CC Media Holdings' CEO Discusses Q2 2013 Results - Earnings Call Transcript

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CC Media Holdings Inc (CCMO.OB) Q2 2013 Earnings Conference Call August 1, 2013 4:30 PM ET


Gregory Lundberg – Senior Vice President, Investor Relations

Bob Pittman – Chairman and Chief Executive Officer

Richard J. Bressler – President and Chief Financial Officer


Jason Kim – Goldman Sachs

Avi Steiner – JPMorgan Securities LLC

Marci Ryvicker - Wells Fargo Securities


Ladies and gentlemen, thank you for standing by and welcome to the Clear Channel Second Quarter 2013 Conference Call. At this time all lines are in a listen-only mode. Later there will be an opportunity for your questions and instructions will be given at that time. (Operator Instructions) And as a reminder, this conference is being recorded.

I will now turn the conference over to Gregory Lundberg. Please go ahead, sir.

Gregory Lundberg

Good afternoon. Thank you for joining our 2013 second quarter earnings call. With us today is Brian Coleman, Senior Vice President and Treasurer. Also joining us for some opening comments are Bob Pittman, Chairman and CEO; and Rich Bressler, President and Chief Financial Officer. We’ll provide an overview of the second quarter 2013 financial and operating performances of the CC Media Holdings, Clear Channel Communications, and Clear Channel Outdoor Holdings.

The purpose of this call we describe the financial and operating performance of the CC Media Holdings that also describes the performance of its subsidiary, Clear Channel Communications. After the introduction and review of the quarter, we’ll open up the line for questions.

Before we begin, I’d like to remind everyone that this conference call may include forward-looking statements that involve uncertainties and risks. There can be no assurance that management’s expectations, beliefs and projections for results will be achieved but the actual results will not differ from expectations.

Please see our annual reports on Form 10-K and our quarterly reports on Form 10-Q filed with the Securities and Exchange Commission for a discussion of important factors that could affect our actual results.

Pacing data will also be mentioned during the call. For those of you not familiar with pacing data, it reflects revenues booked at a specific date versus the comparable date in the prior period and may or may not reflect the actual revenue growth at the end of the period.

The company’s revenue pacing information includes an adjustment to prior periods to incorporate our acquisition and exclude all divestitures in both periods presented for comparative purposes. It also eliminates the movement in foreign exchange rates.

During today’s call, we will also provide certain performance measures that do not conform to Generally Accepted Accounting Principles. We will provide a schedule to reconciles these non-GAAP measures with our reported results on a GAAP basis as part of our earnings press releases which can be found on the Investor Section of our website.

A webcast of this call and the earnings press release of today can be found on the investor section of our website at and A replay of this conference call will also be available for a period of 30 days.

With that I will now turn the call over to Bob Pittman.

Bob Pittman

Thank you. As I’m sure you’re all aware by now we made Rich Bressler, President and CFO of CC Media Holdings and Clear Channel Communications as well as CFO of Clear Channel Outdoor. Before I turn the call over to Rich, I want to thank Tom Casey for his many significant contributions to Clear Channel over the past several years, especially our most recent debt refinancing that has strengthened the company’s financial position.

Now anytime there is a CFO change – before an earnings call, I know there are likely to be some questions. So let me address them directly. The fact is with the timing which results of the national rhythm when the deal is done. And although Tom volunteered do the call, I felt that (inaudible) today. As you understand, we would have a CFO change right before earnings call. But let me directly that this change is not related to any issues with our earnings or internal controls, but in contrary our results which we will detail in a few minutes continue to show revenue growth in a challenging economic environment progress with our strategic investments and tight expense controls. We sorry to lose Tom and we all wish him the very best.

The significant contributions over the last several years helped lay the foundation for the Clear Channel’s next stage of growth and may exist on natural time for transition. Rick will build on Tom’s great work and we believe that Richard’s extensive depth of experience and the long history of media business will be highly beneficial to our entire company, especially given the expanded nature of what is for us an important new position. Rich will be placed in New York as I’m and I’m pleased to introduce him to say to those of you who don’t already know him.

