10-Q: Quarterly report pursuant to Section 13 or 15(d)
Published on May 22, 2018
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 MARCH 31, 2018
[ ] 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
001‑32663
CLEAR CHANNEL OUTDOOR HOLDINGS, INC.
(Exact name of registrant as specified in its charter)
Delaware |
86-0812139 |
|
(State or other jurisdiction of
incorporation or organization)
|
(I.R.S. Employer Identification No.) |
|
20880 Stone Oak Parkway
San Antonio, Texas
|
78258 |
|
(Address of principal executive offices) |
(Zip Code) |
(210) 832-3700
(Registrant’s telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [ ]
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes [X] No [ ]
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer [ ] Accelerated filer [X] Non-accelerated filer [ ] Smaller reporting company [ ] Emerging growth company [ ]
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. [ ]
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 May 17, 2018 |
- - - - - - - - - - - - - - - - - - - - - - - - - - |
- - - - - - - - - - - - - - - - - - - - - - - - - - |
Class A Common Stock, $.01 par value |
49,005,310 |
Class B Common Stock, $.01 par value |
315,000,000 |
CLEAR CHANNEL OUTDOOR HOLDINGS, INC.
INDEX
Page No. |
||
Part I -- Financial Information |
||
Item 1. |
||
Item 2. |
||
Item 3. |
||
Item 4. |
||
Part II -- Other Information |
||
Item 1. |
||
Item 1A. |
||
Item 2. |
||
Item 3. |
||
Item 4. |
||
Item 5. |
||
Item 6. |
||
PART I – FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
CONSOLIDATED BALANCE SHEETS
CLEAR CHANNEL OUTDOOR HOLDINGS, INC. AND SUBSIDIARIES
(In thousands, except share and per share data) |
March 31, 2018 |
December 31, 2017 |
|||||
(Unaudited) |
|||||||
CURRENT ASSETS |
|||||||
Cash and cash equivalents |
$ |
153,229 |
$ |
144,119 |
|||
Accounts receivable, net of allowance of $24,013 in 2018 and $22,487 in 2017 |
635,821 |
659,463 |
|||||
Prepaid expenses |
151,695 |
111,876 |
|||||
Other current assets |
62,908 |
58,714 |
|||||
Total Current Assets |
1,003,653 |
974,172 |
|||||
PROPERTY, PLANT AND EQUIPMENT |
|||||||
Structures, net |
1,151,469 |
1,180,882 |
|||||
Other property, plant and equipment, net |
213,610 |
214,147 |
|||||
INTANGIBLE ASSETS AND GOODWILL |
|||||||
Indefinite-lived intangibles |
977,152 |
977,152 |
|||||
Other intangibles, net |
269,299 |
273,862 |
|||||
Goodwill |
718,667 |
714,043 |
|||||
OTHER ASSETS |
|||||||
Due from iHeartCommunications, net of allowance of $855,648 in 2018 and 2017 |
154,758 |
211,990 |
|||||
Other assets |
126,917 |
124,534 |
|||||
Total Assets |
$ |
4,615,525 |
$ |
4,670,782 |
|||
CURRENT LIABILITIES |
|||||||
Accounts payable |
$ |
120,644 |
$ |
87,960 |
|||
Accrued expenses |
504,028 |
509,801 |
|||||
Deferred income |
108,727 |
59,178 |
|||||
Current portion of long-term debt |
487 |
573 |
|||||
Total Current Liabilities |
733,886 |
657,512 |
|||||
Long-term debt |
5,270,859 |
5,266,153 |
|||||
Due to iHeartCommunications, post iHeart Chapter 11 Cases |
3,445 |
— |
|||||
Deferred income taxes |
336,787 |
318,107 |
|||||
Other long-term liabilities |
264,157 |
270,415 |
|||||
Commitments and Contingent liabilities (Note 5) |
|||||||
STOCKHOLDERS’ DEFICIT |
|||||||
Noncontrolling interest |
158,069 |
157,040 |
|||||
Preferred stock, par value $.01 per share, 150,000,000 shares authorized, no shares issued and outstanding |
— |
— |
|||||
Class A common stock, par value $.01 per share, authorized 750,000,000 shares, issued 49,971,476 and 49,955,300 shares in 2018 and 2017, respectively |
500 |
500 |
|||||
Class B common stock, par value $.01 per share, 600,000,000 shares authorized, 315,000,000 shares issued and outstanding |
3,150 |
3,150 |
|||||
Additional paid-in capital |
3,079,958 |
3,108,148 |
|||||
Accumulated deficit |
(4,892,446 |
) |
(4,765,514 |
) |
|||
Accumulated other comprehensive loss |
(337,025 |
) |
(338,936 |
) |
|||
Cost of shares (951,061 in 2018 and 946,415 in 2017) held in treasury |
(5,815 |
) |
(5,793 |
) |
|||
Total Stockholders’ Deficit |
(1,993,609 |
) |
(1,841,405 |
) |
|||
Total Liabilities and Stockholders’ Deficit |
$ |
4,615,525 |
$ |
4,670,782 |
See Notes to Consolidated Financial Statements
1
CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
CLEAR CHANNEL OUTDOOR HOLDINGS, INC. AND SUBSIDIARIES
(UNAUDITED)
(In thousands, except per share data) |
Three Months Ended |
||||||
March 31, |
|||||||
2018 |
2017 |
||||||
Revenue |
$ |
598,711 |
$ |
544,726 |
|||
Operating expenses: |
|||||||
Direct operating expenses (excludes depreciation and amortization) |
360,202 |
327,931 |
|||||
Selling, general and administrative expenses (excludes depreciation and amortization) |
127,408 |
115,774 |
|||||
Corporate expenses (excludes depreciation and amortization) |
35,435 |
34,540 |
|||||
Depreciation and amortization |
84,060 |
77,494 |
|||||
Other operating income (expense), net |
(54 |
) |
32,611 |
||||
Operating income (loss) |
(8,448 |
) |
21,598 |
||||
Interest expense |
97,264 |
92,633 |
|||||
Interest income on Due from iHeartCommunications |
— |
14,807 |
|||||
Equity in earnings (loss) of nonconsolidated affiliates |
188 |
(472 |
) |
||||
Other income, net |
19,543 |
3,867 |
|||||
Loss before income taxes |
(85,981 |
) |
(52,833 |
) |
|||
Income tax benefit (expense) |
(45,367 |
) |
21,837 |
||||
Consolidated net loss |
(131,348 |
) |
(30,996 |
) |
|||
Less amount attributable to noncontrolling interest |
(4,416 |
) |
(1,995 |
) |
|||
Net loss attributable to the Company |
$ |
(126,932 |
) |
$ |
(29,001 |
) |
|
Other comprehensive income (loss), net of tax: |
|||||||
Foreign currency translation adjustments |
7,237 |
9,653 |
|||||
Unrealized holding loss on marketable securities |
(90 |
) |
(57 |
) |
|||
Reclassification adjustments |
— |
(1,644 |
) |
||||
Other comprehensive income |
7,147 |
7,952 |
|||||
Comprehensive loss |
(119,785 |
) |
(21,049 |
) |
|||
Less amount attributable to noncontrolling interest |
5,236 |
(2,523 |
) |
||||
Comprehensive loss attributable to the Company |
$ |
(125,021 |
) |
$ |
(18,526 |
) |
|
Net loss attributable to the Company per common share: |
|||||||
Basic |
$ |
(0.35 |
) |
$ |
(0.08 |
) |
|
Weighted average common shares outstanding – Basic |
361,515 |
360,754 |
|||||
Diluted |
$ |
(0.35 |
) |
$ |
(0.08 |
) |
|
Weighted average common shares outstanding – Diluted |
361,515 |
360,754 |
|||||
Dividends declared and paid per share |
$ |
0.08 |
$ |
0.78 |
See Notes to Consolidated Financial Statements
2
CONSOLIDATED STATEMENTS OF CASH FLOWS
CLEAR CHANNEL OUTDOOR HOLDINGS, INC. AND SUBSIDIARIES
(UNAUDITED)
(In thousands) |
Three Months Ended March 31, |
||||||
2018 |
2017 |
||||||
Cash flows from operating activities: |
|||||||
Consolidated net loss |
$ |
(131,348 |
) |
$ |
(30,996 |
) |
|
Reconciling items: |
|||||||
Depreciation and amortization |
84,060 |
77,494 |
|||||
Deferred taxes |
20,246 |
(15,579 |
) |
||||
Provision for doubtful accounts |
1,686 |
521 |
|||||
Amortization of deferred financing charges and note discounts, net |
2,628 |
2,683 |
|||||
Share-based compensation |
2,106 |
2,359 |
|||||
Gain on disposal of operating and other assets |
(188 |
) |
(33,322 |
) |
|||
Equity in (earnings) loss of nonconsolidated affiliates |
(188 |
) |
472 |
||||
Foreign exchange transaction gain |
(19,600 |
) |
(3,534 |
) |
|||
Other reconciling items, net |
(1,059 |
) |
(1,478 |
) |
|||
Changes in operating assets and liabilities, net of effects of acquisitions and dispositions: |
|||||||
Decrease in accounts receivable |
36,317 |
37,052 |
|||||
Increase in prepaid expenses and other current assets |
(38,423 |
) |
(55,095 |
) |
|||
Decrease in accrued expenses |
(26,832 |
) |
(59,481 |
) |
|||
Increase (decrease) in accounts payable |
30,574 |
(15,506 |
) |
||||
Increase in accrued interest |
8,491 |
4,835 |
|||||
Increase in deferred income |
47,384 |
44,232 |
|||||
Changes in other operating assets and liabilities |
(10,828 |
) |
(4,367 |
) |
|||
Net cash provided by (used for) operating activities |
$ |
5,026 |
$ |
(49,710 |
) |
||
Cash flows from investing activities: |
|||||||
Purchases of property, plant and equipment |
(28,672 |
) |
(36,344 |
) |
|||
Proceeds from disposal of assets |
1,281 |
53,279 |
|||||
Purchases of other operating assets |
(34 |
) |
(1,064 |
) |
|||
Change in other, net |
168 |
(214 |
) |
||||
Net cash provided by (used for) investing activities |
$ |
(27,257 |
) |
$ |
15,657 |
||
