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Executives

Brian Coleman – Senior Vice President, Treasurer

Tom Casey – CFO, Executive Vice President

Analysts

James Dix

Marci Ryvicker

Avi Steiner

Bishop Cheen

Jason Kim

Lance Vitanza

Aaron Watts

(Jaime Morris)

Doug Arthur

Andrew Finkelstein

Clear Channel Outdoor Holdings, Inc (CCO) Q2 2012 Earnings Conference Call August 1, 2012 4:30 PM ET

Operator

Ladies and gentlemen, good afternoon. Thank you for standing by and welcome to the Clear Channel second quarter earnings conference call.

At this time, all lines are in a listen only mode. There will be an opportunity for questions. (Operator Instructions)

At this time, I’d like to turn the conference over to our host, Senior Vice President and Treasurer, Mr. Brian Coleman. Please go ahead.

Brian Coleman

Good afternoon and thank you for joining our earnings call for the second quarter of 2012. On the call with me today is Tom Casey, Executive Vice President and Chief Financial Officer.

During today’s call, we will provide an overview of the second quarter financial and operating performances of CC Media Holdings, Clear Channel Communications, and Clear Channel Outdoor Holdings.

For purposes of this call, when we describe the financial and operating performances of CC Media Holdings, we are also describing the performance of its subsidiary, Clear Channel Communications. After Tom’s comments, we will open up the line for questions.

Before we begin, I would like to remind everyone that this conference call may include forward-looking statements. They involve uncertainties and risks. There can be no assurance that management’s expectations, beliefs, and projections will result or be achieved or that 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 discussion of important factors that could affect our actual results.

Pacing data may be mentioned during this call. For those not familiar with pacing data, it reflects revenues booked at a specific date versus the comparable date in a 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 include all acquisitions and exclude all the divestitures in both periods presented for comparative purposes.

It also excludes the effects of movements in foreign exchange rates. During today’s call, we will provide certain performance measures that do not conform to generally accepted accounting principles.

We have provided schedules that reconcile these non-GAAP measures with our reported results on GAAP basis as part of our earnings press release, which can be found on the investor sections of our websites.

A webcast of this call and earnings press releases issued today can be found on the investor sections of our websites at www.clearchannel.com, www.clearchanneloutdoor.com, or www.ccmediaholdings.com. A replay of this conference call will be available for a period of 30 days.

And with that, I will now turn the call over to Tom Casey.

Tom Casey

Thank you Brian, and good afternoon everyone. During the second quarter we continued to make solid progress against our strategy to strengthen our business and improve our competitive position.

As I discussed with you last quarter, our strategic investments in our Media and Entertainment and our Outdoor operations are key to keeping driving our business forward.

Building our size, scale, and operating strength, these investments make it possible for us to take full advantage of our opportunity and continue to generate meaningful growth.

Most of all, we’ve had industry leadership, global diversification, and constant innovation. We need to leverage the quality and reach of our assets across the company, today and into the future.

Earlier this year, Media and Entertainment launched our new strategic partnerships, national sales, and integrated marketing and sales groups. So now we can offer a groundbreaking constant marketing solution that only Clear Channel can deliver. That’s helping us gain real traction with our major national advertisers, a key objective of our strategy.

Our industry-leading digital radio platform, iHeartRadio recently reached 10 million registered users faster than any other internet service, and it has been one of the major beneficiaries of this growing national advertising success.

This September’s iHeartRadio Music Festival is another example of our ability to leverage our assets. The festival is being sponsored by such national brands as Amazon Kindle Fire, Dish, Macy’s, MGM Resorts International, NBC’s The Voice, and State Farm.

Our Outdoor businesses, the American and international, reach hundreds of millions of people every month, and we will continue to compete for significant advertising contracts that attract new target audiences around the world for our clients.

Our investments in our Outdoor business are also continuing to pay off. In the Americas, over the last 12 months, we have deployed more than 250 digital displays. Our digital installations now total 963.

Internationally, we have recently won several key contracts and tenders including two large advertising contracts with public transportation companies in Norway and Sweden. Thanks to our investments, including our robust sales infrastructure, we are well positioned to continue driving our growth in the future.

