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EXCEL - IDEA: XBRL DOCUMENT - Clear Channel Outdoor Holdings, Inc.Financial_Report.xls
EX-11 - STATEMENT RE: COMPUTATION OF LOSS PER SHARE - Clear Channel Outdoor Holdings, Inc.Exhibit11.htm
EX-32 - CERTIFICATION OF CHIEF FINANCIAL OFFICER PURSUANT TO SECTION 906 - Clear Channel Outdoor Holdings, Inc.Exhibit32.2.htm
EX-10 - AMENDMENT TO EMPLOYMENT AGREEMENT C. WILLIAM ECCLESHARE - Clear Channel Outdoor Holdings, Inc.Exhibit10.1.htm
EX-10 - EMPLOYMENT AGREEMENT SCOTT WELLS - Clear Channel Outdoor Holdings, Inc.Exhibit10.2.htm
EX-32 - CERTIFICATION OF CHIEF EXECUTIVE OFFICER PURSUANT TO SECTION 906 - Clear Channel Outdoor Holdings, Inc.Exhibit32.1.htm
EX-31 - CERTIFICATION OF CHIEF EXECUTIVE OFFICER PURSUANT TO SECTION 302 - Clear Channel Outdoor Holdings, Inc.Exhibit31.1.htm
EX-31 - CERTIFICATION OF CHIEF FINANCIAL OFFICER PURSUANT TO SECTION 302 - Clear Channel Outdoor Holdings, Inc.Exhibit31.2.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-

(Mark One)

[X]          QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED March 31, 2015

 

[  ]           TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM                          TO                           

 

Commission File Number

1‑32663

 

CLEAR CHANNEL OUTDOOR HOLDINGS, INC.

(Exact name of registrant as specified in its charter)

 

 

                                        Delaware                                                                                             86-0812139 

                      (State or other jurisdiction of                                                      (I.R.S. Employer Identification No.)

                     incorporation or organization)

 

                             200 East Basse Road                                                                                       78209

                              San Antonio, Texas                                                                                    (Zip Code)

             (Address of principal executive offices)

 

(210) 832-3700

(Registrant’s telephone number, including area code)

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes [X] No [  ]

 

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes [X] No [  ]

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.  See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer  [  ]       Accelerated filer   [X]    Non-accelerated filer [  ]       Smaller reporting company   [  ]

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  Yes [  ] No [X]

 

Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date.

Class

- - - - - - - - - - - - - - - - - - - - - - - - - - - - - -

Outstanding at April 26, 2015

- - - - - - - - - - - - - - - - - - - - - - - - - -

Class A Common Stock, $.01 par value

Class B Common Stock, $.01 par value

45,733,862

315,000,000

  

 


 

CLEAR CHANNEL OUTDOOR HOLDINGS, INC.

 

INDEX

 

 

 

Page No.

Part I -- Financial Information

 

Item 1.       Financial Statements

1

Consolidated Balance Sheets as of March 31, 2015 and December 31, 2014

1

Consolidated Statements of Comprehensive Loss for the three months ended March 31, 2015 and 2014

2

Consolidated Statements of Cash Flows for the three months ended March 31, 2015 and 2014

3

Notes to Consolidated Financial Statements

4

Item 2.       Management’s Discussion and Analysis of Financial Condition and Results of Operations

18

Item 3.       Quantitative and Qualitative Disclosures About Market Risk

28

Item 4.       Controls and Procedures

28

Part II -- Other Information

 

Item 1.       Legal Proceedings

30

Item 1A.    Risk Factors

30

Item 2.       Unregistered Sales of Equity Securities and Use of Proceeds

31

Item 3.       Defaults Upon Senior Securities

31

Item 4.       Mine Safety Disclosures

31

Item 5.       Other Information

31

Item 6.       Exhibits

31

Signatures

33

  

 


PART I – FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

CONSOLIDATED BALANCE SHEETS
CLEAR CHANNEL OUTDOOR HOLDINGS, INC. AND SUBSIDIARIES

 

 

 

March 31,

 

 

 

(In thousands)

2015

 

December 31,

 

(Unaudited)

 

2014

CURRENT ASSETS

 

 

 

 

 

Cash and cash equivalents

$

 207,280  

 

$

 186,204  

Accounts receivable, net of allowance of $21,142 in 2015 and $24,308 in 2014

 

 628,679  

 

 

 697,811  

Prepaid expenses

 

 154,141  

 

 

 134,041  

Other current assets

 

 81,291  

 

 

 61,893  

 

Total Current Assets

 

 1,071,391  

 

 

 1,079,949  

PROPERTY, PLANT AND EQUIPMENT

 

 

 

 

 

Structures, net

 

 1,567,653  

 

 

 1,614,199  

Other property, plant and equipment, net

 

 263,514  

 

 

 291,452  

INTANGIBLE ASSETS AND GOODWILL

 

 

 

 

 

Indefinite-lived intangibles

 

 1,065,810  

 

 

 1,066,748  

Other intangibles, net

 

 393,352  

 

 

 412,064  

Goodwill

 

