UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X]
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2019
 
 
[   ]
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 FOR THE TRANSITION PERIOD FROM _________ TO __________
Commission File Number
000-53354
IHEARTMEDIA, INC.
(Exact name of registrant as specified in its charter)
Delaware
 
26-0241222
(State or other jurisdiction of
incorporation or organization)
 
(I.R.S. Employer Identification No.)
 
 
 
20880 Stone Oak Parkway
San Antonio, Texas
 
78258
(Address of principal executive offices)
 
(Zip Code)
(210) 822-2828
(Registrant’s telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.   Yes [X] No [   ]
 
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).   Yes [X] No [  ]
 
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company.  See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer [   ]   Accelerated filer [   ]   Non-accelerated filer [X]  Smaller reporting company [   ] Emerging growth company [ ]
 
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. [ ]
 
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes [  ] No [X]
 
Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Sections 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court. Yes [ ] No [ ]
 
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.
 
 
 
 
 
 
 
Class
 
Outstanding at April 22, 2019
 
 
~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~
 
~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~
 
 
Class A Common Stock, $.001 par value
 
31,434,876

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

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

 
 
 
Class D Common Stock, $.001 par value
 
—

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


IHEARTMEDIA, INC.
INDEX
 
 
Page No.
Part I – Financial Information
 
Item 1.
 
 
 

 
 
Item 2.
Item 3.
Item 4.
Part II – Other Information
 
Item 1.
Item 1A.
Item 2.
Item 3.
Item 4.
Item 5.
Item 6.



PART I – FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
IHEARTMEDIA, INC. AND SUBSIDIARIES
(DEBTOR-IN-POSSESSION)
CONSOLIDATED BALANCE SHEETS
(In thousands, except share and per share data)
March 31,
2019
 
December 31,
2018
 
(Unaudited)
 
 
CURRENT ASSETS
 
 
 
Cash and cash equivalents
$
448,130

 
$
406,493

Accounts receivable, net of allowance of $49,619 in 2019 and $50,808 in 2018
1,387,122

 
1,575,170

Prepaid expenses
179,823

 
195,266

Other current assets
74,977

 
58,088

Total Current Assets
2,090,052

 
2,235,017

PROPERTY, PLANT AND EQUIPMENT
 
 
 
Structures, net
1,014,688

 
1,053,016

Other property, plant and equipment, net
726,550

 
738,124

INTANGIBLE ASSETS AND GOODWILL
 
 
 
Indefinite-lived intangibles - licenses
2,326,533

 
2,417,915

Indefinite-lived intangibles - permits
971,163

 
971,163

Other intangibles, net
439,864

 
453,284

Goodwill
4,118,312

 
4,118,756

OTHER ASSETS
 
 
 
Operating lease right-of-use assets
2,359,275

 
—

Other assets
239,533

 
282,240

Total Assets
$
14,285,970

 
$
12,269,515

CURRENT LIABILITIES
 

 
 

Accounts payable
$
146,853

 
$
163,149

Current operating lease liabilities
366,902

 
—

Accrued expenses
632,078

 
826,865

Accrued interest
12,323

 
3,108

Deferred income
234,672

 
208,195

Current portion of long-term debt
46,744

 
46,332

Total Current Liabilities
1,439,572

 
1,247,649

Long-term debt
5,293,405

 
5,277,108

Noncurrent operating lease liabilities
1,669,447

 
—

Deferred income taxes
323,434

 
335,015

Other long-term liabilities
296,896

 
489,829

Liabilities subject to compromise
16,829,329

 
16,480,256

Commitments and contingent liabilities (Note 6)


 


STOCKHOLDERS’ DEFICIT
 
 
 
Noncontrolling interest
11,437

 
30,868

Preferred stock, par value $.001 per share, 150,000,000 shares authorized, no shares issued and outstanding
—

 
—

Class A Common Stock, par value $.001 per share, authorized 400,000,000 shares, issued 32,247,361 and 32,292,944 shares in 2019 and 2018, respectively
32

 
32

Class B Common Stock, par value $.001 per share, authorized 150,000,000 shares, issued 555,556 shares in 2019 and 2018
1

 
1

Class C Common Stock, par value $.001 per share, authorized 100,000,000 shares, issued 58,967,502 shares in 2019 and 2018
59

 
59

Class D Common Stock, par value $.001 per share, authorized 200,000,000 shares, no shares issued in 2019 and 2018
—

 
—

Additional paid-in capital
2,075,025

 
2,074,632

Accumulated deficit
(13,330,821
)
 
(13,345,346
)
Accumulated other comprehensive loss
(319,284
)
 
(318,030
)
Cost of shares (812,485 in 2019 and 805,982 in 2018) held in treasury
(2,562
)
 
(2,558
)
Total Stockholders' Deficit
(11,566,113
)
 
(11,560,342
)
Total Liabilities and Stockholders' Deficit
$
14,285,970

 
$
12,269,515

See Notes to Consolidated Financial Statements

1


IHEARTMEDIA, INC. AND SUBSIDIARIES
(DEBTOR-IN-POSSESSION)
CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
(UNAUDITED)
(In thousands, except share and per share data)
Three Months Ended March 31,
 
2019
 
2018
Revenue
$
1,381,899

 
$
1,369,648

Operating expenses:
 
 
 
Direct operating expenses (excludes depreciation and amortization)
614,919

 
602,355

Selling, general and administrative expenses (excludes depreciation and amortization)
455,723

 
472,987

Corporate expenses (excludes depreciation and amortization)
74,700

 
78,734

Depreciation and amortization
113,366

 
151,434

Impairment charges
91,382

 
—

Other operating expense, net
(3,549
)
 
(3,286
)
Operating income
28,260

 
60,852

Interest expense (excludes contractual interest of $397,500 and $66,324 for the three months ended March 31, 2019 and 2018, respectively)
114,764

 
418,397

Loss on investments, net
(9,961
)
 
(90
)
Equity in earnings (loss) of nonconsolidated affiliates
(214
)
 
157

Gain (loss) on extinguishment of debt
(5,474
)
 
100

Other expense, net
(761
)
 
(973
)
Reorganization items, net
36,118

 
192,055

Loss before income taxes
(139,032
)
 
(550,406
)
Income tax benefit
3,431

 
117,366

Consolidated net loss
(135,601
)
 
(433,040
)
Less amount attributable to noncontrolling interest
(21,218
)
 
(16,046
)
Net loss attributable to the Company
$
(114,383
)
 
$
(416,994
)
Other comprehensive income (loss), net of tax:
 
 
 
Foreign currency translation adjustments
2,318

 
6,561

Other comprehensive income
2,318

 
6,561

Comprehensive loss
(112,065
)
 
(410,433
)
Less amount attributable to noncontrolling interest
3,572

 
5,446

Comprehensive loss attributable to the Company
$
(115,637
)
 
$
(415,879
)
Net loss attributable to the Company per common share:
 
 
 
Basic
$
(1.34
)
 
$
(4.89
)
Weighted average common shares outstanding - Basic
85,649

 
85,215

Diluted
$
(1.34
)
 
$
(4.89
)
Weighted average common shares outstanding - Diluted
85,649

 
85,215

See Notes to Consolidated Financial Statements

2


IHEARTMEDIA, INC. AND SUBSIDIARIES
(DEBTOR-IN-POSSESSION)
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' DEFICIT
(UNAUDITED)
(In thousands, except share data)
 
 
 
Controlling Interest
 
 
 
Common Shares (1)
 
Non-
controlling
Interest
 
Common
Stock
 
Additional
Paid-in
Capital
 
Accumulated
Deficit
 
Accumulated
Other
Comprehensive
Loss
 
Treasury
Stock
 
 
 
Class C
Shares
 
Class B
Shares
 
Class A
Shares
 
 
 
 
 
 
 
Total
Balances at
December 31, 2018
58,967,502

 
555,556

 
32,292,944

 
$
30,868

 
$
92

 
$
2,074,632

 
$
(13,345,346
)
 
$
(318,030
)
 
$
(2,558
)
 
$
(11,560,342
)
Consolidated net loss
 
 
 
 
 
 
(21,218
)
 
—

 
—

 
(114,383
)
 
—

 
—

 
(135,601
)
Adoption of ASC 842, Leases
 
 
 
 
 
 
—

 
—

 
—

 
128,908

 
—

 
—

 
128,908

Issuance of restricted stock
 
 
 
 


 
64

 
—

 
—

 
—

 
—

 
(4
)
 
60

Forfeitures of restricted stock
 
 
 
 
(45,583
)
 
—

 
—

 
—

 
—

 
—

 
—

 
—

Amortization of share-based compensation
 
 
 
 
 
 
1,835

 
—

 
392

 
—

 
—

 
—

 
2,227

Dividend declared and paid to noncontrolling interests
 
 
 
 
 
 
(3,684
)
 
—

 
—

 
—

 
—

 
—

 
(3,684
)
Other
 
 
 
 
 
 
—

 
—

 
1

 
—

 
—

 
—

 
1

Other comprehensive income (loss)
 
 
 
 
 
 
3,572

 
—

 
—

 
—

 
(1,254
)
 
—

 
2,318

Balances at
March 31, 2019
58,967,502

 
555,556

 
32,247,361

 
$
11,437

 
$
92

 
$
2,075,025

 
$
(13,330,821
)
 
$
(319,284
)
 
$
(2,562
)
 
$
(11,566,113
)
(In thousands, except share data)
 
 
 
Controlling Interest
 
 
 
Common Shares (1)
 
Non-
controlling
Interest
 
Common
Stock
 
Additional
Paid-in
Capital
 
Accumulated
Deficit
 
Accumulated
Other
Comprehensive
Income (Loss)
 
Treasury
Stock
 
 
 
Class C
Shares
 
Class B
Shares
 
Class A
Shares
 
 
 
 
 
 
 
Total
Balances at
December 31, 2017
58,967,502

 
555,556

 
32,626,168

 
$
41,191

 
$
92

 
$
2,072,566

 
$
(13,142,001
)
 
$
(313,718
)
 
$
(2,474
)
 
$
(11,344,344
)
Consolidated net loss
 
 
 
 
 
 
(16,046
)
 
—

 
—

 
(416,994
)
 
—

 
—

 
(433,040
)
Issuance of restricted stock
 
 
 
 
70,000

 
5

 
—

 
—

 
—

 
—

 
—

 
5

Forfeitures of restricted stock
 
 
 
 
(143,882
)
 
—

 
—

 
—

 
—

 
—

 
—

 
—

Amortization of share-based compensation
 
 
 
 
 
 
2,105

 
—

 
579

 
—

 
—

 
—

 
2,684

Dividend declared and paid to noncontrolling interests
 
 
 
 
 
 
(3,251
)
 
—

 
—

 
—

 
—

 
—

 
(3,251
)
Other
 
 
 
 
 
 
(21
)
 
—

 
(1
)
 
(1,435
)
 
1,435

 
(3
)
 
(25
)
Other comprehensive income
 
 
 
 
 
 
5,446

 
—

 
—

 
—

 
1,115

 
—

 
6,561

Balances at
March 31, 2018
58,967,502

 
555,556

 
32,552,286

 
$
29,429

 
$
92

 
$
2,073,144

 
$
(13,560,430
)
 
$
(311,168
)
 
$
(2,477
)
 
$
(11,771,410
)
(1) The Company's Class D Common Stock and Preferred Stock are not presented in the data above as there were no shares issued and outstanding in 2019 or 2018 .

3


IHEARTMEDIA, INC. AND SUBSIDIARIES
(DEBTOR-IN-POSSESSION)
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(In thousands)
Three Months Ended March 31,
 
2019
 
2018
Cash flows from operating activities:
 
 
 
Consolidated net loss
$
(135,601
)
 
$
(433,040
)
Reconciling items:
 
 
 
Impairment charges
91,382

 
—

Depreciation and amortization
113,366

 
151,434

Deferred taxes
(5,357
)
 
(122,038
)
Provision for doubtful accounts
5,674

 
8,515

Amortization of deferred financing charges and note discounts, net
3,042

 
13,671

Non-cash Reorganization items, net
2,173

 
191,903

Share-based compensation
2,227

 
2,684

Loss on disposal of operating and other assets
3,556

 
1,678

Loss on investments
9,961

 
90

Equity in (earnings) loss of nonconsolidated affiliates
214

 
(157
)
(Gain) loss on extinguishment of debt
5,474

 
(100
)
Barter and trade income
(6,448
)
 
(1,417
)
Other reconciling items, net
(563
)
 
(19,783
)
Changes in operating assets and liabilities, net of effects of acquisitions and dispositions:
 
 
 
Decrease in accounts receivable
183,696

 
157,856

Increase in prepaid expenses and other current assets
(50,365
)
 
(54,527
)
Decrease in accrued expenses
(164,042
)
 
(114,377
)
Increase (decrease) in accounts payable
(16,032
)
 
35,051

Increase in accrued interest
9,768

 
310,235

Increase in deferred income
34,910

 
53,091

Changes in other operating assets and liabilities
1,952

 
(5,293
)
Net cash provided by operating activities
88,987

 
175,476

Cash flows from investing activities:
 
 
 
Purchases of property, plant and equipment
(51,126
)
 
(38,703
)
Proceeds from disposal of assets
722

 
2,310

Change in other, net
(2,007
)
 
(803
)
Net cash used for investing activities
(52,411
)
 
(37,196
)
Cash flows from financing activities:
 
 
 
Draws on credit facilities
—

 
25,333

Payments on credit facilities
—

 
(59,000
)
Proceeds from long-term debt
2,235,228

 
—

Payments on long-term debt
(2,206,466
)
 
(55,597
)
Dividends and other payments to noncontrolling interests
(73
)
 
(3,166
)
Debt issuance costs
(26,752
)
 
—

Change in other, net
59

 
(15
)
Net cash provided by (used for) financing activities
1,996

 
(92,445
)
Effect of exchange rate changes on cash, cash equivalents and restricted cash
682

 
3,366

Net increase in cash, cash equivalents and restricted cash
39,254

 
49,201

Cash, cash equivalents and restricted cash at beginning of period
430,334

 
311,300

Cash, cash equivalents and restricted cash at end of period
$
469,588

 
$
360,501

SUPPLEMENTAL DISCLOSURES:
 
 
 
Cash paid for interest
$
103,897

 
$
94,533

Cash paid for income taxes
16,410

 
9,974

Cash paid for Reorganization items, net
33,945

 
152

See Notes to Consolidated Financial Statements

4


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

NOTE 1 – BASIS OF PRESENTATION
Preparation of Interim Financial Statements
All references in this Quarterly Report on Form 10-Q to the “Company,” “we,” “us” and “our” refer to iHeartMedia, Inc. and its consolidated subsidiaries. The Company’s reportable segments are iHeartMedia (“iHM”), Americas outdoor advertising (“Americas outdoor” or “Americas outdoor advertising”) and International outdoor advertising (“International outdoor” or “International outdoor advertising”).
The accompanying consolidated financial statements were prepared by the Company pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”) and, in the opinion of management, include all normal and recurring adjustments necessary to present fairly the results of the interim periods shown. Certain information and footnote disclosures normally included in financial statements prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) have been condensed or omitted pursuant to such SEC rules and regulations. Management believes that the disclosures made are adequate to make the information presented not misleading. Due to seasonality and other factors, the results for the interim periods may not be indicative of results for the full year. The financial statements contained herein should be read in conjunction with the consolidated financial statements and notes thereto included in the Company’s 2018  Annual Report on Form 10-K.
Th e consolidated financial statements include the accounts of the Company and its subsidiaries. Also included in the consolidated financial statements are entities for which the Company has a controlling financial interest or is the primary beneficiary. Investments in companies in which the Company owns 20% to 50% of the voting common stock or otherwise exercises significant influence over operating and financial policies of the company are accounted for under the equity method. All significant intercompany transactions are eliminated in the consolidation process.
Certain prior period amounts have been reclassified to conform to the 2019 presentation.
Voluntary Filing under Chapter 11
On March 14, 2018 (the "Petition Date"), the Company, iHeartCommunications, Inc. ("iHeartCommunications") and certain of the Company's direct and indirect domestic subsidiaries (collectively, the "Debtors") filed voluntary petitions for relief (the "Chapter 11 Cases") under Chapter 11 of the United States Bankruptcy Code (the "Bankruptcy Code"), in the United States Bankruptcy Court for the Southern District of Texas, Houston Division (the "Bankruptcy Court"). Clear Channel Outdoor Holdings, Inc. (“CCOH”) and its direct and indirect subsidiaries did not file voluntary petitions for reorganization under the Bankruptcy Code and are not Debtors in the Chapter 11 Cases.
The Chapter 11 Cases are being administered under the caption In re: iHeartMedia, Inc., Case No. 18-31274 (MI) . The Debtors are operating their businesses as “debtors-in-possession” under the jurisdiction of the Bankruptcy Court and in accordance with the applicable provisions of the Bankruptcy Code and orders of the Bankruptcy Court.
On March 16, 2018, the Debtors entered into a Restructuring Support Agreement (the “RSA”) with certain creditors and equity holders (the “Consenting Stakeholders”). The RSA contemplates the restructuring and recapitalization of the Debtors (the “Restructuring Transactions”) through a plan of reorganization in the Chapter 11 Cases, which plan was confirmed in January 2019. Pursuant to the RSA, the Consenting Stakeholders have agreed to, among other things, support the Restructuring Transactions and vote in favor of a plan of reorganization to effect the Restructuring Transactions.
The RSA provides certain milestones for the Restructuring Transactions. Failure of the Debtors to satisfy these milestones without a waiver or consensual amendment would provide the Consenting Stakeholders a termination right under the RSA. These milestones include (i) the filing of a plan of reorganization and disclosure statement, in form and substance reasonably acceptable to the Debtors and the Consenting Stakeholders, which were filed with the Bankruptcy Court on April 28, 2018, (ii) the filing of a motion for approval of the disclosure statement by May 31, 2018, which deadline was subsequently extended to June 22, 2018, and which motion was filed with the Bankruptcy Court on that date, (iii) the entry of an order approving the disclosure statement by July 27, 2018 (subject to one additional 20-day extension on the terms set forth on the RSA), which order was ultimately entered on September 20, 2018, (iv) the entry of an order confirming the plan of reorganization within 75 days of the entry of an order approving the disclosure statement, which order was ultimately entered on January 22, 2019 and (v) the effective date of the plan of reorganization (the "Effective Date") occurring by March 14, 2019, which has not yet occurred but is currently expected to occur on or about May 1, 2019. The Debtors satisfied the first and second milestones, but did not satisfy the subsequent milestones and as a result, certain of the Consenting Stakeholders presently have the right to terminate the RSA, but as of the date hereof, the RSA has not been terminated.

5


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

iHeartCommunications, which is a Debtor in the Chapter 11 Cases, provides the day-to-day cash management services for CCOH’s cash activities and balances in the U.S. pursuant to the Corporate Services Agreement between iHeartCommunications and CCOH, and is continuing to do so during the Chapter 11 Cases pursuant to a cash management order approved by the Bankruptcy Court.
iHeartCommunications' filing of the Chapter 11 Cases constituted an event of default that accelerated its obligations under its debt agreements. Due to the Chapter 11 Cases, however, the creditors’ ability to exercise remedies under iHeartCommunications' debt agreements were stayed as of March 14, 2018, the date of the Chapter 11 petition filing, and continue to be stayed.
The Company has applied Accounting Standards Codification (“ASC”) 852 - Reorganizations in preparing the consolidated financial statements. ASC 852 requires the financial statements, for periods subsequent to the commencement of the Chapter 11 Cases, to distinguish transactions and events that are directly associated with the reorganization from the ongoing operations of the business. Accordingly, certain charges incurred during 2019 related to the bankruptcy proceedings, including unamortized long-term debt fees and discounts associated with debt classified as liabilities subject to compromise, are recorded as Reorganization items, net. In addition, pre-petition Debtor obligations that may be impacted by the Chapter 11 Cases have been classified on the Consolidated Balance Sheet at March 31, 2019 as Liabilities subject to compromise. These liabilities are reported at the amounts the Company anticipates will be allowed by the Bankruptcy Court, even if they may be settled for lesser amounts. See below for more information regarding Reorganization items.
ASC 852 requires certain additional reporting for financial statements prepared between the bankruptcy filing date and the date of emergence from bankruptcy, including:
•
Reclassification of Debtor pre-petition liabilities that are unsecured, under-secured or where it cannot be determined that the liabilities are fully secured, to a separate line item in the Consolidated Balance Sheet called, "Liabilities subject to compromise"; and
•
Segregation of Reorganization items, net as a separate line in the Consolidated Statement of Comprehensive Loss, outside of income from continuing operations.
Debtor-In-Possession 
In general, as debtors-in-possession under the Bankruptcy Code, the Debtors are authorized to continue to operate as an ongoing business, but may not engage in transactions outside the ordinary course of business without the prior approval of the Bankruptcy Court. Pursuant to first day and second day motions filed with the Bankruptcy Court, the Bankruptcy Court authorized the Debtors to conduct their business activities in the ordinary course, including, among other things and subject to the terms and conditions of such orders, authorizing the Debtors to: (i) pay employees’ wages and related obligations; (ii) continue to operate their cash management system in a form substantially similar to prepetition practice; (iii) use cash collateral on an interim basis; (iv) continue to honor certain obligations related to on-air talent, station affiliates and royalty obligations; (v) continue to maintain certain customer programs; (vi) pay taxes in the ordinary course; (vii) continue their surety bond program; and (viii) maintain their insurance program in the ordinary course.
Automatic Stay 
Subject to certain specific exceptions under the Bankruptcy Code, the Chapter 11 Cases automatically stayed most judicial or administrative actions against the Debtors and efforts by creditors to collect on or otherwise exercise rights or remedies with respect to pre-petition claims. Absent an order from the Bankruptcy Court, substantially all of the Debtors’ pre-petition liabilities are subject to settlement under the Bankruptcy Code. See Note 14, Condensed Combined Debtor-In-Possession Financial Information .
Executory Contracts
Subject to certain exceptions, under the Bankruptcy Code, the Debtors may assume, amend or reject certain executory contracts and unexpired leases subject to the approval of the Bankruptcy Court and certain other conditions. Generally, the rejection of an executory contract or unexpired lease is treated as a pre-petition breach of such executory contract or unexpired lease and, subject to certain exceptions, relieves the Debtors from performing their future obligations under such executory contract or unexpired lease but entitles the contract counterparty or lessor to a pre-petition general unsecured claim for damages caused by such deemed breach. Generally, the assumption of an executory contract or unexpired lease requires the Debtors to cure existing monetary defaults under such executory contract or unexpired lease and provide adequate assurance of future performance. Accordingly, any description of an executory contract or unexpired lease with the Debtors in this document, including where applicable a

