ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
OVERVIEW
Format of Presentation
Management’s discussion and analysis of our financial condition and results of operations (“MD&A”) should be read in conjunction with the consolidated financial statements and related footnotes contained in Item 8 of this Annual Report on Form 10-K. Our discussion is presented on both a consolidated and segment basis. Our reportable operating segments are Americas outdoor advertising (“Americas”) and International outdoor advertising (“International”). Our Americas and International segments provide outdoor advertising services in their respective geographic regions using various digital and traditional display types.
We manage our operating segments primarily focusing on their operating income, while Corporate expenses, Other operating income (expense), net, Interest expense, Interest income on Due from iHeartCommunications, Equity in earnings (loss) of nonconsolidated affiliates, Other income, net and Income tax benefit (expense) are managed on a total company basis and are, therefore, included only in our discussion of consolidated results.
Certain prior period amounts have been reclassified to conform to the
2016
presentation.
Description of Our Business
Our revenue is derived from selling advertising space on the displays we own or operate in key markets worldwide, consisting primarily of billboards, street furniture and transit displays. Part of our long-term strategy is to pursue the technology of digital displays, including flat screens, LCDs and LEDs, as additions to traditional methods of displaying our clients’ advertisements. We are currently installing these technologies in certain markets, both domestically and internationally.
Management typically monitors our business by reviewing the average rates, average revenue per display, occupancy, and inventory levels of each of our display types by market.
We own the majority of our advertising displays, which typically are located on sites that we either lease or own or for which we have acquired permanent easements. Our advertising contracts with clients typically outline the number of displays reserved, the duration of the advertising campaign and the unit price per display.
The significant expenses associated with our operations include direct production, maintenance and installation expenses as well as site lease expenses for land under our displays including revenue-sharing or minimum guaranteed amounts payable under our billboard, street furniture and transit display contracts. Our direct production, maintenance and installation expenses include costs for printing, transporting and changing the advertising copy on our displays, the related labor costs, the vinyl and paper costs, electricity costs and the costs for cleaning and maintaining our displays. Vinyl and paper costs vary according to the complexity of the advertising copy and the quantity of displays. Our site lease expenses include lease payments for use of the land under our displays, as well as any revenue-sharing arrangements or minimum guaranteed amounts payable that we may have with the landlords. The terms of our site leases and revenue-sharing or minimum guaranteed contracts generally range from one to 20 years.
Americas
Our advertising rates are based on a number of different factors including location, competition, type and size of display, illumination, market and gross ratings points. Gross ratings points are the total number of impressions delivered by a display or group of displays, expressed as a percentage of a market population. The number of impressions delivered by a display is measured by the number of people passing the site during a defined period of time. For all of our billboards in the United States, we use independent, third-party auditing companies to verify the number of impressions delivered by a display.
Client contract terms typically range from four weeks to one year for the majority of our display inventory in the United States. Generally, we own the street furniture structures and are responsible for their construction and maintenance. Contracts for the right to place our street furniture and transit displays and sell advertising space on them are awarded by municipal and transit authorities in competitive bidding processes governed by local law or are negotiated with private transit operators. Generally, these contracts have terms ranging from 10 to 20 years.
International
Similar to our Americas business, advertising rates generally are based on the gross ratings points of a display or group of displays. The number of impressions delivered by a display, in some countries, is weighted to account for such factors as
illumination, proximity to other displays and the speed and viewing angle of approaching traffic. In addition, because our International advertising operations are conducted in foreign markets, including Europe and Asia, management reviews the operating results from our foreign operations on a constant dollar basis. A constant dollar basis allows for comparison of operations independent of foreign exchange movements.
Our International display inventory is typically sold to clients through network packages, with client contract terms typically ranging from one to two weeks with terms of up to one year available as well. Internationally, contracts with municipal and transit authorities for the right to place our street furniture and transit displays typically provide for terms ranging from three to 15 years. The major difference between our International and Americas street furniture businesses is in the nature of the municipal contracts. In our International business, these contracts typically require us to provide the municipality with a broader range of metropolitan amenities in exchange for which we are authorized to sell advertising space on certain sections of the structures we erect in the public domain. A different regulatory environment for billboards and competitive bidding for street furniture and transit display contracts, which constitute a larger portion of our business internationally, may result in higher site lease costs in our International business.
Macroeconomic Indicators
Our advertising revenue for our Americas and International segments is highly correlated to changes in gross domestic product (“GDP”) as advertising spending has historically trended in line with GDP, both domestically and internationally. According to the U.S. Department of Commerce, estimated U.S. GDP growth for
2016
was 1.6%. Internationally, our results are impacted by fluctuations in foreign currency exchange rates as well as the economic conditions in the foreign markets in which we have operations.
Relationship with iHeartCommunications
There are several agreements which govern our relationship with iHeartCommunications including the Master Agreement, Corporate Services Agreement, Employee Matters Agreement, Tax Matters Agreement and Trademark and License Agreement. iHeartCommunications has the right to terminate these agreements in various circumstances. As of the date of the filing of this Annual Report on Form 10-K, no notice of termination of any of these agreements has been received from iHeartCommunications. Our agreements with iHeartCommunications continued under the same terms and conditions subsequent to iHeartCommunications’ merger.
In accordance with the Master Agreement, our branch managers follow a corporate policy allowing iHeartCommunications to use, without charge, Americas’ displays they believe would otherwise be unsold. iHeartCommunications bears the cost of producing the advertising and we bear the costs of installing and removing this advertising.
Under the Corporate Services Agreement, iHeartCommunications provides management services to us. These services are charged to us based on actual direct costs incurred or allocated by iHeartCommunications based on headcount, revenue or other factors on a pro rata basis. For the years ended December 31,
2016
,
2015
and
2014
, we recorded approximately $36.0 million, $30.1 million and $31.2 million, respectively, as a component of corporate expenses for these services.
The Trademark License Agreement entitles us to use (1) on a nonexclusive basis, the "Clear Channel" trademark and the Clear Channel "outdoor" trademark logo with respect to day-to-day operations of our business worldwide and on the Internet, and (2) certain other Clear Channel marks in connection with our business. On February 9, 2017, we entered into a binding option and letter of intent with iHeartMedia granting us a binding option to purchase the registered trademarks and domain names owned by iHeartMedia and its subsidiaries that incorporate one or more of the words "Clear" and/or "Channel," and any translations or derivations of any of the foregoing, together with any goodwill associated therewith. This option is exercisable in our sole and absolute discretion at any time between February 23, 2018 and February 23, 2019.
On August 9, 2010, iHeartCommunications announced that its board of directors approved a stock purchase program under which iHeartCommunications or its subsidiaries may purchase up to an aggregate of $100.0 million of our Class A common stock and/or the Class A common stock of iHeartMedia. As of December 31, 2014, an aggregate $34.2 million was available under this program. In January 2015, a subsidiary of iHeartCommunications purchased an additional 2,000,000 shares of the Company's Class A common stock for $20.4 million. On April 2, 2015, a subsidiary of iHeartCommunications purchased an additional 2,172,946 shares of the Company's Class A common stock for $22.2 million. As a result of this purchase, the stock purchase program concluded. The purchase of shares in excess of the amount available under the stock purchase program was separately approved by the iHeartCommunications' board of directors. As of December 31, 2016, iHeartCommunications' and its subsidiaries held 10,726,917 shares of the Company's Class A common stock and all of the Company's class B common stock, which represented 89.9% of the outstanding shares of the Company's common stock on a fully-diluted basis.
Executive Summary
The key developments in our business for the year ended December 31,
2016
are summarized below:
|
|
•
|
Consolidated revenue
decreased
$103.8 million
during
2016
compared to
2015
. Excluding a
$47.6 million
impact from movements in foreign exchange rates, consolidated revenue
decreased
$56.2 million
during
2016
compared to
2015
.
|
|
|
•
|
We sold nine non-strategic U.S. markets in the first quarter of 2016. We sold our businesses in Turkey and Australia in the second and fourth quarters of 2016, respectively. The markets had total revenues of
$123.5 million
in 2016 and
$248.9 million
in 2015 and we realized a net gain of $349.3 million on the sales of the markets.
|
|
|
•
|
We spent
$13.0 million
on strategic revenue and efficiency initiatives during
2016
to realign and improve our on-going business operations—
a decrease
of
$7.3 million
compared to
2015
.
|
Revenues and expenses “excluding the impact of foreign exchange movements” in this Management’s Discussion & Analysis of Financial Condition and Results of Operations is presented because management believes that viewing certain financial results without the impact of fluctuations in foreign currency rates facilitates period to period comparisons of business performance and provides useful information to investors. Revenues and expenses “excluding the impact of foreign exchange movements” are calculated by converting the current period’s revenues and expenses in local currency to U.S. dollars using average foreign exchange rates for the prior period.
RESULTS OF OPERATIONS
Consolidated Results of Operations
The comparison of our historical results of operations for the year ended December 31,
2016
to the year ended December 31,
2015
is as follows:
|
|
|
|
|
|
|
|
|
|
|
(In thousands)
|
Years Ended December 31,
|
|
%
|
|
2016
|
|
2015
|
|
Change
|
Revenue
|
$
|
2,702,395
|
|
|
$
|
2,806,204
|
|
|
(3.7)%
|
Operating expenses:
|
|
|
|
|
|
Direct operating expenses (excludes depreciation and amortization)
|
1,435,569
|
|
|
1,494,902
|
|
|
(4.0)%
|
Selling, general and administrative expenses (excludes depreciation and amortization)
|
515,202
|
|
|
531,504
|
|
|
(3.1)%
|
Corporate expenses (excludes depreciation and amortization)
|
117,383
|
|
|
116,380
|
|
|
0.9%
|
Depreciation and amortization
|
344,124
|
|
|
375,962
|
|
|
(8.5)%
|
Impairment charges
|
7,274
|
|
|
21,631
|
|
|
(66.4)%
|
Other operating income (expense), net
|
354,688
|
|
|
(4,824
|
)
|
|
(7,452.6)%
|
Operating income
|
637,531
|
|
|
261,001
|
|
|
144.3%
|
Interest expense
|
374,892
|
|
|
355,669
|
|
|
|
Interest income on Due from iHeartCommunications
|
50,309
|
|
|
61,439
|
|
|
|
Equity in earnings (loss) of nonconsolidated affiliates
|
(1,689
|
)
|
|
(289
|
)
|
|
|
Other income, net
|
(70,151
|
)
|
|
12,387
|
|
|
|
Income (loss) before income taxes
|
241,108
|
|
|
(21,131
|
)
|
|
|
Income tax expense
|
(76,675
|
)
|
|
(50,177
|
)
|
|
|
Consolidated net income (loss)
|
164,433
|
|
|
(71,308
|
)
|
|
|
Less amount attributable to noncontrolling interest
|
23,002
|
|
|
24,764
|
|
|
|
Net income (loss) attributable to the Company
|
$
|
141,431
|
|
|
$
|
(96,072
|
)
|
|
|
Consolidated Revenue
Consolidated revenue
decreased
$103.8 million
during
2016
compared to
2015
. Excluding a
$47.6 million
impact from movements in foreign exchange rates, consolidated revenue
decreased
$56.2 million
during
2016
compared to
2015
.
The decrease in consolidated revenue is primarily due to the sale of certain U.S. markets and International businesses which generated $248.9 million in revenue in 2015 and $123.5 million in 2016. This decrease was partially offset by revenues from new digital assets and new contracts.
Consolidated Direct Operating Expenses
Consolidated direct operating expenses
decreased
$59.3 million
during
2016
compared to
2015
. Excluding the
$29.0 million
impact from movements in foreign exchange rates, consolidated direct operating expenses
decreased
$30.3 million
during
2016
compared to
2015
.
Lower direct operating expenses was primarily due to the sale of certain U.S. markets and International businesses.
Consolidated Selling, General and Administrative (“SG&A”) Expenses
Consolidated SG&A expenses
decreased
$16.3 million
during
2016
compared to
2015
. Excluding the
$9.9 million
impact from movements in foreign exchange rates, consolidated SG&A expenses
decreased
$6.4 million
during
2016
compared to
2015
.
SG&A expenses were lower primarily due to the sale of nine non-strategic U.S. markets in the first quarter of 2016, and were partially offset by higher variable compensation expenses.
Corporate Expenses
Corporate expenses
increased
$1.0 million
during
2016
compared to
2015
. Excluding the
$4.1 million
impact from movements in foreign exchange rates, corporate expenses
increased
$5.1 million
during
2016
compared to
2015
primarily resulting from higher litigation costs and higher expenses related to non-cash compensation plans.
Revenue and Efficiency Initiatives
Included in the amounts for direct operating expenses, SG&A and corporate expenses discussed above are expenses of
$13.0 million
and
$20.3 million
incurred in
2016
and
2015
, respectively, in connection with our strategic revenue and efficiency initiatives. The costs were incurred to improve revenue growth, enhance yield, reduce costs, and organize each business to maximize performance and profitability. These costs consist primarily of severance related to workforce initiatives, consolidation of locations and positions, consulting expenses and other costs incurred in connection with streamlining our businesses. These costs are expected to provide benefits in future periods as the initiative results are realized. Of these costs for
2016
,
$2.7 million
are reported within direct operating expenses,
$7.8 million
are reported within SG&A and
$2.5 million
are reported within corporate expense. In
2015
, such costs totaled
$9.2 million
,
$4.3 million
, and
$6.8 million
, respectively.
Depreciation and Amortization
Depreciation and amortization
decreased
$31.8 million
during
2016
compared to
2015
primarily due to assets becoming fully depreciated or fully amortized, the sale of certain U.S. markets and International businesses, as well as the impact of movements in foreign exchange rates.
Impairment Charges
We perform our annual impairment test on our goodwill, billboard permits, and other intangible assets as of July 1 of each year. In addition, we test for impairment of property, plant and equipment whenever events and circumstances indicate that depreciable assets might be impaired. As a result of these impairment tests, during
2016
, we recorded an impairment charge of
$7.3 million
during
2016
related to goodwill in one International business. During
2015
, we recognized a
$21.6 million
impairment charge related to billboard permits in one Americas market. Please see Note 2 to the consolidated financial statements included in Item 8 of Part II of this Annual Report on Form 10-K for a further description of the impairment charges.
Other Operating Income (Expense), Net
Other operating
income
, net of
$354.7 million
in
2016
primarily related to the net gain of $278.3 million on sale of nine non-strategic markets in the first quarter of 2016 and the net gain of
$127.6 million
on sale on our business in Australia in the fourth quarter of 2016, partially offset by the
$56.6 million
loss, which includes
$32.2 million
in cumulative translation adjustments, on the sale of our business in Turkey in the second quarter of 2016. In the first quarter of 2016, Americas sold nine non-strategic markets including Cleveland and Columbus, Ohio, Des Moines, Iowa, Ft. Smith, Arkansas, Memphis, Tennessee, Portland, Oregon, Reno, Nevada, Seattle, Washington and Wichita, Kansas for net proceeds of $
592.3 million
in cash and certain advertising assets in Florida.
Other operating
expense
, net of
$4.8 million
in
2015
primarily related to acquisition/disposition transaction costs.
Interest Expense
Interest expense
increased
$19.2 million
in
2016
compared to
2015
, primarily due to the issuance by Clear Channel International B.V. of its 8.75% Senior Notes due 2020 during the fourth quarter of 2015.
Interest Income on Due From iHeartCommunications
Interest income
decreased
$11.1 million
during
2016
compared to
2015
due to the decrease in the average outstanding balance on the Due from iHeartCommunications note.
Equity in Loss of Nonconsolidated Affiliates
Equity in
loss
of nonconsolidated affiliates of
$1.7 million
and
$0.3 million
for
2016
and
2015
, respectively, included the loss from our equity investments in our Americas and International segments.
Other Income (Expense), Net
Other
expense
was
$70.2 million
for
2016
. Other
income
was
$12.4 million
for
2015
. These amounts relate primarily to net foreign exchange gains and losses recognized in connection with intercompany notes denominated in foreign currencies. The decline in value during 2016 of the British pound against the Euro impacted Euro-denominated notes payable by one of our UK subsidiaries, which was the primary driver of the foreign exchange loss in
2016
.
Income Tax Benefit (Expense)
Our operations are included in a consolidated income tax return filed by iHeartMedia. However, for our financial statements, our provision for income taxes was computed as if we file separate consolidated federal income tax returns with our subsidiaries.
The effective tax rate for
2016
was
31.8%
and was primarily impacted by the deferred tax benefits recorded in the current period for the release of valuation allowances in the U.S. and France. The release of the valuation allowance of $32.9 million in the U.S. was primarily due to the taxable income generated from the sale of nine non-strategic U.S. outdoor markets during the first quarter of 2016 and the release of valuation allowance in France of $43.3 million was due to positive evidence that now exists related to the Company’s ability to utilize certain net operating loss carryforwards in the future. The deferred tax benefits described above were partially offset by $54.7 million in tax expense attributable to the sale of our business in Australia during the period.
The effective tax rate for
2015
was (237.5)% and was primarily impacted by the $32.9 million valuation allowance recorded during the period as additional deferred tax expense. The valuation allowance was recorded against a portion of the U.S. Federal and State net operating losses due to the uncertainty of the ability to utilize those losses in future periods. Additionally, the Company recorded additional taxes due to the inability to benefit from losses in certain foreign jurisdictions.
Americas Outdoor Advertising Results of Operations
Our Americas outdoor operating results were as follows:
|
|
|
|
|
|
|
|
|
|
|
(In thousands)
|
Years Ended December 31,
|
|
%
|
|
2016
|
|
2015
|
|
Change
|
Revenue
|
$
|
1,278,413
|
|
|
$
|
1,349,021
|
|
|
(5.2)%
|
Direct operating expenses
|
570,310
|
|
|
597,382
|
|
|
(4.5)%
|
SG&A expenses
|
225,415
|
|
|
233,254
|
|
|
(3.4)%
|
Depreciation and amortization
|
185,654
|
|
|
204,514
|
|
|
(9.2)%
|
Operating income
|
$
|
297,034
|
|
|
$
|
313,871
|
|
|
(5.4)%
|
Americas revenue
decreased
$70.6 million
during
2016
compared to
2015
. Excluding the
$7.7 million
impact from movements in foreign exchange rates, Americas revenue
decreased
$62.9 million
during
2016
compared to
2015
. The decrease in revenue is due to the $102.7 million impact of the sale of nine non-strategic U.S. markets in the first quarter of 2016. The decrease in revenue resulting from these sales was partially offset by increased revenues from digital billboards from new deployments and higher occupancy on existing digital billboards, as well as new airport contracts, and higher revenues in Latin America.
Americas direct operating expenses
decreased
$27.1 million
during
2016
compared to
2015
. Excluding the
$3.6 million
impact from movements in foreign exchange rates, Americas direct operating expenses
decreased
$23.5 million
during
2016
compared to
2015
. The decrease in direct operating expenses was driven by a $35.4 million decrease in direct operating expenses resulting from the sale of the nine non-strategic markets in the first quarter of 2016, partially offset by higher site lease expenses related to new airport contracts.
Americas SG&A expenses
decreased
$7.9 million
during
2016
compared to
2015
. Excluding the
$2.1 million
impact from movements in foreign exchange rates, Americas SG&A expenses
decreased
$5.8 million
during
2016
compared to
2015
. This decrease was due to a $20.4 million decrease in SG&A expenses resulting from the sale of the nine non-
strategic U.S. markets in the first quarter of 2016, partially offset by higher variable compensation expense related to higher revenues.
Depreciation and amortization
decreased
$18.9 million
. Excluding the
$0.8 million
impact from movements in foreign exchange rates, depreciation and amortization
decreased
$18.1 million
primarily due to the sale of the nine non-strategic U.S. markets in the first quarter of 2016 and assets becoming fully depreciated or fully amortized.
International Outdoor Advertising Results of Operations
Our International operating results were as follows:
|
|
|
|
|
|
|
|
|
|
|
(In thousands)
|
Years Ended December 31,
|
|
%
|
|
2016
|
|
2015
|
|
Change
|
Revenue
|
$
|
1,423,982
|
|
|
$
|
1,457,183
|
|
|
(2.3)%
|
Direct operating expenses
|
865,259
|
|
|
897,520
|
|
|
(3.6)%
|
SG&A expenses
|
289,787
|
|
|
298,250
|
|
|
(2.8)%
|
Depreciation and amortization
|
152,758
|
|
|
166,060
|
|
|
(8.0)%
|
Operating income
|
$
|
116,178
|
|
|
$
|
95,353
|
|
|
21.8%
|
International revenue
decreased
$33.2 million
during
2016
compared to
2015
. Excluding the
$39.9 million
impact from movements in foreign exchange rates, International revenue
increased
$6.7 million
during
2016
compared to
2015
. The increase in revenue is due to growth across most of our markets including China, Italy, Spain, Sweden, France and Belgium, primarily from new digital assets and new contracts. This growth was partially offset by a $22.7 million decrease in revenue resulting from the sale of our businesses in Turkey and Australia in the second and fourth quarters of 2016, respectively, as well as lower revenue in the United Kingdom as a result of the London bus shelter contract not being renewed.
International direct operating expenses
decreased
$32.2 million
during
2016
compared to
2015
. Excluding the
$25.4 million
impact from movements in foreign exchange rates, International direct operating expenses
decreased
$6.8 million
during
2016
compared to
2015
. The decrease was driven by a $14.6 million decrease in direct operating expenses resulting from the sale of our businesses in Turkey and Australia and lower rent expense due to lower revenue in the United Kingdom as a result of the London bus shelter contract not being renewed. These decreases were partially offset by higher site lease and production expenses in countries experiencing revenue growth.
International SG&A expenses
decreased
$8.5 million
during
2016
compared to
2015
. Excluding the
$7.8 million
impact from movements in foreign exchange rates, International SG&A expenses
decreased
$0.7 million
during
2016
compared to
2015
. The decrease in SG&A expenses was primarily due to a $3.0 million decrease resulting from the sale of our businesses in Turkey and Australia, partially offset by higher variable compensation expenses.
Included in 2015 International Outdoor direct operating expenses and SG&A expenses are $8.2 million and $3.2 million, respectively, recorded in the fourth quarter of 2015 to correct for accounting errors included in the results of our Netherlands subsidiary reported in prior years. Such corrections are not considered to be material to the prior year financial results.
Depreciation and amortization
decreased
$13.3 million
. Excluding the
$5.5 million
impact from movements in foreign exchange rates, depreciation and amortization
decreased
$7.8 million
primarily due to assets becoming fully depreciated or fully amortized.
Consolidated Results of Operations
The comparison of our historical results of operations for the year ended December 31,
2015
to the year ended December 31,
2014
is as follows:
|
|
|
|
|
|
|
|
|
|
|
(In thousands)
|
Years Ended December 31,
|
|
%
|
|
2015
|
|
2014
|
|
Change
|
Revenue
|
$
|
2,806,204
|
|
|
$
|
2,961,259
|
|
|
(5.2)%
|
Operating expenses:
|
|
|
|
|
|
Direct operating expenses (excludes depreciation and amortization)
|
1,494,902
|
|
|
1,596,888
|
|
|
(6.4)%
|
Selling, general and administrative expenses (excludes depreciation and amortization)
|
531,504
|
|
|
548,519
|
|
|
(3.1)%
|
Corporate expenses (excludes depreciation and amortization)
|
116,380
|
|
|
130,894
|
|
|
(11.1)%
|
Depreciation and amortization
|
375,962
|
|
|
406,243
|
|
|
(7.5)%
|
Impairment charges
|
21,631
|
|
|
3,530
|
|
|
512.8%
|
Other operating (expense) income, net
|
(4,824
|
)
|
|
7,259
|
|
|
(166.5)%
|
Operating income
|
261,001
|
|
|
282,444
|
|
|
(7.6)%
|
Interest expense
|
355,669
|
|
|
353,265
|
|
|
|
Interest income on Due from iHeartCommunications
|
61,439
|
|
|
60,179
|
|
|
|
Equity in earnings (loss) of nonconsolidated affiliates
|
(289
|
)
|
|
3,789
|
|
|
|
Other income, net
|
12,387
|
|
|
15,185
|
|
|
|
Loss before income taxes
|
(21,131
|
)
|
|
8,332
|
|
|
|
Income tax benefit (expense)
|
(50,177
|
)
|
|
8,787
|
|
|
|
Consolidated loss
|
(71,308
|
)
|
|
17,119
|
|
|
|
Less amount attributable to noncontrolling interest
|
24,764
|
|
|
26,709
|
|
|
|
Net loss attributable to the Company
|
$
|
(96,072
|
)
|
|
$
|
(9,590
|
)
|
|
|
Consolidated Revenue
Consolidated revenue decreased $155.1 million during 2015 compared to 2014. Excluding a $229.0 million impact from movements in foreign exchange rates, consolidated revenue increased $73.9 million during 2015 compared to 2014. Americas revenue decreased $1.6 million during 2015 compared to 2014. Excluding the $23.4 million impact from movements in foreign exchange rates, Americas revenue increased $21.8 million during 2015 compared to 2014 primarily driven by higher revenues from digital billboards and our Spectacolor business. International revenue decreased $153.4 million during 2015 compared to 2014. Excluding the $205.6 million impact from movements in foreign exchange rates, International revenue increased $52.2 million during 2015 compared to 2014 primarily driven by new contracts and the impact of sales initiatives.
Consolidated Direct Operating Expenses
Consolidated direct operating expenses decreased $102.0 million during 2015 compared to 2014. Excluding an $146.6 million impact from movements in foreign exchange rates, consolidated direct operating expenses increased $44.6 million during 2015 compared to 2014. Americas direct operating expenses decreased $8.4 million during 2015 compared to 2014. Excluding the $13.1 million impact from movements in foreign exchange rates, Americas direct operating expenses increased $4.7 million during 2015 compared to 2014 primarily due to higher variable site lease expenses related to the increase in revenues. International direct operating expenses decreased $93.6 million during 2015 compared to 2014. Excluding the $133.5 million impact from movements in foreign exchange rates, International direct operating expenses increased $39.9 million during 2015 compared to 2014 primarily as a result of higher variable costs associated with higher revenue, as well as higher spending on strategic efficiency initiatives.
Consolidated SG&A Expenses
Consolidated SG&A expenses decreased $17.0 million during 2015 compared to 2014. Excluding a $51.1 million impact from movements in foreign exchange rates, consolidated SG&A expenses increased $34.1 million during 2015 compared to 2014. Americas SG&A expenses decreased $0.4 million during 2015 compared to 2014. Excluding the $6.0 million impact from movements in foreign exchange rates, Americas SG&A expenses increased $5.6 million during 2015 compared to 2014 primarily in Latin America. International SG&A expenses decreased $16.6 million during 2015 compared to 2014. Excluding the $45.0 million impact from movements in foreign exchange rates, International SG&A expenses increased $28.4 million during 2015 compared to 2014 primarily due to higher compensation expense, including commissions in connection with higher revenues.
Corporate Expenses
Corporate expenses decreased $14.5 million during 2015 compared to 2014. Excluding the $3.5 million impact from movements in foreign exchange rates, corporate expenses decreased $11.0 million during 2015 compared to 2014. Corporate expenses were primarily impacted by lower spending related to our strategic revenue and efficiency initiatives, partially offset by higher variable compensation expense.
Revenue and Efficiency Initiatives
Included in the amounts for direct operating expenses, SG&A and corporate expenses discussed above are expenses of $20.3 million incurred in 2015 in connection with our strategic revenue and efficiency initiatives. The costs were incurred to improve revenue growth, enhance yield, reduce costs, and organize each business to maximize performance and profitability. These costs consist primarily of severance related to workforce initiatives, consolidation of locations and positions, consulting expenses and other costs incurred in connection with streamlining our businesses. These costs are expected to provide benefits in future periods as the initiative results are realized. Of these costs for 2015, $9.2 million are reported within direct operating expenses, $4.3 million are reported within SG&A and $6.8 million are reported within corporate expense. In 2014, such costs totaled $3.5 million, $6.7 million, and $20.0 million, respectively.
Depreciation and Amortization
Depreciation and amortization decreased $30.3 million during 2015 compared to 2014 primarily due to assets becoming fully depreciated or fully amortized as well as the impact of movements in foreign exchange rates.
Impairment Charges
We perform our annual impairment test on our goodwill, billboard permits, and other intangible assets as of July 1 of each year. In addition, we test for impairment of property, plant and equipment whenever events and circumstances indicate that depreciable assets might be impaired. As a result of these impairment tests, during 2015, we recorded impairment charges of $21.6 million during 2015 related to billboard permits in one Americas outdoor market. During 2014, we recognized a $3.5 million other intangible assets impairment charge in our Americas segment primarily related to a decline in the estimated fair value of permanent easements in two markets. Please see Note 2 to the consolidated financial statements included in Item 8 of Part II of this Annual Report on Form 10-K for a further description of the impairment charges.
Other Operating Income, Net
Other operating expense, net of $4.8 million in 2015 primarily related to acquisition/disposition transaction costs.
Other operating income, net of $7.3 million in 2014 primarily related to the gain on the sale of certain outdoor assets in our Americas segment.
Interest Expense
Interest expense increased $2.4 million in 2015 compared to 2014.
Interest Income on Due From iHeartCommunications
Interest income increased $1.3 million during 2015 compared to 2014 due to the increase in the average outstanding balance on the Due from iHeartCommunications note.
Equity in Earnings (Loss) of Nonconsolidated Affiliates
Equity in loss of nonconsolidated affiliates of $0.3 million for 2015 included the loss from our equity investments in our Americas and International segments.
Equity in earnings of nonconsolidated affiliates of $3.8 million for 2014 included the earnings from our equity investments in our Americas and International segments.
Other Income, Net
Other income of $12.4 million and $15.2 million for 2015 and 2014, respectively, primarily related to foreign exchange gains on short-term intercompany accounts.
Income Tax (Expense) Benefit
Our operations are included in a consolidated income tax return filed by iHeartMedia. However, for our financial statements, our provision for income taxes was computed as if we file separate consolidated federal income tax returns with our subsidiaries.
The effective tax rate for 2015 was (237.5)% and was primarily impacted by the $32.9 million valuation allowance recorded during the period as additional deferred tax expense. The valuation allowance was recorded against a portion of the U.S. Federal and State net operating losses due to the uncertainty of the ability to utilize those losses in future periods. Additionally, the Company recorded additional taxes due to the inability to benefit from losses in certain foreign jurisdictions.
The effective tax rate for 2014 was (105.5)%, primarily impacted by our benefits and charges from tax amounts associated with our foreign earnings that are taxed at rates different from the federal statutory rate and an inability to benefit from losses in certain foreign jurisdictions. In addition, we recorded $20.0 million in net tax benefits associated with a decrease in unrecognized tax benefits resulting from the expiration of statutes of limitations to assess taxes in the United Kingdom and several state jurisdictions.
Americas Results of Operations
Our Americas operating results were as follows:
|
|
|
|
|
|
|
|
|
|
|
(In thousands)
|
Years Ended December 31,
|
|
%
|
|
2015
|
|
2014
|
|
Change
|
Revenue
|
$
|
1,349,021
|
|
|
$
|
1,350,623
|
|
|
(0.1)%
|
Direct operating expenses
|
597,382
|
|
|
605,771
|
|
|
(1.4)%
|
SG&A expenses
|
233,254
|
|
|
233,641
|
|
|
(0.2)%
|
Depreciation and amortization
|
204,514
|
|
|
203,928
|
|
|
0.3%
|
Operating income
|
$
|
313,871
|
|
|
$
|
307,283
|
|
|
2.1%
|
Americas revenue decreased $1.6 million during 2015 compared to 2014. Excluding the $23.4 million impact from movements in foreign exchange rates, Americas revenue increased $21.8 million during 2015 compared to 2014 driven primarily by an increase in revenues from digital billboards as a result of new deployments, as well as from our Spectacolor business, partially offset by lower advertising revenues from our static bulletins and posters, and our airports business.
Americas direct operating expenses decreased $8.4 million during 2015 compared to 2014. Excluding the $13.1 million impact from movements in foreign exchange rates, Americas direct operating expenses increased $4.7 million during 2015 compared to 2014 primarily due to higher variable site lease expenses related to the increase in revenues. Americas SG&A expenses decreased $0.4 million during 2015 compared to 2014. Excluding the $6.0 million impact from movements in foreign exchange rates, Americas SG&A expenses increased $5.6 million during 2015 compared to 2014 primarily due to higher expenses in Latin America.