Cash flows from financing activities: |
|||||||
Payments on credit facilities |
— |
(375 |
) |
||||
Payments on long-term debt |
(155 |
) |
(163 |
) |
|||
Net transfers from (to) iHeartCommunications |
60,677 |
(29,448 |
) |
||||
Dividends and other payments from (to) noncontrolling interests |
(97 |
) |
826 |
||||
Dividends paid |
(29,910 |
) |
(281,673 |
) |
|||
Change in other, net |
(16 |
) |
(257 |
) |
|||
Net cash provided by (used for) financing activities |
$ |
30,499 |
$ |
(311,090 |
) |
||
Effect of exchange rate changes on cash, cash equivalents and restricted cash |
3,292 |
3,588 |
|||||
Net increase (decrease) in cash, cash equivalents and restricted cash |
11,560 |
(341,555 |
) |
||||
Cash, cash equivalents and restricted cash at beginning of period |
188,310 |
563,149 |
|||||
Cash, cash equivalents and restricted cash at end of period |
$ |
199,870 |
$ |
221,594 |
|||
SUPPLEMENTAL DISCLOSURES: |
|||||||
Cash paid for interest |
86,054 |
86,759 |
|||||
Cash paid for income taxes |
9,303 |
17,193 |
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
All references in this Quarterly Report on Form 10-Q to the “Company,” “we,” “us” and “our” refer to Clear Channel Outdoor Holdings, Inc. and its consolidated subsidiaries. Our reportable segments are Americas outdoor advertising (“Americas”) and International outdoor advertising (“International”). The accompanying consolidated financial statements were prepared by 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 may not be 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 2017 Annual Report on Form 10-K.
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, iHeartCommunications, Inc. (“iHeartCommunications”). 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% to 50% 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.
The Company re-evaluated its segment reporting and determined that its Latin American operations should be managed by its International leadership team. As a result, beginning on January 1, 2018, the operations of Latin America are no longer reflected within the Company’s Americas segment and are included in the results of its International segment. Accordingly, the Company has recast the corresponding segment disclosures for prior periods to include Latin America within the International segment.
New Accounting Pronouncements Recently Adopted
As of January 1, 2018, the Company adopted the new accounting standard, ASC 606, Revenue from Contracts with Customers. This standard provides guidance for the recognition, measurement and disclosure of revenue from contracts with customers and supersedes previous revenue recognition guidance under U.S. GAAP. The Company has applied this standard using the full retrospective method and concluded that its adoption did not have a material impact on the Company’s balance sheets, statements of comprehensive loss, or statements of cash flows for prior periods. Please refer to Note 2, “Revenue from Contracts with Customers,” for more information.
As a result of adopting this new accounting standard, the Company has updated its significant accounting policies for accounts receivable and revenue recognition, as follows:
Accounts Receivable
Accounts receivable are recorded when the Company has an unconditional right to payment, either because it has satisfied a performance obligation prior to receiving payment from the customer or has a non-cancelable contract that has been billed in advance in accordance with the Company’s normal billing terms.
Accounts receivable are recorded at the invoiced amount, net of allowances for doubtful accounts. The Company evaluates the collectability of its accounts receivable based on a combination of factors. In circumstances where it is aware of a specific customer’s inability to meet its financial obligations, it records a specific reserve to reduce the amounts recorded to what it believes will be collected. For all other customers, it recognizes reserves for bad debt based on historical experience of bad debts as a percent of revenue for each business unit, adjusted for relative improvements or deteriorations in the agings and changes in current economic conditions. The Company believes its concentration of credit risk is limited due to the large number and the geographic diversification of its customers.
4
CLEAR CHANNEL OUTDOOR HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
Revenue Recognition
The Company recognizes revenue in amounts that reflect the consideration it expects to receive in exchange for transferring goods or services to customers, excluding sales taxes and other similar taxes collected on behalf of governmental authorities (the “transaction price”). When this consideration includes a variable amount, the Company estimates the amount of consideration it expects to receive and only recognizes revenue to the extent that it is probable it will not be reversed in a future reporting period. For revenue arrangements that contain multiple distinct goods or services, the Company allocates the transaction price to these performance obligations in proportion to their relative standalone selling prices.
The Company recognizes revenue when or as it satisfies a performance obligation by transferring a promised good or service to a customer. Revenue from the Company’s Americas and International outdoor advertising segments’ contracts, which typically cover periods of a few weeks to one year, are generally recognized ratably over the term of the contract as the advertisement is displayed and the performance obligation is satisfied. Advertising revenue is reported net of agency commissions.
The Company receives payments from customers based on billing schedules that are established in its contracts. Outdoor advertising contracts are generally billed monthly. Americas outdoor is generally billed in advance, and International outdoor includes a combination of advance billings and billings upon completion of service. Deferred income is recorded when payment is received from a customer before the Company has satisfied the performance obligation or a non-cancelable contract has been billed in advance in accordance with the Company’s normal billing terms.
Trade and barter transactions represent the exchange of display space for merchandise, services or other assets in the ordinary course of business. The transaction price for these contracts is determined as the estimated fair value of the non-cash consideration received unless this is not reasonably estimable, in which case the consideration is measured based on the standalone selling price of the display space promised to the customer. Revenue is recognized on trade and barter transactions when the advertisements are displayed, and expenses are recorded ratably over a period that estimates when the merchandise, services or other assets received are utilized, or when the event occurs. Trade and barter revenues and expenses from continuing operations are included in consolidated revenue and selling, general and administrative expenses, respectively. Trade and barter revenues and expenses from continuing operations were as follows:
Three Months Ended March 31, |
|||||||
(In thousands) |
2018 |
2017 |
|||||
Consolidated: |
|||||||
Trade and barter revenues |
$ |
3,339 |
$ |
4,009 |
|||
Trade and barter expenses |
4,720 |
3,780 |
The Company applies a practical expedient to recognize incremental costs of obtaining a contract as expense when incurred if the period of benefit is one year or less. These costs primarily relate to sales commissions, which are included in selling, general and administrative expenses and are generally commensurate with sales. Total capitalized costs to obtain a contract were immaterial during the periods presented.
Refer to Note 2, Revenue from Contracts with Customers, for more information about the Company’s revenue for the three months ended March 31, 2018 and 2017.
Restricted Cash
In November 2016, the FASB issued ASU 2016-18, Restricted Cash, which requires that restricted cash be presented with cash and cash equivalents in the statement of cash flows. Restricted cash is recorded in Other current assets and in Other assets in the Company's Consolidated Balance Sheets. The Company adopted ASU 2016-18 in the first quarter using the retrospective transition method, and accordingly, revised prior period amounts as shown in the Company's Consolidated Statements of Cash Flows.
