CCO 10-Q Quarterly Report Sept. 30, 2012 | Alphaminr
Clear Channel Outdoor Holdings, Inc.

CCO 10-Q Quarter ended Sept. 30, 2012

CLEAR CHANNEL OUTDOOR HOLDINGS, INC.
10-Qs and 10-Ks
10-Q
Quarter ended March 31, 2025
10-K
Fiscal year ended Dec. 31, 2024
10-Q
Quarter ended Sept. 30, 2024
10-Q
Quarter ended June 30, 2024
10-Q
Quarter ended March 31, 2024
10-K
Fiscal year ended Dec. 31, 2023
10-Q
Quarter ended Sept. 30, 2023
10-Q
Quarter ended June 30, 2023
10-Q
Quarter ended March 31, 2023
10-K
Fiscal year ended Dec. 31, 2022
10-Q
Quarter ended Sept. 30, 2022
10-Q
Quarter ended June 30, 2022
10-Q
Quarter ended March 31, 2022
10-K
Fiscal year ended Dec. 31, 2021
10-Q
Quarter ended Sept. 30, 2021
10-Q
Quarter ended June 30, 2021
10-Q
Quarter ended March 31, 2021
10-K
Fiscal year ended Dec. 31, 2020
10-Q
Quarter ended Sept. 30, 2020
10-Q
Quarter ended June 30, 2020
10-Q
Quarter ended March 31, 2020
10-K
Fiscal year ended Dec. 31, 2019
10-Q
Quarter ended Sept. 30, 2019
10-Q
Quarter ended June 30, 2019
10-Q
Quarter ended March 31, 2019
10-K
Fiscal year ended Dec. 31, 2018
10-Q
Quarter ended Sept. 30, 2018
10-Q
Quarter ended June 30, 2018
10-Q
Quarter ended March 31, 2018
10-K
Fiscal year ended Dec. 31, 2017
10-Q
Quarter ended Sept. 30, 2017
10-Q
Quarter ended June 30, 2017
10-Q
Quarter ended March 31, 2017
10-K
Fiscal year ended Dec. 31, 2016
10-Q
Quarter ended Sept. 30, 2016
10-Q
Quarter ended June 30, 2016
10-Q
Quarter ended March 31, 2016
10-K
Fiscal year ended Dec. 31, 2015
10-Q
Quarter ended Sept. 30, 2015
10-Q
Quarter ended June 30, 2015
10-Q
Quarter ended March 31, 2015
10-K
Fiscal year ended Dec. 31, 2014
10-Q
Quarter ended Sept. 30, 2014
10-Q
Quarter ended June 30, 2014
10-Q
Quarter ended March 31, 2014
10-K
Fiscal year ended Dec. 31, 2013
10-Q
Quarter ended Sept. 30, 2013
10-Q
Quarter ended June 30, 2013
10-Q
Quarter ended March 31, 2013
10-K
Fiscal year ended Dec. 31, 2012
10-Q
Quarter ended Sept. 30, 2012
10-Q
Quarter ended June 30, 2012
10-Q
Quarter ended March 31, 2012
10-K
Fiscal year ended Dec. 31, 2011
10-Q
Quarter ended Sept. 30, 2011
10-Q
Quarter ended June 30, 2011
10-Q
Quarter ended March 31, 2011
10-K
Fiscal year ended Dec. 31, 2010
10-Q
Quarter ended Sept. 30, 2010
10-Q
Quarter ended June 30, 2010
10-Q
Quarter ended March 31, 2010
10-K
Fiscal year ended Dec. 31, 2009
PROXIES
DEF 14A
Filed on April 10, 2025
DEF 14A
Filed on March 29, 2024
DEF 14A
Filed on March 16, 2023
DEF 14A
Filed on March 16, 2022
DEF 14A
Filed on March 17, 2021
DEF 14A
Filed on April 1, 2020
DEF 14A
Filed on May 17, 2018
DEF 14A
Filed on April 19, 2017
DEF 14A
Filed on April 13, 2016
DEF 14A
Filed on March 31, 2015
DEF 14A
Filed on March 28, 2014
DEF 14A
Filed on March 26, 2013
DEF 14A
Filed on April 9, 2012
DEF 14A
Filed on April 8, 2011
DEF 14A
Filed on April 26, 2010
10-Q 1 10-Q.htm 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 OR 15( d ) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED September 30, 2012

[  ] 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 (I.R.S. Employer Identification No.)

incorporation or organization)

200 East Basse Road                                                                                                             78209

San Antonio, Texas                                                                                                         (Zip Code)

(Address of principal executive offices)

(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 [X] 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 the 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 26, 2012

- - - - - - - - - - - - - - - - - - - - - - - - - -                                                                            - - - - - - - - - - - -  - - - - - - - - - -

Class A Common Stock, $.01 par value                                                                                         42,220,486

Class B Common Stock, $.01 par value                                                                                        315,000,000


CLEAR CHANNEL OUTDOOR HOLDINGS, INC.

INDEX

Page No.

Part I -- Financial Information

Item 1.        Financial Statements

1

Condensed Consolidated Balance Sheets as of September 30, 2012 and December 31, 2011

1

Consolidated Statements of Comprehensive Income (Loss) for the three and nine months ended

September 30, 2012 and 2011

2

Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 2012 and 2011

3

Notes to Consolidated Financial Statements

4

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

21

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

35

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

36

Item 3.        Defaults Upon Senior Securities

36

Item 4.        Mine Safety Disclosures

36

Item 5.        Other Information

36

Item 6.        Exhibits

37

Signatures

38


PART I -- FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

CLEAR CHANNEL OUTDOOR HOLDINGS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands)

September 30,

2012

December 31,

(Unaudited)

2011

CURRENT ASSETS

Cash and cash equivalents

$

534,907

$

542,655

Accounts receivable, net

690,201

702,091

Other current assets

221,612

208,982

Total Current Assets

1,446,720

1,453,728

PROPERTY, PLANT AND EQUIPMENT

Structures, net

1,887,169

1,950,437

Other property, plant and equipment, net

309,266

296,273

INTANGIBLE ASSETS AND GOODWILL

Definite-lived intangibles, net

573,575

618,526

Indefinite-lived intangibles

1,106,799

1,105,704

Goodwill

856,623

857,193

OTHER ASSETS

Due from Clear Channel Communications

723,311

656,040

Other assets

170,698

150,284

Total Assets

$

7,074,161

$

7,088,185

CURRENT LIABILITIES

Accounts payable and accrued expenses

$

580,846

$

607,197

Deferred income

108,323

89,980

Current portion of long-term debt

19,710

23,806

Total Current Liabilities

708,879

720,983

Long-term debt

4,718,792

2,522,103

Deferred tax liability

793,300

822,932

Other long-term liabilities

288,689

281,940

Commitments and contingent liabilities (Note 6)

SHAREHOLDERS’ EQUITY

Noncontrolling interest

241,121

231,530

Class A common stock

423

411

Class B common stock

3,150

3,150

Additional paid-in capital

4,521,185

6,684,497

Retained deficit

(3,966,105)

(3,931,403)

Accumulated other comprehensive loss

(234,300)

(246,988)

Cost of shares held in treasury

(973)

(970)

Total Shareholders’ Equity

564,501

2,740,227

Total Liabilities and Shareholders’ Equity

$

7,074,161

$

7,088,185

See Notes to Consolidated Financial Statements

1


CLEAR CHANNEL OUTDOOR HOLDINGS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(UNAUDITED)

(In thousands, except per share data)

Three Months Ended

Nine Months Ended

September 30,

September 30,

2012

2011

2012

2011

Revenue

$

731,141

$

748,450

$

2,143,750

$

2,187,872

Operating expenses:

Direct operating expenses (excludes depreciation and amortization)

393,334

408,132

1,194,282

1,214,984

Selling, general and admin expenses (excludes depreciation and amortization)

137,488

131,915

422,922

398,032

Corporate expenses (excludes depreciation and amortization)

25,219

22,303

77,367

67,324

Depreciation and amortization

100,352

114,934

292,357

322,864

Other operating income – net

42,397

37

49,146

9,139

Operating income

117,145

71,203

205,968

193,807

Interest expense

102,612

61,809

273,396

183,595

Interest income on Due from Clear Channel Communications

16,913

12,215

48,982

31,786

Equity in earnings (loss) of nonconsolidated affiliates

(234)

1,038

30

1,640

Other income (expense) – net

1,825

(1,859)

(300)

975

Income (loss) before income taxes

33,037

20,788

(18,716)

44,613

Income tax expense

(8,212)

(11,002)

(1,000)

(11,007)

Consolidated net income (loss)

24,825

9,786

(19,716)

33,606

Less amount attributable to noncontrolling interest

7,541

6,573

14,986

13,239

Net income (loss) attributable to the Company

$

17,284

$

3,213

$

(34,702)

$

20,367

Other comprehensive income, net of tax:

Foreign currency translation adjustments

18,580

(88,618)

13,748

(22,233)

Foreign currency reclassification adjustment

(688)

86

(534)

234

Unrealized loss on marketable securities

(1,087)

(4,979)

(1,077)

(4,459)

Other comprehensive income (loss)

16,805

(93,511)

12,137

(26,458)

Comprehensive income (loss)

34,089

(90,298)

(22,565)

(6,091)

Less amount attributable to noncontrolling interest

1,184

(1,268)

(551)

4,866

Comprehensive income (loss) attributable to the Company

$

32,905

$

(89,030)

$

(22,014)

$

(10,957)

Net income (loss) attributable to the Company per common share:

Basic

$

0.05

$

0.01

$

(0.12)

$

0.05

Weighted average common shares outstanding – Basic

357,108

355,940

356,808

355,873

Diluted

$

0.05

$

0.01

$

(0.12)

$

0.05

Weighted average common shares outstanding – Diluted

357,547

356,428

356,808

356,556

Dividends declared per share

$

-

$

-

$

6.08

$

-

See Notes to Consolidated Financial Statements

2


CLEAR CHANNEL OUTDOOR HOLDINGS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

(In thousands)

Nine Months Ended September 30,

2012

2011

Cash flows from operating activities:

Consolidated net income (loss)

$

(19,716)

$

33,606

Reconciling items:

Depreciation and amortization

292,357

322,864

Deferred taxes

(32,776)

(13,744)

Provision for doubtful accounts

4,507

4,982

Gain on sale of operating assets

(49,146)

(9,139)

Share-based compensation

9,016

8,104

Amortization of deferred financing charges and note discounts, net

8,448

5,740

Other reconciling items – net

(752)

(3,759)

Changes in operating assets and liabilities:

(Increase) decrease in accounts receivable

(9)

25,763

Increase in deferred income

25,673

27,020

Decrease in accrued expenses

(14,633)

(17,201)

Increase in accounts payable and other liabilities

1,102

11,786

Changes in other operating assets and liabilities, net of effects of acquisitions and dispositions

1,835

(44,366)

Net cash provided by operating activities

225,906

351,656

Cash flows from investing activities:

Purchases of property, plant and equipment

(187,369)

(164,400)

Purchases of other operating assets

(9,398)

(13,239)

Proceeds from disposal of assets

54,047

11,008

Change in other – net

(3,775)

947

Net cash used for investing activities

(146,495)

(165,684)

Cash flows from financing activities:

Draws on credit facilities

2,063

-

Payments on credit facilities

(1,922)

(3,202)

Proceeds from long-term debt

2,200,000

1,560

Payments on long-term debt

(7,301)

(13,243)

Net transfers to Clear Channel Communications

(67,277)

(157,595)

Deferred financing charges

(40,002)

-

Dividends paid

(2,170,396)

-

Change in other – net

(3,817)

(4,350)

Net cash used for financing activities

(88,652)

(176,830)

Effect of exchange rate changes on cash

1,493

(1,181)

Net increase (decrease) in cash and cash equivalents

(7,748)

7,961

Cash and cash equivalents at beginning of period

542,655

624,018

Cash and cash equivalents at end of period

$

534,907

$

631,979

See Notes to Consolidated Financial Statements

3


CLEAR CHANNEL OUTDOOR HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

NOTE 1 – BASIS OF PRESENTATION

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 2011 Annual Report on Form 10-K, Quarterly Report on Form 10-Q for the period ended March 31, 2012 and Quarterly Reports on Form 10-Q and Form 10-Q/A for the period ended June 30, 2012.

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.  Also included in the consolidated financial statements are entities for which the Company has a controlling financial interest or is the primary beneficiary.  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 2012 presentation.

During the first quarter of 2012, and in connection with the appointment of the Company’s new chief executive officer, the Company reevaluated its segment reporting and determined that its Latin American operations were more appropriately aligned with the operations of its International segment.  As a result, the operations of Latin America are no longer reflected within the Company’s Americas segment and are currently included in the results of its International segment.  Accordingly, the Company has recast the corresponding segment disclosures for prior periods.

