10-Q 1 ccoh10-qq12017.htm 10-Q Document


UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
FORM 10-
(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, 2017
 
[  ]           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.)
 
 
 
200 East Basse Road, Suite 100
San Antonio, Texas
 
78209
(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, or a smaller reporting company.  See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer  [  ]       Accelerated filer   [X]    Non-accelerated filer [  ]       Smaller reporting company   [  ] 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 1, 2017
- - - - - - - - - - - - - - - - - - - - - - - - - -
- - - - - - - - - - - - - - - - - - - - - - - - - -
Class A Common Stock, $.01 par value
47,509,562
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 data)
March 31, 2017
 
December 31,
2016
 
(Unaudited)
 
CURRENT ASSETS
 

 
 

Cash and cash equivalents
$
200,621

 
$
541,995

Accounts receivable, net of allowance of $21,706 in 2017 and $22,398 in 2016
560,771

 
593,070

Prepaid expenses
152,994

 
111,569

Assets held for sale

 
55,602

Other current assets
50,178

 
39,199

Total Current Assets
964,564

 
1,341,435

PROPERTY, PLANT AND EQUIPMENT
 
 
 
Structures, net
1,181,997

 
1,196,676

Other property, plant and equipment, net
216,819

 
216,157

INTANGIBLE ASSETS AND GOODWILL
 
 
 
Indefinite-lived intangibles
986,010

 
960,966

Other intangibles, net
297,352

 
299,617

Goodwill
699,830

 
696,263

OTHER ASSETS
 
 
 
Due from iHeartCommunications
915,147

 
885,701

Other assets
124,644

 
122,013

Total Assets
$
5,386,363

 
$
5,718,828

CURRENT LIABILITIES
 
 
 
Accounts payable
$
70,575

 
$
86,870

Accrued expenses
433,715

 
480,872

Deferred income
113,709

 
67,005

Current portion of long-term debt
6,678

 
6,971

Total Current Liabilities
624,677

 
641,718

Long-term debt
5,112,858

 
5,110,020

Deferred tax liability
622,316

 
638,705

Other long-term liabilities
261,051

 
259,311

Commitments and Contingent liabilities (Note 4)

 

STOCKHOLDERS’ DEFICIT
 
 
 
Noncontrolling interest
145,140

 
149,886

Preferred stock, $.01 par value, 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 48,128,489 and 47,947,123 shares in 2017 and 2016, respectively
481

 
479

Class B common stock, $.01 par value, 600,000,000 shares authorized, 315,000,000 shares issued and outstanding
3,150

 
3,150

Additional paid-in capital
3,152,132

 
3,432,121

Accumulated deficit
(4,154,799
)
 
(4,125,798
)
Accumulated other comprehensive loss
(376,183
)
 
(386,658
)
Cost of shares (706,316 in 2017 and 633,851 in 2016) held in treasury
(4,460
)
 
(4,106
)
Total Stockholders’ Deficit
(1,234,539
)
 
(930,926
)
Total Liabilities and Stockholders’ Deficit
$
5,386,363

 
$
5,718,828

 

See Notes to Consolidated Financial Statements

1



CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
CLEAR CHANNEL OUTDOOR HOLDINGS, INC. AND SUBSIDIARIES
(UNAUDITED)
 
(In thousands, except per share data)
Three Months Ended
 
 
March 31,
 
 
2017
 
2016
 
Revenue
$
544,726

 
$
589,014

 
Operating expenses:
 
 
 
 
Direct operating expenses (excludes depreciation and amortization)
327,931

 
341,987

 
Selling, general and administrative expenses (excludes depreciation and amortization)
115,774

 
126,801

 
Corporate expenses (excludes depreciation and amortization)
34,540

 
28,224

 
Depreciation and amortization
77,494

 
85,395

 
Other operating income, net
32,611

 
284,774

 
Operating income
21,598

 
291,381

 
Interest expense
92,633

 
93,873

 
Interest income on Due from iHeartCommunications
14,807

 
12,713

 
Equity in loss of nonconsolidated affiliates
(472
)
 
(415
)
 
Other income (expense), net
3,867

 
(5,803
)
 
Income (loss) before income taxes
(52,833
)
 
204,003

 
Income tax benefit (expense)
21,837

 
(62,917
)
 
Consolidated net income (loss)
(30,996
)
 
141,086

 
Less amount attributable to noncontrolling interest
(1,995
)
 
976

 
Net income (loss) attributable to the Company
$
(29,001
)
 
$
140,110

 
Other comprehensive income (loss), net of tax:
 