The following table provides a reconciliation of cash, cash equivalents and restricted cash reported in the Consolidated Balance Sheet to the total of the amounts reported in the Consolidated Statement of Cash Flows:
5
CLEAR CHANNEL OUTDOOR HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(In thousands) |
March 31, 2018 |
December 31, 2017 |
|||||
Cash and cash equivalents |
$ |
153,229 |
$ |
144,119 |
|||
Restricted cash included in: |
|||||||
Other current assets |
30,054 |
26,096 |
|||||
Other assets |
16,587 |
18,095 |
|||||
Total cash, cash equivalents and restricted cash in the Statement of Cash Flows |
$ |
199,870 |
$ |
188,310 |
Stock Compensation
During the second quarter of 2017, the FASB issued ASU 2017-09, Compensation - Stock Compensation (Topic 718). This update mandates that entities will apply the modification accounting guidance if the value, vesting conditions or classification of a stock-based award changes. Entities will have to make all of the disclosures about modifications that are required today, in addition to disclosing that compensation expense hasn't changed. Additionally, the new guidance also clarifies that a modification to an award could be significant and therefore require disclosure, even if the modification accounting is not required. The guidance will be applied prospectively to awards modified on or after the adoption date and is effective for annual periods, and interim periods within those annual periods, beginning after December 15, 2017. The Company adopted the provisions of ASU 2017-09 on January 1, 2018 and the adoption of ASU 2017-09 did not have an impact on our consolidated financial statements.
New Accounting Pronouncements Not Yet Adopted
During the first quarter of 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842). The new leasing standard presents significant changes to the balance sheets of lessees. Lessor accounting is updated to align with certain changes in the lessee model and the new revenue recognition standard which was issued in the third quarter of 2015. The standard is effective for annual periods, and for interim periods within those annual periods, beginning after December 15, 2018. The Company is currently evaluating the impact of the provisions of this new standard on its consolidated financial statements.
During the first quarter of 2017, the FASB issued ASU 2017-04, Intangibles - Goodwill and Other (Topic 350). This update eliminates the requirement to calculate the implied fair value of goodwill to measure a goodwill impairment charge. Entities will record an impairment charge based on the excess of a reporting unit's carrying amount over its fair value. The standard is effective for annual and any interim impairment tests performed for periods beginning after December 15, 2019. The Company is currently evaluating the impact of the provisions of this new standard on its consolidated financial statements.
NOTE 2 – REVENUE FROM CONTRACTS WITH CUSTOMERS
The Americas and International outdoor segments generate revenue primarily from the sale of advertising space on printed and digital displays, including billboards, street furniture displays, transit displays and retail displays.
Certain of the revenue transactions in the Outdoor segments are considered leases as the agreements convey to customers the right to use the Company’s advertising structures for a stated period of time. In order for a transaction with a customer to qualify as a lease, the arrangement must be dependent on the use of a specified advertising structure, and the customer must have almost exclusive use of that structure during the term of the arrangement. Therefore, arrangements that do not involve the use of an advertising structure, where the Company can substitute the advertising structure that is used to display the customer’s advertisement, or where the advertising structure displays advertisements for multiple customers throughout the day are not leases. The Company accounts for revenue from leases, which are all classified as operating leases, in accordance with the lease accounting guidance (Topic 840). All of the Company’s revenue transactions that do not qualify as a lease are accounted for as revenue from contracts with customers (Topic 606).
6
CLEAR CHANNEL OUTDOOR HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
The following table shows, by segment, revenue from contracts with customers disaggregated by geographical region, revenue from leases and total revenue for the three months ended March 31, 2018 and 2017:
(In thousands) |
Americas Outdoor(1)
|
International Outdoor(1)
|
Consolidated |
||||||||
Three Months Ended March 31, 2018 | |||||||||||
Revenue from contracts with customers: |
|||||||||||
United States |
$ |
96,147 |
$ |
— |
$ |
96,147 |
|||||
Other Americas |
650 |
16,792 |
17,442 |
||||||||
Europe |
— |
188,381 |
188,381 |
||||||||
Asia-Pacific and other |
— |
6,508 |
6,508 |
||||||||
Eliminations |
— |
(71 |
) |
(71 |
) |
||||||
Total |
$ |
96,797 |
$ |
211,610 |
$ |
308,407 |
|||||
Revenue from leases |
159,050 |
131,254 |
290,304 |
||||||||
Total Revenue |
$ |
255,847 |
$ |
342,864 |
$ |
598,711 |
|||||
Three Months Ended March 31, 2017 | |||||||||||
Revenue from contracts with customers: | |||||||||||
United States |
$ |
93,662 |
$ |
— |
$ |
93,662 |
|||||
Other Americas |
3,531 |
13,457 |
16,988 |
||||||||
Europe |
— |
154,604 |
154,604 |
||||||||
Asia-Pacific and other |
— |
5,456 |
5,456 |
||||||||
Eliminations |
— |
(40 |
) |
(40 |
) |
||||||
Total |
$ |
97,193 |
$ |
173,477 |
$ |
270,670 |
|||||
Revenue from leases |
163,153 |
110,903 |
274,056 |
||||||||
Total Revenue |
$ |
260,346 |
$ |
284,380 |
$ |
544,726 |
(1) Due to a re-evaluation of the Company’s internal segment reporting during the three months ended March 31, 2018, its operations in Latin America are being included in the International outdoor advertising segment results for all periods presented. See Note 1, Basis of Presentation.
All of the Company’s advertising structures are used to generate revenue. Such revenue may be classified as revenue from contracts with customers or revenue from leases depending on the terms of the contract, as previously described.
7
CLEAR CHANNEL OUTDOOR HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
Revenue from Contracts with Customers
The following table presents the activity related to the Company’s contract balances from contracts with customers for the three months ended March 31, 2018 and 2017:
Three Months Ended March 31, |
|||||||
(In thousands) |
2018 |
2017 |
|||||
Accounts receivable from contracts with customers: |
|||||||
Beginning balance, net of allowance |
$ |
351,228 |
$ |
300,216 |
|||
Additions (collections), net |
(40,323 |
) |
(28,005 |
) |
|||
Bad debt, net of recoveries |
(641 |
) |
(218 |
) |
|||
Ending balance, net of allowance |
$ |
310,264 |
$ |
271,993 |
|||
Accounts receivable from leases |
325,557 |
288,778 |
|||||
Accounts receivable, total |
$ |
635,821 |
$ |
560,771 |
|||
Deferred income from contracts with customers: |
|||||||
Beginning balance |
$ |
28,211 |
$ |
28,681 |
|||
Revenue recognized, included in beginning balance |
(19,522 |
) |
(21,246 |
) |
|||
Additions, net of revenue recognized during period |
36,315 |
41,414 |
|||||
Ending balance |
$ |
45,004 |
$ |
48,849 |
|||
Deferred income from leases |
68,682 |
67,158 |
|||||
Deferred income, total |
$ |
113,686 |
$ |
116,007 |
The Company’s contracts with customers generally have a term of one year or less; however, as of March 31, 2018, the Company expects to recognize $74.4 million of revenue in future periods for remaining performance obligations from current contracts with customers that have an original expected duration of greater than one year, with substantially all of this amount to be recognized over the next five years. As part of the transition to the new revenue standard, the Company is not required to disclose information about remaining performance obligations for periods prior to the date of initial application.
Revenue from Leases
As of December 31, 2017, the Company’s future minimum rentals under non-cancelable operating leases were as follows:
(in thousands) | |||
2018 |
$ |
277,462 |
|
2019 |
34,395 |
||
2020 |
17,155 |
||
2021 |
12,004 |
||
2022 |
8,552 |
||
Thereafter |
7,197 |
||
Total minimum future rentals |
$ |
356,765 |
8
CLEAR CHANNEL OUTDOOR HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 3 – 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 as of March 31, 2018 and December 31, 2017, respectively:
(In thousands) |
March 31, 2018 |
December 31, 2017 |
|||||
Land, buildings and improvements |
$ |
147,376 |
$ |
145,763 |
|||
Structures |
2,890,924 |
2,864,442 |
|||||
Furniture and other equipment |
186,265 |
179,215 |
|||||
Construction in progress |
56,096 |
55,753 |
|||||
3,280,661 |
3,245,173 |
||||||
Less: accumulated depreciation |
1,915,582 |
1,850,144 |
|||||
Property, plant and equipment, net |
$ |
1,365,079 |
$ |
1,395,029 |
Indefinite-lived Intangible Assets
The Company’s indefinite-lived intangible assets 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. Accordingly, there are no indefinite-lived intangible assets in the International segment.
Other Intangible Assets
Other intangible assets include definite-lived intangible assets and permanent easements. The Company’s definite-lived intangible assets primarily include transit and street furniture contracts, site leases 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. Permanent easements are indefinite-lived intangible assets which include certain rights to use real property not owned by the Company. The Company periodically reviews the appropriateness of the amortization periods related to its definite-lived intangible assets. These assets are recorded at cost.