I got to know Rich personally when we worked together at Time Warner, where he served as CFO among other folks. We’ve actually worked together in Time Warner twice. After Time Warner, Rich became the CFO of Viacom and then head into Thomas H. Lee Partners, where he became an invaluable strategic partner for Clear Channel. And I consider this to be fair turnaround. Rich was actually instrumental in recruiting the Clear Channel and Triple-Play and I had a chance to return to table.

With an equal understanding of Clear Channel, Rich brings a unique perspective for the big role he will now be playing in helping us fully capitalized on our unique assets. We are confidence that Rich will be a great partner to be and a tremendous leader for our financial team while working closely with John Hogan and William Eccleshare.

There is no doubt that first of all Rich is stature with his experience and his expertise, he will play a critical role in taking this company to its next level of growth. In fact, when I was recruiting Rich the toughest conversation I had was with Thomas H. Lee’s President, Scott Sperling, who as you might imagine didn’t want to let him go. So Scott finally agreed to let us hire Rich at the end to show how important Clear Channel for him and how much he thinks that Rich can help us.

Since this is Rich’s first day on the job, then you will hear from Greg and Treasurer, Brian Coleman, among others, who will handle some of your more detailed questions. But first let me turn to Rich for a few words of why he has joined the company and the opportunities he sees ahead.

Richard J. Bressler

Thanks. Thanks very much, Bob for those kind words, and good afternoon, everybody. First, I really want to tell how excited I’m about joining Clear Channel and the Clear Channel team. Knowing the company as I do, given how involved I’ve been with the company since 2008, I couldn’t pass up the chance upon with a visionary with a right Bob and will closely with the outstanding line from [TBR] including John Hogan, our Clear Channel Media and Entertainment, and William Eccleshare at Clear Channel Outdoor.

I’ve also just spent two days in San Antonio with the finance team. And I have to say that I was extremely impressed by their abilities and their commitment. Now, that I’m formally on board in this new capacity, I’m thrilled with the tremendous opportunity we have at Clear Channel to capitalize on our wide range of multi-platform assets and to continue our growth as a leading 21st century media company.

You’ll be hearing more shortly about our businesses. Let’s take a quick look at some of the terrific things we have to work with. Our Media and Entertainment division alone has the biggest reach at any media outlet in America with over 240 million monthly users.

iHeartRadio reached 30 million registered users faster than Facebook, Twitter, Spotify or Pandora and Clear Channel Outdoor with its more than 750,000 displays around the world represents yet another way we can talk it out of home consumers. We’re expanding global sweet spot of our unique mix of media that I believe makes our company even more valuable. So it’s been great to roll up my sleeves and get started. Happily, thanks to my deep experience with the company and my partner Thomas H. Lee Partners, and able to hit the ground money. I will close by saying, I look forward to talking to all of you in the months ahead. Thank you very much.

Now, I’ll turn it back to Greg.

Gregory Lundberg

Thanks, Rich. Clear Channel’s results for the second quarter of 2013, once again demonstrates that our ongoing strategic investments are beginning to have a positive impact on expense reduction and revenue enhancement. So CC Media Holdings and Clear Channel Outdoor Holdings delivered top line growth in a difficult global environment, benefiting from the continuing build-out of our digital platforms, including iHeartRadio and outdoor displays and greater sales to national advertisers and the repositioning at outdoors international operations.

We are excited to be in a strong position to help advertisers meet the demand of increasingly mobile connected consumers. We also remain extremely focused on cost controls and capital efficiency having seen some of the benefits of our investment activities, as well as ongoing proactive capital management actions. When you adjust for some items the benefit in last year’s expenses was CC Media Holdings and Clear Channel Outdoor delivered evident growth this quarter.

