10-Q 1 ihmedia10-q2018q3.htm 10-Q Document
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X]
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2018
 
 
[   ]
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 FOR THE TRANSITION PERIOD FROM _________ TO __________
Commission File Number
000-53354
IHEARTMEDIA, INC.
(Exact name of registrant as specified in its charter)
Delaware
 
26-0241222
(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) 822-2828
(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 every Interactive Data File required to be submitted 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 such files).   Yes [X] No [  ]
 
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company.  See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer [   ]   Accelerated filer [   ]   Non-accelerated filer [X]  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 by check mark whether the registrant has filed all documents and reports required to be filed by Sections 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court. Yes [ ] No [ ]
 
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 5, 2018
 
 
~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~
 
~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~
 
 
Class A Common Stock, $.001 par value
 
31,538,017

(1) 
 
 
Class B Common Stock, $.001 par value
 
555,556

 
 
 
Class C Common Stock, $.001 par value
 
58,967,502

 
 
 
Class D Common Stock, $.001 par value
 

 
 
 
 
 
 
 
 
 
(1)    Outstanding Class A common stock includes 111,291 shares owned by a subsidiary



IHEARTMEDIA, 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
IHEARTMEDIA, INC. AND SUBSIDIARIES
(DEBTOR-IN-POSSESSION)
CONSOLIDATED BALANCE SHEETS
(In thousands, except share and per share data)
September 30,
2018
 
December 31,
2017
 
(Unaudited)
 
 
CURRENT ASSETS
 
 
 
Cash and cash equivalents
$
311,162

 
$
267,109

Accounts receivable, net of allowance of $46,531 in 2018 and $48,450 in 2017
1,466,924

 
1,508,370

Prepaid expenses
240,980

 
209,330

Other current assets
59,726

 
82,538

Total Current Assets
2,078,792

 
2,067,347

PROPERTY, PLANT AND EQUIPMENT
 
 
 
Structures, net
1,038,835

 
1,180,882

Other property, plant and equipment, net
680,256

 
703,832

INTANGIBLE ASSETS AND GOODWILL
 
 
 
Indefinite-lived intangibles - licenses
2,417,830

 
2,451,813

Indefinite-lived intangibles - permits
971,163

 
977,152

Other intangibles, net
432,497

 
550,056

Goodwill
4,043,941

 
4,051,082

OTHER ASSETS
 
 
 
Other assets
295,998

 
274,932

Total Assets
$
11,959,312

 
$
12,257,096

CURRENT LIABILITIES
 

 
 

Accounts payable
$
149,236

 
$
163,449

Accrued expenses
764,353

 
764,275

Accrued interest
11,623

 
268,102

Deferred income
218,654

 
186,404

Current portion of long-term debt
347

 
14,972,367

Total Current Liabilities
1,144,213

 
16,354,597

Long-term debt
5,274,490

 
5,676,814

Deferred income taxes
360,429

 
959,390

Other long-term liabilities
498,001

 
610,639

Liabilities subject to compromise
16,475,414

 

Commitments and contingent liabilities (Note 5)


 


STOCKHOLDERS’ DEFICIT
 
 
 
Noncontrolling interest
17,353

 
41,191

Class A Common Stock, par value $.001 per share, authorized 400,000,000 shares, issued 32,379,507 and 32,626,168 shares in 2018 and 2017, respectively
32

 
32

Class B Common Stock, par value $.001 per share, authorized 150,000,000 shares, issued 555,556 shares in 2018 and 2017
1

 
1

Class C Common Stock, par value $.001 per share, authorized 100,000,000 shares, issued 58,967,502 shares in 2018 and 2017
59

 
59

Class D Common Stock, par value $.001 per share, authorized 200,000,000 shares, no shares issued in 2018 and 2017

 

Additional paid-in capital
2,074,194

 
2,072,566

Accumulated deficit
(13,560,251
)
 
(13,142,001
)
Accumulated other comprehensive loss
(322,071
)
 
(313,718
)
Cost of shares (793,968 in 2018 and 610,991 in 2017) held in treasury
(2,552
)
 
(2,474
)
Total Stockholders' Deficit
(11,793,235
)
 
(11,344,344
)
Total Liabilities and Stockholders' Deficit
$
11,959,312

 
$
12,257,096

See Notes to Consolidated Financial Statements

1



IHEARTMEDIA, INC. AND SUBSIDIARIES
(DEBTOR-IN-POSSESSION)
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(UNAUDITED)
(In thousands, except share and per share data)
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
2018
 
2017
 
2018
 
2017
Revenue
$
1,582,765

 
$
1,536,757

 
$
4,553,255

 
$
4,455,270

Operating expenses:
 
 
 
 
 
 
 
Direct operating expenses (excludes depreciation and amortization)
630,264

 
623,741

 
1,869,260

 
1,812,505

Selling, general and administrative expenses (excludes depreciation and amortization)
457,757

 
438,796

 
1,382,234

 
1,337,091

Corporate expenses (excludes depreciation and amortization)
84,193

 
77,967

 
242,553

 
233,487

Depreciation and amortization
120,700

 
149,749

 
419,778

 
443,650

Impairment charges
40,922

 
7,631

 
40,922

 
7,631

Other operating income (expense), net
(1,637
)
 
(13,215
)
 
(5,212
)
 
24,785

Operating income
247,292

 
225,658

 
593,296

 
645,691

Interest expense (excludes contractual interest of $372,162 and $812,420 for the three and nine months ended September 30, 2018, respectively)
99,255

 
470,250

 
625,252

 
1,388,819

Equity in earnings (loss) of nonconsolidated affiliates
172

 
(2,238
)
 
291

 
(2,240
)
Other income (expense), net
(6,182
)
 
50

 
(35,424
)
 
(13,677
)
Reorganization items, net
52,475

 

 
313,270

 

Income (loss) before income taxes
89,552

 
(246,780
)
 
(380,359
)
 
(759,045
)
Income tax expense
(17,769
)
 
(2,051
)
 
(47,188
)
 
(50,143
)
Consolidated net income (loss)
71,783

 
(248,831
)
 
(427,547
)
 
(809,188
)
Less amount attributable to noncontrolling interest
1,705

 
1,659

 
(10,732
)
 
7,614

Net income (loss) attributable to the Company
$
70,078

 
$
(250,490
)
 
$
(416,815
)
 
$
(816,802
)
Other comprehensive income (loss), net of tax:
 
 
 
 
 
 
 
Foreign currency translation adjustments
(7,509
)
 
12,408

 
(20,042
)
 
43,071

Unrealized holding loss on marketable securities

 
(320
)
 

 
(218
)
Reclassification adjustments
1,425

 
6,207

 
1,425

 
4,563

Other comprehensive income (loss)
(6,084
)
 
18,295

 
(18,617
)
 
47,416

Comprehensive income (loss)
63,994

 
(232,195
)
 
(435,432
)
 
(769,386
)
Less amount attributable to noncontrolling interest
(5,212
)
 
4,161

 
(8,829
)
 
10,060

Comprehensive income (loss) attributable to the Company
$
69,206

 
$
(236,356
)
 
$
(426,603
)
 
$
(779,446
)
Net loss attributable to the Company per common share:
 
 
 
 
 
 
 
Basic
$
0.82

 
$
(2.94
)
 
$
(4.88
)
 
$
(9.62
)
Weighted average common shares outstanding - Basic
85,544

 
85,072

 
85,348

 
84,900

Diluted
$
0.82

 
$
(2.94
)
 
$
(4.88
)
 
$
(9.62
)
Weighted average common shares outstanding - Diluted
85,622

 
85,072

 
85,348

 
84,900

See Notes to Consolidated Financial Statements

2



IHEARTMEDIA, INC. AND SUBSIDIARIES
(DEBTOR-IN-POSSESSION)
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(In thousands)
Nine Months Ended September 30,
 
2018
 
2017
Cash flows from operating activities:
 
 
 
Consolidated net loss
$
(427,547
)
 
$
(809,188
)
Reconciling items:
 
 
 
Impairment charges
40,922

 
7,631

Depreciation and amortization
419,778

 
443,650

Deferred taxes
22,020

 
13,291

Provision for doubtful accounts
19,911

 
20,936

Amortization of deferred financing charges and note discounts, net
19,871

 
42,682

Non-cash Reorganization items, net
261,057

 

Share-based compensation
8,385

 
9,020

(Gain) loss on disposal of operating and other assets
432

 
(30,149
)
Equity in (earnings) loss of nonconsolidated affiliates
(291
)
 
2,240

Barter and trade income
(10,080
)
 
(32,953
)
Other reconciling items, net
13,105

 
(19,169
)
Changes in operating assets and liabilities, net of effects of acquisitions and dispositions:
 
 
 
(Increase) decrease in accounts receivable
5,799

 
(60,984
)
Increase in prepaid expenses and other current assets
(38,058
)
 
(41,237
)
Decrease in accrued expenses
(30,887
)
 
(37,819
)
Increase in accounts payable
35,525

 
9,419

Increase (decrease) in accrued interest
312,605

 
(78,087
)
Increase in deferred income
16,774

 
3,847

Changes in other operating assets and liabilities
(5,972
)
 
(808
)
Net cash provided by (used for) operating activities
663,349

 
(557,678
)
Cash flows from investing activities:
 
 
 
Purchases of other investments
(253
)
 
(500
)
Proceeds from sale of other investments
18,909

 
628

Purchases of property, plant and equipment
(157,569
)
 
(184,944
)
Proceeds from disposal of assets
7,245

 
71,320

Purchases of other operating assets
(2,132
)
 
(3,224
)
Change in other, net
(1,092
)
 
(3,693
)
Net cash used for investing activities
(134,892
)
 
(120,413
)
Cash flows from financing activities:
 
 
 
Draws on credit facilities
143,359

 
60,000

Payments on credit facilities
(258,308
)
 
(25,909
)
Proceeds from long-term debt

 
156,000

Payments on long-term debt
(364,776
)
 
(5,385
)
Payments to purchase noncontrolling interests

 
(953
)
Dividends and other payments to noncontrolling interests
(11,042
)
 
(41,083
)
Change in other, net
(2,340
)
 
(5,604
)
Net cash provided by (used for) financing activities
(493,107
)
 
137,066

Effect of exchange rate changes on cash, cash equivalents and restricted cash
(8,553
)
 
7,496

Net increase (decrease) in cash, cash equivalents and restricted cash
26,797

 
(533,529
)
Cash, cash equivalents and restricted cash at beginning of period
311,300

 
855,726

Cash, cash equivalents and restricted cash at end of period
$
338,097

 
$
322,197

SUPPLEMENTAL DISCLOSURES:
 
 
 
Cash paid for interest
$
293,689

 
$
1,426,438

Cash paid for income taxes
27,597

 
31,668

Cash paid for Reorganization items, net
52,213

 

