| The value of all benefits included in the All Other Compensation column is based on actual costs. For a description of the items reflected in the table above, see “—Employment Agreements with the Named Executive Officers” below. From time to time, our officers use aircraft owned or leased by iHeartMedia, pursuant to iHeartMedia’s Aircraft Policy. The value of personal aircraft usage reported above is based on iHeartMedia’s direct variable operating costs. This methodology calculates an average variable cost per hour of flight. iHeartMedia applies the same methodology to aircraft that are covered by contracts with an outside aircraft management company under which iHeartMedia reimburses the aircraft management company for costs that would otherwise be incurred directly by iHeartMedia (including crew salaries, insurance, fuel and hangar rent) and pays them a monthly management fee for the oversight and administrative services that would otherwise have to be provided by iHeartMedia. On certain occasions, an executive’s spouse or other family members and guests may accompany the executive on a flight and the additional direct operating cost incurred in such situations is included under the foregoing methodology.
(e) | Mr. Pittman became Chief Executive Officer of iHeartMedia on October 2, 2011 and was appointed as our Chairman and Chief Executive Officer on March 2, 2015. The summary compensation information presented above for Mr. Pittman reflects his service in that capacity during the periods presented. |
(f) | The value of the apartment made available to Mr. Bressler became our Chief Financial Officer on July 29, 2013. The summary compensation information presented above for Mr. Bressler reflects his service in that capacity since July 29, 2013. |
(g) | As described below under “Certain Relationships and Related Party Transactions—iHeartMedia, Inc.—Corporate Services Agreement,” a subsidiary of iHeartMedia provides, among other things, certain executive officer services to us. Pursuant to the Corporate Services Agreement,Wells is based on our OIBDAN as a percentage of iHeartCommunications’ total OIBDAN, we were allocated 38.72% of certain amounts for 2015, 39.67% of certain amounts for 2014annual rent and 36.51% of certain amounts for 2013. For Mr. Macri,related expenses paid by Clear Channel Outdoor, and the 2015 and 2014 allocated amounts also reflect the portionvalue of his role thattravel and other expenses for 2022 is tiedbased on actual costs to Clear Channel Outdoor as Senior Vice President—Corporate Finance (50%). The 2014 allocated amount also reflects the portion of the year that he served in this role (31%). For Mr. Pittman, none of his 2015 compensation was allocated to CCOH.Outdoor. |
The Summary Compensation Table above reflects these allocated amounts, as described below:
The Salary, Bonus, Non-Equity Incentive Plan Compensation and All Other Compensation columns presented above reflect the portion of the Salary, Bonus, Non-Equity Incentive Plan Compensation and All Other Compensation amounts allocated to us pursuant to the Corporate Services Agreement for Mr. Bressler for 2015, 2014 and 2013, for Mr. Macri for 2015 and 2014 and for Mr. Hamilton for 2015, 2014 and 2013.
The tables below reflect 100% of the applicable Salary, Bonus and Non-Equity Incentive Plan Compensation amounts and 100% of those allocated elements of the All Other Compensation amounts, the allocated percentage of which is included in the Summary Compensation Table above. For Messrs. Bressler and Macri, who also are named executive officers for iHeartMedia, these 100% amounts for the allocated items are disclosed by iHeartMedia in the Summary Compensation Table in iHeartMedia’s proxy statement.
| | | | | | | | | | | | | | | | 100% of Allocated Salary Amounts | | | | | 2015 | | | 2014 | | | 2013 | | Richard J. Bressler | | $ | 1,200,000 | | | $ | 1,200,000 | | | | $512,500 | | Steven J. Macri | | | 640,000 | | | | 640,000 | | | | — | | Scott D. Hamilton | | | 375,000 | | | | 360,000 | | | | 330,000 | | | | | | | 100% of Allocated Bonus and
Non-Equity Incentive Plan Compensation | | | | | 2015 | | | 2014 | | | 2013 | | Richard J. Bressler | | $ | 1,700,000 | | | $ | 1,500,000 | | | $ | 1,269,315 | | Steven J. Macri | | | 810,000 | | | | 560,000 | | | | — | | Scott D. Hamilton | | | 200,453 | | | | 149,882 | | | | 93,160 | | | | | | | 100% of Allocated All Other
Compensation Amounts | | | | | 2015 | | | 2014 | | | 2013 | | Richard J. Bressler | | | $44,633 | | | | $147,424 | | | | $71,748 | | Steven J. Macri | | | 5,000 | | | | 6,500 | | | | — | | Scott D. Hamilton | | | 5,000 | | | | 6,500 | | | | 6,375 | |
(h) | On January 24, 2012, Mr. Eccleshare was promoted to Chief Executive Officer of Clear Channel Outdoor, overseeing both CCOA and CCI and served in that position until March 2, 2015, when he transitioned to become Chairman and Chief Executive Officer of our International division. Prior thereto, Mr. Eccleshare served as our Chief Executive Officer—International. The summary compensation information presented
|
| above for Mr. Eccleshare reflects his service in those capacities during the relevant periods, as well as his service as a director of Clear Media Limited, as described in footnote (i) below. Mr. Eccleshare is a citizen of the United Kingdom and compensation amounts reported for him in the Summary Compensation Table that were originally denominated in British pounds have been converted to U.S. dollars using the average exchange rates of £1=$1.5281, £1=$1. 6464 and £1=$1. 5637 for the years ended December 31, 2015, 2014 and 2013, respectively. |
(i) | The amounts in the Salary column for Mr. Eccleshare include his base salary for his service as an officer of ours, as well as amounts paid for their service as a director of our majority-owned subsidiary, Clear Media Limited. Clear Media Limited is listed on the Hong Kong Stock Exchange. The amounts paid for the periods during which they each served as a director of Clear Media Limited are set forth in the table below. The amounts reflected in the table have been converted from Hong Kong dollars to U.S. dollars using the average exchange rate of HK$1=$0.1290 for the year ended December 31, 2015 and HK$1=$0.1289 for each of the years ended December 31, 2014 and 2013. |
| | | | | | | | | | | | | | | | 2015 | | | 2014 | | | 2013 | | C. William Eccleshare | | $ | 18,060 | | | $ | 18,046 | | | $ | 18,046 | |
(j) | Mr. Wells became the Chief Executive Officer of CCOA on March 3, 2015. The summary compensation information presented above for Mr. Wells reflects his service in that capacity during the periods presented. |
(k) | Mr. Macri became our Senior Vice President—Corporate Finance on September 9, 2014, and has served as Executive Vice President and Chief Financial Officer of the iHeartMedia division since October 7, 2013. Mr. Macri was not a named executive officer of ours until 2014. The summary compensation information presented above for Mr. Macri reflects his service in that capacity during 2015 and 2014. |
(l) | Mr. Hamilton was appointed Senior Vice President, Chief Accounting Officer & Assistant Secretary on April 26, 2010, but was not a named executive officer of ours until 2012. The summary compensation information presented above for Mr. Hamilton reflects his service in that capacity during 2013, 2014 and 2015. |
EMPLOYMENT AGREEMENTS WITH THE NAMED EXECUTIVE OFFICERS Messrs. EccleshareWells, Coleman and WellsDilger, and Ms. Feldman have employment agreements with us. Messrs. Pittman, Bressler and Macri have employment agreements with iHeartMedia and Mr. Hamilton has an employment agreement with iHMMS. Certain elements of their compensation are determined based on their respective employment agreements. The descriptions of the employment agreements effective as of December 31, 2022 set forth below do not purport to be complete and are qualified in their entirety by the employment agreements. For further discussion of the amounts of salary and bonus and other forms of compensation, see “Compensation Discussion and Analysis” above. Each of the employment agreements discussed below provides for severance and change in control payments as more fully described under “—Potential Post-Employment Payments” in this proxy statement,Proxy Statement, which descriptions are incorporated herein by reference. As described below under “Certain Relationships and Related Party Transactions—iHeartMedia, Inc.—Corporate Services Agreement,” iHeartCommunications, our indirect parent entity, makes available to us, and we are obligated to use,Scott R. Wells
Mr. Wells assumed the servicesrole of certain executive officers of iHeartCommunications, and a portion of their compensation is allocated to us in recognition of their services provided to us. Accordingly, a portion of the compensation for (1) 2015, 2014 and 2013 for Richard J. Bressler and Scott D. Hamilton, and (2) 2015 and 2014 for Steven J. Macri was allocated to us in recognition of their services provided to us under the Corporate Services Agreement. The provisions of the employment agreements for Messrs. Bressler, Macri and Hamilton are described below to the extent that amounts payable thereunder would be or have been allocated to us under the Corporate Services Agreement. Robert W. Pittman
On October 2, 2011, iHeartMedia entered into an employment agreement with Robert W. Pittman, pursuant to which he serves as Chief Executive Officer of iHeartMedia and served as Executive Chairman of the Board of Directors of CCOH. On March 2, 2015, Mr. Pittman became the ChairmanPresident and Chief Executive Officer of CCOH. The October 2, 2011 employment agreement superseded the consulting agreement thatCompany on January 1, 2022 and was appointed as a member of the Board.
In connection with the appointment of Mr. Pittman previously entered into with iHeartMediaWells as Chief Executive Officer, the Company and Pilot Group Manager LLC, dated November 15, 2010, and had an initial term ending on December 31, 2016, with automatic 12-month extensions thereafter unless either party provided prior notice electing not to extend the employment agreement. On January 13, 2014, iHeartMediaMr. Wells entered into an amended and restated employment agreement, withdated as of July 28, 2021 (the “Wells Amended and Restated Employment Agreement”). Under the Wells Amended and Restated Employment Agreement, Mr. Pittman. The amended and restated employment agreement hasWells receives an initial five-year term ending on January 13, 2019, with automatic 12-month extensions thereafter unless either party gives prior notice electing not to extend the agreement. Pursuant to his amended and restated employment agreement, Mr. Pittman’s minimumannual base salary increased from $1,000,000 per year under his previous employment agreementequal to $1,200,000 per year. His base salary may be increased (but not decreased) at the discretion of iHeartMedia’s Board or its compensation committee. Mr. Pittman also has the opportunity$1,100,000 and is eligible to earn an annual performance bonus for the achievement of reasonable performance goals established annually by iHeartMedia’s Board or its compensation committee after consultation with Mr. Pittman. Under Mr. Pittman’s previous employment agreement, his aggregate target annual bonus that could be earned upon achievement of all of his performance objectives was not less than $1,650,000. Under the amended and restated employment agreement, beginning in 2014, Mr. Pittman’s aggregate target annual performance bonus is 150% of his annual base salary. For 2015, Mr. Pittman received an annual incentive bonus of $1,700,000, including a discretionary bonus of $174,932. See “Compensation Discussion and Analysis—Elements of Compensation—Annual Incentive Bonus.”
Mr. Pittman is entitled to participate in all pension, profit sharing and other retirement plans, all incentive compensation plans, all group health, hospitalization and disability or other insurance plans, paid vacation, sick leave and other employee welfare benefit plans in which other similarly situated employees of iHeartMedia may participate. In addition, during the term of his employment, iHeartMedia will make an aircraft (which, to the extent available, will be a Dassault-Breguet Mystere Falcon 900) available to Mr. Pittman for his business and personal use and will pay all costs associated with the provision of the aircraft. iHeartMedia leases this aircraft from a company controlled by Mr. Pittman. See “Certain Relationships and Related Party Transactions—Commercial Transactions.” If a company aircraft is not available due to service or maintenance issues, iHeartMedia will charter a comparable aircraft for Mr. Pittman’s business and personal use. iHeartMedia also will make a car and driver available for Mr. Pittman’s business and personal use in and around the New York area as well as anywhere else on company business. During 2014, iHeartMedia reimbursed Mr. Pittman for legal fees incurred by Mr. Pittman in connection with the negotiation of the amended and restated employment agreement.
Pursuant to his previous employment agreement, on October 2, 2011, Mr. Pittman was granted a stock option to purchase 830,000 shares of iHeartMedia’s Class A common stock. See “—Outstanding Equity Awards at Fiscal Year-End” below. In connection with the amended and restated employment agreement, on January 13, 2014, iHeartMedia and Mr. Pittman amended his stock option to terminate and forfeit 200,000 of the options. The termination and forfeiture applied ratably such that, effective January 13, 2014, 252,000 of the options were vested and 378,000 of the options vest ratably on the third, fourth and fifth anniversary of the October 2, 2011 grant date.
Pursuant to the amended and restated employment agreement, on January 13, 2014, iHeartMedia granted Mr. Pittman 350,000 restricted shares of iHeartMedia’s Class A common stock. Mr. Pittman’s iHeartMedia restricted stock award is divided into two tranches consisting of: (1) 100,000 shares (the “Tranche 1 Shares”) and (2) 250,000 shares (the “Tranche 2 Shares”). The Tranche 1 Shares vest in two equal parts on each of December 31, 2017 and December 31, 2018. The Tranche 2 Shares vest only if the Sponsors receive a 100%
return on their investment in iHeartMedia in the form of cash returns. In addition, as provided in the amended and restated employment agreement, on January 13, 2014, CCOH granted Mr. Pittman 271,739 restricted shares of CCOH’s Class A common stock. Mr. Pittman’s CCOH restricted stock award vests in two equal parts on each of December 31, 2016 and December 31, 2017.
Mr. Pittman’s amended and restated employment agreement contains a 280G “gross-up” provision that applies in certain circumstances in which any payments (the “Company Payments”) received by Mr. Pittman are deemed to be “excess parachute payments” subject to excise taxes under Section 4999 of the Code. If, at the time any such excise tax is imposed, the shareholder approval rules of Q&A 6 in the applicable Section 280G regulations (the “Cleansing Vote Rules”) are applicable and Mr. Pittman declines to submit such excess parachute payments for approval by iHeartMedia’s shareholders, iHeartMedia will pay to Mr. Pittman an amount equal to the excise tax imposed by Section 4999 of the Code. If, at the time any excise tax is imposed, the Cleansing Vote Rules are not applicable, Mr. Pittman will be entitled to a gross-up payment equal to (1) the excise tax and (2) any U.S. Federal, state and local income or payroll tax imposed on the gross-up payment (excluding any U.S. Federal, state and local income or payroll taxes otherwise imposed on the Company Payments); provided that if the Company Payments are found to be equal to or less than 110% of the “safe harbor” amount referenced in the amended and restated employment agreement, the Company Payments will be reduced to equal the safe harbor amount, such that no excise tax will be imposed by Section 4999 of the Code.
Under the employment agreement, Mr. Pittman is required to protect the secrecy of the confidential information of iHeartMedia, CCOH and the subsidiaries of each (the “Company Group”). He also is prohibited by the agreement from engaging in certain activities that compete with the Company Group during employment and for 18 months after his employment terminates, and he is prohibited from soliciting employees or customers of the Company Group during employment and for 18 months after termination of employment. iHeartMedia agreed to defend and indemnify Mr. Pittman for acts committed in the course and scope of his employment.
Richard J. Bressler
On July 29, 2013, iHeartMedia entered into an employment agreement with Mr. Bressler. The employment agreement has an initial term ending on December 31, 2018, with automatic 12-month extensions beginning on January 1, 2019 unless either party gives prior notice electing not to extend the employment agreement.
Under the employment agreement, Mr. Bressler receives a base salary from iHeartMedia at a rate no less than $1,200,000 per year, subject to increase at the discretion of iHeartMedia’s board of directors or its compensation committee. Mr. Bressler also has the opportunity to earn an annual performance bonus from iHeartMedia for the achievement of reasonable performance goals established annually by iHeartMedia’s board of directors or its compensation committee after consultation with Mr. Bressler. The annual target performance bonus that may be earned from iHeartMedia when all of Mr. Bressler’s performance objectives are achieved will be not less than 150% of Mr. Bressler’s base salary amount. In addition to the annual bonus, Mr. Bressler is also eligible for an additional annual bonus opportunity from iHeartMedia of up to $500,000, based on iHeartMedia’s achievement of one or more annual performance goals determined by iHeartMedia’s chief executive officer and approved by iHeartMedia’s board of directors or a committee thereof. Any additional bonus amounts will be paid during the quarter that follows the third anniversary of the beginning of the applicable performance period and will be contingent in each case upon Mr. Bressler’s continued employment through the applicable payment date. For 2015, Mr. Bressler received from iHeartMedia an annual incentive bonus of $1,700,000, including a discretionary bonus of $174,932. Mr. Bressler also earned an additional bonus of $500,000 which will be paid when performance bonuses are generally paid in 2018 if he remains employed on the payment date. Mr. Bressler also is entitled to participate in all pension, profit sharing and other retirement plans, all incentive compensation plans, all group health, hospitalization and disability or other insurance plans, paid vacation, sick leave and other employee welfare benefit plans in which other similarly situated employees of iHeartMedia may participate.
During the term of his employment, iHeartMedia will make a car service available for Mr. Bressler’s business use.
Mr. Bressler’s employment agreement contains a 280G “gross-up” provision that applies in certain circumstances in which any payments (the “Company Payments”) received by Mr. Bressler are deemed to be “excess parachute payments” subject to excise taxes under Section 4999 of the Code. If, at the time any such excise tax is imposed, the shareholder approval rules of Q&A 6 in the applicable Section 280G regulations (the “Cleansing Vote Rules”) are applicable and Mr. Bressler declines to submit the excess parachute payments for approval by iHeartMedia’s shareholders, iHeartMedia will pay to Mr. Bressler an amount equal to the excise tax imposed by Section 4999 of the Code. If, at the time any excise tax is imposed, the Cleansing Vote Rules are not applicable, Mr. Bressler will be entitled to a gross-up payment equal to (1) the excise tax and (2) any U.S. Federal, state and local income or payroll tax imposed on such gross-up payment (excluding any U.S. Federal, state and local income or payroll taxes otherwise imposed on the Company Payments); provided that if the Company Payments are found to be equal to or less than 110% of the “safe harbor” amount referenced in Mr. Bressler’s employment agreement, the Company Payments will be reduced to equal the safe harbor amount, such that no excise tax will be imposed by Section 4999 of the Code.
As provided in Mr. Bressler’s employment agreement, on July 29, 2013, Clear Channel Outdoor granted Mr. Bressler 271,739 restricted shares of the Class A common stock of Clear Channel Outdoor. See the Grants of Plan-Based Awards During 2014 table and “—Outstanding Equity Awards at Fiscal Year-End” below for a description of the terms of the award.
Under the employment agreement, Mr. Bressler is required to protect the secrecy of the confidential information of iHeartMedia, Clear Channel Outdoor and the subsidiaries of each (the “Company Group”). He also is prohibited by the agreement from engaging in certain activities that compete with the Company Group during employment and for 18 months after his employment terminates, and he is prohibited from soliciting employees or customers of the Company Group during employment and for 18 months after termination of employment. iHeartMedia agreed to defend and indemnify Mr. Bressler for acts committed in the course and scope of his employment.
C. William Eccleshare
January 24, 2012 Employment Agreement. On January 24, 2012, Mr. Eccleshare was promoted to serve as Chief Executive Officer of Clear Channel Outdoor, overseeing both our Americas and International divisions. In connection with his promotion, Clear Channel Outdoor and Mr. Eccleshare entered into a new employment agreement. Mr. Eccleshare’s employment agreement has an initial term beginning on January 24, 2012 and continuing until December 31, 2014, with automatic 12-month extensions thereafter, beginning on January 1, 2015, unless either Clear Channel Outdoor or Mr. Eccleshare gives prior notice electing not to extend the employment agreement. The employment agreement replaces Mr. Eccleshare’s Contract of Employment dated August 31, 2009.
As our Chief Executive Officer, Mr. Eccleshare relocated from our offices in London to our offices in New York City in 2012. In his new position, Mr. Eccleshare receives an annual base salary of $1,000,000; provided, however, that until Mr. Eccleshare relocated to the United States, his base salary was to be paid in British pounds (using an exchange rate of £1=$1.49). His salary will be reviewed at least annually for possible increase by our Board. During the term of the employment agreement, Mr. Eccleshare is eligible to receive an annual performance bonus with a target of not less than $1,000,000 and the opportunity to earn up to 200% of the target amount based on the achievement of the performance goals specified in his employment agreement for 2012 and the performance goals to be set by the Compensation Committee of our Board for years after 2012. In addition to the annual bonus, Mr. Eccleshare is eligible to receive an additional annual bonus of up to $300,000 based on the achievement of one or more annual performance goals determined by our Board or a subcommittee thereof. Any bonus earned under the additional bonus opportunity will be paid by us in equal cash installments
on or about the first, second and third anniversary of the beginning of the applicable performance period and will be contingent in each case upon his continued employment through the applicable payment date. For 2015, Mr. Eccleshare received an annual bonus of $712,686. Mr. Eccleshare also (1) received an additional bonus payment of $84,000 provided pursuant to his additional bonus opportunity earned with respect to 2013 performance (2) received an additional bonus payment of $85,000 provided pursuant to his additional bonus opportunity earned with respect to 2014 performance and (3) earned an additional bonus of $240,000 with respect to his additional bonus opportunity with respect to 2015 performance, $80,000 of which was paid in February 2016 and $160,000 of which will be paid in equal installments in 2017 and 2018 when performance bonuses are generally paid if he remains employed on the applicable payment dates. See “Compensation Discussion and Analysis—Elements of Compensation—Annual Incentive Bonus.”
We continue to contribute to Mr. Eccleshare’s personal pension plan registered under Chapter 2, Part 4 of the Finance Act of 2004 in the United Kingdom, as provided in his previous Contract of Employment. We also agreed to reimburse Mr. Eccleshare for the reasonable costs and expenses (not to exceed $25,000 annually, fully grossed-up for applicable taxes) associated with filing his U.S. and U.K. personal income tax returns, as applicable. If Mr. Eccleshare’s actual U.S. and U.K. income tax and Social Security/National Insurance in a given year exceeds the tax obligations that he would have incurred on the same income (excluding all taxable income not paid by us or a subsidiary or affiliate) had he remained subject only to U.K. income tax and National Insurance over the same period, we will reimburse this excess tax on a fully-grossed up basis for applicable taxes. We also agreed to make a car service available for Mr. Eccleshare’s business use and paid all fees associated with the immigration applications for Mr. Eccleshare and his spouse. Mr. Eccleshare is eligible to receive health, medical, welfare and life insurance benefits and paid vacation on a basis no less favorable than provided to our similarly-situated senior executives; provided, however, that his life insurance benefit shall be for an amount equal to four times his annual base salary. Further, we agreed to make a car service available to Mr. Eccleshare for his business use. Mr. Eccleshare is also to be reimbursed for travel and entertainment related expenses, consistent with past practices pursuant to Company policy.
As provided in the employment agreement, Mr. Eccleshare was awarded 506,329 restricted stock units with respect to our Class A common stock on July 26, 2012 in connection with his promotion. See “—Outstanding Equity Awards at Fiscal Year-End” below.
During Mr. Eccleshare’s employment with us and for 18 months thereafter, Mr. Eccleshare is subject to non-competition, non-interference and non-solicitation covenants substantially consistent with our other senior executives. Mr. Eccleshare also is subject to customary confidentiality, work product and trade secret provisions. During the term of the employment agreement, Mr. Eccleshare may continue to perform non-executive services with Hays plc. Upon his service with Hays plc ceasing, Mr. Eccleshare will be permitted to perform another non-executive role at any time with a business that does not compete with us or our affiliates, subject to our prior written consent that will not be unreasonably withheld.
March 2, 2015 Amendment to January 24, 2012 Employment Agreement. Effective March 2, 2015, Mr. Eccleshare and Clear Channel Outdoor entered into an amendment (the “First Eccleshare Amendment”) to Mr. Eccleshare’s employment agreement dated January 24, 2012 (the “Prior Employment Agreement”). Pursuant to the terms of the First Eccleshare Amendment, (1) Mr. Eccleshare’s title was amended to be Chairman and Chief Executive Officer of CCI, (2) the definition of Good Reason was amended to provide that Mr. Eccleshare may not trigger Good Reason as a result of the change in position and duties related to the First Eccleshare Amendment for a period of one (1) year after the effective date of the First Eccleshare Amendment, after which Mr. Eccleshare can exercise the right to trigger Good Reason as a result of the change in position and duties related to the First Eccleshare Amendment for thirty (30) days as provided for and in accordance with the terms of his Prior Employment Agreement, (3) Clear Channel Outdoor agreed to continue to reimburse Mr. Eccleshare for the reasonable costs and expenses (not to exceed $25,000 annually, fully grossed-up for applicable taxes) associated with filing his U.S. and U.K. personal income tax returns, as applicable, both during the remainder of his employment with Clear Channel Outdoor and for a period of twelve (12) months thereafter, and (4) Clear
Channel Outdoor agreed to reimburse Mr. Eccleshare for certain relocation costs associated with the relocation of Mr. Eccleshare and his family from New York City to London in connection with a termination due to death, “disability,” by Clear Channel Outdoor without “cause” or by Mr. Eccleshare for Good Reason (as such terms are defined in the Prior Employment Agreement), whether such costs are incurred during his employment with Clear Channel Outdoor or during the 12-month period thereafter (previously, Mr. Eccleshare would only be entitled to such reimbursement if the relevant costs were incurred during the 12-month period following termination of his employment with Clear Channel Outdoor).
December 17, 2015 Amendment to January 24, 2012 Employment Agreement. Effective December 17, 2015, Mr. Eccleshare and Clear Channel Outdoor entered into an amendment (the “Second Eccleshare Amendment”) to Mr. Eccleshare’s Prior Employment Agreement. Pursuant to the terms of the Second Eccleshare Amendment, (1) Mr. Eccleshare’s term of employment was extended until December 31, 2017 and thereafter provided for automatic one-year extensions, unless either Clear Channel Outdoor or Mr. Eccleshare gives prior notice electing not to extend the agreement, (2) in the event there is a disposition of the European assets of CCI, Mr. Eccleshare will be considered for a cash payment in an amount to be determined by Clear Channel Outdoor in its sole discretion, (3) commencing in 2016, Mr. Eccleshare is eligible for an additional long-term incentive opportunity from Clear Channel Outdoor, consistent with other comparable positions pursuant to the terms of the award agreement(s), taking into consideration demonstrated performance and potential, and subject to approval by Mr. Eccleshare’s manager and the Board or the compensation committee of Clear Channel Outdoor, and (4) in consideration of Mr. Eccleshare entering into the First Eccleshare Amendment and the Second Eccleshare Amendment and as a result of the change in his position and duties related to the First Eccleshare Amendment and provided Mr. Eccleshare’s employment has not ended prior to March 1, 2016, Mr. Eccleshare shall receive, subject to certain conditions, (a) the severance payment he would have been entitled to pursuant to the Prior Employment Agreement, except it shall be paid in two annual installments of $1.1 million on March 1, 2016 and $1.1 million on March 1, 2017 and (b) vesting of one-half of any then unvested restricted stock units on March 1, 2016 and vesting of the other half of such restricted stock units on March 1, 2017.
Scott R. Wells
Effective March 3, 2015 (the “Effective Date”), CCOH entered into an employment agreement (the “Wells Employment Agreement”) with Mr. Wells. The Wells Employment Agreement has an initial term (the “Initial Term”) that ends on March 2, 2019 and thereafter provides for automatic four-year extensions, unless either CCOH or Mr. Wells gives prior notice electing not to extend the agreement. Subject to the termination provisions described below, Mr. Wells will receive a base salary from CCOH at a rate no less than $750,000 per year, which shall be increased at CCOH’s discretion. Mr. Wells will also have the opportunity to earn an annual performance bonus (the “Performance Bonus”) from CCOH for the achievement of financial and performance criteria established by CCOHClear Channel Outdoor and approved in the annual budget. The target performance bonus that may be earned will be not less than 100%110% of Mr. Wells’ base salary amount (the “Target Bonus”).amount. In addition to the annual bonus, Mr. Wells is also eligible for an additional long-term incentive opportunity (the “Long-Term Incentive Amount”) from CCOHClear Channel Outdoor with an approximate value of $1,000,000 for each award, consistentnot less than $2,000,000. Mr. Wells also received a one-time grant of restricted stock units with other comparable positions pursuanta grant value equal to the terms of the award agreement(s), taking into consideration demonstrated performance and potential, and subject to approval by the board of directors or the compensation committee of CCOH, as applicable. The$962,615. Mr. Wells Employment Agreementis also entitles Mr. Wellseligible to participate in all employee welfarevarious benefit plans in whichprograms provided by Clear Channel Outdoor on the same terms and conditions as they are made available to other similarly situated employees of CCOH may participate. CCOH will reimburse Mr. Wells for the attorneys’ fees incurred by Mr. Wells in connection with the negotiation of the Wells Employment Agreement and ancillary documents, up to a maximum reimbursement of $25,000 in the aggregate. The Wells Employment Agreement also contains a customary confidentiality provision that survives Mr. Wells’ termination of employment, as well as customary non-competition and non-solicitation provisions that apply during employment and for the 12-month period thereafter.employees.
IfDuring Mr. Wells’ employment with CCOH is terminated by CCOH without Cause (as defined in the Wells Employment Agreement), ifClear Channel Outdoor and for 12 months thereafter, Mr. Wells terminates his employment for Good Reason (as defined in the Wells
Employment Agreement) or if Mr. Wells’ employment is terminated following CCOH’s notice of non-renewal, CCOH shall paysubject to Mr. Wells: (i) Mr. Wells’ accruednon-competition, non-interference and unpaid base salary; (ii) any earned but unpaid prior year bonus, if any, through the date of termination; (iii) any unreimbursed business expenses; and (iv) any payments to which he may be entitled under any applicable employee benefit plan according to the terms of such plans and policies (collectively, the “Accrued Obligations”). In addition, ifnon-solicitation covenants substantially consistent with our other senior executives. Mr. Wells has signedis also subject to customary confidentiality, work product and returned (and has not revoked) a general release of claims in a form satisfactory to CCOH by the thirtieth (30th) day following the date of his termination, CCOH will: (i) pay to Mr. Wells, in periodic payments over a period of 18 months following such date of termination in accordance with ordinary payroll practices and deductions in effect on the date of termination, Mr. Wells’ base salary; (ii) pay Mr. Wells in a lump sum an amount equal to the COBRA premium payments Mr. Wells would be required to pay for continuation of healthcare coverage during the 12-month period following the date of Mr. Wells’ termination (less the amount that Mr. Wells would have had to pay for such coverage as an active employee); (iii) pay to Mr. Wells a prorated bonus, calculated based upon performance as of the termination date as related to overall performance at the end of the calendar year; (iv) pay to Mr. Wells a separation bonus in an amount equal to the Target Bonus to which Mr. Wells would be entitled for the year in which Mr. Wells’ employment terminates; and (v) any unvested Time Vesting Options (as defined below) scheduled to vest within the twelve (12) month period following the date of termination will vest in full on the date of termination and any unvested Performance Vesting Options (as defined below) will remain eligible to vest for the three (3) month period following the date of termination.trade secret provisions.
If Mr. Wells’ employment with CCOH is terminated due to Mr. Wells’ death or disability or Mr. Wells elects not to renew his employment, CCOH will pay to Mr. Wells or to his designee or estate the Accrued Obligations.Brian D. Coleman
As provided in the Wells Employment Agreement the compensation committee of the board of directors of CCOH approved an award by CCOH, effective as of March 3, 2015, of options to purchase shares of CCOH’s Class A common stock having a value equal to $1,500,000 as of the award date (based on the Black-Scholes valuation method). Fifty percent of the award has performance-based vesting (the “Performance Vesting Options”)Effective in 2022
Clear Channel Outdoor and fifty percent of the award vests over time (the “Time Vesting Options”). The Time Vesting Options will vest in equal amounts on the first, second, third and fourth anniversaries of the Effective Date, so long as Mr. Wells remains employed on the vesting date (except as previously set forth in the event of a termination by CCOH without Cause (as defined in the Wells Employment Agreement), if Mr. Wells terminates his employment for Good Reason (as defined in the Wells Employment Agreement) or if Mr. Wells’ employment is terminated following CCOH’s notice of non-renewal). The Performance Vesting Options will vest on the date that CCOA achieves certain financial and performance criteria, so long as Mr. Wells remains employed on the vesting date (except as previously set forth in the event of a termination by CCOH without Cause (as defined in the Wells Employment Agreement), if Mr. Wells terminates his employment for Good Reason (as defined in the Wells Employment Agreement) or if Mr. Wells’ employment is terminated following CCOH’s notice of non-renewal). Steven J. Macri
Effective October 7, 2013, Steven J. MacriBrian D. Coleman entered into an employment agreement, with iHeartMedia. Pursuant to his agreement,dated May 1, 2019 (the “2022 Coleman Employment Agreement”), which superseded and replaced Mr. Macri will serve as Executive Vice PresidentColeman’s prior employment agreement.
The initial term of the 2022 Coleman Employment Agreement would end on April 30, 2023, and Chief Financial Officer of iHeartMedia + Entertainment, Inc. (formerly known asthereafter would extend for additional three year periods unless Clear Channel Broadcasting, Inc.Outdoor or Mr. Coleman provided written notice of non-renewal between October 1 and November 1 (the “Notice of Non-Renewal Period”) (“iHM”),prior to the end of the then applicable employment period. Under the 2022 Coleman Employment Agreement, Mr. Coleman receives an annual base salary of $650,000, which is subject to increase at Clear Channel Outdoor’s discretion. During the term of the 2022 Coleman Employment Agreement, Mr. Coleman is eligible to receive (i) an annual performance bonus with a wholly owned subsidiarytarget of iHeartMedia, until October 6, 2017,not less than 100% of his base salary based on applicable performance goals to be set by Clear Channel Outdoor, (ii) a one-time long-term incentive opportunity with an approximate value of $500,000, to be allocated between stock options and restricted stock at the discretion of the Compensation Committee and (iii) additional long-term incentive opportunities, with an approximate value of $300,000 per award, to be allocated between stock options and restricted stock at the discretion of the Compensation Committee. Mr. Coleman is also eligible to participate in various benefit programs provided by Clear Channel Outdoor on the same terms and conditions as they are made available to other similarly situated employees. | | | | | 48 Notice and Proxy Statement 2023 | |  | | |
Clear Channel Outdoor may elect at any time prior to the Notice of Non-Renewal Period to place Mr. Coleman in a consulting status for 12 months (a “Consulting Period”). During a Consulting Period, Clear Channel Outdoor will limit its requests for services to allow Mr. Coleman to accept and perform non-competitive services, but his eligibility to participate in certain benefit plans may change or be terminated in accordance with such benefit plans, and any vacation benefits, long-term incentive awards or options shall not continue to vest or accrue. A Consulting Period under the employment agreement will be coextensive with and may extend the term of Mr. Coleman’s employment under the employment agreement, after which time such employment period shall end. During Mr. Coleman’s employment with Clear Channel Outdoor and for 12 months thereafter, Mr. Coleman is subject to non-competition, non-interference and non-solicitation covenants substantially consistent with our other senior executives. Mr. Coleman is also subject to customary confidentiality, work product and trade secret provisions. Employment Agreement Effective as of April 1, 2023 On March 7, 2023, Clear Channel Outdoor and Mr. Coleman entered into an amended and restated employment agreement (the “Coleman Amended and Restated Employment Agreement”), effective as of April 1, 2023. The Coleman Amended and Restated Employment Agreement supersedes the 2022 Coleman Employment Agreement. The initial term of the Coleman Amended and Restated Employment Agreement ends on March 31, 2026 and will be automatically extended from year to yearfor additional two-year periods, unless either partythe Company or Mr. Coleman gives prior written notice of non-renewal between September 1 and October 1 prior to the end of the then-applicable employment period. Under the Coleman Amended and Restated Employment Agreement, Mr. Coleman receives an annual base salary of $700,000, which is subject to increase at Clear Channel Outdoor’s discretion. During the term of the Coleman Amended and Restated Employment Agreement, Mr. Coleman is eligible to receive (i) an annual performance bonus with a target of not less than 100% of his base salary (and prorated for changes in base salary or bonus target that occur during the applicable plan year) based on applicable performance goals to be set by the Compensation Committee, and (ii) beginning in 2023, an annual long-term incentive opportunity, with a target value equal $1,350,000; provided, that, in no event will the grant date fair value be less than $300,000. Mr. Coleman is also eligible to participate in various benefit programs provided by Clear Channel Outdoor on the same terms and conditions as permitted inthey are made available to other similarly situated employees. Other than the agreement. On September 9, 2014, Mr. Macri became Senior Vice President—Corporate Financeremoval of iHeartMediathe Consulting Period, the other terms of the Coleman Amended and Restated Employment Agreement are substantially similar to those of the 2022 Coleman Employment Agreement. Lynn A. Feldman Effective November 1, 2022, Clear Channel Outdoor and Ms. Feldman entered into an amended and restated employment agreement (the “Feldman Employment Agreement”). The Feldman Employment Agreement supersedes the prior employment agreement between Ms. Feldman and Clear Channel Outdoor effective June 27, 2016, as well.amended on May 1, 2019 and January 1, 2020. Under hisThe initial term of the Feldman Employment Agreement ends on October 31, 2025 and will be automatically extended for additional two year periods, unless the Company or Ms. Feldman gives prior written notice of non-renewal of the Feldman Employment Agreement between March 1 and March 31 prior to the end of the then-applicable employment term.
Pursuant to the Feldman Employment Agreement, Ms. Feldman will (i) receive an annual base salary of $650,000, (ii) be eligible to receive an annual performance bonus with a target of 100% of her annual base salary, and (iii) beginning in 2023, an annual long-term incentive opportunity with an annual target value equal to $825,000; provided, that, in no event will the grant date fair value be less than $300,000. Ms. Feldman is also eligible to participate in various benefit programs provided by Clear Channel Outdoor on the same terms and conditions as they are made available to other similarly situated employees. During Ms. Feldman’s employment with Clear Channel Outdoor and for 12 months thereafter, Ms. Feldman is subject to non-competition, non-interference and non-solicitation covenants substantially consistent with our other senior executives. Ms. Feldman is also subject to customary confidentiality, work product and trade secret provisions. | | | | | | | | | Notice and Proxy Statement 2023 49 |
Jason A. Dilger On January 20, 2022, Clear Channel Outdoor and Mr. Dilger entered into an amended and restated employment agreement (the “Dilger Amended and Restated Employment Agreement”), effective as of January 1, 2022. The initial term of the Dilger Amended and Restated Employment Agreement ends on January 1, 2025 and will be automatically extended for additional three-year periods, unless the Company or Mr. Macri receives compensation consisting Dilger gives prior written notice of non-renewal of the Dilger Amended and Restated Employment Agreement between June 1 and July 1 prior to the end of the then-applicable employment term. Pursuant to the Dilger Amended and Restated Employment Agreement, Mr. Dilger will (i) receive a base salary incentive awards and other benefits and perquisites. Mr. Macri’s currentat an annualized rate of $400,000 retroactive to October 1, 2021, (ii) be eligible to receive an annual performance bonus with a target of 60% of his annual base salary is $640,000. During 2013, Mr. Macri received a $60,000 signing bonus. No later than March 15 of each calendar year, Mr. Macri isand (iii) be eligible to receive a performance bonus. For 2013, Mr. Macri’s target bonus was $375,000, with $187,500 of such amount guaranteed and $187,500 of such amount MBO-based. For purposes of his agreement, MBO-based means the subjective performance criteria agreed to onfor an annual basis between the President and Chief Financial Officerequity incentive grant with an approximate value of iHeartMedia and Mr. Macri at about the same time as established for other similarly situated employees. For 2014 and thereafter, Mr. Macri’s target bonus will be nonot less than his base salary for$325,000 per award.
During the year to which the bonus relates and the criteria will be set by management in consultation withterm of Mr. Macri. For 2015, Mr. Macri received an annual bonus of $810,000 including a discretionary bonus of $267,754. Mr. Macri also earned an additional bonus of $300,000 pursuant to his additional bonus opportunity with respect to 2015 performance, which will be paid when performance bonuses are generally paid in 2018 if he remains employed on the payment date. See “Compensation Discussion and Analysis—Elements of Compensation—Annual Incentive Bonus.” He is entitled to participate in all employee benefit plans and perquisites in which other similarly situated employees may participate. Additionally, pursuant to his employment agreement, on October 7, 2013, Mr. Macri received a one-time long term incentive grant of 100,000 shares of restricted stock.
Under the employment agreement, Mr. Macri is required to protect the secrecy of confidential information of iHeartMedia and its affiliates and to assign certain intellectual property rights. He also is prohibited by the agreement from engaging in certain activities that compete with iHeartMedia and its affiliates duringDilger’s employment and for 12 months after his employment terminates,thereafter, Mr. Dilger is subject to non-competition, non-interference and he is prohibited from soliciting employees for employment during employment and for 12 months after termination of employment. iHeartMedia agreed to defend and indemnify Mr. Macri for acts committed in the course and scope of his employment.
Scott D. Hamilton
Effective May 1, 2014, Scott D. Hamilton entered into an employment agreementnon-solicitation covenants substantially consistent with iHMMS. Pursuant to his agreement, Mr. Hamilton will serve as Senior Vice President, Chief Accounting Officer and Assistant Secretary of iHeartMedia, iHeartCommunications and Clear Channel Outdoor until April 30, 2018, after which time such employment period will automatically be extended for additional two-year periods unless either iHMMS orOutdoor’s other senior executives. Mr. Hamilton gives written notice of non-renewal.
Under his agreement, Mr. Hamilton receives compensation consisting of a base salary of $375,000 and an annual bonus targeted at 60% of Mr. Hamilton’s base salary. Mr. Hamilton also receives other benefits and perquisites, including paid vacation, participation in employee welfare benefit and pension plans and eligibility for long term incentive opportunities.
Under the employment agreement, Mr. Hamilton is required to protect the secrecy of confidential information of iHMMS and its affiliates. HeDilger also is prohibited by the agreement from engaging in certain activities that compete with iHMMSsubject to customary confidentiality, work product and its affiliates during employment and for 12 months after his employment terminates, and he is prohibited from soliciting employees for employment during employment and for 12 months after termination of employment. iHMMS agreed to defend and indemnify Mr. Hamilton for acts committed in the course and scope of his employmenttrade secret provisions.
GRANTS OF PLAN-BASEDPLAN BASED AWARDS Stock Incentive Plans Clear Channel Outdoor grants equity incentive awards to named executive officersNEOs and other eligible participants under its Stock Incentivethe 2021 Plan. The Stock Incentive2021 Plan is intended to facilitate the ability of Clear Channel Outdoor to attract, motivate and retain employees, directors and other personnel through the use of equity-based and other incentive compensation opportunities. The Stock Incentive2021 Plan allows for the issuance of restricted stock, incentive and non-statutory stock options, stock appreciation rights, director shares, deferredrestricted stock rightsunits and other types of stock-based and/or performance-based awards to any present or future director, officer, employee, consultant or advisor of or to Clear Channel Outdoor or its subsidiaries. The Stock Incentive2021 Plan is administered by the Compensation Committee, except that the entire Board has sole authority for granting and administering awards to non-employee directors. The Compensation Committee determines which eligible persons receive an award and the types of awards to be granted as well as the amounts, terms and conditions of each award including, if relevant, the exercise price, the form of payment of the exercise price, the number of shares, cash or other consideration subject to the award and the vesting schedule. These terms and conditions will be set forth in the award agreement furnished to each participant at the time an award is granted to him or her under the Stock Incentive2021 Plan. The Compensation Committee also makes other determinations and interpretations necessary to carry out the purposes of the Stock Incentive2021 Plan. For a description of the treatment of awards upon a participant’s termination of employment or change in control, see “—Potential Post-Employment Payments.” Cash Incentive Plan As discussed above, named executive officersNEOs also are eligible to receive awards under the Annual Incentive Plan. See “Compensation Discussion and Analysis—ElementsAnalysis of Compensation—2022 Executive Compensation Decisions—Annual Incentive Bonus”Plan” for a more detailed description of the Annual Incentive Plan and the grant of awards to the named executive officersNEOs thereunder. The following table sets forth certain information concerning plan-based awards granted to the named executive officersNEOs during the year ended December 31, 2015. As described below under “Certain Relationships and Related Party Transactions— iHeartMedia, Inc.—Corporate Services Agreement,” our parent entities provide us with, among other things, certain executive officer services. A portion (38.72%, 19.36% and 38.72%) of the annual incentive awards provided by our parent entities to Messrs. Bressler, Macri and Hamilton, respectively, with respect to 2015 was allocated to us in recognition of their services provided to us. Those allocated amounts are reflected in the 2022. | | | | | 50 Notice and Proxy Statement 2023 | | | | |
Grants of Plan-Based Awards During 2015 table below and 100% of the annual incentive awards to the named executive officers of iHeartMedia are reflected by iHeartMedia in the comparable table in its proxy statement. Grants of Plan-Based Awards During 20152022
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | Name | | Grant Date | | Estimated Possible Payouts Under
Non-Equity Incentive Plan Awards | | | All
Other
Stock
Awards:
Number
of shares
of Stock
or Units
(#) | | | All Other
Option
Awards:
Number of
Securities
Underlying
Options
(#) | | | Exercise
of Base
Price
of Option
Awards
($/Sh) | | | Grant Date
Fair Value
of Stock
and Option
Awards(a)
($) | | | | | Threshold
($) | | Target
($) | | | Maximum
($) | | | | | | Robert W. Pittman | | 2/24/2015(b) | | — | | | — | | | | — | | | | 85,197 | | | | — | | | | — | | | | 857,082 | | | | | | | | | | | Richard J. Bressler | | N/A(c) | | — | | | 696,960 | | | | 1,393,920 | | | | — | | | | — | | | | — | | | | — | | | | N/A(c) | | — | | | 193,600 | | | | 193,600 | | | | — | | | | — | | | | — | | | | — | | | | 2/24/2015(d) | | — | | | — | | | | — | | | | 31,948 | | | | — | | | | — | | | | 321,397 | | | | | | | | | | | C. William Eccleshare | | N/A(c) | | — | | | 1,000,000 | | | | 2,000,000 | | | | — | | | | — | | | | — | | | | — | | | | N/A(c) | | — | | | 300,000 | | | | 300,000 | | | | — | | | | — | | | | — | | | | — | | | | | | | | | | | Scott R. Wells | | N/A(c) | | — | | | 624,658 | | | | 1,249,316 | | | | — | | | | — | | | | — | | | | — | | | | 3/3/2015(e) | | — | | | — | | | | — | | | | — | | | | 338,600 | | | | 9.73 | | | | 1,499,998 | | | | 6/15/2015(f) | | — | | | — | | | | — | | | | 45,830 | | | | 37,764 | | | | 10.59 | | | | 649,991 | | | | | | | | | | | Steven J. Macri | | N/A(c) | | — | | | 123,904 | | | | 247,808 | | | | — | | | | — | | | | — | | | | — | | | | N/A(c) | | — | | | 58,080 | | | | 58,080 | | | | — | | | | — | | | | — | | | | — | | | | | | | | | | | Scott D. Hamilton | | N/A(c) | | — | | | 87,120 | | | | 174,240 | | | | — | | | | — | | | | — | | | | — | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Name | | Grant Date | | Estimated Future Payouts Under
Non-Equity Incentive Plan Awards | | | Estimated Future Payouts Under
Equity Incentive Plan Awards | | | All
Other
Stock
Awards:
Number
of Shares
of Stock | | | All Other
Option
Awards:
Number of
Securities
Underlying | | | Exercise
or Base
Price
of Option | | | Grant Date
Fair Value
of Stock
and Option | | | | | | | | | Threshold
($) | | | Target
($) | | | Maximum
($) | | | Threshold
(#) | | | Target
(#) | | | Maximum
(#) | | | or Units
(#) | | | Options
(#) | | | Awards ($/Sh) | | | Awards(a)
($) | | | | | | | | | | | | | | Scott R. Wells | | N/A(b) | | | — | | | | 1,210,000 | | | | 2,420,000 | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | 1/20/22(c) | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | 311,526 | | | | — | | | | — | | | | 962,615 | | | | 5/4/22(d) | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | 294,612 | | | | — | | | | — | | | | 763,045 | | | | 5/4/22(d) | | | — | | | | — | | | | — | | | | 300,926 | | | | 601,851 | | | | 902,777 | | | | — | | | | — | | | | — | | | | 1,624,998 | | | | | | | | | | | | | | | Brian D. Coleman | | N/A(b) | | | — | | | | 650,000 | | | | 1,300,000 | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | 5/4/22(e) | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | 168,350 | | | | — | | | | — | | | | 436,026 | | | | 5/4/22(e) | | | — | | | | — | | | | — | | | | 138,889 | | | | 277,777 | | | | 416,666 | | | | — | | | | — | | | | — | | | | 749,998 | | | | | | | | | | | | | | | Lynn Feldman | | N/A(b) | | | — | | | | 608,356 | | | | 1,216,712 | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | 5/4/22(f) | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | 107,744 | | | | — | | | | — | | | | 279,057 | | | | 5/4/22(f) | | | — | | | | — | | | | — | | | | 88,889 | | | | 177,777 | | | | 266,666 | | | | — | | | | — | | | | — | | | | 479,998 | | | | | | | | | | | | | | | Jason Dilger | | N/A(b) | | | — | | | | 240,000 | | | | 480,000 | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | 5/4/22(g) | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | 49,242 | | | | — | | | | — | | | | 127,537 | | | | 5/4/22(g) | | | — | | | | — | | | | — | | | | 33,102 | | | | 66,203 | | | | 99,305 | | | | — | | | | — | | | | — | | | | 178,748 | |
| (a) | ReflectsThe amounts in the table reflect the full grant date fair value of time-vesting restricted stock awardsoptions, RSUs and PSUs computed in accordance with the requirements of FASB ASC Topic 718, but excluding any impact of estimated forfeiture rates as required by
|
| SEC regulations. The grant date fair value of time-vesting RSUs is based on the closing price of our common stock on the date of grant. The grant date fair value of PSUs is based on a Monte Carlo valuation as of the grant date assuming achievement at the target payout level, or 100%. For assumptions made in the valuation, see footnote (b) to the Summary Compensation Table above and Note 9-Shareholders’ Equity (Deficit)13-Stockholders’ Deficit beginning on page A-6792 of Appendix A.our 2022 Annual Report on Form 10-K. |
| (b) | On February 24, 2015, Mr. Pittman received a restricted stock award with respect to 85,197 shares of Clear Channel Outdoor’s Class A common stock under our 2012 Stock Incentive Plan. The restricted stock will vest with respect to 33% of the shares on February 12, 2016, 33% of the shares on February 12, 2017Messrs. Wells, Coleman and 34% of the shares on February 12, 2018. |
(c) | Messrs. Bressler, MacriDilger and Hamilton received cash incentive awards from iHeartMedia under the iHeartMedia 2015 Executive Incentive Plan. The amounts shown for Messrs. Bressler, Macri and Hamilton reflect the allocated portion of their respective cash incentive awards under the iHeartMedia 2015 Executive Incentive Plan based on the achievement of pre-established performance goals. As described in footnote (g) to the Summary Compensation Table above, Mr. Pittman’s cash incentive award from iHeartMedia for 2015 was not allocated pursuant to the Corporate Services Agreement. Messrs. Eccleshare and WellsMs. Feldman received cash incentive awards from Clear Channel Outdoor under the Annual Incentive Plan. In addition, Messrs. Eccleshare, Bressler and Macri were eligible to participate in an additional bonus opportunity with respect to Clear Channel Outdoor’s 2015 performance in the case of Mr. Eccleshare and with respect to iHeartMedia’s 2015 performance in the case of Messrs. Bressler and Macri. Mr. Eccleshare had the opportunity to earn up to $300,000 from Clear Channel Outdoor under his additional bonus opportunity and earned $240,000 based on 2015 performance, of which $80,000 was paid at the end of February 2016 and is included under the Non-Equity Incentive Plan Compensation column in the Summary Compensation Table, and the remaining $160,000 of which will be paid in equal installments of $80,000 each at the same time as the annual incentive bonus payments are paid generally in 2017 and 2018 if Mr. Eccleshare remains employed at that time. Mr. Bressler had the opportunity to earn up to $500,000 from iHeartMedia ($193,600 of which would be allocated to Clear Channel Outdoor pursuant to the Corporate Services Agreement) under this additional bonus opportunity and earned the full $500,000 based on 2015 performance, which will be paid by iHeartMedia in 2018 if Mr. Bressler remains employed at that time. Mr. Macri had the opportunity to earn up to $300,000 from iHeartMedia ($58,080 of which would be allocated to Clear Channel Outdoor pursuant to the Corporate Services Agreement) under this additional bonus opportunity and earned the full $300,000 based on 2015 performance, which will be paid by iHeartMedia in 2018 if Mr. Macri remains employed at that time. For further discussion of the 20152022 cash incentive awards, see “Compensation Discussion and Analysis—Elements of Compensation—Annual Incentive Bonus.” |
(d)(c) | On February 24, 2015,January 20, 2022, Mr. BresslerWells received a restricted stock award with respect to 31,948grant of 311,526 shares of Clear Channel Outdoor’s Class A common stock under our 2012 Stock Incentive Plan.stock. The restricted stockRSUs will vest 1/3 on each of January 20, 2023, January 20, 2024 and January 20, 2025. |
| (d) | On May 4, 2022, Mr. Wells received a grant of 896,463 shares of Clear Channel Outdoor’s common stock. The RSUs will vest as follows: (1) 294,612 shares of the award are time-vesting, with respect to 33%one-third vesting on each of April 1, 2023, April 1, 2024 and April 1, 2025; (2) 601,851 of the shares will be earned between 0%—150% based on February 12, 2016, 33% of therelative TSR. The earned shares will vest 100% on February 12, 2017 and 34% of the shares on February 12, 2018.April 1, 2025. |
| (e) | On March 3, 2015,May 4, 2022, Mr. Wells was granted stock options to purchaseColeman received a grant of 446,127 shares of Clear Channel Outdoor’s Class A common stock under our 2012 Stock Incentive Plan. 50%stock. The RSUs will vest as follows: (1) 168,350 shares of the options vest in 25% increments annually, beginningaward are time-vesting, with one-third vesting on the first anniversaryeach of April 1, 2023, April 1, 2024 and April 1, 2025; (2) 277,777 of the grant date, and 50% of the optionsshares will be earned between 0%—150% based on relative TSR. The earned shares will vest upon achievement of OIBDAN targets to be specified by the Board.100% on April 1, 2025. |
| (f) | On June 15, 2015, Mr. Wells was granted stock options to purchaseMay 4, 2022, Ms. Feldman received a grant of 285,521 shares of Clear Channel Outdoor’s Class A common stock under our 2012 Stock Incentive Plan.stock. The optionsRSUs will vest in 25% increments annually, beginning on the first anniversaryas follows: (1) 107,744 shares of the grant date.award are time-vesting, with one-third vesting on each of April 1, 2023, April 1, 2024 and April 1, 2025; (2) 177,777 of the shares will be earned between 0%—150% based on relative TSR. The earned shares will vest 100% on April 1, 2025. |
On June 15, 2015, Mr. Wells was granted restricted stock under our 2012 Stock Incentive Plan. The restricted stock vests with respect to 50% of the shares on each of June 15, 2018 and June 15, 2019.
| (g) | On May 4, 2022, Mr. Dilger received a grant of 115,445 shares of Clear Channel Outdoor’s Class A common stock. The RSUs will vest as follows: (1) 49,242 shares of the award are time-vesting, with one-third vesting on each of April 1, 2023, April 1, 2024 and April 1, 2025; (2) 66,203 of the shares will be earned between 0%—150% based on relative TSR. The earned shares will vest 100% on April 1, 2025. |
For further discussion of the equity awards, see “Compensation Discussion and Analysis—Elements of Compensation—Long-Term Incentive Compensation.”
