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EX-31 - CERTIFICATION OF CHIEF EXECUTIVE OFFICER PURSUANT TO SECTION 302 - iHeartCommunications, Inc.Exhibit31.1.htm
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EX-32 - CERTIFICATION OF CHIEF EXECUTIVE OFFICER PURSUANT TO SECTION 906 - iHeartCommunications, Inc.Exhibit32.1.htm
EX-32 - CERTIFICATION OF CHIEF FINANCIAL OFFICER PURSUANT TO SECTION 906 - iHeartCommunications, Inc.Exhibit32.2.htm
EX-31 - CERTIFICATION OF CHIEF FINANCIAL OFFICER PURSUANT TO SECTION 302 - iHeartCommunications, Inc.Exhibit31.2.htm

 

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, 2015

 

[   ]          TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE

                 ACT OF 1934 FOR THE TRANSITION PERIOD FROM _________ TO __________

 

Commission File Number

001-09645

 

iHeartCommunications, Inc.

(Exact name of registrant as specified in its charter)

 

                                                   Texas                                                                                                           74-1787539

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

                             incorporation or organization)

 

                                     200 East Basse Road

                                      San Antonio, Texas                                                                                                    78209

                     (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 [   ] No [X]

 

(Explanatory Note: The registrant is a voluntary filer and is therefore not subject to the filing requirements of the Securities Exchange Act of 1934. However, during the preceding 12 months, and pursuant to the bond indentures of iHeartCommunications, Inc., the registrant has filed all reports that it would have been required to file by Section 13 or 15(d) of the Securities Exchange Act of 1934 if the registrant was subject to the filing requirements of the Securities Exchange Act of 1934 during such timeframe.)

 

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

 

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

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

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes [  ] No [X]

 

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

 

                                                Class                                                                                      Outstanding at April 26, 2015

                    ~~~~~~~~~~~~~~~~~~~~~~~~~                                                  ~~~~~~~~~~~~~~~~~~~~~~~~~

                       Common Stock, $.001 par value                                                                                 500,000,000

 

The registrant meets the conditions set forth in General Instructions H(1)(a) and (b) of Form 10-Q and is therefore filing this form in a reduced disclosure format permitted by General Instruction H(2).

 


 

  

 

 


 

IHEARTCOMMUNICATIONS, INC.
INDEX

 

 

 

Page No.

Part I – Financial Information

 

Item 1.       Financial Statements

2

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

2

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

3

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

4

                    Notes to Consolidated Financial Statements

5

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

15

Item 3.       Quantitative and Qualitative Disclosures About Market Risk

28

Item 4.       Controls and Procedures

28

Part II – Other Information

 

Item 1.       Legal Proceedings

29

Item 1A.    Risk Factors

29

Item 2.       Unregistered Sales of Equity Securities and Use of Proceeds (intentionally omitted pursuant to General Instruction H(2)(b) of Form 10-Q)

29

Item 3.       Defaults Upon Senior Securities (intentionally omitted pursuant to General Instruction H(2)(b) of Form 10-Q)

29

Item 4.       Mine Safety Disclosures

29

Item 5.       Other Information

29

Item 6.       Exhibits

31

Signatures

32

  

 


PART I – FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

iHeartCommunications, Inc. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS

 

(In thousands, except share data)

March 31,

 

 

 

 

 

2015

 

December 31,

 

(Unaudited)

 

2014

CURRENT ASSETS

 

 

 

 

 

Cash and cash equivalents

$

 289,014  

 

$

 457,024  

Accounts receivable, net of allowance of $30,193 in 2015 and $32,396 in 2014

 

 1,242,075  

 

 

 1,395,248  

Prepaid expenses

 

 244,840  

 

 

 191,572  

Other current assets

 

 141,624  

 

 

 136,299  

 

Total Current Assets

 

 1,917,553  

 

 

 2,180,143  

PROPERTY, PLANT AND EQUIPMENT

 

 

 

 

 

Structures, net

 

 1,567,653  

 

 

 1,614,199  

Other property, plant and equipment, net

 

 1,018,137  

 

 

 1,084,865  

INTANGIBLE ASSETS AND GOODWILL

 

 

 

 

 

Indefinite-lived intangibles - licenses

 

 2,411,259  

 

 

 2,411,071  

Indefinite-lived intangibles - permits

 

 1,065,810  

 

 

 1,066,748  

Other intangibles, net

 

 1,141,481  

 

 

 1,206,727  

Goodwill

 

 4,170,632  

 

 

 4,187,424  

OTHER ASSETS

 

 

 

 

 

Other assets

 

 289,408  

 

 

 289,065  

Total Assets

$

 13,581,933  

 

$

 14,040,242  

CURRENT LIABILITIES

 

 

 

 

 

Accounts payable

$

 132,419  

 

$

 132,258  

Accrued expenses

 

 718,418  

 

 

 799,475  

Accrued interest

 

 162,961  

 

 

 252,900  

Deferred income

 

 217,019  

 

 

 176,048  

Current portion of long-term debt

 

 2,844  

 

 

 3,604  

 

Total Current Liabilities

 

 1,233,661  

 

 

 1,364,285  

Long-term debt

 

 20,483,195  

 

 

 20,322,414  

Deferred income taxes

 

 1,566,965  

 

 

 1,563,888  

Other long-term liabilities

 