To drive future revenues, we are engaging our advertising partners in new ways and we are very confident in our global out-of-home advertising market position. All of our businesses are positioned to reach a variety number of consumers who are mobile and out of their homes more and more everyday. We’re confident that Clear Channel is clearly in the sweet spot of this growing trend towards the connected mobile consumer.

As Rich mentioned our radio station programming reaches 243 million people monthly, the largest U.S. reach of any media outlet.

Our digital presence is also growing with nearly 60 million unique across our properties, that’s up 24% year-over-year. iHeartRadio at 34 million registered users at the end of the quarter, up a 162% year-over-year. And as Rich mentioned, crossed about 30 million registered user mark faster than Facebook, Twitter, Spotify or Pandora.

In total, iHeart has over 200 million downloads of its mobileapp and upgrades. In addition, iHeartRadio has integrated into the dashboards of 38 current models across just the Ford and Toyota brands and is on track to increase significantly in 2013 and 2014 through agreements with GM and Chrysler, which we announced this January.

Our media and entertainment events continue to grow as well, highlighting the unique relationship we have with iHeart and the unmatched ability to connect them with our fans, and the ability to connect advertisers to the special relationship. We finished the very successful iHeartRadio ultimate pool party in June and announced the third annual iHeartRadio music festival coming up this September. These events generate a lot of excitement for advertisers on our stations and iHeartRadio increasingly, we’re selling multi-platform solutions to advertisers across all our key assets.

This includes outdoor where our company continues to innovate from delivering prepackage target audiences declines to expanding our global digital networks and developing campaigns that are integrated with mobile and video. We also increased our financial flexibility during the quarter through two transformative capital markets transactions.

First, Clear Channel Communications expanded $5 billion in term loans for 2019 from the original maturity in 2016 and then exchanged 780 million of notes due 2016., and some new notes due 2021. Combined with our prepayment of Term Loan A in the first quarter of this year, which meaningfully improved our debt maturity schedule, and we will continue to address our balance sheet to improve our operating an financial flexibility. These proactive changes in our balance sheet, as well as the strategic investments we are making give us confidence that we’re taking the right steps with our business, help us prepare for uncertainties in the market, and position us for long-term growth.

So let’s review the company’s performance in the quarter, compared to the same period last year and discuss our pacing outlook, starting with the overall results for the CC Media Holdings. I’ll continue with our Media and Entertainment business and then discuss Clear Channel Outdoor Holdings. Lastly, Brian will wrap up with a review of our capital spending and liquidity before taking the questions.

Please not that our two earnings releases provided detailed breakdown of all foreign exchange and non-cash compensation expense items, as well as segment revenues and the live event for the quarter and the full-year today. My discussion today also excludes the effect of movements in foreign exchange and an adjustment for divestitures in 2012 unless otherwise noted.

CC Media Holdings revenues totaled $1.6 billion, up 1%. Media and Entertainment, which includes stations premier networks and total traffic network increased $13 million, or 2% to $806 million, driven primarily by national revenues at the stations improved the premier.

At outdoor the Americas business, which includes U.S. and Canada grew $14 million, or 5% to $335 million and strengthened virtually all categories. International declined $1 million, or less than 1% reflecting strong growth in emerging markets with positive steps in certain developed markets.

CC Media (inaudible) for the quarter was $505 million, representing a decrease of 5% or $26 million due in part to two items that favorably affected last year’s second quarter expenses. First, there was a $21 million expense credit for performance rights fees and then an $8 million benefit from a favorable court ruling in Americas outdoor. Our results also reflect continued focus on costs as well as our strategic investments to keep driving efficiencies and future revenues.

Please note that below the line, this quarter’s financials also included a $131 million line item of gain on marketable securities related to the sales of our investment with Sirius XM Radio, Inc., which is the primary driver of the year-over-year change in net income and also provided a significant choice of cash as Brian will discuss in a moment.

Now, let’s move on to our segments in more detail beginning with the performance of Media and Entertainment. Overall, Media and Entertainment revenues increased $13 million or 2%. National sales for the stations grew 5% with local up 1%. Excluding the impact of political advertising in both quarters, national sales were up 7% and local was up 2%.