 800,320  

 

 

 817,112  

OTHER ASSETS

 

 

 

 

 

Due from iHeartCommunications

 

 886,321  

 

 

 947,806  

Other assets

 

 131,428  

 

 

 133,081  

Total Assets

$

 6,179,789  

 

$

 6,362,411  

CURRENT LIABILITIES

 

 

 

 

 

Accounts payable

$

 74,164  

 

$

 75,915  

Accrued expenses

 

 454,543  

 

 

 543,818  

Deferred income

 

 129,264  

 

 

 94,635  

Current portion of long-term debt

 

 2,700  

 

 

 3,461  

 

Total Current Liabilities

 

 660,671  

 

 

 717,829  

Long-term debt

 

 4,928,335  

 

 

 4,930,468  

Deferred tax liability

 

 616,112  

 

 

 620,255  

Other long-term liabilities

 

 229,927  

 

 

 234,800  

SHAREHOLDERS’ DEFICIT

 

 

 

 

 

Noncontrolling interest

 

 204,079  

 

 

 203,334  

Preferred stock, $.01 par value, 150,000,000 shares authorized, no shares issued and outstanding

 

 -  

 

 

 -  

Class A common stock, $.01 par value, 750,000,000 shares authorized, 45,887,306 and

 

 

 

 

 

 

45,231,282 shares issued in 2015 and 2014, respectively

 

 459  

 

 

 452  

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

 

 4,170,681  

 

 

 4,167,233  

Accumulated deficit

 

 (4,206,083) 

 

 

 (4,172,565) 

Accumulated other comprehensive loss

 

 (425,471) 

 

 

 (341,353) 

Cost of shares (229,943 in 2015 and 140,702 in 2014) held in treasury

 

 (2,071) 

 

 

 (1,192) 

 

Total Shareholders’ Deficit

 

 (255,256) 

 

 

 (140,941) 

 

Total Liabilities and Shareholders’ Deficit

$

 6,179,789  

 

$

 6,362,411  

  

 

See Notes to Consolidated Financial Statements

1


CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
CLEAR CHANNEL OUTDOOR HOLDINGS, INC. AND SUBSIDIARIES

(UNAUDITED)

 

 

(In thousands, except per share data)

 

 

Three Months Ended

 

 

 

 

 

March 31,

 

 

 

 

 

2015

 

2014

Revenue

 

 

 

 

 

 

$

 615,043  

 

$

 635,251  

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

Direct operating expenses (excludes depreciation and amortization)

 

 

 362,971  

 

 

 381,513  

 

 

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

 

 

 127,130  

 

 

 132,949  

 

 

Corporate expenses (excludes depreciation and amortization)

 

 

 

 

 

 

 

 28,753  

 

 

 30,697  

 

 

Depreciation and amortization

 

 

 

 

 

 

 

 94,094  

 

 

 98,742  

 

 

Other operating income (expense), net

 

 

 

 

 

 

 

 (5,444) 

 

 

 2,654  

Operating loss

 

 

 

 

 

 

 

 (3,349) 

 

 

 (5,996) 

Interest expense

 

 

 

 

 

 

 

 89,416  

 

 

 89,262  

Interest income on Due from iHeartCommunications

 

 

 

 

 

 

 

 15,253  

 

 

 14,673  

Equity in earnings (loss) of nonconsolidated affiliates

 

 

 

 

 

 

 

 522  

 

 

 (736) 

Other income, net

 

 

 

 

 

 

 

 19,938  

 

 

 1,898  

Loss before income taxes

 

 

 

 

 

 

 

 (57,052) 

 

 

 (79,423) 

Income tax benefit (expense)

 

 

 

 

 

 

 

 24,099  

 

 

 (16,946) 

Consolidated net loss

 

 

 

 

 

 

 

 (32,953) 

 

 

 (96,369) 

 

Less amount attributable to noncontrolling interest

 

 

 

 

 

 

 

 565  

 

 

 501  

Net loss attributable to the Company

 

 

 

 

 

 

$

 (33,518) 

 

$

 (96,870) 

Other comprehensive income (loss), net of tax:

 

 

 

 

 

 

 

 

 

 

 

 

Foreign currency translation adjustments

 

 

 

 

 

 

 

 (81,487) 

 

 

 (4,537) 

 

Unrealized holding gain on marketable securities

 

 

 

 

 

 

 

 822  

 

 

 1,084  

 

Other adjustments to comprehensive loss

 

 

 

 

 

 

 

 (1,154) 

 

 

 -  

Other comprehensive loss

 

 

 

 

 

 

 

 (81,819) 

 

 

 (3,453) 

Comprehensive loss

 

 

 

 

 

 

 

 (115,337) 

 

 

 (100,323) 

 

 Less amount attributable to noncontrolling interest

 

 

 

 

 

 

 

 2,299  

 

 

 (2,897) 

Comprehensive loss attributable to the Company

 

 

 

 

 

 

$

 (117,636) 

 

$

 (97,426) 

Net loss attributable to the Company per common share:

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 

 

 

 

 