See Notes to Consolidated Financial Statements

3



IHEARTMEDIA, INC. AND SUBSIDIARIES (DEBTOR-IN-POSSESSION)
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 iHeartMedia, Inc. and its consolidated subsidiaries. The Company’s reportable segments are iHeartMedia (“iHM”), Americas outdoor advertising (“Americas outdoor” or “Americas outdoor advertising”) and International outdoor advertising (“International outdoor” or “International outdoor advertising”).
The accompanying consolidated financial statements were prepared by the Company pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”) and, in the opinion of management, include all normal and recurring adjustments necessary to present fairly the results of the interim periods shown. Certain information and footnote disclosures normally included in financial statements prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) have been condensed or omitted pursuant to such SEC rules and regulations. Management believes that the disclosures made are adequate to make the information presented not misleading. Due to seasonality and other factors, the results for the interim periods may not be indicative of results for the full year. The financial statements contained herein should be read in conjunction with the consolidated financial statements and notes thereto included in the Company’s 2017 Annual Report on Form 10-K.
The consolidated financial statements include the accounts of the Company and its subsidiaries. Also included in the consolidated financial statements are entities for which the Company has a controlling financial interest or is the primary beneficiary. Investments in companies in which the Company owns 20% to 50% of the voting common stock or otherwise exercises significant influence over operating and financial policies of the company are accounted for under the equity method. All significant intercompany transactions are eliminated in the consolidation process.
The Company re-evaluated its segment reporting and determined that its Latin American operations should be managed by its International outdoor leadership team. As a result, beginning on January 1, 2018, the operations of Latin America are no longer reflected within the Company’s Americas outdoor segment and are included in the results of its International outdoor segment. Accordingly, the Company has recast the corresponding segment disclosures for prior periods to include Latin America within the International outdoor segment.
Certain prior period amounts have been reclassified to conform to the 2018 presentation.
Immaterial Corrections to Prior Periods
During the three months ended June 30, 2018, the Company identified misstatements associated with VAT obligations in its International Outdoor segment, which resulted in an understatement of the Company's VAT obligation. The Company evaluated the effects of these misstatements on prior periods’ consolidated financial statements, individually and in the aggregate, in accordance with the guidance in SEC Staff Bulletins ("SAB") 99, Materiality, SAB 108, Considering the Effects of Prior year Misstatements when Quantifying Misstatements in the Current Year Financial Statements and Accounting Standards Codification 250, Accounting Changes and Error Corrections, and concluded that no prior period is materially misstated. However, the Company has determined to revise our consolidated financial statements for the VAT misstatements, as well as other previously identified immaterial errors, for the prior periods presented herein.


4



IHEARTMEDIA, INC. AND SUBSIDIARIES (DEBTOR-IN-POSSESSION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)

A summary of the effect of the corrections on the Consolidated Balance Sheet as of December 31, 2017 is as follows:
 
December 31, 2017
(In thousands)
As Reported
 
Correction
 
Revised
Other assets
$
278,267

 
$
(3,335
)
 
$
274,932

Total Assets
12,260,431

 
(3,335
)
 
12,257,096

Other long-term liabilities
597,085

 
13,554

 
610,639

Noncontrolling interest
42,764

 
(1,573
)
 
41,191

Accumulated deficit
(13,127,843
)
 
(14,158
)
 
(13,142,001
)
Accumulated other comprehensive loss
(312,560
)
 
(1,158
)
 
(313,718
)
Total Stockholders' Deficit
(11,327,455
)
 
(16,889
)
 
(11,344,344
)
Total Liabilities and Stockholders' Deficit
12,260,431

 
(3,335
)
 
12,257,096

A summary of the effect of the corrections on the Consolidated Statement of Comprehensive Income (Loss) for the three and nine months ended September 30, 2017 is as follows:
 
Three Months Ended September 30, 2017
(In thousands)
As Reported
 
Correction
 
Revised
Revenue
$
1,537,416

 
$
(659
)
 
$
1,536,757

Direct operating expenses (excludes depreciation and amortization)
621,895

 
1,846

 
623,741

Selling, general and administrative expenses (excludes depreciation and amortization)
438,654

 
142

 
438,796

Operating income
228,305

 
(2,647
)
 
225,658

Loss before income taxes
(244,133
)
 
(2,647
)
 
(246,780
)
Consolidated net loss
(246,184
)
 
(2,647
)
 
(248,831
)
Less amount attributable to noncontrolling interest
1,993

 
(334
)
 
1,659

Net loss attributable to the Company
(248,177
)
 
(2,313
)
 
(250,490
)
Foreign currency translation adjustments
13,010

 
(602
)
 
12,408

Other comprehensive income
18,897

 
(602
)
 
18,295

Comprehensive loss
(229,280
)
 
(2,915
)
 
(232,195
)
Less amount attributable to noncontrolling interest
4,289

 
(128
)
 
4,161

Comprehensive loss attributable to the Company
(233,569
)
 
(2,787
)
 
(236,356
)
Basic loss per share
(2.92
)
 
(0.02
)
 
(2.94
)
Diluted loss per share
(2.92
)
 
(0.02
)
 
(2.94
)

5



IHEARTMEDIA, INC. AND SUBSIDIARIES (DEBTOR-IN-POSSESSION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)

 
Nine Months Ended September 30, 2017
(In thousands)
As Reported
 
Correction
 
Revised
Revenue
$
4,457,106

 
$
(1,836
)
 
$
4,455,270

Direct operating expenses (excludes depreciation and amortization)
1,807,534

 
4,971

 
1,812,505

Selling, general and administrative expenses (excludes depreciation and amortization)
1,336,563

 
528

 
1,337,091

Operating income
653,026

 
(7,335
)
 
645,691

Interest expense
1,388,747

 
72

 
1,388,819

Loss before income taxes
(751,638
)
 
(7,407
)
 
(759,045
)
Consolidated net loss
(801,781
)
 
(7,407
)
 
(809,188
)
Less amount attributable to noncontrolling interest
8,648

 
(1,034
)
 
7,614

Net loss attributable to the Company
(810,429
)
 
(6,373
)
 
(816,802
)
Foreign currency translation adjustments
44,665

 
(1,594
)
 
43,071

Other comprehensive income
49,010

 
(1,594
)
 
47,416

Comprehensive loss
(761,419
)
 
(7,967
)
 
(769,386
)
Less amount attributable to noncontrolling interest
10,342

 
(282
)
 
10,060

Comprehensive loss attributable to the Company
(771,761
)
 
(7,685
)
 
(779,446
)
Basic loss per share
(9.55
)
 
(0.07
)
 
(9.62
)
Diluted loss per share
(9.55
)
 
(0.07
)
 
(9.62
)
Voluntary Filing under Chapter 11
On March 14, 2018 (the "Petition Date"), the Company, iHeartCommunications, Inc. ("iHeartCommunications") and certain of the Company's direct and indirect domestic subsidiaries (collectively, the "Debtors") filed voluntary petitions for relief (the "Chapter 11 Cases") under Chapter 11 of the United States Bankruptcy Code (the "Bankruptcy Code"), in the United States Bankruptcy Court for the Southern District of Texas, Houston Division (the "Bankruptcy Court"). Clear Channel Outdoor Holdings, Inc. (“CCOH”) and its direct and indirect subsidiaries did not file voluntary petitions for reorganization under the Bankruptcy Code and are not Debtors in the Chapter 11 Cases.
The Chapter 11 Cases are being administered under the caption In re: iHeartMedia, Inc., Case No. 18-31274 (MI). The Debtors are operating their businesses as “debtors-in-possession” under the jurisdiction of the Bankruptcy Court and in accordance with the applicable provisions of the Bankruptcy Code and orders of the Bankruptcy Court.
On March 16, 2018, the Debtors entered into a Restructuring Support Agreement (the “RSA”) with certain creditors and equity holders (the “Consenting Stakeholders”). The RSA contemplates the restructuring and recapitalization of the Debtors (the “Restructuring Transactions”), which will be implemented through a plan of reorganization in the Chapter 11 Cases, if confirmed by the Bankruptcy Court. Pursuant to the RSA, the Consenting Stakeholders have agreed to, among other things, support the Restructuring Transactions and vote in favor of a plan of reorganization to effect the Restructuring Transactions.
The RSA provides certain milestones for the Restructuring Transactions. Failure of the Debtors to satisfy these milestones without a waiver or consensual amendment would provide the Consenting Stakeholders a termination right under the RSA. These milestones include (i) the filing of a plan of reorganization and disclosure statement, in form and substance reasonably acceptable to the Debtors and the Consenting Stakeholders, which were filed with the Bankruptcy Court on April 28, 2018, (ii) the filing of a motion for approval of the disclosure statement by May 31, 2018, which deadline was subsequently extended to June 22, 2018, and which motion was filed with the Bankruptcy Court on June 22, 2018, (iii) the entry of an order approving the disclosure statement by July 27, 2018 (subject to one additional 20-day extension on the terms set forth on the RSA), (iv) the entry of an order confirming the plan of reorganization within 75 days of the entry of an order approving the disclosure statement and (v) the effective date of the plan of reorganization occurring by March 14, 2019. The Debtors satisfied the first and second milestones, but did not satisfy the third milestone because the order approving the Disclosure Statement was not entered until September 20, 2018, which was after the date required by the third milestone. As a result, certain of the Consenting Stakeholders presently have the right to terminate the RSA, but as of the date hereof, the RSA has not been terminated.

6



IHEARTMEDIA, INC. AND SUBSIDIARIES (DEBTOR-IN-POSSESSION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)

On June 15, 2018, July 16, 2018 August 15, 2018, September 7, 2018 and October 1, 2018, the Debtors filed monthly operating reports for the periods from March 15, 2018 to April 30, 2018, May 1, 2018 to May 31, 2018, June 1, 2018 to June 30, 2018, July 1, 2018 to July 31, 2018 and August 1, 2018 to August 31, 2018, respectively (the “Monthly Operating Reports”) with the Bankruptcy Court.
iHeartCommunications, which is a Debtor in the Chapter 11 Cases, provides the day-to-day cash management services for CCOH’s cash activities and balances in the U.S. pursuant to the Corporate Services Agreement between iHeartCommunications and CCOH, and is continuing to do so during the Chapter 11 Cases pursuant to a cash management order approved by the Bankruptcy Court.
iHeartCommunications' filing of the Chapter 11 Cases constituted an event of default that accelerated its obligations under its debt agreements. Due to the Chapter 11 Cases, however, the creditors’ ability to exercise remedies under iHeartCommunications' debt agreements were stayed as of March 14, 2018, the date of the Chapter 11 petition filing, and continue to be stayed.
The Company has applied Accounting Standards Codification (“ASC”) 852 - Reorganizations in preparing the consolidated financial statements. ASC 852 requires the financial statements, for periods subsequent to the commencement of the Chapter 11 Cases, to distinguish transactions and events that are directly associated with the reorganization from the ongoing operations of the business. Accordingly, certain charges incurred during 2018 related to the bankruptcy proceedings, including unamortized long-term debt fees and discounts associated with debt classified as liabilities subject to compromise, are recorded as Reorganization items, net. In addition, pre-petition Debtor obligations that may be impacted by the Chapter 11 Cases have been classified on the Consolidated Balance Sheet at September 30, 2018 as Liabilities subject to compromise. These liabilities are reported at the amounts the Company anticipates will be allowed by the Bankruptcy Court, even if they may be settled for lesser amounts. See below for more information regarding Reorganization items.
ASC 852 requires certain additional reporting for financial statements prepared between the bankruptcy filing date and the date of emergence from bankruptcy, including:
Reclassification of Debtor pre-petition liabilities that are unsecured, under-secured or where it cannot be determined that the liabilities are fully secured, to a separate line item in the Consolidated Balance Sheet called, "Liabilities subject to compromise"; and
Segregation of Reorganization items, net as a separate line in the Consolidated Statement of Comprehensive Income (Loss), outside of income from continuing operations.
Debtor-In-Possession 
The Debtors are currently operating as debtors in possession in accordance with the applicable provisions of the Bankruptcy Code. The Bankruptcy Court has approved motions filed by the Debtors that were designed primarily to mitigate the impact of the Chapter 11 Cases on the Company’s operations, customers and employees. In general, as debtors-in-possession under the Bankruptcy Code, the Debtors are authorized to continue to operate as an ongoing business, but may not engage in transactions outside the ordinary course of business without the prior approval of the Bankruptcy Court. Pursuant to first day motions and second day motions filed with the Bankruptcy Court, the Bankruptcy Court authorized the Debtors to conduct their business activities in the ordinary course, including, among other things and subject to the terms and conditions of such orders, authorizing the Debtors to: (i) pay employees’ wages and related obligations; (ii) continue to operate their cash management system in a form substantially similar to pre-petition practice; (iii) use cash collateral on an interim basis; (iv) continue to honor certain obligations related to on-air talent, station affiliates and royalty obligations; (v) continue to maintain certain customer programs; (vi) pay taxes in the ordinary course; (vii) continue their surety bond program; and (viii) maintain their insurance program in the ordinary course.
Automatic Stay 
Subject to certain specific exceptions under the Bankruptcy Code, the Bankruptcy Petitions automatically stayed most judicial or administrative actions against the Debtors and efforts by creditors to collect on or otherwise exercise rights or remedies with respect to pre-petition claims. Absent an order from the Bankruptcy Court, substantially all of the Debtors’ pre-petition liabilities are subject to settlement under the Bankruptcy Code. See Note 13, Condensed Combined Debtor-In-Possession Financial Information.