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, 2012 and December 31, 2011, respectively:

(In thousands)

September 30,

December 31,

2012

2011

Land, buildings and improvements

$

208,224

$

204,543

Structures

2,882,291

2,783,434

Furniture and other equipment

122,520

111,481

Construction in progress

76,423

57,504

3,289,458

3,156,962

Less: accumulated depreciation

1,093,023

910,252

Property, plant and equipment, net

$

2,196,435

$

2,246,710

Definite-lived Intangible Assets

The Company has definite-lived intangible assets which consist primarily of transit and street furniture contracts and other contractual rights, all of which 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 Company periodically reviews the appropriateness of the amortization periods related to its definite-lived intangible assets.  These assets are recorded at cost.

4


CLEAR CHANNEL OUTDOOR HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(UNAUDITED)

The following table presents the gross carrying amount and accumulated amortization for each major class of definite-lived intangible assets at September 30, 2012 and December 31, 2011, respectively:

(In thousands)

September 30, 2012

December 31, 2011

Gross Carrying Amount

Accumulated Amortization

Gross Carrying Amount

Accumulated Amortization

Transit, street furniture and other contractual rights

$

778,942

$

(381,466)

$

773,238

$

(329,563)

Other

177,572

(1,473)

176,779

(1,928)

Total

$

956,514

$

(382,939)

$

950,017

$

(331,491)

Total amortization expense related to definite-lived intangible assets for the three months ended September 30, 2012 and 2011 was $18.9 million and $30.8 million, respectively.  Total amortization expense related to definite-lived intangible assets for the nine months ended September 30, 2012 and 2011 was $56.0 million and $77.3 million, respectively.

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)

2013

$

72,652

2014

67,900

2015

50,662

2016

43,256

2017

32,601

Indefinite-lived Intangible Assets

The Company’s indefinite-lived intangibles consist primarily of billboard permits in its Americas segment.  Due to significant differences in both business practices and regulations, billboards in the International segment are subject to long-term, finite contracts unlike the Company’s permits in the United States and Canada.  Accordingly, there are no indefinite-lived assets in the International segment.

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, 2010

$

571,932

$

290,310

$

862,242

Foreign currency

-

(6,898)

(6,898)

Impairment

-

(1,146)

(1,146)

Acquisitions

-

2,995

2,995

Balance as of December 31, 2011

571,932

285,261

857,193

Foreign currency

-

2,159

2,159

Dispositions

-

(2,729)

(2,729)

Balance as of September 30, 2012

$

571,932

$

284,691

$

856,623

5


CLEAR CHANNEL OUTDOOR HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(UNAUDITED)

NOTE 3 – LONG-TERM DEBT

Long-term debt at September 30, 2012 and December 31, 2011, respectively, consisted of the following:

(In thousands)

September 30,

December 31,

2012

2011

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

Clear Channel Worldwide Holdings Senior Subordinated Notes:

7.625% Series A Senior Subordinated Notes Due 2020

275,000

-

7.625% Series B Senior Subordinated Notes Due 2020

1,925,000

-

Other debt

38,502

45,909

Total debt

4,738,502

2,545,909

Less: current portion

19,710

23,806

Total long-term debt

$

4,718,792

$

2,522,103

The aggregate market value of the Company’s debt based on market prices for which quotes were available was approximately $4.9 billion and $2.7 billion at September 30, 2012 and December 31, 2011, respectively.

Clear Channel Worldwide Holdings Senior Subordinated Notes Issuance

During the first quarter of 2012, the Company’s wholly-owned subsidiary, Clear Channel Worldwide Holdings, Inc. (“CCWH”) issued $275.0 million aggregate principal amount of 7.625% Series A Senior Subordinated Notes due 2020 (the “Series A Subordinated Notes”) and $1,925.0 million aggregate principal amount of 7.625% Series B Senior Subordinated Notes due 2020 (the “Series B Subordinated Notes” and collectively with the Series A Subordinated Notes, the “Subordinated Notes”).  Interest on the Subordinated Notes is payable to the trustee weekly in arrears and to the noteholders on March 15 and September 15 of each year, beginning on September 15, 2012.


The Subordinated Notes are CCWH’s senior subordinated obligations and are fully and unconditionally guaranteed, jointly and severally, on a senior subordinated basis by the Company, its wholly-owned subsidiary Clear Channel Outdoor, Inc. (“CCOI”), and certain of the Company’s other domestic subsidiaries (collectively, the “Guarantors”). The Subordinated Notes are unsecured senior subordinated obligations that rank junior to all of CCWH’s existing and future senior debt, including CCWH’s outstanding senior notes, equally with any of CCWH’s existing and future senior subordinated debt and ahead of all of CCWH’s existing and future debt that expressly provides that it is subordinated to the Subordinated Notes. The guarantees of the Subordinated Notes rank junior to each Guarantor’s existing and future senior debt, including CCWH’s outstanding senior notes, equally with each Guarantor’s existing and future senior subordinated debt and ahead of each Guarantor’s existing and future debt that expressly provides that it is subordinated to the guarantees of the Subordinated Notes.

The Series A Subordinated Notes were issued pursuant to an indenture, dated as of March 15, 2012 (the “Series A Subordinated Note Indenture”), among CCWH, the Company, CCOI and the other guarantors named therein (collectively with the Company and CCOI, the “Series A Subordinated Note Guarantors”) and U.S. Bank National Association, as trustee (the “Trustee”), and the Series B Subordinated Notes were issued pursuant to an indenture, dated as of March 15, 2012 (the “Series B Subordinated Note Indenture” and together with the Series A Subordinated Note Indenture, the “Subordinated Indentures”), among CCWH, the Company, CCOI and the other guarantors named therein (collectively with the Company and CCOI, the “Series B Subordinated Note Guarantors”) and the Trustee.

At any time prior to March 15, 2015, CCWH may redeem the Subordinated Notes, in whole or in part, at a price equal to 100% of the principal amount of the Subordinated Notes plus a “make-whole” premium, together with accrued and unpaid interest, if any, to the redemption date. CCWH may redeem the Subordinated Notes, in whole or in part, on or after March 15, 2015, at the redemption prices set forth in the applicable Subordinated Indenture plus accrued and unpaid interest to the redemption date. At any time on or before March 15, 2015, CCWH may elect to redeem up to 40% of the then outstanding aggregate principal amount of the Subordinated Notes at a redemption price equal to 107.625% of the principal amount thereof, plus accrued and unpaid interest to the redemption date, with the net proceeds of one or more equity offerings. Notwithstanding the foregoing, neither the Company nor any of its subsidiaries is permitted to make any purchase of, or otherwise effectively cancel or retire any Series B Subordinated Notes if,

6


CLEAR CHANNEL OUTDOOR HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(UNAUDITED)

after giving effect thereto and, if applicable, any concurrent purchase of or other addition with respect to any Series A Subordinated Notes, the ratio of (a) the outstanding aggregate principal amount of the Series A Subordinated Notes to (b) the outstanding aggregate principal amount of the Series B Subordinated Notes shall be greater than 0.25, subject to certain exceptions.

The Series A Subordinated Note Indenture contains covenants that limit the Company’s ability and the ability of its restricted subsidiaries to, among other things: (i) incur additional debt or issue certain preferred stock; (ii) engage in certain transactions with affiliates; (iii) create restrictions on dividends or other payments by the restricted subsidiaries; and (iv) merge, consolidate or sell substantially all of the Company’s or CCWH’s assets. The Series A Subordinated Note Indenture does not include limitations on dividends, stock redemptions or other distributions or investments or on asset sales. The Series B Subordinated Note Indenture contains covenants that limit the Company’s ability and the ability of its restricted subsidiaries to, among other things: (i) pay dividends, redeem stock or make other distributions or investments; (ii) incur additional debt or issue certain preferred stock; (iii) transfer or sell assets; (iv) engage in certain transactions with affiliates; (v) create restrictions on dividends or other payments by the restricted subsidiaries; and (vi) merge, consolidate or sell substantially all of the Company’s or CCWH’s assets. The Subordinated Indentures also provide for customary events of default.

The Company capitalized $40.0 million in fees and expenses associated with the Subordinated Notes offering and is amortizing them through interest expense over the life of the Subordinated Notes.


With the proceeds of the Subordinated Notes (net of the initial purchasers’ discount of $33.0 million), CCWH loaned an aggregate amount equal to $2,167.0 million to CCOI. CCOI paid all other fees and expenses of the offering using cash on hand and, with the proceeds of the loans, made a special cash dividend to the Company, which in turn made the special cash dividend (the “CCOH Dividend”) on March 15, 2012 in an amount equal to $6.0832 per share to its Class A and Class B stockholders of record at the close of business on March 12, 2012, including Clear Channel Holdings, Inc. (“Clear Channel Holdings”) and CC Finco, LLC (“CC Finco”), both wholly-owned subsidiaries of Clear Channel Communications.

Clear Channel Communications’ Debt Repayments

On March 15, 2012, using proceeds of the CCOH Dividend distributed to Clear Channel Holdings and CC Finco, together with cash on hand, Clear Channel Communications repaid indebtedness under its senior secured credit facilities in an aggregate amount equal to $ 1,925.7 million. As a result of the prepayment, the revolving credit commitments under Clear Channel Communications’ revolving credit facility were permanently reduced from $1.9 billion to $10.0 million and the sub-limit under which certain of the Company’s international subsidiaries may borrow (to the extent that Clear Channel Communications’ has not already borrowed against this capacity) was reduced from $145.0 million to $750 thousand.  Clear Channel Communications has borrowed the entire sub-limit capacity as of September 30, 2012.

In connection with the Subordinated Notes issuance, Clear Channel Communications used cash on hand to prepay $170.5 million of additional indebtedness under its senior secured credit facilities in order to remain in compliance with its debt covenants.

NOTE 4 – SUPPLEMENTAL DISCLOSURES

Income tax expense

The Company’s income tax expense for the three and nine months ended September 30, 2012 and 2011, respectively, consisted of the following components:

(In thousands)

Three Months Ended

Nine Months Ended

September 30,

September 30,

2012

2011

2012

2011

Current tax expense

$

(16,804)

$

(8,321)

$

(33,776)

$

(24,751)

Deferred tax benefit (expense)

8,592

(2,681)

32,776

13,744

Income tax expense

$

(8,212)

$

(11,002)

$

(1,000)

$

(11,007)

The effective tax rate is the provision for income taxes as a percent of income before income taxes.  The effective tax rates for the three and nine months ended September 30, 2012 were 24.9 % and (5.3)%, respectively. The effective rate for the three months ended September 30, 2012 was primarily impacted by reduced non-U.S. tax rates on financial reporting gains resulting from the disposition of certain foreign subsidiaries.  The effective tax rate for the nine months ended September 30, 2012 was primarily impacted by the

7


CLEAR CHANNEL OUTDOOR HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(UNAUDITED)

inability to record tax benefits on tax losses in certain foreign jurisdictions due to the uncertainty of the ability to utilize those losses in future periods.

The effective tax rate for the three and nine months ended September 30, 2011 was 52.9% and 24.7%, respectively.  The 2011 effective tax rate was primarily impacted by the Company’s settlement of U.S. federal and state tax examinations.  Pursuant to the settlements, the Company recorded a reduction to income tax expense of approximately $3.5 million to reflect the net tax benefits of the settlements.  In addition, the effective rate for the nine months ended September 30, 2011 was impacted by the Company’s ability to benefit from certain tax loss carry forwards in foreign jurisdictions due to increased taxable income during 2011, where the losses previously did not provide a benefit.

During the nine months ended September 30, 2012 and 2011, cash paid for interest and income taxes, net of income tax refunds of $3.7 million and $6.8 million, respectively, was as follows:

(In thousands)

Nine Months Ended September 30,

2012

2011

Interest

$

267,395

$

176,070

Income taxes

41,176

27,050

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 in accordance with ASC 820-10-35. 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 investments at September 30, 2012 and December 31, 2011 are as follows:

(In thousands)

September 30,

December 31,

2012

2011

Cost

$

3,188

$

3,188

Gross unrealized losses

(1,087)

-

Gross unrealized gains

83

74

Fair value

$

2,184

$

3,262

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, have accrued an 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.  Additionally, due to the inherent uncertainty of litigation, there can be no assurance that the resolution of any particular claim or proceeding would not have a material adverse effect on the Company’s financial condition or results of operations.

Although the Company is involved in a variety of legal proceedings in the ordinary course of business, a large portion of the Company’s litigation arises in the following contexts: commercial disputes; employment and benefits related claims; governmental fines; and tax disputes.