$

 (0.09) 

 

$

 (0.27) 

 

Weighted average common shares outstanding – Basic

 

 

 

 

 

 

 

 359,093  

 

 

 358,397  

 

Diluted

 

 

 

 

 

 

$

 (0.09) 

 

$

 (0.27) 

 

Weighted average common shares outstanding – Diluted

 

 

 

 

 

 

 359,093  

 

 

 358,397  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Dividends declared per share

 

 

 

 

 

 

$

 -  

 

$

 -  

 

See Notes to Consolidated Financial Statements

2


CONSOLIDATED STATEMENTS OF CASH FLOWS OF
CLEAR CHANNEL OUTDOOR HOLDINGS, INC. AND SUBSIDIARIES

(UNAUDITED)

(In thousands)

 

 

 

Three Months Ended March 31,

 

 

 

2015

 

2014

Cash flows from operating activities:

 

 

 

 

 

 

 

 

 

Consolidated net loss

 

 

 

$

 (32,953) 

 

$

 (96,369) 

Reconciling items:

 

 

 

 

 

 

 

 

 

Depreciation and amortization

 

 

 

 

 94,094  

 

 

 98,742  

 

Deferred taxes

 

 

 

 

 4,737  

 

 

 (22,465) 

 

Provision for doubtful accounts

 

 

 

 

 2,525  

 

 

 1,521  

 

Share-based compensation

 

 

 

 

 1,925  

 

 

 2,010  

 

Gain on sale of operating and fixed assets

 

 

 

 

 (1,355) 

 

 

 (2,654) 

 

Amortization of deferred financing charges and note discounts, net

 

 

 

 

 2,171  

 

 

 2,162  

 

Other reconciling items, net

 

 

 

 

 (20,681) 

 

 

 (1,495) 

 

Changes in operating assets and liabilities, net of effects of acquisitions

   and dispositions:

 

 

 

 

 

 

 

 

 

 

Decrease in accounts receivable

 

 

 

 

 34,095  

 

 

 50,647  

 

 

Decrease in accrued expenses

 

 

 

 

 (59,575) 

 

 

 (31,557) 

 

 

Increase in accounts payable

 

 

 

 

 4,362  

 

 

 12,911  

 

 

Increase in deferred income

 

 

 

 

 39,758  

 

 

 43,288  

 

 

Changes in other operating assets and liabilities

 

 

 

 

 (59,381) 

 

 

 (28,696) 

Net cash provided by operating activities

 

 

 

 

 9,722  

 

 

 28,045  

Cash flows from investing activities:

 

 

 

 

 

 

 

 

 

Purchases of property, plant and equipment

 

 

 

 

 (41,815) 

 

 

 (38,628) 

 

Proceeds from disposal of assets

 

 

 

 

 938  

 

 

 2,422  

 

Purchases of other operating assets

 

 

 

 

 (29) 

 

 

 (272) 

 

Change in other, net

 

 

 

 

 -  

 

 

 (1,315) 

Net cash used for investing activities

 

 

 

 

 (40,906) 

 

 

 (37,793) 

Cash flows from financing activities:

 

 

 

 

 

 

 

 

 

Draws on credit facilities

 

 

 

 

 -  

 

 

 820  

 

Payments on credit facilities

 

 

 

 

 (1,859) 

 

 

 (675) 

 

Payments on long-term debt

 

 

 

 

 (13) 

 

 

 (11) 

 

Net transfers (to) from iHeartCommunications

 

 

 

 

 61,485  

 

 

 (28,744) 

 

Dividends and other payments to noncontrolling interests

 

 

 

 

 (2,119) 

 

 

 (3,955) 

 

Change in other, net

 

 

 

 

 650  

 

 

 409  

Net cash provided by (used for) financing activities

 

 

 

 

 58,144  

 

 

 (32,156) 

Effect of exchange rate changes on cash

 

 

 

 

 (5,884) 

 

 

 (2,414) 

Net increase (decrease) in cash and cash equivalents

 

 

 

 

 21,076  

 

 

 (44,318) 

Cash and cash equivalents at beginning of period

 

 

 

 

 186,204  

 

 

 314,545  

Cash and cash equivalents at end of period

 

 

 

$

 207,280  

 

$

 270,227  

SUPPLEMENTAL DISCLOSURES:

 

 

 

 

 

 

 

 

Cash paid during the quarter for interest

 

 

 87,717  

 

 

 89,409  

Cash paid during the quarter for income taxes

 

 

 9,643  

 

 

 11,446  

 

See Notes to Consolidated Financial Statements

3


CLEAR CHANNEL OUTDOOR HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

 

NOTE 1 – BASIS OF PRESENTATION

Preparation of Interim Financial Statements

The accompanying consolidated financial statements were prepared by Clear Channel Outdoor Holdings, Inc. (the “Company”) pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”) and, in the opinion of management, include all normal and recurring adjustments necessary to present fairly the results of the interim periods shown. Certain information and footnote disclosures normally included in financial statements prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) have been condensed or omitted pursuant to such SEC rules and regulations.  Management believes that the disclosures made are adequate to make the information presented not misleading.  Due to seasonality and other factors, the results for the interim periods may not be indicative of results for the full year.  The financial statements contained herein should be read in conjunction with the consolidated financial statements and notes thereto included in the Company’s 2014 Annual Report on Form 10-K. All references in this Quarterly Report on Form 10-Q to “we,” “us” and “our” refer to Clear Channel Outdoor Holdings, Inc. and its consolidated subsidiaries.  Our reportable segments are Americas outdoor advertising (“Americas”) and International outdoor advertising (“International”).