6


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

quantification of the Company’s obligations under any such executory contract or unexpired lease of the Debtors, is qualified by any overriding rejection rights the Company has under the Bankruptcy Code.
Potential Claims
The Debtors have filed with the Bankruptcy Court schedules and statements setting forth, among other things, the assets and liabilities of each of the Debtors, subject to the assumptions filed in connection therewith. These schedules and statements may be subject to further amendment or modification after filing. Certain holders of pre-petition claims that are not governmental units were required to file proofs of claim by the deadline for general claims, which was on June 29, 2018 (the “Bar Date”).
The Debtors' have received approximately 4,300   proofs of claim as of April 22, 2019 for an amount of approximately  $808.4 billion . Such amount includes duplicate claims across multiple Debtor legal entities. These claims will be reconciled to amounts recorded in the Company's accounting records. Differences in amounts recorded and claims filed by creditors will be investigated and resolved, including through the filing of objections with the Bankruptcy Court, where appropriate. The Bankruptcy Court does not allow for claims that have been acknowledged as duplicates. Approximately 2,000 claims totaling approximately $7.0 billion have been disallowed, modified or withdrawn and the Debtors have filed additional claim objections with the Bankruptcy Court for approximately 50 claims totaling approximately $0.6 million in additional reductions and modifications. The Company may ask the Bankruptcy Court to disallow claims that the Company believes have been later amended or superseded, are without merit, are overstated or should be disallowed for other reasons. In addition, as a result of this process, the Company may identify additional liabilities that will need to be recorded or reclassified to Liabilities subject to compromise. In light of the substantial number of claims filed, and expected to be filed, the claims resolution process may take considerable time to complete and will continue after the Debtors emerge from bankruptcy.
Reorganization Items, Net  
The Debtors have incurred and will continue to incur significant costs associated with the reorganization, including the write-off of original issue discount and deferred long-term debt fees on debt subject to compromise, costs of debtor-in-possession refinancing, legal and professional fees. The amount of these charges, which since the Petition Date are being expensed as incurred, are expected to significantly affect the Company’s results of operations. In accordance with applicable guidance, costs associated with the bankruptcy proceedings have been recorded as Reorganization items, net within the Company's accompanying Consolidated Statements of Comprehensive Loss for the three months ended March 31, 2019 and 2018 . See Note 13, Reorganization Items, Net .
Financial Statement Classification of Liabilities Subject to Compromise
The accompanying Consolidated Balance Sheets as of March 31, 2019 and December 31, 2018 include amounts classified as Liabilities subject to compromise, which represent liabilities the Company anticipates will be allowed as claims in the Chapter 11 Cases. These amounts represent the Debtors’ current estimate of known or potential obligations to be resolved in connection with the Chapter 11 Cases, and may differ from actual future settlement amounts paid. Differences between liabilities estimated and claims filed, or to be filed, will be investigated and resolved in connection with the claims resolution process. The Company will continue to evaluate these liabilities throughout the Chapter 11 process and adjust amounts as necessary. Such adjustments may be material. See Note 12, Liabilities Subject to Compromise .
Plan of Reorganization
On April 28, 2018, the Debtors filed a plan of reorganization (as amended, the “Plan of Reorganization”) and a related disclosure statement (as amended, the “Disclosure Statement”) with the Bankruptcy Court. Thereafter, the Debtors filed a second, third and fourth amended Plan of Reorganization and amended versions of the Disclosure Statement. On September 20, 2018, the Bankruptcy Court entered an order approving the Disclosure Statement and related solicitation and notice procedures for voting on the Plan of Reorganization. On October 10, 2018, the Debtors filed a fifth amended Plan of Reorganization and the Disclosure Statement Supplement. On October 18, 2018, the Bankruptcy Court entered an order approving the Disclosure Statement Supplement and the continued solicitation of holders of general unsecured claims for voting on the Plan of Reorganization. The deadline for holders of claims and interests to vote on the Plan of Reorganization was November 16, 2018. More than 90% of the votes cast by holders of claims and interests entitled to vote thereon accepted the Plan of Reorganization.
On December 16, 2018, the Debtors, CCOH, GAMCO Asset Management, Inc., and Norfolk County Retirement System entered into the CCOH Separation Settlement (as defined below) resolving all claims, objections, and other causes of action that have

7


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

been or could be asserted by or on behalf of CCOH, GAMCO Asset Management, Inc., and/or Norfolk County Retirement System by and among the Debtors, CCOH, GAMCO Asset Management, Inc., certain individual defendants in the GAMCO Asset Management, Inc. action and/or the Norfolk County Retirement System action, and the private equity sponsor defendants in such actions. In connection with the CCOH Separation Settlement, on December 17, 2018, the Debtors filed a modified fifth amended Plan of Reorganization. On January 10, 2019, hearings commenced to consider confirmation of the Plan of Reorganization. On January 17, 2019, the Debtors came to agreement on the terms of the Legacy Plan Settlement (as defined below) with Wilmington Savings Fund Society, FSB (“WSFS”), solely in its capacity as successor indenture trustee to the 6.875% Senior Notes due 2018 and 7.25% Senior Notes due 2027 (together with the 5.50% Senior Notes due 2016, the “Legacy Notes”), and not in its individual capacity, and certain consenting Legacy Noteholders of all issues related to confirmation of our plan of reorganization, and on January 21, 2019 and January 22, 2019, the Debtors filed further modified versions of the fifth amended Plan of Reorganization. On January 22, 2019, the Bankruptcy Court entered an order confirming the Plan of Reorganization.
The Plan of Reorganization contemplates a restructuring of the Debtors that will reduce iHeartCommunications’ debt from approximately $16 billion to approximately $5.8 billion , and will result in the separation of CCOH from the Company, creating two independent companies.
Going Concern
The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern and contemplate the realization of assets and the satisfaction of liabilities in the normal course of business. As noted above, Liabilities subject to compromise will be resolved in connection with the Chapter 11 Cases. The Company’s ability to continue as a going concern is contingent upon the Company’s ability to successfully implement the Company’s Plan of Reorganization, among other factors. As a result of the Chapter 11 Cases, the realization of assets and the satisfaction of liabilities are subject to uncertainty. While operating as debtors-in-possession under Chapter 11, the Company may sell or otherwise dispose of or liquidate assets or settle liabilities, subject to the approval of the Bankruptcy Court or as otherwise permitted in the ordinary course of business, for amounts other than those reflected in the accompanying consolidated financial statements. Further, the Plan of Reorganization could materially change the amounts and classifications of assets and liabilities reported in the consolidated financial statements. The accompanying consolidated financial statements do not include any adjustments related to the recoverability and classification of assets or the amounts and classification of liabilities or any other adjustments that might be necessary should the Company be unable to continue as a going concern or as a consequence of the Chapter 11 Cases. As a result of our financial condition, the defaults under our debt agreements, and the risks and uncertainties surrounding the Chapter 11 Cases, substantial doubt exists that we will be able to continue as a going concern.
Restricted Cash 
The following table provides a reconciliation of cash, cash equivalents and restricted cash reported in the Consolidated Balance Sheets to the total of the amounts reported in the Consolidated Statements of Cash Flows:
(In thousands)
March 31,
2019
 
December 31,
2018
Cash and cash equivalents
$
448,130

 
$
406,493

Restricted cash included in:
 
 
 
  Other current assets
7,493

 
7,649

  Other assets
13,965

 
16,192

Total cash, cash equivalents and restricted cash in the Statement of Cash Flows
$
469,588

 
$
430,334

New Accounting Pronouncements Recently Adopted
Leases
The Company adopted ASU No. 2016-02, which created ASC 842, Leases , and all subsequent ASUs relating to this Topic, as of January 1, 2019 (collectively, "ASC 842"). This new lease accounting standard, which supersedes previous lease accounting guidance under U.S. GAAP, results in significant changes to the balance sheets of lessees, most significantly by requiring the recognition of a right-of-use ("ROU") asset and lease liability by lessees for those leases classified as operating leases. Lessor

8


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

accounting is also updated to align with certain changes in the lessee model and the revenue recognition standard ("ASC Topic 606"), which was adopted in 2018.
The Company applied the transition provisions of this standard at January 1, 2019 following the optional transition method provided by ASU No. 2018-11; consequently, the consolidated financial statements and notes to the consolidated financial statements for periods before the date of adoption continue to be presented in accordance with ASC Topic 840. In addition, the Company elected the package of practical expedients permitted under the transition guidance within the new standard, which allowed us to not reassess whether expired or existing contracts are or contain leases and to carry forward the historical lease classification for those leases that commenced prior to the date of adoption.
Upon adoption of ASC 842, prepaid and deferred rent balances, which were historically presented separately, were combined and presented net within the ROU asset. Additionally, deferred gains related to previous transactions that were historically accounted for as sale and operating leasebacks in accordance with ASC Topic 840 were recognized as a cumulative-effect adjustment to equity, resulting in an increase to equity, net of tax, of $128.9 million . Under ASC Topic 840, such gains were recognized ratably over the lease term as a credit to operating lease expense, and operating lease expense for the three months ended March 31, 2018 included a credit of $1.5 million for the amortization of these gains, which was not recognized in the three months ended March 31, 2019 .
Adoption of the new standard had a material impact on our consolidated balance sheets, but it did not have a material impact on our other consolidated financial statements. Additionally, the standard requires disclosures to meet the objective of enabling users of the financial statements to assess the amount, timing, and uncertainty of cash flows arising from leases. Refer to Note 2, Revenue , and Note 3, Leases , for more information.
Intangible Assets and Goodwill
During the first quarter of 2017, the FASB issued ASU 2017-04, Intangibles - Goodwill and Other (Topic 350) . This update eliminates the requirement to calculate the implied fair value of goodwill to measure a goodwill impairment charge. Entities will record an impairment charge based on the excess of a reporting unit's carrying amount over its fair value. The standard is effective for annual and any interim impairment tests performed for periods beginning after December 15, 2019. The Company early adopted the proposed guidance under ASU 2017-04 beginning on January 1, 2019 on a prospective basis. The implementation of ASU 2017-04 did not have a material impact on our consolidated financial statements and related disclosures.
During the third quarter of 2018, the FASB issued ASU 2018-15, Intangibles - Goodwill and Other - Internal-Use Software (Subtopic 350-40), Customer's Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement that is a Service Contract . This update requires that a customer in a cloud computing arrangement that is a service contract follow the internal use software guidance in Accounting Standards Codification (ASC) 350-402 to determine which implementation costs to capitalize as assets. The standard is effective for fiscal years beginning after December 15, 2019. The Company early adopted the proposed guidance under ASU 2017-04 beginning on January 1, 2019 on a prospective basis. The implementation of ASU 2017-04 did not have a material impact on our consolidated financial statements and related disclosures.
NOTE 2 – REVENUE
The Company generates revenue from several sources:
•
The primary source of revenue in the iHM segment is the sale of local and national advertising on the Company’s broadcast radio stations, its iHeartRadio digital platforms, station websites, sponsorships and live events. This segment also generates revenues from traffic and weather data, syndicated content, and other miscellaneous transactions.
•
The Americas outdoor and International outdoor segments generate revenue primarily from the sale of advertising space on printed and digital out-of-home advertising displays.
•
The Company also generates revenue through contractual commissions realized from the sale of national spot and online advertising on behalf of clients of its full-service media representation business, Katz Media, which is reported in the Company’s Other segment.

9


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

Trade and Barter
Trade and barter transactions represent the exchange of advertising spots or display space for merchandise, services or other assets in the ordinary course of business. The transaction price for these contracts is measured at the estimated fair value of the non-cash consideration received unless this is not reasonably estimable, in which case the consideration is measured based on the standalone selling price of the advertising spots or display space promised to the customer. Trade and barter revenues and expenses from continuing operations, which are included in consolidated revenue and selling, general and administrative expenses, respectively, were as follows:
 
Three Months Ended March 31,
(In thousands)
2019
 
2018
Consolidated:
 
 
 
  Trade and barter revenues
$
59,382

 
$
57,392

  Trade and barter expenses
51,928

 
68,277

 
 
 
 
iHM Segment:
 
 
 
  Trade and barter revenues
$
55,585

 
$
53,946

  Trade and barter expenses
49,856

 
64,532

Lease Revenue Considerations in Outdoor Segments
Certain of the revenue transactions in the Americas outdoor and International outdoor segments are considered leases, for accounting purposes, as the contracts convey to customers the right to control the use of the Company’s advertising displays for a period of time. These contracts, which typically cover periods of a few weeks to one year (although there are some with longer terms), are generally cancelable after a specified notice period in the Americas outdoor segment, while contracts in the International outdoor segment are generally non-cancelable or require the customer to pay a fee to terminate the contract. To qualify as a lease, fulfillment of the contract must be dependent upon the use of a specified advertising structure, the customer must have almost exclusive use of the advertising display throughout the contract term, and, upon adoption of the new leases standard (ASC 842) on January 1, 2019, the customer must also have the right to change the advertisement that is displayed throughout the contract term.
The Company has elected a practical expedient to not separate non-lease components from associated lease components if certain criteria are met. As such, each right to control the use of an advertising display that meets the lease criteria is combined with the related installation and maintenance services provided under the contract into a single lease component. Production services, which do not meet the criteria to be combined, and each advertising display that does not meet the lease criteria (along with any related installation and maintenance services) are non-lease components. Consideration in outdoor advertising contracts is allocated between lease and non-lease components in proportion to their relative standalone selling prices, which are generally approximated by the contractual prices for each promised service. The Company accounts for revenue from leases, which are all classified as operating leases, in accordance with the lease accounting guidance (ASC Topic 840 or ASC Topic 842, depending on the advertising campaign start date), while the Company’s remaining revenue transactions are accounted for as revenue from contracts with customers (ASC Topic 606).
In accordance with the transition approach that the Company elected to adopt ASC Topic 842, as described in Note 1, revenue contracts with campaign start dates prior to January 1, 2019 were not reassessed to determine whether they qualify as a lease under the requirements of the new leasing standard. Instead, they continue to be accounted for as revenue from contracts with customers or revenue from leases based on the requirements of the previous standard (ASC Topic 840), and the new requirements have been applied to revenue contracts with campaign start dates on or after January 1, 2019. Because the definition of a lease is more restrictive under the new standard, fewer of our new outdoor advertising contracts meet the definition of a lease for accounting purposes, resulting in an increase in the percentage of revenue that is categorized as revenue from contracts with customers as compared to the prior year.

10


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

Disaggregation of Revenue
The following table shows, by segment, revenue from contracts with customers disaggregated by geographical region, revenue from leases and total revenue for the three months ended March 31, 2019 and 2018 :
(In thousands)
iHM
 
Americas Outdoor (1)
 
International Outdoor (1)
 
Other
 
Eliminations
 
Consolidated
Three Months Ended March 31, 2019
Revenue from contracts with customers:
 
 
 
 
 
 
 
 
 
 
 
  United States
$
759,400

 
$
131,431

 
$
—

 
$
30,190

 
$
(269
)
 
$
920,752

  Other Americas
1,027

 
896

 
13,645

 
—

 
—

 
15,568

  Europe
2,351

 
—

 
201,205

 
—

 
—

 
203,556

  Asia-Pacific and other
2,622

 
—

 
53,231

 
—

 
—

 
55,853

     Total
765,400

 
132,327

 
268,081

 
30,190

 
(269
)
 
1,195,729

Revenue from leases
410

 
140,395

 
46,313

 
—

 
(948
)
 
186,170

Revenue, total
$
765,810

 
$
272,722

 
$
314,394

 
$
30,190

 
$
(1,217
)
 
$
1,381,899

 
 
 
 
 
 
 
 
 
 
 
 
Three Months Ended March 31, 2018
Revenue from contracts with customers:
  United States
$
736,940

 
$
96,147

 
$
—

 
$
28,218

 
$
(313
)
 
$
860,992

  Other Americas
1,180

 
650

 
12,123

 
—

 
—

 
13,953

  Europe
2,601

 
—

 
187,216

 
—

 
—

 
189,817

  Asia-Pacific and other
2,957

 
—

 
3,012

 
—

 
—

 
5,969

     Total
743,678

 
96,797

 
202,351

 
28,218

 
(313
)
 
1,070,731

Revenue from leases
890

 
159,050

 
140,200

 
—

 
(1,223
)
 
298,917

Revenue, total
$
744,568

 
$
255,847

 
$
342,551

 
$
28,218

 
$
(1,536
)
 
$
1,369,648

(1)  
All of the Company’s outdoor advertising structures, which may be owned or leased, are used to generate revenue. Such revenue may be classified as revenue from contracts with customers or revenue from leases depending on the terms of the contract, as previously described.
Revenue from Contracts with Customers
The following tables show the Company’s beginning and ending accounts receivable and deferred revenue balances from contracts with customers:
 
Three Months Ended March 31,
(In thousands)
2019
 
2018
Accounts receivable, net of allowance, from contracts with customers:
 
 
 
  Beginning balance
$
1,236,779

 
$
1,195,145

  Ending balance
$
1,169,518

 
$
1,035,939

 
 
 
 
Deferred revenue from contracts with customers:
 
 
 
  Beginning balance
$
188,604

 
$
184,000

  Ending balance
$
212,286

 
$
211,582

During the three months ended March 31, 2019 and 2018 , respectively, the Company recognized $97.3 million and $83.3 million of revenue that was included in the deferred revenue from contracts with customers balance at the beginning of the period.
The Company’s contracts with customers generally have terms of one year or less; however, as of March 31, 2019 , the Company expects to recognize $316.7 million of revenue in future periods for remaining performance obligations from current contracts

11


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

with customers that have an original expected duration greater than one year, with substantially all of this amount to be recognized over the next five years . Commissions related to the Company’s media representation business have been excluded from this amount as they are contingent upon future sales.
Revenue from Leases
As of March 31, 2019 , the future lease payments to be received by the Company are as follows:
(In thousands)
2019
$
397,444

2020
48,769

2021
19,832

2022
10,505

2023
3,138

Thereafter
15,432

  Total
$
495,120

Note that the future lease payments disclosed are limited to the non-cancelable period of the lease and, for contracts that require the customer to pay a significant fee to terminate the contract such that the customer is considered reasonably certain not to exercise this option, periods beyond the termination option. Payments scheduled for periods beyond a termination option are not included for contracts that allow cancellation by the customer without a significant fee.
NOTE 3 – LEASES
The Company enters into operating lease contracts for land, buildings, structures and other equipment. Arrangements are evaluated at inception to determine whether such arrangements contain a lease. Operating leases include land lease contracts, radio towers and contracts for the use of space on floors, walls and exterior locations on buildings. Arrangements in which wall space is used are considered to be lease contracts if all other required elements of a lease contract are present. The Company assessed certain international transit contracts under ASC 842, which historically were determined to be leases, and concluded that the arrangements did not meet the definition of leases under the new leasing standard. In accordance with the transition guidance of ASC 842, such arrangements are included in the Company’s balance sheet as of January 1, 2019. The majority of the Company's transit contracts do not meet the definition of a lease due to substantive substitution rights within those contracts. Arrangements to lease building space consist primarily of the rental of office space, but may also include leases of other equipment, including automobiles and copiers. Operating leases are reflected on the Company's balance sheet within Operating lease right-of-use assets and the related short-term and long-term liabilities are included within Current and Noncurrent operating lease liabilities, respectively. As of March 31, 2019 , a portion of the Company's operating lease liabilities relate to lease contracts entered into prior to the Petition Date. As such, these liabilities are included within Liabilities subject to compromise. See Note 12 - Liabilities Subject to Compromise for more information.
The Company's finance leases are included within Property, plant and equipment with the related liabilities included within Long-term debt or within Liabilities subject to compromise.
ROU assets represent the right to use an underlying asset for the lease term, and lease liabilities represent the obligation to make lease payments arising from the lease. Operating lease ROU assets and liabilities are recognized at commencement date based on the present value of lease payments over the respective lease term. Lease expense is recognized on a straight-line basis over the lease term.
Certain of the Company's operating lease agreements include rental payments based on a percentage of revenue and others include rental payments adjusted periodically for inflationary changes. Percentage rent contracts, in which lease expense is calculated as a percentage of advertising revenue, and payments due to changes in inflationary adjustments are included within variable rent expense, which is accounted for separately from periodic straight-line lease expense. Amounts related to insurance and property taxes in lease arrangements when billed on a pass-through basis are allocated to the lease and non-lease components of the lease based on their relative standalone selling prices. Internationally, the Company is commonly assessed VAT on its contracts, which is treated as a nonlease component.

12


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

Many operating lease contracts expire; however, the Company may continue to operate the leased assets after the rights and obligations of the lease agreements have expired. Such contracts, once expired, are not considered to be leases and future expected payments are not included in operating lease liabilities or ROU assets. Many of the Company's leases entered into in connection with advertising structures provide options to extend the terms of the agreements. Generally, renewal periods are excluded from minimum lease payments when calculating the lease liabilities as, for most leases, the Company does not consider exercise of such options to be reasonably certain. As a result, unless a renewal option is considered reasonably assured, the optional terms and related payments are not included within the lease liability. The Company's lease agreements do not contain any material residual value guarantees or material restrictive covenants.
The implicit rate within the Company's lease agreements is generally not determinable. As such, the Company uses the incremental borrowing rate ("IBR") to determine the present value of lease payments at the commencement of the lease. The IBR, as defined in ASC 842, is "the rate of interest that a lessee would have to pay to borrow on a collateralized basis over a similar term an amount equal to the lease payments in a similar economic environment."

13


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

The following table provides the components of lease expense included within the Consolidated Statement of Comprehensive Loss for the three months ended March 31, 2019 :
(In thousands)
Three Months Ended
March 31, 2019
Operating lease expense
$
168,461

Variable lease expense
31,891

The following table provides the weighted average remaining lease term and the weighted average discount rate for the Company's leases as of March 31, 2019 . The weighted average discount rate is affected by the operating leases entered into by the iHM entities, which are Debtors in the Chapter 11 Cases.
 
March 31,
2019
Operating lease weighted average remaining lease term (in years)
10.0

Operating lease weighted average discount rate
12.44
%
As of March 31, 2019 , the Company’s future maturities of operating lease liabilities were as follows:
(In thousands)
2019
$
471,907

2020
550,241

2021
474,264

2022
387,920

2023
321,722

Thereafter
2,153,963

  Total lease payments
$
4,360,017

Less: Effect of discounting
1,894,444

  Total operating lease liability
$
2,465,573

The following table provides supplemental cash flow information related to leases:
(In thousands)
Three Months Ended
March 31, 2019
 
 
Cash paid for amounts included in measurement of operating lease liabilities
$
189,472

Lease liabilities arising from obtaining right-of-use assets 1
$
2,565,084

1 L ease liabilities from obtaining right-of-use assets include transition liabilities upon adoption of ASC 842, as well as new leases entered into during the three months ended March 31, 2019 .


