Attached files

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EX-11 - STATEMENT RE: COMPUTATION OF LOSS PER SHARE - Clear Channel Outdoor Holdings, Inc.Exhibit11.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 FINANCIAL OFFICER PURSUANT TO SECTION 302 - Clear Channel Outdoor Holdings, Inc.Exhibit31.2.htm
EX-31 - CERTIFICATION OF CHIEF EXECUTIVE OFFICER PURSUANT TO SECTION 302 - Clear Channel Outdoor Holdings, Inc.Exhibit31.1.htm
EX-32 - CERTIFICATION OF CHIEF FINANCIAL OFFICER PURSUANT TO SECTION 906 - Clear Channel Outdoor Holdings, Inc.Exhibit32.2.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, 2016

 

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

 

Commission File Number

001‑32663

 

CLEAR CHANNEL OUTDOOR HOLDINGS, INC.

(Exact name of registrant as specified in its charter)

 

 

                                        Delaware                                                                                             86-0812139 

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

                     incorporation or organization)

 

                   200 East Basse Road, Suite 100                                                                             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 May 2, 2016

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

Class A Common Stock, $.01 par value

Class B Common Stock, $.01 par value

46,618,104

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, 2016 and December 31, 2015

1

Consolidated Statements of Comprehensive Income (Loss) for the three months ended March 31, 2016 and 2015

2

Consolidated Statements of Cash Flows for the three months ended March 31, 2016 and 2015

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

30

Item 4.       Controls and Procedures

30

Part II -- Other Information

 

Item 1.       Legal Proceedings

31

Item 1A.    Risk Factors

31

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

32

Item 6.       Exhibits

32

Signatures

33

  

 


PART I – FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

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

 

(In thousands, except share data)

March 31, 2016

 

December 31,

 

(Unaudited)

 

2015

CURRENT ASSETS

 

 

 

 

 

Cash and cash equivalents

$

489,641

 

$

412,743

Accounts receivable, net of allowance of $27,687 in 2016 and $25,348 in 2015

 

625,713

 

 

697,583

Prepaid expenses

 

148,272

 

 

127,730

Assets held for sale

 

55,159

 

 

295,075

Other current assets

 

40,118

 

 

34,566

 

Total Current Assets

 

1,358,903

 

 

1,567,697

PROPERTY, PLANT AND EQUIPMENT

 

 

 

 

 

Structures, net

 

1,350,399

 

 

1,391,880

Other property, plant and equipment, net

 

227,696

 

 

236,106

INTANGIBLE ASSETS AND GOODWILL

 

 

 

 

 

Indefinite-lived intangibles

 

961,540

 

 

971,327

Other intangibles, net

 

333,902

 

 

342,864

Goodwill

 

749,928

 

 

758,575

OTHER ASSETS

 

 

 

 

 

Due from iHeartCommunications

 

640,089

 

 

930,799

Other assets

 

116,927

 

 

107,540

Total Assets

$

5,739,384

 

$

6,306,788

CURRENT LIABILITIES

 

 

 

 

 

Accounts payable

$

83,851

 

$

100,210

Accrued expenses

 

458,650

 

 

507,665

Dividends payable

 

-

 

 

217,017

Deferred income

 

119,092

 

 

91,411

Current portion of long-term debt

 

4,594

 

 

4,310

 

Total Current Liabilities

 

666,187

 

 

920,613

Long-term debt

 

5,108,621

 

 

5,106,513

Deferred tax liability

 

660,936

 

 

608,910

Other long-term liabilities

 

244,060

 

 

240,419

Commitments and Contingent liabilities (Note 4)

 

 

 

 

 

SHAREHOLDERS’ DEFICIT

 

 

 

 

 

Noncontrolling interest

 

191,606

 

 

187,775

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, 47,062,114 and

 

 

 

 

 

 

46,661,114 shares issued in 2016 and 2015, respectively

 

471

 

 

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

 

3,423,014

 

 

3,961,515

Accumulated deficit

 

(4,128,537)

 

 

(4,268,637)