 

The consolidated financial statements include the accounts of the Company and its subsidiaries and give effect to allocations of expenses from the Company’s indirect parent entity, iHeartCommunications, Inc. (formerly, Clear Channel Communications, Inc. or “iHeartCommunications”).  These allocations were made on a specifically identifiable basis or using relative percentages of headcount or other methods management considered to be a reasonable reflection of the utilization of services provided.  Also included in the consolidated financial statements are entities for which the Company has a controlling financial interest or is the primary beneficiary.  Investments in companies in which the Company owns 20 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 under the equity method.  All significant intercompany transactions are eliminated in the consolidation process.  Certain prior-period amounts have been reclassified to conform to the 2015 presentation.

 

During the first quarter of 2015, and in connection with the appointment of a new chief executive officer for the Company and a new chief executive officer for Americas, the Company reevaluated its segment reporting and determined that its Latin American operations should be managed by its Americas leadership team.  As a result, the operations of Latin America are no longer reflected within the Company’s International segment and are included in the results of its Americas segment. Accordingly, the Company has recast the corresponding segment disclosures for prior periods to include Latin America within the Americas segment.

 

New Accounting Pronouncements

During the first quarter of 2015, the Company adopted the Financial Accounting Standards Board’s (“FASB”) ASU No. 2014-08, Presentation of Financial Statements (Topic 205) and Property, Plant, and Equipment (Topic 360), Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity.  This update provides guidance for the recognition, measurement and disclosure of discontinued operations. The amendments were effective for fiscal years (and interim periods within) beginning after December 15, 2014 and were to be applied retrospectively to all prior periods presented for such obligations that existed at the beginning of an entity’s fiscal year of adoption.  The Company does not anticipate the adoption of this guidance to have a material effect on the Company’s consolidated financial statements.

 

During the first quarter of 2015, the FASB issued ASU No. 2015-02, Consolidation (Topic 810), Amendments to the Consolidation Analysis. This new standard eliminates the deferral of FAS 167, which has allowed entities with interest in certain investment funds to follow the previous consolidation guidance in FIN 46(R), and makes other changes to both the variable interest model and the voting model. The standard is effective for annual periods and interim periods within those annual periods, beginning after December 15, 2015.  The Company is currently evaluating the impact of the provisions of this new standard on its financial position and results of operations.

4


CLEAR CHANNEL OUTDOOR HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

 

NOTE 2 – PROPERTY, PLANT AND EQUIPMENT, INTANGIBLE ASSETS AND GOODWILL

 

Property, Plant and Equipment

 

 

 

 

 

The Company’s property, plant and equipment consisted of the following classes of assets at March 31, 2015 and December 31, 2014, respectively.

 

 

 

 

 

 

(In thousands)

March 31,

 

December 31,

 

2015

 

2014

Land, buildings and improvements

$

 194,425  

 

$

 198,280  

Structures

 

 2,961,735  

 

 

 2,999,582  

Furniture and other equipment

 

 142,636  

 

 

 152,084  

Construction in progress

 

 57,266  

 

 

 75,469  

 

 

 3,356,062  

 

 

 3,425,415  

Less: accumulated depreciation

 

 1,524,895  

 

 

 1,519,764  

Property, plant and equipment, net

$

 1,831,167  

 

$

 1,905,651  

 

Indefinite-lived Intangible Assets

The Company’s indefinite-lived intangible assets consist primarily of billboard permits in its Americas segment.  Due to significant differences in both business practices and regulations, billboards in the International segment and in Latin America are subject to long-term, finite contracts unlike the Company’s permits in the United States and Canada.  Accordingly, there are no indefinite-lived intangible assets in the International segment.

 

Other Intangible Assets

Other intangible assets include definite-lived intangible assets and permanent easements.  The Company’s definite-lived intangible assets 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 at March 31, 2015 and December 31, 2014, respectively:

 

 

 

 

 

 

 

 

 

 

 

 

 

(In thousands)

March 31, 2015

 

December 31, 2014

 

 

Gross Carrying Amount

 

Accumulated Amortization

 

Gross Carrying Amount

 

Accumulated Amortization

Transit, street furniture and other outdoor

   contractual rights

$

 666,820  

 

$

 (445,796) 

 

$

 716,722  

 

$

 (476,523) 

Permanent easements

 

 171,238  

 

 

 -    

 

 

 171,272  

 

 

 -    

Other

 

 2,956  

 

 

 (1,866) 

 

 

 2,912  

 

 

 (2,319) 

 

Total

$

 841,014  

 

$

 (447,662) 

 

$

 890,906  

 

$

 (478,842) 

 

Total amortization expense related to definite-lived intangible assets was $14.7 million and $17.1 million for the three months ended March 31, 2015 and 2014, respectively.