14


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

NOTE 4 – 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 as of March 31, 2019 and December 31, 2018 , respectively:
(In thousands)
March 31,
2019
 
December 31,
2018
Land, buildings and improvements
$
572,362

 
$
572,904

Structures
2,833,051

 
2,835,411

Towers, transmitters and studio equipment
366,500

 
365,991

Furniture and other equipment
818,278

 
793,756

Construction in progress
112,442

 
116,839

 
4,702,633

 
4,684,901

Less: accumulated depreciation
2,961,395

 
2,893,761

Property, plant and equipment, net
$
1,741,238

 
$
1,791,140

Indefinite-lived Intangible Assets
The Company’s indefinite-lived intangible assets consist of Federal Communications Commission (“FCC”) broadcast licenses in its iHM segment and billboard permits in its Americas outdoor advertising segment. Due to significant differences in both business practices and regulations, billboards in the International outdoor segment are subject to long-term, finite contracts unlike the Company’s permits in the United States.  Accordingly, there are no indefinite-lived intangible assets in the International outdoor segment.
The Company performs its annual impairment test on goodwill and indefinite-lived intangible assets, including Federal Communication Commission ("FCC") licenses, as of July 1 of each year. In addition, the Company tests for impairment of intangible assets whenever events and circumstances indicate that such assets might be impaired.  During the three months ended March 31, 2019 , the Company recognized non-cash impairment charges of $91.4 million in relation to indefinite-lived FCC licenses as a result of an increase in the Company's weighted average cost of capital.
Other Intangible Assets
Other intangible assets include definite-lived intangible assets and permanent easements.  The Company’s definite-lived intangible assets primarily include transit and street furniture contracts, talent and representation contracts, customer and advertiser relationships, and site leases and other contractual rights, all of which are amortized over the shorter of either the respective lives of the agreements or over the period of time the assets are expected to contribute directly or indirectly to the Company’s future cash flows. Permanent easements are indefinite-lived intangible assets which include certain rights to use real property not owned by the Company.  The Company periodically reviews the appropriateness of the amortization periods related to its definite-lived intangible assets.  These assets are recorded at amortized cost.

15


IHEARTMEDIA, INC. AND SUBSIDIARIES (DEBTOR-IN-POSSESSION)
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, 2019 and December 31, 2018 , respectively:
(In thousands)
March 31, 2019
 
December 31, 2018
 
Gross Carrying Amount
 
Accumulated Amortization
 
Gross Carrying Amount
 
Accumulated Amortization
Transit, street furniture and other outdoor
contractual rights
$
528,232

 
$
(443,963
)
 
$
528,185

 
$
(440,228
)
Customer / advertiser relationships
1,237,115

 
(1,210,498
)
 
1,249,128

 
(1,208,056
)
Talent contracts
164,932

 
(150,289
)
 
164,933

 
(148,578
)
Representation contracts
77,508

 
(72,419
)
 
77,508

 
(70,829
)
Permanent easements
163,341

 
—

 
163,317

 
—

Other
394,923

 
(249,018
)
 
382,897

 
(244,993
)
Total
$
2,566,051

 
$
(2,126,187
)
 
$
2,565,968

 
$
(2,112,684
)
Total amortization expense related to definite-lived intangible assets for the three months ended March 31, 2019 and 2018 was $13.9 million and $47.0 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)
 
2020
$
43,788

2021
38,457

2022
32,707

2023
24,849

2024
20,983

Goodwill
The following table presents the changes in the carrying amount of goodwill in each of the Company’s reportable segments:
(In thousands)
iHM
 
Americas Outdoor
 
International Outdoor
 
Other
 
Consolidated
Balance as of December 31, 2017
$
3,255,208

 
$
507,819

 
$
206,224

 
$
81,831

 
$
4,051,082

Acquisitions
77,320

 
—

 
—

 
—

 
77,320

Dispositions
(1,606
)
 
—

 
—

 
—

 
(1,606
)
Foreign currency
—

 
—

 
(8,040
)
 
—

 
(8,040
)
Balance as of December 31, 2018
$
3,330,922

 
$
507,819

 
$
198,184

 
$
81,831

 
$
4,118,756

Acquisitions
2,767

 
—

 
—

 
—

 
2,767

Foreign currency
(27
)
 
—

 
(3,184
)
 
—

 
(3,211
)
Balance as of March 31, 2019
$
3,333,662

 
$
507,819

 
$
195,000

 
$
81,831

 
$
4,118,312


16


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

NOTE 5 – LONG-TERM DEBT
Long-term debt outstanding as of March 31, 2019 and December 31, 2018 consisted of the following:
(In thousands)
March 31,
2019
 
December 31,
2018
Senior Secured Credit Facilities
$
—

 
$
—

Debtors-in-Possession Facility (1)
—

 
—

9.0% Priority Guarantee Notes Due 2019
—

 
—

9.0% Priority Guarantee Notes Due 2021
—

 
—

11.25% Priority Guarantee Notes Due 2021
—

 
—

9.0% Priority Guarantee Notes Due 2022
—

 
—

10.625% Priority Guarantee Notes Due 2023
—

 
—

CCO Receivables Based Credit Facility Due 2023 (2)
—

 
—

Other secured subsidiary debt (3)
3,828

 
3,882

Total consolidated secured debt
3,828

 
3,882

 
 
 
 
14.0% Senior Notes Due 2021
—

 
—

Legacy Notes (4)
—

 
—

CCWH Senior Notes due 2022
2,725,000

 
2,725,000

CCWH Subordinated Notes due 2020 (5)
—

 
2,200,000

CCWH Subordinated Notes due 2024 (5)
2,235,000

 
—

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

 
375,000

Other subsidiary debt
46,510

 
46,105

Purchase accounting adjustments and original issue discount
(867
)
 
(739
)
Long-term debt fees
(44,322
)
 
(25,808
)
Long-term debt, net subject to compromise (6)
15,143,713

 
15,149,477

Total debt, prior to reclassification to Liabilities subject to compromise
20,483,862

 
20,472,917

Less: Current portion
46,744

 
46,332

Less: Amounts reclassified to Liabilities subject to compromise
15,143,713

 
15,149,477

Total long-term debt
$
5,293,405

 
$
5,277,108

(1)
The Debtors-in-Possession Facility (the "DIP Facility"), which matures on the earlier of the emergence date from the Chapter 11 Cases or June 14, 2019, provides for borrowings of up to $450.0 million . The DIP Facility also includes a feature to convert into an exit facility at emergence, upon meeting certain conditions. As of March 31, 2019 , the Company had a borrowing base of $426.8 million under iHeartCommunications' DIP Facility, had no outstanding borrowings, had $59.0 million of outstanding letters of credit and had an availability block requirement of $37.5 million , resulting in $330.3 million of excess availability.
(2)
The receivables based credit facility provides for revolving credit commitments of up to $125.0 million . As of March 31, 2019 , the facility had $85.5 million of letters of credit outstanding and a borrowing base of $116.2 million , resulting in $30.7 million of excess availability. Certain additional restrictions, including a springing financial covenant, take effect at decreased levels of excess availability.
(3)
Other secured subsidiary debt matures at various dates from 2019 through 2045.
(4)
iHeartCommunications' Legacy Notes, all of which were issued prior to the acquisition of iHeartCommunications by the Company in 2008, consist of $175.0 million of Senior Notes that matured on June 15, 2018, $300.0 million of Senior Notes that mature in 2027 and $57.1 million of Senior Notes due 2016 held by a subsidiary of the Company that remain outstanding but are eliminated for purposes of consolidation of the Company’s financial statements.
(5)
On February 4, 2019, Clear Channel Worldwide Holdings, Inc., a subsidiary of CCOH (“CCWH”), delivered a conditional notice of redemption calling all of its outstanding $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” and together with the Series A CCWH Subordinated Notes, the “CCWH Subordinated Notes”) for redemption on March 6, 2019. The redemption was conditioned on the closing of the offering of $2,235.0 million of newly-issued 9.25% Senior Subordinated Notes due 2024 (the "New CCWH Subordinated Notes"). At the closing of such offering on February 12, 2019, CCWH deposited with the trustee for the CCWH Subordinated Notes a portion of the proceeds from the new notes in an amount sufficient to pay and discharge the principal amount outstanding, plus accrued and unpaid interest on

17


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

the CCWH Subordinated Notes to, but not including, the redemption date. CCWH irrevocably instructed the trustee to apply such funds to the full payment of the CCWH Subordinated Notes on the redemption date. Concurrently therewith, CCWH elected to satisfy and discharge the indentures governing the CCWH Subordinated Notes in accordance with their terms and the trustee acknowledged such satisfaction and discharge. As a result of the satisfaction and discharge of the indentures, CCWH and the guarantors of the CCWH Subordinated Notes were released from their remaining obligations under the indentures and the CCWH Subordinated Notes.
(6)
In connection with the Company's Chapter 11 Cases, the $6,300.0 million outstanding under the Senior Secured Credit Facilities, the $1,999.8 million outstanding under the 9.0% Priority Guarantee Notes due 2019, the $1,750.0 million outstanding under the 9.0% Priority Guarantee Notes due 2021, the $870.5 million of 11.25% Priority Guarantee Notes due 2021, the $1,000.0 million outstanding under the 9.0% Priority Guarantee Notes due 2022, the $950.0 million outstanding under the 10.625% Priority Guarantee Notes due 2023, $6.0 million outstanding Other Secured Subsidiary debt, the $1,781.6 million outstanding under the 14.0% Senior Notes due 2021, the $475.0 million outstanding under the Legacy Notes and $10.8 million outstanding Other Subsidiary Debt have been reclassified to Liabilities subject to compromise in the Company's Consolidated Balance Sheet as of March 31, 2019 . As of the Petition Date, the Company ceased making principal and interest payments, and ceased accruing interest expense in relation to long-term debt reclassified as Liabilities subject to compromise.
The Company’s weighted average interest rate was 9.4% and 9.2% as of March 31, 2019 and December 31, 2018 , respectively. The aggregate market value of the Company’s debt based on market prices for which quotes were available was approximately $14.9 billion and $14.0 billion as of March 31, 2019 and December 31, 2018 , respectively. Under the fair value hierarchy established by ASC 820-10-35, the market value of the Company’s debt is classified as either Level 1 or Level 2.
Surety Bonds, Letters of Credit and Guarantees
As of March 31, 2019 , the Company and its subsidiaries had outstanding surety bonds, commercial standby letters of credit and bank guarantees of $74.2 million , $144.5 million and $37.3 million , respectively. A portion of the outstanding bank guarantees were supported by $16.9 million of cash collateral. These surety bonds, letters of credit and bank guarantees relate to various operational matters including insurance, bid, concession and performance bonds as well as other items.
NOTE 6 – 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; defamation matters; employment and benefits related claims; governmental fines; intellectual property claims; and tax disputes.
Chapter 11 Cases
iHeartCommunications' filing of the Chapter 11 Cases constitutes an event of default that accelerated its obligations under its debt agreements. Due to the Chapter 11 Cases, however, the creditors' ability to exercise remedies under iHeartCommunications' debt agreements were stayed as of March 14, 2018, the Petition Date, and continue to be stayed. On March 21, 2018, Wilmington Savings Fund Society, FSB ("WSFS"), solely in its capacity as successor indenture trustee to the 6.875% Senior Notes due 2018 and 7.25% Senior Notes due 2027, and not in its individual capacity, filed an adversary proceeding against the Company in the Chapter 11 Cases. In the complaint, WSFS alleged, among other things, that the "springing lien" provisions of the priority guarantee notes indentures and the priority guarantee notes security agreements amounted to "hidden encumbrances" on the Company's property, to which the holders of the 6.875% Senior Notes due 2018 and 7.25% Senior Notes due 2027 were entitled to "equal and ratable" treatment. On March 26, 2018, Delaware Trust Co. ("Delaware Trust"), in its capacity as successor indenture trustee to the 14% Senior Notes due 2021, filed a motion to intervene as a plaintiff in the adversary proceeding filed by WSFS. In the complaint, Delaware Trust alleged, among other things, that the indenture governing the 14% Senior Notes due 2021 also has its own "negative pledge" covenant, and, therefore, to the extent the relief sought by WSFS in its adversary proceeding is warranted, the holders of the 14% Senior Notes due 2021 are also entitled to the same "equal and ratable" liens on the same property. On April 6, 2018, the Company filed a motion to dismiss the adversary proceeding and a hearing on such motion was held on May

18


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

7, 2018. We answered the complaint and completed discovery.  The trial was held on October 24, 2018. On January 15, 2019, the Bankruptcy Court entered judgment in the Company's favor denying all relief sought by WSFS and all other parties. Pursuant to a settlement (the “Legacy Plan Settlement”) with WSFS and certain consenting Legacy Noteholders of all issues related to confirmation of the Company's plan of reorganization, upon the Company's confirmed plan of reorganization becoming effective, this adversary proceeding shall be deemed withdrawn and/or dismissed, with respect to all parties thereto, with prejudice and in its entirety.
On October 9, 2018, WSFS, solely in its capacity as successor indenture trustee to the 6.875% Senior Notes due 2018 and 7.25% Senior Notes due 2027, and not in its individual capacity, filed an adversary proceeding against Clear Channel Holdings, Inc. (“CCH”) and certain shareholders of iHeartMedia. The named shareholder defendants are Bain Capital LP; Thomas H. Lee Partners L.P.; Abrams Capital L.P.; and Highfields Capital Management L.P. In the complaint, WSFS alleged, among other things, that the shareholder defendants engaged in a “pattern of inequitable and bad faith conduct, including the abuse of their insider positions to benefit themselves at the expense of third-party creditors including particularly the Legacy Noteholders.” The complaint asks the court to grant relief in the form of equitable subordination of the shareholder defendants’ term loan, priority guarantee notes and 2021 notes claims to any and all claims of the legacy noteholders. In addition, the complaint seeks to have any votes to accept the Fourth Amended Plan of Reorganization by Abrams and Highfields on account of their 2021 notes claims, and any votes to accept the Fourth Amended Plan of Reorganization by defendant CCH on account of its junior notes claims, to be designated and disqualified. The Court held a pre-trial conference and oral argument on October 18, 2018. Pursuant to the Legacy Plan Settlement, upon the Company's confirmed Plan of Reorganization becoming effective, this adversary proceeding shall be deemed withdrawn and/or dismissed, with respect to all parties thereto, with prejudice and in its entirety.
Stockholder Litigation
On May 9, 2016, a stockholder of CCOH filed a derivative lawsuit in the Court of Chancery of the State of Delaware, captioned GAMCO Asset Management Inc. v. iHeartMedia, Inc. et al., C.A. No. 12312-VCS. The complaint named as defendants the Company, iHeartCommunications, Bain Capital Partners, LLC and Thomas H. Lee Partners, L.P., the Company's private equity sponsors and majority owners (together, the "Sponsor Defendants"), and the members of CCOH's board of directors. CCOH also was named as a nominal defendant. The complaint alleged that CCOH had been harmed by the intercompany agreements with iHeartCommunications , CCOH’s lack of autonomy over its own cash and the actions of the defendants in serving the interests of the Company, iHeartCommunications and the Sponsor Defendants to the detriment of CCOH and its minority stockholders. Specifically, the complaint alleged that the defendants breached their fiduciary duties by causing CCOH to: (i) continue to loan cash to iHeartCommunications under the intercompany note at below-market rates; (ii) abandon its growth and acquisition strategies in favor of transactions that would provide cash to the Company and iHeartCommunications ; (iii) issue new debt in the CCIBV note offering (the "CCIBV Note Offering") to provide cash to the Company and iHeartCommunications through a dividend; and (iv) effect the sales of certain outdoor markets in the U.S. (the "Outdoor Asset Sales") allegedly to provide cash to the Company and iHeartCommunications through a dividend. The complaint also alleged that the Company, iHeartCommunications and the Sponsor Defendants aided and abetted the directors' breaches of their fiduciary duties. The complaint further alleged that the Company, iHeartCommunications and the Sponsor Defendants were unjustly enriched as a result of these transactions and that these transactions constituted a waste of corporate assets for which the defendants are liable to CCOH. The plaintiff sought, among other things, a ruling that the defendants breached their fiduciary duties to CCOH and that the Company, iHeartCommunications and the Sponsor Defendants aided and abetted the CCOH board of directors' breaches of fiduciary duty, rescission of payments made by CCOH to iHeartCommunications and its affiliates pursuant to dividends declared in connection with the CCIBV Note Offering and Outdoor Asset Sales, and an order requiring the Company, iHeartCommunications and the Sponsor Defendants to disgorge all profits they have received as a result of the alleged fiduciary misconduct.
On July 20, 2016, the defendants filed a motion to dismiss plaintiff's verified stockholder derivative complaint for failure to state a claim upon which relief can be granted. On November 23, 2016, the Court granted defendants' motion to dismiss all claims brought by the plaintiff. On December 19, 2016, the plaintiff filed a notice of appeal of the ruling. The oral hearing on the appeal was held on October 11, 2017. On October 12, 2017, the Supreme Court of Delaware affirmed the lower court's ruling, dismissing the case.
On December 29, 2017, another stockholder of CCOH filed a derivative lawsuit in the Court of Chancery of the State of Delaware, captioned Norfolk County Retirement System, v. iHeartMedia, Inc., et al., C.A. No. 2017-0930-JRS. The complaint names as defendants the Company, iHeartCommunications, the Sponsor Defendants, and the members of CCOH's board of directors.  CCOH is named as a nominal defendant. The complaint alleges that CCOH has been harmed by the CCOH Board’s November 2017 decision to extend the maturity date of the intercompany revolving note (the “Third Amendment”) at what the complaint describes

19


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

as far-below-market interest rates.  Specifically, the complaint alleges that (i) the Company and Sponsor defendants breached their fiduciary duties by exploiting their position of control to require CCOH to enter the Third Amendment on terms unfair to CCOH; (ii) the CCOH Board breached their duty of loyalty by approving the Third Amendment and elevating the interests of the Company, iHeartCommunications and the Sponsor Defendants over the interests of CCOH and its minority unaffiliated stockholders; and (iii) the terms of the Third Amendment could not have been agreed to in good faith and represent a waste of corporate assets by the CCOH Board.  The complaint further alleges that the Company, iHeartCommunications and the Sponsor defendants were unjustly enriched as a result of the unfairly favorable terms of the Third Amendment.  The plaintiff is seeking, among other things, a ruling that the defendants breached their fiduciary duties to CCOH, a modification of the Third Amendment to bear a commercially reasonable rate of interest, and an order requiring disgorgement of all profits, benefits and other compensation obtained by defendants as a result of the alleged breaches of fiduciary duties.
On March 7, 2018, the defendants filed a motion to dismiss plaintiff's verified derivative complaint for failure to state a claim upon which relief can be granted. On March 16, 2018, the Company filed a Notice of Suggestion of Pendency of Bankruptcy and Automatic Stay of Proceedings. On May 4, 2018, plaintiff filed its response to the motion to dismiss. On June 26, 2018, the defendants filed a reply brief in further support of their motion to dismiss. Oral argument on the motion to dismiss was held on September 20, 2018.
On August 27, 2018, the same stockholder of CCOH that had filed a derivative lawsuit against the Company and others in 2016 (GAMCO Asset Management Inc.) filed a putative class action lawsuit in the Court of Chancery of the State of Delaware, captioned GAMCO Asset Management, Inc. v. Hendrix, et al., C.A. No. 2018-0633-JRS. The complaint names as defendants the Sponsor Defendants and the members of CCOH’s board of directors. The complaint alleges that minority shareholders in CCOH during the period November 8, 2017 to March 14, 2018 were harmed by decisions of the CCOH Board and the intercompany note committee of the Board relating to the Intercompany Note. Specifically, the complaint alleges that (i) the members of the intercompany note committee breached their fiduciary duties by not demanding payment under the Intercompany Note and issuing a simultaneous dividend after a threshold tied to the Company’s liquidity had been reached; (ii) the CCOH Board breached their fiduciary duties by approving the Third Amendment rather than allowing the Intercompany Note to expire; (iii) the CCOH Board breached their fiduciary duties by not demanding payment under the Intercompany Note and issuing a simultaneous dividend after a threshold tied to the Company’s liquidity had been reached; (iv) the Sponsor Defendants breached their fiduciary duties by not directing the CCOH Board to permit the Intercompany Note to expire and to declare a dividend. The complaint further alleges that the Sponsor Defendants aided and abetted the Board’s alleged breach of fiduciary duties. The plaintiff seeks, among other things, a ruling that the CCOH Board, the intercompany note committee, and the Sponsor Defendants breached their fiduciary duties and that the Sponsor Defendants aided and abetted the Board’s breach of fiduciary duty; and an award of damages, together with pre- and post-judgment interests, to the putative class of minority shareholders.
In connection with the cash management arrangements with CCOH, iHeartCommunications maintains an intercompany revolving promissory note payable by iHeartCommunications to CCOH (the "Intercompany Note"), which matures on May 15, 2019.  As of December 31, 2017, the principal amount outstanding under the Intercompany Note was $1,067.6 million .  As a result of the Chapter 11 Cases, CCOH wrote down the balance of the note by $855.6 million during the fourth quarter of 2017 to reflect the estimated recoverable amount of the Intercompany Note as of December 31, 2017, based on CCOH management's best estimate of the cash settlement amount.  As of the Petition Date, the principal amount outstanding under the Intercompany Note was $1,031.7 million .  As of March 31, 2019, the asset recorded in respect of the Intercompany Note on CCOH's balance sheet was $154.8 million .  Pursuant to an order entered by the Bankruptcy Court, as of March 14, 2018, the balance of the Intercompany Note is frozen, and following March 14, 2018, intercompany allocations that would have been reflected in adjustments to the balance of the Intercompany Note are instead reflected in an intercompany balance that accrues interest at a rate equal to the interest under the Intercompany Note.  As of March 31, 2019, the liability recorded in respect of the post-petition intercompany balance on CCOH's balance sheet was $73.7 million . 
On December 16, 2018, the Debtors, CCOH, GAMCO Asset Management, Inc., and Norfolk County Retirement System entered into a settlement (the “CCOH Separation Settlement”) of all claims, objections, and other causes of action that have been or could be asserted by or on behalf of CCOH, GAMCO Asset Management, Inc., and/or Norfolk County Retirement System by and among the Debtors, CCOH, GAMCO Asset Management, Inc., certain individual defendants in the GAMCO Asset Management, Inc. action and/or the Norfolk County Retirement System action, and the private equity sponsor defendants in such actions. The CCOH Separation Settlement provides for the consensual separation of the Debtors and CCOH, including approximately $149.0 million of recovery to CCOH on account of its claim against iHeartCommunications in the Chapter 11 cases, a $200 million unsecured revolving line of credit from certain of the Debtors to CCOH for a period of up to three years, the transfer of certain of the Debtors’ intellectual property to CCOH, the waiver by the Debtors of the setoff for the value of the transferred intellectual property, mutual