International Advertising Results of Operations
Our International operating results were as follows:
|
|
|
|
|
|
|
|
|
|
|
(In thousands)
|
Years Ended December 31,
|
|
%
|
|
2015
|
|
2014
|
|
Change
|
Revenue
|
$
|
1,457,183
|
|
|
$
|
1,610,636
|
|
|
(9.5)%
|
Direct operating expenses
|
897,520
|
|
|
991,117
|
|
|
(9.4)%
|
SG&A expenses
|
298,250
|
|
|
314,878
|
|
|
(5.3)%
|
Depreciation and amortization
|
166,060
|
|
|
198,143
|
|
|
(16.2)%
|
Operating income
|
$
|
95,353
|
|
|
$
|
106,498
|
|
|
(10.5)%
|
International revenue decreased $153.4 million during 2015 compared to 2014. Excluding the $205.6 million impact from movements in foreign exchange rates, International revenue increased $52.2 million during 2015 compared to 2014 primarily driven by new contracts along with higher occupancy and higher rates for our transit and street furniture products, particularly
digital, in certain European countries, including Sweden, Norway, Italy and the UK, as well as from new contracts in Australia and China.
International direct operating expenses decreased $93.6 million during 2015 compared to 2014. Excluding the $133.5 million impact from movements in foreign exchange rates, International direct operating expenses increased $39.9 million during 2015 compared to 2014 primarily as a result of higher variable costs associated with higher revenue, as well as site lease termination fees on lower-margin boards incurred in connection with strategic revenue and efficiency initiatives. International SG&A expenses decreased $16.6 million during 2015 compared to 2014. Excluding the $45.0 million impact from movements in foreign exchange rates, International SG&A expenses increased $28.4 million during 2015 compared to 2014 primarily due to higher compensation expense, including commissions in connection with higher revenues.
Depreciation and amortization decreased $32.1 million. Excluding the $19.5 million impact from movements in foreign exchange rates, depreciation and amortization decreased $12.6 million primarily due to assets becoming fully depreciated or fully amortized.
Also included in International Outdoor direct operating expenses and SG&A expenses are $8.2 million and $3.2 million, respectively, recorded in the fourth quarter of 2015 to correct for accounting errors included in the results for our Netherlands subsidiary reported in prior years. Such corrections are not considered to be material to the current year or prior year financial results.
Reconciliation of Segment Operating Income to Consolidated Operating Income
|
|
|
|
|
|
|
|
|
|
|
|
|
(In thousands)
|
Years Ended December 31,
|
|
2016
|
|
2015
|
|
2014
|
Americas Outdoor Advertising
|
$
|
297,034
|
|
|
313,871
|
|
|
307,283
|
|
International Outdoor Advertising
|
116,178
|
|
|
95,353
|
|
|
106,498
|
|
Impairment charges
|
(7,274
|
)
|
|
(21,631
|
)
|
|
(3,530
|
)
|
Corporate and other
(1)
|
(123,095
|
)
|
|
(121,768
|
)
|
|
(135,066
|
)
|
Other operating income, net
|
354,688
|
|
|
(4,824
|
)
|
|
7,259
|
|
Consolidated operating income
|
$
|
637,531
|
|
|
$
|
261,001
|
|
|
$
|
282,444
|
|
|
|
(1)
|
Corporate and other includes expenses related to Americas and International and as well as overall executive, administrative and support functions.
|
Share-Based Compensation Expense
As of December 31,
2016
, there was
$14.8 million
of unrecognized compensation cost related to unvested share-based compensation arrangements that will vest based on service conditions. Based on the terms of the award agreements, this cost is expected to be recognized over a weighted average period of approximately
three years
. In addition, as of December 31,
2016
, there was
$0.7 million
of unrecognized compensation cost related to unvested share-based compensation arrangements that will vest based on market, performance and service conditions. This cost will be recognized when it becomes probable that the performance condition will be satisfied.
Share-based compensation expenses are recorded in corporate expenses and were
$10.2 million
,
$8.4 million
and
$7.7 million
for the years ended December 31,
2016
,
2015
and
2014
, respectively.
LIQUIDITY AND CAPITAL RESOURCES
Cash Flows
The following discussion highlights cash flow activities during the years ended December 31,
2016
,
2015
and
2014
.
|
|
|
|
|
|
|
|
|
|
|
|
|
(In thousands)
|
Years Ended December 31,
|
|
2016
|
|
2015
|
|
2014
|
Cash provided by (used for):
|
|
|
|
|
|
Operating activities
|
$
|
310,293
|
|
|
$
|
298,933
|
|
|
$
|
348,423
|
|
Investing activities
|
$
|
551,499
|
|
|
$
|
(257,725
|
)
|
|
$
|
(206,431
|
)
|
Financing activities
|
$
|
(726,499
|
)
|
|
$
|
199,054
|
|
|
$
|
(261,309
|
)
|
Operating Activities
2016
Cash
provided by
operating activities was
$310.3 million
in
2016
compared to
$298.9 million
of cash
provided
in
2015
. Our consolidated net loss included
$121.3 million
of non-cash items in
2016
. Our consolidated net income in
2015
included
$413.0 million
of non-cash items. Non-cash items affecting our net loss include impairment charges, depreciation and amortization, deferred taxes, provision for doubtful accounts, amortization of deferred financing charges and note discounts, net, share-based compensation, gain on disposal of operating and fixed assets, equity in (earnings) loss of nonconsolidated affiliates and other reconciling items, net as presented on the face of the consolidated statement of cash flows. The increase in cash provided by operating activities is primarily attributed to changes in working capital balances, particularly accounts receivable, which was driven primarily by lower revenues and improved collections, partially offset by an increase in cash paid for interest.
2015
Cash provided by operating activities was $298.9 million in 2015 compared to $348.4 million of cash provided in 2014. Our consolidated net loss included $413.0 million of net non-cash items in 2015. Our consolidated net loss in 2014 included $373.7 million of net non-cash items. Non-cash items affecting our net loss include impairment charges, depreciation and amortization, deferred taxes, provision for doubtful accounts, amortization of deferred financing charges and note discounts, net, share-based compensation, gain on disposal of operating and fixed assets, gain on marketable securities, equity in (earnings) loss of nonconsolidated affiliates, loss on extinguishment of debt, and other reconciling items, net as presented on the face of the consolidated statement of cash flows. The decrease in cash provided by operating activities is primarily attributed to a decrease in net income as well as changes in working capital balances, particularly accounts receivable.
2014
Cash provided by operating activities in 2014 was $348.4 million compared to $414.6 million in 2013. Our consolidated net loss included $373.7 million of net non-cash items in 2014. Our consolidated net loss in 2013 included $385.7 million of net non-cash items. Non-cash items affecting our net loss include impairment charges, depreciation and amortization, deferred taxes, provision for doubtful accounts, amortization of deferred financing charges and note discounts, net, share-based compensation, gain on disposal of operating and fixed assets, gain on marketable securities, equity in (earnings) loss of nonconsolidated affiliates, loss on extinguishment of debt, and other reconciling items, net as presented on the face of the consolidated statement of cash flows. Cash paid for interest was $1.0 million higher in 2014 compared to the prior year due to the timing of accrued interest payments from refinancing transactions.
Investing Activities
2016
Cash
provided by
investing activities of
$551.5 million
during
2016
primarily reflected $592.3 million of net cash proceeds from the sale of nine non-strategic outdoor markets including Cleveland and Columbus, Ohio, Des Moines, Iowa, Ft. Smith, Arkansas, Memphis, Tennessee, Portland, Oregon, Reno, Nevada, Seattle, Washington and Wichita, Kansas, and the sale of our business in Australia for
$195.7 million
, net of cash retained by the purchaser and closing costs. Those sale proceeds were partially offset by
$229.8 million
used for capital expenditures. We spent
$81.4 million
in our Americas segment primarily related to the construction of new advertising structures such as digital displays,
$143.8 million
in our International segment primarily related to street furniture advertising structures, and
$4.6 million
by Corporate primarily related to equipment and software.
2015
Cash used for investing activities of $257.7 million during 2015 reflected our capital expenditures of $218.3 million. We spent $82.2 million in our Americas segment primarily related to the construction of new advertising structures such as digital displays, $132.6 million in our International segment primarily related to street furniture advertising and digital billboard structures, and $3.5 million by Corporate primarily related to equipment and software. Other cash provided by investing activities were $11.3 million of proceeds from sales of other operating and fixed assets.
2014
Cash used for investing activities of $206.4 million during 2014 reflected our capital expenditures of $231.2 million. We spent $109.7 million in our Americas segment primarily related to the construction of new advertising structures such as digital displays, $117.5 million in our International segment primarily related to new advertising structures such as billboards and street furniture and renewals of existing contracts, and $4.0 million by Corporate primarily related to equipment and software. Other cash provided by investing activities were $12.9 million of proceeds from sales of other operating and fixed assets.
Financing Activities
2016
Cash
used for
financing activities of
$726.5 million
during
2016
primarily reflected two cash dividends paid in the aggregate amount of $755.5 million, partially offset by net transfers of
$45.1 million
in cash from iHeartCommunications, which represents the activity in the “Due from iHeartCommunications” account.
2015
Cash provided by financing activities of $199.1 million during 2015 primarily reflected the proceeds from the issuance of $225.0 million of senior notes by our subsidiary Clear Channel International B.V. We also received $17.0 million in cash from iHeartCommunications, which represents the activity in the “Due from/to iHeartCommunications” account.
On December 20, 2015, our board of directors declared a special cash dividend of $217.8 million that was paid on January 7, 2016 and was reflected as cash used for financing activities in the first quarter of 2016.
2014
Cash used for financing activities of $261.3 million during 2014 primarily reflected the $175.0 million dividend paid as well as net transfers of $68.8 million in cash to iHeartCommunications, which represents the activity in the “Due from/to iHeartCommunications” account. Other cash used for financing activities included net payments to noncontrolling interests of $19.0 million.
Anticipated Cash Requirements
Our primary sources of liquidity are cash on hand, cash flow from operations, the revolving promissory note with iHeartCommunications and our senior revolving credit facility. As of December 31,
2016
, we had
$542.0 million
of cash on our balance sheet, including
$180.1 million
of cash held outside the U.S. by our subsidiaries, a portion of which is held by non-wholly owned subsidiaries or is otherwise subject to certain restrictions and not readily accessible to us. We disclose in Item 8 of our Form 10-K within Note 1, Summary of Significant Accounting Policies, that our policy is to permanently reinvest the earnings of our non-U.S. subsidiaries as these earnings are generally redeployed in those jurisdictions for operating needs and continued functioning of their businesses. We have the ability and intent to indefinitely reinvest the undistributed earnings of consolidated subsidiaries based outside of the United States. If any excess cash held by our foreign subsidiaries were needed to fund operations in the United States, we could presently repatriate available funds without a requirement to accrue or pay U.S. taxes. This is a result of significant deficits, as calculated for tax law purposes, in our foreign earnings and profits, which gives us flexibility to make future cash distributions as non-taxable returns of capital.
Our primary uses of liquidity are for our working capital, capital expenditure, debt service, special dividend and other funding requirements. Based on our current and anticipated levels of operations and conditions in our markets, we believe that cash on hand, cash flows from operations, repayment of amounts outstanding under the revolving promissory note with iHeartCommunications and borrowing capacity under our senior revolving credit facility will enable us to meet our working capital, capital expenditure, debt service, special dividend and other funding requirements, including the debt service on the CCWH Senior Notes, the CCWH Subordinated Notes and the CCIBV Senior Notes for at least the next 12 months. We believe our long-term plans, which include promoting outdoor media spending, capitalizing on our diverse geographic and product opportunities and the continued deployment of digital displays, will enable us to continue generating cash flows from operations sufficient to meet our liquidity and funding requirements long term. However, our anticipated results are subject to significant uncertainty.
Our ability to fund our working capital, capital expenditures, debt service, special dividend and other obligations depends on our future operating performance and cash from operations. If our future operating performance does not meet our expectations or our plans materially change in an adverse manner or prove to be materially inaccurate, we may need additional financing. We may not be able to secure any such additional financing on terms favorable to us or at all.
In the first quarter of 2016, we paid $757.8 million in special cash dividends to our stockholders. As described under “Uses of Capital-Special Dividends” below, in the first quarter of 2016, we paid a $217.8 million dividend from the proceeds of the issuance of 8.75% Senior Notes due 2020 by Clear Channel International B.V. ("CCIBV"), one of our indirect subsidiaries, and a $540.0 million dividend with the proceeds of a $300 million repayment under the Due from iHeartCommunications note and the sale of our outdoor business in nine non-strategic markets. During the fourth quarter of 2016, we sold our business in Australia for cash proceeds of
$195.7 million
, net of cash retained by the purchaser and closing costs. On February 9, 2017, we declared a special cash dividend to our stockholders of $282.5 million, to be paid using proceeds from the sales of certain non-strategic U.S. markets and of our business in Australia. We paid the dividend on February 23, 2017, of which 89.9% or approximately $254.0 million was paid to iHeartCommunications, with the remaining 10.1% or approximately $28.5 million paid to our public stockholders. The payment of these special dividends reduces the amount of cash available to us for future working capital, capital expenditure, debt service and other funding requirements. Similarly, the repayment of the $300.0 million under the Due from iHeartCommunications note reduced the amount of the Due from iHeartCommunications note asset that is available to us as a source of liquidity. Future special cash dividends will be dependent upon, among other things, our having sufficient available cash.
In addition to any special dividends that our board of directors may declare using the proceeds of any liquidity-generating transactions or other available cash, we may declare special dividends using the proceeds of payments from iHeartCommunications under the Due from iHeartCommunications note. Our board of directors has established a committee that has the non-exclusive authority to demand payments under the Due from iHeartCommunications note under certain specified circumstances tied to iHeartCommunications’ liquidity or the amount outstanding under the Due from iHeartCommunications note, as long as our board of directors declares a simultaneous dividend equal to the amount so demanded. Any future repayments and dividends would further reduce the amount of the Due from iHeartCommunications note asset that is available to us as a source of liquidity for ongoing working capital, capital expenditure, debt service, special dividend and other funding requirements.
As our controlling stockholder, iHeartCommunications may request and may exert pressure on us to engage in transactions for the purpose of supporting its liquidity needs, such as financings or asset sales, which may negatively affect our business operations or our capital structure. In its Annual Report on Form 10-K filed with the SEC on
February 23, 2017
, iHeartCommunications stated that its forecast of future cash flows indicates that such cash flows would not be sufficient for it to meet its obligations, including payment of the outstanding receivables based credit facility balance at maturity on December 24, 2017, as they become due in the ordinary course of business for a period of at least 12 months following February 23, 2017. While iHeartCommunications stated that it believes that the refinancing or the extension of the maturity date of the receivables based credit facility, combined with current funds and expected future cash flows, will be sufficient to enable it to meet its obligations as they become due in the ordinary course of business for a period of at least 12 months following February 23, 2017, there is no assurance that the receivables based credit facility will be extended in a timely manner or on acceptable terms, or at all.
iHeartCommunications provides the day-to-day cash management services for our cash activities and balances in the U.S. We do not have any material committed external sources of capital other than iHeartCommunications, and iHeartCommunications is not required to provide us with funds to finance our working capital or other cash requirements. We have no access to the cash transferred from us to iHeartCommunications under the cash management arrangement other than our right to demand payment by iHeartCommunications of the amounts owed to us under the Due from iHeartCommunications note. As of December 31,
2016
, iHeartCommunications had
$845.0 million
recorded as “Cash and cash equivalents” on its consolidated balance sheets, of which
$542.0 million
was held by us and our subsidiaries, and we had
$885.7 million
due to us from iHeartCommunications under the Due from iHeartCommunications note. Further deterioration in the financial condition or liquidity of iHeartCommunications could result in its inability to repay amounts due to us under the Due from iHeartCommunications note when demanded or at maturity, and could also have the effect of increasing our borrowing costs or impairing our access to capital markets. If iHeartCommunications were to become insolvent or file for bankruptcy, we would be an unsecured creditor of iHeartCommunications. In that event, we would be treated the same as other unsecured creditors of iHeartCommunications and, if we were not repaid or otherwise entitled to amounts outstanding or previously paid under the revolving promissory note, or could not obtain cash previously transferred to iHeartCommunications on a timely basis or retain cash previously received from iHeartCommunications, we could experience a liquidity shortfall.
We were in compliance with the covenants contained in our material financing agreements as of December 31,
2016
. Our ability to comply with the maintenance covenant in our senior secured credit facility may be affected by events beyond our control, including prevailing economic, financial and industry conditions.
In its Annual Report on Form 10-K filed with the SEC on
February 23, 2017
, iHeartCommunications stated that it was in compliance with the covenants contained in its material financing agreements as of December 31,
2016
, other than a payment default on notes held by a subsidiary of iHeartCommunications that has informed iHeartCommunications it does not intend to collect the principal amount due or exercise or request enforcement of any remedy with respect to the payment default under the applicable indenture. iHeartCommunications stated that this payment default is below the $100.0 million cross-default threshold in iHeartCommunications' debt documents. iHeartCommunications similarly stated in its Annual Report that its future results are subject to significant uncertainty and there can be no assurance it will be able to maintain compliance with these covenants. iHeartCommunications stated in its Annual Report that these covenants include a requirement in its senior secured credit facilities that it receive an opinion from its auditors in connection with its year-end audit that is not subject to a "going concern" or like qualification or exception. Moreover, iHeartCommunications stated in its Annual Report that its ability to comply with the covenants in its material financing agreements may be affected by events beyond its control, including the uncertainties described under "Management's Discussion and Analysis of Financial Condition and Results of Operations-Liquidity and Capital Resources-Anticipated Cash Requirements" in its Annual Report and prevailing economic, financial and industry conditions. As discussed therein, the breach of any covenants set forth in iHeartCommunications’ financing agreements would result in a default thereunder, and an event of default would permit the lenders under a defaulted financing agreement to declare all indebtedness thereunder to be immediately due and payable. In addition, iHeartCommunications stated in its Annual Report that if iHeartCommunications is unable to repay its obligations under any secured credit facility, the lenders could proceed against any assets that were pledged to secure such facility. Finally, iHeartCommunications stated in its Annual Report that a default or acceleration under any of its material financing agreements could cause a default under other obligations that are subject to cross-default and cross-acceleration provisions.
We frequently evaluate strategic opportunities both within and outside our existing lines of business. We expect from time to time to dispose of certain businesses and may pursue acquisitions. These dispositions or acquisitions could be material.
Sources of Capital
As of December 31,
2016
and
2015
, we had the following debt outstanding, cash and cash equivalents and amounts due from iHeartCommunications:
|
|
|
|
|
|
|
|
|
|
December 31,
|
(In millions)
|
2016
|
|
2015
|
Clear Channel Worldwide Holdings Senior Notes due 2022
|
$
|
2,725.0
|
|
|
$
|
2,725.0
|
|
Clear Channel Worldwide Holdings Senior Subordinated Notes due 2020
|
2,200.0
|
|
|
2,200.0
|
|
Senior Revolving Credit Facility due 2018
|
—
|
|
|
—
|
|
Clear Channel International B.V. Senior Notes due 2020
|
225.0
|
|
|
225.0
|
|
Other debt
|
14.8
|
|
|
19.0
|
|
Original issue discount
|
(6.7
|
)
|
|
(7.8
|
)
|
Long-term debt fees
|
(41.1
|
)
|
|
(50.4
|
)
|
Total debt
|
5,117.0
|
|
|
5,110.8
|
|
Less: Cash and cash equivalents
|
542.0
|
|
|
412.7
|
|
Less: Due from iHeartCommunications
|
885.7
|
|
|
930.8
|
|
|
$
|
3,689.3
|
|
|
$
|
3,767.3
|
|
We may from time to time repay our outstanding debt or seek to purchase our outstanding equity securities. Such transactions, if any, will depend on prevailing market conditions, our liquidity requirements, contractual restrictions and other factors.
Promissory Notes with iHeartCommunications
We maintain accounts that represent net amounts due to or from iHeartCommunications, which are recorded as “Due from/to iHeartCommunications” on our consolidated balance sheets. The accounts represent our revolving promissory note issued by us to iHeartCommunications and the Due from iHeartCommunications note, in each case in the face amount of $1.0 billion, or if more or less than such amount, the aggregate unpaid principal amount of all advances. The accounts accrue interest pursuant to the terms of the promissory notes and are generally payable on demand or when they mature on December 15, 2017. Included in the accounts are the net activities resulting from day-to-day cash management services provided by iHeartCommunications. Such day-to-day cash management services relate only to our cash activities and balances in the U.S. and exclude any cash activities and balances of our non-U.S. subsidiaries. As of December 31,
2016
and December 31,
2015
, the asset recorded in “Due from
iHeartCommunications” on our consolidated balance sheet was
$885.7 million
and
$930.8 million
, respectively. As of December 31,
2016
, we had no borrowings under the cash management note to iHeartCommunications.
In accordance with the terms of the settlement for the derivative litigation filed by our stockholders regarding the Due from iHeartCommunications note, as previously disclosed, we established a committee of our board of directors, consisting of our independent and disinterested directors, for the specific purpose of monitoring the Due from iHeartCommunications note. This committee has the non-exclusive authority to demand payments under the Due from iHeartCommunications note under certain specified circumstances tied to iHeartCommunications’ liquidity or the amount outstanding under the Due from iHeartCommunications note, as long as our board of directors declares a simultaneous dividend equal to the amount so demanded. The committee last made a demand under the Due from iHeartCommunications note on August 11, 2014. If future demands are made in accordance with the terms of the committee charter, we will declare a simultaneous dividend equal to the amount so demanded, which would further reduce the amount of the “Due from iHeartCommunications” asset that is available to us as a source of liquidity for ongoing working capital, capital expenditure, debt service and other funding requirements.
The net interest income for the years ended December 31,
2016
,
2015
and
2014
was
$50.3 million
,
$61.4 million
and
$60.2 million
, respectively. At December 31,
2016
, the fixed interest rate on the “Due from iHeartCommunications” account was 6.5%, which is equal to the fixed interest rate on the CCWH senior notes. On October 23, 2013, in accordance with the terms of the settlement, the interest rate on the Due from iHeartCommunications note was amended such that if the outstanding balance on the Due from iHeartCommunications note exceeds $1.0 billion and under certain other circumstances tied to iHeartCommunications’ liquidity, the rate will be variable but will in no event be less than 6.5% nor greater than 20%.
Our working capital requirements and capital for general corporate purposes, including acquisitions and capital expenditures, may be provided to us by iHeartCommunications, in its sole discretion, pursuant to a revolving promissory note issued by us to iHeartCommunications or pursuant to repayment of the Due from iHeartCommunications note. If we are unable to obtain financing from iHeartCommunications, we may need to obtain additional financing from banks or other lenders, or through public offerings or private placements of debt or equity, strategic relationships or other arrangements at some future date. As stated above, we may be unable to successfully obtain additional debt or equity financing on satisfactory terms or at all.
As long as iHeartCommunications maintains a significant interest in us, pursuant to the Master Agreement between iHeartCommunications and us, iHeartCommunications will have the option to limit our ability to incur debt or issue equity securities, among other limitations, which could adversely affect our ability to meet our liquidity needs. Under the Master Agreement with iHeartCommunications, we are limited in our borrowings from third parties to no more than $400.0 million at any one time outstanding, without the prior written consent of iHeartCommunications.
CCWH Senior Notes
As of December 31,
2016
, CCWH senior notes represented
$2.7 billion
aggregate principal amount of indebtedness outstanding, which consisted of
$735.8 million
aggregate principal amount of Series A Senior Notes due 2022 (the “Series A CCWH Senior Notes”) and
$1,989.2 million
aggregate principal amount of Series B CCWH Senior Notes due 2022 (the “Series B CCWH Senior Notes”). The CCWH Senior Notes are guaranteed by us, Clear Channel Outdoor, Inc. (“CCOI”) and certain of our direct and indirect subsidiaries.
The CCWH Senior Notes are senior obligations that rank pari passu in right of payment to all unsubordinated indebtedness of CCWH and the guarantees of the CCWH Senior Notes rank pari passu in right of payment to all unsubordinated indebtedness of the guarantors. Interest on the CCWH Senior Notes is payable to the trustee weekly in arrears and to the noteholders on May 15 and November 15 of each year.
At any time prior to November 15, 2017, CCWH may redeem the CCWH Senior Notes, in whole or in part, at a price equal to 100% of the principal amount of the CCWH Senior Notes plus a “make-whole” premium, together with accrued and unpaid interest, if any, to the redemption date. CCWH may redeem the CCWH Senior Notes, in whole or in part, on or after November 15, 2017, at the redemption prices set forth in the applicable indenture governing the CCWH Senior Notes plus accrued and unpaid interest to the redemption date. Notwithstanding the foregoing, neither CCOH nor any of its subsidiaries is permitted to make any purchase of, or otherwise effectively cancel or retire any Series A CCWH Senior Notes or Series B CCWH Senior Notes if, after giving effect thereto and, if applicable, any concurrent purchase of or other addition with respect to any Series B CCWH Senior Notes or Series A CCWH Senior Notes, as applicable, the ratio of (a) the outstanding aggregate principal amount of the Series A CCWH Senior Notes to (b) the outstanding aggregate principal amount of the Series B CCWH Senior Notes shall be greater than 0.25, subject to certain exceptions.
The indenture governing the Series A CCWH Senior Notes contains covenants that limit us and our restricted subsidiaries ability to, among other things:
|
|
•
|
incur or guarantee additional debt to persons other than iHeartCommunications and its subsidiaries (other than us) or issue certain preferred stock;
|
|
|
•
|
create liens on its restricted subsidiaries’ assets to secure such debt;
|
|
|
•
|
create restrictions on the payment of dividends or other amounts to us from our restricted subsidiaries that are not guarantors of the CCWH Senior Notes;
|
|
|
•
|
enter into certain transactions with affiliates; and
|
|
|
•
|
merge or consolidate with another person, or sell or otherwise dispose of all or substantially all of its assets.
|
In addition, the indenture governing the Series A CCWH Senior Notes provides that if CCWH (i) makes an optional redemption of the Series B CCWH Senior Notes or purchases or makes an offer to purchase the Series B CCWH Senior Notes at or above 100% of the principal amount thereof, then CCWH shall apply a pro rata amount to make an optional redemption or purchase a pro rata amount of the Series A CCWH Senior Notes or (ii) makes an asset sale offer under the indenture governing the Series B CCWH Senior Notes, then CCWH shall apply a pro rata amount to make an offer to purchase a pro rata amount of Series A CCWH Senior Notes.
The indenture governing the Series A CCWH Senior Notes does not include limitations on dividends, distributions, investments or asset sales.
The indenture governing the Series B CCWH Senior Notes contains covenants that limit us and our restricted subsidiaries ability to, among other things:
|
|
•
|
incur or guarantee additional debt or issue certain preferred stock;
|
|
|
•
|
redeem, repurchase or retire our subordinated debt;
|
|
|
•
|
make certain investments;
|
|
|
•
|
create liens on its or its restricted subsidiaries’ assets to secure debt;
|
|
|
•
|
create restrictions on the payment of dividends or other amounts to it from its restricted subsidiaries that are not guarantors of the CCWH Senior Notes;
|
|
|
•
|
enter into certain transactions with affiliates;
|
|
|
•
|
merge or consolidate with another person, or sell or otherwise dispose of all or substantially all of its assets;
|
|
|
•
|
sell certain assets, including capital stock of its subsidiaries;
|
|
|
•
|
designate its subsidiaries as unrestricted subsidiaries; and
|
|
|
•
|
pay dividends, redeem or repurchase capital stock or make other restricted payments.
|
The Series A CCWH Senior Notes indenture and Series B CCWH Senior Notes indenture restrict our ability to incur additional indebtedness but permit us to incur additional indebtedness based on an incurrence test. In order to incur (i) additional indebtedness under this test, our debt to adjusted EBITDA ratios (as defined by the indentures) must be lower than 7.0:1 and 5.0:1 for total debt and senior debt, respectively
,
and (ii) additional indebtedness that is subordinated to the CCWH Senior Notes under this test, our debt to adjusted EBITDA ratios (as defined by the indentures) must be lower than 7.0:1 for total debt. The indentures contain certain other exceptions that allow us to incur additional indebtedness. The Series B CCWH Senior Notes indenture also permits us to pay dividends from the proceeds of indebtedness or the proceeds from asset sales if our debt to adjusted EBITDA ratios (as defined by the indentures) are lower than 7.0:1 and 5.0:1 for total debt and senior debt, respectively. The Series A CCWH Senior Notes indenture does not limit our ability to pay dividends. Because our consolidated leverage ratio exceeded the limit in the incurrence tests described above, we are not currently permitted to incur additional indebtedness using the incurrence test in the Series A CCWH Senior Notes indenture and the Series B CCWH Senior Notes indenture, and we are not currently permitted to pay dividends from the proceeds of indebtedness or the excess proceeds from asset sales under the Series B CCWH Senior Notes indenture. There are other exceptions in these indentures that allow us to incur additional indebtedness and pay dividends. The exceptions in the Series B CCWH Senior Notes indenture that allow us to pay dividends include (i) $525.0 million of dividends made pursuant to general restricted payment baskets and (ii) dividends made using proceeds received upon a demand by us of amounts outstanding under the revolving promissory note issued by iHeartCommunications to us.
Consolidated leverage ratio, defined as total debt divided by EBITDA (as defined by the CCWH Senior Notes indentures) for the preceding four quarters was 7.8:1 at December 31,
2016
, and senior leverage ratio, defined as senior debt divided by EBITDA (as defined by the CCWH Senior Notes indentures) for the preceding four quarters was 4.2:1 at December 31,
2016
. As required by the definition of EBITDA in the CCWH Senior Notes indentures, our EBITDA for the preceding four quarters of $661.2 million is calculated as operating income (loss) before depreciation, amortization, impairment charges and other operating income (expense), net, plus share-based compensation, and is further adjusted for the following: (i) costs incurred in connection with severance, the closure and/or consolidation of facilities, retention charges, consulting fees and other permitted activities; (ii) extraordinary, non-recurring or unusual gains or losses or expenses; (iii) non-cash charges; and (iv) various other items.
The following table reflects a reconciliation of EBITDA (as defined by the CCWH Senior Notes indentures) to operating income and net cash provided by operating activities for the four quarters ended December 31,
2016
:
|
|
|
|
|
|
Four Quarters Ended
|
(In millions)
|
December 31, 2016
|
EBITDA
(as defined by the CCWH Senior Notes indentures)
|
$
|
661.2
|
|
Less adjustments to EBITDA (as defined by the CCWH Senior Notes indentures):
|
|
Costs incurred in connection with severance, the closure and/or consolidation of facilities, retention charges, consulting fees and other permitted activities
|
(15.3
|
)
|
Extraordinary, non-recurring or unusual gains or losses or expenses (as referenced in the definition of EBITDA in the CCWH Senior Notes indentures)
|
(9.8
|
)
|
Non-cash charges
|
(10.5
|
)
|
Other items
|
18.4
|
|
Less: Depreciation and amortization, Impairment charges, Other operating income, net and Share-based compensation expense
|
(6.5
|
)
|
Operating income
|
637.5
|
|
Plus: Depreciation and amortization, Impairment charges, Gain (loss) on disposal of operating and fixed assets and Share-based compensation expense
|
(1.8
|
)
|
Less: Interest expense
|
(374.9
|
)
|
Plus: Interest income on Due from iHeartCommunications
|
50.3
|
|
Less: Current income tax expense
|
(45.3
|
)
|
Plus: Other income, net
|
(70.7
|
)
|
Adjustments to reconcile consolidated net loss to net cash provided by operating activities (including Provision for doubtful accounts, Amortization of deferred financing charges and note discounts, net and Other reconciling items, net)
|
90.7
|
|
Change in assets and liabilities, net of assets acquired and liabilities assumed
|
24.5
|
|
Net cash provided by operating activities
|
$
|
310.3
|
|
CCWH Senior Subordinated Notes
As of December 31,
2016
, CCWH Subordinated Notes represented
$2.2 billion
of aggregate principal amount of indebtedness outstanding, which consist of
$275.0 million
aggregate principal amount of 7.625% Series A Senior Subordinated Notes due 2020 (the “Series A CCWH Subordinated Notes”) and
$1,925.0 million
aggregate principal amount of 7.625% Series B Senior Subordinated Notes due 2020 (the “Series B CCWH Subordinated Notes”). Interest on the CCWH Subordinated Notes is payable to the trustee weekly in arrears and to the noteholders on March 15 and September 15 of each year.