The following table presents the gross carrying amount and accumulated amortization for each major class of other intangible assets as of March 31, 2018 and December 31, 2017, respectively:
(In thousands) |
March 31, 2018 |
December 31, 2017 |
|||||||||||||
Gross Carrying Amount |
Accumulated Amortization |
Gross Carrying Amount |
Accumulated Amortization |
||||||||||||
Transit, street furniture and other outdoor
contractual rights
|
$ |
557,381 |
$ |
(453,022 |
) |
$ |
548,918 |
$ |
(440,284 |
) |
|||||
Permanent easements |
162,920 |
— |
162,920 |
— |
|||||||||||
Other |
6,264 |
(4,244 |
) |
4,626 |
(2,318 |
) |
|||||||||
Total |
$ |
726,565 |
$ |
(457,266 |
) |
$ |
716,464 |
$ |
(442,602 |
) |
Total amortization expense related to definite-lived intangible assets for the three months ended March 31, 2018 and 2017 was $5.2 million and $7.0 million, respectively.
As acquisitions and dispositions occur in the future, amortization expense may vary. The following table presents the Company’s estimate of amortization expense for each of the five succeeding fiscal years for definite-lived intangible assets:
9
CLEAR CHANNEL OUTDOOR HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(In thousands) |
|||
2019 |
$ |
15,456 |
|
2020 |
$ |
13,080 |
|
2021 |
$ |
12,841 |
|
2022 |
$ |
10,937 |
|
2023 |
$ |
6,601 |
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 |
Consolidated |
||||||||
Balance as of December 31, 2016 |
$ |
505,478 |
$ |
190,785 |
$ |
696,263 |
|||||
Acquisitions |
2,252 |
— |
2,252 |
||||||||
Impairment |
— |
(1,591 |
) |
(1,591 |
) |
||||||
Dispositions |
— |
(1,817 |
) |
(1,817 |
) |
||||||
Foreign currency |
— |
18,847 |
18,847 |
||||||||
Assets held for sale |
89 |
— |
89 |
||||||||
Balance as of December 31, 2017 |
$ |
507,819 |
$ |
206,224 |
$ |
714,043 |
|||||
Foreign currency |
— |
4,624 |
4,624 |
||||||||
Balance as of March 31, 2018 |
$ |
507,819 |
$ |
210,848 |
$ |
718,667 |
NOTE 4 – LONG-TERM DEBT
Long-term debt outstanding as of March 31, 2018 and December 31, 2017 consisted of the following:
(In thousands) |
March 31, 2018 |
December 31, 2017 |
|||||
Clear Channel Worldwide Holdings Senior Notes: |
|||||||
6.5% Series A Senior Notes Due 2022 |
$ |
735,750 |
$ |
735,750 |
|||
6.5% Series B Senior Notes Due 2022 |
1,989,250 |
1,989,250 |
|||||
Clear Channel Worldwide Holdings Senior Subordinated Notes: |
|||||||
7.625% Series A Senior Subordinated Notes Due 2020 |
275,000 |
275,000 |
|||||
7.625% Series B Senior Subordinated Notes Due 2020 |
1,925,000 |
1,925,000 |
|||||
Senior Revolving Credit Facility Due 2018(1)
|
— |
— |
|||||
Clear Channel International B.V. Senior Notes Due 2020 |
375,000 |
375,000 |
|||||
Other debt |
4,385 |
2,393 |
|||||
Original issue discount |
(360 |
) |
(241 |
) |
|||
Long-term debt fees |
(32,679 |
) |
(35,426 |
) |
|||
Total debt |
$ |
5,271,346 |
$ |
5,266,726 |
|||
Less: current portion |
487 |
573 |
|||||
Total long-term debt |
$ |
5,270,859 |
$ |
5,266,153 |
(1) |
The senior revolving credit facility provides for borrowings up to $75.0 million (the revolving credit commitment). As of March 31, 2018, the Company had $66.5 million of letters of credit outstanding, and $8.5 million of availability, under the senior revolving credit facility.
|
10
CLEAR CHANNEL OUTDOOR HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
The facility matures on August 22, 2018, and the Company is in advanced negotiations with potential lenders to refinance the existing credit facility prior to its maturity.
The aggregate market value of the Company’s debt based on market prices for which quotes were available was approximately $5.4 billion and $5.3 billion as of March 31, 2018 and December 31, 2017, respectively. Under the fair value hierarchy established by ASC 820-10-35, the market value of the Company’s debt is classified as Level 1.
Surety Bonds, Letters of Credit and Guarantees
As of March 31, 2018, the Company had $41.7 million, $91.2 million and $39.9 million in surety bonds, letters of credit and bank guarantees outstanding, respectively. A portion of the outstanding bank guarantees and letters of credit were supported by $17.8 million and $25.4 million of cash collateral, respectively. Additionally, as of March 31, 2018, iHeartCommunications had outstanding commercial standby letters of credit and surety bonds of $1.2 million and $13.4 million, respectively, held on behalf of the Company. These surety bonds, letters of credit and bank guarantees relate to various operational matters, including insurance, bid and performance bonds, as well as other items.
NOTE 5 – COMMITMENTS AND CONTINGENCIES
The Company and its subsidiaries 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 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; misappropriation of likeness and right of publicity claims; employment and benefits related claims; governmental fines; intellectual property claims; and tax disputes.
Stockholder Litigation
On May 9, 2016, a stockholder of the Company filed a derivative lawsuit in the Court of Chancery of the State of Delaware, captioned GAMCO Asset Management Inc. v. iHeartMedia Inc. et al., C.A. No. 12312-VCS. The complaint named as defendants iHeartCommunications, Inc. (“iHeartCommunications”), the Company’s indirect parent company, iHeartMedia, Inc. (“iHeartMedia”), the parent company of iHeartCommunications, Bain Capital Partners, LLC and Thomas H. Lee Partners, L.P. (together, the “Sponsor Defendants”), iHeartMedia’s private equity sponsors and majority owners, and the members of the Company’s board of directors. The Company also was named as a nominal defendant. The complaint alleged that the Company had been harmed by the intercompany agreements with iHeartCommunications, the Company’s lack of autonomy over its own cash and the actions of the defendants in serving the interests of iHeartMedia, iHeartCommunications and the Sponsor Defendants to the detriment of the Company and its minority stockholders. Specifically, the complaint alleged that the defendants breached their fiduciary duties by causing the Company to: (i) continue to loan cash to iHeartCommunications under the intercompany note at below-market rates; (ii) abandon its growth and acquisition strategies in favor of transactions that would provide cash to iHeartMedia and iHeartCommunications; (iii) issue new debt in the CCIBV note offering (the “CCIBV Note Offering”) to provide cash to iHeartMedia and iHeartCommunications through a dividend; and (iv) effect the sales of certain outdoor markets in the U.S. (the “Outdoor Asset Sales”) allegedly to provide cash to iHeartMedia and iHeartCommunications through a dividend. The complaint also alleged that iHeartMedia, iHeartCommunications and the Sponsor Defendants aided and abetted the directors’ breaches of their fiduciary duties. The complaint further alleged that iHeartMedia, iHeartCommunications and the Sponsor Defendants were unjustly enriched as a result of these transactions and that these transactions constituted a waste of corporate assets for which the defendants are liable to the Company. The plaintiff sought, among other things, a ruling that the defendants breached their fiduciary duties to the Company and that iHeartMedia, iHeartCommunications and the Sponsor Defendants aided and abetted the board of directors’ breaches of fiduciary duty, rescission of payments to iHeartCommunications and its affiliates pursuant to dividends declared in connection with the CCIBV Note Offering and Outdoor Asset Sales, and an order requiring iHeartMedia, iHeartCommunications and the Sponsor Defendants to disgorge all profits they have received as a result of the alleged fiduciary misconduct.
11
CLEAR CHANNEL OUTDOOR HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
On July 20, 2016, the defendants filed a motion to dismiss plaintiff's verified stockholder derivative complaint for failure to state a claim upon which relief can be granted. On November 23, 2016, the Court granted defendants’ motion to dismiss all claims brought by the plaintiff. On December 19, 2016, the plaintiff filed a notice of appeal of the ruling. The oral hearing on the appeal was held on October 11, 2017. On October 12, 2017, the Supreme Court of Delaware affirmed the lower court's ruling, dismissing the case.