20


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

releases, the termination of the cash sweep under the existing Corporate Services Agreement, the termination of any agreements or licenses requiring royalty payments from CCOH to the Debtors for trademarks or other intellectual property, the waiver of any post-petition amounts owed by CCOH relating to such trademarks or other intellectual property, and the execution of a new transition services agreement and other separation documents. The CCOH Separation Settlement was approved by the Bankruptcy Court and the United States District Court for the Southern District of Texas on January 22, 2019.
The Separation Agreement contemplates that in connection with the Separation (i) the cash sweep arrangement under the Corporate Services Agreement between CCOH and iHeartCommunications will terminate, and (ii) any agreements or licenses requiring royalty payments to the Debtors by CCOH for trademarks or other intellectual property, will terminate effective as of December 31, 2018. The Debtors agreed to (i) the repayment of the post-petition intercompany balance outstanding in favor of the Debtors as of December 31, 2018, which was equal to $21.6 million as of that date and (ii) the waiver of the set-off value of any royalties and IP license fees owed to iHeartCommunications equal to approximately $31.8 million from March 14, 2018 through December 31, 2018, such that the resulting intercompany balance on such date was $10.2 million in favor of CCOH, payable on the Effective Date.  Since January 1, 2019, CCOH has incurred an additional intercompany liability of $52.1 million in favor of iHeartCommunications as of March 31, 2019.  Pursuant to an amendment to the Separation Agreement (the "Separation Agreement Amendment"), CCOH has agreed to offset the $149 million amount owed by iHeartCommunications on the Effective Date by $52.1 million , resulting in a total net payment to CCOH of approximately $107 million on the Effective Date (including the $10.2 million payment discussed above). Pursuant to the Amendment, within 15 business days after the Effective Date, iHeartCommunications and CCOH will pay the other any intercompany liability incurred from April 1, 2019 through the Effective Date.  The Intercompany Note and Due to iHeartCommunications Note are eliminated in consolidation in our consolidated financial statements.  The Bankruptcy Court approved a final order to allow us to continue to provide the day-to-day cash management services for CCOH during the Chapter 11 Cases.  Upon the occurrence of the Separation on the Effective Date, we will cease to provide these services for CCOH.
China Investigation
Several employees of Clear Media Limited, an indirect, non-wholly-owned subsidiary of the Company whose ordinary shares are listed on the Hong Kong Stock Exchange, are subject to an ongoing police investigation in China for misappropriation of funds. The Company is not aware of any litigation, claim or assessment pending against the Company in relation to this investigation. Based on information known to date, the Company believes any contingent liabilities arising from potential misconduct that has been or may be identified by the investigation in China are not material to the Company’s consolidated financial statements. The effect of the misappropriation of funds is reflected in these financial statements in the appropriate periods.
The Company advised both the United States Securities and Exchange Commission and the United States Department of Justice of the investigation at Clear Media Limited and is cooperating to provide information in response to inquiries from the agencies. The Clear Media Limited investigation could implicate the books and records, internal controls and anti-bribery provisions of the U.S. Foreign Corrupt Practices Act, which statute and regulations provide for potential monetary penalties as well as criminal and civil sanctions. It is possible that monetary penalties and other sanctions could be assessed on the Company in connection with this matter. The nature and amount of any monetary penalty or other sanctions cannot reasonably be estimated at this time and could be qualitatively or quantitatively material to the Company.
Italy Investigation
During the three months ended June 30, 2018, the Company identified misstatements associated with VAT obligations in its business in Italy, which resulted in an understatement of its VAT obligation. These misstatements resulted in an understatement of other long-term liabilities of $16.9 million as of December 31, 2017. The effect of these misstatements is reflected in the historical financial statements in the appropriate periods. Upon identification of these misstatements, the Company undertook certain procedures, including a forensic investigation, which is ongoing. In addition, the Company voluntarily disclosed the matter and preliminary findings to the Italian tax authorities in order to commence a discussion on the appropriate calculation of the VAT position. The current expectation is that the Company may have to repay to the Italian tax authority a substantial portion of the VAT previously applied as a credit in relation to the transactions under investigation, amounting to approximately $17 million , including estimated possible penalties and interest. The Company made a payment of approximately $8.6 million during the fourth quarter of 2018 and expects to pay the remainder during the last half of 2019. The ultimate amount to be paid may differ from the estimates, and such differences may be material.


21


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

NOTE 7 – INCOME TAXES
Income Tax Expense
The Company’s income tax expense for the three months ended March 31, 2019 and 2018 , respectively, consisted of the following components:
(In thousands)
Three Months Ended March 31,
 
2019
 
2018
Current tax expense
$
(1,926
)
 
$
(4,672
)
Deferred tax benefit
5,357

 
122,038

Income tax benefit
$
3,431

 
$
117,366

The effective tax rate for the three months ended March 31, 2019 and 2018 was 2.5% and 21.3% , respectively. The decrease in the effective tax rate is primarily attributed to the tax effects of the impairment charge recorded in relation to indefinite-lived FCC licenses in the current period, and also attributed to year over year changes in the forecasted mix of earnings and tax rates in the jurisdictions in which the Company operates.
NOTE 8 – SHARE-BASED COMPENSATION AND LOSS PER SHARE
The Company has granted restricted stock and CCOH has granted restricted stock, restricted stock units and options to purchase shares of CCOH's Class A common stock to certain key individuals.
COMPUTATION OF LOSS PER SHARE
(In thousands, except per share data)
Three Months Ended
March 31,
 
2019
 
2018
NUMERATOR:
 
 
 
Net loss attributable to the Company – common shares
$
(114,383
)
 
$
(416,994
)
 
 
 
 
DENOMINATOR:
 

 
 

Weighted average common shares outstanding - basic
85,649

 
85,215

Weighted average common shares outstanding - diluted (1)
85,649

 
85,215

 
 
 
 
Net loss attributable to the Company per common share:
 

 
 

Basic
$
(1.34
)
 
$
(4.89
)
Diluted
$
(1.34
)
 
$
(4.89
)
(1)  
Outstanding equity awards of 5.9 million and 8.2 million for the three months ended March 31, 2019 and 2018 , respectively, were not included in the computation of diluted earnings per share because to do so would have been antidilutive.
NOTE 9 — OTHER INFORMATION
Other Comprehensive Income (Loss)
There was no change in deferred income tax liabilities resulting from adjustments to comprehensive loss for the three months ended March 31, 2019 and 2018 .
Preferred Equity Commitment
On April 8, 2019, the Company, iHeartCommunications, iHeart Operations, Inc. ("iHeart Operations"), and CCH entered into a Preferred Equity Commitment Letter (the "Commitment Letter") with an investor. Pursuant to the Commitment Letter, the investor

22


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

has agreed to purchase (i) 60,000 shares of Series A Perpetual Preferred Stock, par value $0.001 per share (the "iHeart Operations Preferred Stock"), of iHeart Operations, Inc. having an aggregate initial liquidation preference of $60 million for a cash purchase price of $60 million and (ii) 45,000 shares of Series A Perpetual Preferred Stock, par value $0.01 per share, of CCH having an aggregate initial liquidation preference of $45 million for a cash purchase price of $45 million .
Holders of the iHeart Operations Preferred Stock will be entitled to receive, as and when declared by the board of directors of iHeart Operations, in respect of each share, cumulative dividends accruing daily and payable quarterly at a per annum rate equal to the sum of (1) the greater of (a) LIBOR and (b)  two percent , plus (2) the applicable margin, which is calculated as a function of iHeartMedia’s consolidated total leverage ratio. Dividends will be payable on the liquidation preference. Unless all accrued and unpaid dividends on the iHeart Operations Preferred Stock are paid in full, no dividends or distributions may be paid on any equity interests of iHeartMedia or its subsidiaries other than iHeart Operations, and no such equity interests may be repurchased or redeemed (subject to certain exceptions that are specified in the certificate of designations for the iHeart Operations Preferred Stock). Dividends, if declared, will be payable on March 31, June 30, September 30 and December 31 of each year (or on the next business day if such date is not a business day).
Other than as set forth below, iHeart Operations may not redeem the iHeart Operations Preferred Stock at its option prior to the third anniversary of the issue date of the iHeart Operations Preferred Stock. Upon consummation of certain equity offerings, iHeart Operations may, at its option, redeem all or a part of the iHeart Operations Preferred Stock for the liquidation preference plus a make-whole premium. At any time on or after the third anniversary of the issue date, the iHeart Operations Preferred Stock may be redeemed at the option of iHeart Operations, in whole or in part, for cash at a redemption price equal to the liquidation preference per share.
Upon (i) a liquidation, dissolution or winding up of iHeart Operations, iHeartMedia or iHeartCommunications, together with the subsidiaries of such entity, taken as a whole, (ii) a bankruptcy event, (iii) a change of control, (iv) a sale or transfer of all or substantially all of iHeart Operations’, iHeartMedia’s or iHeartCommunications’ assets and the assets of such entity’s subsidiaries, taken as a whole in a single transaction (other than to iHeartMedia or any of its subsidiaries), or a series of transactions, (v) an acceleration or payment default of indebtedness of iHeart Operations, iHeartMedia or any of its subsidiaries of $100 million or more or (vi) consummation of certain equity offerings of iHeartMedia, iHeart Operations or iHeartCommunications or certain significant subsidiaries, then any holder of shares of iHeart Operations Preferred Stock may require iHeartMedia to purchase such holder’s shares of iHeart Operations Preferred Stock at a purchase price equal to (a) the liquidation preference plus a make-whole premium, if such purchase is consummated prior to the third anniversary of the issue date or (b) the liquidation preference, if the purchase is consummated on or after the third anniversary of the issue date.
The shares of iHeart Operations Preferred Stock include repurchase rights, pursuant to which the holders may require iHeartMedia or iHeartCommunications to purchase the iHeart Operations Preferred Stock after the fifth anniversary of the issue date.
On the tenth anniversary of the issue date, the shares of iHeart Operations Preferred Stock will be subject to mandatory redemption for an amount equal to the liquidation preference.
If a default occurs or dividends payable on the shares of iHeart Operations Preferred Stock have not been paid in cash for twelve consecutive quarters, the holders of the iHeart Operations Preferred Stock will have the right, voting as a class, to elect one director to iHeartMedia’s Board of Directors. Upon any termination of the rights of the holders of shares of the iHeart Operations Preferred Stock as a class to vote for a director as described above, the director so elected to iHeartMedia’s Board of Directors will cease to be qualified as a director and the term of such director’s office shall terminate immediately.


23


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

NOTE 10 – SEGMENT DATA
The Company’s reportable segments, which it believes best reflect how the Company is currently managed, are iHM, Americas outdoor advertising and International outdoor advertising.  Revenue and expenses earned and charged between segments are recorded at estimated fair value and eliminated in consolidation.  The iHM segment provides media and entertainment services via broadcast and digital delivery and also includes the Company’s events and national syndication businesses.  The Americas outdoor advertising segment consists of operations primarily in the United States.  The International outdoor advertising segment primarily includes operations in Europe, Asia and Latin America.  The Other category includes the Company’s media representation business as well as other general support services and initiatives that are ancillary to the Company’s other businesses.  Corporate includes infrastructure and support, including information technology, human resources, legal, finance and administrative functions for each of the Company’s reportable segments, as well as overall executive, administrative and support functions. Share-based payments are recorded in corporate expense.
The following table presents the Company's reportable segment results for the three months ended March 31, 2019 and 2018 :
(In thousands)
iHM
 
Americas Outdoor
 
International Outdoor
 
Other
 
Corporate and other reconciling items
 
Eliminations
 
Consolidated
Three Months Ended March 31, 2019
Revenue
$
765,810

 
$
272,722

 
$
314,394

 
$
30,190

 
$
—

 
$
(1,217
)
 
$
1,381,899

Direct operating expenses
267,114

 
130,519

 
217,308

 
1

 
—

 
(23
)
 
614,919

Selling, general and administrative expenses
307,729

 
51,636

 
71,330

 
25,251

 
—

 
(223
)
 
455,723

Corporate expenses
—

 
—

 
—

 
—

 
75,671

 
(971
)
 
74,700

Depreciation and amortization
30,417

 
39,496

 
34,581

 
2,945

 
5,927

 
—

 
113,366

Impairment charges
—

 
—

 
—

 
—

 
91,382

 
—

 
91,382

Other operating expense, net
—

 
—

 
—

 
—

 
(3,549
)
 
—

 
(3,549
)
Operating income (loss)
$
160,550

 
$
51,071

 
$
(8,825
)
 
$
1,993

 
$
(176,529
)
 
$
—

 
$
28,260

Intersegment revenues
$
226

 
$
991

 
$
—

 
$
—

 
$
—

 
$
—

 
$
1,217

Capital expenditures
$
20,690

 
$
11,408

 
$
14,819

 
$
37

 
$
4,172

 
$
—

 
$
51,126

Share-based compensation expense
$
—

 
$
—

 
$
—

 
$
—

 
$
2,227

 
$
—

 
$
2,227

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Three Months Ended March 31, 2018
Revenue
$
744,568

 
$
255,847

 
$
342,551

 
$
28,218

 
$
—

 
$
(1,536
)
 
$
1,369,648

Direct operating expenses
241,066

 
124,873

 
236,416

 
—

 
—

 
—

 
602,355

Selling, general and administrative expenses
321,270

 
48,950

 
78,458

 
24,822

 
—

 
(513
)
 
472,987

Corporate expenses
—

 
—

 
—

 
—

 
79,757

 
(1,023
)
 
78,734

Depreciation and amortization
58,333

 
44,504

 
38,565

 
3,766

 
6,266

 
—

 
151,434

Impairment charges
—

 
—

 
—

 
—

 
—

 
—

 
—

Other operating expense, net
—

 
—

 
—

 
—

 
(3,286
)
 
—

 
(3,286
)
Operating income (loss)
$
123,899

 
$
37,520

 
$
(10,888
)
 
$
(370
)
 
$
(89,309
)
 
$
—

 
$
60,852

Intersegment revenues
$
14

 
$
1,522

 
$
—

 
$
—

 
$
—

 
$
—

 
$
1,536

Capital expenditures
$
9,077

 
$
12,907

 
$
15,272

 
$
40

 
$
1,407

 
$
—

 
$
38,703

Share-based compensation expense
$
—

 
$
—

 
$
—

 
$
—

 
$
2,684

 
$
—

 
$
2,684



24


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

NOTE 11 – CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS
The Company is a party to a management agreement with certain affiliates of Bain Capital Partners, LLC and Thomas H. Lee Partners, L.P. (together, the "Sponsors") and certain other parties pursuant to which such affiliates of the Sponsors provided management and financial advisory services until December 31, 2018. These agreements required management fees to be paid to such affiliates of the Sponsors for such services at a rate not greater than $ 15.0 million per year, plus reimbursable expenses. In connection with the Reorganization, the Company is not recognizing management fees following the Petition Date. The Company recognized management fees and reimbursable expenses of $3.1 million for the three months ended March 31, 2018 . As of the effective date of the Plan of Reorganization, these management fees will be waived.


25


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

NOTE 12 – LIABILITIES SUBJECT TO COMPROMISE
As discussed in Note 1, "Basis of Presentation", since the Petition Date, the Company has been operating as debtor in possession under the jurisdiction of the Bankruptcy Court and in accordance with provisions of the Bankruptcy Code. On the accompanying Consolidated Balance Sheets, the caption “Liabilities subject to compromise” reflects the expected allowed amount of the pre-petition claims that are not fully secured and that have at least a possibility of not being repaid at the full claim amount. Liabilities subject to compromise at March 31, 2019 and December 31, 2018 consisted of the following:
(In thousands)
March 31,
2019
 
December 31, 2018
Accounts payable
$
32,232

 
$
32,807

Current operating lease liabilities
32,065

 
—

Accrued expenses
12,050

 
23,277

Deferred taxes
653,522

 
644,926

Noncurrent operating lease liabilities
397,158

 
—

Other long-term liabilities
15,916

 
87,096

Accounts payable, accrued and other liabilities
1,142,943

 
788,106

Debt subject to compromise
15,143,713

 
15,149,477

Accrued interest on debt subject to compromise
542,673

 
542,673

Long-term debt and accrued interest
15,686,386

 
15,692,150

Total liabilities subject to compromise
$
16,829,329

 
$
16,480,256

Determination of the value at which liabilities will ultimately be settled cannot be made until the Bankruptcy Court approves the Plan of Reorganization and the Company emerges from bankruptcy. The Company will continue to evaluate the amount and classification of its pre-petition liabilities. Any additional liabilities that are subject to compromise will be recognized accordingly, and the aggregate amount of liabilities subject to compromise may change.
NOTE 13 – REORGANIZATION ITEMS, NET
Reorganization items incurred as a result of the Chapter 11 Cases are presented separately in the accompanying statements of operations for the three months ended March 31, 2019 and 2018 , respectively, and were as follows:
(In thousands)
Three Months Ended March 31,
 
2019
 
2018
Write-off of deferred long-term debt fees
$
—

 
$
54,670

Write-off of original issue discount on debt subject to compromise
—

 
131,100

Loss on Liabilities subject to compromise settlement
5

 
—

Professional fees and other bankruptcy related costs
36,113

 
6,285

Reorganization items, net
$
36,118

 
$
192,055

Professional fees included in Reorganization items, net represent fees for post-petition expenses related to the Chapter 11 Cases. Write-off of deferred long-term debt fees and write-off of original issue discount are included in Reorganization items, net.
As of March 31, 2019 , $49.7 million of Reorganization items, net were unpaid and accrued in Accounts Payable and Accrued Expenses in the accompanying Consolidated Balance Sheet. As of March 31, 2018 , $6.1 million of professional fees were unpaid and accrued in Accounts Payable and Accrued Expenses in the accompanying Consolidated Balance Sheet.


26


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

NOTE 14 – CONDENSED COMBINED DEBTOR-IN-POSSESSION FINANCIAL INFORMATION
The financial statements below represent the condensed combined financial statements of the Debtors. The results of the Company’s Non-Filing Entities, which are comprised primarily of the Company's Americas outdoor and International outdoor segments, are not included in these condensed combined financial statements.
Intercompany transactions among the Debtors have been eliminated in the financial statements contained herein. Intercompany transactions among the Debtors and the Non-Filing Entities have not been eliminated in the Debtors’ financial statements.
Debtors' Balance Sheet
(In thousands)
March 31,
2019
 
December 31, 2018
 
(Unaudited)
 
 
CURRENT ASSETS
 
 
 
Cash and cash equivalents
$
233,596

 
$
178,924

Accounts receivable, net of allowance of $24,936 in 2019 and 26,347 in 2018
748,143

 
866,088

Intercompany receivable
48,771

 
—

Prepaid expenses
120,009

 
98,836

Other current assets
41,452

 
24,576

Total Current Assets
1,191,971

 
1,168,424

PROPERTY, PLANT AND EQUIPMENT
 
 
 
Property, plant and equipment, net
496,067

 
501,677

INTANGIBLE ASSETS AND GOODWILL
 
 
 
Indefinite-lived intangibles - licenses
2,318,029

 
2,409,411

Other intangibles, net
187,197

 
196,741

Goodwill
3,412,753

 
3,412,753

OTHER ASSETS
 
 
 
Operating lease right-of-use assets
353,404

 
—

Other assets
63,461

 
63,203

Total Assets
$
8,022,882

 
$
7,752,209

CURRENT LIABILITIES
 

 
 
Accounts payable
$
41,512

 
$
49,129

Intercompany payable
—

 
2,894

Accrued expenses
171,043

 
296,149

Accrued interest
674

 
766

Deferred income
128,493

 
120,328

Current portion of long-term debt
46,510

 
46,105

Total Current Liabilities
388,232

 
515,371

Other long-term liabilities
120,662

 
229,640

Liabilities subject to compromise 1
17,861,051

 
17,511,976

EQUITY (DEFICIT)
 
 
 
Equity (Deficit)
(10,347,063
)
 
(10,504,778
)
Total Liabilities and Equity (Deficit)
$
8,022,882

 
$
7,752,209

1 In connection with the cash management arrangements with CCOH, the Company maintains an intercompany revolving promissory note payable by the Company to CCOH (the "Intercompany Note"), which matures on May 15, 2019. Liabilities subject to compromise include the pre-petition principal amount outstanding under the Intercompany Note, which totals $1,031.7 million as of March 31, 2019 and December 31, 2018 .

27


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

Debtors' Statements of Operations
(In thousands)
Three Months Ended March 31,
 
2019
 
2018
Revenue
$
790,558

 
$
767,007

Operating expenses:
 
 
 
Direct operating expenses (excludes depreciation and amortization)
265,684

 
239,461

Selling, general and administrative expenses (excludes depreciation and amortization)
329,919

 
342,951

Corporate expenses (excludes depreciation and amortization)
47,042

 
44,308

Depreciation and amortization
38,040

 
67,116

Impairment charges
91,382

 
—

Other operating expense, net
(23
)
 
(3,232
)
Operating income
18,468

 
69,939

Interest expense, net 1
338

 
342,564

Equity in loss of nonconsolidated affiliates
(7
)
 
(32
)
Gain on extinguishment of debt
—

 
5,667

Dividend income 2
—

 
25,483

Other expense, net
(42
)
 
(20,060
)
Reorganization items, net
36,118

 
192,055

Loss before income taxes
(18,037
)
 
(453,622
)
Income tax benefit
61,373

 
162,973

Net income (loss)
$
43,336

 
$
(290,649
)
1 Includes interest incurred during the three months ended March 31, 2019 and 2018 in relation to the post-petition Intercompany Note and interest incurred during the three months ended March 31, 2018 in relation to the pre-petition Intercompany Notes.
2 Consists of cash dividends received from Non-Debtor entities during the three months ended March 31, 2018 .