 451,795  

 

 

 454,863  

Commitments and contingent liabilities (Note 4)

 

 

 

 

 

SHAREHOLDER'S DEFICIT

 

 

 

 

 

Noncontrolling interest

 

 215,440  

 

 

 224,140  

Common stock, par value $.001 per share, authorized and issued

 

 

 

 

 

 

500,000,000 shares in 2015 and 2014, respectively

 

 500  

 

 

 500  

Additional paid-in capital

 

 2,084,342  

 

 

 2,101,132  

Accumulated deficit

 

 (12,067,356) 

 

 

 (11,682,390) 

Accumulated other comprehensive loss

 

 (386,609) 

 

 

 (308,590) 

 

Total Shareholder's Deficit

 

 (10,153,683) 

 

 

 (9,665,208) 

Total Liabilities and Shareholder's Deficit

$

 13,581,933  

 

$

 14,040,242  

  

 

See Notes to Consolidated Financial Statements

2


iHeartCommunications, Inc. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
(UNAUDITED)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(In thousands)

 

 

Three Months Ended March 31,

 

 

 

 

 

2015

 

2014

Revenue

 

 

 

 

 

 

$

 1,344,564  

 

$

 1,342,548  

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

Direct operating expenses (excludes depreciation and amortization)

 

 

 578,519  

 

 

 597,688  

 

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

 

 

 416,188  

 

 

 414,636  

 

Corporate expenses (excludes depreciation and amortization)

 

 

 77,288  

 

 

 72,705  

 

Depreciation and amortization

 

 

 

 

 

 

 

 170,453  

 

 

 174,871  

 

Other operating income (loss), net

 

 

 

 

 

 

 

 (8,974) 

 

 

 165  

Operating income

 

 

 

 

 

 

 

 93,142  

 

 

 82,813  

Interest expense

 

 

 

 

 

 

 

 441,771  

 

 

 431,114  

Gain on marketable securities

 

 

 

 

 

 

 

 579  

 

 

 -  

Equity in earnings (loss) of nonconsolidated affiliates

 

 

 

 

 

 

 

 331  

 

 

 (13,326) 

Loss on extinguishment of debt

 

 

 

 

 

 

 

 (2,201) 

 

 

 (3,916) 

Other income, net

 

 

 

 

 

 

 

 19,891  

 

 

 1,541  

Loss before income taxes

 

 

 

 

 

 

 

 (330,029) 

 

 

 (364,002) 

Income tax expense

 

 

 

 

 

 

 

 (56,605) 

 

 

 (68,388) 

Consolidated net loss

 

 

 

 

 

 

 

 (386,634) 

 

 

 (432,390) 

 

Less amount attributable to noncontrolling interest

 

 

 

 

 

 

 

 (1,668) 

 

 

 (8,200) 

Net loss attributable to the Company

 

 

 

 

 

 

$

 (384,966) 

 

$

 (424,190) 

Other comprehensive income (loss), net of tax:

 

 

 

 

 

 

 

 

 

 

 

 

Foreign currency translation adjustments

 

 

 

 

 

 

 

 (82,159) 

 

 

 (2,217) 

 

Unrealized holding gain on marketable securities

 

 

 

 

 

 

 

 822  

 

 

 1,084  

 

Other adjustments to comprehensive income (loss)

 

 

 

 

 

 

 

 (1,154) 

 

 

 3,309  

Other comprehensive income (loss)

 

 

 

 

 

 

 

 (82,491) 

 

 

 2,176  

Comprehensive loss

 

 

 

 

 

 

 

 (467,457) 

 

 

 (422,014) 

 

 Less amount attributable to noncontrolling interest

 

 

 

 

 

 

 

 (6,353) 

 

 

 (2,963) 

Comprehensive loss attributable to the Company

 

 

 

 

 

 

$

 (461,104) 

 

$

 (419,051) 

 

See Notes to Consolidated Financial Statements

3


iHeartCommunications, Inc. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)

 

(In thousands)

 

 

 

Three Months Ended March 31,

 

 

 

2015

 

2014

Cash flows from operating activities:

 

 

 

 

 

 

 

 

 

Consolidated net loss

 

 

 

$

 (386,634) 

 

$

 (432,390) 

Reconciling items:

 

 

 

 

 

 

 

 

 

Depreciation and amortization

 

 

 

 

 170,453  

 

 

 174,871  

 

Deferred taxes

 

 

 

 

 16,220  

 

 

 25,308  

 

Provision for doubtful accounts

 

 

 

 

 6,448  

 

 

 3,418  

 

Amortization of deferred financing charges and note discounts, net

 

 

 

 

 15,602  

 

 

 31,220  

 

Share-based compensation

 

 

 

 

 2,524  

 

 

 3,036  

 

(Gain) loss on disposal of operating and fixed assets

 

 

 

 

 552  

 

 

 (165) 

 

Gain on marketable securities

 

 

 

 

 (579) 

 

 

 -  

 

Equity in (earnings) loss of nonconsolidated affiliates

 

 

 

 

 (331) 

 

 

 13,326  

 

Loss on extinguishment of debt

 

 

 

 

 2,201  

 

 

 3,916  

 

Other reconciling items, net

 

 

 

 

 (20,033) 

 

 

 (1,577) 

 