 

5


CLEAR CHANNEL OUTDOOR HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

 

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)

 

 

 

2016

$

 40,553  

 

2017

 

 32,154  

 

2018

 

 20,309  

 

2019

 

 14,718  

 

2020

 

 12,701  

 

 

 

 

 

 

 

 

 

 

 

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, 2013

$

 585,227  

 

$

 264,907  

 

$

 850,134  

 

Foreign currency

 

 (653) 

 

 

 (32,369) 

 

 

 (33,022) 

Balance as of December 31, 2014

$

 584,574  

 

$

 232,538  

 

$

 817,112  

 

Foreign currency

 

 (167) 

 

 

 (16,625) 

 

 

 (16,792) 

Balance as of March 31, 2015

$

 584,407  

 

$

 215,913  

 

$

 800,320  

 

NOTE 3 – LONG-TERM DEBT

 

 

 

 

 

Long-term debt at March 31, 2015 and December 31, 2014 consisted of the following:

 

 

 

 

 

 

 

(In thousands)

March 31,

 

December 31,

 

 

2015

 

2014

Clear Channel Worldwide Holdings Senior Notes:

 

 

 

 

 

 

6.5% Series A Senior Notes Due 2022

$

 735,750  

 

$

 735,750  

 

6.5% Series B Senior Notes Due 2022

 

 1,989,250  

 

 

 1,989,250  

Clear Channel Worldwide Holdings Senior Subordinated Notes:

 

 

 

 

 

 

7.625% Series A Senior Subordinated Notes Due 2020

 

 275,000  

 

 

 275,000  

 

7.625% Series B Senior Subordinated Notes Due 2020

 

 1,925,000  

 

 

 1,925,000  

Senior revolving credit facility due 2018

 

 -  

 

 

 -  

Other debt

 

 12,063  

 

 

 15,107  

Original issue discount

 

 (6,028) 

 

 

 (6,178) 

Total debt

$

 4,931,035  

 

$

 4,933,929  

 

Less: current portion

 

 2,700  

 

 

 3,461  

Total long-term debt

$

 4,928,335  

 

$

 4,930,468  

 

The aggregate market value of the Company’s debt based on market prices for which quotes were available was approximately $5.2 billion and $5.1 billion at March 31, 2015 and December 31, 2014, 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.

 

 

Guarantees

As of March 31, 2015, the Company had $63.2 million and $49.5 million in letters of credit and bank guarantees outstanding, respectively. Bank guarantees of $12.4 million were backed by cash collateral. Additionally, as of March 31, 2015, iHeartCommunications had outstanding commercial standby letters of credit and surety bonds of $1.2 million and $44.2 million,

6


CLEAR CHANNEL OUTDOOR HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

 

respectively, held on behalf of the Company.  These letters of credit, bank guarantees and surety bonds relate to various operational matters, including insurance, bid and performance bonds, as well as other items.

 

NOTE 4 – COMMITMENTS AND CONTINGENCIES

The Company and its subsidiaries are involved in certain legal proceedings arising in the ordinary course of business and, as required, have accrued an estimate of the probable costs for the resolution of those claims for which the occurrence of loss is probable and the amount can be reasonably estimated.  These estimates have been developed in consultation with counsel and are based upon an analysis of potential results, assuming a combination of litigation and settlement strategies.  It is possible, however, that future results of operations for any particular period could be materially affected by changes in the Company’s assumptions or the effectiveness of its strategies related to these proceedings.  Additionally, due to the inherent uncertainty of litigation, there can be no assurance that the resolution of any particular claim or proceeding would not have a material adverse effect on the Company’s financial condition or results of operations.

 

Although the Company is involved in a variety of legal proceedings in the ordinary course of business, a large portion of the Company’s litigation arises in the following contexts: commercial disputes; employment and benefits related claims; governmental fines; and tax disputes.

 

Los Angeles Litigation

 

In 2008, Summit Media, LLC, one of the Company’s competitors, sued the City of Los Angeles (the “City”), Clear Channel Outdoor, Inc. and OUTFRONT Media Inc. (formerly CBS Outdoor Americas Inc.) in Los Angeles Superior Court (Case No. BS116611) challenging the validity of a settlement agreement that had been entered into in November 2006 among the parties and pursuant to which Clear Channel Outdoor, Inc. had taken down existing billboards and converted 83 existing signs from static displays to digital displays.  In 2009 the Los Angeles Superior Court ruled that the settlement agreement constituted an ultra vires act of the City, and nullified its existence.  After further proceedings, on April 12, 2013 the Los Angeles Superior Court invalidated 82 digital modernization permits issued to Clear Channel Outdoor, Inc. (77 of which displays were operating at the time of the ruling), and Clear Channel Outdoor, Inc. was required to turn off the electrical power to all affected digital displays on April 15, 2013.  The digital display structures remain intact but digital displays are currently prohibited in the City.  Clear Channel Outdoor, Inc. is seeking permits under the existing City sign code to either wrap the LED faces with vinyl or convert the LED faces to traditional static signs, and has obtained a number of such permits.  Clear Channel Outdoor, Inc. is also pursuing a new ordinance to permit digital signage in the City.