8


CLEAR CHANNEL OUTDOOR HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(UNAUDITED)

Brazil Litigation

On or about July 12, 2006 and April 12, 2007, two of the Company’s operating businesses (L&C Outdoor Ltda. (“L&C”) and Publicidad Klimes São Paulo Ltda. (“Klimes”), respectively) in the São Paulo, Brazil market received notices of infraction from the state taxing authority, seeking to impose a value added tax (“VAT”) on such businesses, retroactively for the period from December 31, 2001 through January 31, 2006. The taxing authority contends that these businesses fall within the definition of “communication services” and as such are subject to the VAT. L&C and Klimes filed separate petitions to challenge the imposition of this tax.

On August 8, 2011, Brazil’s National Council of Fiscal Policy (CONFAZ) published a convenio authorizing sixteen states, including the State of São Paulo, to issue an amnesty that would reduce the principal amount of VAT allegedly owed and reduce or waive related interest and penalties.  The State of São Paulo ratified the amnesty in late August 2011.   On May 10, 2012, the State of São Paulo published an amnesty decree that mirrors the convenio.  Klimes and L&C accepted the amnesty on May 24, 2012 by making the aggregate required payment of $10.9 million.  On that same day, Klimes and L&C filed petitions to discontinue the tax litigation based on the amnesty payments.

Guarantees

As of September 30, 2012, the Company had $71.5 million in letters of credit outstanding, of which $69.0 million of letters of credit were cash secured. Additionally, as of September 30, 2012, Clear Channel Communications had outstanding commercial standby letters of credit and surety bonds of $18.2 million and $42.4 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. Letters of credit in the amount of $ 5.0 million are collateral in support of surety bonds and these amounts would only be drawn under the letter of credit in the event the associated surety bonds were funded and the Company did not honor its reimbursement obligation to the issuers.

In addition, as of September 30, 2012, the Company had outstanding bank guarantees of $51.4 million related to international subsidiaries, of which $4.6 million were backed by cash collateral.

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 amount of $ 1.0 billion, or if more or less than such amount, 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 or when they mature on December 15, 2017.

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 (after satisfying the funding requirements of the Trustee Accounts under the CCWH senior notes and the CCWH Subordinated Notes).  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, 2012 and December 31, 2011, the asset recorded in “Due from Clear Channel Communications” on the condensed consolidated balance sheets was $723.3 million and $656.0 million, respectively.  At September 30, 2012, we had no borrowings under the revolving promissory note to Clear Channel Communications.

The net interest income for the three months ended September 30, 2012 and 2011 was $16.9 million and $12.2 million, respectively. The net interest income for the nine months ended September 30, 2012 and 2011 was $49.0 million and $31.8 million, respectively. At September 30, 2012 and December 31, 2011, the interest rate on the “Due from Clear Channel Communications” account was 9.25 %, which is equal to the fixed interest rate on the CCWH senior notes.

Clear Channel Communications has a multi-currency revolving credit facility with a maturity in July 2014 which includes a 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.  In connection with the

9


CLEAR CHANNEL OUTDOOR HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(UNAUDITED)

Subordinated Notes issuance during the first quarter of 2012, Clear Channel Communications made mandatory prepayments under its senior secured credit facilities in an aggregate amount equal to $1,925.7 million. As a result of the prepayment, the revolving credit commitments under Clear Channel Communications’ revolving credit facility were permanently reduced from $1.9 billion to $10.0 million and the sub-limit under which certain of the Company’s international subsidiaries may borrow (to the extent that Clear Channel Communications’ has not already borrowed against this capacity) was reduced from $145.0 million to $750 thousand.  As of September 30, 2012, the Company had no outstanding borrowings under the $750 thousand sub-limit facility.  Clear Channel Communications had borrowed the entire sub-limit capacity as of September 30, 2012.

The Company provides advertising space on its billboards for radio stations owned by Clear Channel Communications.  For the three months ended September 30, 2012 and 2011, the Company recorded $0.5 million and $1.1 million, respectively, in revenue for these advertisements. For the nine months ended September 30, 2012 and 2011, the Company recorded $ 1.1 million and $2.8 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) certain 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, 2012 and 2011, the Company recorded $9.5 million and $7.2 million, respectively, as a component of corporate expenses for these services. For the nine months ended September 30, 2012 and 2011, the Company recorded $24.6 million and $19.7 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 $2.8 million and $3.1 million for the three months ended September 30, 2012 and 2011, respectively. For the nine months ended September 30, 2012 and 2011, the Company recorded approximately $8.6 million and $9.1 million, respectively, as a component of selling, general and administrative expenses for these services.

10


CLEAR CHANNEL OUTDOOR HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(UNAUDITED)

NOTE 8 – EQUITY AND COMPREHENSIVE INCOME

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 January 1, 2012

$

2,508,697

$

231,530

$

2,740,227

Net income (loss)

(34,702)

14,986

(19,716)

Dividend

(2,170,396)

-

(2,170,396)

Foreign currency translation adjustments

14,299

(551)

13,748

Unrealized holding loss on marketable securities

(1,077)

-

(1,077)

Reclassification adjustment

(534)

-

(534)

Other - net

7,093

(4,844)

2,249

Balances at September 30, 2012

$

323,380

$

241,121

$

564,501

Balances at January 1, 2011

$

2,498,261

$

209,794

2,708,055

Net income

20,367

13,239

33,606

Foreign currency translation adjustments

(27,099)

4,866

(22,233)

Unrealized holding loss on marketable securities

(4,459)

-

(4,459)

Reclassification adjustment

234

-

234

Other - net

4,794

(3,708)

1,086

Balances at September 30, 2011

$

2,492,098

$

224,191

$

2,716,289

During March 2012, the Company paid the CCOH Dividend, totaling $2,170.4 million, using proceeds from the Subordinated Notes issuance in addition to cash on hand.  The CCOH Dividend was determined to represent a return of capital, or liquidating dividend, to the Company’s shareholders, which resulted in a reduction to “Additional paid-in capital.”

Also, in connection with the CCOH Dividend, all outstanding stock options and restricted stock units as of both March 16, 2012 and March 26, 2012 were modified pursuant to antidilutive provisions contained in the Company’s 2005 Stock Incentive Plan. The modification ensured that the intrinsic value of existing stock options and restricted stock units prior to the dividend payment did not decline due to the reduction the Company’s stock price that resulted from the dividend. The CCOH Dividend was determined to be an equity restructuring in accordance with ASC 718.  No incremental compensation cost was or will be recognized as a result of this modification.

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 consists of operations primarily in the United States and Canada, and the International segment primarily includes operations in Europe, Asia and Latin America.  The Americas and International display inventory consists primarily of billboards, street furniture displays and transit displays.  Corporate includes infrastructure and support including information technology, human resources, legal, finance and administrative functions of each of the Company’s operating segments, as well as overall executive, administrative and support functions.  Share-based payments are recorded by each segment in direct operating and selling, general and administrative expenses.

During the first quarter of 2012 the Company recast its segment reporting, as discussed in Note 1.  The following table presents the Company’s reportable segment results for the three and nine months ended September 30, 2012 and 2011:

11


CLEAR CHANNEL OUTDOOR HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(UNAUDITED)

(In thousands)

Corporate and other

Americas

International

reconciling items

Consolidated

Three months ended September 30, 2012

Revenue

$

335,021

$

396,120

$

-

$

731,141

Direct operating expenses

146,121

247,213

-

393,334

Selling, general and administrative expenses

54,718

82,770

-

137,488

Depreciation and amortization

50,177

49,740

435

100,352

Corporate expenses

-

-

25,219

25,219

Other operating income - net

-

-

42,397

42,397

Operating income

$

84,005

$

16,397

$

16,743

$

117,145

Capital expenditures

$

25,633

$

30,238

$

702

$

56,573

Share-based compensation expense

$

1,893

$

1,708

$

59

$

3,660

Three months ended September 30, 2011

Revenue

$

326,882

$

421,568

$

-

$

748,450

Direct operating expenses

143,345

264,787

-

408,132

Selling, general and administrative expenses

50,639

81,276

-

131,915

Depreciation and amortization

60,117

54,817

-

114,934

Corporate expenses

-

-

22,303

22,303

Other operating income - net

-

-

37

37

Operating income (loss)

$

72,781

$

20,688

$

(22,266)

$

71,203

Capital expenditures

$

17,073

$

42,049

$

1,248

$

60,370

Share-based compensation expense

$

1,903

$

792

$

36

$

2,731

Nine months ended September 30, 2012

Revenue

$

935,850

$

1,207,900

$

-

$

2,143,750

Direct operating expenses

433,716

760,566

-

1,194,282

Selling, general and administrative expenses

151,996

270,926

-

422,922

Depreciation and amortization

141,702

149,485

1,170

292,357

Corporate expenses

-

-

77,367

77,367

Other operating income - net

-

-

49,146

49,146

Operating income (loss)

$

208,436

$

26,923

$

(29,391)

$

205,968

Capital expenditures

$

84,749

$

97,147

$

5,473

$

187,369

Share-based compensation expense

$

5,065

$

3,791

$

160

$

9,016

Nine months ended September 30, 2011

Revenue

$

914,800

$

1,273,072

$

-

$

2,187,872

Direct operating expenses

420,305

794,679

-

1,214,984

Selling, general and administrative expenses

149,232

248,800

-

398,032

Depreciation and amortization

159,061

163,803

-

322,864

Corporate expenses

-

-

67,324

67,324

Other operating income - net

-

-

9,139

9,139

Operating income (loss)

$

186,202

$

65,790

$

(58,185)

$

193,807

Capital expenditures

$

82,550

$

81,150

$

2,444

$

166,144

Share-based compensation expense

$

5,745

$

2,396

$

111

$

8,252

12


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 CCWH (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):

(In thousands)

As of September 30, 2012

Parent

Subsidiary

Guarantor

Non-Guarantor

Company

Issuer

Subsidiaries

Subsidiaries

Eliminations

Consolidated

Cash and cash equivalents

$

214,665

$

-

$

-

$

324,676

$

(4,434)

$

534,907

Accounts receivable, net of allowance

-

-

232,580

457,621

-

690,201

Intercompany receivables

-

183,685

1,393,405

-

(1,577,090)

-

Other current assets

3,953

4,125

78,195

135,339

-

221,612

Total Current Assets

218,618

187,810

1,704,180

917,636

(1,581,524)

1,446,720

Property, plant and equipment, net

-

-

1,414,311

782,124

-

2,196,435

Definite-lived intangibles, net

-

-

364,536

209,039

-

573,575

Indefinite-lived intangibles

-

-

1,091,114

15,685

-

1,106,799

Goodwill

-

-

571,932

284,691

-

856,623

Due from Clear Channel Communications

723,311

-

-

-

-

723,311

Intercompany notes receivable

182,026

4,939,430

-

12,384

(5,133,840)

-

Other assets

586,247

834,813

1,489,740

56,601

(2,796,703)

170,698

Total Assets

$

1,710,202

$

5,962,053

$

6,635,813

$

2,278,160

$

(9,512,067)

$

7,074,161

Accounts payable and accrued expenses

$

(601)

$

5,883

$

90,620

$

489,378

$

(4,434)

$

580,846

Intercompany payable

1,381,158

-

183,685

12,247

(1,577,090)

-

Deferred income

-

-

38,979

69,344

-

108,323

Current portion of long-term debt

-

-

39

19,671

-

19,710

Total Current Liabilities

1,380,557

5,883

313,323

590,640

(1,581,524)

708,879

Long-term debt

-

4,700,000

1,193

17,599

-

4,718,792

Intercompany notes payable

6,040

-

4,845,963

281,837

(5,133,840)

-

Deferred tax liability

225

85

752,144

40,846

-

793,300

Other long-term liabilities

-

-

136,943

151,746

-

288,689

Total shareholders' equity

323,380

1,256,085

586,247

1,195,492

(2,796,703)

564,501

Total Liabilities and Shareholders' Equity

$

1,710,202

$

5,962,053

$

6,635,813

$

2,278,160

$

(9,512,067)

$

7,074,161

13


CLEAR CHANNEL OUTDOOR HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(UNAUDITED)

(In thousands)

As of December 31, 2011

Parent

Subsidiary

Guarantor

Non-Guarantor

Company

Issuer

Subsidiaries

Subsidiaries

Eliminations

Consolidated

Cash and cash equivalents

$

325,696

$

-

$

-

$

249,448

$

(32,489)

$

542,655

Accounts receivable, net of allowance

-

-

232,834

469,257

-

702,091

Intercompany receivables

-

183,310

1,435,881

-

(1,619,191)