The CCWH Subordinated Notes are CCWH’s senior subordinated obligations and are fully and unconditionally guaranteed, jointly and severally, on a senior subordinated basis by us, CCOI and certain of our other domestic subsidiaries. The CCWH Subordinated Notes are unsecured senior subordinated obligations that rank junior to all of CCWH’s existing and future senior debt, including the CCWH Senior Notes, equally with any of CCWH’s existing and future senior subordinated debt and ahead of all of CCWH’s existing and future debt that expressly provides that it is subordinated to the CCWH Subordinated Notes. The guarantees of the CCWH Subordinated Notes rank junior to each guarantor’s existing and future senior debt, including the CCWH Senior Notes, equally with each guarantor’s existing and future senior subordinated debt and ahead of each guarantor’s existing and future debt that expressly provides that it is subordinated to the guarantees of the CCWH Subordinated Notes.
CCWH may redeem the CCWH Subordinated Notes, in whole or in part, at the redemption prices set forth in the applicable indenture governing the CCWH Subordinated Notes plus accrued and unpaid interest to the redemption date. Neither us nor any of our subsidiaries is permitted to make any purchase of, or otherwise effectively cancel or retire any Series A CCWH Subordinated Notes or Series B CCWH Subordinated Notes if, after giving effect thereto and, if applicable, any concurrent purchase of or other addition with respect to any Series B CCWH Subordinated Notes or Series A CCWH Subordinated Notes, as applicable, the ratio of (a) the outstanding aggregate principal amount of the Series A CCWH Subordinated Notes to (b) the outstanding aggregate principal amount of the Series B CCWH Subordinated Notes shall be greater than 0.25, subject to certain exceptions.
The indenture governing the Series A CCWH Subordinated Notes contains covenants that limit us and our restricted subsidiaries ability to, among other things:
|
|
•
|
incur or guarantee additional debt to persons other than iHeartCommunications and its subsidiaries (other than us) or issue certain preferred stock;
|
|
|
•
|
create restrictions on the payment of dividends or other amounts to us from our restricted subsidiaries that are not guarantors of the notes;
|
|
|
•
|
enter into certain transactions with affiliates; and
|
|
|
•
|
merge or consolidate with another person, or sell or otherwise dispose of all or substantially all of CCOH’s assets.
|
In addition, the indenture governing the Series A CCWH Subordinated Notes provides that if CCWH (i) makes an optional redemption of the Series B CCWH Subordinated Notes or purchases or makes an offer to purchase the Series B CCWH Subordinated Notes at or above 100% of the principal amount thereof, then CCWH shall apply a pro rata amount to make an optional redemption or purchase a pro rata amount of the Series A CCWH Subordinated Notes or (ii) makes an asset sale offer under the indenture governing the Series B CCWH Subordinated Notes, then CCWH shall apply a pro rata amount to make an offer to purchase a pro rata amount of Series A CCWH Subordinated Notes.
The indenture governing the Series A CCWH Subordinated Notes does not include limitations on dividends, distributions, investments or asset sales.
The indenture governing the Series B CCWH Subordinated Notes contains covenants that limit us and our restricted subsidiaries ability to, among other things:
|
|
•
|
incur or guarantee additional debt or issue certain preferred stock;
|
|
|
•
|
make certain investments;
|
|
|
•
|
create restrictions on the payment of dividends or other amounts to us from our restricted subsidiaries that are not guarantors of the notes;
|
|
|
•
|
enter into certain transactions with affiliates;
|
|
|
•
|
merge or consolidate with another person, or sell or otherwise dispose of all or substantially all of our assets;
|
|
|
•
|
sell certain assets, including capital stock of our subsidiaries;
|
|
|
•
|
designate our subsidiaries as unrestricted subsidiaries; and
|
|
|
•
|
pay dividends, redeem or repurchase capital stock or make other restricted payments.
|
The Series A CCWH Subordinated Notes indenture and Series B CCWH Subordinated Notes indenture restrict CCOH’s ability to incur additional indebtedness but permit us to incur additional indebtedness based on an incurrence test. In order to incur additional indebtedness under this test, our debt to adjusted EBITDA ratios (as defined by the indentures) must be lower than 7.0:1. The indentures contain certain other exceptions that allow us to incur additional indebtedness. The Series B CCWH Subordinated Notes indenture also permits us to pay dividends from the proceeds of indebtedness or the proceeds from asset sales if its debt to adjusted EBITDA ratios (as defined by the indentures) is lower than 7.0:1. The Series A CCWH Senior Subordinated Notes indenture does not limit our ability to pay dividends. Because our consolidated leverage ratio exceeded the limit in the incurrence tests described above, we are not currently permitted to incur additional indebtedness using the incurrence test in the Series A CCWH Subordinated Notes indenture and the Series B CCWH Subordinated Notes indenture, and we are not currently permitted to pay dividends from the proceeds of indebtedness or the excess proceeds from asset sales under the Series B CCWH Subordinated Notes indenture. There are other exceptions in these indentures that allow us to incur additional indebtedness and pay dividends. The exceptions in the Series B CCWH Subordinated Notes indenture that allow us to pay dividends include (i) $525.0 million of dividends made pursuant to general restricted payment baskets and (ii) dividends made using proceeds received upon a demand by us of amounts outstanding under the revolving promissory note issued by iHeartCommunications to us.
CCIBV Senior Notes
As of December 31,
2016
, Clear Channel International B.V., an international subsidiary of ours, had
$225.0 million
aggregate principal amount outstanding of its 8.75% Senior Notes due 2020 (“CCIBV Senior Notes”).
The CCIBV Senior Notes mature on December 15, 2020 and bear interest at a rate of 8.75% per annum, payable semi-annually in arrears on June 15 and December 15 of each year. The CCIBV Senior Notes are guaranteed by certain of our International outdoor business’s existing and future subsidiaries. The Company does not guarantee or otherwise assume any liability for the CCIBV Senior Notes. The notes are senior unsecured obligations that rank pari passu in right of payment to all unsubordinated indebtedness of Clear Channel International B.V., and the guarantees of the notes are senior unsecured obligations that rank pari passu in right of payment to all unsubordinated indebtedness of the guarantors of the notes.
Clear Channel International B.V. may redeem the notes at its option, in whole or part, at any time prior to December 15, 2017, at a price equal to 100% of the principal amount of the notes redeemed, plus a make-whole premium, plus accrued and unpaid interest to the redemption date. Clear Channel International B.V. may redeem the notes, in whole or in part, on or after
December 15, 2017, at the redemption prices set forth in the indenture plus accrued and unpaid interest to the redemption date. At any time on or before December 15, 2017, Clear Channel International B.V. may elect to redeem up to 40% of the aggregate principal amount of the notes at a redemption price equal to 108.75% of the principal amount thereof, plus accrued and unpaid interest to the redemption date, with the net proceeds of one or more equity offerings.
The indenture governing the CCIBV Senior Notes contains covenants that limit Clear Channel International B.V.’s ability and the ability of its restricted subsidiaries to, among other things: (i) pay dividends, redeem stock or make other distributions or investments; (ii) incur additional debt or issue certain preferred stock; (iii) transfer or sell assets; (iv) create liens on assets; (v) engage in certain transactions with affiliates; (vi) create restrictions on dividends or other payments by the restricted subsidiaries; and (vii) merge, consolidate or sell substantially all of Clear Channel International B.V.’s assets.
Senior Revolving Credit Facility Due 2018
During the third quarter of 2013, we entered into a five-year senior secured revolving credit facility with an aggregate principal amount of $75.0 million. The revolving credit facility may be used for working capital needs, to issue letters of credit and for other general corporate purposes. As of December 31,
2016
, there were no amounts outstanding under the revolving credit facility, and $65.4 million of letters of credit under the revolving credit facility which reduce availability under the facility. The revolving credit facility contains a springing covenant that requires us to maintain a secured leverage ratio (as defined in the revolving credit facility) of not more than 1.5:1 that is tested at the end of a quarter if availability under the facility is less than 75% of the aggregate commitments under the facility. We were in compliance with the secured leverage ratio covenant as of December 31,
2016
.
Other Debt
Other debt consists primarily of loans with international banks. As of December 31,
2016
, approximately
$14.8 million
was outstanding as other debt.
iHeartCommunications’ Debt Covenants
The iHeartCommunications’ senior secured credit facility contains a significant financial covenant which requires iHeartCommunications to comply on a quarterly basis with a financial covenant limiting the ratio of its consolidated secured debt, net of cash and cash equivalents, to consolidated EBITDA for the preceding four quarters (maximum of 8.75:1). In its Annual Report on Form 10-K filed with the SEC on
February 23, 2017
, iHeartCommunications stated that it was in compliance with this covenant as of December 31,
2016
.
Dispositions and Other
In the first quarter of 2016, Americas outdoor sold nine non-strategic outdoor markets including Cleveland and Columbus, Ohio, Des Moines, Iowa, Ft. Smith, Arkansas, Memphis, Tennessee, Portland, Oregon, Reno, Nevada, Seattle, Washington and Wichita, Kansas for net proceeds of $
592.3 million
in cash and certain advertising assets in Florida. We recognized a net gain of
$278.3 million
related to the sale, which is included within Other operating income (expense), net.
In the second quarter of 2016, International outdoor sold its business in Turkey. As a result, we recognized a net loss of
$56.6 million
, which includes
$32.2 million
in cumulative translation adjustments that were recognized upon sale of the subsidiaries in Turkey.
In the fourth quarter 2016, International outdoor sold its business in Australia for cash proceeds of
$195.7 million
. As a result, we recognized a net gain of
$127.6 million
, which is net of
$14.6 million
in cumulative translation adjustments that were recognized upon the sale of our business in Australia.
During 2014, we sold our 50% interest in Buspak, recognizing a gain on the sale of $4.5 million.
Uses of Capital
Capital Expenditures
Our capital expenditures for the years ended December 31,
2016
,
2015
and
2014
were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
(In millions)
|
Years Ended December 31,
|
|
2016
|
|
2015
|
|
2014
|
Americas advertising
|
$
|
81.4
|
|
|
$
|
82.2
|
|
|
$
|
109.7
|
|
International advertising
|
143.8
|
|
|
132.6
|
|
|
117.5
|
|
Corporate
|
4.6
|
|
|
3.5
|
|
|
4.0
|
|
Total capital expenditures
|
$
|
229.8
|
|
|
$
|
218.3
|
|
|
$
|
231.2
|
|
Our capital expenditures are not of significant size individually and primarily relate to the ongoing deployment of digital displays and improvements to traditional displays in our Americas segment as well as new billboard and street furniture contracts and renewals of existing contracts in our International segment.
See the Contractual Obligations table under “Commitments and Contingencies” and Note 5 to our Consolidated Financial Statements located in Item 8 of Part II of this Annual Report on Form 10-K for the Company's future capital expenditure commitments.
Part of our long-term strategy is to pursue the technology of digital displays, including flat screens, LCDs and LEDs, as alternatives to traditional methods of displaying our clients’ advertisements. We are currently installing these technologies in certain markets. We believe cash flow from operations will be sufficient to fund these expenditures because we expect enhanced margins through: (i) lower cost of production as the advertisements will be digital and controlled by a central computer network, (ii) decreased down time on displays because the advertisements will be digitally changed rather than manually posted paper or vinyl on the face of the display, and (iii) incremental revenue through more targeted and time specific advertisements.
Commitments, Contingencies and Guarantees
We are currently involved in certain legal proceedings arising in the ordinary course of business and, as required, have accrued our estimate of the probable costs for resolution of those claims for which the occurrence of loss is probable and the amount can be reasonably estimated. These estimates have been developed in consultation with counsel and are based upon an analysis of potential results, assuming a combination of litigation and settlement strategies. It is possible, however, that future results of operations for any particular period could be materially affected by changes in our assumptions or the effectiveness of our strategies related to these proceedings. Please see Item 3. Legal Proceedings within Part I of this Annual Report on Form 10-K.
Our short and long term cash requirements include minimum annual guarantees for our street furniture contracts and operating leases. Noncancelable contracts and operating lease requirements are included in our direct operating expenses, which historically have been satisfied by cash flows from operations. For
2017
, we are committed to $137.4 million and
$335.6
million for minimum annual guarantees and operating leases, respectively. Our long-term commitments for minimum annual guarantees, operating leases and capital expenditure requirements are included in the table below.
Certain agreements relating to acquisitions provide for purchase price adjustments and other future contingent payments based on the financial performance of the acquired companies generally over a one to five year period. The aggregate of these contingent payments, if performance targets are met, would not significantly impact our financial position or results of operations.
In addition to the scheduled maturities on debt issued by CCWH and CCIBV, we have future cash obligations under various types of contracts. We lease office space, certain equipment and the majority of the land occupied by our advertising structures under long-term operating leases. Some of our lease agreements contain renewal options and annual rental escalation clauses (generally tied to the consumer price index), as well as provisions for our payment of utilities and maintenance.
We have minimum franchise payments associated with non-cancelable contracts that enable us to display advertising on such media as buses, trains, bus shelters and terminals. The majority of these contracts contain rent provisions that are calculated as the greater of a percentage of the relevant advertising revenue or a specified guaranteed minimum annual payment.
The scheduled maturities of the CCWH Senior Notes, CCWH Subordinated Notes, CCIBV Senior Notes and other debt outstanding, and our future minimum rental commitments under non-cancelable lease agreements, minimum payments under other non-cancelable contracts, capital expenditure commitments and other long-term obligations as of December 31,
2016
, are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(In thousands)
|
Payments due by Period
|
Contractual Obligations
|
Total
|
|
2017
|
|
2018-2019
|
|
2020-2021
|
|
Thereafter
|
Long-term Debt:
|
|
|
|
|
|
|
|
|
|
CCWH Senior Notes
|
$
|
2,725,000
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
2,725,000
|
|
CCWH Senior Subordinated Notes
|
2,200,000
|
|
|
—
|
|
|
—
|
|
|
2,200,000
|
|
|
—
|
|
CCIBV Senior Notes
|
225,000
|
|
|
—
|
|
|
—
|
|
|
225,000
|
|
|
—
|
|
Other Long-term Debt
|
14,798
|
|
|
6,972
|
|
|
928
|
|
|
644
|
|
|
6,254
|
|
Interest payments on long-term debt
(1)
|
1,658
|
|
|
368
|
|
|
732
|
|
|
460
|
|
|
98
|
|
Non-cancelable operating leases
|
2,556,307
|
|
|
335,574
|
|
|
554,757
|
|
|
454,936
|
|
|
1,211,040
|
|
Non-cancelable contracts
|
1,745,506
|
|
|
363,137
|
|
|
555,692
|
|
|
415,443
|
|
|
411,234
|
|
Employment contracts
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Capital expenditures
|
77,716
|
|
|
49,618
|
|
|
11,797
|
|
|
4,059
|
|
|
12,242
|
|
Unrecognized tax benefits
(2)
|
23,772
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
23,772
|
|
Other long-term obligations
(3)
|
235,539
|
|
|
(1,109
|
)
|
|
10,864
|
|
|
19,880
|
|
|
205,904
|
|
Total
|
$
|
11,172,278
|
|
|
$
|
1,084,723
|
|
|
$
|
1,737,431
|
|
|
$
|
3,742,285
|
|
|
$
|
4,607,839
|
|
|
|
(1)
|
Interest payments on long-term debt consist primarily of interest on the CCWH Senior Notes, the CCWH Senior Subordinated Notes and the CCIBV Senior Notes.
|
|
|
(2)
|
The non-current portion of the unrecognized tax benefits is included in the “Thereafter” column as we cannot reasonably estimate the timing or amounts of additional cash payments, if any, at this time. For additional information, see Note 7 included in Item 8 of Part II of this Annual Report on Form 10-K.
|
|
|
(3)
|
Other long-term obligations consist of $39.5 million related to asset retirement obligations recorded pursuant to ASC 410-20, which assumes the underlying assets will be removed at some period over the next 55 years. Also included in the table is $55.5 million related to retirement plans and $140.7 million related to other long-term obligations with a specific maturity.
|
SEASONALITY
Typically, both our Americas and International segments experience their lowest financial performance in the first quarter of the calendar year, with International historically experiencing a loss from operations in that period. Our International segment typically experiences its strongest performance in the second and fourth quarters of the calendar year. We expect this trend to continue in the future.
MARKET RISK
We are exposed to market risks arising from changes in market rates and prices, including movements in equity security prices, foreign currency exchange rates and inflation.
Foreign Currency Exchange Rate Risk
We have operations in countries throughout the world. Foreign operations are measured in their local currencies. As a result, our financial results could be affected by factors such as changes in foreign currency exchange rates or weak economic conditions in the foreign markets in which we have operations. We believe we mitigate a small portion of our exposure to foreign currency fluctuations with a natural hedge through borrowings in currencies other than the U.S. dollar. Our foreign operations reported net income of $121.1 million for year ended December 31,
2016
. We estimate a 10% increase in the value o
f the U.S. dollar relative to foreign currencies would have decreased our net income for the year ended December 31,
2016
by
$12.1 million. A 10% decrease in the value of the U.S. dollar relative to foreign currencies would have increased our net income for the year ended December 31,
2016
by a corresponding amount.
This analysis does not consider the implications that such currency fluctuations could have on the overall economic activity that could exist in such an environment in the U.S. or the foreign countries or on the results of operations of these foreign entities.
Inflation
Inflation is a factor in the economies in which we do business and we continue to seek ways to mitigate its effect. Inflation has affected our performance in terms of higher costs for wages, salaries and equipment. Although the exact impact of inflation is indeterminable, we believe we have offset these higher costs by increasing the effective advertising rates of most of our outdoor display faces.
NEW ACCOUNTING PRONOUNCEMENTS
During the second quarter of 2014, the FASB issued ASU No. 2014-15,
Presentation of Financial Statements - Going Concern (Subtopic 205-40): Disclosure of Uncertainties about an Entity's Ability to Continue as a Going Concern.
This update provides U.S. GAAP guidance on management’s responsibility in evaluating whether there is substantial doubt about a company’s ability to continue as a going concern and about related footnote disclosures. For each reporting period, the Company will be required to evaluate whether there are conditions or events that raise substantial doubt about a company’s ability to continue as a going concern within one year from the date the financial statements are issued. The amendments in this update are effective for annual periods ending after December 15, 2016, and for interim periods thereafter. Early application is permitted. The adoption of this guidance did not have a material effect on the Company’s consolidated financial statements.
During the third quarter of 2015, the FASB issued ASU 2015-14,
Revenue from Contracts with Customers (Topic 606): Deferral of the Effective Date
. This update provides a one-year deferral of the effective date for ASU No. 2014-09,
Revenue from Contracts with Customers
. ASU No. 2014-09 provides guidance for the recognition, measurement and disclosure of revenue resulting from contracts with customers and will supersede virtually all of the current revenue recognition guidance under U.S. GAAP. The standard is effective for the first interim period within annual reporting periods beginning after December 15, 2017. The two permitted transition methods under the new standard are the full retrospective method, in which case the standard would be applied to each prior reporting period presented and the cumulative effect of applying the standard would be recognized at the earliest period shown, or the modified retrospective method, in which case the cumulative effect of applying the standard would be recognized at the date of initial application. The Company expects to utilize the full retrospective method. The Company has substantially completed its evaluation of the potential changes from adopting the new standard on its future financial reporting and disclosures which included reviews of contractual terms for all of the Company’s significant revenue streams and the development of an implementation plan. The Company continues to execute on its implementation plan, including detailed policy drafting and training of segment personnel. Based on its evaluation, the Company does not expect material changes to its 2016 or 2017 consolidated revenues, operating income or balance sheets as a result of the implementation of this standard.
During the first quarter of 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842). The new leasing standard presents significant changes to the balance sheets of lessees. Lessor accounting is updated to align with certain changes in the lessee model and the new revenue recognition standard which was issued in the third quarter of 2015. The standard is effective for annual periods, and for interim periods within those annual periods, beginning after December 15, 2018. The Company is currently evaluating the impact of the provisions of this new standard on its consolidated financial statements.
During the second quarter of 2016, the FASB issued ASU No. 2016-09, Compensation - Stock Compensation (Topic 718). This update changes the accounting for certain aspects of share-based payments to employees. Income tax effects of share-based payment awards will be recognized in the income statement with the vesting or settlement of the awards and the record keeping for additional paid-in capital pools will no longer be necessary. Additionally, companies can make a policy election to either estimate forfeitures or recognize them as they occur. The standard is effective for annual periods, and for interim periods within those annual periods, beginning after December 15, 2016. The Company does not expect the provisions of this new standard to have a material impact on its consolidated financial statements.
During the second quarter of 2016, the FASB issued ASU No. 2016-13, Financial Instruments - Credit Losses (Topic 326). The new standard changes the impairment model for most financial assets and certain other instruments. Entities will be required to use a model that will result in the earlier recognition of allowances for losses for trade and other receivables, held-to-maturity debt securities, loans and other instruments. For available-for-sale debt securities with unrealized losses, the losses will be recognized as allowances rather than as reductions in the amortized cost of the securities. For an SEC filer, the standard is effective for annual periods, and for interim periods within those annual 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 2016, the FASB issued ASU No. 2016-15, Statement of Cash Flows (Topic 230). The new standard addresses the classification of cash flows related to certain cash receipts and cash payments. Additionally, the standard clarifies how the predominance principle should be used when cash receipts and cash payments have aspects of more than one class of cash flows. First, an entity will apply the guidance in Topic 230 and other applicable topics. If there is no guidance for those cash receipts and cash payments, an entity will determine each separately identifiable source or use and classify the receipt or payment based on the nature of the cash flow. If a receipt or payment has aspects of more than one class of cash flows and
cannot be separated, the classification will depend on the predominant source or use. The standard is effective for annual periods, and for interim periods within those annual periods, beginning after December 15, 2017. The Company is currently evaluating the impact of the provisions of this new standard on its consolidated financial statements.
CRITICAL ACCOUNTING ESTIMATES
The preparation of our financial statements in conformity with U.S. GAAP requires management to make estimates, judgments and assumptions that affect the reported amounts of assets and liabilities, and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amount of expenses during the reporting period. On an ongoing basis, we evaluate our estimates that are based on historical experience and on various other assumptions that are believed to be reasonable under the circumstances. The result of these evaluations forms the basis for making judgments about the carrying values of assets and liabilities and the reported amount of expenses that are not readily apparent from other sources. Because future events and their effects cannot be determined with certainty, actual results could differ from our assumptions and estimates, and such difference could be material. Our significant accounting policies are discussed in the notes to our consolidated financial statements included in Item 8 of Part II of this Annual Report on Form 10-K. Management believes that the following accounting estimates are the most critical to aid in fully understanding and evaluating our reported financial results, and they require management’s most difficult, subjective or complex judgments, resulting from the need to make estimates about the effect of matters that are inherently uncertain. The following narrative describes these critical accounting estimates, the judgments and assumptions and the effect if actual results differ from these assumptions.
Allowance for Doubtful Accounts
We evaluate the collectability of our accounts receivable based on a combination of factors. In circumstances where we are aware of a specific customer’s inability to meet its financial obligations, we record a specific reserve to reduce the amounts recorded to what we believe will be collected. For all other customers, we recognize reserves for bad debt based on historical experience for each business unit, adjusted for relative improvements or deteriorations in the agings and changes in current economic conditions.
If our agings were to improve or deteriorate resulting in a 10% change in our allowance, we estimated that our bad debt expense for the year ended December 31,
2016
would have changed by approximately $2.2 million.
Leases
The most significant estimates used by management in accounting for leases and the impact of these estimates are as follows:
Expected lease term
Our expected lease term includes both contractual lease periods and cancelable option periods where failure to exercise such options would result in an economic penalty. The expected lease term is used in determining whether the lease is accounted for as an operating lease or a capital lease. A lease is considered a capital lease if the lease term exceeds 75% of the leased asset's useful life. The expected lease term is also used in determining the depreciable life of the asset. An increase in the expected lease term will increase the probability that a lease may be considered a capital lease and will generally result in higher interest and depreciation expense for a leased property recorded on our balance sheet.
Incremental borrowing rate
The incremental borrowing rate is primarily used in determining whether the lease is accounted for as an operating lease or a capital lease. A lease is considered a capital lease if the net present value of the minimum lease payments is greater than 90% of the fair market value of the property. An increase in the incremental borrowing rate decreases the net present value of the minimum lease payments and reduces the probability that a lease will be considered a capital lease.
Fair market value of leased asset
The fair market value of leased property is generally estimated based on comparable market data as provided by third-party sources. Fair market value is used in determining whether the lease is accounted for as an operating lease or a capital lease. A lease is considered a capital lease if the net present value of the minimum lease payments equals or exceeds 90% of the fair market value of the leased property. A higher fair market value reduces the likelihood that a lease will be considered a capital lease.
Long-lived Assets
Long-lived assets, including structures and other property, plant and equipment and definite-lived intangibles, are reported at historical cost less accumulated depreciation and amortization. We estimate the useful lives for various types of advertising structures and other long-lived assets based on our historical experience and our plans regarding how we intend to use those assets. Advertising structures have different lives depending on their nature, with large format bulletins generally having longer depreciable lives and posters and other displays having shorter depreciable lives. Street furniture and transit displays are depreciated over their estimated useful lives or appropriate contractual periods, whichever is shorter. Our experience indicates that the estimated useful
lives applied to our portfolio of assets have been reasonable, and we do not expect significant changes to the estimated useful lives of our long-lived assets in the future. When we determine that structures or other long-lived assets will be disposed of prior to the end of their useful lives, we estimate the revised useful lives and depreciate the assets over the revised period. We also review long-lived assets for impairment when events and circumstances indicate that depreciable and amortizable long-lived assets might be impaired and the undiscounted cash flows estimated to be generated by those assets are less than the carrying amounts of those assets. When specific assets are determined to be unrecoverable, the cost basis of the asset is reduced to reflect the current fair market value.
We use various assumptions in determining the remaining useful lives of assets to be disposed of prior to the end of their useful lives and in determining the current fair market value of long-lived assets that are determined to be unrecoverable. Estimated useful lives and fair values are sensitive to factors including contractual commitments, regulatory requirements, future expected cash flows, industry growth rates and discount rates, as well as future salvage values. Our impairment loss calculations require management to apply judgment in estimating future cash flows, including forecasting useful lives of the assets and selecting the discount rate that reflects the risk inherent in future cash flows.
If actual results are not consistent with our assumptions and judgments used in estimating future cash flows and asset fair values, we may be exposed to future impairment losses that could be material to our results of operations.
Annual Impairment Test
The Company performs its annual impairment test on indefinite-lived intangible assets and goodwill as of July 1 of each year.
Indefinite-lived Intangible Assets
Indefinite-lived intangible assets, such as our billboard permits, are reviewed annually for possible impairment using the direct valuation method as prescribed in ASC 805-20-S99. Under the direct valuation method, the estimated fair value of the indefinite-lived intangible assets was calculated at the market level as prescribed by ASC 350-30-35. Under the direct valuation method, it is assumed that rather than acquiring indefinite-lived intangible assets as a part of a going concern business, the buyer hypothetically obtains 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 flows model which results in value that is directly attributable to the indefinite-lived intangible assets.
Our 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 asset within a market.
On July 1,
2016
, we performed our annual impairment test in accordance with ASC 350-30-35, resulting in no impairment charge
In determining the fair value of our billboard permits, the following key assumptions were used:
•
Industry revenue growth forecast at 3.0% was used for the initial four-year period;
•
3.0% revenue growth was assumed beyond the initial four-year period;
•
Revenue was grown over a build-up period, reaching maturity by year 2;
•
Operating margins gradually climb to the industry average margin of up to 56.1%, depending on market size, by year 3; and
•
Assumed discount rate of 7.5%.
While we believe we have made reasonable estimates and utilized appropriate assumptions to calculate the fair value of our indefinite-lived intangible assets, it is possible a material change could occur. If future results are not consistent with our assumptions and estimates, we may be exposed to impairment charges in the future. The following table shows the decline in the fair value of our indefinite-lived intangible assets that would result from a 100 basis point decline in our discrete and terminal period revenue growth rate and profit margin assumptions, and a 100 basis point increase in our discount rate assumption:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(In thousands)
|
|
|
|
|
|
|
Description
|
|
Revenue growth rate
|
|
Profit margin
|
|
Discount rate
|
Billboard permits
|
|
$
|
1,138,600
|
|
|
$
|
162,800
|
|
|
$
|
1,162,700
|
|
The estimated fair value of our billboard permits at July 1,
2016
was $4.0 billion while the carrying value was $1.0 billion. The estimated fair value of our billboard permits at July 1,
2015
was $3.1 billion while the carrying value was $1.1 billion.
Goodwill
Goodwill represents the excess of the purchase price over the fair value of identifiable net assets acquired in business combinations. We test goodwill at interim dates if events or changes in circumstances indicate that goodwill might be impaired. The fair value of our reporting units is used to apply value to the net assets of each reporting unit. To the extent that the carrying amount of net assets would exceed the fair value, an impairment charge may be required to be recorded.
The discounted cash flow approach we use for valuing goodwill as part of the two-step impairment testing approach involves estimating future cash flows expected to be generated from the related assets, discounted to their present value using a risk-adjusted discount rate. Terminal values are also estimated and discounted to their present value.
On July 1,
2016
, we performed our annual impairment test in accordance with ASC 350-30-35, resulting in a goodwill impairment charge of
$7.3 million
related to one of our International outdoor markets. In determining the fair value of our reporting units, we used the following assumptions:
•
Expected cash flows underlying our business plans for the periods
2016
through
2020
. Our cash flow assumptions are based on detailed, multi-year forecasts performed by each of our operating segments, and reflect the advertising outlook across our businesses.
•
Cash flows beyond
2020
are projected to grow at a perpetual growth rate, which we estimated at 3.0%.
•
In order to risk adjust the cash flow projections in determining fair value; we utilized a discount rate of approximately 8.0% to 11.5% for each of our reporting units.
Based on our annual assessment using the assumptions described above, a hypothetical 10% reduction in the estimated fair value in each of our reporting units would not result in a material impairment condition.
While we believe we have made reasonable estimates and utilized appropriate assumptions to calculate the estimated fair value of our reporting units, it is possible a material change could occur. If future results are not consistent with our assumptions and estimates, we may be exposed to impairment charges in the future. The following table shows the decline in the fair value of each of our reportable segments that would result from a 100 basis point decline in our discrete and terminal period revenue growth rate and profit margin assumptions and a 100 basis point increase in our discount rate assumption:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(In thousands)
|
|
|
|
|
|
|
Description
|
|
Revenue growth rate
|
|
Profit margin
|
|
Discount rates
|
Americas
|
|
$
|
860,000
|
|
|
$
|
180,000
|
|
|
$
|
820,000
|
|
International
|
|
$
|
330,000
|
|
|
$
|
210,000
|
|
|
$
|
260,000
|
|
Tax Provisions
Our estimates of income taxes and the significant items giving rise to the deferred tax assets and liabilities are shown in the notes to our consolidated financial statements and reflect our assessment of actual future taxes to be paid on items reflected in the financial statements, giving consideration to both timing and probability of these estimates. Actual income taxes could vary from these estimates due to future changes in income tax law or results from the final review of our tax returns by federal, state or foreign tax authorities.
We use our judgment to determine whether it is more likely than not that our deferred tax assets will be realized. Deferred tax assets are reduced by valuation allowances if the Company believes it is more than likely than not that some portion or the entire asset will not be realized.
We use our judgment to determine whether it is more likely than not that we will sustain positions that we have taken on tax returns and, if so, the amount of benefit to initially recognize within our financial statements. We regularly review our uncertain tax positions and adjust our unrecognized tax benefits (UTBs) in light of changes in facts and circumstances, such as changes in tax law, interactions with taxing authorities and developments in case law. These adjustments to our UTBs may affect our income tax expense. Settlement of uncertain tax positions may require use of our cash.
Litigation Accruals
We are currently involved in certain legal proceedings. Based on current assumptions, we 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. Future results of operations could be materially affected by changes in these assumptions or the effectiveness of our strategies related to these proceedings.
Management’s estimates have been developed in consultation with counsel and are based upon an analysis of potential results, assuming a combination of litigation and settlement strategies.
Asset Retirement Obligations
ASC 410-20 requires us to estimate our obligation upon the termination or nonrenewal of a lease, to dismantle and remove our billboard structures from the leased land and to reclaim the site to its original condition.
Due to the high rate of lease renewals over a long period of time, our calculation assumes all related assets will be removed at some period over the next 55 years. An estimate of third-party cost information is used with respect to the dismantling of the structures and the reclamation of the site. The interest rate used to calculate the present value of such costs over the retirement period is based on an estimated risk-adjusted credit rate for the same period. If our assumption of the risk-adjusted credit rate used to discount current year additions to the asset retirement obligation decreased approximately 1%, our liability as of December 31,
2016
would not be materially impacted. Similarly, if our assumption of the risk-adjusted credit rate increased approximately 1%, our liability would not be materially impacted.