| | | | | | | | | Notice and Proxy Statement 2023 51 |
OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END The following table sets forth certain information concerning outstanding equity awards of the named executive officersNEOs at December 31, 2015.2022. Outstanding Equity Awards at December 31, 20152022 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Option Awards | | | Stock Awards | | | | Number of
Securities
Underlying
Unexercised
Options | | | Option
Exercise
Price ($) | | | Option
Expiration
Date | | | Number of
Shares or
Units of
Stock That
Have Not
Vested (#) | | | Market
Value
of Shares
or Units of
Stock That
Have Not
Vested(a) ($) | | | Equity
Incentive
Plan
Awards:
Number of
Unearned
Shares,
Units or
Other
Rights
That Have
Not
Vested (#) | | Equity
Incentive
Plan
Awards:
Market or
Payout
Value of
Unearned
Shares,
Units or
Other
Rights That
Have Not
Vested(a) ($) | Name | | (#)
Exercisable | | | (#)
Unexercisable | | | | | | | | Robert W. Pittman | | | — | | | | — | | | | — | | | | — | | | | 271,739 | (b) | | | 1,519,021 | | | — | | — | | | | — | | | | — | | | | — | | | | — | | | | 85,197 | (c) | | | 476,251 | | | — | | — | | | | | | | | | | Richard J. Bressler | | | — | | | | — | | | | — | | | | — | | | | 271,739 | (d) | | | 1,519,021 | | | — | | — | | | | — | | | | — | | | | — | | | | — | | | | 31,948 | (e) | | | 178,589 | | | — | | — | | | | | | | | | | C. William Eccleshare | | | 164,907 | (f) | | | — | | | | 4.05 | | | | 09/10/19 | | | | — | | | | — | | | — | | — | | | | 22,500 | (g) | | | — | | | | 3.48 | | | | 02/24/20 | | | | — | | | | — | | | — | | — | | | | 63,583 | (h) | | | — | | | | 4.31 | | | | 09/10/20 | | | | — | | | | — | | | — | | — | | | | 15,360 | (i) | | | — | | | | 7.66 | | | | 12/13/20 | | | | — | | | | — | | | — | | — | | | | 90,000 | (j) | | | — | | | | 8.97 | | | | 02/21/21 | | | | — | | | | — | | | — | | — | | | | 67,500 | (k) | | | 22,500 | (k) | | | 7.90 | | | | 03/26/22 | | | | — | | | | — | | | — | | — | | | | — | | | | — | | | | — | | | | — | | | | 126,582 | (l) | | | 707,593 | | | — | | — | | | | | | | | | | Scott R. Wells | | | — | | | | 338,600 | (m) | | | 9.73 | | | | 03/03/25 | | | | — | | | | — | | | — | | — | | | | — | | | | 37,764 | (n) | | | 10.59 | | | | 06/15/25 | | | | 45,830 | (o) | | | 256,190 | | | — | | — | | | | | | | | | | Steven J. Macri | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | — | | — | | | | | | | | | | Scott D. Hamilton | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | — | | — |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Option Awards | | | Stock Awards | | | | | Number of
Securities
Underlying
Unexercised
Options | | | Option | | | Option | | | Number of
Shares or
Units of
Stock That | | | Market
of Value
of Shares
or Unites of
Stock That | | | Equity
Incentive
Plan
Awards:
Number of
Unearned
Shares,
Units or
Other
Rights
That Have | | | Equity
Incentive
Plan
Awards:
Market or
Payout
Value of
Unearned
Shares,
Units or
Other
Rights That | | | Name | | (#)
Exercisable | | | (#)
Unexercisable | | | Exercise
Price ($) | | | Expiration
Date | | | Have Not
Vested (#) | | | Have Not
Vested(a) ($) | | | Not
Vested (#) | | | Have Not
Vested(a) ($) | | | | | | | | | | | Scott R. Wells | | | 253,950 | (b) | | | 84,650 | (b) | | | 6.85 | | | | 3/3/2025 | | | | — | | | | — | | | | — | | | | — | | | | | 37,764 | | | | — | | | | 7.71 | | | | 6/15/2025 | | | | — | | | | — | | | | — | | | | — | | | | | 25,654 | | | | — | | | | 5.69 | | | | 6/3/2026 | | | | — | | | | — | | | | — | | | | — | | | | | — | | | | — | | | | — | | | | — | | | | 194,175 | (c) | | | 203,884 | | | | — | | | | — | | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | 600,000 | (d) | | | 630,000 | | | | | — | | | | — | | | | — | | | | — | | | | 252,016 | (e) | | | 264,617 | | | | — | | | | — | | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | 183,824 | (f) | | | 193,015 | | | | | — | | | | — | | | | — | | | | — | | | | 311,526 | (g) | | | 327,102 | | | | — | | | | — | | | | | — | | | | — | | | | — | | | | — | | | | 294,612 | (h) | | | 309,343 | | | | — | | | | — | | | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | 300,926 | (i) | | | 315,972 | | | | | | | | | | | Brian D. Coleman | | | — | | | | — | | | | — | | | | — | | | | 52,301 | (j) | | | 54,916 | | | | — | | | | — | | | | | — | | | | — | | | | — | | | | — | | | | 161,812 | (c) | | | 169,903 | | | | — | | | | — | | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | 500,000 | (d) | | | 525,000 | | | | | — | | | | — | | | | — | | | | — | | | | 199,933 | (e) | | | 209,930 | | | | — | | | | — | | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | 145,833 | (f) | | | 153,125 | | | | | — | | | | — | | | | — | | | | — | | | | 168,350 | (h) | | | 176,768 | | | | — | | | | — | | | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | 138,889 | (i) | | | 145,833 | | | | | | | | | | | Lynn A. Feldman | | | 11,043 | | | | — | | | | 5.54 | | | | 7/7/2026 | | | | — | | | | — | | | | — | | | | — | | | | | — | | | | — | | | | — | | | | — | | | | 20,921 | (j) | | | 21,967 | | | | — | | | | — | | | | | — | | | | — | | | | — | | | | — | | | | 113,269 | (c) | | | 118,932 | | | | — | | | | — | | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | 350,000 | (d) | | | 367,500 | | | | | — | | | | — | | | | — | | | | — | | | | 154,570 | (e) | | | 162,299 | | | | — | | | | — | | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | 112,745 | (f) | | | 118,382 | | | | | — | | | | — | | | | — | | | | — | | | | 107,744 | (h) | | | 113,131 | | | | — | | | | — | | | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | 88,889 | (i) | | | 93,333 | | | | | | | | | | | Jason A. Dilger | | | 2,778 | | | | — | | | | 4.65 | | | | 4/10/2023 | | | | — | | | | — | | | | — | | | | — | | | | | 2,778 | | | | — | | | | 5.85 | | | | 4/4/2024 | | | | — | | | | — | | | | — | | | | — | | | | | 3,776 | | | | — | | | | 7.71 | | | | 6/15/2025 | | | | — | | | | — | | | | — | | | | — | | | | | 3,078 | | | | — | | | | 5.69 | | | | 6/3/2026 | | | | — | | | | — | | | | — | | | | — | | | | | — | | | | — | | | | — | | | | — | | | | 32,363 | (c) | | | 33,981 | | | | — | | | | — | | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | 100,000 | (d) | | | 105,000 | | | | | — | | | | — | | | | — | | | | — | | | | 51,747 | (e) | | | 54,334 | | | | — | | | | — | | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | 37,745 | (f) | | | 39,632 | | | | | — | | | | — | | | | — | | | | — | | | | 49,242 | (h) | | | 51,704 | | | | — | | | | — | | | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | 33,102 | (i) | | | 34,757 | |
| (a) | For equity awards with respect to the Class A common stock of CCOH, thisMarket value is based upon the closing sale price of CCOH’s Class AClear Channel Outdoor common stock on December 31, 20152022 of $5.59.$1.05. |
| (b) | Mr. Pittman’s unvested restricted stock award representing 271,739Wells’ grant of time-vesting options to purchase 169,300 shares of CCOH’s Class A common stock vestsvested in four equal annual installments beginning on March 3, 2016. Mr. Wells’ grant of performance-based options to purchase 169,300 shares of common stock vested 50% on eachFebruary 3, 2020 based upon the achievement of an OIBDAN target, and as of December 31, 2016 and December 31, 2017.2022, 50% remain subject to vesting based upon achievement of Adjusted EBITDA targets. |
| (c) | Mr. Pittman’s unvested restricted stock award representing 85,197 shares of CCOH’s Class A common stock vests 33%The outstanding RSUs, which were granted on February 12, 2016, 33%October 20, 2020, will vest on February 12, 2017 and 34% on February 12, 2018.April 1, 2023. |
| (d) | Mr. Bressler’s unvested restricted stock award representing 271,739The PSUs granted on October 20, 2020 will vest, if at all, based on the Relative TSR over a performance period commencing on October 1, 2020 and ending on March 31, 2023. As of December 31, 2022, the Company’s achievement level of Relative TSR was between the threshold and target levels of performance. Accordingly, the number of shares reported in the table reflect amounts based on target performance. The actual number of CCOH’s Class A common stock vests 50% on each of July 29, 2016 and July 29, 2017.shares that will vest pursuant to the PSUs is not yet determinable. |
| | | | | 52 Notice and Proxy Statement 2023 | | | | |
| (e) | Mr. Bressler’s unvested restricted stock award representing 31,948 sharesThe outstanding RSUs, which were granted on July 27, 2021, will vest in annual equal installments on each of CCOH’s Class A common stock vests 33% on February 12, 2016, 33% on February 12, 2017April 1, 2023 and 34% on February 12, 2018.April 1, 2024. |
| (f) | Mr. Eccleshare’s grantThe PSUs granted on July 27, 2021 will vest, if at all, based on the Relative TSR over a performance period commencing on July 1, 2021 and ending on March 31, 2024. As of optionsDecember 31, 2022, the Company’s achievement level of Relative TSR was below the threshold level of performance. Accordingly, the number of shares reported in the table reflect amounts based on threshold performance. The actual number of shares that will vest pursuant to purchase 202,813 shares of CCOH’s Class A common stock vested as follows: (1) options with respect to 48,062 shares vested on September 10, 2010; (2) options with respect to 74,736 shares vested on September 10, 2011; (3) options with respect to 40,006 shares vested on September 10, 2012; and (4) options with respect to 40,009 shares vested on September 10, 2013. During 2015, Mr. Eccleshare exercised 37,906 such options.the PSUs is not yet determinable. |
| (g) | Mr. Eccleshare’s grant of options to purchase 62,094 shares of CCOH’s Class A common stock vested as follows: (1) options with respect to 15,523 shares vestedWells’ RSU award will vest in three equal installments on February 24, 2011; (2) options with respect to 15,524 shares vested on February 24, 2012; (3) options with respect to 15,523 shares vested on February 24, 2013;January 20, 2023, January 20, 2024, and (4) options with respect to 15,524 shares vested on February 24, 2014. During 2015, Mr. Eccleshare exercised 39,594 such options.January 20, 2025. |
| (h) | Mr. Eccleshare’s grant of options to purchase 63,583 shares of CCOH’s Class A common stock vested as follows: (1) options with respect to 15,895 shares vestedThe outstanding RSUs, which were granted on September 10, 2011; (2) options with respect to 15,896 shares vestedMay 4, 2022, will vest in three equal installments on September 10, 2012; (3) options with respect to 15,895 shares vested on September 10, 2013;April 1, 2023, April 1, 2024, and (4) options with respect to 15,897 shares vested on September 10, 2014.April 1, 2025. |
| (i) | Mr. Eccleshare’s grantThe PSUs granted on May 4, 2022 will vest, if at all, based on the Relative TSR over a performance period commencing on April 1, 2022 and ending on March 31, 2025. As of optionsDecember 31, 2022, the Company’s achievement level of Relative TSR was below the threshold level of performance. Accordingly, the number of shares reported in the table reflect amounts based on threshold performance. The actual number of shares that will vest pursuant to purchase 15,360 shares of CCOH’s Class A common stock vested in three equal annual installments beginning on September 10, 2011.the PSUs is not yet determinable. |
| (j) | Mr. Eccleshare’s grant of options to purchase 90,000 shares of CCOH’s Class A common stock vested in four equal installments beginning on February 21, 2012. |
(k) | Mr. Eccleshare’s grant of options to purchase 90,000 shares of CCOH’s Class A common stock vested with respect to options to purchase 22,400 shares on each of March 26, 2013, March 26, 2014 and March 26, 2015. The remaining options with respect to 22,500 shares vested on March 26, 2016. |
(l) | Mr. Eccleshare’s unvestedoutstanding restricted stock unit award representing 126,582 shares of CCOH’s Class A common stock as of December 31, 2015 vested 50%awards, which were granted on March 1, 2016 and the remaining 50%May 22, 2019, will vest on March 1, 2017.May 22, 2023. |
(m) | Mr. Wells’ grant of options to purchase 338,600 shares of CCOH’s Class A common stock vest as follows: (1) 169,300 of the shares of the award are time-vesting, with 25% vesting annually beginning March 3, 2016; and (2) 169,300 shares of the award will vest upon achievement of OIBDAN targets to be specified by the Board. |
(n) | Mr. Wells’ grant of options to purchase 37,764 shares of CCOH’s Class A common stock vest in four equal installments beginning June 15, 2016. |
(o) | Mr. Wells’ unvested restricted stock award representing 45,830 shares of CCOH’s Class A common stock vests 50% on June 15, 2018 and 50% on June 15, 2019. |
OPTION EXERCISES AND STOCK VESTED The following table sets forth certain information concerning option exercises by and stock vesting for the named executive officersNEOs during the year ended December 31, 2015.2022. Option Exercises and Stock Vested During 20152022 | | | | | | | | | | | | | | | | | | | | Option Awards | | | Stock Awards | | Name | | Number of Shares
Acquired on
Exercise(a) (#) | | | Value Realized
on Exercise(b) ($) | | | Number of Shares
Acquired on
Vesting(c) (#) | | | Value Realized on
Vesting(d) ($) | | Robert W. Pittman | | | — | | | | — | | | | — | | | | — | | Richard J. Bressler | | | — | | | | — | | | | — | | | | — | | C. William Eccleshare | | | 77,500 | | | | 583,844 | | | | 189,873 | | | | 1,870,249 | | Scott R. Wells | | | — | | | | — | | | | — | | | | — | | Steven J. Macri | | | — | | | | — | | | | — | | | | — | | Scott D. Hamilton | | | — | | | | — | | | | — | | | | — | |
| | | | | | | | | | | | | | | | | | | | Option Awards | | | Stock Awards | | | Name | | Number of Shares
Acquired on
Exercise(a) (#) | | | Value Realized
on Exercise(b) ($) | | | Number of Shares
Acquired on
Vesting(c) (#) | | | Value Realized on
Vesting(d) ($) | | Scott R. Wells | | | — | | | | — | | | | 776,061 | | | $ | 2,281,765 | | Brian D. Coleman | | | — | | | | — | | | | 546,963 | | | | 1,644,300 | | Lynn A. Feldman | | | — | | | | — | | | | 414,776 | | | | 1,242,455 | | Jason A. Dilger | | | — | | | | — | | | | 106,298 | | | | 327,815 | |
| (a) | Represents the gross number of shares acquired upon exercise of vested options, without taking into account any shares withheld to cover the option exercise price or applicable tax obligations. |
| (b) | Represents the value of the exercised options, calculated by multiplying (1) the number of shares to which the option exercise related by (2) the difference between the actual market price of our Class A common stock at the time of exercise and the option exercise price. |
| (c) | Represents the gross number of shares acquired on vesting of restricted stock units,shares or RSUs, without taking into account any shares withheld to satisfy applicable tax obligations. |
| (d) | Represents the value of the vested restricted stock unitsshares or RSUs calculated by multiplying (1) the number of vested restricted shares or restricted stock units by (2) the closing price on the vesting date. |
PENSION BENEFITS Clear Channel Outdoor does not havesponsor any pension plans in which the named executive officersNEOs participate. NONQUALIFIED DEFERRED COMPENSATION PLANS iHeartCommunications historically has offered a nonqualifiedClear Channel Outdoor does not sponsor any non-qualified deferred compensation plan for a select group of management or highly compensated employees, pursuant toplans in which participants could make an annual election to defer up to 50% of their annual salary and up to 80% of their bonus before taxes. Any matching credits on amounts would be made in iHeartCommunications’ sole discretion. Participants in the plan could allocate their deferrals and any matching credits among different investment options, the performance of which would be used to determine the amounts to be paid to participants under the plan.NEOs participate.
The committee that administers the nonqualified deferred compensation plan decided to suspend all salary and bonus deferral contributions and matching contributions for the 2010 plan year and all succeeding plan years until reinstated by such committee. None of the named executive officers currently participates in the plan.
POTENTIAL POST-EMPLOYMENT PAYMENTS The following narrative and table describe the potential payments or benefits upon termination, change in control or other post-employment scenarios for each of our named executive officers,Messrs. Wells, Coleman and Dilger, and Ms. Feldman using an assumed December 31, 20152022 trigger event for each scenario. As described below under “Certain Relationships and Related Party Transactions—iHeartMedia, Inc.—Corporate Services Agreement,” iHeartCommunications, our indirect parent entity, makes available to us, and we are obligated to use, the services of certain executive officers of iHeartCommunications and a portion of their salary and other personnel costs are allocated to us in recognition of their services provided to us. The provisions of their agreements are described below to the extent that amounts payable thereunder would be allocated to us under the Corporate Services Agreement upon termination, change in control or other post-employment scenario.Scott R. Wells
Robert W. Pittman
Termination by iHeartMedia for Cause, by Mr. Pittman without Good Cause or Upon Non-Renewal of the Agreement by Mr. Pittman. Robert W. Pittman’s employment agreement provides for the following payments and benefits upon termination by us for “Cause,” by Mr. Pittman without “Good Cause” or due to the non-renewal of the agreementDeath. If Mr. Wells’ employment is terminated by Mr. Pittman. Under the agreement, “Cause” is defined as: (1) conduct by Mr. Pittman constituting a material act of willful misconduct in connection with the performance of his duties; (2) continued, willful and deliberate non-performance by Mr. Pittman of his duties under the agreement (other than by reason of physical or mental illness, incapacity or disability) where such non-performance has continued for more than 15 business days after written notice; (3) Mr. Pittman’s refusal or failure to follow lawful directives consistent with his job responsibilities where such refusal or failure has continued for more than 15 business days after written notice; (4) a criminal conviction of, or plea of nolo contendere by, Mr. Pittman for a felony or material violation of any securities law including, without limitation, a conviction of fraud, theft or embezzlement or a crime involving moral turpitude; (5) a material breach of the agreement by Mr. Pittman; or (6) a material violation by Mr. Pittman of iHeartMedia’s employment policies regarding harassment. In the case of (1), (3), (5) or (6), those acts will not constitute Cause unless Mr. Pittman has been given written notice specifying the conduct qualifying for Cause and Mr. Pittman fails to cure within 15 business days after receipt of the notice.
The term “Good Cause” includes, subject to certain exceptions: (1) a repeated willful failure by iHeartMedia to comply with a material term of the agreement after written notice by Mr. Pittman specifying the
alleged failure; (2) a substantial and adverse change in Mr. Pittman’s position, material duties, responsibilities or authority; or (3) a material reduction in Mr. Pittman’s base salary, performance bonus opportunity or additional bonus opportunity. To terminate for Good Cause, Mr. Pittman must provide iHeartMedia with 30 days’ notice, after which iHeartMedia has 15 days to cure.
If iHeartMedia terminates Mr. Pittman’s employment for Cause, iHeartMediadeath, Clear Channel Outdoor will pay Mr. Pittman a lump sum cash payment equal to Mr. Pittman’shis designee or, if no designee, to his estate his accrued and unpaid base salary and any unpaid prior year bonus, if any, through the date of termination, any business expenses incurred by Mr. Wells but not yet reimbursed and any other payments to which he may be entitledrequired under applicable employee benefit plans, (“Accrued Amounts”equity plans or equity award agreements (collectively, the “Accrued Obligations”).
| | | | | | | | | Notice and Proxy Statement 2023 53 |
Termination due to Disability. If Mr. Pittman terminates his employment without Good Cause or elects not to renew his employment agreement, iHeartMedia will pay Mr. Pittman a lump sum cash payment equal to his Accrued Amounts and any earned but unpaid annual bonus with respect to a previous year (“Earned Prior Year Annual Bonus”). Termination by iHeartMedia without Cause, by Mr. Pittman for Good Cause, Upon Non-Renewal of the Agreement by iHeartMedia or Upon Change in Control. If iHeartMedia terminates Mr. Pittman’s employment without Cause, if Mr. Pittman terminates his employment for Good Cause or if iHeartMedia gives Mr. Pittman a notice of non-renewal, Mr. Pittman will receive a lump-sum cash payment equal to his Accrued Amounts and any Earned Prior Year Annual Bonus. In addition, provided he signs and returns a release of claims in the time period required, iHeartMedia will: (1) pay Mr. Pittman, over a period of two years, an amount equal to two times the sum of his base salary and target bonus; (2) reimburse Mr. Pittman for all COBRA premium payments paid by Mr. Pittman for continuation of healthcare coverage during the 18-month period following the date of Mr. Pittman’s termination; and (3) pay Mr. Pittman a prorated annual bonus with respect to the days he was employed in the year that includes the termination, calculated as if he had remained employed through the normal payment date (“Prorated Annual Bonus”). Mr. Pittman’s employment agreement does not provide for payments or benefits upon a change in control. Accordingly, if he is terminated without Cause after a change in control, Mr. Pittman will be entitled to the benefits described for a termination without Cause.
Termination due to Death or Disability. If Mr. Pittman is unable to perform his duties under the agreement on a full-time basis for more than 180 days in any 12-month period, iHeartMedia may terminate his employment. If Mr. Pittman’sWells’ employment is terminated due to death or disability, iHeartMedia will pay to Mr. Pittman or his designee or estate: (1) a lump sum cash payment equal to his Accrued Amounts; (2) any Earned Prior Year Annual Bonus; and (3) a Prorated Annual Bonus. If a release of claims is signed and returned in the time period required, iHeartMedia will reimburse Mr. Pittman or his estate for all COBRA premium payments paid by Mr. Pittman or his estate for continuation of healthcare coverage during the 18-month period following Mr. Pittman’s date of termination.
Impact of Termination on October 2, 2011 and October 15, 2012 Equity Awards. Except as described below, upon termination of Mr. Pittman’s employment, all of his outstanding and unvested iHeartMedia stock options granted on October 2, 2011 and restricted stock granted on October 15, 2012 will be cancelled. If Mr. Pittman’s employment is terminated by iHeartMedia without Cause or by Mr. Pittman for Good Cause within 12 months after a change of control of iHeartMedia where the Sponsors do not receive cash as a direct result of such transaction in an amount equal to at least 75% of their equity interest in iHeartMedia immediately prior to the transaction, his unvested options will vest and become immediately exercisable. If Mr. Pittman’s employment is terminated by iHeartMedia without Cause or by Mr. Pittman for Good Cause (in circumstances other than as described in the previous sentence), the portion of his unvested options that would have vested within 12 months after the date of termination will vest on the date of termination and become immediately exercisable. Upon termination of his employment due to death or disability, Mr. Pittman’s vested stock options will continue to be exercisable for the shorter of one year or the remaining 10-year term of the options. In the case of any termination of employment for a reason other than death or disability, Mr. Pittman’s vested stock options will continue to be exercisable for the shorter of six months or the remaining 10-year term of the options. If both of the following conditions occur during the six-month period after termination of Mr. Pittman’s employment, the period in which to exercise a vested option will be extended by an additional six months (in no event beyond the 10-year term of the options): (1) the average closing value of the Dow Jones Industrial Average
for the 10 consecutive trading days immediately prior to the date the options would otherwise expire pursuant to the previous two sentences (the “Exercise Measurement Period”) is at least 20% less than for the 10 consecutive trading days ending on the date Mr. Pittman’s employment terminated (the “Base Measurement Period”) and (2) the average closing price of the Class A common stock as reported on the principle exchange on which it is listed for trading during the Exercise Measurement Period is at least 25% less than the average closing price of the Class A common stock reported on such exchange for the Base Measurement Period. If Mr. Pittman’s employment is terminated by iHeartMedia without Cause within 12 months after a change of control, his time-vesting iHeartMedia restricted stock granted on October 15, 2012 will vest.
On January 13, 2014, Mr. Pittman and iHeartMedia amended and restated Mr. Pittman’s employment agreement, providing certain additional benefits to Mr. Pittman, as described below.
Impact of Termination on Equity Awards Granted on January 13, 2014. In connection with Mr. Pittman’s amended and restated employment agreement, he was granted awards of restricted stock by iHeartMedia and CCOH on January 13, 2014.
The iHeartMedia restricted stock award granted on January 13, 2014 is divided into the Tranche 1 Shares and the Tranche 2 Shares. The Tranche 1 Shares will: (1) continue to vest in accordance with the terms of the award agreement upon a Change in Control (as defined in the award agreement); (2) vest with respect to 50,000 shares in the event Mr. Pittman’s employment is terminated by iHeartMedia without Cause or by Mr. Pittman for Good Cause, because iHeartMedia does not renew his employment agreement or because of Mr. Pittman’s death or disability (each, a “Good Leaver Termination”); and (3) vest with respect to 100% of any unvested shares if a Good Leaver Termination occurs within 90 days of a Change in Control. The Tranche 2 Shares will: (1) in the case of a Good Leaver Termination, be subject to continued vesting for the six-month period following such termination in accordance with the Qualifying Return to Investor metrics set forth in the award agreement; (2) in the case of a Standalone CIC (defined as a Change in Control that the Board determines is not effected by an entity with material operating assets and after which the business and assets of iHeartMedia continue on a standalone basis materially consistent with immediately prior to the Change in Control), be converted to a dollar vesting schedule such that the Tranche 2 Shares will vest, if at all, at 100% on the date that the Fair Market Value (as defined in the award agreement) of one share of iHeartMedia’s Class A common stock reaches $36; (3) in the case of a Good Leaver Termination that occurs during the 18-month period following a Standalone CIC, vest as to 75% of any unvested Tranche 2 Shares if such Standalone CIC takes place prior to the first anniversary of the grant date; vest as to 50% of any unvested Tranche 2 Shares if such Standalone CIC takes place on or after the first anniversary of the grant date but prior to the second anniversary of the grant date; and vest as to 25% of any unvested Tranche 2 if such Standalone CIC takes place on or after the second anniversary of the grant date but prior to the fifth anniversary of the grant date; and (4) in the case of a Change of Control that is not a Standalone CIC, vest as to 75% of any unvested Tranche 2 Shares if such Change in Control takes place prior to the first anniversary of the grant date; vest as to 50% of any unvested Tranche 2 Shares if such Change in Control takes place on or after the first anniversary of the grant date but prior to the second anniversary of the grant date; and vest as to 25% of any unvested Tranche 2 Shares if such Change in Control takes place on or after the second anniversary of the grant date but prior to the third anniversary of the grant date. Any unvested shares that do not vest as described above will terminate on the date his employment terminates.
With respect to the CCOH restricted stock, in the event that Mr. Pittman’s employment with iHeartMedia and its subsidiaries is terminated by iHeartMedia for a reason other than Cause or by Mr. Pittman for Good Cause, 50% of any shares of CCOH restricted stock that would otherwise vest within 12 months after such termination will remain outstanding and vest on the date such shares would otherwise have vested, except that if such termination occurs during the 90-day period prior to or the 12-month period following a Change in Control (as defined in the award agreement), 100% of any unvested CCOH restricted stock will vest upon the consummation of such Change in Control (or on the termination date in the case of a termination following a Change in Control). If Mr. Pittman ceases to be Executive Chairman of the Board of CCOH but continues to be employed by iHeartMedia, all unvested shares of CCOH restricted stock outstanding as of such termination will
be converted into a number of shares of restricted stock of iHeartMedia having an aggregate Fair Market Value (as defined in iHeartMedia’s Stock Incentive Plan) equal to the aggregate Fair Market Value of such unvested shares, in each case, as of the date of such termination, with such iHeartMedia restricted stock vesting on the terms and conditions as are set forth in the CCOH award agreement (substituting iHeartMedia for CCOH). In the event of Mr. Pittman’s termination of employment or service from iHeartMedia for any other reason, then all unvested shares of CCOH restricted stock will be immediately forfeited.
Gross-Up Provisions under Mr. Pittman’s January 13, 2014 Amended and Restated Employment Agreement. Mr. Pittman’s amended and restated employment agreement contains a 280G “gross-up” provision that applies in certain circumstances in which any Company Payments received by Mr. Pittman are deemed to be “excess parachute payments” subject to excise taxes under Section 4999 of the Code. If, at the time any excise tax is imposed, the Cleansing Vote Rules are applicable and Mr. Pittman declines to submit such excess parachute payments for approval by iHeartMedia’s shareholders, iHeartMedia will pay to Mr. Pittman an amount equal to the excise tax imposed by Section 4999 of the Code. If, at the time any excise tax is imposed, the Cleansing Vote Rules are not applicable, Mr. Pittman will be entitled to a gross-up payment equal to (1) the excise tax and (2) any U.S. Federal, state and local income or payroll tax imposed on the gross-up payment (excluding any U.S. Federal, state and local income or payroll taxes otherwise imposed on the Company Payments); provided that if the Company Payments are found to be equal to or less than 110% of the “safe harbor” amount referenced in Mr. Pittman’s employment agreement, the Company Payments will be reduced to equal the safe harbor amount, such that no excise tax will be imposed by Section 4999 of the Code.
In the event that Mr. Pittman’s employment is terminated due to his death, disability or retirement, then subject to Mr. Pittman’s or his estate’s execution and non-revocation of a release within 60 days of Mr. Pittman’s termination, iHeartMedia will pay him (or his estate) a lump sum amount equal to any taxes paid by Mr. Pittman in accordance with Section 83(b) of the Code with respect to the iHeartMedia restricted stock awarded on January 13, 2014 that, at the time of such death, disability or retirement, remains unvested. For purposes of Mr. Pittman’s employment agreement, retirement is deemed to occur if, for the 12-month period following Mr. Pittman’s termination by reason of non-renewal of the employment agreement by either party (excluding termination by iHeartMedia for Cause or due to disability) or by Mr. Pittman without Good Cause, Mr. Pittman does not commence employment with or provide significant services as an advisor or consultant to iHeartMedia or any unaffiliated companies.
Richard J. Bressler
Termination by iHeartMedia for Cause, by Mr. Bressler without Good Cause or Upon Non-Renewal of the Agreement by Mr. Bressler. Richard J. Bressler’s employment agreement provides for the following payments and benefits upon termination by iHeartMedia for “Cause,” by Mr. Bressler without “Good Cause” or due to the non-renewal of the agreement by Mr. Bressler.
Under the agreement, “Cause” is defined as: (1) conduct by Mr. Bressler constituting a material act of willful misconduct in connection with the performance of his duties; (2) continued, willful and deliberate non-performance by Mr. Bressler of his duties under the agreement (other than by reason of physical or mental illness, incapacity or disability) where such non-performance has continued for more than 15 business days after written notice; (3) Mr. Bressler’s refusal or failure to follow lawful directives consistent with his job responsibilities where such refusal or failure has continued for more than 15 business days after written notice; (4) a criminal conviction of, or plea ofnolo contendere by, Mr. Bressler for a felony or material violation of any securities law including, without limitation, a conviction of fraud, theft or embezzlement or a crime involving moral turpitude; (5) a material breach of the agreement by Mr. Bressler; or (6) a material violation by Mr. Bressler of iHeartMedia’s employment policies regarding harassment. In the case of (1), (3), (5) or (6), those acts will not constitute Cause unless Mr. Bressler has been given written notice specifying the conduct qualifying for Cause and Mr. Bressler fails to cure within 15 business days after receipt of the notice.
The term “Good Cause” includes, subject to certain exceptions: (1) a repeated willful failure by iHeartMedia to comply with a material term of the agreement after written notice by Mr. Bressler specifying the alleged failure; (2) a substantial and adverse change in Mr. Bressler’s position, material duties, responsibilities or authority; or (3) a material reduction in Mr. Bressler’s base salary, performance bonus opportunity or additional bonus opportunity. The removal of Mr. Bressler from the position of Chief Financial Officer of Clear Channel Outdoor will not constitute Good Cause. To terminate for Good Cause, Mr. Bressler must provide iHeartMedia with 30 days’ notice, after which iHeartMedia has 30 dayspay all Accrued Obligations to cure.him.
If iHeartMedia terminates Mr. Bressler’s employment for Cause, iHeartMedia will pay Mr. Bressler a lump sum cash payment equal to Mr. Bressler’s Accrued Amounts. If Mr. Bressler terminates his employment without Good Cause or elects not to renew his employment agreement, iHeartMedia will pay Mr. Bressler a lump sum cash payment equal to his Accrued Amounts and any Earned Prior Year Annual and Additional Bonus.
Termination by iHeartMedia without Cause, by Mr. Bressler for Good Cause, Upon Non-Renewal of the Agreement by iHeartMedia or Upon Change in Control. If iHeartMedia terminates Mr. Bressler’s employment without Cause, if Mr. Bressler terminates his employment for Good Cause or if Mr. Bressler’s employment is terminated following iHeartMedia’s notice of non-renewal after the initial term of the employment agreement, iHeartMedia will pay to Mr. Bressler a lump sum amount equal to: (1) Mr. Bressler’s Accrued Amounts; and (2) any Earned Prior Year Annual and Additional Bonus. In addition, provided he signs and returns a release of claims in the time period required, iHeartMedia will: (1) pay to Mr. Bressler, in periodic ratable installment payments twice per month over a period of 18 months following the date of termination, an aggregate amount equal to 1.5 times the sum of Mr. Bressler’s base salary and target annual bonus; (2) reimburse Mr. Bressler for all COBRA premium payments paid by Mr. Bressler for continuation of healthcare coverage during the 18-month period following the date of Mr. Bressler’s termination; (3) pay to Mr. Bressler a Prorated Annual Bonus; and (4) pay to Mr. Bressler a prorated bonus under his additional bonus opportunity, based on actual results for such year (the “Prorated Additional Bonus”).
Termination due to Death or Disability. If Mr. Bressler is unable to perform his duties under the agreement on a full-time basis for more than 180 days in any 12 month period, iHeartMedia may terminate his employment. If Mr. Bressler’s employment is terminated due to death or disability, iHeartMedia will pay to Mr. Bressler or to his designee or estate: (1) a lump sum equal to Mr. Bressler’s Accrued Amounts; (2) any Earned Prior Year Annual and Additional Bonus; (3) Mr. Bressler’s Prorated Annual Bonus; and (4) Mr. Bressler’s Prorated Additional Bonus. If a release of claims is signed and returned in the time period required, iHeartMedia will reimburse Mr. Bressler or his estate for all COBRA premium payments paid by Mr. Bressler or his estate for continuation of healthcare coverage during the 18-month period following Mr. Bressler’s date of termination.
Gross-Up Provisions. Mr. Bressler’s employment agreement contains a 280G “gross-up” provision that applies in certain circumstances in which any Company Payments received by Mr. Bressler are deemed to be “excess parachute payments” subject to excise taxes under Section 4999 of the Code. If, at the time any excise tax is imposed, the Cleansing Vote Rules are applicable and Mr. Bressler declines to submit the excess parachute payments for approval by iHeartMedia’s shareholders, iHeartMedia will pay to Mr. Bressler an amount equal to the excise tax imposed by Section 4999 of the Code. If, at the time any excise tax is imposed, the Cleansing Vote Rules are not applicable, Mr. Bressler will be entitled to a gross-up payment equal to (1) the excise tax and (2) any U.S. Federal, state and local income or payroll tax imposed on the gross-up payment (excluding any U.S. Federal, state and local income or payroll taxes otherwise imposed on the Company Payments); provided that if the Company Payments are found to be equal to or less than 110% of the “safe harbor” amount referenced in Mr. Bressler’s employment agreement, the Company Payments will be reduced to equal the safe harbor amount, such that no excise tax will be imposed by Section 4999 of the Code.
Impact of Termination on Equity Awards. In connection with Mr. Bressler’s employment agreement, he was granted an award of 271,739 restricted shares of Clear Channel Outdoor Class A common stock on July 29, 2013. In the event of Mr. Bressler’s termination of employment or service for any reason, then, except as
otherwise provided in the award agreement, all unvested shares of the restricted stock will be immediately forfeited. In the event that Mr. Bressler’s employment with iHeartMedia, Clear Channel Outdoor and its subsidiaries is terminated by iHeartMedia or Clear Channel Outdoor for a reason other than Cause or by Mr. Bressler for Good Cause, 50% of any shares of the restricted stock that would otherwise vest within 12 months after such termination will remain outstanding and vest on the date such shares would otherwise have vested, except that if such termination occurs during the 90-day period prior to or the 12-month period following a Change in Control (as defined in the award agreement), 100% of any unvested restricted stock will vest upon the consummation of such Change in Control (or on the termination date in the case of a termination following a Change in Control). If Mr. Bressler ceases to be employed by Clear Channel Outdoor and its subsidiaries by reason of termination by Clear Channel Outdoor with or without Cause or at the written request of iHeartMedia but continues to be employed by iHeartMedia, all unvested shares of the restricted stock outstanding as of such termination will be converted into a number of shares of restricted stock of iHeartMedia having an aggregate Fair Market Value (as defined in the iHeartMedia 2015 Executive Long Term Incentive Plan) equal to the aggregate Fair Market Value of such unvested shares, in each case, as of the date of such termination, with such iHeartMedia restricted stock vesting on the terms and conditions as are set forth in the Clear Channel Outdoor award agreement (substituting iHeartMedia for Clear Channel Outdoor).
C. William Eccleshare
Termination by Clear Channel Outdoor for Cause or by Mr. Eccleshare without Good Reason. Mr. Eccleshare’s employment agreement provides for the following payments and benefits upon termination by Clear Channel Outdoor for “Cause” or by Mr. Eccleshare without “Good Reason.” Under the agreement, “Cause” is defined as: (1) conduct by Mr. Eccleshare constituting a material act of willful misconduct in connection with the performance of his duties; (2) continued, willful and deliberate non-performance by Mr. Eccleshare of his duties (other than by reason of physical or mental illness, incapacity or disability) where such non-performance has continued for more than 15 business days following written notice of such non-performance; (3) Mr. Eccleshare’s refusal or failure to follow lawful and reasonable directives consistent with his job responsibilities where such refusal or failure has continued for more than 15 business days following written notice of such refusal or failure; (4) a criminal conviction of, or a plea ofnolo contendere by, Mr. Eccleshare for a felony or material violation of any securities law including, without limitation, conviction of fraud, theft or embezzlement or a crime involving moral turpitude; (5) a material breach by Mr. Eccleshare of any of the provisions of his employment agreement; or (6) a material violation by Mr. Eccleshare of Clear Channel Outdoor’s employment policies regarding harassment; provided, however, that Cause shall not exist under clauses (1), (3), (5) or (6) unless Mr. Eccleshare has been given written notice specifying the act, omission or circumstances alleged to constitute Cause and he fails to cure or remedy such act, omission or circumstances within 15 business days after receipt of such notice.
The term “Good Reason” includes: (1) a change in Mr. Eccleshare’s reporting line; (2) a material change in his titles, duties or authorities (provided that Mr. Eccleshare shall not have Good Reason to terminate employment if, after a restructuring or reorganization of Clear Channel Outdoor or a sale or spinoff of all or a portion of Clear Channel Outdoor’s operations, Mr. Eccleshare continues as Chief Executive Officer of CCI (or any of its successors)); (3) a reduction in Mr. Eccleshare’s base salary or target bonus, other than an across-the-board reduction applicable to all senior executive officers of Clear Channel Outdoor; (4) a required relocation within the domestic United States of more than 50 miles of his primary place of employment; or (5) a material breach by Clear Channel Outdoor of the terms of the employment agreement. To terminate for Good Reason, Mr. Eccleshare must provide Clear Channel Outdoor with 30 days’ written notice, after which Clear Channel Outdoor has 30 days to cure, and Mr. Eccleshare must terminate employment within ten (10) days following the expiration of the Company’s cure period, if he still intends to terminate.
If Mr. Eccleshare’sWells’ employment is terminated by Clear Channel Outdoor for Cause, or by Mr. Eccleshare without Good Reason, Clear Channel Outdoor will pay all Accrued Obligations to Mr. Eccleshare his accrued and unpaid base salary through the date of termination and any unreimbursed business expenses and any payments or benefits (including him.accrued but untaken vacation, if any) required under applicable employee benefit plans or equity plans in accordance with such plans and/or policies (the “Accrued Amounts”). In addition, if Mr. Eccleshare terminates his employment without Good Reason and he signs and returns a release of claims in the time period required, Clear Channel Outdoor will pay to Mr. Eccleshare any annual bonus and additional bonus earned but unpaid with respect to the calendar year prior to the year of termination (the “Earned Prior Year Annual and Additional Bonus”) and, if Clear Channel Outdoor terminates Mr. Eccleshare’s employment after receipt of Mr. Eccleshare’s notice of termination, Clear Channel Outdoor will pay any base salary for any remaining portion of the 90-day advance notice period.
If Mr. Eccleshare is terminated for Cause, his Clear Channel Outdoor stock options will be cancelled and any unvested Clear Channel Outdoor restricted stock units will be forfeited. If Mr. Eccleshare terminates his employment without Good Reason, any unvested Clear Channel Outdoor stock options will be cancelled, he will have three months to exercise any vested Clear Channel Outdoor stock options and any unvested Clear Channel Outdoor restricted stock units will be forfeited. If his employment is terminated due to retirement (resignation from employment when the sum of his full years of age and full years of service equals at least 70, and he is at least 60 years of age with five full years of service at the time), all of his issued Clear Channel Outdoor stock options will continue to vest for the shorter of five years or the remainder of their original 10-year terms, and any unvested Clear Channel Outdoor restricted stock units will continue to vest as if he were employed.
Termination by Clear Channel Outdoor without Cause, by Mr. Eccleshare for Good Reason, Upon Non-Renewal of the AgreementNon-renewal by Clear Channel Outdoor or Upon Change in ControlTermination by Mr. Wells for Good Reason. If Clear Channel Outdoor terminates Mr. Eccleshare’sWells’ employment without Cause (and not by reason of disability), if Clear Channel Outdooror does not renew the initial term or any subsequent renewal terms of the employment agreement, or if Mr. EccleshareWells terminates his employment for Good Reason, then Clear Channel Outdoor will pay all Accrued Obligations to Mr. Eccleshare any Accrued Amounts.Wells. In addition, if Mr. EccleshareWells signs a severance agreement and returns ageneral release of claims in the time period required,a form satisfactory to Clear Channel Outdoor: (i) Clear Channel Outdoor will: (1)will pay to Mr. Eccleshare a severance paymentWells, in an amount equal to 120% of his then-applicable base salary and 100% of his then-applicable target annual bonus in respect of the year of termination (the “Severance Payment”), with such Severance Payment to be paid in equal monthly installments for a period of 12 months after such termination; (2) reimburse his family’s reasonable relocation expenses from New York City to London that are incurred during employment or within 12 months after his termination, including reimbursement of the New York City apartment lease breakage fee, subject to submission of expensesperiodic payments in accordance with the Company’s reimbursement policyordinary payroll practices and deductions, his current base salary for 18 months (the “Relocation Fee”“Severance Payments” or “Severance Pay Period”); (3) pay to(ii) Mr. Eccleshare the Earned Prior Year Annual and Additional Bonus; (4) pay to Mr. EccleshareWells will be eligible for a pro rata portion of his annualpro-rata bonus for the year of termination,(“Pro-Rata Bonus”), calculated based upon performance as of the termination date as related to overall performance at the end of the calendar year for which pro rata portion of the annual bonusyear. Mr. Eccleshare shall be eligibleWells will receive such Pro-Rata Bonus only if a bonusMr. Wells would have been earned bythe bonus had Mr. Wells remained employed through the end of the applicable calendar year (the “Prorated Annual Bonus”);year. Calculation and (5) provide for him and his dependents continued participation in Clear Channel Outdoor’s group health plan that covers Mr. Eccleshare at Clear Channel Outdoor’s expense for a periodpayment of three months as long as he timely elects continued coverage and continues to pay copayment premiums at the same level and cost as Mr. Eccleshare paid immediately priorbonus, if any, shall be pursuant to the plan in effect during the termination (the “COBRA Coverage Benefit”). If Mr. Eccleshare violates the non-competition, non-interference or non-solicitation covenants contained in the employment agreement (after being provided a 10-day cure opportunity to the extent such violation is curable), Mr. Eccleshare will forfeit any right to the pro rata portion of the Severance Payment for the number of months remaining in the 18-month non-compete period after termination. In addition, no Relocation Fee or COBRA Coverage Benefit will be paid in the event of a violation of the non-competition, non-interference or non-solicitation covenants contained in the employment agreement (after being provided a 10-day cure opportunity to the extent such violation is curable) and Mr. Eccleshare will reimburse Clear Channel Outdoor for any forfeited pro-rata portion of the Severance Payment, Relocation Fee and/or COBRA Coverage Benefit already paid. Furthermore, in the event that Mr. Eccleshare’s employment is terminated by Clear Channel Outdoor without Cause or by Mr. Eccleshare for Good Reason, his unvested Clear Channel Outdoor restricted stock units awarded on July 26, 2012 will vest, his unvested Clear Channel Outdoor stock options will be cancelled and his
vested Clear Channel Outdoor stock options will continue to be exercisable for three months. Mr. Eccleshare’s employment agreement does not provide for payments or benefits upon a change in control. Accordingly, if he is terminated without Cause after a change in control, Mr. Eccleshare will be entitled to the benefits described for a termination without Cause. Mr. Eccleshare’s unvested Clear Channel Outdoor stock options and Clear Channel Outdoor restricted stock units will vest upon a change in control, with or without termination. Further in this event, Mr. Eccleshare shall receive any unpaid portion of the payment to which he is entitled as a result of the Second Eccleshare Amendment, and any unvested restricted stock units shall automatically vest on his last day of employment.
Termination due to Disability. If Mr. Eccleshare is unable to perform the essential functions of his full-time position for more than 180 consecutive days in any 12 month period, Clear Channel Outdoor may terminate his employment. If Mr. Eccleshare’s employment is terminated,year; (iii) Clear Channel Outdoor will pay Mr. Wells a separation bonus in an amount equal to the target bonus to which Mr. Eccleshare orWells would be entitled for the year in which his designee any Accrued Amounts and the Relocation Fee for Mr. Eccleshare and his family. In addition, if Mr. Eccleshare signs and returnsemployment terminates, payable in a release of claims in the time period required,lump sum; (iv) Clear Channel Outdoor will pay Mr. Wells in a lump sum an amount equal to Mr. Eccleshare or his designee any Earned Prior Year Annualthe product of (A) 18 and Additional Bonus, Prorated Annual Bonus and(B) the COBRA Coverage Benefit. If his employment is terminated duepremiums Mr. Wells would be required to disability, hispay if he elected pursuant to COBRA to continue the health benefits coverage he had prior to the termination date (less the amount that Mr. Wells would have to pay for such coverage as an active employee) (the “COBRA Payment”), less applicable federal and state withholdings and all other applicable deductions; and (v) any unvested Clear Channel Outdoor stocktime vesting equity awards scheduled to vest within the 12 month period following the date of termination shall vest in full on the date of termination. Any unvested performance vesting options will continueshall remain eligible to vest for the shorterthree-month period following the date of five years or the remainder of their original 10-year terms, and anytermination. Any unvested Clear Channel Outdoor restricted stock units will continuetime-vesting equity awards scheduled to vest within 12 months following the termination date, will vest in full on the date of termination. Any outstanding and unvested RSUs that are subject to performance-based vesting will vest (i) 1/3 of the target shares are eligible to vest if the date of termination is before the date of which is two years prior to the vesting date, (ii) 2/3 of the target shares are eligible to vest if the date of termination is on or after the date which is two years prior to the vesting date but before the date which is one year prior to the vesting date and (iii) 100% of the target shares are eligible to vest if the date of termination is on or after the date which is the one year prior to the vesting date (or other applicable performance metric). The portion of the RSUs that are subject to performance-based vesting that remain outstanding and eligible to be earned at the end of the applicable performance period based on the Relative TSR Performance (or other applicable performance metric) as outlined in the applicable award agreement and, if he were employed.earned, will then be distributed to Mr. Wells within 60 days.
Termination due to DeathNon-Renewal by Mr. Wells. If Mr. Eccleshare’s employment is terminated by his death,Wells gives notice of non-renewal of the agreement, Clear Channel Outdoor will pay all Accrued Obligations to his designee or estate: (1)Mr. Wells. If the Accrued Amounts; (2) any Earned Prior Year Annual and Additional Bonus; (3)termination date is before the Prorated Annual Bonus; (4)end of the Relocation Fee; and (5) the COBRA Coverage Benefit. If Mr. Eccleshare is terminated due to his death, his unvestedthen current employment period, then Clear Channel Outdoor stock options will, vestin periodic payments in accordance with ordinary payroll practices and continuedeductions, pay Mr. Wells an amount equal to be exercisableMr. Wells’ pro-rata base salary through the end of the then current employment period.
If Mr. Wells is in breach of any post-employment obligations or covenants, or if Mr. Wells is hired or engaged in any capacity by any competitor of Clear Channel Outdoor, in Clear Channel Outdoor’s sole discretion, in any location during any severance pay period, severance payments shall cease. If Mr. Wells is rehired by Clear Channel Outdoor during any severance pay period, severance payments shall cease. However, if Mr. Wells’ new base salary is less than his previous base salary, Clear Channel Outdoor shall pay Mr. Wells the difference between his previous and new base salary for the shorter of one year or the remainder of the original 10-year term and his unvested Clear Channel Outdoor restricted stock units will vest. Scott R. Wells
Termination by Clear Channel Outdoor for Cause or by Mr. Wells without Good Reason. Mr. Wells’ employment agreement provides for the following payments and benefits upon termination by Clear Channel Outdoor for “Cause” or by Mr. Wells without “Good Reason.”severance pay period.
Under the agreement, “Cause” is defined as Mr. Wells’: (1) willful misconduct; (2) willful refusal or repeated failure to perform his duties (other than due to disability); (3) willful refusal or repeated failure to follow lawful directives; (4) felony conviction, a plea of nolo contendere, or other criminal conduct that has or would result in material injury to Clear Channel Outdoor;Outdoor’s reputation; (5) a material breach of his employment agreement; or (6) a material violation of Clear Channel Outdoor’s written employment and management policies that has or would result in material injury to Clear Channel Outdoor. In the case of (2), (3), (5), or (6), unless the action by its nature is not curable or is a recurrence of a previously cured act with respect to which Mr. Wells has previously been provided notice, those acts will not constitute Cause unless Mr. Wells is provided with 15 days to cure after written notice. | | | | | 54 Notice and Proxy Statement 2023 | | | | |
The term “Good Reason” includes: (1) a material reduction in Mr. Wells’ base compensation; (2) a required relocation of Mr. Wells’ residence to a location more than 35 miles from its current location; (3) a material reduction in duties, authority or responsibilities; (4) a requirement that Mr. Wells report to any person of lesser authority than the Chairman and Chief Executive Officer of Clear Channel Outdoor or the Chief Financial Officer of Clear Channel Outdoor;Board; or (5) a material breach by Clear Channel Outdoor of the terms of the employment agreement. To terminate for Good Reason, Brian D. Coleman 2022 Coleman Employment Agreement Termination due to Death. If Mr. Wells must provideColeman’s employment is terminated by his death, Clear Channel Outdoor with 30 days’ written notice, after whichwill pay to his designee or, if no designee, to his estate his accrued and unpaid base salary and any unpaid prior year bonus, if any, through the date of termination, and any payments required under applicable employee benefit plans. Termination due to Disability. If Mr. Coleman’s employment is terminated due to disability, he will receive all accrued and unpaid base salary and any unpaid prior year bonus, if any, through the date of termination, and any payments required under applicable employee benefit plans. Termination by Clear Channel Outdoor has 30 daysfor Cause. If Clear Channel Outdoor terminates Mr. Coleman’s employment for Cause, Clear Channel Outdoor will pay to cure. If Mr. Wells is terminated with Cause, he will receive a lump-sum cash payment equal toColeman his Accrued Amountsaccrued and unpaid base salary through the termination date and any Earned Prior Year Annual Bonus.payments required under applicable employee benefit plans.
Termination by Clear Channel Outdoor without Cause by Mr. Wells for Good Reason or Upon Non-Renewal of the Agreement/ Non-renewal by Clear Channel Outdoor / Termination by Mr. Coleman for Good Cause. If Mr. Wells is terminated by Clear Channel Outdoor terminates Mr. Coleman’s employment without Cause or does not renew the agreement, or if Mr. Wells resignsColeman terminates for Good Reason or the agreement is not renewed byCause, Clear Channel Outdoor: (1) heOutdoor will receive a lump-sum cash payment equal topay his Accrued Amountsaccrued and unpaid base salary through the termination date, unpaid prior year bonus, if any, and any Earned Prior Year Annual Bonus; and (2) provided hepayments required under applicable employee benefit plans. In addition, if Mr. Coleman signs and returns a severance agreement and general release of claims in the time period required, hea form satisfactory to Clear Channel Outdoor, Clear Channel Outdoor will receive (a)pay Mr. Coleman, in periodic payments in accordance with ordinary payroll practices and deductions, hisMr. Coleman’s current base salary for 12 months. Further, Mr. Coleman will be eligible for a pro-rata portion of the annual bonus, calculated based upon performance as of the termination date as related to overall performance at the end of the calendar year. Mr. Coleman is eligible only if a bonus would have been earned by the end of the calendar year. Calculation and payment of the bonus, if any, will be pursuant to the plan in effect during the termination year. Notwithstanding anything to the contrary set forth in any equity award agreements, any unvested Clear Channel Outdoor equity awards will vest in full on the date of termination. Non-Renewal by Mr. Coleman. If Mr. Coleman gives notice of non-renewal of the agreement, Clear Channel Outdoor will pay his accrued and unpaid base salary through the termination for 18 months (the “Wells Severance Payments”); (b)date, and any payments required under applicable employee benefit plans. If the termination date is before the end of the then current employment period, and if Mr. Coleman signs a Prorated Annual Bonus; (c)severance agreement and general release of claims in a separation bonusform satisfactory to Clear Channel Outdoor, then Clear Channel Outdoor will, in periodic payments in accordance with ordinary payroll practices and deductions, pay Mr. Coleman an amount equal to 100%his pro-rata base salary through the end of the then current employment period. If Mr. Coleman is in breach of any post-employment obligations or covenants, or if Mr. Coleman is hired or engaged in any capacity by any competitor of Clear Channel Outdoor, in Clear Channel Outdoor’s sole discretion, in any location during any severance pay period, the severance payments described above shall cease. If Mr. Coleman is rehired by Clear Channel Outdoor during any severance pay period, severance payments shall cease. However, if Mr. Coleman’s new base salary is less than his previous base salary, Clear Channel Outdoor shall pay Mr. Coleman the difference between his previous and new base salary for the remainder of the severance pay period. Under the agreement, “Cause” is defined as Mr. Coleman’s: (1) willful misconduct; (2) willful and repeated failure to perform his duties (other than due to disability); (3) willful and repeated failure to follow lawful directives; (4) felony conviction, a plea of nolo contendere to a felony by Mr. Coleman, or other conduct that has or would result in material injury to Clear Channel Outdoor; (5) a material breach of his then-applicable targetemployment agreement; or (6) a significant violation of Clear Channel Outdoor’s written employment and management policies made known to Mr. Coleman. | | | | | | | | | Notice and Proxy Statement 2023 55 |
The term “Good Cause” includes: (1) a change in reporting lines such that Mr. Coleman no longer reports directly to our Chief Executive Officer; (2) a required relocation of Mr. Coleman’s offices to a location more than 50 miles from the San Antonio metropolitan area; (3) Clear Channel Outdoor’s continued breach of the terms of the agreement after being provided written notice of such breach by Mr. Coleman; (4) a substantial and unusual increase in responsibilities and authority without an offer of additional reasonable compensation as determined by Clear Channel Outdoor in light of compensation for similarly situated employees; (5) a substantial and unusual reduction in responsibilities or authority; or (6) a reduction in Mr. Coleman’s base salary or annual bonus target. Coleman Amended and Restated Employment Agreement Pursuant to the Coleman Amended and Restated Employment Agreement, if Clear Channel Outdoor terminates Mr. Coleman’s employment without Cause or does not renew the agreement, or if Mr. Coleman terminates for Good Cause (each as defined therein), Clear Channel Outdoor will pay his accrued and unpaid base salary through the termination date, unpaid prior year bonus, if any, and any payments required under applicable employee benefit plans. In addition, if Mr. Coleman signs a severance agreement and general release of claims in respecta form satisfactory to Clear Channel Outdoor, Clear Channel Outdoor will pay Mr. Coleman, in periodic payments in accordance with ordinary payroll practices and deductions, Mr. Coleman’s current base salary for 12 months. Further, Mr. Coleman will be eligible for a pro-rata portion of the yearannual bonus, calculated based upon actual performance and pro-rated to reflect Mr. Coleman’s period of termination (the “Separation Bonus”), with such Separation Bonus toemployment during the performance period through the date of termination. Calculation and payment of the bonus, if any, will be paid in a lump sum; (d) a lump sum equalpursuant to the product of (i) 12plan in effect during the termination year. Notwithstanding anything to the contrary set forth in any equity award agreements between the Company and (ii) the COBRA premiums Mr. Wells would be requiredColeman (except in circumstances where treatment more favorable to pay if he elected to continue the health benefits coverage he hadMr. Coleman is provided in any such equity award agreement), (x) any unvested Clear Channel Outdoor equity awards granted prior to the terminationeffective date (lessof the amount Mr. Wells would have to pay for such coverage as an active employee);Coleman Amended and (e)Restated Employment Agreement (the “Effective Date”) will vest in full on the date of termination; (y) any unvested time vesting optionstime-vesting equity awards granted after the Effective Date which are scheduled to vest within the twelve12 month period following the date of termination which options shall be considered fully vestedwill vest in full on the date of terminationtermination; and (z) any outstanding and unvested performance vesting options shall remainstock units granted after the Effective Date will vest as follows: (i) one-third of the target number of shares underlying the performance stock units are eligible to vest for the three month period followingif the date of termination. Iftermination is before the date which is two years prior to the vesting date (as defined in the applicable award agreement), (ii) two-thirds of the target number of shares underlying the performance stock units are eligible to vest if the date of termination is on or after the date which is two years prior to the vesting date but before the date which is one year prior to the vesting date, and (iii) one hundred percent of the target number of shares underlying the performance stock units are eligible to vest if the date of termination is on or after the date which is one year prior to the vesting date. The portion of the performance stock units eligible to vest will remain outstanding and eligible to be earned at the end of the applicable performance period based on the relative total shareholder return performance (or other applicable performance metric) as outlined in the applicable award agreement and, if earned, will then be distributed to Mr. Wells violates theColeman within 60 days. The other terms of the Coleman Amended and Restated Employment Agreement are substantially similar to those of the 2022 Coleman Employment Agreement. Lynn A. Feldman Termination due to Death. If Ms. Feldman’s employment is terminated due to death, Clear Channel Outdoor will pay to her designee or, if no designee, to her estate her accrued and unpaid base salary and any unpaid prior year bonus, if any, through the date of termination, any business expenses incurred by Ms. Feldman but not yet reimbursed and any other payments required under applicable employee benefit plans, equity plans or equity award agreements (collectively, the “Accrued Obligations”). Termination due to Disability. If Ms. Feldman’s employment is terminated due to disability, Clear Channel Outdoor will pay all Accrued Obligations to her. Termination by Clear Channel Outdoor for Cause. If Clear Channel Outdoor terminates Ms. Feldman’s employment for Cause, Clear Channel Outdoor will pay to Ms. Feldman accrued and unpaid base salary through the termination date and any payments required under applicable benefit plans. | | | | | 56 Notice and Proxy Statement 2023 | | | | |
Termination by Clear Channel Outdoor without Cause / Non-renewal by Clear Channel Outdoor / Termination by Ms. Feldman for Good Cause. If Clear Channel Outdoor terminates Ms. Feldman’s employment without Cause or does not renew the agreement, or if Ms. Feldman terminates for Good Cause, Clear Channel Outdoor will pay her the Accrued Obligations. In addition, if Ms. Feldman signs a severance agreement and general release of claims in a form satisfactory to Clear Channel Outdoor, Clear Channel Outdoor will pay Ms. Feldman, in periodic payments in accordance with ordinary payroll practices and deductions, Ms. Feldman’s current base salary for 12 months. Further, Ms. Feldman will be eligible for a pro-rata portion of the Wells Severance Paymentsannual bonus, calculated based upon performance as of the termination date as related to overall performance at the end of the calendar year. Ms. Feldman is eligible only if a bonus would have been earned by the end of the calendar year. Calculation and payment of the bonus, if any, will be pursuant to the plan in effect during the termination year. Any unvested time-vesting equity awards scheduled to vest within 12 months following the termination date will vest in full on the date of termination. Any outstanding and unvested RSUs that are subject to performance-based vesting will vest (i) 1/3 of the target shares are eligible to vest if the date of termination is before the date of which is two years prior to the vesting date, (ii) 2/3 of the target shares are eligible to vest if the date of termination is on or after the date which is two years prior to the vesting date but before the date which is one year prior to the vesting date and (iii) 100% of the target shares are eligible to vest if the date of termination is on or after the date which is the one year prior to the vesting date (or other applicable performance metric). The portion of the RSUs that are subject to performance-based vesting that remain outstanding and eligible to be earned at the end of the applicable performance period based on the Relative TSR Performance (or other applicable performance metric) as outlined in the applicable award agreement and, if earned, will then be distributed to Ms. Feldman within 60 days. Non-Renewal by Ms. Feldman. If Ms. Feldman gives notice of non-renewal of the agreement in accordance with the terms of the agreement, Clear Channel Outdoor will pay her the Accrued Obligations. If Ms. Feldman is in breach of any post-employment obligations or covenants, or if Ms. Feldman is hired or engaged in any capacity by any competitor of Clear Channel Outdoor, in Clear Channel Outdoor’s sole discretion, in any location during any severance pay period, the severance payments described above shall cease. Termination due to Disability. If Mr. WellsMs. Feldman is unable to perform the essential functions of his full-time position for more than 180 days in any 12 month period,rehired by Clear Channel Outdoor may terminate his employment. If Mr. Wells’during any severance pay period, severance payments shall cease. However, if Ms. Feldman’s new base salary is less than her previous base salary, Clear Channel Outdoor shall pay Ms. Feldman the difference between her previous and new base salary for the remainder of the severance pay period.
Under the agreement, “Cause” is defined as Ms. Feldman’s: (1) willful misconduct; (2) material non-performance of her duties (other than due to disability); (3) repeated failure to follow lawful directives; (4) felony conviction, a plea of nolo contendere to a felony by Ms. Feldman, or other conduct that has or would result in material injury to Clear Channel Outdoor’s reputation; (5) a material breach of her employment is terminated, he will receive:agreement; or (6) a material violation of Clear Channel Outdoor’s written employment and management policies. The term “Good Cause” includes: (1) a lump-sum cash payment equalmaterial and substantial diminution of duties or responsibilities or Ms. Feldman’s removal as Executive Vice President and/or general counsel; (2) a required relocation of Ms. Feldman’s principal place of work to his Accrued Amounts and (2) any Earned Prior Year Annual Bonus.a location more than 30 miles from the current location in New York, New York; or (3) a significant reduction in Ms. Feldman’s base salary or annual bonus target. Jason A. Dilger Termination due to Death. If Mr. Wells’Dilger’s employment is terminated by his death, Clear Channel Outdoor will pay in a lump sum to his designee or, if no designee, to his estate: (1)estate his Accrued Amountsaccrued and (2)unpaid base salary and any Earned Prior Year Annual Bonus.unpaid prior year bonus, if any, through the date of termination, and any payments required under applicable employee benefit plans. Steven J. MacriTermination due to Disability. If Mr. Dilger’s employment is terminated due to disability, he will receive all accrued and unpaid base salary and any unpaid prior year bonus, if any, through the date of termination, and any payments required under applicable employee benefit plans.
Termination by iHeartMediaClear Channel Outdoor for Cause. If Clear Channel Outdoor terminates Mr. Dilger’s employment for Cause, Clear Channel Outdoor will pay to Mr. Dilger his accrued and unpaid base salary through the termination date and any payments required under applicable employee benefit plans. | | | | | | | | | Notice and Proxy Statement 2023 57 |
Termination by Clear Channel Outdoor without Cause / Non-renewal by Clear Channel Outdoor. If Clear Channel Outdoor terminates Mr. Dilger’s employment without Cause or does not renew the agreement, Clear Channel Outdoor will pay his accrued and unpaid base salary through the termination date, unpaid prior year bonus, if any, and any payments required under applicable employee benefit plans. In addition, if Mr. Dilger signs a severance agreement and general release of claims in a form satisfactory to Clear Channel Outdoor, Clear Channel Outdoor will pay Mr. Dilger, in periodic payments in accordance with ordinary payroll practices and deductions, Mr. Dilger’s current base salary for 12 months. Further, Mr. Dilger will be eligible for a pro-rata portion of the annual bonus, calculated based upon actual performance and paid at the time annual bonuses are paid to other Clear Channel Outdoor employees. Calculation and payment of the bonus, if any, will be pursuant to the plan in effect during the termination year. Non-Renewalby Mr. Macri without Good Cause Dilger. If Mr. Macri’sDilger gives notice of non-renewal of the agreement, Clear Channel Outdoor will pay his accrued and unpaid base salary through the termination date, and any payments required under applicable employee benefit plans. If the termination date is before the end of the then current employment period, and if Mr. Dilger signs a severance agreement providesand general release of claims in a form satisfactory to Clear Channel Outdoor, then Clear Channel Outdoor will, in periodic payments in accordance with ordinary payroll practices and deductions, pay Mr. Dilger an amount equal to his pro-rata base salary through the end of the then-current employment period. If Mr. Dilger is in breach of any post-employment obligations or covenants, or if Mr. Dilger is hired or engaged in any capacity by any competitor of Clear Channel Outdoor, in Clear Channel Outdoor’s sole discretion, in any location during any severance pay period, the severance payments described above shall cease. If Mr. Dilger is rehired by Clear Channel Outdoor during any severance pay period, severance payments shall cease; however, if Mr. Dilger’s base salary following such rehiring is less than his base salary in effect immediately prior to his termination, Clear Channel Outdoor shall pay Mr. Dilger, for the remainder of the severance pay period, the pro-rata difference between his base salary as in effect immediately prior to the termination and his salary following payments and benefits upon termination by iHeartMedia for “Cause” or by Mr. Macri without “Good Cause.”such rehiring. Under the agreement, “Cause” is defined as Mr. Macri’s:Dilger’s: (1) willful misconduct; (2) non-performance of his duties (other than due to disability); (3) failure to follow lawful directives; (4) felony conviction, a plea of nolo contendere to a felony by Mr. Dilger, or other conduct that has or would result in material injury to iHeartMedia’sClear Channel Outdoor’s reputation; (5) a material breach of his employment agreement; or (6) a material violation of iHeartMedia’s employment and management policies. In the case of (2), (3), (5), or (6) unless the action by its nature is not curable or is a recurrence of a previously cured act with respect to which Mr. Macri has previously been provided notice, those acts will not constitute Cause unless Mr. Macri is provided with 10 days to cure after written notice. The term “Good Cause” includes, subject to certain exceptions: (1) iHeartMedia’s material breach of the agreement after written notice from Mr. Macri specifying the alleged failure; (2) a substantial and unusual increase in responsibilities and authority without an offer of additional reasonable compensation; (3) a substantial and unusual reduction in responsibilities or authority; (4) if Mr. Macri’s responsibilities and authority in a finance-related capacity have not been expanded within the first 12 months of his employment; or (5) a change in the place of Mr. Macri’s performance of more than 50 miles. To terminate for Good Cause, Mr. Macri must provide iHeartMedia with 30 days written notice, after which iHeartMedia has 30 days to cure.