Clearly, given the economic environment, we’ll still stay focused on keeping our costs under control. We are working to right size our operations in the regions where economies have continued to deteriorate, while investing selectively to capitalize on opportunities where economies continue to see growth.

Over all, we are encouraged with our progress, and I look forward to keeping you posted on it throughout the year.

Now let’s go to the company’s performance throughout the quarter. I’ll start with our overall results for CC Media Holdings and Clear Channel Media and Entertainment, then continue with Clear Channel Outdoor Holdings, where I’ll provide you with details of our American and international businesses. And lastly, I’ll wrap up with a review of our capital spending and liquidity, before we’re taking your questions.

CC Media Holdings revenues on a constant foreign exchange basis were $1.64 billion, up 2% in the quarter. Contributing to overall revenue increases, was growth in both Media and Entertainment and Outdoor businesses, particularly across our digital platforms and street furniture assets.

On a reported basis revenues reached $1.6 billion, essentially flat over of the prior-yearquarter. CC Media Holdings (inaudible) for the quarter totaled $532 million, representing a 6% increase compared with the same period in 2011.

Operating margin, which has always (inaudible) percent of revenue, was approximately 33%, an improvement of 180 basis points for year-over-year.

We had several items affecting the (inaudible) results and I will comment on them individually as part of this segment’s discussion. One item that affected all segments is our ongoing realignment and improvement of our business operations.

During the quarter, we incurred approximately $15 million of expenses related to strategic revenue and expense initiatives across the company to fuel future growth and profitability.

Now let’s move to the performance of the Media and Entertainment operations. Our Media and Entertainment revenues grew 3% to $793 million in the quarter, representing growth in national, local advertising sales and digital revenues and as the company continues to expand its digital footprints. Political revenues for the quarter reached $9 million, representing approximately 50 basis points of the quarter’s growth.

As we look at the second half of the year, we do expect political revenues to increase, however it is difficult at this time to estimate the total amount of political revenue we will see for the year.

The quarter’s operating expenses decreased 5% or $25 million. There are several items affecting our expenses for the quarter. First, we incurred $9 million in hired costs related to the timing of the company’s traffic acquisition completed in late April 2011.

And we also had lower music license fees due to lower royalty rates and a $21 million credit to our future royalty payments to one of the company’s industry performance rights organizations.

Overall, we’re happy with our expenses and are seeing the benefits of our expense management activities over the last 12 months and reduced cost through lower head count.

Media and Entertainment (inaudible) increased 15% to $355 million in the quarter. And even with the credit to our future royalty payments CCME has strong operating leverage and we were able to convert a meaningful portion of our revenue into cash flow.

The quarter’s best performing advertising categories include automotive, telecommunications, political, financial services, and entertainment. Reflecting our strategy to expand our presence with national advertisers, our national sales have been growing approximately double the rate of local.

And our digital initiatives, despite being a small portion of our overall revenues are continuing to experience significant growth.

We have continued to make investments to grow our business by leveraging our diverse national and local footprint, unmatched content, innovative digital platforms, and our strategic relationships with our marketing and advertising partners.

To transfer, the third quarter remains positive but visibility is limited. Today, Media and Entertainment revenues is pacing up about 3%, driven by major national advertising buys, compared to the prior year period.

The 3% excludes any impact on the traffic acquisition and political has not had a significant impact on our pacings to date, so our pacings would still be around 3%, excluding political.

Moving on to our outdoor results, Clear Channel Outdoor Holdings revenues grew $10 million and constant foreign exchange rates are 1%. Reported revenues totaled $761 million in the quarter, a decline of 4% over the year ago period, $789 million.

Outdoor (inaudible) decreased 7% totaling $196 million compared to $210 in the second quarter of 2011. Contributing to this decline, were unfair movements in foreign exchange rates totaling $4 million, as well as macro economic weaknesses in certain international countries in which we operate, as well as higher costs from strategic initiatives and last year’s contracts and investments.