Share-Based Compensation
Under the fair value recognition provisions of ASC 718-10, share-based compensation cost is measured at the grant date based on the fair value of the award. Determining the fair value of share-based awards at the grant date requires assumptions and judgments about expected volatility and forfeiture rates, among other factors. If actual results differ significantly from these estimates, our results of operations could be materially impacted.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Required information is located within Item 7 of Part II of this Annual Report on Form 10-K.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Report of Independent Registered Public Accounting Firm
The Board of Directors and Stockholders
Clear Channel Outdoor Holdings, Inc.
We have audited the accompanying consolidated balance sheets of Clear Channel Outdoor Holdings, Inc. and subsidiaries (the Company) as of December 31,
2016
and
2015
, and the related consolidated statements of comprehensive income (loss), changes in stockholders’ equity (deficit) and cash flows for each of the three years in the period ended December 31,
2016
. Our audits also included the financial statement schedule listed in the Index at Item 15(a)2. These financial statements and schedule are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements and schedule based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Clear Channel Outdoor Holdings, Inc. and subsidiaries at December 31,
2016
and
2015
, and the consolidated results of their operations and their cash flows for each of the three years in the period ended December 31,
2016
, in conformity with U.S. generally accepted accounting principles. Also, in our opinion, the related financial statement schedule, when considered in relation to the basic financial statements taken as a whole, presents fairly in all material respects the information set forth therein.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the Company’s internal control over financial reporting as of December 31,
2016
, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework
)
and our report dated
February 23, 2017
expressed an unqualified opinion thereon.
/s/ Ernst & Young LLP
San Antonio, Texas
February 23, 2017
CONSOLIDATED BALANCE SHEETS
CLEAR CHANNEL OUTDOOR HOLDINGS, INC. AND SUBSIDIARIES
|
|
|
|
|
|
|
|
|
(In thousands)
|
December 31,
|
|
December 31,
|
|
2016
|
|
2015
|
CURRENT ASSETS
|
|
|
|
Cash and cash equivalents
|
$
|
541,995
|
|
|
$
|
412,743
|
|
Accounts receivable, net of allowance of $22,398 in 2016 and $25,348 in 2015
|
593,070
|
|
|
697,583
|
|
Prepaid expenses
|
111,569
|
|
|
127,730
|
|
Assets held for sale
|
55,602
|
|
|
295,075
|
|
Other current assets
|
39,199
|
|
|
34,566
|
|
Total Current Assets
|
1,341,435
|
|
|
1,567,697
|
|
PROPERTY, PLANT AND EQUIPMENT
|
|
|
|
Structures, net
|
1,196,676
|
|
|
1,391,880
|
|
Other property, plant and equipment, net
|
216,157
|
|
|
236,106
|
|
INTANGIBLE ASSETS AND GOODWILL
|
|
|
|
Indefinite-lived intangibles
|
960,966
|
|
|
971,327
|
|
Other intangibles, net
|
299,617
|
|
|
342,864
|
|
Goodwill
|
696,263
|
|
|
758,575
|
|
OTHER ASSETS
|
|
|
|
Due from iHeartCommunications
|
885,701
|
|
|
930,799
|
|
Other assets
|
122,013
|
|
|
107,540
|
|
Total Assets
|
$
|
5,718,828
|
|
|
$
|
6,306,788
|
|
CURRENT LIABILITIES
|
|
|
|
Accounts payable
|
$
|
86,870
|
|
|
$
|
100,210
|
|
Accrued expenses
|
480,872
|
|
|
507,665
|
|
Dividends payable
|
—
|
|
|
217,017
|
|
Deferred income
|
67,005
|
|
|
91,411
|
|
Current portion of long-term debt
|
6,971
|
|
|
4,310
|
|
Total Current Liabilities
|
641,718
|
|
|
920,613
|
|
Long-term debt
|
5,110,020
|
|
|
5,106,513
|
|
Deferred tax liability
|
640,567
|
|
|
608,910
|
|
Other long-term liabilities
|
259,311
|
|
|
240,419
|
|
STOCKHOLDERS’ DEFICIT
|
|
|
|
Noncontrolling interest
|
149,886
|
|
|
187,775
|
|
Preferred stock, $.01 par value, 150,000,000 shares authorized, no shares issued and outstanding
|
—
|
|
|
—
|
|
Class A common stock, par value $.01 per share, authorized 750,000,000 shares, issued 47,947,123 and 46,661,114 shares in 2016 and 2015, respectively
|
479
|
|
|
467
|
|
Class B common stock, $.01 par value, 600,000,000 shares authorized, 315,000,000 shares issued and outstanding
|
3,150
|
|
|
3,150
|
|
Additional paid-in capital
|
3,431,667
|
|
|
3,961,515
|
|
Accumulated deficit
|
(4,127,206
|
)
|
|
(4,268,637
|
)
|
Accumulated other comprehensive loss
|
(386,658
|
)
|
|
(451,833
|
)
|
Cost of shares (633,851 in 2016 and 233,868 in 2015) held in treasury
|
(4,106
|
)
|
|
(2,104
|
)
|
Total Stockholders’ Deficit
|
(932,788
|
)
|
|
(569,667
|
)
|
Total Liabilities and Stockholders’ Deficit
|
$
|
5,718,828
|
|
|
$
|
6,306,788
|
|
See Notes to Consolidated Financial Statements
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
CLEAR CHANNEL OUTDOOR HOLDINGS, INC. AND SUBSIDIARIES
|
|
|
|
|
|
|
|
|
|
|
|
|
(In thousands, except per share data)
|
Years Ended December 31,
|
|
2016
|
|
2015
|
|
2014
|
Revenue
|
$
|
2,702,395
|
|
|
$
|
2,806,204
|
|
|
$
|
2,961,259
|
|
Operating expenses:
|
|
|
|
|
|
Direct operating expenses (excludes depreciation and amortization)
|
1,435,569
|
|
|
1,494,902
|
|
|
1,596,888
|
|
Selling, general and administrative expenses (excludes depreciation and amortization)
|
515,202
|
|
|
531,504
|
|
|
548,519
|
|
Corporate expenses (excludes depreciation and amortization)
|
117,383
|
|
|
116,380
|
|
|
130,894
|
|
Depreciation and amortization
|
344,124
|
|
|
375,962
|
|
|
406,243
|
|
Impairment charges
|
7,274
|
|
|
21,631
|
|
|
3,530
|
|
Other operating income (expense), net
|
354,688
|
|
|
(4,824
|
)
|
|
7,259
|
|
Operating income
|
637,531
|
|
|
261,001
|
|
|
282,444
|
|
Interest expense
|
374,892
|
|
|
355,669
|
|
|
353,265
|
|
Interest income on Due from iHeartCommunications
|
50,309
|
|
|
61,439
|
|
|
60,179
|
|
Equity in earnings (loss) of nonconsolidated affiliates
|
(1,689
|
)
|
|
(289
|
)
|
|
3,789
|
|
Other income (expense), net
|
(70,151
|
)
|
|
12,387
|
|
|
15,185
|
|
Income (loss) before income taxes
|
241,108
|
|
|
(21,131
|
)
|
|
8,332
|
|
Income tax benefit (expense)
|
(76,675
|
)
|
|
(50,177
|
)
|
|
8,787
|
|
Consolidated net income (loss)
|
164,433
|
|
|
(71,308
|
)
|
|
17,119
|
|
Less amount attributable to noncontrolling interest
|
23,002
|
|
|
24,764
|
|
|
26,709
|
|
Net income (loss) attributable to the Company
|
$
|
141,431
|
|
|
$
|
(96,072
|
)
|
|
$
|
(9,590
|
)
|
Other comprehensive income (loss), net of tax:
|
|
|
|
|
|
Foreign currency translation adjustments
|
22,408
|
|
|
(112,729
|
)
|
|
(123,104
|
)
|
Unrealized holding gain (loss) on marketable securities
|
(576
|
)
|
|
553
|
|
|
327
|
|
Other adjustments to comprehensive income (loss)
|
(11,814
|
)
|
|
(10,266
|
)
|
|
(11,438
|
)
|
Reclassification adjustments
|
46,730
|
|
|
808
|
|
|
8
|
|
Other comprehensive income (loss)
|
56,748
|
|
|
(121,634
|
)
|
|
(134,207
|
)
|
Comprehensive income (loss)
|
198,179
|
|
|
(217,706
|
)
|
|
(143,797
|
)
|
Less amount attributable to noncontrolling interest
|
(8,427
|
)
|
|
(11,154
|
)
|
|
(6,426
|
)
|
Comprehensive income (loss) attributable to the Company
|
$
|
206,606
|
|
|
$
|
(206,552
|
)
|
|
$
|
(137,371
|
)
|
Net income (loss) attributable to the Company per common share:
|
|
|
|
|
|
Basic
|
$
|
0.39
|
|
|
$
|
(0.27
|
)
|
|
$
|
(0.03
|
)
|
Weighted average common shares outstanding – Basic
|
360,294
|
|
|
359,508
|
|
|
358,565
|
|
Diluted
|
$
|
0.39
|
|
|
$
|
(0.27
|
)
|
|
$
|
(0.03
|
)
|
Weighted average common shares outstanding – Diluted
|
361,612
|
|
|
359,508
|
|
|
358,565
|
|
See Notes to Consolidated Financial Statements
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’
EQUITY (DEFICIT) OF
CLEAR CHANNEL OUTDOOR HOLDINGS, INC. AND SUBSIDIARIES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(In thousands, except share data)
|
|
|
|
|
|
Controlling Interest
|
|
|
|
Class A
Common
Shares
Issued
|
|
Class B Common Shares
Issued
|
|
Non-controlling
Interest
|
|
Common
Stock
|
|
Additional Paid-in
Capital
|
|
Accumulated
Deficit
|
|
Accumulated Other Comprehensive
Loss
|
|
Treasury Stock
|
|
Total
|
Balances at
December 31, 2013
|
44,117,843
|
|
|
315,000,000
|
|
|
$
|
202,046
|
|
|
$
|
3,591
|
|
|
$
|
4,332,045
|
|
|
$
|
(4,162,975
|
)
|
|
$
|
(213,572
|
)
|
|
$
|
(1,027
|
)
|
|
$
|
160,108
|
|
Net income (loss)
|
—
|
|
|
—
|
|
|
26,709
|
|
|
—
|
|
|
—
|
|
|
(9,590
|
)
|
|
—
|
|
|
—
|
|
|
17,119
|
|
Exercise of stock options and other
|
1,113,439
|
|
|
—
|
|
|
—
|
|
|
11
|
|
|
2,390
|
|
|
—
|
|
|
—
|
|
|
(165
|
)
|
|
2,236
|
|
Share-based payments
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
7,743
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
7,743
|
|
Dividends and other payments to noncontrolling interests
|
—
|
|
|
—
|
|
|
(18,995
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(18,995
|
)
|
Dividends declared and paid ($0.4865/share)
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(175,022
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(175,022
|
)
|
Other
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
77
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
77
|
|
Other comprehensive loss
|
—
|
|
|
—
|
|
|
(6,426
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(127,781
|
)
|
|
—
|
|
|
(134,207
|
)
|
Balances at
December 31, 2014
|
45,231,282
|
|
|
315,000,000
|
|
|
$
|
203,334
|
|
|
$
|
3,602
|
|
|
$
|
4,167,233
|
|
|
$
|
(4,172,565
|
)
|
|
$
|
(341,353
|
)
|
|
$
|
(1,192
|
)
|
|
$
|
(140,941
|
)
|
Net income (loss)
|
—
|
|
|
—
|
|
|
24,764
|
|
|
—
|
|
|
—
|
|
|
(96,072
|
)
|
|
—
|
|
|
—
|
|
|
(71,308
|
)
|
Exercise of stock options and other
|
1,429,832
|
|
|
—
|
|
|
—
|
|
|
15
|
|
|
3,783
|
|
|
—
|
|
|
—
|
|
|
(912
|
)
|
|
2,886
|
|
Share-based payments
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
8,359
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
8,359
|
|
Dividends and other payments to noncontrolling interests
|
—
|
|
|
—
|
|
|
(30,870
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(30,870
|
)
|
Dividends declared ($0.6026/share)
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(217,796
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(217,796
|
)
|
Other
|
—
|
|
|
—
|
|
|
1,701
|
|
|
—
|
|
|
(64
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1,637
|
|
Other comprehensive loss
|
—
|
|
|
—
|
|
|
(11,154
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(110,480
|
)
|
|
—
|
|
|
(121,634
|
)
|
Balances at
December 31, 2015
|
46,661,114
|
|
|
315,000,000
|
|
|
$
|
187,775
|
|
|
$
|
3,617
|
|
|
$
|
3,961,515
|
|
|
$
|
(4,268,637
|
)
|
|
$
|
(451,833
|
)
|
|
$
|
(2,104
|
)
|
|
$
|
(569,667
|
)
|
Net income (loss)
|
—
|
|
|
—
|
|
|
23,002
|
|
|
—
|
|
|
—
|
|
|
141,431
|
|
|
—
|
|
|
—
|
|
|
164,433
|
|
Exercise of stock options and other
|
1,286,009
|
|
|
—
|
|
|
—
|
|
|
12
|
|
|
624
|
|
|
—
|
|
|
—
|
|
|
(2,002
|
)
|
|
(1,366
|
)
|
Share-based payments
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
10,238
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
10,238
|
|
Disposal of noncontrolling interest
|
—
|
|
|
—
|
|
|
(36,846
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(36,846
|
)
|
Dividends and other payments to noncontrolling interests
|
—
|
|
|
—
|
|
|
(16,917
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(16,917
|
)
|
Dividends declared and paid ($1.4937/share)
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(540,034
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(540,034
|
)
|
Other
|
—
|
|
|
—
|
|
|
1,299
|
|
|
—
|
|
|
(676
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
623
|
|
Other comprehensive loss
|
—
|
|
|
—
|
|
|
(8,427
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
65,175
|
|
|
—
|
|
|
56,748
|
|
Balances at
December 31, 2016
|
47,947,123
|
|
|
315,000,000
|
|
|
$
|
149,886
|
|
|
$
|
3,629
|
|
|
$
|
3,431,667
|
|
|
$
|
(4,127,206
|
)
|
|
$
|
(386,658
|
)
|
|
$
|
(4,106
|
)
|
|
$
|
(932,788
|
)
|
See Notes to Consolidated Financial Statements
CONSOLIDATED STATEMENTS OF CASH FLOWS OF
CLEAR CHANNEL OUTDOOR HOLDINGS, INC. AND SUBSIDIARIES
|
|
|
|
|
|
|
|
|
|
|
|
|
(In thousands)
|
Years Ended December 31,
|
|
2016
|
|
2015
|
|
2014
|
Cash flows from operating activities:
|
|
|
|
|
|
Consolidated net income (loss)
|
$
|
164,433
|
|
|
$
|
(71,308
|
)
|
|
$
|
17,119
|
|
Reconciling items:
|
|
|
|
|
|
Impairment charges
|
7,274
|
|
|
21,631
|
|
|
3,530
|
|
Depreciation and amortization
|
344,124
|
|
|
375,962
|
|
|
406,243
|
|
Deferred taxes
|
31,333
|
|
|
3,539
|
|
|
(33,569
|
)
|
Provision for doubtful accounts
|
10,659
|
|
|
13,384
|
|
|
7,150
|
|
Amortization of deferred financing charges and note discounts, net
|
10,572
|
|
|
8,770
|
|
|
8,660
|
|
Share-based compensation
|
10,238
|
|
|
8,359
|
|
|
7,743
|
|
Gain on disposal of operating and other assets
|
(363,485
|
)
|
|
(5,468
|
)
|
|
(7,801
|
)
|
Equity in (earnings) loss of nonconsolidated affiliates
|
1,689
|
|
|
289
|
|
|
(3,789
|
)
|
Other reconciling items, net
|
68,933
|
|
|
(13,440
|
)
|
|
(14,461
|
)
|
Changes in operating assets and liabilities, net of effects of acquisitions and dispositions:
|
|
|
|
|
|
(Increase) decrease in accounts receivable
|
30,308
|
|
|
(56,580
|
)
|
|
(38,618
|
)
|
(Increase) decrease in prepaid expenses and other current assets
|
(15,578
|
)
|
|
(1,728
|
)
|
|
5,982
|
|
Increase in accrued expenses
|
25,518
|
|
|
4,565
|
|
|
18,312
|
|
Increase (decrease) in accounts payable
|
(3,797
|
)
|
|
30,642
|
|
|
(4,460
|
)
|
Increase (decrease) in accrued interest
|
194
|
|
|
(4,072
|
)
|
|
811
|
|
Increase (decrease) in deferred income
|
(18,119
|
)
|
|
2,549
|
|
|
(5,370
|
)
|
Changes in other operating assets and liabilities
|
5,997
|
|
|
(18,161
|
)
|
|
(19,059
|
)
|
Net cash provided by operating activities
|
310,293
|
|
|
298,933
|
|
|
348,423
|
|
Cash flows from investing activities:
|
|
|
|
|
|
Purchases of property, plant and equipment
|
(229,772
|
)
|
|
(218,332
|
)
|
|
(231,169
|
)
|
Proceeds from disposal of assets
|
808,194
|
|
|
11,264
|
|
|
12,861
|
|
Purchases of other operating assets
|
(2,244
|
)
|
|
(23,640
|
)
|
|
(912
|
)
|
Proceeds from sale of investment securities
|
781
|
|
|
—
|
|
|
15,834
|
|
Purchases of businesses
|
—
|
|
|
(24,701
|
)
|
|
339
|
|
Change in other, net
|
(25,460
|
)
|
|
(2,316
|
)
|
|
(3,384
|
)
|
Net cash provided by (used for) investing activities
|
551,499
|
|
|
(257,725
|
)
|
|
(206,431
|
)
|
Cash flows from financing activities:
|
|
|
|
|
|
Draws on credit facilities
|
—
|
|
|
—
|
|
|
3,010
|
|
Payments on credit facilities
|
(2,100
|
)
|
|
(3,849
|
)
|
|
(3,682
|
)
|
Proceeds from long-term debt
|
6,856
|
|
|
222,777
|
|
|
—
|
|
Payments on long-term debt
|
(2,334
|
)
|
|
(56
|
)
|
|
(48
|
)
|
Net transfers from (to) iHeartCommunications
|
45,099
|
|
|
17,007
|
|
|
(68,804
|
)
|
Dividends and other payments to noncontrolling interests
|
(16,917
|
)
|
|
(30,870
|
)
|
|
(18,995
|
)
|
Dividends paid
|
(755,538
|
)
|
|
—
|
|
|
(175,022
|
)
|
Deferred financing charges
|
(199
|
)
|
|
(8,606
|
)
|
|
(4
|
)
|
Change in other, net
|
(1,366
|
)
|
|
2,651
|
|
|
2,236
|
|
Net cash provided by (used for) financing activities
|
(726,499
|
)
|
|
199,054
|
|
|
(261,309
|
)
|
Effect of exchange rate changes on cash
|
(6,041
|
)
|
|
(13,723
|
)
|
|
(9,024
|
)
|
Net increase (decrease) in cash and cash equivalents
|
129,252
|
|
|
226,539
|
|
|
(128,341
|
)
|
Cash and cash equivalents at beginning of year
|
412,743
|
|
|
186,204
|
|
|
314,545
|
|
Cash and cash equivalents at end of year
|
$
|
541,995
|
|
|
$
|
412,743
|
|
|
$
|
186,204
|
|
SUPPLEMENTAL DISCLOSURES:
|
|
|
|
|
|
Cash paid during the year for interest
|
$
|
368,051
|
|
|
$
|
356,021
|
|
|
$
|
347,786
|
|
Cash paid during the year for income taxes
|
40,185
|
|
|
43,781
|
|
|
43,275
|
|
See Notes to Consolidated Financial Statements
CLEAR CHANNEL OUTDOOR HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Nature of Business
Clear Channel Outdoor Holdings, Inc. (the “Company”) is an outdoor advertising company which owns or operates advertising display faces domestically and internationally. On November 11, 2005, the Company became a publicly traded company through an initial public offering (“IPO”), in which
10%
, or
35.0 million
shares, of the Company’s Class A common stock was sold. Prior to the IPO, the Company was an indirect wholly-owned subsidiary of iHeartCommunications, Inc. (“iHeartCommunications”), a diversified media and entertainment company. As of December 31,
2016
, iHeartCommunications indirectly holds all of the
315.0 million
shares of Class B common stock outstanding and
10,726,917
shares of Class A common stock, collectively representing
89.9%
of the shares outstanding and approximately
99%
of the voting power. The holders of Class A common stock and Class B common stock have identical rights, except holders of Class A common stock are entitled to
one
vote per share while holders of Class B common stock are entitled to
20
votes per share. The Class B shares of common stock are convertible, at the option of the holder at any time or upon any transfer, into shares of Class A common stock on a
one
-for-one basis, subject to certain limited exceptions.
The Company operates in the outdoor advertising industry by selling advertising on billboards, street furniture displays, transit displays and other advertising displays. The Company has
two
reportable business segments: Americas and International. The Americas segment primarily includes operations in the United States, Canada and Latin America; the International segment primarily includes operations in Europe and Asia.
Agreements with iHeartCommunications
There are several agreements which govern the Company’s relationship with iHeartCommunications including the Master Agreement, Corporate Services Agreement, Employee Matters Agreement, Tax Matters Agreement and Trademark and License Agreement. iHeartCommunications has the right to terminate these agreements in various circumstances. As of the date of the filing of this report, no notice of termination of any of these agreements has been received from iHeartCommunications.
Going Concern
During the second quarter of 2014, the FASB issued ASU No. 2014-15,
Presentation of Financial Statements - Going Concern (Subtopic 205-40): Disclosure of Uncertainties about an Entity's Ability to Continue as a Going Concern.
This update provides U.S. GAAP guidance on management’s responsibility in evaluating whether there is substantial doubt about a company’s ability to continue as a going concern and about related footnote disclosures. For each reporting period, the Company will be required to evaluate whether there are conditions or events that raise substantial doubt about a company’s ability to continue as a going concern within one year from the date the financial statements are issued. The amendments in this update are effective for annual periods ending after December 15, 2016, and for interim periods thereafter. The Company adopted this standard for the year-ended December 31, 2016. See Note 6 - Related Party Transactions.
Use of Estimates
The preparation of the consolidated financial statements in conformity with U.S. generally accepted accounting principles (“GAAP”) requires management to make estimates, judgments, and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes including, but not limited to, legal, tax and insurance accruals. The Company bases its estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances. Actual results could differ from those estimates.
Principles of Consolidation
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 percent to 50 percent of the voting common stock or otherwise exercises significant influence over operating and financial policies of the Company are accounted for using the equity method of accounting. All significant intercompany accounts have been eliminated in consolidation.
Certain prior period amounts have been reclassified to conform to the
2016
presentation. Included in International Outdoor Direct operating expenses and Selling, general and administrative expenses are
$8.2 million
and
$3.2 million
, respectively, recorded in the fourth quarter of 2015 to correct for accounting errors included in the results for our Netherlands subsidiary reported in prior years. Such corrections are not considered to be material to current year or prior year financial results.
CLEAR CHANNEL OUTDOOR HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Cash and Cash Equivalents
Cash and cash equivalents include all highly liquid investments with an original maturity of three months or less.
Accounts Receivable
Accounts receivable are recorded at the invoiced amount, net of reserves for sales returns and 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 revenue for each business unit, adjusted for relative improvements or deteriorations in the agings and changes in current economic conditions. The Company believes its concentration of credit risk is limited due to the large number and the geographic diversification of its customers.
Business Combinations
The Company accounts for its business combinations under the acquisition method of accounting. The total cost of an acquisition is allocated to the underlying identifiable net assets, based on their respective estimated fair values. The excess of the purchase price over the estimated fair values of the net assets acquired is recorded as goodwill. Determining the fair value of assets acquired and liabilities assumed requires management's judgment and often involves the use of significant estimates and assumptions, including assumptions with respect to future cash inflows and outflows, discount rates, asset lives and market multiples, among other items. Various acquisition agreements may include contingent purchase consideration based on performance requirements of the investee. The Company accounts for these payments in conformity with the provisions of ASC 805-20-30, which establish the requirements related to recognition of certain assets and liabilities arising from contingencies.
Property, Plant and Equipment
Property, plant and equipment are stated at cost. Depreciation is computed using the straight-line method at rates that, in the opinion of management, are adequate to allocate the cost of such assets over their estimated useful lives, which are as follows:
Buildings and improvements —
10
to
39
years
Structures —
3
to
20
years
Furniture and other equipment —
2
to
20
years
Leasehold improvements — shorter of economic life or lease term assuming renewal periods, if appropriate
For assets associated with a lease or contract, the assets are depreciated at the shorter of the economic life or the lease or contract term, assuming renewal periods, if appropriate. Expenditures for maintenance and repairs are charged to operations as incurred, whereas expenditures for renewal and betterments are capitalized.
The Company tests for possible impairment of property, plant and equipment whenever events and circumstances indicate that depreciable assets might be impaired and the undiscounted cash flows estimated to be generated by those assets are less than the carrying amounts of those assets. When specific assets are determined to be unrecoverable, the cost basis of the asset is reduced to reflect the current fair market value.
Assets and businesses are classified as held for sale if their carrying amount will be recovered or settled principally through a sale transaction rather than through continuing use. The asset or business must be available for immediate sale and the sale must be highly probable within one year.
Land Leases and Other Structure Leases
Most of the Company’s advertising structures are located on leased land. Americas land leases are typically paid in advance for periods ranging from
one
to
12
months. International land leases are paid both in advance and in arrears, for periods ranging up to
12
months. Most international street furniture display faces are operated through contracts with municipalities for up to
15
years. The leased land and street furniture contracts often include a percent of revenue to be paid along with a base rent payment. Prepaid land leases are recorded as an asset and expensed ratably over the related rental term and rent payments in arrears are recorded as an accrued liability.
CLEAR CHANNEL OUTDOOR HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Intangible Assets
The Company’s indefinite-lived intangible assets include billboard permits in its Americas segment. The Company’s indefinite-lived intangible assets are not subject to amortization, but are tested for impairment at least annually. The Company tests for possible impairment of indefinite-lived intangible assets whenever events or changes in circumstances, such as a significant reduction in operating cash flow or a dramatic change in the manner for which the asset is intended to be used indicate that the carrying amount of the asset may not be recoverable.
The Company performs its annual impairment test for its permits using a direct valuation technique as prescribed in ASC 805-20-S99. The Company engages a third party valuation firm, to assist the Company in the development of these assumptions and the Company’s determination of the fair value of its permits.
Other intangible assets include definite-lived intangible assets and permanent easements. The Company’s definite-lived intangible assets include primarily transit and street furniture contracts, site leases and other contractual rights, all of which are amortized over the shorter of either the respective lives of the agreements or over the period of time the assets are expected to contribute directly or indirectly to the Company’s future cash flows. The Company periodically reviews the appropriateness of the amortization periods related to its definite-lived intangible assets. These assets are recorded at cost. Permanent easements are indefinite-lived intangible assets which include certain rights to use real property not owned by the Company.
The Company tests for possible impairment of other intangible assets whenever events and circumstances indicate that they might be impaired and the undiscounted cash flows estimated to be generated by those assets are less than the carrying amounts of those assets. When specific assets are determined to be unrecoverable, the cost basis of the asset is reduced to reflect the current fair market value.
Goodwill
The Company performs its annual impairment test on July 1 of each year. The Company uses a discounted cash flow model to determine if the carrying value of the reporting unit, including goodwill, is less than the fair value of the reporting unit. The Company identified its reporting units in accordance with ASC 350-20-55. The Company’s U.S. outdoor advertising markets are aggregated into a single reporting unit for purposes of the goodwill impairment test. The Company also determined that within its Americas segment, Canada constitutes a separate reporting unit and each country in its International outdoor segment constitutes a separate reporting unit. The Company had impairment of goodwill of
$7.3 million
for
2016
and
no
impairment of goodwill for
2015
and
2014
.
Nonconsolidated Affiliates
In general, investments in which the Company owns 20 percent to 50 percent of the common stock or otherwise exercises significant influence over the investee are accounted for under the equity method. The Company does not recognize gains or losses upon the issuance of securities by any of its equity method investees. The Company reviews the value of equity method investments and records impairment charges in the statement of operations as a component of “Equity in earnings (loss) of nonconsolidated affiliates” for any decline in value that is determined to be other-than-temporary.
Other Investments
Other investments are composed primarily of equity securities. Securities for which fair value is determinable are classified as available-for-sale or trading and are carried at fair value based on quoted market prices. Securities are carried at historical cost when quoted market prices are unavailable. The net unrealized gains or losses on the available-for-sale securities, net of tax, are reported in accumulated other comprehensive loss as a component of stockholders’ equity (deficit).
The Company periodically assesses the value of available-for-sale and non-marketable securities and records impairment charges in the statement of comprehensive loss for any decline in value that is determined to be other-than-temporary. The average cost method is used to compute the realized gains and losses on sales of equity securities. Based on these assessments,
no
impairments existed at
December 31, 2016
,
2015
and
2014
.
Financial Instruments
Due to their short maturity, the carrying amounts of accounts and notes receivable, accounts payable, accrued liabilities and short-term borrowings approximated their fair values at
December 31, 2016
and
2015
.
CLEAR CHANNEL OUTDOOR HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Asset Retirement Obligation
ASC 410-20 requires the Company to estimate its obligation upon the termination or non-renewal of a lease to dismantle and remove its advertising structures from the leased land and to reclaim the site to its original condition. The Company’s asset retirement obligation is reported in “Other long-term liabilities.” The Company records the present value of obligations associated with the retirement of its advertising structures in the period in which the obligation is incurred. When the liability is recorded, the cost is capitalized as part of the related advertising structures carrying amount. Over time, accretion of the liability is recognized as an operating expense and the capitalized cost is depreciated over the expected useful life of the related asset.
Income Taxes
The Company accounts for income taxes using the liability method. Under this method, deferred tax assets and liabilities are determined based on differences between financial reporting bases and tax bases of assets and liabilities and are measured using the enacted tax rates expected to apply to taxable income in the periods in which the deferred tax asset or liability is expected to be realized or settled. Deferred tax assets are reduced by valuation allowances if the Company believes it is more likely than not that some portion or the entire asset will not be realized. Generally, all earnings from the Company’s foreign operations are permanently reinvested and not distributed. The Company has not provided U.S. federal income taxes for temporary differences with respect to investments in foreign subsidiaries, which at December 31,
2016
, currently result in tax basis amounts greater than the financial reporting basis. It is not apparent that these unrecognized deferred tax assets will reverse in the foreseeable future. If any excess cash held by our foreign subsidiaries were needed to fund operations in the United States, we could presently repatriate available funds without a requirement to accrue or pay U.S. taxes. This is a result of significant deficits, as calculated for tax law purposes, in our foreign earnings and profits, which gives us flexibility to make future cash distributions as non-taxable returns of capital. We regularly review our tax liabilities on amounts that may be distributed in future periods and provide for foreign withholding and other current and deferred taxes on any such amounts. The determination of the amount of federal income taxes, if any, that might become due in the event that our foreign earnings are distributed is not practicable.
The operations of the Company are included in a consolidated U.S. Federal income tax return filed by iHeartMedia. However, for financial reporting purposes, the Company’s provision for income taxes has been computed on the basis that the Company files separate consolidated U.S. federal income tax returns with its subsidiaries.
Revenue Recognition
The Company’s advertising contracts cover periods of a few weeks up to
one
year, and are generally billed monthly. Revenue for advertising space rental is recognized ratably over the term of the contract. Advertising revenue is reported net of agency commissions. Agency commissions are calculated based on a stated percentage applied to gross billing revenue for the Company’s operations. Payments received in advance of being earned are recorded as deferred income. Revenue arrangements typically contain multiple products and services and revenues are allocated based on the relative fair value of each delivered item and recognized in accordance with the applicable revenue recognition criteria for the specific unit of accounting.
Advertising Expense
The Company records advertising expense as it is incurred. Advertising expenses were
$19.3 million
,
$21.1 million
and
$20.1 million
for the years ended
December 31, 2016
,
2015
and
2014
, respectively.
Share-Based Compensation
Under the fair value recognition provisions of ASC 718-10, share-based compensation cost is measured at the grant date based on the fair value of the award. For awards that vest based on service conditions, this cost is recognized as expense on a straight-line basis over the vesting period. For awards that will vest based on market or performance conditions, this cost will be recognized when it becomes probable that the performance conditions will be satisfied. Determining the fair value of share-based awards at the grant date requires assumptions and judgments about expected volatility and forfeiture rates, among other factors.