If Mr. Macri is terminated with Cause, he will receive a lump-sum cash payment equal to his Accrued Amounts.
Termination by iHeartMedia without Cause, by Mr. Macri for Good Cause or Upon Non-Renewal of the Agreement by iHeartMedia. If Mr. Macri is terminated by iHeartMedia without Cause, if Mr. Macri resigns for Good Cause or the agreement is not renewed by iHeartMedia: (1) he will receive a lump-sum cash payment equal to his Accrued Amounts; and (2) provided he signs and returns a release of claims in the time period required, he will receive (a) in periodic payments in accordance with ordinary payroll practices and deductions, his base salary on the date of termination for 12 months plus his target bonus for the year of termination and (b) a Prorated Annual Bonus.
Termination due to Disability. If Mr. Macri is unable to perform the essential functions of his full-time position for more than 180 days in any 12 month period, iHeartMedia may terminate his employment. If Mr. Macri’s employment is terminated, he will receive a lump-sum cash payment equal to his Accrued Amounts.
Termination due to Death. If Mr. Macri’s employment is terminated by his death, iHeartMedia will pay in a lump sum to his designee or, if no designee, to his estate, his Accrued Amounts.
Scott D. Hamilton
Termination by iHMMS for Cause. Mr. Hamilton’s employment agreement provides for the following payments and benefits upon termination by iHMMS for “Cause.”
Under the agreement, “Cause” is defined as Mr. Hamilton’s: (1) willful misconduct; (2) non-performance of his duties (other than due to disability); (3) failure to follow lawful directives; (4) felony conviction, a plea of nolo contendere, or other conduct that has or would result in material injury to the reputation of iHMMS or its affiliates; (5) a material breach of his employment agreement; or (6) a significant violation of theClear Channel Outdoor’s written employment and management policiespolicies.
Equity Award Treatment Pursuant to the terms of iHMMSthe 2021 Plan and applicable award agreements, if an NEO’s employment terminates due to death or its affiliates. Indisability, then unvested RSUs and PSUs will vest in full (with such vesting to be at the case of (2), (3), (5), or (6) unless the action by its nature is not curable or is a recurrence of a previously cured acttarget level with respect to which Mr. Hamilton has previously been provided notice, those actsPSUs), and unvested restricted stock awards will not constitute Cause unless Mr. Hamilton is providedbe forfeited for no consideration. If an NEO’s employment terminates due to Retirement (as defined in the applicable award agreement), with 10 daysrespect to cure after written notice.then unvested RSUs and PSUs, the NEO will vest in the portion of the award that would have vested in the ordinary course during the 12-month period following such Retirement (with such pro rata portion to be at the target level with respect to PSUs), and then unvested restricted stock awards will be forfeited for no consideration. If Mr. Hamilton is terminated with Cause he will receiveUpon a lump-sumChange in Control (as defined in the applicable award agreement), the Compensation Committee may elect to (i) accelerate the vesting of all or a portion of the award, (ii) cancel the award and pay the NEO an amount of cash, paymentshares of stock or combination thereof equal to his Accrued Amounts.
Terminationthe Change in Control Price (as defined in the applicable award agreement) for a number of shares equal to the vested RSUs or target number of PSUs, (iii) provide for the assumption, substitution or continuation of RSUs or PSUs by iHMMS without Causethe successor company or Upon Non-Renewala parent or subsidiary of the Agreement by iHMMS. If Mr. Hamiltonsuccessor company, (v) with respect to PSUs, certify the extent to which the performance conditions have been achieved prior to the conclusion of the performance period, with such PSUs to remain subject to time-based vesting conditions through the conclusion of the performance period, or (v) make such adjustments to the RSUs or PSUs then outstanding as the Compensation Committee deems appropriate to reflect such Change in Control; provided, however, the Compensation Committee may determine that no adjustment is necessary.
In the event that an NEO is terminated by iHMMSthe Company without Cause or the agreement is not renewed by iHMMS: (1) he will receive a lump-sum cash payment equal to his Accrued Amounts; and (2) provided he signs and returns a release of claims(as defined in the time period required, he will receive (a) in periodic payments in accordance with ordinary payroll practices and deductions, his base salary on the date of termination forapplicable award agreement) within 12 months following a Change in Control, then 100% of then unvested RSUs and (b) a Prorated Annual Bonus.restricted stock awards will vest and then unvested PSUs will vest at target level. Termination due to Disability. If Mr. Hamilton is unable to perform the essential functions of his full-time position for more than 180 days in any 12 month period, iHMMS may terminate his employment. If Mr. Hamilton’s employment is terminated, he will receive a lump-sum cash payment equal to his Accrued Amounts.
Termination due to Death. If Mr. Hamilton’s employment is terminated by his death, iHMMS will pay in a lump sum to his designee or, if no designee, to his estate his Accrued Amounts.
| | | | | 58 Notice and Proxy Statement 2023 | | | | |
Post-Employment Table The following table describes the potential payments or benefits upon termination, other post-employment scenarios or change in control for each of those named executive officers.NEOs. The amounts in the table below show only the value of amounts payable or benefits due to enhancements in connection with each scenario, and do not reflect amounts otherwise payable or benefits otherwise due as a result of employment. In addition, the table does not include amounts payable pursuant to plans that are available generally to all salaried employees. The actual amounts to be paid out can only be determined at the time of such change in control or such executive officer’s termination of service. Potential Payments Upon Termination or Change in Control(a) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Name | | Benefit | | Termination
with
“Cause” | | Termination
without
“Cause” or
Resignation
for “Good
Cause” or
“Good
Reason” | | | Termination
due to
“Disability” | | | Termination
due to Death | | | Retirement or
Resignation
without
“Good Cause”
or “Good
Reason” | | | “Change in
Control”
without
Termination(b) | | | “Change in
Control”
with
Termination | | Robert W. Pittman(c) | | Vesting of equity awards(d) | | — | | $ | 412,841 | | | | — | | | | — | | | | — | | | | — | | | $ | 2,127,609 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | TOTAL | | — | | $ | 412,841 | | | | — | | | | — | | | | — | | | | — | | | $ | 2,127,609 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Richard J. Bressler(c) | | Cash payment | | | | $ | 2,594,240 | (e) | | $ | 851,840 | (f) | | $ | 851,840 | (f) | | | — | | | | — | | | $ | 2,397,783 | (e) | | | Cash value of benefits(g) | | — | | | 9,709 | | | | 9,709 | | | | 9,709 | | | | — | | | | — | | | | 9,709 | | | | Vesting of equity awards(d) | | — | | | 450,749 | | | | — | | | | — | | | | — | | | | — | | | | 1,981,578 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | TOTAL | | — | | $ | 3,054,698 | | | $ | 861,549 | | | $ | 861,549 | | | | — | | | | — | | | $ | 4,389,070 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | C. William Eccleshare | | Cash payment | | — | | $ | 3,166,686 | (h) | | $ | 966,686 | (i) | | $ | 966,686 | (i) | | $ | 500,575 | (j) | | | — | | | | — | | | | Vesting of equity awards(d) | | — | | | 2,830,379 | | | | — | | | | 2,830,379 | | | | — | | | $ | 2,830,379 | | | | — | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | TOTAL | | — | | $ | 5,997,065 | | | $ | 966,686 | | | $ | 3,797,065 | | | $ | 500,575 | | | $ | 2,830,379 | | | | — | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Scott R. Wells | | Cash payment | | — | | $ | 2,232,725 | (k) | | | | | | | | | | | | | | | | | | | | | | | Cash value of benefits(g) | | — | | | 25,076 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | TOTAL | | — | | $ | 2,257,801 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Steven J. Macri(c) | | Cash payment | | — | | $ | 404,624 | (l) | | | — | | | | — | | | | — | | | | — | | | | — | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | TOTAL | | — | | $ | 404,624 | | | | — | | | | — | | | | — | | | | — | | | | — | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Scott D. Hamilton(c) | | Cash payment | | — | | $ | 222,815 | (m) | | | | | | | | | | | — | | | | — | | | | — | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | TOTAL | | — | | $ | 222,815 | | | | | | | | | | | | — | | | | — | | | | — | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | Name | | Benefit | | Termination
without
“Cause” or
Resignation
for “Good
Reason” | | | Termination
due to
“Disability” | | | Termination
due to Death | | | Retirement or
Resignation
without
“Good
Reason” | | | “Change in
Control”
without
Termination(b) | | | “Change in
Control”
with
Termination | | | | | | | | | | Scott R. Wells | | Cash payment | | $ | 4,282,842 | (c) | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | 4,282,842 | (c) | | | Cash Value of Benefits(d) | | $ | 15,142 | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | 15,142 | | | | Vesting of equity awards(e) | | $ | 1,646,342 | | | $ | 2,752,919 | | | $ | 2,752,919 | | | $ | — | | | $ | — | | | | 2,752,919 | | | | TOTAL | | $ | 5,944,326 | | | $ | 2,752,919 | | | $ | 2,752,919 | | | $ | — | | | $ | — | | | | 7,050,903 | | | | | | | | | | Brian D.
Coleman | | Cash payment | | $ | 1,414,336 | (f) | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | | 1,414,336 | (f) | | | Vesting of equity awards(e) | | $ | 1,734,431 | | | $ | 1,679,515 | | | $ | 1,679,515 | | | $ | — | | | $ | — | | | | 1,734,431 | | | | TOTAL | | $ | 3,148,767 | | | $ | 1,679,515 | | | $ | 1,679,515 | | | $ | — | | | $ | — | | | | 3,148,767 | | | | | | | | | | Lynn A. Feldman | | Cash payment | | $ | 1,369,649 | (f) | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | | 1,369,649 | (f) | | | Vesting of equity awards(e) | | $ | 847,324 | | | $ | 1,185,293 | | | $ | 1,185,293 | | | $ | — | | | $ | — | | | | 1,207,260 | | | | TOTAL | | $ | 2,216,973 | | | $ | 1,185,293 | | | $ | 1,185,293 | | | $ | — | | | $ | — | | | | 2,576,909 | | | | | | | | | | Jason A. Dilger | | Cash payment | | $ | 676,706 | (f) | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | | 676,706 | (f) | | | Vesting of equity awards(e) | | $ | — | | | $ | 393,797 | | | $ | 393,797 | | | $ | — | | | $ | — | | | | 393,797 | | | | TOTAL | | $ | 676,706 | | | $ | 393,797 | | | $ | 393,797 | | | $ | — | | | $ | — | | | | 1,070,503 | | | | | | | | | | | | | | | | | | | | | | | |
| (a) | Amounts reflected in the table were calculated assuming the triggering event occurred on December 31, 2015.2022. |
| (b) | Amounts reflected in the “Change in Control without Termination” column were calculated assuming that no termination occurred after the change in control. The values of any additional benefits to the named executive officersNEOs that would arise only if a termination were to occur after a change in control are disclosed in the footnotes to the “Change in Control with Termination” or other applicable columns. |
| (c) | Amounts reflected inRepresents the table represent Clear Channel Outdoor’ssum of (1) 1.5 times Mr. Wells’ base salary at termination, (2) the pro rata portion of post-employment payments for Messrs. Pittman, Bressler, Macri and Hamilton. Pursuant to the Corporate Services Agreement, a percentage of payments made to Messrs. Pittman, Bressler, Macri and Hamilton upon termination or a change in control, other than payments with respect to the vesting of any iHeartMedia equity awards, would be allocated to Clear Channel Outdoor. For 2015, this allocation isMr. Wells’ annual bonus based on Clear Channel Outdoor’s 2014 OIBDAN as a percentage of iHeartCommunications’ 2014 OIBDAN. For a further discussion ofactual performance for the Corporate Services Agreement, please referyear ended December 31, 2022, and (3) his annual target bonus for the year ended December 31, 2022, pursuant to “Certain Relationships and Related Party Transactions—iHeartMedia, Inc.—Corporate Services Agreement.”Mr. Wells’ employment agreement. |
| (d) | The value associated with the continued provision of health benefits are based on COBRA premiums for health insurance less the amount Mr. Wells would have paid to continue the same coverage if he remained employed for the 18 months following termination, pursuant to Mr. Wells’ employment agreement. |
| (e) | Amounts reflect the value of unvested Clear Channel Outdoor equity awards held by the respective named executive officersNEOs on December 31, 20152022, that are subject to accelerated vesting. This value is based upon the closing price of iHeartCommunications’Clear Channel Outdoor’s Class A common stock on December 31, 20152022 of $5.59,$1.05, but it excludes stock options with an exercise price exceeding the closing price of Clear Channel |
| Outdoor’s Class A common stock on December 31, 2015.2022. The value of vested equity awards and equity awards that continue to vest and/or remain exercisable following termination (but vesting is not accelerated) are not included in this table. |
(e)(f) | Represents the allocated portion of (1) 1.5 times the sum of Mr. Bressler’s(1) 1.0 times the NEO’s base salary at termination, and (2) the pro rata portion of the NEO’s annual bonus targetbased on actual performance for the year ended December 31, 2015, (2) an annual bonus for the year ended 31, 2015 and (3) an additional bonus for the year ended December 31, 20152022 pursuant to Mr. Bressler’sthe NEO’s employment agreement. |
(f) | | | | | | | | | Notice and Proxy Statement 2023 59 |
PAY VERSUS PERFORMANCE The following table sets forth certain information with respect to Clear Channel Outdoor’s financial performance and the compensation actually paid to our principal executive officer (“PEO”) and the average compensation actually paid to our other NEOs for the years ended on December 31, 2022, 2021 and 2020. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Summary Compensation Table Total for PEO (a) | | Compensation Actually Paid to PEO (a)(b) | | | Average Summary Compensation Table Total for Non-PEO Named Executive Officers (c) | | | Average Compensation Actually Paid to Non-PEO Named Executive Officers (b)(c) | | | Value of Initial Fixed $100
Investment Based On: | | | | | | CCOH Plan Adjusted EBITDA (f) | | | | Total Shareholder Return (d) | | | Peer Group Total Shareholder Return (d) | | | 2022 | | $5,962,621 | | ($ | 1,048,564 | ) (g) | | $ | 1,895,137 | | | ($ | 1,099,639 | ) (g) | | $ | 37 | | | $ | 93 | | | ($ | 94,388,000 | ) | | $ | 632,587,236 | | | 2021 | | $6,234,771 | | $ | 11,854,376 | (h) | | $ | 2,880,092 | | | $ | 5,492,876 | (h) | | $ | 116 | | | $ | 107 | | | ($ | 433,120,000 | ) | | $ | 496,603,373 | | | 2020 | | $4,537,958 | | $ | 4,047,663 | (i) | | $ | 1,676,961 | | | $ | 1,528,992 | (i) | | $ | 58 | | | $ | 95 | | | ($ | 600,226,000 | ) | | $ | 162,508,046 | |
| (a) | The names of the PEO of the Company reflected in these columns for each applicable fiscal year are as follows: (i) for fiscal year 2022, Mr. Wells, and (ii) for fiscal years 2021 and 2020, Mr. Eccleshare. |
| (b) | In calculating the ‘compensation actually paid’ amounts reflected in these columns, the fair value or change in fair value, as applicable, of the equity award adjustments included in such calculations was computed in accordance with FASB ASC Topic 718. The following valuation assumptions used to calculate such fair values did, in some cases, materially differ from those disclosed at the time of grant: |
Performance Award Valuation Assumptions: | | | | | | | | Measurement Year | | 2022 | | 2021 | | 2020 | | | 4.37% - 4.64% | | 0.06% - 0.79% | | 0.11% - 0.13% | | | 0% | | 0% | | 0% | | | 77.3% | | 67.5% | | 62.3% | | | 34.3% - 35.2% | | 33.3% - 34.0% | | 32.8% - 33.4% | TSR performance to date (5) | | -66.2% - 2.3% | | 34.0% - 222.4% | | -32.5% - 60.7% | | | $1.05 | | $3.31 | | $1.65 |
| 1. | Risk-free interest rate assumptions are based on U.S. Treasury constant maturities yields as of each measurement date with a term corresponding to the remaining length of the performance period, as reported in the H.15 Federal Reserve Statistical Release. |
| 2. | We do not currently pay dividends. |
| 3. | The volatility assumptions for the Company as of December 31, 2020, December 31, 2021 and December 31, 2022 were determined based on an average of the blended five-year daily historical volatility for a set of peer companies selected by Clear Channel Outdoor. Volatility for each peer group company was calculated by blending Clear Channel Outdoor’s stock price change history since September 1, 2019 with the peer company’s stock price change history prior to September 1, 2019 for the period comprising the five-year lookback period. |
| 4. | Historical correlation coefficients were calculated based on share price changes over a period consistent with the volatility lookback period between each of the constituents in the peer group as of each measurement date. |
| 5. | Since the measurement date occurs after the beginning of the performance period, actual TSR performance between the beginning of the performance period and the measurement date (“Starting TSR”) must be reflected in the valuation for the Company and each of the constituents in the peer group as of each measurement date. |
| 6. | Represents the allocated portionstock price as of (1) an annual bonus for the year ended December 31 2015,of each applicable fiscal year. |
Stock Option Valuation Assumptions: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 7/7/16
grant as
of
12/31/19 | | | 7/7/16
grant
as of
7/7/20 | | | 6/3/16
grant as
of
12/31/19 | | | 6/3/16
grant
as of
6/3/20 | | | 6/3/19
grant as
of
12/31/19 | | | 6/3/19
grant as
of
12/31/20 | | | 6/3/19
grant as
of
12/31/21 | | | 3/3/15
grant
(vested)
as of
12/31/19 | | | 3/3/15
grant
(vested)
as of
2/3/20 | | | 3/3/15 grant
(outstanding)
as of
12/31/19 &
12/31/20 | | | 3/3/15 grant
(outstanding)
as of
12/31/21 | | | 3/3/15 grant
(outstanding)
as of
12/31/22 | | | | | 1.660 | % | | | 0.270 | % | | | 1.657 | % | | | 0.354 | % | | | 1.803 | % | | | 0.557 | % | | | 1.163 | % | | | N/A | | | | 1.343 | % | | | N/A | | | | 0.995 | % | | | 4.378 | % | | | | N/A | | | | N/A | | | | N/A | | | | N/A | | | | N/A | | | | N/A | | | | N/A | | | | N/A | | | | N/A | | | | N/A | | | | N/A | | | | N/A | | | | | 32.20 | % | | | 40.90 | % | | | 32.20 | % | | | 39.90 | % | | | 32.20 | % | | | 58.90 | % | | | 63.60 | % | | | N/A | | | | 32.20 | % | | | N/A | | | | 63.60 | % | | | 72.50 | % | | | | 4.13 | | | | 4.59 | | | | 4.07 | | | | 4.57 | | | | 6.61 | | | | 6.36 | | | | 4.33 | | | | N/A | | | | 3.67 | | | | N/A | | | | 3.17 | | | | 2.17 | | | | $ | 5.54 | | | $ | 5.54 | | | $ | 5.69 | | | $ | 5.69 | | | $ | 5.11 | | | $ | 5.11 | | | $ | 5.11 | | | | N/A | | | $ | 6.854 | | | | N/A | | | $ | 6.854 | | | $ | 6.854 | | Measurement Date Stock Price (6) | | $ | 2.86 | | | $ | 0.93 | | | $ | 2.86 | | | $ | 0.99 | | | $ | 2.86 | | | $ | 1.65 | | | $ | 3.31 | | | | N/A | | | $ | 2.78 | | | | N/A | | | $ | 3.31 | | | $ | 1.05 | |
| | | | | 60 Notice and (2) an additionalProxy Statement 2023 | | | | |
| 1. | Risk-free interest rate assumptions are based on U.S. Treasury constant maturities yields as of the grant date with a term corresponding to the option’s expected term. |
| 2. | We do not currently pay dividends. |
| 3. | The volatility assumption was determined as follows: |
Measurement dates prior to December 31, 2020 : based on an average of the6.25-year daily historical volatility for a set of peer companies selected by Clear Channel Outdoor.Measurement dates after December 31, 2020 : based on an average of the blended5.80-year daily historical volatility for a set of peer companies selected by Clear Channel Outdoor.| 4. | The expected life assumption is based on the Expected Life assumption used in the grant date valuation that precedes the respective Measurement Date (baseline assumption) with the following adjustments: |
The time elapsed from the Grant Date to the Measurement Date is subtracted from the baseline assumption. Foroptions, for each 1% the Stock Price at Measurement Date exceeds the Strike Price, the baseline assumption (adjusted for elapsed time) is decreased by 0.75% of the period of time between the average remaining time until vest and the baseline assumption (adjusted for elapsed time). For underwater options, for each 1% Stock Price at Measurement Date is less than the Strike Price, the baseline assumption (adjusted for elapsed time) is increased by 0.75% of the period of time between the average remaining time until vest and the baseline assumption (adjusted for elapsed time) and remaining time until expiration. | 5. | The price at which shares of stock may be purchased by the employee upon exercise of the options. |
| 6. | Closing stock price on the Measurement Date. |
We did not report a change in pension benefit values for any of the years reflected in this table, and therefore adjustments to pension benefit values were not included in calculating the ‘compensation actually paid’ amounts reflected in these columns. | (c) | The names of eachnon-PEO NEO reflected in these columns for each applicable fiscal year are as follows: (i) for fiscal year 2022, Messrs. Coleman and Dilger and Ms. Feldman; and (ii) for fiscal years 2021 and 2020, Messrs. Wells, Coleman and Dilger and Ms. Feldman. |
| (d) | The Company’s TSR and the Company’s peer group TSR reflected in these columns for each applicable fiscal year is calculated based on a fixed investment of $100 at the applicable measurement point on the same cumulative basis as is used in Item 201(e) of RegulationS-K. The peer group used to determine the Company’s peer group TSR for each applicable fiscal year is the same peer group that was used for purposes of disclosing our executive compensation benchmarking practices, as described in the section titled “Role of the Executive Compensation Peer Group.” |
| (e) | Represents the amount of net income (loss) reflected in the Company’s audited financial statements for each applicable fiscal year. |
| (f) | We have selected CCOH Plan Adjusted EBITDA as our most important financial measure (that is not otherwise required to be disclosed in the table) used to link ‘compensation actually paid’ to our NEOs to company performance for fiscal year 2022. CCOH Plan Adjusted EBITDA is the adjusted EBITDA amount used for executive bonus calculations, which excludes bonus expense. Below is a reconciliation of CCOH Plan Adjusted EBITDA for fiscal years 2020, 2021 and 2022 to net loss. |
| | | | | | | | | | | | | | (in thousands) | | 2022 | | | 2021 | | | 2020 | | | | | | | | | | | | | | | | Income tax expense (benefit) | | $ | (71,832 | ) | | $ | (34,528 | ) | | $ | (58,006 | ) | | Other expense (income), net | | $ | 35,079 | | | $ | (1,762 | ) | | $ | 170 | | | Loss on extinguishment of debt | | $ | — | | | $ | 102,757 | | | $ | 5,389 | | | Interest expense, net | | $ | 362,680 | | | $ | 350,457 | | | $ | 360,259 | | | Other operating expense (income), net | | $ | 2,386 | | | $ | (627) | | | $ | (53,614 | ) | | Impairment charges | | $ | 39,546 | | | $ | 118,950 | | | $ | 150,400 | | | Depreciation & amortization | | $ | 253,809 | | | $ | 253,155 | | | $ | 269,421 | | | Share-based compensation | | $ | 21,148 | | | $ | 19,398 | | | $ | 13,235 | | | Restructuring and other costs | | $ | 16,244 | | | $ | 47,840 | | | $ | 32,942 | | | | | | | | | | | | | | | | Bonus Expense | | $ | 53,035 | | | $ | 65,605 | | | $ | 16,281 | | | FX Impact / Other | | $ | 14,881 | | | $ | 8,478 | | | $ | (358 | ) | | Divested Businesses (add back loss) | | | — | | | | — | | | $ | 26,615 | | CCOH Plan Adjusted EBITDA | | | | | | | | | | | | |
| | | | | | | | | Notice and Proxy Statement 2023 61 |
| (g) | For fiscal year 2022, the ‘compensation actually paid’ to the PEO and the average ‘compensation actually paid’ to thenon-PEO NEOs reflect the following adjustments made to the total compensation amounts reported in the Summary Compensation Table for fiscal year ended2022, computed in accordance with Item 402(v) of RegulationS-K: |
| | | | | | | | | | | | PEO | | | | | Total Compensation Reported in 2022 Summary Compensation Table | | | | | | | | | | Less, Grant Date Fair Value of Stock & Option Awards Reported in the 2022 Summary Compensation Table | | ($ | 3,350,658 | ) | | ($ | 750,455 | ) | Plus, Year-End Fair Value of Awards Granted in 2022 that are Outstanding and Unvested | | $ | 997,556 | | | $ | 218,237 | | Plus, Change in Fair Value of Awards Granted in Prior Years that are Outstanding and Unvested (From Prior Year-End to Year-End) | | ($ | 4,762,215 | ) | | ($ | 2,552,496 | ) | | Plus, Vesting Date Fair Value of Awards Granted in 2022 that Vested in 2022 | | | — | | | | — | | Plus, Change in Fair Value of Awards Granted in Prior Years that Vested in 2022 (From Prior Year-End to Vesting Date) | | $ | 104,132 | | | $ | 89,938 | | Less, Prior Year-End Fair Value of Awards Granted in Prior Years that Failed to Vest in 2022 | | | — | | | | — | | | Plus, Dollar Value of Dividends or other Earnings Paid on Stock & Option Awards in 2022 prior to Vesting (if not reflected in the fair value of such award or included in Total Compensation for 2022) | | | — | | | | — | | | | | | | | | | ) | Compensation Actually Paid for Fiscal Year 2022 | | | | | | | | ) |
| (h) | For fiscal year 2021, the ‘compensation actually paid’ to the PEO and the average ‘compensation actually paid’ to thenon-PEO NEOs reflect the following adjustments made to the total compensation amounts reported in the Summary Compensation Table for fiscal year 2021, computed in accordance with Item 402(v) of RegulationS-K: |
| | | | | | | | | | | | PEO | | | | | Total Compensation Reported in 2021 Summary Compensation Table | | | | | | | | | | Less, Grant Date Fair Value of Stock & Option Awards Reported in the 2021 Summary Compensation Table | | ($ | 1,947,577 | ) | | ($ | 1,192,283 | ) | Plus, Year-End Fair Value of Awards Granted in 2021 that are Outstanding and Unvested | | $ | 2,899,377 | | | $ | 1,774,963 | | Plus, Change in Fair Value of Awards Granted in Prior Years that are Outstanding and Unvested (From Prior Year-End to Year-End) | | $ | 3,745,426 | | | $ | 1,934,018 | | | Plus, Vesting Date Fair Value of Awards Granted in 2021 that Vested in 2021 | | | — | | | | — | | Plus, Change in Fair Value of Awards Granted in Prior Years that Vested in 2021 (From Prior Year-End to Vesting Date) | | $ | 922,379 | | | $ | 96,086 | | Less, Prior Year-End Fair Value of Awards Granted in Prior Years that Failed to Vest in 2021 | | | — | | | | — | | | Plus, Dollar Value of Dividends or other Earnings Paid on Stock & Option Awards in 2021 prior to Vesting (if not reflected in the fair value of such award or included in Total Compensation for 2021) | | | — | | | | — | | | | | | | | | | | Compensation Actually Paid for Fiscal Year 2021 | | | | | | | | |
| | | | | 62 Notice and Proxy Statement 2023 | | | | |
| (i) | For fiscal year 2020, the ‘compensation actually paid’ to the PEO and the average ‘compensation actually paid’ to thenon-PEO NEOs reflect the following adjustments made to the total compensation amounts reported in the Summary Compensation Table for fiscal year 2020, computed in accordance with Item 402(v) of RegulationS-K: |
| | | | | | | | | | | | PEO | | | | | Total Compensation Reported in 2020 Summary Compensation Table | | | | | | | | | | Less, Grant Date Fair Value of Stock & Option Awards Reported in the 2020 Summary Compensation Table | | ($ | 1,449,030 | ) | | ($ | 748,665 | ) | Plus, Year-End Fair Value of Awards Granted in 2020 that are Outstanding and Unvested | | $ | 2,701,456 | | | $ | 1,395,640 | | Plus, Change in Fair Value of Awards Granted in Prior Years that are Outstanding and Unvested (From Prior Year-End to Year-End) | | ($ | 1,343,351 | ) | | ($ | 603,806 | ) | | Plus, Vesting Date Fair Value of Awards Granted in 2020 that Vested in 2020 | | | — | | | | — | | Plus, Change in Fair Value of Awards Granted in Prior Years that Vested in 2020 (From Prior Year-End to Vesting Date) | | ($ | 399,370 | ) | | ($ | 191,138 | ) | Less, Prior Year-End Fair Value of Awards Granted in Prior Years that Failed to Vest in 2020 | | | — | | | | — | | | Plus, Dollar Value of Dividends or other Earnings Paid on Stock & Option Awards in 2020 prior to Vesting (if not reflected in the fair value of such award or included in Total Compensation for 2020) | | | — | | | | — | | | | | | ) | | | | | Compensation Actually Paid for Fiscal Year 2020 | | | | | | | | |
In accordance with Item 402(v) of RegulationS-K, the Company is providing the following descriptions of the relationships between the information presented in the table above. As demonstrated by the following graph, the amount of ‘compensation actually paid’ to the PEO and the average amount of ‘compensation actually paid’ to thenon-PEO NEOs is generally aligned with the Company’s TSR over the three years presented in the table. This is because a significant portion of the ‘compensation actually paid’ to the PEO and to thenon-PEO NEOs is comprised of equity awards. As described in more detail in the section titled “Supporting OurPhilosophy”, approximately 54% and 44% (averaged) of the value of total compensation awarded to the PEO andnon-PEO NEOs, respectively, is comprised of equity awards. | | | | | | | | | Notice and Proxy Statement 2023 63 |
As demonstrated by the following graph, the amount of ‘compensation actually paid’ to the PEO and the average amount of ‘compensation actually paid’ to thenon-PEO NEOs is generally aligned with the Company’s net income (loss) between 2020 and 2021. Although our net loss decreased during 2022, the ‘compensation actually paid’ to our PEO andnon-PEO NEOs decreased because a significant portion of their ‘compensation actually paid’ is comprised of equity awards, which decreased in value during 2022.  As demonstrated by the following graph, the amount of ‘compensation actually paid’ to the PEO and the average amount of ‘compensation actually paid’ to thenon-PEO NEOs is generally aligned with CCOH Plan Adjusted EBITDA used for bonus purposes between 2020 and 2021. Although our CCOH Plan Adjusted EBITDA increased during 2022, the ‘compensation actually paid’ to our PEO andnon-PEO NEOs decreased because a significant portion of their ‘compensation actually paid’ is comprised of equity awards, which decreased in value during 2022. | | | | | 64 Notice and Proxy Statement 2023 | | | | |
The following table lists our most important performance measures used by us to link ‘compensation actually paid’ to our NEOs to company performance for fiscal year 2022. The performance measures included in this table are not ranked by relative importance. | | Overall CCOH Plan Adjusted EBITDA | Segment CCOA Plan Adjusted EBITDA | Company TSR Relative to S&P 600 | |
| | | | | | | | | Notice and Proxy Statement 2023 65 |
PAY RATIO As required by Item 402(u) of Regulation S-K, we are providing pay ratio information about the relationship of the annual total compensation of our employees and the annual total compensation of Mr. Scott R. Wells, our President and Chief Executive Officer. The rules adopted by the SEC require a registrant to identify its median employee only once every three years if there has been no change to the registrant’s employee population or employee compensation arrangements that would result in a significant change to the pay ratio disclosure. Mr. Wells became the CEO in 2022 and has been provided new compensation arrangements in connection with this appointment. As such, we selected a new median employee for 2022 from a group of employees as of December 31, 2022 whose compensation was approximately equal to the median employee. For 2022, our last completed fiscal year: the median of the annual total compensation of all employees of our company (other than our CEO), was $51,937; and the annual total compensation of our CEO, as reported in the Summary Compensation Table presented elsewhere in this Proxy Statement, was $5,962,621. Based on this information, for 2022 the ratio of the annual total compensation of our CEO to the median of the annual total compensation of all employees was 115 to 1. Methodology, Assumptions and Estimates Used in Determining our Pay Ratio Disclosure In determining the pay ratio calculation, we used the methodology, assumptions and estimates set forth below. We believe the pay ratio included in this information is a reasonable estimate calculated in a manner consistent with Item 402(u) of Regulation S-K. | 1. | We identified the median employee as of December 31, 2015, pursuant to Mr. Bressler’s employment agreement.2022. |
(g) | The values associated with the continued provision2. | We determined that, as of health benefits are based on the 2015 premiums for insurance multiplied by the amountDecember 31, 2012, our employee population consisted of time Messrs. Bresslerapproximately 4,748 individuals working at Clear Channel Outdoor and Wells are entitled to those benefits pursuant to their respective employment agreements.its consolidated subsidiaries. |
(h) | Represents (1) the sum3. | Of our employee population as of 1.2 times Mr. Eccleshare’s base salary at termination and 1.0 times Mr. Eccleshare’s annual bonus target for the year ended December 31, 2015, (2) an annual bonus for the year ended December 31, 2015, (3) $84,000 previously earned pursuant to an additional bonus opportunity with respect to 2013 performance,2022, 1,570 were U.S. employees and (4) $170,000 previously earned pursuant to an additional bonus opportunity with respect to 2014 performance, pursuant to Mr. Eccleshare’s employment agreement.3,178 were non-U.S. employees. |
(i) | Represents (1) an annual bonus for4. | For purposes of measuring the yearcompensation of our employee population, we selected total cash compensation. Total cash compensation includes base salary, hourly pay, overtime, bonuses and commissions, as reported on our payroll records. We measured total cash compensation of the employees included in the calculation over the 12-month period ended December 31, 2015, (2) $84,000 previously earned pursuant to an additional bonus opportunity with respect to 2013 performance, and (3) $170,000 previously earned pursuant to an additional bonus opportunity with respect to 2014 performance, pursuant to Mr. Eccleshare’s employment agreement.2022. |
(j) | Represents (1) $84,000 previously earned pursuant5. | We gathered our total cash compensation information for the 12-month period ended December 31, 2022 from payroll records of each of our business units and applied this compensation measure consistently to an additional bonus opportunity with respect to 2013 performance, (2) $170,000 previously earned pursuant to an additional bonus opportunity with respect to 2014 performance, pursuant to Mr. Eccleshare’s employment agreement, and (3) base salaryall our employees included in the calculation. We annualized the total cash compensation of permanent employees hired during the required 90-day notice period under Mr. Eccleshare’s employment agreement.year. We did not make any other annualizing adjustments, and we did not make any cost-of-living adjustments in identifying the median employee. Amounts in foreign currency were converted from local currency to U.S. dollars using the average daily exchange rate of each country’s respective currency to U.S. dollars for the 12 months ended December 31, 2022. |
(k) | Represents6. | Once we identified the median employee, we identified and calculated the elements of such employee’s compensation for 2022 in accordance with the requirements of Item 402(c)(2)(x) of Regulation S-K, resulting in annual total compensation of $51,937. With respect to the annual total compensation of our CEO, we used the amount payable to Mr. Wells pursuant to his employment agreement, which includes (1) 1.5 times his base salary at termination, (2) his annual bonus target forreported in the year ended December 31, 2015, and (3) a prorated annual bonus for the year ended December 31, 2015. If Mr. Wells were terminated without cause, any time-vesting Clear Channel Outdoor options that would vest within one year following the termination date would vest. Also, any performance-vesting options would remain eligible to vest for 3 months following the termination date.“Total” column of our 2022 Summary Compensation Table included in this Proxy Statement. |
(l) | Represents the allocated portion of (1) the sum of Mr. Macri’s base salary at termination | | | | 66 Notice and annual bonus target for the year ended December 31, 2015, and (2) an annual bonus for the year ended December 31, 2015, pursuant to Mr. Macri’s employment agreement.Proxy Statement 2023 | | | | |
(m) | Represents the allocated portion of (1) the sum of Mr. Hamilton’s base salary at termination and (2) an annual bonus for the year ended December 31, 2015, pursuant to Mr. Hamilton’s employment agreement. |
RELATIONSHIP OF COMPENSATION POLICIES AND PROGRAMS TO RISK MANAGEMENT In consultation with the Compensation Committee, management conducted an assessment of whether Clear Channel Outdoor’s compensation policies and practices encourage excessive or inappropriate risk taking by our employees, including employees other than our named executive officers. This assessment included discussions with members of the corporate Human Resources, Legal and Finance departments, as well as personnel in the business units, and a review of corporate and operational compensation arrangements.NEOs. The assessment analyzed the risk characteristics of our business and the design and structure of our incentive plans and policies. Although a significant portion of our executive compensation program is performance-based, the Compensation Committee has focused on aligning Clear Channel Outdoor’s compensation policies with the long-term interests of Clear Channel Outdoor and avoiding rewards or incentive structures that could create unnecessary risks to Clear Channel Outdoor. Management reported its findings to the Compensation Committee, which agreed with management’s assessment that our plans and policies do not encourage excessive or inappropriate risk taking and determined such policies or practices are not reasonably likely to have a material adverse effect on Clear Channel Outdoor. DIRECTOR COMPENSATION The individuals who served as members of our Board during 20152022 are set forth in the table below. Olivia Sabine replaced Scott R. Wells as a member of our Board on March 3, 2015. Only our independent directors are compensated for serving as directors of Clear Channel Outdoor. As On April 30, 2019, our board of directors approved a result, only Messrs. Jacobs, Shepherd, Templedirector compensation program for independent directors providing for an annual retainer of $75,000 in cash and Tremblay were compensated$150,000 in equity. The equity is in the form of RSUs and is granted annually (beginning in 2020), with vesting prior to the subsequent year’s annual meeting of stockholders. Directors have the option to choose to receive up to 100% of their retainer in RSUs. Non-independent directors do not receive additional fees for their service as directors of Clear Channel Outdoor during 2015.meeting attendance. The following table contains information about our independent directors’ 2015 compensation. Scott R. Wells became Chief Executive OfficerChair of our Americas divisionboard of directors (as long as the Chair is not an employee) receives an annual fee of $50,000, the Chair of the Audit Committee receives an annual fee of $25,000, the Chair of the Compensation Committee receives an annual fee of $20,000, and on March 3, 2015. Mr. Wells compensation for his services as Chief Executive OfficerOctober 21, 2021, our board of our Americas division is includeddirectors approved an increase to the annual fee payable to the Chair of the Nominating and Corporate Governance Committee, resulting in a total annual fee of $15,000. Members of the SummaryAudit Committee (other than the Chair) receive an annual fee of $15,000, members of the Compensation Table above.Committee (other than the Chair) receive an annual fee of $10,000, and members of the Nominating and Corporate Governance Committee (other than the Chair) receive an annual fee of $7,500. Director Compensation Table | | | | | | | | | | | | | | | | | Name | | Fees Earned
or Paid in
Cash ($) | | | Stock
Awards(a) ($) | | | Option
Awards(a) ($) | | | Total ($) | | Blair E. Hendrix | | | — | | | | — | | | | — | | | | — | | Douglas L. Jacobs | | | 109,500 | | | | 62,499 | | | | 62,496 | | | | 234,495 | | Daniel G. Jones | | | — | | | | — | | | | — | | | | — | | Vicente Piedrahita | | | — | | | | — | | | | — | | | | — | | Robert W. Pittman(b) | | | — | | | | — | | | | — | | | | — | | Olivia Sabine | | | — | | | | — | | | | — | | | | — | | Thomas R. Shepherd | | | 71,000 | | | | 62,499 | | | | 62,496 | | | | 195,995 | | Christopher M. Temple | | | 97,000 | | | | 62,499 | | | | 62,496 | | | | 221,995 | | Dale W. Tremblay | | | 106,000 | | | | 62,499 | | | | 62,496 | | | | 230,995 | | Scott R. Wells(c) | | | — | | | | — | | | | — | | | | — | |
| | | | | | | | | | | | | | | | | | | | | | Name | | Fees Earned
or Paid in
Cash ($) | | | Stock
Awards(a) ($) | | | Option
Awards
(a)($) | | | All Other
Compensation ($) | | | Total ($) | | John Dionne | | $ | 97,500 | | | $ | 149,997 | | | | — | | | | — | | | $ | 247,497 | | C. William Eccleshare | | $ | 1,371,271 | (b) | | | — | | | | | | | | 235,996 | (c) | | $ | 1,607,267 | | Lisa Hammitt | | $ | 92,500 | | | $ | 149,997 | | | | — | | | | — | | | $ | 242,497 | | Andrew Hobson | | $ | 100,000 | | | $ | 149,997 | | | | — | | | | — | | | $ | 249,997 | | Thomas King | | | — | | | $ | 244,995 | | | | — | | | | — | | | $ | 244,995 | | Joe Marchese | | | — | | | $ | 242,497 | | | | — | | | | — | | | $ | 242,497 | | W. Benjamin Moreland | | | — | | | $ | 274,997 | | | | — | | | | — | | | $ | 274,997 | | Mary Teresa Rainey(d) | | $ | 105,491 | | | $ | 149,997 | | | | — | | | | — | | | $ | 255,488 | | Jinhy Yoon | | | — | | | | — | | | | — | | | | — | | | | — | |
| (a) | Amounts in the Stock Awards and Option Awards columns reflect the full grant date fair value of stock and options awarded under our 2012 Amended and Restated Stock Incentive Plan during 2015,2022, computed in accordance with the requirements of FASB ASC Topic 718, but excluding any impact of estimated forfeiture rates as required by SEC regulations. On June 24, 2015, each of Messrs. Jacobs, Shepherd, Temple and Tremblay received an annual award of 6,490 shares of time-vesting restricted stock and time-vesting stock options to purchase 15,868 shares of our Class A common stock. |
For the restricted stock awards, the grant date fair value is based on the closing price of our Class A common stock on the date of grant. The fair value of each stock option awarded in 2015 was estimated, based on several assumptions, on the date of grant using a Black Scholes option valuation model. The fair value and assumptions used for the stock option awards are shown below:
| | | | | | | June 24, 2015
Grant | | Fair value per share of options granted
| | | $3.9385 | Notice and Proxy Statement 2023 67 |
Fair value assumptions:
| | | | Each of Messrs. Dionne, Hobson, King, Marchese and Moreland were granted 44,247 time-based RSUs on February 10, 2022. These awards vested in full on January 1, 2023. |
Expected volatility
| | | 38.56 | % In addition, Messrs. King, Marchese and Moreland elected to receive their annual retainer and committee fees in the form of time-based RSUs. Mr. King received 28,023 RSUs, Mr. Marchese received 27,286 RSUs and Mr. Moreland received 36,873 RSUs. Each award vested one-fourth on each of April 1, 2022, July 1, 2022, October 1, 2022 and January 1, 2023. |
Expected life, in years
| | | 6.25 | For the restricted stock unit awards, the grant date fair value is based on the closing price of our common stock on the date of grant. |
Risk-free interest rate
| | | 1.95 | % | Dividend yieldFor further discussion of the assumptions made in valuation, see also Note 13-Stockholders’ Deficit beginning on page 92 of our 2022 Annual Report on Form 10-K.
| | | 0.00 | % |
For further discussion of the assumptions made in valuation, see also Note 9-Shareholders’ Equity (Deficit) beginning on page A-67 of Appendix A.
As of December 31, 2015, there were outstanding stock options awarded to our independent directors in 2012 and prior thereto with respect to an aggregate of 124,272 shares of our Class A common stock outstanding under our 2005 Stock Incentive Plan and there were no unvested shares of restricted stock outstanding under our 2005 Stock Incentive Plan awarded to our independent directors. As of December 31, 2015, there were stock options awarded to our independent directors in 2015 and prior thereto with respect to 176,548 shares of our Class A common stock outstanding under our 2012 Stock Incentive Plan and there were 101,604 unvested shares of restricted stock awarded to our independent directors in 2015 and prior thereto outstanding under our 2012 Stock Incentive Plan.
| (b) | Robert W. Pittman servesThe cash fees paid to Mr. Eccleshare reflect (1) a base salary of $625,000, and (2) a cash payment of $808,433 related to 2022 performance as an officerannual incentive plan award under the 2015 Executive Incentive Plan pursuant to pre-established performance goals. Certain amounts shown have been converted to GBP based on Mr. Eccleshare’s contractual exchange rate of Clear Channel Outdoor, iHeartCommunications$1=£0.7765 and iHeartMedia, as well as a memberthen converted back to USD based on the average 2022 exchange rate of our Board and the Boards of Directors of iHeartCommunications and iHeartMedia. Mr. Pittman’s compensation for his services as an officer of Clear Channel Outdoor, iHeartCommunications and iHeartMedia is included in the Summary Compensation Table above. Mr. Pittman did not receive any additional compensation for his service on our Board during 2015.$1=£0.8117. |
| (c) | Scott R. Wells became Chief Executive OfficerThe amount shown reflects: (1) payments in lieu of our Americas divisionpension contributions of $89,684, (2) personal tax services paid by us of $49,780, (3) tax gross-ups on March 3, 2015. Mr. Wells’ compensationtax services of $40,729, (4) legal expenses related to his release agreement of $1,163, (5) the cost of private medical insurance of $23,192, (6) the cost of premiums for his services as Chief Executive Officera supplemental life insurance benefit of our Americas division is included in the Summary Compensation Table above. Mr. Wells did not receive any additional compensation for his service on our Board during 2015.$9,272, and (7) an automobile allowance of $22,176. |
Messrs. Jacobs, Shepherd, Temple and Tremblay all served as our independent directors during 2015. The Board’s compensation structure for our independent directors consists of the following components: (1) an annual cash retainer; (2) an additional cash payment for each Board meeting attended; (3) an additional cash payment for each committee meeting attended; and (4) an additional annual cash retainer for the Committee chairpersons. We also may grant stock options or other stock-based awards to the independent directors, and the independent directors may elect to receive their fees in the form of shares of our common stock. None of the independent directors made this election during 2015. Directors also are reimbursed for their expenses associated with their service as directors of Clear Channel Outdoor.
During 2013, at the request of the Compensation Committee, we conducted an analysis of independent director compensation. After reviewing the analysis, our Board revised the compensation program for our independent directors on December 17, 2013 and granted restricted stock and stock options to our independent directors as described in footnote (a) above. Effective as of December 17, 2013, the compensation program for our independent directors is as set forth below:
| (d) | The cash fees paid to Ms. Rainey were converted to GBP based on the exchange rate at the time of payment. Amounts shown here have been converted back to USD based on the average 2022 exchange rate of $1=£0.8117. |
| | | | | Annual cash retainer68 Notice and Proxy Statement 2023
| | | $55,000 | | Additional cash payment per Board meeting attended
| | | $2,000 | | Additional cash payment per Committee meeting attended
| | | $1,500 | | Additional annual cash retainer for Committee Chairperson:
| | |
EQUITY COMPENSATION PLAN INFORMATION The following table summarizes information as of December 31, 2022 relating to our equity compensation plans pursuant to which grants of options, restricted stock or other rights to acquire shares may be granted from time to time. | | | | | | | | | | | | | | | | Number of Securities to
be issued upon exercise of
outstanding options,
warrants and rights | | | Weighted-Average
exercise price of
outstanding options,
warrants and
rights(1) | | | Number of Securities
remaining available for
future issuance under
equity compensation
plans (excluding
securities reflected in
column (A)) | | | Plan Category | | (A) | | | (B) | | | (C) | | Equity Compensation Plans approved by security holders(2) | | | 27,933,495 | (3) | | $ | 5.56 | | | | 27,095,736 | | Equity Compensation Plans not approved by security holders | | | — | | | | — | | | | — | | Total | | $ | 27,933,495 | | | $ | 5.56 | | | | 27,095,736 | |
| (1) | | • Audit Committee Chair
| | | $20,000 | | • Compensation Committee Chair
| | | $15,000 | | • Intercompany Note Committee Chair
| | | $15,000 | | Annual equity award value (50% stockThe weighted-average exercise price is calculated based solely on the exercise prices of the outstanding options and 50% restricted stock)does not reflect the shares that will be issued upon the vesting of outstanding awards of RSUs or PSUs, which have no exercise price.
| | | $125,000 | |
During 2015, the Chairperson of the Intercompany Note Committee (Mr. Temple) received a quarterly payment of $3,750 and the members of the Intercompany Note Committee received payments of $3,000 (Messrs. Temple and Tremblay) and $1,500 (Mr. Jacobs) for meetings of the Intercompany Note Committee during 2015.
| (2) | Represents the 2012 Second Amended and Restated Stock Incentive Plan. |
| (3) | This number includes shares subject to outstanding awards granted, of which 3,438,943 shares are subject to outstanding options, 13,149,312 shares are subject to outstanding time-based RSUs and 11,345,240 shares are subject to outstanding PSUs, assuming a maximum level of performance is achieved. 73,222 shares subject to outstanding restricted stock awards have been excluded. |
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act requires Clear Channel Outdoor’s directors, executive officers and beneficial owners of more than 10% of any class of equity securities of Clear Channel Outdoor to file reports of ownership and changes in ownership with the SEC. Directors, executive officers and greater than 10% shareholders are required to furnish Clear Channel Outdoor with copies of all Section 16(a) forms they file.
To our knowledge, based solely on review of the copies of such reports furnished to us and written representations that no other reports were required, during the fiscal year ended December 31, 2015, our officers, directors and greater than 10% beneficial owners timely filed all required Section 16(a) reports, except that the following individuals failed to file timely reports for such fiscal year: Mr. Eccleshare was late in filing one Form 4 disclosing one transaction; Mr. Bressler was late in filing one Form 4 disclosing one transaction; Mr. Pittman was late in filing one Form 4 disclosing one transaction; and CC Finco, LLC was late in filing one Form 4 disclosing two transactions.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION During 2015,2022, Messrs. JacobsKing and TremblayMarchese and Ms. Hammitt served as the members of our Compensation Committee. There were no “interlocks” among any of the directors who served as members of our Compensation Committee and any of our executive officers during 20152022 and as of the date of this proxy statement.Proxy Statement. During 2015,2022, no member of our Compensation Committee simultaneously served as an executive officer of Clear Channel Outdoor. No member of our Compensation Committee had a relationship with us that requires disclosure under Item 404 of Regulation S-K.
| | | | | | | | | Notice and Proxy Statement 2023 69 |
CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS IHEARTMEDIA, INC.
We are an indirect subsidiary of iHeartMedia. As of April 7, 2016, iHeartMedia, through its wholly owned subsidiaries, owned all of our outstanding shares of Class B common stock and 10,726,917 of our outstanding shares of Class A common stock, collectively representing approximately 90.1% of the outstanding shares of our common stock and approximately 99% of the total voting power of our common stock. Each share of our Class B common stock is convertible while owned by iHeartMedia or any of its affiliates (excluding us and our subsidiaries) at the option of the holder thereof into one share of Class A common stock. The agreements between us and iHeartMedia do not prohibit it from selling, spinning off, splitting off or otherwise disposing of any shares of our common stock.
Each of Blair E. Hendrix and Robert W. Pittman, two of our current directors, is a director of iHeartMedia and iHeartCommunications. In addition, Richard J. Bressler, C. William Eccleshare, Scott D. Hamilton, Steven J. Macri, Robert W. Pittman and Robert H. Walls, Jr. serve as executive officers of Clear Channel Outdoor, iHeartMedia and iHeartCommunications. Blair E. Hendrix and Olivia Sabine, two of our current directors, are employed as a managing director and an executive vice president, respectively, of Bain Capital. Daniel G. Jones and Vicente Piedrahita, two of our current directors, are employed as a managing director and a principal, respectively, of THL. Entities controlled by Bain Capital and THL hold all of the shares of iHeartMedia’s Class B common stock and iHeartMedia’s Class C common stock, and these shares represent a majority (whether measured by voting power or economic interest) of the equity of iHeartMedia.
We have entered into a number of agreements with certain subsidiaries of iHeartMedia setting forth various matters governing our relationship with iHeartMedia and iHeartCommunications, referred to collectively
in this section as “iHeartMedia.” These agreements provide for, among other things, the allocation of employee benefit, tax and other liabilities and obligations attributable to our operations.
Set forth below are descriptions of certain agreements, relationships and transactions we have with iHeartMedia.
Master Agreement
We have entered into a master agreement (the “Master Agreement”) with iHeartMedia. Among other things, the Master Agreement sets forth agreements governing our relationship with iHeartMedia.
Auditors and Audits; Annual Financial Statements and Accounting. We have agreed that, for so long as iHeartMedia is required to consolidate our results of operations and financial position or account for its investment in our Company under the equity method of accounting, we will maintain a fiscal year-end and accounting periods the same as iHeartMedia, conform our financial presentation with that of iHeartMedia, we will not change our independent auditors without iHeartMedia’s prior written consent (which will not be unreasonably withheld), and we will use commercially reasonable efforts to enable our independent auditors to complete their audit of our financial statements in a timely manner so as to permit timely filing of iHeartMedia’s financial statements. We have also agreed to provide to iHeartMedia all information required for iHeartMedia to meet its schedule for the filing and distribution of its financial statements and to make available to iHeartMedia and its independent auditors all documents necessary for the annual audit of our Company as well as access to the responsible personnel so that iHeartMedia and its independent auditors may conduct their audits relating to our financial statements. We provide iHeartMedia with financial reports, financial statements, budgets, projections, press releases and other financial data and information with respect to our business, properties and financial positions. We have also agreed to adhere to certain specified disclosure controls and procedures and iHeartMedia accounting policies and to notify and consult with iHeartMedia regarding any changes to our accounting principles and estimates used in the preparation of our financial statements, and any deficiencies in, or violations of law in connection with, our internal control over financial reporting and certain fraudulent conduct and other violations of law.
Exchange of Other Information. The Master Agreement also provides for other arrangements with respect to the mutual sharing of information between iHeartMedia and us in order to comply with reporting, filing, audit or tax requirements, for use in judicial proceedings and in order to comply with our respective obligations after the separation. We have also agreed to provide mutual access to historical records relating to the other’s businesses that may be in our possession.
Indemnification. We have agreed to indemnify, hold harmless and defend iHeartMedia, each of its affiliates (excluding us and our subsidiaries) and each of their respective directors, officers and employees, on an after-tax basis, from and against all liabilities relating to, arising out of or resulting from:
the failure by us or any of our affiliates or any other person or entity to pay, perform or otherwise promptly discharge any liabilities or contractual obligations associated with our businesses, whether arising before or after the separation;
the operations, liabilities and contractual obligations of our business;
any guarantee, indemnification obligation, surety bond or other credit support arrangement by iHeartMedia or any of its affiliates for our benefit;
any breach by us or any of our affiliates of the Master Agreement or our other agreements with iHeartMedia or our amended and restated certificate of incorporation or bylaws; and
any untrue statement of, or omission to state, a material fact in iHeartCommunications’ public filings to the extent the statement or omission was as a result of information that we furnished to iHeartMedia or that iHeartMedia incorporated by reference from our public filings, if the statement or omission was made or occurred after November 16, 2005.
iHeartMedia has agreed to indemnify, hold harmless and defend us, each of our subsidiaries and each of our and our subsidiaries’ respective directors, officers and employees, on an after-tax basis, from and against all liabilities relating to, arising out of or resulting from:
the failure of iHeartMedia or any of its affiliates or any other person or entity to pay, perform or otherwise promptly discharge any liabilities of iHeartMedia or its affiliates, other than liabilities associated with our businesses;
the liabilities of iHeartMedia and its affiliates’ businesses, other than liabilities associated with our businesses;
any breach by iHeartMedia or any of its affiliates of the Master Agreement or its other agreements with us; and
any untrue statement of, or omission to state, a material fact in our public filings to the extent the statement or omission was as a result of information that iHeartMedia furnished to us or that we incorporated by reference from iHeartCommunications’ public filings, if the statement or omission was made or occurred after November 16, 2005.
The Master Agreement also specifies procedures with respect to claims subject to indemnification and related matters and provides for contribution in the event that indemnification is not available to an indemnified party.
Dispute Resolution Procedures. We have agreed with iHeartMedia that neither party will commence any court action to resolve any dispute or claim arising out of or relating to the Master Agreement, subject to certain exceptions. Instead, any dispute that is not resolved in the normal course of business will be submitted to senior executives of each business entity involved in the dispute for resolution. If the dispute is not resolved by negotiation within 45 days after submission to the executives, either party may submit the dispute to mediation. If the dispute is not resolved by mediation within 30 days after the selection of a mediator, either party may submit the dispute to binding arbitration before a panel of three arbitrators. The arbitrators will determine the dispute in accordance with Texas law. Most of the other agreements between iHeartMedia and us have similar dispute resolution provisions.
Other Provisions. The Master Agreement also contains covenants between iHeartMedia and us with respect to other matters, including the following:
our agreement (subject to certain limited exceptions) not to repurchase shares of our outstanding Class A common stock or any other securities convertible into or exercisable for our Class A common stock, without first obtaining the prior written consent or affirmative vote of iHeartMedia, for so long as iHeartMedia owns more than 50% of the total voting power of our common stock;
confidentiality of our and iHeartCommunications’ information;
our right to continue coverage under iHeartCommunications’ insurance policies for so long as iHeartMedia owns more than 50% of our outstanding common stock;
restrictions on our ability to take any action or enter into any agreement that would cause iHeartMedia to violate any law, organizational document, agreement or judgment;
restrictions on our ability to take any action that limits iHeartCommunications’ ability to freely sell, transfer, pledge or otherwise dispose of our stock;
our obligation to comply with iHeartCommunications’ policies applicable to its subsidiaries for so long as iHeartMedia owns more than 50% of the total voting power of our outstanding common stock, except (1) to the extent such policies conflict with our amended and restated certificate of incorporation or bylaws or any of the agreements between iHeartMedia and us, or (2) as otherwise agreed with iHeartMedia or superseded by any policies adopted by our Board; and
restrictions on our ability to enter into any agreement that binds or purports to bind iHeartMedia.
Approval Rights of iHeartMedia on Certain of our Activities. Until the first date on which iHeartMedia owns less than 50% of the total voting power of our common stock, the prior affirmative vote or written consent of iHeartMedia is required for the following actions (subject in each case to certain agreed exceptions):
a merger involving us or any of our subsidiaries (other than mergers involving our wholly owned subsidiaries or to effect acquisitions permitted under our amended and restated certificate of incorporation and the Master Agreement);
acquisitions by us or our subsidiaries of the stock or assets of another business for a price (including assumed debt) in excess of $5 million;
dispositions by us or our subsidiaries of assets in a single transaction or a series of related transactions for a price (including assumed debt) in excess of $5 million, other than transactions to which we and one or more wholly owned subsidiaries of ours are the only parties;
incurrence or guarantee of debt by us or our subsidiaries in excess of $400 million outstanding at any one time or that could reasonably be expected to result in a negative change in any of our credit ratings, excluding our debt with iHeartMedia, intercompany debt (within our Company and its subsidiaries), and debt determined to constitute operating leverage by a nationally recognized statistical rating organization;
issuance by us or our subsidiaries of capital stock or other securities convertible into capital stock;
entry into any agreement restricting our ability or the ability of any of our subsidiaries to pay dividends, borrow money, repay indebtedness, make loans or transfer assets, in any such case to our Company or iHeartMedia;
dissolution, liquidation or winding up of our company or any of our subsidiaries;
adoption of a rights agreement; and
alteration, amendment, termination or repeal of, or adoption of any provision inconsistent with, the provisions of our amended and restated certificate of incorporation or our bylaws relating to our authorized capital stock, the rights granted to the holders of the Class B common stock, amendments to our bylaws, shareholder action by written consent, shareholder proposals and meetings, limitation of liability of and indemnification of our officers and directors, the size or classes of our Board, corporate opportunities and conflicts of interest between our Company and iHeartMedia and Section 203 of the Delaware General Corporation Law.
Corporate Services Agreement
We entered into the Corporate Services Agreement to provide us certain administrative and support services and other assistance. Pursuant to the Corporate Services Agreement, so long as iHeartMedia continues to own greater than 50% of the total voting power of our common stock then an affiliate of iHeartMedia (referred to as iHeartMedia for purposes of this description) will provide us with such services and other assistance which we must accept. These include, among other things, the following:
treasury, payroll and other financial related services;
certain executive officer services;
human resources and employee benefits;
legal and related services;
information systems, network and related services;
investment services;
corporate services; and
procurement and sourcing support.
The charges for the corporate services generally are intended to allow iHeartMedia to fully recover the allocated direct costs of providing the services, plus all out-of-pocket costs and expenses, generally without profit. The allocation of cost is based on various measures depending on the service provided, which measures include relative revenue, employee headcount or number of users of a service.
Under the Corporate Services Agreement, we and iHeartMedia each have the right to purchase goods or services, use intellectual property licensed from third parties and realize other benefits and rights under the other party’s agreements with third-party vendors to the extent allowed by such vendor agreements. The agreement also provides for the lease or sublease of certain facilities used in the operation of our respective businesses and for access to each other’s computing and telecommunications systems to the extent necessary to perform or receive the corporate services.