-

Other current assets

2,012

-

79,626

127,344

-

208,982

Total Current Assets

327,708

183,310

1,748,341

846,049

(1,651,680)

1,453,728

Property, plant and equipment, net

-

-

1,448,078

798,632

-

2,246,710

Definite-lived intangibles, net

-

-

378,515

240,011

-

618,526

Indefinite-lived intangibles

-

-

1,090,597

15,107

-

1,105,704

Goodwill

-

-

571,932

285,261

-

857,193

Due from Clear Channel Communications

656,040

-

-

-

-

656,040

Intercompany notes receivable

182,026

2,774,175

-

17,832

(2,974,033)

-

Other assets

2,775,720

786,783

1,475,709

61,309

(4,949,237)

150,284

Total Assets

$

3,941,494

$

3,744,268

$

6,713,172

$

2,264,201

$

(9,574,950)

$

7,088,185

Accounts payable and accrued expenses

$

144

$

1,134

$

136,226

$

502,182

$

(32,489)

$

607,197

Intercompany payable

1,424,937

-

183,310

10,944

(1,619,191)

-

Deferred income

-

-

34,217

55,763

-

89,980

Current portion of long-term debt

-

-

31

23,775

-

23,806

Total Current Liabilities

1,425,081

1,134

353,784

592,664

(1,651,680)

720,983

Long-term debt

-

2,500,000

1,265

20,838

-

2,522,103

Intercompany notes payable

7,491

-

2,692,644

273,898

(2,974,033)

-

Deferred tax liability

225

(137)

771,105

51,739

-

822,932

Other long-term liabilities

-

1,204

118,650

162,086

-

281,940

Total shareholders' equity

2,508,697

1,242,067

2,775,724

1,162,976

(4,949,237)

2,740,227

Total Liabilities and Shareholders' Equity

$

3,941,494

$

3,744,268

$

6,713,172

$

2,264,201

$

(9,574,950)

$

7,088,185

14


CLEAR CHANNEL OUTDOOR HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(UNAUDITED)

(In thousands)

Three Months Ended September 30, 2012

Parent

Subsidiary

Guarantor

Non-Guarantor

Company

Issuer

Subsidiaries

Subsidiaries

Eliminations

Consolidated

Revenue

$

-

$

-

$

312,395

$

418,746

$

-

$

731,141

Operating expenses:

Direct operating expenses

-

-

131,615

261,719

-

393,334

Selling, general and administrative expenses

-

-

51,335

86,153

-

137,488

Corporate expenses

4,598

-

12,631

7,990

-

25,219

Depreciation and amortization

-

-

49,633

50,719

-

100,352

Other operating income (expense) – net

(126)

-

2,784

39,739

-

42,397

Operating income (loss)

(4,724)

-

69,965

51,904

-

117,145

Interest (income) expense – net

(81)

100,782

2,129

(218)

-

102,612

Interest income on Due from Clear Channel Communications

-

-

16,913

-

-

16,913

Intercompany interest income

3,602

99,266

-

112

(102,980)

-

Intercompany interest expense

116

-

102,719

145

(102,980)

-

Equity in earnings (loss) of nonconsolidated

affiliates

18,009

31,938

28,453

(544)

(78,090)

(234)

Other income (expense) – net

-

-

46

1,779

-

1,825

Income (loss) before income taxes

16,852

30,422

10,529

53,324

(78,090)

33,037

Income tax benefit (expense)

432

(4,078)

7,480

(12,046)

-

(8,212)

Consolidated net income (loss)

17,284

26,344

18,009

41,278

(78,090)

24,825

Less amount attributable to noncontrolling interest

-

-

-

7,541

-

7,541

Net income (loss) attributable to the Company

$

17,284

$

26,344

$

18,009

$

33,737

$

(78,090)

$

17,284

Other comprehensive income (loss):

Foreign currency translation adjustments

(270)

6

527

18,317

-

18,580

Foreign currency reclassification adjustments

-

-

555

(1,243)

-

(688)

Unrealized gain (loss) on marketable securities

-

-

(1,077)

(10)

-

(1,087)

Equity in subsidiary comprehensive income (loss)

15,891

18,740

15,193

-

(49,824)

-

Comprehensive income (loss)

32,905

45,090

33,207

50,801

(127,914)

34,089

Less amount attributable to noncontrolling interest

-

-

(693)

1,877

-

1,184

Comprehensive income (loss) attributable to the Company

$

32,905

$

45,090

$

33,900

$

48,924

$

(127,914)

$

32,905

15


CLEAR CHANNEL OUTDOOR HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(UNAUDITED)

(In thousands)

Three Months Ended September 30, 2011

Parent

Subsidiary

Guarantor

Non-Guarantor

Company

Issuer

Subsidiaries

Subsidiaries

Eliminations

Consolidated

Revenue

$

-

$

-

$

304,102

$

444,348

$

-

$

748,450

Operating expenses:

Direct operating expenses

-

-

131,111

277,021

-

408,132

Selling, general and administrative expenses

-

-

43,534

88,381

-

131,915

Corporate expenses

2,826

-

12,024

7,453

-

22,303

Depreciation and amortization

-

-

59,097

55,837

-

114,934

Other operating income – net

-

-

561

(524)

-

37

Operating income (loss)

(2,826)

-

58,897

15,132

-

71,203

Interest expense – net

110

57,812

1,924

1,963

-

61,809

Interest income on Due from Clear Channel Communications

-

-

12,215

-

-

12,215

Intercompany interest income

3,524

57,874

-

247

(61,645)

-

Intercompany interest expense

124

-

61,461

60

(61,645)

-

Equity in earnings (loss) of nonconsolidated affiliates

2,922

567

(327)

1,038

(3,162)

1,038

Other income (expense) – net

-

(259)

(129)

(1,471)

-

(1,859)

Income (loss) before income taxes

3,386

370

7,271

12,923

(3,162)

20,788

Income tax benefit (expense)

(173)

(445)

(4,349)

(6,035)

-

(11,002)

Consolidated net income (loss)

3,213

(75)

2,922

6,888

(3,162)

9,786

Less amount attributable to noncontrolling interest

-

-

-

6,573

-

6,573

Net income (loss) attributable to the Company

$

3,213

$

(75)

$

2,922

$

315

$

(3,162)

$

3,213

Other comprehensive income (loss), net of tax:

Foreign currency translation adjustments

-

-

-

(88,618)

-

(88,618)

Foreign currency reclassification adjustments

-

-

-

86

-

86

Unrealized gain (loss) on marketable securities

-

-

-

(4,979)

-

(4,979)

Equity in subsidiary comprehensive income (loss)

(92,243)

(71,927)

(92,243)

-

256,413

-

Comprehensive income (loss)

(89,030)

(72,002)

(89,321)

(93,196)

253,251

(90,298)

Less amount attributable to noncontrolling interest

-

-

-

(1,268)

-

(1,268)

Comprehensive income (loss) attributable to the Company

$

(89,030)

$

(72,002)

$

(89,321)

$

(91,928)

$

253,251

$

(89,030)

16


CLEAR CHANNEL OUTDOOR HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(UNAUDITED)

(In thousands)

Nine Months Ended September 30, 2012

Parent

Subsidiary

Guarantor

Non-Guarantor

Company

Issuer

Subsidiaries

Subsidiaries

Eliminations

Consolidated

Revenue

$

-

$

-

$

871,874

$

1,271,876

$

-

$

2,143,750

Operating expenses:

Direct operating expenses

-

-

390,355

803,927

-

1,194,282

Selling, general and administrative expenses

-

-

141,262

281,660

-

422,922

Corporate expenses

11,979

-

40,079

25,309

-

77,367

Depreciation and amortization

-

-

139,648

152,709

-

292,357

Other operating income (expense) – net

(368)

-

9,781

39,733

-

49,146

Operating income (loss)

(12,347)

-

170,311

48,004

-

205,968

Interest (income) expense – net

(328)

266,537

6,516

671

-

273,396

Interest income on Due from Clear Channel Communications

-

-

48,982

-

-

48,982

Intercompany interest income

10,756

263,470

-

531

(274,757)

-

Intercompany interest expense

346

-

273,880

531

(274,757)

-

Equity in earnings (loss) of nonconsolidated affiliates

(33,694)

21,548

16,116

(821)

(3,119)

30

Other income (expense) – net

-

(301)

(6,436)

6,437

-

(300)

Income (loss) before income taxes

(35,303)

18,180

(51,423)

52,949

(3,119)

(18,716)

Income tax benefit (expense)

601

(4,007)

17,729

(15,323)

-

(1,000)

Consolidated net income (loss)

(34,702)

14,173

(33,694)

37,626

(3,119)

(19,716)

Less amount attributable to noncontrolling interest

-

-

-

14,986

-

`

14,986

Net income (loss) attributable to the Company

$

(34,702)

$

14,173

$

(33,694)

$

22,640

$

(3,119)

$

(34,702)

Other comprehensive income (loss):

Foreign currency translation adjustments

1,467

4

1,947

10,330

-

13,748

Foreign currency reclassification adjustments

-

-

555

(1,089)

-

(534)

Unrealized gain (loss) on marketable securities

-

-

(1,077)

-

-

(1,077)

Equity in subsidiary comprehensive income (loss)

11,221

8,018

9,103

-

(28,342)

-

Comprehensive income (loss)

(22,014)

22,195

(23,166)

31,881

(31,461)

(22,565)

Less amount attributable to noncontrolling interest

-

-

(693)

142

-

(551)

Comprehensive income (loss) attributable to the Company

$

(22,014)

$

22,195

$

(22,473)

$

31,739

$

(31,461)

$

(22,014)

17


CLEAR CHANNEL OUTDOOR HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(UNAUDITED)

(In thousands)

Nine Months Ended September 30, 2011

Parent

Subsidiary

Guarantor

Non-Guarantor

Company

Issuer

Subsidiaries

Subsidiaries

Eliminations

Consolidated

Revenue

$

-

$

-

$

848,900

$

1,338,972

$

-

$

2,187,872

Operating expenses:

Direct operating expenses

-

-

377,657

837,327

-

1,214,984

Selling, general and administrative expenses

-

-

134,051

263,981

-

398,032

Corporate expenses

8,914

-

36,931

21,479

-

67,324

Depreciation and amortization

-

-

155,391

167,473

-

322,864

Other operating income – net

-

-

8,157

982

-

9,139

Operating income (loss)

(8,914)

-

153,027

49,694

-

193,807

Interest expense – net

1

173,437

5,786

4,371

-

183,595

Interest income on Due from Clear Channel Communications

-

-

31,786

-

-

31,786

Intercompany interest income

10,478

173,731

-

749

(184,958)

-

Intercompany interest expense

380

-

184,284

294

(184,958)

-

Equity in earnings (loss) of nonconsolidated affiliates

19,626

16,603

23,261

1,639

(59,489)

1,640

Other income (expense) – net

-

(198)

(259)

1,432

-

975

Income (loss) before income taxes

20,809

16,699

17,745

48,849

(59,489)

44,613

Income tax benefit (expense)

(442)

(799)

1,881

(11,647)

-

(11,007)

Consolidated net income (loss)

20,367

15,900

19,626

37,202

(59,489)

33,606

Less amount attributable to noncontrolling interest

-

-

-

13,239

-

13,239

Net income (loss) attributable to the Company

$

20,367

$

15,900

$

19,626

$

23,963

$

(59,489)

$

20,367

Other comprehensive income (loss):

Foreign currency translation adjustments

-

-

-

(22,233)

-

(22,233)

Unrealized gain on marketable securities

-

-

-

(4,459)

-

(4,459)

Reclassification adjustment

-

-

-

234

-

234

Equity in subsidiary comprehensive income (loss)

(31,324)

(16,980)

(31,324)

-

79,628

-

Comprehensive income (loss)

(10,957)

(1,080)

(11,698)

(2,495)

20,139

(6,091)

Less amount attributable to noncontrolling interest

-

-

-

4,866

-

4,866

Comprehensive income (loss) attributable to the Company

$

(10,957)

$

(1,080)

$

(11,698)

$

(7,361)

$

20,139

$

(10,957)

18


CLEAR CHANNEL OUTDOOR HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(UNAUDITED)

(In thousands)

Nine Months Ended September 30, 2012

Parent

Subsidiary

Guarantor

Non-Guarantor

Company

Issuer

Subsidiaries

Subsidiaries

Eliminations

Consolidated

Cash flows from operating activities:

Consolidated net income (loss)

$

(34,702)

$

14,173

$

(33,694)

$

37,626

$

(3,119)

$

(19,716)

Reconciling items:

Depreciation and amortization

-

-

139,648

152,709

-

292,357

Deferred taxes

-

222

(20,613)

(12,385)

-

(32,776)

Provision for doubtful accounts

-

-

2,085

2,422

-

4,507

Gain on sale of operating assets

368

-

(9,781)

(39,733)

-

(49,146)

Share-based compensation

-

-

5,225

3,791

-

9,016

Amortization of deferred financing charges and note discounts, net

-

2,234

6,214

-

-

8,448

Other reconciling items – net

33,694

(21,548)

(23,773)

7,756

3,119

(752)

Changes in operating assets and liabilities:

(Increase) decrease in accounts receivable

-

-

674

(683)

-

(9)

Increase in deferred income

-

-

4,239

21,434

-

25,673

Increase (decrease) in accrued expenses

-

-

(10,987)

(3,646)

-

(14,633)

Increase (decrease) in accounts payable and other liabilities

-

(1,201)

(12,247)

(13,505)

28,055

1,102

Changes in other operating assets and liabilities, net of effects of acquisitions and dispositions

(3,053)

4,749

3,949

(3,810)

-

1,835

Net cash provided by (used for) operating activities

(3,693)

(1,371)

50,939

151,976

28,055

225,906

Cash flows from investing activities:

Purchases of property, plant and equipment

-

-

(88,628)

(98,741)

-

(187,369)

Decrease (increase) in intercompany notes receivable

-

(2,165,255)

(3,763)

2,663

2,166,355

-

Dividends from subsidiaries

2,167,000

-

641

-

(2,167,641)

-

Purchases of other operating assets

-

-

(952)

(8,446)

-

(9,398)

Proceeds from disposal of assets

-

-

8,455

45,592

-

54,047

Change in other – net

-

-

(1,000)

(2,775)

-

(3,775)

Net cash provided by (used for) investing activities

2,167,000

(2,165,255)

(85,247)

(61,707)

(1,286)

(146,495)

Cash flows from financing activities:

Draws on credit facilities

-

-

-

2,063

-

2,063

Payments on credit facilities

-

-

-

(1,922)

-

(1,922)

Proceeds from long-term debt

-

2,200,000

-

-

-

2,200,000

Payments on long-term debt

-

-

(65)

(7,236)

-

(7,301)

Decrease (increase) in intercompany notes payable - net

-

-

2,162,592

3,763

(2,166,355)

-

Net transfers to Clear Channel Communications

(67,277)

-

-

-

-

(67,277)

Intercompany funding

(42,918)

(374)

45,783

(2,491)

-

-

Dividends paid

(2,170,396)

-

(2,167,000)

(641)

2,167,641

(2,170,396)

Deferred financing charges

-

(33,000)

(7,002)

-

-

(40,002)

Change in other – net

6,253

-

-

(10,070)

-

(3,817)

Net cash provided by (used for) financing activities

(2,274,338)

2,166,626

34,308

(16,534)

1,286

(88,652)

Effect of exchange rate changes on cash

-

-

-

1,493

-

1,493

Net increase (decrease) in cash and cash equivalents

(111,031)

-

-

75,228

28,055

(7,748)

Cash and cash equivalents at beginning of period

325,696

-

-

249,448

(32,489)

542,655

Cash and cash equivalents at end of period

$

214,665

$

-

$

-

$

324,676

$

(4,434)

$

534,907

19


CLEAR CHANNEL OUTDOOR HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(UNAUDITED)

(In thousands)

Nine Months Ended September 30, 2011

Parent

Subsidiary

Guarantor

Non-Guarantor

Company

Issuer

Subsidiaries

Subsidiaries

Eliminations

Consolidated

Cash flows from operating activities:

Consolidated net income (loss)

$

20,367

$

15,900

$

19,626

$

37,202

$

(59,489)

$

33,606

Reconciling items:

Depreciation and amortization

-

-

155,391

167,473

-

322,864

Deferred taxes

-

(72)

3,538

(17,210)

-

(13,744)

Provision for doubtful accounts

-

-

1,426

3,556

-

4,982

Gain on sale of operating assets

-

-

(8,157)

(982)

-

(9,139)

Share-based compensation

-

-

5,708

2,396

-

8,104

Amortization of deferred financing charges and note discounts, net

-

-

5,740

-

-

5,740

Other reconciling items – net

(19,626)

(16,603)

(23,062)

(3,957)

59,489

(3,759)

Changes in operating assets and liabilities:

Decrease in accounts receivable

-

-

21,082

4,681

-

25,763

Increase in deferred income

-

-

7,216

19,804

-

27,020

Increase (decrease) in accrued expenses

-

73

(25,332)

8,058

-

(17,201)

Increase (decrease) in accounts payable and other liabilities

-

-

23,105

5,408

(16,727)

11,786

Changes in other operating assets and liabilities, net of effects of acquisitions and dispositions

(2,639)

918

(18,273)

(24,372)

-

(44,366)

Net cash provided by (used for) operating activities

(1,898)

216

168,008

202,057

(16,727)

351,656

Cash flows from investing activities:

Purchases of property, plant and equipment

-

-

(80,896)

(83,504)

-

(164,400)

Equity contributions to subsidiaries

-

-

(199)

-

199

-

Purchases of businesses and other operating assets

-

-

(12,908)

(331)

-

(13,239)

Proceeds from disposal of assets

-

-

7,128

3,880

-

11,008

Decrease in intercompany notes receivable - net

-

20,100

-

-

(20,100)

-

Change in other – net

-

-

879

772

(704)

947

Net cash provided by (used for) investing activities

-

20,100

(85,996)

(79,183)

(20,605)

(165,684)

Cash flows from financing activities:

Increase in intercompany notes payable - net

-

-

-

(20,100)

20,100

-

Payments on credit facilities

-

-

(129)

(3,073)

-

(3,202)

Proceeds from long-term debt

-

-

-

1,560

1,560

Payments on long-term debt

-

-

-

(13,243)

-

(13,243)

Net transfers to Clear Channel Communications

(157,595)

-

-

-

-

(157,595)

Intercompany funding

94,935

(20,316)

(81,883)

7,264

-

-

Equity contributions from parent

-

-

-

199

(199)

-

Change in other – net

1,131

-

-

(6,185)

704

(4,350)

Net cash used for financing activities

(61,529)

(20,316)

(82,012)

(33,578)

20,605

(176,830)

Effect of exchange rate changes on cash

-

-

-

(1,181)

-

(1,181)

Net increase (decrease) in cash and cash equivalents

(63,427)

-

-

88,115

(16,727)

7,961

Cash and cash equivalents at beginning of period

426,742

-

-

203,789

(6,513)

624,018

Cash and cash equivalents at end of period

$

363,315

$

-

$

-

$

291,904

$

(23,240)

$

631,979

20


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

Format of Presentation

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

During the first quarter of 2012, and in connection with the appointment of our new chief executive officer, we reevaluated our segment reporting and determined that our Latin American operations were more appropriately aligned within the operations of our International segment.  As a result, the operations of Latin America are no longer reflected within our Americas segment and are currently included in the results of our International segment.  Accordingly, we have recast the corresponding segment disclosures for prior periods.

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

Management typically monitors our businesses by reviewing the average rates, occupancy and inventory levels of each of our display types by market.  Our advertising revenue is derived from selling advertising space on the displays we own or operate in key markets worldwide, consisting primarily of billboards, street furniture and transit displays.  Part of our long-term strategy for our Americas and International businesses is to pursue the technology of digital displays, including flat screens, LCDs and LEDs, as additions to traditional methods of displaying our clients’ advertisements.  We are currently installing these technologies in certain markets.

Advertising revenue for our segments is highly correlated to changes in gross domestic product (“GDP”) as advertising spending has historically trended in line with GDP, both domestically and internationally.  According to the U.S. Department of Commerce, estimated U.S. GDP growth for the third quarter of 2012 was 2.0%.  Internationally, our results are impacted by fluctuations in foreign currency exchange rates and economic conditions in the foreign markets in which we have operations.

Executive Summary

The key developments in our business for the three and nine months ended September 30, 2012 are summarized below:

· Consolidated revenue decreased $17.3 million including negative foreign exchange movements of $24.9 million during the three months ended September 30, 2012 and decreased $44.1 million including negative foreign exchange movements of $73.7 million during the nine months ended September 30, 2012 compared to the same periods of 2011. Excluding foreign exchange impacts, consolidated revenue increased $7.6 million and $29.6 million, respectively, over the comparable three-month and nine-month periods in the prior year.

· Americas revenue increased $8.1 million and $21.1 million during the three and nine months ended September 30, 2012, respectively, compared to the same periods of 2011.

· During the nine months ended September 30, 2012, we deployed 147 digital displays in the United States, compared to 153 in the nine months ended September 30, 2011.

· International revenue decreased $25.4 million and $65.2 million including negative foreign exchange movements of $24.7 million and $72.8 million during the three and nine months ended September 30, 2012, respectively, compared to the same periods of 2011.  Excluding foreign exchange impacts, revenue was relatively flat and increased $7.6 million, respectively, over the comparable three-month and nine-month periods in the prior year.  The strengthening of the dollar significantly contributed to the revenue decline in our International advertising business. The weakened macroeconomic conditions in Europe had a negative impact on our operations in certain countries.

· During the third quarter of 2012, we spent $10.3 million on strategic revenue and cost-saving initiatives to realign and improve our on-going business operations—an increase of $7.8 million over the third quarter of 2011.

· During the first quarter of 2012, our wholly-owned subsidiary, Clear Channel Worldwide Holdings, Inc. (“CCWH”), issued $275.0 million aggregate principal amount of 7.625% Series A Senior Subordinated Notes due 2020 and $1,925.0 million aggregate principal amount of 7.625% Series B Senior Subordinated Notes due 2020 (collectively, the

21


“Subordinated Notes”) and in connection therewith, we distributed a special cash dividend equal to $2,170.4 million. Please refer to the “Clear Channel Worldwide Holdings Senior Subordinated Notes Issuance” section within this MD&A for further discussion of the Subordinated Notes offering, including the use of the proceeds.

RESULTS OF OPERATIONS

Consolidated Results of Operations

The comparison of our results of operations for the three and nine months ended September 30, 2012 to the three and nine months ended September 30, 2011 is as follows:

(In thousands)

Three Months Ended September 30,

%

Nine Months Ended September 30,

%

2012

2011

Change

2012

2011

Change

Revenue

$

731,141

$

748,450

(2%)

$

2,143,750

$

2,187,872

(2%)

Operating expenses:

Direct operating expenses (excludes depreciation and amortization)

393,334

408,132

(4%)

1,194,282

1,214,984

(2%)

Selling, general and administrative expenses (excludes depreciation and amortization)

137,488

131,915

4%

422,922

398,032

6%

Corporate expenses (excludes depreciation and amortization)

25,219

22,303

13%

77,367

67,324

15%

Depreciation and amortization

100,352

114,934

(13%)

292,357

322,864

(9%)

Other operating income – net

42,397

37

49,146

9,139

Operating income

117,145

71,203

65%

205,968

193,807

6%

Interest expense

102,612

61,809

273,396

183,595

Interest income on Due from Clear Channel Communications

16,913

12,215

48,982

31,786

Equity in earnings (loss) of nonconsolidated affiliates

(234)

1,038

30

1,640

Other income (expense) – net

1,825

(1,859)

(300)

975

Income (loss) before income taxes

33,037

20,788

(18,716)

44,613

Income tax expense

(8,212)

(11,002)

(1,000)

(11,007)

Consolidated net income (loss)

24,825

9,786

(19,716)

33,606

Less amount attributable to noncontrolling interest

7,541

6,573

14,986

13,239

Net income (loss) attributable to the Company

$

17,284

$

3,213

$

(34,702)

$

20,367

Consolidated Revenue

Our consolidated revenue during the third quarter of 2012 decreased $17.3 million including negative movements in foreign exchange of $24.9 million compared to the same period of 2011.  Excluding the impact of foreign exchange movements, consolidated revenue increased $7.6 million. Americas revenue increased $8.1 million driven primarily by our bulletin revenue growth as a result of our continued digital display deployments during 2012 and 2011 and revenue growth from our airports business.  International revenue decreased $25.4 million including negative movements in foreign exchange of $24.7 million compared to the same period of 2011. Excluding the impact of foreign exchange movements, International revenue decreased $0.7 million.  Revenue from our street furniture business was a primary driver of growth in certain countries, partially offset by declines in other countries as a result of weakened macroeconomic conditions and the impact of businesses divested during the quarter.