Our strongest performing ad categories remained financial services, retail and telecom. Digital sales continued to grow in the double-digit as we monetize our stations’ online presence and keep growing iHeartRadio with total listening hours were up 36% in the second quarter. We also saw good year-over-year growth at Premiere Networks. Partially offsetting this growth were revenue declines in the traffic business from lost contracts and lower sales resulting from integration activities.

Operating expenses increased $42 million or 9% reflecting a $21 million expense credit from one of our performance rights organizations, which we received in the second quarter of last year. The remaining increase in expenses resulted from our increased investments in building out national and digital sales capabilities, higher streaming expenses from increased listenership on iHeartRadio, and higher promotional and marketing expenses for special events such as last month’s iHeartRadio Ultimate Pool Party. Overall, Media and Entertainment OIBDAN declined $29 million or 8% to $323 million.

Overall, we feel good about the Media and Entertainment performance in the quarter. We saw a strong April and May, but June was slower and we see some of that slowdown affecting our 3Q payments. As of last week, our 3Q radio station pacings are up 3%, compared to the prior year period, and our total pacings from Media and Entertainment was up 1%.

Now, let’s turn to the Outdoor results, where all the numbers will exclude the effects of movements in foreign exchange and will be adjusted for businesses we divested in the third quarter of 2012 unless otherwise noted.

Clear Channel Outdoor Holdings revenues grew $13 million or 2% in the second quarter with Americas up 5% and international flat. On a reported basis, which includes a benefit from foreign exchange this quarter and does not adjust for the $9 million impact of divestitures, total Outdoor revenues rose 1% year-over-year. Expenses edged up just $2 million to $531 million as adjusted for $8 million of expenses from the divested businesses.

Please note that the second quarter of 2012 also included an $8 million expense credit due to a favorable court ruling in the Americas. So you can see that our previous strategic cost initiatives are starting to pay off. OIBDAN grew 4% to $203 million, up $8 million from last year. On a reported basis, OIBDAN increased 3%.

Now let’s turn to the regional performance, beginning first with the Americas. Americas’ outdoor revenues grew $14 million or 5% to $335 million, one of our strongest results in several quarters. The driving digital bulletins performance with higher occupancy and capacity, we also saw higher occupancy and rates in traditional bulletins, posters and airports. Across all our products, the quarter’s fastest growing large advertising categories included retail, auto and beverage. Americas operating expenses were up $10 million or 6% with $8 million of this increase reflecting impact of an expense reduction in last year’s second quarter from the favorable court ruling I mentioned earlier.

We also saw higher expenses related to our digital billboard litigation in Los Angeles. Offsetting these increases were benefits from increased sales of higher margin products and our previous strategic cost initiatives. With our solid revenue growth, OIBDAN rose $4 million or 3% to $138 million, representing a 41% margin with the calculated OIBDAN as a percentage of revenue. In terms pacings, similar to Media and Entertainment, we had a strong start to the quarter, but have seen the market slowdown in June and into the third quarter. As of last week, revenues at our Americas segment are pacing down 5% for the third quarter compared to the year ago period. The pacing is also reflecting the lost revenues in 77 digital billboards in Los Angeles as described in our filings. Our airports business is also showing a loss of the Phoenix airport concession.

Lastly, so far in the third quarter, our strongest performing stock advertising categories include business services, healthcare, and auto.

Now, let’s turn to the international results. International revenues declined $1 million or less than 1%. Similar to last quarter, we saw strong double-digit revenue growth in emerging markets like Brazil, Mexico, and China, offset by continued pressures in developed markets, where conditions remain challenging particularly in France.

In the second quarter, however, we did see some advances in some of our larger developed markets like the UK and Australia, which helped drive improvement throughout the quarter. Operating expenses decreased $9 million or 3% to $334 million. Strategic revenue cost initiatives comprised $4 million of this decline and last year’s second quarter also included approximately $5 million related to legal and other costs in Brazil.