Changes in operating assets and liabilities, net of effects of

    acquisitions and dispositions:

 

 

 

 

 

 

 

 

 

 

Decrease in accounts receivable

 

 

 

 

 114,083  

 

 

 149,407  

 

 

Decrease in accrued expenses

 

 

 

 

 (63,457) 

 

 

 (39,724) 

 

 

Increase in accounts payable

 

 

 

 

 6,284  

 

 

 8,008  

 

 

Decrease in accrued interest

 

 

 

 

 (73,316) 

 

 

 (39,739) 

 

 

Increase in deferred income

 

 

 

 

 48,623  

 

 

 61,525  

 

 

Changes in other operating assets and liabilities

 

 

 

 

 (74,852) 

 

 

 (52,088) 

Net cash used in operating activities

 

 

 

 

 (236,212) 

 

 

 (91,648) 

Cash flows from investing activities:

 

 

 

 

 

 

 

 

 

Proceeds from sale of other investments

 

 

 

 

 579  

 

 

 220,961  

 

Purchases of property, plant and equipment

 

 

 

 

 (56,455) 

 

 

 (67,408) 

 

Proceeds from disposal of assets

 

 

 

 

 32,603  

 

 

 1,425  

 

Purchases of other operating assets

 

 

 

 

 (1,964) 

 

 

 (370) 

 

Change in other, net

 

 

 

 

 (5,331) 

 

 

 (1,954) 

Net cash provided by (used for) investing activities

 

 

 

 

 (30,568) 

 

 

 152,654  

Cash flows from financing activities:

 

 

 

 

 

 

 

 

 

Draws on credit facilities

 

 

 

 

 120,000  

 

 

 820  

 

Payments on credit facilities

 

 

 

 

 (1,859) 

 

 

 (247,675) 

 

Proceeds from long-term debt

 

 

 

 

 950,000  

 

 

 209,975  

 

Payments on long-term debt

 

 

 

 

 (931,274) 

 

 

 (63,902) 

 

Payments to purchase noncontrolling interests

 

 

 

 

 (20,400) 

 

 

 -  

 

Dividends and other payments to noncontrolling interests

 

 

 

 

 (2,119) 

 

 

 (3,955) 

 

Deferred financing charges

 

 

 

 

 (10,011) 

 

 

 (1,064) 

 

Change in other, net

 

 

 

 

 644  

 

 

 (183) 

Net cash provided by (used for) financing activities

 

 

 

 

 104,981  

 

 

 (105,984) 

Effect of exchange rate changes on cash

 

 

 

 

 (6,211) 

 

 

 (2,431) 

Net decrease in cash and cash equivalents

 

 

 

 

 (168,010) 

 

 

 (47,409) 

Cash and cash equivalents at beginning of period

 

 

 

 

 457,024  

 

 

 708,151  

Cash and cash equivalents at end of period

 

 

 

$

 289,014  

 

$

 660,742  

SUPPLEMENTAL DISCLOSURES:

 

 

 

 

 

 

 

 

Cash paid during the quarter for interest

 

 

 

$

 495,007  

 

$

 412,643  

Cash paid during the quarter for taxes

 

 

 

 

 9,858  

 

 

 11,504  

 

See Notes to Consolidated Financial Statements

4


iHeartCommunications, Inc. AND SUBSIDIARIES

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 iHeartCommunications, Inc. (the “Company”) 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 2014 Annual Report on Form 10-K.

 

We are a holding company and have no significant assets other than the ownership interests in our subsidiaries. All of our operations and all of our operating assets are held by our subsidiaries.  Certain of our outstanding indebtedness is fully and unconditionally guaranteed on a joint and several basis by our parent, iHeartMedia Capital I, LLC (“Capital I”), and certain of our material wholly-owned domestic subsidiaries.  Not all of our subsidiaries guarantee our obligations under such outstanding indebtedness.  For a presentation of the allocation of assets, liabilities, equity, revenues and expenses attributable to the guarantors of our indebtedness in conformity with the SEC’s Regulation S-X Rule 3-10(d), please refer to Note 10 to the consolidated financial statements of Parent as of and for the period ending March 31, 2015.

 

The consolidated financial statements include the accounts of the Company and its subsidiaries.  Also included in the consolidated financial statements are entities for which the Company has a controlling financial interest or is the primary beneficiary.  Investments in companies in which the Company owns 20 percent to 50 percent of the voting common stock or otherwise exercises significant influence over operating and financial policies of the Company are accounted for under the equity method.  All significant intercompany transactions are eliminated in the consolidation process.  Certain prior-period amounts have been reclassified to conform to the 2015 presentation.

 

During the first quarter of 2015, in connection with the appointment of the new chief executive officer for Clear Channel Outdoor Holdings, Inc. (“CCOH”) and a new chief executive officer for the Americas outdoor business, the Company reevaluated its segment reporting and determined that its Latin American operations should be managed by its Americas outdoor leadership team.  As a result, the operations of Latin America are no longer reflected within the Company’s International outdoor segment and are included in the results of its Americas outdoor segment.  In addition, the Company reorganized a portion of its national representation business such that the cost of sales personnel for iHeartMedia (“iHM”) radio stations are now included in the iHM segment and its national representation business no longer charges iHM for intercompany cost allocations.  Accordingly, the Company has recast the corresponding segment disclosures for prior periods to include Latin America within the Americas outdoor segment and has also recast the corresponding segment disclosures to reflect internal representation services as direct expenses of iHM. 