Foreign Currency
Results of operations for foreign subsidiaries and foreign equity investees are translated into U.S. dollars using the average exchange rates during the year. The assets and liabilities of those subsidiaries and investees are translated into U.S. dollars using the exchange rates at the balance sheet date. The related translation adjustments are recorded in a separate component of stockholders’ equity (deficit), “Accumulated other comprehensive loss”. Foreign currency transaction gains and losses are included in operations.
CLEAR CHANNEL OUTDOOR HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
New Accounting Pronouncements
During the third quarter of 2015, the FASB issued ASU 2015-14,
Revenue from Contracts with Customers (Topic 606): Deferral of the Effective Date
. This update provides a one-year deferral of the effective date for ASU No. 2014-09,
Revenue from Contracts with Customers
. ASU No. 2014-09 provides guidance for the recognition, measurement and disclosure of revenue resulting from contracts with customers and will supersede virtually all of the current revenue recognition guidance under U.S. GAAP. The standard is effective for the first interim period within annual reporting periods beginning after December 15, 2017. The two permitted transition methods under the new standard are the full retrospective method, in which case the standard would be applied to each prior reporting period presented and the cumulative effect of applying the standard would be recognized at the earliest period shown, or the modified retrospective method, in which case the cumulative effect of applying the standard would be recognized at the date of initial application. The Company expects to utilize the full retrospective method. The Company has substantially completed its evaluation of the potential changes from adopting the new standard on its future financial reporting and disclosures which included reviews of contractual terms for all of the Company’s significant revenue streams and the development of an implementation plan. The Company continues to execute on its implementation plan, including detailed policy drafting and training of segment personnel. Based on its evaluation, the Company does not expect material changes to its 2016 or 2017 consolidated revenues, operating income or balance sheets as a result of the implementation of this standard.
During the second quarter of 2015, the FASB issued ASU No. 2015-03,
Interest-Imputation of Interest (Subtopic 835-30): Simplifying the Presentation of Debt Issuance Costs
. This update simplifies the presentation of debt issuance costs as a deduction from the carrying value of the outstanding debt balance rather than showing the debt issuance costs as an asset. The standard is effective for annual periods, and for interim periods within those annual periods, beginning after December 15, 2015. The retrospective adoption of this guidance resulted in the reclassification of debt issuance costs of
$50.4 million
as of December 31, 2015, which are now reflected as “Long-term debt fees” in Note 4.
During the first quarter of 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842). The new leasing standard presents significant changes to the balance sheets of lessees. Lessor accounting is updated to align with certain changes in the lessee model and the new revenue recognition standard which was issued in the third quarter of 2015. The standard is effective for annual periods, and for interim periods within those annual periods, beginning after December 15, 2018. The Company is currently evaluating the impact of the provisions of this new standard on its consolidated financial statements.
During the second quarter of 2016, the FASB issued ASU No. 2016-09, Compensation - Stock Compensation (Topic 718). This update changes the accounting for certain aspects of share-based payments to employees. Income tax effects of share-based payment awards will be recognized in the income statement with the vesting or settlement of the awards and the record keeping for additional paid-in capital pools will no longer be necessary. Additionally, companies can make a policy election to either estimate forfeitures or recognize them as they occur. The standard is effective for annual periods, and for interim periods within those annual periods, beginning after December 15, 2016. The Company does not expect the provisions of this new standard to have a material impact on its consolidated financial statements.
During the second quarter of 2016, the FASB issued ASU No. 2016-13, Financial Instruments - Credit Losses (Topic 326). The new standard changes the impairment model for most financial assets and certain other instruments. Entities will be required to use a model that will result in the earlier recognition of allowances for losses for trade and other receivables, held-to-maturity debt securities, loans and other instruments. For available-for-sale debt securities with unrealized losses, the losses will be recognized as allowances rather than as reductions in the amortized cost of the securities. For an SEC filer, the standard is effective for annual periods, and for interim periods within those annual 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 2016, the FASB issued ASU No. 2016-15, Statement of Cash Flows (Topic 230). The new standard addresses the classification of cash flows related to certain cash receipts and cash payments. Additionally, the standard clarifies how the predominance principle should be used when cash receipts and cash payments have aspects of more than one class of cash flows. First, an entity will apply the guidance in Topic 230 and other applicable topics. If there is no guidance for those cash receipts and cash payments, an entity will determine each separately identifiable source or use and classify the receipt or payment based on the nature of the cash flow. If a receipt or payment has aspects of more than one class of cash flows and cannot be separated, the classification will depend on the predominant source or use. The standard is effective for annual periods, and for interim periods within those annual periods, beginning after December 15, 2017. The Company is currently evaluating the impact of the provisions of this new standard on its consolidated financial statements.
NOTE 2 – PROPERTY, PLANT AND EQUIPMENT, INTANGIBLE ASSETS AND GOODWILL
CLEAR CHANNEL OUTDOOR HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Dispositions
During the first quarter of 2016, Americas sold
nine
non-strategic outdoor markets including Cleveland and Columbus, Ohio, Des Moines, Iowa, Ft. Smith, Arkansas, Memphis, Tennessee, Portland, Oregon, Reno, Nevada, Seattle, Washington and Wichita, Kansas for net proceeds, which included cash and certain advertising assets in Florida, totaling
$592.3 million
. The Company recognized a net gain of
$278.3 million
related to the sale, which is included within Other operating income (expense), net.
During the first quarter of 2016, Americas also entered into an agreement to sell its Indianapolis, Indiana market in exchange for certain assets in Atlanta, Georgia, plus approximately
$41.2 million
in cash. The transaction closed in January 2017 and was classified as held-for-sale and the related assets are separately presented on the face of the Consolidated Balance Sheet.
During the second quarter of 2016, International sold its business in Turkey. As a result, the Company recognized a net loss of
$56.6 million
, which includes
$32.2 million
in cumulative translation adjustments that were recognized upon the sale of the Company's subsidiaries in Turkey.
During the fourth quarter of 2016, International sold its business in Australia for cash proceeds of
$195.7 million
, net of cash retained by the purchaser and closing costs. As a result, the Company recognized a net gain of
$127.6 million
, which is net of
$14.6 million
in cumulative translation adjustments that were recognized upon the sale of the Company's business in Australia.
Property, Plant and Equipment
The Company’s property, plant and equipment consisted of the following classes of assets as of
December 31, 2016
and
2015
, respectively.
|
|
|
|
|
|
|
|
|
(In thousands)
|
December 31,
|
|
December 31,
|
|
2016
|
|
2015
|
Land, buildings and improvements
|
$
|
152,775
|
|
|
$
|
167,739
|
|
Structures
|
2,684,673
|
|
|
2,824,794
|
|
Furniture and other equipment
|
148,516
|
|
|
156,046
|
|
Construction in progress
|
58,585
|
|
|
54,701
|
|
|
3,044,549
|
|
|
3,203,280
|
|
Less: accumulated depreciation
|
1,631,716
|
|
|
1,575,294
|
|
Property, plant and equipment, net
|
$
|
1,412,833
|
|
|
$
|
1,627,986
|
|
Indefinite-lived Intangible Assets
The Company’s indefinite-lived intangible assets consist primarily of billboard permits. The Company’s billboard permits are granted for the right to operate an advertising structure at the specified location as long as the structure is in compliance with the laws and regulations of each jurisdiction. The Company’s permits are located on owned land, leased land or land for which we have acquired permanent easements. In cases where the Company’s permits are located on leased land, the leases typically have initial terms of between
10
and
20
years and renew indefinitely, with rental payments generally escalating at an inflation-based index. If the Company loses its lease, the Company will typically obtain permission to relocate the permit or bank it with the municipality for future use. Due to significant differences in both business practices and regulations, billboards in the International segment are subject to long-term, finite contracts unlike the Company’s permits in the United States and Canada. Accordingly, there are
no
indefinite-lived intangible assets in the International segment.
Annual Impairment Test to Billboard Permits
The Company performs its annual impairment test on July 1 of each year. The impairment tests for indefinite-lived intangible assets consist of a comparison between the fair value of the indefinite-lived intangible asset at the market level with its carrying amount. If the carrying amount of the indefinite-lived intangible asset exceeds its fair value, an impairment loss is recognized equal to that excess. After an impairment loss is recognized, the adjusted carrying amount of the indefinite-lived asset is its new accounting basis. The fair value of the indefinite-lived asset is determined using the direct valuation method as prescribed in ASC 805-20-S99. Under the direct valuation method, the fair value of the indefinite-lived assets is calculated at the market level as prescribed by ASC 350-30-35. The Company engaged a third-party valuation firm, to assist it in the development of the assumptions and the Company’s determination of the fair value of its indefinite-lived intangible assets.
CLEAR CHANNEL OUTDOOR HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The application of the direct valuation method attempts to isolate the income that is properly attributable to the indefinite-lived intangible asset alone (that is, apart from tangible and identified intangible assets and goodwill). It is based upon modeling a hypothetical “greenfield” build-up to a “normalized” enterprise that, by design, lacks inherent goodwill and whose only other assets have essentially been paid for (or added) as part of the build-up process. The Company forecasts revenue, expenses and cash flows over a ten-year period for each of its markets in its application of the direct valuation method. The Company also calculates a “normalized” residual year which represents the perpetual cash flows of each market. The residual year cash flow was capitalized to arrive at the terminal value of the permits in each market.
Under the direct valuation method, it is assumed that rather than acquiring indefinite-lived intangible assets as part of a going concern business, the buyer hypothetically develops indefinite-lived intangible assets and builds a new operation with similar attributes from scratch. Thus, the buyer incurs start-up costs during the build-up phase which are normally associated with going concern value. Initial capital costs are deducted from the discounted cash flow model which results in value that is directly attributable to the indefinite-lived intangible assets.
The key assumptions using the direct valuation method are market revenue growth rates, market share, profit margin, duration and profile of the build-up period, estimated start-up capital costs and losses incurred during the build-up period, the risk-adjusted discount rate and terminal values. This data is populated using industry normalized information representing an average billboard permit within a market.
During
2016
, the Company recognized
no
impairment charges related to billboard permits. During 2015, the Company recognized an impairment charge of
$21.6 million
related to billboard permits in one market.
Other Intangible Assets
Other intangible assets include definite-lived intangible assets and permanent easements. The Company’s definite-lived intangible assets consist primarily of transit and street furniture contracts, site-leases and other contractual rights, all of which are amortized over the shorter of either the respective lives of the agreements or over the period of time the assets are expected to contribute directly or indirectly to the Company’s future cash flows. Permanent easements are indefinite-lived intangible assets which include certain rights to use real property not owned by the Company. The Company periodically reviews the appropriateness of the amortization periods related to its definite-lived intangible assets. These assets are recorded at cost.
The following table presents the gross carrying amount and accumulated amortization for each major class of other intangible assets as of
December 31, 2016
and
2015
, respectively:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(In thousands)
|
December 31, 2016
|
|
December 31, 2015
|
|
Gross Carrying Amount
|
|
Accumulated Amortization
|
|
Gross Carrying Amount
|
|
Accumulated Amortization
|
Transit, street furniture and other outdoor
contractual rights
|
$
|
563,863
|
|
|
$
|
(426,752
|
)
|
|
$
|
635,772
|
|
|
$
|
(457,060
|
)
|
Permanent easements
|
159,782
|
|
|
—
|
|
|
156,349
|
|
|
—
|
|
Other
|
4,536
|
|
|
(1,812
|
)
|
|
9,687
|
|
|
(1,884
|
)
|
Total
|
$
|
728,181
|
|
|
$
|
(428,564
|
)
|
|
$
|
801,808
|
|
|
$
|
(458,944
|
)
|
Total amortization expense related to definite-lived intangible assets for the years ended
December 31, 2016
,
2015
and
2014
was
$37.8 million
,
$49.2 million
, and
$66.8 million
, respectively.
CLEAR CHANNEL OUTDOOR HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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)
|
|
2017
|
$
|
26,934
|
|
2018
|
19,907
|
|
2019
|
15,468
|
|
2020
|
13,204
|
|
2021
|
13,721
|
|
Annual Impairment Test to Goodwill
The Company performs its annual impairment test on July 1 of each year. Each of the Company’s advertising markets are components. The U.S. advertising markets are aggregated into a single reporting unit for purposes of the goodwill impairment test using the guidance in ASC 350-20-55. The Company also determined that within its Americas segment, Canada constitutes a separate reporting unit and each country in its International segment constitutes a separate reporting unit.
The goodwill impairment test is a two-step process. The first step, used to screen for potential impairment, compares the fair value of the reporting unit with its carrying amount, including goodwill. If applicable, the second step, used to measure the amount of the impairment loss, compares the implied fair value of the reporting unit goodwill with the carrying amount of that goodwill.
Each of the Company’s reporting units is valued using a discounted cash flow model which requires estimating future cash flows expected to be generated from the reporting unit, discounted to their present value using a risk-adjusted discount rate. Terminal values were also estimated and discounted to their present value. Assessing the recoverability of goodwill requires the Company to make estimates and assumptions about sales, operating margins, growth rates and discount rates based on its budgets, business plans, economic projections, anticipated future cash flows and marketplace data. There are inherent uncertainties related to these factors and management’s judgment in applying these factors.
The Company recognized goodwill impairment of
$7.3 million
for the year ended
December 31, 2016
based on declining future cash flows expected in one country in the International segment and
no
goodwill impairment for the year ended December 31,
2015
.
The following table presents the changes in the carrying amount of goodwill in each of the Company’s reportable segments:
|
|
|
|
|
|
|
|
|
|
|
|
|
(In thousands)
|
Americas
|
|
International
|
|
Consolidated
|
Balance as of December 31, 2014
|
$
|
584,574
|
|
|
$
|
232,538
|
|
|
$
|
817,112
|
|
Acquisitions
|
—
|
|
|
10,998
|
|
|
10,998
|
|
Foreign currency
|
(709
|
)
|
|
(19,644
|
)
|
|
(20,353
|
)
|
Assets held for sale
|
(49,182
|
)
|
|
—
|
|
|
(49,182
|
)
|
Balance as of December 31, 2015
|
$
|
534,683
|
|
|
$
|
223,892
|
|
|
$
|
758,575
|
|
Impairment
|
—
|
|
|
(7,274
|
)
|
|
(7,274
|
)
|
Dispositions
|
(6,934
|
)
|
|
(30,718
|
)
|
|
(37,652
|
)
|
Foreign currency
|
(1,998
|
)
|
|
(5,051
|
)
|
|
(7,049
|
)
|
Assets held for sale
|
(10,337
|
)
|
|
—
|
|
|
(10,337
|
)
|
Balance as of December 31, 2016
|
$
|
515,414
|
|
|
$
|
180,849
|
|
|
$
|
696,263
|
|
The balance at December 31,
2014
is net of cumulative impairments of
$2.6 billion
and
$326.6 million
in the Company’s Americas and International segments, respectively.
CLEAR CHANNEL OUTDOOR HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 3 – ASSET RETIREMENT OBLIGATION
The Company’s asset retirement obligation is reported in “Other long-term liabilities” with the current portion recorded in “Accrued liabilities” and relates to its obligation to dismantle and remove outdoor advertising displays from leased land and to reclaim the site to its original condition upon the termination or non-renewal of a lease or contract. When the liability is recorded, the cost is capitalized as part of the related long-lived assets’ carrying value. Due to the high rate of lease renewals over a long period of time, the calculation assumes that all related assets will be removed at some period over the next
55
years. An estimate of third-party cost information is used with respect to the dismantling of the structures and the reclamation of the site. The interest rate used to calculate the present value of such costs over the retirement period is based on an estimated risk adjusted credit rate for the same period.
The following table presents the activity related to the Company’s asset retirement obligation:
|
|
|
|
|
|
|
|
|
(In thousands)
|
Years Ended December 31,
|
|
2016
|
|
2015
|
Beginning balance
|
$
|
45,125
|
|
|
$
|
48,161
|
|
Adjustment due to changes in estimates
|
(5,431
|
)
|
|
2,024
|
|
Accretion of liability
|
4,863
|
|
|
546
|
|
Liabilities settled
|
(4,104
|
)
|
|
(2,720
|
)
|
Foreign Currency
|
(1,002
|
)
|
|
(2,886
|
)
|
Ending balance
|
$
|
39,451
|
|
|
$
|
45,125
|
|
NOTE 4 – LONG-TERM DEBT
Long-term debt at
December 31, 2016
and
2015
consisted of the following:
|
|
|
|
|
|
|
|
|
(In thousands)
|
December 31,
|
|
December 31,
|
|
2016
|
|
2015
|
Clear Channel Worldwide Holdings Notes
|
$
|
4,925,000
|
|
|
$
|
4,925,000
|
|
Clear Channel International B.V. Senior Notes
|
225,000
|
|
|
225,000
|
|
Senior revolving credit facility due 2018
|
—
|
|
|
—
|
|
Other debt
|
14,798
|
|
|
19,003
|
|
Original issue discount
|
(6,738
|
)
|
|
(7,769
|
)
|
Long-term debt fees
|
(41,069
|
)
|
|
(50,411
|
)
|
Total debt
|
$
|
5,116,991
|
|
|
$
|
5,110,823
|
|
Less: current portion
|
6,971
|
|
|
4,310
|
|
Total long-term debt
|
$
|
5,110,020
|
|
|
$
|
5,106,513
|
|
The aggregate market value of the Company’s debt based on market prices for which quotes were available was approximately
$5.2 billion
and
$4.9 billion
at
December 31, 2016
and
December 31, 2015
, respectively. Under the fair value hierarchy established by ASC 820-10-35, the market value of the Company’s debt is classified as Level 1.
CLEAR CHANNEL OUTDOOR HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Senior Notes
As of
December 31, 2016
and
2015
, the Company had Senior Notes consisting of:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(In thousands)
|
Maturity Date
|
|
Interest Rate
|
|
Interest Payment Terms
|
|
12/31/2016
|
|
12/31/2015
|
CCWH Senior Notes:
|
|
|
|
|
|
|
|
|
|
6.5% Series A Senior Notes Due 2022
|
11/15/2022
|
|
6.5%
|
|
Payable to the trustee weekly in arrears and to noteholders on May 15 and November 15 of each year
|
|
$
|
735,750
|
|
|
$
|
735,750
|
|
6.5% Series B Senior Notes Due 2022
|
11/15/2022
|
|
6.5%
|
|
Payable to the trustee weekly in arrears and to noteholders on May 15 and November 15 of each year
|
|
1,989,250
|
|
|
1,989,250
|
|
CCWH Senior Subordinated Notes:
|
|
|
|
|
|
|
|
|
7.625% Series A Senior Notes Due 2020
|
3/15/2020
|
|
7.625%
|
|
Payable to the trustee weekly in arrears and to noteholders on March 15 and September 15 of each year
|
|
275,000
|
|
|
275,000
|
|
7.625% Series B Senior Notes Due 2020
|
3/15/2020
|
|
7.625%
|
|
Payable to the trustee weekly in arrears and to noteholders on March 15 and September 15 of each year
|
|
1,925,000
|
|
|
1,925,000
|
|
Total CCWH Notes
|
|
|
|
|
|
|
$
|
4,925,000
|
|
|
$
|
4,925,000
|
|
Clear Channel International B.V. Senior Notes:
|
|
|
|
|
|
|
8.75% Senior Notes Due 2020
|
12/15/2020
|
|
8.750%
|
|
Payable semi-annually in arrears on June 15 and December 15 of each year
|
|
225,000
|
|
|
225,000
|
|
Total Senior Notes
|
|
|
|
|
|
|
$
|
5,150,000
|
|
|
$
|
5,150,000
|
|
Guarantees and Security
The CCWH Senior Notes are guaranteed by CCOH, Clear Channel Outdoor, Inc. (“CCOI”) and certain of CCOH’s direct and indirect subsidiaries. The CCWH Senior Subordinated Notes are fully and unconditionally guaranteed, jointly and severally, on a senior subordinated basis by CCOH, CCOI and certain of CCOH’s other domestic subsidiaries and rank junior to each guarantor’s existing and future senior debt, including the CCWH Senior Notes, equally with each guarantor’s existing and future senior subordinated debt and ahead of each guarantor’s existing and future debt that expressly provides that it is subordinated to the guarantees of the CCWH Senior Subordinated Notes.
The CCWH Senior Notes are senior obligations that rank pari passu in right of payment to all unsubordinated indebtedness of CCWH and the guarantees of the CCWH Senior Notes rank pari passu in right of payment to all unsubordinated indebtedness of the guarantors. The CCWH Senior Subordinated Notes are unsecured senior subordinated obligations that rank junior to all of CCWH’s existing and future senior debt, including the CCWH Senior Notes, equally with any of CCWH’s existing and future senior subordinated debt and ahead of all of CCWH’s existing and future debt that expressly provides that it is subordinated to the CCWH Senior Subordinated Notes.
CLEAR CHANNEL OUTDOOR HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Redemptions
CCWH may redeem the Senior Notes and Senior Subordinated Notes at its option, in whole or part, at redemption prices set forth in the indentures plus accrued and unpaid interest to the redemption date and plus an applicable premium.
Certain Covenants
The indentures governing the Senior Notes and Senior Subordinated Notes contain covenants that limit CCOH and its restricted subsidiaries ability to, among other things:
|
|
•
|
incur or guarantee additional debt or issue certain preferred stock;
|
|
|
•
|
make certain investments;
|
|
|
•
|
in case of the Senior Notes, create liens on its restricted subsidiaries’ assets to secure such debt;
|
|
|
•
|
create restrictions on the payment of dividends or other amounts to it from its restricted subsidiaries that are not guarantors of the notes;
|
|
|
•
|
enter into certain transactions with affiliates;
|
|
|
•
|
merge or consolidate with another person, or sell or otherwise dispose of all or substantially all of its assets;
|
|
|
•
|
sell certain assets, including capital stock of its subsidiaries; and
|
|
|
•
|
in the case of the Series B CCWH Senior Notes and the Series B CCWH Senior Subordinated Notes, pay dividends, redeem or repurchase capital stock or make other restricted payments.
|
Clear Channel International B.V. Senior Notes
The CCIBV Senior Notes are guaranteed by certain of the International outdoor business’s existing and future subsidiaries. The Company does not guarantee or otherwise assume any liability for the CCIBV Senior Notes. The notes are senior unsecured obligations that rank pari passu in right of payment to all unsubordinated indebtedness of Clear Channel International B.V., and the guarantees of the notes are senior unsecured obligations that rank pari passu in right of payment to all unsubordinated indebtedness of the guarantors of the notes.
Redemptions
Clear Channel International B.V. may redeem the notes at its option, in whole or part, at the redemption prices set forth in the indenture plus accrued and unpaid interest to the redemption date.
Certain Covenants
The indenture governing the CCIBV Senior Notes contains covenants that limit Clear Channel International B.V.’s ability and the ability of its restricted subsidiaries to, among other things:
|
|
•
|
pay dividends, redeem stock or make other distributions or investments;
|
|
|
•
|
incur additional debt or issue certain preferred stock;
|
|
|
•
|
transfer or sell assets;
|
|
|
•
|
create liens on assets;
|
|
|
•
|
engage in certain transactions with affiliates;
|
|
|
•
|
create restrictions on dividends or other payments by the restricted subsidiaries; and
|
|
|
•
|
merge, consolidate or sell substantially all of Clear Channel International B.V.’s assets.
|
Senior Revolving Credit Facility Due 2018
During the third quarter of 2013, the Company entered into a
five
-year senior secured revolving credit facility with an aggregate principal amount of
$75.0 million
. The revolving credit facility may be used for working capital needs, to issue letters of credit and for other general corporate purposes. As of December 31,
2016
, there were
no
amounts outstanding under the revolving credit facility, and
$65.4 million
of letters of credit under the revolving credit facility which reduce availability under the facility. The revolving credit facility contains a springing covenant that requires us to maintain a secured leverage ratio (as defined in the revolving credit facility) of not more than
1.5
:1 that is tested at the end of a quarter if availability under the facility is less than
CLEAR CHANNEL OUTDOOR HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
75%
of the aggregate commitments under the facility. The Company was in compliance with the secured leverage ratio covenant as of December 31,
2016
.
Other Debt
Other debt includes various borrowings and capital leases utilized for general operating purposes. Included in the
$14.8 million
balance at
December 31, 2016
is
$7.0 million
that matures in less than one year.
Future Maturities of Long-term Debt
Future maturities of long-term debt as of
December 31, 2016
are as follows:
|
|
|
|
|
(in thousands)
|
|
2017
|
$
|
6,972
|
|
2018
|
618
|
|
2019
|
310
|
|
2020
|
2,425,303
|
|
2021
|
341
|
|
Thereafter
|
2,731,254
|
|
Total
(1)
|
$
|
5,164,798
|
|
|
|
(1)
|
Excludes original issue discount and long-term debt fees of
$6.7 million
and
$41.1 million
, respectively, which are amortized through interest expense over the life of the underlying debt obligations.
|
Guarantees
As of
December 31, 2016
, the Company had
$66.6 million
in letters of credit outstanding, of which no letters of credit were cash secured. Additionally, as of
December 31, 2016
, iHeartCommunications had outstanding commercial standby letters of credit and surety bonds of
$1.4 million
and
$52.7 million
, respectively, held on behalf of the Company. These letters of credit and surety bonds relate to various operational matters, including insurance, bid and performance bonds, as well as other items.
In addition, as of
December 31, 2016
, the Company had outstanding bank guarantees of
$35.7 million
related to international subsidiaries, of which
$18.8 million
were backed by cash collateral.
NOTE 5 – COMMITMENTS AND CONTINGENCIES
Commitments and Contingencies
The Company accounts for its rentals that include renewal options, annual rent escalation clauses, minimum franchise payments and maintenance related to displays under the guidance in ASC 840.
The Company considers its non-cancelable contracts that enable it to display advertising on buses, bus shelters, trains, etc. to be leases in accordance with the guidance in ASC 840-10. These contracts may contain minimum annual franchise payments which generally escalate each year. The Company accounts for these minimum franchise payments on a straight-line basis. If the rental increases are not scheduled in the lease, such as an increase based on subsequent changes in the index or rate, those rents are considered contingent rentals and are recorded as expense when accruable. Other contracts may contain a variable rent component based on revenue. The Company accounts for these variable components as contingent rentals and records these payments as expense when accruable. No single contract or lease is material to the Company’s operations.
The Company accounts for annual rent escalation clauses included in the lease term on a straight-line basis under the guidance in ASC 840-20-25. The Company considers renewal periods in determining its lease terms if at inception of the lease there is reasonable assurance the lease will be renewed. Expenditures for maintenance are charged to operations as incurred, whereas expenditures for renewal and betterments are capitalized.
The Company leases office space, equipment and the majority of the land occupied by its advertising structures under long-term operating leases. The Company accounts for these leases in accordance with the policies described above.
CLEAR CHANNEL OUTDOOR HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The Company’s contracts with municipal bodies or private companies relating to street furniture, billboards, transit and malls generally require the Company to build bus stops, kiosks and other public amenities or advertising structures during the term of the contract. The Company owns these structures and is generally allowed to advertise on them for the remaining term of the contract. Once the Company has built the structure, the cost is capitalized and expensed over the shorter of the economic life of the asset or the remaining life of the contract.
In addition, the Company has commitments relating to required purchases of property, plant, and equipment under certain street furniture contracts. Certain of the Company’s contracts contain penalties for not fulfilling its commitments related to its obligations to build bus stops, kiosks and other public amenities or advertising structures. Historically, any such penalties have not materially impacted the Company’s financial position or results of operations.
As of
December 31, 2016
, the Company’s future minimum rental commitments under non-cancelable operating lease agreements with terms in excess of one year, minimum payments under non-cancelable contracts in excess of one year, capital expenditure commitments and employment contracts consist of the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
(In thousands)
|
|
|
|
|
Capital
|
|
Non-Cancelable
|
|
Non-Cancelable
|
|
Expenditure
|
|
Operating Lease
|
|
Contracts
|
|
Commitments
|
2017
|
$
|
335,574
|
|
|
$
|
363,137
|
|
|
$
|
49,618
|
|
2018
|
289,525
|
|
|
293,279
|
|
|
7,348
|
|
2019
|
265,232
|
|
|
262,413
|
|
|
4,449
|
|
2020
|
239,517
|
|
|
224,343
|
|
|
1,962
|
|
2021
|
215,419
|
|
|
191,100
|
|
|
2,097
|
|
Thereafter
|
1,211,040
|
|
|
411,234
|
|
|
12,242
|
|
Total
|
$
|
2,556,307
|
|
|
$
|
1,745,506
|
|
|
$
|
77,716
|
|
Rent expense charged to operations for the years ended
December 31, 2016
,
2015
and
2014
was
$947.4 million
,
$978.6 million
and
$1,025.3 million
, respectively.
In various areas in which the Company operates, outdoor advertising is the object of restrictive and, in some cases, prohibitive zoning and other regulatory provisions, either enacted or proposed. The impact to the Company of loss of displays due to governmental action has been somewhat mitigated by Federal and state laws mandating compensation for such loss and constitutional restraints.
The Company and its subsidiaries are involved in certain legal proceedings arising in the ordinary course of business and, as required, have accrued an estimate of the probable costs for the resolution of those claims for which the occurrence of loss is probable and the amount can be reasonably estimated. These estimates have been developed in consultation with counsel and are based upon an analysis of potential results, assuming a combination of litigation and settlement strategies. It is possible, however, that future results of operations for any particular period could be materially affected by changes in the Company’s assumptions or the effectiveness of its strategies related to these proceedings. Additionally, due to the inherent uncertainty of litigation, there can be no assurance that the resolution of any particular claim or proceeding would not have a material adverse effect on the Company’s financial condition or results of operations.
Although the Company is involved in a variety of legal proceedings in the ordinary course of business, a large portion of its litigation arises in the following contexts: commercial disputes; misappropriation of likeness and right of publicity claims; employment and benefits related claims; governmental fines; intellectual property claims; and tax disputes.
International Outdoor Investigation
On April 21, 2015, inspections were conducted at the premises of Clear Channel in Denmark and Sweden as part of an investigation by Danish competition authorities. Additionally, on the same day, Clear Channel UK received a communication from the UK competition authorities, also in connection with the investigation by Danish competition authorities. Clear Channel and its affiliates are cooperating with the national competition authorities.
CLEAR CHANNEL OUTDOOR HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 6 — RELATED PARTY TRANSACTIONS
The Company records net amounts due from or to iHeartCommunications as “Due from/to iHeartCommunications” on the consolidated balance sheets. The accounts represent the revolving promissory note issued by the Company to iHeartCommunications and the revolving promissory note issued by iHeartCommunications to the Company in the face amount of
$1.0 billion
, or if more or less than such amount, the aggregate unpaid principal amount of all advances. The accounts accrue interest pursuant to the terms of the promissory notes and are generally payable on demand or when they mature on December 15, 2017.
Included in the accounts are the net activities resulting from day-to-day cash management services provided by iHeartCommunications. As a part of these services, the Company maintains collection bank accounts swept daily into accounts of iHeartCommunications (after satisfying the funding requirements of the Trustee Accounts under the CCWH Senior Notes and the CCWH Subordinated Notes). In return, iHeartCommunications funds the Company’s controlled disbursement accounts as checks or electronic payments are presented for payment. The Company’s claim in relation to cash transferred from its concentration account is on an unsecured basis and is limited to the balance of the “Due from iHeartCommunications” account.
As of
December 31, 2016
and
December 31, 2015
, the asset recorded in “Due from iHeartCommunications” on the consolidated balance sheet was
$885.7 million
and
$930.8 million
, respectively. As of
December 31, 2016
, the fixed interest rate on the “Due from iHeartCommunications” account was
6.5%
, which is equal to the fixed interest rate on the CCWH Senior Notes. The net interest income for the years ended
December 31, 2016
,
2015
and
2014
was
$50.3 million
,
$61.4 million
, and
$60.2 million
, respectively.
In its Annual Report on Form 10-K filed with the SEC on February 23, 2017, iHeartCommunications stated that its forecast of future cash flows indicates that such cash flows would not be sufficient for it to meet its obligations, including payment of the outstanding receivables based credit facility balance at maturity on December 24, 2017, as they become due in the ordinary course of business for a period of 12 months following February 23, 2017. While iHeartCommunications stated that it believes that the refinancing or the extension of the maturity date of the receivables based credit facility, combined with current funds and expected future cash flows, will be sufficient to enable it to meet its obligations as they become due in the ordinary course of business for a period of 12 months, there is no assurance that the receivables based credit facility will be extended in a timely manner or on acceptable terms, or at all.