Our consolidated revenue decreased $44.1 million including negative movements in foreign exchange of $73.7 million during the nine months ended September 30, 2012 compared to the same period of 2011.  Excluding the impact of foreign exchange

22


movements, revenue increased $29.6 million.  Americas revenue increased $21.1 million, driven primarily by our bulletin revenue growth as a result of our continued deployment of new digital displays during 2012 and 2011 and revenue growth from our airports business.  International revenue decreased $65.2 million including negative movements in foreign exchange of $72.8 million compared to the same period of 2011.  Excluding the impact of foreign exchange movements, revenue increased $7.6 million.  Street furniture and billboard revenue in certain countries drove our revenue growth, which was partially offset by declines in other countries as a result of weakened macroeconomic conditions.

Consolidated Direct Operating Expenses

Direct operating expenses decreased $14.8 million including a $16.4 million decline due to the effects of movements in foreign exchange during the third quarter of 2012 compared to the same period of 2011.  Americas direct operating expenses increased $2.8 million, primarily due to higher site lease expense associated with our continued deployment of digital bulletins.  Direct operating expenses in our International segment decreased $17.6 million including a $16.3 million decrease from movements in foreign exchange.  The decrease in expense excluding the impact of movements in foreign exchange was primarily driven by lower site lease expenses in certain countries impacted by weakened economic conditions.

Direct operating expenses decreased $20.7 million including a $47.4 million decline due to the effects of movements in foreign exchange during the nine months ended September 30, 2012 compared to the same period of 2011.  Americas direct operating expenses increased $13.4 million, primarily due to increased site lease expense associated with our continued development of digital displays.  Direct operating expenses in our International segment decreased $34.1 million including a $46.8 million decline due to the effects of movements in foreign exchange.  The increase in expense excluding the impact of movements in foreign exchange was primarily driven by higher site lease and other expenses as a result of new contracts. These increases were partially offset by lower variable costs in countries where revenues have declined.

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

SG&A expenses increased $5.6 million including a decline of $6.0 million due to the effects of movements in foreign exchange during the third quarter of 2012 compared to the same period of 2011.  SG&A expenses increased $4.1 million in our Americas segment primarily due to higher personnel costs and costs associated with strategic revenue and cost initiatives.  Our International SG&A expenses increased $1.5 million including a $5.6 million decrease due to the effects of movements in foreign exchange, offset by higher expenses related to revenue and cost initiatives in certain markets.

SG&A expenses increased $24.9 million including a decrease of $20.1 million due to the effects of movements in foreign exchange during the nine months ended September 30, 2012 compared to the same period of 2011.  SG&A expenses in our Americas segment increased $2.8 million due to increased personnel costs and costs associated with strategic revenue and cost initiatives partially offset by a favorable court ruling resulting in a $7.8 million decrease in expenses.  Our International SG&A expenses increased $22.1 million including a $20.0 million decline due to the effects of movements in foreign exchange. The increase was primarily due to $22.7 million of expense related to the negative impact of litigation in Latin America, including expenses related to the Brazil litigation discussed further in Item 1 of Part II of this Quarterly Report on Form 10-Q. Also contributing to the increase were additional costs related to revenue and cost initiatives.

Corporate Expenses

Corporate expenses increased $2.9 million and $10.0 million during the three and nine months ended September 30, 2012, respectively, compared to the same periods of 2011, primarily related to strategic cost initiatives and legal costs related to our stockholder litigation discussed further in Item 1 of Part II of this Quarterly Report on Form 10-Q.

Depreciation and Amortization

Depreciation and amortization decreased $14.6 million and $30.5 million during the three and nine months ended September 30, 2012, respectively, including the decrease due to the effects of movements in foreign exchange of $4.7 million and $8.9 million, respectively, compared to the same period of 2011. The decrease is primarily as a result of declines in accelerated depreciation and amortization in our Americas segment due to timing related to the removal of various structures, including the removal of traditional billboards in connection with the continued deployment of digital billboards.  Additionally, amortization declined in our International segment primarily as a result of assets that became fully amortized during 2011.

23


Other Operating Income – Net

Other operating income of $42.4 million and $49.1 million for the third quarter and first nine months of 2012, respectively, primarily related to the gain on the sale of our international neon business in August 2012.

Interest Expense

Interest expense increased $40.8 million and $89.8 million during the three and nine months ended September 30, 2012, respectively, compared to the same periods of 2011 primarily as a result of the issuance of the Subordinated Notes during the first quarter of 2012.

Interest Income on Due From Clear Channel Communications

Interest income increased $4.7 million and $17.2 million during the three and nine months ended September 30, 2012, respectively, compared to the same periods of 2011 due to the increase in the balance of the Due from Clear Channel Communications account during 2012.

Income Tax Benefit

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 as if we file separate consolidated Federal income tax returns with our subsidiaries.

The effective tax rate is the provision for income taxes as a percent of income before income taxes.  The effective tax rates for the three and nine months ended September 30, 2012 were 24.9% and (5.3)%, respectively. The effective rate for the three months ended September 30, 2012 was primarily impacted by reduced non-U.S. tax rates on financial reporting gains resulting from the disposition of certain foreign subsidiaries.  The effective tax rate for the nine months ended September 30, 2012 was primarily impacted by our inability to record tax benefits on tax losses in certain foreign jurisdictions due to the uncertainty of the ability to utilize those losses in future periods.

Our effective tax rate for the three and nine months ended September 30, 2011 was 52.9% and 24.7%, respectively. Our effective tax rate for the three months ended September 30, 2011 was primarily impacted by increases in tax expense attributable to an increase in unrecognized tax benefits, and our inability to record the benefit of losses in certain foreign jurisdictions. Our effective tax rate for the nine months ended September 30, 2011 was primarily impacted by the settlement of U.S. federal and state tax examinations during the period. Pursuant to the settlements, we recorded a reduction to income tax expense of approximately $3.5 million to reflect the net tax benefits of the settlements. In addition, the effective tax rate for the nine months ended September 30, 2011 was impacted by our ability to benefit from certain tax loss carryforwards in foreign jurisdictions due to increased taxable income during 2011, where the losses previously did not provide a benefit. The effects of these items were partially offset by the items mentioned above related to the three months ended September 30, 2011.

Americas Results of Operations

Our Americas operating results were as follows:

(In thousands)

Three Months Ended

Nine Months Ended

September 30,

%

September 30,

%

2012

2011

Change

2012

2011

Change

Revenue

$

335,021

$

326,882

2%

$

935,850

$

914,800

2%

Direct operating expenses

146,121

143,345

2%

433,716

420,305

3%

SG&A expenses

54,718

50,639

8%

151,996

149,232

2%

Depreciation and amortization

50,177

60,117

(17%)

141,702

159,061

(11%)

Operating income

$

84,005

$

72,781

15%

$

208,436

$

186,202

12%

Three Months

Our Americas revenue increased $8.1 million during the third quarter of 2012 compared to the same period of 2011, driven by growth in bulletins primarily as a result of our continued digital display deployments during 2012 and 2011.  Our airport revenues

24


grew as a result of increased occupancy by our largest U.S. airport customers.  These increases were partially offset by declines in poster revenues.

Direct operating expenses increased $2.8 million, primarily due to higher site lease expense associated with our continued deployment of digital displays. SG&A expenses increased $4.1 million as a result of higher personnel costs and expenses associated with strategic revenue initiatives.

Depreciation and amortization declined $9.9 million primarily as a result of declines in accelerated depreciation and amortization due to timing related to the removal of various structures, including the removal of traditional billboards in connection with the continued deployment of digital billboards.

Nine Months

Our Americas revenue increased $21.1 million during the nine months ended September 30, 2012 compared to the same period of 2011 primarily from growth in bulletin and airport revenues. Our continued deployment of new digital displays during 2012 and 2011 is the primary driver of our growth.  Our airport revenues grew as a result of increased occupancy by our largest U.S. airport customers. These increases were partially offset by declines in poster and shelter revenues.

Direct operating expenses increased $13.4 million due to increased site lease expense primarily as result of our continued deployment of digital displays.  SG&A expenses increased $2.8 million primarily due to higher personnel costs and costs associated with strategic revenue initiatives partially offset by a favorable court ruling resulting in a $7.8 million decrease in expenses.

Depreciation and amortization decreased $17.4 million, primarily as a result of declines in accelerated depreciation and amortization in our Americas segment due to timing related to the removal of various structures, including the removal of traditional billboards in connection with the continued deployment of digital billboards.

International Results of Operations

Our International operating results were as follows:

(In thousands)

Three Months Ended

Nine Months Ended

September 30,

%

September 30,

%

2012

2011

Change

2012

2011

Change

Revenue

$

396,120

$

421,568

(6%)

$

1,207,900

$

1,273,072

(5%)

Direct operating expenses

247,213

264,787

(7%)

760,566

794,679

(4%)

SG&A expenses

82,770

81,276

2%

270,926

248,800

9%

Depreciation and amortization

49,740

54,817

(9%)

149,485

163,803

(9%)

Operating income

$

16,397

$

20,688

(21%)

$

26,923

$

65,790

(59%)

Three Months

International revenue decreased $25.4 million during the third quarter of 2012 compared to the same period of 2011, including $24.7 million of negative movements in foreign exchange.  Excluding the impact of movements in foreign exchange, countries including China and Australia experienced increased revenues, primarily related to our street furniture business, and the Olympic Games led to increased revenues in the United Kingdom.  These increases were offset by revenue declines in certain geographies as a result of weakened macroeconomic conditions, particularly in France, southern Europe and the Nordic countries as well as a $5.5 million decline in revenues resulting from the sale of our international neon business in August 2012.

Direct operating expenses decreased $17.6 million including a $16.3 million decrease due to the effects of movements in foreign exchange.  The remaining decrease was primarily driven by lower site lease expenses in certain countries impacted by weakened economic conditions.  SG&A expenses increased $1.5 million including a $5.6 million decrease due to the effects of movements in foreign exchange, offset by higher expenses related to revenue and cost initiatives in certain markets.

Depreciation and amortization declined $5.1 million, including $3.0 million of negative movements in foreign exchange primarily as a result of assets that became fully depreciated or amortized during 2011.

25


Nine Months

International revenue decreased $65.2 million during the nine months ended September 30, 2012 compared to the same period of 2011, including $72.8 million of negative movements in foreign exchange. Excluding the impact of movements in foreign exchange, countries including China, Australia, Switzerland, United Kingdom and Belgium experienced increased revenues, primarily related to our shelters, street furniture and billboard businesses.  New contracts won during 2011 helped drive revenue growth.  These increases were partially offset by revenue declines in certain geographies as a result of weakened macroeconomic conditions, particularly in France, southern Europe and the Nordic countries.

Direct operating expenses decreased $34.1 million including a $46.8 million decline due to the effects of movements in foreign exchange. The increase in expense excluding the impact of movements in foreign exchange was primarily driven by higher site lease and other expenses as a result of new contracts. These increases were partially offset by lower variable costs in countries where revenues have declined.

SG&A expenses increased $22.1 million including a $20.0 million decrease from the effects of movements in foreign exchange. The increase was driven primarily by $22.7 million of expense related to the negative impact of litigation in Latin America, including expenses related to the Brazil litigation discussed further in Item 1 of Part II of this Quarterly Report on Form 10-Q. Also contributing to the increase were additional costs related to revenue and cost initiatives.

Depreciation and amortization declined $14.3 million, including $8.8 million of negative movements in foreign exchange primarily as a result of assets that became fully depreciated or amortized during 2011.

Reconciliation of Segment Operating Income to Consolidated Operating Income

(In thousands)

Three Months Ended

Nine Months Ended

September 30,

September 30,

2012

2011

2012

2011

Americas

$

84,005

$

72,781

$

208,436

$

186,202

International

16,397

20,688

26,923

65,790

Corporate expenses

(25,654)

(22,303)

(78,537)

(67,324)

Other operating income – net

42,397

37

49,146

9,139

Consolidated operating income

$

117,145

$

71,203

$

205,968

$

193,807

Share-Based Compensation Expense

The following table presents amounts related to share-based compensation expense for the three and nine months ended September 30, 2012 and 2011, respectively:

(In thousands)

Three Months Ended

Nine Months Ended

September 30,

September 30,

2012

2011

2012

2011

Americas

$

1,893

$

1,903

$

5,065

$

5,745

International

1,708

792

3,791

2,396

Corporate

59

36

160

111

Total share-based compensation expense

$

3,660

$

2,731

$

9,016

$

8,252

As of September 30, 2012, there was $22.0 million of total 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 three years.  In addition, as of September 30, 2012, there was $0.6 million of unrecognized compensation cost, net of estimated forfeitures, related to unvested share-based compensation arrangements that will vest based on market, performance and service conditions.  This cost will be recognized when it becomes probable that the performance condition will be satisfied.