 

The Company is a Texas corporation with all of its common stock being held by Capital I.  All of Capital I’s interests are held by iHeartMedia Capital II, LLC, a direct, wholly-owned subsidiary of iHeartMedia, Inc. (“Parent”). Parent was formed in May 2007 by private equity funds sponsored by Bain Capital Partners, LLC and Thomas H. Lee Partners, L.P. (together, the “Sponsors”) for the purpose of acquiring the business of the Company.

 

Omission of Per Share Information

Net loss per share information is not presented as Capital I owns 100% of the Company’s common stock. The Company does not have any publicly traded common stock.

 

New Accounting Pronouncements

During the first quarter of 2015, the Company adopted the Financial Accounting Standards Board’s (“FASB”) ASU No. 2014-08, Presentation of Financial Statements (Topic 205) and Property, Plant, and Equipment (Topic 360), Reporting Discontinued

5


iHeartCommunications, Inc. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

 

Operations and Disclosures of Disposals of Components of an Entity.  This update provides guidance for the recognition, measurement and disclosure of discontinued operations. The amendments were effective for fiscal years (and interim periods within) beginning after December 15, 2014 and were to be applied retrospectively to all prior periods presented for such obligations that existed at the beginning of an entity’s fiscal year of adoption.  The adoption of these standards did not have a material effect on the Company’s consolidated financial statements.

 

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

 

NOTE 2 – Property, plant and equipment, INTANGIBLE ASSETS AND GOODWILL

Dispositions

During the first quarter 2015, the Company sold its executive office building and data and administrative service center located in San Antonio, TX in exchange for proceeds of $34.3 million.  Concurrently with the sale of these properties, the Company entered into lease agreements for the continued use of the buildings, pursuant to which the Company will have annual lease payments of $2.6 million.  The Company recognized a loss of $0.2 million on the sale of the executive office building, which was recognized on the date of sale and a gain of $8.1 million on the sale of the data and administrative service center, which will be recognized over the term of the lease. 

 

On April 3, 2015, Parent and certain of the Company’s subsidiaries completed the first closing of the previously-announced agreement with an affiliate of Vertical Bridge Holdings, LLC, for the sale of 411 of the Company’s broadcast communications tower sites and related assets for up to $400 million. In connection with the first closing, the Company sold 367 of its tower sites and related assets in exchange for $369 million of proceeds.  Simultaneous with the first closing, the Company entered into lease agreements for the continued use of the towers.

 

Property, Plant and Equipment

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

 

 

 

 

 

 

(In thousands)

March 31,

 

December 31,

 

2015

 

2014

Land, buildings and improvements

$

 698,642  

 

$

 731,925  

Structures

 

 2,961,735  

 

 

 2,999,582  

Towers, transmitters, and studio equipment

 

 457,517  

 

 

 453,044  

Furniture and other equipment

 

 544,002  

 

 

 536,255  

Construction in progress

 

 68,030  

 

 

 95,671  

 

 

 4,729,926  

 

 

 4,816,477  

Less: accumulated depreciation

 

 2,144,136  

 

 

 2,117,413  

Other property, plant and equipment, net

$

 2,585,790  

 

$

 2,699,064  

 

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 advertising segment and in Latin America are subject to long-term, finite contracts unlike the Company’s permits in the United States and Canada. Accordingly, there are no indefinite-lived intangible assets in the International outdoor advertising segment.

 

6


iHeartCommunications, Inc. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

 

Other Intangible Assets

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

 

The following table presents the gross carrying amount and accumulated amortization for each major class of other intangible assets at March 31, 2015 and December 31, 2014, respectively:

 

 

 

 

 

 

 

 

 

 

 

 

 

(In thousands)

March 31, 2015

 

December 31, 2014

 

 

Gross Carrying Amount

 

Accumulated Amortization

 

Gross Carrying Amount

 

Accumulated Amortization

Transit, street furniture and other outdoor

   contractual rights

$

 666,821  

 

$

 (445,797) 

 

$

 716,723  

 

$

 (476,523) 

Customer / advertiser relationships

 

 1,222,518  

 

 

 (800,930) 

 

 

 1,222,518  

 

 

 (765,596) 

Talent contracts

 

 319,384  

 

 

 (231,083) 

 

 

 319,384  

 

 

 (223,936) 

Representation contracts

 

 240,017  

 

 

 (211,229) 

 

 

 238,313  

 

 

 (206,338) 

Permanent easements

 

 171,238  

 

 

 -    

 

 

 171,271  

 

 

 -    

Other

 

 388,247  

 

 

 (177,705) 

 

 

 388,160  

 

 

 (177,249) 

 

Total

$

 3,008,225  

 

$

 (1,866,744) 

 

$

 3,056,369  

 

$

 (1,849,642) 

 

Total amortization expense related to definite-lived intangible assets was $62.9 million and $66.9 million for the three months ended March 31, 2015 and 2014, 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)

 

 

 

2016

$

 222,529  

 

2017

 

 199,136  

 

2018

 

 126,019  

 

2019

 

 41,451  

 

2020

 

 35,217  

 

 

7


iHeartCommunications, Inc. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

 

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 Advertising

 

International Outdoor Advertising

 