If iHeartCommunications were to become insolvent, the Company would be an unsecured creditor of iHeartCommunications. In such event, the Company would be treated the same as other unsecured creditors of iHeartCommunications and, if the Company were not entitled to amounts outstanding under the receivable from iHeartCommunications, or could not obtain such cash on a timely basis, the Company could experience a liquidity shortfall.
The Company provides advertising space on its billboards for radio stations owned by iHeartCommunications. For the years ended
December 31, 2016
,
2015
and
2014
, the Company recorded
$3.5 million
,
$2.7 million
, and
$3.4 million
, respectively, in revenue for these advertisements.
Under the Corporate Services Agreement between iHeartCommunications and the Company, iHeartCommunications provides management services to the Company, which include, among other things: (i) treasury, payroll and other financial related services; (ii) certain executive officer services; (iii) human resources and employee benefits services; (iv) legal and related services; (v) information systems, network and related services; (vi) investment services; (vii) procurement and sourcing support services; and (viii) other general corporate services. These services are charged to the Company based on actual direct costs incurred or allocated by iHeartCommunications based on headcount, revenue or other factors on a pro rata basis. For the years ended
December 31, 2016
,
2015
and
2014
, the Company recorded
$36.0 million
,
$30.1 million
, and
$31.2 million
, respectively, as a component of corporate expenses for these services.
Pursuant to the Tax Matters Agreement between iHeartCommunications and the Company, the operations of the Company are included in a consolidated federal income tax return filed by iHeartCommunications. The Company’s provision for income taxes has been computed on the basis that the Company files separate consolidated federal income tax returns with its subsidiaries. Tax payments are made to iHeartCommunications on the basis of the Company’s separate taxable income. Tax benefits recognized on the Company’s employee stock option exercises are retained by the Company.
The Company computes its deferred income tax provision using the liability method in accordance with the provisions of ASC 740-10, as if the Company was a separate taxpayer. Deferred tax assets and liabilities are determined based on differences
CLEAR CHANNEL OUTDOOR HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
between financial reporting basis and tax basis of assets and liabilities and are measured using the enacted tax rates expected to apply to taxable income in the periods in which the deferred tax asset or liability is expected to be realized or settled. Deferred tax assets are reduced by valuation allowances if the Company believes it is more likely than not some portion or all of the asset will not be realized.
Pursuant to the Employee Matters Agreement, the Company’s employees participate in iHeartCommunications’ employee benefit plans, including employee medical insurance and a 401(k) retirement benefit plan. For the years ended
December 31, 2016
,
2015
and
2014
, the Company recorded
$9.4 million
,
$10.7 million
and
$10.7 million
, respectively, as a component of selling, general and administrative expenses for these services.
Stock Purchases
On August 9, 2010, iHeartCommunications announced that its board of directors approved a stock purchase program under which iHeartCommunications or its subsidiaries may purchase up to an aggregate of
$100 million
of the Company’s Class A common stock and/or the Class A common stock of iHeartMedia, Inc. (“iHeartMedia”). The stock purchase program did not have a fixed expiration date and could be modified, suspended or terminated at any time at iHeartCommunications’ discretion. As of December 31, 2014, an aggregate
$34.2 million
was available under this program. In January 2015, CC Finco, LLC (“CC Finco”), an indirect wholly-owned subsidiary of iHeartCommunications, purchased an additional
2,000,000
shares of the Company’s Class A common stock for
$20.4 million
. On April 2, 2015, CC Finco purchased an additional
2,172,946
shares of the Company’s Class A common stock for
$22.2 million
, increasing iHeartCommunications’ collective holdings to represent approximately
90%
of the outstanding shares of the Company’s common stock on a fully-diluted basis, assuming the conversion of all of the Company’s Class B common stock into Class A common stock. As a result of this purchase, the stock purchase program concluded. The purchase of shares in excess of the amount available under the stock purchase program was separately approved by the iHeartCommunications’ board of directors.
Dividends
On February 9, 2017, the Company declared a special dividend of
$282.5 million
using a portion of the proceeds from the sales of certain non-strategic U.S. outdoor markets and of our Australia outdoor business. On February 23, 2017, we paid approximately
89.9%
of the dividend or
$254.0 million
to iHeartCommunications, with the remaining
10.1%
or
$28.5 million
paid to public stockholders of the Company.
NOTE 7 — INCOME TAXES
The operations of the Company are included in a consolidated U.S. federal income tax return filed by iHeartMedia. However, for financial reporting purposes, the Company’s provision for income taxes has been computed on the basis that the Company files separate consolidated U.S. federal income tax returns with its subsidiaries.
Significant components of the provision for income tax benefit (expense) are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
(In thousands)
|
Years Ended December 31,
|
|
2016
|
|
2015
|
|
2014
|
Current - federal
|
$
|
—
|
|
|
$
|
(270
|
)
|
|
$
|
2,001
|
|
Current - foreign
|
(43,611
|
)
|
|
(45,322
|
)
|
|
(26,281
|
)
|
Current - state
|
(1,731
|
)
|
|
(1,046
|
)
|
|
(502
|
)
|
Total current expense
|
(45,342
|
)
|
|
(46,638
|
)
|
|
(24,782
|
)
|
|
|
|
|
|
|
Deferred - federal
|
(89,068
|
)
|
|
(8,259
|
)
|
|
26,744
|
|
Deferred - foreign
|
56,759
|
|
|
5,282
|
|
|
4,307
|
|
Deferred - state
|
976
|
|
|
(562
|
)
|
|
2,518
|
|
Total deferred benefit (expense)
|
(31,333
|
)
|
|
(3,539
|
)
|
|
33,569
|
|
Income tax benefit (expense)
|
$
|
(76,675
|
)
|
|
$
|
(50,177
|
)
|
|
$
|
8,787
|
|
CLEAR CHANNEL OUTDOOR HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the year ended
December 31, 2016
the Company recorded current tax
expense
of
$45.3 million
as compared to
$46.6 million
for the
2015
year. The current tax expense for
2016
was primarily related to foreign income taxes on operating profits generated in certain jurisdictions during the period.
For the year ended
December 31, 2015
the Company recorded current tax expense of
$46.6 million
compared to
$24.8 million
for the
2014
year. The change in current tax was due primarily to a reduction in unrecognized tax benefits during
2015
, which resulted from the expiration of statutes of limitations to assess taxes in the United Kingdom and several state jurisdictions. This decrease in unrecognized tax benefits resulted in a reduction to current tax expense of
$21.8 million
during 2014.
Deferred tax
expense
of
$31.3 million
was recorded for
2016
compared with a deferred tax
expense
of
$3.5 million
for
2015
. The change in deferred tax expense is primarily due to the current year utilization of net operating loss carryforwards in the U.S. which offset taxable income from the gains on the sales of
nine
non-strategic U.S. outdoor markets during the first quarter of 2016 and the sale of the Company's Australia business during the fourth quarter of 2016. The current year federal deferred tax expenses was partially offset by foreign deferred tax benefit attributable to the release of
$43.3 million
of valuation allowance against certain net operating losses in France. Due to positive evidence that now exists, the Company expects to realize the benefit of these net operating loss carryforwards in the future.
Deferred tax expense of
$3.5 million
was recorded for
2015
compared with a deferred tax benefit of
$33.6 million
for
2014
. The change in deferred tax is primarily due to the valuation allowance of
$32.9 million
recorded against the Company's federal and state net operating losses during 2015
Significant components of the Company’s deferred tax liabilities and assets as of
December 31, 2016
and
2015
are as follows:
|
|
|
|
|
|
|
|
|
(In thousands)
|
December 31,
|
|
December 31,
|
|
2016
|
|
2015
|
Deferred tax liabilities:
|
|
|
|
Intangibles and fixed assets
|
$
|
800,144
|
|
|
$
|
927,779
|
|
Equity in earnings
|
2,816
|
|
|
2,374
|
|
Other
|
16,971
|
|
|
16,036
|
|
Total deferred tax liabilities
|
819,931
|
|
|
946,189
|
|
Deferred tax assets:
|
|
|
|
Accrued expenses
|
19,458
|
|
|
17,121
|
|
Net operating loss carryforwards
|
257,613
|
|
|
472,975
|
|
Bad debt reserves
|
3,364
|
|
|
3,256
|
|
Other
|
36,266
|
|
|
29,006
|
|
Total deferred tax assets
|
316,701
|
|
|
522,358
|
|
Less: Valuation allowance
|
137,337
|
|
|
185,079
|
|
Net deferred tax assets
|
179,364
|
|
|
337,279
|
|
Net deferred tax liabilities
|
$
|
640,567
|
|
|
$
|
608,910
|
|
During the fourth quarter of 2015, the Company elected early adoption of ASU No. 2015-17,
Income Taxes (Topic 740), Balance Sheet Classification of Deferred Taxes
. This update requires companies to classify all deferred tax assets and liabilities as noncurrent on the balance sheet instead of separating deferred taxes into current and noncurrent amounts.
The deferred tax liabilities associated with intangibles and fixed assets primarily relates to the difference in book and tax basis of acquired billboard permits and tax deductible goodwill created from the Company’s various stock acquisitions. In accordance with ASC 350-10, Intangibles—Goodwill and Other, the Company does not amortize its book basis in permits. As a result, this deferred tax liability will not reverse over time unless the Company recognizes future impairment charges related to its permits and tax deductible goodwill or sells its permits. As the Company continues to amortize its tax basis in its permits and tax deductible goodwill, the deferred tax liability will increase over time. The Company’s net foreign deferred tax assets for the period ending December 31, 2016 were
$50.0 million
and its foreign deferred tax liabilities for the period ended December 31, 2015 were
$6.4 million
.
CLEAR CHANNEL OUTDOOR HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
At
December 31, 2016
, the Company had recorded deferred tax assets for net operating loss carryforwards (tax effected) for federal and state income tax purposes of
$105.2 million
, which expire in various amounts through 2035. The Company expects to realize the benefits of its deferred tax assets attributable to federal and state net operating losses based upon expected future taxable income from deferred tax liabilities that reverse in the relevant federal and state jurisdictions and carryforward periods. During
2016
, the Company released the valuation allowance of
$32.9 million
that was previously recorded against these deferred tax assets attributable to federal and state net operating losses. The release of valuation allowance was due to the taxable gains that were recognized from the sale of various outdoor markets during the period. In addition, the Company recorded a net decrease of
$14.8 million
in valuation allowances against its foreign deferred tax assets during the year ended
December 31, 2016
. At
December 31, 2016
, the Company had recorded
$152.5 million
(tax-effected) of deferred tax assets for foreign net operating losses, which are offset in part by an associated valuation allowance of
$103.3 million
. The remaining deferred tax valuation allowance of
$34.0 million
offsets other foreign deferred tax assets that are not expected to be realized. Realization of these foreign deferred tax assets is dependent upon the Company’s ability to generate future taxable income in appropriate tax jurisdictions to obtain benefits. Due to the Company’s evaluation of all available evidence, including significant negative evidence of cumulative losses in these jurisdictions, the Company continues to record valuation allowances on the foreign deferred tax assets that are not expected to be realized. The Company expects to realize its remaining gross deferred tax assets based upon its assessment of deferred tax liabilities that will reverse in the same carryforward period and jurisdiction and are of the same character as the net operating loss carryforwards and temporary differences that give rise to the deferred tax assets. Any deferred tax liabilities associated with billboard permits and tax deductible goodwill intangible assets are not relied upon as a source of future taxable income, as these intangible assets have an indefinite life.
At
December 31, 2016
and
2015
, net deferred tax assets include a deferred tax asset of
$14.9 million
and
$16.4 million
, respectively, relating to stock-based compensation expense under ASC 718-10,
Compensation—Stock Compensation
. Full realization of this deferred tax asset requires stock options to be exercised at a price equaling or exceeding the sum of the grant price plus the fair value of the option at the grant date and restricted stock to vest at a price equaling or exceeding the fair market value at the grant date. Accordingly, there can be no assurance that the stock price of the Company’s Common Stock will rise to levels sufficient to realize the entire deferred tax benefit currently reflected in our balance sheet. See Note 8 for additional discussion of ASC 718-10.
Income (loss) before income taxes:
|
|
|
|
|
|
|
|
|
|
|
|
|
(In thousands)
|
Years Ended December 31,
|
|
2016
|
|
2015
|
|
2014
|
US
|
$
|
182,311
|
|
|
$
|
(69,676
|
)
|
|
$
|
(87,120
|
)
|
Foreign
|
58,797
|
|
|
48,545
|
|
|
95,452
|
|
Total income (loss) before income taxes
|
$
|
241,108
|
|
|
$
|
(21,131
|
)
|
|
$
|
8,332
|
|
The reconciliation of income tax computed at the U.S. federal statutory rates to income tax benefit is:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(In thousands)
|
Years Ended December 31,
|
|
2016
|
|
2015
|
|
2014
|
|
Amount
|
|
Percent
|
|
Amount
|
|
Percent
|
|
Amount
|
|
Percent
|
Income tax benefit (expense) at statutory rates
|
$
|
(84,388
|
)
|
|
35.0%
|
|
$
|
7,396
|
|
|
35.0%
|
|
$
|
(2,916
|
)
|
|
35.0%
|
State income taxes, net of federal tax effect
|
(4,602
|
)
|
|
1.9%
|
|
2,238
|
|
|
10.6%
|
|
2,016
|
|
|
(24.2)%
|
Foreign income taxes
|
(20,725
|
)
|
|
8.6%
|
|
(23,062
|
)
|
|
(109.1)%
|
|
11,434
|
|
|
(137.3)%
|
Nondeductible items
|
(687
|
)
|
|
0.3%
|
|
(754
|
)
|
|
(3.6)%
|
|
(722
|
)
|
|
8.7%
|
Changes in valuation allowance and other estimates
|
34,597
|
|
|
(14.4)%
|
|
(33,684
|
)
|
|
(159.4)%
|
|
2,941
|
|
|
(35.3)%
|
Other, net
|
(870
|
)
|
|
0.4%
|
|
(2,311
|
)
|
|
(11.0)%
|
|
(3,966
|
)
|
|
47.6%
|
Income tax benefit (expense)
|
$
|
(76,675
|
)
|
|
31.8%
|
|
$
|
(50,177
|
)
|
|
(237.5)%
|
|
$
|
8,787
|
|
|
(105.5)%
|
During
2016
, the Company recorded tax
expense
of approximately
$76.7 million
. The 2016 income tax
expense
and
31.8%
effective tax rate were impacted primarily by the $
32.9 million
and
$43.3 million
deferred tax benefits recorded in connection with the
CLEAR CHANNEL OUTDOOR HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
release of valuation allowances in the U.S. and France, respectively. These deferred tax benefits were partially offset by
$54.7 million
in tax expense attributable to the sale of our Australia outdoor business.
During 2015, the Company recorded tax expense of approximately $
50.2 million
. The 2015 income tax expense and
(237.5)%
effective tax rate were impacted primarily by a
$32.9 million
valuation allowance recorded against the Company’s federal and state net operating losses during 2015. Additionally, the Company recorded additional taxes due to the inability to benefit from losses in certain foreign jurisdictions.
During 2014, the Company recorded tax benefit of approximately $
8.8 million
. The 2014 income tax benefit and
(105.5)%
effective tax rate were impacted primarily by the Company's benefits and charges from tax amounts associated with its foreign earnings that are taxed at rates different from the federal statutory rate and an inability to benefit from losses in certain foreign jurisdictions. Additionally, the Company recorded
$20.0 million
in net tax benefits associated with a decrease in unrecognized tax benefits resulting from the expiration of statutes of limitations to assess taxes in the United Kingdom and several state jurisdictions.
The Company provides for any related tax liability on undistributed earnings that the Company does not intend to be indefinitely reinvested outside the United States or would otherwise become taxable upon remittance within our foreign structure. Substantially all of the Company’s undistributed international earnings are intended to be indefinitely reinvested in home country operations outside the United States. If any excess cash held by our foreign subsidiaries were needed to fund operations in the U.S., we could presently repatriate available funds without a requirement to accrue or pay U.S. taxes. This is a result of significant deficits, as calculated for tax law purposes, in our foreign earnings and profits, which give us flexibility to make future cash distributions as non-taxable returns of capital. All tax liabilities owed by the Company are paid either by the Company or on behalf of the Company by iHeartCommunications through an operating account that represents net amounts due to or from iHeartCommunications.
The Company continues to record interest and penalties related to unrecognized tax benefits in current income tax expense. The total amount of interest accrued at
December 31, 2016
and
2015
, was
$3.4 million
and
$3.6 million
, respectively. The total amount of unrecognized tax benefits including accrued interest and penalties at
December 31, 2016
and
2015
, was
$39.7 million
and
$43.5 million
, respectively, of which
$23.8 million
and
$23.8 million
is included in “Other long-term liabilities.” In addition,
$15.9 million
and
$19.7 million
of unrecognized tax benefits are recorded net with the Company’s deferred tax assets for its net operating losses as opposed to being recorded in “Other long-term liabilities” at
December 31, 2016
and
2015
, respectively. The total amount of unrecognized tax benefits at
December 31, 2016
and
2015
that, if recognized, would impact the effective income tax rate is
$18.6 million
and
$18.2 million
, respectively.
A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows:
|
|
|
|
|
|
|
|
|
|
(In thousands)
|
|
Years Ended December 31,
|
Unrecognized Tax Benefits
|
|
2016
|
|
2015
|
Balance at beginning of period
|
|
$
|
39,908
|
|
|
$
|
39,143
|
|
Increases for tax position taken in the current year
|
|
6,996
|
|
|
6,311
|
|
Increases for tax positions taken in previous years
|
|
2,199
|
|
|
1,025
|
|
Decreases for tax position taken in previous years
|
|
(6,148
|
)
|
|
(2,009
|
)
|
Decreases due to settlements with tax authorities
|
|
(717
|
)
|
|
(689
|
)
|
Decreases due to lapse of statute of limitations
|
|
(5,906
|
)
|
|
(3,873
|
)
|
Balance at end of period
|
|
$
|
36,332
|
|
|
$
|
39,908
|
|
Pursuant to the Tax Matters Agreement between iHeartCommunications and the Company, the operations of the Company are included in a consolidated U.S. federal income tax return filed by iHeartMedia. In addition, the Company and its subsidiaries file income tax returns in various state and foreign jurisdictions. During 2016 and 2015, the Company reversed
$6.2
and
$3.9 million
in unrecognized tax benefits, inclusive of interest, as a result of the expiration of statutes of limitations to assess taxes in certain state and foreign jurisdictions. During 2016, the Company settled certain tax examinations that resulted in the reduction of uncertain tax positions of
$6.8 million
, inclusive of interest. All federal income tax matters through 2010 are closed. The Company is currently in appeals with the IRS for its tax returns for the 2011 and 2012 periods. Substantially all material state, local, and foreign income tax matters have been concluded for years through 2008.
CLEAR CHANNEL OUTDOOR HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 8 – STOCKHOLDERS’ EQUITY (DEFICIT)
The Company reports its noncontrolling interests in consolidated subsidiaries as a component of equity separate from the Company’s equity. The following table shows the changes in stockholders’ equity attributable to the Company and the noncontrolling interests of subsidiaries in which the Company has a majority, but not total, ownership interest:
|
|
|
|
|
|
|
|
|
|
|
|
|
(In thousands)
|
The Company
|
|
Noncontrolling
Interests
|
|
Consolidated
|
Balances as of January 1, 2016
|
$
|
(757,442
|
)
|
|
$
|
187,775
|
|
|
$
|
(569,667
|
)
|
Net income
|
141,431
|
|
|
23,002
|
|
|
164,433
|
|
Dividends declared
|
(540,034
|
)
|
|
—
|
|
|
(540,034
|
)
|
Dividends and other payments to noncontrolling interests
|
—
|
|
|
(16,917
|
)
|
|
(16,917
|
)
|
Disposal of noncontrolling interests
|
—
|
|
|
(36,846
|
)
|
|
(36,846
|
)
|
Share-based compensation
|
10,238
|
|
|
—
|
|
|
10,238
|
|
Foreign currency translation adjustments
|
30,835
|
|
|
(8,427
|
)
|
|
22,408
|
|
Unrealized holding loss on marketable securities
|
(576
|
)
|
|
—
|
|
|
(576
|
)
|
Other adjustments to comprehensive loss
|
(11,814
|
)
|
|
—
|
|
|
(11,814
|
)
|
Reclassifications
|
46,730
|
|
|
—
|
|
|
46,730
|
|
Other, net
|
(2,042
|
)
|
|
1,299
|
|
|
(743
|
)
|
Balances as of December 31, 2016
|
$
|
(1,082,674
|
)
|
|
$
|
149,886
|
|
|
$
|
(932,788
|
)
|
|
|
|
|
|
|
Balance as of January 1, 2015
|
$
|
(344,275
|
)
|
|
$
|
203,334
|
|
|
$
|
(140,941
|
)
|
Net income (loss)
|
(96,072
|
)
|
|
24,764
|
|
|
(71,308
|
)
|
Dividends declared
|
(217,796
|
)
|
|
—
|
|
|
(217,796
|
)
|
Dividends and other payments to noncontrolling interests
|
—
|
|
|
(30,870
|
)
|
|
(30,870
|
)
|
Share-based compensation
|
8,359
|
|
|
—
|
|
|
8,359
|
|
Foreign currency translation adjustments
|
(101,575
|
)
|
|
(11,154
|
)
|
|
(112,729
|
)
|
Unrealized holding gain on marketable securities
|
553
|
|
|
—
|
|
|
553
|
|
Other adjustments to comprehensive loss
|
(10,266
|
)
|
|
—
|
|
|
(10,266
|
)
|
Reclassifications
|
808
|
|
|
—
|
|
|
808
|
|
Other, net
|
2,822
|
|
|
1,701
|
|
|
4,523
|
|
Balances as of December 31, 2015
|
$
|
(757,442
|
)
|
|
$
|
187,775
|
|
|
$
|
(569,667
|
)
|
Share-Based Awards
Stock Options
The Company has granted options to purchase shares of its Class A common stock to certain employees and directors of the Company and its affiliates under its equity incentive plan at no less than the fair value of the underlying stock on the date of grant. These options are granted for a term not exceeding
ten
years and are forfeited, except in certain circumstances, in the event the employee or director terminates his or her employment or relationship with the Company or one of its affiliates. These options vest solely on continued service over a period of up to
five
years. The equity incentive plan contains anti-dilutive provisions that permit an adjustment for any change in capitalization.
The Company accounts for its share-based payments using the fair value recognition provisions of ASC 718-10. The fair value of the options is estimated using a Black-Scholes option-pricing model and amortized straight-line to expense over the vesting period. ASC 718-10 requires the cash flows from the tax benefits resulting from tax deductions in excess of the compensation cost recognized for those options (excess tax benefits) to be classified as financing cash flows. The excess tax benefit that is required to be classified as a financing cash inflow after application of ASC 718-10 is not material.
The fair value of each option awarded is estimated on the date of grant using a Black-Scholes option-pricing model. Expected volatilities are based on historical volatility of the Company’s stock over the expected life of the options. The expected life of
CLEAR CHANNEL OUTDOOR HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
options granted represents the period of time that options granted are expected to be outstanding. The Company uses historical data to estimate option exercise and employee terminations within the valuation model. The Company includes estimated forfeitures in its compensation cost and updates the estimated forfeiture rate through the final vesting date of awards. The risk free interest rate is based on the U.S. Treasury yield curve in effect at the time of grant for periods equal to the expected life of the option. The following assumptions were used to calculate the fair value of the Company’s options on the date of grant:
|
|
|
|
|
|
|
|
Years Ended December 31,
|
|
2016
|
|
2015
|
|
2014
|
Expected volatility
|
42% - 44%
|
|
37% – 56%
|
|
54% – 56%
|
Expected life in years
|
6.3
|
|
6.3
|
|
6.3
|
Risk-free interest rate
|
1.12% - 1.41%
|
|
1.70% – 2.07%
|
|
1.73% – 2.08%
|
Dividend yield
|
—%
|
|
—%
|
|
—%
|
The following table presents a summary of the Company's stock options outstanding at and stock option activity during the year ended
December 31, 2016
:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(In thousands, except per share data)
|
Options
|
|
Price
(3)
|
|
Weighted
Average
Remaining
Contractual
Term
|
|
Aggregate
Intrinsic
Value
|
Outstanding, January 1, 2016
|
5,348
|
|
|
$
|
7.86
|
|
|
|
|
|
Granted
(1)
|
290
|
|
|
6.43
|
|
|
|
|
|
Exercised
(2)
|
(173
|
)
|
|
3.66
|
|
|
|
|
|
Forfeited
|
(159
|
)
|
|
7.25
|
|
|
|
|
|
Expired
|
(273
|
)
|
|
12.15
|
|
|
|
|
|
Outstanding, December 31, 2016
|
5,033
|
|
|
7.71
|
|
|
4.9 years
|
|
$
|
2,539
|
|
Exercisable
|
3,868
|
|
|
7.86
|
|
|
3.8 years
|
|
$
|
2,526
|
|
Expected to vest
|
1,042
|
|
|
7.18
|
|
|
8.4 years
|
|
$
|
12
|
|
|
|
(1)
|
The weighted average grant date fair value of the Company’s options granted during the years ended
December 31, 2016
,
2015
and
2014
was
$2.82
,
$4.25
and
$4.69
per share, respectively.
|
|
|
(2)
|
Cash received from option exercises during the years ended
December 31, 2016
,
2015
and
2014
was
$0.6 million
,
$3.8 million
and
$2.4 million
, respectively. The total intrinsic value of the options exercised during the years ended
December 31, 2016
,
2015
and
2014
was
$0.4 million
,
$2.8 million
and
$1.5 million
, respectively.
|
|
|
(3)
|
Reflects the weighted average exercise price per share.
|
A summary of the Company’s unvested options at and changes during the year ended
December 31, 2016
is presented below:
|
|
|
|
|
|
|
|
(In thousands, except per share data)
|
Options
|
|
Weighted Average Grant Date Fair Value
|
Unvested, January 1, 2016
|
1,690
|
|
|
$
|
4.27
|
|
Granted
|
290
|
|
|
2.82
|
|
Vested
(1)
|
(657
|
)
|
|
4.18
|
|
Forfeited
|
(159
|
)
|
|
4.22
|
|
Unvested, December 31, 2016
|
1,164
|
|
|
$
|
3.97
|
|
|
|
(1)
|
The total fair value of the Company’s options vested during the years ended
December 31, 2016
,
2015
and
2014
was
$2.7 million
,
$4.2 million
and
$6.1 million
, respectively.
|
CLEAR CHANNEL OUTDOOR HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Restricted Stock Awards
The Company has also granted both restricted stock and restricted stock unit awards to its employees and affiliates under its equity incentive plan. The restricted stock awards represent shares of Class A common stock that contain a legend which restricts their transferability for a term of up to
five
years. The restricted stock units represent the right to receive shares upon vesting, which is generally over a period of up to
five years
. Both restricted stock awards and restricted stock units are forfeited, except in certain circumstances, in the event the employee terminates his or her employment or relationship with the Company prior to the lapse of the restriction.
The following table presents a summary of the Company's restricted stock and restricted stock units outstanding at and activity during the year ended
December 31, 2016
(“Price” reflects the weighted average share price at the date of grant):
|
|
|
|
|
|
|
|
(In thousands, except per share data)
|
Awards
|
|
Price
|
Outstanding, January 1, 2016
|
2,762
|
|
|
$
|
8.43
|
|
Granted
|
1,510
|
|
|
5.67
|
|
Vested (restriction lapsed)
|
(1,198
|
)
|
|
6.85
|
|
Forfeited
|
(331
|
)
|
|
8.19
|
|
Outstanding, December 31, 2016
|
2,743
|
|
|
7.63
|
|
Share-Based Compensation Cost
The share-based compensation cost is measured at the grant date based on the fair value of the award and is recognized as expense on a straight-line basis over the vesting period. Share-based compensation payments are recorded in corporate expenses and were
$10.2 million
,
$8.4 million
and
$7.7 million
, during the years ended
December 31, 2016
,
2015
and
2014
, respectively.
The tax benefit related to the share-based compensation expense for the years ended
December 31, 2016
,
2015
and
2014
was
$3.9 million
,
$3.2 million
and
$3.0 million
, respectively.
As of
December 31, 2016
, there was
$14.8 million
of unrecognized compensation cost related to unvested share-based compensation arrangements that will vest based on service conditions. This cost is expected to be recognized over a weighted average period of approximately
three years
. In addition, as of
December 31, 2016
, there was
$0.7 million
of unrecognized compensation cost related to unvested share-based compensation arrangements that will vest based on market, performance and service conditions. This cost will be recognized when it becomes probable that the performance condition will be satisfied.
Net Income (Loss) per Share
The following table presents the computation of earnings (loss) per share for the years ended December 31,
2016
,
2015
and
2014
:
|
|
|
|
|
|
|
|
|
|
|
|
|
(In thousands, except per share data)
|
Years Ended December 31,
|
|
2016
|
|
2015
|
|
2014
|
NUMERATOR:
|
|
|
|
|
|
Net income (loss) attributable to the Company – common shares
|
$
|
141,431
|
|
|
$
|
(96,072
|
)
|
|
$
|
(9,590
|
)
|
|
|
|
|
|
|
DENOMINATOR:
|
|
|
|
|
|
|
|
|
Weighted average common shares outstanding – basic
|
360,294
|
|
|
359,508
|
|
|
358,565
|
|
Stock options and restricted stock
(1)
:
|
1,318
|
|
|
|
|
|
|
|
Weighted average common shares outstanding – diluted
|
361,612
|
|
|
359,508
|
|
|
358,565
|
|
|
|
|
|
|
|
Net income (loss) attributable to the Company per common share:
|
|
|
|
|
|
|
|
|
Basic
|
$
|
0.39
|
|
|
$
|
(0.27
|
)
|
|
$
|
(0.03
|
)
|
Diluted
|
$
|
0.39
|
|
|
$
|
(0.27
|
)
|
|
$
|
(0.03
|
)
|
CLEAR CHANNEL OUTDOOR HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
|
|
(1)
|
5.6 million
,
8.1 million
and
8.5 million
stock options and restricted shares were outstanding at
December 31, 2016
,
2015
and
2014
, respectively, that were not included in the computation of diluted earnings per share because to do so would have been anti-dilutive.
|
NOTE 9 – EMPLOYEE STOCK AND SAVINGS PLANS
The Company’s U.S. employees are eligible to participate in various 401(k) savings and other plans provided by iHeartCommunications for the purpose of providing retirement benefits for substantially all employees. Under these plans, a Company employee can make pre-tax contributions and the Company will match
50%
of the employee’s first
5%
of pay contributed to the plan. Employees vest in these Company matching contributions based upon their years of service to the Company. Contributions to these plans of
$2.3 million
,
$2.4 million
and
$2.7 million
for the years ended
December 31, 2016
,
2015
and
2014
, respectively, were recorded as a component of operating expenses.
In addition, employees in the Company’s International markets participate in retirement plans administered by the Company which are not part of the 401(k) savings and other plans sponsored by iHeartCommunications. Contributions to these plans of
$15.1 million
,
$13.6 million
and
$15.6 million
for the years ended
December 31, 2016
,
2015
and
2014
, respectively, were recorded as a component of operating expenses.
Certain highly compensated executives of the Company are eligible to participate in a non-qualified deferred compensation plan sponsored by iHeartCommunications, under which such executives were able to make an annual election to defer up to
50%
of their annual salary and up to
80%
of their bonus before taxes. The Company suspended all salary and bonus deferral and company matching contributions to the deferred compensation plan on January 1, 2010. Matching credits on amounts deferred may be made in the sole discretion of iHeartCommunications and iHeartCommunications retains ownership of all assets until distributed. Participants in the plan have the opportunity to allocate their deferrals and any matching credits among different investment options, the performance of which is used to determine the amounts paid to participants under the plan. There is no liability recorded by the Company under this deferred compensation plan as the liability of this plan is that of iHeartCommunications.
NOTE 10 — OTHER INFORMATION
The following table discloses the components of “Other income (expense)” for the years ended
December 31, 2016
,
2015
and
2014
, respectively:
|
|
|
|
|
|
|
|
|
|
|
|
|
(In thousands)
|
Years Ended December 31,
|
|
2016
|
|
2015
|
|
2014
|
Foreign exchange loss
|
$
|
(69,599
|
)
|
|
$
|
14,790
|
|
|
$
|
15,460
|
|
Other
|
(552
|
)
|
|
(2,403
|
)
|
|
(275
|
)
|
Total other income (expense) — net
|
$
|
(70,151
|
)
|
|
$
|
12,387
|
|
|
$
|
15,185
|
|
For the years ended
December 31, 2016
,
2015
and
2014
the total increase (decrease) in other comprehensive income (loss) related to the impact of pensions on deferred income tax liabilities were
$(1.0) million
,
$1.6 million
and
$(5.6) million
, respectively.