 
 
 
Foreign currency translation adjustments
9,653

 
27,264

 
Unrealized holding loss on marketable securities
(57
)
 
(36
)
 
Reclassification adjustments
(1,644
)
 

 
Other comprehensive income
7,952

 
27,228

 
Comprehensive income (loss)
(21,049
)
 
167,338

 
Less amount attributable to noncontrolling interest
(2,523
)
 
2,419

 
Comprehensive income (loss) attributable to the Company
$
(18,526
)
 
$
164,919

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

 
 

 
Basic
$
(0.08
)
 
$
0.39

 
Weighted average common shares outstanding – Basic
360,754

 
359,915

 
Diluted
$
(0.08
)
 
$
0.39

 
Weighted average common shares outstanding – Diluted
360,754

 
360,904

 
 
 
 
 
 
Dividends declared per share
$
0.78

 
$
1.49

 
 
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,
 
2017
 
2016
Cash flows from operating activities:
 
 
 
Consolidated net income (loss)
$
(30,996
)
 
$
141,086

Reconciling items:
 
 
 
Depreciation and amortization
77,494

 
85,395

Deferred taxes
(15,579
)
 
52,654

Provision for doubtful accounts
521

 
2,018

Amortization of deferred financing charges and note discounts, net
2,683

 
2,613

Share-based compensation
2,359

 
2,370

Gain on disposal of operating and other assets
(33,322
)
 
(285,519
)
Equity in loss of nonconsolidated affiliates
472

 
415

Other reconciling items, net
(5,012
)
 
4,957

Changes in operating assets and liabilities, net of effects of acquisitions and dispositions:
 
 
 
Decrease in accounts receivable
37,052

 
80,033

Increase in prepaid expenses and other current assets
(54,808
)
 
(19,331
)
Decrease in accrued expenses
(59,481
)
 
(64,020
)
Decrease in accounts payable
(15,506
)
 
(18,190
)
Increase in accrued interest
4,835

 
3,069

Increase in deferred income
44,232

 
25,151

Changes in other operating assets and liabilities
(5,091
)
 
3,469

Net cash provided by (used for) operating activities
$
(50,147
)
 
$
16,170

Cash flows from investing activities:
 

 
 

Purchases of property, plant and equipment
(36,344
)
 
(47,202
)
Proceeds from disposal of assets
53,279

 
586,690

Purchases of other operating assets
(1,064
)
 
(1,573
)
Change in other, net
404

 
(14,371
)
Net cash provided by investing activities
$
16,275

 
$
523,544

Cash flows from financing activities:
 

 
 

Payments on credit facilities
(375
)
 
(577
)
Payments on long-term debt
(163
)
 
(517
)
Net transfers from (to) iHeartCommunications
(29,448
)
 
290,711

Dividends and other payments from (to) noncontrolling interests
826

 
(789
)
Dividends paid
(281,673
)
 
(754,217
)
Change in other, net
(257
)
 
(1,079
)
Net cash used for financing activities
$
(311,090
)
 
$
(466,468
)
Effect of exchange rate changes on cash
3,588

 
3,652

Net increase (decrease) in cash and cash equivalents
(341,374
)
 
76,898

Cash and cash equivalents at beginning of period
541,995

 
412,743

Cash and cash equivalents at end of period
$
200,621

 
$
489,641

SUPPLEMENTAL DISCLOSURES:
 

 
 

Cash paid for interest
86,759

 
85,959

Cash paid for income taxes
17,193

 
14,632

 
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 2016 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.  Certain prior-period amounts have been reclassified to conform to the 2017 presentation. 
New Accounting Pronouncements
During the third quarter of 2015, the FASB issued ASU 2015-14, Revenue from Contracts with Customers (Topic 606): Deferral of the Effective Date. This update provides a one-year deferral of the effective date for ASU No. 2014-09, Revenue from Contracts with Customers.  ASU No. 2014-09 provides guidance for the recognition, measurement and disclosure of revenue resulting from contracts with customers and will supersede virtually all of the current revenue recognition guidance under U.S. GAAP.  The standard is effective for the first interim period within annual reporting periods beginning after December 15, 2017. The two permitted transition methods under the new standard are the full retrospective method, in which case the standard would be applied to each prior reporting period presented and the cumulative effect of applying the standard would be recognized at the earliest period shown, or the modified retrospective method, in which case the cumulative effect of applying the standard would be recognized at the date of initial application. The Company expects to utilize the full retrospective method. The Company has substantially completed its evaluation of the potential changes from adopting the new standard on its future financial reporting and disclosures which included reviews of contractual terms for all of the Company’s significant revenue streams and the development of an implementation plan. The Company continues to execute on its implementation plan, including detailed policy drafting and training of segment personnel. Based on its evaluation, the Company does not expect material changes to its 2016 or 2017 consolidated revenues, operating income or balance sheets as a result of the implementation of this standard.
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 second quarter of 2016, the FASB issued ASU No. 2016-09, Compensation - Stock Compensation (Topic 718). This update changes the accounting for certain aspects of share-based payments to employees. Income tax effects of share-based payment awards will be recognized in the income statement with the vesting or settlement of the awards and the record keeping for additional paid-in capital pools will no longer be necessary. Additionally, companies can make a policy election to either estimate forfeitures or recognize them as they occur. The standard is effective for annual periods, and for interim periods within those annual periods, beginning after December 15, 2016.  The Company adopted this standard in the first quarter of 2017. The retrospective adoption of this guidance did not result in material changes to the Company's 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