The Corporate Services Agreement provides that iHeartMedia will make available to us, and we will be obligated to utilize, certain executive officers of iHeartMedia to serve as our executive officers. The Corporate Services Agreement may be terminated by mutual agreement or, after the date iHeartMedia owns shares of our common stock representing less than 50% of the total voting power of our common stock, upon six months written notice by us to iHeartMedia. iHeartMedia charges an allocable portion of the compensation and benefits costs of such persons based on a ratio of our financial performance to the financial performance of iHeartMedia. The compensation and benefits costs allocated to us include such executives’ base salary, bonus and other standard employee benefits, but exclude equity-based compensation. See footnote (g) to the Summary Compensation Table for additional information regarding the allocations. For the year ended December 31, 2015, charges for the corporate and executive services provided to us by iHeartMedia under the Corporate Services Agreement totaled $30.1 million.
Tax Matters Agreement
We and certain of our corporate subsidiaries continue to be included in the affiliated group of corporations that files a consolidated return for U.S. Federal income tax purposes of which iHeartMedia is the common parent corporation and, in certain cases, we or one or more of our subsidiaries may be included in a combined, consolidated or unitary group with iHeartMedia or one or more of its subsidiaries for certain state and local income tax purposes. We and iHeartMedia have entered into a tax matters agreement (the “Tax Matters Agreement”) to allocate the responsibility of iHeartMedia and its subsidiaries, on the one hand, and we and our subsidiaries, on the other, for the payment of taxes resulting from filing tax returns on a combined, consolidated or unitary basis.
With respect to tax returns in which we or any of our subsidiaries are included in a combined, consolidated or unitary group with iHeartMedia or any of its subsidiaries for Federal, state or local tax purposes, we make payments to iHeartMedia pursuant to the Tax Matters Agreement equal to the amount of taxes that would be paid if we and each of our subsidiaries included in such group filed a separate tax return. We also reimburse iHeartMedia for the amount of any taxes paid by it on our behalf with respect to tax returns that include only us or any of our subsidiaries for Federal, state or local tax purposes, which tax returns are prepared and filed by iHeartMedia. With respect to certain tax items, such as foreign tax credits, alternative minimum tax credits, net operating losses and net capital losses, that are generated by us or our subsidiaries, but are used by iHeartMedia or its subsidiaries when a tax return is filed on a combined, consolidated or unitary basis for Federal, state or local tax purposes, we are reimbursed by iHeartMedia as such tax items are used.
Under the Tax Matters Agreement, iHeartMedia is appointed the sole and exclusive agent for us and our subsidiaries in any and all matters relating to Federal, state and local income taxes, and has sole and exclusive responsibility for the preparation and filing of all tax returns (or amended returns) related to such taxes and has the power, in its sole discretion, to contest or compromise any asserted tax adjustment or deficiency and to file, litigate or compromise any claim for refund on behalf of us or any of our subsidiaries with respect to such taxes. Additionally, iHeartMedia determines the amount of our liability to (or entitlement to payment from) iHeartMedia under the Tax Matters Agreement. This arrangement may result in conflicts of interest between iHeartMedia and us. For example, under the Tax Matters Agreement, iHeartMedia will be able to choose to contest, compromise or settle any adjustment or deficiency proposed by the relevant taxing authority in a manner that may be beneficial to iHeartMedia and detrimental to us.
For U.S. Federal income tax purposes, each member of an affiliated group of corporations that files a consolidated return is jointly and severally liable for the U.S. Federal income tax liability of the entire group. Similar principles may apply with respect to members of a group that file a tax return on a combined, consolidated or unitary group basis for state and local tax purposes. Accordingly, although the Tax Matters Agreement will allocate tax liabilities between iHeartMedia and us during the period in which we or any of our subsidiaries are included in the consolidated group of iHeartMedia or any of its subsidiaries, we and our subsidiaries included in such consolidated group could be liable for the tax liability of the entire consolidated group in the event any such tax liability is incurred and not discharged by iHeartMedia. The Tax Matters Agreement provides, however, that iHeartMedia will indemnify us and our subsidiaries to the extent that, as a result of us or any of our subsidiaries being a member of a consolidated group, we or our subsidiaries becomes liable for the tax liability of the entire consolidated group (other than the portion of such liability for which we and our subsidiaries are liable under the Tax Matters Agreement).
Under Section 482 of the Code, the Internal Revenue Service has the authority in certain instances to redistribute, reapportion or reallocate gross income, deductions, credits or allowances between iHeartMedia and us. Other taxing authorities may have similar authority under comparable provisions of foreign, state and local law. The Tax Matters Agreement provides that we or iHeartMedia will indemnify the other to the extent that, as a result of the Internal Revenue Service exercising its authority (or any other taxing authority exercising a similar authority), the tax liability of one group is reduced while the tax liability of the other group is increased.
If iHeartMedia spins off our Class B common stock to its shareholders in a distribution that is intended to be tax-free under Section 355 of the Code, we have agreed in the Tax Matters Agreement to indemnify iHeartMedia and its affiliates against any and all tax-related liabilities if such a spin-off fails to qualify as a tax-free distribution (including as a result of Section 355(e) of the Code) due to actions, events or transactions relating to our stock, assets or business, or a breach of the relevant representations or covenants made by us in the Tax Matters Agreement. If neither we nor iHeartMedia is responsible under the Tax Matters Agreement for any such spin-off not being tax-free under Section 355 of the Code, we and iHeartMedia have agreed that we will each be responsible for 50% of the tax-related liabilities arising from the failure of such a spin-off to so qualify.
At December 31, 2015, the amount payable to iHeartMedia under the Tax Matters Agreement was $139,357.
Employee Matters Agreement
We have entered into an employee matters agreement (the “Employee Matters Agreement”) with iHeartMedia covering certain compensation and employee benefit issues. In general, with certain exceptions, our employees participate in the iHeartMedia employee plans and arrangements along with the employees of other iHeartMedia subsidiaries. Our payroll is also administered by iHeartMedia.
We and iHeartMedia reserve the right to withdraw from or terminate our participation, as the case may be, in any of the iHeartMedia employee plans and arrangements at any time and for any reason, subject to at least 90 days notice. Unless sooner terminated, it is likely that our participation in iHeartMedia employee plans and arrangements will end if and at such time as we are no longer a subsidiary of iHeartMedia which, for this purpose, means iHeartMedia owns less than 80% of the total combined voting power of all classes of our capital stock entitled to vote. We will, however, continue to bear the cost of and retain responsibility for all employment-related liabilities and obligations associated with our employees (and their covered dependents and beneficiaries), regardless of when incurred.
Trademarks
We have entered into a trademark license agreement (the “Trademark License Agreement”) with a subsidiary of iHeartMedia that entitles us to use (1) on a nonexclusive basis, the “iHeartMedia” trademark and the iHeartMedia “outdoor” trademark logo with respect to day-to-day operations of our business worldwide and
on the Internet, and (2) certain other iHeartMedia marks in connection with our business. Our use of the marks is subject to iHeartCommunications’ approval. iHeartMedia may terminate our use of the marks in certain circumstances, including (1) a breach by us of a term or condition of our various agreements with iHeartMedia and (2) at any time after iHeartMedia ceases to own at least 50% of the total voting power of our common stock. In 2015, iHeartMedia did not charge us a royalty fee for our use of the trademarks and other marks. We also do not currently anticipate that we will be charged a royalty fee under the Trademark License Agreement in 2016.
Products and Services Provided between iHeartMedia and Us
We and iHeartMedia engage in transactions in the ordinary course of our respective businesses. These transactions include our providing billboard and other advertising space to iHeartMedia at rates we believe would be charged to a third party in an arms-length transaction.
Our branch managers have historically followed a corporate policy allowing iHeartMedia to use, without charge, domestic displays that they or their staff believe would otherwise be unsold. Our sales personnel receive partial revenue credit for that usage for compensation purposes. This partial revenue credit is not included in our reported revenues. iHeartMedia bears the cost of producing the advertising and we bear the costs of installing and removing this advertising. In 2015, we incurred approximately $212,000 to install and remove this advertising.
Cash Management Notes
We maintain accounts that represent net amounts due to or from iHeartMedia, which is recorded as “Due from/to iHeartCommunications” on our consolidated balance sheets. The accounts represent our revolving promissory note issued by us to iHeartMedia and the revolving promissory note issued by iHeartMedia to us (the “Due from iHeartCommunications Note”), in each case in the face amount of $1.0 billion, or if more or less than such amount, the aggregate unpaid principal amount of all advances. The accounts accrue interest pursuant to the terms of the promissory notes and are generally payable on demand or when they mature on December 15, 2017. Included in the accounts are the net activities resulting from day-to-day cash management services provided by iHeartMedia. Such day-to-day cash management services relate only to our cash activities and balances in the U.S. and exclude any cash activities and balances of our non-U.S. subsidiaries. At December 31, 2015, the asset recorded in “Due from iHeartCommunications” on our condensed consolidated balance sheet was $930.8 million. At December 31, 2015, we had no borrowings under the cash management note to iHeartMedia. The net interest income for the year ended December 31, 2015 was $61.4 million. At December 31, 2015, the fixed interest rate on the “Due from iHeartCommunications” account was 6.5%, which is equal to the fixed interest rate on the senior notes issued by our subsidiary. If the outstanding balance on the Due from iHeartCommunications Note exceeds $1.0 billion and under certain other circumstances tied to iHeartMedia’s liquidity, the rate will be variable, but will in no event be less than 6.5% nor greater than 20%.
COMMERCIAL TRANSACTIONS
As described above, we are an indirect subsidiary of iHeartMedia, and entities controlled by Bain Capital and THL hold all of the shares of iHeartMedia’s Class B common stock and iHeartMedia’s Class C common stock, representing a majority (whether measured by voting power or economic interest) of the equity of iHeartMedia. Two of our directors also serve as directors of iHeartMedia (one of whom is affiliated with Bain Capital) and three of our other directors are affiliated with Bain Capital or THL.
We are a global advertising company providing clients with advertising opportunities through billboards, street furniture displays, transit displays and other out-of-home advertising displays in more than 35 countries across five continents. Bain Capital and THL are private equity firms that have investments in many companies. As a result of our worldwide reach, the nature of our business and the breadth of investments by Bain Capital and THL, it is not unusual for us to engage in ordinary course of business transactions with entities in which one of our directors, executive officers, greater than 5% shareholders or an immediate family member of any of them, may also be a director, executive officer, partner or investor or have some other direct or indirect interest.
During 2015, we provided ordinary course of business advertising services and/or received ordinary course of business services relating to our businesses exceeding $120,000 in value with respect to six companies in which Bain Capital and/or THL directly or indirectly owns a greater than 10% equity interest. These transactions were negotiated on an arms-length basis and, in the aggregate, we were paid approximately $1.9 million by these entities and we paid approximately $1.3 million to these entities with respect to these 2015 transactions. In addition, entities in which THL directly or indirectly owns a greater than 10% equity interest provided us (and our parent entities and subsidiaries) with payroll tax processing services and commercial credit card processing services pursuant to arms-length agreements at competitive market rates. The fees paid for these services in the aggregate were approximately $223,994.
POLICY ON REVIEW AND APPROVAL OR RATIFICATION OF TRANSACTIONS WITH RELATED PERSONS We have adopted formal written policies and procedures for the review and approval or ratification of certain related party transactions involving us and one of our executive officers, directors or nominees for director, or ownerowners of more than 5% of any class of our voting securities, and which may be required to be reported under the SECSEC’s disclosure rules. Such transactions must be pre-approved by the Audit Committee of our Board (other than the directors involved, if any) or by a majority of disinterested directors, except that no such pre-approval shall be required for an agreement, or series of related agreements, providing solely for ordinary course of business transactions made on standard terms and conditions where the aggregate amount to be paid to us is less than $10 million or the aggregate amount paid by us is less than $250,000.directors. In addition, if our management, in consultation with our Chief Executive Officer or Chief Financial Officer, determines that it is not practicable to wait untilconvene the next Audit Committee meeting to approve or ratify a particular transaction, then the Board has delegated authority to the ChairmanChair of the Audit Committee to approve or ratifypre-approve such transactions. The ChairmanChair of the Audit Committee reports to the Audit Committee any transactions reviewed by him or her pursuant to this delegated authority at the next Audit Committee meeting. The primary considerationconsiderations with respect to the approval of related party transactions isare the overall fairness of the terms of the transaction to us.us and that they are not inconsistent with our and our stockholder interests. CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS Mr. Cochrane, our Chief Executive Officer of Clear Channel UK & Europe, who was appointed as an “executive officer” as defined in Rule 3b-7 and an “officer” for purposes of Section 16 of the Exchange Act, effective January 1, 2023, entered into a loan agreement with the Company in July of 2022 for principal of £1,000,000 with no annual interest rate. The related person transactions described above in this proxy statementpurpose of the loan was to allow Mr. Cochrane to pay certain taxes owed to the Irish tax authorities that were ratified or approvederroneously withheld by the Audit Committee or Board pursuant to these policiesCompany from Mr. Cochrane’s salary and procedures,paid to the extent required, withUnited Kingdom tax authorities. Mr. Cochrane repaid the exceptionloan in full to the Company in December 2022 prior to his appointment as an executive officer of the transactions described above with respect to iHeartMedia because they occurred prior to the time the policies and procedures were adopted. We generally expect transactions of a similar nature to occur during 2016.Company.
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AUDIT COMMITTEE REPORT The following Report of the Audit Committee concerns the Audit Committee’s activities regarding oversight of Clear Channel Outdoor’s financial reporting and auditing process, and it does not constitute soliciting material and should not be deemed filed or incorporated by reference into any other filing under the Securities Act of 1933, as amended, or the Securities Exchange Act, except to the extent Clear Channel Outdoor specifically incorporates this Report by reference therein. The Audit Committee is comprised solely of independent directors, and it operates under a written charter adopted by the Board. The charter reflects standards set forth in SEC regulations and NYSE rules. In addition, the composition of the Audit Committee, the attributes of its members and the responsibilities of the Audit Committee, as reflected in its charter, are intended to be in accordance with applicable requirements for corporate audit committees. The Audit Committee reviews and assesses the adequacy of its charter on an annual basis. The full text of the Audit Committee’s charter can be found on Clear Channel Outdoor’s website atwww.clearchanneloutdoor.comwww.investor.clearchannel.com. As set forth in more detail in theits charter, the Audit Committee assists the Board in its general oversight of Clear Channel Outdoor’s financial reporting, internal control and audit functions. Management is responsible for the preparation, presentation and integrity of Clear Channel Outdoor’s financial statements, accounting and financial reporting principles and internal controls and procedures designed to ensure compliance with accounting standards, applicable laws and regulations. Ernst & Young LLP, the independent registered public accounting firm that serves as Clear Channel Outdoor’s independent auditor, is responsible for performing an independent audit of the consolidated financial statements and expressing an opinion on the conformity of those financial statements with United States generally accepted accounting principles, as well as expressing an opinion on the effectiveness of internal control over financial reporting. The Audit Committee members are not professional accountants or auditors, and their functions are not intended to duplicate or to certify the activities of management and the independent auditor, nor can the Audit Committee certify that the independent auditor is “independent” under applicable rules. The Audit Committee serves a Board-level oversight role, in which it provides advice, counsel and direction to management and the auditors on the basis of the information it receives, discussions with management and the auditors and the experience of the Audit Committee’s members in business, financial and accounting matters. Among other matters, the Audit Committee monitors the activities and performance of Clear Channel Outdoor’s internal and external auditors, including the audit scope and staffing, external audit fees, auditor independence matters and the extent to which the independent auditor may be retained to perform non-audit services. Subject to the consent of our corporate parent, theThe Audit Committee has ultimate authority and responsibility to select, evaluate and, when appropriate, replace Clear Channel Outdoor’s independent auditor. The Audit Committee also reviews the risk management and compliance processes and internal controls over financial reporting and the results of the internal and external audit work with regard to the adequacy and appropriateness of Clear Channel Outdoor’s financial, accounting and internal controls. Management and independent auditor presentations to, and discussions with, the Audit Committee also cover various topics and events that may have significant financial impact or are the subject of discussions betweenamong management and the independent auditor. In addition, the Audit Committee generally oversees Clear Channel Outdoor’s internal compliance programs. The Audit Committee has implemented procedures to ensure that during the course of each fiscal year it devotes the attention that it deems necessary or appropriate to each of the matters assigned to it under the Audit Committee’s charter. In overseeing the preparation of Clear Channel Outdoor’s financial statements, the Audit Committee met with both management and Clear Channel Outdoor’s independent auditors to review and discuss all financial statements prior to their issuance and to discuss significant accounting issues. Management advised the Audit Committee that the financial statements were prepared in accordance with generally accepted accounting principles. The Audit Committee’s review included discussion with the independent auditors of matters required to be discussed pursuant to Statement on Auditing Standards No. 61, as amended (AICPA,Professional Standards, Vol. 1. AU Section 380), as adopted bythe applicable requirements of the Public Company Accounting Oversight Board in Rule 3200T.and the Securities and Exchange Commission. With respect to Clear Channel Outdoor’s independent auditors, the Audit Committee, among other things, discussed with Ernst & Young LLP matters relating to its independence and received from the independent auditors | | | | | | | | | Notice and Proxy Statement 2023 71 |
their letter and the written disclosures required by applicable requirements of the Public Company Accounting Oversight Board regarding Ernst & Young LLP’s communications with the Audit Committee concerning independence. On the basis of these reviews and discussions, the Audit Committee recommended to the Board of Directors that Clear Channel Outdoor’s audited financial statements be included in Clear Channel Outdoor’s Annual Report on Form 10-K for the year ended December 31, 2015,2022 for filing with the Securities and Exchange Commission. | | | | | Respectfully submitted, | | | | | THE AUDIT COMMITTEE | Douglas L. Jacobs, Chairman | | Christopher M. Temple | | Andrew Hobson, Chair | Dale W. Tremblay | | John Dionne | | | Mary Teresa Rainey |
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AUDITOR FEES The following fees for services provided by Ernst & Young LLP were incurred by Clear Channel Outdoor with respect to the years ended December 31, 20152022 and 2014:2021: | | | | Years Ended December 31, | | | Years Ended December 31, | | (In thousands) | | 2015 | | | 2014 | | | 2022 | | | 2021 | | Audit Fees(a) | | | $4,515 | | | $ | 4,493 | | | $ | 4,881 | | | $ | 5,826 | | Audit-Related Fees(b) | | | 134 | | | | 64 | | | | 99 | | | | 202 | | Tax Fees(c) | | | 712 | | | | 1,087 | | | | 2,955 | | | | 2,154 | | All Other Fees(d) | | | — | | | | — | | | | 14 | | | | 8 | | | | | | | | | | Total Fees for Services | | | $5,361 | | | $ | 5,644 | | | $ | 7,949 | | | $ | 8,190 | | | | | | | | | |
| (a) | Audit Fees include professional services rendered for the audit of annual financial statements and reviews of quarterly financial statements. This category also includes fees for statutory audits required internationally, services associated with documents filed with the SEC and in connection with securities offerings and private placements, work performed by tax professionals in connection with the audit or quarterly reviews and accounting consultation and research work necessary to comply with financial reporting and accounting standards. |
| (b) | Audit-Related Fees include assurance and related services not reported under annual Audit Fees that reasonably relate to the performance of the audit or review of our financial statements and are not reported under Audit Fees, including attest and agreed-upon procedures services not required by statute or regulations, information systems reviews, due diligence related to mergers and acquisitions and employee benefit plan audits required internationally. |
| (c) | Tax Fees include professional services rendered for tax compliance and tax planning advice provided domestically and internationally, except those provided in connection with the audit or quarterly reviews. Of the $712,280 in Tax Fees and $1,087,230 in Tax Fees with respect to 2015 and 2014, respectively, $43,684 and $122,010, respectively, was related to tax compliance services. |
| (d) | All Other Fees include fees for products and services other than those in the above three categories. This category includes permitted corporate finance services and certain advisory services. |
Clear Channel Outdoor’s Audit Committee has considered whether Ernst & Young LLP’s provision of non-audit services to Clear Channel Outdoor is compatible with maintaining Ernst & Young LLP’s independence. The Audit Committee pre-approves all audit and permitted non-audit services (including the fees and terms thereof) to be performed for Clear Channel Outdoor by its independent auditor. The ChairmanChair of the Audit Committee may represent the entire committee for the purposes of pre-approving permissible non-audit services, provided that the decision to pre-approve any service is disclosed to the Audit Committee no later than its next scheduled meeting.
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PROPOSAL 2: ADVISORY RESOLUTION ON EXECUTIVE COMPENSATION We are asking our stockholders to approve an advisory resolution on our executive compensation as reported in this Proxy Statement. As described above in the Compensation Discussion and Analysis section of this Proxy Statement, we believe that compensation of our named executive officers should be directly and materially linked to operating performance. The fundamental objective of our compensation program is to attract, retain and motivate top quality executives through compensation and incentives that are competitive with the various labor markets and industries in which we compete for talent and that align the interests of our executives with the interests of our stockholders. Overall, we have designed our compensation program to: support our business strategy and business plan by clearly communicating what is expected of executives with respect to goals and results and by rewarding achievement; recruit, motivate and retain executive talent; and align executive performance with stockholder interests. We urge stockholders to read the Compensation Discussion and Analysis section of this Proxy Statement, which describes in more detail how our executive compensation policies and procedures operate and are designed to achieve our compensation objectives, as well as the Summary Compensation Table and other related compensation tables and narrative appearing in this Proxy Statement, which provide detailed information on the compensation of our named executive officers. In accordance with Section 14A of the Exchange Act, and as a matter of good corporate governance, we are asking stockholders to approve the following advisory resolution at the Annual Meeting: RESOLVED, that the stockholders approve, on an advisory basis, the compensation of the named executive officers, as disclosed in the Proxy Statement for the 2023 Annual Meeting of stockholders pursuant to Item 402 of Regulation S-K, including the Compensation Discussion and Analysis, the Summary Compensation Table and the related compensation tables, notes and narrative. This resolution, commonly referred to as a “say-on-pay” resolution, is advisory, which means that the vote is not binding on Clear Channel Outdoor, our Board or our Compensation Committee. The vote on this resolution is not intended to address any specific element of compensation, but rather is related to the overall compensation of our named executive officers, as described in this Proxy Statement pursuant to the rules of the SEC. Although non-binding, the Board and the Compensation Committee will review and consider the voting results when making future decisions regarding our executive compensation program. The Board recommends that you vote “FOR” approval of the advisory resolution on executive compensation above. Properly submitted proxies will be so voted unless stockholders specify otherwise. | | | | | 74 Notice and Proxy Statement 2023 | | | | |
PROPOSAL 3: ADVISORY VOTE ON THE FREQUENCY OF FUTURE SAY-ON-PAY VOTES Pursuant to Section 14A of the Exchange Act, we are asking our stockholders to vote on whether future advisory votes on executive compensation of the nature reflected above in Proposal 2 should occur every year, every two years or every three years. Stockholders also may abstain from voting. This non-binding advisory vote is commonly referred to as “say-on-pay frequency” vote. Stockholders last voted on the advisory vote on executive compensation at our annual meeting of stockholders held in 2017. At such meeting, our stockholders recommended, and the Board determined, that the stockholder vote on the compensation of our named executive officers would occur every three years. In 2021, however, our Board determined to change the frequency of the “say-on-pay” votes to occur every year, in order to allow us to obtain stockholder input on our executive compensation program on a more regular basis. After careful consideration and receiving feedback from stockholders during our ongoing outreach efforts, the Board considers that future advisory votes on executive compensation should continue to occur every year (annually). We believe that an annual advisory vote furthers our objective of engaging in regular and timely communication with our stockholders regarding our executive compensation policies. The vote is advisory, which means that the vote is not binding on Clear Channel Outdoor, our Board or our Compensation Committee. The Board will consider the frequency that receives the highest number of votes to be the frequency selected by our stockholders, regardless of whether that frequency receives a majority of the votes cast. However, because this vote is advisory and not binding in any way, the Board may decide that it is in the best interests of the stockholders and Clear Channel Outdoor to hold an advisory vote on executive compensation more or less frequently than the option selected by our stockholders. The proxy card provides stockholders with the opportunity to choose from among four options (holding the vote every one, two or three years, or abstaining from voting), and therefore, stockholders will not be voting to approve or disapprove the recommendation of our Board. The Board recommends that you vote for the option of “ONE YEAR” as the preferred frequency for advisory votes on executive compensation. Properly submitted proxies will be so voted unless stockholders specify otherwise. | | | | | | | | | Notice and Proxy Statement 2023 75 |
PROPOSAL 4: RATIFICATION OF SELECTION OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM The Audit Committee has reappointed Ernst & Young LLP as the independent registered public accounting firm to audit the consolidated financial statements of Clear Channel Outdoor for the year ending December 31, 2016.2023. ShareholderStockholder ratification of the selection of Ernst & Young LLP as our independent registered public accounting firm is not required by our bylawsBy-laws or any other applicable legal requirement. However, the Board is
submitting the selection of Ernst & Young LLP to the shareholdersstockholders for ratification as a matter of good corporate practice.governance. If the appointment of Ernst & Young LLP is not ratified, the Audit Committee will evaluate the basis for the shareholders’stockholders’ vote when determining whether to continue the firm’s engagement, but ultimately may determine to continue the engagement of the firm or another audit firm without re-submitting the matter to shareholders.stockholders. Even if the appointment of Ernst & Young LLP is ratified, the Audit Committee may terminate the appointment of Ernst & Young LLP as the independent registered public accounting firm without shareholderstockholder approval whenever the Audit Committee deems termination necessary or appropriate. Representatives of Ernst & Young LLP are expected to be present at the annual meeting of shareholders,Annual Meeting, will have an opportunity to make a statement if they so desire and will be available to respond to appropriate questions. The Board recommends that you vote “For”“FOR” the ratification of the selection of Ernst & Young LLP as the Company’s independent registered public accounting firm for the year ending December 31, 2016.2023. Properly submitted proxies will be so voted unless shareholdersstockholders specify otherwise. SHAREHOLDER
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STOCKHOLDER PROPOSALS FOR 20172024 ANNUAL MEETING AND ADVANCE NOTICE PROCEDURES ShareholdersStockholders interested in submitting a proposal for inclusion in our proxy materials for the annual meeting of shareholdersstockholders in 20172024 may do so by following the procedures prescribed in SEC Rule 14a-8. To In general ,to be eligible for inclusion, shareholderstockholder proposals must be received by the Corporate Secretary of Clear Channel Outdoor no later than December 21, 2016,November 23, 2023 and must otherwise comply with the SEC’s rules. Proposals should be sent to: Corporate Secretary, Clear Channel Outdoor Holdings, Inc., 200 East Basse Road,4830 North Loop 1604W, Suite 100,111, San Antonio, Texas 78209.78249.
If you intend to present a proposal at the annual meeting of shareholdersstockholders in 2017,2024 (other than pursuant to Rule 14a-8), or if you want to nominate one or more directors at the annual meeting of shareholdersstockholders in 2017,2024, you must comply with the advance notice provisions of Clear Channel Outdoor’s bylaws. IfBy-laws, which require, among other things, that you intend to present a proposal at the annual meeting, or if you want to nominate one or more directors, you must give timely notice thereof in writing to the Corporate Secretary at the address set forth above. Our Secretary must receive the notice not less than 90 days and not more than 120 days before the anniversary date of the immediately preceding annual meeting of shareholders. This means that, for our 2017 annual meeting, ourCorporate Secretary must receive the notice no earlier than the close of business on January 27, 20174, 2024 and no later than the close of business on February 25, 2017.3, 2024. However, if the date of our 2024 Annual Meeting is more than 30 days before or after the first anniversary of the date of the Annual Meeting, then our Corporate Secretary must receive the notice no earlier than the close of business on the 120th calendar day prior to the date of the 2024 Annual Meeting and not later than the close of business on the later of the 90th calendar day prior to the date of the 2024 Annual Meeting and the 10th calendar day following the day on which public announcement of the date of 2024 Annual Meeting is first made by us. You may contact our Corporate Secretary at the address set forth above for a copy of the relevant bylawBy-law provisions regarding the requirements for making shareholderstockholder proposals and nominating director candidates. In addition to satisfying the requirements of the By-laws, to comply with the requirements set forth in Rule 14a-19 of the Exchange Act (the universal proxy rules), stockholders who intend to solicit proxies in support of director nominees other than the Board’s nominees must also provide written notice to the Corporate Secretary that sets forth all the information required by Rule 14a-19(b) of the Exchange Act. Such notice must be postmarked or transmitted electronically to the Company at the Company’s principal executive offices no later than March 4, 2024. OTHER MATTERS Neither Clear Channel Outdoor’s management nor the Board knows of any other business to be brought before the annual meetingAnnual Meeting other than the matters described above. If any other matters properly come before the annual meeting,Annual Meeting, the proxies will be voted on such matters in accordance with the judgment of the persons named as proxies therein, or their substitutes, present and acting at the meeting. GENERAL The cost of soliciting proxies will be borne by Clear Channel Outdoor. Following the original mailing of the proxy soliciting material, for a fee of approximately $18,500, plus certain costs and expenses, Innisfree M&A Incorporated may assist Clear Channel Outdoor in soliciting proxies. In addition, regular employees of Clear Channel Outdoor may solicit proxies by mail, telephone, facsimile, e-mail and personal interview. Proxy cards and materials will also be distributed to beneficial owners of stock, through brokers, custodians, nominees and other like parties. Clear Channel Outdoor expects to reimburse such parties for their charges and expenses connected therewith. The SEC has adopted rules that permit companies and intermediaries such as brokers to satisfy delivery requirements for proxy statements with respect to two or more shareholdersstockholders sharing the same address by delivering a single proxy statement addressed to those shareholders.stockholders. This process, which is commonly referred to as “householding,”“householding”, potentially provides extra convenience for shareholdersstockholders and cost savings for companies. Clear Channel Outdoor and some brokers household proxy materials, delivering a single proxy statementProxy Statement to multiple shareholdersstockholders sharing an address unless contrary instructions have been received from the affected shareholders.stockholders. Once you have received notice from your broker or us that they or we will be householding materials to your address, | | | | | | | | | Notice and Proxy Statement 2023 77 |
householding will continue until you are notified otherwise or until you revoke your consent. If, at any time, you no longer wish to participate in householding and would prefer to receive a separate proxy statement,Proxy Statement, please notify your broker if your shares are held in a brokerage account or us if your shares are registered in your name. You can notify us by sending a written request to Clear Channel Outdoor Holdings, Inc., Investor Relations, 200 East Basse Road,4830 North Loop 1604W, Suite 100,111, San Antonio, Texas 7820978249 or by calling (210) 832-3700. Upon written or oral request, we will promptly deliver a separate copy of this proxy statementProxy Statement to a beneficial owner at a shared address to which a single copy of the proxy statementProxy Statement was delivered. An electronic copy of Clear Channel Outdoor’s Annual Report on Form 10-K filed with the SEC on February 25, 201628, 2023 is available free of charge at Clear Channel Outdoor’s website atwww.clearchanneloutdoor.comwww.investor.clearchannel.com. A paper copy of the Form 10-K is also is available without charge to shareholdersstockholders upon written request to: Investor Relations, Clear Channel Outdoor Holdings, Inc., 200 East Basse Road,4830 North Loop 1604W, Suite 100,111, San Antonio, Texas 78209. APPENDIX A
FINANCIAL STATEMENTS, FOOTNOTES AND OTHER DATA
STOCK PERFORMANCE GRAPH
The following chart provides a comparison of the cumulative total returns, adjusted for any stock splits and dividends, for Clear Channel Outdoor Holdings, Inc., our Outdoor Index and the S&P 500 Composite Index from December 31, 2010 through December 31, 2015.
Indexed Yearly Stock Price Close
(Price Adjusted for Stock Splits and Dividends)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | 12/31/2010 | | | 12/31/2011 | | | 12/31/2012 | | | 12/31/2013 | | | 12/31/2014 | | | 12/31/2015 | | Clear Channel Outdoor Holdings | | $ | 1,351 | | | $ | 1,208 | | | $ | 685 | | | $ | 976 | | | $ | 1,019 | | | $ | 538 | | Outdoor Index* | | $ | 1,281 | | | $ | 885 | | | $ | 1,266 | | | $ | 1,681 | | | $ | 1,725 | | | $ | 1,929 | | S&P500 Index | | $ | 1,128 | | | $ | 1,128 | | | $ | 1,309 | | | $ | 1,658 | | | $ | 1,846 | | | $ | 1,833 | |
* | Our Outdoor Index consists of Lamar Advertising Co., Inc., which in November 2014 completed the reorganization of its business operations to qualify as a real estate investment trust (“REIT”). |
EXCERPTS FROM THE ANNUAL REPORT ON FORM 10-K
Our Business Segments
We have two reportable business segments, Americas outdoor advertising (“Americas”) and International outdoor advertising (“International”), which represented 48% and 52% of our 2015 revenue, respectively.
We are a leading global outdoor advertising company providing clients with advertising opportunities through billboards, street furniture displays, transit displays and other out-of-home advertising displays. Through our extensive display inventory, we have the ability to deliver innovative, effective marketing campaigns for advertisers and marketing, creative and strategic partners in communities across the Americas and internationally.
We focus on building the leadership position of our diverse global assets and maximizing our financial performance while serving our local communities. We intend to continue to execute upon our long-standing outdoor advertising strategies, while closely managing expenses and focusing on achieving operating efficiencies throughout our businesses. Part of our long-term strategy is to pursue the technology of digital displays, including flat screens, LCDs and LEDs, as additions to traditional methods of displaying our clients’ advertisements. We are currently installing these technologies in certain markets, both domestically and internationally.
For more information about our revenue, gross profit and assets by segment and our revenue and long-lived assets by geographic area, see Note 12 to our Consolidated Financial Statements located in Item 8 of Part II of the Annual Report on Form 10-K.
Americas Sources of Revenue
Americas generated 48%, 46% and 47% of our revenue in 2015, 2014 and 2013, respectively. Americas revenue is derived from the sale of advertising copy placed on our traditional and digital displays. Our display inventory consists primarily of billboards, street furniture displays and transit displays. The margins on our billboard contracts, including those related to digital billboards, tend to be higher than those on contracts for other displays, due to their greater size, impact and location along major roadways that are highly trafficked. Billboards comprise approximately two-thirds of our display revenues. The following table shows the approximate percentage of revenue derived from each category for our Americas inventory:
| | | | | | | | | | | | | | | | Year Ended December 31, | | | | | 2015 | | | 2014 | | | 2013 | | Billboards: | | | | | | | | | | | | | Bulletins | | | 58 | % | | | 58 | % | | | 56 | % | Posters | | | 12 | % | | | 12 | % | | | 12 | % | Street furniture displays | | | 6 | % | | | 7 | % | | | 7 | % | Transit displays | | | 15 | % | | | 16 | % | | | 16 | % | Spectaculars/wallscapes | | | 5 | % | | | 3 | % | | | 4 | % | Other | | | 4 | % | | | 4 | % | | | 5 | % | | | | | | | | | | | | | | Total | | | 100 | % | | | 100 | % | | | 100 | % | | | | | | | | | | | | | |
Our Americas segment generates revenues from local and national sales. Our advertising rates are based on a number of different factors including location, competition, size of display, illumination, market and gross ratings points. Gross ratings points are the total number of impressions delivered, expressed as a percentage of a market population, of a display or group of displays. The number of impressions delivered by a display is measured by the number of people passing the site during a defined period of time. For all of our billboards in the United States, we use independent, third-party auditing companies to verify the number of impressions delivered by a display.
While location, price and availability of displays are important competitive factors, we believe that providing quality customer service and establishing strong client relationships are also critical components of sales. In addition, we have long-standing relationships with a diversified group of advertising brands and agencies that allow us to diversify client accounts and establish continuing revenue streams.
International Sources of Revenue
Our International segment generated 52%, 54% and 53% of our revenue in 2015, 2014 and 2013, respectively. Our International display inventory consists primarily of street furniture displays, billboards, transit displays and other out-of-home advertising displays. The following table shows the approximate percentage of revenue derived from each inventory category of our International segment:
| | | | | | | | | | | | | | | | Year Ended December 31, | | | | | 2015 | | | 2014 | | | 2013 | | Street furniture displays | | | 52 | % | | | 50 | % | | | 49 | % | Billboards | | | 19 | % | | | 20 | % | | | 21 | % | Transit displays | | | 9 | % | | | 10 | % | | | 10 | % | Other(1) | | | 20 | % | | | 20 | % | | | 20 | % | | | | | | | | | | | | | | Total | | | 100 | % | | | 100 | % | | | 100 | % | | | | | | | | | | | | | |
(1) | Includes advertising revenue from mall displays, other small displays, and non-advertising revenue from sales of street furniture equipment, cleaning and maintenance services, operation of SmartBike programs and production revenue. |
Our International segment generates the majority of its revenue from the sale of advertising space on street furniture displays, billboards, retail displays and transit displays. Similar to our Americas business, advertising rates generally are based on the gross ratings points of a display or group of displays. In some of the countries where we have operations, the number of impressions delivered by a display is weighted to account for such factors as illumination, proximity to other displays and the speed and viewing angle of approaching traffic.
While location, price and availability of displays are important competitive factors, we believe that providing quality customer service and establishing strong client relationships are also critical components of sales. Our entrepreneurial culture allows local management to operate their markets as separate profit centers, encouraging customer cultivation and service.
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
Market Information
Shares of our Class A common stock trade on the New York Stock Exchange (“NYSE”) under the symbol “CCO.” There were 74 stockholders of record as of February 22, 2016. This figure does not include an estimate of the indeterminate number of beneficial holders whose shares may be held of record by brokerage firms and clearing agencies. The following table sets forth, for the calendar quarters indicated, the reported high and low sales prices of our Class A common stock as reported on the NYSE:
| | | | | | | | | | | | | | | | | | | | | | Class A
Common Stock
Market Price | | | | | Class A
Common Stock
Market Price | | | | | High | | | Low | | | | | High | | | Low | | 2015 | | | | | | | | | | 2014 | | | | | | | | | First Quarter | | $ | 11.00 | | | $ | 9.01 | | | First Quarter | | $ | 10.35 | | | $ | 8.89 | | Second Quarter | | | 11.61 | | | | 9.63 | | | Second Quarter | | | 9.14 | | | | 7.90 | | Third Quarter | | | 10.23 | | | | 7.09 | | | Third Quarter | | | 7.70 | | | | 6.74 | | Fourth Quarter | | | 7.65 | | | | 4.78 | | | Fourth Quarter | | | 10.59 | | | | 6.34 | |
There is no established public trading market for our Class B common stock. There were 315,000,000 shares of our Class B common stock outstanding on February 22, 2016. iHeartCommunications indirectly holds all of the shares of Class B common stock outstanding and 10,726,917 shares of Class A common stock, representing approximately 90% of the shares outstanding and approximately 99% of the voting power. The holders of our Class A common stock and Class B common stock have identical rights, except holders of our Class A common stock are entitled to one vote per share while holders of Class B common stock are entitled to 20 votes per share. The shares of Class B common stock are convertible, at the option of the holder at any time or upon any transfer, into shares of Class A common stock on a one-for-one basis, subject to certain limited exceptions.
Dividend Policy
On March 15, 2012, we paid a special dividend in an amount equal to $6.0832 per share to the holders of record of our Class A and Class B common stock at the close of business on March 12, 2012 and, on November 8, 2013, in connection with the settlement of the derivative litigation related to the Due from iHeartCommunications note, we paid a special dividend in an amount equal to $0.5578 per share to the holders of record of our Class A and Class B common stock at the close of business on November 5, 2013. On August 11, 2014, we paid a special dividend in an amount equal to $0.4865 per share to the holders of record of our Class A and Class B common stock at the close of business on August 4, 2014. On January 7, 2016, we paid a special dividend in an amount equal to $0.6026 per share to the holders of record of our Class A and Class B common stock at the close of business on January 4, 2016. On February 4, 2016, we paid a special dividend in an amount equal to $1.4937 per share to the holders of record of our Class A and Class B common stock at the close of business on February 1, 2016. We do not pay regularly scheduled dividends, and our ability to pay dividends on our common stock is subject to restrictions should we seek to do so in the future.
We are a holding company with no independent operations and no significant assets other than the stock of our subsidiaries and the Due from iHeartCommunications note. We, therefore, are dependent on the receipt of dividends or other distributions from our subsidiaries or repayment by iHeartCommunications of amounts outstanding under the Due from iHeartCommunications note to pay dividends. On October 19, 2013, in accordance with the terms of the derivative litigation settlement, we established a committee of our board of directors for the specific purpose of monitoring the Due from iHeartCommunications note. The committee has the non-exclusive authority pursuant to a committee charter to demand repayment under the Due from
iHeartCommunications note under certain circumstances related to iHeartCommunications’ liquidity or the amount outstanding under the Due from iHeartCommunications note as long as our board of directors declares a simultaneous dividend equal to the amount so demanded.
In addition, the agreements governing our indebtedness contain restrictions on our ability to pay dividends. If we were to declare and pay cash dividends in the future, holders of our Class A common stock and Class B common stock would share equally, on a per share basis, in any such cash dividend. See “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources—Sources of Capital” and Note 5 to the Consolidated Financial Statements in Item 8 of the Annual Report on Form 10-K.
Sales of Unregistered Securities
We did not sell any equity securities during 2015 that were not registered under the Securities Act of 1933.
Purchases of Equity Securities
The following table sets forth the purchases made during the quarter ended December 31, 2015 by or on behalf of us or an affiliated purchaser of shares of our Class A common stock registered pursuant to Section 12 of the Exchange Act:
| | | | | | | | | | | | | | | | | Period | | Total
Number of
Shares
Purchased(1)(2) | | | Average
Price Paid
per Share(1)(2) | | | Total Number of Shares
Purchased as Part of
Publicly Announced
Plans or Programs(2) | | | Maximum Number (or
Approximate Dollar
Value) of Shares that
May Yet Be Purchased
Under the Plans or
Programs(2) | | October 1 through October 31 | | | 3,525 | | | $ | 7.18 | | | | — | | | $ | — | | November 1 through November 30 | | | — | | | | — | | | | — | | | | — | | December 1 through December 31 | | | — | | | | — | | | | — | | | | — | | | | | | | | | | | | | | | | | | | Total | | | 3,525 | | | $ | 7.18 | | | | — | | | $ | — | |
(1) | The shares indicated consist of shares of our Class A common stock tendered by employees to us during the three months ended December 31, 2015 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. |
(2) | On August 9, 2010, iHeartCommunications announced that its board of directors approved a stock purchase program under which iHeartCommunications or its subsidiaries may purchase up to an aggregate of $100.0 million of the Company’s Class A common stock and/or the Class A common stock of iHeartMedia, Inc. (“iHeartMedia”). The stock purchase program did not have a fixed expiration date and could be modified, suspended or terminated at any time at iHeartCommunications’ discretion. As of December 31, 2014, an aggregate $34.2 million was available under this program. In January 2015, a subsidiary of iHeartCommunications purchased an additional 2,000,000 shares of the Company’s Class A common stock for $20.4 million. On April 2, 2015, a subsidiary of iHeartCommunications purchased an additional 2,172,946 shares of the Company’s Class A common stock for $22.2 million, increasing iHeartCommunications’ collective holdings to represent slightly more than 90% of the outstanding shares of the Company’s common stock on a fully-diluted basis, assuming the conversion of all of the Company’s Class B common stock into Class A common stock. As a result of this purchase, the stock purchase program concluded. The purchase of shares in excess of the amount available under the stock purchase program was separately approved by the iHeartCommunications’ board of directors. |
ITEM 6. | SELECTED FINANCIAL DATA |
The following tables set forth our summary historical consolidated financial and other data as of the dates and for the periods indicated. The summary historical financial data are derived from our audited consolidated financial statements. Certain prior period amounts have been reclassified to conform to the 2015 presentation. Historical results are not necessarily indicative of the results to be expected for future periods. Acquisitions and dispositions impact the comparability of the historical consolidated financial data reflected in this schedule of Selected Financial Data.
The summary historical consolidated financial and other data should be read in conjunction with “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our consolidated financial statements and the related notes thereto located within Item 8 of Part II of the Annual Report on Form 10-K.
| | | | | | | | | | | | | | | | | | | | | | (In thousands) | | For the Years Ended December 31, | | | | 2015 | | | 2014 | | | 2013 | | | 2012 | | | 2011 | | Results of Operations Data: | | | | | | | | | | | | | | | | | | | | | Revenue | | $ | 2,806,204 | | | $ | 2,961,259 | | | $ | 2,946,190 | | | $ | 2,946,944 | | | $ | 3,003,874 | | Operating expenses: | | | | | | | | | | | | | | | | | | | | | Direct operating expenses (excludes depreciation and amortization) | | | 1,494,902 | | | | 1,596,888 | | | | 1,594,728 | | | | 1,603,492 | | | | 1,630,875 | | Selling, general and administrative expenses (excludes depreciation and amortization) | | | 531,504 | | | | 548,519 | | | | 543,572 | | | | 574,662 | | | | 538,032 | | Corporate expenses (excludes depreciation and amortization) | | | 116,380 | | | | 130,894 | | | | 124,399 | | | | 115,832 | | | | 100,971 | | Depreciation and amortization | | | 375,962 | | | | 406,243 | | | | 403,170 | | | | 399,264 | | | | 432,035 | | Impairment charges(1) | | | 21,631 | | | | 3,530 | | | | 13,150 | | | | 37,651 | | | | 7,614 | | Other operating income (expense), net | | | (4,824 | ) | | | 7,259 | | | | 22,979 | | | | 50,943 | | | | 8,591 | | | | | | | | | | | | | | | | | | | | | | | Operating income | | | 261,001 | | | | 282,444 | | | | 290,150 | | | | 266,986 | | | | 302,938 | | Interest expense, net (including interest income on Due from iHeartCommunications) | | | 294,230 | | | | 293,086 | | | | 298,573 | | | | 310,115 | | | | 196,976 | | Loss on marketable securities | | | — | | | | — | | | | (18 | ) | | | (2,578 | ) | | | (4,827 | ) | Equity in earnings (loss) of nonconsolidated affiliates | | | (289 | ) | | | 3,789 | | | | (2,092 | ) | | | 843 | | | | 6,029 | | Loss on extinguishment of debt | | | — | | | | — | | | | — | | | | (221,071 | ) | | | — | | Other income (expense), net | | | 12,387 | | | | 15,185 | | | | 1,016 | | | | (364 | ) | | | (649 | ) | | | | | | | | | | | | | | | | | | | | | | Income (loss) before income taxes | | | (21,131 | ) | | | 8,332 | | | | (9,517 | ) | | | (266,299 | ) | | | 106,515 | | Income tax benefit (expense) | | | (50,177 | ) | | | 8,787 | | | | (14,809 | ) | | | 107,089 | | | | (43,296 | ) | | | | | | | | | | | | | | | | | | | | | | Consolidated net income (loss) | | | (71,308 | ) | | | 17,119 | | | | (24,326 | ) | | | (159,210 | ) | | | 63,219 | | Less amount attributable to noncontrolling interest | | | 24,764 | | | | 26,709 | | | | 24,134 | | | | 23,902 | | | | 20,273 | | | | | | | | | | | | | | | | | | | | | | | Net income (loss) attributable to the Company | | $ | (96,072 | ) | | $ | (9,590 | ) | | $ | (48,460 | ) | | $ | (183,112 | ) | | $ | 42,946 | | | | | | | | | | | | | | | | | | | | | | | Net income (loss) attributable to the Company per common share: | | | | | | | | | | | | | | | | | | | | | Basic | | $ | (0.27 | ) | | $ | (0.03 | ) | | $ | (0.14 | ) | | $ | (0.54 | ) | | $ | 0.11 | | Weighted average common shares | | | 359,508 | | | | 358,565 | | | | 357,662 | | | | 356,915 | | | | 355,907 | | Diluted | | $ | (0.27 | ) | | $ | (0.03 | ) | | $ | (0.14 | ) | | $ | (0.54 | ) | | $ | 0.11 | | Weighted average common shares | | | 359,508 | | | | 358,565 | | | | 357,662 | | | | 356,915 | | | | 356,528 | |
(1) | We recorded non-cash impairment charges of $21.6 million, $3.5 million, $13.2 million, $37.7 million and $7.6 million during 2015, 2014, 2013, 2012 and 2011, respectively. Our impairment charges are discussed more fully in Item 8 of Part II of the Annual Report on Form 10-K. |
| | | | | | | | | | | | | | | | | | | | | | | | As of December 31, | | | (In thousands) | | 2015 | | | 2014 | | | 2013 | | | 2012 | | | 2011 | | Balance Sheet Data: | | | | | | | | | | | | | | | | | | | | | Current assets | | $ | 1,577,211 | | | $ | 1,064,110 | | | $ | 1,222,125 | | | $ | 1,509,346 | | | $ | 1,453,728 | | Property, plant and equipment, net | | | 1,627,986 | | | | 1,905,651 | | | | 2,081,098 | | | | 2,207,744 | | | | 2,246,710 | | Total assets | | | 6,357,199 | | | | 6,346,572 | | | | 6,743,089 | | | | 7,099,728 | | | | 7,088,185 | | Current liabilities | | | 920,613 | | | | 717,829 | | | | 773,590 | | | | 811,405 | | | | 720,983 | | Long-term debt, including current maturities | | | 5,161,234 | | | | 4,933,929 | | | | 4,935,376 | | | | 4,944,795 | | | | 2,545,909 | | Shareholders’ equity (deficit) | | | (569,667 | ) | | | (140,941 | ) | | | 160,108 | | | | 446,089 | | | | 2,740,227 | |
ITEM 7. | MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS |
OVERVIEW
Format of Presentation
Management’s discussion and analysis of our financial condition and results of operations (“MD&A”) should be read in conjunction with the consolidated financial statements and related footnotes contained in Item 8 of the Annual Report on Form 10-K. Our discussion is presented on both a consolidated and segment basis. Our reportable operating segments are Americas outdoor advertising (“Americas”) and International outdoor advertising (“International”). Our Americas and International segments provide outdoor advertising services in their respective geographic regions using various digital and traditional display types.
We manage our operating segments primarily focusing on their operating income, while Corporate expenses, Other operating income (expense), net, Interest expense, Interest income on Due from iHeartCommunications, Loss on marketable securities, Equity in earnings (loss) of nonconsolidated affiliates, Loss on extinguishment of debt, Gain (loss) on extinguishment of debt, Other income, net and Income tax benefit (expense) are managed on a total company basis and are, therefore, included only in our discussion of consolidated results.
Certain prior period amounts have been reclassified to conform to the 2015 presentation.
Description of Our Business
Our revenue is derived from selling advertising space on the displays we own or operate in key markets worldwide, consisting primarily of billboards, street furniture and transit displays. Part of our long-term strategy is to pursue the technology of digital displays, including flat screens, LCDs and LEDs, as additions to traditional methods of displaying our clients’ advertisements. We are currently installing these technologies in certain markets, both domestically and internationally.
Management typically monitors our business by reviewing the average rates, average revenue per display, occupancy, and inventory levels of each of our display types by market.
We own the majority of our advertising displays, which typically are located on sites that we either lease or own or for which we have acquired permanent easements. Our advertising contracts with clients typically outline the number of displays reserved, the duration of the advertising campaign and the unit price per display.
The significant expenses associated with our operations include direct production, maintenance and installation expenses as well as site lease expenses for land under our displays including revenue-sharing or minimum guaranteed amounts payable under our billboard, street furniture and transit display contracts. Our direct production, maintenance and installation expenses include costs for printing, transporting and changing the advertising copy on our displays, the related labor costs, the vinyl and paper costs, electricity costs and the costs for cleaning and maintaining our displays. Vinyl and paper costs vary according to the complexity of the advertising copy and the quantity of displays. Our site lease expenses include lease payments for use of the land under our displays, as well as any revenue-sharing arrangements or minimum guaranteed amounts payable that we may have with the landlords. The terms of our site leases and revenue-sharing or minimum guaranteed contracts generally range from one to 20 years.
Americas
Our advertising rates are based on a number of different factors including location, competition, type and size of display, illumination, market and gross ratings points. Gross ratings points are the total number of
impressions delivered by a display or group of displays, expressed as a percentage of a market population. The number of impressions delivered by a display is measured by the number of people passing the site during a defined period of time. For all of our billboards in the United States, we use independent, third-party auditing companies to verify the number of impressions delivered by a display.
Client contract terms typically range from four weeks to one year for the majority of our display inventory in the United States. Generally, we own the street furniture structures and are responsible for their construction and maintenance. Contracts for the right to place our street furniture and transit displays and sell advertising space on them are awarded by municipal and transit authorities in competitive bidding processes governed by local law or are negotiated with private transit operators. Generally, these contracts have terms ranging from 10 to 20 years.
International
Similar to our Americas business, advertising rates generally are based on the gross ratings points of a display or group of displays. The number of impressions delivered by a display, in some countries, is weighted to account for such factors as illumination, proximity to other displays and the speed and viewing angle of approaching traffic. In addition, because our International advertising operations are conducted in foreign markets, including Europe, Asia and Australia, management reviews the operating results from our foreign operations on a constant dollar basis. A constant dollar basis allows for comparison of operations independent of foreign exchange movements.
Our International display inventory is typically sold to clients through network packages, with client contract terms typically ranging from one to two weeks with terms of up to one year available as well. Internationally, contracts with municipal and transit authorities for the right to place our street furniture and transit displays typically provide for terms ranging from three to 15 years. The major difference between our International and Americas street furniture businesses is in the nature of the municipal contracts. In our International business, these contracts typically require us to provide the municipality with a broader range of metropolitan amenities in exchange for which we are authorized to sell advertising space on certain sections of the structures we erect in the public domain. A different regulatory environment for billboards and competitive bidding for street furniture and transit display contracts, which constitute a larger portion of our business internationally, may result in higher site lease costs in our International business. As a result, our margins are typically lower in our International business than in our Americas business.
Macroeconomic Indicators
Our advertising revenue for our Americas and International segments is highly correlated to changes in gross domestic product (“GDP”) as advertising spending has historically trended in line with GDP, both domestically and internationally. According to the U.S. Department of Commerce, estimated U.S. GDP growth for 2015 was 2.4%. Internationally, our results are impacted by fluctuations in foreign currency exchange rates as well as the economic conditions in the foreign markets in which we have operations.
Relationship with iHeartCommunications
There are several agreements which govern our relationship with iHeartCommunications including the Master Agreement, Corporate Services Agreement, Employee Matters Agreement, Tax Matters Agreement and Trademark and License Agreement. iHeartCommunications has the right to terminate these agreements in various circumstances. As of the date of the filing of the Annual Report on Form 10-K, no notice of termination of any of these agreements has been received from iHeartCommunications. Our agreements with iHeartCommunications continued under the same terms and conditions subsequent to iHeartCommunications’ merger.
In accordance with the Master Agreement, our branch managers follow a corporate policy allowing iHeartCommunications to use, without charge, Americas’ displays they believe would otherwise be unsold. iHeartCommunications bears the cost of producing the advertising and we bear the costs of installing and removing this advertising.
Under the Corporate Services Agreement, iHeartCommunications provides management services to us. These services are charged to us based on actual direct costs incurred or allocated by iHeartCommunications based on headcount, revenue or other factors on a pro rata basis. For the years ended December 31, 2015, 2014 and 2013, we recorded approximately $30.1 million, $31.2 million and $35.4 million, respectively, as a component of corporate expenses for these services.
On August 9, 2010, iHeartCommunications announced that its board of directors approved a stock purchase program under which iHeartCommunications or its subsidiaries may purchase up to an aggregate of $100.0 million of our Class A common stock and/or the Class A common stock of iHeartMedia. As of December 31, 2014, an aggregate $34.2 million was available under this program. In January 2015, a subsidiary of iHeartCommunications purchased an additional 2,000,000 shares of the Company’s Class A common stock for $20.4 million. On April 2, 2015, a subsidiary of iHeartCommunications purchased an additional 2,172,946 shares of the Company’s Class A common stock for $22.2 million, increasing iHeartCommunications’ collective holdings to represent slightly more than 90% of the outstanding shares of the Company’s common stock on a fully-diluted basis, assuming the conversion of all of the Company’s Class B common stock into Class A common stock. As a result of this purchase, the stock purchase program concluded. The purchase of shares in excess of the amount available under the stock purchase program was separately approved by the iHeartCommunications’ board of directors.
Executive Summary
The key developments in our business for the year ended December 31, 2015 are summarized below:
Consolidated revenue decreased $155.1 million during 2015 compared to 2014. Excluding a $229.0 million impact from movements in foreign exchange rates, consolidated revenue increased $73.9 million during 2015 compared to 2014.
We spent $20.3 million on strategic revenue and efficiency initiatives during 2015 to realign and improve our on-going business operations—a decrease of $10.0 million compared to 2014.
On December 16, 2015, Clear Channel International B.V. (“CCIBV”), our indirect wholly-owned subsidiary, issued $225.0 million in aggregate principal amount of 8.75% Senior Notes due 2020. We used the proceeds of the offering to fund a special cash dividend in an aggregate amount equal to approximately $217.8 million to our stockholders, which was paid on January 7, 2016.
Revenues and expenses “excluding the impact of foreign exchange movements” in this Management’s Discussion & Analysis of Financial Condition and Results of Operations is presented because management believes that viewing certain financial results without the impact of fluctuations in foreign currency rates facilitates period to period comparisons of business performance and provides useful information to investors. Revenues and expenses “excluding the impact of foreign exchange movements” are calculated by converting the current period’s revenues and expenses in local currency to U.S. dollars using average foreign exchange rates for the prior period.
RESULTS OF OPERATIONS
Consolidated Results of Operations
The comparison of our historical results of operations for the year ended December 31, 2015 to the year ended December 31, 2014 is as follows:
| | | | | | | | | | | | | | | | Years Ended December 31, | | | %
Change | | | (In thousands) | | 2015 | | | 2014 | | | Revenue | | $ | 2,806,204 | | | $ | 2,961,259 | | | | (5 | %) | Operating expenses: | | | | | | | | | | | | | Direct operating expenses (excludes depreciation and amortization) | | | 1,494,902 | | | | 1,596,888 | | | | (6 | %) | Selling, general and administrative expenses (excludes depreciation and amortization) | | | 531,504 | | | | 548,519 | | | | (3 | %) | Corporate expenses (excludes depreciation and amortization) | | | 116,380 | | | | 130,894 | | | | (11 | %) | Depreciation and amortization | | | 375,962 | | | | 406,243 | | | | (7 | %) | Impairment charges | | | 21,631 | | | | 3,530 | | | | 513 | % | Other operating income (expense), net | | | (4,824 | ) | | | 7,259 | | | | (166 | %) | | | | | | | | | | | | | | Operating income | | | 261,001 | | | | 282,444 | | | | (8 | %) | Interest expense | | | 355,669 | | | | 353,265 | | | | | | Interest income on Due from iHeartCommunications | | | 61,439 | | | | 60,179 | | | | | | Equity in earnings (loss) of nonconsolidated affiliates | | | (289 | ) | | | 3,789 | | | | | | Other income, net | | | 12,387 | | | | 15,185 | | | | | | | | | | | | | | | | | | | Income (loss) before income taxes | | | (21,131 | ) | | | 8,332 | | | | | | Income tax benefit (expense) | | | (50,177 | ) | | | 8,787 | | | | | | | | | | | | | | | | | | | Consolidated net income (loss) | | | (71,308 | ) | | | 17,119 | | | | | | Less amount attributable to noncontrolling interest | | | 24,764 | | | | 26,709 | | | | | | | | | | | | | | | | | | | Net loss attributable to the Company | | $ | (96,072 | ) | | $ | (9,590 | ) | | | | | | | | | | | | | | | | | |
Consolidated Revenue
Consolidated revenue decreased $155.1 million during 2015 compared to 2014. Excluding a $229.0 million impact from movements in foreign exchange rates, consolidated revenue increased $73.9 million during 2015 compared to 2014. Americas revenue decreased $1.6 million during 2015 compared to 2014. Excluding the $23.4 million impact from movements in foreign exchange rates, Americas revenue increased $21.8 million during 2015 compared to 2014 primarily driven by higher revenues from digital billboards and our Spectacolor business. International revenue decreased $153.4 million during 2015 compared to 2014. Excluding the $205.6 million impact from movements in foreign exchange rates, International revenue increased $52.2 million during 2015 compared to 2014 primarily driven by new contracts and the impact of sales initiatives.
Consolidated Direct Operating Expenses
Consolidated direct operating expenses decreased $102.0 million during 2015 compared to 2014. Excluding an $146.6 million impact from movements in foreign exchange rates, consolidated direct operating expenses increased $44.6 million during 2015 compared to 2014. Americas direct operating expenses decreased $8.4 million during 2015 compared to 2014. Excluding the $13.1 million impact from movements in foreign exchange rates, Americas direct operating expenses increased $4.7 million during 2015 compared to 2014 primarily due to higher variable site lease expenses related to the increase in revenues. International direct operating expenses
decreased $93.6 million during 2015 compared to 2014. Excluding the $133.5 million impact from movements in foreign exchange rates, International direct operating expenses increased $39.9 million during 2015 compared to 2014 primarily as a result of higher variable costs associated with higher revenue, as well as higher spending on strategic efficiency initiatives.