On December 29, 2017, another stockholder of the Company filed a derivative lawsuit in the Court of Chancery of the State of Delaware, captioned Norfolk County Retirement System, v. iHeartMedia, Inc., et al., C.A. No. 2017-0930-JRS. The complaint names as defendants iHeartMedia, iHeartCommunications, the Sponsor Defendants, and the members of the Company's board of directors. The Company is named as a nominal defendant. The complaint alleges that the Company has been harmed by the Company Board’s November 2017 decision to extend the maturity date of the intercompany revolving note (the “Third Amendment”) at what the complaint describes as far-below-market interest rates. Specifically, the complaint alleges that (i) iHeartMedia and Sponsor defendants breached their fiduciary duties by exploiting their position of control to require the Company to enter the Third Amendment on terms unfair to the Company; (ii) the Company Board breached their duty of loyalty by approving the Third Amendment and elevating the interests of iHeartMedia, iHeartCommunications and the Sponsor Defendants over the interests of the Company and its minority unaffiliated stockholders; and (iii) the terms of the Third Amendment could not have been agreed to in good faith and represent a waste of corporate assets by the Company Board. The complaint further alleges that iHeartMedia, iHeartCommunications and the Sponsor defendants were unjustly enriched as a result of the unfairly favorable terms of the Third Amendment. The plaintiff is seeking, among other things, a ruling that the defendants breached their fiduciary duties to the Company, a modification of the Third Amendment to bear a commercially reasonable rate of interest, and an order requiring disgorgement of all profits, benefits and other compensation obtained by defendants as a result of the alleged breaches of fiduciary duties.
On December 29, 2017, another stockholder of CCOH filed a derivative lawsuit in the Court of Chancery of the State of Delaware, captioned Norfolk County Retirement System, v. iHeartMedia, Inc., et al., C.A. No. 2017-0930-JRS. The complaint names as defendants the Company, iHeartCommunications, the Sponsor Defendants, and the members of CCOH's board of directors. CCOH is named as a nominal defendant. The complaint alleges that CCOH has been harmed by the CCOH Board’s November 2017 decision to extend the maturity date of the intercompany revolving note (the “Third Amendment”) at what the complaint describes as far-below-market interest rates. Specifically, the complaint alleges that (i) the Company and Sponsor defendants breached their fiduciary duties by exploiting their position of control to require CCOH to enter the Third Amendment on terms unfair to CCOH; (ii) the CCOH Board breached their duty of loyalty by approving the Third Amendment and elevating the interests of the Company, iHeartCommunications and the Sponsor Defendants over the interests of CCOH and its minority unaffiliated stockholders; and (iii) the terms of the Third Amendment could not have been agreed to in good faith and represent a waste of corporate assets by the CCOH Board. The complaint further alleges that the Company, iHeartCommunications and the Sponsor defendants were unjustly enriched as a result of the unfairly favorable terms of the Third Amendment. The plaintiff is seeking, among other things, a ruling that the defendants breached their fiduciary duties to CCOH, a modification of the Third Amendment to bear a commercially reasonable rate of interest, and an order requiring disgorgement of all profits, benefits and other compensation obtained by defendants as a result of the alleged breaches of fiduciary duties.
On March 7, 2018, the defendants filed a motion to dismiss plaintiff's verified derivative complaint for failure to state a claim upon which relief can be granted. On March 16, 2018, iHeartMedia filed a Notice of Suggestion of Pendency of Bankruptcy and Automatic Stay of Proceedings. On May 4, 2018, plaintiff filed its response to the motion to dismiss.
China Investigation
Several employees of Clear Media Limited, an indirect, non-wholly-owned subsidiary of the Company whose ordinary shares are listed, but are currently suspended from trading on, the Hong Kong Stock Exchange, are subject to an ongoing police investigation in China for misappropriation of funds. The police investigation is on-going, and the Company is not aware of any litigation, claim or assessment pending against the Company. Based on information known to date, the Company believes any contingent liabilities arising from potential misconduct that has been or may be identified by the investigations are not material to the Company's consolidated financial statements.
The Company advised both the United States Securities and Exchange Commission and the United States Department of Justice of the investigation at Clear Media Limited and is cooperating to provide information in response to inquiries from the agencies. The Clear Media Limited investigation could implicate the books and records, internal controls and anti-bribery provisions of the U.S. Foreign Corrupt Practices Act, which statute and regulations provide for potential monetary penalties as well as criminal and
12
CLEAR CHANNEL OUTDOOR HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
civil sanctions. It is possible that monetary penalties and other sanctions could be assessed on the Company in connection with this matter. The nature and amount of any monetary penalty or other sanctions cannot reasonably be estimated at this time.
NOTE 6 — RELATED PARTY TRANSACTIONS
The Company records net amounts due from iHeartCommunications as “Due from iHeartCommunications” on the consolidated balance sheets. The amounts represent the revolving promissory note issued by the Company to iHeartCommunications and the revolving promissory note issued by iHeartCommunications 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 amounts accrue interest pursuant to the terms of the promissory notes and are generally payable on demand or when they mature on May 15, 2019.
Included in the amounts are the net activities resulting from day-to-day cash management services provided by iHeartCommunications. As a part of these services, the Company maintains collection bank accounts swept daily into accounts of iHeartCommunications (after satisfying the funding requirements of the Trustee Accounts under the CCWH Senior Notes and the CCWH Subordinated Notes and 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 iHeartCommunications” account.
As of March 31, 2018 and December 31, 2017, the asset recorded in “Due from iHeartCommunications” on the consolidated balance sheet was $154.8 million and $212.0 million, respectively. On March 14, 2018, iHeartMedia, iHeartCommunications and certain of iHeartMedia's direct and indirect domestic subsidiaries, not including the Company or any of its subsidiaries (collectively, the "Debtors"), filed voluntary petitions for relief (the "iHeart Chapter 11 Cases") under Chapter 11 of the United States Bankruptcy Code, in the United States Bankruptcy Court for the Southern District of Texas, Houston Division (the "Bankruptcy Court"). As an unsecured creditor of iHeartCommunications, the Company does not expect that the Company will be able to recover all of the amounts owed under the Due from iHeartCommunications Note upon the implementation of any plan of reorganization that is ultimately accepted by the requisite creditors and approved by the Bankruptcy Court. As a result, the Company recognized a loss of $855.6 million on the Due from iHeartCommunications Note during the fourth quarter of 2017 to reflect the estimated recoverable amount of the note as of December 31, 2017, based on management's best estimate of the cash settlement amount. In addition, starting January 1, 2018 the Company ceased recording interest income on the balance due from iHeartCommunications as the collectability of the interest was not considered probable. As a result of the $855.6 million allowance on the Due from iHeartCommunications Note and the $21.3 million reserve recognized in relation to interest incurred during the three months ended March 31, 2018, the amount outstanding of $1,031.7 million as of March 31, 2018 was reduced to $154.8 million as of March 31, 2018. The final settlement amount of the Due from iHeartCommunications note is expected to be negotiated as part of iHeartCommunications' bankruptcy proceedings. The final settlement amount may differ from the estimated recoverable amount of $154.8 million.
The terms of the Due from iHeartCommunications Note provide that any balance over $1.0 billion accrues at an interest rate equal to the average yield of the nearest dated reference security, capped at 20%. As of March 31, 2018, the balance outstanding on the "Due from iHeartCommunications" exceeded $1.0 billion and therefore the interest rate applied to $1.0 billion of the balance outstanding was 9.3%. The interest rate applied to the remaining balance was 20.0%. As noted above, no interest income was recorded during the three months ended March 31, 2018. The Company recognized interest income in the three months ended March 31, 2017 of $14.8 million.
Pursuant to a final order entered by the Bankruptcy Court, as of March 14, 2018, the actual pre-bankruptcy balance of the Due from iHeartCommunications Note is frozen, and following March 14, 2018, intercompany allocations that would have been reflected in adjustments to the balance of the Due from iHeartCommunications Note are instead reflected in a new intercompany balance that accrues interest at a rate equal to the interest under the Due from iHeartCommunications Note. The $3.4 million owed by the Company to iHeartCommunications as of March 31, 2018 is reflected as "Due to iHeartCommunications, post iHeart Chapter 11 Cases" on the Company's Consolidated Balance Sheet.
If the Company does not recognize the expected recovery under the Due from iHeartCommunications Note, or cannot obtain that amount on a timely basis, the Company could experience a liquidity shortfall. In addition, any repayments that the Company received on the Due from iHeartCommunications Note during the one-year preference period prior to the filing of the iHeart Chapter 11 Cases may potentially be avoidable as a preference and subject to recovery by the iHeartCommunications bankruptcy estate, which could further exacerbate any liquidity shortfall.
