 million, respectively, and that a 10% decrease in the value of the U.S. dollar relative to foreign currencies would have decreased our net loss by a corresponding amount.

This analysis does not consider the implications that such currency fluctuations could have on the overall economic activity that could exist in such an environment in the U.S. or the foreign countries or on the results of operations of these foreign entities.

Inflation

Inflation is a factor in the economies in which we do business and we continue to seek ways to mitigate its effect. Inflation has affected our performance in terms of higher costs for wages, salaries and equipment. Although the exact impact of inflation is indeterminable, we believe we have offset these higher costs by increasing the effective advertising rates of most of our outdoor display faces.

NEW ACCOUNTING PRONOUNCEMENTS

CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING STATEMENTS

The Private Securities Litigation Reform Act of 1995 provides a safe harbor for forward-looking statements made by us or on our behalf. Except for the historical information, this report contains various forward-looking statements which represent our expectations or beliefs concerning future events, including without limitation, our future operating and financial performance and availability of capital and the terms thereof. Statements expressing expectations and projections with respect to future matters are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. We caution that these forward-looking statements involve a number of risks and uncertainties and are subject to many variables which could impact our

future performance. These statements are made on the basis of management’s views and assumptions, as of the time the statements are made, regarding future events and performance. There can be no assurance, however, that management’s expectations will necessarily come to pass. We do not intend, nor do we undertake any duty, to update any forward-looking statements.

A wide range of factors could materially affect future developments and performance, including:

•

risks associated with a global economic downturn and its impact on capital markets;

•

other general economic and political conditions in the United States and in other countries in which we currently do business, including those resulting from recessions, political events and acts or threats of terrorism or military conflicts;

•

the risk that our restructuring program may not be entirely successful;

•

the impact of the geopolitical environment;

•

industry conditions, including competition;

•

fluctuations in operating costs;

•

technological changes and innovations;

•

changes in labor conditions;

•

legislative or regulatory requirements;

•

capital expenditure requirements;

•

fluctuations in exchange rates and currency values;

•

the outcome of pending and future litigation;

•

changes in interest rates;

•

taxes;

•

shifts in population and other demographics;

•

access to capital markets and borrowed indebtedness;

•

the risk that we may not be able to integrate the operations of recently acquired companies successfully;

•

the impact of the above and similar factors on Clear Channel Communications, our primary direct or indirect external source of capital; and

•

certain other factors set forth in our filings with the SEC, including our Annual Report on Form 10-K for the year ended December 31, 2009.

This list of factors that may affect future performance and the accuracy of forward-looking statements is illustrative and is not intended to be exhaustive. Accordingly, all forward-looking statements should be evaluated with the understanding of their inherent uncertainty.

Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Required information is presented under “MARKET RISK” within Item 2 of this Part I.

Item 4. CONTROLS AND PROCEDURES

Under the supervision and with the participation of management, including our Chief Executive Officer and our Chief Financial Officer, we have carried out an evaluation of our disclosure controls and procedures (as defined in Rule 13a-15(e) under the Exchange Act). Based on that evaluation, our Chief Executive Officer and our Chief Financial Officer concluded that our disclosure controls and procedures were effective as of September 30, 2010 to ensure that information we are required to disclose in reports that are filed or submitted under the Exchange Act is recorded, processed, summarized and reported within the time periods specified by the SEC and is accumulated and communicated to our management, including our Chief Executive Officer and our Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.

There were no changes in our internal control over financial reporting that occurred during the most recent fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Part II — OTHER INFORMATION

Item 1. Legal Proceedings

On or about July 12, 2006, two of the Company’s operating businesses (L&C Outdoor Ltda. and Publicidad Klimes Sao Paulo Ltda.) in the Sao Paulo, Brazil market received notices of infraction from the state taxing authority, seeking to impose a value added tax (“VAT”) on such businesses, retroactively for the period from December 31, 2001 through January 31, 2006. The taxing authority contends that the Company’s businesses fall within the definition of “communication services” and as such are subject to the VAT. The aggregate amount of tax initially claimed to be owed by both businesses equals approximately $69.4 million, comprised of approximately $20.2 million in taxes, approximately $40.2 million in penalty and approximately $9.0 million in interest (as of September 30, 2010 at an exchange rate of 0.59). In addition, the taxing authorities are seeking to impose an additional aggregate amount of interest on the tax and penalty amounts until the initial tax, penalty and interest are paid of approximately $39.3 million (as of September 30, 2010 at an exchange rate of 0.59). The aggregate amount of additional interest accrues daily at an interest rate promulgated by the Brazilian government, which at September 30, 2010 is equal to approximately $1.85 million per month.

We are currently involved in certain legal proceedings arising in the ordinary course of business and, as required, have accrued an estimate of the probable costs for the resolution of 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 our assumptions or the effectiveness of our strategies related to these proceedings. Additionally, due to the inherent uncertainty of litigation, there can be no assurance that the resolution of any particular claim or proceeding would not have a material adverse effect on the Company’s financial condition or results of operations.

Item 1A. Risk Factors

For information regarding our risk factors, please refer to Item 1A in our Annual Report on Form 10-K for the year ended December 31, 2009. There have not been any material changes in the risk factors disclosed in the 2009 Annual Report on Form 10-K.

Additional information relating to risk factors is described in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” under “Cautionary Statement Concerning Forward-Looking Statements.”

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

The following table sets forth the purchases made during the quarter ended September 30, 2010 by or on behalf of the Company or an affiliated purchaser of shares of our Class A common stock registered pursuant to Section 12 of the Exchange Act:


Period	Total Number of Shares Purchased (1)		Average Price Paid per Share (2)		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs		Maximum Number of Shares (or Approximate Dollar Value) that May Yet Be Purchased Under the Plans or Programs
July 1 through July 31		137	$	11.19		—		(3)
August 1 through August 31		—		—		—		(3)
September 1 through September 30		87	$	10.71		—		(3)

Total		224	$	11.00		—	$	100,000,000(3)

(1)

The shares indicated consist of shares tendered by employees to the Company during the three months ended September 30, 2010 to satisfy the employees’ tax withholding obligations in connection with the vesting and release of restricted shares, which are repurchased by the Company based on their fair market value on the date the relevant transaction occurs.

(2)	The calculation of the average price paid per share does not give effect to any fees, commissions or other costs associated with the repurchase of such shares.

(3)

On August 9, 2010, Clear Channel Communications, Inc., the Company’s indirect parent entity, announced that its board of directors approved a stock purchase program under which Clear Channel Communications or its subsidiaries may purchase up to an aggregate of $100 million of the Class A common stock of the Company and/or the Class A common stock of CC Media Holdings, Inc., the indirect parent entity of Clear Channel Communications. The stock purchase program does not have a fixed expiration date and may be modified, suspended or terminated at any time at Clear Channel Communications’ discretion. No shares were purchased under the stock purchase program during the three months ended September 30, 2010.

Item 3. Defaults Upon Senior Securities

None.

Item 4. (Removed and Reserved)

Item 5. Other Information

None.

Item 6. Exhibits


Exhibit Number		Description

10.1*		Employment Agreement, dated as of July 19, 2010, between the Company and Joseph Bagan.

11*		Statement re: Computation of Per Share Earnings.

31.1*		Certification Pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2*		Certification Pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32.1**		Certification of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

32.2**		Certification of Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

* Filed herewith.

** Furnished herewith.

Signatures

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


				CLEAR CHANNEL OUTDOOR HOLDINGS, INC.

November 8, 2010				/s/ Scott D. Hamilton
				Scott D. Hamilton Chief Accounting Officer

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