7



IHEARTMEDIA, INC. AND SUBSIDIARIES (DEBTOR-IN-POSSESSION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)

Executory Contracts
Subject to certain exceptions, under the Bankruptcy Code, the Debtors may assume, amend or reject certain executory contracts and unexpired leases subject to the approval of the Bankruptcy Court and certain other conditions. Generally, the rejection of an executory contract or unexpired lease is treated as a pre-petition breach of such executory contract or unexpired lease and, subject to certain exceptions, relieves the Debtors from performing their future obligations under such executory contract or unexpired lease but entitles the contract counterparty or lessor to a pre-petition general unsecured claim for damages caused by such deemed breach. Generally, the assumption of an executory contract or unexpired lease requires the Debtors to cure existing monetary defaults under such executory contract or unexpired lease and provide adequate assurance of future performance. Accordingly, any description of an executory contract or unexpired lease with the Debtors in this document, including where applicable a quantification of the Company’s obligations under any such executory contract or unexpired lease of the Debtors, is qualified by any overriding rejection rights the Company has under the Bankruptcy Code.
Potential Claims
The Debtors have filed with the Bankruptcy Court schedules and statements setting forth, among other things, the assets and liabilities of each of the Debtors, subject to the assumptions filed in connection therewith. These schedules and statements may be subject to further amendment or modification after filing. Certain holders of pre-petition claims that are not governmental units were required to file proofs of claim by the deadline for general claims, which was on June 29, 2018 (the “Bar Date”).
The Debtors' have received approximately 4,200 proofs of claim as of November 5, 2018 for an amount of approximately $808.3 billion. Such amount includes duplicate claims across multiple debtor legal entities. These claims will be reconciled to amounts recorded in the Company's accounting records. Differences in amounts recorded and claims filed by creditors will be investigated and resolved, including through the filing of objections with the Bankruptcy Court, where appropriate. The Bankruptcy Court does not allow for claims that have been acknowledged as duplicates. Approximately 275 claims totaling approximately $13 million have been disallowed or withdrawn and the Debtors have filed additional claim objections with the Bankruptcy Court for approximately 200 claims totaling approximately $4.8 billion in additional reductions. The Company may ask the Bankruptcy Court to disallow claims that the Company believes have been later amended or superseded, are without merit, are overstated or should be disallowed for other reasons. In addition, as a result of this process, the Company may identify additional liabilities that will need to be recorded or reclassified to Liabilities subject to compromise. In light of the substantial number of claims filed, and expected to be filed, the claims resolution process may take considerable time to complete and likely will continue after the Debtors emerge from bankruptcy.
Reorganization Items, Net  
The Debtors have incurred and will continue to incur significant costs associated with the reorganization, including the write-off of original issue discount and deferred long-term debt fees on debt subject to compromise, costs of debtor-in-possession refinancing, legal and professional fees. The amount of these charges, which since the Petition Date are being expensed as incurred, are expected to significantly affect the Company’s results of operations. In accordance with applicable guidance, costs associated with the bankruptcy proceedings have been recorded as Reorganization items, net within the Company's accompanying Consolidated Statements of Comprehensive Income (Loss) for the three and nine months ended September 30, 2018. See Note 12, Reorganization Items, Net.
Financial Statement Classification of Liabilities Subject to Compromise
The accompanying Consolidated Balance Sheet as of September 30, 2018 includes amounts classified as Liabilities subject to compromise, which represent liabilities the Company anticipates will be allowed as claims in the Chapter 11 Cases. These amounts represent the Debtors’ current estimate of known or potential obligations to be resolved in connection with the Chapter 11 Cases, and may differ from actual future settlement amounts paid. Differences between liabilities estimated and claims filed, or to be filed, will be investigated and resolved in connection with the claims resolution process. The Company will continue to evaluate these liabilities throughout the Chapter 11 process and adjust amounts as necessary. Such adjustments may be material. See Note 11, Liabilities Subject to Compromise.
Plan of Reorganization
On April 28, 2018, the Debtors filed a plan of reorganization (as amended, the “Plan of Reorganization”) and a related disclosure statement (as amended, the “Disclosure Statement”) with the Bankruptcy Court pursuant to Chapter 11 of the Bankruptcy Code.

8



IHEARTMEDIA, INC. AND SUBSIDIARIES (DEBTOR-IN-POSSESSION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)

On June 21, 2018, the Debtors filed an amended Disclosure Statement with the Bankruptcy Court. On August 5, 2018, the Debtors filed an amended Plan of Reorganization with the Bankruptcy Court. On August 23, 2018, the Debtors filed a second amended Plan of Reorganization and a further amended Disclosure Statement with the Bankruptcy Court. On August 28, 2018, the Debtors filed a third amended Plan of Reorganization and a further amended Disclosure Statement with the Bankruptcy Court. On September 12, 2018, the Debtors filed a fourth amended Plan of Reorganization and a further amended Disclosure Statement with the Bankruptcy Court. On September 18, 2018, the Debtors filed a revised fourth amended Plan of Reorganization and a further amended Disclosure Statement with the Bankruptcy Court. On September 20, 2018, the Bankruptcy Court entered an order approving the Disclosure Statement and related solicitation and notice procedures for voting on the Plan of Reorganization, and the Debtors filed solicitation versions of the Plan of Reorganization and Disclosure Statement.
Following the entry of the order approving the Disclosure Statement, the Debtors, certain Consenting Stakeholders, and the Official Committee of Unsecured Creditors reached an agreement regarding the treatment of general unsecured claims under the Plan of Reorganization. On October 10, 2018, the Debtors filed a fifth amended Plan of Reorganization reflecting such agreement and a supplement to the Disclosure Statement (the “Disclosure Statement Supplement”). On October 18, 2018, the Bankruptcy Court entered an order approving the Disclosure Statement Supplement and the continued solicitation of holders of general unsecured claims for voting on the Plan of Reorganization, and the Debtors filed solicitation versions of the Plan of Reorganization and Disclosure Statement Supplement. The deadline by which holders of claims and interests entitled to vote on the Plan of Reorganization must vote is currently November 16, 2018, and a hearing has been scheduled for December 11, 2018 to consider confirmation of the Plan of Reorganization.
Pursuant to the Plan of Reorganization, iHeartMedia, Inc. or its successor or assignee on the effective date of the Plan of Reorganization (“Reorganized iHeart”) will issue new common stock (“Reorganized iHeart Common Stock”), special warrants to purchase Reorganized iHeart Common Stock (“Special Warrants”), or, if applicable, interests in a trust that may be created to hold Reorganized iHeart Common Stock and/or Special Warrants pending the Federal Communications Commission’s approval of the transactions contemplated by the Plan of Reorganization (the “FCC Trust,” and collectively with the Reorganized iHeart Common Stock and the Special Warrants, the “iHeart Equity Interests”), in exchange for claims against or interests in the Debtors. Holders of claims with respect to the iHeartCommunications term loan credit agreement, priority guarantee notes, 14% senior notes due 2021 and legacy notes will receive their pro rata share of a distribution of new term loans and new notes of iHeartCommunications and 99% of the iHeart Equity Interests, subject to dilution by any Reorganized iHeart Common Stock issued pursuant to a post-emergence equity incentive plan, as set forth in the Plan of Reorganization. The preliminary terms of the new term loans and new notes are set forth in the Disclosure Statement, and the amount and tenor of the new term loans and new notes will be set forth in a supplement to the Plan of Reorganization. Holders of equity interests in iHeartMedia will receive their pro rata share of 1% of the iHeart Equity Interests, subject to dilution by any Reorganized iHeart Common Stock issued pursuant to a post-emergence equity incentive plan. On the effective date of the Plan of Reorganization, the applicable Debtors will execute documents to effect the separation of CCOH from iHeartMedia, and the equity interests in CCOH (or its successor) currently held by subsidiaries of iHeartMedia will be distributed to holders of claims with respect to the term loan credit agreement and priority guarantee notes.
The Plan of Reorganization is subject to the approval of the Bankruptcy Court and other constituencies in accordance with the Bankruptcy Code, and is subject to further revision. There can be no assurance that the Plan of Reorganization will be confirmed by the Bankruptcy Court on the currently contemplated terms or at all, or that any confirmed plan of reorganization will be implemented successfully.
Going Concern
The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern and contemplate the realization of assets and the satisfaction of liabilities in the normal course of business. As noted above, Liabilities subject to compromise will be resolved in connection with the Chapter 11 Cases. The Company’s ability to continue as a going concern is contingent upon the Company’s ability to successfully implement the Company’s plan of reorganization, among other factors. As a result of the Chapter 11 Cases, the realization of assets and the satisfaction of liabilities are subject to uncertainty. While operating as debtors-in-possession under Chapter 11, the Company may sell or otherwise dispose of or liquidate assets or settle liabilities, subject to the approval of the Bankruptcy Court or as otherwise permitted in the ordinary course of business, for amounts other than those reflected in the accompanying consolidated financial statements. Further, the plan of reorganization could materially change the amounts and classifications of assets and liabilities reported in the consolidated financial statements. The accompanying consolidated financial statements do not include any adjustments related to the recoverability and classification of assets or the amounts and classification of liabilities or any other adjustments that might be