Consolidated Selling, General and Administrative (“SG&A”) Expenses
Consolidated SG&A expenses decreased $17.0 million during 2015 compared to 2014. Excluding a $51.1 million impact from movements in foreign exchange rates, consolidated SG&A expenses increased $34.1 million during 2015 compared to 2014. Americas SG&A expenses decreased $0.4 million during 2015 compared to 2014. Excluding the $6.0 million impact from movements in foreign exchange rates, Americas SG&A expenses increased $5.6 million during 2015 compared to 2014 primarily in Latin America. International SG&A expenses decreased $16.6 million during 2015 compared to 2014. Excluding the $45.0 million impact from movements in foreign exchange rates, International SG&A expenses increased $28.4 million during 2015 compared to 2014 primarily due to higher compensation expense, including commissions in connection with higher revenues.
Corporate Expenses
Corporate expenses decreased $14.5 million during 2015 compared to 2014. Excluding the $3.5 million impact from movements in foreign exchange rates, corporate expenses decreased $11.0 million during 2015 compared to 2014. Corporate expenses were primarily impacted by lower spending related to our strategic revenue and efficiency initiatives, partially offset by higher variable compensation expense.
Revenue and Efficiency Initiatives
Included in the amounts for direct operating expenses, SG&A and corporate expenses discussed above are expenses of $20.3 million incurred in 2015 in connection with our strategic revenue and efficiency initiatives. The costs were incurred to improve revenue growth, enhance yield, reduce costs, and organize each business to maximize performance and profitability. These costs consist primarily of severance related to workforce initiatives, consolidation of locations and positions, consulting expenses and other costs incurred in connection with streamlining our businesses. These costs are expected to provide benefits in future periods as the initiative results are realized. Of these costs for 2015, $9.2 million are reported within direct operating expenses, $4.3 million are reported within SG&A and $6.8 million are reported within corporate expense. In 2014, such costs totaled $3.5 million, $6.7 million, and $20.0 million, respectively.
Depreciation and Amortization
Depreciation and amortization decreased $30.3 million during 2015 compared to 2014 primarily due to assets becoming fully depreciated or fully amortized as well as the impact of movements in foreign exchange rates.
Impairment Charges
Historically, we performed our annual impairment test on our goodwill, billboard permits, and other intangible assets as of October 1 of each year. Beginning in the third quarter of 2015, we began performing our annual impairment test on July 1 of each year. In addition, we test for impairment of property, plant and equipment whenever events and circumstances indicate that depreciable assets might be impaired. As a result of these impairment tests, during 2015, we recorded impairment charges of $21.6 million during 2015 related to billboard permits in one Americas outdoor market. During 2014, we recognized a $3.5 million other intangible assets impairment charge in our Americas segment primarily related to a decline in the estimated fair value of permanent easements in two markets. Please see Note 2 to the consolidated financial statements included in Item 8 of Part II of the Annual Report on Form 10-K for a further description of the impairment charges.
Other Operating Income (Expense), Net
Other operating expense, net of $4.8 million in 2015 primarily related to acquisition/disposition transaction costs.
Other operating income, net of $7.3 million in 2014 primarily related to the gain on the sale of certain outdoor assets in our Americas segment.
Interest Expense
Interest expense increased $2.4 million in 2015 compared to 2014.
Interest Income on Due From iHeartCommunications
Interest income increased $1.3 million during 2015 compared to 2014 due to the increase in the average outstanding balance on the Due from iHeartCommunications note.
Equity in Earnings (Loss) of Nonconsolidated Affiliates
Equity in loss of nonconsolidated affiliates of $0.3 million for 2015 included the loss from our equity investments in our Americas and International segments.
Equity in earnings of nonconsolidated affiliates of $3.8 million for 2014 included the earnings from our equity investments in our Americas and International segments.
Other Income (Expense), Net
Other income of $12.4 million and $15.2 million for 2015 and 2014, respectively, primarily related to foreign exchange gains on short-term intercompany accounts.
Income Tax Benefit (Expense)
Our operations are included in a consolidated income tax return filed by iHeartMedia. However, for our financial statements, our provision for income taxes was computed as if we file separate consolidated federal income tax returns with our subsidiaries.
The effective tax rate for 2015 was (237.5%) and was primarily impacted by the $32.9 million valuation allowance recorded during the period as additional deferred tax expense. The valuation allowance was recorded against a portion of the U.S. Federal and State net operating losses due to the uncertainty of the ability to utilize those losses in future periods. Additionally, the Company recorded additional taxes due to the inability to benefit from losses in certain foreign jurisdictions.
The effective tax rate for 2014 was (105.5%), primarily impacted by our benefits and charges from tax amounts associated with our foreign earnings that are taxed at rates different from the federal statutory rate and an inability to benefit from losses in certain foreign jurisdictions. In addition, we recorded $20.0 million in net tax benefits associated with a decrease in unrecognized tax benefits resulting from the expiration of statutes of limitations to assess taxes in the United Kingdom and several state jurisdictions.
Americas Outdoor Advertising Results of Operations
Our Americas outdoor operating results were as follows:
| | | | | | | | | | | | | | (In thousands) | | Years Ended December 31, | | | %
Change | | | | 2015 | | | 2014 | | | Revenue | | $ | 1,349,021 | | | $ | 1,350,623 | | | | (0 | %) | Direct operating expenses | | | 597,382 | | | | 605,771 | | | | (1 | %) | SG&A expenses | | | 233,254 | | | | 233,641 | | | | (0 | %) | Depreciation and amortization | | | 204,514 | | | | 203,928 | | | | 0 | % | | | | | | | | | | | | | | Operating income | | $ | 313,871 | | | $ | 307,283 | | | | 2 | % | | | | | | | | | | | | | |
Americas revenue decreased $1.6 million during 2015 compared to 2014. Excluding the $23.4 million impact from movements in foreign exchange rates, Americas revenue increased $21.8 million during 2015 compared to 2014 driven primarily by an increase in revenues from digital billboards as a result of new deployments, as well as from our Spectacolor business, partially offset by lower advertising revenues from our static bulletins and posters, and our airports business.
Americas direct operating expenses decreased $8.4 million during 2015 compared to 2014. Excluding the $13.1 million impact from movements in foreign exchange rates, Americas direct operating expenses increased $4.7 million during 2015 compared to 2014 primarily due to higher variable site lease expenses related to the increase in revenues. Americas SG&A expenses decreased $0.4 million during 2015 compared to 2014. Excluding the $6.0 million impact from movements in foreign exchange rates, Americas SG&A expenses increased $5.6 million during 2015 compared to 2014 primarily due to higher expenses in Latin America.
International Outdoor Advertising Results of Operations
Our International operating results were as follows:
| | | | | | | | | | | | | | (In thousands) | | Years Ended December 31, | | | %
Change | | | | 2015 | | | 2014 | | | Revenue | | $ | 1,457,183 | | | $ | 1,610,636 | | | | (10 | %) | Direct operating expenses | | | 897,520 | | | | 991,117 | | | | (9 | %) | SG&A expenses | | | 298,250 | | | | 314,878 | | | | (5 | %) | Depreciation and amortization | | | 166,060 | | | | 198,143 | | | | (16 | %) | | | | | | | | | | | | | | Operating income | | $ | 95,353 | | | $ | 106,498 | | | | (10 | %) | | | | | | | | | | | | | |
International revenue decreased $153.4 million during 2015 compared to 2014. Excluding the $205.6 million impact from movements in foreign exchange rates, International revenue increased $52.2 million during 2015 compared to 2014 primarily driven by new contracts along with higher occupancy and higher rates for our transit and street furniture products, particularly digital, in certain European countries, including Sweden, Norway, Italy and the UK, as well as from new contracts in Australia and China.
International direct operating expenses decreased $93.6 million during 2015 compared to 2014. Excluding the $133.5 million impact from movements in foreign exchange rates, International direct operating expenses increased $39.9 million during 2015 compared to 2014 primarily as a result of higher variable costs associated with higher revenue, as well as site lease termination fees on lower-margin boards incurred in connection with strategic revenue and efficiency initiatives. International SG&A expenses decreased $16.6 million during 2015 compared to 2014. Excluding the $45.0 million impact from movements in foreign exchange rates, International SG&A expenses increased $28.4 million during 2015 compared to 2014 primarily due to higher compensation expense, including commissions in connection with higher revenues.
Depreciation and amortization decreased $32.1 million. Excluding the $19.5 million impact from movements in foreign exchange rates, depreciation and amortization decreased $12.6 million primarily due to assets becoming fully depreciated or fully amortized.
Also included in International Outdoor direct operating expenses and SG&A expenses are $8.2 million and $3.2 million, respectively, recorded in the fourth quarter of 2015 to correct for accounting errors included in the results for our Netherlands subsidiary reported in prior years. Such corrections are not considered to be material to the current year or prior year financial results.
Consolidated Results of Operations
The comparison of our historical results of operations for the year ended December 31, 2014 to the year ended December 31, 2013 is as follows:
| | | | | | | | | | | | | | | | Years Ended December 31, | | | %
Change | | | (In thousands) | | 2014 | | | 2013 | | | Revenue | | $ | 2,961,259 | | | $ | 2,946,190 | | | | 1 | % | Operating expenses: | | | | | | | | | | | | | Direct operating expenses (excludes depreciation and amortization) | | | 1,596,888 | | | | 1,594,728 | | | | 0 | % | Selling, general and administrative expenses (excludes depreciation and amortization) | | | 548,519 | | | | 543,572 | | | | 1 | % | Corporate expenses (excludes depreciation and amortization) | | | 130,894 | | | | 124,399 | | | | 5 | % | Depreciation and amortization | | | 406,243 | | | | 403,170 | | | | 1 | % | Impairment charges | | | 3,530 | | | | 13,150 | | | | (73 | %) | Other operating income, net | | | 7,259 | | | | 22,979 | | | | (68 | %) | | | | | | | | | | | | | | Operating income | | | 282,444 | | | | 290,150 | | | | (3 | %) | Interest expense | | | 353,265 | | | | 352,783 | | | | | | Interest income on Due from iHeartCommunications | | | 60,179 | | | | 54,210 | | | | | | Loss on marketable securities | | | — | | | | (18 | ) | | | | | Equity in earnings (loss) of nonconsolidated affiliates | | | 3,789 | | | | (2,092 | ) | | | | | Other income, net | | | 15,185 | | | | 1,016 | | | | | | | | | | | | | | | | | | | Loss before income taxes | | | 8,332 | | | | (9,517 | ) | | | | | Income tax benefit (expense) | | | 8,787 | | | | (14,809 | ) | | | | | | | | | | | | | | | | | | Consolidated loss | | | 17,119 | | | | (24,326 | ) | | | | | Less amount attributable to noncontrolling interest | | | 26,709 | | | | 24,134 | | | | | | | | | | | | | | | | | | | Net loss attributable to the Company | | $ | (9,590 | ) | | $ | (48,460 | ) | | | | | | | | | | | | | | | | | |
Consolidated Revenue
Our consolidated revenue increased $15.1 million including a decrease of $22.7 million from movements in foreign exchange during 2014 compared to 2013. Excluding the impact of foreign exchange movements, consolidated revenue increased $37.8 million. Americas revenue decreased $35.1 million compared to 2013, including negative movements in foreign exchange of $9.4 million. Excluding the impact of foreign exchange movements, Americas revenue decreased $25.7 million primarily driven by lower revenues generated by national accounts and the nonrenewal of certain airport contracts, and lower revenues in our Los Angeles market as a result of the impact of litigation. Our International revenue increased $50.2 million compared to 2013, including negative movements in foreign exchange of $13.3 million. Excluding the impact of foreign exchange movements, International revenue increased $63.5 million primarily driven by new contracts and from growth in Europe and emerging markets.
Consolidated Direct Operating Expenses
Consolidated direct operating expenses during 2014 increased $2.2 million including a decrease of $11.9 million from movements in foreign exchange compared to 2013. Excluding the impact of foreign exchange movements, consolidated direct operating expenses increased $14.1 million. Direct operating expenses in our Americas segment decreased $4.9 million compared to 2013, including a decrease of $6.0 million from movements in foreign exchange. Excluding the impact of foreign exchange movements, direct operating expenses in our Americas segment increased $1.1 million. Direct operating expenses in our International segment increased $7.1 million compared to 2013, including a decrease of $5.9 million from movements in foreign exchange. Excluding the impact of foreign exchange movements, direct operating expenses in our International segment increased $13.0 million primarily as a result of higher variable costs associated with new contracts.
Consolidated SG&A Expenses
Consolidated SG&A expenses during 2014 increased $4.9 million including a decrease of $4.5 million from movements in foreign exchange compared to 2013. Excluding the impact of foreign exchange movements, consolidated SG&A expenses increased $9.4 million. SG&A expenses decreased $9.8 million in our Americas segment including a decrease of $1.9 million from movements in foreign exchange compared to 2013. Excluding the impact of foreign exchange movements, SG&A expenses in our Americas segment decreased $7.9 million primarily due to lower commission expense in connection with lower revenues and property tax refunds. Our International SG&A expenses increased $14.7 million compared to 2013, including a $2.6 million decrease due to the effects of movements in foreign exchange. Excluding the impact of foreign exchange movements, SG&A expenses in our International segment increased $17.3 million primarily due to higher compensation expense, including commissions, in connection with higher revenues, as well as higher litigation expenses.
Corporate Expenses
Corporate expenses increased $6.5 million during 2014 compared to 2013 primarily due to higher spending on strategic revenue and efficiency costs.
Revenue and Efficiency Initiatives
Included in the amounts for direct operating expenses, SG&A and corporate expenses discussed above are expenses of $30.2 million incurred in connection with our strategic revenue and efficiency initiatives. The costs were incurred to improve revenue growth, enhance yield, reduce costs, and organize each business to maximize performance and profitability. These costs consist primarily of consulting expenses, consolidation of locations and positions, severance related to workforce initiatives and other costs incurred in connection with streamlining our businesses. These costs are expected to provide benefits in future periods as the initiative results are realized. Of these costs, $3.5 million are reported within direct operating expenses, $6.7 million are reported within SG&A and $20.0 million are reported within corporate expense. In 2013, such costs totaled $12.5 million, $12.2 million, and $11.7 million, respectively.
Depreciation and Amortization
Depreciation and amortization increased $3.1 million during 2014 compared to 2013 primarily due to purchases of property, plant & equipment.
Impairment Charges
We performed our annual impairment tests as of October 1, 2014 and 2013 on our goodwill, billboard permits, and other intangible assets and recorded impairment charges of $3.5 million and $13.2 million, respectively. During 2014, we recognized a $3.5 million other intangible assets impairment charge in our Americas segment primarily related to a decline in the estimated fair value of permanent easements in two markets. During 2013, we recognized a $10.7 million goodwill impairment charge in our International segment
related to a decline in the estimated fair value of one market. Please see Note 2 to the consolidated financial statements included in Item 8 of Part II of the Annual Report on Form 10-K for a further description of the impairment charges.
Other Operating Income, Net
Other operating income, net of $7.3 million in 2014 primarily related to the gain on the sale of certain outdoor assets in our Americas segments.
Other operating income, net of $23.0 million in 2013 primarily related to the gain on the sale of certain outdoor assets in our Americas segment.
Interest Expense
Interest expense increased $0.5 million in 2014 compared to 2013.
Interest Income on Due From iHeartCommunications
Interest income increased $6.0 million during 2014 compared to 2013 due to the increase in the average outstanding balance.
Equity in Earnings (Loss) of Nonconsolidated Affiliates
Equity in earnings of nonconsolidated affiliates of $3.8 million for 2014 included the earnings from our equity investments in our Americas and International segments.
Equity in loss of nonconsolidated affiliates of $2.1 million for 2013 included the loss from our equity investments in our International segment.
Other Income, Net
Other income of $15.2 million for 2014 primarily related to foreign exchange gains on short-term intercompany accounts.
Other income of $1.0 million for 2013 primarily related to $1.7 million in foreign exchange gains on short-term intercompany accounts partially offset by miscellaneous expenses of $0.7 million.
Income Tax (Expense) Benefit
Our operations are included in a consolidated income tax return filed by iHeartMedia. However, for our financial statements, our provision for income taxes was computed as if we file separate consolidated federal income tax returns with our subsidiaries.
The effective tax rate for 2014 was (105.5%), primarily impacted by our benefits and charges from tax amounts associated with our foreign earnings that are taxed at rates different from the federal statutory rate and an inability to benefit from losses in certain foreign jurisdictions. In addition, we recorded $20.0 million in net tax benefits associated with a decrease in unrecognized tax benefits resulting from the expiration of statutes of limitations to assess taxes in the United Kingdom and several state jurisdictions.
The effective tax rate for 2013 was (155.6%), primarily impacted by our benefits and charges from tax amounts associated with our foreign earnings that are taxed at rates different from the federal statutory rate and an inability to benefit from losses in certain foreign jurisdictions. In addition, we recorded additional foreign deferred tax expense of $3.4 million on certain foreign earnings that are expected to be distributed in future periods from our Asia subsidiaries on which foreign withholding and other taxes have not previously been provided.
Americas Results of Operations
Our Americas operating results were as follows:
| | | | | | | | | | | | | | | | Years Ended December 31, | | | %
Change | | | (In thousands) | | 2014 | | | 2013 | | | Revenue | | $ | 1,350,623 | | | $ | 1,385,757 | | | | (3 | %) | Direct operating expenses | | | 605,771 | | | | 610,750 | | | | (1 | %) | SG&A expenses | | | 233,641 | | | | 243,456 | | | | (4 | %) | Depreciation and amortization | | | 203,928 | | | | 206,031 | | | | (1 | %) | | | | | | | | | | | | | | Operating income | | $ | 307,283 | | | $ | 325,520 | | | | (6 | %) | | | | | | | | | | | | | |
Our Americas outdoor revenue decreased $35.1 million compared to 2013, including negative movements in foreign exchange of $9.4 million. Excluding the impact of foreign exchange movements, Americas outdoor revenue decreased $25.7 million driven primarily by lower spending by national accounts and the nonrenewal of certain airport contracts. Revenues were also lower in our Los Angeles market as a result of the impact of litigation as discussed further in Item 3 of Part I of the Annual Report on Form 10-K.
Direct operating expenses decreased $4.9 million compared to 2013, including a decrease of $6.0 million from movements in foreign exchange. Excluding the impact of foreign exchange movements, direct operating expenses in our Americas outdoor segment increased $1.1 million. SG&A expenses decreased $9.8 million compared to 2013, including a decrease of $1.9 million from movements in foreign exchange. Excluding the impact of foreign exchange movements, SG&A expenses in our Americas outdoor segment decreased $7.9 million primarily due to lower commission expense in connection with lower revenues and property tax refunds.
International Advertising Results of Operations
Our International operating results were as follows:
| | | | | | | | | | | | | | | | Years Ended December 31, | | | %
Change | | | (In thousands) | | 2014 | | | 2013 | | | Revenue | | $ | 1,610,636 | | | $ | 1,560,433 | | | | 3 | % | Direct operating expenses | | | 991,117 | | | | 983,978 | | | | 1 | % | SG&A expenses | | | 314,878 | | | | 300,116 | | | | 5 | % | Depreciation and amortization | | | 198,143 | | | | 194,493 | | | | 2 | % | | | | | | | | | | | | | | Operating income | | $ | 106,498 | | | $ | 81,846 | | | | 30 | % | | | | | | | | | | | | | |
International outdoor revenue increased $50.2 million compared to 2013, including a decrease of $13.3 million from movements in foreign exchange. Excluding the impact of foreign exchange movements, revenues increased $63.5 million primarily driven by revenue growth in Europe including Italy, due to a new contract for the Rome airports, as well as Sweden, France, and the UK. Revenue in emerging markets also increased, particularly in China primarily as a result of new contracts.
Direct operating expenses increased $7.1 million compared to 2013, including a decrease of $5.9 million from movements in foreign exchange. Excluding the impact of movements in foreign exchange, direct operating expenses increased $13.0 million primarily as a result of higher variable costs associated with new contracts, including the Rome airports contract in Italy. SG&A expenses increased $14.8 million compared to 2013, including a decrease of $2.7 million from movements in foreign exchange. Excluding the impact of movements in foreign exchange, SG&A expenses increased $17.5 million primarily due to higher compensation expense, including commissions, in connection with higher revenues, as well as higher litigation expenses.
Depreciation and amortization increased $3.7 million, primarily due to purchases of property, plant, & equipment.
Reconciliation of Segment Operating Income to Consolidated Operating Income
| | | | | | | | | | | | | | (In thousands) | | Years Ended December 31, | | | | 2015 | | | 2014 | | | 2013 | | Americas Outdoor Advertising | | $ | 313,871 | | | | 307,283 | | | | 325,520 | | International Outdoor Advertising | | | 95,353 | | | | 106,498 | | | | 81,846 | | Impairment charges | | | (21,631 | ) | | | (3,530 | ) | | | (13,150 | ) | Corporate and other(1) | | | (121,768 | ) | | | (135,066 | ) | | | (127,045 | ) | Other operating income, net | | | (4,824 | ) | | | 7,259 | | | | 22,979 | | | | | | | | | | | | | | | Consolidated operating income | | $ | 261,001 | | | $ | 282,444 | | | $ | 290,150 | | | | | | | | | | | | | | |
(1) | Corporate and other includes expenses related to Americas and International and as well as overall executive, administrative and support functions. |
Share-Based Compensation Expense
As of December 31, 2015, there was $17.8 million of unrecognized compensation cost related to unvested share-based compensation arrangements that will vest based on service conditions. Based on the terms of the award agreements, this cost is expected to be recognized over a weighted average period of approximately three years. In addition, as of December 31, 2015, there was $0.6 million of unrecognized compensation cost related to unvested share-based compensation arrangements that will vest based on market, performance and service conditions. This cost will be recognized when it becomes probable that the performance condition will be satisfied.
Share-based compensation expenses are recorded in corporate expenses and were $8.4 million, $7.7 million and $7.7 million for the years ended December 31, 2015, 2014 and 2013, respectively.
LIQUIDITY AND CAPITAL RESOURCES
Cash Flows
The following discussion highlights cash flow activities during the years ended December 31, 2015, 2014 and 2013.
| | | | | | | | | | | | | | (In thousands) | | Years Ended December 31, | | | | 2015 | | | 2014 | | | 2013 | | Cash provided by (used for): | | | | | | | | | | | | | Operating activities | | $ | 298,933 | | | $ | 348,423 | | | $ | 414,640 | | Investing activities | | $ | (257,725 | ) | | $ | (206,431 | ) | | $ | (177,679 | ) | Financing activities | | $ | 199,054 | | | $ | (261,309 | ) | | $ | (484,393 | ) |
Operating Activities
2015
Cash provided by operating activities was $298.9 million in 2015 compared to $348.4 million of cash provided in 2014. Our consolidated net loss included $413.0 million of non-cash items in 2015. Our consolidated
net loss in 2014 included $373.7 million of non-cash items. Non-cash items affecting our net loss include impairment charges, depreciation and amortization, deferred taxes, provision for doubtful accounts, amortization of deferred financing charges and note discounts, net, share-based compensation, gain on disposal of operating and fixed assets, gain on marketable securities, equity in (earnings) loss of nonconsolidated affiliates, loss on extinguishment of debt, and other reconciling items, net as presented on the face of the consolidated statement of cash flows. The decrease in cash provided by operating activities is primarily attributed to a decrease in net income as well as changes in working capital balances, particularly accrued expenses.
2014
Cash provided by operating activities in 2014 was $348.4 million compared to $414.6 million in 2013. Our consolidated net loss included $373.7 million of non-cash items in 2014. Our consolidated net loss in 2013 included $385.7 million of non-cash items. Non-cash items affecting our net loss include impairment charges, depreciation and amortization, deferred taxes, provision for doubtful accounts, amortization of deferred financing charges and note discounts, net, share-based compensation, gain on disposal of operating and fixed assets, gain on marketable securities, equity in (earnings) loss of nonconsolidated affiliates, loss on extinguishment of debt, and other reconciling items, net as presented on the face of the consolidated statement of cash flows. Cash paid for interest was $1.0 million higher in 2014 compared to the prior year due to the timing of accrued interest payments from refinancing transactions.
2013
Cash provided by operating activities in 2013 was $414.6 million compared to $355.1 million of cash used in 2012. Our consolidated net loss included $385.7 million of non-cash items in 2013. Our consolidated net loss in 2012 included $481.0 million of non-cash items. Non-cash items affecting our net loss include depreciation and amortization, deferred taxes, provision for doubtful accounts, share-based compensation, gain on disposal of operating assets, amortization of deferred financing charges and note discounts, net and other reconciling items, net as presented on the face of the consolidated statement of cash flows. Cash paid for interest was $34.5 million lower in 2013 compared to the prior year due to the repurchase of the $2,500.0 million aggregate principal amount of Existing CCWH Senior Notes using the proceeds from the issuance of the $2,725.0 million aggregate principal amount of CCWH Senior Notes during December 2012 that reduced the weighted average cost of debt.
Investing Activities
2015
Cash used for investing activities of $257.7 million during 2015 reflected our capital expenditures of $218.3 million. We spent $82.2 million in our Americas segment primarily related to the construction of new advertising structures such as digital displays, $132.6 million in our International segment primarily related to street furniture advertising and digital billboard structures, and $3.5 million by Corporate primarily related to equipment and software. Other cash provided by investing activities were $11.3 million of proceeds from sales of other operating and fixed assets.
2014
Cash used for investing activities of $206.4 million during 2014 reflected our capital expenditures of $231.2 million. We spent $97 million in our Americas segment primarily related to the construction of new advertising structures such as digital displays, $130.2 million in our International segment primarily related to new advertising structures such as billboards and street furniture and renewals of existing contracts, and $4.0 million by Corporate primarily related to equipment and software. Other cash provided by investing activities were $12.9 million of proceeds from sales of other operating and fixed assets.
2013
Cash used for investing activities of $177.7 million during 2013 reflected our capital expenditures of $206.2 million. We spent $89.0 million in our Americas segment primarily related to the construction of new advertising structures such as digital displays, $108.6 million in our International segment primarily related to new advertising structures such as billboards and street furniture and renewals of existing contracts, and $8.6 million by Corporate primarily related to equipment and software. Other cash provided by investing activities were $42.1 million of proceeds from sales of other operating and fixed assets.
Financing Activities
2015
Cash provided by financing activities of $199.1 million during 2015 primarily reflected the proceeds from the issuance of $225.0 million of senior notes by our subsidiary Clear Channel International B.V. We also received $17.0 million in cash from iHeartCommunications, which represents the activity in the “Due from/to iHeartCommunications” account.
On December 20, 2015, our board of directors declared a special cash dividend of $217.8 million that was paid on January 7, 2016 and will be reflected as cash used for financing activities in the first quarter of 2016.
2014
Cash used for financing activities of $261.3 million during 2014 primarily reflected the $175.0 million dividend paid as well as net transfers of $68.8 million in cash to iHeartCommunications, which represents the activity in the “Due from/to iHeartCommunications” account. Other cash used for financing activities included net payments to noncontrolling interests of $19.0 million.
2013
Cash used for financing activities of $484.4 million during 2013 primarily reflected a $200.0 million dividend as well as net transfers of $150.0 million in cash to iHeartCommunications, which represents the activity in the “Due from/to iHeartCommunications” account. Other cash used for financing activities included net payments to noncontrolling interests of $68.4 million and payments to repurchase noncontrolling interests of $61.1 million.
Anticipated Cash Requirements
Our primary sources of liquidity are cash on hand, cash flow from operations, the revolving promissory note with iHeartCommunications and our senior revolving credit facility. As of December 31, 2015, we had $412.7 million of cash on our balance sheet, including $175.6 million of cash held outside the U.S. by our subsidiaries, a portion of which is held by non-wholly owned subsidiaries or is otherwise subject to certain restrictions and not readily accessible to us. We disclose in Item 8 of our Form 10-K within Note 1, Summary of Significant Accounting Policies, that our policy is to permanently reinvest the earnings of our non-U.S. subsidiaries as these earnings are generally redeployed in those jurisdictions for operating needs and continued functioning of their businesses. We have the ability and intent to indefinitely reinvest the undistributed earnings of consolidated subsidiaries based outside of the United States. If any excess cash held by our foreign subsidiaries were needed to fund operations in the United States, we could presently repatriate available funds without a requirement to accrue or pay U.S. taxes. This is a result of significant deficits, as calculated for tax law purposes, in our foreign earnings and profits, which gives us flexibility to make future cash distributions as non-taxable returns of capital. In December 2015, Clear Channel International B.V. (“CCIBV”), one of our international indirect subsidiaries, distributed the proceeds of the 8.75% Senior Notes due 2020 it issued to one of our domestic subsidiaries and ultimately to us, for the purpose of funding a special dividend to our stockholders. As the $217.8 million dividend was paid to our stockholders on January 7, 2016, the amount of the dividend is included in cash on hand as of December 31, 2015.
Our primary uses of liquidity are for our working capital, capital expenditure, debt service, special dividend and other funding requirements. Based on our current and anticipated levels of operations and conditions in our markets, we believe that cash on hand, cash flows from operations, borrowing capacity under or repayment of amounts outstanding under the revolving promissory note with iHeartCommunications and borrowing capacity under our senior revolving credit facility will enable us to meet our working capital, capital expenditure, debt service, special dividend and other funding requirements, including the debt service on the CCWH Senior Notes, the CCWH Subordinated Notes and the CCIBV Senior Notes for at least the next 12 months. We believe our long-term plans, which include promoting outdoor media spending, capitalizing on our diverse geographic and product opportunities and the continued deployment of digital displays, will enable us to continue generating cash flows from operations sufficient to meet our liquidity and funding requirements long term. However, our anticipated results are subject to significant uncertainty. Our ability to fund our working capital, capital expenditures, debt service and other obligations depends on our future operating performance and cash from operations. If our future operating performance does not meet our expectations or our plans materially change in an adverse manner or prove to be materially inaccurate, we may need additional financing. We may not be able to secure any such additional financing on terms favorable to us or at all.
We recently paid special cash dividends to our stockholders. On December 16, 2015, CCIBV issued $225.0 million in aggregate principal amount of 8.75% Senior Notes due 2020. We used the proceeds of the offering, which are included in the $412.7 million of Cash and cash equivalents as of December 31, 2015, to pay a special dividend in an aggregate amount of $217.8 million to our stockholders on January 7, 2016. In the first quarter of 2016, we sold our business in nine non-strategic markets within our Americas segment for approximately $602 million in cash and certain advertising assets in Florida (the “Americas Transactions”). Following the sale, we notified iHeartCommunications of our intent to make a demand for repayment of $300.0 million outstanding under the Due from iHeartCommunications note and simultaneously pay a special cash dividend of $540.0 million, which was paid on February 4, 2016. We used the $300.0 million from the repayment and $240.0 million of the proceeds of the Americas Transactions to fund the special dividend. The repayment of the $300.0 million under the Due from iHeartCommunications note reduced the amount of the Due from iHeartCommunications note asset that is available to us as a source of liquidity for future working capital, capital expenditure, debt service, special dividend and other funding requirements. In addition, the interest payments that we receive under the Due from iHeartCommunications note are expected to be lower in 2016 than in 2015 as a result of the lower outstanding indebtedness on the note. Future special cash dividends will be dependent upon us having sufficient available cash.
In addition to any special dividends that our board of directors may declare using the proceeds of any liquidity-generating transactions or other available cash, we may declare special dividends using the proceeds of payments from iHeartCommunications under the Due from iHeartCommunications note. Our board of directors has established a committee that has the non-exclusive authority to demand payments under the Due from iHeartCommunications note under certain specified circumstances tied to iHeartCommunications’ liquidity or the amount outstanding under the Due from iHeartCommunications note, as long as our board of directors declares a simultaneous dividend equal to the amount so demanded. Any future repayments and dividends would further reduce the amount of the Due from iHeartCommunications note asset that is available to us as a source of liquidity for ongoing working capital, capital expenditure, debt service, special dividend and other funding requirements.
As our controlling stockholder, iHeartCommunications may cause us to engage in transactions for the purpose of supporting its liquidity needs, such as financings or asset sales, which may negatively affect our business operations or our capital structure. In its Annual Report on Form 10-K filed with the SEC on February 25, 2016, iHeartCommunications stated that its ability to fund its ongoing capital needs depends on its future operating performance and cash from operations, as well as its ability to generate cash from liquidity-generating transactions, and that it is currently exploring, and expects to continue to explore, a variety of transactions to provide it with additional liquidity. These liquidity-generating transactions may involve us or our assets. As of December 31, 2015, iHeartCommunications had $772.7 million recorded as “Cash and cash
equivalents” on its consolidated balance sheets, of which $412.7 million was held by us and our subsidiaries. Further deterioration in the financial condition of iHeartCommunications could also have the effect of increasing our borrowing costs or impairing our access to capital markets.
We were in compliance with the covenants contained in our material financing agreements as of December 31, 2015. Our ability to comply with the maintenance covenant in our senior secured credit facility may be affected by events beyond our control, including prevailing economic, financial and industry conditions.
In its Annual Report on Form 10-K filed with the SEC on February 25, 2016, iHeartCommunications stated that it was in compliance with the covenants contained in its material financing agreements as of December 31, 2015. iHeartCommunications similarly stated in its Annual Report that its anticipated results are also subject to significant uncertainty and there can be no assurance that actual results will be in compliance with the covenants. Moreover, iHeartCommunications stated in its Annual Report that its ability to comply with the covenants in its material financing agreements may be affected by events beyond its control, including prevailing economic, financial and industry conditions. As discussed therein, the breach of any covenants set forth in iHeartCommunications’ financing agreements would result in a default thereunder, and an event of default would permit the lenders under a defaulted financing agreement to declare all indebtedness thereunder to be due and payable prior to maturity. Moreover, as discussed therein, the lenders under iHeartCommunications’ receivables-based credit facility would have the option to terminate their commitments to make further extensions of credit thereunder. In addition, iHeartCommunications stated in its Annual Report that if iHeartCommunications is unable to repay its obligations under any secured credit facility, the lenders could proceed against any assets that were pledged to secure such facility. Finally, iHeartCommunications stated in its Annual Report that a default or acceleration under any of its material financing agreements could cause a default under other obligations that are subject to cross-default and cross-acceleration provisions. If iHeartCommunications were to become insolvent, we would be an unsecured creditor of iHeartCommunications. In that event, we would be treated the same as other unsecured creditors of iHeartCommunications and, if we were not entitled to the cash previously transferred to iHeartCommunications, or could not obtain such cash on a timely basis, we could experience a liquidity shortfall.
We frequently evaluate strategic opportunities both within and outside our existing lines of business. We expect from time to time to pursue additional acquisitions and may decide to dispose of certain businesses. These acquisitions or dispositions could be material.
Sources of Capital
As of December 31, 2015 and 2014, we had the following debt outstanding, cash and cash equivalents and amounts due from iHeartCommunications:
| | | | | | | | | | | | December 31, | | | (In millions) | | 2015 | | | 2014 | | Clear Channel Worldwide Holdings Senior Notes due 2022 | | $ | 2,725.0 | | | $ | 2,725.0 | | Clear Channel Worldwide Holdings Senior Subordinated Notes due 2020 | | | 2,200.0 | | | | 2,200.0 | | Senior Revolving Credit Facility due 2018 | | | — | | | | — | | Clear Channel International B.V. Senior Notes due 2020 | | | 225.0 | | | | — | | Other debt | | | 19.0 | | | | 15.1 | | Original issue discount | | | (7.8 | ) | | | (6.2 | ) | | | | | | | | | | Total debt | | | 5,161.2 | | | | 4,933.9 | | Less: Cash and cash equivalents | | | 412.7 | | | | 186.2 | | Less: Due from iHeartCommunications | | | 930.8 | | | | 947.8 | | | | | | | | | | | | | $ | 3,817.7 | | | $ | 3,799.9 | | | | | | | | | | |
We may from time to time repay our outstanding debt or seek to purchase our outstanding equity securities. Such transactions, if any, will depend on prevailing market conditions, our liquidity requirements, contractual restrictions and other factors.
Promissory Notes with iHeartCommunications
We maintain accounts that represent net amounts due to or from iHeartCommunications, which are recorded as “Due from/to iHeartCommunications” on our consolidated balance sheets. The accounts represent our revolving promissory note issued by us to iHeartCommunications and the Due from iHeartCommunications note, in each case in the face amount of $1.0 billion, or if more or less than such amount, the aggregate unpaid principal amount of all advances. The accounts accrue interest pursuant to the terms of the promissory notes and are generally payable on demand or when they mature on December 15, 2017. Included in the accounts are the net activities resulting from day-to-day cash management services provided by iHeartCommunications. Such day-to-day cash management services relate only to our cash activities and balances in the U.S. and exclude any cash activities and balances of our non-U.S. subsidiaries. As of December 31, 2015 and December 31, 2014, the asset recorded in “Due from iHeartCommunications” on our consolidated balance sheet was $930.8 million and $947.8 million, respectively. As of December 31, 2015, we had no borrowings under the cash management note to iHeartCommunications.
In accordance with the terms of the settlement for the derivative litigation filed by our stockholders regarding the Due from iHeartCommunications note, as previously disclosed, we established a committee of our board of directors, consisting of our independent and disinterested directors, for the specific purpose of monitoring the Due from iHeartCommunications note. This committee has the non-exclusive authority to demand payments under the Due from iHeartCommunications note under certain specified circumstances tied to iHeartCommunications’ liquidity or the amount outstanding under the Due from iHeartCommunications note, as long as our board of directors declares a simultaneous dividend equal to the amount so demanded. The committee last made a demand under the Due from iHeartCommunications note on August 11, 2014. If future demands are made in accordance with the terms of the committee charter, we will declare a simultaneous dividend equal to the amount so demanded, which would further reduce the amount of the “Due from iHeartCommunications” asset that is available to us as a source of liquidity for ongoing working capital, capital expenditure, debt service and other funding requirements.
The net interest income for the years ended December 31, 2015, 2014 and 2013 was $61.4 million, $60.2 million and $54.2 million, respectively. At December 31, 2015, the fixed interest rate on the “Due from iHeartCommunications” account was 6.5%, which is equal to the fixed interest rate on the CCWH senior notes. On October 23, 2013, in accordance with the terms of the settlement, the interest rate on the Due from iHeartCommunications note was amended such that if the outstanding balance on the Due from iHeartCommunications note exceeds $1.0 billion and under certain other circumstances tied to iHeartCommunications’ liquidity, the rate will be variable but will in no event be less than 6.5% nor greater than 20%.
Our working capital requirements and capital for general corporate purposes, including acquisitions and capital expenditures, may be provided to us by iHeartCommunications, in its sole discretion, pursuant to a revolving promissory note issued by us to iHeartCommunications or pursuant to repayment of the Due from iHeartCommunications note. If we are unable to obtain financing from iHeartCommunications, we may need to obtain additional financing from banks or other lenders, or through public offerings or private placements of debt or equity, strategic relationships or other arrangements at some future date. As stated above, we may be unable to successfully obtain additional debt or equity financing on satisfactory terms or at all.
As long as iHeartCommunications maintains a significant interest in us, pursuant to the Master Agreement between iHeartCommunications and us, iHeartCommunications will have the option to limit our ability to incur debt or issue equity securities, among other limitations, which could adversely affect our ability to meet our
liquidity needs. Under the Master Agreement with iHeartCommunications, we are limited in our borrowings from third parties to no more than $400.0 million at any one time outstanding, without the prior written consent of iHeartCommunications.
CCWH Senior Notes
As of December 31, 2015, CCWH senior notes represented $2.7 billion aggregate principal amount of indebtedness outstanding, which consisted of $735.75 million aggregate principal amount of Series A Senior Notes due 2022 (the “Series A CCWH Senior Notes”) and $1,989.25 million aggregate principal amount of Series B CCWH Senior Notes due 2022 (the “Series B CCWH Senior Notes”). The CCWH Senior Notes are guaranteed by us, Clear Channel Outdoor, Inc. (“CCOI”) and certain of our direct and indirect subsidiaries.
The CCWH Senior Notes are senior obligations that rank pari passu in right of payment to all unsubordinated indebtedness of CCWH and the guarantees of the CCWH Senior Notes rank pari passu in right of payment to all unsubordinated indebtedness of the guarantors. Interest on the CCWH Senior Notes is payable to the trustee weekly in arrears and to the noteholders on May 15 and November 15 of each year, which began on May 15, 2013.
At any time prior to November 15, 2017, CCWH may redeem the CCWH Senior Notes, in whole or in part, at a price equal to 100% of the principal amount of the CCWH Senior Notes plus a “make-whole” premium, together with accrued and unpaid interest, if any, to the redemption date. CCWH may redeem the CCWH Senior Notes, in whole or in part, on or after November 15, 2017, at the redemption prices set forth in the applicable indenture governing the CCWH Senior Notes plus accrued and unpaid interest to the redemption date. At any time on or before November 15, 2015, CCWH may elect to redeem up to 40% of the then outstanding aggregate principal amount of the CCWH Senior Notes at a redemption price equal to 106.500% of the principal amount thereof, plus accrued and unpaid interest to the redemption date, with the net proceeds of one or more equity offerings, subject to certain restrictions. Notwithstanding the foregoing, neither CCOH nor any of its subsidiaries is permitted to make any purchase of, or otherwise effectively cancel or retire any Series A CCWH Senior Notes or Series B CCWH Senior Notes if, after giving effect thereto and, if applicable, any concurrent purchase of or other addition with respect to any Series B CCWH Senior Notes or Series A CCWH Senior Notes, as applicable, the ratio of (a) the outstanding aggregate principal amount of the Series A CCWH Senior Notes to (b) the outstanding aggregate principal amount of the Series B CCWH Senior Notes shall be greater than 0.25, subject to certain exceptions.
The indenture governing the Series A CCWH Senior Notes contains covenants that limit us and our restricted subsidiaries ability to, among other things:
incur or guarantee additional debt to persons other than iHeartCommunications and its subsidiaries (other than us) or issue certain preferred stock;
create liens on its restricted subsidiaries’ assets to secure such debt;
create restrictions on the payment of dividends or other amounts to us from our restricted subsidiaries that are not guarantors of the CCWH Senior Notes;
enter into certain transactions with affiliates; and
merge or consolidate with another person, or sell or otherwise dispose of all or substantially all of its assets.
In addition, the indenture governing the Series A CCWH Senior Notes provides that if CCWH (i) makes an optional redemption of the Series B CCWH Senior Notes or purchases or makes an offer to purchase the Series B CCWH Senior Notes at or above 100% of the principal amount thereof, then CCWH shall apply a pro rata amount to make an optional redemption or purchase a pro rata amount of the Series A CCWH Senior Notes or
(ii) makes an asset sale offer under the indenture governing the Series B CCWH Senior Notes, then CCWH shall apply a pro rata amount to make an offer to purchase a pro rata amount of Series A CCWH Senior Notes.
The indenture governing the Series A CCWH Senior Notes does not include limitations on dividends, distributions, investments or asset sales.
The indenture governing the Series B CCWH Senior Notes contains covenants that limit us and our restricted subsidiaries ability to, among other things:
incur or guarantee additional debt or issue certain preferred stock;
redeem, repurchase or retire our subordinated debt;
make certain investments;
create liens on its or its restricted subsidiaries’ assets to secure debt;
create restrictions on the payment of dividends or other amounts to it from its restricted subsidiaries that are not guarantors of the CCWH Senior Notes;
enter into certain transactions with affiliates;
merge or consolidate with another person, or sell or otherwise dispose of all or substantially all of its assets;
sell certain assets, including capital stock of its subsidiaries;
designate its subsidiaries as unrestricted subsidiaries; and
pay dividends, redeem or repurchase capital stock or make other restricted payments.
The Series A CCWH Senior Notes indenture and Series B CCWH Senior Notes indenture restrict our ability to incur additional indebtedness but permit us to incur additional indebtedness based on an incurrence test. In order to incur (i) additional indebtedness under this test, our debt to adjusted EBITDA ratios (as defined by the indentures) must be lower than 7.0:1 and 5.0:1 for total debt and senior debt, respectively, and (ii) additional indebtedness that is subordinated to the CCWH Senior Notes under this test, our debt to adjusted EBITDA ratios (as defined by the indentures) must be lower than 7.0:1 for total debt. The indentures contain certain other exceptions that allow us to incur additional indebtedness. The Series B CCWH Senior Notes indenture also permits us to pay dividends from the proceeds of indebtedness or the proceeds from asset sales if our debt to adjusted EBITDA ratios (as defined by the indentures) are lower than 7.0:1 and 5.0:1 for total debt and senior debt, respectively. The Series A CCWH Senior Notes indenture does not limit our ability to pay dividends. The Series B CCWH Senior Notes indenture contains certain exceptions that allow us to pay dividends, including (i) $525.0 million of dividends made pursuant to general restricted payment baskets and (ii) dividends made using proceeds received upon a demand by us of amounts outstanding under the revolving promissory note issued by iHeartCommunications to us.
Consolidated leverage ratio, defined as total debt divided by EBITDA (as defined by the CCWH Senior Notes indentures) for the preceding four quarters was 7.2:1 at December 31, 2015, and senior leverage ratio, defined as senior debt divided by EBITDA (as defined by the CCWH Senior Notes indentures) for the preceding four quarters was 3.8:1 at December 31, 2015. As required by the definition of EBITDA in the CCWH Senior Notes indentures, our EBITDA for the preceding four quarters of $717.4 million is calculated as operating income (loss) before depreciation, amortization, impairment charges and other operating income (expense), net, plus share-based compensation, and is further adjusted for the following: (i) costs incurred in connection with severance, the closure and/or consolidation of facilities, retention charges, consulting fees and other permitted activities; (ii) extraordinary, non-recurring or unusual gains or losses or expenses; (iii) non-cash charges; and (iv) various other items.
The following table reflects a reconciliation of EBITDA (as defined by the CCWH Senior Notes indentures) to operating income and net cash provided by operating activities for the four quarters ended December 31, 2015:
| | | | | | (In millions) | | Four Quarters Ended
December 31, 2015 | | EBITDA (as defined by the CCWH Senior Notes indentures) | | $ | 717.4 | | Less adjustments to EBITDA (as defined by the CCWH Senior Notes indentures): | | | | | Costs incurred in connection with severance, the closure and/or consolidation of facilities, retention charges, consulting fees and other permitted activities | | | (20.4 | ) | Extraordinary, non-recurring or unusual gains or losses or expenses (as referenced in the definition of EBITDA in the CCWH Senior Notes indentures) | | | (9.9 | ) | Non-cash charges | | | (10.8 | ) | Other items | | | (5.0 | ) | Less: Depreciation and amortization, Impairment charges, Other operating income, net and Share-based compensation expense | | | (410.3 | ) | | | | | | Operating income | | | 261.0 | | Plus: Depreciation and amortization, Impairment charges, Gain (loss) on disposal of operating and fixed assets and Share-based compensation expense | | | 400.5 | | Less: Interest expense | | | (355.7 | ) | Plus: Interest income on Due from iHeartCommunications | | | 61.4 | | Less: Current income tax expense | | | (46.6 | ) | Plus: Other income, net | | | 12.4 | | Adjustments to reconcile consolidated net loss to net cash provided by operating activities (including Provision for doubtful accounts, Amortization of deferred financing charges and note discounts, net and Other reconciling items, net) | | | 8.7 | | Change in assets and liabilities, net of assets acquired and liabilities assumed | | | (42.8 | ) | | | | | | Net cash provided by operating activities | | $ | 298.9 | | | | | | |
CCWH Senior Subordinated Notes
As of December 31, 2015, CCWH Subordinated Notes represented $2.2 billion of aggregate principal amount of indebtedness outstanding, which consist of $275.0 million aggregate principal amount of 7.625% Series A Senior Subordinated Notes due 2020 (the “Series A CCWH Subordinated Notes”) and $1,925.0 million aggregate principal amount of 7.625% Series B Senior Subordinated Notes due 2020 (the “Series B CCWH Subordinated Notes”). Interest on the CCWH Subordinated Notes is payable to the trustee weekly in arrears and to the noteholders on March 15 and September 15 of each year, which began on September 15, 2012.
The CCWH Subordinated Notes are CCWH’s senior subordinated obligations and are fully and unconditionally guaranteed, jointly and severally, on a senior subordinated basis by us, CCOI and certain of our other domestic subsidiaries. The CCWH Subordinated Notes are unsecured senior subordinated obligations that rank junior to all of CCWH’s existing and future senior debt, including the CCWH Senior Notes, equally with any of CCWH’s existing and future senior subordinated debt and ahead of all of CCWH’s existing and future debt that expressly provides that it is subordinated to the CCWH Subordinated Notes. The guarantees of the CCWH Subordinated Notes rank junior to each guarantor’s existing and future senior debt, including the CCWH Senior Notes, equally with each guarantor’s existing and future senior subordinated debt and ahead of each guarantor’s existing and future debt that expressly provides that it is subordinated to the guarantees of the CCWH Subordinated Notes.
At any time prior to March 15, 2015, CCWH may redeem the CCWH Subordinated Notes, in whole or in part, at a price equal to 100% of the principal amount of the CCWH Subordinated Notes plus a “make-whole”
premium, together with accrued and unpaid interest, if any, to the redemption date. CCWH may redeem the CCWH Subordinated Notes, in whole or in part, on or after March 15, 2015, at the redemption prices set forth in the applicable indenture governing the CCWH Subordinated Notes plus accrued and unpaid interest to the redemption date. At any time on or before March 15, 2015, CCWH may elect to redeem up to 40% of the then outstanding aggregate principal amount of the CCWH Subordinated Notes at a redemption price equal to 107.625% of the principal amount thereof, plus accrued and unpaid interest to the redemption date, with the net proceeds of one or more equity offerings, subject to certain restrictions. Notwithstanding the foregoing, neither us nor any of our subsidiaries is permitted to make any purchase of, or otherwise effectively cancel or retire any Series A CCWH Subordinated Notes or Series B CCWH Subordinated Notes if, after giving effect thereto and, if applicable, any concurrent purchase of or other addition with respect to any Series B CCWH Subordinated Notes or Series A CCWH Subordinated Notes, as applicable, the ratio of (a) the outstanding aggregate principal amount of the Series A CCWH Subordinated Notes to (b) the outstanding aggregate principal amount of the Series B CCWH Subordinated Notes shall be greater than 0.25, subject to certain exceptions.
The indenture governing the Series A CCWH Subordinated Notes contains covenants that limit us and our restricted subsidiaries ability to, among other things:
incur or guarantee additional debt to persons other than iHeartCommunications and its subsidiaries (other than us) or issue certain preferred stock;
create restrictions on the payment of dividends or other amounts to us from our restricted subsidiaries that are not guarantors of the notes;
enter into certain transactions with affiliates; and
merge or consolidate with another person, or sell or otherwise dispose of all or substantially all of CCOH’s assets.
In addition, the indenture governing the Series A CCWH Subordinated Notes provides that if CCWH (i) makes an optional redemption of the Series B CCWH Subordinated Notes or purchases or makes an offer to purchase the Series B CCWH Subordinated Notes at or above 100% of the principal amount thereof, then CCWH shall apply a pro rata amount to make an optional redemption or purchase a pro rata amount of the Series A CCWH Subordinated Notes or (ii) makes an asset sale offer under the indenture governing the Series B CCWH Subordinated Notes, then CCWH shall apply a pro rata amount to make an offer to purchase a pro rata amount of Series A CCWH Subordinated Notes.
The indenture governing the Series A CCWH Subordinated Notes does not include limitations on dividends, distributions, investments or asset sales.
The indenture governing the Series B CCWH Subordinated Notes contains covenants that limit us and our restricted subsidiaries ability to, among other things:
incur or guarantee additional debt or issue certain preferred stock;
make certain investments;
create restrictions on the payment of dividends or other amounts to us from our restricted subsidiaries that are not guarantors of the notes;
enter into certain transactions with affiliates;
merge or consolidate with another person, or sell or otherwise dispose of all or substantially all of our assets;
sell certain assets, including capital stock of our subsidiaries;
designate our subsidiaries as unrestricted subsidiaries; and
pay dividends, redeem or repurchase capital stock or make other restricted payments.
The Series A CCWH Subordinated Notes indenture and Series B CCWH Subordinated Notes indenture restrict CCOH’s ability to incur additional indebtedness but permit us to incur additional indebtedness based on an incurrence test. In order to incur additional indebtedness under this test, our debt to adjusted EBITDA ratios (as defined by the indentures) must be lower than 7.0:1. The indentures contain certain other exceptions that allow us to incur additional indebtedness. The Series B CCWH Subordinated Notes indenture also permits us to pay dividends from the proceeds of indebtedness or the proceeds from asset sales if its debt to adjusted EBITDA ratios (as defined by the indentures) is lower than 7.0:1. The Series A CCWH Senior Subordinated Notes indenture does not limit our ability to pay dividends. The Series B CCWH Subordinated Notes indenture contains certain exceptions that allow us to pay dividends, including (i) $525.0 million of dividends made pursuant to general restricted payment baskets and (ii) dividends made using proceeds received upon a demand by us of amounts outstanding under the revolving promissory note issued by iHeartCommunications to us.
CCIBV Senior Notes
As of December 31, 2015, Clear Channel International B.V., an international subsidiary of ours, had $225.0 million aggregate principal amount outstanding of its 8.75% Senior Notes due 2020 (“CCIBV Senior Notes”).
The CCIBV Senior Notes mature on December 15, 2020 and bear interest at a rate of 8.75% per annum, payable semi-annually in arrears on June 15 and December 15 of each year, beginning on June 15, 2016. The CCIBV Senior Notes are guaranteed by certain of our International outdoor business’s existing and future subsidiaries. The Company does not guarantee or otherwise assume any liability for the CCIBV Senior Notes. The notes are senior unsecured obligations that rank pari passu in right of payment to all unsubordinated indebtedness of Clear Channel International B.V., and the guarantees of the notes are senior unsecured obligations that rank pari passu in right of payment to all unsubordinated indebtedness of the guarantors of the notes.
Clear Channel International B.V. may redeem the notes at its option, in whole or part, at any time prior to December 15, 2017, at a price equal to 100% of the principal amount of the notes redeemed, plus a make-whole premium, plus accrued and unpaid interest to the redemption date. Clear Channel International B.V. may redeem the notes, in whole or in part, on or after December 15, 2017, at the redemption prices set forth in the indenture plus accrued and unpaid interest to the redemption date. At any time on or before December 15, 2017, Clear Channel International B.V. may elect to redeem up to 40% of the aggregate principal amount of the notes at a redemption price equal to 108.75% of the principal amount thereof, plus accrued and unpaid interest to the redemption date, with the net proceeds of one or more equity offerings.
The indenture governing the CCIBV Senior Notes contains covenants that limit Clear Channel International B.V.’s ability and the ability of its restricted subsidiaries to, among other things: (i) pay dividends, redeem stock or make other distributions or investments; (ii) incur additional debt or issue certain preferred stock; (iii) transfer or sell assets; (iv) create liens on assets; (v) engage in certain transactions with affiliates; (vi) create restrictions on dividends or other payments by the restricted subsidiaries; and (vii) merge, consolidate or sell substantially all of Clear Channel International B.V.’s assets.
Senior Revolving Credit Facility Due 2018
During the third quarter of 2013, we entered into a five-year senior secured revolving credit facility with an aggregate principal amount of $75.0 million. The revolving credit facility may be used for working capital needs, to issue letters of credit and for other general corporate purposes. As of December 31, 2015, there were no amounts outstanding under the revolving credit facility, and $59.4 million of letters of credit under the revolving credit facility which reduce availability under the facility. The revolving credit facility contains a springing covenant that requires us to maintain a secured leverage ratio (as defined in the revolving credit facility) of not more than 1.5:1 that is tested at the end of a quarter if availability under the facility is less than 75% of the aggregate commitments under the facility. We were in compliance with the secured leverage ratio covenant as of December 31, 2015.
Other Debt
Other debt consists primarily of loans with international banks. As of December 31, 2015, approximately $19.0 million was outstanding as other debt.
iHeartCommunications’ Debt Covenants
The iHeartCommunications’ senior secured credit facility contains a significant financial covenant which requires iHeartCommunications to comply on a quarterly basis with a financial covenant limiting the ratio of its consolidated secured debt, net of cash and cash equivalents, to consolidated EBITDA for the preceding four quarters (maximum of 8.75:1). In its Annual Report on Form 10-K filed with the SEC on February 25, 2016, iHeartCommunications stated that it was in compliance with this covenant as of December 31, 2015.
Dispositions and Other
In the first quarter of 2016, Americas outdoor sold nine non-strategic outdoor markets including Cleveland and Columbus, Ohio, Des Moines, Iowa, Ft. Smith, Arkansas, Memphis, Tennessee, Portland, Oregon, Reno, Nevada, Seattle, Washington and Wichita, Kansas for approximately $602 million in cash and certain advertising assets in Florida.
During 2014, we sold our 50% interest in Buspak, recognizing a gain on the sale of $4.5 million.
During 2013, our Americas segment divested certain outdoor advertising assets in Times Square for approximately $18.7 million resulting in a gain of $12.2 million included in “Other operating income, net.”
Uses of Capital
Capital Expenditures
Our capital expenditures for the years ended December 31, 2015, 2014 and 2013 were as follows:
| | | | | | | | | | | | | | (In millions) | | Years Ended December 31, | | | | 2015 | | | 2014 | | | 2013 | | Americas advertising | | $ | 82.2 | | | $ | 109.7 | | | $ | 96.6 | | International advertising | | | 132.6 | | | | 117.5 | | | | 100.9 | | Corporate | | | 3.5 | | | | 4.0 | | | | 8.7 | | | | | | | | | | | | | | | Total capital expenditures | | $ | 218.3 | | | $ | 231.2 | | | $ | 206.2 | | | | | | | | | | | | | | |
Our capital expenditures are not of significant size individually and primarily relate to the ongoing deployment of digital displays and improvements to traditional displays in our Americas segment as well as new billboard and street furniture contracts and renewals of existing contracts in our International segment.
See the Contractual Obligations table under “Commitments, Contingencies and Guarantees” and Note 6 to our Consolidated Financial Statements located in Item 8 of Part II of the Annual Report on Form 10-K for the Company’s future capital expenditure commitments.
Part of our long-term strategy is to pursue the technology of digital displays, including flat screens, LCDs and LEDs, as alternatives to traditional methods of displaying our clients’ advertisements. We are currently installing these technologies in certain markets. We believe cash flow from operations will be sufficient to fund these expenditures because we expect enhanced margins through: (i) lower cost of production as the advertisements will be digital and controlled by a central computer network, (ii) decreased down time on displays
because the advertisements will be digitally changed rather than manually posted paper or vinyl on the face of the display, and (iii) incremental revenue through more targeted and time specific advertisements.
Commitments, Contingencies and Guarantees
We are currently involved in certain legal proceedings arising in the ordinary course of business and, as required, have accrued our estimate of the probable costs for resolution of those claims for which the occurrence of loss is probable and the amount can be reasonably estimated. These estimates have been developed in consultation with counsel and are based upon an analysis of potential results, assuming a combination of litigation and settlement strategies. It is possible, however, that future results of operations for any particular period could be materially affected by changes in our assumptions or the effectiveness of our strategies related to these proceedings. Please see Item 3. Legal Proceedings within Part I of the Annual Report on Form 10-K.
Our short and long term cash requirements include minimum annual guarantees for our street furniture contracts and operating leases. Noncancelable contracts and operating lease requirements are included in our direct operating expenses, which historically have been satisfied by cash flows from operations. For 2016, we are committed to $367.2 million and $296.7 million for minimum annual guarantees and operating leases, respectively. Our long-term commitments for minimum annual guarantees, operating leases and capital expenditure requirements are included in the table below.
Certain agreements relating to acquisitions provide for purchase price adjustments and other future contingent payments based on the financial performance of the acquired companies generally over a one to five year period. The aggregate of these contingent payments, if performance targets are met, would not significantly impact our financial position or results of operations.
In addition to the scheduled maturities on debt issued by CCWH and CCIBV, we have future cash obligations under various types of contracts. We lease office space, certain equipment and the majority of the land occupied by our advertising structures under long-term operating leases. Some of our lease agreements contain renewal options and annual rental escalation clauses (generally tied to the consumer price index), as well as provisions for our payment of utilities and maintenance.
We have minimum franchise payments associated with non-cancelable contracts that enable us to display advertising on such media as buses, trains, bus shelters and terminals. The majority of these contracts contain rent provisions that are calculated as the greater of a percentage of the relevant advertising revenue or a specified guaranteed minimum annual payment.