Accumulated other comprehensive loss

 

(427,024)

 

 

(451,833)

Cost of shares (453,262 shares in 2016 and 233,868 shares in 2015) held in treasury

 

(3,100)

 

 

(2,104)

 

Total Shareholders’ Deficit

 

(940,420)

 

 

(569,667)

 

Total Liabilities and Shareholders’ Deficit

$

5,739,384

 

$

6,306,788

  

 

See Notes to Consolidated Financial Statements

1


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

(UNAUDITED)

 

 

(In thousands, except per share data)

 

 

Three Months Ended

 

 

 

 

 

March 31,

 

 

 

 

 

2016

 

2015

Revenue

 

 

 

 

 

 

$

590,721

 

$

615,043

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

Direct operating expenses (excludes depreciation and amortization)

 

 

343,694

 

 

362,971

 

 

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

 

 

126,801

 

 

127,130

 

 

Corporate expenses (excludes depreciation and amortization)

 

 

 

 

 

28,239

 

 

28,753

 

 

Depreciation and amortization

 

 

 

 

 

 

 

85,395

 

 

94,094

 

 

Other operating income (expense), net

 

 

 

 

 

 

 

284,774

 

 

(5,444)

Operating income (loss)

 

 

 

 

 

 

 

291,366

 

 

(3,349)

Interest expense

 

 

 

 

 

 

 

93,873

 

 

89,416

Interest income on Due from iHeartCommunications

 

 

 

 

 

 

 

12,713

 

 

15,253

Equity in earnings (loss) of nonconsolidated affiliates

 

 

 

 

 

 

 

(415)

 

 

522

Other income (expense), net

 

 

 

 

 

 

 

(5,803)

 

 

19,938

Income (loss) before income taxes

 

 

 

 

 

 

 

203,988

 

 

(57,052)

Income tax benefit (expense)

 

 

 

 

 

 

 

(62,912)

 

 

24,099

Consolidated net income (loss)

 

 

 

 

 

 

 

141,076

 

 

(32,953)

 

Less amount attributable to noncontrolling interest

 

 

 

 

 

 

 

976

 

 

565

Net income (loss) attributable to the Company

 

 

 

 

 

 

$

140,100

 

$

(33,518)

Other comprehensive income (loss), net of tax:

 

 

 

 

 

 

 

 

 

 

 

 

Foreign currency translation adjustments

 

 

 

 

 

 

 

27,264

 

 

(81,487)

 

Unrealized holding gain (loss) on marketable securities

 

 

 

 

 

 

 

(36)

 

 

822

 

Other adjustments to comprehensive loss

 

 

 

 

 

 

 

-

 

 

(1,154)

Other comprehensive income (loss)

 

 

 

 

 

 

 

27,228

 

 

(81,819)

Comprehensive income (loss)

 

 

 

 

 

 

 

167,328

 

 

(115,337)

 

 Less amount attributable to noncontrolling interest

 

 

 

 

 

 

 

2,419

 

 

2,299

Comprehensive income (loss) attributable to the Company

 

 

 

 

$

164,909

 

$

(117,636)

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

 

 

 

 

 

 

 

 

 

 

Basic

 

 

 

 

 

 

$

0.39

 

$

(0.09)

 

Weighted average common shares outstanding – Basic

 

 

 

 

 

 

 

359,915

 

 

359,093

 

Diluted

 

 

 

 

 

 

$

0.39

 

$

(0.09)

 

Weighted average common shares outstanding – Diluted

 

 

 

 

 

 

360,904

 

 

359,093

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Dividends declared per share

 

 

 

 

 

 

$

1.49

 

$

-

 

See Notes to Consolidated Financial Statements

2


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

(UNAUDITED)

(In thousands)

 

 

 

Three Months Ended March 31,

 

 

 

2016

 

2015

Cash flows from operating activities:

 

 

 

 

 

 

 

 

 

Consolidated net income (loss)

 

 

 

$

141,076

 

$

(32,953)

Reconciling items:

 

 

 

 

 

 

 

 

 

Depreciation and amortization

 