Now let’s focus on our America segment. America’s outdoor revenue grew 1% or $2 million to $321 million in the quarter. Bulletins, particularly digital and airports drove this growth offsetting the revenue growth is, in part, was decline in poster revenues.

America’s operating expenses declined 1% to $187 million, including a $7.8 million benefit from a favorable court ruling. This decrease in expense was partially offset by increased in personnel costs and charges associated with strategic revenue initiatives, as well as higher site lease expenses related to new digital displays.

In the quarter, America’s (inaudible) increased 3% to $134 million. The quarter’s strongest advertising categories included retail, media, business services, amusement, and automotive. Underscoring our commitment to continue to expand our digital footprint, we did install 49 new digital displays during the quarter.

Right now, revenues at America’s segment are pacing up approximately 3% to the third quarter, compared to a year ago period.

Now let’s turn to our international results. In the quarter, international revenues rose $7 million or 1%, excluding the impact of foreign exchange rates. On a reported basis revenues decreased 6%, to $441 million due primarily to $37 million in unfavorable effects of foreign exchange rates.

Street furniture contributed to our revenue growth in China, Australia, and the UK, while Switzerland Billboard's business also performed well. In addition, contracts signed in 2011 also helped drive the quarter’s growth.

Macro economic conditions continue to drive uneven performance across our international markets. But the weakness in Southern Europe, France, and the Nordic countries has been offset by continuing growth in Asia and the Pacific region, and some regions of Europe, especially Switzerland.

Operating expenses were up 4% or $16 million excluding the effects of movements in foreign exchange rates. On a reported basis, expenses decreased 5% or $17 million, including a $34 million decline (inaudible) foreign exchange rates.

The increase in expense results, from a higher site lease expenses, related primarily to new contracts won in 2011, as well as increased legal and other expenses in Latin America.

As a result of the slowing economic recovery and higher expenses in the quarter, (inaudible) decreased 13% to $90 million. Our international segment continues to see healthy development in certain countries, however revenue declines in other countries are placing pressure on (inaudible).

With several European countries still facing economic challenges, our international team continues to pursue the strategy as benefit from their diverse footprint across Europe, Asia, Australia and Latin America as well as pursue various cost reduction efforts to improve overall profitability.

Today, international revenues are pacing down about 1% for the third quarter compared to the year-ago period. Now let's turn to our capital spending and our balance sheet.

CC Media Holdings' capital spending for the quarter totaled about $102 million compared to $76 million in last year's second quarter. Since June of 2011, our capital spending was approximately $398 million highlighting our business' increased investments.

Our outdoor operations accounted for approximately $75 million of our second quarter spending and digital displays domestically and expanding certain street (furniture) and transit contracts internationally.

On June 30th, the CC Media Holdings' total debt stood at $20.7 billion. Clear Channel's leverage as defined under its credit agreement at the end of the second quarter was 6.1 times versus 7.1 times in the year-ago quarter. And cash on the balance sheet was $1.3 billion at the end of the quarter.

At the end of the quarter, Clear Channel Outdoor Holdings' net debt reached approximately $4.3 billion and leverage under its indentures was 6.05 times on a total consolidated debt basis and 3.24 times on a senior debt basis. Cash on the balance sheet totaled $491 million.

With less than $475 million of Clear Channel debt and no Outdoor debt maturing before 2014, we are pleased with our short-term liquidity profile. We plan to continue to proactively manage our balance sheets while working to generate strong (inaudible) and cash flow across our operations.

Just on (inaudible), we are encouraged by our progress over the quarter. Our investments are working for us and we will keep investing in higher-return opportunities to put ourselves in the best position to weather the world economic cycle.

At the same time, our teams are working hard to reposition our outdoor business in Europe where an economic slowdown seems to be taking root. We are especially excited about our strategic partnerships, national sales and integrated marketing and sales groups and their success so far with national advertisers. We will continue to focus on building on that momentum over the coming quarters.

We are confident we have the right strategy and the right people to keep us on track. As you know, (John Hogan) at Media Entertainment and Outdoor's (William McAlshare) has been building out the senior teams over the past several months.