13
CLEAR CHANNEL OUTDOOR HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
The Company provides advertising space on its billboards for iHeartMedia, Inc. and for radio stations owned by iHeartMedia, Inc. For the three months ended March 31, 2018 and 2017, the Company recorded $1.5 million and $1.8 million, respectively, in revenue for these advertisements.
Under the Corporate Services Agreement between iHeartCommunications and the Company, iHeartCommunications 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 iHeartCommunications based on headcount, revenue or other factors on a pro rata basis. For the three months ended March 31, 2018 and 2017, the Company recorded $17.2 million and $16.2 million, respectively, as a component of corporate expenses for these services. The iHeart Chapter 11 Cases could materially impact iHeartCommunications' ability to provide these services to us, which could cause significant uncertainties for us and disrupt our operations and/or adversely affect our rights under the Corporate Services Agreement and the other intercompany agreements.
Pursuant to the Tax Matters Agreement between iHeartCommunications and the Company, the operations of the Company are included in a consolidated federal income tax return filed by iHeartCommunications. 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 iHeartCommunications 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 the financial reporting basis and tax basis 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 iHeartCommunications’ employee benefit plans, including employee medical insurance and a 401(k) retirement benefit plan. For the three months ended March 31, 2018 and 2017, the Company recorded $2.3 million and $2.4 million, respectively, as a component of selling, general and administrative expenses for these services.
NOTE 7 – INCOME TAXES
Income Tax Benefit (Expense)
The Company’s income tax benefit (expense) for the three months ended March 31, 2018 and 2017 consisted of the following components:
(In thousands) |
Three Months Ended March 31, |
||||||
2018 |
2017 |
||||||
Current tax benefit (expense) |
$ |
(25,121 |
) |
$ |
6,258 |
||
Deferred tax benefit (expense) |
(20,246 |
) |
15,579 |
||||
Income tax benefit (expense) |
$ |
(45,367 |
) |
$ |
21,837 |
The effective tax rate for the three months ended March 31, 2018 was (52.8)%. The effective rate was primarily impacted by the valuation allowance recorded against deferred tax assets resulting from current period net operating losses in U.S. federal, state and certain foreign jurisdictions due to uncertainty regarding the Company's ability to realize those assets in future periods.
The effective tax rate for the three months ended March 31, 2017 was 41.3%. The effective rate for the three months ended March 31, 2017 was primarily impacted by the Company's inability to benefit from losses in certain foreign jurisdictions due to uncertainty regarding the ability to utilize those losses in future periods.
14
CLEAR CHANNEL OUTDOOR HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
On December 22, 2017, the U.S. government enacted comprehensive income tax legislation, referred to as The Tax Cuts and Jobs Act (the Tax Act) which reduced the U.S. federal corporate tax rate from 35% to 21% effective January 1, 2018. During the three months ended March 31, 2018, adjustments to the provisional income tax benefit recorded in December 2017 from the enactment of the Tax Act were not material. At March 31, 2018, we have not yet completed our accounting for the income tax effects of the Tax Act, but have made reasonable estimates of those effects on our existing deferred income tax balances. The final financial statement impact of the Tax Act may differ from our previously recorded estimates, possibly materially, due to, among other things, changes in interpretations of the Tax Act, any legislative action to address questions that arise because of the Tax Act, and changes in accounting standards for income taxes or related interpretations in response to the Tax Act, or any updates to estimates the company has utilized to calculate the provisional impacts. The Securities and Exchange Commission (SEC) has issued rules that allow for a measurement period of up to one year after the enactment date of the Tax Act to finalize the recording of the related income tax impacts.
NOTE 8 – STOCKHOLDERS’ EQUITY (DEFICIT)
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 stockholders’ equity (deficit) 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 as of January 1, 2018 |
$ |
(1,998,445 |
) |
$ |
157,040 |
$ |
(1,841,405 |
) |
|||
Net loss |
(126,932 |
) |
(4,416 |
) |
(131,348 |
) |
|||||
Dividends paid |
(29,995 |
) |
— |
(29,995 |
) |
||||||
Payments to noncontrolling interests |
— |
(97 |
) |
(97 |
) |
||||||
Share-based compensation |
1,800 |
306 |
2,106 |
||||||||
Foreign currency translation adjustments |
2,001 |
5,236 |
7,237 |
||||||||
Unrealized holding loss on marketable securities |
(90 |
) |
— |
(90 |
) |
||||||
Reclassification adjustments |
— |
— |
— |
||||||||
Other, net |
(17 |
) |
— |
(17 |
) |
||||||
Balances as of March 31, 2018 |
$ |
(2,151,678 |
) |
$ |
158,069 |
$ |
(1,993,609 |
) |
|||
Balances as of January 1, 2017 |
$ |
(1,080,812 |
) |
$ |
149,886 |
$ |
(930,926 |
) |
|||
Net loss |
(29,001 |
) |
(1,995 |
) |
(30,996 |
) |
|||||
Dividends declared |
(282,486 |
) |
— |
(282,486 |
) |
||||||
Payments from noncontrolling interests |
— |
826 |
826 |
||||||||
Share-based compensation |
2,230 |
129 |
2,359 |
||||||||
Disposal of noncontrolling interest |
— |
(1,046 |
) |
(1,046 |
) |
||||||
Foreign currency translation adjustments |
12,176 |
(2,523 |
) |
9,653 |
|||||||
Unrealized holding loss on marketable securities |
(57 |
) |
— |
(57 |
) |
||||||
Reclassification adjustments |
(1,644 |
) |
— |
(1,644 |
) |
||||||
Other, net |
(85 |
) |
(137 |
) |
(222 |
) |
|||||
Balances as of March 31, 2017 |
$ |
(1,379,679 |
) |
$ |
145,140 |
$ |
(1,234,539 |
) |
The Company has granted restricted stock, restricted stock units and options to purchase shares of its Class A common stock to certain key individuals.
On February 23, 2017, the Company paid a special cash dividend to our stockholders of $282.5 million, using proceeds from the sales of certain non-strategic U.S. markets and of our business in Australia. iHeartCommunications received 89.9%, or approximately $254.0 million, with the remaining 10.1%, or approximately $28.5 million, paid to our public stockholders. The
15
CLEAR CHANNEL OUTDOOR HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
payment of these special dividends reduces the amount of cash available to us for future working capital, capital expenditure, debt service and other funding requirements.
On January 5, 2018, the board of directors of the Company declared a special cash dividend paid on January 24, 2018 to Class A and Class B stockholders of record at the closing of business on January 19, 2018, in an aggregate amount equal to $30.0 million. iHeartCommunications received approximately 89.5%, or approximately $26.8 million, of the proceeds of the dividend through its wholly-owned subsidiaries. The remaining approximately 10.5% of the proceeds of the dividend, or approximately $3.2 million, was paid to the Company's public stockholders.
COMPUTATION OF LOSS PER SHARE
(In thousands, except per share data) |
Three Months Ended March 31, |
||||||
2018 |
2017 |
||||||
NUMERATOR: |
|||||||
Net loss attributable to the Company – common shares |
$ |
(126,932 |
) |
$ |
(29,001 |
) |
|
DENOMINATOR: |
|||||||
Weighted average common shares outstanding - basic |
361,515 |
360,754 |
|||||
Stock options and restricted stock(1)
|
— |
— |
|||||
Weighted average common shares outstanding - diluted |
361,515 |
360,754 |
|||||
Net loss attributable to the Company per common share: |
|||||||
Basic |
$ |
(0.35 |
) |
$ |
(0.08 |
) |
|
Diluted |
$ |
(0.35 |
) |
$ |
(0.08 |
) |
(1) |
Outstanding equity awards of 7.9 million and 7.2 million for the three months ended March 31, 2018 and 2017, respectively, were not included in the computation of diluted earnings per share because to do so would have been antidilutive.
|
NOTE 9 — OTHER INFORMATION
Other Comprehensive Income (Loss)
There was no change in deferred income tax liabilities resulting from adjustments to comprehensive loss for the three months ended March 31, 2018 and 2017.
NOTE 10 – 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 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 reportable segments, as well as overall executive, administrative and support functions. Share-based payments are recorded in corporate expenses.
