10-Q 1 ccoh10-q2017q3.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 SEPTEMBER 30, 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.)
 
 
 
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, 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 November 6, 2017
- - - - - - - - - - - - - - - - - - - - - - - - - -
- - - - - - - - - - - - - - - - - - - - - - - - - -
Class A Common Stock, $.01 par value
48,984,920
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)
September 30, 2017
 
December 31,
2016
 
(Unaudited)
 
CURRENT ASSETS
 

 
 

Cash and cash equivalents
$
222,387

 
$
541,995

Accounts receivable, net of allowance of $25,038 in 2017 and $22,398 in 2016
632,963

 
593,070

Prepaid expenses
131,806

 
111,569

Assets held for sale

 
55,602

Other current assets
62,037

 
39,199

Total Current Assets
1,049,193

 
1,341,435

PROPERTY, PLANT AND EQUIPMENT
 
 
 
Structures, net
1,152,066

 
1,196,676

Other property, plant and equipment, net
228,376

 
216,157

INTANGIBLE ASSETS AND GOODWILL
 
 
 
Indefinite-lived intangibles
977,152

 
960,966

Other intangibles, net
282,426

 
299,617

Goodwill
713,277

 
696,263

OTHER ASSETS
 
 
 
Due from iHeartCommunications
1,051,349

 
885,701

Other assets
126,649

 
122,013

Total Assets
$
5,580,488

 
$
5,718,828

CURRENT LIABILITIES
 
 
 
Accounts payable
$
88,022

 
$
86,870

Accrued expenses
532,247

 
480,872

Deferred income
90,756

 
67,005

Current portion of long-term debt
573

 
6,971

Total Current Liabilities
711,598

 
641,718

Long-term debt
5,264,290

 
5,110,020

Deferred tax liability
601,887

 
638,705

Other long-term liabilities
286,883

 
259,311

Commitments and Contingent liabilities (Note 4)

 

STOCKHOLDERS’ DEFICIT
 
 
 
Noncontrolling interest
152,338

 
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 49,921,834 and 47,947,123 shares in 2017 and 2016, respectively
499

 
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
3,131,164

 
3,432,121

Accumulated deficit
(4,221,215
)
 
(4,125,798
)
Accumulated other comprehensive loss
(344,361
)
 
(386,658
)
Cost of shares (935,812 in 2017 and 633,851 in 2016) held in treasury
(5,745
)
 
(4,106
)
Total Stockholders’ Deficit
(1,284,170
)
 
(930,926
)
Total Liabilities and Stockholders’ Deficit
$
5,580,488

 
$
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
 
Nine Months Ended
 
September 30,
 
September 30,
 
2017
 
2016
 
2017
 
2016
Revenue
$
645,089

 
$
669,221

 
$
1,862,134

 
$
1,966,321

Operating expenses:
 
 
 
 
 
 
 
Direct operating expenses (excludes depreciation and amortization)
356,100

 
362,250

 
1,034,204

 
1,066,238

Selling, general and administrative expenses (excludes depreciation and amortization)
128,397

 
126,164

 
370,069

 
388,532

Corporate expenses (excludes depreciation and amortization)
35,333

 
28,103

 
105,213

 
86,000

Depreciation and amortization
81,096

 
85,780

 
236,880

 
258,149

Impairment charges
1,591

 
7,274

 
1,591

 
7,274

Other operating income (expense), net
(11,783
)
 
1,095

 
28,657

 
226,485

Operating income
30,789

 
60,745

 
142,834

 
386,613

Interest expense
95,467

 
93,313

 
282,730

 
281,836

Interest income on Due from iHeartCommunications
17,087

 
12,429

 
47,277

 
36,433

Equity in loss of nonconsolidated affiliates
(628
)
 
(727
)
 
(829
)
 
(1,374
)
Other income (expense), net
9,164

 
(6,524
)
 
21,804

 
(46,198
)
Income (loss) before income taxes
(39,055
)
 
(27,390
)
 
(71,644
)
 
93,638

Income tax benefit (expense)
(16,347
)
 
3,619

 
(12,900
)
 
(37,579
)
Consolidated net income (loss)
(55,402
)
 
(23,771
)
 
(84,544
)
 
56,059

Less amount attributable to noncontrolling interest
6,237

 
7,329

 
10,873

 
16,162

Net income (loss) attributable to the Company
$
(61,639
)
 