The following table discloses the components of “Other current assets” as of
December 31, 2016
and
2015
, respectively:
|
|
|
|
|
|
|
|
|
(In thousands)
|
As of December 31,
|
|
2016
|
|
2015
|
Inventory
|
$
|
21,190
|
|
|
$
|
23,514
|
|
Deposits
|
1,445
|
|
|
1,954
|
|
Other receivables
|
9,302
|
|
|
2,278
|
|
Other
|
7,262
|
|
|
6,820
|
|
Total other current assets
|
$
|
39,199
|
|
|
$
|
34,566
|
|
CLEAR CHANNEL OUTDOOR HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The following table discloses the components of “Other assets” as of
December 31, 2016
and
2015
, respectively:
|
|
|
|
|
|
|
|
|
(In thousands)
|
As of December 31,
|
|
2016
|
|
2015
|
Investments
|
$
|
10,183
|
|
|
$
|
8,432
|
|
Deposits
|
19,318
|
|
|
24,672
|
|
Prepaid expenses
|
61,814
|
|
|
69,807
|
|
Other
|
30,698
|
|
|
4,629
|
|
Total other assets
|
$
|
122,013
|
|
|
$
|
107,540
|
|
The following table discloses the components of “Other long-term liabilities” as of
December 31, 2016
and
2015
, respectively:
|
|
|
|
|
|
|
|
|
(In thousands)
|
As of December 31,
|
|
2016
|
|
2015
|
Unrecognized tax benefits
|
$
|
23,772
|
|
|
$
|
23,802
|
|
Asset retirement obligation
|
39,451
|
|
|
45,125
|
|
Deferred rent
|
101,673
|
|
|
98,282
|
|
Employee related liabilities
|
55,460
|
|
|
47,491
|
|
Other
|
38,955
|
|
|
25,719
|
|
Total other long-term liabilities
|
$
|
259,311
|
|
|
$
|
240,419
|
|
The following table discloses the components of “Accumulated other comprehensive loss,” net of tax, as of
December 31, 2016
and
2015
, respectively:
|
|
|
|
|
|
|
|
|
(In thousands)
|
As of December 31,
|
|
2016
|
|
2015
|
Cumulative currency translation adjustments and other
|
$
|
(388,246
|
)
|
|
$
|
(453,995
|
)
|
Cumulative unrealized gain on securities
|
1,588
|
|
|
2,162
|
|
Total accumulated other comprehensive loss
|
$
|
(386,658
|
)
|
|
$
|
(451,833
|
)
|
NOTE 11 – SEGMENT DATA
The Company has
two
reportable segments, which it believes best reflect how the Company is currently managed – Americas and International. The Americas segment consists of operations primarily in the United States, Canada and Latin America and the International segment primarily includes operations in Europe and Asia. The Americas and International display inventory consists primarily of billboards, street furniture displays and transit displays. Corporate includes infrastructure and support including information technology, human resources, legal, finance and administrative functions of each of the Company’s reportable segments, as well as overall executive, administrative and support functions. Share-based payments are recorded in corporate expenses.
CLEAR CHANNEL OUTDOOR HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The following table presents the Company’s reportable segment results for the years ended
December 31, 2016
,
2015
and
2014
:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(In thousands)
|
Americas Outdoor Advertising
|
|
International Outdoor Advertising
|
|
Corporate and other reconciling items
|
|
Consolidated
|
Year Ended December 31, 2016
|
|
|
|
|
|
|
|
Revenue
|
$
|
1,278,413
|
|
|
$
|
1,423,982
|
|
|
$
|
—
|
|
|
$
|
2,702,395
|
|
Direct operating expenses
|
570,310
|
|
|
865,259
|
|
|
—
|
|
|
1,435,569
|
|
Selling, general and administrative expenses
|
225,415
|
|
|
289,787
|
|
|
—
|
|
|
515,202
|
|
Corporate expenses
|
—
|
|
|
—
|
|
|
117,383
|
|
|
117,383
|
|
Depreciation and amortization
|
185,654
|
|
|
152,758
|
|
|
5,712
|
|
|
344,124
|
|
Impairment charges
|
—
|
|
|
—
|
|
|
7,274
|
|
|
7,274
|
|
Other operating income, net
|
—
|
|
|
—
|
|
|
354,688
|
|
|
354,688
|
|
Operating income
|
$
|
297,034
|
|
|
$
|
116,178
|
|
|
$
|
224,319
|
|
|
$
|
637,531
|
|
Segment assets
|
$
|
3,175,355
|
|
|
$
|
1,342,356
|
|
|
$
|
1,201,117
|
|
|
$
|
5,718,828
|
|
Capital expenditures
|
$
|
81,401
|
|
|
$
|
143,788
|
|
|
$
|
4,583
|
|
|
$
|
229,772
|
|
Share-based compensation expense
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
10,238
|
|
|
$
|
10,238
|
|
|
|
|
|
|
|
|
|
Year Ended December 31, 2015
|
|
|
|
|
|
|
|
Revenue
|
$
|
1,349,021
|
|
|
$
|
1,457,183
|
|
|
$
|
—
|
|
|
$
|
2,806,204
|
|
Direct operating expenses
|
597,382
|
|
|
897,520
|
|
|
—
|
|
|
1,494,902
|
|
Selling, general and administrative expenses
|
233,254
|
|
|
298,250
|
|
|
—
|
|
|
531,504
|
|
Corporate expenses
|
—
|
|
|
—
|
|
|
116,380
|
|
|
116,380
|
|
Depreciation and amortization
|
204,514
|
|
|
166,060
|
|
|
5,388
|
|
|
375,962
|
|
Impairment charges
|
—
|
|
|
—
|
|
|
21,631
|
|
|
21,631
|
|
Other operating expense, net
|
—
|
|
|
—
|
|
|
(4,824
|
)
|
|
(4,824
|
)
|
Operating income (loss)
|
$
|
313,871
|
|
|
$
|
95,353
|
|
|
$
|
(148,223
|
)
|
|
$
|
261,001
|
|
Segment assets
|
$
|
3,567,764
|
|
|
$
|
1,573,161
|
|
|
$
|
1,165,863
|
|
|
$
|
6,306,788
|
|
Capital expenditures
|
$
|
82,165
|
|
|
$
|
132,554
|
|
|
$
|
3,613
|
|
|
$
|
218,332
|
|
Share-based compensation expense
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
8,359
|
|
|
$
|
8,359
|
|
|
|
|
|
|
|
|
|
Year Ended December 31, 2014
|
|
|
|
|
|
|
|
Revenue
|
$
|
1,350,623
|
|
|
$
|
1,610,636
|
|
|
$
|
—
|
|
|
$
|
2,961,259
|
|
Direct operating expenses
|
605,771
|
|
|
991,117
|
|
|
—
|
|
|
1,596,888
|
|
Selling, general and administrative expenses
|
233,641
|
|
|
314,878
|
|
|
—
|
|
|
548,519
|
|
Corporate expenses
|
—
|
|
|
—
|
|
|
130,894
|
|
|
130,894
|
|
Depreciation and amortization
|
203,928
|
|
|
198,143
|
|
|
4,172
|
|
|
406,243
|
|
Impairment charges
|
—
|
|
|
—
|
|
|
3,530
|
|
|
3,530
|
|
Other operating income, net
|
—
|
|
|
—
|
|
|
7,259
|
|
|
7,259
|
|
Operating income (loss)
|
$
|
307,283
|
|
|
$
|
106,498
|
|
|
$
|
(131,337
|
)
|
|
$
|
282,444
|
|
|
|
|
|
|
|
|
|
Segment assets
|
$
|
3,648,735
|
|
|
$
|
1,680,598
|
|
|
$
|
967,296
|
|
|
$
|
6,296,629
|
|
Capital expenditures
|
$
|
109,727
|
|
|
$
|
117,480
|
|
|
$
|
3,962
|
|
|
$
|
231,169
|
|
Share-based compensation expense
|
—
|
|
|
—
|
|
|
$
|
7,743
|
|
|
$
|
7,743
|
|
Revenue of
$1.6 billion
,
$1.6 billion
and
$1.8 billion
derived from the Company’s foreign operations are included in the data above for the years ended
December 31, 2016
,
2015
and
2014
, respectively. Revenue of
$1.1 billion
,
$1.2 billion
and
$1.2 billion
derived from the Company’s U.S. operations are included in the data above for the years ended
December 31, 2016
,
2015
and
2014
.
CLEAR CHANNEL OUTDOOR HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Identifiable long-lived assets of
$539.9 million
,
$628.8 million
and
$682.7 million
derived from the Company’s foreign operations are included in the data above for the years ended
December 31, 2016
,
2015
and
2014
, respectively. Identifiable long-lived assets of
$0.9 billion
,
$1.0 billion
and
$1.2 billion
derived from the Company’s U.S. operations are included in the data above for the years ended
December 31, 2016
,
2015
and
2014
, respectively.
CLEAR CHANNEL OUTDOOR HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 12 — QUARTERLY RESULTS OF OPERATIONS (Unaudited)
(In thousands, except per share data)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
March 31,
|
|
Three Months Ended
June 30,
|
|
Three Months Ended
September 30,
|
|
Three Months Ended
December 31,
|
|
2016
|
|
2015
|
|
2016
|
|
2015
|
|
2016
|
|
2015
|
|
2016
|
|
2015
|
Revenue
|
$
|
590,721
|
|
|
$
|
615,043
|
|
|
$
|
712,146
|
|
|
$
|
722,819
|
|
|
$
|
673,057
|
|
|
$
|
696,277
|
|
|
$
|
726,471
|
|
|
$
|
772,065
|
|
Operating expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Direct operating expenses
|
343,694
|
|
|
362,971
|
|
|
366,061
|
|
|
372,342
|
|
|
366,086
|
|
|
372,716
|
|
|
359,728
|
|
|
386,873
|
|
Selling, general and administrative expenses
|
126,801
|
|
|
127,130
|
|
|
135,567
|
|
|
132,522
|
|
|
126,164
|
|
|
132,559
|
|
|
126,670
|
|
|
139,293
|
|
Corporate expenses
|
28,239
|
|
|
28,753
|
|
|
29,652
|
|
|
30,154
|
|
|
28,058
|
|
|
28,347
|
|
|
31,434
|
|
|
29,126
|
|
Depreciation and amortization
|
85,395
|
|
|
94,094
|
|
|
86,974
|
|
|
93,405
|
|
|
85,780
|
|
|
93,040
|
|
|
85,975
|
|
|
95,423
|
|
Impairment charges
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
7,274
|
|
|
21,631
|
|
|
—
|
|
|
—
|
|
Other operating income (expense), net
|
284,774
|
|
|
(5,444
|
)
|
|
(59,384
|
)
|
|
659
|
|
|
1,095
|
|
|
5,029
|
|
|
128,203
|
|
|
(5,068
|
)
|
Operating income (loss)
|
291,366
|
|
|
(3,349
|
)
|
|
34,508
|
|
|
95,055
|
|
|
60,790
|
|
|
53,013
|
|
|
250,867
|
|
|
116,282
|
|
Interest expense
|
93,873
|
|
|
89,416
|
|
|
94,650
|
|
|
88,556
|
|
|
93,313
|
|
|
88,088
|
|
|
93,056
|
|
|
89,609
|
|
Interest income on Due from iHeartCommunications
|
12,713
|
|
|
15,253
|
|
|
11,291
|
|
|
15,049
|
|
|
12,429
|
|
|
15,630
|
|
|
13,876
|
|
|
15,507
|
|
Equity in earnings (loss) of nonconsolidated affiliates
|
(415
|
)
|
|
522
|
|
|
(232
|
)
|
|
(351
|
)
|
|
(727
|
)
|
|
(812
|
)
|
|
(315
|
)
|
|
352
|
|
Other income (expense), net
|
(5,803
|
)
|
|
19,938
|
|
|
(33,871
|
)
|
|
15,276
|
|
|
(6,524
|
)
|
|
(17,742
|
)
|
|
(23,953
|
)
|
|
(5,085
|
)
|
Income (loss) before income taxes
|
203,988
|
|
|
(57,052
|
)
|
|
(82,954
|
)
|
|
36,473
|
|
|
(27,345
|
)
|
|
(37,999
|
)
|
|
147,419
|
|
|
37,447
|
|
Income tax benefit (expense)
|
(62,912
|
)
|
|
24,099
|
|
|
21,712
|
|
|
(27,187
|
)
|
|
3,603
|
|
|
22,797
|
|
|
(39,078
|
)
|
|
(69,886
|
)
|
Consolidated net income (loss)
|
141,076
|
|
|
(32,953
|
)
|
|
(61,242
|
)
|
|
9,286
|
|
|
(23,742
|
)
|
|
(15,202
|
)
|
|
108,341
|
|
|
(32,439
|
)
|
Less amount attributable to noncontrolling interest
|
976
|
|
|
565
|
|
|
7,857
|
|
|
7,876
|
|
|
7,329
|
|
|
7,379
|
|
|
6,840
|
|
|
8,944
|
|
Net income (loss) attributable to the Company
|
$
|
140,100
|
|
|
$
|
(33,518
|
)
|
|
$
|
(69,099
|
)
|
|
$
|
1,410
|
|
|
$
|
(31,071
|
)
|
|
$
|
(22,581
|
)
|
|
$
|
101,501
|
|
|
$
|
(41,383
|
)
|
Net income (loss) per common share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
$
|
0.39
|
|
|
$
|
(0.09
|
)
|
|
$
|
(0.19
|
)
|
|
$
|
—
|
|
|
$
|
(0.09
|
)
|
|
$
|
(0.06
|
)
|
|
$
|
0.28
|
|
|
$
|
(0.12
|
)
|
Diluted
|
$
|
0.39
|
|
|
$
|
(0.09
|
)
|
|
$
|
(0.19
|
)
|
|
$
|
—
|
|
|
$
|
(0.09
|
)
|
|
$
|
(0.06
|
)
|
|
$
|
0.28
|
|
|
$
|
(0.12
|
)
|
CLEAR CHANNEL OUTDOOR HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 13 – GUARANTOR SUBSIDIARIES
The Company and certain of the Company’s direct and indirect wholly-owned domestic subsidiaries (the “Guarantor Subsidiaries”) fully and unconditionally guarantee on a joint and several basis certain of the outstanding indebtedness of Clear Channel Worldwide Holdings, Inc. ("CCWH" or the “Subsidiary Issuer”). The following consolidating schedules present financial information on a combined basis in conformity with the SEC’s Regulation S-X Rule 3-10(d):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(In thousands)
|
December 31, 2016
|
|
Parent
|
|
Subsidiary
|
|
Guarantor
|
|
Non-Guarantor
|
|
|
|
|
|
Company
|
|
Issuer
|
|
Subsidiaries
|
|
Subsidiaries
|
|
Eliminations
|
|
Consolidated
|
Cash and cash equivalents
|
300,285
|
|
|
—
|
|
|
61,542
|
|
|
180,168
|
|
|
—
|
|
|
$
|
541,995
|
|
Accounts receivable, net of allowance
|
—
|
|
|
—
|
|
|
193,474
|
|
|
399,596
|
|
|
—
|
|
|
593,070
|
|
Intercompany receivables
|
—
|
|
|
687,043
|
|
|
2,694,094
|
|
|
99,431
|
|
|
(3,480,568
|
)
|
|
—
|
|
Prepaid expenses
|
1,363
|
|
|
3,433
|
|
|
51,751
|
|
|
55,022
|
|
|
—
|
|
|
111,569
|
|
Assets held for sale
|
—
|
|
|
—
|
|
|
55,602
|
|
|
—
|
|
|
—
|
|
|
55,602
|
|
Other current assets
|
—
|
|
|
—
|
|
|
6,873
|
|
|
32,326
|
|
|
—
|
|
|
39,199
|
|
Total Current Assets
|
301,648
|
|
|
690,476
|
|
|
3,063,336
|
|
|
766,543
|
|
|
(3,480,568
|
)
|
|
1,341,435
|
|
Structures, net
|
—
|
|
|
—
|
|
|
746,877
|
|
|
449,799
|
|
|
—
|
|
|
1,196,676
|
|
Other property, plant and equipment, net
|
—
|
|
|
—
|
|
|
124,138
|
|
|
92,019
|
|
|
—
|
|
|
216,157
|
|
Indefinite-lived intangibles
|
—
|
|
|
—
|
|
|
951,439
|
|
|
9,527
|
|
|
—
|
|
|
960,966
|
|
Other intangibles, net
|
—
|
|
|
—
|
|
|
259,915
|
|
|
39,702
|
|
|
—
|
|
|
299,617
|
|
Goodwill
|
—
|
|
|
—
|
|
|
505,478
|
|
|
190,785
|
|
|
—
|
|
|
696,263
|
|
Due from iHeartCommunications
|
885,701
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
885,701
|
|
Intercompany notes receivable
|
182,026
|
|
|
4,887,354
|
|
|
—
|
|
|
—
|
|
|
(5,069,380
|
)
|
|
—
|
|
Other assets
|
280,435
|
|
|
418,658
|
|
|
1,320,838
|
|
|
65,589
|
|
|
(1,963,507
|
)
|
|
122,013
|
|
Total Assets
|
$
|
1,649,810
|
|
|
$
|
5,996,488
|
|
|
$
|
6,972,021
|
|
|
$
|
1,613,964
|
|
|
$
|
(10,513,455
|
)
|
|
$
|
5,718,828
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts payable
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
14,897
|
|
|
$
|
71,973
|
|
|
$
|
—
|
|
|
$
|
86,870
|
|
Intercompany payable
|
2,694,094
|
|
|
—
|
|
|
786,474
|
|
|
—
|
|
|
(3,480,568
|
)
|
|
—
|
|
Accrued expenses
|
2,223
|
|
|
58,652
|
|
|
35,509
|
|
|
384,488
|
|
|
—
|
|
|
480,872
|
|
Dividends payable
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Deferred income
|
—
|
|
|
—
|
|
|
33,471
|
|
|
33,534
|
|
|
—
|
|
|
67,005
|
|
Current portion of long-term debt
|
—
|
|
|
—
|
|
|
89
|
|
|
6,882
|
|
|
—
|
|
|
6,971
|
|
Total Current Liabilities
|
2,696,317
|
|
|
58,652
|
|
|
870,440
|
|
|
496,877
|
|
|
(3,480,568
|
)
|
|
641,718
|
|
Long-term debt
|
—
|
|
|
4,886,318
|
|
|
1,711
|
|
|
221,991
|
|
|
—
|
|
|
5,110,020
|
|
Intercompany notes payable
|
—
|
|
|
5,000
|
|
|
5,027,681
|
|
|
36,699
|
|
|
(5,069,380
|
)
|
|
—
|
|
Deferred tax liability
|
772
|
|
|
1,367
|
|
|
687,642
|
|
|
(49,214
|
)
|
|
—
|
|
|
640,567
|
|
Other long-term liabilities
|
1,055
|
|
|
—
|
|
|
135,094
|
|
|
123,162
|
|
|
—
|
|
|
259,311
|
|
Total stockholders' equity (deficit)
|
(1,048,334
|
)
|
|
1,045,151
|
|
|
249,453
|
|
|
784,449
|
|
|
(1,963,507
|
)
|
|
(932,788
|
)
|
Total Liabilities and Stockholders' Equity
|
$
|
1,649,810
|
|
|
$
|
5,996,488
|
|
|
$
|
6,972,021
|
|
|
$
|
1,613,964
|
|
|
$
|
(10,513,455
|
)
|
|
$
|
5,718,828
|
|
CLEAR CHANNEL OUTDOOR HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(In thousands)
|
December 31, 2015
|
|
Parent
|
|
Subsidiary
|
|
Guarantor
|
|
Non-Guarantor
|
|
|
|
|
|
Company
|
|
Issuer
|
|
Subsidiaries
|
|
Subsidiaries
|
|
Eliminations
|
|
Consolidated
|
Cash and cash equivalents
|
$
|
218,701
|
|
|
$
|
—
|
|
|
$
|
18,455
|
|
|
$
|
175,587
|
|
|
$
|
—
|
|
|
$
|
412,743
|
|
Accounts receivable, net of allowance
|
—
|
|
|
—
|
|
|
210,252
|
|
|
487,331
|
|
|
—
|
|
|
697,583
|
|
Intercompany receivables
|
—
|
|
|
461,549
|
|
|
1,921,025
|
|
|
8,003
|
|
|
(2,390,577
|
)
|
|
—
|
|
Prepaid expenses
|
1,423
|
|
|
3,433
|
|
|
62,039
|
|
|
60,835
|
|
|
—
|
|
|
127,730
|
|
Assets held for sale
|
—
|
|
|
—
|
|
|
295,075
|
|
|
—
|
|
|
—
|
|
|
295,075
|
|
Other current assets
|
—
|
|
|
—
|
|
|
1,823
|
|
|
32,743
|
|
|
—
|
|
|
34,566
|
|
Total Current Assets
|
220,124
|
|
|
464,982
|
|
|
2,508,669
|
|
|
764,499
|
|
|
(2,390,577
|
)
|
|
1,567,697
|
|
Structures, net
|
—
|
|
|
—
|
|
|
868,586
|
|
|
523,294
|
|
|
—
|
|
|
1,391,880
|
|
Other property, plant and equipment, net
|
—
|
|
|
—
|
|
|
129,339
|
|
|
106,767
|
|
|
—
|
|
|
236,106
|
|
Indefinite-lived intangibles
|
—
|
|
|
—
|
|
|
962,074
|
|
|
9,253
|
|
|
—
|
|
|
971,327
|
|
Other intangibles, net
|
—
|
|
|
—
|
|
|
272,307
|
|
|
70,557
|
|
|
—
|
|
|
342,864
|
|
Goodwill
|
—
|
|
|
—
|
|
|
522,750
|
|
|
235,825
|
|
|
—
|
|
|
758,575
|
|
Due from iHeartCommunications
|
930,799
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
930,799
|
|
Intercompany notes receivable
|
182,026
|
|
|
5,107,392
|
|
|
—
|
|
|
—
|
|
|
(5,289,418
|
)
|
|
—
|
|
Other assets
|
78,341
|
|
|
307,054
|
|
|
1,214,311
|
|
|
45,393
|
|
|
(1,537,559
|
)
|
|
107,540
|
|
Total Assets
|
$
|
1,411,290
|
|
|
$
|
5,879,428
|
|
|
$
|
6,478,036
|
|
|
$
|
1,755,588
|
|
|
$
|
(9,217,554
|
)
|
|
$
|
6,306,788
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts payable
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
12,124
|
|
|
$
|
88,086
|
|
|
$
|
—
|
|
|
$
|
100,210
|
|
Intercompany payable
|
1,915,287
|
|
|
—
|
|
|
475,290
|
|
|
—
|
|
|
(2,390,577
|
)
|
|
—
|
|
Accrued expenses
|
953
|
|
|
(707
|
)
|
|
108,480
|
|
|
398,939
|
|
|
—
|
|
|
507,665
|
|
Dividends payable
|
217,017
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
217,017
|
|
Deferred income
|
—
|
|
|
—
|
|
|
37,471
|
|
|
53,940
|
|
|
—
|
|
|
91,411
|
|
Current portion of long-term debt
|
—
|
|
|
—
|
|
|
65
|
|
|
4,245
|
|
|
—
|
|
|
4,310
|
|
Total Current Liabilities
|
2,133,257
|
|
|
(707
|
)
|
|
633,430
|
|
|
545,210
|
|
|
(2,390,577
|
)
|
|
920,613
|
|
Long-term debt
|
—
|
|
|
4,877,578
|
|
|
1,014
|
|
|
227,921
|
|
|
—
|
|
|
5,106,513
|
|
Intercompany notes payable
|
—
|
|
|
—
|
|
|
5,032,499
|
|
|
256,919
|
|
|
(5,289,418
|
)
|
|
—
|
|
Deferred tax liability
|
772
|
|
|
1,367
|
|
|
599,541
|
|
|
7,230
|
|
|
—
|
|
|
608,910
|
|
Other long-term liabilities
|
1,587
|
|
|
—
|
|
|
133,227
|
|
|
105,605
|
|
|
—
|
|
|
240,419
|
|
Total stockholders' equity (deficit)
|
(724,326
|
)
|
|
1,001,190
|
|
|
78,325
|
|
|
612,703
|
|
|
(1,537,559
|
)
|
|
(569,667
|
)
|
Total Liabilities and Stockholders' Equity
|
$
|
1,411,290
|
|
|
$
|
5,879,428
|
|
|
$
|
6,478,036
|
|
|
$
|
1,755,588
|
|
|
$
|
(9,217,554
|
)
|
|
$
|
6,306,788
|
|
CLEAR CHANNEL OUTDOOR HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(In thousands)
|
Year Ended December 31, 2016
|
|
Parent
|
|
Subsidiary
|
|
Guarantor
|
|
Non-Guarantor
|
|
|
|
|
|
Company
|
|
Issuer
|
|
Subsidiaries
|
|
Subsidiaries
|
|
Eliminations
|
|
Consolidated
|
Revenue
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
1,144,445
|
|
|
$
|
1,557,950
|
|
|
$
|
—
|
|
|
$
|
2,702,395
|
|
Operating expenses:
|
|
|
|
|
|
|
|
|
|
|
|
Direct operating expenses
|
—
|
|
|
—
|
|
|
497,634
|
|
|
937,935
|
|
|
—
|
|
|
1,435,569
|
|
Selling, general and administrative expenses
|
—
|
|
|
—
|
|
|
196,006
|
|
|
319,196
|
|
|
—
|
|
|
515,202
|
|
Corporate expenses
|
13,157
|
|
|
—
|
|
|
61,873
|
|
|
42,353
|
|
|
—
|
|
|
117,383
|
|
Depreciation and amortization
|
—
|
|
|
—
|
|
|
177,918
|
|
|
166,206
|
|
|
—
|
|
|
344,124
|
|
Impairment charges
|
—
|
|
|
—
|
|
|
—
|
|
|
7,274
|
|
|
—
|
|
|
7,274
|
|
Other operating income (expense), net
|
(427
|
)
|
|
—
|
|
|
291,717
|
|
|
63,398
|
|
|
—
|
|
|
354,688
|
|
Operating income (loss)
|
(13,584
|
)
|
|
—
|
|
|
502,731
|
|
|
148,384
|
|
|
—
|
|
|
637,531
|
|
Interest expense
|
(1,195
|
)
|
|
353,447
|
|
|
721
|
|
|
21,919
|
|
|
—
|
|
|
374,892
|
|
Interest income on Due from iHeartCommunications
|
50,309
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
50,309
|
|
Intercompany interest income
|
16,142
|
|
|
341,472
|
|
|
52,103
|
|
|
—
|
|
|
(409,717
|
)
|
|
—
|
|
Intercompany interest expense
|
50,309
|
|
|
15
|
|
|
357,614
|
|
|
1,779
|
|
|
(409,717
|
)
|
|
—
|
|
Gain on investments, net
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Equity in loss of nonconsolidated affiliates
|
136,919
|
|
|
44,767
|
|
|
(19,575
|
)
|
|
(2,837
|
)
|
|
(160,963
|
)
|
|
(1,689
|
)
|
Gain on extinguishment of debt
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Other income (expense), net
|
3,429
|
|
|
—
|
|
|
(6,626
|
)
|
|
(66,954
|
)
|
|
—
|
|
|
(70,151
|
)
|
Loss before income taxes
|
144,101
|
|
|
32,777
|
|
|
170,298
|
|
|
54,895
|
|
|
(160,963
|
)
|
|
241,108
|
|
Income tax benefit (expense)
|
(2,670
|
)
|
|
(55,574
|
)
|
|
(33,379
|
)
|
|
14,948
|
|
|
—
|
|
|
(76,675
|
)
|
Consolidated net loss
|
141,431
|
|
|
(22,797
|
)
|
|
136,919
|
|
|
69,843
|
|
|
(160,963
|
)
|
|
164,433
|
|
Less amount attributable to noncontrolling interest
|
—
|
|
|
—
|
|
|
—
|
|
|
23,002
|
|
|
—
|
|
|
23,002
|
|
Net loss attributable to the Company
|
$
|
141,431
|
|
|
$
|
(22,797
|
)
|
|
$
|
136,919
|
|
|
$
|
46,841
|
|
|
$
|
(160,963
|
)
|
|
$
|
141,431
|
|
Other comprehensive (loss), net of tax:
|
|
|
|
|
|
|
|
|
|
|
|
Foreign currency translation adjustments
|
—
|
|
|
—
|
|
|
(8,000
|
)
|
|
30,408
|
|
|
—
|
|
|
22,408
|
|
Unrealized holding loss on marketable securities
|
—
|
|
|
—
|
|
|
—
|
|
|
(576
|
)
|
|
—
|
|
|
(576
|
)
|
Other adjustments to comprehensive loss
|
—
|
|
|
—
|
|
|
—
|
|
|
(11,814
|
)
|
|
—
|
|
|
(11,814
|
)
|
Reclassification adjustments
|
—
|
|
|
—
|
|
|
—
|
|
|
46,730
|
|
|
—
|
|
|
46,730
|
|
Equity in subsidiary comprehensive loss
|
65,175
|
|
|
66,758
|
|
|
73,175
|
|
|
—
|
|
|
(205,108
|
)
|
|
—
|
|
Comprehensive loss
|
206,606
|
|
|
43,961
|
|
|
202,094
|
|
|
111,589
|
|
|
(366,071
|
)
|
|
198,179
|
|
Less amount attributable to noncontrolling interest
|
—
|
|
|
—
|
|
|
—
|
|
|
(8,427
|
)
|
|
—
|
|
|
(8,427
|
)
|
Comprehensive loss attributable to the Company
|
$
|
206,606
|
|
|
$
|
43,961
|
|
|
$
|
202,094
|
|
|
$
|
120,016
|
|
|
$
|
(366,071
|
)
|
|
$
|
206,606
|
|
CLEAR CHANNEL OUTDOOR HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(In thousands)
|
Year Ended December 31, 2015
|
|
Parent
|
|
Subsidiary
|
|
Guarantor
|
|
Non-Guarantor
|
|
|
|
|
|
Company
|
|
Issuer
|
|
Subsidiaries
|
|
Subsidiaries
|
|
Eliminations
|
|
Consolidated
|
Revenue
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
1,193,320
|
|
|
$
|
1,612,884
|
|
|
$
|
—
|
|
|
$
|
2,806,204
|
|
Operating expenses:
|
|
|
|
|
|
|
|
|
|
|
|
Direct operating expenses
|
—
|
|
|
—
|
|
|
507,729
|
|
|
987,173
|
|
|
—
|
|
|
1,494,902
|
|
Selling, general and administrative expenses
|
—
|
|
|
—
|
|
|
199,769
|
|
|
331,735
|
|
|
—
|
|
|
531,504
|
|
Corporate expenses
|
13,049
|
|
|
—
|
|
|
58,576
|
|
|
44,755
|
|
|
—
|
|
|
116,380
|
|
Depreciation and amortization
|
—
|
|
|
—
|
|
|
194,891
|
|
|
181,071
|
|
|
—
|
|
|
375,962
|
|
Impairment charges
|
—
|
|
|
—
|
|
|
21,631
|
|
|
—
|
|
|
—
|
|
|
21,631
|
|
Other operating income (expense), net