In medium entertainment sales, for instance, we have new leaders such as (Tim Castelli), President of National Sales, Marketing and Partnerships who came to us from senior positions at AOL and Google as well as (Rick Song), our EVP of Digital Sales who joined us from Microsoft.

And in Outdoor, a long-time advertising veteran, (Gene Leanne) was named Senior Regional President to manage the 12 largest US markets as well as airports, malls and (inaudible) businesses.

Thanks to all this new energy and vision, we look forward to delivering on Clear Channel's great potential. Thanks for your time. Operator, please open the lines for questions.

Question-and-Answer Session

Operator

(Operator Instructions) Your first question comes from the line of James Dix.

James Dix

Just a couple, one easy housekeeping one for you – my ears must be going bad; were the Americas for the third quarter pacing up 2% or 3%?

Tom Casey

3%.

James Dix

I'm sorry, 3%? And then in the second quarter, excluding digital, would Americas have had a positive growth on the revenue line?

Tom Casey

Well, we don't break out the individual products. As you know, we sell digital as part of a broader network. Digital continues to ramp up capacity, so it obviously is going to have a faster growth rate than the rest of the traditional business, which is not growing new capacity. In fact, it's shrinking capacity as we modify traditional boards into digital boards.

So we continue to see great growth in digital. We did see some softness in posters as I mentioned but overall capacity we're generating and the excitement with better-run digital continues to be a key driver.

James Dix

And just two others, one for corporate; it seemed to spike up a little bit year-over-year in the third quarter, in the second quarter. Any color on that and is that good run rate to think about the rest of the year? And then any outlook on capital expenditures for the rest of the year, especially given some of the street furniture transit contract wins and defenses that you've had.

Tom Casey

A couple comments on corporate, we did see about $15 million increase in corporate. We did have some unfavorable benefit reserve on some healthcare issues that came through the quarter.

We also are seeing higher bonus calculations than prior years, so that's obviously a recovery from last year when we were – saw a much weaker environment than we had anticipated.

Obviously we have (Bob) onboard now and also we continue to ramp up our initiatives in some of the things I mentioned earlier in Outdoor and the CC&E. So I think that with regard to CapEx, I think we've given you kind of an idea of where we're coming in for the year I don't think that we have anything – changes to that right now but I would say that clearly we're looking at being disciplined about how we deploy capital.

Frankly, a lot of capital we will deploy up to now and into years already been committed and this is just a rollout of certain tenders that we've previously won. So that's – we'll give you an update on the next quarter and as we start getting into next year what we look like next year. But I think we're still on track for our target this year.

Operator

Your next question comes from the line of Marci Ryvicker.

Marci Ryvicker

The first question, the weakness in posters in the second quarter, since posters are shorter term, is this indicative of macro issues? Is there a certain category? Could you talk about what drove the weakness in this segment?

Tom Casey

I think nothing in particular. I mean, I would agree that we're seeing a shorter and shorter sales cycle here. So we're getting later and later postings and so the whole turn time is much shorter.

No one individual market came out as being a unique driver. Our local, international business were pretty much in line with each other for the quarter with the 1% growth in revenue. We didn't see a significant delta if you will really year-over-year as far as national, local or in individual markets.

Marci Ryvicker

Then there has been some thought that billboard companies may pursue conversion to a REIT. Is this something that Clear Channel Outdoor would consider or discuss?

Tom Casey

We saw the same press that you saw and we have no plans or are not contemplating any restructuring on our company into a REIT. And we'll monitor the developments but at this time we have no plans.

Marci Ryvicker

Then my last question is on the media and entertainment division. You called out higher expenses related to traffic acquisition. What about revenue in the second quarter?

Tom Casey

Revenue for the quarter was about, if I recall, up about $3 million or about $35 million for the full quarter. (Inaudible) is down to about $3 million. So we clearly are seeing some improvement in our top line. We are looking at the TV business as a bit of a raw piece of our business, so that is putting some pressure on the overall metro line.

But the total was plus about $3.5 million, given the fact that we didn't have the full acquisition in last year.