$
(31,100
)
 
$
(95,417
)
 
$
39,897

Other comprehensive income (loss), net of tax:
 
 
 
 
 
 
 
Foreign currency translation adjustments
12,950

 
7,214

 
43,947

 
43,584

Unrealized holding loss on marketable securities
(320
)
 
(290
)
 
(218
)
 
(635
)
Reclassification adjustments
6,207

 

 
4,563

 
32,823

Other adjustments to comprehensive income (loss)

 
193

 

 
(3,551
)
Other comprehensive income
18,837

 
7,117

 
48,292

 
72,221

Comprehensive income (loss)
(42,802
)
 
(23,983
)
 
(47,125
)
 
112,118

Less amount attributable to noncontrolling interest
2,666

 
575

 
5,995

 
(984
)
Comprehensive income (loss) attributable to the Company
$
(45,468
)
 
$
(24,558
)
 
$
(53,120
)
 
$
113,102

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

 
 

 
 
 
 
Basic
$
(0.17
)
 
$
(0.09
)
 
$
(0.26
)
 
$
0.11

Weighted average common shares outstanding – Basic
361,302

 
360,454

 
361,064

 
360,202

Diluted
$
(0.17
)
 
$
(0.09
)
 
$
(0.26
)
 
$
0.11

Weighted average common shares outstanding – Diluted
361,302

 
360,454

 
361,064

 
361,417

 
 
 
 
 
 
 
 
Dividends declared per share
$
0.07

 
$

 
$
0.85

 
$
1.49

 
See Notes to Consolidated Financial Statements

2



CONSOLIDATED STATEMENTS OF CASH FLOWS
CLEAR CHANNEL OUTDOOR HOLDINGS, INC. AND SUBSIDIARIES
(UNAUDITED)
(In thousands)
Nine Months Ended September 30,
 
2017
 
2016
Cash flows from operating activities:
 
 
 
Consolidated net income (loss)
$
(84,544
)
 
$
56,059

Reconciling items:
 
 
 
Impairment charges
1,591

 
7,274

Depreciation and amortization
236,880

 
258,149

Deferred taxes
(28,101
)
 
28,575

Provision for doubtful accounts
6,328

 
8,444

Amortization of deferred financing charges and note discounts, net
7,996

 
7,907

Share-based compensation
7,153

 
8,191

Gain on disposal of operating and other assets
(30,295
)
 
(232,026
)
Equity in loss of nonconsolidated affiliates
829

 
1,374

Foreign exchange transaction (gain) loss
(22,266
)
 
46,283

Other reconciling items, net
(4,930
)
 
(968
)
Changes in operating assets and liabilities, net of effects of acquisitions and dispositions:
 
 
 
(Increase) decrease in accounts receivable
(17,826
)
 
49,690

Increase in prepaid expenses and other current assets
(16,177
)
 
(39,653
)
Decrease in accrued expenses
(8,810
)
 
(22,053
)
Decrease in accounts payable
(4,023
)
 
(26,548
)
Increase in accrued interest
6,031

 
5,057

Increase in deferred income
18,718

 
8,509

Changes in other operating assets and liabilities
3,515

 
25,893

Net cash provided by operating activities
$
72,069

 
$
190,157

Cash flows from investing activities:
 

 
 

Purchases of property, plant and equipment
(134,868
)
 
(148,005
)
Proceeds from disposal of assets
71,034

 
591,764

Purchases of other operating assets
(2,984
)
 
(1,689
)
Change in other, net
(20,289
)
 
(30,349
)
Net cash provided by (used for) investing activities
$
(87,107
)
 
$
411,721

Cash flows from financing activities:
 

 
 

Payments on credit facilities
(909
)
 
(1,728
)
Proceeds from long-term debt
156,000

 
800

Payments on long-term debt
(604
)
 
(1,976
)
Net transfers from (to) iHeartCommunications
(165,650
)
 
161,335

Dividends and other payments to noncontrolling interests
(12,027
)
 
(21,046
)
Dividends paid
(282,658
)
 
(755,149
)
Change in other, net
(6,234
)
 
(1,479
)
Net cash used for financing activities
$
(312,082
)
 
$
(619,243
)
Effect of exchange rate changes on cash
7,512

 
(1,054
)
Net decrease in cash and cash equivalents
(319,608
)
 