4



CLEAR CHANNEL OUTDOOR HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)


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 – PROPERTY, PLANT AND EQUIPMENT, INTANGIBLE ASSETS AND GOODWILL
Dispositions
In January 2017, Americas sold its Indianapolis, Indiana market to Fairway Media Group, LLC in exchange for certain assets in Atlanta, Georgia with a fair value of $39.6 million, plus approximately $43.0 million in cash, net of closing costs. The assets acquired as part of the transaction consisted of $9.9 million in fixed assets, $29.5 million in intangible assets (including $2.3 million in goodwill) and $0.2 million in other assets. The Company recognized a net gain of $28.6 million related to the sale, which is included within Other operating income, net.
Property, Plant and Equipment

The Company’s property, plant and equipment consisted of the following classes of assets as of March 31, 2017 and December 31, 2016, respectively:
(In thousands)
March 31,
2017
 
December 31,
2016
 
 
Land, buildings and improvements
$
153,833

 
$
152,775

Structures
2,720,902

 
2,684,673

Furniture and other equipment
153,473

 
148,516

Construction in progress
60,212

 
58,585

 
3,088,420

 
3,044,549

Less: accumulated depreciation
1,689,604

 
1,631,716

Property, plant and equipment, net
$
1,398,816

 
$
1,412,833

 
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 and Canada.  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.


5



CLEAR CHANNEL OUTDOOR HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)


The following table presents the gross carrying amount and accumulated amortization for each major class of other intangible assets as of March 31, 2017 and December 31, 2016, respectively:

(In thousands)
March 31, 2017
 
December 31, 2016
 
Gross Carrying Amount
 
Accumulated Amortization
 
Gross Carrying Amount
 
Accumulated Amortization
Transit, street furniture and other outdoor
   contractual rights
$
569,114

 
$
(437,297
)
 
$
563,863

 
$
(426,752
)
Permanent easements
162,893

 

 
159,782

 

Other
4,558

 
(1,916
)
 
4,536

 
(1,812
)
Total
$
736,565

 
$
(439,213
)
 
$
728,181

 
$
(428,564
)
 
Total amortization expense related to definite-lived intangible assets for the three months ended March 31, 2017 and 2016 was $7.0 million and $9.8 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:

(In thousands)
 
2018
$
19,684

2019
$
15,590

2020
$
13,289

2021
$
12,887

2022
$
11,410

 
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, 2015
$
534,683

 
$
223,892

 
$
758,575

Impairment

 
(7,274
)
 
(7,274
)
Dispositions
(6,934
)
 
(30,718
)
 
(37,652
)
Foreign currency
(1,998
)
 
(5,051
)
 
(7,049
)
Assets held for sale
(10,337
)
 

 
(10,337
)
Balance as of December 31, 2016
$
515,414

 
$
180,849

 
$
696,263

Impairment

 

 

Acquisitions
2,252

 

 
2,252

Dispositions

 
(1,817
)
 
(1,817
)
Foreign currency
583

 
2,460

 
3,043

Assets held for sale
89

 

 
89

Balance as of March 31, 2017
$
518,338

 
$
181,492

 
$
699,830



6



CLEAR CHANNEL OUTDOOR HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)


NOTE 3 – LONG-TERM DEBT

Long-term debt outstanding as of March 31, 2017 and December 31, 2016 consisted of the following:

(In thousands)
March 31,
2017
 
December 31,
2016
 
 
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
225,000

 
225,000

Other debt
14,660

 
14,798

Original issue discount
(6,468
)
 
(6,738
)
Long-term debt fees
(38,656
)
 
(41,069
)
Total debt
$
5,119,536

 
$
5,116,991

Less: current portion
6,678

 
6,971

Total long-term debt
$
5,112,858

 
$
5,110,020


(1)
 The Senior revolving credit facility provides for borrowings up to $75.0 million (the revolving credit commitment). As of March 31, 2017, we had $67.3 million of letters of credit outstanding, and $7.7 million of availability, under the senior revolving credit facility.