9



IHEARTMEDIA, INC. AND SUBSIDIARIES (DEBTOR-IN-POSSESSION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)

necessary should the Company be unable to continue as a going concern or as a consequence of the Chapter 11 Cases. As a result of our financial condition, the defaults under our debt agreements, and the risks and uncertainties surrounding the Chapter 11 Cases, substantial doubt exists that we will be able to continue as a going concern.
New Accounting Pronouncements Recently Adopted
Revenue from Contracts with Customers
As of January 1, 2018, the Company adopted the new accounting standard, ASC 606, Revenue from Contracts with Customers. This standard provides guidance for the recognition, measurement and disclosure of revenue from contracts with customers and supersedes previous revenue recognition guidance under U.S. GAAP. The Company has applied this standard using the full retrospective method and concluded that its adoption did not have a material impact on the Company’s Consolidated Balance Sheets, Consolidated Statements of Comprehensive Income (Loss), or Consolidated Statements of Cash Flows for prior periods. Please refer to Note 2, Revenues, for more information.
As a result of adopting this new accounting standard, the Company has updated its significant accounting policies, as follows:
Accounts Receivable
Accounts receivable are recorded when the Company has an unconditional right to payment, either because it has satisfied a performance obligation prior to receiving payment from the customer or has a non-cancelable contract that has been billed in advance in accordance with the Company’s normal billing terms.
Accounts receivable are recorded at the invoiced amount, net of reserves for sales allowances and allowances for doubtful accounts. The Company evaluates the collectability of its accounts receivable based on a combination of factors. In circumstances where it is aware of a specific customer’s inability to meet its financial obligations, it records a specific reserve to reduce the amounts recorded to what it believes will be collected. For all other customers, it recognizes reserves for bad debt based on historical experience of bad debts as a percent of accounts receivable for each business unit, adjusted for relative improvements or deteriorations in the agings and changes in current economic conditions. The Company believes its concentration of credit risk is limited due to the large number and the geographic diversification of its customers.
Revenue Recognition
The Company recognizes revenue when or as it satisfies a performance obligation by transferring a promised good or service to a customer. Where third-parties are involved in the provision of goods and services to a customer, revenue is recognized at the gross amount of consideration the Company expects to receive if the Company controls the promised good or service before it is transferred to the customer; otherwise, revenue is recognized at the net amount the Company retains. The Company receives payments from customers based on billing schedules that are established in its contracts, and deferred income is recorded when payment is received from a customer before the Company has satisfied the performance obligation or a non-cancelable contract has been billed in advance in accordance with the Company’s normal billing terms.
The primary source of revenue in the iHM segment is the sale of advertising on the Company’s broadcast radio stations, its iHeartRadio mobile application and website, station websites, and national and local live events. Revenues for advertising spots are recognized at the point in time when the advertisement is broadcast or streamed, while revenues for online display advertisements are recognized over time based on impressions delivered or time elapsed, depending upon the terms of the contract. Revenues for event sponsorships are recognized over the period of the event. iHM also generates revenues from programming talent, network syndication, traffic and weather data, and other miscellaneous transactions, which are recognized when the services are transferred to the customer. iHM’s contracts with advertisers are typically a year or less in duration and are generally billed monthly upon satisfaction of the performance obligations.
The Americas outdoor and International outdoor segments generate revenue primarily from the sale of advertising space on printed and digital displays, including billboards, street furniture displays, transit displays and retail displays, which may be sold as individual units or as a network package. Revenues from these contracts, which typically cover periods of a few weeks to one year, are generally recognized ratably over the term of the contract as the advertisement is displayed. These segments also generate revenue from production and creative services, which are distinct from the advertising display services, and related revenue is recognized at the point in time the Company installs the advertising copy at the display site. Americas outdoor contracts are

10



IHEARTMEDIA, INC. AND SUBSIDIARIES (DEBTOR-IN-POSSESSION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)

generally billed monthly in advance, and International outdoor includes a combination of advance billings and billings upon completion of service.
The Company also generates revenue through contractual commissions realized from the sale of national spot and online advertising on behalf of clients of its full-service media representation business, Katz Media, which is reported in the Company’s Other segment. Revenues from these contracts are recognized at the point in time when the advertisements are broadcast. Because the Company is a representative of its media clients and does not control the advertising inventory before it is transferred to the advertiser, the Company recognizes revenue at the net amount of contractual commissions retained for its representation services. The Company’s media representation contracts typically have terms up to ten years in duration and are generally billed monthly upon satisfaction of the performance obligations.
The Company recognizes revenue in amounts that reflect the consideration it expects to receive in exchange for transferring goods or services to customers, excluding sales taxes and other similar taxes collected on behalf of governmental authorities (the "transaction price”). When this consideration includes a variable amount, the Company estimates the amount of consideration it expects to receive and only recognizes revenue to the extent that it is probable it will not be reversed in a future reporting period. Because the transfer of promised goods and services to the customer is generally within a year of scheduled payment from the customer, the Company is not typically required to consider the effects of the time value of money when determining the transaction price. Advertising revenue is reported net of agency commissions.
Trade and barter transactions represent the exchange of advertising spots or display space for merchandise, services or other assets in the ordinary course of business. The transaction price for these contracts is measured at the estimated fair value of the non-cash consideration received unless this is not reasonably estimable, in which case the consideration is measured based on the standalone selling price of the advertising spots or display space promised to the customer. Revenue is recognized on trade and barter transactions when the advertisements are broadcasted or displayed, and expenses are recorded ratably over a period that estimates when the merchandise, services or other assets received are utilized, or when the event occurs. Trade and barter revenues and expenses from continuing operations are included in consolidated revenue and selling, general and administrative expenses, respectively. Trade and barter revenues and expenses from continuing operations were as follows:
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
(In thousands)
2018
 
2017
 
2018
 
2017
Consolidated:
 
 
 
 
 
 
 
  Trade and barter revenues
$
55,475

 
$
49,886

 
$
153,185

 
$
162,330

  Trade and barter expenses
42,985

 
34,672

 
145,656

 
126,502

 
 
 
 
 
 
 
 
iHM Segment:
 
 
 
 
 
 
 
  Trade and barter revenues
$
51,831

 
$
45,884

 
$
141,769

 
$
149,164

  Trade and barter expenses
40,607

 
31,859

 
136,827

 
118,215

In order to appropriately identify the unit of accounting for revenue recognition, the Company determines which promised goods and services in a contract with a customer are distinct and are therefore separate performance obligations. If a promised good or service does not meet the criteria to be considered distinct, it is combined with other promised goods or services until a distinct bundle of goods or services exists. Certain of the Company’s contracts with customers include options for the customer to acquire additional goods or services for free or at a discount, and management judgment is required to determine whether these options are material rights that are separate performance obligations.
For revenue arrangements that contain multiple distinct goods or services, the Company allocates the transaction price to these performance obligations in proportion to their relative standalone selling prices. The Company has concluded that the contractual prices for the promised goods and services in its standard contracts generally approximate management’s best estimate of standalone selling price as the rates reflect various factors such as the size and characteristics of the target audience, market location and size, and recent market selling prices. However, where the Company provides customers with free or discounted services as part of contract negotiations, management uses judgment to determine how much of the transaction price to allocate to these performance obligations.

11



IHEARTMEDIA, INC. AND SUBSIDIARIES (DEBTOR-IN-POSSESSION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)

Contract Costs
Incremental costs of obtaining a contract primarily relate to sales commissions, which are included in selling, general and administrative expenses and are generally commensurate with sales. These costs are generally expensed when incurred because the period of benefit is one year or less.
Restricted Cash 
In November 2016, the FASB issued ASU 2016-18, Restricted Cash, which requires that restricted cash be presented with cash and cash equivalents in the statement of cash flows. Restricted cash is recorded in Other current assets and in Other assets in the Company's Consolidated Balance Sheets. The Company adopted ASU 2016-18 in the first quarter of 2018 using the retrospective transition method, and accordingly, revised prior period amounts as shown in the Company's Consolidated Statements of Cash Flows.
The following table provides a reconciliation of cash, cash equivalents and restricted cash reported in the Consolidated Balance Sheets to the total of the amounts reported in the Consolidated Statements of Cash Flows:
(In thousands)
September 30,
2018
 
December 31, 2017
Cash and cash equivalents
$
311,162

 
$
267,109

Restricted cash included in:
 
 
 
  Other current assets
7,653

 
26,096

  Other assets
19,282

 
18,095

Total cash, cash equivalents and restricted cash in the Statement of Cash Flows
$
338,097

 
$
311,300


The following table provides a reconciliation of cash, cash equivalents and restricted cash reported in the Debtors' Balance Sheet to the total of the amounts reported in the Debtors' Statement of Cash Flows:
(In thousands)
September 30,
2018
Cash and cash equivalents
$
76,154

Restricted cash included in:
 
  Other current assets
3,422

Total cash, cash equivalents and restricted cash in the Statement of Cash Flows
$
79,576

Stock Compensation
During the second quarter of 2017, the FASB issued ASU 2017-09, Compensation - Stock Compensation (Topic 718). This update mandates that entities will apply the modification accounting guidance if the value, vesting conditions or classification of a stock-based award changes. Entities will have to make all of the disclosures about modifications that are required today, in addition to disclosing that compensation expense hasn't changed. Additionally, the new guidance also clarifies that a modification to an award could be significant and therefore require disclosure, even if the modification accounting is not required. The guidance is being applied prospectively to awards modified on or after the adoption date and is effective for annual periods, and interim periods within those annual periods, beginning after December 15, 2017. The Company adopted the provisions of ASU 2017-09 on January 1, 2018 and the adoption of ASU 2017-09 did not have an impact on our consolidated financial statements.
New Accounting Pronouncements Not Yet Adopted
During the first quarter of 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842). The new leasing standard presents significant changes to the balance sheets of lessees. The most significant change to the standard includes the recognition of right-of-use assets and lease liabilities by lessees for those leases classified as operating leases. Lessor accounting also is updated to align with certain changes in the lessee model and the new revenue recognition standard which was adopted this year. The standard

12



IHEARTMEDIA, INC. AND SUBSIDIARIES (DEBTOR-IN-POSSESSION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)

is effective for annual periods, and for interim periods within those annual periods, beginning after December 15, 2018. The standard is expected to have a material impact on our consolidated balance sheet, but is not expected to materially impact our consolidated statement of comprehensive income (loss) or cash flows. The Company is continuing to evaluate the impact of the provisions of this new standard on its consolidated financial statements.
In July 2018, The FASB issued ASU No. 2018-11, Leases (Topic 842) - Targeted Improvements. The update provides an additional (optional) transition method to adopt the new lease standard, allowing entities to apply the new lease standard at the adoption date. The Company plans to adopt Topic 842 following this optional transition method. The update also provides lessors a practical expedient to allow them to not separate non-lease components from the associated lease component and instead to account for those components as a single component if certain criteria are met. The updated practical expedient for lessors will not have a material effect 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 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 third quarter of 2018, the FASB issued ASU 2018-15, Intangibles - Goodwill and Other - Internal-Use Software (Subtopic 350-40), Customer's Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement that is a Service Contract. This update requires that a customer in a cloud computing arrangement that is a service contract follow the internal use software guidance in Accounting Standards Codification (ASC) 350-402 to determine which implementation costs to capitalize as assets. The standard is effective for fiscal years 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 – REVENUES
The Company generates revenue from several sources:
The primary source of revenue in the iHM segment is the sale of advertising on the Company’s radio stations, its iHeartRadio mobile application and website, station websites, and live events. This segment also generates revenues from programming talent, network syndication, traffic and weather data, and other miscellaneous transactions.
The Americas outdoor and International outdoor segments generate revenue primarily from the sale of advertising space on printed and digital out-of-home advertising displays.
The Company also generates revenue through contractual commissions realized from the sale of national spot and online advertising on behalf of clients of its full-service media representation business, Katz Media, which is reported in the Company’s Other segment.
Certain of the revenue transactions in the Americas outdoor and International outdoor segments are considered leases, for accounting purposes, as the agreements convey to customers the right to use the Company’s advertising structures for a stated period of time. In order for a transaction with a customer to qualify as a lease, the arrangement must be dependent on the use of a specified advertising structure, and the customer must have almost exclusive use of that structure during the term of the arrangement. Therefore, arrangements that do not involve the use of an advertising structure, where the Company can substitute the advertising structure that is used to display the customer’s advertisement, or where the advertising structure displays advertisements for multiple customers throughout the day are not leases. The Company accounts for revenue from leases, which are all classified as operating leases, in accordance with the lease accounting guidance (Topic 840). All of the Company’s revenue transactions that do not qualify as a lease are accounted for as revenue from contracts with customers (Topic 606).