(18,419
)
Cash and cash equivalents at beginning of period
541,995

 
412,743

Cash and cash equivalents at end of period
$
222,387

 
$
394,324

SUPPLEMENTAL DISCLOSURES:
 

 
 

Cash paid for interest
270,126

 
271,833

Cash paid for income taxes
29,771

 
34,800

 
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 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.
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 the 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

4



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


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 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 $39.4 million, plus $43.1 million in cash, net of closing costs. The assets acquired as part of the transaction consisted of $9.9 million in fixed assets and $29.5 million in intangible assets (including $2.3 million in goodwill). The Company recognized a net gain of $28.9 million related to the sale, which is included within Other operating income (expense), net.
During the third quarter of 2017, Americas sold its ownership interest in a joint venture in Canada. As a result, the Company recognized a net loss on sale of $12.1 million, including a $6.3 million cumulative translation adjustment, which is included within Other operating income (expense), net.
Property, Plant and Equipment

The Company’s property, plant and equipment consisted of the following classes of assets as of September 30, 2017 and December 31, 2016, respectively:
(In thousands)
September 30,
2017
 
December 31,
2016
 
 
Land, buildings and improvements
$
145,531

 
$
152,775

Structures
2,807,023

 
2,684,673

Furniture and other equipment
175,627

 
148,516

Construction in progress
70,514

 
58,585

 
3,198,695

 
3,044,549

Less: accumulated depreciation
1,818,253

 
1,631,716

Property, plant and equipment, net
$
1,380,442

 
$
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. 

Annual Impairment Test on Indefinite-lived Intangible Assets

The Company performs its annual impairment test on indefinite-lived intangible assets as of July 1 of each year.

The impairment tests for indefinite-lived intangible assets consist of a comparison between the fair value of the indefinite-lived intangible asset at the market level with its carrying amount. If the carrying amount of the indefinite-lived intangible asset exceeds its fair value, an impairment loss is recognized equal to that excess. After an impairment loss is recognized, the adjusted carrying amount of the indefinite-lived asset is its new accounting basis. The fair value of the indefinite-lived asset is determined using the direct valuation method as prescribed in ASC 805-20-S99. Under the direct valuation method, the fair value of the indefinite-lived assets is calculated at the market level as prescribed by ASC 350-30-35. The Company engaged a third-party valuation firm, to assist it in the development of the assumptions and the Company’s determination of the fair value of its indefinite-lived intangible assets.


5



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


The application of the direct valuation method attempts to isolate the income that is attributable to the indefinite-lived intangible asset alone (that is, apart from tangible and identified intangible assets and goodwill). It is based upon modeling a hypothetical “greenfield” build-up to a “normalized” enterprise that, by design, lacks inherent goodwill and whose only other assets have essentially been paid for (or added) as part of the build-up process. The Company forecasts revenue, expenses and cash flows over a ten-year period for each of its markets in its application of the direct valuation method. The Company also calculates a “normalized” residual year which represents the perpetual cash flows of each market. The residual year cash flow was capitalized to arrive at the terminal value of the permits in each market.

Under the direct valuation method, it is assumed that rather than acquiring indefinite-lived intangible assets as part of a going concern business, the buyer hypothetically develops indefinite-lived intangible assets and builds a new operation with similar attributes from scratch. Thus, the buyer incurs start-up costs during the build-up phase which are normally associated with going concern value. Initial capital costs are deducted from the discounted cash flow model which results in value that is directly attributable to the indefinite-lived intangible assets.

The key assumptions using the direct valuation method are market revenue growth rates, market share, profit margin, duration and profile of the build-up period, estimated start-up capital costs and losses incurred during the build-up period, the risk-adjusted discount rate and terminal values. This data is populated using industry normalized information representing an average billboard permit within a market.

The Company concluded no impairment of indefinite-lived intangible assets was required for the three and nine months ended September 30, 2017 and 2016, respectively.
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 September 30, 2017 and December 31, 2016, respectively:

(In thousands)
September 30, 2017
 
December 31, 2016
 
Gross Carrying Amount
 
Accumulated Amortization
 
Gross Carrying Amount
 
Accumulated Amortization
Transit, street furniture and other outdoor
   contractual rights
$
587,099

 
$
(469,982
)
 
$
563,863

 
$
(426,752
)
Permanent easements
162,919

 

 
159,782

 

Other
4,667

 
(2,277
)
 
4,536

 
(1,812
)
Total
$
754,685

 
$
(472,259
)
 
$
728,181

 
$
(428,564
)
 
Total amortization expense related to definite-lived intangible assets for the three months ended September 30, 2017 and 2016 was $7.1 million and $9.3 million, respectively. Total amortization expense related to definite-lived intangible assets for the nine months ended September 30, 2017 and 2016 was $21.2 million and $29.2 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:


6



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


(In thousands)
 
2018
$
19,389

2019
$
15,639

2020
$
13,356

2021
$
13,074

2022
$
11,603

 
Goodwill
Annual Impairment Test to Goodwill
The Company performs its annual impairment test on goodwill as of July 1 of each year.