The aggregate market value of the Company’s debt based on market prices for which quotes were available was approximately $5.3 billion and $5.2 billion at March 31, 2017 and December 31, 2016, 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, 2017, the Company had $68.5 million and $34.9 million in letters of credit and bank guarantees outstanding, respectively. Bank guarantees of $18.6 million were backed by cash collateral. Additionally, as of March 31, 2017, iHeartCommunications had outstanding commercial standby letters of credit and surety bonds of $1.4 million and $51.7 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 4 – 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.

7



CLEAR CHANNEL OUTDOOR HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)


International Outdoor Investigation
On April 21, 2015, inspections were conducted at the premises of Clear Channel in Denmark and Sweden as part of an investigation by Danish competition authorities.  Additionally, on the same day, Clear Channel UK received a communication from the UK competition authorities, also in connection with the investigation by Danish competition authorities. Clear Channel and its affiliates are cooperating with the national competition authorities.
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 names 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 is named as a nominal defendant. The complaint alleges that the Company has 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 alleges that the defendants have 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”) to provide cash to iHeartMedia and iHeartCommunications through a dividend. The complaint also alleges that iHeartMedia, iHeartCommunications and the Sponsor Defendants aided and abetted the directors’ breaches of their fiduciary duties. The complaint further alleges 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 is seeking, 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.
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.
NOTE 5 — RELATED PARTY TRANSACTIONS
The Company records net amounts due from iHeartCommunications as “Due from iHeartCommunications” on the consolidated balance sheets.  The accounts 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 accounts accrue interest pursuant to the terms of the promissory notes and are generally payable on demand or when they mature on December 15, 2017.
 
Included in the accounts are the net activities resulting from day-to-day cash management services provided by 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).  In return, iHeartCommunications funds the Company’s controlled disbursement accounts as checks or electronic payments are presented for payment.  The Company’s claim in relation to cash transferred from its concentration account is on an unsecured basis and is limited to the balance of the “Due from iHeartCommunications” account.
As of March 31, 2017 and December 31, 2016, the asset recorded in “Due from iHeartCommunications” on the consolidated balance sheet was $915.1 million and $885.7 million, respectively.  As of March 31, 2017, the fixed interest rate on the “Due from iHeartCommunications” account was 6.5%, which is equal to the fixed interest rate on the CCWH Senior Notes.  The net interest income for the three months ended March 31, 2017 and 2016 was $14.8 million and $12.7 million, respectively.

8



CLEAR CHANNEL OUTDOOR HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)


In its Quarterly Report on Form 10-Q filed with the SEC on May 4, 2017, iHeartCommunications stated that its forecast of future cash flows indicates that such cash flows would not be sufficient for it to meet its obligations, including payment of the outstanding receivables based credit facility balance at maturity on December 24, 2017 and payment of the 10% Senior Notes due January 15, 2018, as they become due in the ordinary course of business for a period of 12 months following May 4, 2017. iHeartCommunications further stated that management has determined that there is substantial doubt as to iHeartCommunications’ ability to continue as a going concern for a period of 12 months following May 4, 2017.
If iHeartCommunications was to become insolvent, the Company would be an unsecured creditor of iHeartCommunications.  In such event, the Company would be treated the same as other unsecured creditors of iHeartCommunications and, if the Company were not entitled to amounts outstanding under the receivable from iHeartCommunications, or could not obtain such cash on a timely basis, the Company could experience a liquidity shortfall. 
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, 2017 and 2016, the Company recorded $1.8 million and $0.3 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, 2017 and 2016, the Company recorded $16.2 million and $9.3 million, respectively, as a component of corporate expenses for these services. In February 2017, the Company and its indirect parent company, iHeartMedia, Inc., entered into an agreement related to the potential purchase of the Clear Channel registered trademarks and domain names. The agreements provide that CCOH will pay a license fee to iHeartMedia, Inc. in 2017 based on revenues of entities using the Clear Channel name. Included within the management services expense recognized in the three months ended March 31, 2017 is an additional expense of $7.8 million related to this license. Financial distress at iHeartCommunications could impact its ability to provide these services to us, and if iHeartCommunications was to become insolvent or file a bankruptcy petition, such event could cause significant uncertainties 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 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, 2017 and 2016, the Company recorded $2.4 million and $2.3 million, respectively, as a component of selling, general and administrative expenses for these services.