 

NOTE 5 — 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.

 

At March 31, 2015 and December 31, 2014, the asset recorded in “Due from iHeartCommunications” on the consolidated balance sheet was $886.3 million and $947.8 million, respectively.  At March 31, 2015, the fixed interest rate on the “Due from iHeartCommunications” account was 6.5%, which is equal to the fixed interest rate on the CCWH Senior Notes.  The net interest income for the three months ended March 31, 2015 and 2014 was $15.3 million and $14.7 million, respectively. 

 

The Company provides advertising space on its billboards for radio stations owned by iHeartCommunications.  For the three months ended March 31, 2015 and 2014, the Company recorded $1.1 million and $1.0 million in revenue for these advertisements, respectively.

 

7


CLEAR CHANNEL OUTDOOR HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

 

Under the Corporate Services Agreement between iHeartCommunications and the Company, iHeartCommunications provides management services to the Company, which include, among other things: (i) treasury, payroll and other financial related services; (ii) certain executive officer services; (iii) human resources and employee benefits services; (iv) legal and related services; (v) information systems, network and related services; (vi) investment services; (vii) procurement and sourcing support services; and (viii) other general corporate services.  These services are charged to the Company based on actual direct costs incurred or allocated by iHeartCommunications based on headcount, revenue or other factors on a pro rata basis.  For the three months ended March 31, 2015 and 2014, the Company recorded $7.9 million and $9.1 million as a component of corporate expense for these services, respectively.

 

Pursuant to the Tax Matters Agreement between iHeartCommunications and the Company, the operations of the Company are included in a consolidated federal income tax return filed by iHeartCommunications.  The Company’s provision for income taxes has been computed on the basis that the Company files separate consolidated federal income tax returns with its subsidiaries.  Tax payments are made to iHeartCommunications on the basis of the Company’s separate taxable income.  Tax benefits recognized on the Company’s employee stock option exercises are retained by the Company.

 

The Company computes its deferred income tax provision using the liability method in accordance with the provisions of ASC 740-10, as if the Company was a separate taxpayer.  Deferred tax assets and liabilities are determined based on differences between 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 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.  These costs are recorded as a component of selling, general and administrative expenses and were approximately $2.7 million for each of the three months ended March 31, 2015 and 2014.

 

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. During 2011, a subsidiary of iHeartCommunications purchased 1,553,971 shares of the Company’s Class A common stock through open market purchases for approximately $16.4 million.  During 2014, a subsidiary of iHeartCommunications purchased 5,000,000 shares of the Company’s Class A common stock for approximately $48.8 million.  On January 7, 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, increasing iHeartCommunications’ collective holdings to represent slightly more than 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. 

 

8


CLEAR CHANNEL OUTDOOR HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

 

NOTE 6 – INCOME TAXES

Income Tax Benefit (Expense)

 

 

 

 

 

 

 

 

 

 

 

 

The Company’s income tax benefit (expense) for the three months ended March 31, 2015 and 2014, respectively, consisted of the following components:

 

 

 

 

 

 

 

 

 

 

 

 

(In thousands)

 

 

Three Months Ended March 31,

 

 

 

 

 

2015

 

2014

Current tax benefit (expense)

 

 

 

 

 

 

$

 28,836  

 

$

 (39,411) 

Deferred tax benefit (expense)

 

 

 

 

 

 

 

 (4,737) 

 

 

 22,465  

Income tax benefit (expense)

 

 

 

 

 

 

$

 24,099  

 

$

 (16,946) 

 

The effective tax rate for the three months ended March 31, 2015 was 42.2%. The effective rate was primarily impacted by the uncertainty of the ability to recognize the future benefit of certain deferred tax assets that consists of current period net operating losses in U.S. federal, state and certain foreign jurisdictions.  The Company has recorded a valuation allowance against these deferred tax assets as the reversing deferred tax liabilities and other sources of taxable income that may be available to realize the deferred tax assets were exceeded by deferred tax assets recognized on the additional net operating losses incurred in the current period. 

 

The effective tax rate for the three months ended March 31, 2014 was (21.3)%.  The effective rate was primarily impacted by the Company’s inability to record tax benefits on tax losses in certain foreign jurisdictions due to the uncertainty of the ability to utilize those losses in future years.