Each of the Company’s advertising markets are components. The U.S. advertising markets are aggregated into a single reporting unit for purposes of the goodwill impairment test using the guidance in ASC 350-20-55. The Company also determined that each country within its Americas segment and its International segment constitutes a separate reporting unit.

The goodwill impairment test is a two-step process. The first step, used to screen for potential impairment, compares the fair value of the reporting unit with its carrying amount, including goodwill. If applicable, the second step, used to measure the amount of the impairment loss, compares the implied fair value of the reporting unit goodwill with the carrying amount of that goodwill.

Each of the Company’s reporting units is valued using a discounted cash flow model which requires estimating future cash flows expected to be generated from the reporting unit and discounting such cash flows to their present value using a risk-adjusted discount rate. Terminal values were also estimated and discounted to their present value. Assessing the recoverability of goodwill requires the Company to make estimates and assumptions about sales, operating margins, growth rates and discount rates based on its budgets, business plans, economic projections, anticipated future cash flows and marketplace data. There are inherent uncertainties related to these factors and management’s judgment in applying these factors.

The Company recognized goodwill impairment of $1.6 million during the three and nine months ended September 30, 2017 related to one market in the Company's International outdoor segment. The Company recognized goodwill impairment of $7.3 million during the three and nine months ended September 30, 2016 related to one market in the Company's International outdoor segment.

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

 
(1,591
)
 
(1,591
)
Acquisitions
2,252

 

 
2,252

Dispositions

 
(1,817
)
 
(1,817
)
Foreign currency
654

 
17,427

 
18,081

Assets held for sale
89

 

 
89

Balance as of September 30, 2017
$
518,409

 
$
194,868

 
$
713,277



7



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


NOTE 3 – LONG-TERM DEBT

Long-term debt outstanding as of September 30, 2017 and December 31, 2016 consisted of the following:

(In thousands)
September 30,
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
375,000

 
225,000

Other debt
2,529

 
14,798

Original issue discount
(123
)
 
(6,738
)
Long-term debt fees
(37,543
)
 
(41,069
)
Total debt
$
5,264,863

 
$
5,116,991

Less: current portion
573

 
6,971

Total long-term debt
$
5,264,290

 
$
5,110,020


(1)
The Senior revolving credit facility provides for borrowings up to $75.0 million (the revolving credit commitment). As of September 30, 2017, we had $72.7 million of letters of credit outstanding, and $2.3 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 $5.4 billion and $5.2 billion as of September 30, 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.
On August 14, 2017, Clear Channel International B.V. (“CCIBV”), an indirect subsidiary of the Company, issued $150.0 million in aggregate principal amount of 8.75% Senior Notes due 2020 (the “New CCIBV Notes”). The New CCIBV Notes were issued as additional notes under the indenture governing CCIBV’s existing 8.75% Senior Notes due 2020 and were issued at a premium, resulting in $156.0 million in proceeds.  The New CCIBV Notes mature on December 15, 2020 and bear interest at a rate of 8.75% per annum, payable semi-annually in arrears on June 15 and December 15 of each year.


Surety Bonds, Letters of Credit and Guarantees
As of September 30, 2017, the Company had $95.4 million and $36.6 million in letters of credit and bank guarantees outstanding, respectively. Bank guarantees and letters of credit of $17.3 million and $23.5 million, respectively, were backed by cash collateral. Additionally, as of September 30, 2017, iHeartCommunications had outstanding commercial standby letters of credit and surety bonds of $12.1 million and $54.3 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

8



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


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.
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”) allegedly 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. 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.
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