 

 

 

85,395

 

 

94,094

 

Deferred taxes

 

 

 

 

52,649

 

 

4,737

 

Provision for doubtful accounts

 

 

 

 

2,018

 

 

2,525

 

Share-based compensation

 

 

 

 

2,385

 

 

1,925

 

Gain on sale of operating and other assets

 

 

 

 

(285,519)

 

 

(1,355)

 

Amortization of deferred financing charges and note discounts, net

 

 

 

 

2,613

 

 

2,171

 

Other reconciling items, net

 

 

 

 

5,372

 

 

(20,681)

 

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

   and dispositions:

 

 

 

 

 

 

 

 

 

 

Decrease in accounts receivable

 

 

 

 

80,033

 

 

34,095

 

 

Increase in prepaid expenses and other current assets

 

 

 

 

(19,331)

 

 

(56,109)

 

 

Decrease in accrued expenses

 

 

 

 

(60,951)

 

 

(59,575)

 

 

Increase (decrease) in accounts payable

 

 

 

 

(18,190)

 

 

4,362

 

 

Increase in deferred income

 

 

 

 

25,151

 

 

39,758

 

 

Changes in other operating assets and liabilities

 

 

 

 

3,469

 

 

(3,272)

Net cash provided by operating activities

 

 

 

$

16,170

 

$

9,722

Cash flows from investing activities:

 

 

 

 

 

 

 

 

 

Purchases of property, plant and equipment

 

 

 

 

(47,202)

 

 

(41,815)

 

Proceeds from disposal of assets

 

 

 

 

586,690

 

 

938

 

Purchases of other operating assets

 

 

 

 

(1,573)

 

 

(29)

 

Change in other, net

 

 

 

 

(14,371)

 

 

-

Net cash provided by (used for) investing activities

 

 

 

$

523,544

 

$

(40,906)

Cash flows from financing activities:

 

 

 

 

 

 

 

 

 

Payments on credit facilities

 

 

 

 

(577)

 

 

(1,859)

 

Payments on long-term debt

 

 

 

 

(517)

 

 

(13)

 

Net transfers from iHeartCommunications

 

 

 

 

290,711

 

 

61,485

 

Dividends and other payments to noncontrolling interests

 

 

 

 

(789)

 

 

(2,119)

 

Dividends paid

 

 

 

 

(754,217)

 

 

-

 

Change in other, net

 

 

 

 

(1,079)

 

 

650

Net cash provided by (used for) financing activities

 

 

 

$

(466,468)

 

$

58,144

Effect of exchange rate changes on cash

 

 

 

 

3,652

 

 

(5,884)

Net increase in cash and cash equivalents

 

 

 

 

76,898

 

 

21,076

Cash and cash equivalents at beginning of period

 

 

 

 

412,743

 

 

186,204

Cash and cash equivalents at end of period

 

 

 

$

489,641

 

$

207,280

SUPPLEMENTAL DISCLOSURES:

 

 

 

 

 

 

 

 

Cash paid for interest

 

 

 

 

85,959

 

 

87,717

Cash paid for income taxes

 

 

 

 

14,632

 

 

9,643

 

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 2015 Annual Report on Form 10-K. All references in this Quarterly Report on Form 10-Q to “we,” “us” and “our” refer to the Company 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. (“iHeartCommunications”).  These allocations were made on a specifically identifiable basis or using relative percentages of headcount or other methods management considered to be a reasonable reflection of the utilization of services provided.  Also included in the consolidated financial statements are entities for which the Company has a controlling financial interest or is the primary beneficiary.  Investments in companies in which the Company owns 20% to 50% of the voting common stock or otherwise exercises significant influence over operating and financial policies of the company are accounted for under the equity method.  All significant intercompany transactions are eliminated in the consolidation process.  Certain prior-period amounts have been reclassified to conform to the 2016 presentation.   

 

New Accounting Pronouncements

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 for interim periods within those annual periods, beginning after December 15, 2015.  The adoption of this guidance did not have a material effect on the Company’s consolidated financial statements.