26


LIQUIDITY AND CAPITAL RESOURCES

Cash Flows

The following discussion highlights our cash flow activities during the nine months ended September 30, 2012 and 2011.

(In thousands)

Nine Months Ended September 30,

2012

2011

Cash provided by (used for):

Operating activities

$

225,906

$

351,656

Investing activities

(146,495)

(165,684)

Financing activities

(88,652)

(176,830)

Operating Activities

Our consolidated net loss, adjusted for $231.7 million of non-cash items, provided positive cash flows of $211.9 million during the nine months ended September 30, 2012.  Our consolidated net income, adjusted for $315.0 million of non-cash items, provided positive cash flows of $348.6 million during the nine months ended September 30, 2011.  Cash provided by operating activities during the nine months ended September 30, 2012 was $225.9 million compared to $351.7 million during the nine months ended September 30, 2011.  Higher interest expense as a result of the issuance of the Subordinated Notes is the primary driver for the decrease in cash provided by operating activities compared to the prior year.

Non-cash items affecting our net loss include depreciation and amortization, deferred taxes, gain on disposal of operating assets, provision for doubtful accounts, share-based compensation, amortization of deferred financing charges and note discounts – net and other reconciling items – net as presented on the face of the consolidated statement of cash flows.

Investing Activities

Cash used for investing activities of $146.5 million during the nine months ended September 30, 2012 reflected capital expenditures of $187.4 million.  We spent $84.7 million in our Americas segment primarily related to the construction of new billboards, and $97.1 million in our International segment primarily related to new billboard and street furniture contracts and renewals of existing contracts.  Partially offsetting cash used for investing activities were proceeds from the divestiture of our international neon business.

Cash used for investing activities of $165.7 million during the nine months ended September 30, 2011 primarily reflected capital expenditures of $164.4 million.  We spent $82.6 million in our Americas segment primarily related to the construction of new billboards and $81.2 million in our International segment primarily related to new billboard and street furniture contracts and renewals of existing contracts.

Financing Activities

Cash used for financing activities of $88.7 million for the nine months ended September 30, 2012 reflected the payment of the CCOH Dividend (defined below) totaling $2,170.4 million and net transfers of $67.3 million in cash to Clear Channel Communications which represents the activity in the “Due from/to Clear Channel Communications” account.  The proceeds from the Subordinated Notes issuance of $2.2 billion partially offset the cash used for financing activities.

Cash used for financing activities of $176.8 million for the nine months ended September 30, 2011 primarily related to net transfers of cash to Clear Channel Communications which represents the activity in the “Due from/to Clear Channel Communications” account.

Anticipated Cash Requirements

Our primary source of liquidity is cash on hand, cash flow from operations and the revolving promissory note with Clear Channel Communications.  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 borrowing capacity under or repayment of the revolving promissory note with Clear

27


Channel Communications will enable us to meet our working capital, capital expenditure, debt service and other funding requirements, including the debt service on our senior notes and the Subordinated Notes, for at least the next 12 months.  In addition, we expect to be in compliance with the covenants governing our indebtedness in 2012.  We believe our long-term plans, which include promoting outdoor media spending and capitalizing on our diverse geographic and product opportunities, including the continued deployment of digital displays, will enable us to continue generating cash flows from operations sufficient to meet our liquidity and funding requirements long term.  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 2, 2012, Clear Channel Communications stated that it expects to be in compliance with the covenants in its material financing agreements in 2012.  Clear Channel Communications similarly stated in such 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, Clear Channel Communications stated in such Quarterly Report that its ability to comply with the covenants in its material financing agreements may be affected by events beyond its 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 receivables-based credit facility under Clear Channel Communications’ senior secured credit facilities would have the option to terminate their commitments to make further extensions of credit thereunder. In addition, Clear Channel Communications stated in such Quarterly Report that if Clear Channel Communications is unable to repay its obligations under any secured credit facility, the lenders could proceed against any assets that were pledged to secure such facility.  Finally, Clear Channel Communications stated in such Quarterly Report that a default or acceleration under any of its material financing agreements could cause a default under other obligations that are subject to cross-default and cross-acceleration provisions.  If Clear Channel Communications were to become insolvent, we would be an unsecured creditor of Clear Channel Communications.  In such event, we would be treated the same as other unsecured creditors of Clear Channel Communications and, if we were not entitled to the cash previously transferred to Clear Channel Communications, or could not obtain such cash on a timely basis, we could experience a liquidity shortfall.

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, 2012, Clear Channel Communications had $1,296.6 million recorded as “Cash and cash equivalents” on its condensed consolidated balance sheets.

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.

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.

Sources of Capital

As of September 30, 2012 and December 31, 2011, we had the following debt outstanding, cash and cash equivalents and amounts due from Clear Channel Communications:

(In millions)

September 30,

December 31,

2012

2011

Clear Channel Worldwide Holdings Senior Notes

$

2,500.0

$

2,500.0

Clear Channel Worldwide Holdings Senior Subordinated Notes

2,200.0

-

Other debt

38.5

45.9

Total debt

4,738.5

2,545.9

Less:  Cash and cash equivalents

534.9

542.7

Less:  Due from Clear Channel Communications

723.3

656.0

$

3,480.3

$

1,347.2

28


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.  The accounts accrue interest pursuant to the terms of the promissory notes and are generally payable on demand or when they mature on December 15, 2017.  Included in the accounts are the net activities resulting from day-to-day cash management services provided by Clear Channel Communications.  At September 30, 2012 and December 31, 2011, the asset recorded in “Due from Clear Channel Communications” on our condensed consolidated balance sheet was $723.3 million and $656.0 million, respectively.  At September 30, 2012, we had no borrowings under the cash management note to Clear Channel Communications.

The net interest income for the three months ended September 30, 2012 and 2011 was $16.9 million and $12.2 million, respectively. The net interest income for the nine months ended September 30, 2012 and 2011 was $49.0 million and $31.8 million, respectively.  At September 30, 2012 and December 31, 2011, the interest rate on the “Due from Clear Channel Communications” account was 9.25%, which is equal to the fixed interest rate on the CCWH senior notes.

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 borrowings from third parties to no more than $400.0 million at any one time outstanding, without the prior written consent of Clear Channel Communications.

Clear Channel Worldwide Holdings Senior Notes

The Series A Notes indenture and the Series B Notes indenture governing CCWH’s senior notes restrict our ability to incur additional indebtedness but permit us to incur additional indebtedness based on an incurrence test.  In order to incur additional indebtedness under this test, our debt to adjusted EBITDA ratios (as defined in the indentures) must be lower than 6.5:1 and 3.25:1 for total debt and senior debt, respectively.  The indentures contain certain other exceptions that allow us to incur additional indebtedness.  The Series B Notes indenture also permits us to pay dividends from the proceeds of indebtedness or the proceeds from asset sales if our debt to adjusted EBITDA ratios (as defined in the indenture) are lower than 6.0:1 and 3.0:1 for total debt and senior debt, respectively. The Series A Notes indenture does not limit our ability to pay dividends.  The Series B Notes indenture contains certain exceptions that allow us to incur additional indebtedness and pay dividends, including a $500 million exception for the payment of dividends.

Consolidated leverage ratio, defined as total debt divided by EBITDA for the preceding four quarters was 6.1:1 at September 30, 2012, and senior leverage ratio, defined as senior debt divided by EBITDA for the preceding four quarters was 3.3:1 at September 30, 2012. Our adjusted EBITDA of $781.7 million is calculated as operating income (loss) before depreciation, amortization, impairment charges and other operating income (expense) – net, plus non-cash compensation, and is further adjusted for the following items: (i) an increase of $34.3 million for non-cash items; (ii) an increase of $55.9 million related to costs incurred in connection with

29


the closure and/or consolidation of facilities, retention charges, consulting fees and other permitted activities; and (iii) an increase of $4.2 million for various other items.

Clear Channel Worldwide Holdings Senior Subordinated Notes Issuance

During the first quarter of 2012, CCWH issued the Subordinated Notes.  Interest on the Subordinated Notes is payable to the trustee weekly in arrears and to the noteholders on March 15 and September 15 of each year, beginning on September 15, 2012.

The Subordinated Notes are CCWH’s senior subordinated obligations and are fully and unconditionally guaranteed, jointly and severally, on a senior subordinated basis by us, our wholly-owned subsidiary Clear Channel Outdoor, Inc. (“CCOI”), and certain of our other domestic subsidiaries (collectively, the “Guarantors”). The Subordinated Notes are unsecured senior subordinated obligations that rank junior to all of CCWH’s existing and future senior debt, including CCWH’s outstanding senior notes, equally with any of CCWH’s existing and future senior subordinated debt and ahead of all of CCWH’s existing and future debt that expressly provides that it is subordinated to the Subordinated Notes. The guarantees of the Subordinated Notes rank junior to each Guarantor’s existing and future senior debt, including CCWH’s outstanding senior notes, equally with each Guarantor’s existing and future senior subordinated debt and ahead of each Guarantor’s existing and future debt that expressly provides that it is subordinated to the guarantees of the Subordinated Notes.

The $275.0 million aggregate principal amount of 7.625% Series A Subordinated Notes were issued pursuant to an indenture, dated as of March 15, 2012 (the “Series A Subordinated Note Indenture”), among CCWH, us, CCOI and the other guarantors named therein (collectively with us and CCOI, the “Series A Subordinated Note Guarantors”) and U.S. Bank National Association, as trustee (the “Trustee”), and the $1,925.0 million aggregate principal amount of 7.625% Series B Subordinated Notes were issued pursuant to an indenture, dated as of March 15, 2012 (the “Series B Subordinated Note Indenture” and together with the Series A Subordinated Note Indenture, the “Subordinated Indentures”), among CCWH, us, CCOI and the other guarantors named therein (collectively with us and CCOI, the “Series B Subordinated Note Guarantors”) and the Trustee.

At any time prior to March 15, 2015, CCWH may redeem the Subordinated Notes, in whole or in part, at a price equal to 100% of the principal amount of the Subordinated Notes plus a “make-whole” premium, together with accrued and unpaid interest, if any, to the redemption date. CCWH may redeem the Subordinated Notes, in whole or in part, on or after March 15, 2015, at the redemption prices set forth in the applicable Subordinated Indenture plus accrued and unpaid interest to the redemption date. At any time on or before March 15, 2015, CCWH may elect to redeem up to 40% of the then outstanding aggregate principal amount of the Subordinated Notes at a redemption price equal to 107.625% of the principal amount thereof, plus accrued and unpaid interest to the redemption date, with the net proceeds of one or more equity offerings. Notwithstanding the foregoing, neither we nor any of our subsidiaries is permitted to make any purchase of, or otherwise effectively cancel or retire any Series B Subordinated Notes if, after giving effect thereto and, if applicable, any concurrent purchase of or other addition with respect to any Series A Subordinated Notes, the ratio of (a) the outstanding aggregate principal amount of the Series A Subordinated  Notes to (b) the outstanding aggregate principal amount of the Series B Subordinated Notes shall be greater than 0.25, subject to certain exceptions.

The Series A Subordinated Note Indenture contains covenants that limit our ability and the ability of our restricted subsidiaries to, among other things: (i) incur additional debt or issue certain preferred stock; (ii) engage in certain transactions with affiliates; (iii) create restrictions on dividends or other payments by the restricted subsidiaries; and (iv) merge, consolidate or sell substantially all of our or CCWH’s assets. The Series A Subordinated Note Indenture does not include limitations on dividends, stock redemptions or other distributions or investments or on asset sales. The Series B Subordinated Note Indenture contains covenants that limit the our ability and the ability of our restricted subsidiaries to, among other things: (i) pay dividends, redeem stock or make other distributions or investments; (ii) incur additional debt or issue certain preferred stock; (iii) transfer or sell assets; (iv) engage in certain transactions with affiliates; (v) create restrictions on dividends or other payments by the restricted subsidiaries; and (vi) merge, consolidate or sell substantially all of our or CCWH’s assets. The Subordinated Indentures also provide for customary events of default.

We capitalized $40.0 million in fees and expenses associated with the Subordinated Notes offering and are amortizing them through interest expense over the life of the Subordinated Notes.

With the proceeds of the Subordinated Notes (net of the initial purchasers’ discount of $33.0 million), CCWH loaned an aggregate amount equal to $2,167.0 million to CCOI. CCOI paid all other fees and expenses of the offering using cash on hand and, with the proceeds of the loans, distributed a special cash dividend to us, and we in turn distributed the special cash dividend (the “CCOH Dividend”) on March 15, 2012 in an amount equal to $6.0832 per share to our Class A and Class B stockholders of record at

30


the close of business on March 12, 2012, including Clear Channel Holdings, Inc. (“Clear Channel Holdings”) and CC Finco, LLC (“CC Finco”), both wholly-owned subsidiaries of Clear Channel Communications.