9



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


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 September 30, 2017 and December 31, 2016, the asset recorded in “Due from iHeartCommunications” on the consolidated balance sheet was $1,051.3 million and $885.7 million, respectively.  The terms of the "Due from iHeartCommuniations" 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 September 30, 2017, 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 6.5%, which is equal to the fixed interest rate on the CCWH Senior Notes.  The interest rate applied to the remaining balance was 20.0%. The net interest income for the three months ended September 30, 2017 and 2016 was $17.1 million and $12.4 million, respectively, and $47.3 million and $36.4 million for the nine months ended September 30, 2017 and 2016, respectively.
On October 5, 2017, the Company made a demand for repayment of $25.0 million outstanding under the "Due from iHeartCommunications" Note and simultaneously paid a special cash dividend of $25.0 million. On October 31, 2017, the Company made a demand for repayment of $25.0 million outstanding under the "Due from iHeartCommunications" Note and simultaneously paid a special cash dividend of $25.0 million.

In its Quarterly Report on Form 10-Q filed with the SEC on November 8, 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, as they become due in the ordinary course of business for a period of 12 months following November 8, 2017, including interest payments on its outstanding debt and payment of the $365.0 million outstanding under the receivables based credit facility at maturity on December 24, 2017, payment of the $51.5 million principal amount of 10% Senior Notes due January 15, 2018 (after giving effect to certain debt exchanges that occurred after September 30, 2017), the payment of the $175.0 million principal amount of 6.875% Senior Notes due June 15, 2018 and the payment of $24.8 million of contractual AHYDO catch-up payments to be made on the Company’s 14% Senior Notes due 2021 beginning with the interest payment due on August 1, 2018. 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 November 8, 2017.
If iHeartCommunications were to become insolvent or file for bankruptcy, 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 "Due from iHeartCommunications Note", or could not obtain such cash on a timely basis or return cash previously received from iHeartCommunications, 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 September 30, 2017 and 2016, the Company recorded $1.7 million and $1.2 million, respectively, and $5.4 million and $2.0 million for the nine months ended September 30, 2017 and 2016, 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 September 30, 2017 and 2016, the Company recorded $16.7 million and $7.6 million, respectively, and $50.3 million and $26.0 million for the nine months ended September 30, 2017 and 2016, respectively, as a component of corporate expenses for these services. 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.
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

10



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


license fee to iHeartMedia, Inc. in 2017 based on revenues of entities using the Clear Channel name, pursuant to the Amended and Restated License Agreement, dated November 10, 2005, by and between iHM Identity, Inc. and Outdoor Management Services, Inc. Included within the management services expense recognized in the three and nine months ended September 30, 2017 is an additional expense related to this license of $9.2 million and $26.4 million, respectively.
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 September 30, 2017 and 2016, the Company recorded $2.3 million and $2.3 million, respectively, and $7.1 million and $7.0 million for the nine months ended September 30, 2017 and 2016, respectively, as a component of selling, general and administrative expenses for these services.
NOTE 6 – INCOME TAXES

Income Tax Benefit (Expense)

The Company’s income tax benefit (expense) for the three and nine months ended September 30, 2017 and 2016, respectively, consisted of the following components:
(In thousands)
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
2017
 
2016
 
2017
 
2016
Current tax benefit (expense)
$
(21,094
)
 
$
(10,260
)
 
$
(41,001
)
 
$
(9,004
)
Deferred tax benefit (expense)
4,747

 
13,879

 
28,101

 
(28,575
)
Income tax benefit (expense)
$
(16,347
)
 
$
3,619

 
$
(12,900
)
 
$
(37,579
)
 
The effective tax rates for the three and nine months ended September 30, 2017 were (41.9)% and (18.0)%. The effective rates were primarily impacted by the mix of earnings within the various jurisdictions in which the Company operates and the benefits and charges from tax amounts associated with its foreign earnings that are taxed at rates different from the federal statutory rate. In addition, we were unable to record benefits on losses in certain foreign jurisdictions due to the uncertainty of the ability to utilize those losses in future periods.
 
The effective tax rates for the three and nine months ended September 30, 2016 were 13.2% and 40.1%. The effective rates were 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.