 

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 $48.2 million and $50.4 million as of March 31, 2016 and December 31, 2015, respectively, which are now reflected as “Long-term debt fees” in Note 3. 

 

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 Company is currently evaluating the impact of the provisions of this new standard on its financial position and results of operations.

 

During the third quarter of 2015, the FASB issued ASU No. 2015-16, Business Combinations (Topic 805): Simplifying the Accounting for Measurement-Period Adjustments. This update eliminates the requirement for an acquirer in a business combination to account for measurement-period adjustments retrospectively. Instead, acquirers must recognize measurement-period adjustments during the period in which they determine the amounts, including the effect on earnings of any amounts they would have recorded in previous periods if the accounting had been completed at the acquisition date. The standard is effective for fiscal years beginning after December 15, 2015, and interim periods within those fiscal years. The adoption of this guidance did not have a material effect on the Company’s consolidated financial statements.

 

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

4


CLEAR CHANNEL OUTDOOR HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

 

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 financial position and results of operations.    

 

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

Dispositions

During 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, including cash and certain advertising assets in Florida, of $596.6 million. The Company recognized a net gain of $281.7 million related to the sale, which is included within Other operating income (expense), net.

During the first quarter of 2016, Americas outdoor 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 is subject to regulatory approvals and is expected to close in 2016. This transaction has met the criteria to be classified as held-for-sale and as such, the related assets are separately presented on the face of the Consolidated Balance Sheet.    

 

Property, Plant and Equipment

 

 

 

 

 

The Company’s property, plant and equipment consisted of the following classes of assets as of March 31, 2016 and December 31, 2015, respectively.

 

 

 

 

 

 

(In thousands)

March 31,

 

December 31,

 

2016

 

2015

Land, buildings and improvements

$

163,733

 

$

167,739

Structures

 

2,799,699

 

 

2,824,794

Furniture and other equipment

 

157,479

 

 

156,046

Construction in progress

 

54,158

 

 

54,701

 

 

3,175,069

 

 

3,203,280

Less: accumulated depreciation

 

1,596,974

 

 

1,575,294

Property, plant and equipment, net

$

1,578,095

 

$

1,627,986

 

Intangible Assets

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

 

Other intangible assets include definite-lived intangible assets and permanent easements.  The Company’s definite-lived intangible assets primarily include transit and street furniture contracts, site-leases and other contractual rights, all of which are amortized over the shorter of either the respective lives of the agreements or over the period of time the assets are expected to contribute directly or indirectly to the Company’s future cash flows.  Permanent easements are indefinite-lived intangible assets which include certain rights to use real property not owned by the Company.  The Company periodically reviews the appropriateness of the amortization periods related to its definite-lived intangible assets.  These assets are recorded at cost.

 

5


CLEAR CHANNEL OUTDOOR HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

 

The following table presents the gross carrying amount and accumulated amortization for each major class of other intangible assets as of March 31, 2016 and December 31, 2015, respectively:

 

 

 

 

 

 

 

 

 

 

 

 

 

(In thousands)

March 31, 2016

 

December 31, 2015

 

Gross Carrying Amount

 

Accumulated Amortization

 

Gross Carrying Amount

 

Accumulated Amortization

Transit, street furniture and other outdoor

   contractual rights

$

631,943

 

$

(458,829)

 

$

635,772

 

$

(457,060)

Permanent easements

 

157,313

 

 

-

 

 

156,349

 

 

-

Other

 

5,084

 

 

(1,609)

 

 

9,687

 

 

(1,884)

 

Total

$

794,340

 

$

(460,438)

 

$

801,808

 

$

(458,944)

 

Total amortization expense related to definite-lived intangible assets for the three months ended March 31, 2016 and 2015 was $9.8 million and $14.7 million, respectively.