Operator

Your next question comes from the line of Avi Steiner.

Avi Steiner

Just a very quick follow-up, did you say $3 million incremental weight from traffic?

Tom Casey

$3.5 million in part because of the – I think we acquired in April last year, so we had a little bit of a – not a full quarter in last year's comparable numbers.

Avi Steiner

Just in radio, anecdotally we had been hearing the quarter was down. And I'm curious what's going on there with respect to you guys. And I know you called out some national things but I don't know if that's more of a back half event.

But are you taking share in the radio division? I mean, this looked like a good number relative to what we were expecting.

Tom Casey

We think we continue to position ourselves to take share. We saw a strong national growth about double what we saw in local. We're seeing strong verticals in auto, political, telecommunications and so on, financial services as well.

But I think more importantly we are starting to see the efforts we put in place with our strategic partnerships and our national programs to really start to leverage the relationships we're starting to build through.

We feel real optimistic about the traction we're getting and we think that we will differentiate ourselves across the radio business. So we have historically outperformed the radio business and I would expect with this additional efforts and energy we're putting behind us, we're encouraged with our numbers for the quarter.

Avi Steiner

And then if I can go to the – I think the radio but going to the royalty comments you made. You called out in the press release I believe a $26 million royalty benefit and then this – in your opening comments you talked about a $21 million credit on future royalty payments.

So do we think about that as $47 million of one-time benefits in the quarter and on some of the lower royalty payments is that same magnitude going forward in the upcoming quarters?

Tom Casey

Yes, the big one this quarter was (BMI) and so we tried to break it out for you because there's really two things happening there. We did get a credit for about $21 million. We'll reduce our go-forward rate. We also got a quarter run rate reduction as well.

So it's really two pieces to the puzzle. The quarterly run rate reduction was about $3 million or so going forward.

Avi Steiner

So the $21 million is not a subset of the $26 million, correct?

Tom Casey

Yes, it is.

Avi Steiner

$21 million is a subset of that.

Tom Casey

Absolutely, yes.

Avi Steiner

And then maybe if I can turn it over to the balance sheet and then I'll let other people chime in, really two questions. One, do you have the ability to buy back any bonds in the open market and then have you done anything subsequent to your quarter close?

Brian Coleman

We have not repurchased any bonds in the open market. We have a variety of (baskets) available under the credit agreement that permit us to repurchase debt securities but we have not during the quarter.

Avi Steiner

How about – I'm sorry. I hate to nit pick but the question was subsequent. If you don't answer, that's great and I'll turn it over.

Brian Coleman

We have not purchased anything subsequent to the quarter, sorry.

Operator

Your next question comes from the line of Bishop Cheen.

Bishop Cheen

Let me go back to something that Avi was talking about. (CC&E) certainly has the entertainment component in it now but it – that hasn't been broken out really I guess because it's too new with all the digital initiatives.

So I'm just trying to get a sense, since you have been, by perception, the leader in the digital revolution, how much of a lift has the digital component of (CC&E) added to your (inaudible) in Q2?

Tom Casey

We are seeing very good growth in our digital business. It's one of our fastest growing areas. But keep in mind that we're not monetizing the custom radio streams rather in our iHeart radio today.

However, we are leveraging the platform for us to – for example, our iHeartRadio festival we've got coming up in Las Vegas in September is another example where we leverage our assets to drive additional sponsorships and national advertisers to the media.

So we're excited about what we can do. We haven't broken it out. It's part of our – the way we're running our business and I think we're getting some good traction where we can really differentiate our asset base and our reach across the country for large national advertisers.

So we're quite encouraged. Still early days but early, early indications are we're getting good traction.

Operator

Your next question comes from the line of Jason Kim.

Jason Kim

So on the – any update you can provide in terms of potentially extending an ABL facility which you briefly alluded to during last quarter's call? And second, as we get closer to the December calling on the (inaudible) senior notes, I was curious where your appetite was to refinance the piece of paper at a better rate than you're currently paying.