11



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 income (loss)
(95,417
)
 
10,873

 
(84,544
)
Dividends declared
(307,492
)
 

 
(307,492
)
Payments to noncontrolling interests

 
(12,027
)
 
(12,027
)
Share-based compensation
6,529

 
624

 
7,153

Disposal of noncontrolling interest

 
(2,438
)
 
(2,438
)
Foreign currency translation adjustments
37,952

 
5,995

 
43,947

Unrealized holding loss on marketable securities
(218
)
 

 
(218
)
Reclassification adjustments
4,563

 

 
4,563

Other, net
(1,613
)
 
(575
)
 
(2,188
)
Balances as of September 30, 2017
$
(1,436,508
)
 
$
152,338

 
$
(1,284,170
)
 
 
 
 
 
 
Balances as of January 1, 2016
$
(755,599
)
 
$
187,775

 
$
(567,824
)
Net income
39,897

 
16,162

 
56,059

Dividends declared
(540,034
)
 

 
(540,034
)
Dividends and other payments to noncontrolling interests

 
(21,046
)
 
(21,046
)
Share-based compensation
8,191

 

 
8,191

Foreign currency translation adjustments
45,230

 
(1,646
)
 
43,584

Unrealized holding loss on marketable securities
(635
)
 

 
(635
)
Reclassification adjustments
32,161

 
662

 
32,823

Other adjustments to comprehensive loss
(3,551
)
 

 
(3,551
)
Other, net
(2,028
)
 
1,299

 
(729
)
Balances as of September 30, 2016
$
(1,176,368
)
 
$
183,206

 
$
(993,162
)

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 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 September 14, 2017, the board of directors of the Company declared a special cash dividend paid on October 5, 2017 to Class A and Class B stockholders of record at the closing of business on October 2, 2017, in an aggregate amount equal to $25.0 million.


12



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


COMPUTATION OF LOSS PER SHARE
(In thousands, except per share data)
Three Months Ended
September 30,
 
Nine Months Ended
September 30,
 
2017
 
2016
 
2017
 
2016
NUMERATOR:
 
 
 
 
 
 
 
Net income (loss) attributable to the Company – common shares
$
(61,639
)
 
$
(31,100
)
 
$
(95,417
)
 
$
39,897

 
 
 
 
 
 
 
 
DENOMINATOR:
 

 
 

 
 

 
 

Weighted average common shares outstanding - basic
361,302

 
360,454

 
361,064

 
360,202

Stock options and restricted stock(1)

 

 

 
1,215

Weighted average common shares outstanding - diluted
361,302

 
360,454

 
361,064

 
361,417

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

 
 

 
 

 
 

Basic
$
(0.17
)
 
$
(0.09
)
 
$
(0.26
)
 
$
0.11

Diluted
$
(0.17
)
 
$
(0.09
)
 
$
(0.26
)
 
$
0.11


(1) 
Outstanding equity awards of 8.3 million and 8.1 million for the three months ended September 30, 2017 and 2016, respectively, 8.3 million and 5.4 million for the nine months ended September 30, 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 and nine months ended September 30, 2017. The total increase (decrease) in deferred income tax liabilities of other adjustments to comprehensive loss for the three and nine months ended September 30, 2016 was $0.1 million and $(0.7) million.

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.


13



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


The following table presents the Company's reportable segment results for the three and nine months ended September 30, 2017 and 2016:
(In thousands)
Americas
 
International
 
Corporate and other reconciling items
 
Consolidated
Three Months Ended September 30, 2017
 
 
 
 
 
 
 
Revenue
$
316,587

 
$
328,502

 
$

 
$
645,089

Direct operating expenses
141,609

 
214,491

 

 
356,100

Selling, general and administrative expenses
54,689

 
73,708

 

 
128,397

Corporate expenses

 

 
35,333

 
35,333

Depreciation and amortization
47,035

 
32,886

 
1,175

 
81,096

Impairment charges

 

 
1,591

 
1,591

Other operating expense, net

 

 
(11,783
)
 
(11,783
)
Operating income (loss)
$
73,254

 
$
7,417

 
$
(49,882
)
 
$
30,789

 
 
 
 
 
 
 
 
Capital expenditures
$
5,118

 
$
26,211

 
$
460

 
$
31,789

Share-based compensation expense
$

 
$

 
$
2,894

 
$
2,894

 
 
 
 
 
 
 
 
Three Months Ended September 30, 2016
 
 
 
 
 
 
 
Revenue
$
322,997

 
$
346,224

 
$

 
$
669,221

Direct operating expenses
142,989

 
219,261

 

 
362,250

Selling, general and administrative expenses
54,500

 
71,664

 

 
126,164

Corporate expenses

 