13



IHEARTMEDIA, INC. AND SUBSIDIARIES (DEBTOR-IN-POSSESSION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)

Disaggregation of Revenue
The following table shows, by segment, revenue from contracts with customers disaggregated by geographical region, revenue from leases and total revenue for the three and nine months ended September 30, 2018 and 2017:
(In thousands)
iHM
 
Americas Outdoor(1)
 
International Outdoor(1)
 
Other
 
Eliminations
 
Consolidated
Three Months Ended September 30, 2018
Revenue from contracts with customers:
 
 
 
 
 
 
 
 
 
 
 
  United States
$
869,126

 
$
116,503

 
$

 
$
47,088

 
$
(168
)
 
$
1,032,549

  Other Americas
582

 
671

 
11,242

 

 

 
12,495

  Europe
2,415

 

 
191,514

 

 

 
193,929

  Asia-Pacific and other
4,059

 

 
5,563

 

 

 
9,622

  Eliminations
(3,415
)
 

 

 

 

 
(3,415
)
     Total
872,767

 
117,174

 
208,319

 
47,088

 
(168
)
 
1,245,180

Revenue from leases
637

 
186,247

 
151,999

 

 
(1,298
)
 
337,585

Revenue, total
$
873,404

 
$
303,421

 
$
360,318

 
$
47,088

 
$
(1,466
)
 
$
1,582,765

 
 
 
 
 
 
 
 
 
 
 
 
Three Months Ended September 30, 2017
Revenue from contracts with customers:
  United States
$
854,890

 
$
106,806

 
$

 
$
34,452

 
$
(341
)
 
$
995,807

  Other Americas
704

 
2,488

 
14,224

 

 

 
17,416

  Europe
2,420

 

 
181,229

 

 

 
183,649

  Asia-Pacific and other
4,453

 
162

 
4,635

 

 

 
9,250

  Eliminations
(3,798
)
 

 

 

 

 
(3,798
)
     Total
858,669

 
109,456

 
200,088

 
34,452

 
(341
)
 
1,202,324

Revenue from leases
862

 
184,351

 
150,535

 

 
(1,315
)
 
334,433

Revenue, total
$
859,531

 
$
293,807

 
$
350,623

 
$
34,452

 
$
(1,656
)
 
$
1,536,757

 
 
 
 
 
 
 
 
 
 
 
 
Nine Months Ended September 30, 2018
Revenue from contracts with customers:
 
 
 
 
 
 
 
 
 
 
 
  United States
$
2,457,506

 
$
328,138

 
$

 
$
113,803

 
$
(1,606
)
 
$
2,897,841

  Other Americas
2,025

 
1,955

 
36,723

 

 

 
40,703

  Europe
7,477

 

 
605,032

 

 

 
612,509

  Asia-Pacific and other
12,640

 

 
17,685

 

 

 
30,325

  Eliminations
(10,568
)
 

 

 

 

 
(10,568
)
     Total
2,469,080

 
330,093

 
659,440

 
113,803

 
(1,606
)
 
3,570,810

Revenue from leases
2,159

 
529,097

 
455,487

 

 
(4,298
)
 
982,445

Revenue, total
$
2,471,239

 
$
859,190

 
$
1,114,927

 
$
113,803

 
$
(5,904
)
 
$
4,553,255

 
 
 
 
 
 
 
 
 
 
 
 
Nine Months Ended September 30, 2017
Revenue from contracts with customers:
  United States
$
2,487,144

 
$
308,988

 
$

 
$
99,332

 
$
(1,778
)
 
$
2,893,686

  Other Americas
2,107

 
10,279

 
37,418

 

 

 
49,804

  Europe
6,825

 

 
533,111

 

 

 
539,936

  Asia-Pacific and other
12,782

 
568

 
14,853

 

 

 
28,203

  Eliminations
(11,120
)
 

 

 

 

 
(11,120
)
     Total
2,497,738

 
319,835

 
585,382

 
99,332

 
(1,778
)
 
3,500,509

Revenue from leases
3,346

 
534,509

 
420,572

 

 
(3,666
)
 
954,761

Revenue, total
$
2,501,084

 
$
854,344

 
$
1,005,954

 
$
99,332

 
$
(5,444
)
 
$
4,455,270


14



IHEARTMEDIA, INC. AND SUBSIDIARIES (DEBTOR-IN-POSSESSION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)

(1) Due to a re-evaluation of the Company’s segment reporting in 2018, its operations in Latin America are included in the International outdoor segment results for all periods presented. See Note 1, Basis of Presentation.
All of the Company’s advertising structures are used to generate revenue. Such revenue may be classified as revenue from contracts with customers or revenue from leases depending on the terms of the contract, as previously described.
Revenue from Contracts with Customers
The following tables show the changes in the Company’s contract balances from contracts with customers for the three and nine months ended September 30, 2018 and 2017:
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
(In thousands)
2018
 
2017
 
2018
 
2017
Accounts receivable from contracts with customers:
 
 
 
 
 
 
 
  Beginning balance, net of allowance
$
1,104,255

 
$
1,106,289

 
$
1,196,101

 
$
1,067,980

    Additions (collections), net
19,628

 
6,487

 
(58,027
)
 
55,186

    Bad debt, net of recoveries
(2,720
)
 
(6,189
)
 
(16,911
)
 
(16,579
)
  Ending balance, net of allowance
1,121,163

 
1,106,587

 
1,121,163

 
1,106,587

Accounts receivable from leases, net of allowance
345,761

 
326,432

 
345,761

 
326,432

Total accounts receivable, net of allowance
$
1,466,924

 
$
1,433,019

 
$
1,466,924

 
$
1,433,019

 
 
 
 
 
 
 
 
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
(In thousands)
2018
 
2017
 
2018
 
2017
Deferred revenue from contracts with customers:
 
 
 
 
 
 
 
  Beginning balance
$
204,013

 
$
206,807

 
$
181,748

 
$
191,916

    Revenue recognized, included in beginning balance
(106,893
)
 
(97,775
)
 
(131,449
)
 
(141,045
)
    Additions, net of revenue recognized during period
96,173

 
88,297

 
142,994

 
146,458

  Ending balance
193,293

 
197,329

 
193,293

 
197,329

Deferred revenue from leases
50,930

 
54,639

 
50,930

 
54,639

Total deferred revenue
244,223

 
251,968

 
244,223

 
251,968

Less: Non-current portion, included in other long-term liabilities
30,484

 
41,473

 
30,484

 
41,473

Current portion of deferred revenue, included in deferred income
$
213,739

 
$
210,495

 
$
213,739

 
$
210,495

The Company’s contracts with customers generally have a term of one year or less; however, as of September 30, 2018, the Company expects to recognize $243.1 million of revenue in future periods for remaining performance obligations from current contracts with customers that have an original expected duration of greater than one year, with substantially all of this amount to be recognized over the next five years. Commissions related to the Company’s media representation business have been excluded from this amount as they are contingent upon future sales. As part of the transition to the new revenue standard, the Company is not required to disclose information about remaining performance obligations for periods prior to the date of initial application.

15



IHEARTMEDIA, INC. AND SUBSIDIARIES (DEBTOR-IN-POSSESSION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)

Revenue from Leases
As of December 31, 2017, the Company’s future minimum rentals under non-cancelable operating leases were as follows:
(In thousands)
2018
$
280,909

2019
37,024

2020
19,103

2021
13,683

2022
9,628

Thereafter
18,836

  Total minimum future rentals
$
379,183


NOTE 3 – PROPERTY, PLANT AND EQUIPMENT, INTANGIBLE ASSETS AND GOODWILL
Acquisition
On October 10, 2018, the Company acquired Stuff Media LLC for $55.0 million.
Property, Plant and Equipment
The Company’s property, plant and equipment consisted of the following classes of assets as of September 30, 2018 and December 31, 2017, respectively:
(In thousands)
September 30,
2018
 
December 31,
2017
Land, buildings and improvements
$
568,499

 
$
562,702

Structures
2,808,059

 
2,864,442

Towers, transmitters and studio equipment
362,158

 
356,664

Furniture and other equipment
750,459

 
707,163

Construction in progress
87,337

 
74,810

 
4,576,512

 
4,565,781

Less: accumulated depreciation
2,857,421

 
2,681,067

Property, plant and equipment, net
$
1,719,091

 
$
1,884,714

Indefinite-lived Intangible Assets
The Company’s indefinite-lived intangible assets consist of Federal Communications Commission (“FCC”) broadcast licenses in its iHM segment and billboard permits in its Americas outdoor advertising segment. Due to significant differences in both business practices and regulations, billboards in the International outdoor segment are subject to long-term, finite contracts unlike the Company’s permits in the United States.  Accordingly, there are no indefinite-lived intangible assets in the International outdoor 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-

16



IHEARTMEDIA, INC. AND SUBSIDIARIES (DEBTOR-IN-POSSESSION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)

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.
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 licenses 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 FCC license or billboard permit within a market.
During the third quarter of 2018, the Company recognized impairment charges of $33.1 million related to FCC licenses in several iHM radio markets and an impairment charge of $7.8 million related to permits in one Americas outdoor market. The Company recognized impairment charges related to its indefinite-lived intangible assets within one iHM radio market of $6.0 million during the three and nine months ended September 30, 2017.
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, talent and representation contracts, customer and advertiser relationships, and 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, 2018 and December 31, 2017, respectively:
(In thousands)
September 30, 2018
 
December 31, 2017
 
Gross Carrying Amount
 
Accumulated Amortization
 
Gross Carrying Amount
 
Accumulated Amortization
Transit, street furniture and other outdoor
contractual rights
$
533,274

 
$
(440,452
)
 
$
548,918

 
$
(440,284
)
Customer / advertiser relationships
1,226,329

 
(1,205,662
)
 
1,226,314

 
(1,133,251
)
Talent contracts
161,962

 
(146,978
)
 
161,962

 
(138,728
)
Representation contracts
77,507

 
(68,976
)
 
77,507

 
(62,753
)
Permanent easements
162,920

 

 
162,920

 

Other
373,675

 
(241,102
)
 
372,292

 
(224,841
)
Total
$
2,535,667

 
$
(2,103,170
)
 
$
2,549,913

 
$
(1,999,857
)

17



IHEARTMEDIA, INC. AND SUBSIDIARIES (DEBTOR-IN-POSSESSION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)

Total amortization expense related to definite-lived intangible assets for the three months ended September 30, 2018 and 2017 was $24.2 million and $49.5 million, respectively. Total amortization expense related to definite-lived intangible assets for the nine months ended September 30, 2018 and 2017 was $116.4 million and $148.2 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:
(In thousands)
 
2019
$
45,875

2020
$
39,144

2021
$
34,303

2022
$
29,153

2023
$
21,377

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 U.S. radio markets and outdoor advertising markets are components of the Company. The U.S. radio markets are aggregated into a single reporting unit and the U.S. outdoor 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 outdoor segment and International outdoor 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 concluded no goodwill impairment was required during the three and nine months ended September 30, 2018. 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.