Brian Coleman

I guess first, with regard to the ABL, I know I mentioned it on the last quarter's call and I actually got a couple calls from some of the banks that are in that facility asking what's going on. And I guess what I would say to date is that's an attractive market. We feel that that is a target piece of paper, a target facility that we can extend.

We would like to extend that. It expires in 2014. It's undrawn. By extending it, we have – we extend our liquidity. But I say all that in the context of we don't feel like there's any pressure to extend today and so it's something as with other initiatives that we look at, it's something that we'll continue to take a look at and when we feel it is opportune to do so, we'll like to extend.

So I do think it's one of those things that's in the toolkit. It's something we're looking at. But we don’t feel under a great deal of pressure to move forward on it. But don't be surprised if you see some action, you know, at some point in the future.

Your second question, with regard to the senior Outdoor notes that have a fixed price call in December of this, that's a balance. It's a balance between the economics of issuing new notes to replace those at a lower market rate versus the cost of the call.

And I think you throw into the mix the likely set of terms and conditions we can get under new notes are improved versus the current indenture. I don't have an answer for you whether or not we'll take action in December or subsequent to the fixed price call kicking in.

But it is one of the things that we also take a look at, so we're looking at these things as well as other initiatives. We'll be opportunistic if the markets (presents) an opportunity. We may avail ourselves of those, but not real guidance at this point.

Jason Kim

Then just a follow-up; when you look a potential refi transaction on the senior, I mean, do you look at that as an opportunity as a way to reduce interest cost principally or is it more about getting additional proceeds to chip away your (bank end) maturities in the (prada) basis?

Brian Coleman

I think it can be a combination of both. I think we would have to look at all of the potential impacts of a refinancing event and what our goals are. So I think it's a little above when we would take a look at whether or not to exercise the call.

Jason Kim

And just lastly, a housekeeping question and I apologize because I probably should know this already but next year I think you have about $57 million worth of (OHIDA) payment on your – for the (inaudible) through August of 2013.

Is that payment owed to the (inaudible) that are outstanding to third parties such as on the $830 million outstanding or does it actually include the (inaudible) notes that you had bought back a while ago but have not retired, so it's owned to $1.3 billion, which I believe is the original amount of the bond at issuance.

Brian Coleman

I believe it's an offer that’s made to the notes that are outstanding. It doesn't include the ones that have been retired.

Jason Kim

So that would also include the bond that you currently hold that (you are) repurchase but have not been retired.

Brian Coleman

That is correct. That's the essence of your question. The ones that have been repurchased by an unrestricted sub and have not been retired. That's correct.

Operator

Your next question comes from the line of Lance Vitanza.

Lance Vitanza

I wanted to ask on the Outdoor side, (inaudible) talked earlier in the week about an expected five to six point increase in the UK market thanks to the Olympics. And I wanted to ask you is that consistent with what you're seeing?

Tom Casey

Say again.

Lance Vitanza

(JC Dacode) talked about seeing a five to six point increase in the UK market thanks to the Olympics. Is that consistent with what you're seeing?

Tom Casey

Yes, I think we clearly, clearly are seeing a lift in the Olympics for the quarter. It's hard to determine exactly what the Olympic (inaudible) will be, so I'm not going to give you a specific number.

But we would say that we are definitely seeing a lift and I'll have better information for you, how it all plays through in the third quarter. But right now it is included in our pacings for CCI.

There's still a negative one pacing right now and we'll have to wait and see how this plays out. We had a similar pacing number for your last quarter. I'll give you an update next earnings call but we're well positioned in the UK with regard to the Olympics and are absorbing as much revenue as we can to take advantage of the market there.

Lance Vitanza

And then aside from the Olympics, do you think that the Northern European markets have bottomed out and what kind of recovery do you suspect? Is it going to be a U-shaped or perhaps something more positive?

Tom Casey

Well, clearly Northern Europe is definitely starting to feel, over the last few quarters, definitely starting to feel some of the challenges that Southern Europe has had. So we're clearly experiencing that in our numbers. You're seeing that.

As I've said in the past, we continue to see good growth in Australia and China and actually even in Switzerland. But the Northern European countries are clearly starting to feel the pressure, significantly feel the pressure.