 
28,103

 
28,103

Depreciation and amortization
47,242

 
37,018

 
1,520

 
85,780

Impairment charges

 

 
7,274

 
7,274

Other operating income, net

 

 
1,095

 
1,095

Operating income (loss)
$
78,266

 
$
18,281

 
$
(35,802
)
 
$
60,745

 
 
 
 
 
 
 
 
Capital expenditures
$
19,114

 
$
30,803

 
$
1,033

 
$
50,950

Share-based compensation expense
$

 
$

 
$
2,742

 
$
2,742




14



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


(In thousands)
Americas
 
International
 
Corporate and other reconciling items
 
Consolidated
Nine Months Ended September 30, 2017
 
 
 
 
 
 
 
Revenue
$
919,967

 
$
942,167

 
$

 
$
1,862,134

Direct operating expenses
427,181

 
607,023

 

 
1,034,204

Selling, general and administrative expenses
165,538

 
204,531

 

 
370,069

Corporate expenses

 

 
105,213

 
105,213

Depreciation and amortization
137,689

 
95,149

 
4,042

 
236,880

Impairment Charges

 

 
1,591

 
1,591

Other operating income, net

 

 
28,657

 
28,657

Operating income (loss)
$
189,559

 
$
35,464

 
$
(82,189
)
 
$
142,834

 
 
 
 
 
 
 
 
Capital expenditures
$
48,749

 
$
83,851

 
$
2,268

 
$
134,868

Share-based compensation expense
$

 
$

 
$
7,153

 
$
7,153

 
 
 
 
 
 
 
 
Nine Months Ended September 30, 2016
 
 
 
 
 
 
 
Revenue
$
931,058

 
$
1,035,263

 
$

 
$
1,966,321

Direct operating expenses
421,039

 
645,199

 

 
1,066,238

Selling, general and administrative expenses
167,660

 
220,872

 

 
388,532

Corporate expenses

 

 
86,000

 
86,000

Depreciation and amortization
140,883

 
113,075

 
4,191

 
258,149

Impairment charges

 

 
7,274

 
7,274

Other operating income, net

 

 
226,485

 
226,485

Operating income
$
201,476

 
$
56,117

 
$
129,020

 
$
386,613

 
 
 
 
 
 
 
 
Capital expenditures
$
47,808

 
$
97,487

 
$
2,710

 
$
148,005

Share-based compensation expense
$

 
$

 
$
8,191

 
$
8,191



15



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)
September 30, 2017
 
Parent
 
Subsidiary
 
Guarantor
 
Non-Guarantor
 
 
 
 
 
Company
 
Issuer
 
Subsidiaries
 
Subsidiaries
 
Eliminations
 
Consolidated
Cash and cash equivalents
$
2,359

 
$

 
$
13,830

 
$
206,198

 
$

 
$
222,387

Accounts receivable, net of allowance

 

 
189,217

 
443,746

 

 
632,963

Intercompany receivables

 
726,495

 
2,862,295

 
93,497

 
(3,682,287
)
 

Prepaid expenses
318

 
3,433

 
61,312

 
66,743

 

 
131,806

Other current assets
23,464

 

 
3,705

 
34,868

 

 
62,037

Total Current Assets
26,141

 
729,928

 
3,130,359

 
845,052

 
(3,682,287
)
 
1,049,193

Structures, net

 

 
690,930

 
461,136

 

 
1,152,066

Other property, plant and equipment, net

 

 
125,704

 
102,672

 

 
228,376

Indefinite-lived intangibles

 

 
977,152

 

 

 
977,152

Other intangibles, net

 

 
252,186

 
30,240

 

 
282,426

Goodwill

 

 
507,819

 
205,458

 

 
713,277

Due from iHeartCommunications
1,051,349

 

 

 

 

 
1,051,349

Intercompany notes receivable
182,026

 
4,857,393

 
12,437

 
74,107

 
(5,125,963
)
 

Other assets
224,750

 
431,992

 
1,312,735

 
71,635

 
(1,914,463
)
 
126,649

Total Assets
$
1,484,266

 
$
6,019,313

 
$
7,009,322

 
$
1,790,300

 
$
(10,722,713
)
 
$
5,580,488

 
 
 
 
 
 
 
 
 
 
 
 
Accounts payable
$

 
$

 
$
13,810

 
$
74,212

 
$

 
$
88,022

Intercompany payable
2,862,295

 

 
819,992

 