28


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

Debtors' Statement of Cash Flows
(In thousands)
Three Months Ended March 31,
 
2019
 
2018
Cash flows from operating activities:
 
 
 
Consolidated net income (loss)
$
43,336

 
$
(290,649
)
Reconciling items:
 
 
 
Impairment charges
91,382

 
—

Depreciation and amortization
38,040

 
67,116

Deferred taxes
8,596

 
(138,949
)
Provision for doubtful accounts
3,838

 
6,829

Amortization of deferred financing charges and note discounts, net
405

 
11,043

Non-cash Reorganization items, net
2,173

 
191,903

Share-based compensation
393

 
578

Loss on disposal of operating and other assets
143

 
1,864

Equity in loss of nonconsolidated affiliates
7

 
32

Gain on extinguishment of debt
—

 
(5,667
)
Barter and trade income
(5,076
)
 
(357
)
Other reconciling items, net
(13
)
 
(80
)
Changes in operating assets and liabilities, net of effects of acquisitions and dispositions:
 
 
 
Decrease in accounts receivable
114,107

 
110,270

Increase in prepaid expenses and other current assets
(38,596
)
 
(66,429
)
Decrease in accrued expenses
(127,089
)
 
(27,223
)
Increase (decrease) in accounts payable
(8,192
)
 
4,444

Increase in accrued interest
328

 
301,896

Increase in deferred income
13,049

 
13,604

Changes in other operating assets and liabilities
(1,272
)
 
(1,116
)
Net cash provided by operating activities
135,559

 
179,109

Cash flows from investing activities:
 
 
 
Purchases of property, plant and equipment
(22,932
)
 
(10,010
)
Proceeds from disposal of assets
121

 
1,028

Purchases of other operating assets
—

 
(305
)
Change in other, net
(7
)
 
(29
)
Net cash used for investing activities
(22,818
)
 
(9,316
)
Cash flows from financing activities:
 
 
 
Draws on credit facilities
—

 
25,000

Payments on credit facilities
—

 
(59,000
)
Proceeds from long-term debt
228

 
—

Payments on long-term debt
(6,412
)
 
(50,027
)
Net transfers to related parties
(51,881
)
 
(51,996
)
Change in other, net
(4
)
 
2

Net cash used for financing activities
(58,069
)
 
(136,021
)
Net increase in cash, cash equivalents and restricted cash
54,672

 
33,772

Cash, cash equivalents and restricted cash at beginning of period
182,352

 
102,468

Cash, cash equivalents and restricted cash at end of period
$
237,024

 
$
136,240

The following table provides a reconciliation of cash, cash equivalents and restricted cash reported in the Debtors' Balance Sheet to the total of the amounts reported in the Debtors' Statement of Cash Flows:

29


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

(In thousands)
March 31,
2019
 
December 31,
2018
Cash and cash equivalents
$
233,596

 
$
178,924

Restricted cash included in:
 
 
 
  Other current assets
3,428

 
3,428

Total cash, cash equivalents and restricted cash in the Statement of Cash Flows
$
237,024

 
$
182,352



30


ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
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 1 of this Quarterly Report on Form 10-Q.  Our discussion is presented on both a consolidated and segment basis. Our reportable segments are iHeartMedia (“iHM”), Americas outdoor advertising (“Americas outdoor” or “Americas outdoor advertising”) and International outdoor advertising (“International outdoor” or “International outdoor advertising”). Our iHM segment provides media and entertainment services via live broadcast and digital delivery, and also includes our events and national syndication business. Our Americas outdoor and International outdoor segments provide outdoor advertising services in their respective geographic regions using various digital and traditional display types. Included in the “Other” category is our media representation business, Katz Media Group, which is ancillary to our other businesses.
We manage our operating segments by focusing primarily on their operating income, while Corporate expenses, Other operating income (expense), net, Interest expense, Gain on marketable securities, Equity in earnings (loss) of nonconsolidated affiliates, Loss on extinguishment of debt, Other income, net and Income tax 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 2019 presentation.
Current Bankruptcy Proceedings
On March 14, 2018 (the "Petition Date"), iHeartMedia, Inc. (the “Company”, “iHeartMedia,” “we” or “us”), iHeartCommunications, Inc. (“iHeartCommunications”) and certain of the Company's direct and indirect domestic subsidiaries (collectively, the "Debtors") filed voluntary petitions for relief (the "Chapter 11 Cases") under Chapter 11 of the United States Bankruptcy Code (the "Bankruptcy Code"), in the United States Bankruptcy Court for the Southern District of Texas, Houston Division (the "Bankruptcy Court"). Clear Channel Outdoor Holdings, Inc. (“CCOH”) and its direct and indirect subsidiaries did not file voluntary petitions for reorganization under the Bankruptcy Code and are not Debtors in the Chapter 11 Cases.
The Chapter 11 Cases are being administered under the caption In re: iHeartMedia, Inc., et al . Case No. 18-31274 (MI). The Debtors continue to operate their businesses as “debtors-in-possession” under the jurisdiction of the Bankruptcy Court and in accordance with the applicable provisions of the Bankruptcy Code and orders of the Bankruptcy Court. On April 28, 2018, the Debtors filed a plan of reorganization (as amended, the “Plan of Reorganization”) and a related disclosure statement (as amended, the “Disclosure Statement”) with the Bankruptcy Court. On January 22, 2019, the Bankruptcy Court entered an order confirming the Plan of Reorganization. Subject to the satisfaction of certain conditions, we currently anticipate the Plan of Reorganization will become effective and iHeartMedia will emerge from Chapter 11 on or about May 1, 2019 (the "Effective Date").
On the Effective Date, we will emerge from Chapter 11 through (a) a series of transactions through which CCOH, its parent Clear Channel Holdings, Inc. (“CCH”) and its subsidiaries will be separated from, and cease to be controlled by us and our subsidiaries (the “Separation”), and (b) a series of transactions through which we will reduce our debt from approximately $16 billion to approximately $5.8 billion and effect a global compromise and settlement among holders of claims in connection with the Chapter 11 Cases (the “Reorganization”), which will involve, among other things, (i) the restructuring of our indebtedness by (A) replacing our existing DIP facility with a $450 million senior secured asset-based revolving credit facility (the “New ABL Facility”) and (B) issuing to certain of our prepetition senior creditors, on account of their claims, a $3.5 billion senior secured term loan credit facility, $1.45 billion aggregate principal amount of new Senior Unsecured Notes due 2027 and $800 million aggregate principal amount of new Senior Secured Notes due 2026, (ii) our issuance of new common stock and special warrants to holders of claims and interests, subject to ownership restrictions imposed by the FCC, and (iii) the intercompany settlement transactions and sale of the preferred stock of our indirect wholly-owned subsidiary iHeart Operations, Inc., in each case pursuant to the separation and settlement agreement entered into among us, iHeartCommunications, CCH and CCOH (the "Separation Agreement").
Upon the occurrence of the Separation on the Effective Date, iHeartCommunications will enter into a revolving credit facility that provides for borrowings to Clear Channel Outdoor, LLC ("CCOL"), a subsidiary of CCH, at CCOL’s option, of up to $200 million, with any borrowings bearing interest at a rate equal to the prime lending rate (the "iHC Line of Credit"). The iHC Line of Credit will be unsecured. The facility will have a three year maturity, and may be terminated by CCOL earlier at CCOL's option.
For more information regarding the impact of the Chapter 11 Cases, see "--Liquidity After Filing the Chapter 11 Cases" and "--Liquidity Following the Reorganization and Separation."

31


Description of our Business
Our iHM strategy centers on delivering entertaining and informative content where our listeners want to find us across multiple platforms, including broadcast, mobile and digital, as well as events. Our primary source of revenue is derived from selling broadcast local and national advertising time on our radio stations, with contracts typically less than one year in duration. The programming formats of our radio stations are designed to reach audiences with targeted demographic characteristics. We are working closely with our advertising and marketing partners to develop tools and leverage data to enable advertisers to effectively reach their desired audiences. We continue to expand the choices for listeners and we deliver our content and sell advertising across multiple distribution channels including digitally via our iHeartRadio mobile application, our station websites and other digital platforms which reach national, regional and local audiences. We also generate revenues from our networks, including Premiere and Total Traffic & Weather, as well as through sponsorships and our nationally recognized live events and other revenue streams. We also generate revenue by providing audio and media services to radio and TV broadcast industry participants through our Katz Media and RCS businesses.
Management typically monitors our outdoor advertising business by reviewing the average rates, average revenue per display, occupancy and inventory levels of each of our display types by market. Our outdoor advertising 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 for our outdoor advertising businesses 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.
Our advertising revenue for all of our 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.  Our broadcast national and local revenue, as well as our Katz Media revenue are generally impacted by political cycles. 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.
Executive Summary
The key developments that impacted our business are summarized below:
•
Consolidated revenue increased $12.3 million during the three months ended March 31, 2019 compared to the same period of 2018 . Excluding the $24.7 million impact from movements in foreign exchange rates, consolidated revenue increased $37.0 million during the three months ended March 31, 2019 compared to the same period of 2018 .
•
As a result of the Chapter 11 Cases, we incurred $36.1 million of Reorganization items, net during the three months ended March 31, 2019 and reclassified $16.8 billion of pre-petition claims that are not fully secured and that have at least a possibility of not being repaid to “Liabilities subject to compromise” on the Consolidated Balance Sheet.
•
As a result of our filing of the Chapter 11 Cases, we ceased accruing interest expense on long-term debt reclassified as Liabilities subject to compromise at the Petition Date.
•
Clear Channel Worldwide Holdings, Inc. ("CCWH"), a subsidiary of ours, issued $2,235.0 million of new 9.25% Senior Subordinated Notes due 2024. Proceeds from the new notes were used to pay total principal amount outstanding and accrued and unpaid interest on the $2,200.0 million aggregate principal amount of 7.625% CCWH Series A and Series B Senior Subordinated Notes due 2020.

Revenue and expenses “excluding the impact of foreign exchange movements” in this MD&A are 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.  Revenue and expenses “excluding the impact of foreign exchange movements” are calculated by converting the current period’s revenue and expenses in local currency to U.S. dollars using average foreign exchange rates for the prior period. 


32


Consolidated Results of Operations
The comparison of our historical results of operations for the three months ended March 31, 2019 to the three months ended March 31, 2018 is as follows:
(In thousands)
Three Months Ended
March 31,
 
%
Change
 
2019
 
2018
 
Revenue
$
1,381,899

 
$
1,369,648

 
0.9%
Operating expenses:
 
 
 
 
 
Direct operating expenses (excludes depreciation and amortization)
614,919

 
602,355

 
2.1%
Selling, general and administrative expenses (excludes depreciation and amortization)
455,723

 
472,987

 
(3.6)%
Corporate expenses (excludes depreciation and amortization)
74,700

 
78,734

 
(5.1)%
Depreciation and amortization
113,366

 
151,434

 
(25.1)%
Impairment charges
91,382

 
—

 
—%
Other operating expense, net
(3,549
)
 
(3,286
)
 
 
Operating income
28,260

 
60,852

 
(53.6)%
Interest expense
114,764

 
418,397

 
 
Loss on investments, net
(9,961
)
 
(90
)
 
 
Equity in earnings (loss) of nonconsolidated affiliates
(214
)
 
157

 
 
Gain (loss) on extinguishment of debt
(5,474
)
 
100

 
 
Other expense, net
(761
)
 
(973
)
 
 
Reorganization items, net
36,118

 
192,055

 
 
Loss before income taxes
(139,032
)
 
(550,406
)
 
 
Income tax benefit
3,431

 
117,366

 
 
Consolidated net loss
(135,601
)
 
(433,040
)
 
 
Less amount attributable to noncontrolling interest
(21,218
)
 
(16,046
)
 
 
Net loss attributable to the Company
$
(114,383
)
 
$
(416,994
)
 
 

Consolidated Revenue
Consolidated revenue increased $12.3 million during the three months ended March 31, 2019 compared to the same period of 2018 . Excluding the $24.7 million impact from movements in foreign exchange rates, consolidated revenue increased $37.0 million during the three months ended March 31, 2019 compared to the same period of 2018 . The increase in consolidated revenue is due to revenue growth from our Americas outdoor business and our iHM business, partially offset by lower revenue from our International outdoor business.
Consolidated Direct Operating Expenses
Consolidated direct operating expenses increased $12.6 million during the three months ended March 31, 2019 compared to the same period of 2018 . Excluding the $17.2 million impact from movements in foreign exchange rates, consolidated direct operating expenses increased $29.8 million during the three months ended March 31, 2019 compared to the same period of 2018 . Higher direct operating expenses was driven primarily by our iHM and Americas outdoor businesses, primarily as a result of higher variable expenses driven by revenue growth.
Consolidated Selling, General and Administrative (“SG&A”) Expenses
Consolidated SG&A expenses decreased $17.3 million during the three months ended March 31, 2019 compared to the same period of 2018 . Excluding the $5.6 million impact from movements in foreign exchange rates, consolidated SG&A expenses decreased $11.7 million during the three months ended March 31, 2019 compared to the same period of 2018 . Lower SG&A expenses resulted primarily from lower trade and barter expenses by our iHM business.

33


Corporate Expenses
Corporate expenses decreased $4.0 million during the three months ended March 31, 2019 compared to the same period of 2018 , primarily as a result of lower sponsor management fees, which have not been charged since the March 14, 2018 Petition Date.
Depreciation and Amortization
Depreciation and amortization decreased $38.1 million during the three months ended March 31, 2019 , compared to the same period of 2018 , primarily as a result of assets becoming fully depreciated or fully amortized, including intangible assets that were recorded as part of the merger of iHeartCommunications with iHeartMedia, Inc. in 2008.
Impairment Charges
We perform our annual impairment test on our goodwill, Federal Communication Commission ("FCC") licenses, billboard permits, and other intangible assets as of July 1 of each year. In addition, we test for impairment of intangible assets whenever events and circumstances indicate that such assets might be impaired.  We recognized non-cash impairment charges of $91.4 million in the three months ended March 31, 2019 on our indefinite-lived FCC licenses as a result of an increase in our weighted average cost of capital. See Note 4 to the consolidated financial statements located in Item 1 of this Quarterly Report on Form 10-Q for a further description of the impairment charges.
Other Operating Expense, Net
Other operating expense , net of $3.5 million and $3.3 million for the three months ended March 31, 2019 and 2018 , respectively, relates to net losses recognized on asset disposals.
Interest Expense
Interest expense decreased $303.6 million during the three months ended March 31, 2019 compared to the same period of 2018 as a result of the Company ceasing to accrue interest expense on long-term debt reclassified as Liabilities subject to compromise as of the Petition Date, resulting in $397.5 million in contractual interest not being accrued in the three months ended March 31, 2019 . This decrease was partially offset by higher interest expense incurred in conjunction with the refinancing of the $2,200.0 million 7.625% CCWH Senior Subordinated Notes due 2020 with $2,235.0 million in 9.25% CCWH Senior Subordinated Notes due 2024.
Loss on Investments, net
During the three months ended March 31, 2019 , we recognized losses of $10.0 million primarily in connection with other-than-temporary declines in the value of our investments. Loss on investments, net was $0.1 million for the three months ended March 31, 2018 .
Gain (Loss) on Extinguishment of Debt, Net
Loss on extinguishment of debt, net was $5.5 million for the three months ended March 31, 2019 , which primarily resulted from a loss in relation to the refinancing of the CCWH Series A and Series B Senior Subordinated Notes Due 2020. Gain on extinguishment of debt, net was $0.1 million for the three months ended March 31, 2018 .
Other Expense, Net
Other expense , net was $0.8 million for the three months ended March 31, 2019 , which related primarily to net foreign exchange losses recognized in connection with intercompany notes denominated in foreign currencies.

Other expense , net was $1.0 million for the three months ended March 31, 2018 , which related primarily to expenses incurred in connection with negotiations with lenders and other activities related to our capital structure, partially offset by net foreign exchange gains of $19.8 million recognized in connection with intercompany notes denominated in foreign currencies.

34


Reorganization Items, Net
During the three months ended March 31, 2019 , we recognized Reorganization items, net of $36.1 million related to the Chapter 11 Cases, consisting primarily of professional fees. For the three months ended March 31, 2018 , Reorganization items, net of $192.1 million included the write-off of deferred long-term debt fees and original issue discount on debt subject to compromise and professional fees. See Note 13 to our Consolidated Financial Statements included in Part I of this Quarterly Report on Form 10-Q.

Income Tax Benefit
The effective tax rate for the three months ended March 31, 2019 and 2018 was 2.5% and 21.3% , respectively. The decrease in the effective tax rate is primarily attributed to the tax effects of the impairment charge recorded in relation to indefinite-lived FCC licenses in the current period, and also attributed to year over year changes in the forecasted mix of earnings and tax rates in the jurisdictions in which the Company operates.
iHM Results of Operations
Our iHM operating results were as follows:
(In thousands)
Three Months Ended
March 31,
 
%
Change
 
2019
 
2018
 
Revenue
$
765,810

 
$
744,568

 
2.9%
Direct operating expenses
267,114

 
241,066

 
10.8%
SG&A expenses
307,729

 
321,270

 
(4.2)%
Depreciation and amortization
30,417

 
58,333

 
(47.9)%
Operating income
$
160,550

 
$
123,899

 
29.6%
Three Months
iHM revenue increased $21.2 million during the three months ended March 31, 2019 compared to the same period of 2018 . Digital revenue increased $16.6 million driven by growth in podcasting, primarily as a result of our acquisition of Stuff Media in October 2018, as well as other digital revenue, such as live radio and other on-demand services. National broadcast spot revenue increased $16.5 million, primarily as a result of increased programmatic buying by our national customers. Revenue from our Network businesses, including both Premiere and Total Traffic & Weather, also increased $6.1 million. These revenue increases were partially offset by a $19.4 million decrease in Local broadcast spot revenue.
iHM direct operating expenses increased $26.0 million during the three months ended March 31, 2019 compared to the same period of 2018 . The increase in Direct operating expenses was primarily driven by higher digital royalties, content costs and compensation-related expenses from higher podcasting and digital subscription revenue. We also incurred higher production costs related to our events, including the iHeartRadio Music Awards. iHM SG&A expenses decreased $13.5 million during the three months ended March 31, 2019 compared to the same period of 2018 primarily due to lower trade and barter expenses, primarily resulting from the timing, partially offset by higher third-party digital sales activation fees.


35


Americas Outdoor Advertising Results of Operations
Our Americas outdoor operating results were as follows:
(In thousands)
Three Months Ended
March 31,
 
%
Change
 
2019
 
2018
 
Revenue
$
272,722

 
$
255,847

 
6.6%
Direct operating expenses
130,519

 
124,873

 
4.5%
SG&A expenses
51,636

 
48,950

 
5.5%
Depreciation and amortization
39,496

 
44,504

 
(11.3)%
Operating income
$
51,071

 
$
37,520

 
36.1%
Three Months
Americas outdoor revenue increased $16.9 million during the three months ended March 31, 2019 compared to the same period of 2018 . The increase was driven by revenue from airports and digital and print billboards.
Americas outdoor direct operating expenses increased $5.6 million during the three months ended March 31, 2019 compared to the same period of 2018 . The increase was driven by higher site lease expenses, primarily related to increased revenue. Americas outdoor SG&A expenses increased $2.7 million during the three months ended March 31, 2019 compared to the same period of 2018 , primarily related to higher variable employee compensation expenses.
International Outdoor Advertising Results of Operations
Our International outdoor operating results were as follows:
(In thousands)
Three Months Ended
March 31,
 
%
Change
 
2019
 
2018
 
Revenue
$
314,394

 
$
342,551

 
(8.2)%
Direct operating expenses
217,308

 
236,416

 
(8.1)%
SG&A expenses
71,330

 
78,458

 
(9.1)%
Depreciation and amortization
34,581

 
38,565

 
(10.3)%
Operating income
$
(8,825
)
 
$
(10,888
)
 
(18.9)%
Three Months
International outdoor revenue decreased $28.2 million during the three months ended March 31, 2019 compared to the same period of 2018 . Excluding the $24.7 million impact from movements in foreign exchange rates, International outdoor revenue decreased $3.5 million during the three months ended March 31, 2019 compared to the same period of 2018 . The decrease in revenue is due primarily to lower revenue as a result of contracts not being renewed in certain countries, including Italy and Spain. This decrease was partially offset by growth in multiple countries, including Sweden, which continues to benefit from new digital inventory and strong market conditions.
International outdoor direct operating expenses decreased $19.1 million during the three months ended March 31, 2019 compared to the same period of 2018 . Excluding the $17.2 million impact from movements in foreign exchange rates, International outdoor direct operating expenses decreased $1.9 million during the three months ended March 31, 2019 compared to the same period of 2018 . The decrease was primarily due to lower site lease expenses in countries with lower revenue, including Italy, partially offset by site lease expenses related to new contracts. International outdoor SG&A expenses decreased $7.1 million during the three months ended March 31, 2019 compared to the same period of 2018 . Excluding the $5.6 million impact from movements in foreign exchange rates, International outdoor SG&A expenses decreased $1.5 million during the three months ended March 31, 2019 compared to the same period of 2018 .

36


Reconciliation of Segment Operating Income (Loss) to Consolidated Operating Income
(In thousands)
Three Months Ended
March 31,
 
2019
 
2018
iHM
$
160,550

 
$
123,899

Americas outdoor
51,071

 
37,520

International outdoor
(8,825
)
 
(10,888
)
Other
1,993

 
(370
)
Other operating expense, net
(3,549
)
 
(3,286
)
Impairment charges
(91,382
)
 
—

Corporate expense (1)
(81,598
)
 
(86,023
)
Consolidated operating income
$
28,260

 
$
60,852

(1)
Corporate expenses include expenses related to iHM, Americas outdoor, International outdoor and our Other category, as well as overall executive, administrative and support functions.
Share-Based Compensation Expense
We have granted restricted stock and CCOH has granted restricted stock, restricted stock units and options to purchase shares of CCOH's Class A common stock to certain key individuals.
Share-based compensation expenses are recorded in corporate expenses and were $2.2 million and $2.7 million for the three months ended March 31, 2019 and 2018 , respectively.
iHeartMedia Unvested Share-Based Compensation
As of March 31, 2019 , there was $1.7 million of unrecognized compensation cost related to unvested share-based compensation arrangements with vesting based on service conditions and $15.1 million of unrecognized compensation cost related to unvested share-based compensation arrangements with vesting based on market performance and service conditions.  As of the Effective Date of the Plan of Reorganization, all unvested shared-based compensation will be eliminated.
CCOH Unvested Share-Based Compensation
CCOH has granted restricted stock, restricted stock units and options to purchase shares of CCOH's Class A common stock to certain key individuals under equity incentive plans. Certain employees receive equity awards pursuant to our equity incentive plans.  As of March 31, 2019 , there was $13.5 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 2.9 years. 