The scheduled maturities of the CCWH Senior Notes, CCWH Subordinated Notes, CCIBV Senior Notes and other debt outstanding, and our future minimum rental commitments under non-cancelable lease agreements, minimum payments under other non-cancelable contracts, capital expenditure commitments and other long-term obligations as of December 31, 2015, are as follows:
| | | | | | | | | | | | | | | | | | | | | | (In thousands) | | Payments due by Period | | Contractual Obligations | | Total | | | 2016 | | | 2017-2018 | | | 2019-2020 | | | Thereafter | | Long-term Debt: | | | | | | | | | | | | | | | | | | | | | CCWH Senior Notes | | $ | 2,725,000 | | | $ | — | | | $ | — | | | $ | — | | | $ | 2,725,000 | | CCWH Senior Subordinated Notes | | | 2,200,000 | | | | — | | | | — | | | | 2,200,000 | | | | — | | CCIBV Senior Notes | | | 225,000 | | | | — | | | | — | | | | 225,000 | | | | — | | Other Long-term Debt | | | 19,004 | | | | 4,310 | | | | 13,326 | | | | 715 | | | | 653 | | Interest payments on long-term debt(1) | | | 2,024,050 | | | | 365,364 | | | | 729,992 | | | | 596,466 | | | | 332,228 | | Non-cancelable operating leases | | | 2,105,922 | | | | 299,811 | | | | 472,293 | | | | 368,668 | | | | 965,150 | | Non-cancelable contracts | | | 1,554,703 | | | | 367,201 | | | | 494,143 | | | | 334,251 | | | | 359,108 | | Employment contracts | | | 9,090 | | | | 4,926 | | | | 4,164 | | | | — | | | | — | | Capital expenditures | | | 69,003 | | | | 41,180 | | | | 12,944 | | | | 2,334 | | | | 12,545 | | Unrecognized tax benefits(2) | | | 23,802 | | | | — | | | | — | | | | — | | | | 23,802 | | Other long-term obligations(3) | | | 216,704 | | | | 1,931 | | | | 10,569 | | | | 14,851 | | | | 189,353 | | | | | | | | | | | | | | | | | | | | | | | Total | | $ | 11,172,278 | | | $ | 1,084,723 | | | $ | 1,737,431 | | | $ | 3,742,285 | | | $ | 4,607,839 | | | | | | | | | | | | | | | | | | | | | | |
(1) | Interest payments on long-term debt consist primarily of interest on the CCWH Senior Notes and the CCWH Senior Subordinated Notes. |
(2) | The non-current portion of the unrecognized tax benefits is included in the “Thereafter” column as we cannot reasonably estimate the timing or amounts of additional cash payments, if any, at this time. For additional information, see Note 8 included in Item 8 of Part II of the Annual Report on Form 10-K. |
(3) | Other long-term obligations consist of $45.1 million related to asset retirement obligations recorded pursuant to ASC 410-20, which assumes the underlying assets will be removed at some period over the next 50 years. Also included in the table is $47.5 million related to retirement plans and $124.1 million related to other long-term obligations with a specific maturity. |
SEASONALITY
Typically, both our Americas and International segments experience their lowest financial performance in the first quarter of the calendar year, with International historically experiencing a loss from operations in that period. Our International segment typically experiences its strongest performance in the second and fourth quarters of the calendar year. We expect this trend to continue in the future.
MARKET RISK
We are exposed to market risks arising from changes in market rates and prices, including movements in equity security prices and foreign currency exchange rates.
Foreign Currency Exchange Rate Risk
We have operations in countries throughout the world. Foreign operations are measured in their local currencies. As a result, our financial results could be affected by factors such as changes in foreign currency exchange rates or weak economic conditions in the foreign markets in which we have operations. We believe we mitigate a small portion of our exposure to foreign currency fluctuations with a natural hedge through borrowings in currencies other than the U.S. dollar. Our foreign operations reported net income of $39.2 million for year ended December 31, 2015. We estimate a 10% increase in the value of the U.S. dollar relative to foreign
currencies would have decreased our net income for the year ended December 31, 2015 by $3.9 million. A 10% decrease in the value of the U.S. dollar relative to foreign currencies would have increased our net income for the year ended December 31, 2015 by a corresponding amount.
This analysis does not consider the implications that such currency fluctuations could have on the overall economic activity that could exist in such an environment in the U.S. or the foreign countries or on the results of operations of these foreign entities.
Inflation
Inflation is a factor in the economies in which we do business and we continue to seek ways to mitigate its effect. Inflation has affected our performance in terms of higher costs for wages, salaries and equipment. Although the exact impact of inflation is indeterminable, we believe we have offset these higher costs by increasing the effective advertising rates of most of our outdoor display faces.
NEW ACCOUNTING PRONOUNCEMENTS
During the first quarter of 2015, the Company adopted the Financial Accounting Standards Board’s (“FASB”) ASU No. 2014-08,Presentation of Financial Statements (Topic 205) and Property, Plant, and Equipment (Topic 360), Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity. This update provides guidance for the recognition, measurement and disclosure of discontinued operations. The adoption of this guidance 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 for 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.
During the second quarter of 2015, the FASB issued ASU No. 2015-03,Interest-Imputation of Interest (Subtopic 835-30): Simplifying the Presentation of Debt Issuance Costs. This update requires entities to present debt issuance costs related to a recognized debt liability as a direct deduction from the carrying amount of that direct debt liability. The standard is effective for annual periods, and for interim periods within those annual periods, beginning after December 15, 2015. The Company will adopt this standard in the first quarter of 2016.
During the third quarter of 2015, the FASB issued ASU 2015-14,Revenue from Contracts with Customers (Topic 606): Deferral of the Effective Date. This update provides a one-year deferral of the effective date for ASU No. 2014-09,Revenue from Contracts with Customers. ASU No. 2014-09 provides guidance for the recognition, measurement and disclosure of revenue resulting from contracts with customers and will supersede virtually all of the current revenue recognition guidance under U.S. GAAP. The standard is effective for the first interim period within annual reporting periods beginning after December 15, 2017. The Company is currently evaluating the impact of the provisions of this new standard on its financial position and results of operations.
During the third quarter of 2015, the FASB issued ASU No. 2015-16,Business Combinations (Topic 805): Simplifying the Accounting for Measurement-Period Adjustments. This update eliminates the requirement for an acquirer in a business combination to account for measurement-period adjustments retrospectively. Instead, acquirers must recognize measurement-period adjustments during the period in which they determine the amounts, including the effect on earnings of any amounts they would have recorded in previous periods if the
accounting had been completed at the acquisition date. The standard is effective for fiscal years beginning after December 15, 2015, and interim periods within those fiscal years. The Company is currently evaluating the impact of the provisions of this new standard on its financial position and results of operations.
During the fourth quarter of 2015, the Company adopted FASB’s ASU No. 2015-17,Income Taxes (Topic 740), Balance Sheet Classification of Deferred Taxes. This update requires companies to classify all deferred tax assets and liabilities as noncurrent on the balance sheet instead of separating deferred taxes into current and noncurrent amounts. The adoption of this guidance did not have a material effect on the Company’s consolidated financial statements.
CRITICAL ACCOUNTING ESTIMATES
The preparation of our financial statements in conformity with U.S. GAAP requires management to make estimates, judgments and assumptions that affect the reported amounts of assets and liabilities, and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amount of expenses during the reporting period. On an ongoing basis, we evaluate our estimates that are based on historical experience and on various other assumptions that are believed to be reasonable under the circumstances. The result of these evaluations forms the basis for making judgments about the carrying values of assets and liabilities and the reported amount of expenses that are not readily apparent from other sources. Because future events and their effects cannot be determined with certainty, actual results could differ from our assumptions and estimates, and such difference could be material. Our significant accounting policies are discussed in the notes to our consolidated financial statements included in Item 8 of Part II of the Annual Report on Form 10-K. Management believes that the following accounting estimates are the most critical to aid in fully understanding and evaluating our reported financial results, and they require management’s most difficult, subjective or complex judgments, resulting from the need to make estimates about the effect of matters that are inherently uncertain. The following narrative describes these critical accounting estimates, the judgments and assumptions and the effect if actual results differ from these assumptions.
Allowance for Doubtful Accounts
We evaluate the collectability of our accounts receivable based on a combination of factors. In circumstances where we are aware of a specific customer’s inability to meet its financial obligations, we record a specific reserve to reduce the amounts recorded to what we believe will be collected. For all other customers, we recognize reserves for bad debt based on historical experience for each business unit, adjusted for relative improvements or deteriorations in the agings and changes in current economic conditions.
If our agings were to improve or deteriorate resulting in a 10% change in our allowance, we estimated that our bad debt expense for the year ended December 31, 2015 would have changed by approximately $2.5 million.
Long-lived Assets
Long-lived assets, including structures and other property, plant and equipment and definite-lived intangibles, are reported at historical cost less accumulated depreciation. We estimate the useful lives for various types of advertising structures and other long-lived assets based on our historical experience and our plans regarding how we intend to use those assets. Advertising structures have different lives depending on their nature, with large format bulletins generally having longer depreciable lives and posters and other displays having shorter depreciable lives. Street furniture and transit displays are depreciated over their estimated useful lives or appropriate contractual periods, whichever is shorter. Our experience indicates that the estimated useful lives applied to our portfolio of assets have been reasonable, and we do not expect significant changes to the estimated useful lives of our long-lived assets in the future. When we determine that structures or other long-lived assets will be disposed of prior to the end of their useful lives, we estimate the revised useful lives and
depreciate the assets over the revised period. We also review long-lived assets for impairment when events and circumstances indicate that depreciable and amortizable long-lived assets might be impaired and the undiscounted cash flows estimated to be generated by those assets are less than the carrying amounts of those assets. When specific assets are determined to be unrecoverable, the cost basis of the asset is reduced to reflect the current fair market value.
We use various assumptions in determining the remaining useful lives of assets to be disposed of prior to the end of their useful lives and in determining the current fair market value of long-lived assets that are determined to be unrecoverable. Estimated useful lives and fair values are sensitive to factors including contractual commitments, regulatory requirements, future expected cash flows, industry growth rates and discount rates, as well as future salvage values. Our impairment loss calculations require management to apply judgment in estimating future cash flows, including forecasting useful lives of the assets and selecting the discount rate that reflects the risk inherent in future cash flows.
If actual results are not consistent with our assumptions and judgments used in estimating future cash flows and asset fair values, we may be exposed to future impairment losses that could be material to our results of operations.
Indefinite-lived Intangible Assets
Indefinite-lived intangible assets, such as our billboard permits, are reviewed annually for possible impairment using the direct valuation method as prescribed in ASC 805-20-S99. Under the direct valuation method, the estimated fair value of the indefinite-lived intangible assets was calculated at the market level as prescribed by ASC 350-30-35. Under the direct valuation method, it is assumed that rather than acquiring indefinite-lived intangible assets as a part of a going concern business, the buyer hypothetically obtains indefinite-lived intangible assets and builds a new operation with similar attributes from scratch. Thus, the buyer incurs start-up costs during the build-up phase which are normally associated with going concern value. Initial capital costs are deducted from the discounted cash flows model which results in value that is directly attributable to the indefinite-lived intangible assets.
Our key assumptions using the direct valuation method are market revenue growth rates, market share, profit margin, duration and profile of the build-up period, estimated start-up capital costs and losses incurred during the build-up period, the risk-adjusted discount rate and terminal values. This data is populated using industry normalized information representing an average asset within a market.
Historically, the Company performed its annual impairment test on indefinite-lived intangible assets as of October 1 of each year. Beginning in the third quarter of 2015, the Company began performing its annual impairment test on July 1 of each year.
On July 1, 2015, we performed our annual impairment test in accordance with ASC 350-30-35 and recognized an impairment of $21.6 million related to billboard permits in one of our outdoor markets.
In determining the fair value of our billboard permits, the following key assumptions were used:
Industry revenue growth forecast at 3.0% was used for the initial four-year period;
3.0% revenue growth was assumed beyond the initial four-year period;
Revenue was grown over a build-up period, reaching maturity by year 2;
Operating margins gradually climb to the industry average margin of up to 56.0%, depending on market size, by year 3; and
Assumed discount rate of 8.0%.
While we believe we have made reasonable estimates and utilized appropriate assumptions to calculate the fair value of our indefinite-lived intangible assets, it is possible a material change could occur. If future results are not consistent with our assumptions and estimates, we may be exposed to impairment charges in the future. The following table shows the decline in the fair value of our indefinite-lived intangible assets that would result from a 100 basis point decline in our discrete and terminal period revenue growth rate and profit margin assumptions and a 100 basis point increase in our discount rate assumption:
| | | | | | | | | | | | | | (In thousands) | | | | | | | | | | Description | | Revenue growth rate | | | Profit margin | | | Discount rates | | Billboard permits | | $ | 959,600 | | | $ | 161,500 | | | $ | 965,100 | |
The estimated fair value of our billboard permits at July 1, 2015 was $3.1 billion while the carrying value was $1.1 billion. The estimated fair value of our billboard permits at October 1, 2014 was $2.6 billion while the carrying value was $1.1 billion.
Goodwill
Goodwill represents the excess of the purchase price over the fair value of identifiable net assets acquired in business combinations. We test goodwill at interim dates if events or changes in circumstances indicate that goodwill might be impaired. The fair value of our reporting units is used to apply value to the net assets of each reporting unit. To the extent that the carrying amount of net assets would exceed the fair value, an impairment charge may be required to be recorded.
The discounted cash flow approach we use for valuing goodwill as part of the two-step impairment testing approach involves estimating future cash flows expected to be generated from the related assets, discounted to their present value using a risk-adjusted discount rate. Terminal values are also estimated and discounted to their present value.
Historically, the Company performed its annual impairment test on goodwill as of October 1 of each year. Beginning in the third quarter of 2015, the Company began performing its annual impairment test on July 1 of each year.
On July 1, 2015, we performed our annual impairment test in accordance with ASC 350-30-35, resulting in no goodwill impairment charge. In determining the fair value of our reporting units, we used the following assumptions:
Expected cash flows underlying our business plans for the periods 2015 through 2019. Our cash flow assumptions are based on detailed, multi-year forecasts performed by each of our operating segments, and reflect the advertising outlook across our businesses.
Cash flows beyond 2019 are projected to grow at a perpetual growth rate, which we estimated at 3.0%.
In order to risk adjust the cash flow projections in determining fair value; we utilized a discount rate of approximately 8.0% to 11.5% for each of our reporting units.
Based on our annual assessment using the assumptions described above, a hypothetical 25% reduction in the estimated fair value in each of our reporting units would not result in a material impairment condition.
While we believe we have made reasonable estimates and utilized appropriate assumptions to calculate the estimated fair value of our reporting units, it is possible a material change could occur. If future results are not consistent with our assumptions and estimates, we may be exposed to impairment charges in the future. The following table shows the decline in the fair value of each of our reportable segments that would result from a 100 basis point decline in our discrete and terminal period revenue growth rate and profit margin assumptions and a 100 basis point increase in our discount rate assumption:
| | | | | | | | | | | | | | (In thousands) | | | | | | | | | | Description | | Revenue growth rate | | | Profit margin | | | Discount rates | | Americas | | $ | 920,000 | | | $ | 190,000 | | | $ | 890,000 | | International | | $ | 450,000 | | | $ | 230,000 | | | $ | 420,000 | |
Tax Accruals
Our estimates of income taxes and the significant items giving rise to the deferred tax assets and liabilities are shown in the notes to our consolidated financial statements and reflect our assessment of actual future taxes to be paid on items reflected in the financial statements, giving consideration to both timing and probability of these estimates. Actual income taxes could vary from these estimates due to future changes in income tax law or results from the final review of our tax returns by Federal, state or foreign tax authorities.
We use our judgment to determine whether it is more likely than not that our deferred tax assets will be realized. Deferred tax assets are reduced by valuation allowances if the Company believes it is more likely than not that some portion or the entire asset will not be realized.
We use our judgment to determine whether it is more likely than not that we will sustain positions that we have taken on tax returns and, if so, the amount of benefit to initially recognize within our financial statements. We regularly review our uncertain tax positions and adjust our unrecognized tax benefits (UTBs) in light of changes in facts and circumstances, such as changes in tax law, interactions with taxing authorities and developments in case law. These adjustments to our UTBs may affect our income tax expense. Settlement of uncertain tax positions may require use of our cash.
Litigation Accruals
We are currently involved in certain legal proceedings. Based on current assumptions, we have accrued an estimate of the probable costs for the resolution of those claims for which the occurrence of loss is probable and the amount can be reasonably estimated. Future results of operations could be materially affected by changes in these assumptions or the effectiveness of our strategies related to these proceedings.
Management’s estimates have been developed in consultation with counsel and are based upon an analysis of potential results, assuming a combination of litigation and settlement strategies.
Asset Retirement Obligations
ASC 410-20 requires us to estimate our obligation upon the termination or nonrenewal of a lease, to dismantle and remove our billboard structures from the leased land and to reclaim the site to its original condition.
Due to the high rate of lease renewals over a long period of time, our calculation assumes all related assets will be removed at some period over the next 50 years. An estimate of third-party cost information is used with respect to the dismantling of the structures and the reclamation of the site. The interest rate used to calculate the present value of such costs over the retirement period is based on an estimated risk-adjusted credit rate for the same period. If our assumption of the risk-adjusted credit rate used to discount current year additions to the asset
retirement obligation decreased approximately 1%, our liability as of December 31, 2015 would not be materially impacted. Similarly, if our assumption of the risk-adjusted credit rate increased approximately 1%, our liability would not be materially impacted.
Share-Based Compensation
Under the fair value recognition provisions of ASC 718-10, share-based compensation cost is measured at the grant date based on the fair value of the award. Determining the fair value of share-based awards at the grant date requires assumptions and judgments about expected volatility and forfeiture rates, among other factors. If actual results differ significantly from these estimates, our results of operations could be materially impacted.
ITEM 7A. | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK |
Required information is located within Item 7 of Part II of the Annual Report on Form 10-K.
ITEM 8. | FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA |
Report of Independent Registered Public Accounting Firm
The Board of Directors and Shareholders
Clear Channel Outdoor Holdings, Inc.
We have audited the accompanying consolidated balance sheets of Clear Channel Outdoor Holdings, Inc. and subsidiaries (the Company) as of December 31, 2015 and 2014, and the related consolidated statements of comprehensive loss, changes in shareholders’ equity (deficit) and cash flows for each of the three years in the period ended December 31, 2015. Our audits also included the financial statement schedule listed in the Index at Item 15(a)2. These financial statements and schedule are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements and schedule based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Clear Channel Outdoor Holdings, Inc. and subsidiaries at December 31, 2015 and 2014, and the consolidated results of their operations and their cash flows for each of the three years in the period ended December 31, 2015, in conformity with U.S. generally accepted accounting principles. Also, in our opinion, the related financial statement schedule, when considered in relation to the basic financial statements taken as a whole, presents fairly in all material respects the information set forth therein.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the Company’s internal control over financial reporting as of December 31, 2015, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission(2013 framework)and our report dated February 25, 2016 expressed an unqualified opinion thereon.
/s/ Ernst & Young LLP
San Antonio, Texas
February 25, 2016
CONSOLIDATED BALANCE SHEETS
CLEAR CHANNEL OUTDOOR HOLDINGS, INC. AND SUBSIDIARIES
| | | | | | | | | | (In thousands) | | December 31,
2015 | | | December 31,
2014 | | CURRENT ASSETS | | | | | | | | | Cash and cash equivalents | | $ | 412,743 | | | $ | 186,204 | | Accounts receivable, net of allowance of $25,348 in 2015 and $24,308 in 2014 | | | 697,583 | | | | 697,811 | | Prepaid expenses | | | 127,730 | | | | 134,041 | | Assets held for sale | | | 295,075 | | | | — | | Other current assets | | | 44,080 | | | | 46,054 | | | | | | | | | | | Total Current Assets | | | 1,577,211 | | | | 1,064,110 | | PROPERTY, PLANT AND EQUIPMENT | | | | | | | | | Structures, net | | | 1,391,880 | | | | 1,614,199 | | Other property, plant and equipment, net | | | 236,106 | | | | 291,452 | | INTANGIBLE ASSETS AND GOODWILL | | | | | | | | | Indefinite-lived intangibles | | | 971,327 | | | | 1,066,748 | | Other intangibles, net | | | 342,864 | | | | 412,064 | | Goodwill | | | 758,575 | | | | 817,112 | | OTHER ASSETS | | | | | | | | | Due from iHeartCommunications | | | 930,799 | | | | 947,806 | | Other assets | | | 148,437 | | | | 133,081 | | | | | | | | | | | Total Assets | | $ | 6,357,199 | | | $ | 6,346,572 | | | | | | | | | | | CURRENT LIABILITIES | | | | | | | | | Accounts payable | | $ | 100,210 | | | $ | 75,915 | | Accrued expenses | | | 507,665 | | | | 543,818 | | Dividends payable | | | 217,017 | | | | — | | Deferred income | | | 91,411 | | | | 94,635 | | Current portion of long-term debt | | | 4,310 | | | | 3,461 | | | | | | | | | | | Total Current Liabilities | | | 920,613 | | | | 717,829 | | | | | | | | | | | Long-term debt | | | 5,156,924 | | | | 4,930,468 | | Deferred tax liability | | | 608,910 | | | | 604,416 | | Other long-term liabilities | | | 240,419 | | | | 234,800 | | | | | | | | | | | SHAREHOLDERS’ EQUITY | | | | | | | | | Noncontrolling interest | | | 187,775 | | | | 203,334 | | Preferred stock, $.01 par value, 150,000,000 shares authorized, no shares issued and outstanding | | | — | | | | — | | Class A common stock, $.01 par value, 750,000,000 shares authorized, 46,661,114 and 45,231,282 shares issued in 2015 and 2014, respectively | | | 467 | | | | 452 | | Class B common stock, $.01 par value, 600,000,000 shares authorized, 315,000,000 shares issued and outstanding | | | 3,150 | | | | 3,150 | | Additional paid-in capital | | | 3,961,515 | | | | 4,167,233 | | Accumulated deficit | | | (4,268,637 | ) | | | (4,172,565 | ) | Accumulated other comprehensive loss | | | (451,833 | ) | | | (341,353 | ) | Cost of shares (233,868 in 2015 and 140,702 in 2014) held in treasury | | | (2,104 | ) | | | (1,192 | ) | | | | | | | | | | Total Shareholders’ Deficit | | | (569,667 | ) | | | (140,941 | ) | | | | | | | | | | Total Liabilities and Shareholders’ Deficit | | $ | 6,357,199 | | | $ | 6,346,572 | | | | | | | | | | |
See Notes to Consolidated Financial Statements
CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
CLEAR CHANNEL OUTDOOR HOLDINGS, INC. AND SUBSIDIARIES
| | | | | | | | | | | | | | | | Years Ended December 31, | | | (In thousands, except per share data) | | 2015 | | | 2014 | | | 2013 | | Revenue | | $ | 2,806,204 | | | $ | 2,961,259 | | | $ | 2,946,190 | | Operating expenses: | | | | | | | | | | | | | Direct operating expenses (excludes depreciation and amortization) | | | 1,494,902 | | | | 1,596,888 | | | | 1,594,728 | | Selling, general and administrative expenses (excludes depreciation and amortization) | | | 531,504 | | | | 548,519 | | | | 543,572 | | Corporate expenses (excludes depreciation and amortization) | | | 116,380 | | | | 130,894 | | | | 124,399 | | Depreciation and amortization | | | 375,962 | | | | 406,243 | | | | 403,170 | | Impairment charges | | | 21,631 | | | | 3,530 | | | | 13,150 | | Other operating income (expense), net | | | (4,824 | ) | | | 7,259 | | | | 22,979 | | | | | | | | | | | | | | | Operating income | | | 261,001 | | | | 282,444 | | | | 290,150 | | Interest expense | | | 355,669 | | | | 353,265 | | | | 352,783 | | Interest income on Due from iHeartCommunications | | | 61,439 | | | | 60,179 | | | | 54,210 | | Loss on marketable securities | | | — | | | | — | | | | (18 | ) | Equity in earnings (loss) of nonconsolidated affiliates | | | (289 | ) | | | 3,789 | | | | (2,092 | ) | Other income, net | | | 12,387 | | | | 15,185 | | | | 1,016 | | | | | | | | | | | | | | | Income (loss) before income taxes | | | (21,131 | ) | | | 8,332 | | | | (9,517 | ) | Income tax benefit (expense) | | | (50,177 | ) | | | 8,787 | | | | (14,809 | ) | | | | | | | | | | | | | | Consolidated net income (loss) | | | (71,308 | ) | | | 17,119 | | | | (24,326 | ) | Less amount attributable to noncontrolling interest | | | 24,764 | | | | 26,709 | | | | 24,134 | | | | | | | | | | | | | | | Net loss attributable to the Company | | $ | (96,072 | ) | | $ | (9,590 | ) | | $ | (48,460 | ) | | | | | | | | | | | | | | Other comprehensive income (loss), net of tax: | | | | | | | | | | | | | Foreign currency translation adjustments | | | (112,729 | ) | | | (123,104 | ) | | | (9,654 | ) | Unrealized holding gain (loss) on marketable securities | | | 553 | | | | 327 | | | | 1,187 | | Other adjustments to comprehensive income (loss) | | | (10,266 | ) | | | (11,438 | ) | | | 6,732 | | Reclassification adjustments | | | 808 | | | | 8 | | | | (1,432 | ) | | | | | | | | | | | | | | Other comprehensive income (loss) | | | (121,634 | ) | | | (134,207 | ) | | | (3,167 | ) | | | | | | | | | | | | | | Comprehensive loss | | | (217,706 | ) | | | (143,797 | ) | | | (51,627 | ) | Less amount attributable to noncontrolling interest | | | (11,154 | ) | | | (6,426 | ) | | | (2,194 | ) | | | | | | | | | | | | | | Comprehensive loss attributable to the Company | | $ | (206,552 | ) | | $ | (137,371 | ) | | $ | (49,433 | ) | | | | | | | | | | | | | | Net loss attributable to the Company per common share: | | | | | | | | | | | | | Basic | | $ | (0.27 | ) | | $ | (0.03 | ) | | $ | (0.14 | ) | Weighted average common shares outstanding—Basic | | | 359,508 | | | | 358,565 | | | | 357,662 | | Diluted | | $ | (0.27 | ) | | $ | (0.03 | ) | | $ | (0.14 | ) | Weighted average common shares outstanding—Diluted | | | 359,508 | | | | 358,565 | | | | 357,662 | |
See Notes to Consolidated Financial Statements
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’
EQUITY (DEFICIT) OF
CLEAR CHANNEL OUTDOOR HOLDINGS, INC. AND SUBSIDIARIES
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Controlling Interest | | | | | | (In thousands, except share data) | | Class A
Common
Shares
Issued | | | Class B
Common
Shares
Issued | | | Non-
controlling
Interest | | | Common
Stock | | | Additional
Paid-in
Capital | | | Accumulated
Deficit | | | Accumulated
Other
Comprehensive
Loss | | | Treasury
Stock | | | Total | | Balances at December 31, 2012 | | | 42,357,863 | | | | 315,000,000 | | | $ | 247,934 | | | $ | 3,574 | | | $ | 4,522,668 | | | $ | (4,114,515 | ) | | $ | (212,599 | ) | | $ | (973 | ) | | $ | 446,089 | | Net income (loss) | | | — | | | | — | | | | 24,134 | | | | — | | | | — | | | | (48,460 | ) | | | — | | | | — | | | | (24,326 | ) | Exercise of stock options and other | | | 1,759,980 | | | | — | | | | — | | | | 17 | | | | 4,228 | | | | — | | | | — | | | | (54 | ) | | | 4,191 | | Share-based payments | | | — | | | | — | | | | — | | | | — | | | | 7,725 | | | | — | | | | — | | | | — | | | | 7,725 | | Dividends and other payments to noncontrolling interests | | | — | | | | — | | | | (68,441 | ) | | | — | | | | — | | | | — | | | | — | | | | — | | | | (68,441 | ) | Dividends declared and paid ($0.5578/share) | | | — | | | | — | | | | — | | | | — | | | | (200,010 | ) | | | — | | | | — | | | | — | | | | (200,010 | ) | Other | | | — | | | | — | | | | 613 | | | | — | | | | (2,566 | ) | | | — | | | | — | | | | — | | | | (1,953 | ) | Other comprehensive loss | | | — | | | | — | | | | (2,194 | ) | | | — | | | | — | | | | — | | | | (973 | ) | | | — | | | | (3,167 | ) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Balances at December 31, 2013 | | | 44,117,843 | | | | 315,000,000 | | | $ | 202,046 | | | $ | 3,591 | | | $ | 4,332,045 | | | $ | (4,162,975 | ) | | $ | (213,572 | ) | | $ | (1,027 | ) | | $ | 160,108 | | Net income (loss) | | | — | | | | — | | | | 26,709 | | | | — | | | | — | | | | (9,590 | ) | | | — | | | | — | | | | 17,119 | | Exercise of stock options and other | | | 1,113,439 | | | | — | | | | — | | | | 11 | | | | 2,390 | | | | — | | | | — | | | | (165 | ) | | | 2,236 | | Share-based payments | | | — | | | | — | | | | — | | | | — | | | | 7,743 | | | | — | | | | — | | | | — | | | | 7,743 | | Dividends and other payments to noncontrolling interests | | | — | | | | — | | | | (18,995 | ) | | | — | | | | — | | | | — | | | | — | | | | — | | | | (18,995 | ) | Dividends declared and paid ($0.4865/share) | | | — | | | | — | | | | — | | | | — | | | | (175,022 | ) | | | — | | | | — | | | | — | | | | (175,022 | ) | Other | | | — | | | | — | | | | | | | | — | | | | 77 | | | | — | | | | — | | | | — | | | | 77 | | Other comprehensive loss | | | — | | | | — | | | | (6,426 | ) | | | — | | | | — | | | | — | | | | (127,781 | ) | | | — | | | | (134,207 | ) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Balances at December 31, 2014 | | | 45,231,282 | | | | 315,000,000 | | | $ | 203,334 | | | $ | 3,602 | | | $ | 4,167,233 | | | $ | (4,172,565 | ) | | $ | (341,353 | ) | | $ | (1,192 | ) | | $ | (140,941 | ) | Net income (loss) | | | — | | | | — | | | | 24,764 | | | | — | | | | — | | | | (96,072 | ) | | | — | | | | — | | | | (71,308 | ) | Exercise of stock options and other | | | 1,429,832 | | | | — | | | | — | | | | 15 | | | | 3,783 | | | | — | | | | — | | | | (912 | ) | | | 2,886 | | Share-based payments | | | — | | | | — | | | | — | | | | — | | | | 8,359 | | | | — | | | | — | | | | — | | | | 8,359 | | Dividends and other payments to noncontrolling interests | | | — | | | | — | | | | (30,870 | ) | | | — | | | | — | | | | — | | | | — | | | | — | | | | (30,870 | ) | Dividends declared ($0.6026/share) | | | — | | | | — | | | | — | | | | — | | | | (217,796 | ) | | | — | | | | — | | | | — | | | | (217,796 | ) | Other | | | — | | | | — | | | | 1,701 | | | | — | | | | (64 | ) | | | — | | | | — | | | | — | | | | 1,637 | | Other comprehensive loss | | | — | | | | — | | | | (11,154 | ) | | | — | | | | — | | | | — | | | | (110,480 | ) | | | — | | | | (121,634 | ) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Balances at December 31, 2015 | | | 46,661,114 | | | | 315,000,000 | | | $ | 187,775 | | | $ | 3,617 | | | $ | 3,961,515 | | | $ | (4,268,637 | ) | | $ | (451,833 | ) | | $ | (2,104 | ) | | $ | (569,667 | ) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
See Notes to Consolidated Financial Statements
CONSOLIDATED STATEMENTS OF CASH FLOWS OF
CLEAR CHANNEL OUTDOOR HOLDINGS, INC. AND SUBSIDIARIES
| | | | | | | | | | | | | | | | Years Ended December 31, | | | (In thousands) | | 2015 | | | 2014 | | | 2013 | | Cash flows from operating activities: | | | | | | | | | | | | | Consolidated net income (loss) | | $ | (71,308 | ) | | $ | 17,119 | | | $ | (24,326 | ) | Reconciling items: | | | | | | | | | | | | | Impairment charges | | | 21,631 | | | | 3,530 | | | | 13,150 | | Depreciation and amortization | | | 375,962 | | | | 406,243 | | | | 403,170 | | Deferred taxes | | | 3,539 | | | | (33,569 | ) | | | (31,216 | ) | Provision for doubtful accounts | | | 13,384 | | | | 7,150 | | | | 5,124 | | Share-based compensation | | | 8,359 | | | | 7,743 | | | | 7,725 | | Gain on sale of operating and fixed assets | | | (5,468 | ) | | | (7,801 | ) | | | (22,979 | ) | Loss on marketable securities | | | — | | | | — | | | | 18 | | Amortization of deferred financing charges and note discounts, net | | | 8,770 | | | | 8,660 | | | | 8,562 | | Other reconciling items, net | | | (13,151 | ) | | | (18,250 | ) | | | 2,188 | | Changes in operating assets and liabilities, net of effects of acquisitions and dispositions: | | | | | | | | | | | | | (Increase) decrease in accounts receivable | | | (56,580 | ) | | | (38,618 | ) | | | 43,429 | | (Increase) decrease in prepaid expenses and other current assets | | | (1,728 | ) | | | 5,982 | | | | (6,342 | ) | Increase in accrued expenses | | | 493 | | | | 19,123 | | | | 19,304 | | Increase (decrease) in accounts payable | | | 30,642 | | | | (4,460 | ) | | | (10,407 | ) | Increase (decrease) in deferred income | | | 2,549 | | | | (5,370 | ) | | | 334 | | Changes in other operating assets and liabilities | | | (18,161 | ) | | | (19,059 | ) | | | 6,906 | | | | | | | | | | | | | | | Net cash provided by operating activities | | | 298,933 | | | | 348,423 | | | | 414,640 | | | | | | | | | | | | | | | Cash flows from investing activities: | | | | | | | | | | | | | Purchases of property, plant and equipment | | | (218,332 | ) | | | (231,169 | ) | | | (206,187 | ) | Proceeds from disposal of assets | | | 11,264 | | | | 12,861 | | | | 42,134 | | Purchases of other operating assets | | | (23,640 | ) | | | (573 | ) | | | (10,483 | ) | Proceeds from sale of investment securities | | | — | | | | 15,834 | | | | — | | Purchases of businesses | | | (24,701 | ) | | | — | | | | — | | Change in other, net | | | (2,316 | ) | | | (3,384 | ) | | | (3,143 | ) | | | | | | | | | | | | | | Net cash used for investing activities | | | (257,725 | ) | | | (206,431 | ) | | | (177,679 | ) | | | | | | | | | | | | | | Cash flows from financing activities: | | | | | | | | | | | | | Draws on credit facilities | | | — | | | | 3,010 | | | | 2,752 | | Payments on credit facilities | | | (3,849 | ) | | | (3,682 | ) | | | (4,815 | ) | Proceeds from long-term debt | | | 222,777 | | | | — | | | | — | | Payments on long-term debt | | | (56 | ) | | | (48 | ) | | | (6,626 | ) | Net transfers from (to) iHeartCommunications | | | 17,007 | | | | (68,804 | ) | | | (149,957 | ) | Payments to repurchase noncontrolling interests | | | (234 | ) | | | — | | | | (61,143 | ) | Dividends and other payments to noncontrolling interests | | | (30,870 | ) | | | (18,995 | ) | | | (68,442 | ) | Dividends paid | | | — | | | | (175,022 | ) | | | (200,010 | ) | Deferred financing charges | | | (8,606 | ) | | | — | | | | (344 | ) | Change in other, net | | | 2,885 | | | | 2,232 | | | | 4,192 | | | | | | | | | | | | | | | Net cash provided by (used for) financing activities | �� | | 199,054 | | | | (261,309 | ) | | | (484,393 | ) | | | | | | | | | | | | | | Effect of exchange rate changes on cash | | | (13,723 | ) | | | (9,024 | ) | | | (2 | ) | | | | | | | | | | | | | | Net increase (decrease) in cash and cash equivalents | | | 226,539 | | | | (128,341 | ) | | | (247,434 | ) | Cash and cash equivalents at beginning of year | | | 186,204 | | | | 314,545 | | | | 561,979 | | | | | | | | | | | | | | | Cash and cash equivalents at end of year | | $ | 412,743 | | | $ | 186,204 | | | $ | 314,545 | | | | | | | | | | | | | | | SUPPLEMENTAL DISCLOSURES: | | | | | | | | | | | | | Cash paid during the year for interest | | $ | 356,021 | | | $ | 347,786 | | | $ | 346,833 | | Cash paid during the year for income taxes | | | 43,781 | | | | 43,275 | | | | 46,262 | |
See Notes to Consolidated Financial Statements
CLEAR CHANNEL OUTDOOR HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1—SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Nature of Business
Clear Channel Outdoor Holdings, Inc. (the “Company”) is an outdoor advertising company which owns or operates advertising display faces domestically and internationally. On November 11, 2005, the Company became a publicly traded company through an initial public offering (“IPO”), in which 10%, or 35.0 million shares, of the Company’s Class A common stock was sold. Prior to the IPO, the Company was an indirect wholly-owned subsidiary of iHeartCommunications, Inc. (“iHeartCommunications”), a diversified media and entertainment company. As of December 31, 2015, iHeartCommunications indirectly holds all of the 315.0 million shares of Class B common stock outstanding and 10,726,917 shares of Class A common stock, collectively representing slightly more than 90% of the shares outstanding and approximately 99% of the voting power. The holders of Class A common stock and Class B common stock have identical rights, except holders of Class A common stock are entitled to one vote per share while holders of Class B common stock are entitled to 20 votes per share. The Class B shares of common stock are convertible, at the option of the holder at any time or upon any transfer, into shares of Class A common stock on a one-for-one basis, subject to certain limited exceptions.
The Company operates in the outdoor advertising industry by selling advertising on billboards, street furniture displays, transit displays and other advertising displays. The Company has two reportable business segments: Americas and International. The Americas segment primarily includes operations in the United States, Canada and Latin America; the International segment primarily includes operations in Europe, Asia and Australia.
Agreements with iHeartCommunications
There are several agreements which govern the Company’s relationship with iHeartCommunications including the Master Agreement, Corporate Services Agreement, Employee Matters Agreement, Tax Matters Agreement and Trademark and License Agreement. iHeartCommunications has the right to terminate these agreements in various circumstances. As of the date of the filing of this report, no notice of termination of any of these agreements has been received from iHeartCommunications.
Use of Estimates
The preparation of the consolidated financial statements in conformity with U.S. generally accepted accounting principles (“GAAP”) requires management to make estimates, judgments, and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes including, but not limited to, legal, tax and insurance accruals. The Company bases its estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances. Actual results could differ from those estimates.
Principles of Consolidation
The consolidated financial statements include the accounts of the Company and its subsidiaries. Also included in the consolidated financial statements are entities for which the Company has a controlling financial interest or is the primary beneficiary. Investments in companies in which the Company owns 20 percent to 50 percent of the voting common stock or otherwise exercises significant influence over operating and financial policies of the Company are accounted for using the equity method of accounting. All significant intercompany accounts have been eliminated in consolidation.
Certain prior period amounts have been reclassified to conform to the 2015 presentation. Included in International Outdoor Direct operating expenses and Selling, general and administrative expenses are $8.2
CLEAR CHANNEL OUTDOOR HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
million and $3.2 million, respectively, recorded in the fourth quarter of 2015 to correct for accounting errors included in the results for our Netherlands subsidiary reported in prior years. Such corrections are not considered to be material to current year or prior year financial results.
Cash and Cash Equivalents
Cash and cash equivalents include all highly liquid investments with an original maturity of three months or less.
Accounts Receivable
Accounts receivable are recorded at the invoiced amount, net of reserves for sales returns and allowances, and allowances for doubtful accounts. The Company evaluates the collectability of its accounts receivable based on a combination of factors. In circumstances where it is aware of a specific customer’s inability to meet its financial obligations, it records a specific reserve to reduce the amounts recorded to what it believes will be collected. For all other customers, it recognizes reserves for bad debt based on historical experience of bad debts as a percent of revenue for each business unit, adjusted for relative improvements or deteriorations in the agings and changes in current economic conditions. The Company believes its concentration of credit risk is limited due to the large number and the geographic diversification of its customers.
Business Combinations
The Company accounts for its business combinations under the acquisition method of accounting. The total cost of an acquisition is allocated to the underlying identifiable net assets, based on their respective estimated fair values. The excess of the purchase price over the estimated fair values of the net assets acquired is recorded as goodwill. Determining the fair value of assets acquired and liabilities assumed requires management’s judgment and often involves the use of significant estimates and assumptions, including assumptions with respect to future cash inflows and outflows, discount rates, asset lives and market multiples, among other items. Various acquisition agreements may include contingent purchase consideration based on performance requirements of the investee. The Company accounts for these payments in conformity with the provisions of ASC 805-20-30, which establish the requirements related to recognition of certain assets and liabilities arising from contingencies.
Property, Plant and Equipment
Property, plant and equipment are stated at cost. Depreciation is computed using the straight-line method at rates that, in the opinion of management, are adequate to allocate the cost of such assets over their estimated useful lives, which are as follows:
Buildings and improvements—10 to 39 years
Structures—3 to 20 years
Furniture and other equipment—2 to 20 years
Leasehold improvements—shorter of economic life or lease term assuming renewal periods, if appropriate
For assets associated with a lease or contract, the assets are depreciated at the shorter of the economic life or the lease or contract term, assuming renewal periods, if appropriate. Expenditures for maintenance and repairs are charged to operations as incurred, whereas expenditures for renewal and betterments are capitalized.
The Company tests for possible impairment of property, plant and equipment whenever events and circumstances indicate that depreciable assets might be impaired and the undiscounted cash flows estimated to be generated by
CLEAR CHANNEL OUTDOOR HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
those assets are less than the carrying amounts of those assets. When specific assets are determined to be unrecoverable, the cost basis of the asset is reduced to reflect the current fair market value.
Assets and businesses are classified as held for sale if their carrying amount will be recovered or settled principally through a sale transaction rather than through continuing use. The asset or business must be available for immediate sale and the sale must be highly probable within one year.
Land Leases and Other Structure Leases
Most of the Company’s advertising structures are located on leased land. Americas land leases are typically paid in advance for periods ranging from one to 12 months. International land leases are paid both in advance and in arrears, for periods ranging from one to 12 months. Most international street furniture display faces are operated through contracts with municipalities for up to 20 years. The leased land and street furniture contracts often include a percent of revenue to be paid along with a base rent payment. Prepaid land leases are recorded as an asset and expensed ratably over the related rental term and rent payments in arrears are recorded as an accrued liability.
Intangible Assets
The Company’s indefinite-lived intangible assets include billboard permits in its Americas segment. The Company’s indefinite-lived intangible assets are not subject to amortization, but are tested for impairment at least annually. The Company tests for possible impairment of indefinite-lived intangible assets whenever events or changes in circumstances, such as a significant reduction in operating cash flow or a dramatic change in the manner for which the asset is intended to be used indicate that the carrying amount of the asset may not be recoverable.
The Company performs its annual impairment test for its permits using a direct valuation technique as prescribed in ASC 805-20-S99. The Company engages Corporate Valuation Consulting LLC (formerly Mesirow Financial Consulting Practice), a third party valuation firm, to assist the Company in the development of these assumptions and the Company’s determination of the fair value of its permits.
Other intangible assets include definite-lived intangible assets and permanent easements. The Company’s definite-lived intangible assets include primarily transit and street furniture contracts, site leases and other contractual rights, all of which are amortized over the shorter of either the respective lives of the agreements or over the period of time the assets are expected to contribute directly or indirectly to the Company’s future cash flows. The Company periodically reviews the appropriateness of the amortization periods related to its definite-lived intangible assets. These assets are recorded at cost. Permanent easements are indefinite-lived intangible assets which include certain rights to use real property not owned by the Company.
The Company tests for possible impairment of other intangible assets whenever events and circumstances indicate that they might be impaired and the undiscounted cash flows estimated to be generated by those assets are less than the carrying amounts of those assets. When specific assets are determined to be unrecoverable, the cost basis of the asset is reduced to reflect the current fair market value.
Goodwill
At least annually, the Company performs its impairment test for each reporting unit’s goodwill. Historically, we performed our annual impairment test on our goodwill, billboard permits, and other intangible assets as of October 1 of each year. Beginning in the third quarter of 2015, we began performing our annual impairment test
CLEAR CHANNEL OUTDOOR HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
on July 1 of each year. In 2015 and 2014, the Company used a discounted cash flow model to determine if the carrying value of the reporting unit, including goodwill, is less than the fair value of the reporting unit. The Company identified its reporting units in accordance with ASC 350-20-55. The Company’s U.S. outdoor advertising markets are aggregated into a single reporting unit for purposes of the goodwill impairment test. The Company also determined that within its Americas segment, Canada constitutes a separate reporting unit and each country in its International outdoor segment constitutes a separate reporting unit. The Company had no impairment of goodwill for 2015 and 2014. The Company recognized a non-cash impairment charge to goodwill of $10.7 million based on declining future cash flows expected in one country in the International outdoor segment for 2013.
Nonconsolidated Affiliates
In general, investments in which the Company owns 20 percent to 50 percent of the common stock or otherwise exercises significant influence over the investee are accounted for under the equity method. The Company does not recognize gains or losses upon the issuance of securities by any of its equity method investees. The Company reviews the value of equity method investments and records impairment charges in the statement of operations as a component of “Equity in earnings (loss) of nonconsolidated affiliates” for any decline in value that is determined to be other-than-temporary.
Other Investments
Other investments are composed primarily of equity securities. Securities for which fair value is determinable are classified as available-for-sale or trading and are carried at fair value based on quoted market prices. Securities are carried at historical cost when quoted market prices are unavailable. The net unrealized gains or losses on the available-for-sale securities, net of tax, are reported in accumulated other comprehensive loss as a component of shareholders’ equity (deficit).
The Company periodically assesses the value of available-for-sale and non-marketable securities and records impairment charges in the statement of comprehensive loss for any decline in value that is determined to be other-than-temporary. The average cost method is used to compute the realized gains and losses on sales of equity securities. Based on these assessments, no impairments existed at December 31, 2015, 2014 and 2013.
Financial Instruments
Due to their short maturity, the carrying amounts of accounts and notes receivable, accounts payable, accrued liabilities and short-term borrowings approximated their fair values at December 31, 2015 and 2014.
Asset Retirement Obligation
ASC 410-20 requires the Company to estimate its obligation upon the termination or non-renewal of a lease to dismantle and remove its advertising structures from the leased land and to reclaim the site to its original condition. The Company’s asset retirement obligation is reported in “Other long-term liabilities.” The Company records the present value of obligations associated with the retirement of its advertising structures in the period in which the obligation is incurred. When the liability is recorded, the cost is capitalized as part of the related advertising structures carrying amount. Over time, accretion of the liability is recognized as an operating expense and the capitalized cost is depreciated over the expected useful life of the related asset.
CLEAR CHANNEL OUTDOOR HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Income Taxes
The Company accounts for income taxes using the liability method. Under this method, deferred tax assets and liabilities are determined based on differences between financial reporting bases and tax bases of assets and liabilities and are measured using the enacted tax rates expected to apply to taxable income in the periods in which the deferred tax asset or liability is expected to be realized or settled. Deferred tax assets are reduced by valuation allowances if the Company believes it is more likely than not that some portion or the entire asset will not be realized. Generally, all earnings from the Company’s foreign operations are permanently reinvested and not distributed. The Company has not provided U.S. federal income taxes for temporary differences with respect to investments in foreign subsidiaries, which at December 31, 2015, currently result in tax basis amounts greater than the financial reporting basis. It is not apparent that these unrecognized deferred tax assets will reverse in the foreseeable future. If any excess cash held by our foreign subsidiaries were needed to fund operations in the United States, we could presently repatriate available funds without a requirement to accrue or pay U.S. taxes. This is a result of significant deficits, as calculated for tax law purposes, in our foreign earnings and profits, which gives us flexibility to make future cash distributions as non-taxable returns of capital. We regularly review our tax liabilities on amounts that may be distributed in future periods and provide for foreign withholding and other current and deferred taxes on any such amounts. The determination of the amount of federal income taxes, if any, that might become due in the event that our foreign earnings are distributed is not practicable.
The operations of the Company are included in a consolidated U.S. Federal income tax return filed by iHeartMedia. However, for financial reporting purposes, the Company’s provision for income taxes has been computed on the basis that the Company files separate consolidated U.S. federal income tax returns with its subsidiaries.
Revenue Recognition
The Company’s advertising contracts cover periods of a few weeks up to one year, and are generally billed monthly. Revenue for advertising space rental is recognized ratably over the term of the contract. Advertising revenue is reported net of agency commissions. Agency commissions are calculated based on a stated percentage applied to gross billing revenue for the Company’s operations. Payments received in advance of being earned are recorded as deferred income. Revenue arrangements typically contain multiple products and services and revenues are allocated based on the relative fair value of each delivered item and recognized in accordance with the applicable revenue recognition criteria for the specific unit of accounting.
Advertising Expense
The Company records advertising expense as it is incurred. Advertising expenses were $21.1 million, $20.1 million and $18.6 million for the years ended December 31, 2015, 2014 and 2013, respectively.
Share-Based Compensation
Under the fair value recognition provisions of ASC 718-10, share-based compensation cost is measured at the grant date based on the fair value of the award. For awards that vest based on service conditions, this cost is recognized as expense on a straight-line basis over the vesting period. For awards that will vest based on market or performance conditions, this cost will be recognized when it becomes probable that the performance conditions will be satisfied. Determining the fair value of share-based awards at the grant date requires assumptions and judgments about expected volatility and forfeiture rates, among other factors.
CLEAR CHANNEL OUTDOOR HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Foreign Currency
Results of operations for foreign subsidiaries and foreign equity investees are translated into U.S. dollars using the average exchange rates during the year. The assets and liabilities of those subsidiaries and investees are translated into U.S. dollars using the exchange rates at the balance sheet date. The related translation adjustments are recorded in a separate component of shareholders’ equity (deficit), “Accumulated other comprehensive loss”. Foreign currency transaction gains and losses are included in operations.
New Accounting Pronouncements
During the first quarter of 2015, the Company adopted the Financial Accounting Standards Board’s (“FASB”) ASU No. 2014-08,Presentation of Financial Statements (Topic 205) and Property, Plant, and Equipment (Topic 360), Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity. This update provides guidance for the recognition, measurement and disclosure of discontinued operations. The adoption of this guidance 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 for 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.
During the second quarter of 2015, the FASB issued ASU No. 2015-03,Interest-Imputation of Interest (Subtopic 835-30): Simplifying the Presentation of Debt Issuance Costs. This update requires entities to present debt issuance costs related to a recognized debt liability as a direct deduction from the carrying amount of that direct debt liability. The standard is effective for annual periods, and for interim periods within those annual periods, beginning after December 15, 2015. The Company will adopt this standard in the first quarter of 2016.
During the third quarter of 2015, the FASB issued ASU 2015-14,Revenue from Contracts with Customers (Topic 606): Deferral of the Effective Date. This update provides a one-year deferral of the effective date for ASU No. 2014-09,Revenue from Contracts with Customers. ASU No. 2014-09 provides guidance for the recognition, measurement and disclosure of revenue resulting from contracts with customers and will supersede virtually all of the current revenue recognition guidance under U.S. GAAP. The standard is effective for the first interim period within annual reporting periods beginning after December 15, 2017. The Company is currently evaluating the impact of the provisions of this new standard on its financial position and results of operations.
During the third quarter of 2015, the FASB issued ASU No. 2015-16,Business Combinations (Topic 805): Simplifying the Accounting for Measurement-Period Adjustments. This update eliminates the requirement for an acquirer in a business combination to account for measurement-period adjustments retrospectively. Instead, acquirers must recognize measurement-period adjustments during the period in which they determine the amounts, including the effect on earnings of any amounts they would have recorded in previous periods if the accounting had been completed at the acquisition date. The standard is effective for fiscal years beginning after December 15, 2015, and interim periods within those fiscal years. The Company is currently evaluating the impact of the provisions of this new standard on its financial position and results of operations.
During the fourth quarter of 2015, the Company adopted FASB’s ASU No. 2015-17,Income Taxes (Topic 740), Balance Sheet Classification of Deferred Taxes. This update requires companies to classify all deferred tax assets
CLEAR CHANNEL OUTDOOR HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
and liabilities as noncurrent on the balance sheet instead of separating deferred taxes into current and noncurrent amounts. The adoption of this guidance did not have a material effect on the Company’s consolidated financial statements.
NOTE 2—PROPERTY, PLANT AND EQUIPMENT, INTANGIBLE ASSETS AND GOODWILL
Dispositions
In the first quarter of 2016, Americas outdoor sold nine non-strategic outdoor markets including Cleveland and Columbus, Ohio, Des Moines, Iowa, Ft. Smith, Arkansas, Memphis, Tennessee, Portland, Oregon, Reno, Nevada, Seattle, Washington and Wichita, Kansas for approximately $602 million in cash and certain advertising assets in Florida. As of December 31, 2015, eight of these disposals met the criteria to be classified as held-for-sale and as such, the related assets are separately presented on the face of the Consolidated Balance Sheet.
Property, Plant and Equipment
The Company’s property, plant and equipment consisted of the following classes of assets as of December 31, 2015 and 2014, respectively.
| | | | | | | | | | (In thousands) | | December 31,
2015 | | | December 31,
2014 | | Land, buildings and improvements | | $ | 167,739 | | | $ | 198,280 | | Structures | | | 2,824,794 | | | | 2,999,582 | | Furniture and other equipment | | | 156,046 | | | | 152,084 | | Construction in progress | | | 54,701 | | | | 75,469 | | | | | | | | | | | | | | 3,203,280 | | | | 3,425,415 | | Less: accumulated depreciation | | | 1,575,294 | | | | 1,519,764 | | | | | | | | | | | Property, plant and equipment, net | | $ | 1,627,986 | | | $ | 1,905,651 | | | | | | | | | | |
Indefinite-lived Intangible Assets
The Company’s indefinite-lived intangible assets consist primarily of billboard permits. The Company’s billboard permits are granted for the right to operate an advertising structure at the specified location as long as the structure is in compliance with the laws and regulations of each jurisdiction. The Company’s permits are located on owned land, leased land or land for which we have acquired permanent easements. In cases where the Company’s permits are located on leased land, the leases typically have initial terms of between 10 and 20 years and renew indefinitely, with rental payments generally escalating at an inflation-based index. If the Company loses its lease, the Company will typically obtain permission to relocate the permit or bank it with the municipality for future use. Due to significant differences in both business practices and regulations, billboards in the International segment are subject to long-term, finite contracts unlike the Company’s permits in the United States and Canada. Accordingly, there are no indefinite-lived intangible assets in the International segment.
Annual Impairment Test to Billboard Permits
Historically, the Company performed its annual impairment test on indefinite-lived intangible assets as of October 1 of each year. Beginning in the third quarter of 2015, the Company began performing its annual impairment test on July 1 of each year.
CLEAR CHANNEL OUTDOOR HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
The impairment tests for indefinite-lived intangible assets consist of a comparison between the fair value of the indefinite-lived intangible asset at the market level with its carrying amount. If the carrying amount of the indefinite-lived intangible asset exceeds its fair value, an impairment loss is recognized equal to that excess. After an impairment loss is recognized, the adjusted carrying amount of the indefinite-lived asset is its new accounting basis. The fair value of the indefinite-lived asset is determined using the direct valuation method as prescribed in ASC 805-20-S99. Under the direct valuation method, the fair value of the indefinite-lived assets is calculated at the market level as prescribed by ASC 350-30-35. The Company engaged Corporate Valuation Consulting LLC (formerly a Mesirow Financial Consulting Practice), a third-party valuation firm, to assist it in the development of the assumptions and the Company’s determination of the fair value of its indefinite-lived intangible assets.
The application of the direct valuation method attempts to isolate the income that is properly attributable to the indefinite-lived intangible asset alone (that is, apart from tangible and identified intangible assets and goodwill). It is based upon modeling a hypothetical “greenfield” build-up to a “normalized” enterprise that, by design, lacks inherent goodwill and whose only other assets have essentially been paid for (or added) as part of the build-up process. The Company forecasts revenue, expenses and cash flows over a ten-year period for each of its markets in its application of the direct valuation method. The Company also calculates a “normalized” residual year which represents the perpetual cash flows of each market. The residual year cash flow was capitalized to arrive at the terminal value of the permits in each market.
Under the direct valuation method, it is assumed that rather than acquiring indefinite-lived intangible assets as part of a going concern business, the buyer hypothetically develops indefinite-lived intangible assets and builds a new operation with similar attributes from scratch. Thus, the buyer incurs start-up costs during the build-up phase which are normally associated with going concern value. Initial capital costs are deducted from the discounted cash flow model which results in value that is directly attributable to the indefinite-lived intangible assets.
The key assumptions using the direct valuation method are market revenue growth rates, market share, profit margin, duration and profile of the build-up period, estimated start-up capital costs and losses incurred during the build-up period, the risk-adjusted discount rate and terminal values. This data is populated using industry normalized information representing an average billboard permit within a market.
During 2015, the Company recognized an impairment charge of $21.6 million related to billboard permits in one market.
Other Intangible Assets
Other intangible assets include definite-lived intangible assets and permanent easements. The Company’s definite-lived intangible assets consist primarily of transit and street furniture contracts, site-leases and other contractual rights, all of which are amortized over the shorter of either the respective lives of the agreements or over the period of time the assets are expected to contribute directly or indirectly to the Company’s future cash flows. Permanent easements are indefinite-lived intangible assets which include certain rights to use real property not owned by the Company. The Company periodically reviews the appropriateness of the amortization periods related to its definite-lived intangible assets. These assets are recorded at cost.
CLEAR CHANNEL OUTDOOR HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
The following table presents the gross carrying amount and accumulated amortization for each major class of other intangible assets as of December 31, 2015 and 2014, respectively:
| | | | | | | | | | | | | | | | | | | | December 31, 2015 | | | December 31, 2014 | | | (In thousands) | | Gross Carrying
Amount | | | Accumulated
Amortization | | | Gross Carrying
Amount | | | Accumulated
Amortization | | Transit, street furniture and other outdoor contractual rights | | $ | 635,772 | | | $ | (457,060 | ) | | $ | 716,722 | | | $ | (476,523 | ) | Permanent easements | | | 156,349 | | | | — | | | | 171,272 | | | | — | | Other | | | 9,687 | | | | (1,884 | ) | | | 2,912 | | | | (2,319 | ) | | | | | | | | | | | | | | | | | | Total | | $ | 801,808 | | | $ | (458,944 | ) | | $ | 890,906 | | | $ | (478,842 | ) | | | | | | | | | | | | | | | | | |
Total amortization expense related to definite-lived intangible assets for the years ended December 31, 2015, 2014 and 2013 was $49.2 million, $66.8 million, and $70.9 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) | | | | 2016 | | $ | 38,112 | | 2017 | | $ | 29,963 | | 2018 | | $ | 21,246 | | 2019 | | $ | 16,838 | | 2020 | | $ | 14,813 | |
Annual Impairment Test to Goodwill
Historically, the Company performed its annual impairment test on goodwill as of October 1 of each year. Beginning in the third quarter of 2015, the Company began performing its annual impairment test on July 1 of each year.
Each of the Company’s advertising markets are components. The U.S. advertising markets are aggregated into a single reporting unit for purposes of the goodwill impairment test using the guidance in ASC 350-20-55. The Company also determined that within its Americas segment, Canada constitutes a separate reporting unit and each country in its International segment constitutes a separate reporting unit.
The goodwill impairment test is a two-step process. The first step, used to screen for potential impairment, compares the fair value of the reporting unit with its carrying amount, including goodwill. If applicable, the second step, used to measure the amount of the impairment loss, compares the implied fair value of the reporting unit goodwill with the carrying amount of that goodwill.
Each of the Company’s reporting units is valued using a discounted cash flow model which requires estimating future cash flows expected to be generated from the reporting unit, discounted to their present value using a risk-adjusted discount rate. Terminal values were also estimated and discounted to their present value. Assessing the recoverability of goodwill requires the Company to make estimates and assumptions about sales, operating margins, growth rates and discount rates based on its budgets, business plans, economic projections, anticipated future cash flows and marketplace data. There are inherent uncertainties related to these factors and management’s judgment in applying these factors.
CLEAR CHANNEL OUTDOOR HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
The Company recognized no goodwill impairment for the years ended December 31, 2015 and 2014. Based on declining future cash flows expected in one country in the International segment, the Company recognized a non-cash impairment charge to goodwill of $10.7 million and recognized no goodwill impairment for its Americas segment for the year ended December 31, 2013.
The following table presents the changes in the carrying amount of goodwill in each of the Company’s reportable segments:
| | | | | | | | | | | | | | (In thousands) | | Americas | | | International | | | Consolidated | | Balance as of December 31, 2013 | | $ | 585,227 | | | $ | 264,907 | | | $ | 850,134 | | Foreign currency | | | (653 | ) | | | (32,369 | ) | | | (33,022 | ) | | | | | | | | | | | | | | Balance as of December 31, 2014 | | $ | 584,574 | | | $ | 232,538 | | | $ | 817,112 | | Acquisitions | | | — | | | | 10,998 | | | | 10,998 | | Foreign currency | | | (709 | ) | | | (19,644 | ) | | | (20,353 | ) | Assets held for sale | | | (49,182 | ) | | | — | | | | (49,182 | ) | | | | | | | | | | | | | | Balance as of December 31, 2015 | | $ | 534,683 | | | $ | 223,892 | | | $ | 758,575 | | | | | | | | | | | | | | |
The balance at December 31, 2013 is net of cumulative impairments of $2.6 billion and $326.6 million in the Company’s Americas and International segments, respectively.
NOTE 3—INVESTMENTS
The Company’s most significant investments in nonconsolidated affiliates are listed below:
Buspak
The Company owned a 50% interest in Buspak, a bus advertising company in Hong Kong. On July 18, 2014, a subsidiary of the Company sold its 50% interest in Buspak, recognizing a gain on the sale of $4.5 million.