16
CLEAR CHANNEL OUTDOOR HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
As of January 1, 2018, the Company revised its segment reporting, as discussed in Note 1. The following table presents the Company's reportable segment results for the three months ended March 31, 2018 and 2017:
(In thousands) |
Americas |
International |
Corporate and other reconciling items |
Consolidated |
|||||||||||
Three Months Ended March 31, 2018 |
|||||||||||||||
Revenue |
$ |
255,847 |
$ |
342,864 |
$ |
— |
$ |
598,711 |
|||||||
Direct operating expenses |
124,873 |
235,329 |
— |
360,202 |
|||||||||||
Selling, general and administrative expenses |
48,950 |
78,458 |
— |
127,408 |
|||||||||||
Corporate expenses |
— |
— |
35,435 |
35,435 |
|||||||||||
Depreciation and amortization |
44,504 |
38,565 |
991 |
84,060 |
|||||||||||
Other operating expense, net |
— |
— |
(54 |
) |
(54 |
) |
|||||||||
Operating income (loss) |
$ |
37,520 |
$ |
(9,488 |
) |
$ |
(36,480 |
) |
$ |
(8,448 |
) |
||||
Capital expenditures |
$ |
12,907 |
$ |
15,272 |
$ |
493 |
$ |
28,672 |
|||||||
Share-based compensation expense |
$ |
— |
$ |
— |
$ |
2,106 |
$ |
2,106 |
|||||||
Three Months Ended March 31, 2017 |
|||||||||||||||
Revenue |
$ |
260,346 |
$ |
284,380 |
$ |
— |
$ |
544,726 |
|||||||
Direct operating expenses |
130,651 |
197,280 |
— |
327,931 |
|||||||||||
Selling, general and administrative expenses |
50,378 |
65,396 |
— |
115,774 |
|||||||||||
Corporate expenses |
— |
— |
34,540 |
34,540 |
|||||||||||
Depreciation and amortization |
42,816 |
33,152 |
1,526 |
77,494 |
|||||||||||
Other operating income, net |
— |
— |
32,611 |
32,611 |
|||||||||||
Operating income (loss) |
$ |
36,501 |
$ |
(11,448 |
) |
$ |
(3,455 |
) |
$ |
21,598 |
|||||
Capital expenditures |
$ |
13,588 |
$ |
22,340 |
$ |
416 |
$ |
36,344 |
|||||||
Share-based compensation expense |
$ |
— |
$ |
— |
$ |
2,359 |
$ |
2,359 |
17
CLEAR CHANNEL OUTDOOR HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 11 – GUARANTOR SUBSIDIARIES
The Company and certain of the Company’s direct and indirect wholly-owned domestic subsidiaries (the “Guarantor Subsidiaries”) fully and unconditionally guarantee on a joint and several basis certain of the outstanding indebtedness of Clear Channel Worldwide Holdings, Inc. ("CCWH" or 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) |
March 31, 2018 |
||||||||||||||||||||||
Parent |
Subsidiary |
Guarantor |
Non-Guarantor |
||||||||||||||||||||
Company |
Issuer |
Subsidiaries |
Subsidiaries |
Eliminations |
Consolidated |
||||||||||||||||||
Cash and cash equivalents |
$ |
2,304 |
$ |
— |
$ |
15,490 |
$ |
135,435 |
$ |
— |
$ |
153,229 |
|||||||||||
Accounts receivable, net of allowance |
— |
— |
180,224 |
455,597 |
— |
635,821 |
|||||||||||||||||
Intercompany receivables |
— |
781,444 |
2,893,271 |
79,300 |
(3,754,015 |
) |
— |
||||||||||||||||
Prepaid expenses |
264 |
3,075 |
68,448 |
79,908 |
— |
151,695 |
|||||||||||||||||
Other current assets |
25,441 |
— |
2,577 |
34,890 |
— |
62,908 |
|||||||||||||||||
Total Current Assets |
28,009 |
784,519 |
3,160,010 |
785,130 |
(3,754,015 |
) |
1,003,653 |
||||||||||||||||
Structures, net |
— |
— |
651,882 |
499,587 |
— |
1,151,469 |
|||||||||||||||||
Other property, plant and equipment, net |
— |
— |
116,548 |
97,062 |
— |
213,610 |
|||||||||||||||||
Indefinite-lived intangibles |
— |
— |
977,152 |
— |
— |
977,152 |
|||||||||||||||||
Other intangibles, net |
— |
— |
245,252 |
24,047 |
— |
269,299 |
|||||||||||||||||
Goodwill |
— |
— |
507,819 |
210,848 |
— |
718,667 |
|||||||||||||||||
Due from iHeartCommunications |
154,758 |
— |
— |
— |
— |
154,758 |
|||||||||||||||||
Intercompany notes receivable |
182,026 |
5,097,092 |
5,746 |
16,273 |
(5,301,137 |
) |
— |
||||||||||||||||
Other assets |
336,110 |
106,036 |
1,331,326 |
70,945 |
(1,717,500 |
) |
126,917 |
||||||||||||||||
Total Assets |
$ |
700,903 |
$ |
5,987,647 |
$ |
6,995,735 |
$ |
1,703,892 |
$ |
(10,772,652 |
) |
$ |
4,615,525 |
||||||||||
Accounts payable |
$ |
— |
$ |
— |
$ |
29,162 |
$ |
91,482 |
$ |
— |
$ |
120,644 |
|||||||||||
Intercompany payable |
2,893,271 |
— |
860,744 |
— |
(3,754,015 |
) |
— |
||||||||||||||||
Accrued expenses |
(11,573 |
) |
2,662 |
118,597 |
394,342 |
— |
504,028 |
||||||||||||||||
Deferred income |
— |
— |
43,752 |
64,975 |
— |
108,727 |
|||||||||||||||||
Current portion of long-term debt |
— |
— |
138 |
349 |
— |
487 |
|||||||||||||||||
Total Current Liabilities |
2,881,698 |
2,662 |
1,052,393 |
551,148 |
(3,754,015 |
) |
733,886 |
||||||||||||||||
Long-term debt |
— |
4,897,308 |
3,898 |
369,653 |
— |
5,270,859 |
|||||||||||||||||
Intercompany notes payable |
— |
16,273 |
5,039,418 |
245,446 |
(5,301,137 |
) |
— |
||||||||||||||||
Due to iHeartCommunications, post iHeart Chapter 11 Cases |
3,445 |
— |
— |
— |
— |
3,445 |
|||||||||||||||||
Deferred tax liability |
(67,381 |
) |
853 |
457,644 |
(54,329 |
) |
— |
336,787 |
|||||||||||||||
Other long-term liabilities |
1,362 |
— |
138,352 |
124,443 |
— |
264,157 |
|||||||||||||||||
Total stockholders' equity (deficit) |
(2,118,221 |
) |
1,070,551 |
304,030 |
467,531 |
(1,717,500 |
) |
(1,993,609 |
) |
||||||||||||||
Total Liabilities and Stockholders' Equity (Deficit) |
$ |
700,903 |
$ |
5,987,647 |
$ |
6,995,735 |
$ |
1,703,892 |
$ |
(10,772,652 |
) |
$ |
4,615,525 |
18
CLEAR CHANNEL OUTDOOR HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(In thousands) |
December 31, 2017 |
||||||||||||||||||||||
Parent |
Subsidiary |
Guarantor |
Non-Guarantor |
||||||||||||||||||||
Company |
Issuer |
Subsidiaries |
Subsidiaries |
Eliminations |
Consolidated |
||||||||||||||||||
Cash and cash equivalents |
$ |
2,212 |
$ |
— |
$ |
22,841 |
$ |
119,066 |
$ |
— |
$ |
144,119 |
|||||||||||
Accounts receivable, net of allowance |
— |
— |
192,493 |
466,970 |
— |
659,463 |
|||||||||||||||||
Intercompany receivables |
— |
785,075 |
2,924,888 |
88,053 |
(3,798,016 |
) |
— |
||||||||||||||||
Prepaid expenses |
291 |
3,433 |
50,028 |
58,124 |
— |
111,876 |
|||||||||||||||||
Other current assets |
25,441 |
— |
2,552 |
30,721 |
— |
58,714 |
|||||||||||||||||
Total Current Assets |
27,944 |
788,508 |
3,192,802 |
762,934 |
(3,798,016 |
) |
974,172 |
||||||||||||||||
Structures, net |
— |
— |
675,443 |
505,439 |
— |
1,180,882 |
|||||||||||||||||
Other property, plant and equipment, net |
— |
— |
119,856 |
94,291 |
— |
214,147 |
|||||||||||||||||
Indefinite-lived intangibles |
— |
— |
977,152 |
— |
— |
977,152 |
|||||||||||||||||