LIQUIDITY AND CAPITAL RESOURCES
Cash Flows
The following discussion highlights cash flow activities during the three months ended March 31, 2019 and 2018 :
(In thousands)
Three Months Ended March 31,
 
2019
 
2018
Cash provided by (used for):
 
 
 
Operating activities
$
88,987

 
$
175,476

Investing activities
$
(52,411
)
 
$
(37,196
)
Financing activities
$
1,996

 
$
(92,445
)

37



Operating Activities
Cash provided by operating activities was $89.0 million during the three months ended March 31, 2019 compared to $175.5 million of cash provided by operating activities during the three months ended March 31, 2018 .  The decrease in cash provided by operating activities is primarily attributed to cash paid in relation to Reorganization items, net of $33.9 million during the three months ended March 31, 2019 and changes in working capital balances, particularly accounts payable, which were affected by the timing of payments. Cash paid for interest was $103.9 million during the three months ended March 31, 2019 compared to $94.5 million during the three months ended March 31, 2018 . The increase of $9.4 million in cash paid for interest is due primarily to the refinancing of the $2,200.0 million 7.625% CCWH Senior Subordinated Notes due 2020 with $2,235.0 million in 9.25% CCWH Senior Subordinated Notes due 2024 during the three months ended March 31, 2019 .
Investing Activities
Cash used for investing activities of $52.4 million during the three months ended March 31, 2019 primarily reflected $51.1 million used for capital expenditures. We spent $20.7 million for capital expenditures in our iHM segment primarily related to IT infrastructure, $11.4 million in our Americas outdoor segment primarily related to the construction of new advertising structures, such as digital boards, $14.8 million in our International outdoor segment primarily related to street furniture and transit advertising structures, including digital displays and $4.2 million in Corporate primarily related to equipment and software purchases.
Cash used for investing activities of $37.2 million during the three months ended March 31, 2018 primarily reflected $38.7 million used for capital expenditures. We spent $9.1 million for capital expenditures in our iHM segment primarily related to IT infrastructure, $12.9 million in our Americas outdoor segment primarily related to the construction of new advertising structures, such as digital displays, $15.3 million in our International outdoor segment primarily related to street furniture and transit advertising structures and $1.4 million in Corporate primarily related to equipment and software purchases.
Financing Activities
Cash provided by financing activities of $2.0 million during the three months ended March 31, 2019 primarily resulted from net proceeds from long-term debt.
Cash used for financing activities of $92.4 million during the three months ended March 31, 2018 primarily resulted from payments on long-term debt and on our receivables based credit facility.
Liquidity After Filing the Chapter 11 Cases
iHeartCommunications' filing of the Chapter 11 Cases constituted an event of default that accelerated its obligations under its debt agreements. Due to the Chapter 11 Cases, however, the creditors' ability to exercise remedies under iHeartCommunications' debt agreements were stayed as of March 14, 2018, the Petition Date, and continue to be stayed.
On March 16, 2018, the Debtors entered into a Restructuring Support Agreement (the “RSA”) with certain creditors and equity holders (the “Consenting Stakeholders”). The RSA contemplates the restructuring and recapitalization of the Debtors (the “Restructuring Transactions”) through a Plan of Reorganization, which was confirmed in January 2019. Pursuant to the RSA, the Consenting Stakeholders have agreed to, among other things, support the Restructuring Transactions and vote in favor of a plan of reorganization to effect the Restructuring Transactions.
The RSA provides certain milestones for the Restructuring Transactions. Failure of the Debtors to satisfy these milestones without a waiver or consensual amendment would provide the Consenting Stakeholders a termination right under the RSA. These milestones include (i) the filing of a plan of reorganization and disclosure statement, in form and substance reasonably acceptable to the Debtors and the Consenting Stakeholders, which were filed initially with the Bankruptcy Court on April 28, 2018, (ii) the filing of a motion for approval of the disclosure statement by May 31, 2018, which deadline was subsequently extended to June 22, 2018, and which motion was filed with the Bankruptcy Court on that date, (iii) the entry of an order approving the disclosure statement by July 27, 2018 (subject to one additional 20-day extension on the terms set forth in the RSA), which order was ultimately entered on September 20, 2018 (iv) the entry of an order confirming the plan of reorganization within 75 days of the entry of an order approving the disclosure statement, which order was ultimately entered on January 22, 2019 and (v) the Effective Date occurring by March 14, 2019, which has not yet occurred but is currently expected to occur on or about May 1, 2019. The Debtors satisfied the first and second milestones, but did not satisfy the subsequent milestones and as a result, certain of the Consenting Stakeholders presently have the right to terminate the RSA, but as of the date hereof the RSA has not been terminated.

38


In general, as debtors-in-possession under the Bankruptcy Code, we are authorized to continue to operate as an ongoing business, but may not engage in transactions outside the ordinary course of business without the prior approval of the Bankruptcy Court. Pursuant to first day and second day motions filed with the Bankruptcy Court, the Bankruptcy Court authorized us to conduct our business activities in the ordinary course, including, among other things and subject to the terms and conditions of such orders, authorizing us to: (i) pay employees’ wages and related obligations; (ii) continue to operate our cash management system in a form substantially similar to prepetition practice; (iii) use cash collateral on an interim basis; (iv) continue to honor certain obligations related to on-air talent, station affiliates and royalty obligations; (v) continue to maintain certain customer programs; (vi) pay taxes in the ordinary course; (vii) continue our surety bond program; and (viii) maintain our insurance program in the ordinary course.
The filing of the Chapter 11 Cases is intended to permit iHeartCommunications to reduce its indebtedness to achieve a manageable capital structure.
On April 28, 2018, the Debtors filed a plan of reorganization (as amended, the “Plan of Reorganization”) and a related disclosure statement (as amended, the “Disclosure Statement”) with the Bankruptcy Court pursuant to Chapter 11 of the Bankruptcy Code. On June 21, 2018, the Debtors filed an amended Disclosure Statement with the Bankruptcy Court. On August 5, 2018, the Debtors filed an amended Plan of Reorganization with the Bankruptcy Court. On August 23, 2018, the Debtors filed a second amended Plan of Reorganization and a further amended Disclosure Statement with the Bankruptcy Court. On August 28, 2018, the Debtors filed a third amended Plan of Reorganization and a further amended Disclosure Statement with the Bankruptcy Court. On September 12, 2018, the Debtors filed a fourth amended Plan of Reorganization and a further amended Disclosure Statement with the Bankruptcy Court. On September 18, 2018, the Debtors filed a revised fourth amended Plan of Reorganization and a further amended Disclosure Statement with the Bankruptcy Court. On September 20, 2018, the Bankruptcy Court entered an order approving the Disclosure Statement and related solicitation and notice procedures for voting on the Plan of Reorganization, and the Debtors filed solicitation versions of the Plan of Reorganization and Disclosure Statement.
Following the entry of the order approving the Disclosure Statement, the Debtors, certain Consenting Stakeholders, and the Official Committee of Unsecured Creditors reached an agreement regarding the treatment of general unsecured claims under the Plan of Reorganization. On October 10, 2018, the Debtors filed a fifth amended Plan of Reorganization and a supplement to the Disclosure Statement (the “Disclosure Statement Supplement”). On October 18, 2018, the Bankruptcy Court entered an order approving the Disclosure Statement Supplement and the continued solicitation of holders of general unsecured claims for voting on the Plan of Reorganization, and the Debtors filed solicitation versions of the Plan of Reorganization and Disclosure Statement Supplement. On January 22, 2019, the Bankruptcy Court entered an order confirming the Plan of Reorganization.
Pursuant to the Plan of Reorganization, we will issue new common stock, and special warrants to purchase common stock (“Special Warrants”) in exchange for claims against or interests in the Debtors. Holders of claims with respect to the iHeartCommunications term loan credit agreement, priority guarantee notes, 14% Senior Notes due 2021 and legacy notes will receive their pro rata share of a distribution of new term loans and new notes of iHeartCommunications and 99% of our new equity interests, subject to dilution by any common stock issued pursuant to a post-emergence equity incentive plan, as set forth in the Plan of Reorganization to be filed prior to the Effective Date. The preliminary terms of the new term loans and new notes are set forth in the Disclosure Statement, and the specific terms of the new term loans and new notes will be set forth in a supplement to the Plan of Reorganization. Holders of equity interests in iHeartMedia will receive their pro rata share of 1% of our new equity interests, subject to dilution by any common stock issued pursuant to a post-emergence equity incentive plan. On the Effective Date, the applicable Debtors will execute documents to effect the Separation of CCOH from iHeartMedia, and the equity interests of the successor to CCOH currently held by subsidiaries of iHeartMedia will be distributed to holders of claims with respect to the term loan credit agreement and priority guarantee notes.
The Plan of Reorganization has been confirmed by the Bankruptcy Court, but there can be no assurance that the Effective Date for the Plan of Reorganization will occur on or about May 1, 2019 or at all.
During the pendency of the Chapter 11 Cases, iHeartCommunications' principal sources of liquidity have been limited to cash flow from operations, cash on hand and borrowings under its DIP credit facility. Our ability to maintain adequate liquidity through the reorganization process and beyond depends on successful operation of our business, and appropriate management of operating expenses and capital spending. Our anticipated liquidity needs are highly sensitive to changes in each of these and other factors.
On January 18, 2018, iHeartCommunications incurred $25.0 million of additional borrowings under the revolving credit loan portion of its receivables based credit facility bringing its total outstanding borrowings under the facility to $430.0 million. In February 2018, iHeartCommunications prepaid $59.0 million on the revolving credit loan portion of this facility. On the Petition Date, we incurred a prepayment premium of $5.5 million upon acceleration of the loans and pre-petition accrued interest and fees

39


totaling $2.4 million, which were added to the principal amount outstanding under the facility, bringing the total outstanding borrowings under the facility to $379.0 million. On June 14, 2018, iHeartCommunications entered into a Superpriority Secured Debtor-in-Possession Credit Agreement (the “DIP Credit Agreement”), as parent borrower, with Holdings, Subsidiary Borrowers, Citibank, N.A., as a lender and administrative agent, the swing line lenders and letter of credit issuers named therein and the other lenders from time to time party thereto. The entry into the DIP Credit Agreement was approved by an order of the Court (the “DIP Order”). We used proceeds from this facility (the "DIP Facility") and cash on hand to repay all amounts owed under and terminate iHeartCommunications' receivables based credit facility. As of March 31, 2019 , we had no borrowings under the DIP Facility.
In connection with the cash management arrangements with CCOH, iHeartCommunications maintains an intercompany revolving promissory note payable by iHeartCommunications to CCOH (the "Intercompany Note"), which matures on May 15, 2019. As of December 31, 2017, the principal amount outstanding under the Intercompany Note was $1,067.6 million. As a result of the Chapter 11 Cases, CCOH wrote down the balance of the note by $855.6 million during the fourth quarter of 2017 to reflect the estimated recoverable amount of the Intercompany Note as of December 31, 2017, based on CCOH management's best estimate of the cash settlement amount. As of the Petition Date, the principal amount outstanding under the Intercompany Note was $1,031.7 million. As of March 31, 2019 , the asset recorded in respect of the Intercompany Note on CCOH's balance sheet was $154.8 million . Pursuant to an order entered by the Bankruptcy Court, as of March 14, 2018, the balance of the Intercompany Note is frozen, and following March 14, 2018, intercompany allocations that would have been reflected in adjustments to the balance of the Intercompany Note are instead reflected in an intercompany balance that accrues interest at a rate equal to the interest under the Intercompany Note. As of March 31, 2019 , the liability recorded in respect of the post-petition intercompany balance on CCOH's balance sheet was $73.7 million . The Separation Agreement contemplates that in connection with the Separation (i) the cash sweep arrangement under the Corporate Services Agreement between CCOH and iHeartCommunications will terminate, and (ii) any agreements or licenses requiring royalty payments to the Debtors by CCOH for trademarks or other intellectual property, will terminate effective as of December 31, 2018. The Debtors agreed to (i) the repayment of the post-petition intercompany balance outstanding in favor of the Debtors as of December 31, 2018, which was equal to $21.6 million as of that date and (ii) the waiver of the set-off value of any royalties and IP license fees owed to iHeartCommunications equal to approximately $31.8 million from March 14, 2018 through December 31, 2018, such that the resulting intercompany balance on such date was $10.2 million in favor of CCOH, payable on the Effective Date. Since January 1, 2019, CCOH has incurred an additional intercompany liability of $52.1 million in favor of iHeartCommunications as of March 31, 2019.  Pursuant to an amendment to the Separation Agreement (the "Separation Agreement Amendment"), CCOH has agreed to offset the $149 million amount owed by us on the Effective Date by $52.1 million, resulting in a total net payment to CCOH of approximately $107 million on the Effective Date (including the $10.2 million payment discussed above). Pursuant to the Amendment, within 15 business days after the Effective Date, iHeartCommunications and CCOH will pay the other any intercompany liability incurred from April 1, 2019 through the Effective Date. The Intercompany Note and Due to iHeartCommunications Note are eliminated in consolidation in our consolidated financial statements. The Bankruptcy Court approved a final order to allow us to continue to provide the day-to-day cash management services for CCOH during the Chapter 11 Cases. Upon the occurrence of the Separation on the Effective Date, we will cease to provide these services for CCOH.
The Bankruptcy Court’s order also approves iHeartCommunications' continuing to provide services to CCOH pursuant to the Corporate Services Agreement during the Chapter 11 Cases. Upon the occurrence of the Separation on the Effective Date, we will enter into a new Transition Services Agreement with iHeartMedia Management Services, Inc. (“iHM Management Services”), iHeartCommunications and CCOH, for one year from the Effective Date (subject to certain rights of New CCOH to extend up to one additional year), pursuant to which iHM Management Services expects to provide, or expects iHeartCommunications, iHeart Operations, us or any of our subsidiaries to provide, CCH with certain administrative and support services and other assistance which CCH will utilize in the conduct of its business as such business was conducted prior to the Separation.
Following the Chapter 11 Cases, all interest payments due on debt held by the Debtors were stayed, which included $165.1 million on the Senior Secured Credit Facilities, $78.8 million on the 9.0% Priority Guarantee Notes due 2021, $45.0 million on the 9.0% Priority Guarantee Notes due 2022, $50.5 million on the 10.625% Priority Guarantee Notes due 2023, $49.0 million on the 11.25% Priority Guarantee Notes due 2021 and $124.7 million on the 14.0% Senior Notes due 2021 during the three months ended March 31, 2019 .
The Consolidated Financial Statements included in this Quarterly Report on Form 10-Q have been prepared on a going concern basis of accounting, which contemplates continuity of operations, realization of assets, and satisfaction of liabilities and commitments in the normal course of business. The Consolidated Financial Statements do not reflect any adjustments that might result from the outcome of the Chapter 11 Cases, including but not limited to future effects from relief or emergence. We have significant indebtedness and we have reclassified all of the Debtors' indebtedness other than the DIP Facility to Liabilities Subject to Compromise at March 31, 2019 . Our level of indebtedness has adversely impacted and is continuing to adversely impact our

40


financial condition. As a result of our financial condition, the defaults under our debt agreements, and the risks and uncertainties surrounding the Chapter 11 Cases, substantial doubt exists that we will be able to continue as a going concern.
Liquidity Following the Separation and Reorganization
The Separation and Reorganization will result in a new capital structure with significantly lower levels of long-term debt and a corresponding decrease in debt service requirements after emergence compared to historical debt levels. As a result of the Separation and Reorganization, our consolidated long-term debt is expected to decrease from $20.5 billion to approximately $5.8 billion. In 2018, we paid $398.0 million of cash interest, and incurred contractual interest of $1,189.1 million that was not paid. In 2017, we paid cash interest of $1,772.4 million. After the Effective Date, we anticipate that our annual cash interest payments will be less than $400 million.
In connection with the Reorganization and Separation, we anticipate that we will be required to make certain cash payments, including approximately $107 million to be paid to CCOH in settlement of intercompany payable balances as of March 31, 2019 , $17.7 million to cure contracts, $19.7 million for general unsecured claims, and approximately $124 million for professional fees (of which $99 million is to be paid on the Effective Date). Other anticipated cash requirements for the year ended December 31, 2019 include capital expenditures of approximately $129 million and $47.4 million to be paid in the fourth quarter of 2019 for the remaining consideration for two businesses acquired in the fourth quarter of 2018.
Following the Effective Date, we expect that our primary sources of liquidity will be cash on hand, cash flow from operations and borrowing capacity under the New ABL Facility. Upon emergence, we expect to have cash on hand of approximately $60 million after payment of settlement amounts and professional fees on the Effective Date. As of March 31, 2019 , we had no borrowings outstanding under the DIP Facility, a borrowing base of $426.8 million , $59.0 million of outstanding letters of credit and had an availability block requirement of $37.5 million , resulting in $330.3 million of excess availability.
Following the Effective Date, we expect that our primary anticipated uses of liquidity will be to fund our working capital, debt service, capital expenditures and other obligations. These other obligations include dividend payments to be due to the investor of preferred stock of iHeart Operations, the terms of which are further described in Note 9 to our financial statements included herein, and any borrowings to be provided to CCOL under the iHC Line of Credit. Our ability to fund our working capital, debt service, capital expenditures and other obligations, and to comply with the financial covenants under our new financing agreements, depends on our future operating performance and cash flows from operations, which are subject to prevailing economic conditions and other factors, many of which are beyond our control. A significant amount of our cash requirements will be for debt service obligations, and we anticipate that we will have approximately $0.4 billion of annual cash interest payments after the Effective Date. Our future success will depend on our ability to achieve our operating performance goals, address our annual cash interest obligations and reduce our outstanding debt.

41


Sources of Capital
As of March 31, 2019 and December 31, 2018 , we had the following debt outstanding, net of cash and cash equivalents:
(In millions)
March 31, 2019
 
December 31, 2018
Senior Secured Credit Facilities:
 
 
 
Term Loan D Facility Due 2019
$
—

 
$
—

Term Loan E Facility Due 2019
—

 
—

Debtors-in-Possession Facility (1)
—

 
—

9.0% Priority Guarantee Notes Due 2019
—

 
—

9.0% Priority Guarantee Notes Due 2021
—

 
—

11.25% Priority Guarantee Notes Due 2021
—

 
—

9.0% Priority Guarantee Notes Due 2022
—

 
—

10.625% Priority Guarantee Notes Due 2023
—

 
—

CCO Receivables Based Credit Facility due 2023
—

 
—

Other Secured Subsidiary Debt
3.8

 
3.9

Total Secured Debt
3.8

 
3.9

 
 
 
 
14.0% Senior Notes Due 2021
—

 
—

Legacy Notes:
 
 
 
6.875% Senior Notes Due 2018
—

 
—

7.25% Senior Notes Due 2027
—

 
—

CCWH Senior Notes:
 
 
 
6.5% Series A Senior Notes Due 2022
735.8

 
735.8

6.5% Series B Senior Notes Due 2022
1,989.2

 
1,989.2

CCWH Senior Subordinated Notes:
 
 
 
7.625% Series A Senior Notes Due 2020 (2)
—

 
275.0

7.625% Series B Senior Notes Due 2020 (2)
—

 
1,925.0

9.25% Senior Notes Due 2024 (2)
2,235.0

 
—

Clear Channel International B.V. 8.75% Senior Notes due 2020
375.0

 
375.0

Other Subsidiary Debt
46.6

 
46.1

Purchase accounting adjustments and original issue discount
(0.9
)
 
(0.7
)
Long-term debt fees
(44.3
)
 
(25.9
)
Liabilities subject to compromise (3)
15,143.7

 
15,149.5

Total Debt
20,483.9

 
20,472.9

Less: Cash and cash equivalents
448.1

 
406.5

 
$
20,035.8

 
$
20,066.4

(1)
The Debtors-in-Possession Facility (the "DIP" Facility), which matures on the earlier of the emergence date from the Chapter 11 Cases or June 14, 2019, provides for borrowings of up to $450.0 million . The DIP Facility also includes a feature to convert into an exit facility at emergence, upon meeting certain conditions. As of March 31, 2019 , the Company had a borrowing base of $426.8 million under iHeartCommunications' DIP Facility, had no outstanding borrowings, had $59.0 million of outstanding letters of credit and had an availability block requirement of $37.5 million , resulting in $330.3 million of excess availability.
(2)
On February 4, 2019, CCWH, a subsidiary of CCOH, delivered a conditional notice of redemption calling all of its outstanding $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” and together with the Series A CCWH Subordinated Notes, the “CCWH Subordinated Notes”) for redemption on March 6, 2019. The redemption was conditioned on the closing of the offering of $2,235.0 million of newly-issued 9.25% Senior Subordinated Notes due 2024 (the "New CCWH Subordinated Notes"). At the closing of such offering on February 12, 2019, CCWH deposited with the trustee for the CCWH Subordinated Notes a portion of the proceeds from the new notes in an amount sufficient to pay and discharge the principal amount outstanding, plus accrued and unpaid interest on the CCWH Subordinated Notes to, but not including, the redemption date. CCWH irrevocably instructed the trustee to apply such funds to the full payment of the CCWH Subordinated Notes on the redemption date. Concurrently therewith, CCWH elected to satisfy and discharge the indentures governing the CCWH

42


Subordinated Notes in accordance with their terms and the trustee acknowledged such satisfaction and discharge. As a result of the satisfaction and discharge of the indentures, CCWH and the guarantors of the CCWH Subordinated Notes have been released from their remaining obligations under the indentures and the CCWH Subordinated Notes.
(3)
In connection with our Chapter 11 Cases, the $6.3 billion outstanding under the Senior Secured Credit Facilities, the $1,999.8 million outstanding under the 9.0% Priority Guarantee Notes due 2019, the $1,750.0 million outstanding under the 9.0% Priority Guarantee Notes due 2021, the $870.5 million of 11.25% Priority Guarantee Notes due 2021, the $1,000.0 million outstanding under the 9.0% Priority Guarantee Notes due 2022, the $950.0 million outstanding under the 10.625% Priority Guarantee Notes due 2023, $6.0 million outstanding Other Secured Subsidiary Debt, the $1,781.6 million outstanding under the 14.0% Senior Notes due 2021, the $475.0 million outstanding under the Legacy Notes and $10.8 million outstanding Other Subsidiary Debt have been reclassified to Liabilities subject to compromise in our Consolidated Balance Sheet as of March 31, 2019 . As of the Petition Date, we ceased accruing interest expense in relation to long-term debt reclassified as Liabilities subject to compromise.
CCWH Senior Subordinated Notes
As of March 31, 2019, the New CCWH Senior Subordinated Notes represented $2,235.0 million aggregate principal amount of indebtedness outstanding. On February 4, 2019, CCWH delivered a conditional notice of redemption calling all of its outstanding CCWH Subordinated Notes for redemption on March 6, 2019. The redemption was conditioned on the closing of the offering of $2,235.0 million of New CCWH Subordinated Notes. At the closing of such offering on February 12, 2019, CCWH deposited with the trustee for the CCWH Subordinated Notes a portion of the proceeds from the new notes in an amount sufficient to pay and discharge the principal amount outstanding, plus accrued and unpaid interest on the CCWH Subordinated Notes to, but not including, the redemption date. CCWH irrevocably instructed the trustee to apply such funds to the full payment of the CCWH Subordinated Notes on the redemption date. Concurrently therewith, CCWH elected to satisfy and discharge the indentures governing the CCWH Subordinated Notes in accordance with their terms and the trustee acknowledged such discharge and satisfaction. As a result of the satisfaction and discharge of the indentures, CCWH and the guarantors of the CCWH Subordinated Notes have been released from their remaining obligations under the indentures and the CCWH Subordinated Notes.
The New CCWH Subordinated Notes were issued pursuant to an indenture, dated as of February 12, 2019 (the “Indenture”), among Clear Channel Worldwide, CCOH, Clear Channel Outdoor, Inc. (“CCOI”) and the other guarantors party thereto (collectively with CCOH and CCOI, the “Guarantors”), and U.S. Bank National Association, as trustee, paying agent, registrar and transfer agent (the “Trustee”). The New CCWH Subordinated Notes mature on February 15, 2024 and bear interest at a rate of 9.25% per annum. Prior to CCOH’s separation from iHeartMedia, Inc. in connection with the completion of iHeartMedia, Inc.’s Chapter 11 proceedings, interest will be payable to the Trustee weekly in arrears. Following the Separation, interest will be payable to the Trustee semi-annually. In each case, interest will be payable to the holders of the New CCWH Subordinated Notes semi-annually on February 15 and August 15 of each year, beginning on August 15, 2019.
The New CCWH Subordinated Notes and the guarantees of the New CCWH Subordinated Notes are unsecured senior subordinated obligations that rank pari passu in right of payment to all senior subordinated indebtedness of Clear Channel Worldwide and the Guarantors, junior to all senior indebtedness of Clear Channel Worldwide and the Guarantors, including Clear Channel Worldwide’s outstanding 6.50% Series A Senior Notes and Series B Senior Notes due 2022 (the “Senior Notes”), and senior to all future subordinated indebtedness of Clear Channel Worldwide and the Guarantors that expressly provides that it is subordinated to the New CCWH Subordinated Notes. Following the satisfaction of certain conditions, including that the Senior Notes are no longer outstanding and at least a portion of such notes has been refinanced with senior secured indebtedness, the New CCWH Subordinated Notes and the guarantees of the New CCWH Subordinated Notes will cease to be subordinated obligations and thereafter will rank pari passu in right of payment with all senior indebtedness of Clear Channel Worldwide and the Guarantors (the “step-up”). There can be no assurance that the step-up will ever occur and that the New CCWH Subordinated Notes and the guarantees will ever cease to be subordinated indebtedness of Clear Channel Worldwide and the Guarantors.
Clear Channel Worldwide may redeem the New CCWH Subordinated Notes at its option, in whole or part, at any time prior to February 15, 2021, at a price equal to 100% of the principal amount of the New CCWH Subordinated Notes redeemed, plus a make-whole premium, plus accrued and unpaid interest to the redemption date. Clear Channel Worldwide may redeem the New CCWH Subordinated Notes, in whole or in part, on or after February 15, 2021, at the redemption prices set forth in the Indenture plus accrued and unpaid interest to the redemption date. At any time prior to February 15, 2021, Clear Channel Worldwide may elect to redeem up to 40% of the aggregate principal amount of the New CCWH Subordinated Notes at a redemption price equal to 109.25% of the principal amount thereof, plus accrued and unpaid interest to the redemption date, with the net proceeds of one or more equity offerings. In addition, Clear Channel Worldwide may redeem up to 20% of the aggregate principal amount of the New CCWH Subordinated Notes at any time prior to February 15, 2021, using the net proceeds from certain other equity offerings at 103% of the principal amount of the New CCWH Subordinated Notes. Clear Channel Worldwide will be permitted to use these two redemption options concurrently but will not be permitted to redeem, in the aggregate, more than 40% of the principal amount of the New CCWH Subordinated Notes pursuant to these options.