 

As acquisitions and dispositions occur in the future, amortization expense may vary.  The following table presents the Company’s estimate of amortization expense for each of the five succeeding fiscal years for definite-lived intangible assets:

 

 

 

 

 

(In thousands)

 

 

2017

$

 30,017  

 

2018

$

 21,053  

 

2019

$

 16,283  

 

2020

$

 13,785  

 

2021

$

 13,614  

 

 

Goodwill     

 

The following table presents the changes in the carrying amount of goodwill in each of the Company’s reportable segments:

 

 

 

 

 

 

 

 

 

 

(In thousands)

Americas

 

International

 

Consolidated

Balance as of December 31, 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

 

Dispositions

 

(6,934)

 

 

-

 

 

(6,934)

 

Foreign currency

 

(1,210)

 

 

9,834

 

 

8,624

 

Assets held for sale

 

(10,337)

 

 

-

 

 

(10,337)

Balance as of March 31, 2016

$

516,202

 

$

233,726

 

$

749,928

 

6


CLEAR CHANNEL OUTDOOR HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

 

NOTE 3 – LONG-TERM DEBT

 

 

 

 

 

Long-term debt outstanding as of March 31, 2016 and December 31, 2015 consisted of the following:

 

 

 

 

 

 

 

(In thousands)

March 31,

 

December 31,

 

 

2016

 

2015

Clear Channel Worldwide Holdings Senior Notes:

 

 

 

 

 

 

6.5% Series A Senior Notes Due 2022

$

735,750

 

$

735,750

 

6.5% Series B Senior Notes Due 2022

 

1,989,250

 

 

1,989,250

Clear Channel Worldwide Holdings Senior Subordinated Notes:

 

 

 

 

 

 

7.625% Series A Senior Subordinated Notes Due 2020

 

275,000

 

 

275,000

 

7.625% Series B Senior Subordinated Notes Due 2020

 

1,925,000

 

 

1,925,000

Senior Revolving Credit Facility Due 2018(1)

 

-

 

 

-

Clear Channel International B.V. Senior Notes Due 2020

 

225,000

 

 

225,000

Other debt

 

18,902

 

 

19,003

Original issue discount

 

(7,518)

 

 

(7,769)

Long-term debt fees

 

(48,169)

 

 

(50,411)

Total debt

$

5,113,215

 

$

5,110,823

 

Less: current portion

 

4,594

 

 

4,310

Total long-term debt

$

5,108,621

 

$

5,106,513

 

 

 

 

 

 

 

(1)

The Senior revolving credit facility provides for borrowings up to $75.0 million (the revolving credit commitment).

 

The aggregate market value of the Company’s debt based on market prices for which quotes were available was approximately $4.8 billion and $4.9 billion at March 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.

 

Surety Bonds, Letters of Credit and Guarantees

As of March 31, 2016, the Company had $50.1 million and $59.3 million in letters of credit and bank guarantees outstanding, respectively. Bank guarantees of $24.1 million were backed by cash collateral. Additionally, as of March 31, 2016, iHeartCommunications had outstanding commercial standby letters of credit and surety bonds of $1.2 million and $56.5 million, respectively, held on behalf of the Company.  These surety bonds, letters of credit and bank guarantees relate to various operational matters, including insurance, bid and performance bonds, as well as other items.

 

NOTE 4 – COMMITMENTS AND CONTINGENCIES

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

 

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

 

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

7


CLEAR CHANNEL OUTDOOR HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

 

are cooperating with the national competition authorities.

 

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.

 

As of March 31, 2016 and December 31, 2015, the asset recorded in “Due from iHeartCommunications” on the consolidated balance sheet was $640.1 million and $930.8 million, respectively.  As of March 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 three months ended March 31, 2016 and 2015 was $12.7 million and $15.3 million, respectively. On February 4, the Company demanded the repayment of $300.0 million outstanding under the Due from iHeartCommunications note and used the repayment to partially fund a special cash dividend of $540.0 million, which was paid on February 4, 2016.

 

The Company provides advertising space on its billboards for radio stations owned by iHeartCommunications.  For the three months ended March 31, 2016 and 2015, the Company recorded $0.3 million and $1.1 million, respectively, in revenue for these advertisements.