Other intangibles, net |
— |
— |
248,674 |
25,188 |
— |
273,862 |
|||||||||||||||||
Goodwill |
— |
— |
507,820 |
206,223 |
— |
714,043 |
|||||||||||||||||
Due from iHeartCommunications |
211,990 |
— |
— |
— |
— |
211,990 |
|||||||||||||||||
Intercompany notes receivable |
182,026 |
5,087,742 |
12,437 |
16,273 |
(5,298,478 |
) |
— |
||||||||||||||||
Other assets |
447,152 |
111,432 |
1,335,346 |
70,897 |
(1,840,293 |
) |
124,534 |
||||||||||||||||
Total Assets |
$ |
869,112 |
$ |
5,987,682 |
$ |
7,069,530 |
$ |
1,681,245 |
$ |
(10,936,787 |
) |
$ |
4,670,782 |
||||||||||
Accounts payable |
$ |
— |
$ |
— |
$ |
7,592 |
$ |
80,368 |
$ |
— |
$ |
87,960 |
|||||||||||
Intercompany payable |
2,924,888 |
— |
873,128 |
— |
(3,798,016 |
) |
— |
||||||||||||||||
Accrued expenses |
1,167 |
(1,315 |
) |
91,325 |
418,624 |
— |
509,801 |
||||||||||||||||
Deferred income |
— |
— |
25,278 |
33,900 |
— |
59,178 |
|||||||||||||||||
Current portion of long-term debt |
— |
— |
115 |
458 |
— |
573 |
|||||||||||||||||
Total Current Liabilities |
2,926,055 |
(1,315 |
) |
997,438 |
533,350 |
(3,798,016 |
) |
657,512 |
|||||||||||||||
Long-term debt |
— |
4,895,104 |
1,820 |
369,229 |
— |
5,266,153 |
|||||||||||||||||
Intercompany notes payable |
— |
16,273 |
5,046,119 |
236,086 |
(5,298,478 |
) |
— |
||||||||||||||||
Deferred tax liability |
(93,111 |
) |
853 |
466,827 |
(56,462 |
) |
— |
318,107 |
|||||||||||||||
Other long-term liabilities |
1,157 |
— |
140,272 |
128,986 |
— |
270,415 |
|||||||||||||||||
Total stockholders' equity (deficit) |
(1,964,989 |
) |
1,076,767 |
417,054 |
470,056 |
(1,840,293 |
) |
(1,841,405 |
) |
||||||||||||||
Total Liabilities and Stockholders' Equity (Deficit) |
$ |
869,112 |
$ |
5,987,682 |
$ |
7,069,530 |
$ |
1,681,245 |
$ |
(10,936,787 |
) |
$ |
4,670,782 |
19
CLEAR CHANNEL OUTDOOR HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(In thousands) |
Three Months Ended March 31, 2018 |
||||||||||||||||||||||
Parent |
Subsidiary |
Guarantor |
Non-Guarantor |
||||||||||||||||||||
Company |
Issuer |
Subsidiaries |
Subsidiaries |
Eliminations |
Consolidated |
||||||||||||||||||
Revenue |
$ |
— |
$ |
— |
$ |
253,663 |
$ |
345,048 |
$ |
— |
$ |
598,711 |
|||||||||||
Operating expenses: |
|||||||||||||||||||||||
Direct operating expenses |
— |
— |
123,345 |
236,857 |
— |
360,202 |
|||||||||||||||||
Selling, general and administrative expenses |
— |
— |
48,723 |
78,685 |
— |
127,408 |
|||||||||||||||||
Corporate expenses |
3,059 |
— |
23,922 |
8,454 |
— |
35,435 |
|||||||||||||||||
Depreciation and amortization |
— |
— |
45,228 |
38,832 |
— |
84,060 |
|||||||||||||||||
Other operating income (expense), net |
(104 |
) |
— |
(600 |
) |
650 |
— |
(54 |
) |
||||||||||||||
Operating income (loss) |
(3,163 |
) |
— |
11,845 |
(17,130 |
) |
— |
(8,448 |
) |
||||||||||||||
Interest (income) expense, net |
(2 |
) |
88,169 |
388 |
8,709 |
— |
97,264 |
||||||||||||||||
Intercompany interest income |
4,146 |
90,228 |
5,297 |
— |
(99,671 |
) |
— |
||||||||||||||||
Intercompany interest expense |
— |
217 |
94,374 |
5,080 |
(99,671 |
) |
— |
||||||||||||||||
Equity in earnings (loss) of nonconsolidated affiliates |
(114,934 |
) |
(5,019 |
) |
(4,789 |
) |
(127 |
) |
125,057 |
188 |
|||||||||||||
Other income, net |
416 |
— |
1,641 |
17,486 |
— |
19,543 |
|||||||||||||||||
Loss before income taxes |
(113,533 |
) |
(3,177 |
) |
(80,768 |
) |
(13,560 |
) |
125,057 |
(85,981 |
) |
||||||||||||
Income tax benefit (expense) |
(13,399 |
) |
(2,662 |
) |
(34,166 |
) |
4,860 |
— |
(45,367 |
) |
|||||||||||||
Consolidated net loss |
(126,932 |
) |
(5,839 |
) |
(114,934 |
) |
(8,700 |
) |
125,057 |
(131,348 |
) |
||||||||||||
Less amount attributable to noncontrolling interest |
— |
— |
— |
(4,416 |
) |
— |
(4,416 |
) |
|||||||||||||||
Net loss attributable to the Company |
$ |
(126,932 |
) |
$ |
(5,839 |
) |
$ |
(114,934 |
) |
$ |
(4,284 |
) |
$ |
125,057 |
$ |
(126,932 |
) |
||||||
Other comprehensive income (loss), net of tax: |
|||||||||||||||||||||||
Foreign currency translation adjustments |
— |
— |
70 |
7,167 |
— |
7,237 |
|||||||||||||||||
Unrealized holding loss on marketable securities |
— |
— |
— |
(90 |
) |
— |
(90 |
) |
|||||||||||||||
Equity in subsidiary comprehensive income |
1,911 |
(377 |
) |
1,841 |
— |
(3,375 |
) |
— |
|||||||||||||||
Comprehensive income (loss) |
(125,021 |
) |
(6,216 |
) |
(113,023 |
) |
2,793 |
121,682 |
(119,785 |
) |
|||||||||||||
Less amount attributable to noncontrolling interest |
— |
— |
— |
5,236 |
— |
5,236 |
|||||||||||||||||
Comprehensive loss attributable to the Company |
$ |
(125,021 |
) |
$ |
(6,216 |
) |
$ |
(113,023 |
) |
$ |
(2,443 |
) |
$ |
121,682 |
$ |
(125,021 |
) |
20
CLEAR CHANNEL OUTDOOR HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(In thousands) |
Three Months Ended March 31, 2017 |
||||||||||||||||||||||
Parent |
Subsidiary |
Guarantor |
Non-Guarantor |
||||||||||||||||||||
Company |
Issuer |
Subsidiaries |
Subsidiaries |
Eliminations |
Consolidated |
||||||||||||||||||
Revenue |
$ |
— |
$ |
— |
$ |
252,986 |
$ |
291,740 |
$ |
— |
$ |
544,726 |
|||||||||||
Operating expenses: |
|||||||||||||||||||||||
Direct operating expenses |
— |
— |
124,892 |
203,039 |
— |
327,931 |
|||||||||||||||||
Selling, general and administrative expenses |
— |
— |
48,471 |
67,303 |
— |
115,774 |
|||||||||||||||||
Corporate expenses |
3,927 |
— |
22,281 |
8,332 |
— |
34,540 |
|||||||||||||||||
Depreciation and amortization |
— |
— |
43,517 |
33,977 |
— |
77,494 |
|||||||||||||||||
Impairment charges |
— |
— |
— |
— |
— |
— |
|||||||||||||||||
Other operating income (expense), net |
(103 |
) |
— |
32,603 |
111 |
— |
32,611 |
||||||||||||||||
Operating income (loss) |
(4,030 |
) |
— |
46,428 |
(20,800 |
) |
— |
21,598 |
|||||||||||||||
Interest (income) expense , net |
(301 |
) |
88,331 |
(637 |
) |
5,240 |
— |
92,633 |
|||||||||||||||
Interest income on Due from iHeartCommunications |
14,807 |
— |
— |
— |
— |
14,807 |
|||||||||||||||||
Intercompany interest income |
4,065 |
85,102 |
15,018 |
— |
(104,185 |
) |
— |
||||||||||||||||
Intercompany interest expense |
14,807 |
57 |
89,167 |
154 |
(104,185 |
) |
— |
||||||||||||||||
Equity in loss of nonconsolidated affiliates |
(32,636 |
) |
(21,289 |
) |
(25,700 |
) |
(875 |
) |
80,028 |
(472 |
) |
||||||||||||
Other income (expense), net |
5,447 |
— |
(1,457 |
) |
(123 |
) |
— |
3,867 |
|||||||||||||||
Loss before income taxes |
(26,853 |
) |
(24,575 |
) |
(54,241 |
) |