43


The Indenture contains covenants that limit CCOH’s ability and the ability of its restricted subsidiaries to, among other things: (i) incur or guarantee additional debt or issue certain preferred stock; (ii) redeem, purchase or retire subordinated debt; (iii) make certain investments; (iv) create restrictions on the payment of dividends or other amounts from CCOH’s restricted subsidiaries that are not Guarantors; (v) enter into certain transactions with affiliates; (vi) merge or consolidate with another person, or sell or otherwise dispose of all or substantially all of CCOH’s assets; (vii) sell certain assets, including capital stock of CCOH’s subsidiaries; (viii) designate CCOH’s subsidiaries as unrestricted subsidiaries, (ix) pay dividends, redeem or repurchase capital stock or make other restricted payments; and (x) in the event that the step-up occurs and New CCWH Subordinated Notes cease to be subordinated, incur certain liens.
Upon the occurrence of the Separation on the Effective Date, Clear Channel Worldwide and the Guarantors will no longer be subsidiaries of CCOH and we will no longer be subject to the Indenture or include this indebtedness in our consolidated financial statements.
Uses of Capital
Debt Repayments, Maturities and Other
On February 4, 2019, CCWH delivered a conditional notice of redemption calling all of its outstanding CCWH Subordinated Notes for redemption on March 6, 2019. The redemption was conditioned on the closing of the offering of $2,235.0 million of New CCWH Subordinated Notes. At the closing of such offering on February 12, 2019, CCWH deposited with the trustee for the CCWH Subordinated Notes a portion of the proceeds from the new notes in an amount sufficient to pay and discharge the principal amount outstanding, plus accrued and unpaid interest on the CCWH Subordinated Notes to, but not including, the redemption date. CCWH irrevocably instructed the trustee to apply such funds to the full payment of the CCWH Subordinated Notes on the redemption date. Concurrently therewith, CCWH elected to satisfy and discharge the indentures governing the CCWH Subordinated Notes in accordance with their terms and the trustee acknowledged such discharge and satisfaction. As a result of the satisfaction and discharge of the indentures, CCWH and the guarantors of the CCWH Subordinated Notes have been released from their remaining obligations under the indentures and the CCWH Subordinated Notes.
Certain Relationships with the Sponsors
We are party to a management agreement with certain affiliates of the Sponsors and certain other parties pursuant to which such affiliates of the Sponsors provided management and financial advisory services until December 31, 2018.  These arrangements required management fees to be paid to such affiliates of the Sponsors for such services at a rate not greater than $15.0 million per year, plus reimbursable expenses.  In connection with the Reorganization, the Company is not recognizing management fees in the post-petition period. The Company recognized management fees and reimbursable expenses of $3.1 million for the three months ended March 31, 2018 . As of the Effective Date of the Plan of Reorganization, these management fees will be waived.
CCOH Dividends
In connection with the cash management arrangements with CCOH, iHeartCommunications maintained an intercompany revolving promissory note payable by iHeartCommunications to CCOH (the “Intercompany Note”), which consists of the net activities resulting from day-to-day cash management services provided by iHeartCommunications to CCOH.  As of March 14, 2018, the principal amount outstanding under the Intercompany Note was $1,031.7 million . The Intercompany Note is eliminated in consolidation in our consolidated financial statements.
The Intercompany Note previously was the subject of litigation. Pursuant to the terms of the settlement of that litigation, CCOH’s board of directors established an intercompany note committee for the specific purpose of monitoring the Intercompany Note. The CCOH Intercompany Note Committee has the non-exclusive authority, pursuant to the terms of its charter, to demand payments under the Intercompany Note under certain specified circumstances tied to the Company’s liquidity or the amount outstanding under the Intercompany Note as long as CCOH makes a simultaneous dividend equal to the amount so demanded. If the specified circumstances tied to the Company’s liquidity occur, the CCOH Intercompany Note Committee is authorized to demand repayment of up to the full principal amount of the Intercompany Note, if it declares a simultaneous dividend to CCOH’s stockholders in the same amount. As a result of the Chapter 11 Cases, the balance on the Intercompany Note is currently frozen and any payment pursuant to such demand would be subject to the approval of the Bankruptcy Court.
As a result of the filing of the Chapter 11 Cases, the balance under the Intercompany Note has become immediately due and payable. Pursuant to an order entered by the Bankruptcy Court, as of March 14, 2018, the balance of the Intercompany Note is frozen, and following March 14, 2018, intercompany allocations that would have been reflected in adjustments to the balance of the Intercompany Note are instead reflected in an intercompany balance that accrues interest at a rate equal to the interest under the Intercompany Note. As of March 31, 2019 , the liability recorded in respect of the post-petition intercompany arrangement on CCOH's balance sheet was $73.7 million . The Separation Agreement contemplates that in connection with the Separation (i) the

44


cash sweep arrangement under the Corporate Services Agreement between CCOH and iHeartCommunications will terminate, and (ii) any agreements or licenses requiring royalty payments to the Debtors by CCOH for trademarks or other intellectual property, will terminate effective as of December 31, 2018. As noted above, the Separation Agreement provides for (i) the repayment of the post-petition intercompany balance outstanding in favor of us as of December 31, 2018, which was equal to $21.6 million as of that date and (ii) the waiver of the set-off value of any royalties and IP license fees owed to us equal to approximately $31.8 million from March 14, 2018 through December 31, 2018, such that the resulting intercompany balance on such date was $10.2 million in favor of CCOH, payable on the Effective Date.  Since January 1, 2019, CCOH has incurred an additional intercompany liability of $52.1 million in favor of us as of March 31, 2019. Pursuant to the Separation Agreement Amendment, CCOH has agreed to offset the $149 million owed by us on the Effective Date by $52.1 million, resulting in a total net payment to CCOH of approximately $107 million on the Effective Date (including the $10.2 million payment discussed above). Pursuant to the Separation Agreement Amendment, within 15 business days after the Effective Date, iHeartCommunications and CCOH will pay the other any intercompany liability incurred from April 1, 2019 through the Effective Date.
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 refer to “Legal Proceedings” in Part II, Item 1 of this Quarterly Report on Form 10-Q.
SEASONALITY
Typically, the iHM, Americas outdoor and International outdoor segments experience their lowest financial performance in the first quarter of the calendar year, with International outdoor historically experiencing a loss from operations in that period. Our International outdoor 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. Due to this seasonality and certain other factors, the results for the interim periods may not be indicative of results for the full year.  
MARKET RISK
We are exposed to market risks arising from changes in market rates and prices, including movements in interest rates, foreign currency exchange rates and inflation.
Interest Rate Risk
A significant amount of our long-term debt bears interest at variable rates. Accordingly, our earnings will be affected by changes in interest rates. As of March 31, 2019 , approximately 31% of our aggregate principal amount of long-term debt bore interest at floating rates. Assuming the current level of borrowings and assuming a 50% change in LIBOR, disregarding the impact of the Chapter 11 Cases on our requirement to pay interest on our long-term debt, it is estimated that our interest expense for the three months ended March 31, 2019 would have changed by $19.7 million.
In the event of an adverse change in interest rates, management may take actions to mitigate our exposure.  However, due to the uncertainty of the actions that would be taken and their possible effects, the preceding interest rate sensitivity analysis assumes no such actions.  Further, the analysis does not consider the effects of the change in the level of overall economic activity that could exist in such an environment.
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 a net loss of $37.6 million for the three months ended March 31, 2019 .  We estimate a 10% increase in the value of the U.S. dollar relative to foreign currencies would have decreased our net loss for the three months ended March 31, 2019 by $3.8 million .  A 10% decrease in the value of the U.S. dollar relative to foreign currencies during the three months ended March 31, 2019 would have increased our net loss for the same period by a corresponding amount.

45


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 broadcasting stations and outdoor display faces in our iHM, Americas outdoor and International outdoor operations.

CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING STATEMENTS
The Private Securities Litigation Reform Act of 1995 provides a safe harbor for forward-looking statements made by us or on our behalf.  This report contains various forward-looking statements which represent our expectations or beliefs concerning future events, including, without limitation, our future operating and financial performance, our ability to comply with the covenants in the agreements governing our indebtedness and the availability of capital and the terms thereof.  Statements expressing expectations and projections with respect to future matters are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995.  We caution that these forward-looking statements involve a number of risks and uncertainties and are subject to many variables which could impact our future performance.  These statements are made on the basis of management’s views and assumptions, as of the time the statements are made, regarding future events and performance.  There can be no assurance, however, that management’s expectations will necessarily come to pass.  Actual future events and performance may differ materially from the expectations reflected in our forward-looking statements.  We do not intend, nor do we undertake any duty, to update any forward-looking statements.
A wide range of factors could materially affect future developments and performance, including but not limited to:
•
the risks and uncertainties associated with the Chapter 11 Cases, including unfavorable tax consequences;
•
our ability to generate sufficient cash from operations to fund our operations;
•
our ability to successfully implement our business plan;
•
our ability to pursue our business strategies during the Chapter 11 Cases;
•
the diversion of management’s attention as a result of the Chapter 11 Cases;
•
increased levels of employee attrition as a result of the Chapter 11 Cases;
•
the impact of our restructuring on our business;
•
our ability to obtain sufficient exit financing to emerge from Chapter 11 and operate successfully;
•
volatility of our financial results as a result of the Chapter 11 Cases;
•
our inability to predict our long-term liquidity requirements and the adequacy of our capital resources;
•
the availability of cash to maintain our operations and fund our emergence costs;
•
our ability to continue as a going concern;
•
the impact of our substantial indebtedness upon emergence from Chapter 11, including the effect of our leverage on our financial position and earnings;
•
our ability to change the public perception relating to our bankruptcy proceedings;
•
the implementation and transition of a new board of directors upon emergence;
•
risks associated with weak or uncertain global economic conditions and their impact on the level of expenditures on advertising;

46


•
other general economic and political conditions in the United States and in other countries in which we currently do business, including those resulting from recessions, political events and acts or threats of terrorism or military conflicts;
•
industry conditions, including competition;
•
increased competition from alternative media platforms and technologies;
•
changes in labor conditions, including programming, program hosts and management;
•
fluctuations in operating costs;
•
technological changes and innovations;
•
shifts in population and other demographics;
•
our ability to obtain keep municipal concessions for our street furniture and transit products;
•
the impact of future dispositions, acquisitions and other strategic transactions;
•
legislative or regulatory requirements;
•
regulations and consumer concerns regarding privacy and data protection, and breaches of information security measures;
•
restrictions on outdoor advertising of certain products;
•
fluctuations in exchange rates and currency values;
•
risks of doing business in foreign countries;
•
the identification of a material weakness in our internal control over financial reporting; and
•
certain other factors set forth in our other filings with the SEC.
This list of factors that may affect future performance and the accuracy of forward-looking statements is illustrative and is not intended to be exhaustive.  Accordingly, all forward-looking statements should be evaluated with the understanding of their inherent uncertainty.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Required information is presented under “Market Risk” within Item 2 of this Part I.
ITEM 4. CONTROLS AND PROCEDURES
As required by Rule 13a-15(b) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), under the supervision and with the participation of management, including our Chief Executive Officer and our Chief Financial Officer, we have carried out an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rule 13a-15(e) under the Exchange Act) as of the end of the period covered by this report.  Our disclosure controls and procedures are designed to provide reasonable assurance that information we are required to disclose in reports that are filed or submitted under the Exchange Act is accumulated and communicated to our management, including our Chief Executive Officer and our Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure and is recorded, processed, summarized and reported within the time periods specified by the SEC.  Based on that evaluation, our Chief Executive Officer and our Chief Financial Officer concluded that our disclosure controls and procedures were effective as of March 31, 2019 at the reasonable assurance level. 
There were no changes in our internal control over financial reporting that occurred during the quarter ended March 31, 2019 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.


47


PART II -- OTHER INFORMATION
ITEM 1.  LEGAL PROCEEDINGS
We currently 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 our assumptions or the effectiveness of our 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 our financial condition or results of operations.
Although we are involved in a variety of legal proceedings in the ordinary course of business, a large portion of our litigation arises in the following contexts: commercial disputes; defamation matters; employment and benefits related claims; governmental fines; intellectual property claims; and tax disputes. The Plan of Reorganization provides for the treatment of claims against the Debtors' bankruptcy estates, including pre-petition liabilities that have not otherwise been satisfied or addressed during the Chapter 11 Cases.
Chapter 11 Cases
iHeartCommunications' filing of the Chapter 11 Cases constitutes an event of default that accelerated its obligations under its debt agreements. Due to the Chapter 11 Cases, however, the creditors' ability to exercise remedies under iHeartCommunications' debt agreements were stayed as of March 14, 2018 , the date of the Chapter 11 petition filing, and continue to be stayed. See Note 6 to our consolidated financial statements located in Item 8 of Part II of this Annual Report on Form 10-K for more information about the debt agreements. On March 21, 2018, Wilmington Savings Fund Society, FSB ("WSFS"), solely in its capacity as successor indenture trustee to the 6.875% Senior Notes due 2018 and 7.25% Senior Notes due 2027 (collectively with the 5.50% Senior Notes due 2016, the “Legacy Notes”), and not in its individual capacity, filed an adversary proceeding against us in the Chapter 11 Cases. In the complaint, WSFS alleged, among other things, that the "springing lien" provisions of the priority guarantee notes indentures and the priority guarantee notes security agreements amounted to "hidden encumbrances" on the Company's property, to which the holders of the 6.875% senior notes due 2018 and 7.25% senior notes due 2027 were entitled to "equal and ratable" treatment. On March 26, 2018, Delaware Trust Co. ("Delaware Trust"), in its capacity as successor indenture trustee to the 14.0% Senior Notes due 2021, filed a motion to intervene as a plaintiff in the adversary proceeding filed by WSFS. In the complaint, Delaware Trust alleged, among other things, that the indenture governing the 14.0% Senior Notes due 2021 also has its own "negative pledge" covenant, and, therefore, to the extent the relief sought by WSFS in its adversary proceeding is warranted, the holders of the 14.0% Senior Notes due 2021 are also entitled to the same "equal and ratable" liens on the same property. On April 6, 2018, we filed a motion to dismiss the adversary proceeding and a hearing on such motion was held on May 7, 2018. We answered the complaint and completed discovery.  The trial was held on October 24, 2018. On January 15, 2019, the Bankruptcy Court entered judgment in our favor denying all relief sought by WSFS and all other parties. Pursuant to a settlement (the “Legacy Plan Settlement”) with WSFS and certain consenting Legacy Noteholders of all issues related to confirmation of our Plan of Reorganization, upon our confirmed Plan of Reorganization becoming effective, this adversary proceeding shall be deemed withdrawn and/or dismissed, with respect to all parties thereto, with prejudice and in its entirety.
On October 9, 2018, WSFS, solely in its capacity as successor indenture trustee to the 6.875% Senior Notes due 2018 and 7.25% Senior Notes due 2027, and not in its individual capacity, filed an adversary proceeding against Clear Channel Holdings Inc. (“CCH”) and certain shareholders of iHeartMedia. The named shareholder defendants are Bain Capital LP; THL; Abrams Capital L.P. ("Abrams"); and Highfields Capital Management L.P. ("Highfields"). In the complaint, WSFS alleged, among other things, that the shareholder defendants engaged in a “pattern of inequitable and bad faith conduct, including the abuse of their insider positions to benefit themselves at the expense of third-party creditors including particularly the Legacy Noteholders.” The complaint asks the court to grant relief in the form of equitable subordination of the shareholder defendants’ term loan, Priority Guarantee Notes and 14.0% Senior Notes due 2021 claims to any and all claims of the legacy noteholders. In addition, the complaint sought to have any votes to accept the fourth amended plan of reorganization by Abrams and Highfields on account of their 2021 notes claims, and any votes to accept the fourth amended plan of reorganization by the defendant Clear Channel Holdings, Inc., ("CCH") on account of its junior notes claims, to be designated and disqualified. The court held a pre-trial conference and oral argument on October 18, 2018. Pursuant to the Legacy Plan Settlement, upon our confirmed Plan of Reorganization becoming effective, this adversary proceeding shall be deemed withdrawn and/or dismissed, with respect to all parties thereto, with prejudice and in its entirety.

48


Stockholder Litigation
On May 9, 2016, a stockholder of CCOH filed a derivative lawsuit in the Court of Chancery of the State of Delaware, captioned GAMCO Asset Management Inc. v. iHeartMedia Inc. et al., C.A. No. 12312-VCS. The complaint names as defendants the Company, iHeartCommunications, Bain Capital and THL (together, the "Sponsor Defendants"), the Company's private equity sponsors and majority owners, and the members of CCOH's board of directors. CCOH also is named as a nominal defendant. The complaint alleges that CCOH has been harmed by the intercompany agreements with iHeartCommunications , CCOH’s lack of autonomy over its own cash and the actions of the defendants in serving the interests of the Company, iHeartCommunications and the Sponsor Defendants to the detriment of CCOH and its minority stockholders. Specifically, the complaint alleges that the defendants have breached their fiduciary duties by causing CCOH to: (i) continue to loan cash to iHeartCommunications under the intercompany note at below-market rates; (ii) abandon its growth and acquisition strategies in favor of transactions that would provide cash to the Company and iHeartCommunications ; (iii) issue new debt in Clear Channel International B.V.'s, an international subsidiary of ours, offering of 8.75% Senior Notes due 2020 (the "CCIBV Note Offering") to provide cash to the Company and iHeartCommunications through a dividend; and (iv) effect the sales of certain outdoor markets in the U.S. (the "Outdoor Asset Sales") allegedly to provide cash to the Company and iHeartCommunications through a dividend. The complaint also alleges that the Company, iHeartCommunications and the Sponsor Defendants aided and abetted the directors' breaches of their fiduciary duties. The complaint further alleges that the Company, iHeartCommunications and the Sponsor Defendants were unjustly enriched as a result of these transactions and that these transactions constituted a waste of corporate assets for which the defendants are liable to CCOH. The plaintiff sought, among other things, a ruling that the defendants breached their fiduciary duties to CCOH and that the Company, iHeartCommunications and the Sponsor Defendants aided and abetted the CCOH board of directors' breaches of fiduciary duty, rescission of payments made by CCOH to iHeartCommunications and its affiliates pursuant to dividends declared in connection with the CCIBV Note Offering and Outdoor Asset Sales, and an order requiring the Company, iHeartCommunications and the Sponsor Defendants to disgorge all profits they have received as a result of the alleged fiduciary misconduct.
On July 20, 2016, the defendants filed a motion to dismiss plaintiff's verified stockholder derivative complaint for failure to state a claim upon which relief can be granted. On November 23, 2016, the Court granted defendants’ motion to dismiss all claims brought by the plaintiff.  On December 19, 2016, the plaintiff filed a notice of appeal of the ruling. The oral hearing on the appeal was held on October 11, 2017. On October 12, 2017, the Supreme Court of Delaware affirmed the lower court's ruling, dismissing the case.
On December 29, 2017, another stockholder of CCOH filed a derivative lawsuit in the Court of Chancery of the State of Delaware, captioned Norfolk County Retirement System, v. iHeartMedia, Inc., et al., C.A. No. 2017-0930-JRS. The complaint names as defendants the Company, iHeartCommunications , the Sponsor Defendants, and the members of CCOH's board of directors.  CCOH is named as a nominal defendant. The complaint alleges that CCOH has been harmed by the CCOH board of directors' November 2017 decision to extend the maturity date of the intercompany revolving note (the “Third Amendment”) at what the complaint describes as far-below-market interest rates.  Specifically, the complaint alleges that (i) the Company and Sponsor defendants breached their fiduciary duties by exploiting their position of control to require CCOH to enter the Third Amendment on terms unfair to CCOH; (ii) the CCOH board of directors breached their duty of loyalty by approving the Third Amendment and elevating the interests of the Company, iHeartCommunications and the Sponsor Defendants over the interests of CCOH and its minority unaffiliated stockholders; and (iii) the terms of the Third Amendment could not have been agreed to in good faith and represent a waste of corporate assets by the CCOH board of directors.  The complaint further alleges that the Company, iHeartCommunications and the Sponsor defendants were unjustly enriched as a result of the unfairly favorable terms of the Third Amendment.  The plaintiff sought, among other things, a ruling that the defendants breached their fiduciary duties to CCOH, a modification of the Third Amendment to bear a commercially reasonable rate of interest, and an order requiring disgorgement of all profits, benefits and other compensation obtained by defendants as a result of the alleged breaches of fiduciary duties.
On March 7, 2018, the defendants filed a motion to dismiss plaintiff's verified derivative complaint for failure to state a claim upon which relief can be granted. On March 16, 2018, the Company filed a Notice of Suggestion of Pendency of Bankruptcy and Automatic Stay of Proceedings. On May 4, 2018, plaintiff filed its response to the motion to dismiss. On June 26, 2018, the defendants filed a reply brief in further support of their motion to dismiss. Oral argument on the motion to dismiss was held on September 20, 2018.
On August 27, 2018, the same stockholder of CCOH that had filed a derivative lawsuit against the Company and others in 2016 (GAMCO Asset Management Inc.) filed a putative class action lawsuit in the Court of Chancery of the State of Delaware, captioned GAMCO Asset Management, Inc. v. Hendrix, et al., C.A. No. 2018-0633-JRS. The complaint names as defendants the Sponsor Defendants and the members of CCOH’s board of directors. The complaint alleges that minority shareholders in CCOH during the period November 8, 2017 to March 14, 2018 were harmed by decisions of the CCOH board and the intercompany note committee of the board of directors relating to the Intercompany Note. Specifically, the complaint alleges that (i) the members