As far as where we are in that cycle, it's difficult to determine. Southern Europe, while it continues to be slow, we're not seeing the same level of declines year-over-year that we're seeing in Northern Europe.

Lance Vitanza

And then I think someone asked about this earlier but (Daco) had also come through on their earnings call with enhanced disclosures surrounding digital revenues, percent of total revenue and the pace at which their digital revenues are increasing.

Can you do the same? Is that something that you guys have thought about and would be prepared to disclose in perhaps in subsequent quarters?

Tom Casey

Well, yes, I had a look at their specific disclosure and what their objective was. Our digital business in the US is significantly different than theirs. We are different formats as well as the way we sell them in broader networks.

We are continuing to grow our digital footprint in our international business, which tends to be more transient in malls. So it is becoming a different format when you look at different mediums, including airports, malls, street furniture and our big format business in the US.

So a little hard to give really apples-to-apples comparison. So we sell them as a network and haven't been breaking them out because it's a combination of both digital and traditional that we really think is important for our clients to be purchasing. So just breaking out one is a little bit of half the story.

Lance Vitanza

Then lastly for Brian, I was just wondering if you could give me some additional disclosures around cash flows in the quarter. I was looking for cash interest, cash taxes and working capital as a use of cash in the quarter if you can provide that please.

Brian Coleman

For CCMH, operating cash flow was about – from operations, was about $120 million, $121 million. And then CapEx, as we told you was about $102 million.

Lance Vitanza

Can you help with the cash – interest in cash taxes? I’m – basically I’m trying to reconcile from the EBITDA numbers down to that cash flow of up – the CFO numbers.

Brian Coleman

Yes, the cash tax is – I believe they are disclosed in the financial statements of both the 10-Qs and it looks like it's up about $16 million of cash benefit this quarter.

Lance Vitanza

The Qs have been filed.

Brian Coleman

Yes, they have.

Operator

Your next question comes from the line of Aaron Watts.

Aaron Watts

On the radio side, I thought the deal you guys announced with Big Machine was pretty interesting, obviously something new for the industry. Can you maybe just talk a little bit more about that and what – how material does a deal like that impact your expenses?

And to the extent that it makes the digital platform much more viable to the bottom line going forward, should we expect to see more of those deals or are the costs of doing this kind of prohibited right now to keep you from striking a lot more of those deals?

Tom Casey

Well, as you know, this was really the first agreement that we've entered into where artists will now participate in traditional broadcast revenues as well as digital and share in the growth of digital radio, which we believe this partnership will help drive growth.

The agreement does shift the way we pay Big Machine and we think – that also matches the way we make money. So we thin it's a great transaction to do that. This is a very small percentage of our – of the music we play. We do believe it is a bit groundbreaking because it does change the fundamental structures that we work under.

But we think that it's a – it puts us on the same side of the fence as far as how we draw our business and it's a start. But it's an early – we're in early days here and we're working hard to get our arms around (inaudible) opportunities to align ourselves with the labels.

Aaron Watts

And then just one other one for me on political; hearing big talk out of the television guys on what political is going to look like this year. Any reason to believe that political shouldn't be a record-type number for you guys this year as well compared to what you've done in the past?

Tom Casey

We've been hearing the same thing. We gave you the numbers. We're not in a position to tell you exactly what that's going to be. As you can imagine, this business gets placed pretty late in the cycle and it's where the – typically going to be where the key states are.

We think we're well positioned. We think we'll get more than our fair share but we just have not projected out what we think political is going to be in any of the quarters. I did indicate that in our pacing number for 3%. We don't really see a very significant impact in the current pacing. So as we get closer to the elections, maybe we'll start to see more significant. But I’m not prepared to talk about record setting at this point.

Operator

Your next question comes from the line of (Jaime Morris)

(Jaime Morris)

I was just hoping to get a better understanding of what's driving the improvement in the US for the pacing number versus where the quarter ended up. I mean, is there anything you can give me, any color – is it billboards or street furniture or any categories that are particularly driving the improvement?