Overall, decreases in expenses for developed markets with declining revenues were offset by increased expenses in emerging markets with higher revenue growth. This client revenues and an overall expense decline, International Outdoor OIBDAN in the second quarter of 2013 with $7 million or 8% to $96 million.

Turning to our pace and data, international is pacing better in Q3 and as well as in our Q2 pacings of negative 4% back in May. Throughout Q2, we saw both emerging and developed market business improved. As of last week, international revenues are pacing down 2% for the third quarter, compared to the year-ago period, which is pro forma for divestitures.

Overall, the pacing information includes double-digit growth in emerging markets offset by a decline in developed markets. As in the second quarter, some developed markets are pacing up nicely like the UK, while we’re still seeing challenges in certain large markets like France, which although negative improved continuously throughout the quarter. In emerging markets, China and Latin America overall are demonstrating consistently strong results.

Now, I’ll hand the call over to Brian Coleman to discuss capital spending and in our balance sheet.

Brian Coleman

Thanks, Greg. CC Media Holdings capital spending for the quarter totaled $71 million, included $21 million in Outdoor, the America’s $17 million investment for new advertising structure such as digital displays. We added nine of them this quarter for a total of 1,055 digital displays across the U.S., a total figure that still includes the 77 turned off in Los Angeles. International is $23 million of capital expenditures with new advertising structure in billboards and street furniture.

So for the six months ended June 30, 2013, CC Media Holdings capital expenditures totaled $133 million. It’s worth noting that although, we do expect the pick up in capital spending, particularly in Digital Outdoor, we’re anticipating at this point that our total CapEx for 2013 will come in below the guidance of $350 million that we previously provided.

As of June 30, CC Media Holdings debt totaled $20.4 billion, down slightly from the first quarter. During the quarter, we completed two significant transactions. Clear Channel Communications extended $5 billion of Term Loan B and C facilities, which were due in 2016, into a new Term Loan D facility that matures three years later in 2019.

Clear Channel Communications also exchange a significant portion of its all notes due in 2016, while cash and new notes due 2021. This included exchanging $348 million of existing 10.75 senior cash paid notes with $348 million of new notes, as well as exchanging $970 million of 11% and 11.75% Senior Toggle Note or $853 million in new notes and $64 million in cash.

On the Toggle Note Exchange, please not that a subsidiary of the company also exchange notes if held and those holdings although outstanding are eliminated from our financial statements in consolidation. So when you look at our financials, you’ll see that a $465 million reduction, which is $917 million total amount of Toggle Notes Exchange, that’s the $453 held by the subsidiary prior to that exchange.

As we mentioned at the beginning of the call, these are very important transactions for the company on a number of levels, including increasing our financial and operating flexibility going forward. Senior secured leverage is defined in the Clear Channel Communications credit agreement, at the end of the second quarter was 6.2 times.

Based on consolidation growth trend 12 months EBITDA of $2 billion as of Q2 2013, which was flat year-over-year. The calculation of the EBITDA is detailed in the press release for your information and makes certain adjustments pursuant to the credit agreements. Cash on the balance sheet amounts to $704 million as of June 30, 2013. Clear Channel Outdoor Holdings debt was unchanged at $4.9 billion and leveraged under its indentures was 6.2 times on a total consolidated debt basis and 3.5 times on a senior debt basis. Cash on its balance sheet totaled $399 million.

Looking ahead, Clear Channel Communications has $32 million of remaining maturities in 2013. Maturities in 2014 consists primarily of $461 million, or 5.5% notes, maturities in 2015 consists primarily of $250 million, or 4.9% notes.

Clear Channel Outdoor Holdings has no significant maturities until 2020. We are comfortable with these maturity schedules in the near-term and we’ll continue to take disciplined proactive steps to address our capital structures and our liquidity needs.