9



CLEAR CHANNEL OUTDOOR HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)


NOTE 6 – INCOME TAXES

Income Tax Benefit (Expense)

The Company’s income tax benefit (expense) for the three months ended March 31, 2017 and 2016, respectively, consisted of the following components:
(In thousands)
Three Months Ended March 31,
 
 
2017
 
2016
 
Current tax benefit (expense)
$
6,258

 
$
(10,263
)
 
Deferred tax benefit (expense)
15,579

 
(52,654
)
 
Income tax benefit (expense)
$
21,837

 
$
(62,917
)
 
 
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.
 
The effective tax rate for the three months ended March 31, 2016 was 30.8%. The effective rate was primarily impacted by the reversal of the valuation allowance recorded in 2015 against net operating losses in U.S. federal and state jurisdictions due to taxable gains from the dispositions of nine outdoor markets during the period. Additionally, we were unable to benefit from losses in certain foreign jurisdictions due to the uncertainty of the ability to utilize those losses in future periods.

10



CLEAR CHANNEL OUTDOOR HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)


NOTE 7 – 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, 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
)
 
 
 
 
 
 
Balances as of January 1, 2016
$
(755,599
)
 
$
187,775

 
$
(567,824
)
Net income
140,110

 
976

 
141,086

Dividends declared
(540,016
)
 

 
(540,016
)
Dividends and other payments to noncontrolling interests

 
(789
)
 
(789
)
Share-based compensation
2,370

 

 
2,370

Foreign currency translation adjustments
24,845

 
2,419

 
27,264

Unrealized holding loss on marketable securities
(36
)
 

 
(36
)
Other, net
(1,863
)
 
1,225

 
(638
)
Balances as of March 31, 2016
$
(1,130,189
)
 
$
191,606

 
$
(938,583
)

The Company has granted restricted stock, restricted stock units and options to purchase shares of its class A common stock to certain key individuals.
COMPUTATION OF LOSS PER SHARE
(In thousands, except per share data)
Three Months Ended
March 31,
 
 
2017
 
2016
 
NUMERATOR:
 
 
 
 
Net income (loss) attributable to the Company – common shares
$
(29,001
)
 
$
140,110

 
 
 
 
 
 
DENOMINATOR:
 

 
 

 
Weighted average common shares outstanding - basic
360,754

 
359,915

 
Stock options and restricted stock(1)

 
989

 
Weighted average common shares outstanding - diluted
360,754

 
360,904

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

 
 

 
Basic
$
(0.08
)
 
$
0.39

 
Diluted
$
(0.08
)
 
$
0.39

 

11



CLEAR CHANNEL OUTDOOR HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)



(1) 
Outstanding equity awards of 7.2 million and 6.1 million for the three months ended March 31, 2017 and 2016, respectively, were not included in the computation of diluted earnings per share because to do so would have been antidilutive.

NOTE 8 — 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, 2017 and 2016.
 
NOTE 9 – SEGMENT DATA
The Company has two reportable segments, which it believes best reflect how the Company is currently managed – Americas and International.  The Americas segment consists of operations primarily in the United States, Canada and Latin America and the International segment primarily includes operations in Europe and Asia.  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.

The following table presents the Company's reportable segment results for the three months ended March 31, 2017 and 2016:
(In thousands)
Americas
 
International
 
Corporate and other reconciling items
 
Consolidated
Three Months Ended March 31, 2017
 
 
 
 
 
 
 
Revenue
$
279,420

 
$
265,306

 
$

 
$
544,726

Direct operating expenses
140,473

 
187,458

 

 
327,931

Selling, general and administrative expenses
56,086

 
59,688

 

 
115,774

Corporate expenses

 

 
34,540

 
34,540

Depreciation and amortization
45,295

 
30,673

 
1,526

 
77,494

Other operating income, net

 

 
32,611

 
32,611

Operating income (loss)
$
37,566

 
$
(12,513
)
 
$
(3,455
)
 
$
21,598

 
 
 
 
 
 
 
 
Capital expenditures
$
14,104

 
$
21,824

 
$
416

 
$
36,344

Share-based compensation expense
$

 
$

 
$
2,359

 
$
2,359

 
 
 
 
 
 
 
 
Three Months Ended March 31, 2016
 
 
 
 
 