The following table summarizes the Company’s investments in nonconsolidated affiliates:
| | | | | | | | | | | | | | (In thousands) | | Buspak | | | All
Others | | | Total | | Balance as of December 31, 2013 | | $ | 10,495 | | | $ | 4,896 | | | $ | 15,391 | | Equity in net earnings (loss) | | | 5,139 | | | | (1,350 | ) | | | 3,789 | | Divestitures of investments, net | | | (15,821 | ) | | | (333 | ) | | | (16,154 | ) | Cash advances | | | — | | | | 2,290 | | | | 2,290 | | Foreign currency translation adjustments | | | 187 | | | | (110 | ) | | | 77 | | | | | | | | | | | | | | | Balance as of December 31, 2014 | | $ | — | | | $ | 5,393 | | | $ | 5,393 | | Equity in net loss | | | — | | | | (289 | ) | | | (289 | ) | Cash advances | | | — | | | | 711 | | | | 711 | | Foreign currency translation adjustments | | | — | | | | (89 | ) | | | (89 | ) | | | | | | | | | | | | | | Balance as of December 31, 2015 | | $ | — | | | $ | 5,726 | | | $ | 5,726 | | | | | | | | | | | | | | |
The investments in the table above are not consolidated, but are accounted for under the equity method of accounting, whereby the Company records its investments in these entities in the balance sheet as “Other assets.” The Company’s interests in their operations are recorded in the statement of comprehensive loss as “Equity in earnings (loss) of nonconsolidated affiliates.”
CLEAR CHANNEL OUTDOOR HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
NOTE 4—ASSET RETIREMENT OBLIGATION
The Company’s asset retirement obligation is reported in “Other long-term liabilities” with the current portion recorded in “Accrued liabilities” and relates to its obligation to dismantle and remove outdoor advertising displays from leased land and to reclaim the site to its original condition upon the termination or non-renewal of a lease or contract. When the liability is recorded, the cost is capitalized as part of the related long-lived assets’ carrying value. Due to the high rate of lease renewals over a long period of time, the calculation assumes that all related assets will be removed at some point over the next 50 years. An estimate of third-party cost information is used with respect to the dismantling of the structures and the reclamation of the site. The interest rate used to calculate the present value of such costs over the retirement period is based on an estimated risk adjusted credit rate for the same period.
The following table presents the activity related to the Company’s asset retirement obligation:
| | | | | | | | | | | | Years Ended December 31, | | | (In thousands) | | 2015 | | | 2014 | | Beginning balance | | $ | 48,161 | | | $ | 54,832 | | Adjustment due to changes in estimates | | | 2,024 | | | | (6,508 | ) | Accretion of liability | | | 546 | | | | 7,340 | | Liabilities settled | | | (2,720 | ) | | | (5,669 | ) | Foreign Currency | | | (2,886 | ) | | | (1,834 | ) | | | | | | | | | | Ending balance | | $ | 45,125 | | | $ | 48,161 | | | | | | | | | | |
NOTE 5—LONG-TERM DEBT
Long-term debt at December 31, 2015 and 2014 consisted of the following:
| | | | | | | | | | (In thousands) | | December 31,
2015 | | | December 31,
2014 | | Clear Channel Worldwide Holdings Notes | | $ | 4,925,000 | | | $ | 4,925,000 | | Clear Channel International B.V. Senior Notes | | | 225,000 | | | | — | | Senior revolving credit facility due 2018 | | | — | | | | — | | Other debt | | | 19,003 | | | | 15,107 | | Original issue discount | | | (7,769 | ) | | | (6,178 | ) | | | | | | | | | | Total debt | | $ | 5,161,234 | | | $ | 4,933,929 | | Less: current portion | | | 4,310 | | | | 3,461 | | | | | | | | | | | Total long-term debt | | $ | 5,156,924 | | | $ | 4,930,468 | | | | | | | | | | |
The aggregate market value of the Company’s debt based on market prices for which quotes were available was approximately $4.9 billion and $5.1 billion at December 31, 2015 and December 31, 2014, respectively. Under the fair value hierarchy established by ASC 820-10-35, the market value of the Company’s debt is classified as Level 1.
CLEAR CHANNEL OUTDOOR HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Senior Notes
As of December 31, 2015 and 2014, the Company had Senior Notes consisting of:
| | | | | | | | | | | | | | | | | | | | (In thousands) | | Maturity Date | | | Interest Rate | | | Interest Payment Terms | | December 31,
2015 | | | December 31,
2014 | | CCWH Senior Notes: | | | | | | | | | | | | | | | | | | | 6.5% Series A Senior Notes Due 2022 | | | 11/15/2022 | | |
| 6.5 |
% | | Payable to the trustee weekly in arrears and to the noteholders on May 15 and November 15 of each year | | $ | 735,750 | | | | 735,750 | | 6.5% Series B Senior Notes Due 2022 | | | 11/15/2022 | | |
| 6.5 |
% | | Payable to the trustee weekly in arrears and to the noteholders on May 15 and November 15 of each year | | | 1,989,250 | | | | 1,989,250 | | CCWH Senior Subordinated Notes: | | | | | | | | | | | | | | | | | | | 7.625% Series A Senior Notes Due 2020 | | | 3/15/2020 | | |
| 7.625 |
% | | Payable to the trustee weekly in arrears and to the noteholders on March 15 and September 15 of each year | | | 275,000 | | | | 275,000 | | 7.625% Series B Senior Notes Due 2020 | | | 3/15/2020 | | |
| 7.625 |
% | | Payable to the trustee weekly in arrears and to the noteholders on March 15 and September 15 of each year | | | 1,925,000 | | | | 1,925,000 | | | | | | | | | | | | | | | | | | | | | Total CCWH Notes | | | | | | | | | | | | $ | 4,925,000 | | | $ | 4,925,000 | | Clear Channel International B.V. Senior Notes: | | | | | | | | | | | | | | | | | | | 8.75% Senior Notes Due 2020 | | | 12/15/2020 | | |
| 8.750 |
% | | Payable semi-annually in arrears on June 15 and December 15 of each year | | | 225,000 | | | | — | | | | | | | | | | | | | | | | | | | | | Total Senior Notes | | | | | | | | | | | | $ | 5,150,000 | | | | 4,925,000 | | | | | | | | | | | | | | | | | | | | |
Guarantees and Security
The CCWH Senior Notes are guaranteed by CCOH, Clear Channel Outdoor, Inc. (“CCOI”) and certain of CCOH’s direct and indirect subsidiaries. The CCWH Senior Subordinated Notes are fully and unconditionally guaranteed, jointly and severally, on a senior subordinated basis by CCOH, CCOI and certain of CCOH’s other domestic subsidiaries and rank junior to each guarantor’s existing and future senior debt, including the CCWH Senior Notes, equally with each guarantor’s existing and future senior subordinated debt and ahead of each guarantor’s existing and future debt that expressly provides that it is subordinated to the guarantees of the CCWH Senior Subordinated Notes.
The CCWH Senior Notes are senior obligations that rank pari passu in right of payment to all unsubordinated indebtedness of CCWH and the guarantees of the CCWH Senior Notes rank pari passu in right of payment to all unsubordinated indebtedness of the guarantors. The CCWH Senior Subordinated Notes are unsecured senior subordinated obligations that rank junior to all of CCWH’s existing and future senior debt, including the CCWH Senior Notes, equally with any of CCWH’s existing and future senior subordinated debt and ahead of all of CCWH’s existing and future debt that expressly provides that it is subordinated to the CCWH Subordinated Notes.
CLEAR CHANNEL OUTDOOR HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Redemptions
CCWH may redeem the Senior Notes and Senior Subordinated Notes at its option, in whole or part, at redemption prices set forth in the indentures plus accrued and unpaid interest to the redemption date and plus an applicable premium.
Certain Covenants
The indentures governing the Senior Notes and Senior Subordinated Notes contain covenants that limit CCOH and its restricted subsidiaries ability to, among other things:
incur or guarantee additional debt or issue certain preferred stock;
in the case of the Senior Notes, create liens on its restricted subsidiaries’ assets to secure such debt;
create restrictions on the payment of dividends or other amounts;
enter into certain transactions with affiliates;
merge or consolidate with another person, or sell or otherwise dispose of all or substantially all of its assets; and
sell certain assets, including capital stock of its subsidiaries.
Clear Channel International B.V. Senior Notes
The CCIBV Senior Notes are guaranteed by certain of the International outdoor business’s existing and future subsidiaries. The Company does not guarantee or otherwise assume any liability for the CCIBV Senior Notes. The notes are senior unsecured obligations that rank pari passu in right of payment to all unsubordinated indebtedness of Clear Channel International B.V., and the guarantees of the notes are senior unsecured obligations that rank pari passu in right of payment to all unsubordinated indebtedness of the guarantors of the notes.
Redemptions
Clear Channel International B.V. may redeem the notes at its option, in whole or part, at the redemption prices set forth in the indenture plus accrued and unpaid interest to the redemption date.
Certain Covenants
The indenture governing the CCIBV Senior Notes contains covenants that limit Clear Channel International B.V.’s ability and the ability of its restricted subsidiaries to, among other things:
pay dividends, redeem stock or make other distributions or investments;
incur additional debt or issue certain preferred stock;
transfer or sell assets;
create liens on assets;
engage in certain transactions with affiliates;
create restrictions on dividends or other payments by the restricted subsidiaries; and
merge, consolidate or sell substantially all of Clear Channel International B.V.’s assets.
CLEAR CHANNEL OUTDOOR HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Senior Revolving Credit Facility Due 2018
During the third quarter of 2013, the Company entered into a five-year senior secured revolving credit facility with an aggregate principal amount of $75.0 million. The revolving credit facility may be used for working capital needs, to issue letters of credit and for other general corporate purposes. As of December 31, 2015, there were no amounts outstanding under the revolving credit facility, and $59.4 million of letters of credit under the revolving credit facility which reduce availability under the facility. The revolving credit facility contains a springing covenant that requires us to maintain a secured leverage ratio (as defined in the revolving credit facility) of not more than 1.5:1 that is tested at the end of a quarter if availability under the facility is less than 75% of the aggregate commitments under the facility. The Company was in compliance with the secured leverage ratio covenant as of December 31, 2015.
Other Debt
Other debt includes various borrowings and capital leases utilized for general operating purposes. Included in the $19.0 million balance at December 31, 2015 is $4.3 million that matures in less than one year.
Future Maturities
Future maturities of long-term debt as of December 31, 2015 are as follows:
| | | | | | (in thousands) | | | | 2016 | | $ | 4,310 | | 2017 | | | 8,248 | | 2018 | | | 5,078 | | 2019 | | | 344 | | 2020 | | | 2,425,370 | | Thereafter | | | 2,725,653 | | | | | | | Total(1) | | $ | 5,169,003 | | | | | | |
(1) | Excludes original issue discount of $7.8 million, which is amortized through interest expense over the life of the underlying debt obligations. |
GUARANTEES
As of December 31, 2015, the Company had $60.0 million in letters of credit outstanding, of which no letters of credit were cash secured. Additionally, as of December 31, 2015, iHeartCommunications had outstanding commercial standby letters of credit and surety bonds of $1.2 million and $57.9 million, respectively, held on behalf of the Company. These letters of credit and surety bonds relate to various operational matters, including insurance, bid and performance bonds, as well as other items.
In addition, as of December 31, 2015, the Company had outstanding bank guarantees of $51.3 million related to international subsidiaries, of which $13.1 million were backed by cash collateral.
CLEAR CHANNEL OUTDOOR HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 6—COMMITMENTS AND CONTINGENCIES
Commitments and Contingencies
The Company accounts for its rentals that include renewal options, annual rent escalation clauses, minimum franchise payments and maintenance related to displays under the guidance in ASC 840.
The Company considers its non-cancelable contracts that enable it to display advertising on buses, bus shelters, trains, etc. to be leases in accordance with the guidance in ASC 840-10. These contracts may contain minimum annual franchise payments which generally escalate each year. The Company accounts for these minimum franchise payments on a straight-line basis. If the rental increases are not scheduled in the lease, such as an increase based on subsequent changes in the index or rate, those rents are considered contingent rentals and are recorded as expense when accruable. Other contracts may contain a variable rent component based on revenue. The Company accounts for these variable components as contingent rentals and records these payments as expense when accruable. No single contract or lease is material to the Company’s operations.
The Company accounts for annual rent escalation clauses included in the lease term on a straight-line basis under the guidance in ASC 840-20-25. The Company considers renewal periods in determining its lease terms if at inception of the lease there is reasonable assurance the lease will be renewed. Expenditures for maintenance are charged to operations as incurred, whereas expenditures for renewal and betterments are capitalized.
The Company leases office space, equipment and the majority of the land occupied by its advertising structures under long-term operating leases. The Company accounts for these leases in accordance with the policies described above.
The Company’s contracts with municipal bodies or private companies relating to street furniture, billboards, transit and malls generally require the Company to build bus stops, kiosks and other public amenities or advertising structures during the term of the contract. The Company owns these structures and is generally allowed to advertise on them for the remaining term of the contract. Once the Company has built the structure, the cost is capitalized and expensed over the shorter of the economic life of the asset or the remaining life of the contract.
In addition, the Company has commitments relating to required purchases of property, plant, and equipment under certain street furniture contracts. Certain of the Company’s contracts contain penalties for not fulfilling its commitments related to its obligations to build bus stops, kiosks and other public amenities or advertising structures. Historically, any such penalties have not materially impacted the Company’s financial position or results of operations.
Certain acquisition agreements include deferred consideration payments based on performance requirements by the seller, typically involving the completion of a development or obtaining appropriate permits that enable the Company to construct additional advertising displays. At December 31, 2015, the Company believes its maximum aggregate contingency, which is subject to performance requirements by the seller, is approximately $30.0 million. As the contingencies have not been met or resolved as of December 31, 2015, these amounts are not recorded.
CLEAR CHANNEL OUTDOOR HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
As of December 31, 2015, the Company’s future minimum rental commitments under non-cancelable operating lease agreements with terms in excess of one year, minimum payments under non-cancelable contracts in excess of one year, capital expenditure commitments and employment contracts consist of the following:
| | | | | | | | | | | | | | | | | | (In thousands) | | Non-Cancelable
Operating Lease | | | Non-Cancelable
Contracts | | | Capital
Expenditure
Commitments | | | Employment
Contracts | | 2016 | | $ | 299,811 | | | $ | 367,201 | | | $ | 41,180 | | | $ | 4,926 | | 2017 | | | 247,495 | | | | 276,180 | | | | 10,691 | | | | 3,276 | | 2018 | | | 224,798 | | | | 217,963 | | | | 2,253 | | | | 888 | | 2019 | | | 196,797 | | | | 181,251 | | | | 1,064 | | | | — | | 2020 | | | 171,871 | | | | 153,000 | | | | 1,270 | | | | — | | Thereafter | | | 965,150 | | | | 359,108 | | | | 12,545 | | | | — | | | | | | | | | | | | | | | | | | | Total | | $ | 2,105,922 | | | $ | 1,554,703 | | | $ | 69,003 | | | $ | 9,090 | | | | | | | | | | | | | | | | | | |
Rent expense charged to operations for the years ended December 31, 2015, 2014 and 2013 was $978.6 million, $1,025.3 million and $1,017.0 million, respectively.
In various areas in which the Company operates, outdoor advertising is the object of restrictive and, in some cases, prohibitive zoning and other regulatory provisions, either enacted or proposed. The impact to the Company of loss of displays due to governmental action has been somewhat mitigated by Federal and state laws mandating compensation for such loss and constitutional restraints.
The Company and its subsidiaries are involved in certain legal proceedings arising in the ordinary course of business and, as required, have accrued an estimate of the probable costs for the resolution of those claims for which the occurrence of loss is probable and the amount can be reasonably estimated. These estimates have been developed in consultation with counsel and are based upon an analysis of potential results, assuming a combination of litigation and settlement strategies. It is possible, however, that future results of operations for any particular period could be materially affected by changes in the Company’s assumptions or the effectiveness of its strategies related to these proceedings. Additionally, due to the inherent uncertainty of litigation, there can be no assurance that the resolution of any particular claim or proceeding would not have a material adverse effect on the Company’s financial condition or results of operations.
Although the Company is involved in a variety of legal proceedings in the ordinary course of business, a large portion of its litigation arises in the following contexts: commercial disputes; misappropriation of likeness and right of publicity claims; employment and benefits related claims; governmental fines; intellectual property claims; and tax disputes.
International Outdoor Investigation
On April 21, 2015, inspections were conducted at the premises of Clear Channel in Denmark and Sweden as part of an investigation by Danish competition authorities. Additionally, on the same day, Clear Channel UK received a communication from the UK competition authorities, also in connection with the investigation by Danish competition authorities. Clear Channel and its affiliates are cooperating with the national competition authorities.
CLEAR CHANNEL OUTDOOR HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 7—RELATED PARTY TRANSACTIONS
The Company records net amounts due from or to iHeartCommunications as “Due from/to iHeartCommunications” on the consolidated balance sheets. The accounts represent the revolving promissory note issued by the Company to iHeartCommunications and the revolving promissory note issued by iHeartCommunications to the Company in the face amount of $1.0 billion, or if more or less than such amount, the aggregate unpaid principal amount of all advances. The accounts accrue interest pursuant to the terms of the promissory notes and are generally payable on demand or when they mature on December 15, 2017.
Included in the accounts are the net activities resulting from day-to-day cash management services provided by iHeartCommunications. As a part of these services, the Company maintains collection bank accounts swept daily into accounts of iHeartCommunications (after satisfying the funding requirements of the Trustee Accounts under the CCWH Senior Notes and the CCWH Subordinated Notes). In return, iHeartCommunications funds the Company’s controlled disbursement accounts as checks or electronic payments are presented for payment. The Company’s claim in relation to cash transferred from its concentration account is on an unsecured basis and is limited to the balance of the “Due from iHeartCommunications” account.
As of December 31, 2015 and December 31, 2014, the asset recorded in “Due from iHeartCommunications” on the consolidated balance sheet was $930.8 million and $947.8 million, respectively. As of December 31, 2015, the fixed interest rate on the “Due from iHeartCommunications” account was 6.5%, which is equal to the fixed interest rate on the CCWH Senior Notes. The net interest income for the years ended December 31, 2015, 2014 and 2013 was $61.4 million, $60.2 million, and $54.2 million, respectively.
The Company provides advertising space on its billboards for radio stations owned by iHeartCommunications. For the years ended December 31, 2015, 2014 and 2013, the Company recorded $2.7 million, $3.4 million, and $2.5 million, respectively, in revenue for these advertisements.
Under the Corporate Services Agreement between iHeartCommunications and the Company, iHeartCommunications provides management services to the Company, which include, among other things: (i) treasury, payroll and other financial related services; (ii) certain executive officer services; (iii) human resources and employee benefits services; (iv) legal and related services; (v) information systems, network and related services; (vi) investment services; (vii) procurement and sourcing support services; and (viii) other general corporate services. These services are charged to the Company based on actual direct costs incurred or allocated by iHeartCommunications based on headcount, revenue or other factors on a pro rata basis. For the years ended December 31, 2015, 2014 and 2013, the Company recorded $30.1 million, $31.2 million, and $35.4 million, respectively, as a component of corporate expenses for these services.
Pursuant to the Tax Matters Agreement between iHeartCommunications and the Company, the operations of the Company are included in a consolidated federal income tax return filed by iHeartCommunications. The Company’s provision for income taxes has been computed on the basis that the Company files separate consolidated federal income tax returns with its subsidiaries. Tax payments are made to iHeartCommunications on the basis of the Company’s separate taxable income. Tax benefits recognized on the Company’s employee stock option exercises are retained by the Company.
The Company computes its deferred income tax provision using the liability method in accordance with the provisions of ASC 740-10, as if the Company was a separate taxpayer. Deferred tax assets and liabilities are determined based on differences between financial reporting basis and tax basis of assets and liabilities and are measured using the enacted tax rates expected to apply to taxable income in the periods in which the deferred tax asset or liability is expected to be realized or settled. Deferred tax assets are reduced by valuation allowances if the Company believes it is more likely than not some portion or all of the asset will not be realized.
CLEAR CHANNEL OUTDOOR HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Pursuant to the Employee Matters Agreement, the Company’s employees participate in iHeartCommunications’ employee benefit plans, including employee medical insurance and a 401(k) retirement benefit plan. For the years ended December 31, 2015, 2014 and 2013, the Company recorded $10.7 million, $10.7 million and $10.5 million, respectively, as a component of selling, general and administrative expenses for these services.
Stock Purchases
On August 9, 2010, iHeartCommunications announced that its board of directors approved a stock purchase program under which iHeartCommunications or its subsidiaries may purchase up to an aggregate of $100 million of the Company’s Class A common stock and/or the Class A common stock of iHeartMedia, Inc. (“iHeartMedia”). The stock purchase program did not have a fixed expiration date and could be modified, suspended or terminated at any time at iHeartCommunications’ discretion. As of December 31, 2014, an aggregate $34.2 million was available under this program. In January 2015, CC Finco, LLC (“CC Finco”), an indirect wholly-owned subsidiary of iHeartCommunications, purchased an additional 2,000,000 shares of the Company’s Class A common stock for $20.4 million. On April 2, 2015, CC Finco purchased an additional 2,172,946 shares of the Company’s Class A common stock for $22.2 million, increasing iHeartCommunications’ collective holdings to represent slightly more than 90% of the outstanding shares of the Company’s common stock on a fully-diluted basis, assuming the conversion of all of the Company’s Class B common stock into Class A common stock. As a result of this purchase, the stock purchase program concluded. The purchase of shares in excess of the amount available under the stock purchase program was separately approved by the iHeartCommunications’ board of directors.
NOTE 8—INCOME TAXES
The operations of the Company are included in a consolidated U.S. federal income tax return filed by iHeartMedia. However, for financial reporting purposes, the Company’s provision for income taxes has been computed on the basis that the Company files separate consolidated U.S. federal income tax returns with its subsidiaries.
Significant components of the provision for income tax benefit (expense) are as follows:
| | | | | | | | | | | | | | (In thousands) | | Years Ended December 31, | | | | 2015 | | | 2014 | | | 2013 | | Current—federal | | $ | (270 | ) | | $ | 2,001 | | | $ | (1,470 | ) | Current—foreign | | | (45,322 | ) | | | (26,281 | ) | | | (45,327 | ) | Current—state | | | (1,046 | ) | | | (502 | ) | | | 772 | | | | | | | | | | | | | | | Total current expense | | | (46,638 | ) | | | (24,782 | ) | | | (46,025 | ) | | | | | Deferred—federal | | | (8,259 | ) | | | 26,744 | | | | 21,369 | | Deferred—foreign | | | 5,282 | | | | 4,307 | | | | 8,278 | | Deferred—state | | | (562 | ) | | | 2,518 | | | | 1,569 | | | | | | | | | | | | | | | Total deferred benefit (expense) | | | (3,539 | ) | | | 33,569 | | | | 31,216 | | | | | | | | | | | | | | | Income tax benefit (expense) | | $ | (50,177 | ) | | $ | 8,787 | | | $ | (14,809 | ) | | | | | | | | | | | | | |
For the year ended December 31, 2015 the Company recorded current tax expense of $46.6 million as compared to $24.8 million for the 2014 year. The change in current tax was due primarily to a reduction in unrecognized tax benefits during 2014, which resulted from the expiration of statutes of limitations to assess taxes in the
CLEAR CHANNEL OUTDOOR HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
United Kingdom and several state jurisdictions. This decrease in unrecognized tax benefits resulted in a reduction to current tax expense of $21.8 million during 2014.
For the year ended December 31, 2014 the Company recorded current tax expense of $24.8 million as compared to $46.0 million for the 2013 year. The change in current tax was due primarily to a reduction in unrecognized tax benefits during 2014, which resulted from the expiration of statutes of limitations to assess taxes in the United Kingdom and several state jurisdictions. This decrease in unrecognized tax benefits resulted in a reduction to current tax expense of $21.8 million during 2014.
Deferred tax expense of $3.5 million was recorded for 2015 compared with a deferred tax benefit of $33.6 million for 2014. The change in deferred tax is primarily due to the valuation allowance of $32.9 million recorded against the Company’s current period federal and state net operating losses during 2015.
Deferred tax benefits increased $2.4 million for the year ended December 31, 2014 compared to 2013, primarily due to an increase in federal and state losses in 2014.
Significant components of the Company’s deferred tax liabilities and assets as of December 31, 2015 and 2014 are as follows:
| | | | | | | | | | (In thousands) | | December 31,
2015 | | | December 31,
2014 | | Deferred tax liabilities: | | | | | | | | | Intangibles and fixed assets | | $ | 927,779 | | | $ | 946,960 | | Equity in earnings | | | 2,374 | | | | 1,740 | | Other | | | 16,036 | | | | 10,891 | | | | | | | | | | | Total deferred tax liabilities | | | 946,189 | | | | 959,591 | | | | | | | | | | | Deferred tax assets: | | | | | | | | | Accrued expenses | | | 17,121 | | | | 18,185 | | Net operating loss carryforwards | | | 472,975 | | | | 478,754 | | Bad debt reserves | | | 3,256 | | | | 3,520 | | Other | | | 29,006 | | | | 23,271 | | | | | | | | | | | Total deferred tax assets | | | 522,358 | | | | 523,730 | | Less: Valuation allowance | | | 185,079 | | | | 168,555 | | | | | | | | | | | Net deferred tax assets | | | 337,279 | | | | 355,175 | | | | | | | | | | | Net deferred tax liabilities | | $ | 608,910 | | | $ | 604,416 | | | | | | | | | | |
During the fourth quarter of 2015, the Company elected early adoption of ASU No. 2015-17,Income Taxes (Topic 740), Balance Sheet Classification of Deferred Taxes. This update requires companies to classify all deferred tax assets and liabilities as noncurrent on the balance sheet instead of separating deferred taxes into current and noncurrent amounts.
The deferred tax liabilities associated with intangibles and fixed assets primarily relates to the difference in book and tax basis of acquired billboard permits and tax deductible goodwill created from the Company’s various stock acquisitions. In accordance with ASC 350-10, Intangibles—Goodwill and Other, the Company does not amortize its book basis in permits. As a result, this deferred tax liability will not reverse over time unless the Company recognizes future impairment charges related to its permits and tax deductible goodwill or sells its permits. As the Company continues to amortize its tax basis in its permits and tax deductible goodwill, the
CLEAR CHANNEL OUTDOOR HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
deferred tax liability will increase over time. The Company’s net foreign deferred tax liabilities were $6.4 million and $10.7 million for the periods ended December 31, 2015 and 2014, respectively.
At December 31, 2015, the Company had recorded deferred tax assets for net operating loss carryforwards (tax effected) for federal and state income tax purposes of $337.5 million, which expire in various amounts through 2035. The Company expects to realize the benefits of a portion of its deferred tax assets attributable to federal and state net operating losses based upon expected future taxable income from deferred tax liabilities that reverse in the relevant federal and state jurisdictions and carryforward periods. As of December 31, 2015, the Company has recorded a partial valuation allowance of $32.9 million against these deferred tax assets attributable to federal and state net operating losses. In addition, the Company recorded $8.8 million in additional valuation allowance against its foreign deferred tax assets during the year ended December 31, 2015, the effects of which are included in foreign tax expense. At December 31, 2015, the Company had recorded $134.7 million (tax-effected) of deferred tax assets for foreign net operating losses, which are offset in part by an associated valuation allowance of $132.1 million. The remaining deferred tax valuation allowance of $20.1 million offsets other foreign deferred tax assets that are not expected to be realized. Realization of these foreign deferred tax assets is dependent upon the Company’s ability to generate future taxable income in appropriate tax jurisdictions to obtain benefits. Due to the Company’s evaluation of all available evidence, including significant negative evidence of cumulative losses in these jurisdictions, the Company continues to record valuation allowances on the foreign deferred tax assets that are not expected to be realized. The Company expects to realize its remaining gross deferred tax assets based upon its assessment of deferred tax liabilities that will reverse in the same carryforward period and jurisdiction and are of the same character as the net operating loss carryforwards and temporary differences that give rise to the deferred tax assets. Any deferred tax liabilities associated with billboard permits and tax deductible goodwill intangible assets are not relied upon as a source of future taxable income, as these intangible assets have an indefinite life.
At December 31, 2015 and 2014, net deferred tax assets include a deferred tax asset of $16.4 million and $16.2 million, respectively, relating to stock-based compensation expense under ASC 718-10,Compensation—Stock Compensation. Full realization of this deferred tax asset requires stock options to be exercised at a price equaling or exceeding the sum of the grant price plus the fair value of the option at the grant date and restricted stock to vest at a price equaling or exceeding the fair market value at the grant date. Accordingly, there can be no assurance that the stock price of the Company’s Common Stock will rise to levels sufficient to realize the entire deferred tax benefit currently reflected in our balance sheet. See Note 10 for additional discussion of ASC 718-10.
The reconciliation of income tax computed at the U.S. federal statutory rates to income tax benefit is:
| | | | | | | | | | | | | | | | | | | | | | | | | | (In thousands) | | Years Ended December 31, | | | | 2015 | | | 2014 | | | 2013 | | | | Amount | | | Percent | | | Amount | | | Percent | | | Amount | | | Percent | | Income tax benefit (expense) at statutory rates | | $ | 7,396 | | | | 35 | % | | $ | (2,916 | ) | | | 35 | % | | $ | 3,331 | | | | 35 | % | State income taxes, net of federal tax effect | | | 2,238 | | | | 10 | % | | | 2,016 | | | | (24 | %) | | | 2,342 | | | | 25 | % | Foreign income taxes | | | (23,062 | ) | | | (109 | %) | | | 11,434 | | | | (137 | %) | | | (19,777 | ) | | | (208 | %) | Nondeductible items | | | (754 | ) | | | (3 | %) | | | (722 | ) | | | 9 | % | | | (613 | ) | | | (7 | %) | Changes in valuation allowance and other estimates | | | (33,684 | ) | | | (159 | %) | | | 2,941 | | | | (35 | %) | | | (2,488 | ) | | | (26 | %) | Other, net | | | (2,311 | ) | | | (11 | %) | | | (3,966 | ) | | | 47 | % | | | 2,396 | | | | 25 | % | | | | | | | | | | | | | | | | | | | | | | | | | | Income tax benefit (expense) | | $ | (50,177 | ) | | | (237 | %) | | $ | 8,787 | | | | (105 | %) | | $ | (14,809 | ) | | | (156 | %) | | | | | | | | | | | | | | | | | | | | | | | | | |
CLEAR CHANNEL OUTDOOR HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
During 2015, the Company recorded tax expense of approximately $50.2 million. The 2015 income tax expense and (237.5%) effective tax rate were impacted primarily by a $32.9 million valuation allowance recorded against the Company’s current period federal and state net operating losses during 2015. Additionally, the Company recorded additional taxes due to the inability to benefit from losses in certain foreign jurisdictions. Foreign income before income taxes was approximately $48.5 million for 2015, and it should be noted that with limited exceptions, tax rates in our foreign jurisdictions are lower than that of the U.S. federal statutory rate.
During 2014, the Company recorded tax benefits of approximately $8.8 million. The 2014 income tax benefit and (105.5%) effective tax rate were impacted primarily by the Company’s benefits and charges from tax amounts associated with its foreign earnings that are taxed at rates different from the federal statutory rate and an inability to benefit from losses in certain foreign jurisdictions. Additionally, the Company recorded $20.0 million in net tax benefits associated with a decrease in unrecognized tax benefits resulting from the expiration of statutes of limitations to assess taxes in the United Kingdom and several state jurisdictions. Foreign income before income taxes was approximately $95.5 million for 2014, and it should be noted that with limited exceptions, tax rates in our foreign jurisdictions are lower than that of the U.S. federal statutory rate.
During 2013, the Company recorded tax expense of approximately $14.8 million. The 2013 income tax expense and (155.6)% effective tax rate were impacted primarily by the Company’s benefits and charges from tax amounts associated with its foreign earnings that are taxed at rates different from the federal statutory rate and an inability to benefit from losses in certain foreign jurisdictions. In addition the Company recorded additional foreign deferred tax expense of $3.4 million on certain foreign earnings that are expected to be distributed in future periods from its Asia subsidiaries on which foreign withholding and other taxes have not previously been provided. Foreign income before income taxes was approximately $47.5 million for 2013.
The Company provides for any related tax liability on undistributed earnings that the Company does not intend to be indefinitely reinvested outside the United States or would otherwise become taxable upon remittance within our foreign structure. Substantially all of the Company’s undistributed international earnings are intended to be indefinitely reinvested in home country operations outside the United States. If any excess cash held by our foreign subsidiaries were needed to fund operations in the U.S., we could presently repatriate available funds without a requirement to accrue or pay U.S. taxes. This is a result of significant deficits, as calculated for tax law purposes, in our foreign earnings and profits, which give us flexibility to make future cash distributions as non-taxable returns of capital. All tax liabilities owed by the Company are paid either by the Company or on behalf of the Company by iHeartCommunications through an operating account that represents net amounts due to or from iHeartCommunications.
The Company continues to record interest and penalties related to unrecognized tax benefits in current income tax expense. The total amount of interest accrued at December 31, 2015 and 2014, was $3.6 million and $3.2 million, respectively. The total amount of unrecognized tax benefits and accrued interest and penalties at December 31, 2015 and 2014, was $43.5 million and $42.4 million, respectively, of which $23.8 million and $25.3 million is included in “Other long-term liabilities.” In addition, $19.7 million and $17.0 million of unrecognized tax benefits are recorded net with the Company’s deferred tax assets for its net operating losses as opposed to being recorded in “Other long-term liabilities” at December 31, 2015 and 2014, respectively. The total amount of unrecognized tax benefits at December 31, 2015 and 2014 that, if recognized, would impact the effective income tax rate is $18.2 million and $24.7 million, respectively.
CLEAR CHANNEL OUTDOOR HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows:
| | | | | | | | | | (In thousands) | | Years Ended December 31, | | Unrecognized Tax Benefits | | 2015 | | | 2014 | | Balance at beginning of period | | $ | 39,143 | | | $ | 52,619 | | Increases for tax position taken in the current year | | | 6,311 | | | | 9,771 | | Increases for tax positions taken in previous years | | | 1,025 | | | | 1,752 | | Decreases for tax position taken in previous years | | | (2,009 | ) | | | (5,148 | ) | Decreases due to settlements with tax authorities | | | (689 | ) | | | (2,669 | ) | Decreases due to lapse of statute of limitations | | | (3,873 | ) | | | (17,182 | ) | | | | | | | | | | Balance at end of period | | $ | 39,908 | | | $ | 39,143 | | | | | | | | | | |
Pursuant to the Tax Matters Agreement between iHeartCommunications and the Company, the operations of the Company are included in a consolidated U.S. federal income tax return filed by iHeartMedia. In addition, the Company and its subsidiaries file income tax returns in various state and foreign jurisdictions. During 2015 and 2014, the Company reversed $3.9 and $21.8 million in unrecognized tax benefits, inclusive of interest, as a result of the expiration of statutes of limitations to assess taxes in certain state and foreign jurisdictions. All federal income tax matters through 2010 are closed. The IRS is currently auditing the Company’s tax returns for the 2011 and 2012 periods. Substantially all material state, local, and foreign income tax matters have been concluded for years through 2006.
CLEAR CHANNEL OUTDOOR HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 9—SHAREHOLDERS’ EQUITY (DEFICIT)
The Company reports its noncontrolling interests in consolidated subsidiaries as a component of equity separate from the Company’s equity. The following table shows the changes in shareholders’ equity attributable to the Company and the noncontrolling interests of subsidiaries in which the Company has a majority, but not total, ownership interest:
| | | | | | | | | | | | | | (In thousands) | | The Company | | | Noncontrolling
Interests | | | Consolidated | | Balances as of January 1, 2015 | | $ | (344,275 | ) | | $ | 203,334 | | | $ | (140,941 | ) | Net income (loss) | | | (96,072 | ) | | | 24,764 | | | | (71,308 | ) | Dividends declared | | | (217,796 | ) | | | — | | | | (217,796 | ) | Dividends and other payments to noncontrolling interests | | | — | | | | (30,870 | ) | | | (30,870 | ) | Share-based compensation | | | 8,359 | | | | — | | | | 8,359 | | Foreign currency translation adjustments | | | (101,575 | ) | | | (11,154 | ) | | | (112,729 | ) | Unrealized holding gain on marketable securities | | | 553 | | | | — | | | | 553 | | Other adjustments to comprehensive loss | | | (10,266 | ) | | | — | | | | (10,266 | ) | Reclassifications | | | 808 | | | | — | | | | 808 | | Other, net | | | 2,822 | | | | 1,701 | | | | 4,523 | | | | | | | | | | | | | | | Balances as of December 31, 2015 | | $ | (757,442 | ) | | $ | 187,775 | | | $ | (569,667 | ) | | | | | | | | | | | | | | Balances as of January 1, 2014 | | $ | (41,938 | ) | | $ | 202,046 | | | $ | 160,108 | | Net income (loss) | | | (9,590 | ) | | | 26,709 | | | | 17,119 | | Dividends paid | | | (175,022 | ) | | | — | | | | (175,022 | ) | Dividends and other payments to noncontrolling interests | | | — | | | | (18,995 | ) | | | (18,995 | ) | Share-based compensation | | | 7,743 | | | | — | | | | 7,743 | | Foreign currency translation adjustments | | | (116,678 | ) | | | (6,426 | ) | | | (123,104 | ) | Unrealized holding gain on marketable securities | | | 327 | | | | — | | | | 327 | | Other adjustments to comprehensive loss | | | (11,438 | ) | | | — | | | | (11,438 | ) | Reclassifications | | | 8 | | | | — | | | | 8 | | Other, net | | | 2,313 | | | | — | | | | 2,313 | | | | | | | | | | | | | | | Balances as of December 31, 2014 | | $ | (344,275 | ) | | $ | 203,334 | | | $ | (140,941 | ) | | | | | | | | | | | | | |
Share-Based Awards
Stock Options
The Company has granted options to purchase shares of its Class A common stock to certain employees and directors of the Company and its affiliates under its equity incentive plan at no less than the fair value of the underlying stock on the date of grant. These options are granted for a term not exceeding ten years and are forfeited, except in certain circumstances, in the event the employee or director terminates his or her employment or relationship with the Company or one of its affiliates. These options vest solely on continued service over a period of up to five years. The equity incentive plan contains anti-dilutive provisions that permit an adjustment for any change in capitalization.
The Company accounts for its share-based payments using the fair value recognition provisions of ASC 718-10. The fair value of the options is estimated using a Black-Scholes option-pricing model and amortized straight-line to expense over the vesting period. ASC 718-10 requires the cash flows from the tax benefits resulting from tax deductions in excess of the compensation cost recognized for those options (excess tax benefits) to be classified
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
as financing cash flows. The excess tax benefit that is required to be classified as a financing cash inflow after application of ASC 718-10 is not material.
The fair value of each option awarded is estimated on the date of grant using a Black-Scholes option-pricing model. Expected volatilities are based on historical volatility of the Company’s stock over the expected life of the options. The expected life of options granted represents the period of time that options granted are expected to be outstanding. The Company uses historical data to estimate option exercise and employee terminations within the valuation model. The Company includes estimated forfeitures in its compensation cost and updates the estimated forfeiture rate through the final vesting date of awards. The risk free interest rate is based on the U.S. Treasury yield curve in effect at the time of grant for periods equal to the expected life of the option. The following assumptions were used to calculate the fair value of the Company’s options on the date of grant:
| | | | | | | | | | Years Ended December 31, | | | | 2015 | | 2014 | | 2013 | Expected volatility | | 37% – 56% | | 54% – 56% | | 55% – 56% | Expected life in years | | 6.3 | | 6.3 | | 6.3 | Risk-free interest rate | | 1.70% – 2.07% | | 1.73% – 2.08% | | 1.05% – 2.19% | Dividend yield | | 0% | | 0% | | 0% |
The following table presents a summary of the Company’s stock options outstanding at and stock option activity during the year ended December 31, 2015:
| | | | | | | | | | | | | | | | | | (In thousands, except per share data) | | Options | | | Price (3) | | | Weighted
Average
Remaining
Contractual
Term | | | Aggregate
Intrinsic
Value | | Outstanding, January 1, 2015 | | | 6,025 | | | $ | 9.92 | | | | | | | | | | Granted(1) | | | 921 | | | | 9.96 | | | | | | | | | | Exercised(2) | | | (622 | ) | | | 6.11 | | | | | | | | | | Forfeited | | | (34 | ) | | | 8.74 | | | | | | | | | | Expired | | | (942 | ) | | | 12.45 | | | | | | | | | | | | | | | | | | | | | | | | | | | Outstanding, December 31, 2015 | | | 5,348 | | | | 9.93 | | | | 5.6 years | | | $ | 1,049 | | | | | | | | | | | | | | | | | | | Exercisable | | | 3,658 | | | | 10.33 | | | | 4.2 years | | | $ | 1,049 | | Expected to vest | | | 1,535 | | | | 9.02 | | | | 8.4 years | | | $ | — | |
(1) | The weighted average grant date fair value of the Company’s options granted during the years ended December 31, 2015, 2014 and 2013 was $4.25, $4.69 and $4.10 per share, respectively. |
(2) | Cash received from option exercises during the years ended December 31, 2015, 2014 and 2013 was $3.8 million, $2.4 million and $4.2 million, respectively. The total intrinsic value of the options exercised during the years ended December 31, 2015, 2014 and 2013 was $2.8 million, $1.5 million and $5.0 million, respectively. |
(3) | Reflects the weighted average exercise price per share. |
CLEAR CHANNEL OUTDOOR HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
A summary of the Company’s unvested options at and changes during the year ended December 31, 2015 is presented below:
| | | | | | | | | | (In thousands, except per share data) | | Options | | | Weighted
Average Grant
Date Fair Value | | Unvested, January 1, 2015 | | | 1,553 | | | $ | 4.92 | | Granted | | | 921 | | | | 4.25 | | Vested(1) | | | (750 | ) | | | 5.56 | | Forfeited | | | (34 | ) | | | 4.92 | | | | | | | | | | | Unvested, December 31, 2015 | | | 1,690 | | | | 4.27 | | | | | | | | | | |
(1) | The total fair value of the Company’s options vested during the years ended December 31, 2015, 2014 and 2013 was $4.2 million, $6.1 million and $7.1 million, respectively. |
Restricted Stock Awards
The Company has also granted both restricted stock and restricted stock unit awards to its employees and affiliates under its equity incentive plan. The restricted stock awards represent shares of Class A common stock that contain a legend which restricts their transferability for a term of up to five years. The restricted stock units represent the right to receive shares upon vesting, which is generally over a period of up to five years. Both restricted stock awards and restricted stock units are forfeited, except in certain circumstances, in the event the employee terminates his or her employment or relationship with the Company prior to the lapse of the restriction.
The following table presents a summary of the Company’s restricted stock and restricted stock units outstanding at and activity during the year ended December 31, 2015 (“Price” reflects the weighted average share price at the date of grant):
| | | | | | | | | | (In thousands, except per share data) | | Awards | | | Price | | Outstanding, January 1, 2015 | | | 2,458 | | | $ | 7.54 | | Granted | | | 702 | | | | 10.35 | | Vested (restriction lapsed) | | | (340 | ) | | | 6.13 | | Forfeited | | | (58 | ) | | | 8.39 | | | | | | | | | | | Outstanding, December 31, 2015 | | | 2,762 | | | | 8.43 | | | | | | | | | | |
Share-Based Compensation Cost
The share-based compensation cost is measured at the grant date based on the fair value of the award and is recognized as expense on a straight-line basis over the vesting period. Share-based compensation payments are recorded in corporate expenses and were $8.4 million, $7.7 million and $7.7 million, during the years ended December 31, 2015, 2014 and 2013, respectively.
The tax benefit related to the share-based compensation expense for the years ended December 31, 2015, 2014 and 2013 was $3.2 million, $3.0 million and $3.0 million, respectively.
As of December 31, 2015, there was $17.8 million of unrecognized compensation cost related to unvested share-based compensation arrangements that will vest based on service conditions. This cost is expected to be
CLEAR CHANNEL OUTDOOR HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
recognized over a weighted average period of approximately three years. In addition, as of December 31, 2015, there was $0.6 million of unrecognized compensation cost related to unvested share-based compensation arrangements that will vest based on market, performance and service conditions. This cost will be recognized when it becomes probable that the performance condition will be satisfied.
Loss per Share
The following table presents the computation of earnings (loss) per share for the years ended December 31, 2015, 2014 and 2013:
| | | | | | | | | | | | | | | | Years Ended December 31, | | | (In thousands, except per share data) | | 2015 | | | 2014 | | | 2013 | | NUMERATOR: | | | | | | | | | | | | | Net loss attributable to the Company—common shares | | $ | (96,072 | ) | | $ | (9,590 | ) | | $ | (48,460 | ) | Less: Participating securities dividends | | | — | | | | — | | | | 2,566 | | | | | | | | | | | | | | | Net income (loss) attributable to the Company per common share—basic and diluted | | $ | (96,072 | ) | | $ | (9,590 | ) | | $ | (51,026 | ) | | | | | | | | | | | | | | DENOMINATOR: | | | | | | | | | | | | | Weighted average common shares outstanding—basic | | | 359,508 | | | | 358,565 | | | | 357,662 | | Effect of dilutive securities: | | | | | | | | | | | | | | | | | | | | | | | | | | Weighted average common shares outstanding—diluted | | | 359,508 | | | | 358,565 | | | | 357,662 | | | | | | | | | | | | | | | Net income (loss) attributable to the Company per common share: | | | | | | | | | | | | | Basic | | $ | (0.27 | ) | | $ | (0.03 | ) | | $ | (0.14 | ) | Diluted | | $ | (0.27 | ) | | $ | (0.03 | ) | | $ | (0.14 | ) |
(1) | 8.1 million, 8.5 million and 8.8 million stock options and restricted shares were outstanding at December 31, 2015, 2014 and 2013, respectively, that were not included in the computation of diluted earnings per share because to do so would have been anti-dilutive. |
NOTE 10—EMPLOYEE STOCK AND SAVINGS PLANS
The Company’s U.S. employees are eligible to participate in various 401(k) savings and other plans provided by iHeartCommunications for the purpose of providing retirement benefits for substantially all employees. Under these plans, a Company employee can make pre-tax contributions and the Company will match 50% of the employee’s first 5% of pay contributed to the plan. Employees vest in these Company matching contributions based upon their years of service to the Company. Contributions to these plans of $2.4 million, $2.7 million and $2.4 million for the years ended December 31, 2015, 2014 and 2013, respectively, were recorded as a component of operating expenses.
In addition, employees in the Company’s International markets participate in retirement plans administered by the Company which are not part of the 401(k) savings and other plans sponsored by iHeartCommunications. Contributions to these plans of $13.6 million, $15.6 million and $15.8 million for the years ended December 31, 2015, 2014 and 2013, respectively, were recorded as a component of operating expenses.
Certain highly compensated executives of the Company are eligible to participate in a non-qualified deferred compensation plan sponsored by iHeartCommunications, under which such executives were able to make an annual election to defer up to 50% of their annual salary and up to 80% of their bonus before taxes. The
CLEAR CHANNEL OUTDOOR HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Company suspended all salary and bonus deferral and company matching contributions to the deferred compensation plan on January 1, 2010. Matching credits on amounts deferred may be made in the sole discretion of iHeartCommunications and iHeartCommunications retains ownership of all assets until distributed. Participants in the plan have the opportunity to allocate their deferrals and any matching credits among different investment options, the performance of which is used to determine the amounts paid to participants under the plan. There is no liability recorded by the Company under this deferred compensation plan as the liability of this plan is that of iHeartCommunications.
NOTE 11—OTHER INFORMATION
The following table discloses the components of “Other income (expense)” for the years ended December 31, 2015, 2014 and 2013, respectively:
| | | | | | | | | | | | | | | | Years Ended December 31, | | | (In thousands) | | 2015 | | | 2014 | | | 2013 | | Foreign exchange loss | | $ | 14,790 | | | $ | 15,460 | | | $ | 1,674 | | Other | | | (2,403 | ) | | | (275 | ) | | | (658 | ) | | | | | | | | | | | | | | Total other income (expense)—net | | $ | 12,387 | | | $ | 15,185 | | | $ | 1,016 | | | | | | | | | | | | | | |
For the years ended December 31, 2015, 2014, and 2013 the total increase (decrease) in deferred income tax liabilities of other comprehensive income (loss) related to pensions were $1.6. million, ($5.6) million and $0.2 million, respectively.
The following table discloses the components of “Other current assets” as of December 31, 2015 and 2014, respectively:
| | | | | | | | | | | | As of December 31, | | | (In thousands) | | 2015 | | | 2014 | | Deferred loan costs | | $ | 9,514 | | | $ | 8,080 | | Inventory | | | 23,514 | | | | 21,892 | | Deposits | | | 1,954 | | | | 3,124 | | Other receivables | | | 2,278 | | | | 2,788 | | Other | | | 6,820 | | | | 10,170 | | | | | | | | | | | Total other current assets | | $ | 44,080 | | | $ | 46,054 | | | | | | | | | | |
The following table discloses the components of “Other assets” as of December 31, 2015 and 2014, respectively:
| | | | | | | | | | | | As of December 31, | | | (In thousands) | | 2015 | | | 2014 | | Prepaid expenses | | $ | 69,807 | | | $ | 53,669 | | Deferred loan costs | | | 40,897 | | | | 41,862 | | Deposits | | | 24,672 | | | | 26,283 | | Investments | | | 8,432 | | | | 7,509 | | Other | | | 4,629 | | | | 3,758 | | | | | | | | | | | Total other assets | | $ | 148,437 | | | $ | 133,081 | | | | | | | | | | |
CLEAR CHANNEL OUTDOOR HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
The following table discloses the components of “Other long-term liabilities” as of December 31, 2015 and 2014, respectively:
| | | | | | | | | | | | As of December 31, | | | (In thousands) | | 2015 | | | 2014 | | Unrecognized tax benefits | | $ | 23,802 | | | $ | 25,279 | | Asset retirement obligation | | | 45,125 | | | | 48,161 | | Employee related liabilities | | | 47,491 | | | | 39,963 | | Deferred rent | | | 98,282 | | | | 94,946 | | Other | | | 25,719 | | | | 26,451 | | | | | | | | | | | Total other long-term liabilities | | $ | 240,419 | | | $ | 234,800 | | | | | | | | | | |
The following table discloses the components of “Accumulated other comprehensive loss,” net of tax, as of December 31, 2015 and 2014, respectively:
| | | | | | | | | | | | As of December 31, | | | (In thousands) | | 2015 | | | 2014 | | Cumulative currency translation adjustments and other | | $ | (453,995 | ) | | $ | (342,909 | ) | Cumulative unrealized gain on securities | | | 2,162 | | | | 1,556 | | | | | | | | | | | Total accumulated other comprehensive loss | | $ | (451,833 | ) | | $ | (341,353 | ) | | | | | | | | | |
NOTE 12—SEGMENT DATA
The Company has two reportable segments, which it believes best reflect how the Company is currently managed—Americas and International. The Americas segment consists of operations primarily in the United States, Canada and Latin America and the International segment primarily includes operations in Europe, Asia and Australia. The Americas and International display inventory consists primarily of billboards, street furniture displays and transit displays. Corporate includes infrastructure and support including information technology, human resources, legal, finance and administrative functions of each of the Company’s reportable segments, as well as overall executive, administrative and support functions. Share-based payments are recorded in corporate expenses.
CLEAR CHANNEL OUTDOOR HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
The following table presents the Company’s reportable segment results for the years ended December 31, 2015, 2014 and 2013:
| | | | | | | | | | | | | | | | | | (In thousands) | | Americas Outdoor
Advertising | | | International Outdoor
Advertising | | | Corporate and other
reconciling items | | | Consolidated | | Year Ended December 31, 2015 | | Revenue | | $ | 1,349,021 | | | $ | 1,457,183 | | | $ | — | | | $ | 2,806,204 | | Direct operating expenses | | | 597,382 | | | | 897,520 | | | | — | | | | 1,494,902 | | Selling, general and administrative expenses | | | 233,254 | | | | 298,250 | | | | — | | | | 531,504 | | Corporate expenses | | | — | | | | — | | | | 116,380 | | | | 116,380 | | Depreciation and amortization | | | 204,514 | | | | 166,060 | | | | 5,388 | | | | 375,962 | | Impairment charges | | | — | | | | — | | | | 21,631 | | | | 21,631 | | Other operating loss, net | | | — | | | | — | | | | (4,824 | ) | | | (4,824 | ) | | | | | | | | | | | | | | | | | | Operating income (loss) | | $ | 313,871 | | | $ | 95,353 | | | $ | (148,223 | ) | | $ | 261,001 | | | | | | | | | | | | | | | | | | | Segment assets | | $ | 3,567,763 | | | $ | 1,581,710 | | | $ | 1,207,726 | | | $ | 6,357,199 | | Capital expenditures | | $ | 82,165 | | | $ | 132,554 | | | $ | 3,613 | | | $ | 218,332 | | Share-based compensation expense | | $ | — | | | $ | — | | | $ | 8,359 | | | $ | 8,359 | | Year Ended December 31, 2014 | | | | | | | | | | | | | | | | | Revenue | | $ | 1,350,623 | | | $ | 1,610,636 | | | $ | — | | | $ | 2,961,259 | | Direct operating expenses | | | 605,771 | | | | 991,117 | | | | — | | | | 1,596,888 | | Selling, general and administrative expenses | | | 233,641 | | | | 314,878 | | | | — | | | | 548,519 | | Corporate expenses | | | — | | | | — | | | | 130,894 | | | | 130,894 | | Depreciation and amortization | | | 203,928 | | | | 198,143 | | | | 4,172 | | | | 406,243 | | Impairment charges | | | — | | | | — | | | | 3,530 | | | | 3,530 | | Other operating income, net | | | — | | | | — | | | | 7,259 | | | | 7,259 | | | | | | | | | | | | | | | | | | | Operating income (loss) | | $ | 307,283 | | | $ | 106,498 | | | $ | (131,337 | ) | | $ | 282,444 | | | | | | | | | | | | | | | | | | | Segment assets | | $ | 3,664,574 | | | $ | 1,680,598 | | | $ | 1,001,400 | | | $ | 6,346,572 | | Capital expenditures | | $ | 109,727 | | | $ | 117,480 | | | $ | 3,962 | | | $ | 231,169 | | Share-based compensation expense | | $ | — | | | $ | — | | | $ | 7,743 | | | $ | 7,743 | | Year Ended December 31, 2013 | | | | | | | | | | | | | | | | | Revenue | | $ | 1,385,757 | | | $ | 1,560,433 | | | $ | — | | | $ | 2,946,190 | | Direct operating expenses | | | 610,750 | | | | 983,978 | | | | — | | | | 1,594,728 | | Selling, general and administrative expenses | | | 243,456 | | | | 300,116 | | | | — | | | | 543,572 | | Corporate expenses | | | — | | | | — | | | | 124,399 | | | | 124,399 | | Depreciation and amortization | | | 206,031 | | | | 194,493 | | | | 2,646 | | | | 403,170 | | Impairment charges | | | — | | | | — | | | | 13,150 | | | | 13,150 | | Other operating income, net | | | — | | | | — | | | | 22,979 | | | | 22,979 | | | | | | | | | | | | | | | | | | | Operating income (loss) | | $ | 325,520 | | | $ | 81,846 | | | $ | (117,216 | ) | | $ | 290,150 | | | | | | | | | | | | | | | | | | | Segment assets | | $ | 3,823,347 | | | $ | 1,899,648 | | | $ | 1,020,094 | | | $ | 6,743,089 | | Capital expenditures | | $ | 96,590 | | | $ | 100,949 | | | $ | 8,648 | | | $ | 206,187 | | Share-based compensation expense | | $ | — | | | $ | — | | | $ | 7,725 | | | $ | 7,725 | |
CLEAR CHANNEL OUTDOOR HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Revenue of $1.6 billion, $1.8 billion and $1.7 billion derived from the Company’s foreign operations are included in the data above for the years ended December 31, 2015, 2014 and 2013, respectively. Revenue of $1.2 billion, derived from the Company’s U.S. operations are included in the data above for each of the years ended December 31, 2015, 2014 and 2013.
Identifiable long-lived assets of $628.8 million, $682.7 million and $759.3 million derived from the Company’s foreign operations are included in the data above for the years ended December 31, 2015, 2014 and 2013, respectively. Identifiable long-lived assets of $1.0 billion, $1.2 billion and $1.3 billion derived from the Company’s U.S. operations are included in the data above for the years ended December 31, 2015, 2014 and 2013, respectively.