Our liquidity in enhanced in the second quarter of 2013, due to the $135 million sale of our investment in Sirius XM Radio as part of our continuing valuation of our non-core asset. We expect future liquidity to be enhanced by free cash flow generation, including capital expenditure discipline as well as improved working cap. Our post today again about again reaffirming that we believe that our company is in a great position for the long-term trend for increasingly connected mobile consumers. We are continuing to make the necessary strategic investments to capitalize fully on this trend.

Although, we expect that our strategic investments combined with disciplined expense control will help us weather the softness that we’re seeing in the market for the third quarter and our truly transformational financing transactions over the past several months better align our balance sheet with the current business environment and our strategic plan. We look forward to providing you with the future updates on our business at upcoming investor conferences and on our third quarter conference call in the November. Thank you to everyone.

Due to time constraints, we will have a shortened question-and-answer session. We will be happy to follow up with you after the call. Operator, please open the lines for question.

Question-and-Answer Session


(Operator Instructions) And our first question will come from Jason Kim with Goldman Sachs. Please go ahead, sir.

Jason Kim – Goldman Sachs

Hey. Thanks, guys. I know you guys have been pretty active in the capital markets this year and now the 2016 maturity wall is down pretty substantially, but as you alluded to, you still have some small amounts of that coming due in 2014 and 2015 at the legacy bond level. And I was just curious, when you look at how to approach those end maturities, if there is something that you can attack on prior to maturity and what other sources of liquidity you can consider down the road aside from cash on hand and cash flow?

Brian Coleman

Hi, Jason, it’s Brian. Good question. It’s certainly something we think about quite a bit and those are really the two liquidity drop that we’ll need to address between now and the 2016 maturity. We do feel comfortable that we have cash on our balance sheet and when we think of liquidity, we also include availability under our ABL revolver. Free cash flow generation between now and those maturities, is also something that rely upon as we grow the business. There are other levers that we can use to generate liquidity. I think the disposition of non-core asset is certainly around we demonstrated back this quarter with the sale of the Sirius XM stock. Those initiatives going on right now are headed by some folks in the accounting and SG&A group focused on working capital and reducing our working capital.

Subsidiary distributions is another thing we look through. The intercompany note balance between Outdoor and Clear Channel went up a little bit as some monies were repatriated from international operations and then early today, our Chinese operations for media has proposed a special dividend after taking a look their operating needs going forward. So I think the company is doing the right thing, has a cash balance, has other levers that it can look through, has exercised some of those levers. I also think as we look through future financing as well I think about not just pushing out our maturities, would certainly would create liquidity if we extended some of these legacy notes.

But I think there is opportunities also given some of the capital structure initiatives that we’ve done. Take a look at property putting in liquidity facilities, internationally to help meet operating needs there at the Outdoor level, perhaps at the Clear Channel level. So I think there is a lot of things that you can take a look at, some we exercise on, some we continue to look at, but I think we felt pretty good over the next couple of years that we will be able to meet these maturities.

Jason Kim – Goldman Sachs

And then the proceeds (inaudible) I presume that there is any – there is no restrictions or no limitation as to what you can do with the cash including repaying debt the legacies are coming due, but I just want to confirm that and that but there will be no taxes paid on the sale of those investments?

Gregory Lundberg

So the serious stock was held by an unrestricted subsidiary. So the cash that you are seeing is under the senior unrestricted subsidiary you are not going to use kind of outside of restrictions. So if one of the views is certainly due to upstream back to the restricted group and users to satisfy that debt obligation. No cash taxes as a result of the policy.

Jason Kim – Goldman Sachs

Okay, great. And just lastly on the CC Americas side, is it possible to quantify what sort of impact you could be having from the LA that this sort of whole situation?

Gregory Lundberg

Well, we don’t call that out the impact of just the LA board. So I do think, you are seeing in Q2 results and then Q2 pacings we are starting to see some impact. But that, we don’t think it’s material for the consolidated operation of the business.

Jason Kim – Goldman Sachs

Okay. Thank you.