 
 
Revenue
$
282,528

 
$
306,486

 
$

 
$
589,014

Direct operating expenses
138,012

 
203,975

 

 
341,987

Selling, general and administrative expenses
55,329

 
71,472

 

 
126,801

Corporate expenses

 

 
28,224

 
28,224

Depreciation and amortization
46,116

 
37,880

 
1,399

 
85,395

Other operating income, net

 

 
284,774

 
284,774

Operating income (loss)
$
43,071

 
$
(6,841
)
 
$
255,151

 
$
291,381

 
 
 
 
 
 
 
 
Capital expenditures
$
11,292

 
$
34,913

 
$
997

 
$
47,202

Share-based compensation expense
$

 
$

 
$
2,370

 
$
2,370



12



CLEAR CHANNEL OUTDOOR HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)



NOTE 10 – GUARANTOR SUBSIDIARIES

The Company and certain of the Company’s direct and indirect wholly-owned domestic subsidiaries (the “Guarantor Subsidiaries”) fully and unconditionally guarantee on a joint and several basis certain of the outstanding indebtedness of 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, 2017
 
Parent
 
Subsidiary
 
Guarantor
 
Non-Guarantor
 
 
 
 
 
Company
 
Issuer
 
Subsidiaries
 
Subsidiaries
 
Eliminations
 
Consolidated
Cash and cash equivalents
$
42,225

 
$

 
$
16,594

 
$
141,802

 
$

 
$
200,621

Accounts receivable, net of allowance

 

 
171,029

 
389,742

 

 
560,771

Intercompany receivables

 
627,297

 
2,741,198

 
94,763

 
(3,463,258
)
 

Prepaid expenses
2,893

 
3,433

 
69,242

 
77,426

 

 
152,994

Other current assets
(2,148
)
 
(1,107
)
 
11,753

 
41,680

 

 
50,178

Total Current Assets
42,970

 
629,623

 
3,009,816

 
745,413

 
(3,463,258
)
 
964,564

Structures, net

 

 
733,948

 
448,049

 

 
1,181,997

Other property, plant and equipment, net

 

 
123,655

 
93,164

 

 
216,819

Indefinite-lived intangibles

 

 
976,395

 
9,615

 

 
986,010

Other intangibles, net

 

 
259,335

 
38,017

 

 
297,352

Goodwill

 

 
507,819

 
192,011

 

 
699,830

Due from iHeartCommunications
915,147

 

 

 

 

 
915,147

Intercompany notes receivable
182,026

 
4,887,354

 

 

 
(5,069,380
)
 

Other assets
259,682

 
402,568

 
1,278,853

 
68,956

 
(1,885,415
)
 
124,644

Total Assets
$
1,399,825

 
$
5,919,545

 
$
6,889,821

 
$
1,595,225

 
$
(10,418,053
)
 
$
5,386,363

 
 
 
 
 
 
 
 
 
 
 
 
Accounts payable
$

 
$

 
$
7,861

 
$
62,714

 
$

 
$
70,575

Intercompany payable
2,741,198

 

 
722,060

 

 
(3,463,258
)
 

Accrued expenses
1,904

 

 
73,484

 
358,327

 

 
433,715

Deferred income

 

 
47,814

 
65,895

 

 
113,709

Current portion of long-term debt

 

 
104

 
6,574

 

 
6,678

Total Current Liabilities
2,743,102

 

 
851,323

 
493,510

 
(3,463,258
)
 
624,677

Long-term debt

 
4,888,510

 
1,908

 
222,440

 

 
5,112,858

Intercompany notes payable

 
5,000

 
5,027,480

 
36,900

 
(5,069,380
)
 

Deferred tax liability
772

 
1,367

 
671,952

 
(51,775
)
 

 
622,316

Other long-term liabilities
1,427

 

 
134,304

 
125,320

 

 
261,051

Total stockholders' equity (deficit)
(1,345,476
)
 
1,024,668

 
202,854

 
768,830

 
(1,885,415
)
 
(1,234,539
)
Total Liabilities and Stockholders'
   Equity (Deficit)
$
1,399,825

 
$
5,919,545

 
$
6,889,821

 
$
1,595,225

 
$
(10,418,053
)
 
$
5,386,363


 

13



CLEAR CHANNEL OUTDOOR HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)


(In thousands)
December 31, 2016
 
Parent
 
Subsidiary
 
Guarantor
 
Non-Guarantor
 
 
 
 
 