Clear Channel Communications’ Debt Repayments

On March 15, 2012, using proceeds of the CCOH Dividend distributed to Clear Channel Holdings and CC Finco, together with cash on hand, Clear Channel Communications repaid indebtedness under its senior secured credit facilities in an aggregate amount equal to $1,925.7 million. As a result of the prepayment, the revolving credit commitments under Clear Channel Communications’ revolving credit facility were permanently reduced from $1.9 billion to $10.0 million and the sub-limit under which certain of the Company’s international subsidiaries may borrow (to the extent that Clear Channel Communications’ has not already borrowed against this capacity) was reduced from $145.0 million to $750 thousand.

Certain of our International subsidiaries may borrow under the sub-limit to the extent Clear Channel Communications has not already borrowed against this capacity and is in compliance with its covenants under the credit facility.  The obligations of these International subsidiaries that are borrowers under the revolving credit facility are guaranteed by certain of our material wholly-owned subsidiaries, and secured by substantially all of the assets of such borrowers and guarantors, subject to permitted liens and other exceptions. As of September 30, 2012 , we had no outstanding borrowings under the $750 thousand sub-limit facility.  Clear Channel Communications had borrowed the entire sub-limit capacity as of September 30, 2012 .

In connection with the Subordinated Notes issuance, Clear Channel Communications used cash on hand to prepay $170.5 million of additional indebtedness under its senior secured credit facilities in order to remain in compliance with its debt covenants.

Other Debt

Other debt consists primarily of loans with international banks.  At September 30, 2012, approximately $38.5 million was outstanding as other debt.

Clear Channel Communications’ Debt Covenants

The Clear Channel Communications’ senior secured credit facility contains a significant financial covenant which requires Clear Channel Communications to comply on a quarterly basis with a financial covenant limiting the ratio of its consolidated secured debt, net of cash and cash equivalents, to consolidated EBITDA for the preceding four quarters (maximum of 9.5:1).  The financial covenant 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 2, 2012, Clear Channel Communications stated that it was in compliance with this covenant as of September 30, 2012.

Uses of Capital

Commitments, Contingencies and Guarantees

We are currently involved in certain legal proceedings arising in the ordinary course of business and, as required, have accrued our 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 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 International segment typically experiences its strongest performance in the second and fourth quarters of the calendar year.  We expect this trend to continue in the future.

31


Market Risk

We are exposed to market risks arising from changes in market rates and prices, including movements in equity security prices and foreign currency exchange rates.

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 our comprehensive income at September 30, 2012 by $0.4 million.

Foreign Currency Exchange Rate Risk

We have operations in countries throughout the world.  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 have operations.  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.  Our foreign operations reported net gains of $40.7 million and $36.9 million for the three and nine months ended September 30, 2012, respectively.  We estimate a 10% increase in the value of the U.S. dollar relative to foreign currencies would have decreased our net gains for the three and nine months ended September 30, 2012 by $4.1 million and $3.7 million, respectively.  A 10% decrease in the value of the U.S. dollar relative to foreign currencies during the three and nine months ended September 30, 2012 would have increased our net gains 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.

C autionary 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, our ability to comply with the covenants in the agreements governing our indebtedness and the 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;

· industry conditions, including competition;

· the level of expenditures on advertising;

· legislative or regulatory requirements;

· fluctuations in operating costs;

· technological changes and innovations;

· changes in labor conditions and management;

32


· capital expenditure requirements;

· risks of doing business in foreign countries;

· fluctuations in exchange rates and currency values;

· the outcome of pending and future litigation;

· changes in interest rates;

· taxes and tax disputes;

· shifts in population and other demographics;

· access to capital markets and borrowed indebtedness;

· our ability to implement our business strategies;

· the risk that we may not be able to integrate the operations of acquired businesses successfully;

· the risk that our cost savings initiatives may not be entirely successful or that any cost savings achieved from those initiatives may not persist;

· the impact of our substantial indebtedness, including the effect of our leverage on our financial position and earnings;

· the need to allocate significant amounts of our cash flow to make payments on our indebtedness, which in turn could reduce our financial flexibility and ability to fund other activities;

· our relationship with Clear Channel Communications, including its ability to elect all of the members of our Board of Directors and its ability as our controlling stockholder to determine the outcome of matters submitted to our stockholders and certain additional matters governed by intercompany agreements between us;

· the impact of the above and similar factors on Clear Channel Communications, our primary direct or indirect external source of capital, which could have a significant need for capital in the future; and

· certain other factors set forth in our other filings with the Securities and Exchange Commission.

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, 2012 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.

33


PART II -- OTHER INFORMATION

Item 1.  Legal Proceedings

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

Although we are involved in a variety of legal proceedings in the ordinary course of business, a large portion of our litigation arises in the following contexts: commercial disputes; employment and benefits related claims; governmental fines; and tax disputes.

Brazil Litigation

On or about July 12, 2006 and April 12, 2007, two of our operating businesses (L&C Outdoor Ltda. (“L&C”) and Publicidad Klimes São Paulo Ltda. (“Klimes”), respectively) in the São Paulo, Brazil market received notices of infraction from the state taxing authority, seeking to impose a value added tax (“VAT”) on such businesses, retroactively for the period from December 31, 2001 through January 31, 2006.  The taxing authority contends that these businesses fall within the definition of “communication services” and as such are subject to the VAT.  L&C and Klimes filed separate petitions to challenge the imposition of this tax.

On August 8, 2011, Brazil’s National Council of Fiscal Policy (CONFAZ) published a convenio authorizing sixteen states, including the State of São Paulo, to issue an amnesty that would reduce the principal amount of VAT allegedly owed and reduce or waive related interest and penalties.  The State of São Paulo ratified the amnesty in late August 2011.  On May 10, 2012, the State of São Paulo published an amnesty decree that mirrors the convenio.  Klimes and L&C accepted the amnesty on May 24, 2012 by making the aggregate required payment of $10.9 million.  On that same day, Klimes and L&C filed petitions to discontinue the tax litigation based on the amnesty payments.

Stockholder Litigation

Two derivative lawsuits were filed in March 2012 in Delaware Chancery Court by stockholders of the Company, which is an indirect non-wholly owned subsidiary of Clear Channel Communications, which is, in turn, an indirect wholly owned subsidiary of CC Media Holdings.  The consolidated lawsuits are captioned In re Clear Channel Outdoor Holdings, Inc. Derivative Litigation, Consolidated Case No. 7315-CS. The complaints name as defendants certain of Clear Channel Communications’ and the Company’s current and former directors and Clear Channel Communications, as well Bain Capital Partners, LLC and Thomas H. Lee Partners, L.P.  The Company also is named as a nominal defendant.  The complaints allege, among other things, that in December 2009 Clear Channel Communications breached fiduciary duties to the Company and its stockholders by allegedly requiring the Company to agree to amend the terms of a revolving promissory note payable by Clear Channel Communications to the Company to extend the maturity date of the note and to amend the interest rate payable on the note.  According to the complaints, the terms of the amended promissory note were unfair to the Company because, among other things, the interest rate was below market.  The complaints further allege that Clear Channel Communications was unjustly enriched as a result of that transaction.  The complaints also allege that the director defendants breached fiduciary duties to the Company in connection with that transaction and that the transaction constituted corporate waste.  On April 4, 2012, the board of directors of the Company formed a special litigation committee consisting of independent directors (the “SLC”) to review and investigate plaintiffs’ claims and determine the course of action that serves the best interests of the Company and its stockholders.  On June 20, 2012, the SLC filed a motion to stay the lawsuits for six months while it completes its review and investigation.  In response, on June 27, 2012, plaintiffs filed a motion for an expedited trial, asking the Court to schedule a trial on the merits in October 2012. On July 23, 2012, the Court issued an order granting the motion to stay and denying the motion for an expedited trial.

Los Angeles Litigation

In 2008, Summit Media, LLC, one of our competitors, sued the City of Los Angeles, CCOI and CBS Outdoor in Los Angeles Superior Court (Case No. BS116611) challenging the validity of a Stipulated Judgment that had been entered into in November 2006 among the parties.  Pursuant to the Stipulated Judgment, CCOI had taken down existing billboards and converted 83 existing signs from static displays to digital displays pursuant to modernization permits issued through an administrative process of the City.  The Los Angeles Superior Court ruled in January 2010 that the Stipulated Judgment constituted an ultra vires act of the City and nullified its existence, but did not invalidate the modernization permits issued to CCOI and CBS.  All parties appealed the ruling by the Los

34


Angeles Superior Court to Court of Appeal for the State of California, Second Appellate District, Division 8.  At an October 30, 2012 oral argument by the parties, the California Court of Appeal read a preliminary ruling from the bench prior to the argument indicating it would uphold the Los Angeles Superior Court’s finding that the Stipulated Judgment was ultra vires and would remand the case to the Los Angeles Superior Court for the purpose of invalidating the permits issued to CCOI and CBS for the digital displays that were the subject of the Stipulated Judgment.  The Court of Appeal has ninety days from the date of the argument to issue its written ruling in this matter.

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, 2011 and our Quarterly Report on Form 10-Q for the quarter ended March 31, 2012.  There have not been any material changes in the risk factors disclosed in those reports.

35


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, 2012 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

Average Price Paid per Share

Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs

Maximum Number (or Approximate Dollar Value) of Shares that May Yet Be Purchased Under the Plans or Programs

July 1 through July 31

-

-

-

(1)

August 1 through August 31

-

-

-

(1)

September 1 through September 30

-

-

-

(1)

Total

-

-

-

$

82,934,423 (1)

(1) On August 9, 2010, Clear Channel Communications, 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, the indirect parent entity of Clear Channel Communications.  No shares of the Company’s Class A common stock or CC Media Holdings’ Class A common stock were purchased under the stock purchase program during the quarter ended September 30, 2012.  During 2011, a subsidiary of Clear Channel Communications purchased $16,372,690 of the Class A common stock of the Company (1,553,971 shares) in open market purchases.  During the quarter ended June 30, 2012, a subsidiary of Clear Channel Communications purchased $692,887 of the Class A common stock of CC Media Holdings (111,291 shares) under the stock purchase program.  As a result of these purchases of shares of the Class A common stock of CC Media Holdings and the Class A common stock of the Company, an aggregate of $82,934,423 remains available under the stock purchase program to purchase the Class A common stock of CC Media Holdings and/or the Class A common stock of the Company.  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.

Item 3.  Defaults Upon Senior Securities

None.

Item 4.  Mine Safety Disclosures

Not applicable.

Item 5. Other Information

None.

36


ITEM 6.  EXHIBITS

Exhibit

Number

Description

10.1

Employment Agreement, effective as of January 24, 2012, between C. William Eccleshare and Clear Channel Outdoor Holdings, Inc. (incorporated by reference to Exhibit 10.1 to the Clear Channel Outdoor Holdings, Inc. Current Report on Form 8-K filed on July 27, 2012).

10.2

Form of Restricted Stock Unit Agreement under the Clear Channel Outdoor Holdings, Inc. 2012 Stock Incentive Plan, dated July 26, 2012, between C. William Eccleshare and Clear Channel Outdoor Holdings, Inc. (incorporated by reference to Exhibit 10.2 to the Clear Channel Outdoor Holdings, Inc. Current Report on Form 8-K filed on July 27, 2012).

10.3

Indemnification Agreement by and among Clear Channel Outdoor Holdings, Inc. and Robert W. Pittman dated September 18, 2012 (incorporated by reference to Exhibit 10.4 to the CC Media Holdings, Inc. Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2012).

10.4

Indemnification Agreement by and among Clear Channel Outdoor Holdings, Inc. and Thomas W. Casey dated September 5, 2012 (incorporated by reference to Exhibit 10.5 to the CC Media Holdings, Inc. Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2012).

10.5

Indemnification Agreement by and among Clear Channel Outdoor Holdings, Inc. and Robert H. Walls, Jr. dated September 5, 2012 (incorporated by reference to Exhibit 10.6 to the CC Media Holdings, Inc. Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2012).

11*

Statement re: Computation of Income (Loss) Per Share.

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 Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

32.2**

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

101***

Interactive Data Files.

__________________

*              Filed herewith.

**           Furnished herewith.

***         In accordance with Rule 406T of Regulation S-T, these interactive data files are deemed not filed or part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, as amended, are deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and otherwise are not subject to liability under those sections.

37


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 2, 2012 /s/ SCOTT D. HAMILTON

Scott D. Hamilton

Senior Vice President, Chief Accounting Officer and

Assistant Secretary

38


TABLE OF CONTENTS