|
(458
|
)
|
|
—
|
|
|
(7,732
|
)
|
|
3,366
|
|
|
—
|
|
|
(4,824
|
)
|
Operating income (loss)
|
(13,507
|
)
|
|
—
|
|
|
202,992
|
|
|
71,516
|
|
|
—
|
|
|
261,001
|
|
Interest (income) expense, net
|
2
|
|
|
352,329
|
|
|
1,630
|
|
|
1,708
|
|
|
—
|
|
|
355,669
|
|
Interest income on Due from iHeartCommunications
|
61,439
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
61,439
|
|
Intercompany interest income
|
16,068
|
|
|
340,457
|
|
|
62,002
|
|
|
—
|
|
|
(418,527
|
)
|
|
—
|
|
Intercompany interest expense
|
61,439
|
|
|
—
|
|
|
356,525
|
|
|
563
|
|
|
(418,527
|
)
|
|
—
|
|
Gain on investments, net
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Equity in earnings (loss) of nonconsolidated affiliates
|
(76,018
|
)
|
|
10,383
|
|
|
5,609
|
|
|
(1,935
|
)
|
|
61,672
|
|
|
(289
|
)
|
Gain on extinguishment of debt
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Other income, net
|
2,915
|
|
|
3,440
|
|
|
20,318
|
|
|
10,289
|
|
|
(24,575
|
)
|
|
12,387
|
|
Income (loss) before income taxes
|
(70,544
|
)
|
|
1,951
|
|
|
(67,234
|
)
|
|
77,599
|
|
|
37,097
|
|
|
(21,131
|
)
|
Income tax expense
|
(953
|
)
|
|
(575
|
)
|
|
(8,784
|
)
|
|
(39,865
|
)
|
|
—
|
|
|
(50,177
|
)
|
Consolidated net income (loss)
|
(71,497
|
)
|
|
1,376
|
|
|
(76,018
|
)
|
|
37,734
|
|
|
37,097
|
|
|
(71,308
|
)
|
Less amount attributable to noncontrolling interest
|
—
|
|
|
—
|
|
|
—
|
|
|
24,764
|
|
|
—
|
|
|
24,764
|
|
Net income (loss) attributable to the Company
|
$
|
(71,497
|
)
|
|
$
|
1,376
|
|
|
$
|
(76,018
|
)
|
|
$
|
12,970
|
|
|
$
|
37,097
|
|
|
$
|
(96,072
|
)
|
Other comprehensive loss, net of tax:
|
|
|
|
|
|
|
|
|
|
|
|
Foreign currency translation adjustments
|
—
|
|
|
(3,440
|
)
|
|
(16,605
|
)
|
|
(92,684
|
)
|
|
—
|
|
|
(112,729
|
)
|
Unrealized holding gain on marketable securities
|
0
|
|
|
0
|
|
|
0
|
|
|
553
|
|
|
0
|
|
|
553
|
|
Other adjustments to comprehensive loss
|
—
|
|
|
—
|
|
|
—
|
|
|
(10,266
|
)
|
|
—
|
|
|
(10,266
|
)
|
Reclassification adjustments
|
—
|
|
|
—
|
|
|
—
|
|
|
808
|
|
|
—
|
|
|
808
|
|
Equity in subsidiary comprehensive loss
|
(110,480
|
)
|
|
(61,867
|
)
|
|
(93,875
|
)
|
|
—
|
|
|
266,222
|
|
|
—
|
|
Comprehensive loss
|
(181,977
|
)
|
|
(63,931
|
)
|
|
(186,498
|
)
|
|
(88,619
|
)
|
|
303,319
|
|
|
(217,706
|
)
|
Less amount attributable to noncontrolling interest
|
—
|
|
|
—
|
|
|
—
|
|
|
(11,154
|
)
|
|
—
|
|
|
(11,154
|
)
|
Comprehensive loss attributable to the Company
|
$
|
(181,977
|
)
|
|
$
|
(63,931
|
)
|
|
$
|
(186,498
|
)
|
|
$
|
(77,465
|
)
|
|
$
|
303,319
|
|
|
$
|
(206,552
|
)
|
CLEAR CHANNEL OUTDOOR HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(In thousands)
|
Year Ended December 31, 2014
|
|
Parent
|
|
Subsidiary
|
|
Guarantor
|
|
Non-Guarantor
|
|
|
|
|
|
Company
|
|
Issuer
|
|
Subsidiaries
|
|
Subsidiaries
|
|
Eliminations
|
|
Consolidated
|
Revenue
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
1,162,842
|
|
|
$
|
1,798,417
|
|
|
$
|
—
|
|
|
$
|
2,961,259
|
|
Operating expenses:
|
|
|
|
|
|
|
|
|
|
|
|
Direct operating expenses
|
—
|
|
|
—
|
|
|
495,651
|
|
|
1,101,237
|
|
|
—
|
|
|
1,596,888
|
|
Selling, general and administrative expenses
|
—
|
|
|
—
|
|
|
196,653
|
|
|
351,866
|
|
|
—
|
|
|
548,519
|
|
Corporate expenses
|
12,274
|
|
|
—
|
|
|
67,989
|
|
|
50,631
|
|
|
—
|
|
|
130,894
|
|
Depreciation and amortization
|
—
|
|
|
—
|
|
|
194,396
|
|
|
211,847
|
|
|
—
|
|
|
406,243
|
|
Impairment charges
|
—
|
|
|
—
|
|
|
3,530
|
|
|
—
|
|
|
—
|
|
|
3,530
|
|
Other operating income (expense), net
|
(541
|
)
|
|
—
|
|
|
3,235
|
|
|
4,565
|
|
|
—
|
|
|
7,259
|
|
Operating income (loss)
|
(12,815
|
)
|
|
—
|
|
|
207,858
|
|
|
87,401
|
|
|
—
|
|
|
282,444
|
|
Interest (income) expense, net
|
(6
|
)
|
|
352,280
|
|
|
1,555
|
|
|
(564
|
)
|
|
—
|
|
|
353,265
|
|
Interest income on Due from iHeartCommunications
|
60,179
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
60,179
|
|
Intercompany interest income
|
15,624
|
|
|
340,824
|
|
|
61,073
|
|
|
—
|
|
|
(417,521
|
)
|
|
—
|
|
Intercompany interest expense
|
60,179
|
|
|
—
|
|
|
356,448
|
|
|
894
|
|
|
(417,521
|
)
|
|
—
|
|
Gain on investments, net
|
0
|
|
|
0
|
|
|
0
|
|
|
|
|
|
0
|
|
|
—
|
|
Equity in earnings (loss) of nonconsolidated affiliates
|
(15,463
|
)
|
|
46,938
|
|
|
42,382
|
|
|
2,038
|
|
|
(72,106
|
)
|
|
3,789
|
|
Gain on extinguishment of debt
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Other income (expense), net
|
4,122
|
|
|
—
|
|
|
(2,691
|
)
|
|
13,754
|
|
|
—
|
|
|
15,185
|
|
Income (loss) before income taxes
|
(8,526
|
)
|
|
35,482
|
|
|
(49,381
|
)
|
|
102,863
|
|
|
(72,106
|
)
|
|
8,332
|
|
Income tax benefit (expense)
|
(1,064
|
)
|
|
(276
|
)
|
|
33,918
|
|
|
(23,791
|
)
|
|
—
|
|
|
8,787
|
|
Consolidated net income (loss)
|
(9,590
|
)
|
|
35,206
|
|
|
(15,463
|
)
|
|
79,072
|
|
|
(72,106
|
)
|
|
17,119
|
|
Less amount attributable to noncontrolling interest
|
|
|
|
|
|
|
|
|
|
26,709
|
|
|
|
|
|
26,709
|
|
Net income (loss) attributable to the Company
|
$
|
(9,590
|
)
|
|
$
|
35,206
|
|
|
$
|
(15,463
|
)
|
|
$
|
52,363
|
|
|
$
|
(72,106
|
)
|
|
$
|
(9,590
|
)
|
Other comprehensive loss, net of tax:
|
|
|
|
|
|
|
|
|
|
|
|
Foreign currency translation adjustments
|
—
|
|
|
21
|
|
|
(8,471
|
)
|
|
(114,654
|
)
|
|
—
|
|
|
(123,104
|
)
|
Unrealized holding gain on marketable securities
|
—
|
|
|
—
|
|
|
—
|
|
|
327
|
|
|
—
|
|
|
327
|
|
Other adjustments to comprehensive loss
|
|
|
|
—
|
|
|
—
|
|
|
(11,438
|
)
|
|
—
|
|
|
(11,438
|
)
|
Reclassification adjustments
|
—
|
|
|
—
|
|
|
—
|
|
|
8
|
|
|
—
|
|
|
8
|
|
Equity in subsidiary comprehensive loss
|
(127,781
|
)
|
|
(117,825
|
)
|
|
(119,310
|
)
|
|
—
|
|
|
364,916
|
|
|
—
|
|
Comprehensive loss
|
(137,371
|
)
|
|
(82,598
|
)
|
|
(143,244
|
)
|
|
(73,394
|
)
|
|
292,810
|
|
|
(143,797
|
)
|
Less amount attributable to noncontrolling interest
|
|
|
|
|
|
|
|
|
|
(6,426
|
)
|
|
|
|
|
(6,426
|
)
|
Comprehensive loss attributable to the Company
|
$
|
(137,371
|
)
|
|
$
|
(82,598
|
)
|
|
$
|
(143,244
|
)
|
|
$
|
(66,968
|
)
|
|
$
|
292,810
|
|
|
$
|
(137,371
|
)
|
CLEAR CHANNEL OUTDOOR HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(In thousands)
|
Year Ended December 31, 2016
|
|
Parent
|
|
Subsidiary
|
|
Guarantor
|
|
Non-Guarantor
|
|
|
|
|
|
Company
|
|
Issuer
|
|
Subsidiaries
|
|
Subsidiaries
|
|
Eliminations
|
|
Consolidated
|
Cash flows from operating activities:
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated net income (loss)
|
$
|
141,431
|
|
|
$
|
(22,797
|
)
|
|
$
|
136,919
|
|
|
$
|
69,843
|
|
|
$
|
(160,963
|
)
|
|
$
|
164,433
|
|
Reconciling items:
|
|
|
|
|
|
|
|
|
|
|
|
Impairment charges
|
—
|
|
|
—
|
|
|
—
|
|
|
7,274
|
|
|
—
|
|
|
7,274
|
|
Depreciation and amortization
|
—
|
|
|
—
|
|
|
177,918
|
|
|
166,206
|
|
|
—
|
|
|
344,124
|
|
Deferred taxes
|
—
|
|
|
—
|
|
|
88,102
|
|
|
(56,769
|
)
|
|
—
|
|
|
31,333
|
|
Provision for doubtful accounts
|
—
|
|
|
—
|
|
|
5,565
|
|
|
5,094
|
|
|
—
|
|
|
10,659
|
|
Amortization of deferred financing charges and note discounts, net
|
—
|
|
|
8,741
|
|
|
—
|
|
|
1,831
|
|
|
—
|
|
|
10,572
|
|
Share-based compensation
|
—
|
|
|
—
|
|
|
5,605
|
|
|
4,633
|
|
|
—
|
|
|
10,238
|
|
Gain on disposal of operating assets, net
|
—
|
|
|
—
|
|
|
(293,802
|
)
|
|
(69,683
|
)
|
|
—
|
|
|
(363,485
|
)
|
Equity in (earnings) loss of nonconsolidated affiliates
|
(136,919
|
)
|
|
(44,767
|
)
|
|
19,575
|
|
|
2,837
|
|
|
160,963
|
|
|
1,689
|
|
Other reconciling items, net
|
—
|
|
|
—
|
|
|
24,380
|
|
|
44,553
|
|
|
—
|
|
|
68,933
|
|
Changes in operating assets and liabilities, net of effects of acquisitions and dispositions:
|
|
|
|
|
|
|
|
|
|
|
|
Decrease in accounts receivable
|
—
|
|
|
—
|
|
|
13,660
|
|
|
16,648
|
|
|
—
|
|
|
30,308
|
|
(Increase) decrease in prepaids and other current assets
|
60
|
|
|
—
|
|
|
5,662
|
|
|
(21,300
|
)
|
|
—
|
|
|
(15,578
|
)
|
Increase (decrease) in accrued expenses
|
(228
|
)
|
|
59,359
|
|
|
(70,833
|
)
|
|
37,220
|
|
|
—
|
|
|
25,518
|
|
Increase (decrease) in accounts payable
|
—
|
|
|
—
|
|
|
2,764
|
|
|
(6,561
|
)
|
|
—
|
|
|
(3,797
|
)
|
Increase (decrease) in accrued interest
|
—
|
|
|
—
|
|
|
(571
|
)
|
|
765
|
|
|
—
|
|
|
194
|
|
Decrease in deferred income
|
—
|
|
|
—
|
|
|
(5,265
|
)
|
|
(12,854
|
)
|
|
—
|
|
|
(18,119
|
)
|
Changes in other operating assets and liabilities
|
—
|
|
|
—
|
|
|
9,846
|
|
|
(3,849
|
)
|
|
—
|
|
|
5,997
|
|
Net cash provided by operating activities
|
$
|
4,344
|
|
|
$
|
536
|
|
|
$
|
119,525
|
|
|
$
|
185,888
|
|
|
$
|
—
|
|
|
$
|
310,293
|
|
Cash flows from investing activities:
|
|
|
|
|
|
|
|
|
|
|
|
Purchases of property, plant and equipment
|
—
|
|
|
—
|
|
|
(77,034
|
)
|
|
(152,738
|
)
|
|
—
|
|
|
(229,772
|
)
|
Proceeds from disposal of assets
|
—
|
|
|
—
|
|
|
358,906
|
|
|
449,288
|
|
|
—
|
|
|
808,194
|
|
Purchases of other operating assets
|
—
|
|
|
—
|
|
|
(1,689
|
)
|
|
(555
|
)
|
|
—
|
|
|
(2,244
|
)
|
Proceeds from sale of investment securities
|
—
|
|
|
—
|
|
|
—
|
|
|
781
|
|
|
—
|
|
|
781
|
|
Decrease in intercompany notes receivable, net
|
—
|
|
|
220,038
|
|
|
—
|
|
|
—
|
|
|
(220,038
|
)
|
|
—
|
|
Dividends from subsidiaries
|
—
|
|
|
—
|
|
|
235,467
|
|
|
—
|
|
|
(235,467
|
)
|
|
—
|
|
Change in other, net
|
—
|
|
|
(79
|
)
|
|
—
|
|
|
(25,460
|
)
|
|
79
|
|
|
(25,460
|
)
|
Net cash provided by (used for) investing activities
|
$
|
—
|
|
|
$
|
219,959
|
|
|
$
|
515,650
|
|
|
$
|
271,316
|
|
|
$
|
(455,426
|
)
|
|
$
|
551,499
|
|
Cash flows from financing activities:
|
|
|
|
|
|
|
|
|
|
|
|
Payments on credit facilities
|
—
|
|
|
—
|
|
|
—
|
|
|
(2,100
|
)
|
|
—
|
|
|
(2,100
|
)
|
Proceeds from long-term debt
|
—
|
|
|
—
|
|
|
800
|
|
|
6,056
|
|
|
—
|
|
|
6,856
|
|
Payments on long-term debt
|
—
|
|
|
—
|
|
|
(79
|
)
|
|
(2,255
|
)
|
|
—
|
|
|
(2,334
|
)
|
Net transfers to iHeartCommunications
|
45,099
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
45,099
|
|
Dividends and other payments to noncontrolling interests
|
—
|
|
|
—
|
|
|
—
|
|
|
(16,917
|
)
|
|
—
|
|
|
(16,917
|
)
|
Dividends paid
|
(755,537
|
)
|
|
—
|
|
|
(914
|
)
|
|
(234,554
|
)
|
|
235,467
|
|
|
(755,538
|
)
|
Increase (decrease) in intercompany notes payable, net
|
—
|
|
|
5,000
|
|
|
(3,604
|
)
|
|
(221,434
|
)
|
|
220,038
|
|
|
—
|
|
Intercompany funding
|
789,044
|
|
|
(225,495
|
)
|
|
(588,291
|
)
|
|
24,742
|
|
|
—
|
|
|
—
|
|
Deferred financing charges
|
—
|
|
|
—
|
|
|
—
|
|
|
(199
|
)
|
|
—
|
|
|
(199
|
)
|
Change in other, net
|
(1,366
|
)
|
|
—
|
|
|
—
|
|
|
79
|
|
|
(79
|
)
|
|
(1,366
|
)
|
Net cash provided by (used for) financing activities
|
77,240
|
|
|
(220,495
|
)
|
|
(592,088
|
)
|
|
(446,582
|
)
|
|
455,426
|
|
|
(726,499
|
)
|
Effect of exchange rate changes on cash
|
—
|
|
|
—
|
|
|
—
|
|
|
(6,041
|
)
|
|
—
|
|
|
(6,041
|
)
|
Net increase in cash and cash equivalents
|
81,584
|
|
|
—
|
|
|
43,087
|
|
|
4,581
|
|
|
—
|
|
|
129,252
|
|
Cash and cash equivalents at beginning of year
|
218,701
|
|
|
—
|
|
|
18,455
|
|
|
175,587
|
|
|
—
|
|
|
412,743
|
|
Cash and cash equivalents at end of year
|
$
|
300,285
|
|
|
$
|
—
|
|
|
$
|
61,542
|
|
|
$
|
180,168
|
|
|
$
|
—
|
|
|
$
|
541,995
|
|
CLEAR CHANNEL OUTDOOR HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(In thousands)
|
Year Ended December 31, 2015
|
|
Parent
|
|
Subsidiary
|
|
Guarantor
|
|
Non-Guarantor
|
|
|
|
|
|
Company
|
|
Issuer
|
|
Subsidiaries
|
|
Subsidiaries
|
|
Eliminations
|
|
Consolidated
|
Cash flows from operating activities:
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated net income (loss)
|
$
|
(71,497
|
)
|
|
$
|
1,376
|
|
|
$
|
(76,018
|
)
|
|
$
|
37,734
|
|
|
$
|
37,097
|
|
|
$
|
(71,308
|
)
|
Reconciling items:
|
|
|
|
|
|
|
|
|
|
|
|
Impairment charges
|
—
|
|
|
—
|
|
|
21,631
|
|
|
—
|
|
|
—
|
|
|
21,631
|
|
Depreciation and amortization
|
—
|
|
|
—
|
|
|
194,891
|
|
|
181,071
|
|
|
—
|
|
|
375,962
|
|
Deferred taxes
|
—
|
|
|
1,282
|
|
|
7,539
|
|
|
(5,282
|
)
|
|
—
|
|
|
3,539
|
|
Provision for doubtful accounts
|
—
|
|
|
—
|
|
|
5,398
|
|
|
7,986
|
|
|
—
|
|
|
13,384
|
|
Amortization of deferred financing charges and note discounts, net
|
—
|
|
|
7,468
|
|
|
1,230
|
|
|
72
|
|
|
—
|
|
|
8,770
|
|
Share-based compensation
|
—
|
|
|
—
|
|
|
5,712
|
|
|
2,647
|
|
|
—
|
|
|
8,359
|
|
Gain on sale of operating and fixed assets
|
—
|
|
|
—
|
|
|
(1,235
|
)
|
|
(4,233
|
)
|
|
—
|
|
|
(5,468
|
)
|
Equity in (earnings) loss of nonconsolidated affiliates
|
76,018
|
|
|
(10,383
|
)
|
|
(5,609
|
)
|
|
1,935
|
|
|
(61,672
|
)
|
|
289
|
|
Other reconciling items, net
|
—
|
|
|
(3,440
|
)
|
|
1,339
|
|
|
(11,339
|
)
|
|
—
|
|
|
(13,440
|
)
|
Changes in operating assets and liabilities, net of effects of acquisitions and dispositions:
|
|
|
|
|
|
|
|
|
|
|
|
Increase in accounts receivable
|
—
|
|
|
—
|
|
|
(12,878
|
)
|
|
(43,702
|
)
|
|
—
|
|
|
(56,580
|
)
|
(Increase) decrease in prepaids and other current assets
|
(124
|
)
|
|
(3,433
|
)
|
|
4,664
|
|
|
(2,835
|
)
|
|
|
|
|
(1,728
|
)
|
Increase (decrease) in accrued expenses
|
486
|
|
|
(983
|
)
|
|
5,476
|
|
|
(414
|
)
|
|
—
|
|
|
4,565
|
|
Increase (decrease) in accounts payable
|
—
|
|
|
—
|
|
|
(15,742
|
)
|
|
26,424
|
|
|
19,960
|
|
|
30,642
|
|
Increase (decrease) in accrued interest
|
—
|
|
|
(3,199
|
)
|
|
15
|
|
|
(888
|
)
|
|
—
|
|
|
(4,072
|
)
|
Increase (decrease) in deferred income
|
—
|
|
|
—
|
|
|
(6,879
|
)
|
|
9,428
|
|
|
—
|
|
|
2,549
|
|
Changes in other operating assets and liabilities
|
—
|
|
|
—
|
|
|
(17,114
|
)
|
|
(1,047
|
)
|
|
—
|
|
|
(18,161
|
)
|
Net cash provided by (used for) operating activities
|
$
|
4,883
|
|
|
$
|
(11,312
|
)
|
|
$
|
112,420
|
|
|
$
|
197,557
|
|
|
$
|
(4,615
|
)
|
|
$
|
298,933
|
|
Cash flows from investing activities:
|
|
|
|
|
|
|
|
|
|
|
|
Purchases of property, plant and equipment
|
—
|
|
|
—
|
|
|
(72,374
|
)
|
|
(145,958
|
)
|
|
—
|
|
|
(218,332
|
)
|
Proceeds from disposal of assets
|
—
|
|
|
—
|
|
|
4,626
|
|
|
6,638
|
|
|
—
|
|
|
11,264
|
|
Purchases of other operating assets
|
—
|
|
|
—
|
|
|
(23,042
|
)
|
|
(598
|
)
|
|
—
|
|
|
(23,640
|
)
|
Proceeds from sale of investment securities
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Purchases of businesses
|
—
|
|
|
—
|
|
|
—
|
|
|
(24,701
|
)
|
|
—
|
|
|
(24,701
|
)
|
Decrease in intercompany notes receivable, net
|
—
|
|
|
70,125
|
|
|
—
|
|
|
—
|
|
|
(70,125
|
)
|
|
—
|
|
Dividends from subsidiaries
|
—
|
|
|
157,570
|
|
|
—
|
|
|
—
|
|
|
(157,570
|
)
|
|
—
|
|
Change in other, net
|
—
|
|
|
(8,606
|
)
|
|
(909
|
)
|
|
(2,314
|
)
|
|
9,513
|
|
|
(2,316
|
)
|
Net cash provided by (used for) investing activities
|
$
|
—
|
|
|
$
|
219,089
|
|
|
$
|
(91,699
|
)
|
|
$
|
(166,933
|
)
|
|
$
|
(218,182
|
)
|
|
$
|
(257,725
|
)
|
Cash flows from financing activities:
|
|
|
|
|
|
|
|
|
|
|
|
Draws on credit facilities
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Payments on credit facilities
|
—
|
|
|
—
|
|
|
—
|
|
|
(3,849
|
)
|
|
—
|
|
|
(3,849
|
)
|
Proceeds from long-term debt
|
—
|
|
|
—
|
|
|
—
|
|
|
222,777
|
|
|
—
|
|
|
222,777
|
|
Payments on long-term debt
|
—
|
|
|
—
|
|
|
(56
|
)
|
|
—
|
|
|
—
|
|
|
(56
|
)
|
Net transfers to iHeartCommunications
|
17,007
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
17,007
|
|
Dividends and other payments to noncontrolling interests
|
—
|
|
|
—
|
|
|
—
|
|
|
(30,870
|
)
|
|
—
|
|
|
(30,870
|
)
|
Dividends paid
|
—
|
|
|
—
|
|
|
—
|
|
|
(182,145
|
)
|
|
182,145
|
|
|
—
|
|
Decrease in intercompany notes payable, net
|
—
|
|
|
—
|
|
|
(4,625
|
)
|
|
(65,500
|
)
|
|
70,125
|
|
|
—
|
|
Intercompany funding
|
193,021
|
|
|
(207,777
|
)
|
|
2,415
|
|
|
12,341
|
|
|
—
|
|
|
—
|
|
Deferred financing charges
|
—
|
|
|
—
|
|
|
—
|
|
|
(8,606
|
)
|
|
—
|
|
|
(8,606
|
)
|
Change in other, net
|
2,885
|
|
|
—
|
|
|
—
|
|
|
9,279
|
|
|
(9,513
|
)
|
|
2,651
|
|
Net cash provided by (used for) financing activities
|
212,913
|
|
|
(207,777
|
)
|
|
(2,266
|
)
|
|
(46,573
|
)
|
|
242,757
|
|
|
199,054
|
|
Effect of exchange rate changes on cash
|
—
|
|
|
—
|
|
|
—
|
|
|
(13,723
|
)
|
|
—
|
|
|
(13,723
|
)
|
Net increase (decrease) in cash and cash equivalents
|
217,796
|
|
|
—
|
|
|
18,455
|
|
|
(29,672
|
)
|
|
19,960
|
|
|
226,539
|
|
Cash and cash equivalents at beginning of year
|
905
|
|
|
—
|
|
|
—
|
|
|
205,259
|
|
|
(19,960
|
)
|
|
186,204
|
|
Cash and cash equivalents at end of year
|
$
|
218,701
|
|
|
$
|
—
|
|
|
$
|
18,455
|
|
|
$
|
175,587
|
|
|
$
|
—
|
|
|
$
|
412,743
|
|
CLEAR CHANNEL OUTDOOR HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(In thousands)
|
Year Ended December 31, 2014
|
|
Parent
|
|
Subsidiary
|
|
Guarantor
|
|
Non-Guarantor
|
|
|
|
|
|
Company
|
|
Issuer
|
|
Subsidiaries
|
|
Subsidiaries
|
|
Eliminations
|
|
Consolidated
|
Cash flows from operating activities:
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated net income (loss)
|
$
|
(9,590
|
)
|
|
$
|
35,206
|
|
|
$
|
(15,463
|
)
|
|
$
|
79,072
|
|
|
$
|
(72,106
|
)
|
|
$
|
17,119
|
|
Reconciling items:
|
|
|
|
|
|
|
|
|
|
|
|
Impairment charges
|
—
|
|
|
—
|
|
|
3,530
|
|
|
—
|
|
|
—
|
|
|
3,530
|
|
Depreciation and amortization
|
—
|
|
|
—
|
|
|
194,396
|
|
|
211,847
|
|
|
—
|
|
|
406,243
|
|
Deferred taxes
|
597
|
|
|
—
|
|
|
(29,835
|
)
|
|
(4,331
|
)
|
|
—
|
|
|
(33,569
|
)
|
Provision for doubtful accounts
|
—
|
|
|
—
|
|
|
3,247
|
|
|
3,903
|
|
|
—
|
|
|
7,150
|
|
Amortization of deferred financing charges and note discounts, net
|
—
|
|
|
7,428
|
|
|
1,232
|
|
|
—
|
|
|
—
|
|
|
8,660
|
|
Share-based compensation
|
—
|
|
|
—
|
|
|
5,006
|
|
|
2,737
|
|
|
—
|
|
|
7,743
|
|
Gain on sale of operating and fixed assets
|
—
|
|
|
—
|
|
|
(3,236
|
)
|
|
(4,565
|
)
|
|
—
|
|
|
(7,801
|
)
|
Equity in (earnings) loss of nonconsolidated affiliates
|
15,463
|
|
|
(46,938
|
)
|
|
(42,382
|
)
|
|
(2,038
|
)
|
|
72,106
|
|
|
(3,789
|
)
|
Other reconciling items, net
|
—
|
|
|
—
|
|
|
984
|
|
|
(15,445
|
)
|
|
—
|
|
|
(14,461
|
)
|
Changes in operating assets and liabilities, net of effects of acquisitions and dispositions:
|
|
|
|
|
|
|
|
|
|
|
|
(Increase) decrease in accounts receivable
|
—
|
|
|
—
|
|
|
404
|
|
|
(39,022
|
)
|
|
—
|
|
|
(38,618
|
)
|
(Increase) decrease in prepaids and other current assets
|
94
|
|
|
|
|
|
6,368
|
|
|
(480
|
)
|
|
|
|
|
5,982
|
|
Increase (decrease) in accrued expenses
|
(258
|
)
|
|
1,315
|
|
|
(2,487
|
)
|
|
19,742
|
|
|
—
|
|
|
18,312
|
|
Increase (decrease) in accounts payable
|
—
|
|
|
—
|
|
|
16,126
|
|
|
(626
|
)
|
|
(19,960
|
)
|
|
(4,460
|
)
|
Increase (decrease) in accrued interest
|
—
|
|
|
818
|
|
|
(179
|
)
|
|
172
|
|
|
—
|
|
|
811
|
|
Increase (decrease) in deferred income
|
—
|
|
|
—
|
|
|
1,735
|
|
|
(7,105
|
)
|
|
—
|
|
|
(5,370
|
)
|
Changes in other operating assets and liabilities
|
—
|
|
|
—
|
|
|
1,143
|
|
|
(20,202
|
)
|
|
—
|
|
|
(19,059
|
)
|
Net cash provided by (used by) operating activities
|
6,306
|
|
|
(2,171
|
)
|
|
140,589
|
|
|
223,659
|
|
|
(19,960
|
)
|
|
348,423
|
|
Cash flows from investing activities:
|
|
|
|
|
|
|
|
|
|
|
|
Purchases of property, plant and equipment
|
—
|
|
|
—
|
|
|
(96,695
|
)
|
|
(134,474
|
)
|
|
—
|
|
|
(231,169
|
)
|
Proceeds from disposal of assets
|
—
|
|
|
—
|
|
|
6,216
|
|
|
6,645
|
|
|
—
|
|
|
12,861
|
|
Purchases of other operating assets
|
—
|
|
|
—
|
|
|
(252
|
)
|
|
(660
|
)
|
|
—
|
|
|
(912
|
)
|
Proceeds from sale of investment securities
|
—
|
|
|
—
|
|
|
—
|
|
|
15,834
|
|
|
—
|
|
|
15,834
|
|
Purchases of businesses
|
—
|
|
|
—
|
|
|
—
|
|
|
339
|
|
|
—
|
|
|
339
|
|
Decrease in intercompany notes receivable, net
|
—
|
|
|
84,264
|
|
|
—
|
|
|
—
|
|
|
(84,264
|
)
|
|
—
|
|
Dividends from subsidiaries
|
—
|
|
|
—
|
|
|
3,182
|
|
|
—
|
|
|
(3,182
|
)
|
|
—
|
|
Change in other, net
|
—
|
|
|
|
|
|
(11
|
)
|
|
(3,373
|
)
|
|
—
|
|
|
(3,384
|
)
|
Net cash provided by (used by) investing activities
|
—
|
|
|
84,264
|
|
|
(87,560
|
)
|
|
(115,689
|
)
|
|
(87,446
|
)
|
|
(206,431
|
)
|
Cash flows from financing activities:
|
|
|
|
|
|
|
|
|
|
|
|
Draws on credit facilities
|
—
|
|
|
—
|
|
|
—
|
|
|
3,010
|
|
|
—
|
|
|
3,010
|
|
Payments on credit facilities
|
—
|
|
|
—
|
|
|
—
|
|
|
(3,682
|
)
|
|
—
|
|
|
(3,682
|
)
|
Payments on long-term debt
|
—
|
|
|
—
|
|
|
(48
|
)
|
|
—
|
|
|
—
|
|
|
(48
|
)
|
Net transfer from iHeartCommunications
|
(68,804
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(68,804
|
)
|
Payments to repurchase noncontrolling interests
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Dividends and other payments to noncontrolling interests
|
—
|
|
|
—
|
|
|
—
|
|
|
(18,995
|
)
|
|
—
|
|
|
(18,995
|
)
|
Dividends paid
|
(175,022
|
)
|
|
—
|
|
|
—
|
|
|
(3,182
|
)
|
|
3,182
|
|
|
(175,022
|
)
|
Decrease in intercompany notes payable, net
|
—
|
|
|
—
|
|
|
—
|
|
|
(84,264
|
)
|
|
84,264
|
|
|
—
|
|
Deferred financing charges
|
—
|
|
|
—
|
|
|
(4
|
)
|
|
—
|
|
|
—
|
|
|
(4
|
)
|
Intercompany funding
|
153,004
|
|
|
(82,093
|
)
|
|
(58,862
|
)
|
|
(12,049
|
)
|
|
—
|
|
|
—
|
|
Change in other, net
|
2,236
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
2,236
|
|
Net cash used by financing activities
|
(88,586
|
)
|
|
(82,093
|
)
|
|
(58,914
|
)
|
|
(119,162
|
)
|
|
87,446
|
|
|
(261,309
|
)
|
Effect of exchange rate changes on cash
|
|
|
|
|
|
|
|
|
|
(9,024
|
)
|
|
|
|
|
(9,024
|
)
|
Net decrease in cash and cash equivalents
|
(82,280
|
)
|
|
—
|
|
|
(5,885
|
)
|
|
(20,216
|
)
|
|
(19,960
|
)
|
|
(128,341
|
)
|
Cash and cash equivalents at beginning of year
|
83,185
|
|
|
—
|
|
|
5,885
|
|
|
225,475
|
|
|
—
|
|
|
314,545
|
|
Cash and cash equivalents at end of year
|
$
|
905
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
205,259
|
|
|
$
|
(19,960
|
)
|
|
$
|
186,204
|
|