Tom Casey

Again, we're not seeing anything in particular. We are seeing additional capacity growth in our digitals. We talked about continuing to put up a number of new signs, 250 year-over-year. But our national and local business has been pretty consistent.

We're not seeing any particular markets that are driving it. But again, we think we're well positioned and teams are doing an excellent job to take advantage of the environment that we're in and we're encouraged.

It's a point in time that both national and local are up and we'll have to see how the rest of the quarter plays out.

(Jaime Morris)

And can you just comment, in the quarter, how pricing was relative to occupancy within the US growth?

Tom Casey

Yes, again, I should have mentioned that we're not seeing anything there either. Occupancy and pricing were pretty consistent, so not – unfortunately I don't have a lot of drivers for you because national and local were pretty consistent, occupancy and rate were pretty consistent. So not a lot – obviously it varies by market but in total really, really not very big distinguishing factors.

Operator

Your next question comes from the line of Doug Arthur. Your next question will come from the line of Andrew Finkelstein.

Andrew Finkelstein

Just one follow-up on that Outdoor, US Outdoor, I mean, not to beat at a dead horse but I think last quarter you talked about how the slower economy is having an impact. Obviously we haven't seen much better economic numbers yet. But is that -- I mean, are you hearing back from the sales force? Is it a better – is there a better tone out there?

Tom Casey

I think – you're still talking about Americas, right. So we continue to see some strength in the third quarter for retail and auto and those obviously are important. (Inaudible) has been good and healthcare, medical have been strong.

I would say everyone's feeling kind of the slow recovery and there seems to be some pockets where we're able to see a little bit stronger growth than others. But again, it's a point in time – I'm not forecasting where we'll be for the third quarter. This is – obviously we're encouraged with the early start and the strong level of pacings. But again, we'll have to wait and see how the full quarter plays out into the third quarter.

Andrew Finkelstein

And has their national been any better than local?

Tom Casey

Again, they're both – they've been pretty consistent. I'm not seeing a big difference between local and national. We think there is – just like we thought in the radio side, we think there's opportunity in the national to continue to differentiate with what we're doing on the CCME side to leverage both parts of our business.

We already have seen some terrific partnering between the two businesses with some large national buys. I think that's helped the early days of Outdoor's pacings. But as we do more and more national business, we'll have more and more swings in our international year-over-year numbers that maybe not have seen in the past.

So I'll try to keep you up to speed on that but we're very encouraged by the early progress we're making and we're encouraged that it can really affect both businesses.

Andrew Finkelstein

Then one last one for me, just on the international expenses, obviously business has been struggling a little bit. But the expenses were up I think 9% or 10% in the first quarter and I think it's 4% this quarter excluding FX.

Is there any developments there or is it just built in contracts that you've got to work through?

Tom Casey

Well, I think it's a couple things. I think it's clearly some of the economies are not getting resized fast enough for the reduction or slowdown we're seeing in revenues, that's first. So it's putting some pressure on the bottom line.

And as I mentioned, we are committed to resizing where we can for those new environments. We continue to invest, as you mentioned, so we do have ongoing operating costs related to some of the tenders that we did, so that we're still digesting some of the large amounts of capital expenditures we put in place last year.

And then finally, for the quarter, we also did have some of the revenue and expense initiatives, as I mentioned, so things like severance and some consultant costs and take down expenses that are affecting the quarter as well. And just for (CCI) alone, that's probably in the $6 million range.

So clearly we're working it hard but it is something that – it's country-by-country really reevaluating what we need to do to reposition some of these businesses.

All right, well, thank you. That completes today's conference call. I would like to make one comment that a question that Jason Kim asked earlier about the (inaudible) payment.

The $57 million that we disclose in our financial statements would be payable to third-party holders. So it would not include any notes held by our unrestricted subsidiary. I believe that it said it would also include that. So I apologize for that error.

That does complete today's conference call. We appreciate each of you joining us today and if you have any follow-up questions, please feel free to contact us. Thank you.

Operator

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

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Source: Clear Channel Outdoor Holdings, Inc.'s CEO Discusses Second Quarter Results- Earnings Call Transcript
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