Other

 

Consolidated

Balance as of December 31, 2013

$

 3,234,807  

 

$

 585,227  

 

$

 264,907  

 

$

 117,246  

 

$

 4,202,187  

 

Acquisitions

 

 17,900  

 

 

 -  

 

 

 -  

 

 

 299  

 

 

 18,199  

 

Foreign currency

 

 -  

 

 

 (653) 

 

 

 (32,369) 

 

 

 -  

 

 

 (33,022) 

 

Other

 

 60  

 

 

 -  

 

 

 -  

 

 

 -  

 

 

 60  

Balance as of December 31, 2014

$

 3,252,767  

 

$

 584,574  

 

$

 232,538  

 

$

 117,545  

 

$

 4,187,424  

 

Acquisitions

 

 -    

 

 

 -    

 

 

 -    

 

 

 -    

 

 

 -  

 

Foreign currency

 

 -    

 

 

 (167) 

 

 

 (16,625) 

 

 

 -    

 

 

 (16,792) 

 

Other

 

 -    

 

 

 -    

 

 

 -    

 

 

 -    

 

 

 -  

Balance as of March 31, 2015

$

 3,252,767  

 

$

 584,407  

 

$

 215,913  

 

$

 117,545  

 

$

 4,170,632  

 

8


iHeartCommunications, Inc. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

 

NOTE 3 – LONG-TERM DEBT

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

 

 

 

 

 

 

 

(In thousands)

March 31,

 

December 31,

 

 

2015

2014

Senior Secured Credit Facilities(1)

 

 $6,300,000  

 

 

 $7,231,222  

Receivables Based Credit Facility Due 2017

 

 120,000  

 

 

 -    

9.0% Priority Guarantee Notes Due 2019

 

 1,999,815  

 

 

 1,999,815  

9.0% Priority Guarantee Notes Due 2021

 

 1,750,000  

 

 

 1,750,000  

11.25% Priority Guarantee Notes Due 2021

 

 575,000  

 

 

 575,000  

9.0% Priority Guarantee Notes Due 2022

 

 1,000,000  

 

 

 1,000,000  

10.625% Priority Guarantee Notes Due 2023

 

 950,000  

 

 

 -    

Subsidiary Revolving Credit Facility Due 2018

 

 -    

 

 

 -    

Other Secured Subsidiary Debt(2)

 

 16,729  

 

 

 19,257  

Total Consolidated Secured Debt

 

 12,711,544  

 

 

 12,575,294  

 

 

 

 

 

 

 

14.0% Senior Notes Due 2021

 

 1,678,314  

 

 

 1,661,697  

The Company's Legacy Notes(3)

 

 667,900  

 

 

 667,900  

10.0% Senior Notes Due 2018

 

 730,000  

 

 

 730,000  

Subsidiary Senior Notes due 2022

 

 2,725,000  

 

 

 2,725,000  

Subsidiary Senior Subordinated Notes due 2020

 

 2,200,000  

 

 

 2,200,000  

Other Subsidiary Debt

 

 467  

 

 

 1,024  

Purchase accounting adjustments and original issue discount

 

 (227,186) 

 

 

 (234,897) 

Total debt

 

 20,486,039  

 

 

 20,326,018  

Less: current portion

 

 2,844  

 

 

 3,604  

Total long-term debt

$

 20,483,195  

 

$

 20,322,414  

 

 

 

 

 

 

 

(1)

Term Loan D and Term Loan E mature in 2019.

(2)

Other secured subsidiary debt matures at various dates from 2015 through 2025.

(3)

The Company's Legacy Notes, all of which were issued prior to the acquisition by iHeartMedia, Inc., consist of Senior Notes maturing at various dates from 2016 through 2027.

 

The Company’s weighted average interest rates at March 31, 2015 and December 31, 2014 were 8.4% and 8.1%, respectively.  The aggregate market value of the Company’s debt based on market prices for which quotes were available was approximately $20.0 billion and $19.7 billion at March 31, 2015 and December 31, 2014, respectively.  Under the fair value hierarchy established by ASC 820-10-35, the market value of the Company’s debt is classified as either Level 1 or Level 2.

Debt Issuance

 

On February 26, 2015, the Company issued at par $950.0 million aggregate principal amount of 10.625% Priority Guarantee Notes due 2023.  The notes mature on March 15, 2023 and bear interest at a rate of 10.625% per annum, payable semi-annually in arrears on March 15 and September 15 of each year, beginning on September 15, 2015.  The Company used the net proceeds from the offering primarily to prepay its term loan facilities due 2016.

 

During the first quarter of 2015, the Company borrowed $120.0 million principal amount under its receivables based credit facility due 2017 and used the borrowings therefrom for general corporate purposes.

 

 

 

9


iHeartCommunications, Inc. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

 

Debt Repayments, Maturities, and Other

 

On February 26, 2015, the Company prepaid at par $916.1 million of loans outstanding under its Term Loan B facility and $15.2 million of loans outstanding under its Term Loan C asset sale facility, using the net proceeds of the Priority Guarantee Notes due 2023 issued on such date.