 

NOTE 7 – SHAREHOLDERS’ EQUITY

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 shareholders’ 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 at January 1, 2015

$

 (344,275) 

 

 

 203,334  

 

 

 (140,941) 

 

Net income (loss)

 

 (33,518) 

 

 

 565  

 

 

 (32,953) 

 

Dividends and other payments to noncontrolling interests

 

 -    

 

 

 (2,119) 

 

 

 (2,119) 

 

Foreign currency translation adjustments

 

 (83,786) 

 

 

 2,299  

 

 

 (81,487) 

 

Unrealized holding gain on marketable securities

 

 822  

 

 

 -    

 

 

 822  

 

Other adjustments to comprehensive loss

 

 (1,154) 

 

 

 -    

 

 

 (1,154) 

 

Other, net

 

 2,576  

 

 

 -    

 

 

 2,576  

Balances at March 31, 2015

$

(459,335)

 

$

204,079

 

$

(255,256)

 

 

 

 

 

 

 

 

 

 

Balances at January 1, 2014

$

(41,938)

 

$

 202,046  

 

$

160,108

 

Net income (loss)

 

 (96,870) 

 

 

 501  

 

 

 (96,369) 

 

Dividends and other payments to noncontrolling interests

 

 -    

 

 

 (3,954) 

 

 

 (3,954) 

 

Foreign currency translation adjustments

 

 (1,640) 

 

 

 (2,897) 

 

 

 (4,537) 

 

Unrealized holding gain on marketable securities

 

 1,084  

 

 

 -    

 

 

 1,084  

 

Other, net

 

 2,422  

 

 

 -    

 

 

 2,422  

Balances at March 31, 2014

$

 (136,942) 

 

$

 195,696  

 

$

 58,754  

9


CLEAR CHANNEL OUTDOOR HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

 

NOTE 8 — OTHER INFORMATION

 

Other Comprehensive Income (Loss)

For the three months ended March 31, 2015 and 2014, the total increase (decrease) in deferred income tax liabilities of other comprehensive income (loss) related to pensions were ($0.6) million and $0.0 million, respectively.

10


CLEAR CHANNEL OUTDOOR HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

 

NOTE 9 – SEGMENT DATA

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

 

During the first quarter of 2015, the Company revised its segment reporting, as discussed in Note 1.  The following table presents the Company’s reportable segment results for the three months ended March 31, 2015 and 2014:

 

 

 

 

 

 

 

 

 

 

 

 

 

(In thousands)

Americas Outdoor Advertising

 

International Outdoor Advertising

 

Corporate and other reconciling items

 

Consolidated

Three Months Ended March 31, 2015

 

 

 

 

 

 

 

 

 

 

 

Revenue

$

 295,863  

 

$

 319,180  

 

$

 -    

 

$

 615,043  

Direct operating expenses

 

 146,234  

 

 

 216,737  

 

 

 -    

 

 

 362,971  

Selling, general and administrative expenses

 

 55,637  

 

 

 71,493  

 

 

 -    

 

 

 127,130  

Corporate expenses

 

 -    

 

 

 -    

 

 

 28,753  

 

 

 28,753  

Depreciation and amortization

 

 50,340  

 

 

 42,441  

 

 

 1,313  

 

 

 94,094  

Other operating loss, net

 

 -    

 

 

 -    

 

 

 (5,444) 

 

 

 (5,444) 

Operating income (loss)

$

 43,652  

 

$

 (11,491) 

 

$

 (35,510) 

 

$

 (3,349) 

 

 

 

 

 

 

 

 

 

 

 

 

 

Capital expenditures

$

 16,695  

 

$

 25,105  

 

$

 15  

 

$

 41,815  

Share-based compensation expense

$

 -    

 

$

 -    

 

$

 1,925  

 

$

 1,925  

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended March 31, 2014

 

 

 

 

 

 

 

 

 

 

 

Revenue

$

 290,610  

 

$

 344,641  

 

$

 -    

 

$

 635,251  

Direct operating expenses

 

 143,364  

 

 

 238,149  

 

 

 -    

 

 

 381,513  

Selling, general and administrative expenses

 

 56,368  

 

 

 76,581  

 

 

 -    

 

 

 132,949  

Corporate expenses

 

 -    

 

 

 -    

 

 

 30,697  

 

 

 30,697  

Depreciation and amortization

 

 49,712  

 

 

 48,331  

 

 

 699  

 

 

 98,742  

Other operating income, net

 

 -    

 

 

 -    

 

 

 2,654  

 

 

 2,654  

Operating income (loss)

$

 41,166  

 

$

 (18,420) 

 

$

 (28,742) 

 

$

 (5,996) 

 

 

 

 

 

 

 

 

 

 

 

 

 

Capital expenditures

$

 16,444  

 

$

 20,862  

 

$

 1,322  

 

$

 38,628  

Share-based compensation expense

$

 -    

 

$

 -    

 

$

 2,010  

 

$

 2,010  

 

11


CLEAR CHANNEL OUTDOOR HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

 

NOTE 10 – GUARANTOR SUBSIDIARIES

The Company and certain of the Company’s direct and indirect wholly-owned domestic subsidiaries (the “Guarantor Subsidiaries”) fully and unconditionally guarantee on a joint and several basis certain of the outstanding indebtedness of Clear Channel Worldwide Holdings, Inc. ("CCWH" or the “Subsidiary Issuer”).  The following consolidating schedules present financial information on a combined basis in conformity with the SEC’s Regulation S-X Rule 3-10(d):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(In thousands)