 

Under the Corporate Services Agreement between iHeartCommunications and the Company, iHeartCommunications provides management services to the Company, which include, among other things: (i) treasury, payroll and other financial related services; (ii) certain executive officer services; (iii) human resources and employee benefits services; (iv) legal and related services; (v) information systems, network and related services; (vi) investment services; (vii) procurement and sourcing support services; and (viii) other general corporate services.  These services are charged to the Company based on actual direct costs incurred or allocated by iHeartCommunications based on headcount, revenue or other factors on a pro rata basis. For the three months ended March 31, 2016 and 2015, the Company recorded $9.3 million and $7.9 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 between financial reporting basis and tax basis of assets and liabilities and are measured using the enacted tax rates expected to apply to taxable income in the periods in which the deferred tax asset or liability is expected to be realized or settled.  Deferred tax assets are reduced by valuation allowances if the Company believes it is more likely than not some portion or all of the asset will not be realized.

 

Pursuant to the Employee Matters Agreement, the Company’s employees participate in iHeartCommunications’ employee benefit plans, including employee medical insurance and a 401(k) retirement benefit plan.  For the three months ended March 31, 2016 and 2015, the Company recorded $2.3 million and $2.7 million, respectively, as a component of selling, general and administrative expenses for these services.    

 

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, 2016 and 2015, respectively, consisted of the following components:

 

 

 

 

 

 

 

 

 

 

 

 

(In thousands)

 

 

Three Months Ended March 31,

 

 

 

 

 

2016

 

2015

Current tax benefit (expense)

 

 

 

 

 

 

$

(10,263)

 

$

28,836

Deferred tax expense

 

 

 

 

 

 

 

(52,649)

 

 

(4,737)

Income tax benefit (expense)

 

 

 

 

 

 

$

(62,912)

 

$

24,099

 

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

 

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.

 

9


CLEAR CHANNEL OUTDOOR HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

 

NOTE 7 – SHAREHOLDERS’ 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 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 as of January 1, 2016

$

(757,442)

 

$

187,775

 

$

(569,667)

 

Net income

 

140,100

 

 

976

 

 

141,076

 

Dividends declared

 

(540,016)

 

 

-

 

 

(540,016)

 

Dividends and other payments to noncontrolling interests

 

-

 

 

(789)

 

 

(789)

 

Share-based compensation

 

2,385

 

 

-

 

 

2,385

 

Foreign currency translation adjustments

 

24,845

 

 

2,419

 

 

27,264

 

Unrealized holding loss on marketable securities

 

(36)

 

 

-

 

 

(36)

 

Other, net

 

(1,862)

 

 

1,225

 

 

(637)

Balances as of March 31, 2016

$

(1,132,026)

 

$

191,606

 

$

(940,420)

 

 

 

 

 

 

 

 

 

 

Balances as of 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)

 

Share-based compensation

 

1,925

 

 

-

 

 

1,925

 

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

 

651

 

 

-

 

 

651

Balances as of March 31, 2015

$

(459,335)

 

$

204,079

 

$

(255,256)

10


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, 2016 and 2015 the total increase (decrease) in deferred income tax liabilities of other comprehensive income (loss) related to pensions were ($0.0) million and ($0.6) million, respectively.

 

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.

 

The following table presents the Company’s reportable segment results for the three months ended March 31, 2016 and 2015:

 

 

 

 

 

 

 

 

 

 

 

 

 

(In thousands)

Americas

 

International

 

Corporate and other reconciling items

 

Consolidated

Three Months Ended March 31, 2016

 

 

 

 

 

 

 

 

 

 

 

Revenue

$

282,528

 

$

308,193

 

$

-

 

$

590,721

Direct operating expenses

 

138,012

 

 

205,682

 

 

-

 

 

343,694

Selling, general and administrative expenses

 

55,329

 

 

71,472

 

 

-

 

 

126,801

Corporate expenses

 

-

 

 

-

 

 

28,239

 

 

28,239

Depreciation and amortization

 

46,116

 

 

37,880

 

 

1,399

 

 

85,395

Other operating income, net

 

-

 

 

-

 

 

284,774

 