 

Guarantees

As of March 31, 2015, the Company had outstanding surety bonds, commercial standby letters of credit, and bank guarantees of $45.9 million, $115.5 million and $49.5 million, respectively. Bank guarantees of $12.4 million were cash secured.  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 4 – COMMITMENTS AND CONTINGENCIES

The Company and its subsidiaries are involved in certain legal proceedings arising in the ordinary course of business and, as required, have accrued an estimate of the probable costs for the resolution of those claims for which the occurrence of loss is probable and the amount can be reasonably estimated.  These estimates have been developed in consultation with counsel and are based upon an analysis of potential results, assuming a combination of litigation and settlement strategies.  It is possible, however, that future results of operations for any particular period could be materially affected by changes in the Company’s assumptions or the effectiveness of the Company’s 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.

 

Los Angeles Litigation

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

 

10


iHeartCommunications, Inc. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

 

NOTE 5 – INCOME TAXES

 

 

 

 

 

 

 

 

 

 

 

 

Income Tax Expense

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

 

 

 

 

 

 

 

 

 

 

 

 

(In thousands)

 

 

Three Months Ended March 31,

 

 

 

 

 

2015

 

2014

Current tax expense

 

 

 

 

 

 

$

 (40,385) 

 

$

 (43,080) 

Deferred tax expense

 

 

 

 

 

 

 

 (16,220) 

 

 

 (25,308) 

Income tax expense

 

 

 

 

 

 

$

 (56,605) 

 

$

 (68,388) 

 

The effective tax rate for the three months ended March 31, 2015 was (17.2)% and for the three months ended March 31, 2014 was (18.8)%. The 2015 and 2014 effective tax rates were primarily impacted by the valuation allowance recorded against deferred tax assets resulting from current period net operating losses in U.S. federal, state and certain foreign jurisdictions due to the uncertainty of the ability to utilize those assets in future periods.

 

NOTE 6 – SHAREHOLDER’S DEFICIT

The Company reports its noncontrolling interests in consolidated subsidiaries as a component of equity separate from the Company’s equity.  The following table shows the changes in shareholder’s deficit attributable to the Company and the noncontrolling interests of subsidiaries in which the Company has a majority, but not total ownership interest:

 

 

 

 

 

 

 

 

 

 

(In thousands)

The Company

 

Noncontrolling

Interests

 

Consolidated

Balances at January 1, 2015

$

 (9,889,348) 

 

$

 224,140  

 

$

 (9,665,208) 

 

Net income (loss)

 

 (384,966) 

 

 

 (1,668) 

 

 

 (386,634) 

 

Dividends and other payments to noncontrolling interests

 

 -    

 

 

 (2,119) 

 

 

 (2,119) 

 

Purchase of additional noncontrolling interests

 

 (19,264) 

 

 

 (1,136) 

 

 

 (20,400) 

 

Foreign currency translation adjustments

 

 (75,840) 

 

 

 (6,319) 

 

 

 (82,159) 

 

Unrealized holding gain on marketable securities

 

 738  

 

 

 84  

 

 

 822  

 

Other adjustments to comprehensive loss

 

 (1,036) 

 

 

 (118) 

 

 

 (1,154) 

 

Other, net

 

 593  

 

 

 2,576  

 

 

 3,169  

Balances at March 31, 2015

$

(10,369,123)

 

$

215,440

 

$

(10,153,683)

 

(In thousands)

The Company

 

Noncontrolling

Interests

 

Consolidated

Balances at January 1, 2014

$

(8,942,166)

 

$

 245,531  

 

$

(8,696,635)

 

Net loss

 

 (424,190) 

 

 

 (8,200) 

 

 

 (432,390) 

 

Foreign currency translation adjustments

 

 875  

 

 

 (3,092) 

 

 

 (2,217) 

 

Unrealized holding gain on marketable securities

 

 955  

 

 

 129  

 

 

 1,084  

 

Other adjustments to comprehensive loss

 

 3,309  

 

 

 -    

 

 

 3,309  

 

Other, net

 

 430  

 

 

 (1,533) 

 

 

 (1,103) 

Balances at March 31, 2014

$

 (9,360,787) 

 

$

 232,835  

 

$

 (9,127,952) 

 

The Company does not have any compensation plans under which it grants awards to employees. Parent and CCOH have granted restricted stock, restricted stock units and options to purchase shares of their Class A common stock to certain key individuals.

 

11


iHeartCommunications, Inc. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

 

NOTE 7 — OTHER INFORMATION

 

Other Comprehensive Income (Loss)

The total (decrease) increase in deferred income tax liabilities of other comprehensive income (loss) related to foreign currency translation adjustments and other for the quarters ended March 31, 2015 and 2014 were ($0.6) million and $8.2 million respectively.

 

Barter and Trade

Barter and trade revenues and expenses from continuing operations are included in consolidated revenue and selling, general and administrative expenses, respectively.  Barter and trade revenues were $30.0 million and $13.6 million for the three months ended March 31, 2015 and 2014, respectively and barter and trade expenses were $28.1 million and $13.5 million for the three months ended March 31, 2015 and 2014, respectively.

 

NOTE 8 – 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, Canada, and Latin America.  The International outdoor advertising segment primarily includes operations in Europe, Asia, and Australia.  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.