49


of the intercompany note committee breached their fiduciary duties by not demanding payment under the Intercompany Note and issuing a simultaneous dividend after a threshold tied to the Company’s liquidity had been reached; (ii) the CCOH board of directors breached their fiduciary duties by approving the Third Amendment rather than allowing the Intercompany Note to expire; (iii) the CCOH board breached their fiduciary duties by not demanding payment under the Intercompany Note and issuing a simultaneous dividend after a threshold tied to the Company’s liquidity had been reached; (iv) the Sponsor Defendants breached their fiduciary duties by not directing the CCOH board to permit the Intercompany Note to expire and to declare a dividend. The complaint further alleges that the Sponsor Defendants aided and abetted the board’s alleged breach of fiduciary duties. The plaintiff sought, among other things, a ruling that the CCOH board, the intercompany note committee, and the Sponsor Defendants breached their fiduciary duties and that the Sponsor Defendants aided and abetted the board of directors' breach of fiduciary duty; and an award of damages, together with pre- and post-judgment interests, to the putative class of minority shareholders.
On December 16, 2018, the Debtors, CCOH, GAMCO Asset Management, Inc., and Norfolk County Retirement System entered into the CCOH Separation Settlement to settle of all claims, objections, and other causes of action that have been or could be asserted by or on behalf of CCOH, GAMCO Asset Management, Inc., and/or Norfolk County Retirement System by and among the Debtors, CCOH, GAMCO Asset Management, Inc., certain individual defendants in the GAMCO Asset Management, Inc. action and/or the Norfolk County Retirement System action, and the private equity sponsor defendants in such actions. The CCOH Separation Settlement provides for the consensual separation of the Debtors and CCOH, including approximately $149.0 million of recovery to CCOH on account of its claim against iHeartCommunications in the Chapter 11 Cases, a $200 million unsecured revolving line of credit from certain of the Debtors to CCOH for a period of up to three years, the transfer of certain of the Debtors’ intellectual property to CCOH, the waiver by the Debtors of the setoff for the value of the transferred intellectual property, mutual releases, the termination of the cash sweep under the existing Corporate Services Agreement, the termination of any agreements or licenses requiring royalty payments from CCOH to the Debtors for trademarks or other intellectual property, the waiver of any post-petition amounts owed by CCOH relating to such trademarks or other intellectual property, and the execution of a new transition services agreement and other separation documents. The CCOH Separation Settlement was approved by the Bankruptcy Court and the United States District Court for the Southern District of Texas on January 22, 2019.
China Investigation
Several employees of Clear Media Limited, an indirect, non-wholly-owned subsidiary of the Company whose ordinary shares are listed on the Hong Kong Stock Exchange, are subject to an ongoing police investigation in China for misappropriation of funds. We are not aware of any litigation, claim or assessment pending against us in relation to this investigation. Based on information known to date, we believe any contingent liabilities arising from potential misconduct that has been or may be identified by the investigation in China are not material to our consolidated financial statements. The effect of the misappropriation of funds is reflected in these financial statements in the appropriate periods.
We advised both the SEC and the DOJ of the investigation at Clear Media Limited and we are cooperating to provide information in response to inquiries from the agencies. The Clear Media Limited investigation could implicate the books and records, internal controls and anti-bribery provisions of the U.S. Foreign Corrupt Practices Act, which statute and regulations provide for potential monetary penalties as well as criminal and civil sanctions. It is possible that monetary penalties and other sanctions could be assessed on the Company in connection with this matter. The nature and amount of any monetary penalty or other sanctions cannot reasonably be estimated at this time and could be qualitatively or quantitatively material to the Company.
Italy Investigation
During the three months ended June 30, 2018, we identified misstatements associated with VAT obligations in our business in Italy, which resulted in an understatement of our VAT obligation. These misstatements resulted in an understatement of other long-term liabilities of $16.9 million as of December 31, 2017. The effect of these misstatements is reflected in the historical financial statements in the appropriate periods. Upon identification of these misstatements, we undertook certain procedures, including a forensic investigation, which is ongoing. In addition, we voluntarily disclosed the matter and preliminary findings to the Italian tax authorities in order to commence a discussion on the appropriate calculation of the VAT position. The current expectation is that we may have to repay to the Italian tax authority a substantial portion of the VAT previously applied as a credit in relation to the transactions under investigation, amounting to approximately $17 million, including estimated possible penalties and interest. We made a payment of $8.6 million during the fourth quarter of 2018 and expect to pay the remainder during the last half of 2019. The ultimate amount to be paid may differ from our estimates, and such differences may be material.


50


ITEM 1A.  RISK FACTORS
For information regarding our risk factors, please refer to Item 1A in our Annual Report on Form 10-K for the year ended December 31, 2018 (the "Annual Report"). There have not been any material changes in the risk factors disclosed in our Annual Report.


ITEM 2.  UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
The following table sets forth our purchases of shares of our Class A common stock made during the quarter ended March 31, 2019 :
Period
Total Number of Shares Purchased (1)
 
Average Price Paid per Share (1)
 
Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs
 
Maximum Number (or Approximate Dollar Value) of Shares that May Yet Be Purchased Under the Plans or Programs
January 1 through January 31
3,927

 
$
0.43

 
—

 
$
—

February 1 through February 28
2,576

 
0.94

 
—

 
—

March 1 through March 31
—

 


 
—

 
—

Total
6,503

 
$
0.63

 
—

 
$
—

(1)
The shares indicated consist of shares of our Class A common stock tendered by employees to us during the three months ended March 31, 2019 to satisfy the employees’ tax withholding obligation in connection with the vesting and release of restricted shares, which are repurchased by us based on their fair market value on the date the relevant transaction occurs.
ITEM 3.  DEFAULTS UPON SENIOR SECURITIES
The filing of the Chapter 11 Cases constituted an event of default that accelerated the Debtors’ obligations under the following debt instruments (the “Debt Instruments”):
•
Senior Indenture, dated as of October 1, 1997 (as amended or supplemented from time to time), by and between iHeartCommunications and The Bank of New York (now known as The Bank of New York Mellon), as trustee (with Wilmington Savings Fund Society, FSB as successor trustee), governing iHeartCommunications’ 5.50% Senior Notes due 2016, 6.875% Senior Notes due 2018 and 7.25% Senior Notes due 2027;
•
Credit Agreement, dated as of May 13, 2008, as amended and restated as of February 23, 2011 (as further amended or supplemented from time to time), by and among iHeartCommunications, as the parent borrower, the subsidiary co-borrowers and foreign subsidiary revolving borrowers party thereto, iHeartMedia Capital I, LLC, as a guarantor, Citibank, N.A., as administrative agent, swing line lender and letter of credit issuer, and the other the lenders from time to time party thereto governing iHeartCommunications’ Term Loan D and Term Loan E credit facilities;
•
Indenture, dated as of February 23, 2011 (as amended or supplemented from time to time), by and among iHeartCommunications, iHeartMedia Capital I, LLC, as guarantor, the other guarantors party thereto, Wilmington Trust FSB, as trustee (with Wilmington Trust, National Association as successor in interest), and Deutsche Bank Trust Company Americas, as collateral agent, paying agent, registrar, authentication agent and transfer agent, governing iHeartCommunications’ 9.0% Priority Guarantee Notes due 2021;
•
Indenture, dated as of October 25, 2012 (as amended or supplemented from time to time), by and among iHeartCommunications, iHeartMedia Capital I, LLC, as guarantor, the other guarantors party thereto, U.S. Bank National Association, as trustee, paying agent, registrar and transfer agent (with Wilmington Trust, National Association as successor trustee, paying agent, registrar and transfer agent), and Deutsche Bank Trust Company Americas, as collateral agent, governing iHeartCommunications’ 9.0% Priority Guarantee Notes due 2019;

51


•
Indenture, dated as of June 21, 2013 (as amended or supplemented from time to time), by and among iHeartCommunications, iHeartMedia Capital I, LLC, as guarantor, the other guarantors party thereto, Law Debenture Trust Company of New York, as trustee (with Delaware Trust Company as successor trustee), and Deutsche Bank Trust Company Americas, as paying agent, registrar and transfer agent, governing iHeartCommunications’ 14.0% Senior Notes due 2021;
•
Indenture, dated as of February 28, 2013 (as amended or supplemented from time to time), by and among iHeartCommunications, iHeartMedia Capital I, LLC, as guarantor, the other guarantors party thereto, U.S. Bank National Association, as trustee, paying agent, registrar, authentication agent and transfer agent (with UMB Bank National Association as successor trustee, paying agent, registrar, authentication agent and transfer agent), and Deutsche Bank Trust Company Americas, as collateral agent, governing iHeartCommunications’ 11.25% Priority Guarantee Notes due 2021;
•
Indenture, dated as of September 10, 2014 (as amended or supplemented from time to time), by and among iHeartCommunications, iHeartMedia Capital I, LLC, as guarantor, the other guarantors party thereto, U.S. Bank National Association, as trustee, paying agent, registrar, authentication agent and transfer agent (with Wilmington Trust, National Association as successor trustee, paying agent, registrar, authentication agent and transfer agent), and Deutsche Bank Trust Company Americas, as collateral agent, governing iHeartCommunications’ 9.0% Priority Guarantee Notes due 2022;
•
Indenture, dated as of February 26, 2015 (as amended or supplemented from time to time), by and among iHeartCommunications, iHeartMedia Capital I, LLC, as guarantor, the other guarantors party thereto, U.S. Bank National Association, as trustee, paying agent, registrar, authentication agent and transfer agent, and Deutsche Bank Trust Company Americas, as collateral agent, governing iHeartCommunications’ 10.625% Priority Guarantee Notes due 2023;
•
Credit Agreement, dated as of November 30, 2017, by and among iHeartCommunications, as the parent borrower, iHeartMedia Capital I, LLC, as a guarantor, the subsidiary borrowers party thereto, TPG Specialty Lending, Inc., as administrative agent, sole lead arranger and a lender, the other lenders, swing line lenders and letter of credit issuers from time to time party thereto and the other syndication agents party thereto, governing iHeartCommunications’ asset-based term loan and revolving credit facility; and
•
Revolving Promissory Note, dated November 10, 2005, as amended by the first amendment entered into on December 23, 2009, the second amendment entered into on October 23, 2013, and the third amendment entered into on November 29, 2017, between iHeartCommunications, as maker, and Clear Channel Outdoor Holdings, Inc., as payee.
As previously disclosed, any efforts to enforce the payment obligations under the Debt Instruments are automatically stayed as a result of the Chapter 11 Cases, and the creditors’ rights of enforcement in respect of the Debt Instruments are subject to the applicable provisions of the Bankruptcy Code.
ITEM 4.  MINE SAFETY DISCLOSURES
Not applicable.
ITEM 5.  OTHER INFORMATION
None.

52


ITEM 6. EXHIBITS
Exhibit
Number
 
Description
2.1
 
4.1
 

4.2
 

4.3
 

10.1
 

10.2*
 

31.1*
 

31.2*
 

32.1**
 

32.2**
 

101*
 
Interactive Data Files.
____________
*    Filed herewith.
**    Furnished herewith.

53


Signatures
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
 
IHEARTMEDIA, INC.
 
 
April 25, 2019
/s/ SCOTT D. HAMILTON
 
Scott D. Hamilton
 
Senior Vice President, Chief Accounting Officer and Assistant Secretary

54
EXECUTION VERSION

AMENDMENT
TO
SETTLEMENT AND SEPARATION AGREEMENT

This Amendment to Settlement and Separation Agreement (this “ Amendment ”) effective as of April 24, 2019, is by and among iHeartMedia, Inc., a Delaware corporation (“ IHM ”), iHeartCommunications, Inc. (f/k/a Clear Channel Communications, Inc.), a Texas corporation (“ IHC ”), Clear Channel Holdings, Inc., a Delaware corporation and a wholly-owned subsidiary of IHC (“ CCH ”), and Clear Channel Outdoor Holdings, Inc., a Delaware corporation (“ CCOH ” and, together with CCH after the Merger, “ New CCOH ”, and, together with IHM, IHC, CCH, and CCOH, the “ Parties ” and each a “ Party ”).

WHEREAS, reference is hereby made to that certain Settlement and Separation Agreement, dated as of March 27, 2019, by and among IHM, IHC, CCH and CCOH (as the same may be amended from time to time, the “ Separation Agreement ”); capitalized terms used but not otherwise defined herein shall have the meanings ascribed to such terms in the Separation Agreement; and

WHEREAS, pursuant to and in accordance with Section 10.11 of the Separation Agreement, the Parties desire to amend a certain provision of the Separation Agreement as hereinafter set forth.

NOW, THEREFORE, in consideration of the mutual agreements, provisions and covenants in this Amendment, the Parties, intending to be legally bound, hereby agree as follows:

1. Amendment to Schedule 1.1G . Schedule 1.1G shall be amended by adding the following at the end of such Schedule:
mestransportscommuniquent.be
mestransportscommuniquent.co
mestransportscommuniquent.com
mestransportscommuniquent.eu
mestransportscommuniquent.fr
mestransportscommuniquent.lu
mestransportscommuniquent.net
me stransportscommuniquent.org
mestransportscommuniquent.paris
 
2.      Amendment to Section 2.7(a)(ii) . Section 2.7(a)(ii) of the Separation Agreement is hereby deleted in its entirety and replaced with the following:
“IHM, on behalf of itself and the iHeart Group, hereby waives (A) the set-off value of the Outdoor Name and Marks and Outdoor Transferred Intellectual Property, and $31,807,423.61, representing the royalties on any Intellectual Property and any license fees incurred by CCOH (including under the CCOH License Agreement)




from March 14, 2018 through December 31, 2018 and (B) the repayment of $21,591,486.06 by the Outdoor Group to the iHeart Group, representing the outstanding balance under the Intercompany Notes as of December 31, 2018 in favor of the iHeart Group, such that the resulting balance of the Intercompany Notes as of December 31, 2018 (after giving effect to the waivers pursuant to this Section 2.7(a)(ii)) shall be $10,215,937.55 payable to CCOH, which IHC shall pay, or cause to be paid, to CCOH or its designee on the Closing Date as provided in Section 2.7(c) below.
3.      Amendment to Section 2.7(c) . Section 2.7(c) of the Separation Agreement is hereby deleted in its entirety and replaced with the following:
“In consideration for the settlement, termination, cancellation and extinguishment of the iHeart Note, subject to the satisfaction or waiver of each of the conditions to Closing set forth in Section 4.2 , on the Closing Date, CCOH shall receive cash in an amount equal to (i) $148,980,556.59, plus (ii) $10,215,937.55 (representing the resulting balance of the Intercompany Notes as of December 31, 2018 pursuant to Section 2.7(a)(ii) above), minus (iii) $52,155,255.26 (representing the amount owed to IHC under the Intercompany Accounts incurred from January 1, 2019 through March 31, 2019 (after giving effect to the termination of the CCOH License Agreement and other agreements pursuant to Section 2.7(a)(i) )). CCOH, on the one hand, and IHC, on the other hand, shall within fifteen (15) Business Days after the Closing Date pay the other any amount owed to it under the Intercompany Accounts to the extent incurred on or after April 1, 2019 through the Closing Date (after giving effect to the termination of the CCOH License Agreement and other agreements pursuant to S ection 2.7(a)(i) ). Subject to the satisfaction or waiver of each of the conditions to Closing set forth in Section 4.2 and after giving effect to the transactions contemplated by Section 2.7(a) , Section 2.7(b) and this Section 2.7(c) , upon the consummation of the Closing, the Intercompany Accounts and CCOH Note shall be settled, terminated, canceled, extinguished and be of no further force or effect with no further liability to any party thereto, except as set forth in this Agreement.”
4.      Amendment to Section 2.13 . Section 2.13 shall be amended by adding the following Section 2.13(d) immediately following Section 2.13(c) :
“(d) Until such time that the Gelco Letter of Credit (as defined on Schedule 2.13(a) ) has been amended, reduced, terminated or separated, New CCOH agrees it shall be liable for the Outdoor Group’s ratable portion (based on the portion of the Gelco Letter of Credit used by the Outdoor Group as compared to the total amount of the Gelco Letter of Credit) of all reasonable out-of-pocket fees, expenses and costs incurred as a result of the Gelco Letter of Credit, including the “fronting fee” under

2



the ABL Credit Agreement (the “ Outdoor Gelco LOC Costs ”). IHM shall deliver to New CCOH a quarterly invoice for the Outdoor Gelco LOC Costs, and New CCOH shall pay, or cause to be paid, to IHM or the applicable member of the iHeart Group the Outdoor Gelco LOC Costs upon the later of (i) five (5) Business Days after IHM’s delivery to New CCOH of each such invoice and (ii) the date when any such payment under the Gelco Letter of Credit is due. For purposes of this Section 2.13(d) the “ABL Credit Agreement” shall mean that certain ABL Credit Agreement in effect as of the Effective Date (as amended from time to time), by and among IHC, iHeartMedia Capital I, LLC, a Delaware limited liability company, Citibank, N.A., as Administrative Agent, the Swing Line Lender and an L/C Issuer, and each other lender, Swing Line Lender and L/C Issuer from time to time party thereto.”
5.      Amendment to Schedule 2.13(a) . Schedule 2.13(a) shall be amended by adding the following:
“3. Irrevocable Standby Letter of Credit No. 69611540, dated as of November 13, 2017¸ issued by Citibank, N.A. in favor of Gelco Corporation and Gelco Fleet Trust (“ Gelco ”), as applied by iHeartCommunications, Inc. on behalf of itself, Clear Channel Outdoor Holdings, Inc. and iHeartMedia, Inc. (the “ Gelco Letter of Credit ”). The iHeart Group will remain obligor for the Outdoor Group under the Gelco Letter of Credit until such time that Gelco has provided its consent to terminate the Gelco Letter of Credit and enter into new letters of credit with each of the iHeart Group and the Outdoor Group.”
6.      Reference to and Effect on the Separation Agreement .
(a)      On and after the date of this Amendment, each reference in the Separation Agreement to “this Agreement”, “hereunder”, “hereof”, “herein”, or words of like import referring to such Separation Agreement, shall mean and be a reference to the Separation Agreement as amended by this Amendment.
(b)      Except as specifically amended by this Amendment, the Separation Agreement shall remain in full force and effect and is hereby ratified and confirmed in all respects.
(c)      The execution, delivery and performance of this Amendment shall not, except as expressly provided herein, constitute a waiver of any provision of, or operate as a waiver of any right, power or remedy of any Party pursuant to the Separation Agreement.
7.      Miscellaneous .

3



(a)      This Amendment may be executed in one or more counterparts, all of which shall be considered one and the same agreement, and shall become effective when one or more counterparts have been signed by each Party hereto and delivered to each other Party hereto.
(b)      All interpretative provisions of the Separation Agreement, including Article IX , (Dispute Resolution), Section 10.2 (Assignability), Section 10.3 (Third-Party Beneficiaries), Section 10.4 (Notices), Section 10.9 (Waiver of Default), Section 10.10 (Amendments), Section 10.12 (Interpretation) and Section 10.14 (Limitations of Liability) are hereby incorporated by reference, mutatis mutandis .
[ Remainder of page intentionally left blank. ]
IN WITNESS WHEREOF, the parties have caused this Amendment to be executed by their duly authorized Representatives, in each case as of the date first written above.
IHEARTMEDIA, INC.
By:     
Name:
Title:
IHEARTCOMMUNICATIONS, INC.
By:     
Name:
Title:
CLEAR CHANNEL HOLDINGS, INC.
By:    
Name:
Title:
CLEAR CHANNEL OUTDOOR HOLDINGS, INC.
By:    
Name:
Title:


4



EXHIBIT 31.1 - CERTIFICATION PURSUANT TO RULES 13A-14(A) AND 15D-14(A) UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
 
I, Robert W. Pittman, certify that:
1.
I have reviewed this Quarterly Report on Form 10-Q of iHeartMedia, Inc. ;
2.
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.
The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
(a)
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b)
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c)
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d)
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5.
The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
(a)
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
(b)
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
Date: April 25, 2019

/s/ Robert W. Pittman
Robert W. Pittman
Chairman and Chief Executive Officer





EXHIBIT 31.2 - CERTIFICATION PURSUANT TO RULES 13A-14(A) AND 15D-14(A) UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
 
I, Richard J. Bressler, certify that:
1.
I have reviewed this Quarterly Report on Form 10-Q of iHeartMedia, Inc. ;
2.
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.
The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
(a)
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b)
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c)
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d)
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5.
The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
(a)
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
(b)
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
Date: April 25, 2019

/s/ Richard J. Bressler
Richard J. Bressler
President and Chief Financial Officer





EXHIBIT 32.1 – CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
 
This certification is provided pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, and accompanies the Quarterly Report on Form 10-Q for the quarter ended March 31, 2019 as filed with the Securities and Exchange Commission on the date hereof (the “Form 10-Q”) of iHeartMedia, Inc. (the “Company”).  The undersigned hereby certifies that to his knowledge, the Form 10-Q fully complies with the requirements of Section 13(a) or Section 15(d) of the Securities Exchange Act of 1934 and that the information contained in the Form 10-Q fairly presents, in all material respects, the financial condition and results of operations of the Company.
Dated: April 25, 2019

By:
/s/ Robert W. Pittman
Name:
Robert W. Pittman
Title:
Chairman and Chief Executive Officer





EXHIBIT 32.2 – CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
 
This certification is provided pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, and accompanies the Quarterly Report on Form 10-Q for the quarter ended March 31, 2019 as filed with the Securities and Exchange Commission on the date hereof (the “Form 10-Q”) of iHeartMedia, Inc. (the “Company”).  The undersigned hereby certifies that to his knowledge, the Form 10-Q fully complies with the requirements of Section 13(a) or Section 15(d) of the Securities Exchange Act of 1934 and that the information contained in the Form 10-Q fairly presents, in all material respects, the financial condition and results of operations of the Company.
Dated: April 25, 2019

By:
/s/ Richard J. Bressler
Name:
Richard J. Bressler
Title:
President and Chief Financial Officer