18



IHEARTMEDIA, INC. AND SUBSIDIARIES (DEBTOR-IN-POSSESSION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)

The following table presents the changes in the carrying amount of goodwill in each of the Company’s reportable segments:
(In thousands)
iHM
 
Americas Outdoor
 
International Outdoor
 
Other
 
Consolidated
Balance as of December 31, 2016
$
3,288,481

 
$
505,478

 
$
190,785

 
$
81,831

 
$
4,066,575

Impairment

 

 
(1,591
)
 

 
(1,591
)
Acquisitions
2,442

 
2,252

 

 

 
4,694

Dispositions
(35,715
)
 

 
(1,817
)
 

 
(37,532
)
Foreign currency

 

 
18,847

 

 
18,847

Assets held for sale

 
89

 

 

 
89

Balance as of December 31, 2017
$
3,255,208

 
$
507,819

 
$
206,224

 
$
81,831

 
$
4,051,082

Dispositions
(1,606
)
 

 

 

 
(1,606
)
Foreign currency

 

 
(5,535
)
 

 
(5,535
)
Balance as of September 30, 2018
$
3,253,602

 
$
507,819

 
$
200,689

 
$
81,831

 
$
4,043,941


19



IHEARTMEDIA, INC. AND SUBSIDIARIES (DEBTOR-IN-POSSESSION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)

NOTE 4 – LONG-TERM DEBT
Long-term debt outstanding as of September 30, 2018 and December 31, 2017 consisted of the following:
(In thousands)
September 30,
2018
 
December 31,
2017
Senior Secured Credit Facilities
$

 
$
6,300,000

Receivables Based Credit Facility due 2020(1)

 
405,000

Debtors-in-Possession Facility(1)

 

9.0% Priority Guarantee Notes Due 2019

 
1,999,815

9.0% Priority Guarantee Notes Due 2021

 
1,750,000

11.25% Priority Guarantee Notes Due 2021

 
870,546

9.0% Priority Guarantee Notes Due 2022

 
1,000,000

10.625% Priority Guarantee Notes Due 2023

 
950,000

CCO Receivables Based Credit Facility Due 2023(2)

 

Other secured subsidiary debt(3)
4,034

 
8,522

Total consolidated secured debt
4,034

 
13,283,883

 
 
 
 
14.0% Senior Notes Due 2021

 
1,763,925

Legacy Notes(4)

 
475,000

10.0% Senior Notes Due 2018(5)

 
47,482

CCWH Senior Notes due 2022
2,725,000

 
2,725,000

CCWH Senior Subordinated Notes due 2020
2,200,000

 
2,200,000

Clear Channel International B.V. Senior Notes due 2020
375,000

 
375,000

Other subsidiary debt
26

 
24,615

Purchase accounting adjustments and original issue discount(6)
(611
)
 
(136,653
)
Long-term debt fees(6)
(28,612
)
 
(109,071
)
Long-term debt, net subject to compromise(7)
15,148,955

 

Total debt, prior to reclassification to Liabilities subject to compromise
20,423,792

 
20,649,181

Less: current portion
347

 
14,972,367

Less: Amounts reclassified to Liabilities subject to compromise
15,148,955

 

Total long-term debt
$
5,274,490

 
$
5,676,814


(1)
On June 14, 2018 (the “DIP Closing Date”), iHeartCommunications refinanced its receivables based credit facility with a new $450.0 million debtors-in-possession credit facility (the "DIP Facility"), which matures on the earlier of the emergence date from the Chapter 11 Cases or June 14, 2019. The DIP Facility also includes a feature to convert into an exit facility at emergence, upon meeting certain conditions. The DIP Facility accrues interest at LIBOR plus 2.25%. At closing, iHeartCommunications drew $125.0 million on the DIP Facility. On June 14, 2018, the Company used proceeds from the DIP Facility and cash on hand to repay the outstanding $306.4 million and $74.3 million term loan and revolving credit commitments, respectively, of the iHeartCommunications receivables based credit facility. Long-term debt fees incurred in relation to the DIP Facility were expensed as incurred and are reflected within Reorganization items, net in the Company's Consolidated Statement of Comprehensive Income (Loss). On August 16, 2018 and September 17, 2018, the Company repaid $100.0 million and $25.0 million, respectively, of the amount drawn under the DIP Facility. As of September 30, 2018, the Company had a borrowing limit of $450.0 million under iHeartCommunications' DIP Facility, had no outstanding borrowings, had $65.3 million of outstanding letters of credit and had an availability block requirement of $37.5 million, resulting in $347.2 million of excess availability.
(2)
On June 1, 2018, a subsidiary of the Company's Outdoor advertising subsidiary, Clear Channel Outdoor, Inc. ("CCO"), refinanced CCOH's senior revolving credit facility and replaced it with an asset based credit facility that provided for revolving credit commitments of up to $75.0 million. On June 29, 2018, CCO entered into an amendment providing for a $50.0 million incremental increase of the facility, bringing the aggregate revolving credit commitments to $125.0 million. The facility has a five-year term, maturing in 2023. As of

20



IHEARTMEDIA, INC. AND SUBSIDIARIES (DEBTOR-IN-POSSESSION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)

September 30, 2018, the facility had $86.4 million of letters of credit outstanding and a borrowing base of $113.0 million, resulting in $26.6 million of excess availability.
(3)
Other secured subsidiary debt matures at various dates from 2018 through 2045.
(4)
iHeartCommunications' Legacy Notes, all of which were issued prior to the acquisition of iHeartCommunications by the Company in 2008, consist of $175.0 million of Senior Notes that matured on June 15, 2018, $300.0 million of Senior Notes that mature in 2027 and $57.1 million of Senior Notes due 2016 held by a subsidiary of the Company that remain outstanding but are eliminated for purposes of consolidation of the Company’s financial statements.
(5)
On January 4, 2018, a subsidiary of iHeartCommunications repurchased $5.4 million aggregate principal amount of 10.0% Senior Notes due 2018 that were held by unaffiliated third parties for $5.3 million in cash. On January 16, 2018, iHeartCommunications repaid the remaining balance of $42.1 million aggregate principal amount of 10.0% Senior Notes due 2018 at maturity.
(6)
As a result of the Company's Chapter 11 Cases, the Company expensed $67.1 million of deferred long-term debt fees and $131.1 million of original issue discount to Reorganization items, net, in the Consolidated Statement of Comprehensive Income (Loss) for the nine months ended September 30, 2018.
(7)
In connection with the Company's Chapter 11 Cases, the $6.3 billion outstanding under the Senior Secured Credit Facilities, the $1,999.8 million outstanding under the 9.0% Priority Guarantee Notes due 2019, the $1,750.0 million outstanding under the 9.0% Priority Guarantee Notes due 2021, the $870.5 million of 11.25% Priority Guarantee Notes due 2021, the $1,000.0 million outstanding under the 9.0% Priority Guarantee Notes due 2022, the $950.0 million outstanding under the 10.625% Priority Guarantee Notes due 2023, $6.1 million outstanding Other Secured Subsidiary debt, the $1,781.6 million outstanding under the 14.0% Senior Notes due 2021, the $475.0 million outstanding under the Legacy Notes and $16.0 million outstanding Other Subsidiary Debt have been reclassified to Liabilities subject to compromise in the Company's Consolidated Balance Sheet as of September 30, 2018. As of the Petition Date, the Company ceased making principal and interest payments, and ceased accruing interest expense in relation to long-term debt reclassified as Liabilities subject to compromise.
The Company’s weighted average interest rate was 9.1% and 8.9% as of September 30, 2018 and December 31, 2017, respectively. The aggregate market value of the Company’s debt based on market prices for which quotes were available was approximately $15.4 billion as of September 30, 2018 and December 31, 2017. Under the fair value hierarchy established by ASC 820-10-35, the market value of the Company’s debt is classified as either Level 1 or Level 2.
Debtors-in-Possession Facility
On June 14, 2018, iHeartCommunications, Inc., an indirect subsidiary of the Company, entered into a Superpriority Secured Debtor-in-Possession Credit Agreement (the “DIP Credit Agreement”), as parent borrower, with iHeartMedia Capital I, LLC (“Holdings”), as guarantor, certain Debtor subsidiaries of iHeartCommunications named therein, as subsidiary borrowers (the “Subsidiary Borrowers”), Citibank, N.A., as a lender and administrative agent, the swing line lenders and letter of credit issuers named therein and the other lenders from time to time party thereto.
Size and Availability
The DIP Credit Agreement provides for a first-out asset-based revolving credit facility in the aggregate principal amount of up to $450 million, with amounts available from time to time (including in respect of letters of credit) equal to the lesser of (i) the borrowing base, which equals 90.0% of the eligible accounts receivable of iHeartCommunications and the subsidiary guarantors, subject to customary reserves and eligibility criteria, and (ii) the aggregate revolving credit commitments. As of the DIP Closing Date, the aggregate revolving credit commitments were $450.0 million. Subject to certain conditions, iHeartCommunications may at any time request one or more increases in the amount of revolving credit commitments, in minimum amounts of $10.0 million and in an aggregate maximum amount of $100.0 million.
The proceeds from the DIP Facility were made available on the DIP Closing Date, and were used in combination with cash on hand to fully pay off and terminate iHeartCommunications’ asset-based credit facility and all commitments thereunder governed by the credit agreement, dated as of November 30, 2017, by and among iHeartCommunications, Holdings, the Subsidiary Borrowers, and the lenders and issuing banks from time to time party thereto and TPG Specialty Lending, Inc., as administrative agent and collateral agent.
Interest Rate and Fees
Borrowings under the DIP Credit Agreement bear interest at a rate per annum equal to the applicable rate plus, at iHeartCommunications’ option, either (1) a base rate determined by reference to the highest of (a) the rate announced from time to time by the Administrative Agent at its principal office, (b) the Federal Funds rate plus 0.50%, and (c) the Eurocurrency rate for an interest period of one month plus 1.00% or (2) a Eurocurrency rate that is the greater of (a) 1.00%, and (b) the quotient of (i) the ICE LIBOR rate, or if such rate is not available, the rate determined by the Administrative Agent, and (ii) one minus the