 

12


iHeartCommunications, Inc. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

 

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

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(In thousands)

iHM

 

Americas Outdoor Advertising

 

International Outdoor Advertising

 

Other

 

Corporate and other reconciling items

 

Eliminations

 

Consolidated

Three Months Ended March 31, 2015

Revenue

$

 697,801  

 

$

 295,863  

 

$

 319,180  

 

$

 35,462  

 

$

 -    

 

$

 (3,742) 

 

$

 1,344,564  

Direct operating expenses

 

 213,829  

 

 

 146,234  

 

 

 216,737  

 

 

 3,398  

 

 

 -    

 

 

 (1,679) 

 

 

 578,519  

Selling, general and

   administrative expenses

 

 261,349  

 

 

 55,637  

 

 

 71,493  

 

 

 29,772  

 

 

 -    

 

 

 (2,063) 

 

 

 416,188  

Depreciation and

   amortization

 

 60,742  

 

 

 50,340  

 

 

 42,441  

 

 

 7,666  

 

 

 9,264  

 

 

 -    

 

 

 170,453  

Corporate expenses

 

 -    

 

 

 -    

 

 

 -    

 

 

 -    

 

 

 77,288  

 

 

 -    

 

 

 77,288  

Other operating expense, net

 

 -    

 

 

 -    

 

 

 -    

 

 

 -    

 

 

 (8,974) 

 

 

 -    

 

 

 (8,974) 

Operating income (loss)

$

 161,881  

 

$

 43,652  

 

$

 (11,491) 

 

$

 (5,374) 

 

$

 (95,526) 

 

$

 -    

 

$

 93,142  

Intersegment revenues

$

 -    

 

$

 1,101  

 

$

 -    

 

$

 2,641  

 

$

 -    

 

$

 -    

 

$

 3,742  

Capital expenditures

$

 11,913  

 

$

 16,695  

 

$

 25,105  

 

$

 1,051  

 

$

 1,691  

 

$

 -    

 

$

 56,455  

Share-based compensation

   expense

$

 -    

 

$

 -    

 

$

 -    

 

$

 -    

 

$

 2,524  

 

$

 -    

 

$

 2,524  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended March 31, 2014

Revenue

$

 670,347  

 

$

 290,610  

 

$

 344,641  

 

$

 41,495  

 

$

 -    

 

$

 (4,545) 

 

$

 1,342,548  

Direct operating expenses

 

 211,946  

 

 

 143,364  

 

 

 238,149  

 

 

 6,388  

 

 

 -    

 

 

 (2,159) 

 

 

 597,688  

Selling, general and

   administrative expenses

 

 253,345  

 

 

 56,368  

 

 

 76,581  

 

 

 30,728  

 

 

 -    

 

 

 (2,386) 

 

 

 414,636  

Depreciation and

   amortization

 

 60,324  

 

 

 49,712  

 

 

 48,331  

 

 

 8,719  

 

 

 7,785  

 

 

 -    

 

 

 174,871  

Corporate expenses

 

 -    

 

 

 -    

 

 

 -    

 

 

 -    

 

 

 72,705  

 

 

 -    

 

 

 72,705  

Other operating income, net

 

 -    

 

 

 -    

 

 

 -    

 

 

 -    

 

 

 165  

 

 

 -    

 

 

 165  

Operating income (loss)

$

 144,732  

 

$

 41,166  

 

$

 (18,420) 

 

$

 (4,340) 

 

$

 (80,325) 

 

$

 -    

 

$

 82,813  

Intersegment revenues

$

 -    

 

$

 976  

 

$

 -    

 

$

 3,569  

 

$

 -    

 

$

 -    

 

$

 4,545  

Capital expenditures

$

 10,292  

 

$

 16,444  

 

$

 20,862  

 

$

 1,807  

 

$

 18,003  

 

$

 -    

 

$

 67,408  

Share-based compensation

   expense

$

 -    

 

$

 -    

 

$

 -    

 

$

 -    

 

$

 3,036  

 

$

 -    

 

$

 3,036  

 

NOTE 9 – CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS

The Company is a party to a management agreement with certain affiliates of the Sponsors and certain other parties pursuant to which such affiliates of the Sponsors will provide management and financial advisory services until 2018. These agreements require 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. For the three months ended March 31, 2015 and 2014, the Company recognized management fees and reimbursable expenses of $3.9 million and $4.0 million, respectively.

 

Stock Purchases

On August 9, 2010, the Company announced that its board of directors approved a stock purchase program under which the Company or its subsidiaries may purchase up to an aggregate of $100.0 million of the Class A common stock of Parent and/or the Class A common stock of CCOH. The stock purchase program did not have a fixed expiration date and could be modified, suspended or terminated at any time at our discretion. In January 2015, CC Finco, LLC (“CC Finco”), an indirect wholly-owned subsidiary of the Company, purchased 2,000,000 shares of CCOH’s Class A common stock for $20.4 million.  During 2014, CC Finco purchased 5,000,000 shares of CCOH’s Class A common stock for approximately $48.8 million.  During 2012, CC Finco purchased 111,291 shares of Parent’s Class A common stock for $0.7 million. During 2011, CC Finco purchased 1,553,971 shares of CCOH’s Class A

13


iHeartCommunications, Inc. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

 

common stock through open market purchases for approximately $16.4 million.  As of March 31, 2015, an aggregate $13.8 million was available under the stock purchase program to purchase Class A common stock of Parent and/or the Class A common stock of CCOH. 