Thank you. Our next question is from Avi Steiner with JPMorgan. Please go ahead.

Avi Steiner – JPMorgan Securities LLC

Thanks. Couple along the same of things, post the exchange with it a little over $400 million of the 14% notes. Anything preventing you from selling monetizing using those in a manner and then would you be free to use those proceeds, but you did decide to do something with them for uses other than secured debt?

Unidentified Company Representative

Yeah. Avi, great question. Those notes as for the Sirius XM, those notes are held at in a restricted subsidiary. Is there anything preventing us from monetizing, right? So I think, we put certainly news that those currencies to exchange for legacy notes, if they were willing a counterparty, we could sell those notes and I think we’re issuing that I think the economics has to be attractive, 90% or so, traded down a little bit, but I think have traded up a little bit more recently.

So we’ll continue to keep an eye on that. But I kind of view that as issuing debt (inaudible) we can facilitate, but certainly another liquidity level. There’s probably some securities issues we want to make sure that we follow for example, right now we could sell those notes, they would be fungible. Right now, the notes that are out there, the existing 14% notes don’t have registration rights, but they’re not – they will do get a same class and I think if we – until those notes are registered, the notes that looked the same. So maybe there’s a little bit of window time for more attractive to do it. I think at the end of the day, there’s nothing preventing us from doing that, of a next good sense and the hires on the other side.

Avi Steiner – JPMorgan Securities LLC

Okay, that’s helpful. Secondly, anything stopping you going back to an old amendment you did, but stopping you from raising a new revolver here as long as proceeds are used to repay carried debt? And then second question related to that, could there be potential revolver raise at Outdoor?

Unidentified Company Representative

Yeah, I think that is something and I alluded to it a little bit on Jason’s question, I think one of the things we are looking is whether it’s at the top of the structure in which case, baskets are fairly limited and proceeds would likely need to be used to repay other senior debt so that we stay inside of our incremental senior debt basket cuts in our LBO and note indentures.

Outdoor can certainly support our revolver something we’ve talked about for a period of time. That would necessarily have to, we used to repay debt as long as our basket capacity and we have some of the same issues there. But we have a lot of debt agreements and we are just careful of doing that. I think you are getting (inaudible) enormous structure. We don’t have other than some over draft facilities that help meet liquidity needs on a short term basis. We don’t have a lot of revolving capacity in our international operations. That’s another where we might be able to put in some incremental debt, again, as long as it was compliant of our debt agreement.

So I think all those things are open and it’s into the extent that either supply liquidity directly or they give a local operations, greater comfort in moving cash kind of up the system because now they have a local facility they can rely upon and face forecast or offer in cases of liquidity needs. I think those are all things that in our play book and we can take a look at.

Avi Steiner – JPMorgan Securities LLC

Okay. A last question from me and thank you. I just wanted a quick clarification. On the casing you gave within the CCME division in radio, I want to make sure that doesn’t exclude political?

Unidentified Company Representative

They are like-for-like.

Avi Steiner – JPMorgan Securities LLC

Thanks for the time.


Thank you. And our next question is from Marci Ryvicker with Wells Fargo Securities. Please go ahead.

Marci Ryvicker - Wells Fargo Securities

Thanks. I have a couple of questions on as far as service outdoor. I’m just trying to understand the volatility. You were pacing up 3% in the City America’s division. You are pacing 3% I think in May. You ended the quarter up 5, now you’re pacing down 5. How dose that happen, if LA is not a material part of that happen if LA is not a material part of this, what is going on in the outdoor business?

Unidentified Company Representative

Market privacy, portfolios we have both across Americas and internationally helps weather some of these variations in the market and then we saw the volatility internationally we were facing last quarter of negative four. It came in basically flat, now we’re looking down to the numbers in Americas you’re correct as well.

Marci Ryvicker - Wells Fargo Securities

It’s impact?