21



IHEARTMEDIA, INC. AND SUBSIDIARIES (DEBTOR-IN-POSSESSION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)

maximum rate at which reserves are required to be maintained for Eurocurrency liabilities. The applicable rate for borrowings under the DIP Credit Agreement is 2.25% with respect to Eurocurrency rate loans and 1.25% with respect to base rate loans.
In addition to paying interest on outstanding principal under the DIP Credit Agreement, iHeartCommunications is required to pay a commitment fee of 0.50% per annum to the lenders under the DIP Credit Agreement in respect of the unutilized revolving commitments thereunder. iHeartCommunications must also pay a letter of credit fee equal to 2.25% per annum.
Maturity
Borrowings under the DIP Credit Agreement will mature, and lending commitments thereunder will terminate, upon the earliest to occur of: (a) June 14, 2019 (the “Scheduled Termination Date”) (provided that to the extent the Consummation Date (as defined below) has not occurred solely as a result of failure to obtain necessary regulatory approvals, the Scheduled Termination Date shall be September 16, 2019) and (b) the date of the substantial consummation (as defined in the Bankruptcy Code) of a confirmed plan of reorganization pursuant to an order of the Bankruptcy Court (the “Consummation Date”); provided, that if the DIP Facility is converted into an exit facility as described under “Conversion to Exit Facility” below, then the borrowings will mature on the maturity date set forth in the credit agreement governing such exit facility.
Prepayments
If at any time (a) the revolving credit exposures exceed the revolving credit commitments (this clause (a), the “Excess”) or (b) the lesser of the borrowing base and the aggregate revolving credit commitments minus $37.5 million minus the aggregate revolving credit exposures (the clause (b), the “Excess Availability”), is for any reason less than $0, iHeartCommunications will be required to repay all revolving loans outstanding, and cash collateralize letters of credit in an aggregate amount equal to such Excess or until Excess Availability is not less than $0, as applicable.
iHeartCommunications may voluntarily repay, without premium or penalty, outstanding amounts under the revolving credit facility at any time.
Guarantees and Security
The facility is guaranteed by, subject to certain exceptions, Holdings and iHeartCommunications’ Debtor subsidiaries. All obligations under the DIP Credit Agreement, and the guarantees of those obligations, are secured by a perfected first priority senior priming lien on all of iHeartCommunications’ and all of the subsidiary guarantors’ accounts receivable and related proceeds thereof, subject to certain exceptions.
Certain Covenants and Events of Default
The DIP Credit Agreement includes negative covenants that, subject to significant exceptions, limit iHeartCommunications’ ability and the ability of its restricted subsidiaries to, among other things:

incur additional indebtedness;
create liens on assets;
engage in mergers, consolidations, liquidations and dissolutions;
sell assets;
pay dividends and distributions or repurchase iHeartCommunications' capital stock;
make investments, loans, or advances;
prepay certain junior indebtedness;
engage in certain transactions with affiliates;
amend material agreements governing certain junior indebtedness; and

22



IHEARTMEDIA, INC. AND SUBSIDIARIES (DEBTOR-IN-POSSESSION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)

change lines of business.
The DIP Credit Agreement includes certain customary representations and warranties, affirmative covenants and events of default, including but not limited to, payment defaults, breach of representations and warranties, covenant defaults, cross-defaults to certain indebtedness, certain bankruptcy-related events, certain events under ERISA, material judgments and a change of control. If an event of default occurs, the lenders under the DIP Credit Agreement will be entitled to take various actions, including the acceleration of all amounts due under the DIP Credit Agreement and all actions permitted to be taken under the loan documents or applicable law, subject to the terms of the DIP Order.
Conversion to Exit Facility
Upon the satisfaction or waiver of the conditions set forth in the DIP Credit Agreement and the entry by the Bankruptcy Court of an order confirming an acceptable plan of reorganization, the DIP Facility will convert into an exit facility on the terms set forth in an exhibit to the DIP Credit Agreement.
Surety Bonds, Letters of Credit and Guarantees
As of September 30, 2018, the Company and its subsidiaries had outstanding surety bonds, commercial standby letters of credit and bank guarantees of $70.5 million, $153.9 million and $41.0 million, respectively. A portion of the outstanding bank guarantees were supported by $20.5 million of cash collateral. These surety bonds, letters of credit and bank guarantees relate to various operational matters including insurance, bid, concession and performance bonds as well as other items.
NOTE 5 – COMMITMENTS AND CONTINGENCIES
iHeartCommunications' filing of the Chapter 11 Cases constitutes an event of default that accelerated its obligations under its debt agreements. Due to the Chapter 11 Cases, however, the creditors' ability to exercise remedies under iHeartCommunications' debt agreements were stayed as of March 14, 2018, the date of the Chapter 11 petition filing, and continue to be stayed. On March 21, 2018, Wilmington Savings Fund Society, FSB ("WSFS"), solely in its capacity as successor indenture trustee to the 6.875% Senior Notes due 2018 and 7.25% Senior Notes due 2027, and not in its individual capacity, filed an adversary proceeding against the Company in the Chapter 11 Cases. In the complaint, WSFS alleged, among other things, that the "springing lien" provisions of the priority guarantee notes indentures and the priority guarantee notes security agreements amounted to "hidden encumbrances" on the Company's property, to which the holders of the 6.875% Senior Notes due 2018 and 7.25% Senior Notes due 2027 were entitled to "equal and ratable" treatment. On March 26, 2018, Delaware Trust Co. ("Delaware Trust"), in its capacity as successor indenture trustee to the 14% Senior Notes due 2021, filed a motion to intervene as a plaintiff in the adversary proceeding filed by WSFS. In the complaint, Delaware Trust alleged, among other things, that the indenture governing the 14% Senior Notes due 2021 also has its own "negative pledge" covenant, and, therefore, to the extent the relief sought by WSFS in its adversary proceeding is warranted, the holders of the 14% Senior Notes due 2021 are also entitled to the same "equal and ratable" liens on the same property. On April 6, 2018, the Company filed a motion to dismiss the adversary proceeding and a hearing on such motion was held on May 7, 2018. We have answered the complaint and discovery is proceeding.  The trial was held on October 24, 2018. The parties are awaiting a ruling from the court.
On October 9, 2018, WSFS, solely in its capacity as successor indenture trustee to the 6.875% Senior Notes due 2018 and 7.25% Senior Notes due 2027, and not in its individual capacity, filed an adversary proceeding against Clear Channel Holdings Inc. (“CCH”) and certain shareholders of iHeartMedia. The named shareholder defendants are Bain Capital LP; Thomas H. Lee Partners L.P.; Abrams Capital L.P.; and Highfields Capital Management L.P. In the complaint, WSFS alleged, among other things, that the shareholder defendants engaged in a “pattern of inequitable and bad faith conduct, including the abuse of their insider positions to benefit themselves at the expense of third-party creditors including particularly the Legacy Noteholders.” The complaint asks the court to grant relief in the form of equitable subordination of the shareholder defendants’ term loan, priority guarantee notes and 2021 notes claims to any and all claims of the legacy noteholders. In addition, the complaint seeks to have any votes to accept the Fourth Amended Plan of Reorganization by Abrams and Highfields on account of their 2021 notes claims, and any votes to accept the Fourth Amended Plan of Reorganization by defendant CCH on account of its junior notes claims, to be designated and disqualified. The Court held a pre-trial conference and oral argument on October 18, 2018. Discovery has not yet begun in this proceeding.
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

23



IHEARTMEDIA, INC. AND SUBSIDIARIES (DEBTOR-IN-POSSESSION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)

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; defamation matters; employment and benefits related claims; governmental fines; intellectual property claims; and tax disputes.
Stockholder Litigation
On May 9, 2016, a stockholder of Clear Channel Outdoor Holdings, Inc. ("CCOH") filed a derivative lawsuit in the Court of Chancery of the State of Delaware, captioned GAMCO Asset Management Inc. v. iHeartMedia Inc. et al., C.A. No. 12312-VCS. The complaint named as defendants the Company, iHeartCommunications, Bain Capital Partners, LLC and Thomas H. Lee Partners, L.P. (together, the "Sponsor Defendants"), the Company's private equity sponsors and majority owners, and the members of CCOH's board of directors. CCOH also was named as a nominal defendant. The complaint alleged that CCOH had been harmed by the intercompany agreements with iHeartCommunications, CCOH’s lack of autonomy over its own cash and the actions of the defendants in serving the interests of the Company, iHeartCommunications and the Sponsor Defendants to the detriment of CCOH and its minority stockholders. Specifically, the complaint alleged that the defendants breached their fiduciary duties by causing CCOH 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 the Company and iHeartCommunications; (iii) issue new debt in the CCIBV note offering (the "CCIBV Note Offering") to provide cash to the Company 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 the Company and iHeartCommunications through a dividend. The complaint also alleged that the Company, iHeartCommunications and the Sponsor Defendants aided and abetted the directors' breaches of their fiduciary duties. The complaint further alleged that the Company, 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 CCOH. The plaintiff sought, among other things, a ruling that the defendants breached their fiduciary duties to CCOH and that the Company, iHeartCommunications and the Sponsor Defendants aided and abetted the CCOH board of directors' breaches of fiduciary duty, rescission of payments made by CCOH to iHeartCommunications and its affiliates pursuant to dividends declared in connection with the CCIBV Note Offering and Outdoor Asset Sales, and an order requiring the Company, 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.
On December 29, 2017, another stockholder of CCOH filed a derivative lawsuit in the Court of Chancery of the State of Delaware, captioned Norfolk County Retirement System, v. iHeartMedia, Inc., et al., C.A. No. 2017-0930-JRS. The complaint names as defendants the Company, iHeartCommunications, the Sponsor Defendants, and the members of CCOH's board of directors.  CCOH is named as a nominal defendant. The complaint alleges that CCOH has been harmed by the CCOH Board’s November 2017 decision to extend the maturity date of the intercompany revolving note (the “Third Amendment”) at what the complaint describes as far-below-market interest rates.  Specifically, the complaint alleges that (i) the Company and Sponsor defendants breached their fiduciary duties by exploiting their position of control to require CCOH to enter the Third Amendment on terms unfair to CCOH; (ii) the CCOH Board breached their duty of loyalty by approving the Third Amendment and elevating the interests of the Company, iHeartCommunications and the Sponsor Defendants over the interests of CCOH and its minority unaffiliated stockholders; and (iii) the terms of the Third Amendment could not have been agreed to in good faith and represent a waste of corporate assets by the CCOH Board.  The complaint further alleges that the Company, iHeartCommunications and the Sponsor defendants were unjustly enriched as a result of the unfairly favorable terms of the Third Amendment.  The plaintiff is seeking, among other things, a ruling that the defendants breached their fiduciary duties to CCOH, a modification of the Third Amendment to bear a commercially reasonable rate of interest, and an order requiring disgorgement of all profits, benefits and other compensation obtained by defendants as a result of the alleged breaches of fiduciary duties.

