|
Derivative Financial Instruments
|
6 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
|
Jun. 30, 2011
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Derivative Financial Instruments [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Derivative Financial Instruments |
3. Derivative Financial Instruments
The Company’s derivative financial instruments are as follows:
May 2005 Option
In May 2005, the Company entered into an interest rate option agreement (the “May 2005
Option”), that provided Bank of America, N.A. the right to enter into an underlying swap agreement
with the Company for two years, from March 13, 2009 through March 13, 2011.
The May 2005 Option was exercised on March 11, 2009. This instrument was not highly effective
in mitigating the risks in the Company’s cash flows, and therefore the Company deemed it
speculative, and accounted for changes in the May 2005 Option’s value as a current element of
interest expense. The May 2005 Option expired on March 13, 2011. The balance sheets as of June 30,
2011 and December 31, 2010 reflect current liabilities of $0.0 million and $3.7 million,
respectively, to include the fair value of the May 2005 Option. The Company reported interest
income of $0.0 million and $3.7 million, inclusive of the fair value adjustment during the three
and six months ended June 30, 2011, respectively. Additionally for the three and six months ended
June 30, 2010, the Company reported $3.5 million and $5.4 million in interest expense,
respectively.
The Company does not utilize financial instruments for trading or other speculative purposes.
Green Bay Option
On April 10, 2009 (the “Acquisition Date”), Clear Channel and the Company entered into an LMA
whereby the Company is responsible for operating (i.e., programming, advertising, etc.) five Green
Bay radio stations and must pay Clear Channel a monthly fee of approximately $0.2 million over a
five year term (expiring December 31, 2013), in exchange for the Company retaining the operating
profits from managing the radio stations. Clear Channel also has a put option (the “Green Bay
Option”) that would allow it to require the Company to purchase the five Green Bay radio stations
at any time during the two-month period commencing July 1, 2013 (or earlier if the LMA is
terminated before this date) for $17.6 million (the fair value of the radio stations as of April
10, 2009). The Company accounted for the Green Bay Option as a derivative contract. Accordingly, the fair
value of the put was recorded as a liability offsetting the gain at the Acquisition Date with
subsequent changes in the fair value recorded through earnings. The fair value of the Green Bay
Option was determined using inputs that are supported by little or no market activity (a “Level 3”
fair value measurement). The fair value represents an estimate of the net amount that the Company
would be required to pay if the Green Bay Option was transferred to another party as of the date of
the valuation (see Note 4, “Fair Value Measurements”).
The following table sets forth the location and fair values of derivatives in the unaudited
condensed consolidated balance sheets:
Information on the Location and Amounts of Derivatives Fair Values in the
Unaudited Condensed Consolidated Balance Sheets (dollars in thousands)
The location and fair values of derivatives in the unaudited condensed consolidated statements
of operations are shown in the following table:
Information on the Location and Amounts of Derivatives Fair Values in the
Unaudited Condensed Consolidated Statements of Operations (dollars in thousands)
|
|||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||