 
(3,682,287
)
 

Accrued expenses
23,378

 
1,711

 
94,033

 
413,125

 

 
532,247

Deferred income

 

 
39,874

 
50,882

 

 
90,756

Current portion of long-term debt

 

 
112

 
461

 

 
573

Total Current Liabilities
2,885,673

 
1,711

 
967,821

 
538,680

 
(3,682,287
)
 
711,598

Long-term debt

 
4,892,903

 
1,850

 
369,537

 

 
5,264,290

Intercompany notes payable

 
74,107

 
5,039,418

 
12,438

 
(5,125,963
)
 

Deferred tax liability
772

 
1,367

 
662,316

 
(62,568
)
 

 
601,887

Other long-term liabilities
1,019

 

 
143,119

 
142,745

 

 
286,883

Total stockholders' equity (deficit)
(1,403,198
)
 
1,049,225

 
194,798

 
789,468

 
(1,914,463
)
 
(1,284,170
)
Total Liabilities and Stockholders' Equity (Deficit)
$
1,484,266

 
$
6,019,313

 
$
7,009,322

 
$
1,790,300

 
$
(10,722,713
)
 
$
5,580,488


 

16



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


 

 






17



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


(In thousands)
Three Months Ended September 30, 2017
 
Parent
 
Subsidiary
 
Guarantor
 
Non-Guarantor
 
 
 
 
 
Company
 
Issuer
 
Subsidiaries
 
Subsidiaries
 
Eliminations
 
Consolidated
Revenue
$

 
$

 
$
288,433

 
$
356,656

 
$

 
$
645,089

Operating expenses:
 
 
 
 
 
 
 
 
 
 
 

Direct operating expenses

 

 
126,536

 
229,564

 

 
356,100

Selling, general and administrative expenses

 

 
47,994

 
80,403

 

 
128,397

Corporate expenses
3,602

 

 
22,658

 
9,073

 

 
35,333

Depreciation and amortization

 

 
45,180

 
35,916

 

 
81,096

Impairment charges

 

 

 
1,591

 

 
1,591

Other operating income (expense), net
(102
)
 

 
1,876

 
(13,557
)
 

 
(11,783
)
Operating income (loss)
(3,704
)
 

 
47,941

 
(13,448
)
 

 
30,789

Interest (income) expense, net
(20
)
 
88,232

 
126

 
7,129

 

 
95,467

Interest income on Due from iHeartCommunications
17,087

 

 

 

 

 
17,087

Intercompany interest income
4,090

 
85,067

 
17,316

 
43

 
(106,516
)
 

Intercompany interest expense
17,087

 
203

 
89,200

 
26

 
(106,516
)
 

Equity in loss of nonconsolidated affiliates
(57,326
)
 
(15,720
)
 
(32,846
)
 
(838
)
 
106,102

 
(628
)
Other income (expense), net
(7,517
)
 

 
9,958

 
6,723

 

 
9,164

Loss before income taxes
(64,437
)
 
(19,088
)
 
(46,957
)
 
(14,675
)
 
106,102

 
(39,055
)
Income tax benefit (expense)
2,798

 
(1,711
)
 
(10,369
)
 
(7,065
)
 

 
(16,347
)
Consolidated net loss
(61,639
)
 
(20,799
)
 
(57,326
)
 
(21,740
)
 
106,102

 
(55,402
)
Less amount attributable to noncontrolling interest

 

 

 
6,237

 

 
6,237

Net loss attributable to the Company
$
(61,639
)
 
$
(20,799
)
 
$
(57,326
)
 
$
(27,977
)
 
$
106,102

 
$
(61,639
)
Other comprehensive income (loss), net of tax:
 

 
 

 
 

 
 

 
 

 
 

Foreign currency translation adjustments

 

 
712

 
12,238

 

 
12,950

Unrealized holding loss on marketable securities

 

 

 
(320
)
 

 
(320
)
Reclassification adjustments

 

 

 
6,207

 

 
6,207

Equity in subsidiary comprehensive income
16,171

 
7,963

 
15,459

 

 
(39,593
)
 

Comprehensive loss
(45,468
)
 
(12,836
)
 
(41,155
)
 
(9,852
)
 
66,509

 
(42,802
)
Less amount attributable to noncontrolling interest

 

 

 
2,666

 

 
2,666

Comprehensive loss attributable to the Company
$
(45,468