24



IHEARTMEDIA, INC. AND SUBSIDIARIES (DEBTOR-IN-POSSESSION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)

On March 7, 2018, the defendants filed a motion to dismiss plaintiff's verified derivative complaint for failure to state a claim upon which relief can be granted. On March 16, 2018, the Company filed a Notice of Suggestion of Pendency of Bankruptcy and Automatic Stay of Proceedings. On May 4, 2018, plaintiff filed its response to the motion to dismiss. On June 26, 2018, the defendants filed a reply brief in further support of their motion to dismiss. Oral argument on the motion to dismiss was held on September 20, 2018. We are awaiting a ruling by the Court.
On August 27, 2018, the same stockholder of CCOH that had filed a derivative lawsuit against the Company and others in 2016 (GAMCO Asset Management Inc.) filed a putative class action lawsuit in the Court of Chancery of the State of Delaware, captioned GAMCO Asset Management, Inc. v. Hendrix, et al., C.A. No. 2018-0633-JRS. The complaint names as defendants the Sponsor Defendants and the members of CCOH’s board of directors. The complaint alleges that minority shareholders in CCOH during the period November 8, 2017 to March 14, 2018 were harmed by decisions of the CCOH Board and the intercompany note committee of the Board relating to the Intercompany Note. Specifically, the complaint alleges that (i) the members of the intercompany note committee breached their fiduciary duties by not demanding payment under the Intercompany Note and issuing a simultaneous dividend after a threshold tied to the Company’s liquidity had been reached; (ii) the CCOH Board breached their fiduciary duties by approving the Third Amendment rather than allowing the Intercompany Note to expire; (iii) the CCOH Board breached their fiduciary duties by not demanding payment under the Intercompany Note and issuing a simultaneous dividend after a threshold tied to the Company’s liquidity had been reached; (iv) the Sponsor Defendants breached their fiduciary duties by not directing the CCOH Board to permit the Intercompany Note to expire and to declare a dividend. The complaint further alleges that the Sponsor Defendants aided and abetted the Board’s alleged breach of fiduciary duties. The plaintiff seeks, among other things, a ruling that the CCOH Board, the intercompany note committee, and the Sponsor Defendants breached their fiduciary duties and that the Sponsor Defendants aided and abetted the Board’s breach of fiduciary duty; and an award of damages, together with pre- and post-judgment interests, to the putative class of minority shareholders.
China Investigation
Several employees of Clear Media Limited, an indirect, non-wholly-owned subsidiary of the Company whose ordinary shares are listed, but are currently suspended from trading on, the Hong Kong Stock Exchange, are subject to a police investigation in China for misappropriation of funds. The police investigation is ongoing, and the Company is not aware of any litigation, claim or assessment pending against the Company. Based on information known to date, the Company believes any contingent liabilities arising from potential misconduct that has been or may be identified by the investigations are not material to the Company's consolidated financial statements.
The Company advised both the United States Securities and Exchange Commission and the United States Department of Justice of the investigation at Clear Media Limited and is cooperating to provide information in response to inquiries from the agencies. The Clear Media Limited investigation could implicate the books and records, internal controls and anti-bribery provisions of the U.S. Foreign Corrupt Practices Act, which statute and regulations provide for potential monetary penalties as well as criminal and civil sanctions. It is possible that monetary penalties and other sanctions could be assessed on the Company in connection with this matter. The nature and amount of any monetary penalty or other sanctions cannot reasonably be estimated at this time.
Italy Investigation
As described in Note 1 to these consolidated financial statements, during the three months ended June 30, 2018, the Company identified misstatements associated with VAT obligations related to its subsidiary in Italy.  Upon identification of these misstatements, the Company undertook certain procedures, including a forensic investigation, which is ongoing.  In addition, the Company voluntarily disclosed the matter and preliminary findings to the Italian tax authorities in order to commence a discussion on the appropriate calculation of the VAT position.  The current expectation is that the Company may have to repay to the Italian tax authority a substantial portion of the VAT previously applied as a credit, amounting to approximately $17 million, including estimated possible penalties and interest.  The discussion with the tax authorities is at an early stage and therefore the ultimate amount that will be paid to the tax authorities in Italy is unknown. The ultimate amount to be paid may differ from the Company’s estimates, and such differences may be material.

25



IHEARTMEDIA, INC. AND SUBSIDIARIES (DEBTOR-IN-POSSESSION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)

NOTE 6 – INCOME TAXES
Income Tax Expense
The Company’s income tax expense for the three and nine months ended September 30, 2018 and 2017, respectively, consisted of the following components:
(In thousands)
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
2018
 
2017
 
2018
 
2017
Current tax benefit (expense)
$
(14,979
)
 
$
7,522

 
$
(25,168
)
 
$
(36,852
)
Deferred tax expense
(2,790
)
 
(9,573
)
 
(22,020
)
 
(13,291
)
Income tax expense
$
(17,769
)
 
$
(2,051
)
 
$
(47,188
)
 
$
(50,143
)
The effective tax rates for the three and nine months ended September 30, 2018 were 19.8% and (12.4)%, respectively. The effective tax rates were primarily impacted by the valuation allowance recorded against deferred tax assets resulting from current period net operating losses in U.S. federal, state and certain foreign jurisdictions due to uncertainty regarding the Company's ability to realize those assets in future periods.
The effective tax rates for the three and nine months ended September 30, 2017 were (0.8)% and (6.6)%, respectively. The effective tax rates were primarily impacted by the valuation allowance recorded against deferred tax assets resulting from current year net operating losses in U.S. federal, state and certain foreign jurisdictions due to uncertainty regarding the Company's ability to realize those assets in future periods.
On December 22, 2017, the U.S. government enacted comprehensive income tax legislation, referred to as The Tax Cuts and Jobs Act (the “Tax Act”) which reduced the U.S. federal corporate tax rate from 35% to 21% effective January 1, 2018. During the three months ended September 30, 2018, adjustments to the provisional income tax benefit recorded in December 2017 from the enactment of the Tax Act were not material.  At September 30, 2018, we have not yet completed our accounting for the income tax effects of the Tax Act, but have made reasonable estimates of those effects on our existing deferred income tax balances.  The final financial statement impact of the Tax Act may differ from our previously recorded estimates, possibly materially, due to, among other things, changes in interpretations of the Tax Act, any legislative action to address questions that arise because of the Tax Act, and changes in accounting standards for income taxes or related interpretations in response to the Tax Act, or any updates to estimates the company has utilized to calculate the provisional impacts. The SEC has issued rules that allow for a measurement period of up to one year after the enactment date of the Tax Act to finalize the recording of the related income tax impacts.

NOTE 7 – STOCKHOLDERS’ 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' 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
Balance as of January 1, 2018
$
(11,385,535
)
 
$
41,191

 
$
(11,344,344
)
Net loss
(416,815
)
 
(10,732
)
 
(427,547
)
Dividends declared and other payments to noncontrolling interests

 
(10,381
)
 
(10,381
)
Share-based compensation
1,628

 
6,757

 
8,385

Foreign currency translation adjustments
(11,062
)
 
(8,980
)
 
(20,042
)
Reclassification adjustments
1,274

 
151

 
1,425

Other, net
(78
)
 
(653
)
 
(731
)
Balances as of September 30, 2018
$
(11,810,588
)
 
$
17,353

 
$
(11,793,235
)

26



IHEARTMEDIA, INC. AND SUBSIDIARIES (DEBTOR-IN-POSSESSION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)

(In thousands)
The Company
 
Noncontrolling
Interests
 
Consolidated
Balance as of January 1, 2017
$
(11,030,835
)
 
$
128,974

 
$
(10,901,861
)
Net income (loss)
(816,802
)
 
7,614

 
(809,188
)
Dividends declared and other payments to noncontrolling interests

 
(43,540
)
 
(43,540
)
Share-based compensation
1,867

 
7,153

 
9,020

Purchase of additional noncontrolling interests
(378
)
 
(575
)
 
(953
)
Disposal of noncontrolling interest

 
(2,438
)
 
(2,438
)
Foreign currency translation adjustments
33,473

 
9,598

 
43,071

Unrealized holding loss on marketable securities
(195
)
 
(23
)
 
(218
)
Reclassification adjustments
4,078

 
485

 
4,563

Other, net
(323
)
 
(1,235
)
 
(1,558
)
Balances as of September 30, 2017
$
(11,809,115
)
 
$
106,013

 
$
(11,703,102
)
The Company has granted restricted stock and CCOH has granted restricted stock, restricted stock units and options to purchase shares of CCOH's Class A common stock to certain key individuals.
COMPUTATION OF LOSS PER SHARE
(In thousands, except per share data)
Three Months Ended
September 30,
 
Nine Months Ended
September 30,
 
2018
 
2017
 
2018
 
2017
NUMERATOR:
 
 
 
 
 
 
 
Net income (loss) attributable to the Company – common shares
$
70,078

 
$
(250,490
)
 
$
(416,815
)
 
$
(816,802
)
 
 
 
 
 
 
 
 
DENOMINATOR:
 

 
 

 
 

 
 

Weighted average common shares outstanding - basic
85,544

 
85,072

 
85,348

 
84,900

Weighted average common shares outstanding - diluted(1)
85,622

 
85,072

 
85,348

 
84,900

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

 
 

 
 

 
 

Basic
$
0.82

 
$
(2.94
)
 
$
(4.88
)
 
$
(9.62
)
Diluted
$
0.82

 
$
(2.94
)
 
$
(4.88
)
 
$
(9.62
)
(1) 
Outstanding equity awards of 6.6 million and 8.5 million for the three months ended September 30, 2018 and 2017, respectively, and 7.6 million and 8.5 million for the nine months ended September 30, 2018 and 2017, 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)
The total decrease in other comprehensive income (loss) related to the impact of pensions on deferred income tax liabilities was $0.3 million for the three and nine months ended September 30, 2018. There was no change in deferred income tax liabilities resulting from adjustments to comprehensive income (loss) for the three and nine months ended September 30, 2017.
Investments
During the second quarter of 2018, the Company sold its ownership interest in one of its cost method investments, resulting in a gain on sale of $9.9 million, which is reflected within Other income (expense), net in the Company's Consolidated Statement of Comprehensive Income (Loss) for the nine months ended September 30, 2018.
During the third quarter of 2018, the Company sold one of its investments for net cash proceeds of $11.1 million.

27



IHEARTMEDIA, INC. AND SUBSIDIARIES (DEBTOR-IN-POSSESSION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)

NOTE 9 – SEGMENT DATA
The Company’s reportable segments, which it believes best reflect how the Company is currently managed, are iHM, Americas outdoor advertising and International outdoor advertising.  Revenue and expenses earned and charged between segments are recorded at estimated fair value and eliminated in consolidation.  The iHM segment provides media and entertainment services via broadcast and digital delivery and also includes the Company’s events and national syndication businesses.  The Americas outdoor advertising segment consists of operations primarily in the United States.  The International outdoor advertising segment primarily includes operations in Europe, Asia and Latin America.  The Other category includes the Company’s media representation business as well as other general support services and initiatives that are ancillary to the Company’s other businesses.  Corporate includes infrastructure and support, including information technology, human resources, legal, finance and administrative functions for each of the Company’s reportable segments, as well as overall executive, administrative and support functions. Share-based payments are recorded in corporate expense.
The Company re-evaluated its segment reporting and determined that its Latin American operations should be managed by its International outdoor leadership team. As a result, beginning on January 1, 2018, the operations of Latin America are no longer reflected within the Company’s Americas outdoor segment and are included in the results of its International segment. Accordingly, the Company has recast the corresponding segment disclosures for prior periods to include Latin America within the International outdoor segment. The following table presents the Company's reportable segment results for the three and nine months ended September 30, 2018 and 2017:

28



IHEARTMEDIA, INC. AND SUBSIDIARIES (DEBTOR-IN-POSSESSION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)

(In thousands)
iHM
 
Americas Outdoor
 
International Outdoor
 
Other
 
Corporate and other reconciling items
 
Eliminations
 
Consolidated
Three Months Ended September 30, 2018
Revenue
$
873,404

 
$
303,421

 
$
360,318

 
$
47,088

 
$

 
$
(1,466
)
 
$
1,582,765

Direct operating expenses
268,606

 
131,241

 
230,440

 

 

 
(23
)
 
630,264

Selling, general and administrative expenses
303,451

 
49,247

 
79,550

 
25,985

 

 
(476
)
 
457,757

Corporate expenses

 

 

 

 
85,160

 
(967
)
 
84,193

Depreciation and amortization
34,882

 
39,783

 
36,627

 
3,222

 
6,186

 

 
120,700

Impairment charges

 

 

 

 
40,922

 

 
40,922

Other operating expense, net

 

 

 

 
(1,637
)
 

 
(1,637
)
Operating income (loss)
$
266,465

 
$
83,150

 
$