March 31, 2015

 

 

Parent

 

Subsidiary

 

Guarantor

 

Non-Guarantor

 

 

 

 

 

 

 

 

Company

 

Issuer

 

Subsidiaries

 

Subsidiaries

 

Eliminations

 

Consolidated

Cash and cash equivalents

$

 905  

 

$

 -  

 

$

 19,442  

 

$

 186,933  

 

$

 -  

 

$

 207,280  

Accounts receivable, net of allowance

 

 -  

 

 

 -  

 

 

 193,117  

 

 

 435,562  

 

 

 -  

 

 

 628,679  

Intercompany receivables

 

 -  

 

 

 258,113  

 

 

 1,667,997  

 

 

 12,174  

 

 

 (1,938,284) 

 

 

 -  

Prepaid expenses

 

 2,829  

 

 

 -  

 

 

 71,949  

 

 

 79,363  

 

 

 -  

 

 

 154,141  

Other current assets

 

 (239) 

 

 

 7,844  

 

 

 46,470  

 

 

 27,216  

 

 

 -  

 

 

 81,291  

 

Total Current Assets

 

 3,495  

 

 

 265,957  

 

 

 1,998,975  

 

 

 741,248  

 

 

 (1,938,284) 

 

 

 1,071,391  

Structures, net

 

 -  

 

 

 -  

 

 

 1,034,908  

 

 

 532,745  

 

 

 -  

 

 

 1,567,653  

Other property, plant and equipment, net

 

 -  

 

 

 -  

 

 

 156,983  

 

 

 106,531  

 

 

 -  

 

 

 263,514  

Indefinite-lived intangibles

 

 -  

 

 

 -  

 

 

 1,055,716  

 

 

 10,094  

 

 

 -  

 

 

 1,065,810  

Other intangibles, net

 

 -  

 

 

 -  

 

 

 317,899  

 

 

 75,453  

 

 

 -  

 

 

 393,352  

Goodwill

 

 -  

 

 

 -  

 

 

 571,932  

 

 

 228,388  

 

 

 -  

 

 

 800,320  

Due from iHeartCommunications

 

 886,321  

 

 

 -  

 

 

 -  

 

 

 -  

 

 

 -  

 

 

 886,321  

Intercompany notes receivable

 

 182,026  

 

 

 4,927,517  

 

 

 -  

 

 

 -  

 

 

 (5,109,543) 

 

 

 -  

Other assets

 

 146,055  

 

 

 736,423  

 

 

 1,208,553  

 

 

 49,067  

 

 

 (2,008,670) 

 

 

 131,428  

 

Total Assets

$

 1,217,897  

 

$

 5,929,897  

 

$

 6,344,966  

 

$

 1,743,526  

 

$

 (9,056,497) 

 

$

 6,179,789  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accounts payable

$

 -  

 

$

 -  

 

$

 8,817  

 

$

 65,347  

 

$

 -  

 

$

 74,164  

Intercompany payable

 

 1,667,997  

 

 

 -  

 

 

 270,287  

 

 

 -  

 

 

 (1,938,284) 

 

 

 -  

Accrued expenses

 

 -  

 

 

 3,199  

 

 

 89,675  

 

 

 361,669  

 

 

 -  

 

 

 454,543  

Deferred income

 

 -  

 

 

 -  

 

 

 60,663  

 

 

 68,601  

 

 

 -  

 

 

 129,264  

Current portion of long-term debt

 

 -  

 

 

 -  

 

 

 58  

 

 

 2,642  

 

 

 -  

 

 

 2,700  

 

Total Current Liabilities

 

 1,667,997  

 

 

 3,199  

 

 

 429,500  

 

 

 498,259  

 

 

 (1,938,284) 

 

 

 660,671  

Long-term debt

 

 -  

 

 

 4,918,972  

 

 

 1,063  

 

 

 8,300  

 

 

 -  

 

 

 4,928,335  

Intercompany notes payable

 

 -  

 

 

 -  

 

 

 5,032,859  

 

 

 76,684  

 

 

 (5,109,543) 

 

 

 -  

Deferred tax liability

 

 772  

 

 

 85  

 

 

 606,228  

 

 

 9,027  

 

 

 -  

 

 

 616,112  

Other long-term liabilities

 

 -  

 

 

 -  

 

 

 129,199  

 

 

 100,728  

 

 

 -  

 

 

 229,927  

Total shareholders' equity (deficit)

 

 (450,872) 

 

 

 1,007,641  

 

 

 146,117  

 

 

 1,050,528  

 

 

 (2,008,670) 

 

 

 (255,256) 

 

Total Liabilities and Shareholders'

   Equity

$

 1,217,897  

 

$

 5,929,897  

 

$

 6,344,966  

 

$

 1,743,526  

 

$

 (9,056,497) 

 

$

 6,179,789  

 

12


CLEAR CHANNEL OUTDOOR HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

 

(In thousands)

December 31, 2014

 

 

Parent

 

Subsidiary

 

Guarantor

 

Non-Guarantor