NOTE 13—QUARTERLY RESULTS OF OPERATIONS (Unaudited)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | (In thousands, except per share data) | | Three Months Ended
March 31, | | | Three Months Ended
June 30, | | | Three Months Ended
September 30, | | | Three Months Ended
December 31, | | | | 2015 | | | 2014 | | | 2015 | | | 2014 | | | 2015 | | | 2014 | | | 2015 | | | 2014 | | Revenue | | $ | 615,043 | | | $ | 635,251 | | | $ | 722,819 | | | $ | 781,205 | | | $ | 696,277 | | | $ | 742,794 | | | $ | 772,065 | | | $ | 802,009 | | Operating expenses: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Direct operating expenses | | | 362,971 | | | | 381,513 | | | | 372,342 | | | | 413,144 | | | | 372,716 | | | | 400,834 | | | | 386,873 | | | | 401,397 | | Selling, general and administrative expenses | | | 127,130 | | | | 132,949 | | | | 132,522 | | | | 140,271 | | | | 132,559 | | | | 139,613 | | | | 139,293 | | | | 135,686 | | Corporate expenses | | | 28,753 | | | | 30,697 | | | | 30,154 | | | | 33,333 | | | | 28,347 | | | | 33,548 | | | | 29,126 | | | | 33,316 | | Depreciation and amortization | | | 94,094 | | | | 98,742 | | | | 93,405 | | | | 98,726 | | | | 93,040 | | | | 100,416 | | | | 95,423 | | | | 108,359 | | Impairment charges | | | — | | | | — | | | | — | | | | — | | | | 21,631 | | | | — | | | | — | | | | 3,530 | | Other operating income (expense), net | | | (5,444 | ) | | | 2,654 | | | | 659 | | | | 247 | | | | 5,029 | | | | 4,623 | | | | (5,068 | ) | | | (265 | ) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Operating income (loss) | | | (3,349 | ) | | | (5,996 | ) | | | 95,055 | | | | 95,978 | | | | 53,013 | | | | 73,006 | | | | 116,282 | | | | 119,456 | | Interest expense | | | 89,416 | | | | 89,262 | | | | 88,556 | | | | 88,212 | | | | 88,088 | | | | 87,695 | | | | 89,609 | | | | 88,096 | | Interest income on Due from iHeartCommunications | | | 15,253 | | | | 14,673 | | | | 15,049 | | | | 15,227 | | | | 15,630 | | | | 15,105 | | | | 15,507 | | | | 15,174 | | Equity in earnings (loss) of nonconsolidated affiliates | | | 522 | | | | (736 | ) | | | (351 | ) | | | 327 | | | | (812 | ) | | | 4,185 | | | | 352 | | | | 13 | | Other income (expense), net | | | 19,938 | | | | 1,898 | | | | 15,276 | | | | 11,983 | | | | (17,742 | ) | | | 2,191 | | | | (5,085 | ) | | | (887 | ) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Income (loss) before income taxes | | | (57,052 | ) | | | (79,423 | ) | | | 36,473 | | | | 35,303 | | | | (37,999 | ) | | | 6,792 | | | | 37,447 | | | | 45,660 | | Income tax benefit (expense) | | | 24,099 | | | | (16,946 | ) | | | (27,187 | ) | | | 24,820 | | | | 22,797 | | | | (5,372 | ) | | | (69,886 | ) | | | 6,285 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Consolidated net income (loss) | | | (32,953 | ) | | | (96,369 | ) | | | 9,286 | | | | 60,123 | | | | (15,202 | ) | | | 1,420 | | | | (32,439 | ) | | | 51,945 | | Less amount attributable to noncontrolling interest | | | 565 | | | | 501 | | | | 7,876 | | | | 9,086 | | | | 7,379 | | | | 8,483 | | | | 8,944 | | | | 8,639 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Net income (loss) attributable to the Company | | $ | (33,518 | ) | | $ | (96,870 | ) | | $ | 1,410 | | | $ | 51,037 | | | $ | (22,581 | ) | | $ | (7,063 | ) | | $ | (41,383 | ) | | $ | 43,306 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Net income (loss) per common share: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Basic | | $ | (0.09 | ) | | $ | (0.27 | ) | | $ | — | | | $ | 0.14 | | | $ | (0.06 | ) | | $ | (0.02 | ) | | $ | (0.12 | ) | | $ | 0.12 | | Diluted | | $ | (0.09 | ) | | $ | (0.27 | ) | | $ | — | | | $ | 0.14 | | | $ | (0.06 | ) | | $ | (0.02 | ) | | $ | (0.12 | ) | | $ | 0.12 | |
CLEAR CHANNEL OUTDOOR HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 14—GUARANTOR SUBSIDIARIES
The Company and certain of the Company’s direct and indirect wholly-owned domestic subsidiaries (the “Guarantor Subsidiaries”) fully and unconditionally guarantee on a joint and several basis certain of the outstanding indebtedness of Clear Channel Worldwide Holdings, Inc. (“CCWH” or the “Subsidiary Issuer”). The following consolidating schedules present financial information on a combined basis in conformity with the SEC’s Regulation S-X Rule 3-10(d):
| | | | | | | | | | | | | | | | | | | | | | | | | | (In thousands) | | December 31, 2015 | | | | Parent
Company | | | Subsidiary
Issuer | | | Guarantor
Subsidiaries | | | Non-Guarantor
Subsidiaries | | | Eliminations | | | Consolidated | | Cash and cash equivalents | | $ | 218,701 | | | $ | — | | | $ | 18,455 | | | $ | 175,587 | | | $ | — | | | $ | 412,743 | | Accounts receivable, net of allowance | | | — | | | | — | | | | 210,252 | | | | 487,331 | | | | — | | | | 697,583 | | Intercompany receivables | | | — | | | | 467,287 | | | | 1,915,287 | | | | 8,003 | | | | (2,390,577 | ) | | | — | | Prepaid expenses | | | 1,423 | | | | 3,433 | | | | 62,039 | | | | 60,835 | | | | — | | | | 127,730 | | Assets held for sale | | | | | | | | | | | 295,075 | | | | | | | | | | | | 295,075 | | Other current assets | | | — | | | | 6,850 | | | | 3,053 | | | | 34,177 | | | | — | | | | 44,080 | | | | | | | | | | | | | | | | | | | | | | | | | | | Total Current Assets | | | 220,124 | | | | 477,570 | | | | 2,504,161 | | | | 765,933 | | | | (2,390,577 | ) | | | 1,577,211 | | Structures, net | | | — | | | | — | | | | 868,586 | | | | 523,294 | | | | — | | | | 1,391,880 | | Other property, plant and equipment, net | | | — | | | | — | | | | 129,339 | | | | 106,767 | | | | — | | | | 236,106 | | Indefinite-lived intangibles | | | — | | | | — | | | | 962,074 | | | | 9,253 | | | | — | | | | 971,327 | | Other intangibles, net | | | — | | | | — | | | | 272,307 | | | | 70,557 | | | | — | | | | 342,864 | | Goodwill | | | — | | | | — | | | | 522,750 | | | | 235,825 | | | | — | | | | 758,575 | | Due from iHeartCommunications | | | 930,799 | | | | — | | | | — | | | | — | | | | — | | | | 930,799 | | Intercompany notes receivable | | | 182,026 | | | | 5,107,392 | | | | — | | | | — | | | | (5,289,418 | ) | | | — | | Other assets | | | 78,341 | | | | 336,328 | | | | 1,218,819 | | | | 52,508 | | | | (1,537,559 | ) | | | 148,437 | | | | | | | | | | | | | | | | | | | | | | | | | | | Total Assets | | $ | 1,411,290 | | | $ | 5,921,290 | | | $ | 6,478,036 | | | $ | 1,764,137 | | | $ | (9,217,554 | ) | | $ | 6,357,199 | | | | | | | | | | | | | | | | | | | | | | | | | | | Accounts payable | | $ | — | | | $ | — | | | $ | 12,124 | | | $ | 88,086 | | | $ | — | | | $ | 100,210 | | Intercompany payable | | | 1,915,287 | | | | — | | | | 475,290 | | | | — | | | | (2,390,577 | ) | | | — | | Accrued expenses | | | 953 | | | | (707 | ) | | | 108,480 | | | | 398,939 | | | | — | | | | 507,665 | | Dividends payable | | | 217,017 | | | | — | | | | — | | | | — | | | | — | | | | 217,017 | | Deferred income | | | — | | | | — | | | | 37,471 | | | | 53,940 | | | | — | | | | 91,411 | | Current portion of long-term debt | | | — | | | | — | | | | 65 | | | | 4,245 | | | | — | | | | 4,310 | | | | | | | | | | | | | | | | | | | | | | | | | | | Total Current Liabilities | | | 2,133,257 | | | | (707 | ) | | | 633,430 | | | | 545,210 | | | | (2,390,577 | ) | | | 920,613 | | Long-term debt | | | — | | | | 4,919,440 | | | | 1,014 | | | | 236,470 | | | | — | | | | 5,156,924 | | Intercompany notes payable | | | — | | | | — | | | | 5,032,499 | | | | 256,919 | | | | (5,289,418 | ) | | | — | | Deferred tax liability | | | 772 | | | | 1,367 | | | | 599,541 | | | | 7,230 | | | | — | | | | 608,910 | | Other long-term liabilities | | | 1,587 | | | | — | | | | 133,227 | | | | 105,605 | | | | — | | | | 240,419 | | Total shareholders’ equity (deficit) | | | (724,326 | ) | | | 1,001,190 | | | | 78,325 | | | | 612,703 | | | | (1,537,559 | ) | | | (569,667 | ) | | | | | | | | | | | | | | | | | | | | | | | | | | Total Liabilities and Shareholders’ Equity | | $ | 1,411,290 | | | $ | 5,921,290 | | | $ | 6,478,036 | | | $ | 1,764,137 | | | $ | (9,217,554 | ) | | $ | 6,357,199 | | | | | | | | | | | | | | | | | | | | | | | | | | |
CLEAR CHANNEL OUTDOOR HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
| | | | | | | | | | | | | | | | | | | | | | | | | | (In thousands) | | December 31, 2014 | | | | Parent
Company | | | Subsidiary
Issuer | | | Guarantor
Subsidiaries | | | Non-Guarantor
Subsidiaries | | | Eliminations | | | Consolidated | | Cash and cash equivalents | | $ | 905 | | | $ | — | | | $ | — | | | $ | 205,259 | | | $ | (19,960 | ) | | $ | 186,204 | | Accounts receivable, net of allowance | | | — | | | | — | | | | 202,771 | | | | 495,040 | | | | — | | | | 697,811 | | Intercompany receivables | | | — | | | | 259,510 | | | | 1,731,448 | | | | 8,056 | | | | (1,999,014 | ) | | | — | | Prepaid expenses | | | 1,299 | | | | — | | | | 64,922 | | | | 67,820 | | | | — | | | | 134,041 | | Other current assets | | | — | | | | 6,850 | | | | 5,646 | | | | 33,558 | | | | — | | | | 46,054 | | | | | | | | | | | | | | | | | | | | | | | | | | | Total Current Assets | | | 2,204 | | | | 266,360 | | | | 2,004,787 | | | | 809,733 | | | | (2,018,974 | ) | | | 1,064,110 | | Structures, net | | | — | | | | — | | | | 1,049,684 | | | | 564,515 | | | | — | | | | 1,614,199 | | Other property, plant and equipment, net | | | — | | | | — | | | | 172,809 | | | | 118,643 | | | | — | | | | 291,452 | | Indefinite-lived intangibles | | | — | | | | — | | | | 1,055,728 | | | | 11,020 | | | | — | | | | 1,066,748 | | Other intangibles, net | | | — | | | | — | | | | 322,550 | | | | 89,514 | | | | — | | | | 412,064 | | Goodwill | | | — | | | | — | | | | 571,932 | | | | 245,180 | | | | — | | | | 817,112 | | Due from iHeartCommunications | | | 947,806 | | | | — | | | | — | | | | — | | | | — | | | | 947,806 | | Intercompany notes receivable | | | 182,026 | | | | 4,927,517 | | | | — | | | | — | | | | (5,109,543 | ) | | | — | | Other assets | | | 264,839 | | | | 793,626 | | | | 1,287,717 | | | | 50,568 | | | | (2,263,669 | ) | | | 133,081 | | | | | | | | | | | | | | | | | | | | | | | | | | | Total Assets | | $ | 1,396,875 | | | $ | 5,987,503 | | | $ | 6,465,207 | | | $ | 1,889,173 | | | $ | (9,392,186 | ) | | $ | 6,346,572 | | | | | | | | | | | | | | | | | | | | | | | | | | | Accounts payable | | $ | — | | | $ | — | | | $ | 27,866 | | | $ | 68,009 | | | $ | (19,960 | ) | | $ | 75,915 | | Intercompany payable | | | 1,731,448 | | | | — | | | | 267,566 | | | | — | | | | (1,999,014 | ) | | | — | | Accrued expenses | | | 467 | | | | 3,475 | | | | 103,243 | | | | 436,633 | | | | — | | | | 543,818 | | Deferred income | | | — | | | | — | | | | 44,363 | | | | 50,272 | | | | — | | | | 94,635 | | Current portion of long-term debt | | | — | | | | — | | | | 55 | | | | 3,406 | | | | — | | | | 3,461 | | | | | | | | | | | | | | | | | | | | | | | | | | | Total Current Liabilities | | | 1,731,915 | | | | 3,475 | | | | 443,093 | | | | 558,320 | | | | (2,018,974 | ) | | | 717,829 | | Long-term debt | | | — | | | | 4,918,822 | | | | 1,077 | | | | 10,569 | | | | — | | | | 4,930,468 | | Intercompany notes payable | | | — | | | | — | | | | 5,035,279 | | | | 74,264 | | | | (5,109,543 | ) | | | — | | Deferred tax liability | | | 772 | | | | 85 | | | | 592,002 | | | | 11,557 | | | | — | | | | 604,416 | | Other long-term liabilities | | | — | | | | — | | | | 128,855 | | | | 105,945 | | | | — | | | | 234,800 | | Total shareholders’ equity (deficit) | | | (335,812 | ) | | | 1,065,121 | | | | 264,901 | | | | 1,128,518 | | | | (2,263,669 | ) | | | (140,941 | ) | | | | | | | | | | | | | | | | | | | | | | | | | | Total Liabilities and Shareholders’ Equity | | $ | 1,396,875 | | | $ | 5,987,503 | | | $ | 6,465,207 | | | $ | 1,889,173 | | | $ | (9,392,186 | ) | | $ | 6,346,572 | | | | | | | | | | | | | | | | | | | | | | | | | | |
CLEAR CHANNEL OUTDOOR HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
| | | | | | | | | | | | | | | | | | | | | | | | | | (In thousands) | | Year Ended December 31, 2015 | | | | Parent
Company | | | Subsidiary
Issuer | | | Guarantor
Subsidiaries | | | Non-Guarantor
Subsidiaries | | | Eliminations | | | Consolidated | | Revenue | | $ | — | | | $ | — | | | $ | 1,193,320 | | | $ | 1,612,884 | | | $ | — | | | $ | 2,806,204 | | Operating expenses: | | | | | | | | | | | | | | | | | | | | | | | | | Direct operating expenses | | | — | | | | — | | | | 507,729 | | | | 987,173 | | | | — | | | | 1,494,902 | | Selling, general and administrative expenses | | | — | | | | — | | | | 199,769 | | | | 331,735 | | | | — | | | | 531,504 | | Corporate expenses | | | 13,049 | | | | — | | | | 58,576 | | | | 44,755 | | | | — | | | | 116,380 | | Depreciation and amortization | | | — | | | | — | | | | 194,891 | | | | 181,071 | | | | — | | | | 375,962 | | Impairment charges | | | — | | | | — | | | | 21,631 | | | | — | | | | — | | | | 21,631 | | Other operating income (expense), net | | | (458 | ) | | | — | | | | (7,732 | ) | | | 3,366 | | | | — | | | | (4,824 | ) | | | | | | | | | | | | | | | | | | | | | | | | | | Operating income (loss) | | | (13,507 | ) | | | — | | | | 202,992 | | | | 71,516 | | | | — | | | | 261,001 | | Interest expense | | | 2 | | | | 352,329 | | | | 1,630 | | | | 1,708 | | | | — | | | | 355,669 | | Interest income on Due from iHeartCommunications | | | 61,439 | | | | — | | | | — | | | | — | | | | — | | | | 61,439 | | Intercompany interest income | | | 16,068 | | | | 340,457 | | | | 62,002 | | | | — | | | | (418,527 | ) | | | — | | Intercompany interest expense | | | 61,439 | | | | — | | | | 356,525 | | | | 563 | | | | (418,527 | ) | | | — | | Equity in earnings (loss) of nonconsolidated affiliates | | | (76,018 | ) | | | 10,383 | | | | 5,609 | | | | (1,935 | ) | | | 61,672 | | | | (289 | ) | Other income, net | | | 2,915 | | | | 3,440 | | | | 20,318 | | | | 10,289 | | | | (24,575 | ) | | | 12,387 | | | | | | | | | | | | | | | | | | | | | | | | | | | Income (loss) before income taxes | | | (70,544 | ) | | | 1,951 | | | | (67,234 | ) | | | 77,599 | | | | 37,097 | | | | (21,131 | ) | Income tax expense | | | (953 | ) | | | (575 | ) | | | (8,784 | ) | | | (39,865 | ) | | | — | | | | (50,177 | ) | | | | | | | | | | | | | | | | | | | | | | | | | | Consolidated net income (loss) | | | (71,497 | ) | | | 1,376 | | | | (76,018 | ) | | | 37,734 | | | | 37,097 | | | | (71,308 | ) | Less amount attributable to noncontrolling interest | | | — | | | | — | | | | — | | | | 24,764 | | | | — | | | | 24,764 | | | | | | | | | | | | | | | | | | | | | | | | | | | Net income (loss) attributable to the Company | | $ | (71,497 | ) | | $ | 1,376 | | | $ | (76,018 | ) | | $ | 12,970 | | | $ | 37,097 | | | $ | (96,072 | ) | Other comprehensive (loss), net of tax: | | | | | | | | | | | | | | | | | | | | | | | | | Foreign currency translation adjustments | | | — | | | | (3,440 | ) | | | (16,605 | ) | | | (92,684 | ) | | | — | | | | (112,729 | ) | Unrealized holding gain on marketable securities | | | — | | | | — | | | | — | | | | 553 | | | | — | | | | 553 | | Other adjustments to comprehensive loss | | | — | | | | — | | | | — | | | | (10,266 | ) | | | — | | | | (10,266 | ) | Reclassification adjustments | | | — | | | | — | | | | — | | | | 808 | | | | — | | | | 808 | | Equity in subsidiary comprehensive income | | | (110,480 | ) | | | (61,867 | ) | | | (93,875 | ) | | | — | | | | 266,222 | | | | — | | | | | | | | | | | | | | | | | | | | | | | | | | | Comprehensive loss | | | (181,977 | ) | | | (63,931 | ) | | | (186,498 | ) | | | (88,619 | ) | | | 303,319 | | | | (217,706 | ) | Less amount attributable to noncontrolling interest | | | — | | | | — | | | | — | | | | (11,154 | ) | | | — | | | | (11,154 | ) | | | | | | | | | | | | | | | | | | | | | | | | | | Comprehensive loss attributable to the Company | | $ | (181,977 | ) | | $ | (63,931 | ) | | $ | (186,498 | ) | | $ | (77,465 | ) | | $ | 303,319 | | | $ | (206,552 | ) | | | | | | | | | | | | | | | | | | | | | | | | | |
CLEAR CHANNEL OUTDOOR HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
| | | | | | | | | | | | | | | | | | | | | | | | | | (In thousands) | | Year Ended December 31, 2014 | | | | Parent
Company | | | Subsidiary
Issuer | | | Guarantor
Subsidiaries | | | Non-Guarantor
Subsidiaries | | | Eliminations | | | Consolidated | | Revenue | | $ | — | | | $ | — | | | $ | 1,162,842 | | | $ | 1,798,417 | | | $ | — | | | $ | 2,961,259 | | Operating expenses: | | | | | | | | | | | | | | | | | | | | | | | | | Direct operating expenses | | | — | | | | — | | | | 495,651 | | | | 1,101,237 | | | | — | | | | 1,596,888 | | Selling, general and administrative expenses | | | — | | | | — | | | | 196,653 | | | | 351,866 | | | | — | | | | 548,519 | | Corporate expenses | | | 12,274 | | | | — | | | | 67,989 | | | | 50,631 | | | | — | | | | 130,894 | | Depreciation and amortization | | | — | | | | — | | | | 194,396 | | | | 211,847 | | | | — | | | | 406,243 | | Impairment charges | | | — | | | | — | | | | 3,530 | | | | — | | | | — | | | | 3,530 | | Other operating income (expense), net | | | (541 | ) | | | — | | | | 3,235 | | | | 4,565 | | | | — | | | | 7,259 | | | | | | | | | | | | | | | | | | | | | | | | | | | Operating income (loss) | | | (12,815 | ) | | | — | | | | 207,858 | | | | 87,401 | | | | — | | | | 282,444 | | Interest (income) expense, net | | | (6 | ) | | | 352,280 | | | | 1,555 | | | | (564 | ) | | | — | | | | 353,265 | | Interest income on Due from iHeartCommunications | | | 60,179 | | | | — | | | | — | | | | — | | | | — | | | | 60,179 | | Intercompany interest income | | | 15,624 | | | | 340,824 | | | | 61,073 | | | | — | | | | (417,521 | ) | | | — | | Intercompany interest expense | | | 60,179 | | | | — | | | | 356,448 | | | | 894 | | | | (417,521 | ) | | | — | | Loss on marketable securities | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | Equity in earnings (loss) of nonconsolidated affiliates | | | (15,463 | ) | | | 46,938 | | | | 42,382 | | | | 2,038 | | | | (72,106 | ) | | | 3,789 | | Other income (expense), net | | | 4,122 | | | | — | | | | (2,691 | ) | | | 13,754 | | | | — | | | | 15,185 | | | | | | | | | | | | | | | | | | | | | | | | | | | Income (loss) before income taxes | | | (8,526 | ) | | | 35,482 | | | | (49,381 | ) | | | 102,863 | | | | (72,106 | ) | | | 8,332 | | Income tax benefit (expense) | | | (1,064 | ) | | | (276 | ) | | | 33,918 | | | | (23,791 | ) | | | — | | | | 8,787 | | | | | | | | | | | | | | | | | | | | | | | | | | | Consolidated net income (loss) | | | (9,590 | ) | | | 35,206 | | | | (15,463 | ) | | | 79,072 | | | | (72,106 | ) | | | 17,119 | | Less amount attributable to noncontrolling interest | | | — | | | | — | | | | — | | | | 26,709 | | | | — | | | | 26,709 | | | | | | | | | | | | | | | | | | | | | | | | | | | Net income (loss) attributable to the Company | | $ | (9,590 | ) | | $ | 35,206 | | | $ | (15,463 | ) | | $ | 52,363 | | | $ | (72,106 | ) | | $ | (9,590 | ) | Other comprehensive loss, net of tax: | | | | | | | | | | | | | | | | | | | | | | | | | Foreign currency translation adjustments | | | — | | | | 21 | | | | (8,471 | ) | | | (114,654 | ) | | | — | | | | (123,104 | ) | Unrealized holding gain on marketable securities | | | — | | | | — | | | | — | | | | 327 | | | | — | | | | 327 | | Other adjustments to comprehensive loss | | | — | | | | — | | | | — | | | | (11,438 | ) | | | — | | | | (11,438 | ) | Reclassification adjustments | | | — | | | | — | | | | — | | | | 8 | | | | — | | | | 8 | | Equity in subsidiary comprehensive income | | | (127,781 | ) | | | (117,825 | ) | | | (119,310 | ) | | | — | | | | 364,916 | | | | — | | | | | | | | | | | | | | | | | | | | | | | | | | | Comprehensive loss | | | (137,371 | ) | | | (82,598 | ) | | | (143,244 | ) | | | (73,394 | ) | | | 292,810 | | | | (143,797 | ) | Less amount attributable to noncontrolling interest | | | — | | | | — | | | | — | | | | (6,426 | ) | | | — | | | | (6,426 | ) | | | | | | | | | | | | | | | | | | | | | | | | | | Comprehensive loss attributable to the Company | | $ | (137,371 | ) | | $ | (82,598 | ) | | $ | (143,244 | ) | | $ | (66,968 | ) | | $ | 292,810 | | | $ | (137,371 | ) | | | | | | | | | | | | | | | | | | | | | | | | | |
CLEAR CHANNEL OUTDOOR HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
| | | | | | | | | | | | | | | | | | | | | | | | | | (In thousands) | | Year Ended December 31, 2013 | | | | Parent
Company | | | Subsidiary
Issuer | | | Guarantor
Subsidiaries | | | Non-Guarantor
Subsidiaries | | | Eliminations | | | Consolidated | | Revenue | | $ | — | | | $ | — | | | $ | 1,197,261 | | | $ | 1,748,929 | | | $ | — | | | $ | 2,946,190 | | Operating expenses: | | | | | | | | | | | | | | | | | | | | | | | | | Direct operating expenses | | | — | | | | — | | | | 506,200 | | | | 1,088,528 | | | | — | | | | 1,594,728 | | Selling, general and administrative expenses | | | — | | | | — | | | | 205,240 | | | | 338,332 | | | | — | | | | 543,572 | | Corporate expenses | | | 13,057 | | | | 3 | | | | 64,987 | | | | 46,352 | | | | — | | | | 124,399 | | Depreciation and amortization | | | — | | | | — | | | | 194,793 | | | | 208,377 | | | | — | | | | 403,170 | | Impairment charges | | | — | | | | — | | | | — | | | | 13,150 | | | | — | | | | 13,150 | | Other operating income (expense), net | | | (494 | ) | | | — | | | | 28,129 | | | | (4,656 | ) | | | — | | | | 22,979 | | | | | | | | | | | | | | | | | | | | | | | | | | | Operating income (loss) | | | (13,551 | ) | | | (3 | ) | | | 254,170 | | | | 49,534 | | | | — | | | | 290,150 | | Interest (income) expense, net | | | (143 | ) | | | 353,189 | | | | 993 | | | | (1,256 | ) | | | — | | | | 352,783 | | Interest income on due with iHeartCommunications | | | 54,210 | | | | — | | | | — | | | | — | | | | — | | | | 54,210 | | Intercompany interest income | | | 15,112 | | | | 341,612 | | | | 54,857 | | | | — | | | | (411,581 | ) | | | — | | Intercompany interest expense | | | 54,436 | | | | — | | | | 356,724 | | | | 421 | | | | (411,581 | ) | | | — | | Loss on marketable securities | | | — | | | | — | | | | — | | | | (18 | ) | | | — | | | | (18 | ) | | | | | | | | Equity in loss of nonconsolidated affiliates | | | (50,279 | ) | | | (12,274 | ) | | | (12,216 | ) | | | (3,588 | ) | | | 76,265 | | | | (2,092 | ) | Other income (expense), net | | | 1,432 | | | | — | | | | (9,760 | ) | | | 9,344 | | | | — | | | | 1,016 | | | | | | | | | | | | | | | | | | | | | | | | | | | Income (loss) before income taxes | | | (47,369 | ) | | | (23,854 | ) | | | (70,666 | ) | | | 56,107 | | | | 76,265 | | | | (9,517 | ) | Income tax benefit (expense) | | | (1,091 | ) | | | 4,184 | | | | 20,387 | | | | (38,289 | ) | | | — | | | | (14,809 | ) | | | | | | | | | | | | | | | | | | | | | | | | | | Consolidated net income (loss) | | | (48,460 | ) | | | (19,670 | ) | | | (50,279 | ) | | | 17,818 | | | | 76,265 | | | | (24,326 | ) | Less amount attributable to noncontrolling interest | | | — | | | | — | | | | — | | | | 24,134 | | | | — | | | | 24,134 | | | | | | | | | | | | | | | | | | | | | | | | | | | Net loss attributable to the Company | | $ | (48,460 | ) | | $ | (19,670 | ) | | $ | (50,279 | ) | | $ | (6,316 | ) | | $ | 76,265 | | | $ | (48,460 | ) | | | | | | | | | | | | | | | | | | | | | | | | | | Other comprehensive income (loss), net of tax | | | | | | | | | | | | | | | | | | | | | | | | | Foreign currency translation adjustments | | | (31 | ) | | | (20 | ) | | | (7,214 | ) | | | (2,389 | ) | | | — | | | | (9,654 | ) | Unrealized loss on marketable securities | | | — | | | | — | | | | — | | | | 1,187 | | | | — | | | | 1,187 | | Other adjustments to comprehensive income | | | — | | | | — | | | | — | | | | 6,732 | | | | — | | | | 6,732 | | Reclassification adjustments | | | (1,432 | ) | | | — | | | | — | | | | — | | | | — | | | | (1,432 | ) | Equity in subsidiary comprehensive income | | | 490 | | | | 9,159 | | | | 7,704 | | | | — | | | | (17,353 | ) | | | — | | | | | | | | | | | | | | | | | | | | | | | | | | | Comprehensive loss | | | (49,433 | ) | | | (10,531 | ) | | | (49,789 | ) | | | (786 | ) | | | 58,912 | | | | (51,627 | ) | Less amount attributable to noncontrolling interest | | | — | | | | — | | | | — | | | | (2,194 | ) | | | — | | | | (2,194 | ) | | | | | | | | | | | | | | | | | | | | | | | | | | Comprehensive income (loss) attributable to the Company | | $ | (49,433 | ) | | $ | (10,531 | ) | | $ | (49,789 | ) | | $ | 1,408 | | | $ | 58,912 | | | $ | (49,433 | ) | | | | | | | | | | | | | | | | | | | | | | | | | |
CLEAR CHANNEL OUTDOOR HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
| | | | | | | | | | | | | | | | | | | | | | | | | | (In thousands) | | Year Ended December 31, 2015 | | | | Parent
Company | | | Subsidiary
Issuer | | | Guarantor
Subsidiaries | | | Non-Guarantor
Subsidiaries | | | Eliminations | | | Consolidated | | Cash flows from operating activities: | | | | | | | | | | | | | | | | | | | | | | | | | Consolidated net income (loss) | | $ | (71,497 | ) | | $ | 1,376 | | | $ | (76,018 | ) | | $ | 37,734 | | | $ | 37,097 | | | $ | (71,308 | ) | Reconciling items: | | | | | | | | | | | | | | | | | | | | | | | | | Impairment charges | | | — | | | | — | | | | 21,631 | | | | — | | | | — | | | | 21,631 | | Depreciation and amortization | | | — | | | | — | | | | 194,891 | | | | 181,071 | | | | — | | | | 375,962 | | Deferred taxes | | | — | | | | 1,282 | | | | 7,539 | | | | (5,282 | ) | | | — | | | | 3,539 | | Provision for doubtful accounts | | | — | | | | — | | | | 5,398 | | | | 7,986 | | | | — | | | | 13,384 | | Share-based compensation | | | — | | | | — | | | | 5,712 | | | | 2,647 | | | | — | | | | 8,359 | | Gain on sale of operating and fixed assets | | | — | | | | — | | | | (1,235 | ) | | | (4,233 | ) | | | — | | | | (5,468 | ) | Amortization of deferred financing charges and note discounts, net | | | — | | | | 7,468 | | | | 1,230 | | | | 72 | | | | — | | | | 8,770 | | Other reconciling items, net | | | 76,018 | | | | (13,823 | ) | | | (4,270 | ) | | | (9,404 | ) | | | (61,672 | ) | | | (13,151 | ) | | | | | | | | Changes in operating assets and liabilities, net of effects of acquisitions and dispositions: | | | | | | | | | | | | | | | | | | | | | | | | | Increase in accounts receivable | | | — | | | | — | | | | (12,878 | ) | | | (43,702 | ) | | | — | | | | (56,580 | ) | (Increase) decrease in prepaids and other current assets | | | (124 | ) | | | (3,433 | ) | | | 4,664 | | | | (2,835 | ) | | | — | | | | (1,728 | ) | Increase (decrease) in accrued expenses | | | 486 | | | | (4,182 | ) | | | 5,491 | | | | (1,302 | ) | | | — | | | | 493 | | Increase (decrease) in accounts payable | | | — | | | | — | | | | (15,742 | ) | | | 26,424 | | | | 19,960 | | | | 30,642 | | Increase (decrease) in deferred income | | | — | | | | — | | | | (6,879 | ) | | | 9,428 | | | | — | | | | 2,549 | | Changes in other operating assets and liabilities | | | — | | | | — | | | | (17,114 | ) | | | (1,047 | ) | | | — | | | | (18,161 | ) | | | | | | | | | | | | | | | | | | | | | | | | | | Net cash provided by (used for) operating activities | | $ | 4,883 | | | $ | (11,312 | ) | | $ | 112,420 | | | $ | 197,557 | | | $ | (4,615 | ) | | $ | 298,933 | | | | | | | | | | | | | | | | | | | | | | | | | | | Cash flows from investing activities: | | | | | | | | | | | | | | | | | | | | | | | | | Purchases of property, plant and equipment | | | — | | | | — | | | | (72,374 | ) | | | (145,958 | ) | | | — | | | | (218,332 | ) | Proceeds from disposal of assets | | | — | | | | — | | | | 4,626 | | | | 6,638 | | | | — | | | | 11,264 | | Purchases of other operating assets | | | — | | | | — | | | | (23,042 | ) | | | (598 | ) | | | — | | | | (23,640 | ) | Purchases of businesses | | | — | | | | — | | | | — | | | | (24,701 | ) | | | — | | | | (24,701 | ) | Decrease in intercompany notes receivable, net | | | — | | | | 70,125 | | | | — | | | | — | | | | (70,125 | ) | | | — | | Dividends from subsidiaries | | | — | | | | 157,570 | | | | — | | | | — | | | | (157,570 | ) | | | — | | Change in other, net | | | — | | | | (8,606 | ) | | | (909 | ) | | | (2,314 | ) | | | 9,513 | | | | (2,316 | ) | | | | | | | | | | | | | | | | | | | | | | | | | | Net cash provided by (used for) investing activities | | $ | — | | | $ | 219,089 | | | $ | (91,699 | ) | | $ | (166,933 | ) | | $ | (218,182 | ) | | $ | (257,725 | ) | | | | | | | | | | | | | | | | | | | | | | | | | | Cash flows from financing activities: | | | | | | | | | | | | | | | | | | | | | | | | | Payments on credit facilities | | | — | | | | — | | | | — | | | | (3,849 | ) | | | — | | | | (3,849 | ) | Proceeds from long-term debt | | | — | | | | — | | | | — | | | | 222,777 | | | | — | | | | 222,777 | | Payments on long-term debt | | | — | | | | — | | | | (56 | ) | | | — | | | | — | | | | (56 | ) | Net transfers to iHeartCommunications | | | 17,007 | | | | — | | | | — | | | | — | | | | — | | | | 17,007 | | Payments to repurchase of noncontrolling interests | | | — | | | | — | | | | — | | | | (234 | ) | | | — | | | | (234 | ) | Dividends and other payments to noncontrolling interests | | | — | | | | — | | | | — | | | | (30,870 | ) | | | — | | | | (30,870 | ) | Dividends paid | | | — | | | | — | | | | — | | | | (182,145 | ) | | | 182,145 | | | | — | | Decrease in intercompany notes payable, net | | | — | | | | — | | | | (4,625 | ) | | | (65,500 | ) | | | 70,125 | | | | — | | Intercompany funding | | | 193,021 | | | | (207,777 | ) | | | 2,415 | | | | 12,341 | | | | — | | | | — | | Deferred financing charges | | | — | | | | — | | | | — | | | | (8,606 | ) | | | — | | | | (8,606 | ) | Change in other, net | | | 2,885 | | | | — | | | | — | | | | 9,513 | | | | (9,513 | ) | | | 2,885 | | | | | | | | | | | | | | | | | | | | | | | | | | | Net cash provided by (used for) financing activities | | | 212,913 | | | | (207,777 | ) | | | (2,266 | ) | | | (46,573 | ) | | | 242,757 | | | | 199,054 | | | | | | | | | | | | | | | | | | | | | | | | | | | Effect of exchange rate changes on cash | | | — | | | | — | | | | — | | | | (13,723 | ) | | | — | | | | (13,723 | ) | | | | | | | | | | | | | | | | | | | | | | | | | | Net inc (dec) in cash and cash equivalents | | | 217,796 | | | | — | | | | 18,455 | | | | (29,672 | ) | | | 19,960 | | | | 226,539 | | Cash and cash equivalents at beginning of year | | | 905 | | | | — | | | | — | | | | 205,259 | | | | (19,960 | ) | | | 186,204 | | | | | | | | | | | | | | | | | | | | | | | | | | | Cash and cash equivalents at end of year | | $ | 218,701 | | | $ | — | | | $ | 18,455 | | | $ | 175,587 | | | $ | — | | | $ | 412,743 | | | | | | | | | | | | | | | | | | | | | | | | | | |
CLEAR CHANNEL OUTDOOR HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
| | | | | | | | | | | | | | | | | | | | | | | | | | (In thousands) | | Year Ended December 31, 2014 | | | | Parent
Company | | | Subsidiary
Issuer | | | Guarantor
Subsidiaries | | | Non-Guarantor
Subsidiaries | | | Eliminations | | | Consolidated | | Cash flows from operating activities: | | | | | | | | | | | | | | | | | | | | | | | | | Consolidated net income (loss) | | $ | (9,590 | ) | | $ | 35,206 | | | $ | (15,463 | ) | | $ | 79,072 | | | $ | (72,106 | ) | | $ | 17,119 | | Reconciling items: | | | | | | | | | | | | | | | | | | | | | | | | | Impairment charges | | | — | | | | — | | | | 3,530 | | | | — | | | | — | | | | 3,530 | | Depreciation and amortization | | | — | | | | — | | | | 194,396 | | | | 211,847 | | | | — | | | | 406,243 | | Deferred taxes | | | 597 | | | | — | | | | (29,835 | ) | | | (4,331 | ) | | | — | | | | (33,569 | ) | Provision for doubtful accounts | | | — | | | | — | | | | 3,247 | | | | 3,903 | | | | — | | | | 7,150 | | Share-based compensation | | | — | | | | — | | | | 5,006 | | | | 2,737 | | | | — | | | | 7,743 | | Gain on sale of operating and fixed assets | | | — | | | | — | | | | (3,236 | ) | | | (4,565 | ) | | | — | | | | (7,801 | ) | Amortization of deferred financing charges and note discounts, net | | | — | | | | 7,428 | | | | 1,232 | | | | — | | | | — | | | | 8,660 | | Other reconciling items, net | | | 15,463 | | | | (46,938 | ) | | | (41,398 | ) | | | (17,483 | ) | | | 72,106 | | | | (18,250 | ) | | | | | | | | Changes in operating assets and liabilities, net of effects of acquisitions and dispositions: | | | | | | | | | | | | | | | | | | | | | | | | | (Increase) decrease in accounts receivable | | | — | | | | — | | | | 404 | | | | (39,022 | ) | | | — | | | | (38,618 | ) | (Increase) decrease in prepaids and other current assets | | | 94 | | | | — | | | | 6,368 | | | | (480 | ) | | | — | | | | 5,982 | | Increase (decrease) in accrued expenses | | | (258 | ) | | | 2,133 | | | | (2,666 | ) | | | 19,914 | | | | — | | | | 19,123 | | Increase (decrease) in accounts payable | | | — | | | | — | | | | 16,126 | | | | (626 | ) | | | (19,960 | ) | | | (4,460 | ) | Increase (decrease) in deferred income | | | — | | | | — | | | | 1,735 | | | | (7,105 | ) | | | — | | | | (5,370 | ) | Changes in other operating assets and liabilities | | | — | | | | — | | | | 1,143 | | | | (20,202 | ) | | | — | | | | (19,059 | ) | | | | | | | | | | | | | | | | | | | | | | | | | | Net cash provided by (used for) operating activities | | $ | 6,306 | | | $ | (2,171 | ) | | $ | 140,589 | | | $ | 223,659 | | | $ | (19,960 | ) | | $ | 348,423 | | | | | | | | | | | | | | | | | | | | | | | | | | | Cash flows from investing activities: | | | | | | | | | | | | | | | | | | | | | | | | | Purchases of property, plant and equipment | | | — | | | | — | | | | (96,695 | ) | | | (134,474 | ) | | | — | | | | (231,169 | ) | Proceeds from disposal of assets | | | — | | | | — | | | | 6,216 | | | | 6,645 | | | | — | | | | 12,861 | | Purchases of other operating assets | | | — | | | | — | | | | (252 | ) | | | (321 | ) | | | — | | | | (573 | ) | Proceeds from sale of investment securities | | | — | | | | — | | | | — | | | | 15,834 | | | | — | | | | 15,834 | | Decrease in intercompany notes receivable, net | | | — | | | | 84,264 | | | | — | | | | — | | | | (84,264 | ) | | | — | | Dividends from subsidiaries | | | — | | | | — | | | | 3,182 | | | | — | | | | (3,182 | ) | | | — | | Change in other, net | | | — | | | | — | | | | (11 | ) | | | (3,373 | ) | | | — | | | | (3,384 | ) | | | | | | | | | | | | | | | | | | | | | | | | | | Net cash provided by (used for) investing activities | | $ | — | | | $ | 84,264 | | | $ | (87,560 | ) | | $ | (115,689 | ) | | $ | (87,446 | ) | | $ | (206,431 | ) | | | | | | | | | | | | | | | | | | | | | | | | | | Cash flows from financing activities: | | | | | | | | | | | | | | | | | | | | | | | | | Draws on credit facilities | | | — | | | | — | | | | — | | | | 3,010 | | | | — | | | | 3,010 | | Payments on credit facilities | | | — | | | | — | | | | — | | | | (3,682 | ) | | | — | | | | (3,682 | ) | Payments on long-term debt | | | — | | | | — | | | | (48 | ) | | | — | | | | — | | | | (48 | ) | Net transfers to iHeartCommunications | | | (68,804 | ) | | | — | | | | — | | | | — | | | | — | | | | (68,804 | ) | Dividends and other payments to noncontrolling interests | | | — | | | | — | | | | — | | | | (18,995 | ) | | | — | | | | (18,995 | ) | Dividends paid | | | (175,022 | ) | | | — | | | | — | | | | (3,182 | ) | | | 3,182 | | | | (175,022 | ) | Decrease in intercompany notes payable, net | | | — | | | | — | | | | — | | | | (84,264 | ) | | | 84,264 | | | | — | | Intercompany funding | | | 153,004 | | | | (82,093 | ) | | | (58,862 | ) | | | (12,049 | ) | | | — | | | | — | | Change in other, net | | | 2,236 | | | | — | | | | (4 | ) | | | — | | | | — | | | | 2,232 | | | | | | | | | | | | | | | | | | | | | | | | | | | Net cash used for financing activities | | | (88,586 | ) | | | (82,093 | ) | | | (58,914 | ) | | | (119,162 | ) | | | 87,446 | | | | (261,309 | ) | | | | | | | | | | | | | | | | | | | | | | | | | | Effect of exchange rate changes on cash | | | — | | | | — | | | | — | | | | (9,024 | ) | | | — | | | | (9,024 | ) | | | | | | | | | | | | | | | | | | | | | | | | | | Net decrease in cash and cash equivalents | | | (82,280 | ) | | | — | | | | (5,885 | ) | | | (20,216 | ) | | | (19,960 | ) | | | (128,341 | ) | Cash and cash equivalents at beginning of year | | | 83,185 | | | | — | | | | 5,885 | | | | 225,475 | | | | — | | | | 314,545 | | | | | | | | | | | | | | | | | | | | | | | | | | | Cash and cash equivalents at end of year | | $ | 905 | | | $ | — | | | $ | — | | | $ | 205,259 | | | $ | (19,960 | ) | | $ | 186,204 | | | | | | | | | | | | | | | | | | | | | | | | | | |
CLEAR CHANNEL OUTDOOR HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | Year Ended December 31, 2013 | | | (In thousands) | | Parent
Company | | | Subsidiary
Issuer | | | Guarantor
Subsidiaries | | | Non-Guarantor
Subsidiaries | | | Eliminations | | | Consolidated | | Cash flows from operating activities: | | | | | | | | | | | | | | | | | | | | | | | | | Consolidated net income (loss) | | $ | (48,460 | ) | | $ | (19,670 | ) | | $ | (50,279 | ) | | $ | 17,818 | | | $ | 76,265 | | | $ | (24,326 | ) | Reconciling items: | | | | | | | | | | | | | | | | | | | | | | | | | Impairment charges | | | — | | | | — | | | | — | | | | 13,150 | | | | — | | | | 13,150 | | Depreciation and amortization | | | — | | | | — | | | | 194,793 | | | | 208,377 | | | | — | | | | 403,170 | | Deferred taxes | | | (51 | ) | | | — | | | | (22,225 | ) | | | (8,940 | ) | | | — | | | | (31,216 | ) | Provision for doubtful accounts | | | — | | | | — | | | | 3,211 | | | | 1,913 | | | | — | | | | 5,124 | | Share-based compensation | | | — | | | | — | | | | 4,881 | | | | 2,844 | | | | — | | | | 7,725 | | (Gain) loss on sale of operating and fixed assets | | | 494 | | | | — | | | | (28,129 | ) | | | 4,656 | | | | — | | | | (22,979 | ) | Loss on marketable securities | | | — | | | | — | | | | — | | | | 18 | | | | — | | | | 18 | | Amortization of deferred financing charges and note discounts, net | | | — | | | | 7,391 | | | | 1,171 | | | | — | | | | — | | | | 8,562 | | Other reconciling items, net | | | 48,847 | | | | 12,274 | | | | 15,241 | | | | 2,091 | | | | (76,265 | ) | | | 2,188 | | Changes in operating assets and liabilities, net of effects of acquisitions and dispositions: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | (Increase) decrease in accounts receivable | | | — | | | | — | | | | 47,475 | | | | (4,046 | ) | | | — | | | | 43,429 | | (Increase) decrease in prepaid expenses and other current assets | | | 227 | | | | — | | | | (981 | ) | | | (5,588 | ) | | | — | | | | (6,342 | ) | Increase (decrease) in accrued expenses | | | 330 | | | | 75,109 | | | | (67,019 | ) | | | 10,884 | | | | — | | | | 19,304 | | Decrease in accounts payable | | | — | | | | (20 | ) | | | (2,131 | ) | | | (13,049 | ) | | | 4,793 | | | | (10,407 | ) | Increase (decrease) in deferred income | | | — | | | | — | | | | (7,582 | ) | | | 7,916 | | | | — | | | | 334 | | Changes in other operating assets and liabilities | | | — | | | | — | | | | 6,675 | | | | 231 | | | | — | | | | 6,906 | | | | | | | | | | | | | | | | | | | | | | | | | | | Net cash provided by operating activities | | | 1,387 | | | | 75,084 | | | | 95,101 | | | | 238,275 | | | | 4,793 | | | | 414,640 | | | | | | | | | | | | | | | | | | | | | | | | | | | Cash flows from investing activities: | | | | | | | | | | | | | | | | | | | | | | | | | Purchases of property, plant and equipment | | | — | | | | — | | | | (96,873 | ) | | | (109,314 | ) | | | — | | | | (206,187 | ) | Proceeds from disposal of assets | | | — | | | | — | | | | 33,925 | | | | 8,209 | | | | — | | | | 42,134 | | Purchases of other operating assets | | | — | | | | — | | | | (9,480 | ) | | | (1,003 | ) | | | — | | | | (10,483 | ) | Purchases of businesses | | | | | | | | | | | | | | | | | | | | | | | | | Increase in intercompany notes receivable, net | | | — | | | | 127,305 | | | | — | | | | — | | | | (127,305 | ) | | | — | | Dividends from subsidiaries | | | 1,153 | | | | — | | | | — | | | | — | | | | (1,153 | ) | | | — | | Change in other, net | | | — | | | | — | | | | (16 | ) | | | (3,127 | ) | | | — | | | | (3,143 | ) | | | | | | | | | | | | | | | | | | | | | | | | | | Net cash provided by (used for) investing activities | | | 1,153 | | | | 127,305 | | | | (72,444 | ) | | | (105,235 | ) | | | (128,458 | ) | | | (177,679 | ) | | | | | | | | | | | | | | | | | | | | | | | | | | Cash flows from financing activities: | | | | | | | | | | | | | | | | | | | | | | | | | Draws on credit facilities | | | — | | | | — | | | | — | | | | 2,752 | | | | — | | | | 2,752 | | Payments on credit facilities | | | — | | | | — | | | | — | | | | (4,815 | ) | | | — | | | | (4,815 | ) | Payments on long-term debt | | | — | | | | — | | | | (41 | ) | | | (6,585 | ) | | | — | | | | (6,626 | ) | Net transfers to iHeartCommunications | | | (149,957 | ) | | | — | | | | — | | | | — | | | | — | | | | (149,957 | ) | Deferred financing charges | | | — | | | | — | | | | (344 | ) | | | — | | | | — | | | | (344 | ) | Payments to repurchase noncontrolling interests | | | — | | | | — | | | | — | | | | (61,143 | ) | | | — | | | | (61,143 | ) | Dividends and other payments to noncontrolling interests | | | — | | | | — | | | | — | | | | (68,442 | ) | | | — | | | | (68,442 | ) | Dividends paid | | | (200,010 | ) | | | — | | | | — | | | | (1,153 | ) | | | 1,153 | | | | (200,010 | ) | Decrease in intercompany notes payable, net | | | — | | | | — | | | | — | | | | (127,305 | ) | | | 127,305 | | | | — | | Intercompany funding | | | 219,009 | | | | (202,389 | ) | | | (16,387 | ) | | | (233 | ) | | | — | | | | — | | Change in other, net | | | 4,192 | | | | — | | | | — | | | | — | | | | — | | | | 4,192 | | | | | | | | | | | | | | | | | | | | | | | | | | | Net cash used for financing activities | | | (126,766 | ) | | | (202,389 | ) | | | (16,772 | ) | | | (266,924 | ) | | | 128,458 | | | | (484,393 | ) | | | | | | | | | | | | | | | | | | | | | | | | | | Effect of exchange rate changes on cash | | | — | | | | — | | | | — | | | | (2 | ) | | | — | | | | (2 | ) | | | | | | | | | | | | | | | | | | | | | | | | | | Net increase (decrease) in cash and cash equivalents | | | (124,226 | ) | | | — | | | | 5,885 | | | | (133,886 | ) | | | 4,793 | | | | (247,434 | ) | Cash and cash equivalents at beginning of year | | | 207,411 | | | | — | | | | — | | | | 359,361 | | | | (4,793 | ) | | | 561,979 | | | | | | | | | | | | | | | | | | | | | | | | | | | Cash and cash equivalents at end of year | | $ | 83,185 | | | $ | — | | | $ | 5,885 | | | $ | 225,475 | | | $ | — | | | $ | 314,545 | | | | | | | | | | | | | | | | | | | | | | | | | | |
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
Not Applicable
ITEM 9A. CONTROLS AND PROCEDURES
Disclosure 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 December 31, 2015 at the reasonable assurance level.
Management’s Annual Report on Internal Control Over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting. Our internal control over financial reporting is a process designed under the supervision of our Chief Executive Officer and Chief Financial Officer to provide reasonable assurance regarding the reliability of financial reporting and preparation of our financial statements for external purposes in accordance with generally accepted accounting principles.
There are inherent limitations to the effectiveness of any control system, however well designed, including the possibility of human error and the possible circumvention or overriding of controls. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Management must make judgments with respect to the relative cost and expected benefits of any specific control measure. The design of a control system also is based in part upon assumptions and judgments made by management about the likelihood of future events, and there can be no assurance that a control will be effective under all potential future conditions. As a result, even an effective system of internal control over financial reporting can provide no more than reasonable assurance with respect to the fair presentation of financial statements and the processes under which they were prepared.
As of December 31, 2015, management assessed the effectiveness of our internal control over financial reporting based on the criteria for effective internal control over financial reporting established inInternal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 Framework). Based on the assessment, management determined that we maintained effective internal control over financial reporting as of December 31, 2015, based on those criteria.
Ernst & Young LLP, the independent registered public accounting firm that audited our consolidated financial statements included in the Annual Report on Form 10-K, has issued an attestation report on the effectiveness of our internal control over financial reporting as of December 31, 2015. The report, which expresses an unqualified opinion on the effectiveness of our internal control over financial reporting as of December 31, 2015, is included in this Item under the heading “Report of Independent Registered Public Accounting Firm.”
Changes in Internal Control Over Financial Reporting
There were no changes in our internal control over financial reporting that occurred during the most recent fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
Report of Independent Registered Public Accounting Firm
The Board of Directors and Shareholders
Clear Channel Outdoor Holdings, Inc.
We have audited Clear Channel Outdoor Holdings, Inc. and subsidiaries’ (the Company) internal control over financial reporting as of December 31, 2015, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) (the COSO criteria). The Company’s management is responsible for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting included in the accompanying Management’s Report on Internal Control Over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit.
We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.
A company’s internal control over financial reporting is a process designed 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. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2015, based on the COSO criteria.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheets of the Company as of December 31, 2015 and 2014, and the related consolidated statements of comprehensive loss, changes in shareholders’ equity (deficit) and cash flows for each of the three years in the period ended December 31, 2015 and our report dated February 25, 2016 expressed an unqualified opinion thereon.
/s/ Ernst & Young LLP
San Antonio, Texas
February 25, 2016
ITEM 9B. OTHER INFORMATION
Not Applicable
OTHER DATA
EXECUTIVE OFFICERS OF THE REGISTRANT
The following information with respect to our executive officers is presented as of April 7, 2016:78249.
| | | | | | | Name78 Notice and Proxy Statement 2023
| | Age | | | Position
| Robert W. Pittman
| | | 62 | | | Chairman and Chief Executive Officer | Richard J. Bressler
| | | 58 | | | Chief Financial Officer | Scott R. Wells
| | | 47 | | | Chief Executive Officer—Clear Channel Outdoor Americas | C. William Eccleshare
| | | 60 | | | Chairman and Chief Executive Officer—Clear Channel Outdoor International | Steven J. Macri
| | | 47 | | | Senior Vice President-Finance | Scott D. Hamilton
| | | 46 | | | Senior Vice President, Chief Accounting Officer and Assistant Secretary | Robert H. Walls, Jr.
| | | 55 | | | Executive Vice President, General Counsel and Secretary |
The officers named above serve until their respective successors are chosen and qualified, in each case unless the officer sooner dies, resigns, is removed or becomes disqualified.
Robert W. Pittmanis the Chairman and Chief Executive Officer of iHeartMedia, iHeartCommunications and iHeartMedia Capital I, LLC and the Chairman and Chief Executive Officer of Clear Channel Outdoor Holdings, Inc. Mr. Pittman was appointed as Chairman and Chief Executive Officer of CCOH on March 2, 2015. He was appointed Executive Chairman and a director of CCOH and as Chief Executive Officer and a director of iHeartMedia and iHeartCommunications on October 2, 2011. He was appointed as Chairman of iHeartMedia and iHeartCommunications on May 17, 2013. He also was appointed as Chairman and Chief Executive Officer and a member of the board of managers of iHeartMedia Capital I, LLC on April 26, 2013. Prior to October 2, 2011, Mr. Pittman served as Chairman of Media and Entertainment Platforms for iHeartMedia and iHeartCommunications since November 2010. He has been a member of, and an investor in, Pilot Group, a private equity investment company, since April 2003. Mr. Pittman was formerly Chief Operating Officer of AOL Time Warner, Inc. from May 2002 to July 2002. He also served as Co-Chief Operating Officer of AOL Time Warner, Inc. from January 2001 to May 2002, and earlier, as President and Chief Operating Officer of America Online, Inc. from February 1998 to January 2001. Mr. Pittman serves on the boards of numerous charitable organizations, including the Alliance for Lupus Research, the Rock and Roll Hall of Fame Foundation and the Robin Hood Foundation, where he has served as past Chairman. Mr. Pittman was selected to serve as a member of our Board because of his service as Chief Executive Officer of iHeartMedia and iHeartCommunications, as well as his extensive media experience gained through the course of his career.
Richard J. Bressleris the President, Chief Operating Officer, Chief Financial Officer and Director of iHeartMedia, the Company and iHeartCommuncations and the Chief Financial Officer of Clear Channel Outdoor Holdings, Inc.. Mr. Bressler was appointed as the Chief Financial Officer and President of iHeartMedia, the Company, iHeartCommunications and Clear Channel Outdoor Holdings, Inc. on July 29, 2013 and as Chief Operating Officer of iHeartMedia, the Company and iHeartCommunications on February 18, 2015. Prior thereto, Mr. Bressler was a Managing Director at THL. Prior to joining THL, Mr. Bressler was the Senior Executive Vice President and Chief Financial Officer of Viacom, Inc. from 2001 through 2005. He also served as Chairman and Chief Executive Officer of Time Warner Digital Media and, from 1995 to 1999, was Executive Vice President and Chief Financial Officer of Time Warner Inc. Prior to joining Time Inc. in 1988, Mr. Bressler was a partner with the accounting firm of Ernst & Young LLP since 1979. Mr. Bressler also currently is a director of iHeartMedia, iHeartCommunications and Gartner, Inc., a member of the board of managers of iHeartMedia
Capital I, LLC and a board observer at Univision Communications Inc. Mr. Bressler previously served as a member of the board of directors of American Media Operations, Inc., Nielsen Holdings B.V. and Warner Music Group Corp. and as a member of the J.P. Morgan Chase National Advisory Board. Mr. Bressler holds a B.B.A. in Accounting from Adelphi University.
Scott R. Wellsis the Chief Executive Officer of Clear Channel Outdoor Americas at each of the iHeartMedia, the Company, iHeartCommuncations and Clear Channel Outdoor Holdings, Inc. and was appointed to this position on March 3, 2015. Previously, Mr. Wells served as an Operating Partner at Bain Capital since January 2011 and prior to that served as an Executive Vice President at Bain Capital since 2007. Mr. Wells also was one of the leaders of the firm’s operationally focused Portfolio Group. Prior to joining Bain Capital, he held several executive roles at Dell, Inc. (“Dell”) from 2004 to 2007, most recently as Vice President of Public Marketing and On-Line in the Americas. Prior to joining Dell, Mr. Wells was a Partner at Bain & Company, where he focused primarily on technology and consumer-oriented companies. Mr. Wells was a member of our Board from August 2008 until March 2015. He currently serves as a director of CRC Health Corporation. He has an M.B.A., with distinction, from the Wharton School of the University of Pennsylvania and a B.S. from Virginia Tech.
C. William Eccleshare is the Chairman and Chief Executive Officer- Clear Channel International at each of iHeartMedia, the Company, iHeartCommuncations and Clear Channel Outdoor Holdings, Inc. and was appointed to this position on March 2, 2015. Prior to such time, he served as Chief Executive Officer—Outdoor of iHeartMedia, iHeartCommuncations and Clear Channel Outdoor Holdings, Inc. since January 24, 2012 and as Chief Executive Officer—Outdoor of the Company on April 26, 2013. Prior to January 24, 2012, he served as Chief Executive Officer—Clear Channel Outdoor—International of iHeartMedia and iHeartCommunications since February 17, 2011 and as Chief Executive Officer—International of Clear Channel Outdoor Holdings, Inc. since September 1, 2009. Previously, he was Chairman and CEO of BBDO EMEA from 2005 to 2009. Prior thereto, he was Chairman and CEO of Young & Rubicam EMEA since 2002.
Steven J. Macri is the Senior Vice President-Corporate Finance of iHeartMedia, the Company, iHeartCommunications and Clear Channel Outdoor Holdings, Inc. and was appointed to this position on September 9, 2014. Prior thereto, Mr. Macri served as the Chief Financial Officer of iHeartMedia’s iHeartMedia division from October 7, 2013 to September 2014. Prior to joining the company, Mr. Macri served as Chief Financial Officer for LogicSource Inc., from March 2012 to September 2013. Prior to joining LogicSource, Mr. Macri was Executive Vice President and Chief Financial Officer at Warner Music Group Corp. from September 2008 to December 2011 and prior thereto served as Controller and Senior Vice President-Finance from February 2005 to August 2008.
Scott D. Hamiltonis the Senior Vice President, Chief Accounting Officer and Assistant Secretary of iHeartMedia, the Company, iHeartCommunications and Clear Channel Outdoor Holdings, Inc.. Mr. Hamilton was appointed Senior Vice President, Chief Accounting Officer and Assistant Secretary of iHeartMedia, iHeartCommunications and Clear Channel Outdoor Holdings, Inc. on April 26, 2010 and was appointed as Senior Vice President, Chief Accounting Officer and Assistant Secretary of the Company on April 26, 2013. Prior to April 26, 2010, Mr. Hamilton served as Controller and Chief Accounting Officer of Avaya Inc. (“Avaya”), a multinational telecommunications company, from October 2008 to April 2010. Prior thereto, Mr. Hamilton served in various accounting and finance positions at Avaya, beginning in October 2004. Prior thereto, Mr. Hamilton was employed by PricewaterhouseCoopers from September 1992 until September 2004 in various roles including audit, transaction services and technical accounting consulting.
Robert H. Walls, Jr.is the Executive Vice President, General Counsel and Secretary of iHeartMedia, the Company, iHeartCommunications and Clear Channel Outdoor Holdings, Inc.. Mr. Walls was appointed the Executive Vice President, General Counsel and Secretary of iHeartMedia, iHeartCommunications and Clear Channel Outdoor Holdings, Inc. on January 1, 2010 and was appointed as Executive Vice President, General Counsel and Secretary of the Company on April 26, 2013. On March 31, 2011, Mr. Walls was appointed to serve
in the newly-created Office of the Chief Executive Officer for us, iHeartCommunications and Clear Channel Outdoor Holdings, Inc., in addition to his existing offices. Mr. Walls served in the Office of the Chief Executive Officer for us and iHeartCommunications until October 2, 2011, and served in the Office of the Chief Executive Officer for Clear Channel Outdoor Holdings, Inc. until January 24, 2012. Mr. Walls was a founding partner of Post Oak Energy Capital, LP and served as Managing Director through December 31, 2009 and as an advisor to Post Oak Energy Capital, LP through December 31, 2013.
Clear Channel Outdoor Holdings, Inc.
Annual Meeting of Stockholders
Hilton San Antonio Airport
Texas A Ballroom
611 NW Loop 410
San Antonio, Texas 78216
May 27, 2016
8:00 a.m.
ADMIT ONE
Clear Channel Outdoor Holdings, Inc.
Annual Meeting of Stockholders
Hilton San Antonio Airport
Texas A Ballroom
611 NW Loop 410
San Antonio, Texas 78216
May 27, 2016
8:00 a.m.
ADMIT ONE
| | | | | | | | |  | | | | | | | | | | | | | | | | | | | Clear Channel Outdoor Holdings, Inc.Your vote matters – here’s how to vote!
You may vote online or by phone instead of mailing this card. | | | | | | | | | | | | | IMPORTANT ANNUAL MEETING INFORMATION | | | | | | Online Go to www.envisionreports.com/cco or scan the QR code – login details are located in the shaded bar below. | | | | | | | | | | | | | 
To vote by mail, sign and date your proxy card and return it in the enclosed postage-paid envelope.
| | All votes by 401(k) Plan participants must be received by 11:59 p.m. Eastern Time on May 24, 2016.Phone
Call toll free 1-800-652-VOTE (8683) within the USA, US territories and Canada | | | | | | | | Using ablack inkpen, mark your votes with anXas shown in this example. Please do not write outside the designated areas. | | x | | | | 
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q IF VOTING BY MAIL, SIGN, DETACH AND RETURN THE BOTTOM PORTION IN THE ENCLOSED ENVELOPE. q | | | | | | A | | | | | Annual Meeting Proxy Card
| | | | | | | | | |
| q PLEASE FOLD ALONG THE PERFORATION, DETACH AND RETURN THE BOTTOM PORTION IN THE ENCLOSED ENVELOPE. q | |
| | | | | | | | | | | | | 1. | | Election – The Board of Directors (Pleaserecommends a vote FOR all the nominees listed in Proposal 1 and FOR Proposals 2 and 4 and EVERY ONE YEARfor a total of only three Nominees) | | | | | | +
| | | The Board recommends that you vote “FOR” all three Nominees listed below: | | | | 01 - Blair E. Hendrix | | 02 - Douglas L. Jacobs | | 03 - Daniel G. Jones | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | ¨ | | Mark here to vote
FOR all nominees
| | ¨ | | Mark here to WITHHOLD
vote from all nominees
| | ¨ | | For AllEXCEPT - To withhold authority to vote for any nominee(s), write the name(s) of such nominee(s) below. | | | | | | | | | | | | | | | | | | | | | | | Proposal 3. | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 1. Election of the following director nominees: John Dionne, Lisa Hammitt, Andrew Hobson, Thomas C. King, Joe Marchese, W. Benjamin Moreland, Mary Teresa Rainey, Scott R. Wells, and Jinhy Yoon | |  | | | | | | | 01 - John Dionne 04 - Thomas C. King 07 - Mary Teresa Rainey | | | | | | | | | | 02 - Lisa Hammitt 05 - Joe Marchese 08 - Scott R. Wells | | | | | | | | | | 03 - Andrew Hobson 06 - W. Benjamin Moreland 09 - Jinhy Yoon | | | | | | | | | | | | | | For | | Against | | Abstain☐ | | Mark here to vote FOR all nominees | | ☐ | | | | | | | | Mark here to WITHHOLD vote from all nominees | | ☐ | | | | | | | | For All EXCEPT - To withhold authority to vote for any nominee(s), write the name(s) of such nominee(s) below. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 2. | | Ratification of the selection of Ernst & Young LLP as the independent registered public accounting firm for the year ending December 31, 2016. | | | | | | ¨ | | ¨ | | ¨ | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | The Board recommends that you | | For | | Against | | Abstain | | | | 3. | | Approval of the advisory (non-binding) vote “FOR” ratification.on the | | 1 Year | | 2 Years | | 3 Years | | Abstain | 2. | | Approval of the advisory (non-binding) resolution on executive compensation | | ☐ | | ☐ | | ☐ | | | | | | frequency of future say-on-pay votes | | ☐ | | ☐ | | ☐ | | ☐ | | | | | | | | | | | | | | | | | For | | Against | | Abstain | | | | | | | | | | | | | | | 4. | | Ratification of Ernst & Young LLP as the independent accounting firm for the year ending December 31, 2023 | | ☐ | | ☐ | | ☐ | | | | | | | | | | | | | | | |
In their discretion, the proxies are authorized to vote upon such other business as may properly come before the Annual Meeting or any adjournment or postponement thereof. If any other matters properly come before the meeting, the proxies will vote as recommended by our Board or, if there is no recommendation, in their discretion. | | |
= Committee member