Unidentified Company Representative

As we mentioned, we did in Phoenix and it is showing LA for the first time. So when we get pace in number it’s not pro forma with LA excluded from last year announced in this unit. It has business from LA last year, but it’s not there now. So it’s really Phoenix in LA in terms of the ad categories we mentioned earlier and we’re seeing good strength and it’s one of the reasons we have a broad portfolio. It’s been weather certain changes like this.

Marci Ryvicker - Wells Fargo Securities

So is it fair to say the traditional billboards outside of these issues are doing materially better than the negative five?

Unidentified Company Representative

I am not going to go into product specifics like that, but within the quarter, we had good performance in all categories, in traditional static, posters as well as digital.

Marci Ryvicker - Wells Fargo Securities

Okay. Is it fair to say that this is a Clear Channel specific issue or just an industry issue?

Unidentified Company Representative

Don’t know yet. And remember that facing is just a snapshot in time. You’ve got very short flight time and have been giving data at August 1 and that’s a snapshot lastly.

Marci Ryvicker - Wells Fargo Securities

Okay. Now with the revenue down at least a lot more than we expected, how should we think about expenses in damage control you have here?

Bob Pittman

We’ve got a lots of initiatives in terms of strategic revenue cost initiatives, we are constantly looking at ways to improve the operating expense structure both internationally and domestically and there are actions we can take as we see headwinds in a particular area, in a particular market we can adjust.

Richard J. Bressler

I think I’d add Greg, that a lot of the expenses that we have are electric ones that are doing to help grow the business a little long-term. So I think we’d have to be pretty judicious as we think through what we are going to touch back on. So we have that flexibility, but we don’t want to sacrifice long-term growth, we do see expenses in the form of strategic initiatives, that we think are important to the business.

Marci L. Ryvicker – Well Fargo Securities

If I could ask how much of your expense base is variable versus fixed?

Richard J. Bressler

Yeah. I don’t think we disclosed that in the past I’m not sure we have that for you.

Marci L. Ryvicker – Well Fargo Securities

Okay. I will also outdoor and..

Richard J. Bressler

And then just lastly, Marci on pricing I think this has come of a very strong second quarter in the Americas and as different advertisers come in or hold back this is again is a snapshot in time and I’m going to ask you to stay tuned for November when we look forward back to you again.

Marci L. Ryvicker – Well Fargo Securities

And then moving to radio, just how should we think about the monetization of iHeartRadio. Is this something that we can see materially over time or is it already instrumental in contributing to the threshold radio growth.

Bob Pittman

It’s Bob Pittman. Let me jump in a little bit on iHeartRadio. iHeartRadio is really a major part of the digital offering to CCME and its the fastest growing segment, I think we have said it’s a double-digit revenue growth and but I think the way you think about the monetization is yes we’ll sell in-stream spot yes we’ll sell display ads. But it also is iHeartRadio, it is the station website. It is the broadcast stations with the best, it is promotions, traffic, and as much as we can we are trying to build those into multi-platform offerings.

So we talk to advertisers increasingly. We are not talking about as much as possible, we are talking about helping them to achieve a goal and we have all of these assets that we can use for their benefit and to lead us the new way people sell as you get an assignment not to buy. And as you look at the national sales, marketing, and promotion platforms, which John Hogan set up, which didn’t he had, that’s one of the goals of doing it as – have one organization that can pull it all together and have those conversations. And it’s been happening in other sectors besides radio and now we are bringing, I think that kind of sophistication to the radio business, which we look as taking more input upside. And nearly digital plays an important role in that and certainly I have radio list tremendous growth, it really want to (inaudible).

Marci Ryvicker - Wells Fargo Securities

Thank you very much.

Brian Coleman

Thank you, everyone. Again, due to time constrains, we’ve got to end it here, but we’ll be happy follow-up with you after the call. And we look forward to seeing you at our upcoming investor conferences and reporting back to you with third quarter in November. Have a good night.


Thank you. And ladies and gentlemen, that does conclude our conference for today. Thank you for your participation and choosing AT&T Executive Teleconference. You may now disconnect.

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