Company
 
Issuer
 
Subsidiaries
 
Subsidiaries
 
Eliminations
 
Consolidated
Cash and cash equivalents
$
300,285

 
$

 
$
61,542

 
$
180,168

 
$

 
$
541,995

Accounts receivable, net of allowance

 

 
193,474

 
399,596

 

 
593,070

Intercompany receivables

 
687,043

 
2,694,094

 
99,431

 
(3,480,568
)
 

Prepaid expenses
1,363

 
3,433

 
51,751

 
55,022

 

 
111,569

Assets held for sale

 

 
55,602

 

 

 
55,602

Other current assets

 

 
6,873

 
32,326

 

 
39,199

Total Current Assets
301,648

 
690,476

 
3,063,336

 
766,543

 
(3,480,568
)
 
1,341,435

Structures, net

 

 
746,877

 
449,799

 

 
1,196,676

Other property, plant and equipment, net

 

 
124,138

 
92,019

 

 
216,157

Indefinite-lived intangibles

 

 
951,439

 
9,527

 

 
960,966

Other intangibles, net

 

 
259,915

 
39,702

 

 
299,617

Goodwill

 

 
505,478

 
190,785

 

 
696,263

Due from iHeartCommunications
885,701

 

 

 

 

 
885,701

Intercompany notes receivable
182,026

 
4,887,354

 

 

 
(5,069,380
)
 

Other assets
280,435

 
418,658

 
1,320,838

 
65,589

 
(1,963,507
)
 
122,013

Total Assets
$
1,649,810

 
$
5,996,488

 
$
6,972,021

 
$
1,613,964

 
$
(10,513,455
)
 
$
5,718,828

 
 
 
 
 
 
 
 
 
 
 
 
Accounts payable
$

 
$

 
$
14,897

 
$
71,973

 
$

 
$
86,870

Intercompany payable
2,694,094

 

 
786,474

 

 
(3,480,568
)
 

Accrued expenses
2,223

 
58,652

 
35,509

 
384,488

 

 
480,872

Dividends payable

 


 


 


 


 

Deferred income

 

 
33,471

 
33,534

 

 
67,005

Current portion of long-term debt

 

 
89

 
6,882

 

 
6,971

Total Current Liabilities
2,696,317

 
58,652

 
870,440

 
496,877

 
(3,480,568
)
 
641,718

Long-term debt

 
4,886,318

 
1,711

 
221,991

 

 
5,110,020

Intercompany notes payable

 
5,000

 
5,027,681

 
36,699

 
(5,069,380
)
 

Deferred tax liability
772

 
1,367

 
685,780

 
(49,214
)
 

 
638,705

Other long-term liabilities
1,055

 

 
135,094

 
123,162

 

 
259,311

Total stockholders' equity (deficit)
(1,048,334
)
 
1,045,151

 
251,315

 
784,449

 
(1,963,507
)
 
(930,926
)
Total Liabilities and Stockholders' Equity (Deficit)
$
1,649,810

 
$
5,996,488

 
$
6,972,021

 
$
1,613,964

 
$
(10,513,455
)
 
$
5,718,828


 

 






14



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

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
)
 
(27,192
)
 
80,028

 
(52,833
)
Income tax benefit (expense)
(2,148
)
 
(1,107
)
 
21,605

 
3,487

 

 
21,837

Consolidated net loss
(29,001
)
 
(25,682
)
 
(32,636
)
 
(23,705
)
 
80,028

 
(30,996
)
Less amount attributable to noncontrolling interest

 

 

 
(1,995
)
 

 
(1,995
)
Net loss attributable to the Company
$
(29,001
)
 
$
(25,682
)
 
$
(32,636
)
 
$
(21,710
)
 
$
80,028

 
$
(29,001
)
Other comprehensive income (loss), net of tax:
 

 
 

 
 

 
 

 
 

 
 

Foreign currency translation adjustments

 

 
(226
)
 
9,879

 

 
9,653

Unrealized holding loss on marketable securities

 

 

 
(57
)
 

 
(57
)
Reclassification adjustments

 

 

 
(1,644
)
 

 
(1,644
)
Equity in subsidiary comprehensive income
10,475

 
5,199

 
10,701

 

 
(26,375
)
 

Comprehensive loss
(18,526
)
 
(20,483
)
 
(22,161
)
 
(13,532
)
 
53,653

 
(21,049
)
Less amount attributable to noncontrolling interest

 

 

 
(2,523
)
 

 
(2,523
)
Comprehensive loss attributable to the Company
$
(18,526
)
 
$
(20,483
)
 
$
(22,161
)
 
$
(11,009
)
 