 

284,774

Operating income (loss)

$

43,071

 

$

(6,841)

 

$

255,136

 

$

291,366

 

 

 

 

 

 

 

 

 

 

 

 

 

Capital expenditures

$

11,292

 

$

34,913

 

$

997

 

$

47,202

Share-based compensation expense

$

-

 

$

-

 

$

2,385

 

$

2,385

 

 

 

 

 

 

 

 

 

 

 

 

 

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

 

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, 2016

 

 

Parent

 

Subsidiary

 

Guarantor

 

Non-Guarantor

 

 

 

 

 

 

 

 

Company

 

Issuer

 

Subsidiaries

 

Subsidiaries

 

Eliminations

 

Consolidated

Cash and cash equivalents

$

330,026

 

$

-

 

$

7,022

 

$

152,593

 

$

-

 

$

489,641

Accounts receivable, net of allowance

 

-

 

 

-

 

 

185,420

 

 

440,293

 

 

-

 

 

625,713

Intercompany receivables

 

-

 

 

470,441

 

 

2,489,586

 

 

7,595

 

 

(2,967,622)

 

 

-

Prepaid expenses

 

2,825

 

 

-

 

 

65,492

 

 

79,955

 

 

-

 

 

148,272

Assets held for sale

 

 

 

 

 

 

 

55,159

 

 

 

 

 

 

 

 

55,159

Other current assets

 

-

 

 

-

 

 

5,824

 

 

34,294

 

 

-

 

 

40,118

 

Total Current Assets

 

332,851

 

 

470,441

 

 

2,808,503

 

 

714,730

 

 

(2,967,622)

 

 

1,358,903

Structures, net

 

-

 

 

-

 

 

815,441

 

 

534,958

 

 

-

 

 

1,350,399

Other property, plant and equipment, net

 

-

 

 

-

 

 

117,846

 

 

109,850

 

 

-

 

 

227,696

Indefinite-lived intangibles

 

-

 

 

-

 

 

951,692

 

 

9,848

 

 

-

 

 

961,540

Other intangibles, net

 

-

 

 

-

 

 

269,090

 

 

64,812

 

 

-

 

 

333,902

Goodwill

 

-

 

 

-

 

 

505,479

 

 

244,449

 

 

-

 

 

749,928

Due from iHeartCommunications

 

640,089

 

 

-

 

 

-

 

 

-

 

 

-

 

 

640,089

Intercompany notes receivable

 

182,026

 

 

5,105,392

 

 

-

 

 

-

 

 

(5,287,418)

 

 

-

Other assets

 

242,051

 

 

298,292

 

 

1,173,371

 

 

60,286

 

 

(1,657,073)

 

 

116,927

 

Total Assets

$

1,397,017

 

$

5,874,125

 

$

6,641,422

 

$

1,738,933

 

$

(9,912,113)

 

$

5,739,384

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accounts payable

$

-

 

$

-

 

$

6,391

 

$

77,460

 

$

-

 

$

83,851

Intercompany payable

 

2,489,586

 

 

-

 

 

478,036

 

 

-

 

 

(2,967,622)

 

 

-

Accrued expenses

 

1,621

 

 

2,241

 

 

84,236

 

 

370,552

 

 

-

 

 

458,650

Deferred income

 

-

 

 

-

 

 

48,998

 

 

70,094

 

 

-

 

 

119,092

Current portion of long-term debt

 

-

 

 

-

 

 

67

 

 

4,527

 

 

-

 

 

4,594

 

Total Current Liabilities

 

2,491,207

 

 

2,241

 

 

617,728

 

 

522,633

 

 

(2,967,622)

 

 

666,187

Long-term debt

 

-

 

 

4,879,758

 

 

997

 

 

227,866

 

 

-

 

 

5,108,621

Intercompany notes payable

 

-

 

 

-

 

 

5,028,225

 

 

259,193

 

 

(5,287,418)

 

 

-

Deferred tax liability

 

772

 

 

1,367

 

 

652,769

 

 

6,028

 

 

-

 

 

660,936