 

On April 2, 2015, CC Finco purchased an additional 2,172,946 shares of CCOH’s Class A common stock for $22.2 million, increasing iHeartCommunications’ collective holdings to represent slightly more than 90% of the outstanding shares of CCOH’s common stock on a fully-diluted basis, assuming the conversion of all of CCOH’s Class B common stock into Class A common stock. As a result of this purchase, the stock purchase program concluded. The purchase of shares in excess of the amount available under the stock purchase program was separately approved by the board of directors.

 

14


  

 

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 should be read in conjunction with the consolidated financial statements and related footnotes.  Our discussion is presented on both a consolidated and segment basis.  All references in this Quarterly Report on Form 10-Q to “we,” “us” and “our” refer to iHeartCommunications, Inc. and its consolidated subsidiaries.  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 broadcast and digital delivery and also includes our events and national syndication businesses.  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 are our media representation business, Katz Media Group, as well as other general support services and initiatives, which are ancillary to our other businesses.  Certain prior-period amounts have been reclassified to conform to the 2015 presentation.

 

We manage our operating segments primarily focusing 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 benefit are managed on a total company basis and are, therefore, included only in our discussion of consolidated results.

 

Our iHM business utilizes several key measurements to analyze performance, including average minute rates and minutes sold. Our iHM revenue is derived primarily from selling advertising time, or spots, on our radio stations, with advertising contracts typically less than one year in duration.  The programming formats of our radio stations are designed to reach audiences with targeted demographic characteristics that appeal to our advertisers.  We also provide streaming content via the Internet, mobile and other digital platforms that reach national, regional and local audiences and derive revenues primarily from selling advertising time with advertising contracts similar to those used by our radio stations. Additionally, we promote, produce and curate special nationally-recognized events for our listeners. 

 

Management typically monitors our Americas outdoor and International outdoor advertising businesses 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 Americas outdoor and International 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.

 

Our advertising revenue for all of our segments is correlated to changes in gross domestic product (“GDP”) as advertising spending has historically trended in line with GDP, both domestically and internationally.  Internationally, our results are impacted by fluctuations in foreign currency exchange rates and economic conditions in the foreign markets in which we have operations.

 

Executive Summary

The key developments in our business for the three months ended March 31, 2015 are summarized below:

·         Consolidated revenue increased $2.0 million during the three months ended March 31, 2015 compared to the same period of 2014. Excluding the $53.8 million impact from movements in foreign exchange rates, consolidated revenue increased $55.8 million during the three months ended March 31, 2015 compared to the same period of 2014.

·         iHM revenue increased $27.5 million during the three months ended March 31, 2015 compared to the same period of 2014 driven primarily by our traffic and weather and syndication businesses and events.

·         Americas outdoor revenue increased $5.3 million during the three months ended March 31, 2015 compared to the same period of 2014. Excluding the $3.7 million impact from movements in foreign exchange rates, Americas outdoor revenue increased $9.0 million during the three months ended March 31, 2015 compared to the same period of 2014 primarily driven by higher revenues from digital billboards and Times Square spectaculars.

·         International outdoor revenue decreased $25.5 million during the three months ended March 31, 2015 compared to the same period of 2014. Excluding the $50.1 million impact from movements in foreign exchange rates, International outdoor revenue increased $24.6 million during the three months ended March 31, 2015 compared to the same period of 2014 primarily driven by growth in Europe, Australia and China.

·         Other revenues decreased $6.0 million during the three months ended March 31, 2015 compared to the same period of 2014 primarily as a result of lower political revenues from our media representation business.

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·         We spent $10.4 million on strategic revenue and efficiency initiatives during Q1 2015 to realign and improve our on-going business operations—a decrease of $2.8 million compared to Q1 2014.

·          In February 2015, the Company issued $950.0 million of 10.625% Priority Guarantee Notes due 2023 and used the net proceeds primarily to prepay at par $916.1 million of the loans outstanding under its Term Loan B facility and $15.2 million of the loans outstanding under its Term Loan C asset sale facility.

·         On April 3, 2015, Parent and certain of our subsidiaries completed the first closing of our previously-announced agreement with an affiliate of Vertical Bridge Holdings, LLC, for the sale of 411 of our broadcast communications tower sites and related assets for up to $400 million. In connection with the first closing, we sold 367 tower sites in exchange for $369 million of proceeds.  Simultaneous with the first closing, we entered into lease agreements for the continued use of the towers.

 

Consolidated Results of Operations

 

 

 

 

 

 

 

 

               The comparison of our historical results of operations for the three months ended March 31, 2015 to the three months ended March 31, 2014 is as follows:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(In thousands)

 

 

 

 

Three Months Ended

 

 

 

 

 

 

 

March 31,

 

%

 

 

 

 

 

 

 

 

2015

 

2014

 

Change

Revenue

 

 

 

 

 

 

 

 

$

 1,344,564  

 

$

 1,342,548  

 

0.2%

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Direct operating expenses (excludes depreciation and amortization)

 

 

 578,519  

 

 

 597,688  

 

(3.2%)

 

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

 

 

 416,188  

 

 

 414,636  

 

0.4%

 

Corporate expenses (excludes depreciation and amortization)

 

 

 77,288  

 

 

 72,705  

 

6.3%

 

Depreciation and amortization

 

 

 

 

 

 

 

 

 

 170,453  

 

 

 174,871  

 

(2.5%)

 

Other operating income (loss), net