$
53,653

 
$
(18,526
)

15



CLEAR CHANNEL OUTDOOR HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)


(In thousands)
Three Months Ended March 31, 2016
 
Parent
 
Subsidiary
 
Guarantor
 
Non-Guarantor
 
 
 
 
 
Company
 
Issuer
 
Subsidiaries
 
Subsidiaries
 
Eliminations
 
Consolidated
Revenue
$

 
$

 
$
253,079

 
$
335,935

 
$

 
$
589,014

Operating expenses:
 
 
 
 
 
 
 
 
 
 
 

Direct operating expenses

 

 
120,460

 
221,527

 

 
341,987

Selling, general and administrative expenses

 

 
48,727

 
78,074

 

 
126,801

Corporate expenses
3,339

 

 
14,418

 
10,467

 

 
28,224

Depreciation and amortization

 

 
44,550

 
40,845

 

 
85,395

Other operating income (expense), net
(116
)
 

 
289,897

 
(5,007
)
 

 
284,774

Operating income (loss)
(3,455
)
 

 
314,821

 
(19,985
)
 

 
291,381

Interest expense, net
(330
)
 
88,078

 
436

 
5,689

 

 
93,873

Interest income on Due from iHeartCommunications
12,713

 

 

 

 

 
12,713

Intercompany interest income
4,033

 
85,451

 
13,203

 

 
(102,687
)
 

Intercompany interest expense
12,713

 

 
89,484

 
490

 
(102,687
)
 

Equity in earnings (loss) of nonconsolidated affiliates
138,911

 
(33,187
)
 
(38,509
)
 
(777
)
 
(66,853
)
 
(415
)
Other income (expense), net
629

 

 
(1,322
)
 
(5,110
)
 

 
(5,803
)
Income (loss) before income taxes
140,448

 
(35,814
)
 
198,273

 
(32,051
)
 
(66,853
)
 
204,003

Income tax benefit (expense)
(338
)
 
958

 
(59,314
)
 
(4,223
)
 

 
(62,917
)
Consolidated net income (loss)
140,110

 
(34,856
)
 
138,959

 
(36,274
)
 
(66,853
)
 
141,086

Less amount attributable to noncontrolling interest

 

 
48

 
928

 

 
976

Net income (loss) attributable to the Company
$
140,110

 
$
(34,856
)
 
$
138,911

 
$
(37,202
)
 
$
(66,853
)
 
$
140,110

Other comprehensive income (loss), net of tax:
 

 
 

 
 

 
 

 
 

 
 

Foreign currency translation adjustments

 

 
(5,664
)
 
32,928

 

 
27,264

Unrealized holding loss on marketable securities

 

 

 
(36
)
 

 
(36
)
Equity in subsidiary comprehensive income
24,809

 
24,425

 
30,473

 

 
(79,707
)
 

Comprehensive income (loss)
164,919

 
(10,431
)
 
163,720

 
(4,310
)
 
(146,560
)
 
167,338

Less amount attributable to noncontrolling interest

 

 

 
2,419

 

 
2,419

Comprehensive income (loss) attributable to the Company
$
164,919

 
$
(10,431
)
 
$
163,720

 
$
(6,729
)
 
$
(146,560
)
 
$
164,919



16



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
Cash flows from operating activities:
 
 
 
 
 
 
 
 
 
 
 
Consolidated net loss
$
(29,001
)
 
$
(25,682
)
 
$
(32,636
)
 
$
(23,705
)
 
$
80,028

 
$
(30,996
)
Reconciling items:
 
 
 
 
 
 
 
 
 
 
 
Depreciation and amortization

 

 
43,517

 
33,977

 

 
77,494

Deferred taxes

 

 
(13,828
)
 
(1,751
)
 

 
(15,579
)
Provision for doubtful accounts

 

 
649

 
(128
)
 

 
521

Amortization of deferred financing charges and note discounts, net

 
2,192

 

 
491

 

 
2,683

Share-based compensation

 

 
2,038

 
321

 

 
2,359

Gain on disposal of operating assets, net

 

 
(32,609
)
 
(713
)
 

 
(33,322
)
Equity in loss of nonconsolidated affiliates
32,636

 
21,289

 
25,700

 
875

 
(80,028
)
 
472

Other reconciling items, net

 

 
(1,294
)
 
(3,718
)
 

 
(5,012
)
Changes in operating assets and liabilities, net
   of effects of acquisitions and dispositions:
 
 
 
 
 
 
 
 
 
 
 
Decrease in accounts receivable

 

 
21,796

 
15,256